##### 



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1
to

Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended October 11, 2002

Commission File Number 0-27656

CHILDTIME LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Michigan(State or other jurisdiction of
incorporation or organization) |  | 38-3261854(I.R.S. Employer
Identification No.)

|                                                                                                        |  |                 
|------------------------------------------------------------------------------------------------------- |  | ----------------
|38345 West 10 Mile Road, Suite 100, Farmington Hills, Michigan
(Address of principal executive offices) |  | 48335
(Zip Code)

Registrants telephone number, including area code: (248) 476-3200

The undersigned registrant hereby amends the Consolidated Financial Statements
of its Quarterly Report for the period ended October 11, 2002 as set forth
herein. This amendment is being filed to correct the Total shareholders
equity as of October 11, 2002, as set forth in the Consolidated Balance Sheets
included in Part I, Item 1 of the Quarterly Report.





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##### 



PART I: FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)

|                                           |                                                                                                                                                               |                                                 |        |             |         |   |           |        |         |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------ | ----------- | ------- | - | --------- | ------ | ------- | -
|                                           |                                                                                                                                                               |                                                 |        | October 11, |         |   | March 29, |       
|                                           |                                                                                                                                                               |                                                 |        | 2002        |         |   | 2002      |       
|                                           |                                                                                                                                                               |                                                 |        | (Unaudited) |         |   |           |       
|ASSETS                                     |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|CURRENT ASSETS:                            |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|                                           | Cash and cash equivalents                                                                                                                                     |                                                 | $      | 2,101       |         |   | $         | 4,891  |        
|                                           | Accounts receivable, net                                                                                                                                      |                                                 |        | 9,722       |         |   |           | 5,235  |        
|                                           | Prepaid expenses and other current assets                                                                                                                     |                                                 |        | 3,120       |         |   |           | 2,329  |        
|                                           | Income tax receivable                                                                                                                                         |                                                 |        | 2,500       |         |   |           | 2,509  |        
|                                           | Deferred income taxes                                                                                                                                         |                                                 |        | 1,833       |         |   |           | 3,764  |        
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               | Total current assets                            |        |             | 19,276  |   |           |        | 18,728  |  
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|LAND, BUILDINGS AND EQUIPMENT:             |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|                                           | Land                                                                                                                                                          |                                                 |        | 9,362       |         |   |           | 9,503  |        
|                                           | Buildings                                                                                                                                                     |                                                 |        | 19,156      |         |   |           | 19,180 |        
|                                           | Leasehold improvements                                                                                                                                        |                                                 |        | 8,800       |         |   |           | 10,010 |        
|                                           | Vehicles, furniture and equipment                                                                                                                             |                                                 |        | 13,219      |         |   |           | 14,820 |        
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               |                                                 | 50,538 |             |         |   | 53,513    |       
|                                           |                                                                                                                                                               | Less: accumulated depreciation and amortization |        |             | (15,326 | ) |           |        | (16,531 | )
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               |                                                 | 35,212 |             |         |   | 36,982    |       
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|OTHER NONCURRENT ASSETS:                   |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|                                           | Intangible assets, net                                                                                                                                        |                                                 |        | 28,101      |         |   |           | 17,325 |        
|                                           | Refundable deposits and other                                                                                                                                 |                                                 |        | 2,246       |         |   |           | 1,080  |        
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               |                                                 | 30,346 |             |         |   | 18,405    |       
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|TOTAL ASSETS                               |                                                                                                                                                               | $                                               | 84,834 |             |         | $ | 74,115    |       
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|CURRENT LIABILITIES:                       |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|                                           | Accounts and drafts payable                                                                                                                                   |                                                 | $      | 5,209       |         |   | $         | 6,271  |        
|                                           | Accrued wages and benefits                                                                                                                                    |                                                 |        | 5,574       |         |   |           | 4,508  |        
|                                           | Revolving line of credit                                                                                                                                      |                                                 |        | 13,900      |         |   |           | 2,500  |        
|                                           | Current portion of long-term debt                                                                                                                             |                                                 |        | 1,168       |         |   |           | 1,133  |        
|                                           | Restructuring accrual                                                                                                                                         |                                                 |        | 1,072       |         |   |           | 829    |        
|                                           | Other current liabilities                                                                                                                                     |                                                 |        | 12,393      |         |   |           | 8,094  |        
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               | Total current liabilities                       |        |             | 39,316  |   |           |        | 23,335  |  
|LONG-TERM DEBT, NET OF CURRENT PORTION     |                                                                                                                                                               |                                                 | 17,383 |             |         |   | 3,196     |       
|DEFERRED RENT LIABILITY                    |                                                                                                                                                               |                                                 | 936    |             |         |   | 983       |       
|DEFERRED INCOME TAXES                      |                                                                                                                                                               |                                                 |       |             |         |   | 3,119     |       
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               | Total liabilities                               |        |             | 57,635  |   |           |        | 30,633  |  
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|SHAREHOLDERS EQUITY:                      |                                                                                                                                                               |                                                 |        |             |         |   |           |       
|                                           | Common stock, 10,000,000 shares authorized, no par value; 5,416,210 and
5,240,772 issued and outstanding at October 11, 2002 and March 29, 2002, respectively |                                                 |        | 31,665      |         |   |           | 31,183 |        
|                                           | Preferred stock, 1,000,000 shares authorized, no par value; no shares
issued or outstanding                                                                   |                                                 |        |             |         |   |           |        |        
|                                           | Retained earnings (deficit)                                                                                                                                   |                                                 |        | (4,466      | )       |   |           | 12,299 |        
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|                                           |                                                                                                                                                               | Total shareholders equity                      |        |             | 27,199  |   |           |        | 43,482  |  
|                                           |                                                                                                                                                               |                                                 |        |             |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                                                               | $                                               | 84,834 |             |         | $ | 74,115    |       
|                                           |                                                                                                                                                               |                                                 |        |             |         |  

