U.S. SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549


                                   FORM 10-QSB


(Mark One)

          _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1996


            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
               For the transition period from _______ to _______ .

                           Commission File No. 0-27780


                          NEW HORIZON KIDS QUEST, INC.
             (Exact name of registrant as specified in its charter)


         MINNESOTA                                               41-1719363
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


                  13705 First Avenue North, Plymouth, MN 55441
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (612) 557-1111


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

                           YES (X)                                     NO (  )

As of November 13, 1996, the Registrant had outstanding 3,293,300 shares of its
Common Stock, $.01 par value.


                          NEW HORIZON KIDS QUEST, INC.

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996



                                      INDEX

                                                                           Page

PART I.           FINANCIAL INFORMATION                                       3


ITEM 1.           Condensed Consolidated Financial Statements

         a)       Condensed Consolidated Balance Sheets --
                  September 30, 1996 and December 31, 1995                    3

         b)       Condensed Consolidated Statements of
                  Operations -- Three months and Nine months ended
                  September 30, 1996 and 1995                                 5

         c)       Condensed Consolidated Statements of
                  Cash Flows -- Nine months ended
                  September 30, 1996 and 1995                                 6

         d)       Notes to Condensed Consolidated Financial
                  Statements                                                  7


ITEM 2.           Management's Discussion and Analysis
                  of Financial Condition and Results
                  of Operations                                               9


PART II. OTHER INFORMATION                                                   12


Signatures                                                                   13



                         PART I. - FINANCIAL INFORMATION


ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                  NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS


                                                                             September 30,         December 31,
                                                                                  1996                1995
                                                                            -----------------   -----------------
                                                                              (UNAUDITED)
<S>                                                                         <C>                 <C>            
CURRENT ASSETS:
   Cash and cash equivalents.........................................       $     1,192,950     $     3,865,018
   Accounts and notes receivable.....................................               465,043             225,141
   Receivable from New Horizon Enterprises, Inc......................                    --               8,963
   Prepaid expenses and other current assets.........................                98,636              80,072
     Total current assets............................................             1,756,629           4,179,194

PROPERTY AND EQUIPMENT:
   Furniture, fixtures, equipment and leaseholds.....................             4,885,268           2,340,168
   Less--Accumulated depreciation and amortization...................              (637,974)           (239,300)
     Total property and equipment....................................             4,247,294           2,100,868

OTHER ASSETS:
   Goodwill (net of accumulated amortization
      1,752,281             934,197
      of $108,890 and $26,700, respectively).........................             1,752,281             934,197
   Notes receivable, net of current portion..........................               711,832             463,616
   Noncompete agreements (net of accumulated amortization
     of $16,442 and $6,950, respectively)............................                48,557              43,050
   Other.............................................................                98,065              33,871
                                                                            $     8,614,658     $     7,754,796


</TABLE>

   See accompanying notes which are an integral part of these balance sheets.



<TABLE>
<CAPTION>
                  NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND SHAREHOLDERS' EQUITY


                                                                             September 30,         December 31,
                                                                                  1996                1995
                                                                            -----------------   -----------------
                                                                              (UNAUDITED)
<S>                                                                         <C>                 <C>            
CURRENT LIABILITIES:
   Current maturities of long-term debt..............................       $       124,621     $        64,500
   Accounts payable..................................................               345,650             312,971
   Accrued expenses..................................................               432,282             224,457
   Payable to New Horizon Enterprises, Inc...........................                40,490                  --
   Deferred rent.....................................................                29,667              32,667
     Total current liabilities.......................................               972,710             634,595

LONG-TERM DEBT, less current maturities..............................             1,200,970             615,227

SHAREHOLDERS' EQUITY:
   Undesignated preferred stock, 3,500,000 shares
     authorized; no shares issued and outstanding....................                    --                  --
   Series A convertible preferred stock, $.01 par value,
     1,500,000 shares authorized; no shares issued and
     outstanding ....................................................                    --                  --
   Common stock, $.01 par value, 20,000,000 shares
     authorized; 3,288,300 shares issued and outstanding
     at September 30, 1996, and 3,287,500 at December 31, 1995.......                32,883              32,875
   Additional paid-in capital........................................             7,146,246           7,142,255
   Accumulated deficit...............................................              (738,151)           (670,156)
     Total shareholders' equity......................................             6,440,978           6,504,974
                                                                            $     8,614,658     $     7,754,796

</TABLE>



   See accompanying notes which are an integral part of these balance sheets.



