NEW HORIZONS WORLDWIDE INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

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

For the transition period from Not Applicable to

Commission File Number 0-17840

NEW HORIZONS WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-2941704

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

1900 S. State College Boulevard, Anaheim, CA 92806

(Address of principal executive offices)

(714) 940-8000

(Registrant’s telephone number, including area code)

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

Yes X No

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Number of shares of common stock outstanding at June 30, 2004: 10,451,658

PART I. ITEM 1 FINANCIAL STATEMENTS

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2004 and December 31, 2003
(Dollars in thousands, except per share data)

		June 30, 2004			December 31, 2003

Assets
Current assets:
Cash and cash equivalents	$	7,018		$	10,850
Accounts receivable, net		15,599			14,496
Inventories		1,112			1,283
Prepaid expenses		7,097			7,329
Refundable income taxes		1,457			980
Deferred tax assets		3,643			3,643
Other current assets		1,318			1,299

Total current assets		37,244			39,880

Property and equipment, net		12,406			14,381
Goodwill		18,368			18,368
Cash surrender value of life insurance		1,360			1,360
Deferred tax assets, net		21,941			21,941
Notes from officers and director		1,011			1,011
Other assets		1,304			1,412

Total Assets	$	93,634		$	98,353

Liabilities and Stockholders' Equity
Current Liabilities:

Current portion of long-term debt	$	5,921		$	3,000
Accounts payable		3,544			4,267
Deferred revenue		19,095			20,032
Other current liabilities		14,496			14,613

Total current liabilities		43,056			41,912

Long-term debt, excluding current portion		--			4,566
Deferred rent		2,266			2,278
Other long-term liabilities		336			824

Total liabilities		45,658			49,580

Commitments and contingencies		--			--

Stockholders' equity:
Preferred stock, no par value, 2,000,000 shares
authorized, no shares issued or outstanding		--			--
Common stock, $.01 par value, 20,000,000 shares authorized;
10,636,658 shares issued; 10,451,658 and 10,450,157
shares issued and outstanding at June 30, 2004
and December 31, 2003, respectively		106			106
Additional paid-in capital		48,572			48,562
Retained earnings		596			1,403
Treasury stock at cost - 185,000 shares at June 30, 2004
and December 31, 2003		(1,298	)		(1,298	)

Total stockholders' equity		47,976			48,773

Total Liabilities & Stockholders' Equity	$	93,634		$	98,353

See accompanying notes to consolidated financial statements.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three and six months ended June 30, 2004 and 2003
(Dollars in thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003

Revenues
Franchising
Franchise fees	$	207		$	412		$	688		$	715
Royalties		4,168			4,527			8,214			8,773
Courseware sales and other		5,246			4,980			10,369			10,010

Total franchising revenues		9,621			9,919			19,271			19,498

Company-owned training centers		23,451			26,039			47,066			52,288

Total revenues		33,072			35,958			66,337			71,786

Cost of revenues		20,006			19,647			39,422			39,657
Selling, general and administrative expenses		14,057			15,564			28,256			30,937

Operating (loss) income		(991	)		747			(1,341	)		1,192

Other income		57			--			100			--
Interest expense		(87	)		(136	)		(169	)		(344	)
Investment income		31			27			66			68

(Loss) income before income taxes		(990	)		638			(1,344	)		916
(Benefit) provision for income taxes		(395	)		256			(538	)		366

Net (loss) income	$	(595	)	$	382		$	(806	)	$	550

Weighted average number of
common shares outstanding - Basic		10,451			10,388			10,451			10,388

Weighted average number of
common shares outstanding - Diluted		10,451			10,388			10,451			10,388

Basic (Loss) Earnings Per Share	$	(0.06	)	$	0.04		$	(0.08	)	$	0.05

Diluted (Loss) Earnings Per Share	$	(0.06	)	$	0.04		$	(0.08	)	$	0.05

See accompanying notes to consolidated financial statements.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 2004 and 2003
(Dollars in thousands)

		Six months ended June 30,
	2004			2003

Cash flows from operating activities:
Net (loss) income	$	(806	)	$	550
Adjustments to reconcile net (loss) income to net cash and cash
equivalents (used in) provided by operating activities:
Depreciation and amortization		3,268			3,468
Provision for bad debts		577			37
Gain on disposal of property and equipment		8			(8	)
Cash (used in) provided by the change in:
Accounts receivable		(1,680	)		513
Inventories		171			22
Prepaid expenses and other assets		320			(869	)
Income taxes		(477	)		4,165
Accounts payable		(723	)		1,057
Deferred revenue		(937	)		1,838
Other liabilities		(604	)		354
Deferred rent		(12	)		277

Net cash (used in) provided by operating activities		(895	)		11,404

Cash flows from investing activities:
Additions to property and equipment		(1,300	)		(2,292	)
Proceeds from sale of property and equipment		--			36

Net cash used in investing activities		(1,300	)		(2,256	)

Cash flows from financing activities:
Proceeds from exercise of stock options		8			--
Proceeds from issuance of debt		--			10,939
Principal payments on debt obligations		(1,645	)		(16,239	)

Net cash used in financing activities		(1,637	)		(5,300	)

Net (decrease) increase in cash and cash equivalents		(3,832	)		3,848

Cash and cash equivalents at beginning of period		10,850			8,585

Cash and cash equivalents at end of period	$	7,018		$	12,433

Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	152		$	284

Income taxes	$	583		$	581

See accompanying notes to consolidated financial statements.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

1.	Description of Business

New Horizons Worldwide, Inc. (“New Horizons,” or the “Company”) owns and franchises computer-training centers. The Company’s training centers provide application software, technical certification, and business skills training to a wide range of individuals and employer-sponsored individuals from domestic and international public and private corporations, service organizations and government agencies worldwide. Additionally, the Company supplies externally licensed curriculum and courseware materials to its franchisees. As of June 30, 2004, the Company and its franchisees delivered training in 25 company-owned and 233 franchised locations in 53 countries around the world.

