<PAGE>

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

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

    For the fiscal year ended February 28, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 [NO FEE REQUIRED]

    For the transition period from              to             .
                                   ------------    ------------

                         Commission file number: 0-4957

                       EDUCATIONAL DEVELOPMENT CORPORATION
             (Exact name of registrant as specified in its charter)

            Delaware                                             73-0750007
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

10302 East 55th Place, Tulsa, Oklahoma                           74146-6515
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number: (918) 622-4522

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

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.20 par value
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes  X   No
                                    ---     ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]

     As of April 17, 2002, 3,835,117 shares of common stock were outstanding.
The aggregate market value of the voting shares held by non-affiliates of the
registrant, based on 2,715,223 shares (total outstanding less shares held by all
officers, directors and 401(k) Plan) extended at the closing market price on
April 17, 2002, of these shares traded on the Nasdaq National Market, was
approximately $19,006,561.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III of this Annual Report, to the extent
not set forth herein, is incorporated herein by reference from the registrant's
definitive proxy statement relating to the annual meeting of stockholders to be
held on July 2, 2002.

                                       1
<PAGE>

                                TABLE OF CONTENTS

<Table>
<S>                                                                                                           <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS...................................................................3

PART I

Item 1.    Business............................................................................................3

Item 2.    Properties..........................................................................................6

Item 3.    Legal Proceedings...................................................................................6

Item 4.    Submission of Matters to a Vote of Security Holders.................................................6

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters...............................6

Item 6.    Selected Financial Data.............................................................................7

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...............7

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.........................................11

Item 8.    Financial Statements and Supplementary Data........................................................11

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............12

PART III

Item 10.   Directors and Executive Officers of the Registrant.................................................12

Item 11.   Executive Compensation.............................................................................12

Item 12.   Security Ownership of Certain Beneficial Owners and Management.....................................13

Item 13.   Certain Relationships and Related Transactions.....................................................13

PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................14
</Table>

                                       2
<PAGE>

                       EDUCATIONAL DEVELOPMENT CORPORATION

                             FORM 10-K ANNUAL REPORT

                      FOR THE YEAR ENDED FEBRUARY 28, 2002

FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This annual Report on Form 10-K contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Certain statements contained in "Item 7 - Management Discussion and Analysis"
are not based on historical facts, but are forward-looking statements that are
based upon numerous assumptions about future conditions that may ultimately
prove to be inaccurate. Actual events and results may be materially different
from anticipated results described in such statements. The Company's ability to
achieve such results is subject to certain risks and uncertainties. Such risks
and uncertainties include but are not limited to, product prices, continued
availability of capital and financing, and other factors affecting the Company's
business that may be beyond its control. Although Educational Development
Corporation believes that the expectations reflected by such forward looking
statements are reasonable based on information currently available to the
Company, no assurances can be given that such exceptions will prove to have been
correct.

                                     PART 1

Item 1. BUSINESS

(a) General Development of Business

         Educational Development Corporation ("EDC" or the "Company"), a
Delaware corporation with its principal office in Tulsa, Oklahoma, is the
exclusive trade publisher of a line of children's books produced in the United
Kingdom by Usborne Publishing Limited.

         The Company was incorporated on August 23, 1965. The Company's original
corporate name was Tutor Tapes International Corporation of Delaware. Its name
was changed to International Teaching Tapes, Inc. on November 24, 1965, and
changed again to the present name on June 24, 1968.

         During Fiscal Year ("FY") 2002 the Company operated two divisions: Home
Business Division ("Usborne Books at Home" or "UBAH") and Publishing Division.
The Home Business Division distributes books through independent consultants who
hold book showings in individual homes, and through book fairs, direct sales and
internet sales. The Home Business Division also distributes these titles to
school and public libraries. The Publishing Division markets books to
bookstores, toy stores, specialty stores and other retail outlets.

         Significant Events During Fiscal Year 2002

         There were no significant events during fiscal year 2002.

(b) Financial Information about Industry Segments

         See part II, Item 8 - Financial Statements and Supplementary Data

                                       3
<PAGE>

(c) Narrative Description of Business

(i) General

         The principal product of both the Home Business Division ("Usborne
Books at Home" or "UBAH") and Publishing Division is a line of children's books
produced in the United Kingdom by Usborne Publishing Limited. The Company is the
sole United States trade publisher of these books. The Company currently offers
approximately 1,100 different titles. The Company also distributes a product
called "Usborne Kid Kits". These Kid Kits take an Usborne book and combine it
with specially selected items and/or toys which complement the information
contained in the book. The Kid Kits are packaged in a reusable vinyl bag.
Alternatively, 18 Kid Kits are also available in an attractive box package.
Currently 70 different Kid Kits are available.

         The Company considers the political risk of importing books from the
United Kingdom to be negligible as the two countries have maintained excellent
relations for many years. Likewise there is little direct economic risk to the
Company in importing books from the United Kingdom as the Company pays for the
books in U.S. dollars and is not directly subject to any currency fluctuations.
There is risk of physical loss of the books should an accident occur while the
books are in transit, which could cause the Company some economic loss due to
lost sales should the supply of some titles be depleted in the event of a lost
shipment. The Company considers this to be highly unlikely as this type of loss
has yet to occur.

There is some risk involved in having only one source for its products - Usborne
Publishing Limited. The Company has an excellent working relationship with its
foreign supplier Usborne Publishing Limited and can foresee no reason for this
to change. Management believes that the Usborne line of books are the best
available books of their type and currently has no plans to sell any other line.

(ii) Industry Segments

     (a) Home Business Division

         The Home Business Division markets the Usborne line of approximately
1,100 titles and 70 Kid Kits through a combination of direct sales, home
parties, book fairs and the internet, sold through a network marketing system.
The division also sells to school and public libraries.

     (b) Publishing Division

         The Publishing Division distributes the Usborne line to bookstores, toy
stores, specialty stores and other retail outlets utilizing an inside telephone
sales force as well as independent field sales representatives.

(iii) Research and Development

         The Company spent approximately $14,000 in fiscal year 2001 and
$120,000 in fiscal year 2000 in development of a new product, "Make Reading
Fun", a fully interactive reading and phonics program. The Company began sales
of this product during the last quarter of FY 2001.

(iv) Marketing

     (a) Home Business Division

         The Home Business Division markets through commissioned consultants
using a combination of direct sales, home parties, book fairs and the internet.
The division had approximately 5,600 consultants in 50 states at February 28,
2002.

                                       4
<PAGE>

     (b) Publishing Division

         The Publishing Division markets through commissioned trade
representatives who call on book, toy, specialty stores and other retail
outlets; and through marketing by telephone to the trade. This division markets
to approximately 9,000 book, toy and specialty stores. Significant orders
totaling 29% of Publishing sales have been received from major book chains.
During fiscal year 2002 the division continued to expand into mass merchandising
outlets such as drug, department and discount stores.

(v) Competition

     (a) Home Business Division

         The Home Business Division faces significant competition from several
other direct selling companies which have more financial resources. Federal and
state funding cuts to schools affect the availability of funds to the school
libraries. The Company is unable to estimate the effect of these funding cuts on
the division's future sales to school libraries, because the magnitude of
funding cuts has yet to be determined by Congress. Management believes its
superior product line and consultant network will enable this division to be
highly competitive in its market area.

     (b) Publishing Division

         The Publishing Division faces strong competition from large U.S. and
international companies which have more financial resources. Industry sales of
juvenile paperbacks approaches $888 million annually. The Publishing Division's
sales are approximately 0.8% of industry sales. Competitive factors include
product quality, price and deliverability. Management believes its product line
will enable this division to compete well in its market area.

(vi) Seasonality

     (a) Home Business Division

         The level of sales for Home Business Division is greatest during the
Fall as individuals prepare for the Holiday season.

     (b) Publishing Division

         The level of shipments of the Company's books is greatest in the Fall
while retailers are stocking up for Holiday season.

(vii) Government Funding

         Local, state and Federal funds are important to the Home Business
Division but not to the Publishing Division. In many cities and states in which
the Company does business, school funds have been severely cut, which impacts
sales to school libraries.

(viii) Trademarks, Copyrights and Patents

         (none)

(ix) Employees

         As of April 1, 2002, the Company had 65 full-time employees and 1
part-time employee. The Company believes its relations with its employees to be
good.

                                       5
<PAGE>

Item 2. PROPERTIES

         The Company is located at 10302 E. 55th Pl, Tulsa, Oklahoma. In
January, 2002, the Company purchased for $1.8 million the warehouse and office
facilities it formerly leased. These facilities contain approximately 80,400
square feet of office and warehouse space.

         The Company's operating facility is well maintained, in good condition
and is adequately insured. Equipment items are well maintained and in good
operating condition consistent with the requirement of the Company's business.
The Company believes that its operating facility meets both its present need and
its needs for future expansion.

Item 3. LEGAL PROCEEDINGS

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

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

         There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders of the Company.

                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The common stock of EDC is traded on the Nasdaq National Market
(symbol--EDUC). The high and low closing quarterly common stock quotations for
fiscal years 2002 and 2001, as reported by the National Association of
Securities Dealers, Inc., were as follows:

<Table>
<Caption>
                                              2002                    2001
                                        -----------------       -----------------
Period                                  High         Low        High         Low
------                                  -----        ----       -----       -----

<S>                                     <C>          <C>        <C>         <C>
1st Qtr .........................       3.688        2.92        3.50       2.469
2nd Qtr .........................        5.30        3.17        4.25        2.00
3rd Qtr .........................        5.75        4.55       4.125        3.00
4th Qtr .........................        7.39        5.28        4.00        3.00
</Table>

The number of shareholders of record of EDC's common stock at April 17, 2002 was
1,121.

The Company paid a $0.04 per share annual dividend during fiscal year 2002 and a
$0.02 per share annual dividend during fiscal year 2001. The Company plans to
pay a $0.04 per share annual dividend during fiscal year 2003.

