SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

              QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


For The Quarter Ended    April 30, 1997
                      -----------------

Commission File Number   0-16425
                      -----------------


                       SUNRISE EDUCATIONAL SERVICES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                               86-0532619
 ------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)


        9128 East San Salvador Road, Suite 200, Scottsdale, Arizona 85258
        -----------------------------------------------------------------
                    (Address of principal executive offices)


                                 (602) 860-1611
                 -----------------------------------------------
                 (Issuers telephone number, including area code)


              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate  by check  mark  whether  the  registrant  (1) has  filed  all  annual,
quarterly and other  reports  required to be filed by Section 13 or 15(d) of the
Securities  Exchange  Act of 1934  during the  preceding  12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to filing requirements for the past 90 days.

                                YES   X
                                    -----
                                NO
                                    -----

The number of shares of the  Company's  Common Stock  outstanding  as of May 30,
1997 1997 was 3,154,526 shares.
<PAGE>

                       SUNRISE EDUCATIONAL SERVICES, INC.

                                TABLE OF CONTENTS


                                                               Page
===================================================================

PART I FINANCIAL INFORMATION

     Item 1 Financial Statements

           Consolidated Balance Sheets
             April 30, 1997 and July 31, 1996                    3

           Consolidated Statements of Operations
             For the Nine Months and Three Months Ended
             April 30, 1997 and 1996                             4

           Consolidated Statements of Cash Flows
             For the Nine Months Ended
             April 30, 1997 and 1996                             5

           Notes to Consolidated Financial Statements            6

     Item 2 Management's Discussion and Analysis of Financial
       Condition and Results of Operations                       8