2.	Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (all of which are normal and recurring) necessary to present fairly the financial position of the Company at June 30, 2004 and the results of operations for the six month periods ended June 30, 2004 and 2003. The statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report for the year ended December 31, 2003.

Certain items have been reclassified to conform to 2004 presentation.

3.	Stock-Based Compensation

The Company accounts for stock-based employee compensation as prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and, effective December 31, 2002, adopted Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” that amends the disclosure and transition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 requires pro forma disclosures of net income and net income per share as if the fair value based method of accounting for stock-based awards had been applied for employee grants. It also requires the disclosure of option status on a more prominent and frequent basis. Such disclosure for the six month periods ended June 30, 2004 and 2003 are presented below. The Company accounts for stock options and warrants issued to non-employees based on the fair value method, but has elected the intrinsic value method for grants to employees and directors. Under the fair value based method, compensation cost is recorded based on the value of the award at the grant date and is recognized over the service period. Under the intrinsic value method, compensation cost is recorded based on the difference between the exercise price of the stock option and the fair value of the underlying stock on date of grant.

At June 30, 2004, the Company has two stock-based employee compensation plans. No stock-based employee compensation cost is reflected in the results of operations, as all options granted under those plans had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant.

If the Company accounted for stock options and warrants issued to employees based on the fair value method, results of operations for the six month periods ending June 30, 2004 and 2003 would have been as follows:

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

		Three months ended June 30,
		2004			2003

Net (loss) income, as reported	$	(595	)	$	382
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects		(370	)		(344	)

Pro forma net (loss) income	$	(965	)	$	38

Pro forma net (loss) income per common share - Basic	$	(0.09	)	$	0.00

Pro forma net (loss) income per common share - Diluted	$	(0.09	)	$	0.00

		Six months ended June 30,
		2004			2003

Net (loss) income, as reported	$	(806	)	$	550
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects		(966	)		(871	)

Pro forma net loss	$	(1,772	)	$	(321	)

Pro forma net loss per common share - Basic	$	(0.17	)	$	(0.03	)

Pro forma net loss per common share - Diluted	$	(0.17	)	$	(0.03	)

The fair value of each option grant was estimated as of the grant date using the Black-Scholes option-pricing model assuming a risk-free interest rate of 3.3%, volatility of 85%, and zero dividend yield for 2004 grants, a risk-free interest rate of 2.3%, volatility of 67%, and zero dividend yield for 2003 grants.

4.	Business Segment Information

The Company’s business units have been aggregated into two reportable segments, company-owned locations and franchising. The two segments are managed separately due to differences in their sources of revenues and services offered. The company-owned training centers reporting unit operates wholly-owned computer training centers in 15 metropolitan cities within the continental United States and generates revenue through the sale and delivery of PC applications, technical software training courses and business skills courses. The franchising segment franchises domestic and international computer training centers and provides computer training instruction, sales, and management concepts to franchisees. The franchising segment earns revenues from initial franchise fees, on-going royalties from franchise operations, and the sale of courseware and other products to franchisees.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables:

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

For the three months ended June 30, 2004:

		Company-owned					Executive
		Centers			Franchising		Office		Consolidated

Revenues from external customers	$	23,451		$	9,621	$	--	$	33,072
Inter-segment revenues		--			2,071		--		2,071
Depreciation and amortization		718			837		--		1,555
Interest expense		87			--		--		87
Interest income		15			16		--		31
Net income (loss) before income taxes		(1,300	)		310		--		(990	)
Income tax provision (benefit)		(517	)		122		--		(395	)
Net income (loss)		(783	)		188		--		(595	)
Total assets		57,239			22,294		14,101		93,634
Capital expenditures		473			137		--		610
Accounts receivable		6,860			8,695		44		15,599

For the three months ended June 30, 2003:

		Company-owned					Executive
		Centers			Franchising		Office		Consolidated

Revenues from external customers	$	26,039		$	9,919	$	--	$	35,958
Inter-segment revenues		--			2,169		--		2,169
Depreciation and amortization		960			763		--		1,723
Interest expense		136			--		--		136
Interest income		14			13		--		27
Net income (loss) before income taxes		(182	)		820		--		638
Income tax provision (benefit)		(67	)		323		--		256
Net income (loss)		(116	)		498		--		382
Total assets		72,572			16,878		18,633		108,083
Capital expenditures		1,001			470		--		1,471
Accounts receivable		9,727			9,328		21		19,076

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

For the six months ended June 30, 2004:

		Company-owned					Executive
		Centers			Franchising		Office		Consolidated

Revenues from external customers	$	47,066		$	19,271	$	--	$	66,337
Inter-segment revenues		--			4,315		--		4,315
Depreciation and amortization		1,507			1,761		--		3,268
Interest expense		169			--		--		169
Interest income		31			35		--		66
Net income (loss) before income taxes		(2,386	)		1,042		--		(1,344	)
Income tax provision (benefit)		(944	)		406		--		(538	)
Net income (loss)		(1,442	)		636		--		(806	)
Total assets		57,239			22,294		14,101		93,634
Capital expenditures		833			467		--		1,300
Accounts receivable		6,860			8,695		44		15,599

For the six months ended June 30, 2003:

		Company-owned					Executive
		Centers			Franchising		Office		Consolidated

Revenues from external customers	$	52,288		$	19,498	$	--	$	71,786
Inter-segment revenues		--			4,325		--		4,325
Depreciation and amortization		1,963			1,505		--		3,468
Interest expense		344			--		--		344
Interest income		35			33		--		68
Net income (loss) before income taxes		(884	)		1,800		--		916
Income tax provision (benefit)		(328	)		694		--		366
Net income (loss)		(557	)		1,107		--		550
Total assets		72,572			16,878		18,633		108,083
Capital expenditures		1,587			705		--		2,292
Accounts receivable		9,727			9,328		21		19,076

5.	Earnings Per Share

The Company computes earnings per share based on SFAS No. 128, “Earnings Per Share” (EPS). SFAS No. 128 requires the Company to report Basic EPS, as defined therein, which assumes no dilution from outstanding stock options, and Diluted EPS, as defined therein, which assumes dilution from outstanding stock options. Earnings per share amounts for all periods presented have been calculated to conform to the requirements of SFAS No. 128.

