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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(MARK ONE)x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JANUARY 3, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM
_____ TO _____

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) |  | 38-3261854
(I.R.S. Employer Identification No.)

38345 West Ten Mile Road, Suite 100
Farmington Hills, Michigan 48335-2883
(Address of principal executive offices)

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

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing required for the past 90 days. Yes x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

The number of shares of Registrants Common Stock, no par value per share,
outstanding at February 14, 2003, was 5,416,210.





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TABLE OF CONTENTS



|                                                  |                                                                     |                                                                                                                                                  |  |  |  |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                    
|                                                  | ITEM 1. Consolidated Financial Statements                          
|                                                  |                                                                     | A. Consolidated Balance Sheets January 3, 2003 and March 29, 2002                                                                               
|                                                  |                                                                     | B. Consolidated Statements of Operations, 12 weeks ended January 3, 2003 and January 4, 2002, 40 weeks ended January 3, 2003 and January 4, 2002
|                                                  |                                                                     | C. Consolidated Statements of Cash Flows 40 weeks ended January 3, 2003 and January 4, 2002                                                     
|                                                  |                                                                     | D. Notes to Consolidated Financial Statements                                                                                                   
|                                                  | ITEM 2. Managements Discussion and Analysis                       
|                                                  | ITEM 3. Quantitative and Qualitative Disclosures about Market Risks
|                                                  | ITEM 4. Controls and Procedures                                    
|PART II  OTHER INFORMATION                      
|                                                  | ITEM 1. Legal Proceedings                                          
|                                                  | ITEM 6. Exhibits, Reports on Form 8-K                              
|SIGNATURES                                       
|Amended & Restated Credit Agreement              
|Sec. 906 Certification of Chief Executive Officer
|Sec. 906 Certification of Chief Financial Officer



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CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

For the Quarterly Period Ended January 3, 2003

|           |  |                       |  |                                                                                       |  |       
|---------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | ------
|           |  |                       |  |                                                                                       |  | Page  
|           |  |                       |  |                                                                                       |  | Number
|           |  |                       |  |                                                                                       |  |       
|PART I     |  | FINANCIAL INFORMATION |  |                                                                                      
|           |  |                       |  |                                                                                       |  |       
|           |  | ITEM 1.               |  | Consolidated Financial Statements                                                     |  |       
|           |  |                       |  | A. Consolidated Balance Sheets                                                        |  | 3     
|           |  |                       |  | January 3, 2003 and March 29, 2002                                                    |  |       
|           |  |                       |  | B. Consolidated Statements of Operations                                              |  | 4     
|           |  |                       |  | 12 weeks ended January 3, 2003 and January 4, 2002                                    |  |       
|           |  |                       |  | 40 weeks ended January 3, 2003 and January 4, 2002                                    |  |       
|           |  |                       |  | C. Consolidated Statements of Cash Flows                                              |  | 5     
|           |  |                       |  | 40 weeks ended January 3, 2003 and January 4, 2002                                    |  |       
|           |  |                       |  | D. Notes to Consolidated Financial Statements                                         |  | 6-17  
|           |  | ITEM 2.               |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  | 17-22 
|           |  | ITEM 3.               |  | Quantitative and Qualitative Disclosures about Market Risks                           |  | 22    
|           |  | ITEM 4.               |  | Controls and Procedures                                                               |  | 22    
|           |  |                       |  |                                                                                       |  |       
|PART II    |  | OTHER INFORMATION     |  |                                                                                      
|           |  |                       |  |                                                                                       |  |       
|           |  | ITEM 1.               |  | Legal Proceedings                                                                     |  | 23    
|           |  | ITEM 6.               |  | Exhibits, Reports on Form 8-K                                                         |  | 24    
|           |  |                       |  |                                                                                       |  |       
|SIGNATURES |  |                       |  |                                                                                       |  |       

2



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PART I: FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)