                                       6
<PAGE>

Item 6. SELECTED FINANCIAL DATA

<Table>
<Caption>
                                                                     YEARS ENDED FEBRUARY 28 (29)
                                      ------------------------------------------------------------------------------------------
                                           2002               2001               2000               1999                1998
                                      --------------     --------------     --------------     --------------     --------------

<S>                                   <C>                <C>                <C>                <C>                <C>
Net Sales                             $   20,554,451     $   17,596,848     $   16,851,261     $   16,671,385     $   19,343,362
                                      --------------     --------------     --------------     --------------     --------------

Earnings From Continuing
   Operations                         $    1,531,274     $    1,090,262     $    1,079,028     $    1,297,493     $    1,704,568
                                      --------------     --------------     --------------     --------------     --------------

Earnings From Continuing Operations
   Per Common Share
     Basic                            $          .40     $          .28     $          .25     $          .26     $          .33
                                      --------------     --------------     --------------     --------------     --------------
     Diluted                          $          .38     $          .27     $          .24     $          .26     $          .32
                                      --------------     --------------     --------------     --------------     --------------

Total Assets                          $   14,169,798     $   12,471,650     $   12,340,022     $   12,339,594     $   13,597,500
                                      --------------     --------------     --------------     --------------     --------------

Cash Dividends Declared
   Per Common Share                   $          .04     $          .02     $          .02     $          .02     $          .01
                                      --------------     --------------     --------------     --------------     --------------
</Table>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         (a)  Results of Operations

FY 2002

         The Home Business Division's net sales increased 28.8% during FY 2002
when compared with FY 2001. Each quarter of FY 2002 recorded a sales increase
when compared with the same quarter of FY 2001. A quarterly comparison of FY
2002 versus FY 2001 shows the first quarter up 28.7%, the second quarter up
42.4%, the third quarter up 22.5% and the fourth quarter up 26.6%. The Company
attributes these increases to the fact that the number of consultants selling
increased 28% during FY 2002. The Company continued offering its leadership
skills seminars throughout FY 2002. These seminars are designed to help
supervisors build their business and the seminars proved to be very popular with
these supervisors. The Home Business Division will hold its Sixth National
Convention in June, 2002, in Tulsa, Oklahoma. Management is optimistic that this
division will continue in FY 2003 the growth trend experienced in FY 2002.

         The Publishing Division's net sales increased slightly in FY 2002 when
compared with FY 2001. Increased marketing efforts contributed to the sales
increase. The Company has an aggressive in-house sales force which maintains
contact with over 9,000 customers. During FY 2002, the telesales force opened
547 new accounts compared with 679 new accounts in FY 2001. The Company offers
two display racks to assist stores in displaying the Company's products. One is
a six-foot rack with five adjustable shelves which can hold approximately 250
titles. The second rack is a four-sided rack with three levels which will hold
between 50 and 60 of the Company's Kid Kits. There were 3,545 of these
attractive racks in retail stores throughout the country at the end of FY 2002
compared with 3,428 at the end of FY 2001. The Company attends major national
trade shows throughout the country to further enhance product visibility. The
trend of prior years in which smaller independent book stores and gift stores
closed due to intense competition from larger chains continues. However, this
trend appears to be slowing. Our in-house telesales force, which contacts
smaller independent stores, reported a slight sales increase during FY 2002. Our
field representatives had a slight sales decrease during FY 2002. Sales to the
national chains continue to dominate the bookstore market. The Company's sales
to these national chains increased 4.5% during FY 2002. The Company plans to
continue its aggressive approach to the national chains in the areas of
cooperative advertising, joint promotional efforts and institutional advertising
in trade publications. Significant potential for growth exists with the national
chains and the Company is strongly committed to increasing these sales. For
these reasons, management is optimistic that the Publishing Division can
maintain its market share.

                                       7
<PAGE>

         Cost of sales increased 11.4% during FY 2002 when compared with FY
2001. Cost of sales as a percentage of gross sales was 26.7% for both FY 2002
and FY 2001. Cost of sales as a percentage of gross sales will fluctuate
depending upon the product mix being sold. Management expects the cost of sales
percentage for FY 2003 will remain consistent with FY 2002.

         Operating and selling expenses increased 12.8% during FY 2002 when
compared with FY 2001. As a percentage of gross sales, these costs were 12.2%
for FY 2002 and 12.1% for FY 2001. Contributing to the increase in operating and
selling expenses were increased payroll costs and higher freight costs.
Increased credit card costs and increased marketing costs in the Home Business
Division, the result of increased sales, also contributed to the increase.
Management expects operating and selling expenses to be approximately 11% to 13%
of gross sales in FY 2003.

         Sales commission increased 30.0% during FY 2002 when compared with FY
2001. As a percentage of gross sales, these costs were 16.0% in FY 2002 and
13.7% in FY 2001. Sales commissions as a percentage of gross sales is determined
by the product mix sold and the division that makes the sale. Commission expense
in the Publishing Division remained unchanged between FY 2002 and FY 2001.
Commission expense in the Home Business Division increased 30.9%, the result of
increased sales and the higher commission structure in the Home Business
Division.

         General and administrative expenses increased 2.2% in FY 2002 versus FY
2001. As a percentage of gross sales, these expenses were 4.8% in FY 2002 and
5.3% in FY 2001. An increase in materials and supplies contributed to the
increase in general and administrative expenses.

         Interest expense declined 80.6% in FY 2002 when compared with FY 2001.
As a percentage of gross sales, interest expense was 0.07% in FY 2002 and 0.4%
in FY 2001. The Company's note payable to the bank was paid off August 29, 2001.
This along with lower borrowings during the first six months of FY 2002 and
lower interest rates contributed to lower interest expense in FY 2002.

FY 2001

         The Home Business Division's net sales increased 15.2% during FY 2001
when compared with FY 2000. Each quarter of FY 2001 recorded a sales increase
when compared with the same quarter of FY 2000. The last two quarters of FY 2001
were especially strong when compared with the same two quarters last year. Net
sales for the third quarter of FY 2001 increased 18.5% over the third quarter of
FY 2000 while net sales for the fourth quarter of FY 2001 increased 32.7% over
the fourth quarter of FY 2000. The Company attributed this increase to several
factors including a 36% increase in the number of active consultants at the end
of FY 2001 when compared with FY 2000. In August, 2001 the major competitor of
the Home Business Division ceased operations. The Company signed up slightly
over 1,000 of this former competitor's sales representatives. The sales by these
consultants made a significant contribution to total net sales during the last
six months of FY 2001. Throughout FY 2001 the Company offered several leadership
skills seminars designed to help supervisors build their business. These
seminars proved to be very popular with the supervisors and a large number of
them participated. The Home Business Division's fifth National Convention was
held in May 2001.

                                       8
<PAGE>

         The Publishing Division's net sales declined 7.6% in FY 2001 when
compared with FY 2000. Decreased volumes contributed to the decline in net
sales. The Company's aggressive in-house telephone sales force maintained
contact with over 10,000 customers. During FY 2001, the telesales force opened
679 new accounts compared with 675 new accounts in FY 2000. The Company offered
two display racks to assist stores in displaying the Company's products. One was
a six-foot rack with five adjustable shelves which can hold approximately 250
titles. The second rack was a four-sided rack with three levels which will hold
between 50 and 60 of the Company's Kid Kits. There were 3,428 of these
attractive racks in retail stores throughout the country at the end of FY 2001
compared with 3,307 at the end of FY 2000. The Company attended major national
trade shows throughout the country to further enhance product visibility. In
recent years, numerous independent book and gift stores have been closed due to
increased competition from larger chains. During the past year, this trend
appeared to be changing in a favorable manner. In-house marketing, which
contacts smaller independent stores, reflected an actual increase in sales in
fiscal year 2001. Our field representatives had a sales decrease, but reported
that their account base was finally stabilizing. These developments have the
potential to reflect positively on future sales. National chains continue,
however, to dominate the bookstore market. In order to increase our presence
with the national chains the Company took a more aggressive approach in the
areas of cooperative advertising, joint promotional efforts and institutional
advertising in trade publications. These efforts were initiated in the last
portion of fiscal year 2001 and were dramatically increased in fiscal year 2002.
The initial response to these efforts was encouraging. There is significant
potential with national chains, and the Company is strongly committed to
increasing these sales.

         Cost of sales increased 4.3% during FY 2001 when compared with FY 2000.
Cost of sales as a percentage of gross sales was 26.7% in FY 2001 and 26.2% in
FY 2000. Cost of sales as a percentage of gross sales fluctuates with the mix of
product sold during a given year.

         Operating and selling expenses increased 2.2% during FY 2001 when
compared with FY 2000. As a percentage of gross sales, these costs were 12.1%
for both FY 2001 and FY 2000. Contributing to the increase in operating and
selling expenses was $130,000 non-recurring charge related to recruiting
expenses in the Home Business Division. Increased credit card costs in the Home
Business Division, the result of increased sales, also contributed to the
increase. Offsetting these increases were decreases in depreciation expense and
payroll costs.

         Sales commissions increased 14.6% during FY 2001 when compared to FY
2000. As a percentage of gross sales, these costs were 13.7% in FY 2001 compared
with 12.3% in FY 2000. Sales commissions as a percentage of gross sales is
determined by the product mix sold and the division which makes the sale.
Commission expense in the Publishing Division declined 10.8% for FY 2001, the
result of a decline in that division's net sales. Offsetting this decline was an
increase in the Home Business Division's commission expense of 15.5% during FY
2001, the result of increased sales and the higher commission structure in the
Home Business Division.

         General and administrative expenses decreased 12.4% in FY 2001 when
compared with FY 2000. As a percentage of gross sales, these expenses were 5.3%
and 6.1% for FY 2001 and FY 2000, respectively. A decrease in depreciation
expense contributed to the decrease in general and administrative expenses for
FY 2001.

