<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED October 31, 1996
COMMISSION FILE NUMBER 0-16425
SUNRISE PRESCHOOLS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 86-0532619
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9128 East San Salvador Road, Suite 200, Scottsdale, Arizona 85258
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(602) 860-1611
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL ANNUAL,
QUARTERLY AND OTHER 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 FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES [X]
NO [ ]
THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK OUTSTANDING AS OF
NOVEMBER 30, 1996 WAS 2,982,968 SHARES.
-1-
<PAGE> 2
SUNRISE PRESCHOOLS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets
October 31, 1996 and July 31, 1996 3
Consolidated Statements of Operations
For the Three Months Ended October 31,
1996 and 1995 4
Consolidated Statements of Cash Flows
For the Three Months Ended October 31,
1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Fin-
ancial Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
-2-
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
SUNRISE PRESCHOOLS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, 1996 July 31, 1996
---------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 1,822,952 $ 2,630,616
Accounts Receivable, net of allowance for doubtful accounts of
$7,000 at October 31, 1996 and $12,000 at July 31, 1996 544,177 387,775
Prepaid Expenses 251,490 149,458
Deferred Tax Asset, current portion 138,000 138,000
Inventory and Other Current Assets 34,374 27,094
----------- -----------
Total Current Assets 2,790,993 3,332,943
Property and Equipment, net 1,935,554 1,386,687
Property and Equipment Held for Lease, net 371,250 367,292
Deferred Tax Asset, net of current portion 557,000 557,000
Note Receivable from Preschool Services, Inc. 256,251 256,251
Intangible Assets, net 1,338,048 733,519
Deposits and Other Assets 110,853 363,340
----------- -----------
Total Assets $ 7,359,949 $ 6,997,032
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of Credit $ 150,000 $ 100,000
Accounts Payable 117,422 272,519
Accrued Expenses 573,281 385,036
Dividends Payable on Preferred Stock 44,367 44,367
Notes Payable and Capital Leases, current portion 133,415 133,415
Accrued Rental Reserve, current portion 218,952 292,000
Deferred Rent, current portion 128,481 155,982
Deferred Gain on Sale and Leaseback of Preschool Facilities,
current portion 45,003 45,003
----------- -----------
Total Current Liabilities 1,410,921 1,428,322
----------- -----------
Notes Payable and Capital Leases, net of current portion 917,660 504,654
----------- -----------
Accrued Rental Reserve, net of current portion 126,000 126,000
----------- -----------
Deferred Rent, net of current portion 279,516 304,058
----------- -----------
Deferred Gain on Sale and Leaseback of Preschool Facilities, net
of current portion 76,397 87,648
----------- -----------
Shareholders' Equity
Preferred Stock, $1 par value - 1,000,000 shares authorized,
857,333 shares issued and outstanding 857,333 857,333
Common Stock, $.01 par value - 10,000,000 shares authorized,
2,982,968 shares issued and outstanding 29,830 29,830
Paid-in Capital 7,609,553 7,609,553
Accumulated Deficit (3,947,261) (3,950,366)
----------- -----------
Total Shareholders' Equity 4,549,455 4,546,350
----------- -----------
Total Liabilities and Shareholders' Equity $ 7,359,949 $ 6,997,032
=========== ===========
</TABLE>
The accompanying footnotes are an integral part of these
consolidated financial statements.
-3-
<PAGE> 4
SUNRISE PRESCHOOLS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED OCTOBER 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating Revenue $ 3,242,628 $ 2,433,322
Operating Expenses
Payroll 1,614,921 1,137,410
Facilities and Maintenance 1,085,612 907,537
General and Administrative 423,517 311,451
Total Operating Expenses 3,124,050 2,356,398
----------- -----------
Income from Operations 118,578 76,924
Other Income (Expense)
Interest Income (Expense), net 8,297 (8,324)
Other Income 9,330 3,100
----------- -----------
Total Other Income (Expense) 17,627 (5,224)
----------- -----------
Net Income $ 136,205 $ 71,700
=========== ===========
Net Income Available for Common Stock $ 3,105 $ 59,200
=========== ===========
Net Income per Common Share and Common
Share Equivalent (Note 2)
Primary $ 0.00 $ 0.02
=========== ===========
Fully Dilluted $ 0.02
=========== ===========
Weighted Average Number of Common Shares
and Common Share Equivalents Outstanding
Primary $ 3,015,261 $ 3,337,796
=========== ===========
Fully Dilluted $ 3,837,796
=========== ===========
</TABLE>
The accompanying footnotes are an integral part of these
consolidated financial statements.