PART II OTHER INFORMATION

     Item 6 Exhibits and Reports on Form 8-K                    12

SIGNATURES                                                      13


                                       -2-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS

                Sunrise Educational Services, Inc. and Subsidiary
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                 April 30, 1997  July 31, 1996
==============================================================================================
                                    ASSETS                         (Unaudited)
<S>                                                                  <C>           <C>
Current Assets
  Cash and Cash Equivalents                                       $ 1,807,270   $ 2,630,616
  Accounts Receivable, net of allowance for doubtful accounts of
    $12,000 at April 30, 1997 and July 31, 1996                       621,273       387,775
  Prepaid Expenses                                                    268,418       149,458
  Deferred Tax Asset, current portion                                 138,000       138,000
  Inventory and Other Current Assets                                   33,962        27,094
----------------------------------------------------------------------------------------------
      Total Current Assets                                          2,868,923     3,332,943
Property and Equipment, net                                         1,647,053     1,386,687
Property and Equipment Held for Lease, net                            382,770       367,292
Deferred Tax Asset, net of current portion                            557,000       557,000
Note Receivable from Preschool Services, Inc.                         256,251       256,251
Intangible Assets, net                                              1,298,610       733,519
Deposits and Other Assets                                             347,599       363,340
----------------------------------------------------------------------------------------------
  Total Assets                                                    $ 7,358,206   $ 6,997,032
==============================================================================================
                     LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Line of Credit                                                  $   161,717   $   100,000
  Accounts Payable                                                    138,500       272,519
  Accrued Expenses                                                    645,715       385,036
  Dividends Payable on Preferred Stock                                 44,367        44,367
  Notes Payable and Capital Leases, current portion                   217,353       133,415
  Accrued Rental Reserve, current portion                             247,555       292,000
  Deferred Rent, current portion                                      163,000       155,982
  Deferred Gain on Sale and Leaseback of Preschool Facilities,
    current portion                                                    45,003        45,003
----------------------------------------------------------------------------------------------
      Total Current Liabilities                                     1,663,210     1,428,322
----------------------------------------------------------------------------------------------
Notes Payable and Capital Leases, net of current portion              765,355       504,654
----------------------------------------------------------------------------------------------
Accrued Rental Reserve, net of current portion                           --         126,000
----------------------------------------------------------------------------------------------
Deferred Rent, net of current portion                                 252,494       304,058
----------------------------------------------------------------------------------------------
Deferred Gain on Sale and Leaseback of Preschool Facilities, net
     of current portion                                                53,896        87,648
----------------------------------------------------------------------------------------------
Shareholders' Equity
  Preferred Stock, $1 par value - 1,000,000 shares authorized,
    857,333 shares issued and outstanding                             857,333       857,333
  Common Stock, $.01 par value - 10,000,000 shares authorized,
    3,154,526 and 2,982,968 shares issued and outstanding              31,545        29,830
    at April 30, 1997 and July 31, 1996 respectively
  Paid-in Capital                                                   7,849,031     7,609,553
  Accumulated Deficit                                              (4,114,658)   (3,950,366)
----------------------------------------------------------------------------------------------
      Total Shareholders' Equity                                    4,623,251     4,546,350
----------------------------------------------------------------------------------------------
         Total Liabilities and Shareholders' Equity               $ 7,358,206   $ 6,997,032
==============================================================================================
</TABLE>
The accompanying  footnotes are an integral part of these consolidated financial
statements.
                                       -3-
<PAGE>
                Sunrise Educational Services, Inc. and Subsidiary
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
                                        For the Nine Months         For the Three Months
                                          Ended April 30,             Ended April 30,
                                     -------------------------   -------------------------
                                        1997           1996          1997        1996
==========================================================================================
<S>                                 <C>           <C>           <C>           <C>        
Operating Revenue                    $ 9,916,217   $ 7,420,994   $ 3,573,363   $ 2,681,233
Operating Expenses
     Payroll                           4,912,098     3,612,407     1,694,933     1,287,090
     Facilities and Maintenance        3,510,622     2,728,490     1,244,956       941,037
     General and Administrative        1,367,432     1,044,280       461,762       387,597
------------------------------------------------------------------------------------------
         Total Operating Expenses      9,790,152     7,385,177     3,401,651     2,615,724
------------------------------------------------------------------------------------------
Income from Operations                   126,065        35,817       171,712        65,509
Non-operating Income (Expense)
     Interest Income (Expense), net       (1,469)       47,684       (10,091)       42,019
     Other Income (Expense), net         110,412         2,771        70,786          (329)
------------------------------------------------------------------------------------------
         Total Non-operating Income      108,943        50,455        60,695        41,690
------------------------------------------------------------------------------------------
Net Income                           $   235,008   $    86,272   $   232,407   $   107,199
==========================================================================================
Net Income (Loss) Available for
   Common Stock                      $  (164,292)  $  (120,466)  $    99,307   $   (24,710)
==========================================================================================
Net Income (Loss) per Common
   Share and Common Share 
   Equivalent (Note 2)
     Primary                         $     (0.05)  $     (0.04)  $      0.03   $     (0.01)
==========================================================================================
Weighted Average Number of
   Common Shares and Common
   Equivalent Shares Outstanding
     Primary                           3,025,482     2,965,725     3,182,424     2,982,968
==========================================================================================
</TABLE>

