U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 0-27780
NEW HORIZON KIDS QUEST, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1719363
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13705 First Avenue North, Plymouth, MN 55441
--------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 557-1111
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of November 5, 1998, the Registrant had outstanding 3,293,300 shares of its
Common Stock, $.01 par value.
<PAGE>
NEW HORIZON KIDS QUEST, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION 3
ITEM 1. Condensed Consolidated Financial Statements
a) Condensed Consolidated Balance Sheets --
September 30, 1998, and December 31, 1997 3
b) Condensed Consolidated Statements of Operations -- Three
months and nine months
ended September 30, 1998, and 1997 5
c) Condensed Consolidated Statements of
Cash Flows -- Nine months ended
September 30, 1998, and 1997 6
d) Notes to Condensed Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION 12
Signatures 13
2
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997
------------- ------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 182,025 $ 554,540
Accounts receivable ........................... 718,645 773,120
Prepaid expenses and other current assets ..... 194,179 262,150
Current portion of notes receivable ........... 119,557 163,539
----------- -----------
Total current assets ....................... 1,214,406 1,753,349
----------- -----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures, equipment and leaseholds . 8,993,512 6,522,416
Less--Accumulated depreciation and amortization (2,784,058) (1,701,827)
----------- -----------
Total property and equipment ............... 6,209,454 4,820,589
OTHER ASSETS:
Goodwill (net of accumulated amortization
of $225,437 and $163,547, respectively) ... 1,012,341 1,074,231
Notes receivable, net of current portion ...... 1,103,107 1,202,216
Other ......................................... 160,381 186,904
----------- -----------
$ 9,699,689 $ 9,037,289
=========== ===========
See accompanying notes which are an integral part of these balance sheets.
3
<PAGE>
NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt ................. $ 1,111,227 $ 861,645
Accounts payable ..................................... 606,495 282,073
Accrued expenses ..................................... 644,890 594,266
Deferred rent ........................................ 21,666 24,666
----------- -----------
Total current liabilities ......................... 2,384,278 1,762,650
LONG-TERM DEBT, less current maturities ................. 2,038,097 2,313,968
SHAREHOLDERS' EQUITY:
Undesignated preferred stock, 3,500,000 shares
authorized; no shares issued and outstanding ...... -- --
Series A convertible preferred stock, $.01 par value,
1,500,000 shares authorized; no shares issued and
outstanding ....................................... -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,293,300 shares issued and outstanding 32,933 32,933
Additional paid-in capital ........................... 7,196,197 7,196,197
Accumulated deficit .................................. (1,951,816) (2,268,459)
----------- -----------
Total shareholders' equity ........................ 5,277,314 4,960,671
----------- -----------
$ 9,699,689 $ 9,037,289
=========== ===========
</TABLE>
See accompanying notes which are an integral part of these balance sheets.
4
<PAGE>
NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE .............................. $ 4,372,368 $ 4,001,377 $ 12,008,499 $ 10,493,113
COSTS AND EXPENSES:
Direct Expenses ................... 3,483,203 3,376,771 9,449,020 8,406,531
Depreciation and Amortization ..... 407,285 286,923 1,059,026 732,139
Pre-Opening Expenses .............. 52,860 42,471 179,029 213,531
------------ ------------ ------------ ------------
Total Costs and Expenses ....... 3,943,348 3,706,165 10,687,075 9,352,201
------------ ------------ ------------ ------------
CENTER OPERATING INCOME .............. 429,020 295,212 1,321,424 1,140,912
Selling, General and Administrative 302,226 366,990 750,215 1,005,866
Depreciation and Amortization ..... 29,674 28,543 88,980 77,829
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) .............. 97,120 (100,321) 482,229 57,217
Interest Expense .................. (96,123) (84,429) (266,159) (202,071)
Interest Income ................... 33,869 34,080 101,374 118,481
Minority Interest ................. (9,704) 1,091 (801) 28,908
------------ ------------ ------------ ------------
NET INCOME (LOSS) .................... $ 25,162 $ (149,579) $ 316,643 $ 2,535
============ ============ ============ ============
INCOME (LOSS) PER SHARE:
Basic and Diluted ................. $ .01 $ (.05) $ .10 $ .00
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic and Diluted ................. 3,293,300 3,293,300 3,293,300 3,293,300
============ ============ ============ ============
</TABLE>
See accompanying notes which are an integral part of these statements.
