<SUBMISSION>
<ACCESSION-NUMBER>0000950124-03-000024
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>7
<PERIOD>20021011
<FILING-DATE>20030106
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CHILDTIME LEARNING CENTERS INC
<CIK>0001003648
<ASSIGNED-SIC>8351
<IRS-NUMBER>383261854
<STATE-OF-INCORPORATION>MI
<FISCAL-YEAR-END>0402
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-27656
<FILM-NUMBER>03505252
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>38345 WEST 10 MILE RD
<STREET2>STE 100
<CITY>FARMINGTON HILLS
<STATE>MI
<ZIP>48335
<PHONE>8104763200
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>k73781e10vq.htm
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
<HTML>
<HEAD>
<TITLE>Quarterly Report</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>SECURITIES AND EXCHANGE COMMISSION</B><BR>
WASHINGTON, D.C. 20549<BR>
<B>FORM 10-Q</B></FONT>


<P align="center"><FONT size="2">(MARK ONE)<BR>
<font face="Wingdings">&#120;</font> <B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT>


<P align="center"><FONT size="2"><B>FOR THE QUARTERLY PERIOD ENDED OCTOBER 11, 2002</B></FONT>


<P align="center"><FONT size="2">OR</FONT>


<P align="center"><FONT size="2"><font face="Wingdings">&#111;</font> <B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT>


<P align="center"><FONT size="2"><B>FOR THE TRANSITION PERIOD FROM
_____ TO _____</B></FONT>


<P align="center"><FONT size="2"><I>COMMISSION FILE NUMBER: 0-27656</I></FONT>


<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC.</B></FONT>


<P align="center"><FONT size="2">(Exact Name Of Registrant As Specified In Its Charter)</FONT>


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    <TD align="center" valign="top"><FONT size="2">MICHIGAN<BR>
(State or other jurisdiction of incorporation)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
38-3261854<BR>
(I.R.S. Employer Identification No.)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">38345 West Ten Mile Road, Suite&nbsp;100<BR>
Farmington Hills, Michigan 48335-2883<BR>
(Address of principal executive offices)</FONT>


<P align="center"><FONT size="2">(248)&nbsp;476-3200<BR>
(Registrant&#146;s telephone number, including area code)</FONT>


<P><FONT size="2">Indicate by check mark whether the Registrant: (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports), and (2)&nbsp;has been subject to such
filing required for the past 90&nbsp;days. Yes <font face="Wingdings">&#111;</font> No <font face="Wingdings">&#120;</font>

</FONT>


<P><FONT size="2">The number of shares of Registrant&#146;s Common Stock, no par value per share,
outstanding at November&nbsp;22, 2002, was 5,416,210.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
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<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
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</TR>
<TR><TD colspan="9"><A HREF="#000">PART I. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. Consolidated Financial Statements</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#002">A. Consolidated Balance Sheets October 11, 2002 and March 29, 2002</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#003">B. Consolidated Statements of Operations 12&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001 and 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#004">C. Consolidated Statements of Cash Flows 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#005">D. Notes to Consolidated Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">ITEM 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">ITEM 3. Quantitative and Qualitative Disclosures about Market Risks</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">ITEM 4. Controls and Procedures</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">PART II. OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">ITEM 1. Legal Proceedings</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">ITEM 2. Changes in Securities and Use of Proceeds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">ITEM 4. Submission of Matters to a Vote of Security Holders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">ITEM 5. Other Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">ITEM 6. Exhibits, Reports on Form&nbsp;8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv10w1.txt">Option Agreement between Company & Paul L. Gavin</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv10w2.txt">Option Agreement between Company & Kenneth Johnson</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv10w3.txt">Option Agreement between Company & Brett D Shevack</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv99w1.txt">Certification of Chief Executive Officer</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv99w2.txt">Certification of Chief Financial Officer</A></TD></TR>
<TR><TD colspan="9"><A HREF="k73781exv99w3.txt">Press release issued January 2, 2003</A></TD></TR>
</TABLE>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES</B></FONT>


<P align="center"><FONT size="2"><B>FORM 10-Q</B></FONT>


<P align="center"><FONT size="2"><B>INDEX</B></FONT>


<P align="center"><FONT size="2"><B>For the Quarterly Period Ended October&nbsp;11, 2002</B></FONT>


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    <TD width="1%">&nbsp;</TD>
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    <TD colspan="1" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"></FONT></DIV></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="1"><b>Page<br>Number</b></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD colspan="1" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"></FONT></DIV></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1"><hr size="1" noshade></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>



<TR valign="bottom">
    <TD colspan="1" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PART I.</FONT></DIV></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FINANCIAL INFORMATION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD colspan="1" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 1.&nbsp;&nbsp;</FONT></DIV></TD>

    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Financial Statements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">A. Consolidated Balance Sheets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">October&nbsp;11, 2002 and March&nbsp;29, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">B. Consolidated Statements of Operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">12&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">C. Consolidated Statements of Cash Flows</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">D. Notes to Consolidated Financial Statements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">6-15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 2.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"> Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">16-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 3.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Quantitative and Qualitative Disclosures about Market Risks</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 4.</FONT></DIV></TD>
<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Controls and Procedures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD nowrap colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PART II.&nbsp;&nbsp;</FONT></DIV></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER INFORMATION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 1.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Legal Proceedings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 2.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in Securities and Use of Proceeds</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">21-22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 4.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Submission of Matters to a Vote of Security Holders</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 5.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other Information</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="1"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ITEM 6.</FONT></DIV></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exhibits, Reports on Form&nbsp;8-K</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SIGNATURES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART I. FINANCIAL INFORMATION " -->
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<!-- link2 "ITEM 1. Consolidated Financial Statements" -->
<DIV align="left"><A NAME="001"></A></DIV>

<!-- link3 "A. Consolidated Balance Sheets October 11, 2002 and March 29, 2002" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P align="center"><FONT size="2"><B>PART I: FINANCIAL INFORMATION</B></FONT>


<P><FONT size="2"><B>ITEM 1. Consolidated Financial Statements</B></FONT>


<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
CONSOLIDATED BALANCE SHEETS</B></FONT>


<P><FONT size="2">(In thousands)</FONT>


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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>March 29,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="2"><FONT size="1"><B>(Unaudited)</B></FONT></TD>

    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT ASSETS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LAND, BUILDINGS AND EQUIPMENT:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,503</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leasehold improvements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Vehicles, furniture and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less: accumulated depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,326</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(16,531</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER NONCURRENT ASSETS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Refundable deposits and other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">84,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">74,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT LIABILITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts and drafts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued wages and benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Revolving line of credit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring accrual</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LONG-TERM DEBT, NET OF CURRENT PORTION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DEFERRED RENT LIABILITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">DEFERRED INCOME TAXES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SHAREHOLDERS&#146; EQUITY:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock, 10,000,000 shares authorized, no par value; 5,416,210 and
5,240,772 issued and outstanding at October&nbsp;11, 2002 and March&nbsp;29, 2002, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preferred stock, 1,000,000 shares authorized, no par value; no shares
issued or outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings (deficit)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,466</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,199</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">84,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">74,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P><FONT size="2">The accompanying footnotes are an integral part of
the consolidated financial statements.</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link3 "B. Consolidated Statements of Operations 12&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001 and 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001" -->
<DIV align="left"><A NAME="003"></A></DIV>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2">(In thousands, except per share data)</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>12 Weeks Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>28 Weeks Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Revenue from Learning Center Operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">42,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">31,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">87,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">78,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Revenue from Franchise Operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Revenue, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating expenses of Learning Centers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">68,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible asset impairment charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long lived fixed asset impairment charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING (LOSS)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(10,745</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(3,783</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(11,287</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,391</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(53</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(58</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(LOSS)&nbsp;BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(11,388</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(3,896</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(12,036</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,641</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax provision (benefit)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,469</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(239</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(619</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(LOSS)&nbsp;BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(11,388</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2,427</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(11,797</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,022</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative
effect of change in accounting principle (net of tax of $910)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET (LOSS)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(11,388</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2,427</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(16,764</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,022</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET (LOSS)&nbsp;PER SHARE:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic and diluted (loss)&nbsp;before
cumulative effect of change in accounting principle</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2.10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2.21</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.20</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of change in accounting principle</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic and diluted (loss)&nbsp;per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2.10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(3.15</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.20</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">WEIGHTED AVERAGE SHARES OUTSTANDING</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P><FONT size="2">The accompanying footnotes are an integral part of the consolidated financial statements.</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link3 "C. Consolidated Statements of Cash Flows 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2">(In thousands)</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>28 Weeks Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(16,764</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,022</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net loss&nbsp;to cash
provided by operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible and long lived fixed asset impairment charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stock option compensation expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred rent liability</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(125</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,188</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(663</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gains (loss)&nbsp;on sale of assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(131</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(777</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,879</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(60</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(648</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring accrual</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(150</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accruals and other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(913</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided (used)&nbsp;by operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,772</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">INVESTING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Acquisition of Tutor Time &#151; net of cash acquired of $682</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21,621</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital spending</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,111</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,466</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expenditures from reimbursable construction costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(942</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sale of assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payments for refundable deposits and other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23,166</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,896</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FINANCING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net borrowings on revolving line of credit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayments under long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(577</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in drafts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,135</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayments of reimbursable construction</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of common shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net decrease in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,790</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,412</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents, beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents, end of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P><FONT size="2">The accompanying footnotes are an integral part of the consolidated
financial statements.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link3 "D. Notes to Consolidated Financial Statements" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2"><B>NOTE 1 &#151; DESCRIPTION OF BUSINESS</B></FONT>


<P><FONT size="2">Childtime Learning Centers, Inc. and subsidiaries (&#147;Childtime&#148; or the
&#147;Company&#148;) began operations in 1967, and operates for-profit childcare centers
in 27 states, the District of Columbia and Canada. On July&nbsp;19, 2002, the
Company acquired substantially all of the assets of Tutor Time Learning
Systems, Inc., a Florida corporation (&#147;Tutor Time&#148;), for an aggregate purchase
price of approximately $22.8&nbsp;million including acquisition costs plus the
assumption of certain liabilities. The acquisition was consummated pursuant to
an asset purchase agreement dated June&nbsp;28, 2002, approved by the U.S.
Bankruptcy Court, Southern District of Florida and closed on July&nbsp;19, 2002. The
assets acquired by the Company consisted of substantially all of the operating
assets and contract rights used by Tutor Time in its child care operations,
which were comprised of 198 company-owned and franchised child care centers
operating in 23 states and internationally, and were purchased to improve its
product offering and to enter the childcare franchise business. This total
included one center that was not yet open whose lease had commenced and an
additional two centers that were assigned to franchisees subsequent to the
purchase. In addition, the Company purchased nine Tutor Time centers, whose
leases were rejected, that were closed within 60&nbsp;days of the purchase. The
Tutor Time centers are on average newer and larger than Childtime&#146;s centers,
and the Company believes Tutor Time is the largest franchisor in the childcare
industry. Additionally, the Company gained access to approximately 34 sites
that are under development and are expected to open as either
franchise or corporate centers over the next 18&nbsp;months. As of October&nbsp;11, 2002,
Childtime operated 337 Company owned centers and franchised an additional 129
centers with an aggregate licensed capacity for over 50,000 children.