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

                                      -4-
<PAGE>
                Sunrise Educational Services, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                             For the Nine Months
                                                                               Ended April 30,
                                                                            ---------------------
                                                                             1997          1996
=================================================================================================
<S>                                                                     <C>           <C>        
Cash Flows from Operating Activities
  Net Income                                                         $   235,008   $    86,272
  Adjustments to Reconcile Net Income to
    Net Cash Provided by (Used in) Operating Activities
      Depreciation and Amortization                                      505,820       243,864
      Amortized Gain on Sale of Real Estate                              (33,752)      (33,752)
      Deferred Rent                                                      (44,546)      (53,252)
      Provision for Doubtful Accounts                                     69,527        55,977
      Gain on Disposal of Property and Equipment                         (43,185)       (3,100)
      Gain on Refinancing                                                (67,227)         --
      Changes in Assets and Liabilities, net of effect of
       businesses acquired:
         Increase in Accounts Receivable                                (303,025)     (143,510)
         Increase in Prepaid Expenses                                   (118,960)      (78,527)
         Increase in Inventory and Other Current Assets                   (6,868)      (16,309)
         (Increase) Decrease in Deposits and Other Assets                 15,741      (257,065)
         Increase (Decrease) in Accounts Payable                        (134,019)       37,566
         Increase in Accrued Expenses                                    260,679       129,092
         Decrease in Accrued Rental Reserve                             (170,445)         --
----------------------------------------------------------------------------------------------
             Total Adjustments                                           (70,260)     (119,016)
----------------------------------------------------------------------------------------------
                Net Cash Provided by (Used in) Operating Activities      164,748       (32,744)
----------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
  Acquisition of Child Care Centers                                     (494,264)     (537,199)
  Registration of New Tradenames                                         (17,555)         --
  Purchases of Property and Equipment                                   (695,113)     (500,623)
  Proceeds from Disposal of Property and Equipment                       328,362         8,000
----------------------------------------------------------------------------------------------
      Net Cash Used in Investing Activities                             (878,570)   (1,029,822)
----------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
  Proceeds from Exercise of Warrants                                        --          40,404
  Proceeds from Sale of Preferred Stock                                     --       4,339,675
  Payment of Dividends                                                  (158,107)     (428,205)
  Proceeds from Notes Payable                                          1,113,658       140,736
  Borrowings on Lines of Credit                                           61,717          --
  Payments on Notes Payable and Capital Leases                        (1,126,792)     (111,029)
----------------------------------------------------------------------------------------------
      Net Cash Provided by (Used in) Financing Activities               (109,524)    3,981,581
-------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents                    (823,346)    2,919,015

Cash and Cash Equivalents, beginning of period                         2,630,616       581,311
----------------------------------------------------------------------------------------------
Cash and Cash Equivalents, end of period                             $ 1,807,270   $ 3,500,326
==============================================================================================
Supplemental Disclosure of Cash Flow Information
  Cash Paid During the Period for Interest                           $    41,222   $    23,290
  Payment of Stock Dividends                                             241,193          --
  Note Payable Issued for Acquisition of Child Care Centers              425,000          --
==============================================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -5-
<PAGE>
                Sunrise Educational Services, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 April 30, 1997
                                   (Unaudited)

1.   BASIS OF PRESENTATION
--------------------------------------------------------------------------------
     The fiscal  year of Sunrise  Educational  Services,  Inc.  (the  "Company")
     consists  of eight  four-week  periods  and four  five-week  periods.  Each
     quarter of the Company's fiscal year consists of two four-week  periods and
     one  five-week  period.  The  Company's  fiscal  year ends on the  Saturday
     nearest  July 31 of each year,  and the third  quarter ends on the Saturday
     nearest April 30. However, for clarity of presentation, all information has
     been  presented  as if the third  quarter  ended on April 30 and the fiscal
     year ended on July 31.

     The consolidated financial statements included herein have been prepared by
     the Company  without  audit  pursuant to the rules and  regulations  of the
     Securities  and  Exchange  Commission.  In the opinion of  Management,  the
     accompanying   interim  financial   statements   reflect  all  adjustments,
     consisting  only of normal  recurring  adjustments,  necessary  to  present
     fairly the Company's  financial  position and its results of operations and
     cash flows for the nine month and three month  periods ended April 30, 1997
     and 1996.

     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or omitted.  It is  suggested  that these
     interim financial statements be read in conjunction with the Company's 1996
     Annual  Report on Form 10-KSB.  The results of  operations  for the interim
     periods are not  necessarily  indicative  of the results to be expected for
     the complete fiscal year.

     The  consolidated  financial  statements  include  the  accounts of Sunrise
     Educational Services, Inc. and Sunrise Preschools Hawaii, Inc.


2.   NET INCOME (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENT
--------------------------------------------------------------------------------
     Primary net income  (loss) per share is  computed  by  dividing  net income
     (loss) available for common stock (net income (loss) less dividends accrued
     during the period on Series B and Series C Preferred Stock) by the weighted
     average  number of common shares and common share  equivalents  outstanding
     during the period.  Shares  issuable  upon the  exercise  of  warrants  and
     employee stock options that are considered antidilutive are not included in
     the weighted  average number of common shares and common share  equivalents
     outstanding.  Fully  dilluted  net income  (loss) per share is not included
     because the calculation is antidillutive.