<TABLE>
<CAPTION>
                  NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                      Three Months Ended                   Nine Months Ended
                                                         September 30                         September 30
                                               ---------------------------------    ---------------------------------
                                                   1996               1995              1996               1995
                                               --------------     --------------    --------------     --------------
<S>                                            <C>                <C>               <C>                <C>          
REVENUE ...................................    $   2,716,752      $   1,767,188     $   7,247,028      $   4,081,474
                                           
COSTS AND EXPENSES:
   Direct Expenses.........................        2,104,553          1,371,603         5,748,975          3,255,696
   Depreciation and Amortization...........          158,902             66,813           395,690            128,189
   Pre-Opening Expenses....................          111,559                 --           197,838                 --
   Minority Interest.......................          (45,175)                --          (117,513)                --

     Total Costs and Expenses..............        2,329,839          1,438,416         6,224,990          3,383,885

CENTER OPERATING INCOME....................          386,913            328,772         1,022,038            697,589

   Selling, General and Administrative.....          332,184            303,055         1,063,825            640,412
   Amortization............................           34,889             13,562            92,158             13,562

OPERATING INCOME (LOSS)....................           19,840             12,155          (133,945)            43,615

   Interest Expense........................          (29,846)           (31,013)          (80,971)           (50,098)
   Interest Income.........................           44,047                 --           146,921                 --

NET INCOME (LOSS)..........................    $      34,041      $     (18,858)    $     (67,995)     $      (6,483)


   Earnings (Loss) Per Share...............    $         .01      $        (.01)    $        (.02)     $        (.00)

   Weighted Average Shares Outstanding.....        3,409,648          2,137,500         3,288,009          2,137,500

</TABLE>



     See accompanying notes which are an integral part of these statements.


<TABLE>
<CAPTION>
                  NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                     Nine Months Ended
                                                                                        September 30
                                                                            -------------------------------------
                                                                                  1996                1995
                                                                            -----------------   -----------------
<S>                                                                         <C>                 <C>             
OPERATING ACTIVITIES:
   Net income (loss).................................................       $       (67,995)    $        (6,483)
   Adjustments to reconcile net loss to net cash provided
     by (used in) operating activities--
       Depreciation and amortization.................................               490,833             127,962
       Deferred Rent.................................................                (3,000)              3,667
       Change in assets and liabilities:
         Accounts receivable.........................................              (204,697)           (138,426)
         Prepaid expenses and other..................................               (46,541)              7,440
         Accounts payable............................................                32,679             205,423
         Payable to (receivable from) New Horizon Enterprises, Inc...                49,453             132,276
         Other assets................................................               (64,663)            (92,528)
         Accrued expenses............................................               207,825              47,181
           Net cash provided by operating activities.................               393,894             286,512

INVESTING ACTIVITIES:
   Purchases of property and equipment...............................            (2,272,601)         (1,310,569)
   Purchases of child care centers, net of notes payable.............              (472,886)           (410,892)
   Issuance of note receivable.......................................              (276,224)                 --
   Payments on note receivable.......................................                25,780                  --
   Net cash used in investing activities.............................            (2,995,931)         (1,721,461)

FINANCING ACTIVITIES:
   Payments on long-term obligations.................................               (74,031)             (4,793)
   Proceeds from the issuance of stock...............................                 4,000                  --
   Proceeds from long-term debt......................................                    --           1,400,000
     Net cash provided by (used in) financing activities.............               (70,031)          1,395,207

     Net decrease in cash and cash equivalents.......................            (2,672,068)            (39,742)

CASH AND CASH EQUIVALENTS,
   beginning of period...............................................             3,865,018             151,738

CASH AND CASH EQUIVALENTS,
   end of period.....................................................       $     1,192,950     $       111,996

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
   Cash paid during the period for--
     Interest........................................................       $        70,717     $        31,029

     Taxes ..........................................................       $            --     $            --

NON-CASH ITEMS:
   Purchase of child care centers with notes payable.................               719,895             700,000

</TABLE>

     See accompanying notes which are an integral part of these statements.



                  NEW HORIZON KIDS QUEST, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



     The condensed consolidated financial statements included herein have been
prepared by New Horizon Kids Quest, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Company's business is seasonal and, accordingly, interim results are not
indicative of results for a full year. In the opinion of the Company, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of September 30, 1996,
and the results of its operations for the three months and nine months ended
September 30, 1996 and 1995, have been reflected in the accompanying financial
statements. Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures provided herein
are adequate to make the information presented not misleading. It is suggested
that these consolidated financial statements be read in conjunction with the
financial statements for the year ended December 31, 1995, and the footnotes
thereto, included in the Company's Form 10-KSB, filed with the Securities and
Exchange Commission.