</FONT>


<P><FONT size="2"><B>NOTE 2  &#151;  ACQUISITION AND PRO FORMA INFORMATION</B></FONT>


<P><FONT size="2">As previously mentioned, on July&nbsp;19, 2002, the Company acquired substantially
all of the assets of Tutor Time Learning Systems, Inc., a Florida corporation
(&#147;Tutor Time&#148;), for an aggregate purchase price of approximately $22.8&nbsp;million,
including acquisition costs plus the assumption of certain liabilities. In
consideration for the provision of investment advisory services with respect to
the acquisition, Jacobson Partners was paid an advisory fee consisting of a
cash payment of $333,336 and the issuance of 175,438 shares of common
stock.
These costs have been capitalized as part of the acquisition costs. Jacobson
Partners is the management and financial consultant to the Company of which
Benjamin R. Jacobson, the Company&#146;s Chairman of the Board is the managing
general partner, James J. Morgan, the Company&#146;s former Chairman of the Board,
is a partner, and George A. Kellner, the Company&#146;s Vice Chairman of the Board,
is a special advisor.

</FONT>


<P><FONT size="2">The Tutor Time acquisition was financed, in part, by Bank One, NA through its
secured credit facility with Childtime Childcare, Inc., a wholly-owned
subsidiary of the Company, as amended by the Second Amendment to Amended and
Restated Credit Agreement (&#147;Second Amendment&#148;) dated as of July&nbsp;19, 2002.

</FONT>


<P><FONT size="2">Subordinated loans (the &#147;Subordinated Notes&#148;) in the aggregate amount of $14
million were provided by a group of lenders organized by Jacobson Partners to
fund the balance of the Tutor Time acquisition purchase price and to provide
related working capital. The Subordinated Notes are subject to a Subordination
Agreement in favor of Bank One, NA, mature December&nbsp;31, 2004 and bear interest
at 15% of which 7% is payable in cash, with the balance payable in kind by the
issuance of additional subordinated notes (the &#147;Additional Subordinated Notes&#148;)
with interest and principal payable on the earlier of December&nbsp;31, 2004 or such
date on or after March&nbsp;31, 2003, on which the Company is in compliance with the
Senior Debt to EBITDA covenant of the Second Amendment, provided that the
Company has consummated the Rights Offering (defined below) and received net
cash proceeds (and/or cancelled Subordinated Notes) of at least $7.5&nbsp;million
from the issuance of common stock in such Rights Offering (the &#147;Minimum Equity
Agreement&#148;). If the Rights Offering is not consummated and the Minimum Equity
Amount is not received on or before July&nbsp;19, 2003, then until the earlier of
December&nbsp;31, 2004 or the date on which the Company consummates the Rights
Offering and receives the Minimum Equity Amount, all interest on the
Subordinated Notes will be payable by the issuance of Additional Subordinated
Notes. Although Jacobson Partners received no consideration for arranging this
financing, lenders included JP Acquisition Fund II, L.P. and JP Acquisition
Fund III, L.P., entities controlled and managed by affiliates of Jacobson
Partners (for an aggregate of $10,536,432), and three directors of the Company
(Mr.&nbsp;Jacobson, Mr.&nbsp;Morgan and Mr.&nbsp;Kellner) and trusts for the benefit of their
adult children (for an aggregate of $307,472).

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2"><B>NOTE 2 &#151; ACQUISITION AND PRO FORMA INFORMATION (CONTINUED)</B></FONT>


<P><FONT size="2">In connection with the Tutor Time acquisition, JP Acquisition Fund II, L.P., JP
Acquisition Fund III, L.P., and certain of their co-investors (collectively,
the &#147;Optionees&#148;), including Messrs.&nbsp;Jacobson, Morgan and Kellner, agreed to
arrange for the Company to obtain a standby purchase commitment in connection
with the Company&#146;s proposed rights offering contemplated for the purpose of
refinancing the subordinated debt incurred by the Company in connection with
the Tutor Time acquisition (the &#147;Rights Offering&#148;). As consideration for
obtaining such commitment, a Special Committee of the Board of Directors
approved, subject to shareholder approval, the grant to the Optionees of
options to purchase, in the aggregate, up to 400,000 shares of common stock,
until July&nbsp;19, 2006, at an exercise price of $5.00 per share. All shares
acquired by the Optionees would be subject to registration rights, pursuant to
which, until July&nbsp;6, 2007, the Optionees would have the right to cause the
Company to register, at the Company&#146;s expense, their shares of common stock,
whenever the Company is otherwise registering shares (except in certain
circumstances). This option grant was approved by shareholders at the Company&#146;s
2002 Annual Meeting of Shareholders held August&nbsp;15, 2002, and, because the
terms of the underlying rights offering have changed (see discussion below),
reapproved by shareholders at a Special Meeting held December&nbsp;17, 2002.
Despite the change in terms of the Rights Offering, the terms of
the options, are
not being changed. In particular, the option price will remain at $5.00 per
share.

</FONT>


<P><FONT size="2">The Rights Offering is expected to take place during the first calendar quarter
of 2003 and will refinance the subordinated debt incurred by the Company in
connection with the Tutor Time acquisition. As originally contemplated, each
Rights Offering unit (&#147;Unit&#148;) would consist of 30 shares of common stock,
valued at $3.50 per share, and a $35 subordinated debenture, giving an
aggregate value to each Unit of $140. Due to the substantial decline in the
trading price of the Company&#146;s common stock, however, the pricing of the common
stock portion of the rights offering has been revised. As currently
contemplated, the offering price per share of the common stock under the rights
offering would, except under limited circumstances, be the four-week average
trading price of the common stock on The Nasdaq SmallCap Market, prior to the
commencement date of the offering; provided, however, that if the one-week
average closing price of the common stock, calculated during the one-week
period immediately prior to the commencement date of the offering, was more
than 10% less than such four-week average closing price, the offering price
related to the common stock portion of the rights offering will equal 110% of
such one-week average closing price. In no event, however, will the offering
price related to the common stock portion of the rights offering be less than
the last trading price of the common stock on The Nasdaq SmallCap Market on or
prior to the day immediately preceding the commencement date of the offering.
Subject to certain shareholder ownership requirements, all common shareholders
as of the Rights Offering record date will be able to participate in the
offering and will be allowed to acquire Units on a pro rata basis. The
subordinated debentures will bear interest at 15%, have a five-year maturity,
and be redeemable by the Company at any time at par, subject to restrictions
under its senior lending agreements. As indicated above, JP Acquisition Fund
II, L.P., JP Acquisition Fund III, L.P., and certain of their co-investors,
including Messrs.&nbsp;Jacobson, Morgan and Kellner, have provided a commitment to
purchase all Units not subscribed for in the Rights Offering.

</FONT>


<P><FONT size="2">The acquisition of Tutor Time is reflected in the consolidated balance sheet of
the Company as of October&nbsp;11, 2002 and has been accounted for in accordance
with Statement of Financial Accounting Standards (&#147;SFAS&#148;) No 141, <I>Business
Combinations</I>. The results of operations of Tutor Time since July&nbsp;19, 2002 are
included in the Company&#146;s results of operations. The purchase price has been
tentatively allocated as follows and is subject to further change (in
thousands):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and notes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,869</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade name and trademarks</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Franchise agreements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Curriculum</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill
and unallocated purchase price</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Liabilities assumed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,717</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase price</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">22,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>



<P><FONT size="2"><B>NOTE 2 &#151; ACQUISITION AND PRO FORMA INFORMATION (CONTINUED)</B></FONT>


<P><FONT size="2">Pro forma information for the Company and Tutor Time follows (in thousands,
except per share data):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>12 Weeks Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>28 Weeks Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Revenue, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">43,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">105,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">106,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating
earnings (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2"></FONT></TD>
    <TD align="right"><FONT size="2">3,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2"></FONT></TD>
    <TD align="right"><FONT size="2">10,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2"></FONT></TD>
    <TD align="right"><FONT size="2">133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss before income taxes and
cumulative effect of change in
accounting principle</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,387</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,804</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,534</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of change in
accounting principle</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(2,687</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(16,532</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(376</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.50</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(3.10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.07</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P><FONT size="2">Since Tutor Time was acquired at the end of the
first quarter, the 12
weeks ended October&nbsp;11, 2002, includes a full 12&nbsp;weeks of Tutor Time
operations.

</FONT>


<P><FONT size="2">In connection with the Tutor Time Learning Systems, Inc. bankruptcy
proceedings, Tutor Time, at the request of the Company was able to reject
numerous leases and franchise agreements. The accompanying pro forma
information includes only the revenues and costs from those Tutor Time centers
and franchises that were not rejected as part of the bankruptcy proceedings. No
pro forma adjustments were made to the historical Tutor Time corporate overhead
expenses ($2.2&nbsp;million for the 12&nbsp;weeks ended
October&nbsp;11, 2001 and $2.0 million and
$5.8 million for the 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001,
respectively). Additional interest expense was included in the pro forma
results based upon the additional debt incurred to finance the Tutor Time
acquisition.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P align="left"><FONT size="2"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</FONT>

<P><FONT size="2"><B>PRINCIPLES OF CONSOLIDATION</B></FONT>


<P><FONT size="2">The consolidated financial statements include the accounts of Childtime
Learning Centers, Inc. and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.

</FONT>


<P><FONT size="2">The accompanying consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles and,
accordingly, include all normal and recurring adjustments which, in the opinion
of management, are necessary for a fair presentation of the periods represented
to fairly state the Company&#146;s financial condition, results of operations and
its cash flows, for the interim periods presented.

</FONT>


<P><FONT size="2">These statements should be read in conjunction with the Company&#146;s consolidated
financial statements and notes thereto for the 52&nbsp;weeks ended March&nbsp;29, 2002.
The results for the 12&nbsp;weeks and the 28&nbsp;weeks ended October&nbsp;11, 2002, are not
necessarily indicative of results for the entire year.

</FONT>


<P><FONT size="2"><B>USE OF ESTIMATES</B></FONT>


<P><FONT size="2">The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to render
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.

</FONT>


<P align="left"><FONT size="2"><B>FRANCHISE FEES AND ROYALTY INCOME</B>
</FONT>

<P><FONT size="2">Franchise fees are recognized as revenue at the time the franchise center
receives a certificate of occupancy. Royalty income related to franchise
operations is recognized as revenue is earned by franchisees.

</FONT>


<P align="left"><FONT size="2"><B>FISCAL YEAR</B>
</FONT>

<P><FONT size="2">The Company utilizes a 52-53&nbsp;week fiscal year ending on the Friday closest to
March&nbsp;31. For Fiscal years 2002 and 2003, the first quarter contained 16&nbsp;weeks,
and the fiscal year contained 52&nbsp;weeks.