|                                           |                                                 |                            |        |             |        |   |           |         |        | 
|------------------------------------------ | ----------------------------------------------- | -------------------------- | ------ | ----------- | ------ | - | --------- | ------- | ------ | 
|                                           |                                                 |                            |        | January 3,  |        |   | March 29, |        
|                                           |                                                 |                            |        | 2003        |        |   | 2002      |        
|                                           |                                                 |                            |        |             |        |   |           |        
|                                           |                                                 |                            |        | (Unaudited) |        |   |           |        
|ASSETS                                     |                                                 |                            |        |             |        |   |           |        
|CURRENT ASSETS:                            |                                                 |                            |        |             |        |   |           |        
|                                           | Cash and cash equivalents                       |                            | $      | 2,808       |        |   | $         | 4,891   |       
|                                           | Accounts receivable, net                        |                            |        | 10,738      |        |   |           | 5,235   |       
|                                           | Prepaid expenses and other current assets       |                            |        | 3,408       |        |   |           | 2,329   |       
|                                           | Income tax receivable                           |                            |        | 185         |        |   |           | 2,509   |       
|                                           | Deferred income taxes                           |                            |        | 1,833       |        |   |           | 3,764   |       
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 | Total current assets       |        |             | 18,972 |   |           |         | 18,728 | 
|                                           |                                                 |                            |        |             |        |  
|LAND, BUILDINGS AND EQUIPMENT:             |                                                 |                            |        |             |        |   |           |        
|                                           | Land                                            |                            |        | 9,362       |        |   |           | 9,503   |       
|                                           | Buildings                                       |                            |        | 19,700      |        |   |           | 19,180  |       
|                                           | Leasehold improvements                          |                            |        | 9,444       |        |   |           | 10,010  |       
|                                           | Vehicles, furniture and equipment               |                            |        | 13,258      |        |   |           | 14,820  |       
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 |                            | 51,764 |             |        |   | 53,513    |        
|                                           | Less: accumulated depreciation and amortization |                            |        | (16,127     | )      |   |           | (16,531 | )     
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 |                            | 35,637 |             |        |   | 36,982    |        
|OTHER NONCURRENT ASSETS:                   |                                                 |                            |        |             |        |   |           |        
|                                           | Intangible assets, net                          |                            |        | 27,924      |        |   |           | 17,325  |       
|                                           | Refundable deposits and other                   |                            |        | 2,265       |        |   |           | 1,080   |       
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 |                            | 30,189 |             |        |   | 18,405    |        
|                                           |                                                 |                            |        |             |        |  
|TOTAL ASSETS                               |                                                 | $                          | 84,798 |             |        | $ | 74,115    |        
|                                           |                                                 |                            |        |             |        |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                 |                            |        |             |        |   |           |        
|CURRENT LIABILITIES:                       |                                                 |                            |        |             |        |   |           |        
|                                           | Accounts and drafts payable                     |                            | $      | 7,833       |        |   | $         | 6,271   |       
|                                           | Accrued wages and benefits                      |                            |        | 5,213       |        |   |           | 4,508   |       
|                                           | Revolving line of credit                        |                            |        | 12,633      |        |   |           | 2,500   |       
|                                           | Current portion of long-term debt               |                            |        | 1,031       |        |   |           | 1,133   |       
|                                           | Exit and closure expense accrual                |                            |        | 1,206       |        |   |           | 829     |       
|                                           | Other current liabilities                       |                            |        | 12,591      |        |   |           | 8,094   |       
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 | Total current liabilities  |        |             | 40,507 |   |           |         | 23,335 | 
|LONG-TERM DEBT, NET OF CURRENT PORTION     |                                                 |                            | 17,249 |             |        |   | 3,196     |        
|DEFERRED RENT LIABILITY                    |                                                 |                            | 909    |             |        |   | 983       |        
|DEFERRED INCOME TAXES                      |                                                 |                            |       |             |        |   | 3,119     |        
|                                           |                                                 |                            |        |             |        |  
|                                           | Total Liabilities                               |                            |        | 58,665      |        |   |           | 30,633  |       
|                                           |                                                 |                            |        |             |        |  
|SHAREHOLDERS EQUITY                       |                                                 |                            |        |             |        |   |           |        
|                                           | Common Stock                                    |                            |        | 31,665      |        |   |           | 31,183  |       
|                                           | Preferred Stock                                 |                            |        |            |        |   |           |        |       
|                                           | Retained earnings (accumulated deficit)         |                            |        | (5,532      | )      |   |           | 12,299  |       
|                                           |                                                 |                            |        |             |        |  
|                                           |                                                 | Total shareholders equity |        |             | 26,133 |   |           |         | 43,482 | 
|                                           |                                                 |                            |        |             |        |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                 | $                          | 84,798 |             |        | $ | 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 |        |   | 40 Weeks Ended |       
|                                                    |                                                                                                             |   |                |        |   |                |       
|                                                    |                                                                                                             |   | January 3,     |        |   | January 4,     |        |       | January 3, |   |         | January 4, |  
|                                                    |                                                                                                             |   | 2003           |        |   | 2002           |        |       | 2003       |   |         | 2002       |  
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |            |  
|Revenue from Learning Center Operations             |                                                                                                             | $ | 42,029         |        |   | $              | 30,860 |       |            | $ | 129,521 |            |   | $ | 109,202 |       
|Revenue from Franchise Operations                   |                                                                                                             |   | 1,258          |        |   |                |       |       |            |   | 2,400   |            |   |   |        |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|Revenue, net                                        |                                                                                                             |   | 43,287         |        |   |                | 30,860 |       |            |   | 131,921 |            |   |   | 109,202 |       
|Operating expenses of Learning Centers              |                                                                                                             |   | 37,133         |        |   |                | 27,616 |       |            |   | 118,540 |            |   |   | 95,933  |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|Gross profit                                        |                                                                                                             |   | 6,154          |        |   |                | 3,244  |       |            |   | 13,381  |            |   |   | 13,269  |       
|Provision for doubtful accounts                     |                                                                                                             |   | 429            |        |   |                | 207    |       |            |   | 908     |            |   |   | 977     |       
|General and administrative expenses                 |                                                                                                             |   | 4,593          |        |   |                | 2,574  |       |            |   | 12,398  |            |   |   | 8,399   |       
|Depreciation and amortization expenses              |                                                                                                             |   | 1,033          |        |   |                | 1,047  |       |            |   | 2,786   |            |   |   | 3,532   |       
|Exit and closure expenses                           |                                                                                                             |   | 377            |        |   |                | 169    |       |            |   | 725     |            |   |   | 2,449   |       
|Intangible asset impairment charges                 |                                                                                                             |   |               |        |   |                |       |       |            |   | 4,181   |            |   |   |        |       
|Fixed asset impairment charges                      |                                                                                                             |   |               |        |   |                |       |       |            |   | 3,401   |            |   |   |        |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | OPERATING (LOSS)                                                                                            |   |                | (278   | ) |                |        | (753  | )          |   |         | (11,018    | ) |   |         | (2,088 | )
|Interest expense, net                               |                                                                                                             |   | 760            |        |   |                | 95     |       |            |   | 1,567   |            |   |   | 345     |       
|Other (income) expense, net                         |                                                                                                             |   | (14            | )      |   |                |       |       |            |   | (72     | )          |   |   | 1       |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | (LOSS) BEFORE INCOME TAXES, DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE |   |                | (1,024 | ) |                |        | (848  | )          |   |         | (12,513    | ) |   |         | (2,434 | )
|Income tax provision (benefit)                      |                                                                                                             |   |               |        |   |                | (326   | )     |            |   | (227    | )          |   |   | (923    | )     
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | (LOSS) BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE               |   |                | (1,024 | ) |                |        | (522  | )          |   |         | (12,286    | ) |   |         | (1,511 | )
|Discontinued operations, net of taxes               |                                                                                                             |   | (42            | )      |   |                | (22    | )     |            |   | (578    | )          |   |   | (56     | )     
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE                                           |   |                | (1,066 | ) |                |        | (544  | )          |   |         | (12,864    | ) |   |         | (1,567 | )
|Cumulative effect of change in accounting principle |                                                                                                             |   |               |        |   |                |       |       |            |   | (4,967  | )          |   |   |        |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | NET (LOSS)                                                                                                  |   | $              | (1,066 | ) |                | $      | (544  | )          |   | $       | (17,831    | ) |   | $       | (1,567 | )
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|BASIC AND DILUTED NET (LOSS) PER SHARE:             |                                                                                                             |   |                |        |   |                |        |       |            |   |         |            |   |   |         |       
|                                                    | (Loss) before discontinued operations
and cumulative effect of change in accounting principle               |   | $              | (0.19  | ) |                | $      | (0.10 | )          |   | $       | (2.30      | ) |   | $       | (0.29  | )
|                                                    | Discontinued operations, net                                                                                |   |                | (0.01  | ) |                |        |      |            |   |         | (0.11      | ) |   |         | (0.01  | )
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | (Loss) before cumulative effect of change in accounting
principle                                           |   |                | (0.20  | ) |                |        | (0.10 | )          |   |         | (2.41      | ) |   |         | (0.30  | )
|                                                    | Cumulative effect of change in accounting principle                                                         |   |                |       |   |                |        |      |            |   |         | (0.93      | ) |   |         |       |  
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|                                                    | Basic and diluted net (loss) per share                                                                      |   | $              | (0.20  | ) |                | $      | (0.10 | )          |   | $       | (3.34      | ) |   | $       | (0.30  | )
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           
|WEIGHTED AVERAGE SHARES OUTSTANDING                 |                                                                                                             |   | 5,416          |        |   |                | 5,241  |       |            |   | 5,346   |            |   |   | 5,232   |       
|                                                    |                                                                                                             |   |                |        |   |                |        |       |            |   |         |           

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)