5
<PAGE>
NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................. $ 316,643 $ 2,535
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization .................... 1,148,006 809,968
Change in operating assets and liabilities:
Accounts receivable ........................... 54,475 138,552
Prepaid expenses and other .................... 67,971 (48,151)
Accounts payable .............................. 324,422 16,716
Other assets .................................. 22,638 (40,573)
Accrued expenses .............................. 47,624 140,352
----------- -----------
Net cash provided by operating activities .. 1,981,779 1,019,399
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment .................... (2,471,096) (1,590,924)
Issuance of note receivable ............................ -- (945,600)
Payments received on note receivable ................... 143,091 719,943
----------- -----------
Net cash used in investing activities .................. (2,328,005) (1,816,581)
----------- -----------
FINANCING ACTIVITIES:
Payments on long-term obligations ...................... (731,290) (922,546)
Additional borrowings of long-term debt ................ 705,001 2,353,664
----------- -----------
Net cash provided by (used in) financing activities . (26,289) 1,431,118
----------- -----------
Net increase (decrease) in cash and cash equivalents (372,515) 633,936
CASH AND CASH EQUIVALENTS, beginning of period ............ 554,540 150,232
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .................. $ 182,025 $ 784,168
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for--
Interest ............................................ $ 263,679 $ 192,698
=========== ===========
Taxes ............................................... $ -- $ --
=========== ===========
NON-CASH ITEMS:
Non-cash payments on notes receivable .................. $ 65,606 $ 95,398
=========== ===========
</TABLE>
See accompanying notes which are an integral part of these statements.
6
<PAGE>
NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by New Horizon Kids Quest, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Company's business is seasonal and, accordingly, interim results may not be
indicative of results for a full year. In the opinion of the Company, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of September 30, 1998,
and the results of its operations for the nine months ended September 30, 1998
and 1997, have been reflected in the accompanying financial statements. Certain
information in footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures provided herein are adequate to make the
information presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements for
the years ended December 31, 1997 and 1996, and the footnotes thereto, included
in the Company's Form 10-KSB, filed with the Securities and Exchange Commission.
1. Basis of Presentation:
Principles of Consolidation -- The consolidated financial statements
include the accounts of New Horizon Kids Quest, Inc. and its wholly owned
subsidiaries (together, the "Company"). All intercompany balances and
transactions have been eliminated in consolidation.
During June 1996, a newly established entity owned 51% by the Company and
49% by Ameristar Casino Council Bluffs, Inc. ("Ameristar"), Kids Quest of
Council Bluffs, LLC ("Kids Quest LLC") began operating a Kids Quest facility in
Council Bluffs, Iowa. The operating agreement governing Kids Quest LLC provides
for the owners to share in profits and losses of Kids Quest LLC.
2. Earnings Per Share:
The shares used for computing basic and diluted earnings per share were
the same for the three months and nine months ended September 30, 1998 and 1997.
Options and warrants were excluded from the computation of diluted earnings per
share for both years because their effect would be anti-dilutive.
3. Recently Issued Accounting Pronouncements:
During June 1997, the Financial Accounting Standards Board released SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 at the
end of 1998 and is currently analyzing the impact it will have on the
disclosures in its financial statements.
4. Reclassifications:
Certain 1997 amounts in the accompanying consolidated financial statements
have been reclassified to conform to the third quarter 1998 presentation. Such
reclassification had no effect on previously reported net income (loss) or
shareholders' equity.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company currently operates seventeen Kids Quest centers providing
hourly child care and fifteen New Horizon Child Care centers providing
traditional child care services. The Company also operates supervised video
entertainment centers in conjunction with four of its Kids Quest locations. Two
of the Company's New Horizon centers are employee child care centers, including
the Company's most recent opening in Joliet, Illinois, in connection with
Empress Casino Joliet and Mobil Oil Corporation. The Company will be opening its
fourth Kids Quest facility with Station Casinos, Inc. early in the first quarter
of 1999 at Texas Station in Las Vegas, Nevada. The Company plans to continue to
seek opportunities for additional Kids Quest, New Horizon Child Care and
supervised video entertainment center locations.
The Company has experienced growth through acquisition and expansion. The
Company's business is seasonal with revenues and operating income for Kids Quest
being the highest and New Horizon Child Care being the lowest in the summer
months. Therefore, results of operations described below may not be indicative
of results to be achieved in any future period.