The computation of Basic EPS is based on the weighted average number of shares outstanding during the period. The computation of Diluted EPS is based upon the weighted average number of shares outstanding, plus shares that would have been outstanding assuming the exercise of all “in-the-money” outstanding options and warrants, computed using the treasury stock method.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

Securities that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the three and six month periods ended June 30, 2004 totaled 2,243,924 and 2,207,812, respectively. Securities that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the three and six month periods ended June 30, 2003 totaled 2,236,114 and 2,236,277, respectively.

Debt

On February 27, 2003, the Company consummated a credit agreement with Wells Fargo Bank, National Association (the “Wells Fargo Credit Agreement”). Upon execution of the Wells Fargo Credit Agreement, the available funds under the facility totaled $12,139, consisting of a term loan of $10,639 and revolving loans of $1,500. As of June 30, 2004, the term loan has a total commitment equal to its outstanding balance of $5,921. Quarterly principal payments of $750 for the term loan commenced on March 31, 2003 and continue through the term loan’s maturity on February 15, 2005. The revolving loan has a total commitment of $1,500 under which loans are available through maturity and which $0 was outstanding as of June 30, 2004. Any unpaid principal and interest balances associated with the term and revolving loans are due upon maturity of the loans on February 15, 2005. The revolving loan also includes a $1,000 sub-limit for the issuance of standby and commercial letters of credit. One standby letter of credit is outstanding under the revolving loan as of June 30, 2004 for $650. At June 30, 2004, $850 was available under the Wells Fargo Credit Agreement.

Interest related to the Wells Fargo Credit Agreement is paid monthly, bimonthly, or quarterly and is based on the “Base Rate” or “Eurodollar Base Rate,” whichever is applicable to the loan, plus margins based on Adjusted EBITDA, as defined in the Wells Fargo Credit Agreement. The Base Rate is a daily fluctuating rate per annum equal to the higher of the Prime Rate or the Federal Funds Rate plus 1.50%. The Eurodollar Base Rate is the rate per annum for United States dollar deposits equal to the Inter-Bank Market Offered Rate, which approximates the London Inter-Bank Market rate plus 3.75%. Commitment fees of 0.5%, are paid quarterly for any unused portion of the revolving loan commitment. The effective rate of the term loan as of June 30, 2004 was 5.31%.

The Wells Fargo Credit Agreement requires the maintenance of certain financial ratios and contains other restrictive covenants, including restrictions on the occurrence of additional indebtedness and acquisitions. As of June 30, 2004, the Company was in compliance with all covenants per the agreement except for the minimum quarterly adjusted EBITDA ratio. The Company received a letter from Wells Fargo Bank, National Association, dated July 26, 2004, waiving the bank’s default rights with respect to the breach during the quarter ended June 30, 2004.

The Wells Fargo Credit Agreement is secured by the Company’s cash and cash equivalents, accounts receivable, intangible assets, and investments, if any.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

7.	Other Current Liabilities

Other current liabilities consist of:

		June 30,		December 31,
		2004		2003

Accounts payable to franchises	$	1,767	$	2,664
Accrued wages and commissions		4,137		4,687
Royalties and fees payable to courseware partners		5,453		3,602
Accrued operating expenses and other		3,139		3,660

	$	14,496	$	14,613

8.	Refundable Income Taxes

Refundable income taxes represent estimated excess federal and state income tax payments and income tax refunds due to the Company. The Company expects to receive $1,457 of refundable income taxes in the form of cash during 2004.

9.	Change in Estimates

Revenue recognition rates utilized for training vouchers, club memberships, and technical certification programs are based on the results of student attendance analyses performed by the Company.

The Company’s student attendance analyses have been derived from historical experience over a period of several years in which the learning programs have been in place. Historical student attendance data from the past eight analyses, or two years of trailing data, are combined to determine the estimates used in revenue recognition. Where the Company has less than two years of historical experience, revenues are recognized on a straight-line basis over the duration of the programs.

Generally, the student attendance analyses indicate a greater percentage of attendance in the earlier months and the last month of the time periods associated with training vouchers, club memberships, and technical certification programs. Thus, a greater percentage of revenues are recognized in these time periods than if the straight-line method were applied.

The continual revision of estimated student attendance rates results in cumulative adjustments to revenue recognized for sales transactions consummated in prior periods. Upon completion of the historical student attendance analyses in the second quarter of 2004, the Company determined that in certain programs, students were taking slightly less time to complete classes compared to past historical experience. As a result of the student attendance analyses performed in the second quarter of 2004, the Company adjusted its revenue recognition rates and recorded a decrease in deferred revenue of $13, resulting in pre-tax income, net of adjustments to related deferred commissions, of $12. For the six months ended June 30, 2004, the adjustments to deferred revenue amounted to $355, resulting in pre-tax income, net of adjustments to related deferred commissions, of $321.

Although the Company believes its current revenue recognition rates are consistent with current student attendance patterns, no assurance can be given that such rates will not change in the future.