The accompanying footnotes are an integral part of
the consolidated financial statements.





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##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(In thousands, except per share data)

|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |         |             |   |        |        |   | 
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | - | ------ | -------------- | - | - | -------------- | ------ | - | ----------- | ------ | ------- | ----------- | - | ------ | ------ | - | 
|                                                                         |                                                                                     |   |        | 12 Weeks Ended |   |   | 28 Weeks Ended |       
|                                                                         |                                                                                     |   |        |                |   |   |                |       
|                                                                         |                                                                                     |   |        | October 11,    |   |   | October 12,    |        |   | October 11, |        |         | October 12, |  
|                                                                         |                                                                                     |   |        | 2002           |   |   | 2001           |        |   | 2002        |        |         | 2001        |  
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |         |             |  
|Revenue from Learning Center Operations                                  |                                                                                     | $ | 42,813 |                |   | $ | 31,950         |        |   | $           | 87,696 |         |             | $ | 78,680 |       
|Revenue from Franchise Operations                                        |                                                                                     |   | 1,142  |                |   |   |               |        |   |             | 1,142  |         |             |   |       |       
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        
|Revenue, net                                                             |                                                                                     |   | 43,955 |                |   |   | 31,950         |        |   |             | 88,838 |         |             |   | 78,680 |       
|Operating expenses of Learning Centers                                   |                                                                                     |   | 41,302 |                |   |   | 28,830         |        |   |             | 81,725 |         |             |   | 68,807 |       
|Provision for doubtful accounts                                          |                                                                                     |   | 288    |                |   |   | 699            |        |   |             | 482    |         |             |   | 771    |       
|General and administrative expenses                                      |                                                                                     |   | 4,277  |                |   |   | 2,808          |        |   |             | 7,805  |         |             |   | 5,714  |       
|Depreciation and amortization expenses                                   |                                                                                     |   | 988    |                |   |   | 1,116          |        |   |             | 1,756  |         |             |   | 2,499  |       
|Restructuring expenses                                                   |                                                                                     |   | 190    |                |   |   | 2,280          |        |   |             | 702    |         |             |   | 2,280  |       
|Intangible asset impairment charges                                      |                                                                                     |   | 4,191  |                |   |   |               |        |   |             | 4,191  |         |             |   |       |       
|Long lived fixed asset impairment charges                                |                                                                                     |   | 3,464  |                |   |   |               |        |   |             | 3,464  |         |             |   |       |       
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        
|                                                                         | OPERATING (LOSS)                                                                    |   | $      | (10,745        | ) |   | $              | (3,783 | ) |             | $      | (11,287 | )           |   | $      | (1,391 | )
|Interest expense, net                                                    |                                                                                     |   | 696    |                |   |   | 113            |        |   |             | 807    |         |             |   | 250    |       
|Other income, net                                                        |                                                                                     |   | (53    | )              |   |   |               |        |   |             | (58    | )       |             |   |       |       
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        
|                                                                         | (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE  |   | $      | (11,388        | ) |   | $              | (3,896 | ) |             | $      | (12,036 | )           |   | $      | (1,641 | )
|Income tax provision (benefit)                                           |                                                                                     |   |       |                |   |   | (1,469         | )      |   |             | (239   | )       |             |   | (619   | )     
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        
|                                                                         | (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                   |   | $      | (11,388        | ) |   | $              | (2,427 | ) |             | $      | (11,797 | )           |   | $      | (1,022 | )
|Cumulative
effect of change in accounting principle (net of tax of $910) |                                                                                     |   |       |                |   |   |               |        |   |             | 4,967  |         |             |   |       |       
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        
|                                                                         | NET (LOSS)                                                                          |   | $      | (11,388        | ) |   | $              | (2,427 | ) |             | $      | (16,764 | )           |   | $      | (1,022 | )
|NET (LOSS) PER SHARE:                                                    |                                                                                     |   |        |                |   |   |                |        |   |             |        |         |             |   |        |       
|                                                                         | Basic and diluted (loss) before
cumulative effect of change in accounting principle |   | $      | (2.10          | ) |   | $              | (0.46  | ) |             | $      | (2.21   | )           |   | $      | (0.20  | )
|                                                                         | Cumulative effect of change in accounting principle                                 |   |        |               |   |   |                |       |   |             |        | 0.94    |             |   |        |       |  
|                                                                         | Basic and diluted (loss) per share                                                  |   | $      | (2.10          | ) |   | $              | (0.46  | ) |             | $      | (3.15   | )           |   | $      | (0.20  | )
|WEIGHTED AVERAGE SHARES OUTSTANDING                                      |                                                                                     |   | 5,416  |                |   |   | 5,230          |        |   |             | 5,329  |         |             |   | 5,228  |       
|                                                                         |                                                                                     |   |        |                |   |   |                |        |   |             |        |        

