SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

FOR QUARTER ENDED January 31, 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
                                 --------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


                            SUNRISE PRESCHOOLS, INC.
                            ------------------------
              (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 February
28, 1997 was 3,075,871 shares.


<PAGE>

                       SUNRISE EDUCATIONAL SERVICES, INC.

                                TABLE OF CONTENTS


                                                                         Page
--------------------------------------------------------------------------------
PART I    FINANCIAL INFORMATION

          Item 1 Financial Statements

                  Consolidated  Balance  Sheets
                   January 31, 1997 and July 31, 1996                      3

                  Consolidated Statements of Operations
                   For the Six Months and Three Months Ended
                   January 31, 1997 and 1996                               4

                  Consolidated Statements of Cash Flows
                   For the Six Months Ended
                   January 31, 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 4 Submission of Matters to a Vote of Security Holders      12

          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>
                                                                 JANUARY 31, 1997  JULY 31, 1996
------------------------------------------------------------------------------------------------
                                                                   (Unaudited)
                                     ASSETS
<S>                                                                  <C>            <C>
Current Assets
  Cash and Cash Equivalents                                          $ 1,536,494    $ 2,630,616
  Accounts Receivable, net of allowance for doubtful accounts of
    $8,000 at January 31, 1997 and $12,000 at July 31, 1996              600,777        387,775
  Prepaid Expenses                                                       272,418        149,458
  Deferred Tax Asset, current portion                                    138,000        138,000
  Inventory and Other Current Assets                                      34,579         27,094
-----------------------------------------------------------------------------------------------
     Total Current Assets                                              2,582,268      3,332,943
Property and Equipment, net                                            1,654,700      1,386,687
Property and Equipment Held for Lease, net                               358,845        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                                                 1,309,552        733,519
Deposits and Other Assets                                                272,729        363,340
-----------------------------------------------------------------------------------------------
     Total Assets                                                    $ 6,991,345    $ 6,997,032
===============================================================================================
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Line of Credit                                                     $   150,000    $   100,000
  Accounts Payable                                                       149,092        272,519
  Accrued Expenses                                                       455,398        385,036
  Dividends Payable on Preferred Stock                                    44,367         44,367
  Notes Payable and Capital Leases, current portion                      236,682        133,415
  Accrued Rental Reserve, current portion                                145,904        292,000
  Deferred Rent, current portion                                         151,640        155,982
  Deferred Gain on Sale and Leaseback of Preschool Facilities,
    current portion                                                       45,003         45,003
-----------------------------------------------------------------------------------------------
     Total Current Liabilities                                         1,378,086      1,428,322
-----------------------------------------------------------------------------------------------
Notes Payable and Capital Leases, net of current portion                 757,613        504,654
-----------------------------------------------------------------------------------------------
Accrued Rental Reserve, net of current portion                           126,000        126,000
-----------------------------------------------------------------------------------------------
Deferred Rent, net of current portion                                    261,152        304,058
-----------------------------------------------------------------------------------------------
Deferred Gain on Sale and Leaseback of Preschool Facilities, net
  of current portion                                                      65,147         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,
    3,075,871 and 2,982,968 shares issued and outstanding                 30,759         29,830
  Paid-in Capital                                                      7,729,220      7,609,553
  Accumulated Deficit                                                 (4,213,965)    (3,950,366)
-----------------------------------------------------------------------------------------------
     Total Shareholders' Equity                                        4,403,347      4,546,350
-----------------------------------------------------------------------------------------------
          Total Liabilities and Shareholders' Equity                 $ 6,991,345    $ 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 SIX MONTHS          FOR THE THREE MONTHS
                                       ENDED JANUARY 31,            ENDED JANUARY 31,
                                    ---------------------         --------------------
                                       1997          1996           1997           1996
------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>
Operating Revenue                 $ 6,342,854    $ 4,739,761    $ 3,100,226    $ 2,304,215

Operating Expenses
Payroll                             3,217,165      2,325,317      1,602,244      1,187,907
Facilities and Maintenance          2,265,666      1,787,453      1,180,054        879,916
General and Administrative            905,670        656,683        482,153        345,232
------------------------------------------------------------------------------------------
Total Operating Expenses            6,388,501      4,769,453      3,264,451      2,413,055
------------------------------------------------------------------------------------------

Loss from Operations                  (45,647)       (29,692)      (164,225)      (108,840)