|                                                                            |                                                                                                                                   |   |                 |         |   |                 |        |        |  
|--------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | - | --------------- | ------- | - | --------------- | ------ | ------ | -
|                                                                            |                                                                                                                                   |   | 40 Weeks Ended  |        
|                                                                            |                                                                                                                                   |   |                 |        
|                                                                            |                                                                                                                                   |   | January 3, 2003 |         |   | January 4, 2002 |       
|                                                                            |                                                                                                                                   |   |                 |         |   |                 |       
|OPERATING ACTIVITIES:                                                       |                                                                                                                                   |   |                 |         |   |                 |        |       
|Net (loss)                                                                  |                                                                                                                                   | $ | (17,831         | )       |   | $               | (1,567 | )     
|Adjustments to reconcile net loss to cash
provided by operating activities: |                                                                                                                                   |   |                 |         |   |                 |        |       
|                                                                            | Depreciation and amortization                                                                                                     |   |                 | 2,892   |   |                 |        | 3,555  |  
|                                                                            | Intangible and fixed asset impairment charges (includes $5,877 classified as cumulative
effect of change in accounting principle) |   |                 | 13,532  |   |                 |        |       |  
|                                                                            | Provision for doubtful accounts                                                                                                   |   |                 | 958     |   |                 |        | 978    |  
|                                                                            | Stock option compensation expense                                                                                                 |   |                 |        |   |                 |        | 185    |  
|                                                                            | Deferred rent liability                                                                                                           |   |                 | (19     | ) |                 |        | (137   | )
|                                                                            | Deferred income taxes                                                                                                             |   |                 | (1,188  | ) |                 |        | (1,927 | )
|                                                                            | Gains (loss) on sale of assets                                                                                                    |   |                 | (114    | ) |                 |        |       |  
|Changes in operating assets and liabilities:                                |                                                                                                                                   |   |                 |         |   |                 |        |       
|                                                                            | Accounts receivable                                                                                                               |   |                 | (2,272  | ) |                 |        | (2,229 | )
|                                                                            | Prepaid expenses and other current assets                                                                                         |   |                 | 1,973   |   |                 |        | 732    |  
|                                                                            | Accounts payable                                                                                                                  |   |                 | 22      |   |                 |        | (497   | )
|                                                                            | Exit and closure expense accrual                                                                                                  |   |                 | 377     |   |                 |        | (500   | )
|                                                                            | Accruals and other current liabilities                                                                                            |   |                 | (956    | ) |                 |        | 1,649  |  
|                                                                            |                                                                                                                                   |   |                 |         |   |                
|                                                                            | Net cash provided (used) by operating activities                                                                                  |   |                 | (2,626  | ) |                 |        | 242    |  
|INVESTING ACTIVITIES:                                                       |                                                                                                                                   |   |                 |         |   |                 |        |       
|                                                                            | Acquisition of Tutor Time  (net of cash of $682)                                                                                 |   |                 | (21,621 | ) |                 |        |       |  
|                                                                            | Capital spending                                                                                                                  |   |                 | (3,387  | ) |                 |        | (3,377 | )
|                                                                            | Expenditures from reimbursable construction costs                                                                                 |   |                 |        |   |                 |        | (1,005 | )
|                                                                            | Proceeds from sale of assets                                                                                                      |   |                 | 555     |   |                 |        | 514    |  
|                                                                            | Payments for refundable deposits and other assets                                                                                 |   |                 | (9      | ) |                 |        | (10    | )
|                                                                            |                                                                                                                                   |   |                 |         |   |                
|                                                                            | Net cash used in investing activities                                                                                             |   |                 | (24,462 | ) |                 |        | (3,878 | )
|FINANCING ACTIVITIES:                                                       |                                                                                                                                   |   |                 |         |   |                 |        |       
|                                                                            | Net borrowings on revolving line of credit                                                                                        |   |                 | 10,133  |   |                 |        | 3,919  |  
|                                                                            | Repayments under long-term debt                                                                                                   |   |                 | (389    | ) |                 |        | (877   | )
|                                                                            | Issuance of long-term debt                                                                                                        |   |                 | 14,000  |   |                 |        |       |  
|                                                                            | Changes in drafts payable                                                                                                         |   |                 | 1,261   |   |                 |        | 74    
|                                                                            | Repayments of reimbursable construction costs                                                                                     |   |                 |        |   |                 |        | 229    |  
|                                                                            | Issuance of common shares                                                                                                         |   |                 |        |   |                 |        | 121    |  
|                                                                            |                                                                                                                                   |   |                 |         |   |                
|                                                                            | Net cash provided by financing activities                                                                                         |   |                 | 25,005  |   |                 |        | 3,466  |  
|Net decrease in cash and cash equivalents                                   |                                                                                                                                   |   | (2,083          | )       |   |                 | (170   | )     
|Cash and cash equivalents, beginning of year                                |                                                                                                                                   |   | 4,891           |         |   |                 | 3,379  |       
|                                                                            |                                                                                                                                   |   |                 |         |   |                
|Cash and cash equivalents, end of period                                    |                                                                                                                                   | $ | 2,808           |         |   | $               | 3,209  |       
|                                                                            |                                                                                                                                   |   |                 |         |   |                

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 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 Company purchased
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 the range of the Companys product offering and
to enter the child care franchise business. The Tutor Time centers are on
average newer and larger than Childtimes centers, and Tutor Time is one of the
largest franchisors in the child care industry. Additionally, the Company
gained access to approximately 34 sites that were under development, which have
opened or are expected to open as either franchise or corporate centers over
the next 18 months. As of January 3, 2003, Childtime operated 336 Company owned
centers and franchised an additional 131 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 providing 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 and interim Chief
Executive Officer, 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 which the Company has consummated the Rights Offering (defined below),
provided that interest on the Subordinated Notes (including the Additional
Subordinated Notes and interest thereon) may be paid only to the extent the
aggregate proceeds of the Rights Offering exceeds $14 million. If the Rights
Offering is not consummated, and the Company has not 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 Amount),
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
$10,497,154), and three directors of the Company (Mr. Jacobson, Mr. Morgan and
Mr. Kellner) and trusts for the benefit of their children (for an aggregate of
$545,132).

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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 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 upon the exercise of
their options 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). The
option grant has been approved by the Companys shareholders.

The Rights Offering is expected to take place during the first half of calendar
2003 and will refinance the subordinated debt incurred by the Company in
connection with the Tutor Time acquisition. As currently contemplated, 100,000
Rights Offering units (Units) will be offered, consisting in the aggregate of
$3.5 million in principal amount of subordinated debentures and a number of
shares of common stock that, based on the formula described below, with the
issuance of the new subordinated debentures, would allow payment in full of the
Subordinated Notes (including the Additional Subordinated Notes) and all
accrued and unpaid interest thereon. The offering price per share of the
common stock under the Rights Offering would be the four-week volume-weighted
average 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
volume-weighted average 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 volume-weighted average price, the
offering price related to the common stock portion of the Rights Offering will
equal 110% of such one-week volume-weighted average price. 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 up to an aggregate amount equal to the
aggregate principal amount of the Subordinated Notes (including the Additional
Subordinated Notes) plus all accrued and unpaid interest thereon.

The acquisition of Tutor Time is reflected in the consolidated balance sheet of
the Company as of January 3, 2003 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 (in
thousands) has been
tentatively allocated as follows and is subject to further change upon audit.

|                    |                                         |                         |        |       |        | 
|------------------- | --------------------------------------- | ----------------------- | ------ | ----- | ------ | 
|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 |      
|                    |                                         |                         |       

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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  |        |   | 40 Weeks Ended  |        
|                 |                                                                                                             |   |                 |        |   |                 |        
|                 |                                                                                                             |   | January 4, 2002 |        |   | January 3, 2003 |         |         | January 4, 2002 |  
|                 |                                                                                                             |   |                 |        |   |                 |         |         |                 |  
|Revenue, net     |                                                                                                             | $ | 42,065          |        |   | $               | 148,469 |         |                 | $ | 148,322 |       
|Operating (loss) |                                                                                                             |   | (647            | )      |   |                 | (9,976  | )       |                 |   | (458    | )     
|                 | (Loss) before income taxes,
discontinued operations and
cumulative effect of change in
accounting principle |   | $               | (1,350 | ) |                 | $       | (12,281 | )               |   | $       | (2,828 | )
|                 | (Loss) before cumulative
effect of change in
accounting principle                                           |   | $               | (814   | ) |                 | $       | (12,632 | )               |   | $       | (1,192 | )
|                 | Net (loss)                                                                                                  |   | $               | (814   | ) |                 | $       | (17,599 | )               |   | $       | (1,192 | )
|                 | Net (loss) per share                                                                                        |   | $               | (0.16  | ) |                 | $       | (3.30   | )               |   | $       | (0.23  | )

Since Tutor Time was acquired at the end of the first quarter, the 12 weeks
ended January 3, 2003, 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 ($2.3 million for the 12 weeks ended January 4, 2002 and $2.0 million
and $8.1 million for the 40 weeks ended January 3, 2003 and January 4, 2002,
respectively). Additional interest expense was included in the pro forma
results based upon the additional debt incurred to finance the Tutor Time
acquisition.

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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 40 weeks ended January 3, 2003, 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
January 3, 2003 and March 29, 2002, the allowance for doubtful accounts was
$1.1 million and $0.7 million, respectively.

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 40 weeks ended January 3, 2003,
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 January 3,
2003 and March 29, 2002, the aggregate drafts payable were $5.4 million and
$4.0 million, respectively.

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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. This credit agreement, as amended, will
mature on July 31, 2003, and is secured by the Companys receivables, equipment
and 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 $12.6 million at January 3, 2003, 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 $2.6 million
at January 3, 2003 and $1.8 million at March 29, 2002.