The accompanying footnotes are an integral part of the consolidated financial statements.





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CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(In thousands)

|                                                                            |                                                          |   |                  |        |   |                  |        |        |  
|--------------------------------------------------------------------------- | -------------------------------------------------------- | - | ---------------- | ------ | - | ---------------- | ------ | ------ | -
|                                                                            |                                                          |   | 28 Weeks Ended   |       
|                                                                            |                                                          |   |                  |       
|                                                                            |                                                          |   | October 11, 2002 |        |   | October 12, 2001 |       
|                                                                            |                                                          |   |                  |        |   |                  |       
|OPERATING ACTIVITIES:                                                       |                                                          |   |                  |        |   |                  |        |       
|Net loss                                                                    |                                                          | $ | (16,764          | )      |   | $                | (1,022 | )     
|Adjustments to reconcile net loss to cash
provided by operating activities: |                                                          |   |                  |        |   |                  |        |       
|                                                                            | Depreciation and amortization                            |   |                  | 1,889  |   |                  |        | 2,499  |  
|                                                                            | Intangible and long lived fixed asset impairment charges |   |                  | 13,532 |   |                  |        |       |  
|                                                                            | Provision for doubtful accounts                          |   |                  | 482    |   |                  |        | 947    |  
|                                                                            | Stock option compensation expense                        |   |                  |       |   |                  |        | 184    |  
|                                                                            | Deferred rent liability                                  |   |                  | 8      |   |                  |        | (125   | )
|                                                                            | Deferred income taxes                                    |   |                  | (1,188 | ) |                  |        | (663   | )
|                                                                            | Gains (loss) on sale of assets                           |   |                  | (131   | ) |                  |        |       |  
|Changes in operating assets and liabilities:                                |                                                          |   |                  |        |   |                  |        |       
|                                                                            | Accounts receivable                                      |   |                  | (777   | ) |                  |        | (1,879 | )
|                                                                            | Prepaid expenses and other current assets                |   |                  | (60    | ) |                  |        | 1,006  |  
|                                                                            | Accounts payable                                         |   |                  | 798    |   |                  |        | (648   | )
|                                                                            | Income taxes payable                                     |   |                  | 110    |   |                  |        |       |  
|                                                                            | Restructuring accrual                                    |   |                  | 242    |   |                  |        | (150   | )
|                                                                            | Accruals and other current liabilities                   |   |                  | (913   | ) |                  |        | 633    |  
|                                                                            |                                                          |   |                  |        |   |                 
|Net cash provided (used) by operating activities                            |                                                          |   | (2,772           | )      |   |                  | 782    |       
|                                                                            |                                                          |   |                  |        |   |                 
|INVESTING ACTIVITIES:                                                       |                                                          |   |                  |        |   |                  |        |       
|Acquisition of Tutor Time  net of cash acquired of $682                    |                                                          |   | (21,621          | )      |   |                  |       |       
|Capital spending                                                            |                                                          |   | (2,111           | )      |   |                  | (2,466 | )     
|Expenditures from reimbursable construction costs                           |                                                          |   |                 |        |   |                  | (942   | )     
|Proceeds from sale of assets                                                |                                                          |   | 555              |        |   |                  | 514    |       
|Payments for refundable deposits and other assets                           |                                                          |   | 11               |        |   |                  | (2     | )     
|                                                                            |                                                          |   |                  |        |   |                 
|Net cash used in investing activities                                       |                                                          |   | (23,166          | )      |   |                  | (2,896 | )     
|                                                                            |                                                          |   |                  |        |   |                 
|FINANCING ACTIVITIES:                                                       |                                                          |   |                  |        |   |                  |        |       
|Net borrowings on revolving line of credit                                  |                                                          |   | 11,400           |        |   |                  | 949    |       
|Repayments under long-term debt                                             |                                                          |   | (117             | )      |   |                  | (577   | )     
|Issuance of long-term debt                                                  |                                                          |   | 14,000           |        |   |                  |       |       
|Changes in drafts payable                                                   |                                                          |   | (2,135           | )      |   |                  | (20    | )     
|Repayments of reimbursable construction                                     |                                                          |   |                 |        |   |                  | 229    |       
|Issuance of common shares                                                   |                                                          |   |                 |        |   |                  | 121    |       
|                                                                            |                                                          |   |                  |        |   |                 
|Net cash provided by financing activities                                   |                                                          |   | 23,148           |        |   |                  | 702    |       
|                                                                            |                                                          |   |                  |        |   |                 
|Net decrease in cash and cash equivalents                                   |                                                          |   | (2,790           | )      |   |                  | (1,412 | )     
|Cash and cash equivalents, beginning of year                                |                                                          |   | 4,891            |        |   |                  | 3,379  |       
|                                                                            |                                                          |   |                  |        |   |                 
|Cash and cash equivalents, end of period                                    |                                                          | $ | 2,101            |        |   | $                | 1,967  |       
|                                                                            |                                                          |   |                  |        |   |                 