NEW HORIZONS WORLDWIDE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2004
(Dollars in thousands, except per share data)

10.

Contingencies

The Company has been named as a defendant in a class action complaint filed by two former instructors in the California Superior Court for Orange County. The complaint alleges that the instructors working in Anaheim, Los Angeles and Sacramento facilities were improperly classified as exempt employees. The plaintiffs seek the right to collect overtime pay for hours worked in excess of 40 in a given work week and/or for hours worked in excess of eight in a given day. This litigation is currently in the initial stages of discovery and the class has not yet been certified. The Company has and will continue to vigorously defend against the allegation contained within the compliant. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company’s financial condition or results of operations.

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

The following discussion should be read in conjunction with the June 30, 2004 Condensed Consolidated Financial Statements and related notes and the Company's annual report for the year ended December 31, 2003.

(Dollars in thousands)

GENERAL

The Company operates and franchises computer training centers. The Company has two reporting units, company-owned training centers and franchising operations. The company-owned training centers reporting unit operates wholly-owned computer training centers in 15 metropolitan cities within the continental United States and generates revenue through the sale and delivery of PC applications, technical software training courses and business skills courses. The franchising operations reporting unit earns revenue through the sale of New Horizons master and unit franchises within the United States and abroad, on-going royalties in return for providing franchises systems of instruction, sales, and management concepts concerning computer training, and the sale of courseware materials and eLearning products to franchises. The franchising operations reporting unit has places of business in Anaheim, California; Amsterdam, Netherlands; and Singapore. Each reporting unit operates within the IT training industry.

CRITICAL ACCOUNTING POLICIES

Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. The following critical accounting policies include: (a) accounting estimates made by management that were highly uncertain at the time of estimation, and (b) accounting estimates in which there were a range of potential reasonable estimates the Company could have used in the current period and changes in these estimates are reasonably likely to occur from period to period. Changes in these estimates could potentially have a material impact on the presentation of the Company’s financial position or results of operations.

Revenue Recognition

The Company recognizes revenue for training vouchers, technical tracks and programs, and club arrangements of certain durations based on estimates of how the Company delivers training to customers over the service period. These estimates differ from the straight-line method. Combined, these products comprise a material amount of the Company’s consolidated revenues. Management has determined historical student attendance pattern rates are the best estimate of how the Company will deliver training to customers in the future.

The Company performs historical student attendance analyses on a quarterly basis. In these analyses, the Company reviews approximately 15% of the sales transactions for these products, selected randomly, to determine the number of courses delivered under each arrangement and the time period between each course date and the invoice date. Based on this data, the Company is able to determine the historical rates at which customers have attended class for each product type. In order to provide customers with adequate time to take courses, the Company allows a period of one-year from the date of sale before performing student attendance analyses.

Historical student attendance data from the past eight analyses, or two years of trailing data, are combined to determine the estimates used in revenue recognition.

Due to the use of estimated delivery rates rather than actual delivery, revenue recognition for training vouchers, technical tracks and programs, and club arrangements based on estimated delivery rates could differ materially from that of actual course delivery. Additionally, the Company’s estimates based on historical student attendance patterns may not accurately forecast future attendance patterns.

The continual revision of estimated student attendance rates may result in cumulative adjustments to revenue recognized for sales transactions consummated in prior periods. Upon completion of historical student attendance rates in the second quarter of 2004, the Company recorded an increase in revenue of $13. For the six months ended June 30, 2004, the Company recorded total increase in revenue of $355.

Deferred Costs

The Company defers those direct and incremental costs associated with the sale of products and services for which revenue is deferred, including commissions paid to sales persons and technology and hosting costs associated with the Company’s eLearning products. Deferred costs are recorded to earnings at the same rate that the associated product revenues are recorded to earnings.

Accounts Receivable

Accounts receivable is presented net of allowances for uncollectible accounts. The Company’s management makes estimates of the collectibility of trade receivables based on historical bad debts, customer concentrations, customer credit-worthiness, current economic trends, and geographic location.

The Company records an allowance for bad debt separately for its franchising and company-owned training centers segments. The franchising segment records an allowance for bad debt each period based upon specifically identified uncollectible receivables, the geographic location of the customer, and historical experience of bad debts. The company-owned training centers segment records an allowance for bad debt based upon a percentage of outstanding receivables. The percentage applied differs by each of the individual centers within the company-owned training centers segment and is estimated based on each center’s historical experience.

Deferred Tax Asset

In preparing the consolidated financial statements, the Company is required to estimate its income taxes for federal and state purposes. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must then assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes that recovery is not likely, must establish a valuation allowance. To the extent a valuation allowance is established or this allowance is increased in a period, an expense must be included within the tax provision in the consolidated statements of operations.

The Company regularly analyzes the future recovery of its deferred tax assets based on its best estimates of future taxable income. Taxable income is forecasted over the periods in which the deferred tax assets relate. In order to realize its deferred tax asset balance of $25,584 at June 30, 2004, the Company’s future taxable income must exceed approximately $63,960.

Accounting for Goodwill

The goodwill balances attributable to the Company’s franchising and company-owned centers reporting units are tested for impairment annually as of December 31^st and also in the event of an impairment indicator. Impairment tests are comprised of two steps. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the reporting unit’s goodwill is considered impaired and the second step of the impairment test is required. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of reporting unit goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess, limited to the carrying amount of reporting unit goodwill.

The Company utilizes outside valuation consultants in determining the fair value of its reporting units. The consultant utilizes both the income approach and the market approach in determining fair value. The consultant’s fair value estimates using the income approach utilize the Company’s best estimates of future operating performance.

