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 October 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)


                                       N/A
              ----------------------------------------------------
              (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 NOVEMBER 
28, 1997 WAS 4,335,095 SHARES.
<PAGE>
                       SUNRISE EDUCATIONAL SERVICES, INC.

                                TABLE OF CONTENTS


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

PART I FINANCIAL INFORMATION

     Item 1 Financial Statements

          Consolidated Balance Sheets 
            October 31, 1997 and July 31, 1997                              3

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

          Consolidated Statements of Cash Flows
            For the Three Months Ended October 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                  7


PART II OTHER INFORMATION

     Item 4 Submission of Matters to a Vote of Security Holders            10

     Item 6 Exhibits and Reports on Form 8-K                               10


SIGNATURES                                                                 11

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

                Sunrise Educational Services, Inc. and Subsidiary
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                        October 31, 1997  July 31, 1997
=======================================================================================
                               ASSETS                      (Unaudited)
<S>                                                       <C>             <C>
Current Assets
  Cash and Cash Equivalents                               $ 1,219,141     $ 1,212,806  
  Accounts Receivable, net                                    775,666         746,570  
  Prepaid Expenses                                            241,242         542,515  
  Deferred Tax Asset, current portion                         193,358         193,358  
  Inventory and Other Current Assets                           29,461          33,323  
-------------------------------------------------------------------------------------
     Total Current Assets                                   2,458,868       2,728,572  

Property and Equipment, net                                 1,714,887       1,983,694  
Property and Equipment Held for Lease, net                    313,470         118,378  
Deferred Tax Asset, net of current portion                    502,000         502,000  
Intangible Assets, net                                      1,244,987       1,252,559
Deposits and Other Assets                                     472,672         337,968  
-------------------------------------------------------------------------------------
     Total Assets                                         $ 6,706,884     $ 6,923,171  
=====================================================================================
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Line of Credit                                          $   223,754     $   223,754  
  Accounts Payable                                            329,436         297,973  
  Accrued Expenses                                            493,305         733,376  
  Dividends Payable on Preferred Stock                        168,310          44,372  
  Notes Payable and Capital Leases, current portion           248,865         248,865  
  Accrued Rental Reserve, current portion                     176,819         341,808  
  Deferred Rent, current portion                               79,492          73,026  
  Deferred Gain on Sale and Leaseback of
     Preschool Facilities, current portion                     45,003          45,003  
-------------------------------------------------------------------------------------
     Total Current Liabilities                              1,764,984       2,008,177  
-------------------------------------------------------------------------------------
Notes Payable and Capital Leases, net of current portion      823,384         802,696  
-------------------------------------------------------------------------------------
Accrued Rental Reserve, net of current portion                480,000         480,000  
-------------------------------------------------------------------------------------
Deferred Rent, net of current portion                         265,427         283,833  
-------------------------------------------------------------------------------------
Deferred Gain on Sale and Leaseback of Preschool
 Facilities, net of current portion                            38,862          42,645  
-------------------------------------------------------------------------------------
Shareholders' Equity
  Preferred Stock, $1 par value - 1,000,000 shares
     authorized, 357,333 shares issued and outstanding        357,333         857,333
  Common Stock, $.01 par value - 10,000,000 shares
     authorized, 4,335,095 shares issued and outstanding       43,350          32,529
  Paid-in Capital                                           8,465,517       7,975,519  
  Accumulated Deficit                                      (5,531,973)     (5,559,561) 
-------------------------------------------------------------------------------------
     Total Shareholders' Equity                             3,334,227       3,305,820  
-------------------------------------------------------------------------------------
        Total Liabilities and Shareholders' Equity        $ 6,706,884     $ 6,923,171  
=====================================================================================
The accompanying footnotes are an integral part of these consolidated financial
statements.
</TABLE>
                                      -3-
<PAGE>
                Sunrise Educational Services, Inc. and Subsidiary
                        Consolidated Statements of Income
                                   (Unaudited)

                                                 For the Three Months
                                                   Ended October 31,
                                            -----------------------------
                                                1997               1996
===========================================================================
Operating Revenue
  Tuition and Other                         $3,846,800         $3,242,628
  Government Programs                          290,834            257,372
-------------------------------------------------------------------------
       Total Operating Revenue              $4,137,634         $3,500,000
-------------------------------------------------------------------------
Operating Expenses
  Payroll                                    1,832,064          1,614,921
  Facilities and Maintenance                 1,368,527          1,085,612
  General and Administrative                   548,125            423,517
  Government Programs                          228,978            260,950
-------------------------------------------------------------------------
       Total Operating Expenses              3,977,694          3,385,000
-------------------------------------------------------------------------
Income from Operations                         159,940            115,000

Other Income (Expense)
  Interest Income (Expense), net                (7,573)             8,297
  Other Income                                      --              9,330
-------------------------------------------------------------------------
       Total Other Income (Expense)             (7,573)            17,627
-------------------------------------------------------------------------
Net Income                                  $  152,367         $  132,627
=========================================================================
Net Income (Loss) Available
  for Common Stock                          $   28,429         $     (473) 
=========================================================================
Net Income per Common Share
and Common Share Equivalent (Note 2)
    Primary                                 $     0.01         $    (0.00)
=========================================================================
Weighted Average Number of
  Common Shares and Common
  Share Equivalents Outstanding
    Primary                                  3,853,985          3,015,261
=========================================================================