The accompanying footnotes are an integral part of the consolidated
financial statements.





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##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1  DESCRIPTION OF BUSINESS

Childtime Learning Centers, Inc. and subsidiaries (Childtime or the
Company) began operations in 1967, and operates for-profit childcare centers
in 27 states, the District of Columbia and Canada. On July 19, 2002, the
Company acquired substantially all of the assets of Tutor Time Learning
Systems, Inc., a Florida corporation (Tutor Time), for an aggregate purchase
price of approximately $22.8 million including acquisition costs plus the
assumption of certain liabilities. The acquisition was consummated pursuant to
an asset purchase agreement dated June 28, 2002, approved by the U.S.
Bankruptcy Court, Southern District of Florida and closed on July 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 days of the purchase. The
Tutor Time centers are on average newer and larger than Childtime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 months. As of October 11, 2002,
Childtime operated 337 Company owned centers and franchised an additional 129
centers with an aggregate licensed capacity for over 50,000 children.

NOTE 2    ACQUISITION AND PRO FORMA INFORMATION

As previously mentioned, on July 19, 2002, the Company acquired substantially
all of the assets of Tutor Time Learning Systems, Inc., a Florida corporation
(Tutor Time), for an aggregate purchase price of approximately $22.8 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s Chairman of the Board is the managing
general partner, James J. Morgan, the Companys former Chairman of the Board,
is a partner, and George A. Kellner, the Companys Vice Chairman of the Board,
is a special advisor.

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 (Second Amendment) dated as of July 19, 2002.

Subordinated loans (the Subordinated Notes) 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 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 Additional Subordinated Notes)
with interest and principal payable on the earlier of December 31, 2004 or such
date on or after March 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 million
from the issuance of common stock in such Rights Offering (the Minimum Equity
Agreement). If the Rights Offering is not consummated and the Minimum Equity
Amount is not received on or before July 19, 2003, then until the earlier of
December 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. Jacobson, Mr. Morgan and Mr. Kellner) and trusts for the benefit of their
adult children (for an aggregate of $307,472).





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##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 2  ACQUISITION AND PRO FORMA INFORMATION (CONTINUED)

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 Optionees), including Messrs. Jacobson, Morgan and Kellner, agreed to
arrange for the Company to obtain a standby purchase commitment in connection
with the Company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 Rights Offering). 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 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 6, 2007, the Optionees would have the right to cause the
Company to register, at the Company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s
2002 Annual Meeting of Shareholders held August 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 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.

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 (Unit) 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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. Jacobson, Morgan and Kellner, have provided a commitment to
purchase all Units not subscribed for in the Rights Offering.

The acquisition of Tutor Time is reflected in the consolidated balance sheet of
the Company as of October 11, 2002 and has been accounted for in accordance
with Statement of Financial Accounting Standards (SFAS) No 141, Business
Combinations. The results of operations of Tutor Time since July 19, 2002 are
included in the Companys results of operations. The purchase price has been
tentatively allocated as follows and is subject to further change (in
thousands):

|                    |                                         |                         |        |       |        | 
|------------------- | --------------------------------------- | ----------------------- | ------ | ----- | ------ | 
|Current assets      |                                         | $                       | 5,594  |      
|Property and notes  |                                         |                         | 2,869  |      
|Intangible assets:  |                                         |                         |       |      
|                    | Trade name and trademarks               |                         |        | 3,905 |       
|                    | Franchise agreements                    |                         |        | 9,090 |       
|                    | Curriculum                              |                         |        | 460   |       
|                    | Goodwill
and unallocated purchase price |                         |        | 7,584 |       
|                    |                                         |                         |       
|                    |                                         | Total Intangible assets |        |       | 21,039 | 
|Total assets        |                                         |                         | 29,502 |      
|Liabilities assumed |                                         |                         | (6,717 | )    
|                    |                                         |                         |       
|Purchase price      |                                         | $                       | 22,785 |      
|                    |                                         |                         |       





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 2  ACQUISITION AND PRO FORMA INFORMATION (CONTINUED)