         Interest expense increased 131.1% in FY 2001 when compared with FY
2000. As a percentage of gross sales, interest expense was 0.4% in FY 2001 and
0.2% in FY 2000. Higher interest rates and increased borrowings throughout the
year contributed to the increase in interest expense.

                                       9
<PAGE>

     (b) Financial Position

     Working capital was $7.5 million for fiscal year end 2002 and $8.1 million
at fiscal year end 2001. The net effect of a decrease in inventory, an increase
in accounts payable and the elimination of short-term bank debt resulted in the
decrease in working capital at fiscal year end 2002. Management expects its
financial position to remain strong and to increase working capital during the
next fiscal year.

     (c) Liquidity and Capital Resources

     Management believes the Company's liquidity at February 28, 2002, is
adequate. There are no known demands, commitments, events or uncertainties that
would result in a material change in the Company's liquidity during fiscal year
2003. Capital expenditures are expected to be less than $750,000 during fiscal
year 2003. These expenditures would consist primarily of software and hardware
enhancements to the Company's existing data processing equipment, property
improvements and additions to equipment in the warehouse.

     Effective June 30, 2001 the Company signed a Second Amendment to the Credit
and Security Agreement with State Bank which provides a $3,500,000 line of
credit. The line of credit is evidenced by a promissory note in the amount of
$3,500,000 payable June 30, 2002. The note bears interest at the Wall Street
Journal prime floating rate minus 0.25% payable monthly (4.50% at February 28,
2002). The note is collateralized by substantially all of the assets of the
Company. At February 28, 2002 the Company had no borrowings outstanding.
Available credit under the revolving credit agreement was $3,500,000 at February
28, 2002.

     The Company obtained and uses the credit facility to fund routine
operations. Payments are made from current cash flows. The Company plans to
renew this facility when it matures on June 30, 2002. The Company believes its
borrowing capacity under this line to be adequate for anticipated operating
levels.

     The Company generated cash from operating activities during fiscal year
2002. Accounts receivable increased during the year as several large orders in
the Publishing Division were received in January and February, and the
Publishing Division offered special dating terms during the fourth quarter with
payment due during the first quarter of fiscal year 2003. The Company plans to
continue to maximize its collection efforts in order to maintain cash flows
during fiscal year 2003.

     Inventory levels declined 11.2% from fiscal year end 2001 to fiscal year
end 2002, the result of the timing of deliveries from the Company's principal
supplier. The Company continues to monitor inventory levels to ensure that
adequate inventory is on hand to support sales as well as to meet the six to
eight month resupply requirements of its principal supplier. The Company expects
inventory levels to increase moderately next year.

     The major component of accounts payable is the amount due the Company's
principal supplier. Increases and decreases in inventory levels directly affect
the level of accounts payable. Also the timing of the purchases and the payment
terms offered by the suppliers affect the year end levels of accounts payable.
The Company expects accounts payable to increase moderately next year.
Management anticipates cash flows from operating activities to increase in the
foreseeable future.

     Cash used in investing activities during fiscal year 2002 was primarily for
the acquisition of the Company's office and warehouse facility which previously
had been leased. The Company did not incur any debt in this purchase but used
cash reserves generated by the increased sales in the Home Business Division.

     The short-term bank loan was paid off in August, 2001, using cash generated
by increased sales in the Home Business Division, whose sales are primarily
cash.

     During the year the Company continued the stock buyback program by
purchasing 139,603 shares of its common stock at a cost of $634,752. The Company
paid a divided of $0.04 per share or $154,175.

                                       10
<PAGE>
         (d) Critical Accounting Policies

         Management continually estimates and calculates the amount of
non-current inventory. The inventory arises due to the Company occasionally
purchasing book inventory in quantities in excess of what will be sold within
the normal operating cycle due to minimum order requirements of the Company's
primary supplier. These non-current inventory quantities are estimated by
management using the historical inventory turnover rates by title and were
$817,500 and $1,051,600 at February 28, 2002 and 2001, respectively.

         Management also estimates a reserve for obsolete inventory based on
inventory turnover rates and market conditions. Management has estimated and
included a reserve for obsolesce for both current and non-current inventory of
$179,990 and $92,990 as of February 28, 2002 and 2001, respectively.

         Management also estimates a reserve for sales returns. The Company's
sales return policy allows the customer to return all purchases for an exchange
or refund for up to 30 days after the customer receives the item. Management has
estimated and included a reserve for sales returns of $101,000 as of February
28, 2002 and 2001. The reserve for sales returns is estimated by management
using historical sales returns data.

         These critical accounting polices represent the best estimate of
management. Actual results could vary significantly and have a material impact
on the financial position of the Company.

         (e) New Accounting Standards

         In June 2001 the FASB issued Statement of Financial Accounting (SFAS)
No 141, Business Combinations. SFAS No. 141 addresses financial accounting and
reporting for business combinations and supersedes Accounting Principals Board
(APB) opinion No. 16, Business Combinations, and FASB No. 38, Accounting for
Preacquisition Contingencies for Purchased Enterprises. All business
combinations in the scope of SFAS No. 141 are to be accounted for using one
method, the purchase method. The Company adopted SFAS No. 141 effective July 1,
2001, as required; however, the Company has not entered into any business
combinations since the effective date of the statement.

         (f) Accounting Standards Issued But Not Yet Adopted

         In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 addresses how intangible assets that are
acquired individually or with a group of other assets (but not those acquired in
a business combination) should be accounted for in financial statements upon
their acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. The Company will adopt SFAS No. 142 in
its 2003 financial statements, as required. Since the Company has no material
intangible assets or goodwill, Management believes adoption of this new standard
will have no impact on the Company's financial statements.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment of Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. The Company adopted the provision of SFAS No.
144 as required on March 1, 2002. This standard had no effect on the Company's
financial statements upon adoption.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  The Company does not have any material market risk.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  The information required by this Item 8 begins at page F-1,
following page 18 hereof.


                                       11
<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         There have been no disagreements on any matter of accounting principles
or practices or financial statement disclosure within the twenty-four months
prior to February 28, 2002.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         (a) Identification of Directors

         The information required by this Item 10 is furnished by incorporation
by reference to all information under the caption "Election of Directors" in the
Company's definitive Proxy Statement to be filed in connection with the annual
Meeting of Shareholders to be held on July 2, 2002.

         (b) Identification of Executive Officers

         The following information is furnished with respect to each of the
executive officers of the Company, each of whom is elected by and serves at the
pleasure of the Board of Directors.

<Table>
<Caption>
                                                                           Office
       Name                             Office                           Held Since            Age
       ----                             ------                           ----------            ---
<S>                            <C>                                       <C>                   <C>
Randall W. White               Chairman of the Board,                      1986                60
                               President and Treasurer

W. Curtis Fossett              Controller and                              1989                56
                               Corporate Secretary

Michael L. Puhl                Vice President - Operations                 1998                46

Craig M. White*                Vice President - Information Systems        2001                33
</Table>

         *The prior business experience for this executive officer who has been
employed by the Company for less than five years is as follows:

     In April 2001, Craig M. White, son of Randall W. White, Chairman of the
Board, President and Chief Executive Officer, was elected Vice President of
Information Systems. Craig White graduated from Oklahoma State University in
December 1994 with a BS degree in Electrical and Computer Engineering. He joined
EDC in December 1994 as an Inventory Analyst. In July 1995 he was named Manager
- Information Systems.

         (c) Compliance With Section 16 (a) of the Exchange Act

         The information required by this Item 10 is furnished by incorporation
by reference to all information under the caption "Compliance With Section 16
(a)" in the Company's definitive Proxy Statement to be filed in connection with
the Annual Meeting of Shareholders to be held on July 2, 2002.

Item 11. EXECUTIVE COMPENSATION

         The information required by this Item 11 is furnished by incorporation
by reference to all information under the caption "Executive Compensation" in
the Company's definitive Proxy Statement to be filed in connection with the
Annual Meeting of Shareholders to be held on July 2, 2002.

                                       12
<PAGE>

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item 12 is furnished by incorporation
by reference to all information under the caption "Voting Securities and
Principal Holders Thereof" in the Company's definitive Proxy Statement to be
filed in connection with the Annual Meeting of Shareholders to be held on July
2, 2002.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         There are no relationships or related transactions required to be
disclosed.

                                       13
<PAGE>

                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

          (a) The following documents are filed as part of this report:

<Table>
<Caption>
              1. Financial Statements                                                  Page
                                                                                       ----
<S>                                                                                    <C>
              Independent Auditors' Report                                             F-1

              Balance Sheets - February 28, 2002
                  and February 28, 2001                                                F-2

              Statements of Earnings - Years ended
                  February 28, 2002, February 28, 2001
                  and February 29, 2000                                                F-3

              Statements of Shareholders' Equity -
                  Years ended February 28, 2002,
                  February 28, 2001 and February 29, 2000                              F-4

              Statements of Cash Flows -
                  Years ended February 28, 2002,
                  February 28, 2001 and February 29, 2000                              F-5

              Notes to Financial Statements                                            F-6-F-15
              Schedules have been omitted as such information is either not required or is
              included in the financial statements.
</Table>

              2. Exhibits

                 3.1    Restated Certificate of Incorporation of the Company
                        dated April 26, 1968, Certificate of Amendment there to
                        dated June 21, 1968 and By-Laws of the Company are
                        incorporated herein by reference to Exhibit 1 to
                        Registration Statement on Form 10 (File No. 0-4957).

                 3.2    Certificate of Amendment of Restated Certificate of
                        Incorporation of the Company dated August 27, 1977 and
                        By-Laws of the Company as amended are incorporated
                        herein by reference to Exhibits 20.1 and 20.2 to Form
                        10-K for fiscal year ended February 28, 1981 (File No.
                        0-4957).

                 3.3    Certificate of Amendment of Restated Certificate of
                        Incorporation of the Company dated November 17, 1986, is
                        incorporated herein by reference to Exhibit 3.3 to Form
                        10-K for fiscal year ended February 28, 1987 (File No.
                        0-4957).