Under this agreement, the Company is required to maintain certain financial
ratios and other financial conditions. In addition, there are restrictions on
the incurrence of additional indebtedness, disposition of assets and
transactions with affiliates. 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 approved waivers to the Amended and Restated
Credit Agreement for financial results for the quarter ended October 11, 2002.
The Companys noncompliance with the required consolidated EBITDA levels
continued as of January 3, 2003. In February 2003, the Amended and Restated
Credit Agreement was further amended, among other things, to revise the
financial covenants (including measuring them on a monthly basis) and to
shorten the maturity of the line of credit to July 31, 2003. The Company is in
compliance with the agreement, as amended. The Company intends to extend and
further amend this agreement prior to its maturity date, but no assurance can
be given that the Company will be successful in doing so.

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 which the Company consummated the Rights
Offering (see Note 2), provided that interest on the Subordinated Notes
(including the Additional Subordinated Notes and interest thereon) may be paid
only to the extent the aggregate proceeds of the Rights Offering exceeds $14
million. If the Rights Offering is not consummated, and the Company has not
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 Amount), 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 $10,479,154), and three directors of the Company
(Mr. Jacobson, Mr. Morgan and Mr. Kellner) and trusts for the benefit of their
children (for an aggregate of $545,132).

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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). The Company
has recorded a liability for estimates of future liabilities under these
leases. 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 is
approximately $99.0 million related to leases and $15.7 million related to
guarantees. The leases have durations from 1-20 years. The Company would be
required to pay the related lease obligations in the case of default by the
franchisee. Should the Company be required to make payments under these
leases, it may assume obligations for operating the center. Should the center
not be economically viable, the Company will make provision for the lease
termination at that time. The Company has taken over operations for a center
previously operated by a franchisee as a result of a default under the
franchisees lease and intends to continue to operate this center. Other than
with respect to the foregoing center, the Company has not been notified that it
will be required to make payments under any of these leases or guarantees, does
not believe that any payments are likely and has not recorded any related
liability.

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 $192,500
and $192,500 for the 40 weeks ended January 3, 2003 and January 4, 2002,
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.

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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.
Deferred taxes are as follows (in thousands):

|                    |  |   |        |  
|------------------- |  | - | ------ | -
|Deferred tax assets |  | $ | 5,984  |  
|Valuation allowance |  |   | (4,151 | )
|                    |  |   |       
|Net deferred taxes  |  | $ | 1,833  |  
|                    |  |   |       

NOTE 11  LOSS PER SHARE

For the 12 and 40 weeks ended January 3, 2003 and January 4, 2002, 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                    |       |  | 40 weeks ended  |            
|                                         |  |                                   |       |  |                 |            
|                                         |  | January 3, 2003                   |       |  | January 4, 2002 |             |       | January 3, 2003 |  |  | January 4, 2002 | 
|                                         |  |                                   |       |  |                 |             |       |                 |  |  |                 | 
|Basic shares (based on
weighted average) |  |                                   | 5,416 |  |                 |             | 5,241 |                 |  |  | 5,346           |  |  |  | 5,232 | 
|Stock options                            |  |                                   |      |  |                 |             |      |                 |  |  |                |  |  |  |      | 
|                                         |  |                                   |       |  |                 |             |       |                 |  |  |                 | 
|Diluted shares                           |  |                                   | 5,416 |  |                 |             | 5,241 |                 |  |  | 5,346           |  |  |  | 5,232 | 
|                                         |  |                                   |       |  |                 |             |       |                 |  |  |                 | 

NOTE 12  EXIT AND CLOSURE EXPENSES AND DISCONTINUED OPERATIONS

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. During the 40 weeks ended January 3, 2003,
8 centers were closed, of which 2 related
to centers classified as discontinued operations. As of January 3, 2003, all
but one of the under-performing centers have been closed.

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

|                                      |  |                                                                        |     |  |          |   |       |          |      |   |                 |         |        |   |       | 
|------------------------------------- |  | ---------------------------------------------------------------------- | --- |  | -------- | - | ----- | -------- | ---- | - | --------------- | ------- | ------ | - | ----- | 
|                                      |  | Exit and closure expenses and Discontinued operations Accrual Analysis |    
|                                      |  |                                                                        |    
|                                      |  | Beginning                                                              |     |  |          |   |       |          |      |   |                 |         | Ending |  
|                                      |  | Accrual                                                                |     |  |          |   |       |          | Cash |   |                 | Accrual |       
|                                      |  | March 29, 2002                                                         |     |  | Expenses |   |       | Payments |      |   | January 3, 2003 |        
|                                      |  |                                                                        |     |  |          |   |       |          |      |   |                 |        
|Continuing operations:                |  |                                                                        |     |  |          |   |       |          |      |   |                 |         |        |   |       | 
|Lease costs                           |  | $                                                                      | 755 |  |          | $ | 725   |          |      | $ | 600             |         |        | $ | 880   | 
|Severance costs                       |  |                                                                        | 74  |  |          |   |      |          |      |   | 54              |         |        |   | 20    | 
|                                      |  |                                                                        |     |  |          |   |       |          |      |   |                 |        
|Continuing operations total           |  |                                                                        | 829 |  |          |   | 725   |          |      |   | 654             |         |        |   | 900   | 
|Discontinued operations  lease costs |  |                                                                        |    |  |          |   | 354   |          |      |   | 48              |         |        |   | 306   | 
|                                      |  |                                                                        |     |  |          |   |       |          |      |   |                 |        
|Total                                 |  | $                                                                      | 829 |  |          | $ | 1,079 |          |      | $ | 702             |         |        | $ | 1,206 | 
|                                      |  |                                                                        |     |  |          |   |       |          |      |   |                 |        

The lease liability for the centers closed during the 40 weeks ended January 3,
2003 has been recorded at managements estimate of fair value.

A summary of discontinued operations was as follows, with dollars in thousands:

|                                          |                                           |   |                |     |   |                |     |     |            |   |     |            |   |   |     |     |  
|----------------------------------------- | ----------------------------------------- | - | -------------- | --- | - | -------------- | --- | --- | ---------- | - | --- | ---------- | - | - | --- | --- | -
|                                          |                                           |   | 12 Weeks Ended |     |   | 40 Weeks Ended |    
|                                          |                                           |   |                |     |   |                |    
|                                          |                                           |   | January 3,     |     |   | January 4,     |     |     | January 3, |   |     | January 4, |  
|                                          |                                           |   | 2003           |     |   | 2002           |     |     | 2003       |   |     | 2002       |  
|                                          |                                           |   |                |     |   |                |     |     |            |   |     |            |  
|Revenues, net                             |                                           | $ | 19             |     |   | $              | 119 |     |            | $ | 222 |            |   | $ | 456 |    
|Operating expenses                        |                                           |   | 59             |     |   |                | 145 |     |            |   | 377 |            |   |   | 523 |    
|Provision for doubtful accounts           |                                           |   | 1              |     |   |                | 1   |     |            |   | 4   |            |   |   | 1   |    
|Depreciation and amortization             |                                           |   | 1              |     |   |                | 8   |     |            |   | 4   |            |   |   | 23  |    
|Exit and closure expenses                 |                                           |   |               |     |   |                |    |     |            |   | 354 |            |   |   |    |    
|Intangible asset impairment charges       |                                           |   |               |     |   |                |    |     |            |   | 10  |            |   |   |    |    
|Long lived fixed asset impairment charges |                                           |   |               |     |   |                |    |     |            |   | 63  |            |   |   |    |    
|                                          |                                           |   |                |     |   |                |     |     |            |   |     |           
|                                          | Discontinued operations before income tax |   |                | (42 | ) |                |     | (35 | )          |   |     | (590       | ) |   |     | (91 | )
|Income tax (benefit)                      |                                           |   |               |     |   |                | (13 | )   |            |   | (12 | )          |   |   | (35 | )  
|                                          |                                           |   |                |     |   |                |     |     |            |   |     |           
|                                          | Discontinued operations, net of tax       |   | $              | (42 | ) |                | $   | (22 | )          |   | $   | (578       | ) |   | $   | (56 | )
|                                          |                                           |   |                |     |   |                |     |     |            |   |     |           

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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 as of the beginning of fiscal 2003. 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 40 weeks ended January 3, 2003. If goodwill
amortization had not been recorded for the quarter and 40 weeks ended January
4, 2002, net loss would have decreased $0.4 and $1.4 million to an adjusted net
loss of ($0.1) and ($0.2) million, respectively.