Results of Operations
Revenue for the three months ended September 30, 1998, increased $370,991,
or 9%, to $4,372,368, from $4,001,377 for the same period in 1997. The Company
opened one new Kids Quest center, one supervised video entertainment center and
two employee child care centers since the beginning of the three month period in
1997, which accounted for $190,720 of additional revenue. Revenue for Kids Quest
centers open during both periods increased $124,498, or 4%, to $3,172,085 for
the three months ended September 30, 1998, from $3,047,587 for the same period
in 1997. The Company's 1998 revenue was impacted by the closure of its Biloxi,
Mississippi, and Gulfport, Mississippi, locations for the final ten days of the
quarter due to Hurricane Georges. In addition, the Company's Grand Casino
Coushatta location in Kinder, Louisiana, was closed for the final seventeen days
of the period due to a relocation within the property. Revenues for the Idaho
New Horizon Child Care centers increased $55,773, or 6%, to $939,200 for the
three month period ended September 30, 1998, from $883,427 for the same period
in 1997.
Revenue for the nine month period ended September 30, 1998, increased
$1,515,386, or 14%, to $12,008,499 in 1998 compared to $10,493,113 for the same
period in 1997. The Company added five new Kids Quest centers, two supervised
video entertainment centers and two employee child care centers during the
comparable periods, which accounted for $1,162,748 of the increase in revenue.
Revenue from existing Kids Quest centers increased $143,758, or 2%, to
$6,632,975 for the nine month period ended September 30, 1998, from $6,489,217
for the same period in 1997. This increase was negatively impacted by a
$215,217, or 21%, decrease in revenue at the Company's Boulder Station location
due to the opening of the Company's Sunset Station center located within five
miles of the Boulder Station location. In addition, same location revenue was
negatively impacted by the closure of its Biloxi, Mississippi, and Gulfport,
Mississippi, locations for the final ten days of the period due to Hurricane
Georges and the relocation of the Company's Grand Casino Coushatta location
which caused the center to be closed for the final seventeen days of the period.
Revenue from the thirteen Idaho New Horizon Child Care centers increased
$208,880, or 8%, to $2,904,268 in 1998 from $2,695,388 for the same period in
1997.
Costs and expenses for the three months ended September 30, 1998,
increased $237,183, or 6%, to $3,943,348 from $3,706,165 for the same period in
1997. Costs and expenses related to new locations added since the beginning of
the three month period in 1997 accounted for an increase of $242,448. Costs and
expenses at existing Kids Quest locations decreased by $6,382 to $2,657,115 for
the three month period in 1998 from $2,663,497 for the same period in 1997. Cost
and expenses at the Idaho New Horizon Child Care centers increased $1,117 to
$957,737 in 1998 from $956,620 for the same period in 1997. Costs and expenses
as a percent of revenue declined to 90% for the three month period ended
September 30, 1998, from 93% for the same period in 1997.
Costs and expenses for the nine months ended September 30, 1998, increased
$1,334,874, or 14%, to $10,687,075 from $9,352,201 for the same period in 1997.
This increase is due primarily to new locations added since the beginning of
1997 which accounted for $1,102,567 of the increase. Costs and expenses for
existing Kids Quest locations increased $132,715, or 2%, to $5,473,041 for the
nine month period ended September 30, 1998, from $5,340,326 for the same period
in 1997. Costs and expenses at the Idaho New Horizon Child Care locations
increased $99,592, or 4%, to $2,764,456 for
8
<PAGE>
the nine month period ended September 30, 1998, from $2,664,864 for the same
period in 1997. The Company attributes the increases in costs and expenses
related to existing locations primarily to direct costs associated with
additional revenues at those locations. Costs and expenses overall for the
comparable periods remained at 89% of revenue.
Selling, general and administrative (SG&A) expenses decreased $64,764, or
18%, to $302,226 for the three month period ended September 30, 1998, from
$366,990 for the same period in 1997. This decrease is due primarily to
reductions of and reimbursements for administrative salaries and development
expenses. Despite the decrease in SG&A expenses, management expects such
expenses to increase with the addition of and negotiation for new locations.
SG&A expenses for the nine month period ended September 30, 1998,
decreased $255,651, or 25%, to $750,215 from $1,005,866 for the same period in
1997. This decrease is due primarily to reductions of and reimbursements for
administrative salaries and development expenses.