1.   Basis of Presentation:

     Principles of Consolidation -- The consolidated financial statements
include the accounts of New Horizon Kids Quest, Inc. and its wholly owned
subsidiaries (together, the "Company"). All intercompany balances and
transactions have been eliminated in consolidation.

     Earnings Per Share -- Weighted average shares include the dilutive effects
of options and the effect of conversion of senior subordinated debt into shares
of common stock which is assumed to be converted at the beginning of 1995.

2.   Acquisitions:

     During the third quarter of 1995, the Company (New Horizon Child Care -
Idaho, Inc.) acquired the net assets of six licensed child care centers located
in Boise, Idaho, for a total purchase price of $1,110,892 (including costs
associated with the acquisitions). The purchase price consisted of cash payments
for $410,892 and a note payable to one of the sellers in the amount of $700,000.
In February and March 1996, New Horizon Child Care - Idaho, Inc. acquired six
additional licensed child care centers in Boise, Idaho. The total purchase price
was $1,192,781 (including costs associated with the acquisition). The purchase
price for these six centers consisted of cash payments of $472,886 and notes
payable to three of the sellers in the amounts of $335,000, $370,000 and
$14,895. All of the transactions have been accounted for using the purchase
method of accounting. The following unaudited pro-forma financial information
for the nine months ended September 30, 1996 and 1995, give effect to the
acquisitions as if they had occurred effective January 1, 1995.


<TABLE>
<CAPTION>
                                                           Nine Months          Nine Months
                                                              Ended                Ended
                                                         ----------------     ----------------
                                                          September 30,        September 30,
                                                               1996                 1995

<S>                                                      <C>                  <C>          
       Revenue                                           $   7,536,286        $   6,129,072
       Income (loss) from operations                           (93,646)              23,285
       Net loss                                                (37,230)            (124,941)
       Loss per share                                             (.01)                (.06)
       Weighted average shares outstanding                   3,288,009            2,137,500

</TABLE>

     This financial information does not purport to represent results which
would actually have been obtained if the acquisitions had been in effect during
the period covered or any future results which may in fact be realized.

3.   Limited Liability Company:

     During June 1996, a newly established entity owned 51% by the Company and
49% by Ameristar Casino Council Bluffs, Inc. ("Ameristar") (Kids Quest of
Council Bluffs, LLC ("Kids Quest LLC")) began operating a Kids Quest facility in
Council Bluffs, Iowa. The operating agreement governing Kids Quest LLC provides
for the owners to share in profits and losses of Kids Quest LLC. Accordingly,
minority interest as referenced on the Company's condensed statement of
operations reflects amounts recoverable from Ameristar, which represent
Ameristar's allocated share of losses incurred by Kids Quest LLC.

4.   Reclassifications

     Certain 1995 and year-to-date 1996 amounts in the accompanying consolidated
financial statements have been reclassified to conform to the third quarter 1996
presentation. Such reclassification had no effect on previously reported net
loss or shareholders' equity.


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


General

     The Company currently operates eleven Kids Quest centers providing hourly
child care, as well as thirteen New Horizon Child Care centers providing
traditional child care services. The first Kids Quest center opened in May 1992
in Grand Casino Hinckley. Since that time, the Company has opened six additional
Kids Quests at Grand Casino locations in Minnesota, Mississippi and Louisiana.
Kids Quest opened its shopping mall location in the Eden Prairie Center in Eden
Prairie, Minnesota, in March 1994. In November 1995, Kids Quest opened at
Boulder Station Hotel and Casino in Las Vegas, Nevada. In June 1996, the Company
opened with Ameristar Casinos, Inc. in its 51% owned Kids Quest of Council
Bluffs, LLC. In August 1996, the Company opened its seventh location with Grand
Casinos in Tunica, Mississippi. Most recently, in October 1996, the Company
opened a Kids Quest facility at the Mohegan Sun Casino in Uncasville,
Connecticut. In the third quarter of 1995, New Horizon Child Care - Idaho, Inc.
(NHCC - Idaho) was formed to acquire substantially all the assets of A Small
World, Inc. (five centers) for $1,021,170 and A Child's Dream (one center) for
$89,722. In February 1996, NHCC - Idaho made an additional acquisition of the
assets of A Child's Image, Inc. (one center) for $180,092 and in March 1996
purchased the assets of Educational Child Care Services, Inc. (d.b.a Teach-A-Tot
Schools) (two centers) for $480,324 and Cottage Schools, Inc. (three centers)
for $532,365.