</FONT>


<P><FONT size="2"><B>NOTE 4 &#151; ACCOUNTS RECEIVABLE</B></FONT>


<P><FONT size="2">Accounts receivable is presented net of an allowance for doubtful accounts. At
October&nbsp;11, 2002 and March&nbsp;29, 2002, the allowance for doubtful accounts was
$0.8&nbsp;million and $1.3&nbsp;million, respectively.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P align="left"><FONT size="2"><B>NOTE 5 &#151; REIMBURSABLE CONSTRUCTION COSTS</B>
</FONT>

<P><FONT size="2">In connection with certain build-to-suit centers to be leased, the Company
enters into arrangements, whereby the Company accumulates costs during the
construction process and is then reimbursed by the developer. The Company has
various legal remedies available pursuant to the construction agreements to
minimize the risk of nonreimbursement. For the 28&nbsp;weeks ended October&nbsp;11, 2002,
and the year ended March&nbsp;29, 2002, the Company financed construction costs of
$0.0&nbsp;million and $0.9&nbsp;million, respectively, while related repayments received
under reimbursement agreements were $0.0&nbsp;million and $2.0&nbsp;million,
respectively.

</FONT>


<P align="left"><FONT size="2"><B>NOTE 6 &#151; DRAFTS PAYABLE</B>
</FONT>

<P><FONT size="2">Drafts payable represent unfunded checks drawn on zero balance accounts that
have not been presented for funding to the Company&#146;s banks. The drafts are
funded, without finance charges, as soon as they are presented. At October&nbsp;11,
2002 and March&nbsp;29, 2002, the aggregate drafts payable are $2.0&nbsp;million and $4.0
million, respectively.

</FONT>


<P align="left"><FONT size="2"><B>NOTE 7 &#151; FINANCING ARRANGEMENTS</B>
</FONT>

<P><FONT size="2">On January&nbsp;31, 2002, the Company amended and restated its revolving line of
credit agreement by entering into a new $17.5&nbsp;million revolving line of credit
agreement with its existing lender. The new credit agreement, as amended on
July&nbsp;19, 2002, will mature on September&nbsp;30, 2004, and is secured by the
Company&#146;s receivables, equipment and certain real estate, with interest payable
at a variable rate, at the Company&#146;s option, based on either the prime rate or
the Eurodollar rate. There were outstanding borrowings of $13.9&nbsp;million at
October&nbsp;11, 2002, and outstanding borrowings of $2.5&nbsp;million at March&nbsp;29, 2002.
Outstanding letters of credit reduced the availability under the line of credit
in the amount of $2.5&nbsp;million at October&nbsp;11, 2002 and $1.8&nbsp;million at March&nbsp;29,
2002.

</FONT>


<P><FONT size="2">As previously discussed, subordinated loans in the aggregate amount of $14
million were provided by a group of lenders organized by Jacobson Partners to
fund the balance of the Tutor Time acquisition purchase price and to provide
related working capital. The Subordinated Notes are subject to a Subordination
Agreement in favor of Bank One, NA, mature December&nbsp;31, 2004 and bear interest
at 15% of which 7% is payable in cash, with the balance payable in kind by the
issuance of additional subordinated notes ($0.5 million accrued and
included in subordinated notes), with interest and principal payable
on the earlier of December&nbsp;31, 2004 or such date on or after March&nbsp;31, 2003, on
which the Company is in compliance with the Senior Debt to EBITDA covenant of
the Second Amendment, provided that the Company has consummated the Rights
Offering (see Note 2) and received net cash proceeds (and/or cancelled
Subordinated Notes) of at least $7.5&nbsp;million from the issuance of common stock
in such Rights Offering. If the Rights Offering is not consummated and the
Minimum Equity Amount is not received on or before July&nbsp;19, 2003, then until
the earlier of December&nbsp;31, 2004 or the date on which the Company consummates
the Rights Offering and receives the Minimum Equity Amount, all interest on the
Subordinated Notes will be payable by the issuance of Additional Subordinated
Notes. Although Jacobson Partners received no consideration for arranging this
financing, lenders included JP Acquisition Fund II, L.P. and JP Acquisition
Fund III, L.P., entities controlled and managed by affiliates of Jacobson
Partners (for an aggregate of $10,536,432), and three directors of the Company
(Mr.&nbsp;Jacobson, Mr.&nbsp;Morgan and Mr.&nbsp;Kellner) and trusts for the benefit of their
adult children (for an aggregate of $307,472).

</FONT>


<P><FONT size="2">At July&nbsp;19, 2002 and at October&nbsp;11, 2002, the Company had not maintained
minimum consolidated EBITDA levels and had not provided timely reporting as
required by the Amended and Restated Credit Agreement. The Company&#146;s lender has
approved waivers to the Amended and Restated Credit Agreement dated as of
January&nbsp;31, 2002. The latest waiver is effective through December&nbsp;27, 2002,
and is limited to the financial results for the quarter ended October&nbsp;11, 2002.
The Company anticipates that it will not be able to maintain minimum
consolidated EBITDA levels in third quarter 2003, and is in the process of
negotiating an amendment to the Amended and Restated Credit Agreement. No
assurance can be given that the Company will be successful in amending this
agreement.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P align="left"><FONT size="2"><B>NOTE 8 &#151; CONTINGENCIES</B>
</FONT>

<P><FONT size="2">During fiscal 2002, the Company decided not to pursue opening three new
build-to-suit centers after leases for these centers had been signed with the
developer of the centers. The Company was subsequently sued by the developer
for breach of contract. This case was settled at the end of fiscal 2002, and a
current liability was recorded on the balance sheet as of March&nbsp;29, 2002 in the
amount of $0.8&nbsp;million, which was paid during first quarter 2003.

</FONT>


<P><FONT size="2">The Company is primarily liable on approximately $1.0&nbsp;million for lease
assignments already negotiated in connection with certain lease terminations
resulting from the fiscal 2001 restructuring program (see Note 12). A
subsidiary of the Company is primarily or contingently liable for many of the
leases of Tutor Time&#146;s franchisees. In an effort to build its franchisee
network, Tutor Time either leased the prospective site for a franchisee, with a
subsequent sublease of the site to the franchisee, or provided a lease
guarantee to the landlord for the benefit of the franchisee in exchange for a
monthly lease guarantee fee payable by the franchisee that is based upon the
monthly rent expense of the guaranteed lease. The liability related to these
leases and guarantees is approximately $177.0&nbsp;million. The Company has not
been notified that it will be required to make payments under any of these
leases or guarantees, and does not believe that any payments are probable and
therefore no liability has been recorded.

</FONT>


<P><FONT size="2">In addition, various legal actions and other claims are pending or could be
asserted against the Company. Litigation is subject to many uncertainties; the
outcome of individual litigated matters is not predictable with assurance, and
it is reasonably possible that some of these matters may be decided unfavorably
to the Company. It is the opinion of management that the ultimate liability,
if any, with respect to these matters will not materially affect the financial
position, results of operations or cash flows of the Company.

</FONT>


<P align="left"><FONT size="2"><B>NOTE 9 &#151; OPTION GRANTS AND PAYMENTS FOR CONSULTING SERVICES</B>
</FONT>

<P><FONT size="2">In July 2000, the Company retained Jacobson Partners, of which Benjamin R.
Jacobson, the Company&#146;s Chairman of the Board, is the managing general partner,
to provide management and financial consulting services. As part of the
consideration to be paid to, and to add further incentive for such services,
Jacobson Partners was granted stock options to purchase 557,275 shares.
Jacobson Partners has exercised options totaling 294,117 shares at a cost of
$2,500,000. The remaining 263,158 shares expired in July 2002. Additionally,
Jacobson Partners receives an annual consulting fee in the amount of $250,000,
plus reimbursement of reasonable out-of-pocket expenses. In connection with the
Tutor Time acquisition, Jacobson Partners was paid an advisory fee consisting
of $333,336 and the issuance of 175,438 shares, and options were granted to
certain related parties to acquire up to 400,000 shares of the Company&#146;s common
stock (see Note 2 &#147;Acquisition and Pro Forma Information&#148;). Total expenses
incurred for Jacobson Partners (exclusive of the Tutor Time fee) were $135,000
and $135,000 for the 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001,
respectively, and are included in General and Administrative expense in the
accompanying Consolidated Statement of Operations.

</FONT>


<P><FONT size="2">The Company&#146;s former Chairman of the Board and Interim Chief Executive Officer
was granted 60,000 options in January 2001. As initially granted, the options
have a $7.00 exercise price, vest at the rate of 10,000 per month and expire
January 2003. After the executive was appointed Chairman of the Board in August
2001, these options were extended to expire in September 2006. At that time, he
was also granted an additional 50,000 options. These additional options have an
$11.00 exercise price, vest after one year and expire in September 2006.

</FONT>

<P><FONT size="2">The former interim Chief Financial Officer was granted
10,000 options in March 2001. The options have a $7.97 exercise
price, vest evenly over 3 years and expire in March 2007. In September
2001, the executive was granted an additional 20,000 options. These
additional options have an $11.00 exercise price, vest after one year
and expire in September 2006. As a result of these stock option grants,
the Company recorded additional compensation expense of $18,004 at
fiscal year end 2002.
</FONT>

<P align="left"><FONT size="2"><B>NOTE 10 &#151; INCOME TAXES</B>
</FONT>

<P><FONT size="2">The Company provides for income taxes in accordance SFAS No.&nbsp;109, <I>Accounting
for Income Taxes</I>, which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the consolidated financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.

</FONT>


<P><FONT size="2">Due to continued losses and uncertainties, the Company has determined that it
is more likely than not that the deferred tax assets will not be recovered
through future taxable income. As a result, a valuation reserve has been
provided reducing deferred tax assets to an amount recoverable through the
reversal of deferred tax liabilities or through carryback to prior tax years.
The tax provision is as follows (in thousands):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="75%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred
tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation
allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,084</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net
deferred taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" nowrap colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)
</FONT>

<P><FONT size="2"><B>NOTE 11 &#151; (LOSS)&nbsp;PER SHARE</B>

</FONT>


<P><FONT size="2">For the 12 and 28&nbsp;weeks ended October&nbsp;11, 2002 and October&nbsp;12, 2001, basic
loss per share has been calculated by dividing earnings available to
common shareholders by the weighted average number of common shares outstanding
for the period. The potential effect of stock options has been
excluded in computing the loss per share as the effect would be
antidilutive. The calculation of basic
and diluted shares is as follows (in thousands):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="22"><FONT size="1"><B>Calculation of Incremental Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="22"><FONT size="1"><B>Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="10"><FONT size="1"><B>12 weeks ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="10"><FONT size="1"><B>28 weeks ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="22"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="6"><FONT size="1"><B>October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic shares (based on
weighted average)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stock options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="6"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>


<P align="left"><FONT size="2"><B>NOTE 12 &#151; RESTRUCTURING CHARGES</B>
</FONT>

<P><FONT size="2">The Company instituted a restructuring program in fiscal 2001 and incurred a
charge of $4,000,000 in March 2001. In this regard, the Company closed all 10
of its Oxford Learning Centers of America and identified 19 under-performing
centers to be closed in fiscal 2002. As of October&nbsp;11, 2002, all but one of the
under-performing centers have been closed. Approximately 200 employees were
involuntarily terminated in connection with the closures of Oxford Learning
Centers of America and the 19 under-performing Childtime centers. The Company
expects to complete its plan during fiscal 2003. For the 28&nbsp;weeks ended October
11, 2002, the Company recorded restructuring expenses of $702,000. Of this
amount, $346,000 is related to the closure of two additional centers, not
included in the 2001 restructuring program. The remaining $356,000 is to
increase reserves related to the 2001 restructuring program. This increase is
necessary as a result of current real estate market conditions.