The changes in the carrying amounts of goodwill and other intangible assets for
the 40 weeks ended January 3, 2003 were as follows (in thousands):

|            |                                         |  |         |        |  |              |   |       |      |            |         |              |  |  |        |     |         |             |   |       |  |  |            |    | 
|----------- | --------------------------------------- |  | ------- | ------ |  | ------------ | - | ----- | ---- | ---------- | ------- | ------------ |  |  | ------ | --- | ------- | ----------- | - | ----- |  |  | ---------- | -- | 
|            |                                         |  |         |        |  |              |   |       |      |            | Pre-Tax |              |  |  |        |     |         |             |   |       |  |  |            |   
|            |                                         |  | Balance |        |  |              |   |       |      | Impairment |         |              |  |  |        |     | Balance |             |   |       |  | 
|            |                                         |  | 3/29/02 |        |  | Additions(1) |   |       | Loss |            |         | Amortization |  |  | 1/3/03 |     |         | Useful life |  
|            |                                         |  |         |        |  |              |   |       |      |            |         |              |  |  |        |     |         |             |  
|Childtime:  |                                         |  |         |        |  |              |   |       |      |            |         |              |  |  |        |     |         |             |   |       |  |  |            |   
|            | Covenants                               |  | $       | 52     |  |              | $ |      |      |            | $       |             |  |  | $      | 30  |         |             | $ | 22    |  |  |            | 2  | 
|            | Goodwill                                |  |         | 17,273 |  |              |   |      |      |            |         | 10,068       |  |  |        |    |         |             |   | 7,205 |  |  | Indefinite
|Tutor Time: |                                         |  |         |        |  |              |   |       |      |            |         |              |  |  |        |     |         |             |   |       |  |  |            |   
|            | Trade Name and trademarks               |  |         |       |  |              |   | 3,905 |      |            |         |             |  |  |        | 90  |         |             |   | 3,815 |  |  |            | 20 | 
|            | Franchise Agreements                    |  |         |       |  |              |   | 9,090 |      |            |         |             |  |  |        | 210 |         |             |   | 8,880 |  |  |            | 20 | 
|            | Curriculum                              |  |         |       |  |              |   | 460   |      |            |         |             |  |  |        | 42  |         |             |   | 418   |  |  |            | 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.

Estimated amortization of intangible assets is expected to be $0.5 million for fiscal 2003 and approximately $0.7 million for each of the next four years.

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.

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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 in
thousands:

|                              |  |                                |        |   |            |   |        |            |  |           |        |  |  |   |        |  
|----------------------------- |  | ------------------------------ | ------ | - | ---------- | - | ------ | ---------- |  | --------- | ------ |  |  | - | ------ | -
|                              |  | 12 Weeks Ended January 3, 2003 |       
|                              |  |                                |       
|                              |  |                                |        |   |            |   |        |            |  | Franchise |        |  |  |   |       
|                              |  | Childtime                      |        |   | Tutor Time |   |        | Operations |  |           | Total  | 
|External revenues             |  | $                              | 31,600 |   |            | $ | 10,429 |            |  | $         | 1,258  |  |  | $ | 43,287 |  
|Intersegment revenues         |  |                                |       |   |            |   |       |            |  |           |       |  |  |   |       |  
|Depreciation and amortization |  |                                | 717    |   |            |   | 211    |            |  |           | 105    |  |  |   | 1,033  |  
|Operating income (loss)       |  |                                | (112   | ) |            |   | (1,054 | )          |  |           | 888    |  |  |   | (278   | )
|Goodwill (1)                  |  |                                | 7,205  |   |            |   | 2,511  |            |  |           | 5,073  |  |  |   | 14,789 |  
|All other assets              |  |                                | 46,957 |   |            |   | 11,199 |            |  |           | 11,853 |  |  |   | 70,009 |  

|                              |  |                                |        |   |            |   |   |            |  |           |       |  |  |   |        |  
|----------------------------- |  | ------------------------------ | ------ | - | ---------- | - | - | ---------- |  | --------- | ----- |  |  | - | ------ | -
|                              |  | 12 Weeks Ended January 4, 2002 |       
|                              |  |                                |       
|                              |  |                                |        |   |            |   |   |            |  | Franchise |       |  |  |   |       
|                              |  | Childtime                      |        |   | Tutor Time |   |   | Operations |  |           | Total | 
|External revenues             |  | $                              | 30,860 |   |            | $ |  |            |  | $         |      |  |  | $ | 30,860 |  
|Intersegment revenues         |  |                                |       |   |            |   |  |            |  |           |      |  |  |   |       |  
|Depreciation and amortization |  |                                | 1,047  |   |            |   |  |            |  |           |      |  |  |   | 1,047  |  
|Operating income (loss)       |  |                                | (753   | ) |            |   |  |            |  |           |      |  |  |   | (753   | )
|Goodwill                      |  |                                | 19,566 |   |            |   |  |            |  |           |      |  |  |   | 19,566 |  
|All other assets              |  |                                | 56,617 |   |            |   |  |            |  |           |      |  |  |   | 56,617 |  

|                              |  |                                |         |   |            |   |        |            |  |           |        |  |  |   |         |  
|----------------------------- |  | ------------------------------ | ------- | - | ---------- | - | ------ | ---------- |  | --------- | ------ |  |  | - | ------- | -
|                              |  | 40 Weeks Ended January 3, 2003 |        
|                              |  |                                |        
|                              |  |                                |         |   |            |   |        |            |  | Franchise |        |  |  |   |        
|                              |  | Childtime                      |         |   | Tutor Time |   |        | Operations |  |           | Total  | 
|External revenues             |  | $                              | 108,605 |   |            | $ | 20,916 |            |  | $         | 2,400  |  |  | $ | 131,921 |  
|Intersegment revenues         |  |                                |        |   |            |   |       |            |  |           |       |  |  |   |        |  
|Depreciation and amortization |  |                                | 2,207   |   |            |   | 369    |            |  |           | 210    |  |  |   | 2,786   |  
|Operating income (loss)       |  |                                | (9,601  | ) |            |   | (3,356 | )          |  |           | 1,939  |  |  |   | (11,018 | )
|Goodwill (1)                  |  |                                | 7,205   |   |            |   | 2,511  |            |  |           | 5,073  |  |  |   | 14,789  |  
|All other assets              |  |                                | 46,957  |   |            |   | 11,199 |            |  |           | 11,853 |  |  |   | 70,009  |  

|                              |  |                                |         |   |            |   |   |            |  |           |       |  |  |   |         |  
|----------------------------- |  | ------------------------------ | ------- | - | ---------- | - | - | ---------- |  | --------- | ----- |  |  | - | ------- | -
|                              |  | 40 Weeks Ended January 4, 2002 |        
|                              |  |                                |        
|                              |  |                                |         |   |            |   |   |            |  | Franchise |       |  |  |   |        
|                              |  | Childtime                      |         |   | Tutor Time |   |   | Operations |  |           | Total | 
|External revenues             |  | $                              | 109,202 |   |            | $ |  |            |  | $         |      |  |  | $ | 109,202 |  
|Intersegment revenues         |  |                                |        |   |            |   |  |            |  |           |      |  |  |   |        |  
|Depreciation and amortization |  |                                | 3,532   |   |            |   |  |            |  |           |      |  |  |   | 3,532   |  
|Operating income (loss)       |  |                                | (2,088  | ) |            |   |  |            |  |           |      |  |  |   | (2,088  | )
|Goodwill                      |  |                                | 19,566  |   |            |   |  |            |  |           |      |  |  |   | 19,566  |  
|All other assets              |  |                                | 56,617  |   |            |   |  |            |  |           |      |  |  |   | 56,617  |  

