NOBEL LEARNING COMMUNITIES INC

During the first quarter of Fiscal 2009, the Company’s Board of Directors adopted a limited duration Shareholder Rights Plan (“Rights Plan”) designed to protect the Company’s shareholders in the event of an attempt to acquire control of the Company on terms which do not secure fair value for all of the Company’s shareholders. The Rights Plan will expire, in accordance with its terms, on July 19, 2012, rather than the more common ten-year term. The four-year term was selected to provide the Company with an opportunity to maximize long-term shareholder value by enabling management of the Company to execute on its growth strategy, while protecting shareholders from a creeping acquisition or other tactics to gain control of the Company without offering all shareholders an adequate price. In addition, the Rights Plan is not intended to prevent a takeover. Instead, it is intended to encourage anyone seeking to acquire the Company to negotiate with the Company’s Board of Directors prior to attempting a takeover in order to ensure that any takeover reflects an adequate price and that the interests of all of the Company’s shareholders and other constituencies are protected.

The Company’s increase in rent and other costs at Comparable Schools for the thirty-nine weeks ended April 2, 2011 as compared to the same period ended March 27, 2010 was primarily the result of overall contractual rent and property tax escalations, marketing expenditures and company retained liabilities for workers compensation claims. Rent and other costs for the thirty-nine weeks ended April 2, 2011 as compared to the same period ended March 27, 2010 at newly opened schools was reflective of four preschools operating during the entire thirty-nine weeks ended April 2, 2011 as compared to two preschools operating during the entire thirty-nine week period ended March 27, 2010.

Comparable Schools’ rent and other costs as a percentage of revenue decreased to 24.8% from 25.2% for the thirteen weeks ended April 2, 2011 as compared to the same period ended March 27, 2010. Comparable Schools’ rent and other costs as a percentage of revenue decreased to 25.9% from 26.2% for the thirteen weeks ended April 2, 2011 as compared to the same period ended March 27, 2010. These decreases were the result of overall costs remaining relatively flat in comparison to a 4.1% and 1.9% increase in revenue for the thirteen and thirty-nine weeks ended April 2, 2011 as compared to the same periods ended March, 27, 2010, respectively.

Interest expense for the thirteen weeks ended April 2, 2011 and March 27, 2010 was $364,000 and $495,000, respectively. Interest expense for the thirty-nine weeks ended April 2, 2011 and March 27, 2010 was $1,132,000 and $1,077,000, respectively. During the thirteen weeks ended April 2, 2011, the Company had average daily debt outstanding of $20,533,000 as compared to average daily debt outstanding of $29,718,000 during the thirteen weeks ended March 27, 2010. During the thirty-nine weeks ended April 2, 2011, the Company had average daily debt outstanding of $21,373,000 as compared to average daily debt outstanding of $26,781,000 during the thirty-nine weeks ended March 27, 2010. Lower average outstanding debt was offset by an approximate 100 - 150 bps increase in interest rates under the terms of the 2008 Amended Credit Agreement, which increased interest expense by approximately $114,000 and $68,000 for the thirteen and thirty-nine week periods ended April 2, 2011 as compared to the same periods ended March 27, 2010, respectively. The 2008 Credit Agreement was amended during the third quarter of Fiscal 2010, fees incurred to provide this amendment are being amortized through June 2013. Interest expense recognized for the amortization of these fees totaled $26,000 and $78,000 for the thirteen and thirty-nine weeks ended April 2, 2011, respectively, as compared to $25,000 for the thirteen weeks ended March 27, 2010.

The Department of Justice, or DOJ, filed a lawsuit on April 29, 2009 in the U.S. District Court for the Eastern District of Pennsylvania against the Company alleging that the Company violated Title III of the ADA by excluding children with disabilities from its schools and programs. The complaint sought an unspecified amount in compensatory damages and civil penalties, as well as declaratory and injunctive relief.