Pursuant to the terms of the Company's contracts with casino operators,
casino operators are entitled to establish a discounted rate below the fair
market value of Kids Quest services to be charged by Kids Quest to the public in
order to attract customers to Kids Quest and ultimately to their casinos. Casino
operators must reimburse the Company for the difference of such amount charged
and the fair market value. The Company received $331,515 of reimbursements for
the three month period ended September 30, 1998, versus $318,317 for the same
period in 1997, an increase of $13,198, or 4%. For the nine month period
September 30, 1998, the Company received $923,601, an increase of $48,669, or
6%, from $874,932 for the same period in 1997. The majority of these rate
discount reimbursements were from three casinos owned by Grand Casinos, Inc.,
three Indian casinos managed by Grand Casinos, Inc. and a fourth Indian casino
managed for a portion of the year by Grand Casinos, Inc. There can be no
assurance that such discounts and reimbursements will not be modified or
discontinued altogether or that future Kids Quest agreements with Grand Casinos,
Inc. or other casinos will provide for a discounted rate to the public. In the
event that casino operators choose not to provide for a discounted hourly rate,
the Company may charge higher hourly rates. Although this may cause patronage to
decline and ultimately result in lower revenues, the Company currently has ten
locations that operate without any rate discount and has found no evidence to
conclude that higher, non-discounted rates to customers have a significant
impact on a location's patronage and resulting revenue.
Interest expense for the three month period ended September 30, 1998,
increased $11,694, or 14%, to $96,123 from $84,429 for the same period in 1997.
Interest expense for the nine months ended September 30, 1998, increased
$64,088, or 32%, to $266,159 from $202,071 for the same period in 1997. These
increases related to debt incurred for the addition of Kids Quest centers.
Net income for the three month period ended September 30, 1998, was
$25,162 compared to a loss of $149,579 for the same period in 1997, an increase
of $174,741. Management attributes the increase primarily to improved operating
results at its existing Kids Quest locations, which contributed an additional
$130,880 between comparable periods, and a decrease in operating loss of $52,523
for existing Idaho New Horizon Child Care centers, as well as decreases in SG&A
expenses for the quarter. The Company was negatively impacted by new locations
added since the beginning of the three month period ended September 30, 1998,
which contributed $51,727 of additional losses between periods and the temporary
closure of three Kids Quest locations at the end of the quarter.
Net income for the nine month period ended September 30, 1998, increased
$314,108 to $316,643 from $2,535 for the same period in 1997. The Company
attributes this increase primarily to $60,181 of additional operating income
from centers added since the beginning of 1997, $11,043 of additional operating
income from existing Kids Quest centers, and a $127,830 reduction of operating
loss from the Idaho New Horizon Child Care centers and decreases in SG&A
expenses.
Liquidity and Capital Resources
During the nine month period ended September 30, 1998, the Company
generated $1,981,779 from operations, invested $2,471,096 in property and
equipment related to new locations and equipment upgrades, and received payments
on notes receivable of $143,091. The Company made payments on long-term debt of
$731,290 and borrowed an additional $705,001 related to the Mall of America
location opened during the second quarter of 1998. The Company ended the period
with a cash balance of $182,025. During the same period in 1997, the Company
generated $1,019,399 from operations, invested $1,590,924 in property and
equipment and issued notes receivable to Station Casinos, Inc. for $491,650 and
$453,950 relating to the Kansas City and Sunset Station Kids Quest locations,
respectively, as well as
9
<PAGE>
received payments on notes receivable of $719,943. The Company borrowed
$2,353,664 to fund expansion as well as to pay off its bank line of credit of
$514,509 and other principle payments of $408,037. The Company ended the period
in 1998 with a cash balance of $784,168.
The Company's capital needs depend on the Company's expansion efforts. The
Company incurs pre-opening expenses in connection with each of its Kids Quest
and New Horizon Child Care centers as well as acquisition or development
expenses to add traditional child care centers. The Company is actively seeking
additional Kids Quest and New Horizon Child Care contracts and is engaged in
site analysis for the construction of additional New Horizon Child Care centers.
The Company has funded its recent expansion through additional borrowings and
with cash flow from operations. As of September 30, 1998, the Company had a
working capital deficit of $1,169,872. The Company believes that cash flow from
operations will be sufficient to fund on-going operations. However, the Company
may require additional financing in 1998 and 1999 as it adds additional Kids
Quest or New Horizon Child Care locations or if the Company were to pursue
additional acquisitions. The Company currently has no firm arrangements for such
additional financing. The Company believes it will be able to arrange such
additional financing through borrowings to fund additional expansion.