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 Three Months
                                                                        Ended October 31,
                                                                    --------------------
                                                                        1997         1996
==========================================================================================
<S>                                                                <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                       $  152,367   $  132,627
  Adjustments to Reconcile Net Income to
    Net Cash Provided by Operating Activities
     Depreciation and Amortization                                    196,794      156,379
     Amortized Gain on Sale of Real Estate                             (3,783)     (11,251)
     Deferred Rent                                                    (11,940)     (52,043)
     Provision for Doubtful Accounts                                   27,039       15,359
     Gain on Disposal of Property and Equipment                             0       (9,330)
     Changes in Assets and Liabilities, net of
      effect of businesses acquired:
        Increase in Accounts Receivable                               (56,135)    (171,761)
        Decrease (Increase) in Prepaid Expenses                       301,273     (102,032)
        Decrease (Increase) in Inventory and Other Current Assets       3,862       (7,280)
        (Increase) Decrease in Deposits and Other Assets             (134,704)     252,487
        Increase (Decrease) in Accounts Payable                        31,463     (155,097)
        (Decrease) Increase in Accrued Expenses                      (240,071)     188,245
        Decrease in Accrued Rental Reserve                           (164,989)     (73,048)
------------------------------------------------------------------------------------------
             Total Adjustments                                        (51,191)      30,628
------------------------------------------------------------------------------------------
               Net Cash Provided by Operating Activities              101,176      163,255
------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Child Care Centers                                        --     (494,264)
  Purchases of Property and Equipment                                (115,507)    (394,469)
  Proceeds from Disposal of Property and Equipment                         --        9,330
------------------------------------------------------------------------------------------
       Net Cash Used in Investing Activities                         (115,507)    (879,403)
------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Payment of Dividends                                                     --     (133,100)
  Proceeds from Notes Payable                                          76,969       54,408
  Borrowings on Lines of Credit                                            --       50,000
  Payments on Notes Payable and Capital Leases                        (56,281)     (66,402)
------------------------------------------------------------------------------------------
       Net Cash Provided by (Used in) Financing Activities             20,688      (95,094)
------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents                    6,357     (811,242)

Cash and Cash Equivalents, Beginning of Period                      1,212,806    2,630,616
------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period                           $1,219,163   $1,819,374
==========================================================================================
Supplemental Disclosure of Cash Flow Information
      Cash Paid During the Period for Interest                     $   25,236   $   18,112
      Cash Paid for Income Taxes                                           --           --
      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
                                October 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 first  quarter ends on the Saturday
     nearest October 31. However,  for clarity of presentation,  all information
     has been  presented  as if the first  quarter  ended on  October 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 three month periods ended October 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 1997 to conform with
     the fiscal 1998 presentation.  It is suggested that these interim financial
     statements be read in conjunction  with the Company's 1997 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 PER COMMON SHARE AND COMMON SHARE EQUIVALENT
--------------------------------------------------------------------------------
     Primary net income per share is computed by dividing  net income  available
     for common stock (net income 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
     diluted net income per share is not included  because the  calculation  for
     that period is antidilutive.

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, 1997, net operating loss carryforwards totaled approximately
     $2,095,000, and expire through the year 2011. Accordingly,  income taxes on
     income  generated during the three month periods ended October 31, 1997 and
     1996 have been offset by the available net operating loss carryforwards.

                                      -6-
<PAGE>

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

RESULTS OF OPERATIONS
================================================================================

THREE MONTHS ENDED OCTOBER 31, 1997 (FIRST  QUARTER OF FISCAL 1998) COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1996 (FIRST QUARTER OF FISCAL 1997)
--------------------------------------------------------------------------------

On October 31,  1997,  the  Company  operated  33 child care  centers  versus 31
centers as of October 31,  1996 due to the  opening of two new centers  over the
past 12 months.  In  addition,  fiscal 1998  results  include a full  quarter of
operations for four centers acquired during the first quarter of fiscal 1997.

Operating  revenue - Operating  revenue for the first quarter of fiscal 1998 was
$4,137,634, an increase of $637,634., or 18%, from revenue of $3,500,000 for the
first  quarter of fiscal 1997.  This increase was primarily due to the inclusion
of revenues of the acquired and newly opened centers. In addition, lease revenue
increased  $58,940  due to the  leasing  of space at  several  centers to Sunray
Charter Schools.

Operating  expenses - Operating  expenses for the first  quarter of fiscal 1998
were $3,977,694 (96.1% of operating revenue),  an increase of $592,694,  or 18%,
from operating  expenses of $3,385,000 (97% of operating  revenue) for the first
quarter of fiscal  1997.  This  increase was  primarily  due to the acquired and
newly opened centers.