-4-
<PAGE> 5
SUNRISE PRESCHOOLS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED OCTOBER 31,
------------------------------
1996 1995
===========================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 136,205 $ 71,700
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization 156,379 78,725
Amortized Gain on Sale of Real Estate (11,251) (11,250)
Deferred Rent (52,043) (17,750)
Provision for Doubtful Accounts 15,359 18,579
Gain on Disposal of Property and Equipment (9,330) (3,100)
Changes in Assets and Liabilties, net of effect of businesses
acquired:
Increase in Accounts Receivable (171,761) (18,289)
Increase in Prepaid Expenses (102,032) (19,139)
Increase in Inventory and Other Current Assets (7,280) (132,116)
Decrease in Deposits and Other Assets 252,487 61,785
Increase (Decrease) in Accounts Payable (155,097) 69,538
Increase in Accrued Expenses 188,245 52,962
Decrease in Accrued Rental Reserve (73,048) --
- -----------------------------------------------------------------------------------------------------------
Total Adjustments 30,628 79,945
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 166,833 151,645
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Child Care Centers (494,264) --
Purchases of Property and Equipment (394,469) (283,103)
Proceeds from Disposal of Property and Equipment 9,330 8,000
- -----------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (879,403) (275,103)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Exercise of Warrants -- 74,903
Proceeds from Sale of Preferred Stock -- 80,000
Payment of Dividends (133,100) --
Proceeds from Notes Payable 54,408 --
Borrowings on Lines of Credit 50,000 --
Payments on Notes Payable and Capital Leases (66,402) (35,541)
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (95,094) 119,362
- -----------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (807,664) (4,096)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,630,616 581,311
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,822,952 $ 577,215
===========================================================================================================
SUPPLEMENTAL DISCLOURE OF CASH FLOW INFORMATION
Cash Paid During the Period for Interest $ 18,112 $ 10,548
Note Payable Issued for Acquisition of Child Care Centers 425,000 --
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE> 6
SUNRISE PRESCHOOLS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
---------------------------------------------------------------------------
The fiscal year of Sunrise Preschools, Inc. (the "Company") consists of
eight four-week periods and four five-week periods. Each quarter of the
Company's fiscal year consists of two four-week periods and one five-week
period. The Company's fiscal year ends on the Saturday nearest July 31 of
each year, and the first quarter ends on the Saturday nearest October 31.
However, for clarity of presentation, all information has been presented as
if the first quarter ended on October 31 and the fiscal year ended on July
31.
The consolidated financial statements included herein have been prepared by
the Company without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of Management, the
accompanying interim financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present
fairly the Company's financial position and its results of operations and
cash flows for the three month periods ended October 31, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Certain reclassifications have
been made to amounts previously reported for fiscal 1996 to conform with
the fiscal 1997 presentation. It is suggested that these interim financial
statements be read in conjunction with the Company's 1996 Annual Report on
Form 10-KSB. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the complete
fiscal year.
The consolidated financial statements include the accounts of Sunrise
Preschools, Inc. and Sunrise Preschools Hawaii, Inc.
2. NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
---------------------------------------------------------------------------
Primary net income per share is computed by dividing net income available
for common stock (net income less dividends accrued during the period on
Series B and Series C Preferred Stock) by the weighted average number of
common shares and common share equivalents outstanding during the period.
Shares issuable upon the exercise of warrants and employee stock options
that are considered antidilutive are not included in the weighted average
number of common shares and common share equivalents outstanding. Fully
diluted net income per share for fiscal 1996 assumes the conversion of the
Series B Preferred Stock into 500,000 shares of common stock. Fully
diluted net income per share for fiscal 1997 is not included because the
calculation for that period is antidilutive.
3. INCOME TAXES
---------------------------------------------------------------------------
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
As of July 31, 1996, net operating loss carryforwards totaled approximately
$2,177,000, and expire through the year 2011. Accordingly, income taxes on
income generated during the three month periods ended October 31, 1996 and
1995 have been offset by the available net operating loss carryforwards.