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting  Standards  No. 128  "Earnings  Per Share"  ("SFAS
     128"). SFAS 128 is effective for financial  statements for both interim and
     annual  periods  ending  after  December  15,  1997.  SFAS 128 replaces the
     current  presentation  of earnings  per share with a dual  presentation  of
     Basic  Earnings  per share  ("Basic  EPS") and diluted  Earnings  per Share
     ("Diluted EPS"). the company does not believe that the adoption of SFAS 128
     will have a  material  impact on its  financial  condition  or  results  of
     operations.

3.   INCOME TAXES
--------------------------------------------------------------------------------
     The Company  accounts  for income  taxes in  accordance  with  Statement of
     Financial Accounting Standards No. 109, Accounting for Income Taxes.

     As of July 31, 1996, net operating loss carryforwards totaled approximately
     $2,177,000, and expire through the year 2011. Accordingly,  income taxes on
     income  generated during the nine month and three month periods ended April
     30,  1997 and 1996 have been offset by the  available  net  operating  loss
     carryforwards.
                                      -6-
<PAGE>

4.   Acquisitions
--------------------------------------------------------------------------------
     On August 22, 1996, the Company  purchased the operations of four preschool
     centers in the Phoenix,  Arizona  metropolitan area. The consideration paid
     by the Company in connection with this  acquisition was $775,000,  of which
     $350,000 was paid at the closing of the  purchase on August 22,  1996,  and
     $425,000 was a note  payable.  The purchase of these  centers was accounted
     for as a purchase in accordance  with Accounting  Principles  Board Opinion
     No. 16. Pro forma  information  for the nine month  periods ended April 30,
     1997 and 1996 follows:

               Sunrise Educational Services, Inc. and Subsidiary
          Unaudited Pro Forma Condensed Consolidated Income Statements
                For the Nine Months Ended April 30, 1997 and 1996
                      (In thousands, except per share data)


                                                    1997        1996
                                                  ------------------

     Operating Revenues                           10,030       8,446

     Operating Expenses                            9,882       8,214
                                                  ------       -----
     Income from Operations                          148         232

     Non-operating Income (Expense)                  106          26
                                                  ------       -----
              Net Income                             254         258
                                                  ======       =====
              Net Income (Loss) Available for
                 Common Stock                       (145)         52
                                                  ======       =====
              Net Income (Loss) per Common
                 Share and Common Share
                 Equivalent                        (0.05)       0.02
                                                  ======       =====
              Average Shares Outstanding           3,025       2,966
                                                  ======       =====



                                      -7-
<PAGE>

               Sunrise Educational Services, Inc. and Subsidiary
           Unaudited Pro Forma Condensed Consolidated Income Statement
                    For the Nine Months Ended April 30, 1997
                      (In thousands, except per share data)


                                     Historical
                                 ------------------
                                            Selling    Pro Forma     Pro Forma
                                 Sunrise    Parties  Adjustments(1)   Combined
                                 -------    -------  --------------   --------
Operating Revenues               $9,916      $114       $ --          $10,030

Operating Expenses                9,790       100         (8)           9,882
                                 ------      ----       ----          -------

Income from Operations              126        14          8              148

Non-operating Income (Expense)      109        --         (3)             106
                                 ------      ----       ----          -------

  Net Income                     $  235      $ 14       $  5          $   254
                                 ======      ====       ====          =======
  Net Income  (Loss) Available
     for Common Stock            $ (164)                              $  (145)
                                 ======                               =======
  Net Income (Loss) per Common
     Share and Common Share
     Equivalent                  $(0.05)                              $ (0.05)
                                 ======                               =======

  Average Shares Outstanding      3,025                                 3,025
                                 ======                               =======

(1)  Pro forma  adjustments  to the unaudited pro forma  condensed  consolidated
     income  statements  consisted  of reducing  payroll  costs by the amount of
     salaries paid to the seller,  increasing  facilities and maintenance  costs
     for depreciation  and  amortization of the acquired assets,  and increasing
     interest expense for the note payable.