Pro forma information for the Company and Tutor Time follows (in thousands,
except per share data):

|                                                                                 |  |                  |        |   |                  |   |         |                  |  |   |         |  
|-------------------------------------------------------------------------------- |  | ---------------- | ------ | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                                                                 |  | 12 Weeks Ended   |        |   | 28 Weeks Ended   |  
|                                                                                 |  |                  |        |   |                  |  
|                                                                                 |  | October 12, 2001 |        |   | October 11, 2002 |   |         | October 12, 2001 | 
|                                                                                 |  |                  |        |   |                  |   |         |                  | 
|Revenue, net                                                                     |  | $                | 43,130 |   |                  | $ | 105,386 |                  |  | $ | 106,594 |  
|Operating
earnings (loss)                                                        |  |                  | 3,666  |   |                  |   | 10,245  |                  |  |   | 133     |  
|Loss before income taxes and
cumulative effect of change in
accounting principle |  |                  | (4,387 | ) |                  |   | (11,804 | )                |  |   | (1,534  | )
|Cumulative effect of change in
accounting principle                              |  |                  |       |   |                  |   | 4,967   |                  |  |   |        |  
|Net (loss)                                                                       |  | $                | (2,687 | ) |                  | $ | (16,532 | )                |  | $ | (376    | )
|Loss per share                                                                   |  | $                | (0.50  | ) |                  | $ | (3.10   | )                |  | $ | (0.07   | )

Since Tutor Time was acquired at the end of the
first quarter, the 12
weeks ended October 11, 2002, includes a full 12 weeks of Tutor Time
operations.

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 million for the 12 weeks ended
October 11, 2001 and $2.0 million and
$5.8 million for the 28 weeks ended October 11, 2002 and October 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.





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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.

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s financial condition, results of operations and
its cash flows, for the interim periods presented.

These statements should be read in conjunction with the Companys consolidated
financial statements and notes thereto for the 52 weeks ended March 29, 2002.
The results for the 12 weeks and the 28 weeks ended October 11, 2002, are not
necessarily indicative of results for the entire year.

USE OF ESTIMATES

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.

FRANCHISE FEES AND ROYALTY INCOME

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.

FISCAL YEAR

The Company utilizes a 52-53 week fiscal year ending on the Friday closest to
March 31. For Fiscal years 2002 and 2003, the first quarter contained 16 weeks,
and the fiscal year contained 52 weeks.

NOTE 4  ACCOUNTS RECEIVABLE

Accounts receivable is presented net of an allowance for doubtful accounts. At
October 11, 2002 and March 29, 2002, the allowance for doubtful accounts was
$0.8 million and $1.3 million, respectively.





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 5  REIMBURSABLE CONSTRUCTION COSTS

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 weeks ended October 11, 2002,
and the year ended March 29, 2002, the Company financed construction costs of
$0.0 million and $0.9 million, respectively, while related repayments received
under reimbursement agreements were $0.0 million and $2.0 million,
respectively.

NOTE 6  DRAFTS PAYABLE

Drafts payable represent unfunded checks drawn on zero balance accounts that
have not been presented for funding to the Companys banks. The drafts are
funded, without finance charges, as soon as they are presented. At October 11,
2002 and March 29, 2002, the aggregate drafts payable are $2.0 million and $4.0
million, respectively.

NOTE 7  FINANCING ARRANGEMENTS

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

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 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 31, 2004 or such date on or after March 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 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 19, 2003, then until
the earlier of December 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. Jacobson, Mr. Morgan and Mr. Kellner) and trusts for the benefit of their
adult children (for an aggregate of $307,472).

At July 19, 2002 and at October 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s lender has
approved waivers to the Amended and Restated Credit Agreement dated as of
January 31, 2002. The latest waiver is effective through December 27, 2002,
and is limited to the financial results for the quarter ended October 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.





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 8  CONTINGENCIES

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 29, 2002 in the
amount of $0.8 million, which was paid during first quarter 2003.

The Company is primarily liable on approximately $1.0 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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 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.

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.

NOTE 9  OPTION GRANTS AND PAYMENTS FOR CONSULTING SERVICES

In July 2000, the Company retained Jacobson Partners, of which Benjamin R.
Jacobson, the Company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s common
stock (see Note 2 Acquisition and Pro Forma Information). Total expenses
incurred for Jacobson Partners (exclusive of the Tutor Time fee) were $135,000
and $135,000 for the 28 weeks ended October 11, 2002 and October 12, 2001,
respectively, and are included in General and Administrative expense in the
accompanying Consolidated Statement of Operations.

The Company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.

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.

NOTE 10  INCOME TAXES

The Company provides for income taxes in accordance SFAS No. 109, Accounting
for Income Taxes, 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.