                 3.4    Certificate of Amendment of Restated Certificate of
                        Incorporation of the Company dated March 22, 1996.

                                       14
<PAGE>

                 4.1    Specimens of Common Stock Certificates are incorporated
                        herein by reference to Exhibits 3.1 and 3.2 to
                        Registration Statement on Form 10-K (File No. 0-4957).

                 10.1   Educational Development Corporation Incentive Stock
                        Option Plan of 1981, is incorporated herein by reference
                        to Exhibit 10.9 to Form 10-K for fiscal year ended
                        February 28, 1982 (File No. 0-4957).

                 10.2   Agreement by and among the Company, Usborne Publishing
                        Ltd., and Hayes Books, Inc., dated May 17, 1983, is
                        incorporated herein by reference to Exhibit 10.16 to
                        Form 10-K for fiscal year ended February 29, 1984 (File
                        No. 0-4957).

                 10.3   Settlement Agreement dated August 7, 1986, by and
                        between the Company and Hayes Publishing Ltd., Cyril
                        Hayes Books, Inc. (formerly named Hayes Books, Inc.),
                        and Cyril Hayes is incorporated herein by reference to
                        Exhibit 10.1 to Form 8-K dated August 7, 1986 (File No.
                        0-4957).

                 10.4   Usborne Agreement-Contractual agreement by and between
                        the Company and Usborne Publishing Limited dated
                        November 25, 1988, is incorporated herein by reference
                        to Exhibit 10.12 to Form 10-K dated February 28, 1989
                        (File No. 0-4957).

                 10.5   Party Plan-Contractual agreement by and between the
                        Company and Usborne Publishing Limited dated March 14,
                        1989, is incorporated herein by reference to Exhibit
                        10.13 to Form 10-K dated February 28, 1989 (File No.
                        0-4957).

                 10.6   Loan Agreement dated January 18, 1990, by and between
                        the Company and State Bank & Trust, N.A., Tulsa, OK
                        (formerly WestStar Bank, N.A., Bartlesville, OK), is
                        incorporated herein by reference to Exhibit 10.11 to
                        Form 10-K dated February 28, 1990 (File No. 0-4957).

                 10.7   Lease Agreement by and between the Company and James D.
                        Dunn dated March 1, 1991, is incorporated herein by
                        reference to Exhibit 10.12 to Form 10-K dated February
                        28, 1991 (File No. 0-4957).

                 10.8   Agreement for Exchange of Contract Rights and Securities
                        by and between the Company and Robert D. Berryhill dated
                        October 1, 1990, is incorporated herein by reference to
                        Exhibit 10.1 to Form 10-K dated February 28, 1991 (File
                        No. 0-4957).

                 10.9   Amendment dated January 1, 1992 to Usborne Agreement -
                        Contractual agreement by and between the Company and
                        Usborne Publishing Limited is incorporated herein by
                        reference to Exhibit 10.13 to Form 10-K dated February
                        29, 1992 (File No. 0-4957).

                                       15
<PAGE>

                 10.10  First Amendment dated January 31, 1992 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, (formally WestStar Bank, N.A., Bartlesville, OK,) is
                        incorporated herein by reference to Exhibit 10.14 to
                        Form 10-K dated February 29, 1992 (File No. 0-4957).

                 10.11  Educational Development Corporation 1992 Incentive Stock
                        Option Plan is incorporated herein by reference to
                        Exhibit 4(c) to Registration Statement on Form S-8 (File
                        No. 33-60188)

                 10.12  Second Amendment dated June 30, 1992 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, (formally WestStar Bank, N.A., Bartlesville, OK,) is
                        incorporated herein by reference to Exhibit 10.12 to
                        Form 10-KSB dated February 28, 1994 (File No. 0-4957).

                 10.13  Third Amendment dated June 30, 1993 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, (formally WestStar Bank, N.A., Bartlesville, OK,) is
                        incorporated herein by reference to Exhibit 10.13 to
                        Form 10-KSB dated February 28, 1995 (File No. 0-4957).

                 10.14  Fourth Amendment dated June 30, 1994 to Loan Agreement
                        between the Company and State Bank & Trust, N.A, Tulsa,
                        OK, is incorporated herein by reference to Exhibit 10.14
                        to Form 10-KSB dated February 28, 1995 (File No.
                        0-4957).

                 10.15  Fifth Amendment dated March 13, 1995 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, is incorporated herein by reference to Exhibit 10.15
                        to Form 10-KSB dated February 28, 1995 (File No.
                        0-4957).

                 10.16  Sixth Amendment dated March 27, 1995 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, is incorporated herein by reference to Exhibit 10.16
                        to Form 10-KSB dated February 28, 1995 (File No.
                        0-4957).

                 10.17  Seventh Amendment dated April 27, 1995 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, is incorporated herein by reference to Exhibit 10.17
                        to Form 10-KSB dated February 28, 1995 (File No.
                        0-4957).

                 10.18  Amendment dated February 28, 1995 to the Lease Agreement
                        by and between the Company and James D. Dunn, is
                        incorporated herein by reference to Exhibit 10.18 to
                        Form 10-KSB dated February 28, 1995 (File No. 0-4957).

                 10.19  Eighth Amendment Dated July 27, 1995 to Loan Agreement
                        between the Company and State Bank & Trust, N.A., Tulsa,
                        OK, is incorporated herein by reference to Exhibit 10.19
                        to Form 10-KSB dated February 29, 1996 (File No.
                        0-4957).

                                       16
<PAGE>

                 10.20  Restated Loan Agreement dated September 25, 1995 between
                        the Company and State Bank & Trust, N.A., Tulsa, OK, is
                        incorporated herein by reference to Exhibit 10.20 to
                        Form 10-KSB dated February 29, 1996 (File No. 0-4957).

                 10.21  Restated Loan Agreement dated June 10, 1996 between the
                        Company and State Bank & Trust, N.A., Tulsa, OK, is
                        incorporated herein by reference to Exhibit 10.21 to
                        Form 10-K dated February 28, 1997 (File No. 0-4957).

                 10.22  First Amendment dated June 30, 1997 to Restated Loan
                        Agreement between the Company and State Bank & Trust,
                        N.A., Tulsa, OK, is incorporated herein by reference to
                        Exhibit 10.22 to Form 10-K dated February 28, 1998 (File
                        No. 0-4957).

                 10.23  Second Amendment dated June 30, 1998 to Restated Loan
                        Agreement between the Company and State Bank & Trust,
                        N.A., Tulsa, OK, is incorporated herein by reference to
                        Exhibit 10.23 to Form 10-K dated February 28, 1999 (File
                        No. 0-4957).

                 10.24  Restated Loan Agreement dated June 30, 1999 between the
                        Company and State Bank & Trust, N.A., Tulsa, OK, is
                        incorporated herein by reference to Exhibit 10.24 to
                        Form 10-K dated February 29, 2000 (File No. 0-4957).

                 10.25  Lease agreement by and between the Company and James D.
                        Dunn dated July 1, 1999, is incorporated herein by
                        reference to Exhibit 10.25 to Form 10-K dated February
                        29, 2000 (File No. 0-4957).

                 10.26  First Amendment dated June 30, 2000 to Restated Loan
                        Agreement between the Company and State Bank & Trust,
                        N.A., Tulsa, OK, is incorporated herein by reference to
                        Exhibit 10.25 to Form 10-K dated February 28, 2001 (File
                        No. 0-4957).

                *10.27  Second Amendment dated June 30, 2001 to Restated Loan
                        Agreement between the Company and State Bank & Trust,
                        N.A., Tulsa, OK.

                *23.    Independent Auditors' Consent

----------

                * Filed Herewith

                        (b) No reports on Form 8-K were filed during the last
                            quarter of the period covered by this report.

                                       17
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(b) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       EDUCATIONAL DEVELOPMENT CORPORATION

Date: May 6, 2002                      By /s/ W. Curtis Fossett
                                          --------------------------------------
                                          W. Curtis Fossett
                                          Principal Financial
                                          and Accounting Officer

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

Date: May 6, 2002                      /s/ Randall W. White
                                       -----------------------------------------
                                       Randall W. White
                                       Chairman of the Board
                                       President, Treasurer and
                                       Director

      May 6, 2002                      /s/ Robert D. Berryhill
                                       -----------------------------------------
                                       Robert D. Berryhill, Director

      May 6, 2002                      /s/ Dean Cosgrove
                                       -----------------------------------------
                                       G. Dean Cosgrove, Director

      May 6, 2002                      /s/ James F. Lewis
                                       -----------------------------------------
                                       James F. Lewis, Director

      May 6, 2002                      /s/ W. Curtis Fossett
                                       -----------------------------------------
                                       W. Curtis Fossett
                                       Principal Financial
                                       and Accounting Officer

                                       18
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
   Educational Development Corporation:

We have audited the accompanying balance sheets of Educational Development
Corporation (the "Company") as of February 28, 2002 and 2001, and the related
statements of earnings, shareholders' equity and cash flows for each of the
three years in the period ended February 28, 2002. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at February 28, 2002 and 2001,
and the results of its operations and its cash flows for each of the three years
in the period ended February 28, 2002 in conformity with accounting principles
generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

April 1, 2002

                                      F-1
<PAGE>

EDUCATIONAL DEVELOPMENT CORPORATION

BALANCE SHEETS
FEBRUARY 28, 2002 AND 2001
--------------------------------------------------------------------------------

<Table>
<Caption>
ASSETS                                                                     2002                2001

<S>                                                                     <C>                 <C>
CURRENT ASSETS:
   Cash and cash equivalents                                            $    906,889        $    268,271
   Accounts receivable, less allowances for doubtful accounts and
      sales returns $184,076 (2002) and $224,346 (2001)                    2,040,423           1,478,355
   Income tax receivable                                                          --              72,697
   Inventories - Net                                                       8,291,950           9,211,942
   Prepaid expenses and other assets                                         218,341             247,126
   Deferred income taxes                                                     120,700              97,800
                                                                        ------------        ------------
             Total current assets                                         11,578,303          11,376,191