                                      -8-
<PAGE>


4.   ACQUISITIONS (CONTINUED)
================================================================================

               Sunrise Educational Services, Inc. and Subsidiary
           Unaudited Pro Forma Condensed Consolidated Income Statement
                    For the Nine Months Ended April 30, 1996
                      (In thousands, except per share data)


                                     Historical
                                 -------------------
                                            Selling     Pro Forma      Pro Forma
                                 Sunrise    Parties    Adjustments(1)  Combined
                                 -------    -------    --------------  --------
Operating Revenues               $7,421     $1,025         $ --          $8,446

Operating Expenses                7,385        904          (75)          8,214
                                 ------     ------         ----          ------

Income from Operations               36       121            75             232

Non-operating Income (Expense)       50        --           (24)             26
                                 ------     -----          ----          ------

  Net Income                     $   86     $ 121          $ 51          $  258
                                 ======     =====          ====          ======
  Net Income Available for
     Common Stock                $ (120)                                 $   52
                                 ======                                  ======
  Net Income per Common
     Share and Common Share
     Equivalent                   (0.04)                                  0.02
                                =======                                =======

  Average Shares Outstanding      2,966                                  2,966
                                =======                                =======

(1)  Pro forma  adjustments  to the unaudited pro forma  condensed  consolidated
     income  statements  consisted  of reducing  payroll  costs by the amount of
     salaries paid to the seller,  increasing  facilities and maintenance  costs
     for depreciation  and  amortization of the acquired assets,  and increasing
     interest expense for the note payable.

                                      -9-
<PAGE>


ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS
================================================================================
On April 30, 1997, the Company  operated 36 child care centers versus 29 centers
as of April 30, 1997, 1996. The increase in the number of centers was the result
of the Company  purchasing  the  operations  of five centers in Arizona (four of
which were previously operating and one of which was newly opened),  opening one
newly constructed center in Arizona, and assuming management of one newly opened
center in  Wisconsin.  During the first nine months of fiscal 1996,  the Company
purchased the operations of three centers in Colorado and one center in Arizona.

NINE MONTHS ENDED APRIL 30, 1997 (FIRST NINE MONTHS OF FISCAL 1997) COMPARED TO
NINE MONTHS ENDED APRIL 30, 1996 (FIRST NINE MONTHS OF FISCAL 1996)
--------------------------------------------------------------------------------
OPERATING  REVENUE -- Operating revenue for the first nine months of fiscal 1997
was  $9,916,217 an increase of  $2,495,223,  or 33.6% from revenue of $7,420,994
for the first nine months of fiscal 1996. Of this  increase,  $2,262,818 was due
to the  inclusion  of revenues of the acquired  and newly  opened  centers,  and
$232,405 was due to a 3.2%  increase in  same-center  revenues.  The increase in
same-center revenues was due to a moderate tuition increase, but was offset by a
large decrease in child  attendance  during the Christmas and New Year's holiday
periods.  Due to the timing of the holidays  this year (both  Christmas  and New
Year's fell on  Wednesdays),  many children were absent from the centers for the
entire  holiday  weeks  rather  than for just one or two days  each  week.  This
decrease in attendance had a significant  negative impact on revenues during the
holiday  period.  Revenues at three  of the  acquired  centers  were  negatively
impacted by a change in the regulations for  reimbursement  for food costs under
the USDA Food Program.  This change  resulted in Food Program  revenues at these
centers being approximately $75,000 lower than they would have been otherwise.

OPERATING  EXPENSES --  Operating  expenses  for the first nine months of fiscal
1997 were $9,790,152 (98.7% of operating revenue),  an increase of $2,404,975 or
32.6% from operating expenses of $7,385,177 (99.5% of operating revenue) for the
first nine months of fiscal 1996. Of this  increase,  $2,257,007  was due to the
acquired and newly opened centers.  The remaining  increase was due to increases
in payroll and general and administrative costs,  partially offset by a decrease
in facilities and maintenance expenses.

     PAYROLL -- Payroll  expense  for the first nine  months of fiscal  1997 was
     $4,912,098  (49.5% of operating  the  acquired  and newly  opened  centers,
     $51,052 was for  additional  corporate  staff added in connection  with the
     Company's  expansion  program,  and $92,981 was for  increased  same-center
     salaries due to slightly higher average salaries.