OVERVIEW

The IT training industry is highly fragmented. Customers are serviced by any or all of the following: multi-national technology companies that specialize in hardware and software implementations and provide initial training to support these products; electronics merchandisers that offer supplementary applications training; independent training providers such as the Company; and accredited public and private institutions.

From 1995 to 2000, the IT training industry exhibited significant growth as a result of the advent of the Internet and the increase in number of PCs owned by households and used in the workplace. Additionally, the strength of the domestic capital markets during this time period fueled commercial growth and expansion that resulted in significant hardware and software implementations at commercial entities and a strong demand for IT professionals and computer-savvy employees.

Since 2001, the IT training industry has experienced a decline from previous levels. Corporate IT spending for hardware, software implementations, and employee training declined consistently with the decline in the economy and corporate earnings. During this period, corporations have been relying on existing IT resources due to fiscal constraints and the lack of a revolutionary application that drives immediate business efficiencies.

In reaction to the aforementioned industry trends, the Company has made and will continue to make reductions in its cost structure, identify additional sources of revenue, segment its sales force, and create products for increasingly complex customer needs.

Reductions in Cost Structure

As a direct response to decreases in sales opportunities and student attendance, the Company has significantly reduced its cost structure by decreasing headcount and capacity, and by maintaining certain class delivery efficiency metrics.

The Company monitors its exposure to compensation expense in terms of selling, instructor, and other non-selling headcount. During the quarter ended June 30, 2004, the Company reduced the staff of its franchising unit by 20. The following table illustrates the Company’s selling, instructor, and other non-selling headcount:

	June 30,	June 30,
	2004	2003

Company-owned training centers headcount
Selling	220	250
Instructor	221	246
Other non-selling	252	292

Company-owned training centers	693	788

Franchising operations	144	164

Total	837	952

The Company has either sublet or terminated its lease agreements for certain Company facilities that had excess capacity, which resulted from decreases in student attendance and training events. As a result of these subleases and lease terminations, the Company recognized cost savings of approximately $299 in the second quarter of 2004. The Company intends to continue to sublet or terminate its leases if and when the opportunity exists at under-utilized Company facilities.

To maintain minimum class delivery efficiency metrics, the Company must scale down operations consistent with decreases in student attendance. These metrics include number of students, number of training events, students per event, instructor utilization, and average price per class day. Instructor utilization represents the ratio of class days taught to the number of available instructor days. The average price per day metric approximates the dollar value, per student class day, of products sold during a period.

Maintaining minimum levels of instructor utilization and students per class performance metrics have allowed the Company to consolidate course schedules. Schedule consolidation has reduced course delivery costs through a reduction in instructor headcount and the number of courses delivered.

The following table illustrates the Company’s class delivery efficiency metrics within the company-owned training centers for the three months ended June 30, 2004 and 2003:

		2004		2003

Training events		9,919		10,806
Number of students		80,576		95,255
Students per event		8.1		8.8
Instructor utilization		90%		85%
Average price per day	$	235	$	225

Additional Sources of Revenue and Segmented Sales Force

Historically, the Company’s sales force almost exclusively targeted small-to-medium size businesses. Decreased sales opportunities at small-to-medium businesses have resulted due to weak corporate operating performance, the perception that employee training is discretionary, and unemployment levels that find qualified IT professionals without jobs. As a result, the Company identified additional revenue sources by dividing the IT training market into three segments: consumers, small-to-medium businesses, and governmental agencies and large corporations (together known as the enterprise/government segment).

Each market segment has distinctly different characteristics. Consumers, or non-employer sponsored individuals, need technical certifications and vendor specific skills required to gain employment in the IT industry. Small-to-medium businesses necessitate IT solutions to customer specific business problems. Enterprise/government customers require IT solutions to their business problems, as well as additional logistical support in the coordination of delivery of IT training in multiple locations and modalities.

The Company estimates the enterprise/government segment to spend approximately $3.6 billion annually on IT related training. Given the number of domestic and international delivery locations within the New Horizons network, the Company’s eLearning product offerings, and the release of the Integrated Learning Manager, the Company believes it is poised to effectively service this segment. During 2003, the Company invested significantly in enterprise/government segment infrastructure and sales personnel and, as a result, both enterprise/government sales and requests for proposal activity grew throughout fiscal year 2003 and the first half of 2004.

In order to effectively sell into the consumer, small-to-medium business, and enterprise/government segments, the Company divided its sales force accordingly. Under the segmented model, sales persons focus on an individual market segment and utilize more sophisticated sales techniques in order to diagnose business problems and prescribe IT training solutions.

Increasingly Complex Customer Needs

The needs of IT training customers have become increasingly more complex. During the industry’s rapid growth, customers required specific software applications training to make employees more efficient in the workplace and to train their IT staff on recently acquired technologies and new IT standards.

Currently, customers are seeking IT solutions to customer specific business problems, as well as multiple delivery methods, and a high return on investment. To satisfy current customer needs, the Company develops relevant product offerings for each market segment, provides blended learning solutions, and obtains the highest quality rankings available in the industry.

To address the customer specific business problems of small-to-medium businesses and enterprise/government customers, the Company offers a high volume of technical courses, cross-vendor platform programs and vendor neutral programs that provide students appropriate technical knowledge to solve current day business issues such as information security, network administration, project management, and fundamental business skills and written communication.

In response to consumer needs, the Company offers a multitude of programs that enable students to obtain technical certifications necessary to gain employment in the IT profession. These certification programs include Microsoft Certified System Administrator, Microsoft Certified System Engineer, A+, Network +, Security +, and Cisco Certified Network Administrator. Additionally, the Company offers English as a second language (ESL) courses for international consumers. In 2004, the Company released a series of courses intended for consumers in the field of health information management.