INVENTORIES - Net                                                            683,880           1,004,980

PROPERTY, PLANT AND EQUIPMENT - Net                                        1,907,615              84,179
                                                                        ------------        ------------
                                                                        $ 14,169,798        $ 12,465,350
                                                                        ============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Note payable to bank                                                 $         --        $  1,084,000
   Accounts payable                                                        3,380,102           1,703,151
   Accrued salaries and commissions                                          352,756             325,661
   Other current liabilities                                                 244,846             118,711
   Income tax payable                                                         63,753                  --
                                                                        ------------        ------------
             Total current liabilities                                     4,041,457           3,231,523

DEFERRED INCOME TAXES                                                         13,000              18,000

COMMITMENTS

SHAREHOLDERS' EQUITY:
   Common stock, $0.20 par value; Authorized 6,000,000 shares;
      Issued 5,429,240 shares;
      Outstanding 3,822,117 (2002) and 3,911,400 (2001) shares             1,085,848           1,085,848
   Capital in excess of par value                                          4,417,507           4,413,627
   Retained earnings                                                       9,647,723           8,270,624
                                                                        ------------        ------------
                                                                          15,151,078          13,770,099
   Less treasury stock, at cost                                           (5,035,737)         (4,554,272)
                                                                        ------------        ------------
                                                                          10,115,341           9,215,827
                                                                        ------------        ------------
                                                                        $ 14,169,798        $ 12,465,350
                                                                        ============        ============
</Table>

See notes to financial statements.

                                      F-2
<PAGE>

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF EARNINGS
YEARS ENDED FEBRUARY 28, 2002 AND 2001, AND FEBRUARY 29, 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                           2002                2001                2000

<S>                                    <C>                 <C>                 <C>
GROSS SALES                            $ 30,457,695        $ 27,260,879        $ 26,613,943
   Less discounts and allowances         (9,903,244)         (9,664,031)         (9,762,682)
                                       ------------        ------------        ------------
           Net sales                     20,554,451          17,596,848          16,851,261
COST OF SALES                             8,121,522           7,287,920           6,984,387
                                       ------------        ------------        ------------
           Gross margin                  12,432,929          10,308,928           9,866,874
                                       ------------        ------------        ------------

OPERATING EXPENSES:
   Operating and selling                  3,717,465           3,295,164           3,224,442
   Sales commissions                      4,867,970           3,743,954           3,266,733
   General and administrative             1,463,631           1,432,030           1,634,027
   Interest                                  20,343             104,925              45,401
                                       ------------        ------------        ------------
                                         10,069,409           8,576,073           8,170,603
                                       ------------        ------------        ------------

OTHER INCOME                                 76,554              37,507              51,757
                                       ------------        ------------        ------------

EARNINGS BEFORE INCOME TAXES              2,440,074           1,770,362           1,748,028

INCOME TAXES                                908,800             680,100             669,000
                                       ------------        ------------        ------------

NET EARNINGS                           $  1,531,274        $  1,090,262        $  1,079,028
                                       ============        ============        ============

BASIC AND DILUTED EARNINGS
   PER SHARE:
   Basic                               $       0.40        $       0.28        $       0.25
                                       ============        ============        ============
   Diluted                             $       0.38        $       0.27        $       0.24
                                       ============        ============        ============

WEIGHTED AVERAGE NUMBER OF
   COMMON AND EQUIVALENT SHARES
   OUTSTANDING:
   Basic                                  3,867,221           3,955,527           4,364,608
                                       ============        ============        ============
   Diluted                                4,061,956           4,042,642           4,426,836
                                       ============        ============        ============
</Table>

See notes to financial statements.

                                      F-3
<PAGE>

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED FEBRUARY 28, 2002 AND 2001, AND FEBRUARY 29, 2000

<Table>
<Caption>
                                                  COMMON STOCK
                                           (PAR VALUE $.20 PER SHARE)
                                           --------------------------                                        TREASURY STOCK
                                            NUMBER OF                   CAPITAL IN                       --------------------------
                                             SHARES                     EXCESS OF        RETAINED        NUMBER OF
                                             ISSUED        AMOUNT       PAR VALUE        EARNINGS          SHARES         AMOUNT

<S>                                         <C>         <C>            <C>             <C>               <C>           <C>
BALANCE, MARCH 1, 1999                      5,429,240   $  1,085,848   $  4,410,066    $  6,266,424         555,986    $ (1,722,960)

   Issuance of treasury stock                      --             --             --              --            (200)            600
   Purchases of treasury stock                     --             --             --              --         874,087      (2,516,232)
   Sales of treasury stock                         --             --             --              --        (168,022)        455,946
   Dividends paid ($0.02/share)                    --             --             --         (86,311)             --              --
   Net earnings                                    --             --             --       1,079,028              --              --
                                            ---------   ------------   ------------    ------------       ---------    ------------
BALANCE, FEBRUARY 29, 2000                  5,429,240      1,085,848      4,410,066       7,259,141       1,261,851      (3,782,646)

   Issuance of treasury stock                      --             --             --              --            (583)          1,700
   Purchases of treasury stock                     --             --             --              --         289,252        (856,215)
   Sales of treasury stock                         --             --          3,561              --         (32,680)         82,889
   Dividends paid ($0.02/share)                    --             --             --         (78,779)             --              --
   Net earnings                                    --             --             --       1,090,262              --              --
                                            ---------   ------------   ------------    ------------       ---------    ------------
BALANCE, FEBRUARY 28, 2001                  5,429,240      1,085,848      4,413,627       8,270,624       1,517,840      (4,554,272)

   Issuance of treasury stock                      --             --          1,327              --          (1,000)          3,023
   Purchases of treasury stock                     --             --             --              --         139,603        (634,752)
   Sales of treasury stock                         --             --         18,480              --         (31,520)         95,812
   Exercise of options ($1.50 - $3.00/
      share)                                       --             --        (15,927)             --         (17,800)         54,452
   Dividends paid ($0.04/share)                    --             --             --        (154,175)             --              --
   Net earnings                                    --             --             --       1,531,274              --              --
                                            ---------   ------------   ------------    ------------       ---------    ------------
BALANCE, FEBRUARY 28, 2002                  5,429,240   $  1,085,848   $  4,417,507    $  9,647,723       1,607,123    $ (5,035,737)
                                            =========   ============   ============    ============       =========    ============

<Caption>
                                           SHAREHOLDERS'
                                              EQUITY

<S>                                        <C>
BALANCE, MARCH 1, 1999                      $ 10,039,378

   Issuance of treasury stock                        600
   Purchases of treasury stock                (2,516,232)
   Sales of treasury stock                       455,946
   Dividends paid ($0.02/share)                  (86,311)
   Net earnings                                1,079,028
                                            ------------
BALANCE, FEBRUARY 29, 2000                     8,972,409

   Issuance of treasury stock                      1,700
   Purchases of treasury stock                  (856,215)
   Sales of treasury stock                        86,450
   Dividends paid ($0.02/share)                  (78,779)
   Net earnings                                1,090,262
                                            ------------
BALANCE, FEBRUARY 28, 2001                     9,215,827

   Issuance of treasury stock                      4,350
   Purchases of treasury stock                  (634,752)
   Sales of treasury stock                       114,292
   Exercise of options ($1.50 - $3.00/
      share)                                      38,525
   Dividends paid ($0.04/share)                 (154,175)
   Net earnings                                1,531,274
                                            ------------
BALANCE, FEBRUARY 28, 2002                  $ 10,115,341
                                            ============
</Table>

See notes to financial statements.

                                      F-4
<PAGE>


EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 28, 2002 AND 2001, AND FEBRUARY 29, 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                  2002           2001           2000

<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings                                                $ 1,531,274    $ 1,090,262    $ 1,079,028
   Adjustments to reconcile net earnings to net cash
      provided by operating activities:
      Depreciation and amortization                                120,738         59,662        299,179
      Loss on disposal of property and equipment                        --             --          1,199
      Deferred income taxes                                        (27,900)        75,700        (90,000)
      Provision for doubtful accounts and sales returns            991,813      1,381,704        984,575
      Stock issued for awards                                        4,350          1,700            600
      Changes in assets and liabilities:
         Accounts and income tax receivable                     (1,481,184)      (912,302)    (1,107,336)
         Inventories                                             1,241,092       (572,826)       (97,422)
         Prepaid expenses and other assets                         (26,456)       (26,745)          (349)
         Accounts payable, accrued salaries and commissions,
            and other current liabilities                        1,830,181        104,833        554,774
         Income tax payable                                         63,753        (46,923)        46,923
                                                               -----------    -----------    -----------
            Total adjustments                                    2,716,387         64,803        592,143
                                                               -----------    -----------    -----------
            Net cash provided by operating activities            4,247,661      1,155,065      1,671,171
                                                               -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                          (1,888,933)       (58,571)       (43,184)
                                                               -----------    -----------    -----------
             Net cash used in investing activities              (1,888,933)       (58,571)       (43,184)
                                                               -----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings on revolving credit agreement                      2,347,000      7,703,000      6,899,000
   Payments on revolving credit agreement                       (3,431,000)    (7,897,000)    (6,377,000)
   Cash received from exercise of stock options                     38,525             --             --
   Cash received from sale of treasury stock                       114,292         86,450        455,946
   Cash paid to acquire treasury stock                            (634,752)      (856,215)    (2,516,232)
   Dividends paid                                                 (154,175)       (78,779)       (86,311)
                                                               -----------    -----------    -----------
             Net cash used in financing activities              (1,720,110)    (1,042,544)    (1,624,597)
                                                               -----------    -----------    -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                          638,618         53,950          3,390

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                       268,271        214,321        210,931
                                                               -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                         $   906,889    $   268,271    $   214,321
                                                               ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH  FLOW
   INFORMATION:
   Cash paid for interest                                      $    26,392    $   105,348    $    41,251
                                                               ===========    ===========    ===========
   Cash paid for income taxes                                  $   800,250    $   724,020    $   657,000
                                                               ===========    ===========    ===========
</Table>

See notes to financial statements.