Non-operating Income
Interest Income (Expense), net          8,622          5,665            325         16,213
Other Income                           39,626          3,100         30,296           --
------------------------------------------------------------------------------------------
Total Non-operating Income             48,248          8,765         30,621         16,213
------------------------------------------------------------------------------------------

Net Income (Loss)                 $     2,601    $   (20,927)   $  (133,604)   $   (92,627)
==========================================================================================

Net Income (Loss) Available for
Common Stock                      $  (263,599)   $   (95,927)   $  (266,704)   $  (155,127)
==========================================================================================

Net Income (Loss) per Common
Share and Common Share
Equivalent (Note 2)
Primary                           $     (0.09)   $     (0.03)   $     (0.09)   $     (0.05)
==========================================================================================

Weighted Average Number of
Common Shares and Common
Equivalent Shares Outstanding
Primary (Note 2)                    3,021,268      2,935,894      3,026,786      2,935,894
==========================================================================================
</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 SIX MONTHS
                                                                              ENDED JANUARY 31,
                                                                             1997           1996
                                                                         --------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                   <C>            <C>
  Net Income (Loss)                                                     $     2,601    $   (20,927)
  Adjustments to Reconcile Net Income (Loss) to
    Net Cash Used in Operating Activities
     Depreciation and Amortization                                          323,216        160,450
     Amortized Gain on Sale of Real Estate                                  (22,501)       (22,501)
     Deferred Rent                                                          (47,248)       (35,501)
     Provision for Doubtful Accounts                                         40,538         18,579
     Gain on Disposal of Property and Equipment                             (39,626)        (3,100)
     Changes in Assets and Liabilties, net of effect of businesses acquired:
        Increase in Accounts Receivable                                    (253,540)       (53,058)
        Increase in Prepaid Expenses                                       (122,960)      (115,725)
        Increase in Inventory and Other Current Assets                       (7,485)       (14,227)
        (Increase) Decrease in Deposits and Other Assets                     90,611        (98,559)
        Increase (Decrease) in Accounts Payable                            (123,427)       143,251
        Increase in Accrued Expenses                                         70,362         19,142
        Decrease in Accrued Rental Reserve                                 (146,096)          --
--------------------------------------------------------------------------------------------------
          Total Adjustments                                                (238,156)        (1,249)
--------------------------------------------------------------------------------------------------
               Net Cash Used in Operating Activities                       (235,555)       (22,176)
--------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Child Care Centers                                        (494,264)       (65,000)
  Escrow Deposit for Purchase of Child Care Center                             --         (310,000)
  Purchases of Property and Equipment                                      (496,691)      (366,209)
  Proceeds from Disposal of Property and Equipment                          296,766          8,000
--------------------------------------------------------------------------------------------------
               Net Cash Used in Investing Activities                       (694,189)      (733,209)
--------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from Exercise of Warrants                                           --           40,404
  Proceeds from Sale of Preferred Stock                                        --        4,026,475
  Payment of Dividends                                                     (145,604)      (286,666)
  Proceeds from Notes Payable                                                54,408         88,886
  Borrowings on Lines of Credit                                              50,000           --
  Payments on Notes Payable and Capital Leases                             (123,182)       (74,823)
--------------------------------------------------------------------------------------------------
               Net Cash Provided by (Used in) Financing Activities         (164,378)     3,794,276
--------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     (1,094,122)     3,038,891

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            2,630,616        581,311
--------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                $ 1,536,494    $ 3,620,202
==================================================================================================
SUPPLEMENTAL DISCLOURE OF CASH FLOW INFORMATION
  Cash Paid During the Period for Interest                              $    41,222    $    23,290
  Payment of Stock Dividends                                                120,596           --
  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
                                JANUARY 31, 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 second quarter ends on the Saturday  nearest  January 31. However,
for clarity of presentation, all information has been presented as if the second
quarter ended on January 31 and the fiscal year ended on July 31.

The consolidated  financial statements included herein have been prepared by the
Company  without audit  pursuant to the rules and  regulations of the Securities
and Exchange Commission. In the opinion of Management,  the accompanying interim
financial  statements  reflect  all  adjustments,   consisting  only  of  normal
recurring  adjustments,  necessary  to present  fairly the  Company's  financial
position  and its  results  of  operations  and cash flows for the six month and
three month periods ended January 31, 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.  Certain  reclassifications  have been made to
amounts  previously  reported  for fiscal  1996 to conform  with the fiscal 1997
presentation. It is suggested that these interim financial statements be read in
conjunction with the Company's 1996 Annual Report on Form 10-KSB. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the complete fiscal year.