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

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NOTE 15  OPERATIONAL IMPROVEMENTS

The Company has continued to experience operating losses for the past six
quarters. As described in Note 7, the Company has not maintained minimum
consolidated EBITDA levels required by the Amended and Restated Credit
Agreement. The Company continues steps to improve the profitability of its
operations through pricing, more effective labor management and expense control
and efforts aimed at boosting enrollment. These measures resulted in
improvements in operating results for the third quarter, and have resulted in
additional improvements in operating results in the first period of the fourth
quarter.

NOTE 16  FINANCIAL INSTRUMENT

During third quarter 2003, the Company entered into an interest rate swap
contract to manage its exposure to fluctuations in interest rates relating to
the revolving line of credit. Swap contracts fix the interest payments of
floating rate debt instruments. As of January 3, 2003, a contract representing
$3.0 million of notional amount was outstanding with a maturity date of
November, 2005. This contract provides for the Company to pay interest at a
fixed rate of 3.02% in return for receiving interest at a floating rate of 3
month LIBOR, which is reset in three month intervals. The fair value of
interest rate swap agreements is subject to changes in value due to changes in
interest rates. During the 12 weeks ended January 3, 2003, the Company
recognized a loss of $46,000 as a result of a decline in the market value of
the outstanding interest rate contract.

NOTE 17  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 during the second quarter of 2003 and
recorded an impairment loss of $5.0 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.

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 $3.5 million during the second quarter of 2003.

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 adoption of SFAS No. 146 did not have
a material impact on the Company.

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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.

SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosurean amendment of FASB Statement No. 123 (Issued 12/02), was issued in
December 2002. This Statement amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported. SFAS No.
148 is not expected to have a material effect on the Companys condensed
financial statements.

In November 2002, the FASB released FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others: an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34.
FIN 45 establishes new disclosure and liability-recognition requirements for
direct and indirect debt guarantees with specified characteristics. The
initial measurement and recognition requirements of FIN 45 are effective
prospectively for guarantees issued or modified after December 31, 2002.
However, the disclosure requirements are effective for interim and annual
financial statement periods ending after December 15, 2002. The Company has
adopted the disclosure provisions, and management expects the full adoption of
FIN 45 will impact the way in which subleases and lease guarantees related to
franchise agreements entered into after December 31, 2002 will be accounted
for.




ITEM 2. Managements Discussion and Analysis

GENERAL

The information presented herein refers to the 12 weeks (third quarter 2003)
and the 40 weeks (year to date 2003) ended January 3, 2003, compared to the 12
weeks (third quarter 2002) and the 40 weeks (year to date 2002) ended January
4, 2002.

The results of Learning Centers opened, acquired or disposed of are included in
the Companys consolidated financial statements from the date of opening or
acquisition and through the date of disposition, except for those centers treated as discontinued operations in accordance with SFAS 144. The timing of
such new openings, acquisitions or dispositions could influence comparisons of
year over year results. These comparisons were particularly influenced by the
Companys acquisition of substantially all of the assets of Tutor Time Learning
Systems, Inc., a Florida Corporation (Tutor Time), on July 19, 2002.

During the third quarter 2003, the Company closed one Learning Center. The
Company closed two Learning Centers during the third quarter 2002. During year
to date 2003, the Company added 60 Learning Centers, which included the 58
Tutor Time Learning Centers acquired at the end of the first quarter of 2003,
closed eight and transferred two Learning Centers to franchisees. The Company
also closed nine centers, whose leases were rejected, as part of the Tutor Time
purchase transaction.

RESULTS OF OPERATIONS

Revenues, net. Net revenues for third quarter 2003 increased $12.4 million, or
40.3%, from the same period last year to $43.3 million. The increase was
primarily a result of additional revenues of $10.4 million contributed by Tutor
Time centers and $1.3 million contributed by Franchise Operations, both of
which were acquired at the end of first quarter 2003. Childtime center revenues
increased $0.7 million, with continuing center revenue increases of $1.3
million partially offset by the loss of revenues from closed centers of $0.6
million. Comparable Childtime center revenues, defined as centers opened 18
months or longer, increased $1.3 million or 4.2%. Net revenues for year to
date 2003 increased $22.7 million, or 20.8%, from the same period last year to
$131.9 million. The increase was the result of additional revenues of $20.9
million contributed by Tutor Time centers and $2.4 million contributed by
Franchise Operations. Childtime center revenues decreased $0.6 million, with
continuing center revenue increases of $1.9 million offset by the loss of
revenues from closed centers of $2.5 million. Comparable Childtime center
revenues increased $0.7 million or 0.7%.

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Revenues from closed centers relate to centers closed in fiscal 2002 or fiscal
2003 that are not considered discontinued operations under SFAS 144.

Operating expenses of Learning Centers.Operating expenses in third quarter
2003 increased $9.5 million, or 34.5%, from the same period last year to $37.1
million. The increase was a result of additional operating expenses of $10.0
million for Tutor Time centers, offset by a decrease of operating expenses of
$0.5 million for closed Childtime centers. Operating expenses for continuing
Childtime centers were unchanged for third quarter 2003, with increases in
personnel and occupancy costs offset by decreases in other center operating
expenses. Operating expenses as a percentage of Revenue from Learning Center
Operations decreased to 88.4% for third quarter 2003 from 89.5% from the same
period last year. The decrease was primarily attributable to the closing in
fiscal 2002 of unprofitable centers which were not included in discontinued
operations since they would not be considered under the scope of SFAS 144.
Operating expenses year to date 2003 increased $22.6 million, or 23.6%, from
the same period last year to $118.5 million. The increase was a result of
additional operating expenses of $21.2 million for Tutor Time centers and an
increase of operating expenses of $1.4 million for Childtime centers (a $3.7
million increase in continuing Childtime centers offset by a decrease from
closed centers of $2.3 million). The operating expenses increase for Childtime
centers was primarily in personnel, as pay increases  were implemented prior to
tuition price increases, and occupancy costs that rose with inflation on
comparable revenues. Year to date 2003 operating expenses as a percentage of
Revenue from Learning Center Operations increased to 91.5%, from 87.8% in the
same period last year. This increase was a result of higher operating costs in
second quarter 2003, primarily in the acquired Tutor Time centers, costs
incurred in center openings and closings, and higher personnel costs.

Gross profit. Gross profit in the third quarter 2003 increased $2.9 million,
or 89.7%, from the same period last year to $6.2 million.
The increase was attributable to $0.4 million contributed by Tutor Time
centers, $1.3 million contributed by Franchise Operations and $1.2 million
contributed by Childtime centers. Gross profit percentages for the third quarter 2003
by segment were 14.1% for Childtime centers (as compared to 10.5% for 2002),
16.4% for Tutor Time centers and 100.0% for Franchise Operations. The increase
in Childtime centers gross profit is attributable to increased continuing
center revenue of $1.3 million and the decrease of operating expenses of $0.5
million for closed centers, partially offset by the loss of revenues from
closed centers of $0.6 million. Gross profit for year to date 2003 increased $0.1
million, or 0.8%, from the same period last year to $13.4 million. The increase
was attributable to $2.4 million contributed by Franchise Operations offset by
($0.3) contributed by Tutor Time centers and ($2.0) contributed by
Childtime centers. Gross profit percentages for year to date 2003 by segment
were 10.3% for Childtime centers (as compared to 12.2% for 2002), 9.9% for
Tutor Time centers and 100.0% for Franchise Operations. The decrease in the
Childtime centers gross profit is attributable to decreased Childtime center revenues
and increased operating expenses primarily in personnel, as pay increases were
implemented prior to tuition price increases, and occupancy costs that rose
with inflation on comparable revenues.