                                      F-5
<PAGE>

EDUCATIONAL DEVELOPMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 2002 AND 2001, AND FEBRUARY 29, 2000
--------------------------------------------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF BUSINESS - Educational Development Corporation (the "Company")
     distributes books and publications through its Publishing and Usborne Books
     at Home Divisions. The Company is the United States ("U.S.") trade
     publisher of books and related matters, which are published primarily in
     England and distributed to book, toy and gift stores, libraries and home
     educators. The Company is also involved in the production and publishing of
     new book titles. The English publishing company is the Company's primary
     supplier. The Company sells to its customers, located throughout the U.S.,
     primarily on standard credit terms.

     ESTIMATES - The Company's financial statements were prepared in conformity
     with accounting principles generally accepted in the United States of
     America, which requires management to make estimates and assumptions that
     affect the amounts and disclosures in the financial statements. Actual
     results could differ from these estimates.

     CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand
     and cash on deposit in banks.

     ACCOUNTS RECEIVABLE - Accounts receivable at February 28, 2002 and 2001,
     include approximately $26,000 and $57,000, respectively, due from directors
     and related parties of the Company.

     INVENTORIES - Inventories are stated at the lower of cost or market. Cost
     is determined using the first-in, first-out ("FIFO") method.

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
     cost and depreciated using the straight-line method over the estimated
     useful lives of the related assets.

     INCOME TAXES - The Company records deferred income taxes for temporary
     differences between the financial reporting and tax bases of the Company's
     assets and liabilities.

     INCOME RECOGNITION - Sales are recorded when products are shipped. At the
     time sales are recognized for certain products under specified conditions,
     estimated allowances for returns are recorded based on prior experience.

     ADVERTISING COSTS - The Company expenses advertising costs as incurred.

     EARNINGS PER SHARE - Basic earnings per share ("EPS") is computed by
     dividing net income by the weighted average number of common shares
     outstanding during the period. Diluted EPS is based on the combined
     weighted average number of common shares outstanding and dilutive potential
     common shares issuable which include, where appropriate, the assumed
     exercise of options. In computing diluted EPS the Company has utilized the
     treasury stock method.

                                      F-6
<PAGE>

     The following reconciles the diluted earnings per share:

<Table>
<Caption>
                                        YEAR ENDED
                                       FEBRUARY 28,        YEAR ENDED
                                 -----------------------  FEBRUARY 29,
                                    2002         2001         2000

<S>                              <C>          <C>          <C>
DILUTED EARNINGS PER SHARE:
   Net earnings applicable to
      common shareholders        $1,531,274   $1,090,262   $1,079,028
                                 ==========   ==========   ==========

SHARES:
   Weighted average shares
      outstanding - basic         3,867,221    3,955,527    4,364,608
   Assumed exercise of options      194,735       87,115       62,228
                                 ----------   ----------   ----------
   Weighted average shares
      outstanding - diluted       4,061,956    4,042,642    4,426,836
                                 ==========   ==========   ==========
DILUTED EARNINGS PER SHARE       $     0.38   $     0.27   $     0.24
                                 ==========   ==========   ==========
</Table>

     Stock options representing 249,600, and 273,400 of common shares for the
     years ended 2001 and 2000, respectively, were not included in calculation
     of diluted earnings per share since the effect was antidilutive. There were
     no stock options for the year ended 2002 excluded from the diluted earnings
     per share calculation.

     FAIR VALUE OF FINANCIAL INSTRUMENTS - For cash and cash equivalents,
     accounts receivable and accounts payable, the carrying amount approximates
     fair value because of the short maturity of those instruments. The fair
     value of the Company's note payable to bank is estimated to approximate
     carrying value based on the borrowing rates currently available to the
     Company for bank loans with similar terms and maturities.

     LONG-LIVED ASSET IMPAIRMENT - The Company reviews the value of long-lived
     assets and certain identifiable intangibles for impairment whenever events
     or changes in circumstances indicate that the carrying amount of an asset
     may not be recoverable based on estimated future cash flows.

     STOCK-BASED COMPENSATION - The Company accounts for stock-based
     compensation using the intrinsic value method prescribed in Accounting
     Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
     Employees. Compensation cost for stock options, if any, is measured as the
     excess of the quoted market price of the Company's stock at the date of
     grant over the amount an employee must pay to acquire the stock. The
     Company has adopted the disclosure requirements of Statement of Financial
     Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
     Compensation.

     NEW ACCOUNTING STANDARDS - In June 2001 the FASB issued SFAS No. 141,
     Business Combinations. SFAS No. 141 addresses financial accounting and
     reporting for business combinations and supersedes APB Opinion No. 16,
     Business Combinations, and FASB No. 38, Accounting for Preacquisition
     Contingencies for Purchased Enterprises. All business combinations in the
     scope of SFAS No. 141 are to be accounted for using one method, the
     purchase method. The Company adopted SFAS No. 141 effective July 1, 2001,
     as required; however, the Company has not entered into any business
     combinations since the effective date of the statement.

                                      F-7
<PAGE>

     ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED - In June 2001, the FASB
     issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142
     addresses how intangible assets that are acquired individually or with a
     group of other assets (but not those acquired in a business combination)
     should be accounted for in financial statements upon their acquisition.
     This statement also addresses how goodwill and other intangible assets
     should be accounted for after they have been initially recognized in the
     financial statements. The Company will adopt SFAS No. 142 in its 2003
     financial statements, as required. Since the Company has no material
     intangible assets or goodwill, management believes adoption of this new
     standard will have no impact on the Company's financial statements.

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
     or Disposal of Long-Lived Assets, which is effective for fiscal years
     beginning after December 15, 2001. The Company adopted the provisions of
     SFAS No. 144 as required on March 1, 2002. This standard had no effect on
     the Company's financial statements upon adoption.

     RECLASSIFICATIONS - Certain prior year amounts have been reclassed to
     conform with the 2002 presentation.

2.   INVENTORIES

     Inventories consist of the following:

<Table>
<Caption>
                                       FEBRUARY 28,
                                --------------------------
                                   2002           2001

<S>                             <C>            <C>
Current:
   Book inventory               $ 8,338,320    $ 9,258,312
   Reserve for obsolescence         (46,370)       (46,370)
                                -----------    -----------
Inventories net - current       $ 8,291,950    $ 9,211,942
                                ===========    ===========

Non-current:
   Book inventory               $   817,500    $ 1,051,600
   Reserve for obsolescence        (133,620)       (46,620)
                                -----------    -----------
Inventories net - non-current   $   683,880    $ 1,004,980
                                ===========    ===========
</Table>

     The Company occasionally purchases book inventory in quantities in excess
     of what will be sold within the normal operating cycle due to minimum order
     requirements of the Company's primary supplier. These amounts are included
     in non-current inventory.

                                      F-8
<PAGE>

3.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following:

<Table>
<Caption>
                                                  ESTIMATED            FEBRUARY 28,
                                                   USEFUL      --------------------------
                                                   LIVES          2002           2001

<S>                                              <C>           <C>            <C>
Land                                                      --   $   250,000    $        --
Building                                            30 years     1,540,000             --
Machinery and equipment                          2 - 5 years     1,439,057      1,349,715
Furniture and fixtures                           2 - 5 years        56,814         56,814
Leasehold improvements                           2 - 5 years        67,778         67,778
                                                               -----------    -----------
                                                                 3,353,649      1,474,307
Less accumulated depreciation and amortization                  (1,446,034)    (1,390,128)
                                                               -----------    -----------
                                                               $ 1,907,615    $    84,179
                                                               ===========    ===========
</Table>

4.   NOTE PAYABLE

     The note payable to bank is under a $3,500,000 revolving credit agreement,
     with interest payable monthly at prime minus .25% (8.25% at February 28,
     2001), collateralized by substantially all assets of the Company, maturing
     on June 30, 2002. At February 28, 2001, the Company had borrowings of
     $1,084,000 under the revolving credit agreement. There were no borrowings
     outstanding under the revolving credit agreement at February 28, 2002.
     Available credit under the revolving credit agreement was $3,500,000 at
     February 28, 2002. The agreement contains provisions that require the
     Company to maintain specified financial ratios, restrict transactions with
     related parties, prohibit mergers or consolidation, disallow additional
     debt, and limit the amount of compensation, salaries, investments, capital
     expenditures and leasing transactions. The Company is in compliance with
     all restrictive covenants at February 28, 2002. The Company intends to
     renew the bank agreement or obtain other financing upon maturity.

     For each of the three years in the period ended February 28, 2002, the
     highest amount of short-term borrowings, the average amount of borrowings
     under these short-term notes, and the weighted average interest rates are
     as follows:

<Table>
<Caption>
                                            YEAR ENDED
                                           FEBRUARY 28,         YEAR ENDED
                                    ------------------------   FEBRUARY 29,
                                       2002          2001          2000

<S>                                 <C>           <C>           <C>
Note payable to bank:
   Largest amount borrowed          $1,112,000    $1,733,000    $1,369,000
   Average amount borrowed             621,613     1,232,000       650,702
   Weighted average interest rate         7.36%          9.0%          8.0%
</Table>

                                      F-9
<PAGE>

5.   INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes. The tax
     effects of significant items comprising the Company's net deferred tax
     assets and liabilities as of February 28, 2002 and 2001 are as follows:

<Table>
<Caption>
                                                            FEBRUARY 28,
                                                       ----------------------
                                                         2002         2001

<S>                                                    <C>          <C>
Current:
   Deferred tax assets:
      Allowance for doubtful accounts                  $  31,600    $  46,800
      Allowance for obsolescence                          79,100       46,000
      Expenses deducted on the cash basis for income
         tax purposes                                     22,800       22,800
      Other                                                3,800        5,000
                                                       ---------    ---------
   Deferred tax assets                                   137,300      120,600
                                                       ---------    ---------
   Deferred tax liability - Software development         (16,600)     (22,800)
                                                       ---------    ---------
Deferred tax asset - Net                               $ 120,700    $  97,800
                                                       =========    =========

Noncurrent:
   Deferred tax assets:
      Property and equipment                           $      --    $   6,300
      Other                                                3,800           --
                                                       ---------    ---------
           Deferred tax assets                             3,800        6,300
                                                       ---------    ---------
   Deferred tax liabilities:
      Software development                               (13,900)     (24,300)
      Property and equipment                              (2,900)          --
                                                       ---------    ---------
           Deferred tax liability                        (16,800)     (24,300)
                                                       ---------    ---------
Deferred tax liability - Net                           $ (13,000)   $ (18,000)
                                                       =========    =========
</Table>

     Management has determined that no valuation allowance is necessary to
     reduce the deferred tax assets as it is more likely than not that such
     assets are realizable.