-6-
<PAGE> 7
4. ACQUISITIONS
---------------------------------------------------------------------------
On August 22, 1996, the Company purchased the operations of four preschool
centers in the Phoenix, Arizona metropolitan area. The consideration paid
by the Company in connection with this acquisition was $775,000, of which
$350,000 was paid at the closing of the purchase on August 22, 1996, and
$425,000 was a note payable. The purchase of these centers was accounted
for as a purchase in accordance with Accounting Principles Board Opinion
No. 16. Pro forma information for the three month periods ended October 31,
1996 and 1995 follows:
Sunrise Preschools, Inc. and Subsidiary
Unaudited Pro Forma Condensed Consolidated Income Statement
For the Three Months Ended October 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
---------------------
Selling Pro Forma Pro Forma
Sunrise Parties Adjustments (1) Combined
------- ------- --------------- --------
<S> <C> <C> <C> <C>
Operating Revenues $3,243 $ 114 $ -- $3,357
Operating Expenses 3,124 100 (8) 3,216
------ ------ ------ ------
Income from Operations 119 14 8 141
Non-operating Income (Expense) 17 -- (3) 14
------ ------ ------ ------
Net Income $ 136 $ 14 $ 5 $ 155
====== ====== ====== ======
Net Income Available for
Common Stock $ 3 $ 22
====== ======
Net Income per Common
Share and Common Share
Equivalent $ 0.00 $ 0.01
====== ======
Average Shares Outstanding 3,015 3,015
====== ======
</TABLE>
(1) Pro forma adjustments to the unaudited pro forma condensed consolidated
income statements consisted of reducing payroll costs by the amount of
salaries paid to the seller, increasing facilities and maintenance
costs for depreciation and amortization of the acquired assets, and
increasing interest expense for the note payable.
-7-
<PAGE> 8
4. ACQUISITIONS (CONTINUED)
---------------------------------------------------------------------------
Sunrise Preschools, Inc. and Subsidiary
Unaudited Pro Forma Condensed Consolidated Income Statement
For the Three Months Ended October 31, 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
---------------------
Selling Pro Forma Pro Forma
Sunrise Parties Adjustments (1) Combined
------- ------- --------------- --------
<S> <C> <C> <C> <C>
Operating Revenues $ 2,433 $ 342 $ -- $ 2,775
Operating Expenses 2,356 301 (25) 2,632
------- ------- ------- -------
Income from Operations 77 41 25 143
Non-operating Income (Expense) (5) -- (8) (13)
------- ------- ------- -------
Net Income $ 72 $ 41 $ 17 $ 130
======= ======= ======= =======
Net Income Available for
Common Stock $ 59 $ 117
======= =======
Net Income per Common
Share and Common Share
Equivalent $ 0.02 $ 0.04
======= =======
Average Shares Outstanding 3,338 3,338
======= =======
</TABLE>
(1) Pro forma adjustments to the unaudited pro forma condensed consolidated
income statements consisted of reducing payroll costs by the amount of
salaries paid to the seller, increasing facilities and maintenance costs
for depreciation and amortization of the acquired assets, and increasing
interest expense for the note payable.
-8-
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
================================================================================
THREE MONTHS ENDED OCTOBER 31, 1996 (FIRST QUARTER OF FISCAL 1997) COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1995 (FIRST QUARTER OF FISCAL 1996)
- --------------------------------------------------------------------------------
On October 31, 1996, the Company operated 36 child care centers versus 25
centers as of October 31, 1995. The increase in the number of centers was the
result of the Company purchasing the operations of six centers in Arizona (five
of which were previously operating and one of which was newly opened) and three
centers in Colorado, opening one newly constructed center in Arizona, and
assuming management of one newly opened center in Wisconsin.
Operating revenue - Operating revenue for the first quarter of fiscal 1997 was
$3,242,628, an increase of $809,306, or 33.3% from revenue of $2,433,322 for the
first quarter of fiscal 1996. Of this increase, $677,646 was due to the
inclusion of revenues of the acquired and newly opened centers, and $131,660 was
due to a 5.7% increase in same-center revenues. The increase in same-center
revenues is due to increased enrollment levels and a moderate tuition increase.
Operating expenses - Operating expenses for the first quarter of fiscal 1997
were $3,124,050 (96.3% of operating revenue), an increase of $767,652 or 32.6%
from operating expenses of $2,356,398 (96.8% of operating revenue) for the first
quarter of fiscal 1996. Of this increase, $697,240 was due to the acquired and
newly opened centers. The remaining increase was due to increases in payroll and
facilities and maintenance costs, partially offset by a decrease in general and
administrative expenses.