The  consolidated   financial   statements   include  the  accounts  of  Sunrise
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.

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 six month and three month periods ended January 31,
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 six month periods ended January 31, 1997 and 1996 follows:

   
             Sunrise Educational Services, Inc. and Subsidiary
           Unaudited Pro Forma Condensed Consolidated Income Statement
               For the Six Months Ended January 31, 1997 and 1996
                     (In thousands, except per share data)

                                                              1997        1996
                                                              ----        ----
Operating Revenues                                         $ 6,457      $ 5,422

Operating Expenses                                           6,480        5,322
                                                           -------      -------

Income from Operations                                         (23)         100

Non-operating Income (Expense)                                  45           (7)
                                                           -------      -------

Net Income                                                 $    22      $    93
                                                           =======      =======

Net Income Available for Common Stock                      $  (244)     $    18
                                                           =======      =======
Net Income per Common Share and Common Share
  Equivalent                                               $ (0.08)     $  0.01
                                                           =======      =======
                                                             3,021        2,957
                                                           =======      =======





                                      -7-
<PAGE>

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

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
On January 24,  1997,  the  stockholders  of the Company  approved a proposal to
change the Company's name from Sunrise  Preschools,  Inc. to Sunrise Educational
Services,  Inc.  This change was made to reflect  the  widened  area of services
provided  by the Company  through  it's  Sunrise  Preschools,  Suncrest  Private
Schools and Sunburst  Child Care  divisions,  and any  subsequent  direction the
Company takes relative to educational services provided.

On January 31,  1997,  the  Company  operated  36 child care  centers  versus 27
centers as of January 31,  1996.  The  increase in the number of centers was the
result of the Company  purchasing the operations of six centers in Arizona (five
of which were  previously  operating  and one of which was newly opened) and one
center in  Colorado,  opening  one newly  constructed  center  in  Arizona,  and
assuming  management of one newly opened  center in Wisconsin.  During the first
six months of fiscal 1996,  the Company  purchased the operations of two centers
in Colorado.

SIX MONTHS ENDED JANUARY 31, 1997 I(FIRST SIX MONTHS OF FISCAL 1997) COMPARED TO
SIX MONTHS ENDED JANUARY 31, 1996 I(FIRST SIX MONTHS OF FISCAL 1996)
--------------------------------------------------------------------------------
Operating  revenue -  Operating  revenue for the first six months of fiscal 1997
was $6,342,854,  an increase of $1,603,093,  or 33.8% from revenue of $4,739,761
for the first six months of fiscal 1996. Of this increase, $1,415,120 was due to
the inclusion of revenues of the acquired and newly opened centers, and $187,973
was due to a 4.0% 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 $50,000 lower than they would have been otherwise.

Operating  expenses - Operating expenses for the first six months of fiscal 1997
were  $6,388,501  (100.7% of operating  revenue),  an increase of  $1,619,048 or
33.9% from operating  expenses of $4,769,453  (100.6% of operating  revenue) for
the first six months of fiscal 1996. Of this increase, $1,590,075 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  six  months of fiscal  1997 was
     $3,217,165 (50.7% of operating  revenue),  an increase of $891,848 or 38.4%
     from payroll  expense of  $2,325,317  (49.1% of operating  revenue) for the
     first six months of fiscal 1996. Of this increase,  $755,845 was due to the
     acquired and newly opened  centers,  $13,686 was for  additional  corporate
     staff  added  in  connection  with the  Company's  expansion  program,  and
     $122,317 was for  increased  same-center  salaries  due to slightly  higher
     average salaries.

     Facilities and maintenance - Facilities and maintenance costs for the first
     six months of fiscal 1997 were $2,265,666 (35.7% of operating revenue),  an
     increase of  $478,213 or 26.8% from  facilities  and  maintenance  costs of
     $1,787,453  (37.7% of  operating  revenue)  during  the first six months of
     fiscal 1996. This increase was due to $524,201 in costs at the acquired and
     newly opened  centers,  an increase in equipment  lease expense of $37,776,
     and  an  increase  in  depreciation  and  amortization  of  $32,777.  These
     increases were offset by a $54,831 decrease in rent expense,  a decrease in
     cleaning and  maintenance  services costs of $37,817 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
     $23,893.
                                      -8-
<PAGE>

SIX MONTHS ENDED JANUARY 31, 1997 I(FIRST SIX MONTHS OF FISCAL 1997) COMPARED TO
SIX MONTHS ENDED JANUARY 31, 1996 I(FIRST SIX MONTHS OF FISCAL 1996) (CONTINUED)
--------------------------------------------------------------------------------
In the first six  months  of fiscal  1996,  rent  expense  included  $97,581  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 six
months of fiscal 1997 of $97,581,  partially offset by an increase of $42,750 in
same-center rents due to moderate rent increases at several of the centers.