Year 2000 Compliance
Beginning in early 1998, the Company began evaluating its year 2000
readiness. The Company began testing its various information systems to
determine if they would correctly recognize and process data information beyond
the year 1999. The evaluation performed included in-house testing of systems by
Company employees, use of various purchased evaluation software, and discussions
with material software vendors. The results of the Company's evaluations have
resulted in the conclusion that much of the Company's systems software, as well
as the imbedded technology of some of the Company's hardware equipment, is not
year 2000 compliant. The Company has begun to upgrade its systems with software
and hardware that is year 2000 compatible. Many of these upgrades were
previously planned in the normal course without regard to the year 2000 issue. A
significant portion of the upgrades are being provided by vendors pursuant to
previously existing software development and service agreements with the
remaining upgrades requiring expenditure by the Company. The costs incurred to
date by the Company are immaterial. The Company currently estimates that its
total expenditures will be less than $50,000 to complete its system upgrades to
year 2000 compliance. The Company plans to have the majority of upgrades,
primarily related to revenue recognition and internal accounting, effective
January 1, 1999.
Although the Company anticipates the bulk of its upgrades to year 2000
compliance will be completed by early 1999, the Company will continue its
evaluation efforts through 1999 and into the year 2000 to identify any
previously unanticipated or unidentified year 2000 issues. If any additional
issues or complications arise that may potentially cause any business
interruption, the Company believes it can effectively rely on manual systems to
assure minimal business interruption as a result of year 2000 system failures.
The Company's reliance on third party vendors are not considered material
and would cause only minor disruption to the Company due to year 2000
non-compliance by such vendor. In any case, the Company is in the process of
evaluating the potential of any third parties that could have an effect on the
Company and plans to begin surveying those entities to determine their year 2000
readiness.
Based on the information the Company currently has available, the Company
does not believe that the year 2000 should pose a significant threat to
disruption of the Company's business. Although the Company will continue to
monitor the issue and its readiness to deal with any potential issues, there can
be no assurances that the Company will be able to identify or cure any
unforeseen year 2000 compliance issue, particularly where the Company is relying
on a supplier or other third party vendor or that such reliance will not have a
an adverse effect on the Company.
Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-QSB (as well as information included in oral statements or other written
statements made or to be made by the Company) may contain statements that are
forward-looking, such as statements relating to plans for future expansion and
other business development activities, as well as other capital spending,
financial sources and the
10
<PAGE>
effects of regulation and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect future results
and, accordingly, such results may differ from those expressed in any
forward-looking statement made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to development and
construction activities, dependence on existing management and third party
contracts, domestic or global economic conditions, changes in federal or state
laws or the administration or enforcement of such laws, litigation or claims, as
well as all other risks and uncertainties described in the Company's filings.
11
<PAGE>
PART II. - OTHER INFORMATION
All items under Part II. have been omitted since they are inapplicable or the
answers are negative.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEW HORIZON KIDS QUEST, INC.
By: /s/ William M. Dunkley
----------------------------------------------
William M. Dunkley
Chief Executive Officer
By: /s/ Kevin M. Greer
----------------------------------------------
Kevin M. Greer
Chief Financial Officer
Date: November 11, 1998
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 182,025
<SECURITIES> 1,414
<RECEIVABLES> 718,645
<ALLOWANCES> 45,053
<INVENTORY> 53,556
<CURRENT-ASSETS> 1,214,406
<PP&E> 8,993,512
<DEPRECIATION> 2,784,058
<TOTAL-ASSETS> 9,699,689
<CURRENT-LIABILITIES> 2,384,278
<BONDS> 0
32,933
0
<COMMON> 0
<OTHER-SE> 5,244,381
<TOTAL-LIABILITY-AND-EQUITY> 9,699,689
<SALES> 737,657
<TOTAL-REVENUES> 12,008,499
<CGS> 421,572
<TOTAL-COSTS> 421,572
<OTHER-EXPENSES> 11,105,499
<LOSS-PROVISION> 8,815
<INTEREST-EXPENSE> 266,159
<INCOME-PRETAX> 316,643
<INCOME-TAX> 0
<INCOME-CONTINUING> 316,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 316,643
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