                                      F-10
<PAGE>

     The components of income tax expense are as follows:

<Table>
<Caption>
                                 YEAR ENDED
                                FEBRUARY 28,         YEAR ENDED
                           ----------------------   FEBRUARY 29,
                             2002         2001         2000

<S>                        <C>          <C>          <C>
Current:
   Federal                 $ 796,200    $ 513,800    $ 645,200
   State                     140,500       90,600      113,800
                           ---------    ---------    ---------
                             936,700      604,400      759,000

Deferred:
   Federal                   (23,700)      64,300      (76,500)
   State                      (4,200)      11,400      (13,500)
                           ---------    ---------    ---------
                             (27,900)      75,700      (90,000)
                           ---------    ---------    ---------
Total income tax expense   $ 908,800    $ 680,100    $ 669,000
                           =========    =========    =========
</Table>

     The following reconciles the Company's expected income tax expense
     utilizing statutory tax rates to the actual tax expense:

<Table>
<Caption>
                                                     YEAR ENDED
                                                    FEBRUARY 28,        YEAR ENDED
                                               ----------------------  FEBRUARY 29,
                                                 2002         2001        2000

<S>                                            <C>          <C>         <C>
Tax expense at federal statutory rate          $ 830,000    $ 602,000   $ 594,000
State income tax, net of federal tax benefit      96,000       72,000      70,000
Other                                            (17,200)       6,100       5,000
                                               ---------    ---------   ---------
                                               $ 908,800    $ 680,100   $ 669,000
                                               =========    =========   =========
</Table>

6.   EMPLOYEE BENEFIT PLAN

     The Company has a profit sharing plan which incorporates the provisions of
     Section 401(k) of the Internal Revenue Code. The 401(k) plan covers
     substantially all employees meeting specific age and length of service
     requirements. Matching contributions from the Company are discretionary and
     amounted to $52,258, $40,557, and $33,477 in fiscal years 2002, 2001, and
     2000, respectively.

7.   COMMITMENTS

     The Company leased its office and warehouse facilities under a
     noncancelable operating lease until January 2002. On January 7, 2002, the
     Company purchased its leased office and warehouse facilities for $1,790,000
     and simultaneously terminated its lease. Total rent expense related to
     these facilities was $204,000 in fiscal 2002, $240,000 in fiscal 2001, and
     $232,980 in fiscal 2000.

     At February 28, 2002, the Company had outstanding commitments to purchase
     inventory from its primary vendor totaling approximately $4,559,000.

                                      F-11
<PAGE>

8.   CAPITAL STOCK, STOCK OPTIONS AND WARRANTS

     In June 1992, the Board of Directors adopted the 1992 Incentive Stock
     Option Plan (the "Incentive Plan"). A total of 1,000,000 stock options are
     authorized to be granted under the Incentive Plan.

     Options granted under the Incentive Plan vest at date of grant and are
     exercisable up to ten years from the date of grant. The exercise price on
     options granted is equal to the market price at the date of grant. Options
     outstanding at February 28, 2002 expire beginning in April 2003 through
     January 2012.

     A summary of the status of the Company's Incentive Plan as of February 28,
     2002 and 2001, and February 29, 2000, and changes during the years then
     ended is presented below:

<Table>
<Caption>
                                     2002                 2001                2000
                              ------------------   ------------------   ------------------
                                        WEIGHTED             WEIGHTED             WEIGHTED
                                        AVERAGE              AVERAGE              AVERAGE
                                        EXERCISE             EXERCISE             EXERCISE
                              SHARES     PRICE     SHARES     PRICE     SHARES     PRICE

<S>                           <C>       <C>        <C>       <C>        <C>       <C>
Outstanding at
   Beginning of Year          599,600    $3.17     507,400    $3.42     490,000    $3.51

Granted                        10,000     5.50     136,000     2.28      40,000     2.50

Exercised/canceled            (19,000)   (2.28)    (43,800)   (3.30)    (22,600)   (3.77)
                              -------    -----     -------    -----     -------    -----
Outstanding at End of Year    590,600    $3.24     599,600    $3.17     507,400    $3.42
                              =======    =====     =======    =====     =======    =====
</Table>

     The following table summarizes information about stock options outstanding
     at February 28, 2002:

<Table>
<Caption>
                           NUMBER
  RANGE OF               OUTSTANDING                  WEIGHTED
  EXERCISE             AT FEBRUARY 28,            AVERAGE REMAINING          WEIGHTED AVERAGE
   PRICES                  2002                CONTRACTUAL LIFE (YEARS)       EXERCISE PRICE
  --------             ---------------         ------------------------      ----------------

<S>                    <C>                     <C>                           <C>
$1.375 - $1.50            74,500                         1                        $1.40
$ 1.51 - $2.50           146,000                         8                         2.26
$ 2.51 - $3.13           111,700                         3                         3.11
$ 3.81                    15,000                         6                         3.81
$ 4.00                    98,200                         6                         4.00
$ 4.63                   135,200                         6                         4.63
$ 5.50                    10,000                        10                         5.50
                         -------
                         590,600
                         =======
</Table>

     All options outstanding are exercisable at February 28, 2002.

                                      F-12
<PAGE>

     The Company applies APB Opinion No. 25 and related interpretations in
     accounting for its Incentive Plan. Accordingly, no compensation cost has
     been recognized for its Incentive Plan. Had compensation cost for the
     Company's Incentive Plan been determined based on the fair value at the
     grant dates for awards under the Incentive Plan consistent with the method
     prescribed by SFAS No. 123, the Company's net earnings and earnings per
     share for the years ended February 28, 2002 and 2001, and February 29, 2000
     would have been reduced to the pro forma amounts indicated below:

<Table>
<Caption>
                                        2002            2001            2000

<S>                                 <C>             <C>             <C>
Net earnings - as reported          $   1,531,274   $   1,090,262   $   1,079,028
                                    =============   =============   =============
Net earnings - pro forma            $   1,526,164   $     923,805   $   1,038,582
                                    =============   =============   =============

Earnings per share - as reported:
   Basic                            $        0.40   $        0.28   $        0.25
                                    =============   =============   =============
   Diluted                          $        0.38   $        0.27   $        0.24
                                    =============   =============   =============

Earnings per share - pro forma:
   Basic                            $        0.39   $        0.23   $        0.24
                                    =============   =============   =============
   Diluted                          $        0.38   $        0.23   $        0.24
                                    =============   =============   =============
</Table>

     The fair value of options granted under the Incentive Plan was estimated on
     the date of grant using the Black-Scholes option-pricing model. The
     following assumptions were used for options granted in 2002: no dividend
     yield, expected volatility of 35.60%, risk free interest rate of 1.98%, and
     expected life of one year; the following assumptions were used for options
     granted in 2001: no dividend yield, expected volatility of 84%, risk free
     interest rates between 5.13% and 6.16%, and expected lives of ten years;
     the following assumptions were used for options granted in 2000: no
     dividend yield, expected volatility of 45%, risk free interest rate of
     5.7%, and expected lives of ten years.

                                      F-13
<PAGE>

9.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of the quarterly results of operations for the
     years ended February 28, 2002 and 2001, and February 29, 2000:

<Table>
<Caption>
                                                               BASIC     DILUTED
                                                              EARNINGS   EARNINGS
                     NET SALES   GROSS MARGIN   NET EARNINGS  PER SHARE  PER SHARE

<S>                 <C>           <C>            <C>          <C>        <C>
2002
   First quarter    $ 4,800,600   $ 2,827,800    $ 369,5000   $   0.09   $   0.09
   Second quarter     5,108,400     3,000,300       423,800       0.11       0.11
   Third quarter      6,007,900     3,772,700       485,000       0.13       0.12
   Fourth quarter     4,637,551     2,832,129       252,974       0.07       0.06
                    -----------   -----------    ----------   --------   --------
Total year          $20,554,451   $12,432,929   $ 1,531,274   $   0.40   $   0.38
                    ===========   ===========   ===========   ========   ========

2001
   First quarter    $ 4,250,400   $ 2,453,000    $ 276,1000   $   0.07   $   0.07
   Second quarter     4,414,600     2,464,300       352,700       0.09       0.09
   Third quarter      5,245,600     3,180,300       381,900       0.10       0.10
   Fourth quarter     3,686,248     2,211,328        79,562       0.02       0.01
                    -----------   -----------    ----------   --------   --------
Total year          $17,596,848   $10,308,928   $ 1,090,262   $   0.28   $   0.27
                    ===========   ===========   ===========   ========   ========

2000
   First quarter    $ 4,122,100   $ 2,395,600    $ 290,3000   $   0.06   $   0.06
   Second quarter     4,202,500     2,397,400       313,600       0.07       0.07
   Third quarter      5,012,800     3,029,400       419,800       0.10       0.10
   Fourth quarter     3,513,861     2,044,474        55,328       0.02       0.01
                    -----------   -----------    ----------   --------   --------
Total year          $16,851,261   $ 9,866,874   $ 1,079,028   $   0.25   $   0.24
                    ===========   ===========   ===========   ========   ========
</Table>

     During the fourth quarter of fiscal years 2001 and 2000, the Company
     corrected the depreciation calculated on certain property and equipment,
     which resulted in a decrease and an increase, respectively, in depreciation
     expense of approximately $30,000.