     FACILITIES  AND  MAINTENANCE -- Facilities  and  maintenance  costs for the
     first  nine  months of  fiscal  1997 were  $3,510,622  (35.4% of  operating
     revenue),  an increase of $782,132 or 28.7% from facilities and maintenance
     costs of  $2,728,490  (36.8% of  operating  revenue)  during the first nine
     months of fiscal  1996.  This  increase  was due to $820,308 in  additional
     costs at the acquired and newly  opened  centers,  an increase in equipment
     lease expense of $70,763, and an increase in amortization of $81,108. These
     increases were offset by a $121,620 decrease in rent expense, a decrease in
     cleaning and  maintenance  services costs of $57,740 due to a change in the
     contractor  used  by  the  Company  to  provide  cleaning  and  maintenance
     services,  and a decrease  in other  facilities  and  maintenance  costs of
     $10,687.
                                      -10-
<PAGE>

NINE MONTHS ENDED APRIL 30, 1997 (FIRST NINE MONTHS OF FISCAL 1997)  COMPARED TO
NINE MONTHS ENDED APRIL 30, 1996 (FIRST NINE MONTHS OF FISCAL 1996) (CONTINUED)
--------------------------------------------------------------------------------
     In the first nine months of fiscal 1996, rent expense included  $140,007 of
     deferred sublease payments payable by Preschool Services,  Inc. ("PSI"). In
     the fourth  quarter of fiscal 1996,  the Company  established a reserve for
     rental  commitments  related to the  remaining  lease  payments due by PSI.
     Future unpaid sublease payments are offset against this reserve rather than
     being charged to rent expense.  This resulted in a decrease in rent expense
     in the first nine months of fiscal 1997 of $140,007, partially offset by an
     increase of $18,387 in same-center  rents due to moderate rent increases at
     several of the centers.

     GENERAL AND  ADMINISTRATIVE -- General and administrative  expenses for the
     first  nine  months of  fiscal  1997 were  $1,367,432  (13.8% of  operating
     revenue),   an  increase  of   $323,152,   or  30.9%,   from   general  and
     administrative  expenses of $1,044,280 (14.1% of operating  revenue) during
     the first  nine  months of fiscal  1996.  Of this  increase,  $281,041  was
     attributable  to the  acquired  and  newly  opened  centers.  In  addition,
     advertising  costs  increased  $67,805 due to  continuance of a multi-media
     advertising  program  into the Fall,  and higher  yellow  pages  costs as a
     result of the new  centers.  This was  partially  offset by a  decrease  of
     $57,660 in  insurance  costs.  The  remaining  increase was due to moderate
     increases  in  other  general  and  administrative  costs  such  as  office
     supplies, professional fees and bank charges.

OTHER  INCOME -- Other  income  included  a gain of  $67,227  as a result of the
Company's refinancing of debt.

NET INCOME -- Net income for the first nine months of fiscal  1997 was  $235,008
compared  to net income of $86,272  for the first  nine  months of fiscal  1996,
primarily  due to improved  same-center  operations  and the  reduction  in rent
expense, partially offset by lower child attendance during the Christmas and New
Year's holiday periods.

THREE MONTHS ENDED APRIL 30, 1997  (THIRD  QUARTER OF FISCAL 1997)  COMPARED TO
THREE MONTHS ENDED APRIL 30, 1996 (THIRD QUARTER OF FISCAL 1996)
--------------------------------------------------------------------------------
OPERATING  REVENUE -- Operating revenue for the third quarter of fiscal 1997 was
$3,573,363,  an increase of $892,130 or 33.3% from revenue of $2,681,233 for the
third  quarter  of  fiscal  1996.  Of  this  increase,  $847,698  was due to the
inclusion of revenues of the acquired and newly opened centers,  and $44,432 was
due to a 1.8%  increase  in  same-center  revenues  due  to a  moderate  tuition
increase.  Revenues at three of the acquired centers were negatively impacted by
a change in the regulations for reimbursement for food costs under the USDA Food
Program.  This change  resulted in Food Program  revenues at these centers being
approximately $25,000 lower than they would have been otherwise.