</FONT>


<P><FONT size="2">A summary of the restructuring reserve is as follows (in thousands):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="14"><FONT size="1"><B>Restructuring Reserve Analysis</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Beginning</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Ending</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Accrual</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Restructuring</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Cash</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>accrual</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>March 29, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Charge</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>payments</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease termination costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Severance costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2"><B>NOTE 13 &#151; INTANGIBLE ASSETS AND LONG LIVED ASSET IMPAIRMENT</B></FONT>


<P><FONT size="2">During the second quarter of 2003, the Company completed the implementation of
SFAS 142, <I>Goodwill and Other Intangible Assets</i>. Under SFAS 142, goodwill is no
longer amortized. Instead, goodwill and indefinite-lived intangible assets are
tested for impairment in accordance with the provisions of SFAS 142. In
accordance with its impairment policy, the Company employed a discounted cash
flow analysis in conducting its impairment tests for the year ended March&nbsp;29,
2002. The Company completed its impairment test and recorded an impairment loss
of $5.0&nbsp;million (net of a tax benefit of $0.9&nbsp;million) as a cumulative
effect of a change in accounting principle. In addition, as a result of
continuing weakening economic conditions, the Company tested for goodwill
impairment as of October&nbsp;11, 2002, and recorded an impairment loss during the
second quarter of $4.2&nbsp;million.

</FONT>


<P><FONT size="2">In accordance with the provisions of SFAS 142, the Company did not amortize
goodwill for the quarter and 28&nbsp;weeks ended October&nbsp;11, 2002. If goodwill
amortization had not been recorded for the quarter and six months ended October
12, 2001, net loss would have decreased $0.4 and $1.0&nbsp;million to an adjusted
net loss of ($2.0) and ($0.0) million, respectively.

</FONT>


<P><FONT size="2">The changes in the carrying amounts of goodwill and other intangible assets for
the six months ended October&nbsp;11, 2002 were as follows (in thousands):

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Pre-Tax</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Balance</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Impairment</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Balance</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>3/29/02</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Additions (1)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Loss</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Amortization</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>10/11/02</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Useful life</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Childtime:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Covenants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,068</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Indefinite</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tutor Time:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade Name and trademarks</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
  <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Franchise Agreements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Curriculum</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill and unallocated purchase price</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Indefinite</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Additions relate to the July&nbsp;19, 2002 acquisition of Tutor Time Learning
Systems, Inc.</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">Due to the continuing weakening economic conditions, the Company tested for
long-lived asset impairment, which consists primarily of equipment, leasehold improvements and other
assets, as of October&nbsp;11, 2002 in accordance with the provisions of SFAS 144,
<i>Accounting for the Impairment or Disposal of Long-Lived Assets</I>. The Company
employed a cash flow analysis in conducting its impairment test. The Company
completed its impairment test and recorded an impairment loss of $3.5&nbsp;million, which impacted the Childtime
reporting segment.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P><FONT size="2"><B>Note 14 &#151; SEGMENT INFORMATION</B></FONT>


<P><FONT size="2">The Company has three reportable segments: Childtime, Tutor Time and Franchise
Operations. Childtime operates childcare centers primarily under the Childtime
Learning Centers brand name, Tutor Time operates childcare centers under the
Tutor Time brand name and Franchise Operations licenses and provides
developmental and administrative support to franchises operating under the
Tutor Time brand name. The accounting polices of the segments are the same as
those described in the summary of significant accounting policies. The
Company&#146;s reportable segments are reported separately because the Company&#146;s
chief operating decision maker uses the segment information in determining the
allocation of resources among segments and appraising the performance of the
segments.

</FONT>


<P><FONT size="2">Information about the Company&#146;s operating segments are presented below:

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="14"><FONT size="1"><B>12 Weeks
Ended October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="14"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Childtime</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Tutor Time</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Franchise Operations</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Total</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">External revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">32,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">43,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intersegment revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Depreciation and amortization</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">725</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">158</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">105</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">988</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,494</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,302</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,745</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Goodwill(1)</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">7,205</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">6,839</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">745</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">14,789</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="14"><FONT size="1"><B>12 Weeks Ended October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="14"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Childtime</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Tutor Time</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Franchise Operations</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Total</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">External revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">31,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">31,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intersegment revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Depreciation and amortization</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">1,116</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">1,116</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,783</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,783</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Goodwill</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">19,961</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">19,961</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="14"><FONT size="1"><B>28 Weeks
Ended October 11, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="14"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Childtime</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Tutor Time</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Franchise Operations</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Total</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">External revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">77,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">88,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intersegment revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Depreciation and amortization</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">1,493</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">158</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">105</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">1,756</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,036</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,302</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,287</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Goodwill(1)</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">7,205</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">6,839</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">745</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">14,789</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="14"><FONT size="1"><B>28 Weeks Ended October 12, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="14"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Childtime</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Tutor Time</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Franchise Operations</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Total</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">External revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">78,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">78,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intersegment revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Depreciation and amortization</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">2,499</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">2,499</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,391</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,391</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
<TD><font size="2">Goodwill</font></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">19,961</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">&#151;</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right"><FONT size="2">19,961</FONT></TD>
<TD></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P><FONT size="2">(1)&nbsp;&nbsp;&nbsp; Tutor Time and Franchise Operations goodwill includes amounts associated with the unallocated purchase price.</FONT>


<P><FONT size="2"><B>NOTE 15 &#151; OPERATIONAL IMPROVEMENTS</B></FONT>


<P><FONT size="2">The Company has continued to experience operating losses for the past five
quarters. As described in Note 7, the Company has not maintained minimum
consolidated EBITDA levels required by the Amended and Restated Credit
Agreement and anticipates that it will not be able to maintain minimum
consolidated EBITDA levels in third quarter 2003. The Company has taken steps
to improve the profitability of its operations through pricing, more effective
labor management and expense control and efforts aimed at boosting enrollment.
During the first two periods of the third quarter, these measures have begun to
show improvements in operating results.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(UNAUDITED)</FONT>


<P align="left"><FONT size="2"><B>NOTE 16 &#151; NEW ACCOUNTING PRONOUNCEMENTS</B>
</FONT>

<P><FONT size="2">In June 2001, the Financial Accounting Standards Board issued SFAS No.&nbsp;142,
<I>Goodwill and Other Intangible Assets</I>, effective for fiscal years beginning
after December&nbsp;15, 2001. Under the new standard, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized, but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives. The
Company completed its impairment test and recorded an impairment loss of $4.3
million, or $0.81 per average basic and diluted share as a cumulative effect of
a change in accounting principle. In addition, as a result of continuing
weakening economic conditions, the Company tested for goodwill impairment as of
October&nbsp;11, 2002, and recorded an impairment loss during the second quarter of
$6.5&nbsp;million, or $1.19 per average basic and diluted share.

</FONT>


<P><FONT size="2">SFAS No.&nbsp;143, <I>Accounting for Asset Retirement Obligations </I>was issued in August
2001, and addresses legal obligations (arising from laws, statutes, contracts,
etc.) that an entity must satisfy when disposing of tangible, long-lived
assets. The standard requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred. The
Company is evaluating the impact this Statement will have on its consolidated
financial statements and is anticipating the adoption of SFAS No.&nbsp;143 in the
first quarter of Fiscal 2004.

</FONT>


<P><FONT size="2">SFAS No.&nbsp;144, <I>Accounting for the Impairment or Disposal of Long-Lived Assets</I>
was issued in July 2001, and addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement supercedes SFAS
No.&nbsp;121 on the same topic and establishes an accounting model for the
impairment of long-lived assets. The Company employed a cash flow analysis in
conducting its impairment test. The Company completed its impairment test and
recorded an impairment loss of $2.9&nbsp;million, or $0.54 per average basic and
diluted share which impacted the Childtime reporting segment.

</FONT>


<P><FONT size="2">SFAS No.&nbsp;145, <I>Rescission of FASB Statements No.&nbsp;4, 44, and 64, Amendment of
FASB Statement No.&nbsp;13, and Technical Corrections as of April 2002</I>, was issued
in April 2002, and rescinds FASB Statement No.&nbsp;4, <I>Reporting Gains and Losses
from Extinguishments of Debt</I>, and an amendment of that Statement, FASB
Statement No.&nbsp;64, <I>Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements</I>. This Statement also rescinds FASB Statement No.&nbsp;44, <I>Accounting
for Intangible Assets of Motor Carriers</I>. This Statement amends FASB Statement
No.&nbsp;13, <I>Accounting for Leases</I>, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The Company
adopted this Statement during the first quarter of Fiscal 2003 which had no
significant effect on the Company.

</FONT>


<P><FONT size="2">SFAS No.&nbsp;146, <I>Accounting for Costs Associated with Exit or Disposal Activities</I>,
was issued in June 2002, and addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF)&nbsp;Issue No.&nbsp;94-3, &#147;Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring).&#148; The Company is anticipating the adoption
of SFAS No.&nbsp;146 in the third quarter of Fiscal 2003.

</FONT>


<P><FONT size="2">SFAS No. 147<I>, Acquisitions of Certain Financial Institutions&#151;an amendment of
FASB Statements No.&nbsp;72 and 144 and FASB Interpretation No.&nbsp;9</I>, was issued in
October 2002, and addresses FASB Statement No.&nbsp;72, <I>Accounting for Certain
Acquisitions of Banking or Thrift Institutions</I>, and FASB Interpretation No.&nbsp;9,
<I>Applying APB Opinions No.&nbsp;16 and 17 When a Savings and Loan Association or a
Similar Institution Is Acquired in a Business Combination Accounted for by the
Purchase Method</I>, provided interpretive guidance on the application of the
purchase method to acquisitions of financial institutions. Except for
transactions between two or more mutual enterprises, this Statement removes
acquisitions of financial institutions from the scope of both Statement 72 and
Interpretation 9 and requires that those transactions be accounted for in
accordance with FASB Statements No.&nbsp;141, <I>Business
Combinations,</I> and No.&nbsp;142,
<I>Goodwill and Other Intangible Assets</I>. The Company adopted this Statement
during the second quarter of Fiscal 2003 which had no significant effect on the
Company.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "ITEM 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->
<DIV align="left"><A NAME="006"></A></DIV>


<P><FONT size="2"><B>ITEM 2. Management&#146;s Discussion and Analysis</B></FONT>


<P align="left"><FONT size="2"><B>GENERAL</B>
</FONT>

<P><FONT size="2">The information presented herein refers to the 12&nbsp;weeks (second quarter 2003)
and the 28&nbsp;weeks (year to date 2003) ended October&nbsp;11, 2002, compared to the 12
weeks (second quarter 2002) and the 28&nbsp;weeks (year to date 2002) ended October
12, 2001.

</FONT>


<P><FONT size="2">The results of Learning Centers opened, acquired or disposed of are included in
the Company&#146;s consolidated financial statements from the date of opening or
acquisition and through the date of disposition, as applicable. The timing of
such new openings, acquisitions or dispositions could influence comparisons of
year over year results. These comparisons were particularly influenced by the
Company&#146;s acquisition of substantially all of the assets of Tutor Time Learning
Systems, Inc., a Florida Corporation (Tutor Time), on July&nbsp;19, 2002.