     With the opening of the Tunica, Mississippi, location, the Company
introduced a retail area which features developmentally-appropriate educational
products and Kids Quest logo merchandise. The Company has also opened its first
supervised arcade in conjunction with its Kids Quest location at the Mohegan Sun
Casino. The Company plans to continue to seek opportunities for additional
retail and supervised arcade locations.

     The Company has experienced growth through acquisition and expansion. The
business of the Company's Kids Quest centers is seasonal with revenues and
operating income being the highest in the summer months. Therefore, results of
operations described below may not be indicative of results to be achieved in
any future period.


Results of Operations

     Revenues for the three months ended September 30, 1996, increased $949,564
or 54% to $2,716,752 from $1,767,188 for the same period in 1995. This increase
is due primarily to the addition of the New Horizon Child Care centers in Boise,
Idaho, which were acquired in the third quarter of 1995 and the first quarter of
1996, which accounted for $570,266 of additional revenue. The Company also
opened three new Kids Quest centers since the third quarter of 1995, which
accounted for $483,697 of additional revenues. Revenue for existing centers open
during both periods decreased $77,603 or 6% to $1,145,467 for the three months
ended September 30, 1996, from $1,223,070 for the same period in 1995. This
decrease in revenue resulted in part from the fact that the three month period
ended September 30, 1996, contained one less weekend from the comparable period
in 1995. The Company typically generates the majority of its weekly revenues
during the weekends.

     Revenues for the nine months ended September 30, 1996, increased $3,165,554
or 78% to $7,247,028 from $4,081,474 for the same period in 1995. This increase
is due primarily to the addition of the New Horizon Child Care centers in Boise,
Idaho, which accounted for $2,045,477 of the increase, and revenue from the
three new Kids Quest locations accounted for $1,116,068 of additional revenues.
Revenue from existing Kids Quest centers open during both periods decreased
$40,949 or 1% to $3,122,845 from $3,163,794 for the same period in 1995.

     Costs and expenses for the three months ended September 30, 1996, increased
$891,423 or 62% to $2,329,839 from $1,438,416 for the same period in 1995. This
increase is due primarily to the addition of the Idaho New Horizon Child Care
centers, which accounted for $592,037 of the increase, and from the three new
Kids Quest locations, which accounted for $360,681 of the increase. Included in
costs and expenses for the period were $111,559 pre-opening expenses due
primarily to the opening of the Tunica, Mississippi, location. Costs and
expenses from continuing operations decreased
$71,179 or 7% to $996,575 from $992,400 for the same period in 1995. Pursuant to
the terms of its contract for the Tunica, Mississippi, location, Grand Casinos
agreed to reimburse the Company on a monthly basis any cumulative operating
deficits in excess of profits on a calendar year basis. The Company is entitled
to receive $145,497 under the terms of this agreement for the third quarter of
1996 and has recorded such as a reduction in direct expenses.

     Costs and expenses for the nine months ended September 30, 1996, increased
$2,841,105 or 84% to $6,224,990 from $3,383,885 for the same period in 1995.
This increase is primarily attributable to $1,995,527 related to the new Idaho
New Horizon Child Care centers and $835,830 attributable to the new Kids Quest
locations. Included in costs and expenses related to the new Kids Quest
locations were $197,838 of pre-opening expenses relating primarily to the
Tunica, Mississippi, and the Council Bluffs, Iowa, Kids Quest locations.

     Selling, general and administrative expenses increased $29,129 or 10% to
$332,184 for the three month period ended September 30, 1996, from $303,055 for
the same period in 1995. This increase is due primarily to costs associated with
the Idaho New Horizon Child Care centers acquired since the second quarter of
1995. Administrative salaries (excluding NHCC - Idaho) increased $43,911 to
$111,637 in 1996 from $67,726 for the same period in 1995.