      General and  adminstrative - General and  administrative  expenses for the
      first six  months  of  fiscal  1997  were  $905,670  (14.3%  of  operating
      revenue),   an  increase  of   $248,987,   or  37.9%,   from  general  and
      administrative  expenses of $656,683  (13.9% of operating  revenue) during
      the  first six  months of fiscal  1996.  Of this  increase,  $189,646  was
      attributable  to the  acquired  and newly  opened  centers.  In  addition,
      advertising  costs  increased  $66,859 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
      $30,770 in insurance  costs.  The  remaining  increase was due to moderate
      increases  in  other  general  and  administrative  costs  such as  office
      supplies and bank charges.

Net  Income - Net  income  for the first six  months of fiscal  1997 was  $2,601
compared  to net loss of  $20,927  for the  first six  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 JANUARY 31, 1997 I(SECOND QUARTER OF FISCAL 1997) COMPARED TO
THREE MONTHS ENDED JANUARY 31, 1996 (SECOND QUARTER OF FISCAL 1996)
--------------------------------------------------------------------------------
Operating  revenue - Operating revenue for the second quarter of fiscal 1997 was
$3,100,226, an increase of $796,011, or 34.5% from revenue of $2,304,215 for the
second  quarter  of  fiscal  1996.  Of this  increase,  $737,474  was due to the
inclusion of revenues of the acquired and newly opened centers,  and $58,537 was
due to a 2.6%  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 $25,000 lower than they would have been otherwise.

Operating  expenses - Operating  expenses for the second  quarter of fiscal 1997
were $3,264,451 (105.3% of operating revenue),  an increase of $851,396 or 35.3%
from  operating  expenses of  $2,413,055  (104.7% of operating  revenue) for the
second  quarter  of  fiscal  1996.  Of this  increase,  $772,452  was due to the
acquired and newly opened  centers.  The remaining  increase was due to moderate
increases in payroll, facilities and maintenance, and general and administrative
expenses.

      Payroll  - Payroll  expense  for the  second  quarter  of fiscal  1997 was
      $1,602,244  (51.7% of  operating  revenue),  an increase of $414,337  from
      payroll expense of $1,187,907 (51.6% of operating  revenue) for the second
      quarter of fiscal 1996. Of this increase, $390,927 was due to the acquired
      and newly  opened  centers.  The  remaining  $23,410  increase  was due to
      slightly higher average salaries,  partially offset by a decrease in hours
      worked during the Christmas  and New Year's  holiday  periods due to lower
      child attendance.

                                      -9-
<PAGE>

THREE MONTHS ENDED JANUARY 31, 1997 I(SECOND QUARTER OF FISCAL 1997) COMPARED TO
THREE MONTHS ENDED JANUARY 31, 1996 I(SECOND QUARTER OF FISCAL 1996) (CONTINUED)
--------------------------------------------------------------------------------
      Facilities  and  maintenance - Facilities  and  maintenance  costs for the
      second  quarter  of  fiscal  1997  were  $1,180,054  (38.1%  of  operating
      revenue), an increase of $300,138 or 34.1% from facilities and maintenance
      costs of $879,916  (38.2% of operating  revenue) during the second quarter
      of fiscal 1996. This increase was due to $286,715 in costs at the acquired
      and newly  opened  centers,  an increase  in  equipment  lease  expense of
      $25,052,  and an increase in  depreciation  and  amortization  of $19,099.
      These  increases  were offset by a $17,822  decrease in rent expense and a
      decrease in other facilities and maintenance  costs,  (primarily  building
      maintenance and cleaning expenses) of $12,906.

     In the second  quarter of fiscal  1996,  rent expense  included  $48,385 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 second quarter of fiscal
     1997 of $48,385,  partially offset by an increase of $30,563 in same-center
     rents due to moderate rent increases at several of the centers.