OPERATING  EXPENSES -- Operating  expenses for the third  quarter of fiscal 1997
were $3,401,651 (95.2% of operating  revenue),  an increase of $785,927 or 30.0%
from operating expenses of $2,615,724 (97.6% of operating revenue) for the third
quarter of fiscal  1996.  This  increase was due to $787,315 at the acquired and
newly opened  centers.  This was  partially  offset by a decrease in general and
administrative costs.

     PAYROLL  --  Payroll  expense  for the third  quarter  of  fiscal  1997 was
     $1,694,933  (47.4% of  operating  revenue),  an increase  of $407,843  from
     payroll  expense of $1,287,090  (48.0% of operating  revenue) for the third
     quarter of fiscal 1996. Of this increase,  $399,813 was due to the acquired
     and newly opened centers. The remaining $8,030 increase was due to slightly
     higher  average  salaries and higher  corporate  costs due to the Company's
     expansion program.
                                      -11-
<PAGE>

THREE  MONTHS ENDED APRIL 30, 1997 (THIRD  QUARTER OF FISCAL  1997)  COMPARED TO
THREE MONTHS ENDED APRIL 30, 1996 (THIRD QUARTER OF FISCAL 1996) (CONTINUED)
--------------------------------------------------------------------------------
     FACILITIES  AND  MAINTENANCE -- Facilities  and  maintenance  costs for the
     third quarter of fiscal 1997 were $1,244,956 (34.8% of operating  revenue),
     an increase of $303,919 or 32.3% from facilities and  maintenance  costs of
     $941,037  (35.1% of operating  revenue)  during the third quarter of fiscal
     1996.  This increase was due to $296,107 in increased costs at the acquired
     and newly  opened  centers,  an  increase  in  equipment  lease  expense of
     $32,987,  and an increase in amortization of $28,497.  These increases were
     partially  offset by a $32,229  decrease in rent  expense and a decrease in
     other facilities and maintenance costs (primarily building  maintenance and
     cleaning expenses) of $21,443.

     In the third  quarter of fiscal  1996,  rent  expense  included  $42,426 of
     deferred  sublease payments payable by PSI. In the fourth quarter of fiscal
     1996, the Company  established a reserve for rental commitments  related to
     the remaining lease payments due by PSI.  Future unpaid  sublease  payments
     are offset  against this reserve rather than being charged to rent expense.
     This  resulted in a decrease in rent expense in the third quarter of fiscal
     1997 of $42,426,  partially offset by an increase of $10,197 in same-center
     rents due to moderate rent increases at several of the centers.

     GENERAL AND  ADMINSTRATIVE -- General and  administrative  expenses for the
     third quarter of fiscal 1997 were $461,762 (12.9% of operating revenue), an
     increase of $74,165 or 19.1% from  general and  administrative  expenses of
     $387,597  (14.5% of  operating  revenue)  during the first three  months of
     fiscal 1996. This increase was  attributable to $91,395 at the acquired and
     newly opened  centers,  partially  offset by decreases in other general and
     administrative costs such as insurance.

OTHER  INCOME -- Other  income  included  a gain of  $67,227  as a result of the
Company's refinancing of debt.

NET  INCOME -- Net  income for the third  quarter  of fiscal  1997 was  $232,407
compared  to net  income of  $107,199  for the  third  quarter  of fiscal  1996,
primarily due to the profitability of the acquired and newly opened centers.

TRENDS
--------------------------------------------------------------------------------
Due to a moderate  October tuition  increase and continued  tight  management of
costs,  same-center  operating  results  continued  to  improve  over last year.
Operations  at the  company's  two newly opened  centers  continue to improve as
these  centers  move  through  their  initial   "ramp-up"  phase.  In  addition,
profitability   should  improve  as  the  acquired  centers  become  more  fully
integrated into the Company.

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------
Net cash provided by operating  activities  for first nine months of fiscal 1997
was $164,748.  Cash was sufficient to meet the normal operating  requirements of
the Company. Due to the Company's purchase of four child care centers in August,
1996,  and  amounts  spent to upgrade the  existing  equipment  at the  acquired
centers as well as to equip the newly opened centers,  working capital decreased
by $739,713, from $1,904,621 at July 31, 1996 to $1,205,713 at April 30, 1997.