Provision for doubtful accounts. Provision for doubtful accounts increased from
$0.2 million to $0.4 million in third quarter 2003 and decreased from $1.0
million to $0.9 million year to date 2003.

General and administrative expenses. General and administrative expenses in
third quarter 2003 increased $2.0 million, or 78.4%, from the same period last
year to $4.6 million. This increase was a result of $1.5 million of general and
administrative costs incurred by Tutor Time operations, $0.2 million for higher
costs associated with the establishment of regional offices, and compensation
arrangements associated with executive leadership. Year to date 2003 expenses
increased $4.0 million, or 47.6%, from the same period last year to $12.4
million. This increase was a result of $2.7 million of general and
administrative costs incurred by Tutor Time operations, $0.8 million for higher
costs associated with the establishment of regional offices, and compensation
arrangements associated with executive leadership.

Depreciation and amortization expense. Depreciation and amortization expense in
third quarter 2003 was $1.0 million, unchanged from the same period last year.
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
effective in fiscal 2003, goodwill is no longer amortized. This resulted in a
reduction of amortization expense of $0.4 million for the current quarter,
which was offset by depreciation and amortization of $0.3 million attributable
to the Tutor Time centers. Year to date 2003 expenses decreased $0.7 million
from the same period last year to $2.8 million. This was a result of a
reduction of amortization expense of $1.4 million for year to date 2003, which
was offset by depreciation and amortization of $0.7 million attributable to the
Tutor Time centers.

Exit and closure expenses. The Company instituted a restructuring program in
fiscal 2001 and incurred a charge of $4.0 million in March 2001. In this
regard, the Company closed all 10 of its Oxford Learning Centers of America and
identified 19 under-performing centers to be closed in fiscal 2002. As of
January 3, 2003, all but one of the under-performing centers have been closed.
Approximately 200 employees were involuntarily terminated in connection with
the closures of Oxford Learning Centers of America and the 19 under-performing
Childtime centers. For third quarter 2003, the Company recorded exit and
closure expenses of $0.4 million. This amount related to the closure of one
additional center, not included in the previous restructuring program. For year
to

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date 2003, the Company recorded exit and closure expenses of $1.1 million. Of
this amount, $0.7 million related to the closure of three additional centers
not included in the 2001 restructuring program. The remaining $0.4 million was
to increase reserves related to the 2001 restructuring program, as a result of
current real estate market conditions. During third quarter 2003, the Company
made cash payments of $243,000 related to lease termination costs and none
related to severance costs. During year to date 2003, the Company made cash
payments of $648,000 related to lease termination costs and $54,000 related to
severance costs.

Impairment charges. During year to date 2003, the Company incurred an expense
of $4.2 million as a result of an evaluation done under SFAS 142, Goodwill and
Other Intangible Assets. During year to date 2003, the Company incurred an
expense of $3.5 million, including $0.1 million in discontinued operations as a result of an evaluation done under SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. There were no
charges for these items in the same period last year.

Operating (loss). As a result of the foregoing changes, the Company incurred
operating losses of ($0.3) million for third quarter 2003 compared to operating
losses of ($0.8) million for the same period last year. The Company incurred
operating losses of ($11.0) million for year to date 2003 compared to operating
losses of ($2.1) million for the same period last year.

Interest expense. Interest expense for third quarter 2003 was $0.8 million
compared to $0.1 million for the same period last year. Interest expense for
year to date 2003 was $1.6 million compared to $0.3 million for the same period
last year. These increases were a result of indebtedness incurred in connection
with the acquisition of Tutor Time, partially offset by the reduction of
interest rates on variable rate indebtedness.

Income tax benefit.Income tax benefit for third quarter 2003 was $0.0 million
compared to $0.3 million for the same period last year. Income tax benefit for
year to date 2003 was $0.2 million compared to $0.9 million for the same period
last year. The effective tax rate was 0.0% for second quarter 2003 compared to
38.3% for the same period last year and 1.8% for year to date 2003 compared to
37.9% for the same period last year. The tax benefits and rates for both 2003
periods were reduced by valuation reserves.

Discontinued operations, net of taxes.Discontinued operations, net of taxes
for the third quarter 2003 was a loss of ($42,000) compared to a loss of
($22,000) for the same period last year. Discontinued operations, net for year
to date 2003 was ($578,000) compared to ($56,000) for the same period last
year. The additional losses for the quarter and year to date 2003 were a
result of lease termination costs and SFAS 142 and SFAS 144 impairments.

Cumulative effect of change in accounting principle.Year to date 2003 includes
an adjustment of $5.0 million as the cumulative effect of goodwill impairment
under SFAS 142, Goodwill and Other Intangibles. This amount was reduced by a
tax benefit of $0.9 million, which has been reduced by a valuation reserve.
There was no charge for this item in the same period last year.

Net loss. As a result of the foregoing changes, net loss increased to a net
loss of ($1.1) million for third quarter 2003 compared to a net loss of ($0.5)
million for the third quarter 2002. For year to date 2003, net loss was ($17.8)
million, compared to net a loss of ($1.6) million for year to date 2002.

LIQUIDITY AND CAPITAL RESOURCES

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

The Company maintains a $17.5 million secured revolving line of credit facility
entered into on January 31, 2002, as amended (see Note 7 of the Companys Notes
to Consolidated Financial Statements  unaudited). Outstanding letters of
credit reduced the availability under the line of credit in the amount of $2.6
million at January 3, 2003 and $1.8 million at March 29, 2002. Under this
agreement, the Company is required to maintain certain financial ratios and
other financial conditions. In addition, there are restrictions on the
incurrence of additional indebtedness, disposition of assets and
transactions with affiliates. At July 19, 2002 and at

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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 approved waivers to the Amended
and Restated Credit Agreement for financial results for the quarter ended
October 11, 2002. The Companys noncompliance with the required consolidated
EBITDA levels continued as of January 3, 2003. In February 2003, the Amended
and Restated Credit Agreement was further amended, among other things, to
revise the financial covenants for the quarters ended January 3 and March 28,
2003 and to shorten the maturity of the line of credit to July 31, 2003. The
Company is in compliance with the agreement, as amended.

The Company intends to extend and further amend this agreement prior to the
maturity date, but no assurance can be given that the Company will be
successful in doing so. Should the Company be unsuccessful in amending this
agreement, the Company would be in default of the agreement, unless alternative
financing could be obtained, and would not have sufficient funds to meet
operating obligations.

Net cash provided (used) by operating activities was ($2.6) million for year to
date 2003, compared to $0.2 million for the same period last year. During year
to date 2003, financing activities totaled $25.0 million and consisted
primarily of net borrowings on the revolving line of credit of $10.1 million,
the issuance of long-term debt of $14.0 million, and a $1.3 million increase in
drafts payable. This compared to financing activities of $3.5 million for the
same period last year, consisting primarily of net borrowings on the revolving
line of credit of $3.9 million offset by repayments under long term debt of
$0.9 million. Investing activities were ($24.5) million for year to date 2003, of
which ($21.6) million was associated with the purchase of Tutor Time, and ($3.4)
million was used for capital spending which was partially offset by $0.6
million of proceeds from asset sales. Investing activities were ($3.9) million
for the same period last year, and consisted primarily of ($3.4) million of
capital spending and ($1.0) million for reimbursable construction costs, offset
by $0.5 million from proceeds from the sale of assets. Net accounts receivable
increased to $10.7 for year to date 2003 from $5.2 million at March 29, 2002.
This increase was primarily due to the inclusion of Tutor Time Learning Centers
and Franchise Operations receivables.