The Company offers integrated learning solutions via both instructor-led training and eLearning. Through the Company’s Online LIVE and Online ANYTIME product offerings, the Company has products that offer online access to an array of technology-based training courses and content, in addition to its instructor-led course offerings. The Company’s eLearning products have been well received, primarily because eLearning products provide customers the ability for mobile and remote workers to access training through web-conferencing software and self-paced content libraries. Additionally, eLearning products are typically less expensive than traditional, instructor-led training.

To monitor the quality of instruction, the Company utilizes Metrics That Matter scores, which are independent student satisfaction surveys conducted at each of Microsoft’s Certified Partner Learning Solutions centers. According to these surveys, the Company’s quality rankings have been amongst the highest in the industry. At June 30, 2004 and 2003, New Horizons had more centers ranked in the top twenty-five in overall Microsoft training customer satisfaction than all other training centers combined.

Successful product development materializes into customer demand for New Horizons training products. The Company analyzes two key performance indicators in judging the demand for New Horizons training products. These key performance indicators include non-eLearning courseware sales and system-wide sales comparisons.

Non-eLearning courseware sales are comprised primarily of physical courseware and other class materials, such as kits and books, sold to the franchise network. The Company views these figures as an indicator of the sales and delivery volume occurring throughout the franchise network.

Non-eLearning courseware sales for the quarters ended June 30, 2004 and 2003 are illustrated in the table below:

		2004		2003

Non-eLearning courseware sales	$	3,620	$	3,528

System-wide revenues are defined as the revenues from company-owned training centers and revenues reported to the Company by its domestic and international franchises. Same center revenues represent revenues from company-owned training centers and franchises open during both periods of comparison. Total system-wide revenues for the quarters ended June 30, 2004 and 2003 are illustrated in the table below:

		2004		2003

Total system-wide revenues	$	100,561	$	102,000
System-wide same center revenues		98,784		97,352

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2004

Revenues

Revenues totaled $33,072 for the three months ended June 30, 2004, a decrease of $2,886, or 8%, from $35,958 for the three months ended June 30, 2003. The revenue decrease is the result of the net effect of a revenue decrease at company-owned training centers of $2,588 and a decrease in franchising revenue of $298.

Company-Owned Training Centers

Company-owned training centers earned revenue of $23,451 during the second quarter of 2004, a decrease of $2,588, or 10%, from $26,039 during the second quarter of 2003. The decrease in company-owned training center revenue is primarily the result of continued weakness in demand for training by small-to-medium businesses.

The Company, upon completing its historical student attendance analyses, revised revenue recognition rates utilized for training vouchers, club memberships, and technical certification programs. As a result of these revised rates, the Company recorded an increase to revenue of $13 in the second quarter of 2004.

Franchising

Franchising revenues totaled $9,621 during the second quarter of 2004, a decrease of $298 from $9,919 during the same period in 2003. The decrease in franchising revenues resulted from decreases in franchise fees and franchise royalties, net against an increase in courseware sales. Franchise fees decreased $205 from the same period in 2003, resulting from fewer franchise sales opportunities. Franchise royalties decreased $359 due to the combination of a lower number of domestic franchises and the mix of revenue for international and North American franchises. The number of domestic franchises decreased by 10, or 8%, in the second quarter of 2004 versus the same period in 2003. The Company’s effective royalty rates for international franchises are less than those of North American franchises. In the second quarter of 2004, international franchise revenues comprised 28% of system-wide revenues, whereas in the second quarter of 2003 international franchise revenues comprised only 25% of system-wide revenues.

System-wide

System wide revenues totaled $100,561 during the quarter ended June 30, 2004, a decrease of 1%, or $1,439, from $102,000 during the same period in 2003.

The decrease in system-wide revenues is comprised of the net effect of revenue decreases at company-owned training centers and North American franchises and increase in revenue at international franchises. As discussed above, company-owned training center revenue decreased 10%, or $2,588, in the second quarter of 2004, as compared to the same period in 2003. Similar to the company-owned training centers, North American franchises have experienced decreases in revenue due to the weakness in demand for computer training by small-to-medium businesses. However, the North American franchises revenue decrease was intensified by the closures of 10 franchises, as mentioned previously. In total, North American franchise revenues decreased 4% or $2,244, in the second quarter of 2004. International franchises have experienced revenue increases of $3,406, or 13%, in the second quarter of 2004, as compared to the same period in 2003. Increases in international franchise revenues resulted primarily from strong growth in Middle Eastern franchises, due to governmental spending on IT infrastructure.

Cost of Revenues

Cost of revenues increased $359 or 2% in the second quarter of 2004 compared to the same period in 2003. As a percentage of revenues, cost of revenues in the second quarter increased to 60% in 2004 from 55% in 2003. The increase in the cost of revenues in absolute dollars was a result of an increase in bad debt reserve to provide for potentially uncollectible receivables from franchisees that have ceased, or are at risk of ceasing, operations.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $1,507 or 10% in the second quarter of 2004 as compared to the second quarter of 2003. As a percentage of revenues, selling, general and administrative expenses remained stable at 43%. The decrease in selling, general and administrative expenses in absolute dollars resulted from lesser amount of commission expense and incentive compensation along with reductions in personnel at company-owned training centers.

Interest Expense

Interest expense totaled $87 for the second quarter of 2004, a decrease of $49 from $136 recorded in the second quarter of 2003. The decrease is due to lesser amounts of outstanding debt in 2004 as compared to 2003.

SIX MONTHS ENDED JUNE 30, 2004

Revenues

Revenues totaled $66,337 for the six months ended June 30, 2004, a decrease of $5,449, or 8%, from $71,786 for the six months ended June 30, 2003. The revenue decrease is the result of the net effect of a revenue decrease at company-owned training centers of $5,222 and a decrease in franchising revenue of $227.