      General and  adminstrative - General and  administrative  expenses for the
      second quarter of fiscal 1997 were $482,153 (15.6% of operating  revenue),
      an  increase  of  $136,921,  or 39.7%,  from  general  and  administrative
      expenses of $345,232  (15.0% of operating  revenue) during the first three
      months of fiscal 1996. Of this increase,  $94,810 was  attributable to the
      acquired  and  newly  opened  centers.  In  addition,   advertising  costs
      increased $26,240 due to continuance of a multi-media  advertising program
      into the  Fall,  and  higher  yellow  pages  costs as a result  of the new
      centers.  The  remaining  increase was due to moderate  increases in other
      general and administrative costs such as office supplies and bank charges.

Net  Income  - Net loss for the  second  quarter  of  fiscal  1997 was  $133,604
compared to a loss of $92,627 for the second  quarter of fiscal 1996,  primarily
due to lower than normal  child  attendance  over the  Christmas  and New Year's
holiday periods.

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 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 are fully  integrated  into the  Company.  The
decrease in child  attendance over the holiday  period,  while having a negative
impact on the second quarter's  operating results,  should not have an impact on
future periods.

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------
Net cash used in operating  activities  for the first quarter of fiscal 1997 was
$235,555.  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 $700,439, from $1,904,621 at July 31, 1996 to $1,204,182 at January 31, 1997.

Net cash used in investing  activities was $694,189,  consisting of purchases of
property and equipment totaling  $496,691,  and $494,264 in costs related to the
centers  acquired by the Company in August.  These uses were partially offset by
$296,766 in proceeds  from the sale and  leaseback of a portion of the equipment
purchased over the past six months.

                                      -10-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
--------------------------------------------------------------------------------
Net cash used in financing  activities  was  $164,378,  consisting of additional
notes  payable of $54,408 for the purchase of vehicles and $50,000 in borrowings
under the Company's  working capital credit line,  offset by repayments of notes
payable and capital  leases of $123,182 and payment of dividends on Series B and
C Preferred  Stock of  $145,604.  Dividends  payable on Series B and C Preferred
Stock as of January 31, 1997 were $44,367.

The  Company is current on all  principal  and  interest  payments  on its notes
payable and capital leases. The Company has two lines of credit with a financial
institution  totaling  $500,000:  1) a $250,000  revolving working capital line,
bearing  interest  at prime  (8.25% at January 31,  1997) plus 1.00%,  and; 2) a
$250,000 nonrevolving line of credit for the purchase of vehicles and equipment,
bearing  interest at prime plus 1.25%.  These lines of credit are renewable each
year on  January  31,  and are  secured by the  Company's  accounts  receivable,
inventory, furniture, vehicles and equipment.

The Company  currently expects that it will be able to renew the lines of credit
under  similar  terms upon their  maturity in January 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.



                                      -11-
<PAGE>



PART II   OTHER INFORMATION

Items 1-3 Not applicable

Item 4    Submission of Matters to a Vote of Security Holders

          The 1996 Annual Meeting of Stockholders  was held on January 24, 1997.
          At the  meeting,  James R. Evans was  elected to serve on the Board of
          Directors  for a three-year  term.  The  stockholders  also ratified a
          proposal to change the name of the company  from  Sunrise  Preschools,
          Inc.  to  Sunrise  Educational  Services,  Inc.  The  number of shares
          represented in person or by proxy at the meeting was 4,511,925.  Based
          on the shares  represented  at the  meeting,  voting  results  were as
          follows:

            For James R. Evans      4,409,045    -   97.72%

            Withheld                  102,880    -    2.28%

            For the Name Change     4,416,271    -   97.88%

            Withheld                   95,654    -    2.12%

          The terms of office for  Barbara L.  Owens,  Dr.  Richard H. Hinze and
          Robert A. Rice continued after the meeting.

Items 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

               A report on Form 8-K was filed on February 25, 1997 to report the
               name change from Sunrise Preschools,  Inc. to Sunrise Educational
               Services, Inc



                                      -12-
<PAGE>

                                   SIGNATURES


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


                               SUNRISE EDUCATIONAL SERVICES, INC.

Date: March 7, 1997            By: /s/ James R. Evans
     --------------               ----------------------------------
                                  James R. Evans
                                  Chairman of the Board of Directors
                                  and President (Principal Executive
                                  Officer)


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

/s/Ronald J. O'Connor    Controller (Principal Financial           March 7, 1997
----------------------   Officer,Principal Accounting Officer)     -------------
   Ronald J. O'Connor







                                      -13-