Investors who want to get into the public education market may be drawn to  EMO K12 Inc. (to be traded as LRN), a virtual EMO casting itself as an educational technology firm, but they ought to be looking at a real opportunity in ed-tech -  Scientific Learning (SCIL). The firm was founded by cognitive neuroscientists to commercialize their research in literacy programs as Fast ForWord®. On August 9 it filed a prospectus (download below) to offer over 7.5 million shares of common stock at five dollars per share.

I came across the opportunity checking the firm's press releases for the "catch up" edition of School Improvement Industry Provider Announcements, a monthly web-based publication that goes on hiatus in August.  The list of releases I'd missed since July provides as good a set of reasons as any to consider the investment. edbizbuzz readers will understand immediately how they offer investors a telling contrast to would-be LRN's (i.e. K12 Inc's) IPO.

The press releases I missed suggest a corporate cultured grounded in research, management and board tied into education from infancy to university, programs that the Department of Education agrees pass reasonably rigorous evaluation, and products that are subject to continuous improvement. Over the long run, that's the basis of a sustainable competitive advantage in the school improvement industry.

8/23/07..... Meeting students' instructional needs in an average 6.6 hour school day is no easy feat. It's even more challenging when dealing with struggling readers and other students who require supplemental instruction. Today that job is much easier thanks to new streamlined protocols announced by Scientific Learning Corp., makers of educational software that accelerates learning by developing the student brain to process more efficiently.

8/14/07.... The Fast ForWord® family of products, educational software that accelerates learning by developing the student brain to process more efficiently from Scientific Learning Corp, has received the highest possible rating from the What Works Clearinghouse (WWC), a research unit established by the U.S. Department of Education....

8/09/07.... Scientific Learning Corporation announced today the public offering of 7,661,638 shares of its common stock. The offering was priced at $5.00 per share. All 7,661,638 shares of common stock are being sold by Warburg, Pincus Ventures, L.P....

7/26/07.... Scientific Learning Corp. announced today that Michael A. Moses (chairman of the board for the American College of Education) and Lance R. Odden (managing director of New Providence Asset Management Corp., fmr. headmaster of the Taft School; president of the New England Association of Schools and Colleges; president of the Headmasters' Association; and a member of the executive committee of the National Association of Independent Schools) have joined its board of directors. Dr. Moses was also named Vice Chairman of the board of directors.

7/16/07.... Dr. Martha S. Burns, instructor of the Neuropathologies in Speech and Language doctoral program at the Nova Southeastern University in Ft. Lauderdale, Fla., Adjunct Associate Professor at Northwestern University and the director of Scientific Learning Corp.'s  clinical specialist market, has been elected a Fellow of the American Speech-Language-Hearing Association (ASHA).

6/29/07.... Noted Neuroscientist (Dr. Paula Tallal, founder of Rutgers University's Center for Molecular and Behavioral Neuroscience founder of Scientific Learning) Imparts to Rutgers Graduates the Key to Empowering Themselves and Others.... "You now have the greatest potential to influence many lives and so understanding the power of language is - well - power itself."

And consider the financials described in the prospectus:

For the fiscal year ended December 31, 2006, our revenue was $41.0 million, and we generated a 77% gross margin and $4.3 million of cash flow from operations. For the six months ended June 30, 2007, our revenue was $23.4 million, and we generated a 78% gross margin and used $7.1 million of cash in our operations. As of June 30, 2007, our deferred revenue was $21.1 million, and we had $9.4 million of cash and cash equivalents and no outstanding debt.

Expect more discussion of Scientific Learning's prospectus later.

I have no financial interest in K12 Inc. or Scientific Learning. The latter was a client of our RFPs service, K-12Leads and Youth Service Markets Report, some years ago. The fee for that service today is $1500 per year, and one of the reasons it is set so low is to avoid having any client exercise a material financial impact on this business.