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):

|                    |  |   |        |  
|------------------- |  | - | ------ | -
|Deferred
tax assets |  | $ | 5,917  |  
|Valuation
allowance |  |   | (4,084 | )
|                    |  |   |       
|Net
deferred taxes  |  | $ | 1,833  |  
|                    |  |   |       





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 11  (LOSS) PER SHARE

For the 12 and 28 weeks ended October 11, 2002 and October 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):

|                                         |  |                                   |  |  |                  |  |       |                  |  |  |                  |  |  |  |  |  |  |  |       |  |  |  |       | 
|---------------------------------------- |  | --------------------------------- |  |  | ---------------- |  | ----- | ---------------- |  |  | ---------------- |  |  |  |  |  |  |  | ----- |  |  |  | ----- | 
|                                         |  | Calculation of Incremental Shares | 
|                                         |  | Outstanding                       | 
|                                         |  | 12 weeks ended                    |  |  | 28 weeks ended   | 
|                                         |  |                                   | 
|                                         |  | October 11, 2002                  |  |  | October 12, 2001 |  |       | October 11, 2002 |  |  | October 12, 2001 | 
|                                         |  |                                   |  |  |                  |  |       |                  |  |  |                  | 
|Basic shares (based on
weighted average) |  |                                   |  |  |                  |  | 5,416 |                  |  |  | 5,230            |  |  |  |  |  |  |  | 5,329 |  |  |  | 5,228 | 
|Stock options                            |  |                                   |  |  |                  |  |      |                  |  |  |                 |  |  |  |  |  |  |  |      |  |  |  |      | 
|                                         |  |                                   |  |  |                  |  |       |                  |  |  |                  | 
|Diluted shares                           |  |                                   |  |  |                  |  | 5,416 |                  |  |  | 5,230            |  |  |  |  |  |  |  | 5,329 |  |  |  | 5,228 | 
|                                         |  |                                   |  |  |                  |  |       |                  |  |  |                  | 

NOTE 12  RESTRUCTURING CHARGES

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 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 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.

A summary of the restructuring reserve is as follows (in thousands):

|                        |  |                                |     |  |               |   |     |          |  |   |                  |  |        |   |       | 
|----------------------- |  | ------------------------------ | --- |  | ------------- | - | --- | -------- |  | - | ---------------- |  | ------ | - | ----- | 
|                        |  | Restructuring Reserve Analysis |    
|                        |  | Beginning                      |     |  |               |   |     |          |  |   |                  |  | Ending |  
|                        |  | Accrual                        |     |  | Restructuring |   |     | Cash     |  |   | accrual          | 
|                        |  | March 29, 2002                 |     |  | Charge        |   |     | payments |  |   | October 11, 2002 | 
|                        |  |                                |     |  |               |   |     |          |  |   |                  | 
|Lease termination costs |  | $                              | 755 |  |               | $ | 702 |          |  | $ | 405              |  |        | $ | 1,052 | 
|Severance costs         |  |                                | 74  |  |               |   |    |          |  |   | 54               |  |        |   | 20    | 
|                        |  |                                |     |  |               |   |     |          |  |   |                  | 
|Total                   |  | $                              | 829 |  |               | $ | 702 |          |  | $ | 459              |  |        | $ | 1,072 | 
|                        |  |                                |     |  |               |   |     |          |  |   |                  | 





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 13  INTANGIBLE ASSETS AND LONG LIVED ASSET IMPAIRMENT

During the second quarter of 2003, the Company completed the implementation of
SFAS 142, Goodwill and Other Intangible Assets. 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 29,
2002. The Company completed its impairment test and recorded an impairment loss
of $5.0 million (net of a tax benefit of $0.9 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 11, 2002, and recorded an impairment loss during the
second quarter of $4.2 million.

In accordance with the provisions of SFAS 142, the Company did not amortize
goodwill for the quarter and 28 weeks ended October 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 million to an adjusted
net loss of ($2.0) and ($0.0) million, respectively.

The changes in the carrying amounts of goodwill and other intangible assets for
the six months ended October 11, 2002 were as follows (in thousands):

|            |                                         |  |         |        |  |               |   |       |      |            |         |              |  |  |          |     |         |             |   |       |  |  |            |    | 
|----------- | --------------------------------------- |  | ------- | ------ |  | ------------- | - | ----- | ---- | ---------- | ------- | ------------ |  |  | -------- | --- | ------- | ----------- | - | ----- |  |  | ---------- | -- | 
|            |                                         |  |         |        |  |               |   |       |      |            | Pre-Tax |              |  |  |          |     |         |             |   |       |  |  |            |   
|            |                                         |  | Balance |        |  |               |   |       |      | Impairment |         |              |  |  |          |     | Balance |             |   |       |  | 
|            |                                         |  | 3/29/02 |        |  | Additions (1) |   |       | Loss |            |         | Amortization |  |  | 10/11/02 |     |         | Useful life |  
|            |                                         |  |         |        |  |               |   |       |      |            |         |              |  |  |          |     |         |             |  
|Childtime:  |                                         |  |         |        |  |               |   |       |      |            |         |              |  |  |          |     |         |             |   |       |  |  |            |   
|            | Covenants                               |  | $       | 52     |  |               | $ |      |      |            | $       |             |  |  | $        | 25  |         |             | $ | 27    |  |  |            | 2  | 
|            | Goodwill                                |  |         | 17,273 |  |               |   |      |      |            |         | 10,068       |  |  |          |    |         |             |   | 7,205 |  |  | Indefinite
|Tutor Time: |                                         |  |         |        |  |               |   |       |      |            |         |              |  |  |          |     |         |             |   |       |  |  |            |   
|            | Trade Name and trademarks               |  |         |       |  |               |   | 3,905 |      |            |         |             |  |  |          | 45  |         |             |   | 3,860 |  |  |            | 20 | 
|            | Franchise Agreements                    |  |         |       |  |               |   | 9,090 |      |            |         |             |  |  |          | 105 |         |             |   | 8,985 |  |  |            | 20 | 
|            | Curriculum                              |  |         |       |  |               |   | 460   |      |            |         |             |  |  |          | 21  |         |             |   | 439   |  |  |            | 5  | 
|            | Goodwill and unallocated purchase price |  |         |       |  |               |   | 7,584 |      |            |         |             |  |  |          |    |         |             |   | 7,584 |  |  | Indefinite