Payroll - Payroll expense for the first quarter of fiscal 1997 was
$1,614,921 (49.8% of operating revenue), an increase of $477,511 from
payroll expense of $1,137,410 (46.7% of operating revenue) for the first
quarter of fiscal 1996. Of this increase, $364,918 was due to the acquired
and newly opened centers, $22,433 for additional corporate staff added in
connection with the Company's expansion program, and a $90,160 increase in
same-center salaries due to additional personnel required to handle higher
enrollment levels.
Facilities and maintenance - Facilities and maintenance costs for the first
quarter of fiscal 1997 were $1,085,612 (33.5% of operating revenue), an
increase of $178,075 or 19.6% from facilities and maintenance costs of
$907,537 (37.3% of operating revenue) during the first quarter of fiscal
1996. This increase was due to $237,486 in costs at the acquired and newly
opened centers, partially offset by a $37,009 decrease in rent expense and a
$22,402 decrease in other facilities and maintenance costs, primarily
building maintenance and cleaning expenses.
In the first quarter of fiscal 1996, rent expense included $49,196 of
deferred sublease payments payable by Preschool Services, Inc. ("PSI"). In
the fourth quarter of fiscal 1996, the Company established a reserve for
rental commitments related to the remaining lease payments due by PSI.
Future unpaid sublease payments are offset against this reserve rather than
being charged to rent expense. This resulted in a decrease in rent expense
in the first quarter of fiscal 1997 of $49,196, partially offset by an
increase of $12,187 in same-center rents due to moderate rent increases at
several of the centers.
-9-
<PAGE> 10
THREE MONTHS ENDED OCTOBER 31, 1996 (FIRST QUARTER OF FISCAL 1997) COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1995 (FIRST QUARTER OF FISCAL 1996) (CONTINUED)
- --------------------------------------------------------------------------------
General and administrative - General and administrative expenses for the
first quarter of fiscal 1997 were $423,517 (13.1% of operating revenue), an
increase of $112,066, or 36.0%, from general and administrative expenses of
$311,451 (12.8% of operating revenue) during the first three months of
fiscal 1996. Of this increase, $94,836 was attributable to the acquired and
newly opened centers. In addition, advertising costs increased $40,619 due
to continuance of a multi-media advertising program begun in January and
higher yellow pages costs as a result of the new centers, partially offset
by a decrease of $24,917 in insurance costs. The remaining increase was due
to moderate increases in other general and administrative costs such as
office supplies and bank charges.
Net Income - Net income for the first quarter of fiscal 1997 was $136,205
compared to net income of $71,700 for the first quarter of fiscal 1996,
primarily due to improved same-center operations and the reduction in rent
expense.
TRENDS
- --------------------------------------------------------------------------------
Partially as a result of the multi-media advertising program implemented by the
Company, same-center enrollments were higher than during the first quarter of
fiscal 1996. Management believes that the advertising program, coupled with a
moderate October tuition increase, should continue to have a positive effect on
the Company. In addition, profitability should continue to improve as the newly
opened centers begin to mature and the acquired centers are fully integrated
into the Company.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
Net cash provided by operating activities for the first quarter of fiscal 1997
was $166,833. Cash was sufficient to meet the normal operating requirements of
the Company. Due to the Company's purchase of four child care centers in August,
1996, and amounts spent to upgrade the existing equipment at the acquired
centers as well as to equip the newly opened centers, working capital decreased
by $524,549, from $1,904,621 at July 31, 1996 to $1,380,072 at October 31, 1996.
Net cash used in investing activities was $879,403, consisting of purchases of
property and equipment totaling $394,469, and $494,264 in costs related to the
centers acquired by the Company in August. These uses were partially offset by
$9,330 in proceeds from disposals of property and equipment.
Net cash used in financing activities was $95,094, consisting of additional
notes payable of $54,408 for the purchase of vehicles and $50,000 in borrowings
under the Company's working capital credit line, offset by repayments of notes
payable and capital leases of $66,402 and payment of dividends on Series B and C
Preferred Stock of $133,100. Dividends payable on Series B and C Preferred
Stock as of October 31, 1996 were $44,367.