</FONT>


<P><FONT size="2">During the second quarter 2003, the Company opened
two, closed five and transferred
two Learning Centers to franchisees.
The Company did not add or close any Learning Center during the second quarter
2002. During year to date 2003, the Company added 60 Learning Centers, which
included the 59 Tutor Time Learning Centers acquired at the end of the first
quarter of 2003, closed seven and transferred two Learning Centers to franchisees.
The Company also closed nine centers, whose leases were rejected, as part of
the Tutor Time purchase transaction.

</FONT>


<P><FONT size="2"><B>RESULTS OF OPERATIONS</B></FONT>


<P><FONT size="2"><I>Revenues, net. </I>Net revenues for second quarter 2003 increased $12.0&nbsp;million, or
37.6%, from the same period last year to $44.0&nbsp;million. The increase was
primarily a result of additional revenues of $10.5&nbsp;million contributed by Tutor
Time locations and $1.1 million contributed by Franchise Operations, both of which were acquired
at the end of first quarter 2003.
Comparable center revenues (centers operating for 18&nbsp;months or longer)
increased $0.7&nbsp;million during the quarter. Net revenues for year to date 2003
increased $10.2&nbsp;million, or 12.9%, from the same period last year to $88.8
million. The increase was primarily a result of additional revenues of $10.5
million contributed by Tutor Time and $1.1 million contributed by Franchise Operations, offset by a
comparable center revenue decrease of $0.4&nbsp;million for the period and a
reduction in revenue due to closed centers.

</FONT>


<P><FONT size="2"><I>Operating expenses of Learning Centers. </I>Operating expenses in second quarter
2003 increased $12.5&nbsp;million, or 43.5%, from the same period last year to $41.3
million. Operating expenses year to date 2003 increased $13.0&nbsp;million, or
19.0%, from the same period last year to $81.7&nbsp;million. These increases were
primarily a result of additional operating expenses of $11.3&nbsp;million for the
Tutor Time centers, increased personnel expenses of $.7&nbsp;million for the
Childtime centers, and, for year to date 2003, increases in other
operating expenses, primarily center supplies, transportation and maintenance
for the Childtime centers. Operating expenses increased as a percentage of
revenues to 94.0% in second quarter 2003, from 90.1% in the same period last
year. Year to date 2003 operating expenses increased as a percentage of
revenues to 92.0%, from 87.3% in the same period last year. These increases
were a result of higher operating costs in the acquired Tutor Time centers,
costs incurred in center openings and closings, and higher labor costs.

</FONT>


<P><FONT size="2"><I>Provision for doubtful accounts. </I>Provision for doubtful accounts decreased
from $0.7&nbsp;million to $0.3&nbsp;million in second quarter 2003
and decreased from $0.8
million to $0.5&nbsp;million year to date 2003, as collection experience improved.

</FONT>


<P><FONT size="2"><I>General and administrative expenses. </I>General and administrative expenses in
second quarter 2003 increased $1.5&nbsp;million, or 52.0%, from the same period last
year to $4.3&nbsp;million. This increase was a result of $1.3&nbsp;million of general
and administrative costs incurred by Tutor Time operations and $0.2&nbsp;million for
higher costs associated with the establishment of regional offices in the
latter part of first quarter 2002. Year to date 2003 expenses increased $2.1
million, or 36.0%, from the same period last year to $7.8&nbsp;million. This
increase was a result of $1.3&nbsp;million of general and administrative costs
incurred by Tutor Time operations and $0.6&nbsp;million for higher costs associated
with the establishment of regional offices in the latter part of first quarter
2002.

</FONT>


<P><FONT size="2"><I>Depreciation and amortization expense. </I>Depreciation and amortization expense
in second quarter 2003 decreased by $0.1&nbsp;million from the same period last year
to $1.0&nbsp;million. In accordance with SFAS No.&nbsp;142, <I>Goodwill and Other
Intangible Assets</i>, effective in fiscal 2003, goodwill is no longer amortized.
This resulted in a reduction of amortization expense of $0.4&nbsp;million for the
current quarter, which was offset by depreciation and amortization of
$0.3
million attributable to the Tutor Time centers. Year to date 2003 expenses
decreased $0.7&nbsp;million from the same period last year to $1.8&nbsp;million. This
was a result of a reduction of amortization expense of $1.0&nbsp;million for year to
date 2003, which was offset by depreciation and amortization of $0.3&nbsp;million
attributable to the Tutor Time centers.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
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<P><FONT size="2"><I>Restructuring charges. </I>The Company instituted a restructuring program in
fiscal 2001 and incurred a charge of $4.0&nbsp;million in March 2001. In this
regard, the Company closed all 10 of its Oxford Learning Centers of America and
identified 19 under-performing centers to be closed in fiscal 2002. As of
October&nbsp;11, 2002, all but one of the under-performing centers have been closed.
Approximately 200 employees were involuntarily terminated in connection with
the closures of Oxford Learning Centers of America and the 19 under-performing
Childtime centers. For second quarter 2003, the Company recorded restructuring
expenses of $0.2&nbsp;million. This amount is related to the closure of one
additional center, not included in the 2001 restructuring program. For year to
date 2003, the Company recorded restructuring expenses of $0.7&nbsp;million. Of this
amount, $0.4&nbsp;million is related to the closure of two additional centers not
included in the 2001 restructuring program. The remaining $0.3&nbsp;million is to
increase reserves related to the 2001 restructuring program, as a result of
current real estate market conditions. During second quarter 2003, the Company
made cash payments of $201,000 related to lease termination costs and $18,000
related to severance costs. During year to date 2003, the Company made cash
payments of $405,000 related to lease termination costs and $54,000 related to
severance costs.

</FONT>


<P><FONT size="2"><I>Intangible asset impairment charges. </I>In the second quarter and year to date
2003, the Company incurred an expense of $4.2&nbsp;million as a result of an
evaluation done under SFAS 142 <I>Goodwill and Other Intangible
Assets</I>. There
were no charges for these items in the same periods last year.

</FONT>


<P><FONT size="2"><I>Long lived fixed asset impairment charges. </I>In the second quarter and year to date
2003, the Company incurred an expense of $3.5&nbsp;million as a result of an
evaluation done under SFAS 144 <I>Accounting for the Impairment or Disposal of
Long-Lived Assets</I>. There were no charges for these items in the same periods
last year.

</FONT>


<P><FONT size="2"><I>Operating (loss). </I>As a result of the foregoing changes, the Company
incurred operating losses of ($10.7) million for second quarter 2003 compared
to operating losses of ($3.8) million for the same period last year. The
Company incurred operating losses of ($11.2) million for year to date 2003
compared to operating losses of ($1.4) million for the same period last year.

</FONT>


<P><FONT size="2"><I>Interest expense. </I>Interest expense for
second quarter 2003 was $0.7&nbsp;million
compared to $0.1&nbsp;million for the same period last year. Interest expense for
year to date 2003 was $0.8&nbsp;million compared to $0.3&nbsp;million for the same period
last year. These increases were a result of indebtedness incurred in
connection with the acquisition of Tutor Time, partially offset by the
reduction of interest rates on variable rate indebtedness.

</FONT>


<P><FONT size="2"><I>Income tax benefit. </I>Income tax benefit for second quarter 2003 was $0.0
million compared to $1.5&nbsp;million for the same period last year. Income tax
benefit for year to date 2003 was $0.2&nbsp;million compared to $0.6&nbsp;million
for the same period last year. The effective tax rate was 0.0% for second
quarter 2003 compared to 37.7% for the same period last year and 1.8% for year
to date 2003 compared to 37.7% for the same period last year. The tax benefits
and rates for both 2003 periods were reduced by valuation reserves.

</FONT>


<P><FONT size="2"><I>Cumulative effect of change in accounting
principle.</I> Year to date 2003
includes an adjustment of $5.0&nbsp;million as the cumulative effect of goodwill
impairment under SFAS 142 <I>Goodwill and Other Intangibles</I>. This amount is
reduced by a tax benefit of $0.9&nbsp;million, which has been reduced by a valuation
reserve. There was no charge for this item in the same period last year.

</FONT>


<P><FONT size="2"><I>Net (loss). </I>As a result of the foregoing changes, net (loss)
decreased to a net loss of ($11.4) million for second quarter 2003 from ($2.4)
million in net losses for the second quarter 2002. For year to date 2003, net
losses were ($16.8) million, compared to net losses of ($1.0) million for year
to date 2002.

</FONT>


<P><FONT size="2"><B>LIQUIDITY AND CAPITAL RESOURCES</B></FONT>


<P><FONT size="2">The Company&#146;s primary cash requirements currently consist of its funding of
losses from operations, expenses associated with planned center openings,
repayment of debt, maintenance of existing Learning Centers, and funding lease
termination costs in conjunction with its restructuring program. The Company
expects to fund cash needs through the revolving credit facility, described
below, and cash generated from operations, although alternative forms of
funding continue to be evaluated and new arrangements may be entered into in
the future. The Company experienced decreased liquidity during the
recent
calendar year-end holidays due to decreased attendance. While new enrollments
are generally highest during the traditional fall &#147;back to school&#148; period and
after the calendar year-end holidays, enrollment generally decreases during the
summer months and calendar year-end holidays. Should cash flow generated from
operations and borrowings available under the revolving credit facility not be
adequate to provide for our working capital and debt service needs, the Company
will attempt to make other arrangements to provide needed liquidity. While the
Company is pursuing other arrangements, no assurance can be given that such
sources of capital will be sufficient.

</FONT>


<P><FONT size="2">The Company maintains a $17.5&nbsp;million secured revolving line of credit facility
entered into on January&nbsp;31, 2002, as amended (see Note 7 of the Company&#146;s Notes
to Consolidated Financial Statements &#151; unaudited). Outstanding letters of credit reduced
the availability under the line of credit in the amount of $2.1&nbsp;million at
October&nbsp;11, 2002 and $2.5&nbsp;million at March&nbsp;29, 2002. Under this agreement, the
Company is required to maintain certain financial ratios and other financial
conditions, the most restrictive of which requires the Company to maintain
certain debt-to-EBITDA ratios and minimum consolidated EBITDA levels. In
addition, there are restrictions on the incurrence of additional indebtedness,
disposition of assets and transactions with affiliates. At July&nbsp;19, 2002 and at
October&nbsp;11,

</FONT>


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<P><FONT size="2">2002, the Company had not maintained minimum consolidated EBITDA levels and had
not provided timely reporting as required by the Amended and Restated Credit
Agreement. The Company&#146;s lender has approved waivers to the Amended and
Restated Credit Agreement dated as of January&nbsp;31, 2002. The latest waiver is
effective through December&nbsp;27, 2002, and is limited to the financial results
for the quarter ended October&nbsp;11, 2002. The Company anticipates that it will
not be able to maintain minimum consolidated EBITDA levels in third quarter
2003, and is in the process of negotiating an amendment to the Amended and
Restated Credit Agreement. No assurance can be given that the Company will be
successful in amending this agreement.