|(1) |  | Additions relate to the July 19, 2002 acquisition of Tutor Time Learning
Systems, Inc.
|--- |  | --------------------------------------------------------------------------------------

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 11, 2002 in accordance with the provisions of SFAS 144,
Accounting for the Impairment or Disposal 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 $3.5 million, which impacted the Childtime
reporting segment.





---



##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 14  SEGMENT INFORMATION

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s reportable segments are reported separately because the Companys
chief operating decision maker uses the segment information in determining the
allocation of resources among segments and appraising the performance of the
segments.

Information about the Companys operating segments are presented below:

|                              |  |                                 |        |   |            |   |        |                      |  |   |        |  |  |   |         |  
|----------------------------- |  | ------------------------------- | ------ | - | ---------- | - | ------ | -------------------- |  | - | ------ |  |  | - | ------- | -
|                              |  | 12 Weeks
Ended October 11, 2002 |       
|                              |  |                                 |       
|                              |  | Childtime                       |        |   | Tutor Time |   |        | Franchise Operations |  |   | Total  | 
|                              |  |                                 |        |   |            |   |        |                      |  |   |        | 
|External revenues             |  | $                               | 32,326 |   |            | $ | 10,487 |                      |  | $ | 1,142  |  |  | $ | 43,955  |  
|Intersegment revenues         |  |                                 |       |   |            |   |       |                      |  |   |       |  |  |   |        |  
|Depreciation and amortization |  |                                 | 725    |   |            |   | 158    |                      |  |   | 105    |  |  |   | 988     |  
|Operating income (loss)       |  |                                 | (9,494 | ) |            |   | (2,302 | )                    |  |   | 1,051  |  |  |   | (10,745 | )
|Goodwill(1)                   |  |                                 | 7,205  |   |            |   | 6,839  |                      |  |   | 745    |  |  |   | 14,789  |  
|All other assets              |  |                                 | 47,927 |   |            |   | 10,418 |                      |  |   | 11,700 |  |  |   | 70,045  |  

|                              |  |                                 |        |   |            |   |   |                      |  |   |       |  |  |   |        |  
|----------------------------- |  | ------------------------------- | ------ | - | ---------- | - | - | -------------------- |  | - | ----- |  |  | - | ------ | -
|                              |  | 12 Weeks Ended October 12, 2001 |       
|                              |  |                                 |       
|                              |  | Childtime                       |        |   | Tutor Time |   |   | Franchise Operations |  |   | Total | 
|                              |  |                                 |        |   |            |   |   |                      |  |   |       | 
|External revenues             |  | $                               | 31,950 |   |            | $ |  |                      |  | $ |      |  |  | $ | 31,950 |  
|Intersegment revenues         |  |                                 |       |   |            |   |  |                      |  |   |      |  |  |   |       |  
|Depreciation and amortization |  |                                 | 1,116  |   |            |   |  |                      |  |   |      |  |  |   | 1,116  |  
|Operating income (loss)       |  |                                 | (3,783 | ) |            |   |  |                      |  |   |      |  |  |   | (3,783 | )
|Goodwill                      |  |                                 | 19,961 |   |            |   |  |                      |  |   |      |  |  |   | 19,961 |  
|All other assets              |  |                                 | 53,244 |   |            |   |  |                      |  |   |      |  |  |   | 53,244 |  