On July 19, 2002, the Company acquired the assets of Tutor Time, for an
aggregate purchase price of approximately $22.8 million, including acquisition
costs, plus the assumption of certain liabilities. The assets acquired by the
Company consisted of substantially all of the operating assets and contract
rights used by Tutor Time in its child care operations, which were comprised of
198 company-owned and franchised child care centers operating in 23 states and
internationally, and were purchased to improve the range of the Companys
product offering and to enter the child care franchise business. The Tutor
Time acquisition was financed, in part, through the Companys $17.5 million
secured bank credit facility as well as the issuance of $14 million of
subordinated loans (the Subordinated Notes). The Subordinated Notes were
provided by a group of lenders organized by Jacobson Partners, to fund the
balance of the Tutor Time acquisition purchase price and to provide related
working capital. The Subordinated Notes mature December 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 which the Company has consummated the Rights
Offering (described 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 Amount). 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.

The Subordinated Notes are to be refinanced through a Rights Offering expected
to take place during the first half of calendar 2003. As currently
contemplated, 100,000 Rights Offering units (Units) will be offered,
consisting in the aggregate of $3.5 million in principal amount of subordinated
debentures and a number of shares of common stock that, based on the formula
described below, with the issuance of the new subordinated debentures, would
allow payment in full of the Subordinated Notes (including the Additional
Subordinated Notes) and all accrued and unpaid interest thereon. The
offering price per share of the common stock under the Rights Offering would be
the four-week volume-weighted average 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 volume-weighted average 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
volume-weighted average price, the offering price related to the common stock
portion of the Rights Offering will equal 110% of such one-week average closing
price. Subject to certain shareholder ownership requirements, all common
shareholders as of the Rights Offering record date will be able to participate
in the offering and will be allowed to acquire Units on a pro rata basis. The
subordinated debentures will bear interest at 15%, have a five-year maturity,
and be redeemable by the Company at any time at par, subject to restrictions
under its senior lending agreements. JP Acquisition Fund II, L.P., JP
Acquisition Fund III, L.P., funds controlled by Jacobson Partners and certain
of their co-investors, including Messrs. Jacobson, Morgan and Kellner
(directors of the Company), have provided a commitment to purchase all Units
not subscribed for in the Rights Offering up to

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an aggregate amount equal to the aggregate principal amount of the Subordinated
Notes (including the Additional Subordinated Notes) plus all accrued and unpaid
interest thereon (see Related Party Transactions below).

During third quarter 2003, the Company entered into an interest rate swap
contract to manage its exposure to fluctuations in interest rates relating to
the revolving line of credit. Swap contracts fix the interest payments of
floating rate debt instruments. As of January 3, 2003, a contract representing
$3.0 million of notional amount was outstanding with a maturity date of
November, 2005. This contract provides for the Company to pay interest at a
fixed rate of 3.02% in return for receiving interest at a floating rate of 3
month LIBOR, which is reset in three month intervals. The fair value of
interest rate swap agreements is subject to changes in value due to changes in
interest rates. During the 12 weeks ended January 3, 2003, the Company
recognized a loss of $46,000 as a result of a decline in the market value of
the outstanding interest rate contract.

Related Party Transactions

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

Operational Improvements

The Company continues steps to improve the profitability of its operations
through pricing, more effective labor management and expense control and
efforts aimed at boosting enrollment. These measures resulted in improvements
in operating results for the third quarter, and have resulted in additional
improvements in operating results in the first period of the fourth quarter.

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 of the
Companys Notes to Consolidated Financial Statements  unaudited). 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 is approximately $99.0 million
related to leases and $15.7 million related to guarantees. The leases have
durations from 1-20 years. The Company would be required to pay the related
lease obligations in the case of default by the franchisee. Should the Company
be required to make payments under these leases, it may assume obligations for
operating the center. Should the center not be economically viable, the
Company will make provision for the lease termination at that time. The
Company has taken over operations for a center previously operated by a
franchisee as a result of a default under the franchisees lease and intends to
continue to operate this center.

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.

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Critical Accounting Policies

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

For a description of the Companys significant accounting policies, see Note 3
 Summary of Significant Accounting Policies to the Consolidated Financial
Statements (unaudited), included in this report under Item 1. For a more
complete description, please refer to the Companys Annual Report on Form 10-K
for the fiscal year ended March 29, 2002.

SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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




ITEM 3. Quantitative and Qualitative Disclosures about Market Risks

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

Interest Rates

The Company has exposure to market risk for changes in interest rates related
to its debt obligations. The Company does not have cash flow exposure due to
rate changes on our 15% Subordinated Notes in the amount of $14 million at
January 3, 2003. The Company has cash flow exposure on the revolving line of
credit, with an outstanding balance of $12.6 million and its notes payable,
with an outstanding balance of $3.8 million as of January 3, 2003. Accordingly,
a 2% (200 basis points) change in the LIBOR rate or the prime rate would have
resulted in interest expense changing by approximately $0.1 and $0.3 million in
the third quarter and year to date 2003, respectively.

Foreign Currency Exchange Rates

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




Item 4. Controls and Procedures

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

Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms. Disclosure controls and procedures
include,

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without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

Information regarding this item is set forth in Note 8 to the Companys Notes
to Consolidated Financial Statements included in Part I, Item 1 of this Report.

Items 2-5.

Not applicable.

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

|     |  |                                                                                                                                             
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | Third Amendment to Amended and Restated Credit Agreement dated as of
February 14, 2003, between Childtime Childcare, Inc. and Bank One,
N.A.
|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                                                  

(b)  Reports on Form 8-K

|   |  |                                                                                                                                                                                                                      
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) |  | The Company filed a Current Report on Form 8-K on January 7, 2003,
announcing the results of its Special Meeting of Shareholders, held
December 17, 2002, and related events.                                        
|2) |  | The Company filed a Current Report on Form 8-K on February 10, 2003,
announcing the notification from Nasdaq of Nasdaqs determination to
continue listing of the Companys securities on The Nasdaq SmallCap
Market.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                            |  |                                  |  |                                      
|--------------------------- |  | -------------------------------- |  | -------------------------------------
|                            |  | CHILDTIME LEARNING CENTERS, INC.
|                            |  | (REGISTRANT)                    
|                            |  |                                  |  |                                      
|Date:     February 17, 2003 |  | By:                              |  | /s/ Frank M. Jerneycic               
|                            |  |                                  |  | Frank M. Jerneycic                   
|                            |  |                                  |  | Chief Financial Officer and Treasurer
|                            |  |                                  |  | (Duly Authorized Officer and         
|                            |  |                                  |  | Principal Financial Officer)         

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CERTIFICATIONS

I, William D. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: February 17, 2003 |  |                                                        
|                        |  |                                                        
|                        |  | /s/ William D. Davis                                   
|                        |  |                                                        
|                        |  | William D. Davis, President and
Chief Executive Officer

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CERTIFICATIONS

I, Frank M. Jerneycic, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: February 17, 2003 |  |                                                          
|                        |  |                                                          
|                        |  | /s/ Frank M. Jerneycic                                   
|                        |  |                                                          
|                        |  | Frank M. Jerneycic, Chief Financial Officer
and Treasurer

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EXHIBIT INDEX

|        |  |                                                                                                                                             
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                 
|        |  |                                                                                                                                             
|4.1     |  | Third Amendment to Amended and Restated Credit Agreement dated as
of February 14, 2003, between Childtime Childcare, Inc. and Bank
One, N.A.
|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                                                  

27