</FONT>


<P><FONT size="2">Net cash provided (used)&nbsp;by operating activities was ($2.8) million for year to
date 2003, compared to $.8&nbsp;million for the same period last year. During year
to date 2003, financing activities totaled $23.1&nbsp;million and consisted
primarily of net borrowings on the revolving line of credit of $11.4&nbsp;million,
and the issuance of long-term debt of $14.0&nbsp;million, offset by $2.1&nbsp;million reduction
in drafts payable. This compared to financing activities of $0.7&nbsp;million for
the same period last year. Investing activities were $23.2&nbsp;million for year to
date 2003, of which $21.6&nbsp;million was associated with the purchase of Tutor
Time, with $2.1&nbsp;million for capital spending partially offset by $0.6&nbsp;million
of proceeds from asset sales. Investing activities were $2.9&nbsp;million for the
same period last year, and consisted primarily of $2.5&nbsp;million of capital
spending and $0.9&nbsp;million for reimbursable construction costs, offset by $0.5
million from proceeds from the sale of assets.

</FONT>


<P><FONT size="2">On July&nbsp;19, 2002, the Company acquired substantially all of the assets of Tutor
Time, for an aggregate purchase price of approximately $22.8&nbsp;million, including
acquisition costs plus the assumption of certain liabilities. The assets
acquired by the Company consisted of substantially all of the operating assets
and contract rights used by Tutor Time in its child care operations, which were
comprised of 198 company-owned and franchised child care centers operating in
23 states and internationally, and were purchased to improve its product
offering and to enter the childcare franchise business. This total included
one center that was not yet open whose lease had commenced and an additional
two centers that were assigned to franchisees subsequent to the purchase. In
addition, the Company purchased nine Tutor Time centers, whose leases were
rejected, that were closed within 60&nbsp;days of the purchase. The Tutor Time
acquisition was financed, in part, through the Company&#146;s $17.5&nbsp;million secured
bank credit facility as well as the issuance of $14&nbsp;million of subordinated
loans (the &#147;Subordinated Notes&#148;). The Subordinated Notes were provided by a
group of lenders organized by Jacobson Partners, to fund the balance of the
Tutor Time acquisition purchase price and to provide related working capital.
The Subordinated Notes mature December&nbsp;31, 2004 and bear interest at 15%, of
which 7% is payable in cash, with the balance payable in kind by the issuance
of additional subordinated notes (the &#147;Additional Subordinated Notes&#148;), with
interest and principal payable on the earlier of December&nbsp;31, 2004 or such date
on or after March&nbsp;31, 2003, on which the Company is in compliance with the
Senior Debt to EBITDA covenant of the Amended and Restated Credit Agreement,
provided that the Company has consummated the Rights Offering (described below)
and received net cash proceeds (and/or cancelled Subordinated Notes) of at
least $7.5&nbsp;million from the issuance of common stock in such Rights Offering
(the &#147;Minimum Equity Agreement&#148;). If the Rights Offering is not consummated and
the Minimum Equity Amount is not received on or before July&nbsp;19, 2003, then
until the earlier of December&nbsp;31, 2004 or the date on which the Company
consummates the Rights Offering and receives the Minimum Equity Amount, all
interest on the Subordinated Notes will be payable by the issuance of
Additional Subordinated Notes.

</FONT>


<P><FONT size="2">The Subordinated Notes are to be refinanced through a Rights Offering
contemplated by the Company. The Rights Offering is expected to take place
during the first calendar quarter of 2003 and will refinance the subordinated
debt incurred by the Company in connection with the Tutor Time acquisition. As
originally contemplated, each Rights Offering unit (&#147;Unit&#148;) would consist of 30
shares of common stock, valued at $3.50 per share, and a $35 subordinated
debenture, giving an aggregate value to each Unit of $140. Due to the
substantial decline in the trading price of the Company&#146;s common stock,
however, the pricing of the common stock portion of the rights offering has
been revised. As currently contemplated, the offering price per share of the
common stock under the rights offering would, except under limited
circumstances, be the four-week average trading price of the common stock on
The Nasdaq SmallCap Market, prior to the commencement date of the offering;
provided, however, that if the one-week average closing price of the common
stock, calculated during the one-week period immediately prior to the
commencement date of the offering, was more than 10% less than such four-week
average closing price, the offering price related to the common stock portion
of the rights offering will equal 110% of such one-week average closing price.
In no event, however, will the offering price related to the common stock
portion of the rights offering be less than the last trading price of the
common stock on The Nasdaq SmallCap Market on or prior to the day immediately
preceding the commencement date of the offering. Subject to certain
shareholder ownership requirements, all common shareholders as of the Rights
Offering record date will be able to participate in the offering and will be
allowed to acquire Units on a pro rata basis. The subordinated debentures will
bear interest at 15%, have a five-year maturity, and be redeemable by the
Company at any time at par, subject to restrictions under its senior lending
agreements. JP Acquisition Fund II, L.P., JP Acquisition
Fund III, L.P., funds controlled by Jacobson Partners and certain of their co-investors, including Messrs.&nbsp;Jacobson,
Morgan and Kellner (directors of the Company), have provided a commitment to purchase all Units not
subscribed for in the Rights Offering (see &#147;Related Party
Transactions&#148; below).

</FONT>


<P><FONT size="2"><B>Outlook for the Third Quarter</B></FONT>


<P><FONT size="2">The Company has taken steps to improve the profitability of its operations
through pricing, more effective labor management and expense control and
efforts aimed at boosting enrollment. During the first two periods of the third
quarter, these measures have begun to show improvements in operating results.

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
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<P align="left"><FONT size="2"><B>Related Party Transactions</B>
</FONT>

<P><FONT size="2">In addition to the related party transactions described in the Company&#146;s Annual
Report on Form&nbsp;10-K for the fiscal year ended March&nbsp;29, 2002 (see Item&nbsp;7,
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations &#150; Related Party Transactions&#148;), involving Jacobson Partners, see
Note 2 &#147;Acquisition and Pro Forma Information&#148; of the
Company&#146;s Notes to Consolidated
Financial Statements (unaudited), included in this Report under Item&nbsp;1, for
additional transactions entered into and proposed to be entered into with
Jacobson Partners in connection with the Company&#146;s proposed rights offering.
Jacobson Partners is a private equity firm whose managing partner is Benjamin
R. Jacobson, the Company&#146;s Chairman of the Board. James J. Morgan, a director
of the Company and former Interim Chief Executive Officer, is also a partner of
Jacobson Partners, and George A. Kellner, the Company&#146;s Vice Chairman of the
Board, serves as a special advisor to Jacobson Partners.

</FONT>


<P align="left"><FONT size="2"><B>Contingencies</B>
</FONT>

<P><FONT size="2">During fiscal 2002, the Company decided not to pursue opening three new
build-to-suit centers after leases for these centers had been signed with the
developer of the centers. The Company was subsequently sued by the developer
for breach of contract. This case was settled at the end of fiscal 2002, and a
current liability was recorded on the balance sheet as of March&nbsp;29, 2002 in the
amount of $0.8&nbsp;million, which was paid during first quarter 2003.

</FONT>


<P><FONT size="2">The Company is primarily liable on approximately $1.0&nbsp;million for lease
assignments already negotiated in connection with certain lease terminations
resulting from the fiscal 2001 restructuring program (see Note 12 of
the Company&#146;s Notes to Consolidated Financial Statements &#151;
unaudited). A
subsidiary of the Company is primarily or contingently liable for many of the
leases of Tutor Time&#146;s franchisees. In an effort to build its franchisee
network, Tutor Time either leased the prospective site for a franchisee, with a
subsequent sublease of the site to the franchisee, or provided a lease
guarantee to the landlord for the benefit of the franchisee in exchange for a
monthly lease guarantee fee payable by the franchisee that is based upon the
monthly rent expense of the guaranteed lease. The liability related to these
leases and guarantees is approximately $177.0&nbsp;million. The Company has not
been notified that it will be required to make payments under any of these
leases or guarantees, and does not believe that any payments are probable and
therefore no liability has been recorded.

</FONT>


<P><FONT size="2">In addition, various legal actions and other claims are pending or could be
asserted against the Company. Litigation is subject to many uncertainties; the
outcome of individual litigated matters is not predictable with assurance, and
it is reasonably possible that some of these matters may be decided unfavorably
to the Company. It is the opinion of management that the ultimate liability,
if any, with respect to these matters will not materially affect the financial
position, results of operations or cash flows of the Company.

</FONT>


<P align="left"><FONT size="2"><B>Critical Accounting Policies</B>
</FONT>

<P><FONT size="2">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires that
management make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Predicting future events is
inherently an imprecise activity and as such requires the use of judgment.
Actual results may vary from estimates in amounts that may be material to the
financial statements.

</FONT>


<P><FONT size="2">For a description of the Company&#146;s significant accounting policies, see Note 3
&#150; &#147;Summary of Significant Accounting Policies&#148; to the Consolidated Financial
Statements (unaudited), included in this report under Item&nbsp;1. For a more
complete description, please refer to the Company&#146;s Annual Report on Form&nbsp;10-K
for the fiscal year ended March&nbsp;29, 2002.

</FONT>


<P><FONT size="2"><B>&#147;SAFE HARBOR&#148; STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995</B>

</FONT>


<P><FONT size="2">This Form&nbsp;10-Q contains certain forward-looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any modifications or revisions to these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events. In
connection with the &#147;safe harbor&#148; provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions investors that future
financial and operating results may differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties,
including, but not limited to, ability to hire, train and retain qualified
personnel, continuation of federal and state assistance programs, projected
restructuring and unusual charges, pricing, competition, insurability, demand
for childcare and general economic conditions. Accordingly, actual results
could differ materially from those projected in such forward-looking
statements.

</FONT>


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<!-- link2 "ITEM 3. Quantitative and Qualitative Disclosures about Market Risks" -->
<DIV align="left"><A NAME="007"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 3. Quantitative and
Qualitative Disclosures about Market Risks</B>
</FONT>

<P><FONT size="2">Market risk represents the risk of loss that may impact our consolidated
financial position, results of operations or cash flows. The Company is exposed
to market risk in the areas of interest rates and foreign currency exchange
rates.

</FONT>


<P align="left"><FONT size="2"><B>Interest Rates</B>
</FONT>

<P><FONT size="2">The Company has exposure to market risk for changes in interest rates related
to its debt obligations. The Company does not have cash flow exposure due to
rate changes on our 15% Subordinated Notes in the amount of $14&nbsp;million at
October&nbsp;11, 2002. The Company has cash flow exposure on the
revolving line of credit, with an outstanding balance of $13.9&nbsp;million,
including $3.0 million associated with an interest rate swap, which
the Company entered into on November 21, 2002 and
its notes payable, with an outstanding balance of $4.1&nbsp;million as of
October&nbsp;11, 2002. Accordingly, a 2% (100 basis points) change in the LIBOR
rate or the prime rate would have resulted in interest expense changing by
approximately $0.1 and $0.2&nbsp;million in the second quarter and year to date
2003, respectively.

</FONT>


<P align="left"><FONT size="2"><B>Foreign Currency Exchange Rates</B>
</FONT>

<P><FONT size="2">The Company&#146;s exposure to foreign currency exchange rates is limited to
revenues for one company owned center and franchise royalties for 11 franchised
centers. Based upon the relative size of our foreign operations, the Company
does not believe that the reasonably possible near-term change in the related
exchange rate would have a material effect on its financial position, results
of operations and cash flows.