|                              |  |                                 |         |   |            |   |        |                      |  |   |        |  |  |   |         |  
|----------------------------- |  | ------------------------------- | ------- | - | ---------- | - | ------ | -------------------- |  | - | ------ |  |  | - | ------- | -
|                              |  | 28 Weeks
Ended October 11, 2002 |        
|                              |  |                                 |        
|                              |  | Childtime                       |         |   | Tutor Time |   |        | Franchise Operations |  |   | Total  | 
|                              |  |                                 |         |   |            |   |        |                      |  |   |        | 
|External revenues             |  | $                               | 77,209  |   |            | $ | 10,487 |                      |  | $ | 1,142  |  |  | $ | 88,838  |  
|Intersegment revenues         |  |                                 |        |   |            |   |       |                      |  |   |       |  |  |   |        |  
|Depreciation and amortization |  |                                 | 1,493   |   |            |   | 158    |                      |  |   | 105    |  |  |   | 1,756   |  
|Operating income (loss)       |  |                                 | (10,036 | ) |            |   | (2,302 | )                    |  |   | 1,051  |  |  |   | (11,287 | )
|Goodwill(1)                   |  |                                 | 7,205   |   |            |   | 6,839  |                      |  |   | 745    |  |  |   | 14,789  |  
|All other assets              |  |                                 | 47,927  |   |            |   | 10,418 |                      |  |   | 11,700 |  |  |   | 70,045  |  

|                              |  |                                 |        |   |            |   |   |                      |  |   |       |  |  |   |        |  
|----------------------------- |  | ------------------------------- | ------ | - | ---------- | - | - | -------------------- |  | - | ----- |  |  | - | ------ | -
|                              |  | 28 Weeks Ended October 12, 2001 |       
|                              |  |                                 |       
|                              |  | Childtime                       |        |   | Tutor Time |   |   | Franchise Operations |  |   | Total | 
|                              |  |                                 |        |   |            |   |   |                      |  |   |       | 
|External revenues             |  | $                               | 78,680 |   |            | $ |  |                      |  | $ |      |  |  | $ | 78,680 |  
|Intersegment revenues         |  |                                 |       |   |            |   |  |                      |  |   |      |  |  |   |       |  
|Depreciation and amortization |  |                                 | 2,499  |   |            |   |  |                      |  |   |      |  |  |   | 2,499  |  
|Operating income (loss)       |  |                                 | (1,391 | ) |            |   |  |                      |  |   |      |  |  |   | (1,391 | )
|Goodwill                      |  |                                 | 19,961 |   |            |   |  |                      |  |   |      |  |  |   | 19,961 |  
|All other assets              |  |                                 | 53,244 |   |            |   |  |                      |  |   |      |  |  |   | 53,244 |  

(1)    Tutor Time and Franchise Operations goodwill includes amounts associated with the unallocated purchase price.

NOTE 15  OPERATIONAL IMPROVEMENTS

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.





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##### 



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 16  NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 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 11, 2002, and recorded an impairment loss during the second quarter of
$6.5 million, or $1.19 per average basic and diluted share.

SFAS No. 143, Accounting for Asset Retirement Obligationswas 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. 143 in the
first quarter of Fiscal 2004.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
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. 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 million, or $0.54 per average basic and
diluted share which impacted the Childtime reporting segment.

SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections as of April 2002, was issued
in April 2002, and rescinds FASB Statement No. 4, Reporting Gains and Losses
from Extinguishments of Debt, and an amendment of that Statement, FASB
Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds FASB Statement No. 44, Accounting
for Intangible Assets of Motor Carriers. This Statement amends FASB Statement
No. 13, Accounting for Leases, 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.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
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) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). The Company is anticipating the adoption
of SFAS No. 146 in the third quarter of Fiscal 2003.

SFAS No. 147, Acquisitions of Certain Financial Institutionsan amendment of
FASB Statements No. 72 and 144 and FASB Interpretation No. 9, was issued in
October 2002, and addresses FASB Statement No. 72, Accounting for Certain
Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9,
Applying APB Opinions No. 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, 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. 141, Business
Combinations, and No. 142,
Goodwill and Other Intangible Assets. The Company adopted this Statement
during the second quarter of Fiscal 2003 which had no significant effect on the
Company.





---



##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned hereunto duly authorized.

|                      |  |                                                                                      
|--------------------- |  | -------------------------------------------------------------------------------------
|                      |  | CHILDTIME LEARNING CENTERS, INC.                                                     
|                     
|Date: January 7, 2003 |  | By: /s/ Frank JerneycicFrank M. Jerneycic
Its:  Chief Financial Officer and Treasurer





---



##### 



CERTIFICATIONS

I, William D. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Childtime Learning
Centers, Inc.;

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;

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;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;

5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent
function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and

6. The registrant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.

Date: January 7, 2003



| | /s/ William D. DavisWilliam D. Davis, President and
Chief Executive Officer
| | ---------------------------------------------------------------------------





---



##### 



CERTIFICATIONS

I, Frank M. Jerneycic, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Childtime Learning
Centers, Inc.;

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;

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;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;

5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent
function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and

6. The registrant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.

Date: January 7, 2003



| | /s/ Frank M. Jerneycic
Frank M. Jerneycic, Chief Financial Officer
and Treasurer
| | --------------------------------------------------------------------------------



---



##### 



EXHIBIT INDEX

|        |  |                                                                                           
|------- |  | ------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                               
|        |  |                                                                                           
|99.1    |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
|        |  |                                                                                           
|99.2    |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act