     Payroll  -  Payroll  expense  for the  first  quarter  of  fiscal  1998 was
     $1,832,064  (44.3% of  operating  revenue),  an increase  of $217,143  from
     payroll  expense of  $1,614,921  (46% of  operating  revenue) for the first
     quarter of fiscal  1997.  This  increase  was due to the acquired and newly
     opened  centers,  along with slightly  higher average  salaries at existing
     centers.

     Facilities and maintenance - Facilities and maintenance costs for the first
     quarter of fiscal 1998 were  $1,368,527  (33.1% of operating  revenue),  an
     increase of  $282,915 or 26.1% from  facilities  and  maintenance  costs of
     $1,085,612  (31% of operating  revenue)  during the first quarter of fiscal
     1997. This increase was due to the acquired and newly opened centers, along
     with slightly  higher  same-center  rents due to moderate rent increases at
     several of the centers.

     General and  administrative - General and  administrative  expenses for the
     first quarter of fiscal 1998 were $548,125 (13.2% of operating revenue), an
     increase of $124,608, or 29.4%, from general and administrative expenses of
     $423,517  (12% of  operating  revenue)  during the first  quarter of fiscal
     1997.  This  increase  was  primarily  due to the acquired and newly opened
     centers.  The  remaining  increase  was due to moderate  increases in other
     general and  administrative  costs such as advertising,  investor relations
     and bank charges.

     Government  Programs - Government program expenses for the first quarter of
     fiscal  1998 were  $228,978  (5.5% of  operating  revenue),  a decrease  of
     $31,972,  or 12%,  from  government  program  expenses of  $260,950  (7% of
     operating  revenue)  during the first quarter of fiscal 1997. This decrease
     was  primarily  due to the tighter  management  of the  government  program
     expenses.
                                      -7-
<PAGE>

THREE MONTHS ENDED OCTOBER 31, 1997 (FIRST  QUARTER OF FISCAL 1998) COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1996 (FIRST QUARTER OF FISCAL 1997)  (CONTINUED)
--------------------------------------------------------------------------------
Net  Income - Net income  for the first  quarter  of fiscal  1998 was  $152,367
compared to $132,627 for the first quarter of fiscal 1997,  primarily due to the
acquired and newly opened centers, along with the increase in lease revenue.

TRENDS
--------------------------------------------------------------------------------
Same-center  operating results remained stable from last year. Operations at the
two newly opened centers continue to improve as these centers move through their
initial "ramp-up" phase.

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------
Net cash provided by operating  activities  for the first quarter of fiscal 1998
was $101,154.  Cash was sufficient to meet the normal operating  requirements of
the  Company.  Due to amounts  spent to equip the newly  opened  centers  and to
upgrade  equipment at existing  centers,  working capital decreased by $168,742,
from $720,395 at July 31, 1997 to $551,653 at October 31, 1997.

Net cash used in investing  activities was $115,507,  consisting of purchases of
property and equipment.

Net cash provided by financing activities was $20,688,  consisting of additional
notes  payable of $76,969.  offset by  repayments  of notes  payable and capital
leases of $56,281.  Dividends  payable on Series B and C  Preferred  Stock as of
October 31, 1997 were $168,310

The  Company is current on all  principal  and  interest  payments  on its notes
payable.

The Company has four credit  facilities  with a financial  institution  totaling
$3,000,000:  1) a $500,000  revolving working capital line,  bearing interest at
prime plus 1.50%;  2) a $1,000,000  nonrevolving  line of credit for acquisition
financing,  bearing  interest  at prime plus 2.5%;  (3) a $500,000  note for the
purchase of vehicles and equipment  bearing  interest at prime plus 1.75%,  and;
(4) a $1,000,000  term loan which was used to refinance the  Company's  existing
notes payable and capital leases,  bearing  interest at 10.42%  annually.  These
credit  facilities  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.
 However,  if the credit facilities 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 over the next 12 months.
Under current plans,  these centers 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.

                                      -8-
<PAGE>

THREE MONTHS ENDED OCTOBER 31, 1997 (FIRST  QUARTER OF FISCAL 1998) COMPARED TO
THREE Months Ended October 31, 1996 (First Quarter of Fiscal 1997) (Continued)
--------------------------------------------------------------------------------
On September 2, 1997, the Company announced it had signed a definitive agreement
to combine with Education Alternatives, Inc. (EAI). Under the agreement, Sunrise
will operate as a wholly owned  subsidiary of EAI. EAI is to acquire the Company
for approximately $13.5 million in cash and stock, subject to adjustments.  EAI,
based  out of  Minneapolis,  operates  private  schools  and has been  awarded a
contract  to operate 12 charter  schools in  Arizona.  It is  expected  that the
exchange of stock will be tax-free to Sunrise  stockholders and that the merger,
which is subject to the approval of  stockholders  of both companies and certain
other conditions, will be completed by late December 1997.

During fiscal 1997, PSI was selected to operate  charter schools in the State of
Arizona.  In  September  1997,  PSI opened  several  schools  as Sunray  Charter
Schools.  The  Company  has agreed to manage and lease  space to Sunray  Charter
Schools.



                                      -9-
<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

                  None





                                      -10-
<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: December 12, 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           December 12, 1997
------------------------    (Principal Financial Officer,
    Barbara L. Owens        Principal Accounting Officer)




                                      -11-