10.  BUSINESS SEGMENTS

     The Company has two reportable segments: Publishing and Usborne Books at
     Home ("UBAH"). These reportable segments are business units that offer
     different methods of distribution to different types of customers. They are
     managed separately based on the fundamental differences in their
     operations. The Publishing Division markets its products to retail
     accounts, which include book, toy and gift stores, school supply and
     museums, through commissioned sales representatives, trade and specialty
     wholesalers and an internal telesales group. The UBAH Division markets its
     product line through a network of independent sales consultants through a
     combination of direct sales, home shows and book fairs. The UBAH Division
     also distributes to school and public libraries.

                                      F-14
<PAGE>

     The accounting policies of the segments are the same as those described in
     the summary of significant accounting policies. The Company evaluates
     segment performance based on operating profits of the segments which is
     defined as segment net sales reduced by direct cost of sales and direct
     expenses. Corporate expenses, including interest and depreciation, and
     income taxes are not allocated to the segments. The Company's assets are
     not allocated on a segment basis.

     Information by industry segment for the years ended February 28, 2002 and
     2001, and February 29, 2000 is set forth below:

<Table>
<Caption>
                                      PUBLISHING       UBAH         OTHER           TOTAL

<S>                                   <C>           <C>           <C>            <C>
2002

Net sales                             $ 7,362,332   $13,192,119   $        --    $20,554,451
Earnings (loss) before income taxes     2,579,082     2,845,712    (2,984,720)     2,440,074

2001

Net sales                             $ 7,353,750   $10,243,098   $        --    $17,596,848
Earnings (loss) before income taxes     2,577,593     2,234,031    (3,041,262)     1,770,362

2000

Net sales                             $ 7,960,891   $ 8,890,370   $        --    $16,851,261
Earnings (loss) before income taxes     2,811,887     2,181,300    (3,245,159)     1,748,028
</Table>

                                     ******

                                      F-15
<PAGE>
                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------

<S>            <C>
 3.1           Restated Certificate of Incorporation of the Company dated April
               26, 1968, Certificate of Amendment there to dated June 21, 1968
               and By-Laws of the Company are incorporated herein by reference
               to Exhibit 1 to Registration Statement on Form 10 (File No.
               0-4957).

 3.2           Certificate of Amendment of Restated Certificate of Incorporation
               of the Company dated August 27, 1977 and By-Laws of the Company
               as amended are incorporated herein by reference to Exhibits 20.1
               and 20.2 to Form 10-K for fiscal year ended February 28, 1981
               (File No. 0-4957).

 3.3           Certificate of Amendment of Restated Certificate of Incorporation
               of the Company dated November 17, 1986, is incorporated herein by
               reference to Exhibit 3.3 to Form 10-K for fiscal year ended
               February 28, 1987 (File No. 0-4957).

 3.4           Certificate of Amendment of Restated Certificate of Incorporation
               of the Company dated March 22, 1996.

 4.1           Specimens of Common Stock Certificates are incorporated herein by
               reference to Exhibits 3.1 and 3.2 to Registration Statement on
               Form 10-K (File No. 0-4957).

 10.1          Educational Development Corporation Incentive Stock Option Plan
               of 1981, is incorporated herein by reference to Exhibit 10.9 to
               Form 10-K for fiscal year ended February 28, 1982 (File No.
               0-4957).

 10.2          Agreement by and among the Company, Usborne Publishing Ltd., and
               Hayes Books, Inc., dated May 17, 1983, is incorporated herein by
               reference to Exhibit 10.16 to Form 10-K for fiscal year ended
               February 29, 1984 (File No. 0-4957).

 10.3          Settlement Agreement dated August 7, 1986, by and between the
               Company and Hayes Publishing Ltd., Cyril Hayes Books, Inc.
               (formerly named Hayes Books, Inc.), and Cyril Hayes is
               incorporated herein by reference to Exhibit 10.1 to Form 8-K
               dated August 7, 1986 (File No. 0-4957).

 10.4          Usborne Agreement-Contractual agreement by and between the
               Company and Usborne Publishing Limited dated November 25, 1988,
               is incorporated herein by reference to Exhibit 10.12 to Form 10-K
               dated February 28, 1989 (File No. 0-4957).

 10.5          Party Plan-Contractual agreement by and between the Company and
               Usborne Publishing Limited dated March 14, 1989, is incorporated
               herein by reference to Exhibit 10.13 to Form 10-K dated February
               28, 1989 (File No. 0-4957).

 10.6          Loan Agreement dated January 18, 1990, by and between the Company
               and State Bank & Trust, N.A., Tulsa, OK (formerly WestStar Bank,
               N.A., Bartlesville, OK), is incorporated herein by reference to
               Exhibit 10.11 to Form 10-K dated February 28, 1990 (File No.
               0-4957).

 10.7          Lease Agreement by and between the Company and James D. Dunn
               dated March 1, 1991, is incorporated herein by reference to
               Exhibit 10.12 to Form 10-K dated February 28, 1991 (File No.
               0-4957).

 10.8          Agreement for Exchange of Contract Rights and Securities by and
               between the Company and Robert D. Berryhill dated October 1,
               1990, is incorporated herein by reference to Exhibit 10.1 to Form
               10-K dated February 28, 1991 (File No. 0-4957).

 10.9          Amendment dated January 1, 1992 to Usborne Agreement -
               Contractual agreement by and between the Company and Usborne
               Publishing Limited is incorporated herein by reference to Exhibit
               10.13 to Form 10-K dated February 29, 1992 (File No. 0-4957).
</Table>

<PAGE>

<Table>
<S>            <C>
 10.10         First Amendment dated January 31, 1992 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, (formally
               WestStar Bank, N.A., Bartlesville, OK,) is incorporated herein by
               reference to Exhibit 10.14 to Form 10-K dated February 29, 1992
               (File No. 0-4957).

 10.11         Educational Development Corporation 1992 Incentive Stock Option
               Plan is incorporated herein by reference to Exhibit 4(c) to
               Registration Statement on Form S-8 (File No. 33-60188)

 10.12         Second Amendment dated June 30, 1992 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, (formally
               WestStar Bank, N.A., Bartlesville, OK,) is incorporated herein by
               reference to Exhibit 10.12 to Form 10-KSB dated February 28, 1994
               (File No. 0-4957).

 10.13         Third Amendment dated June 30, 1993 to Loan Agreement between the
               Company and State Bank & Trust, N.A., Tulsa, OK, (formally
               WestStar Bank, N.A., Bartlesville, OK,) is incorporated herein by
               reference to Exhibit 10.13 to Form 10-KSB dated February 28, 1995
               (File No. 0-4957).

 10.14         Fourth Amendment dated June 30, 1994 to Loan Agreement between
               the Company and State Bank & Trust, N.A, Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.14 to Form 10-KSB
               dated February 28, 1995 (File No. 0-4957).

 10.15         Fifth Amendment dated March 13, 1995 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.15 to Form 10-KSB
               dated February 28, 1995 (File No. 0-4957).

 10.16         Sixth Amendment dated March 27, 1995 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.16 to Form 10-KSB
               dated February 28, 1995 (File No. 0-4957).

 10.17         Seventh Amendment dated April 27, 1995 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.17 to Form 10-KSB
               dated February 28, 1995 (File No. 0-4957).

 10.18         Amendment dated February 28, 1995 to the Lease Agreement by and
               between the Company and James D. Dunn, is incorporated herein by
               reference to Exhibit 10.18 to Form 10-KSB dated February 28, 1995
               (File No. 0-4957).

 10.19         Eighth Amendment Dated July 27, 1995 to Loan Agreement between
               the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.19 to Form 10-KSB
               dated February 29, 1996 (File No. 0-4957).
</Table>

<PAGE>

<Table>
<S>            <C>
 10.20         Restated Loan Agreement dated September 25, 1995 between the
               Company and State Bank & Trust, N.A., Tulsa, OK, is incorporated
               herein by reference to Exhibit 10.20 to Form 10-KSB dated
               February 29, 1996 (File No. 0-4957).

 10.21         Restated Loan Agreement dated June 10, 1996 between the Company
               and State Bank & Trust, N.A., Tulsa, OK, is incorporated herein
               by reference to Exhibit 10.21 to Form 10-K dated February 28,
               1997 (File No. 0-4957).

 10.22         First Amendment dated June 30, 1997 to Restated Loan Agreement
               between the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.22 to Form 10-K
               dated February 28, 1998 (File No. 0-4957).

 10.23         Second Amendment dated June 30, 1998 to Restated Loan Agreement
               between the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.23 to Form 10-K
               dated February 28, 1999 (File No. 0-4957).

 10.24         Restated Loan Agreement dated June 30, 1999 between the Company
               and State Bank & Trust, N.A., Tulsa, OK, is incorporated herein
               by reference to Exhibit 10.24 to Form 10-K dated February 29,
               2000 (File No. 0-4957).

 10.25         Lease agreement by and between the Company and James D. Dunn
               dated July 1, 1999, is incorporated herein by reference to
               Exhibit 10.25 to Form 10-K dated February 29, 2000 (File No.
               0-4957).

 10.26         First Amendment dated June 30, 2000 to Restated Loan Agreement
               between the Company and State Bank & Trust, N.A., Tulsa, OK, is
               incorporated herein by reference to Exhibit 10.25 to Form 10-K
               dated February 28, 2001 (File No. 0-4957).

*10.27         Second Amendment dated June 30, 2001 to Restated Loan Agreement
               between the Company and State Bank & Trust, N.A., Tulsa, OK.

*23.           Independent Auditors' Consent
</Table>

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* Filed Herewith