Net cash used in investing  activities was $878,570,  consisting of purchases of
property  and  equipment  totaling  $695,113,  $494,264 in costs  related to the
centers  acquired by the Company in August,  and $17,555  spent to register  the
Company's  new trade  name.  These uses were  partially  offset by  $328,362  in
proceeds,  primarily  from the sale and  leaseback of a portion of the equipment
purchased over the past nine months.

                                      -12-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
--------------------------------------------------------------------------------
Net cash used in financing  activities  was $109,524.  As a result of new credit
facilities with its bank, the Company refinanced all of its outstanding  capital
leases and notes payable to obtain a more favorable  average interest rate. As a
result, proceeds from notes payable totaled $1,113,658,  offset by $1,126,792 in
repayments to retire the Company's  previously  outstanding debt. Net borrowings
on the Company's  seasonal working capital credit facility totaled $61,717,  and
payment of dividends on Series B and C Preferred Stock were $158,107.  Dividends
payable on Series B and C Preferred Stock as of April 30, 1997 were $44,367.

The  Company is current on all  principal  and  interest  payments  on its notes
payable  and  capital  leases.  The  Company  has four  lines of credit  with a
financial  institution  totaling  $3,000,000:  1) a $500,000  revolving  working
capital line, bearing interest at prime (8.25% at April 30, 1997) plus 1.50%; 2)
a  $500,000  nonrevolving  line of  credit  for the  purchase  of  vehicles  and
equipment,  bearing  interest at prime plus 1.75%; 3) a $1,000,000  nonrevolving
line of credit  for  acquisition  financing:  and 4) a  $1,000,000  term loan to
refinance the  Company's  existing  notes payable and capital  leases at a more
favorable  average  interest rate. These lines of credit are renewable each year
on April 30, and are secured by the Company's  accounts  receivable,  inventory,
furniture, vehicles and equipment.

The Company  currently expects that it will be able to renew the lines of credit
under similar terms upon their maturity in April of 1998.  However, if the lines
of credit are not renewed,  there is no assurance that they can be replaced.  If
the Company  were unable to renew or replace  these lines of credit and was then
unable  to repay  any  outstanding  balance,  the bank  could  foreclose  on the
collateral.

The  Company  plans to open  several  additional  centers in the Summer and Fall
1997. Under current plans, one of these centers will be an on-site center at the
corporate  headquarters  of Swift  Transportation  Company,  Inc.  The other new
centers to be opened by the Company will be constructed by a third party and the
Company  will  then  enter  into long term  leases  for the land and  buildings.
Preopening  costs of a center  normally  range between  $90,000 and $110,000 per
center.  Management  expects cash generated from operations and cash on hand to
be  sufficient  to satisfy  the needs at its  existing  schools  for the next 12
months and to open the new centers as planned.

The Company is also considering  various additional  acquisitions of established
child care centers  operated in the  southwestern  United States,  as well as in
other  geographic  areas.  The  Company  intends to finance  these  acquisitions
through a combination of cash and long-term notes.


                                      -13-
<PAGE>

PART II OTHER INFORMATION


Items 1 - 5  Not applicable

Item  6      Exhibits and Reports on Form 8-K

             (a)  Exhibits

                  Exhibit 11 - Statement Re: Computation of per share earnings

                  Exhibit 27 - Financial Data Schedule

             (b)  Reports on Form 8-K

                  There were no reports on Form 8-K filed  during the  quarter
                  ended April 30, 1997.



                                      -14-
<PAGE>


                                   SIGNATURES


In accordance with the  requirements of the Securities and Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                       SUNRISE EDUCATIONAL SERVICES, INC.



Date: May 30, 1997         By: /s/ James R. Evans
     --------------           -----------------------------------
                               James R. Evans
                               Chairman of the Board of Directors
                               and President (Principal Executive
                               Officer)



     Signature                     Capacity                          Date
     ---------                     --------                          ----

/s/ Barbara L. Owens           Executive Vice President          May 30, 1997
---------------------------    (Principal Financial Officer,
    Barbara L. Owens           Principal Accounting Officer)

                                      -15-