The Company is current on all principal and interest payments on its notes
payable and capital leases. The Company has two lines of credit with a
financial institution totaling $500,000: 1) a $250,000 revolving working capital
line, bearing interest at prime (8.25% at October 31, 1996) plus 1.00%, and; 2)
a $250,000 nonrevolving line of credit for the purchase of vehicles and
equipment, bearing interest at prime plus 1.25%. These lines of credit are
renewable each year on January 31, and are secured by the Company's accounts
receivable, inventory, furniture, vehicles and equipment.
-10-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- --------------------------------------------------------------------------------
The Company currently expects that it will be able to renew the lines of credit
under similar terms upon their maturity. However, if the lines of credit are not
renewed, there is no assurance that they can be replaced. If the Company were
unable to renew or replace these lines of credit and was then unable to repay
any outstanding balance, the bank could foreclose on the collateral.
The Company plans to open several additional centers in the Spring and Summer of
1997. Under current plans, one of these centers will be an on-site center at the
corporate headquarters of Swift Transportation Company, Inc. The other new
centers to be opened by the Company will be constructed by a third party and the
Company will then enter into long term leases for the land and buildings.
Preopening costs of a center normally range between $90,000 and $110,000 per
center. Management expects cash generated from operations and cash on hand to
be sufficient to satisfy the needs at its existing schools for the next 12
months and to open the new centers as planned.
The Company is also considering various additional acquisitions of established
child care centers operated in the southwestern United States, as well as in
other geographic areas. The Company intends to finance these acquisitions
through a combination of cash and long-term notes.
-11-
<PAGE> 12
PART II OTHER INFORMATION
Items 1 - 5 Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Statement Re: Computation of per share earnings
(b) Reports on Form 8-K
Reports on Form 8-K were filed on September 5, 1996 and
September 8, 1996 to report acquisitions of child care
centers by the Company.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUNRISE PRESCHOOLS, INC.
Date: December 10, 1996 By: /s/ James R. Evans
----------------- -------------------------------------
James R. Evans
Chairman of the Board of Directors
and President (Principal Executive
Officer)
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ---------------------------- ------------------------------------- -----------------
<S> <C> <C>
/s/ Ronald J. O'Connor Controller (Principal Financial Officer, December 10, 1996
- ---------------------------- Principal Accounting Officer) -----------------
Ronald J. O'Connor
</TABLE>
-13-
<PAGE> 1
EXHIBIT 11
SUNRISE PRESCHOOLS, INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
--------------------------
1996 1995
==========================================================================
<S> <C> <C>
PRIMARY:
Common Shares Outstanding,
Beginning of Year 2,982,968 2,935,894
Effect of weighting shares:
Employee stock options outstanding 18,315 283,893
Assumed Exercise of Warrants 13,978 118,009
- --------------------------------------------------------------------------
Weighted Average Number of Common
Shares and Common Share
Equivalents Outstanding 3,015,261 3,337,796
==========================================================================
Net Income Available for
Common Stock $ 3,105 $ 59,200
==========================================================================
Net Income per Common Share
and Common Share Equivalent $ 0.00 $ 0.02
==========================================================================
FULLY DILUTED:
Common Shares Outstanding,
Beginning of Year 2,935,894
Effect of Weighting Shares:
Employee Stock Options Outstanding 283,893
Exercise of Warrants 118,009
Assumed Conversion of Preferred Stock 500,000
- --------------------------------------------------------------------------
Weighted Average Number of Common
Shares and Common Share
Equivalents Outstanding 3,837,796
==========================================================================
Net Income Available for Common Stock $ 71,700
==========================================================================
Net Income per Common Share and Common
Share Equivalent $ 0.02
==========================================================================
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR THE THREE MONTHS
ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10QSB FOR THE QUARTER ENDED OCTOBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 1822952
<SECURITIES> 0
<RECEIVABLES> 551177
<ALLOWANCES> 7000
<INVENTORY> 34374
<CURRENT-ASSETS> 2790993
<PP&E> 5178068
<DEPRECIATION> 2871264
<TOTAL-ASSETS> 7359949
<CURRENT-LIABILITIES> 1410921
<BONDS> 0
0
857333
<COMMON> 29830
<OTHER-SE> 3662292
<TOTAL-LIABILITY-AND-EQUITY> 7359949
<SALES> 0
<TOTAL-REVENUES> 3251958
<CGS> 0
<TOTAL-COSTS> 3124050
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15359
<INTEREST-EXPENSE> (8297)
<INCOME-PRETAX> 136205
<INCOME-TAX> 0
<INCOME-CONTINUING> 136205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136205
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0
</TABLE>