</FONT>


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<P align="left"><FONT size="2"><B>Item&nbsp;4. Controls and Procedures</B>
</FONT>

<P><FONT size="2">Under the supervision and with the participation of our management, including
our chief executive officer and chief financial officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures within 90&nbsp;days of the filing date of this quarterly report, and,
based on their evaluation, our chief executive officer and chief financial
officer have concluded that these controls and procedures are effective. There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.

</FONT>


<P><FONT size="2">Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
and Exchange Commission&#146;s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under
the Exchange Act is accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate to
allow timely decisions regarding required disclosure.

</FONT>


<!-- link1 "PART II. OTHER INFORMATION" -->
<DIV align="left"><A NAME="009"></A></DIV>

<!-- link2 "ITEM 1. Legal Proceedings" -->
<DIV align="left"><A NAME="010"></A></DIV>
<P align="center"><FONT size="2"><B>PART II &#150; OTHER INFORMATION</B></FONT>


<P align="left"><FONT size="2"><B>Item&nbsp;1. Legal Proceedings</B>
</FONT>

<P><FONT size="2">Information regarding this item is set forth in Note 8 to the Company&#146;s Notes
to Consolidated Financial Statements included in Part I, Item&nbsp;1 of this Report.

</FONT>


<!-- link2 "ITEM 2. Changes in Securities and Use of Proceeds" -->
<DIV align="left"><A NAME="011"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;2. Changes in Securities and Use of Proceeds</B>
</FONT>

<P><FONT size="2">The following securities were sold by us during or immediately prior to the
period covered by this Report without being registered under the Securities Act
of 1933 (the &#147;Act&#148;):

</FONT>


<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. On June&nbsp;26, 2002, in connection with the Company&#146;s acquisition of
substantially all of the assets of Tutor Time Learning Systems, Inc., the
Company entered into an investment advisory agreement with Jacobson Partners.
Upon consummation of the acquisition, Jacobson Partners was paid an advisory
fee consisting of a cash payment of $333,336 and the issuance of 175,438 shares
of common stock (based on a value of $3.80 per share). None of the shares
issued to Jacobson Partners were registered, but were issued in reliance of the
exemptions from registration contained in Section&nbsp;4(2) of the Act.

</FONT>


<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. On August&nbsp;15, 2002, at the Company&#146;s Annual Meeting of Shareholders,
the Company&#146;s shareholders approved a grant of options in favor of JP
Acquisition Fund II, L.P., JP Acquisition Fund III, L.P., and certain of their
co-investors (collectively, the &#147;Optionees&#148;) to acquire, in the aggregate, up
to 400,000 shares of the Company&#146;s common stock at an exercise price of $5.00
per share. The options were granted as consideration for the Optionees
agreement to arrange for the Company to obtain a standby purchase commitment in
connection with the Company&#146;s proposed rights offering. The options will
become exercisable upon the consummation of the rights offering. The options
expire on July&nbsp;19, 2006. If the rights offering is not consummated by July&nbsp;19,
2003,

</FONT>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "ITEM 4. Submission of Matters to a Vote of Security Holders" -->
<DIV align="left"><A NAME="012"></A></DIV>

<!-- link2 "ITEM 5. Other Information" -->
<DIV align="left"><A NAME="013"></A></DIV>

<!-- link2 "ITEM 6. Exhibits, Reports on Form&nbsp;8-K" -->
<DIV align="left"><A NAME="014"></A></DIV>
<P><FONT size="2">the options will be forfeited. Such options were not registered, but were
granted in reliance upon the exemptions from registration contained in Section
4(2) of the Act.

</FONT>


<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. On August&nbsp;15, 2002, pursuant to a Stock Option Agreement, Childtime
granted to William D. Davis, its newly-appointed President and Chief Executive
Officer, an option to purchase 150,000 shares of Childtime&#146;s common stock, at
an exercise price of $3.50. The option will vest annually in 20% increments
(30,000 shares each) on August&nbsp;15, 2003, and on each subsequent anniversary of
the grant date. The option granted to Mr.&nbsp;Davis will expire on August&nbsp;15,
2009. None of the options were registered, but were granted in reliance upon
the exemptions from registration contained in Section&nbsp;4(2) of the Act.

</FONT>


<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. On October&nbsp;16, 2002, as an inducement to their acceptance of their
appointment to the Company&#146;s Board of Directors, each of Paula L. Gavin,
Kenneth Johnsson and Brett D. Shevack were granted options to purchase 2,500
shares of the Company&#146;s common stock at $1.50 per share. The options vest on
the first anniversary of the grant date and expire in October 2007. None of
the options were registered, but were granted in reliance upon the exemptions
from registration contained in Section&nbsp;4(2) of the Act.

</FONT>


<P align="left"><FONT size="2"><B>Item&nbsp;3.</B>
</FONT>

<P><FONT size="2">Not applicable.

</FONT>


<P align="left"><FONT size="2"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders</B>
</FONT>

<P><FONT size="2">The information required by this Item has been previously reported in the
Company&#146;s periodic report on Form&nbsp;10-Q for the period ending July&nbsp;19, 2002.

</FONT>


<P align="left"><FONT size="2"><B>Item&nbsp;5. Other Information</B>
</FONT>

<P><FONT size="2">On or about November&nbsp;26, 2002, a Notice of Special Meeting of Shareholders,
together with a proxy statement and proxy card, were mailed to the Company&#146;s
shareholders of record as of the close of business on November&nbsp;22, 2002. The
Special Meeting was held on December&nbsp;17, 2002, at the offices of Jacobson
Partners, 595 Madison Avenue, Suite&nbsp;3100, New York, New York 10022. At the
meeting, shareholders voted (i)&nbsp;to approve an amendment to Article&nbsp;III of the
Company&#146;s Restated Articles of Incorporation to increase the number of
authorized shares of common stock, no par value per share, from 10,000,000 to
20,000,000, and (ii)&nbsp;to re-approve the grant of options in favor of JP
Acquisition Fund II, L.P., JP Acquisition Fund III, L.P. and certain of their
designees, to acquire, in the aggregate, up to 400,000 shares of common stock
(the &#147;Option Grant&#148;). The Option Grant was previously approved by the
Company&#146;s shareholders at the Company&#146;s Annual Meeting on August&nbsp;15, 2002.

</FONT>


<P><FONT size="2"><B>Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K</B></FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Exhibits</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Paula L. Gavin</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Kenneth Johnsson</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Brett D. Shevack</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Chief Executive Officer pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Chief Financial Officer pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Press release issued January 2, 2003, announcing the Company&#146;s
notification from the Nasdaq Listing Qualifications Department of an
additional delinquency, for failure to timely file a Form 8-K/A
containing audited financial statements in connection with its
acquisition of the assets of Tutor Time Learning Systems, Inc., as
required by Nasdaq Marketplace Rule 4310(c)(14).</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Reports on Form&nbsp;8-K</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
1)
</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">The Company filed a Current Report on Form&nbsp;8-K on
October&nbsp;11, 2002, announcing the transfer of the listing of its
securities from The Nasdaq National Market System to The Nasdaq
SmallCap Market.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
2)
</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">The Company filed a Current Report on Form&nbsp;8-K on
December&nbsp;4, 2002, announcing a Nasdaq Staff Determination that
the Company&#146;s securities are subject to delisting, absent
appeal, from The Nasdaq SmallCap Market.</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SIGNATURES " -->
<DIV align="left"><A NAME="015"></A></DIV>
<P align="center"><FONT size="2"><B>SIGNATURES</B></FONT>


<P><FONT size="2">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.

</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" colspan="3" valign="top"><FONT size="2"><B>CHILDTIME LEARNING CENTERS, INC.</B><BR>
(REGISTRANT)</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left" valign="top"><FONT size="2">
January 6, 2003
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;<BR>
</FONT>/s/ Frank M. Jerneycic<HR size="1" noshade><FONT size="2">
Frank M. Jerneycic<BR>
Chief Financial Officer and Treasurer<BR>
(Duly Authorized Officer and<BR>
Principal Financial Officer)</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CERTIFICATIONS</B>
</FONT>

<P><FONT size="2">I, William D. Davis, certify that:

</FONT>


<P><FONT size="2">1. I have reviewed this quarterly report on Form&nbsp;10-Q of Childtime Learning
Centers, Inc.;

</FONT>


<P><FONT size="2">2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

</FONT>


<P><FONT size="2">3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

</FONT>


<P><FONT size="2">4. The registrant&#146;s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and we have:

</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">b) evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures as of a date within 90&nbsp;days prior to the filing date of this
quarterly report (the &#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">5. The registrant&#146;s other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant&#146;s auditors and the audit committee of
the registrant&#146;s board of directors (or persons performing the equivalent
function):

</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant&#146;s ability to record,
process, summarize and report financial data and have identified for the
registrant&#146;s auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal
controls; and</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">6. The registrant&#146;s other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

</FONT>


<P><FONT size="2">Date: January 6, 2003</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="50%">/s/ William D. Davis<FONT size="2"><HR size="1" noshade>
William D. Davis, President and<BR>
Chief Executive Officer

</FONT></TD>
</TR>
</TABLE>


<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CERTIFICATIONS</B></FONT>


<P><FONT size="2">I, Frank M. Jerneycic, certify that:

</FONT>


<P><FONT size="2">1. I have reviewed this quarterly report on Form&nbsp;10-Q of Childtime Learning
Centers, Inc.;

</FONT>


<P><FONT size="2">2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

</FONT>


<P><FONT size="2">3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

</FONT>


<P><FONT size="2">4. The registrant&#146;s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and we have:

</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">b) evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures as of a date within 90&nbsp;days prior to the filing date of this
quarterly report (the &#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">5. The registrant&#146;s other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant&#146;s auditors and the audit committee of
the registrant&#146;s board of directors (or persons performing the equivalent
function):

</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant&#146;s ability to record,
process, summarize and report financial data and have identified for the
registrant&#146;s auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
        <TD width="6%"></TD>
        <TD width="94%"></TD>
</TR>
<TR valign="top">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal
controls; and</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">6. The registrant&#146;s other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

</FONT>


<P><FONT size="2">Date: January 6, 2003</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="50%"><FONT size="2">/s/ Frank M. Jerneycic<HR size="1" noshade>
Frank M. Jerneycic, Chief Financial Officer<BR>
and Treasurer

</FONT></TD>
</TR>
</TABLE>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>EXHIBIT INDEX</B></FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade width="80"></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Paula L. Gavin</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Kenneth Johnsson</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Option Agreement, dated as of October&nbsp;16, 2002, between the Company and Brett D. Shevack</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Chief Executive Officer pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Chief Financial Officer pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Press release issued January 2, 2003, announcing the Company&#146;s
notification from the Nasdaq Listing Qualifications Department of an
additional delinquency, for failure to timely file a Form 8-K/A
containing audited financial statements in connection with its
acquisition of the assets of Tutor Time Learning Systems, Inc., as
required by Nasdaq Marketplace Rule 4310(c)(14).</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">&nbsp;</FONT>


</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>k73781exv10w1.txt
<DESCRIPTION>OPTION AGREEMENT BETWEEN COMPANY & PAUL L. GAVIN
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1

             [CHILDTIME LEARNING CENTERS, INC. LETTERHEAD AND LOGO]



                                                    Dated as of October 16, 2002

To:  Paula L. Gavin

         Childtime Learning Centers, Inc. (the "Corporation") hereby grants to
you an option ("Option") to purchase two thousand five hundred (2,500) shares
("Shares") of the Common Stock of the Corporation at $1.50 per Share, upon the
terms and conditions contained in this Stock Option Agreement (the "Agreement").
Although this Option is not being granted pursuant to the Corporation's Director
Stock Option Plan (the "Directors Plan"), it shall be treated and governed as if
it had been so granted. Accordingly, the Directors Plan, a copy of which is
attached to this Agreement, is made a part of this Agreement and will govern the
terms hereof.