     Selling, general and administrative expenses increased $423,413 or 66% to
$1,063,825 for the nine month period ended September 30, 1996, from $640,412 for
the same period in 1995. This increase is due in part to $48,023 of additional
administrative costs associated with the Idaho New Horizon Child Care centers
acquired since the second quarter of 1995, as well as expenses incurred during
1996 as a result of the Company's increased expansion efforts. Administrative
salaries (excluding NHCC - Idaho) increased $129,489 or 66% to $326,902 in 1996
from $197,413 for the same period in 1995. Management expects selling, general
and administrative expenses to continue to increase with the addition of and
negotiation for new locations and that such expenses will decrease as a
percentage of revenues with the continued expansion of the Company's business.

     Pursuant to the terms of its contracts with casino operators, the Company
has received certain child care subsidies. The Company received $463,021 for the
three month period ended September 30, 1996, and $486,506 for the same period in
1995, which amounts are included in total revenue. For the nine month period
ended September 30, 1996, the Company received $1,339,055 of subsidies and
$1,283,411 for the same period in 1995. The majority of these subsidies were
from Grand Casinos, Inc. Due to a price increase to the public at the Grand
Casino locations, such subsidies were reduced beginning in the third quarter of
1996. There can be no assurance that such subsidies will not be additionally
modified or discontinued or that the Company will obtain such subsidies in
future Kids Quest agreements with Grand Casinos or other casinos. The Company
has executed agreements to develop Kids Quest centers that do not provide for
any subsidy payments from the related casinos. Although not contractually
obligated to provide a subsidy, many casinos have expressed an interest in
providing some sort of subsidy. In the event that subsidies are not provided or
are lower than currently received under existing agreements, the Company may
charge higher hourly rates. This may cause patronage to be significantly less
and may ultimately result in lower revenues. The Company's Boulder Station
location, however, has been operating without any subsidy from the casino.
Although charging higher rates and utilizing a similar amount of space,
occupancy at the Boulder Station location for the three and nine month periods
ended September 30, 1996, exceeded each of the other Kids Quest locations for
that same period.

     Interest expense for the three month period ended September 30, 1996,
decreased $1,167 to $29,846 from $31,013 for the same period in 1995. For the
nine month period interest expense increased $30,873 or 62% to $80,971 from
$50,098 for the same period in 1995. Substantially all of the interest expense
incurred by the Company during 1996 relates to debt incurred in connection with
the acquisition of the Idaho New Horizon Child Care centers.

     Net income for the three month period ended September 30, 1996, was $34,041
versus net loss of $18,858 for the same period in 1995. Although profitable for
the current three month period, net income was affected by a net loss of
$118,297 from the Idaho New Horizon Child Care centers.

     Net loss for the nine month period ended September 30, 1996, was $67,995
versus a net loss of $6,483 for the same period in 1995. Net loss for the period
was due primarily to a loss of $262,367 from the Idaho New Horizon Child Care
centers.


Liquidity and Capital Resources

     During the nine months ended September 30, 1995, the Company generated
$286,512 from operations, invested $1,721,461 in property and equipment, and
borrowed $1,400,000 in long-term debt. During the same period in 1996, the
Company generated $393,894 from operations and used $2,745,487 for the purchase
of property and equipment and the assets of six existing child care centers in
Boise, Idaho. In addition, the Company loaned $276,224 to a third party to
finance the purchase of a building in Boise, Idaho, which is being leased back
by the Company.

     The Company recently secured a $1,300,000 line of credit. The Company
believes that its current cash, funds generated from operations, and the line of
credit will provide adequate resources for the Company's capital needs at least
through the fourth quarter of 1996. The Company may, however, require additional
financing in 1997 based on current commitments. The Company is seeking
additional financing and will continue to do so as the Company secures
additional contracts or if the Company pursues additional acquisitions.


Private Securities Litigation Reform Act

     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-QSB and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities, as well as
other capital spending, financial sources and the effects of regulation and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect future results and, accordingly,
such results may differ from those expressed in any forward-looking statement
made by or on behalf of the Company. These risks and uncertainties include, but
are not limited to, those relating to development and construction activities,
dependence on existing management, domestic or global economic conditions,
changes in federal or state laws or the administration of such laws, as well as
all other risks and uncertainties described in the Company's filings.


                          PART II. - OTHER INFORMATION


    All items under Part II. have been omitted since they are inapplicable or
the answers are negative.



                                   SIGNATURES


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


                                NEW HORIZON KIDS QUEST, INC.



                                By:      /s/ William M. Dunkley
                                             William M. Dunkley
                                             Chief Executive Officer


                                By:      /s/ Kevin M. Greer
                                             Kevin M. Greer
                                             Chief Financial Officer



Date:  November 13, 1996