Company-Owned Training Centers

Company-owned training centers earned revenue of $47,066 during the six months ended June 30, 2004, a decrease of $5,222, or 10%, as compared to the same period in 2003. The decrease in company-owned training center revenue is primarily the result of continued weakness in demand for training by small-to-medium businesses.

Franchising

Franchising revenues totaled $19,271 during the six month period ended June 30, 2004, a decrease of $227 as compared to the same period in 2003. The decrease in franchising revenues resulted from decreases in franchise fees and franchise royalties, net against an increase in courseware sales. Franchise fees decreased $27 from the same period in 2003, resulting from fewer franchise sales opportunities. Franchise royalties decreased $559 due to the combination of a lower number of domestic franchises and the mix of revenue for international and North American franchises. The number of domestic franchises decreased by 10, or 8%, in the six month period ended June 30, 2004 versus the same period in 2003. The Company’s effective royalty rates for international franchises are less than those of North American franchises. In the first six months of 2004, international franchise revenues comprised 28% of system-wide revenues, whereas in the first six months of 2003, international franchise revenues comprised only 24% of system-wide revenues.

System-wide

System wide revenues totaled $198,614 during the six months ended June 30, 2004, a decrease of 2%, or $4,454, from $203,068 during the same period in 2003.

The decrease in system-wide revenues is comprised of the net effect of revenue decreases at company-owned training centers and North American franchises and increase in revenue at international franchises. As discussed above, company-owned training center revenue decreased 10%, or $5,222, in the first six months of 2004, as compared to the same period in 2003. Similar to the company-owned training centers, North American franchises have experienced decreases in revenue due to the weakness in demand for computer training by small-to-medium businesses. However, the North American franchises revenue decrease was intensified by the closures of 10 franchises. In total, North American franchise revenues decreased 5% or $5,286, in the first six months of 2004. International franchises have experienced revenue increases of $6,097, or 12%, in the first six months of 2004, as compared to the same period in 2003. Increases in international franchise revenues resulted primarily from strong growth in Middle Eastern franchises, due to governmental spending on IT infrastructure.

Cost of Revenues

Cost of revenues decreased $235 or 1% during the six months ended June 30, 2004, as compared to the same period in 2003. As a percentage of revenues, cost of revenues in the first six months increased to 59% in 2004 from 55% in 2003. The decrease in the cost of revenues in absolute dollars was a result of decreased revenues, and the effect of cost reduction initiatives that decrease facilities costs at company-owned training centers offset by the increase in bad debt reserve.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $2,681 or 9% for the six month period ended June 30, 2004, as compared to the same period in 2003. As a percentage of revenues, selling, general and administrative expenses remained stable at 43%. The decrease in selling, general and administrative expenses in absolute dollars resulted from lower commission expense and incentive compensation along with reductions in personnel at company-owned training centers.

Interest Expense

Interest expense totaled $169 for the six months ended June 30, 2004, a decrease of $175 from $344 recorded in the same period of 2003. The decrease is due to lower outstanding debt in 2004 as compared to 2003.

Liquidity and Capital Resources

The Company’s sources of cash are comprised of sales of IT training courses at company-owned training centers, the sale of master and unit franchise territories, continuing royalties from franchises, courseware sales to franchises, and available credit on the Company’s debt facility with Wells Fargo Bank.

Historically, the Company has been able to fund operations and meet its debt obligations through cash provided by operating activities. Cash used in operations for the six months ended June 30, 2004 totaled $895. Cash provided by operations for the six months ended June 30, 2003 totaled $11,404.

The Company’s future obligations consist primarily of its debt facility with Wells Fargo Bank, trade payables and future delivery of IT training courses and off-balance sheet obligations and contractual commitments.

At June 30, 2004, the outstanding balance on the Company’s debt facility totaled $5,921. The debt facility with Wells Fargo Bank requires the Company to maintain minimum financial ratios and contains restrictive covenants including restrictions on the occurrence of additional indebtedness and acquisitions. As of June 30, 2004, the Company was in compliance with all covenants and minimum financial ratios per the credit agreement, except for the minimum quarterly adjusted EBITDA ratio. The Company has received a waiver letter from Wells Fargo Bank waiving the bank’s default rights with respect to the breach during the quarter ended June 30, 2004. The Company believes its relationship with Wells Fargo is good as of June 30, 2004. Based on this relationship, the Company believes it may have access to additional capital in the future, in the form of debt secured by the assets of the Company.

At June 30, 2004, the Company’s accounts payable and accrued liabilities equaled $18,040. The Company believes these amounts will be required to be paid in cash during the next year. Additionally, the Company’s deferred revenue balance, which represents the Company’s obligation to provide future IT training to customers, totaled $19,095 at June 30, 2004. The Company believes certain of these obligations will be performed during the next year, requiring cash outflows for incremental delivery costs of approximately $5,700.

The nature of the IT training industry requires substantial cash commitments for the purchase of computer equipment, software, and training facilities. During the first six months of 2004, the Company made capital expenditures of approximately $1,300. Capital expenditures for 2004 are expected to total approximately $3,500 to $4,000.

The Company has never paid cash dividends on its common stock and has no present intention to pay any cash dividends in the foreseeable future.

Management believes that existing capital, anticipated cash flows from operations, and current and anticipated borrowings under its credit facility, will be adequate to support its current and anticipated capital and operating expenditures for the foreseeable future.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company’s off-balance sheet arrangements and contractual obligations consist of outstanding guarantees and surety bonds.

The Company has outstanding guarantees and surety bonds of $650 and $1,073, respectively. Outstanding guarantees pertain to a letter of credit issued to a landlord of a certain company-owned training center as a security deposit. The Company has issued surety bonds on behalf of company-owned training centers and certain franchises to guarantee performance in various states in respect to providing training to consumers. In the event the Company were to abandon training in a state where there is a surety bond, the state agency could draw against the bond to satisfy undelivered training obligations. The Company has not recorded any liability for these guarantees and surety bonds within its financial statements as of June 30, 2004.

INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

The statements made in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements. Such statements are based on current expectations but involve risks, uncertainties, and other factors which may cause actual results to differ materially from those contemplated by such forward-looking statements. All statements that address operating performance, events or developments that management anticipates will occur in the future, including statements relating to future revenue, profits, expenses, income and earnings per share or statements expressing general optimism about future results, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). In addition, words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to safe harbors created in the Exchange Act.

The Company has historically grown through the sale of franchises, the opening of new company-owned facilities, the buyback of franchises in certain markets, and revenue growth from the existing training centers.

In the future, the Company plans to continue to grow through improved revenues and profits at company-owned and franchised locations; the sale of additional franchises; the development of new course offerings and market segments than can be delivered through the existing distribution channel; and the acquisition of companies in similar or complementary businesses.

The Company’s growth strategy is premised on a number of assumptions concerning trends in the IT training industry. These include the continuation of growth in the market for IT training and the trends toward outsourcing and eLearning. To the extent that the Company’s assumptions with respect to any of these matters are inaccurate, its results of operations and financial condition could be adversely affected. Important factors that may cause the results contemplated by such forward-looking statements to vary include, but are by no means limited to: (i) the Company’s ability to respond effectively to potential changes in the manner in which computer training is delivered, including the increasing acceptance of technology-based training, including through the Internet, which could have more favorable economics with respect to timing and delivery costs and the emergence of just-in-time interactive training; (ii) the Company’s ability to attract and retain qualified instructors and management employees; (iii) the rate at which new software applications are introduced by manufacturers and the Company’s ability to keep up with new applications and enhancements to existing applications; (iv) the level of expenditures devoted to upgrading information systems and computer software by customers; (v) the Company’s ability to compete effectively with low cost training providers who may not be authorized by software manufacturers; and (vi) the Company’s ability to manage the growth of its business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to changes in interest rates. It monitors the risks associated with interest rates and financial instrument positions.

The Company’s primary interest rate risk exposure results from floating rate debt on its line of credit. As of June 30, 2004, the Company’s total bank debt consisted of floating rate debt. If interest rates were to increase 100 basis points (1.0%) from June 30, 2004 rates, and assuming no changes in bank debt from the June 30, 2004 levels, the additional annual expense would be approximately $59 on a pre-tax basis. The Company currently does not hedge its exposure to floating interest rate risk.

The Company’s revenue derived from international operations is paid by its franchisees in United States dollars and, accordingly, the foreign currency exchange rate fluctuation is not material.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of June 30, 2004 (the “Evaluation Date”), have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

(b) Changes in Internal Controls

There were no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter ended June 30, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Recent Sale of Unregistered Securities

The Company has not issued or sold any securities not registered under the Securities Act of 1933, as amended, during the period covered by this Quarterly Report on Form 10-Q.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company’s Annual Meeting of Stockholders was held on May 4, 2004.

At the Annual Meeting, stockholders of the Company elected the following three nominees to serve as Directors of the Company for a three-year term until the Annual Meeting in 2007 and until each of their respective successors has been elected and qualified: David A. Goldfinger, Richard L. Osborne and Ching Yuen (Sam) Yau.

The terms of office of the following Directors of the Company continued after the Annual Meeting:


	Term Expiring in 2005		Term Expiring in 2006

	Curtis Lee Smith, Jr		Stuart O. Smith

	William H. Heller		Thomas J. Bresnan

	Martin G. Bean		Scott R. Wilson

At the Annual Meeting, the stockholders voted on the following matters: (1) the election of three Directors whose three-year term of office will expire in 2007 and (2) the ratification of the selection of Grant Thornton LLP as the Company’s independent auditors for 2004.

The number of votes cast for or withheld with respect to each of the three nominees to serve as a Director of the Company were as follows:


NAME	FOR	WITHHELD

David A. Goldfinger	8,268,663	443,090

Richard L. Osborne	8,268,663	443,090

Ching Yuen (Sam) Yau	8,706,428	5,325

The stockholders ratified the selection of Grant Thornton LLP as the Company’s independent auditors for 2004 by the following vote:


FOR	AGAINST	ABSTAIN

8,272,932	390,133	48,688

There were no matters voted upon at the Company’s Annual Meeting to which broker non-votes applied.

For a description of the bases used in tabulating the above-referenced votes, see the Company’s definitive Proxy Statement used in connection with the solicitation of proxies for the Annual Meeting of Stockholders held on May 4, 2004.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

EXHIBIT NO.

EXHIBIT DESCRIPTION

		4.1			Waiver, dated July 26, 2004, to the Credit Agreement between the Registrant
					and Wells Fargo Bank, N.A.

		31.1			Rule 13a - 14(a) Certification of the Company's Chief Executive Officer

		31.2			Rule 13a - 14(a) Certification of the Company's Chief Financial Officer

		32.1			Section 1350 Certification of the Company's Chief Executive Officer

		32.2			Section 1350 Certification of the Company's Chief Financial Officer

b) Reports on Form 8-K

During the three-month period ended June 30, 2004, the Company filed the Current Report on Form 8-K, dated April 22, 2004 furnishing under Item 9 a press release pursuant to Regulation FD regarding the Company's first quarter results.

SIGNATURE

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 thereto duly authorized.

		NEW HORIZONS WORLDWIDE, INC.
		(Registrant)


Date:	August 9, 2004	By: /s/ Robert S. McMillan
		Robert S. McMillan
		NEW HORIZONS WORLDWIDE, INC.
		Chief Financial Officer