         1. The Option is intended to be a Nonqualified Option, as defined in
the Directors Plan.

         2. The Option granted by this Agreement may not be transferred by you
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and during your lifetime the Option is exercisable only by you.

         3. Subject to the other terms of this Option, the Option shall become
exercisable, in full, on the first anniversary of the date of the granting of
the Option and shall continue to be exercisable (except as otherwise stated in
the Agreement) at any time through the fifth anniversary of such date.

         4. In accordance with Paragraphs 10, 11 and 12 of the Directors Plan,
it is expressly agreed that if your service to the Corporation as a director is
terminated, you shall have the right to exercise all or any part of the Option
for the period provided in Directors Plan, but in no event subsequent to the
expiration date of this Option.

         5. This Option shall be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full, in
the form provided in Paragraph 8 of the Directors Plan, of the aggregate option
price for the number of Shares purchased. Such exercise shall be effective only
upon the actual receipt of such written notice and no rights or privileges of a
shareholder of the Corporation in respect of any of the Shares issuable upon the
exercise of any part of the Option shall inure to you, or any other person
entitled to exercise the Option, unless and until certificates representing such
Shares shall have been issued.

                                       Very truly yours,

                                       CHILDTIME LEARNING CENTERS, INC.,
                                       a Michigan corporation


                                       By:      /s/ Frank Jerneycic
                                           -------------------------------------

                                       Its: Chief Financial Officer
The above is agreed to and accepted:


/s/ Paula L. Gavin
------------------------------------
Paula L. Gavin

Dated: November 11, 2002



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>k73781exv10w2.txt
<DESCRIPTION>OPTION AGREEMENT BETWEEN COMPANY & KENNETH JOHNSON
<TEXT>
<PAGE>


                                                                    EXHIBIT 10.2

             [CHILDTIME LEARNING CENTERS, INC. LETTERHEAD AND LOGO]

                                                    Dated as of October 16, 2002

To:  Ken Johnsson

         Childtime Learning Centers, Inc. (the "Corporation") hereby grants to
you an option ("Option") to purchase two thousand five hundred (2,500) shares
("Shares") of the Common Stock of the Corporation at $1.50 per Share, upon the
terms and conditions contained in this Stock Option Agreement (the "Agreement").
Although this Option is not being granted pursuant to the Corporation's Director
Stock Option Plan (the "Directors Plan"), it shall be treated and governed as if
it had been so granted. Accordingly, the Directors Plan, a copy of which is
attached to this Agreement, is made a part of this Agreement and will govern the
terms hereof.

         1. The Option is intended to be a Nonqualified Option, as defined in
the Directors Plan.

         2. The Option granted by this Agreement may not be transferred by you
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and during your lifetime the Option is exercisable only by you.

         3. Subject to the other terms of this Option, the Option shall become
exercisable, in full, on the first anniversary of the date of the granting of
the Option and shall continue to be exercisable (except as otherwise stated in
the Agreement) at any time through the fifth anniversary of such date.

         4. In accordance with Paragraphs 10, 11 and 12 of the Directors Plan,
it is expressly agreed that if your service to the Corporation as a director is
terminated, you shall have the right to exercise all or any part of the Option
for the period provided in Directors Plan, but in no event subsequent to the
expiration date of this Option.

         5. This Option shall be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full, in
the form provided in Paragraph 8 of the Directors Plan, of the aggregate option
price for the number of Shares purchased. Such exercise shall be effective only
upon the actual receipt of such written notice and no rights or privileges of a
shareholder of the Corporation in respect of any of the Shares issuable upon the
exercise of any part of the Option shall inure to you, or any other person
entitled to exercise the Option, unless and until certificates representing such
Shares shall have been issued.

                                       Very truly yours,

                                       CHILDTIME LEARNING CENTERS, INC.,
                                       a Michigan corporation


                                       By:      /s/ Frank Jerneycic
                                           -------------------------------------

                                       Its:  Chief Financial Officer
The above is agreed to and accepted:


/s/ Ken Johnsson
-----------------------------------
Ken Johnsson

Dated: November 12, 2002



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>k73781exv10w3.txt
<DESCRIPTION>OPTION AGREEMENT BETWEEN COMPANY & BRETT D SHEVACK
<TEXT>
<PAGE>


                                                                    EXHIBIT 10.3

             [CHILDTIME LEARNING CENTERS, INC. LETTERHEAD AND LOGO]

                                                    Dated as of October 16, 2002

To:  Brett D. Shevack

         Childtime Learning Centers, Inc. (the "Corporation") hereby grants to
you an option ("Option") to purchase two thousand five hundred (2,500) shares
("Shares") of the Common Stock of the Corporation at $1.50 per Share, upon the
terms and conditions contained in this Stock Option Agreement (the "Agreement").
Although this Option is not being granted pursuant to the Corporation's Director
Stock Option Plan (the "Directors Plan"), it shall be treated and governed as if
it had been so granted. Accordingly, the Directors Plan, a copy of which is
attached to this Agreement, is made a part of this Agreement and will govern the
terms hereof.

         1. The Option is intended to be a Nonqualified Option, as defined in
the Directors Plan.

         2. The Option granted by this Agreement may not be transferred by you
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and during your lifetime the Option is exercisable only by you.

         3. Subject to the other terms of this Option, the Option shall become
exercisable, in full, on the first anniversary of the date of the granting of
the Option and shall continue to be exercisable (except as otherwise stated in
the Agreement) at any time through the fifth anniversary of such date.

         4. In accordance with Paragraphs 10, 11 and 12 of the Directors Plan,
it is expressly agreed that if your service to the Corporation as a director is
terminated, you shall have the right to exercise all or any part of the Option
for the period provided in Directors Plan, but in no event subsequent to the
expiration date of this Option.

         5. This Option shall be exercised by giving a written notice of
exercise to the Treasurer of the Corporation. Such notice shall specify the
number of Shares to be purchased and shall be accompanied by payment in full, in
the form provided in Paragraph 8 of the Directors Plan, of the aggregate option
price for the number of Shares purchased. Such exercise shall be effective only
upon the actual receipt of such written notice and no rights or privileges of a
shareholder of the Corporation in respect of any of the Shares issuable upon the
exercise of any part of the Option shall inure to you, or any other person
entitled to exercise the Option, unless and until certificates representing such
Shares shall have been issued.

                                       Very truly yours,

                                       CHILDTIME LEARNING CENTERS, INC.,
                                       a Michigan corporation


                                       By:      /s/ Frank Jerneycic
                                           -------------------------------------

                                       Its:  Chief Financial Officer
The above is agreed to and accepted:


/s/ Brett D. Shevack
------------------------------------
Brett D. Shevack

Dated: November 22, 2002



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>k73781exv99w1.txt
<DESCRIPTION>CERTIFICATION OF CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>



                                                                    EXHIBIT 99.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of Childtime Learning Centers,
Inc. (the "Company") on Form 10-Q for the quarter ended October 11, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Periodic Report"), I, William D. Davis, President and Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002, that:

         1.       the Periodic Report fully complies with the requirements of
                  Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
                  and

         2.       the information contained in the Periodic Report fairly
                  presents, in all material respects, the financial condition
                  and results of operations of the Company.

Dated: January 6, 2003                        /s/ William D. Davis
                                              ----------------------------------
                                              William D. Davis, President and
                                              Chief Executive Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>7
<FILENAME>k73781exv99w2.txt
<DESCRIPTION>CERTIFICATION OF CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>


                                                                    EXHIBIT 99.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of Childtime Learning Centers,
Inc. (the "Company") on Form 10-Q for the quarter ended October 11, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Periodic Report"), I, Frank M. Jerneycic, Chief Financial Officer and Treasurer
of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002, that:

         1.       the Periodic Report fully complies with the requirements of
                  Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
                  and

         2.       the information contained in the Periodic Report fairly
                  presents, in all material respects, the financial condition
                  and results of operations of the Company.

Dated:   January 6, 2003                   /s/ Frank Jerneycic
                                           ----------------------------------
                                           Frank M. Jerneycic,
                                           Chief Financial Officer and Treasurer








</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>8
<FILENAME>k73781exv99w3.txt
<DESCRIPTION>PRESS RELEASE ISSUED JANUARY 2, 2003
<TEXT>
<PAGE>
                                                           Exhibit 99.3
                                                           For Immediate Release

Media Contact
Libby Barland
Childtime Learning Centers, Inc.
38345 West 10 Mile Road, Suite 100
Farmington Hills, MI  48335
561-237-2243
http://www.childtime.com


CHILDTIME LEARNING CENTERS REPORTS THAT THE COMPANY HAS RECEIVED
NOTICE OF ADDITIONAL DELINQUENCY

FARMINGTON HILLS, MI, January 2, 2003 -- Childtime Learning Centers, Inc.
(NASDAQ: CTIME), today announced that it had received notice that in addition to
the previous filing delinquency, the failure to file the Company's Form 10-Q for
the period ended October 11, 2002, as required for continued inclusion by
Marketplace Rule 4310(c)(14), the Company also failed to timely file a Form
8-K/A containing audited financial statements in connection with its acquisition
of the assets of Tutor Time Learning Systems, Inc., as required by Nasdaq
Marketplace Rule 4310(c)(14). The Company was formally notified that this
additional issue will be considered at the Company's oral hearing, which is
scheduled for Friday, January 10, 2003. As a result of the Company's filing
delinquency, trading symbols for the Company's securities was changed from CTIM
to CTIME at the opening of business on December 5, 2002.

The Company has requested and has been granted a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff determination on January 10, 2003.
During the pendency of the appeal process, the Company's securities will remain
listed on The Nasdaq SmallCap Market. Although there are no assurances that an
appeal by the Company would be successful, the Company is currently in the
process of preparing the Company's Form 10-Q for the period ended October 11,
2002 and the Form 8-K/A, as required for continued inclusion on The Nasdaq
SmallCap Market by Marketplace Rule 4310(c)(14). The Company expects that the
delinquent reports will be filed prior to the January 10, 2003 hearing.

Childtime Learning Centers, Inc., of Farmington Hills, MI acquired Tutor Time
Learning Systems, Inc. on July 19, 2002 and is now the nation's third largest
publicly traded child care provider with operations in 30 states, the District
of Columbia and internationally. Childtime Learning Centers, Inc. has over 7,500
employees and provides education and care for over 50,000 children daily in over
450 corporate and franchise centers nationwide.



</TEXT>
</DOCUMENT>
</SUBMISSION>
