Press Releases

Scientific Learning Corporation to Acquire Soliloquy Learning

12/18/07

Media Contact:
Jessica Lindl
Vice President of Marketing
Scientific Learning Corporation
(510) 625-6784
jlindl@scilearn.com

Investor Contact:
Jane A. Freeman
Senior Vice President and CFO
Scientific Learning Corporation
(510) 625-2281
investorrelations@scilearn.com

OAKLAND, CA – Scientific Learning (NASDAQ: SCIL), has entered into a definitive agreement to acquire Soliloquy Reading Assistant™ and all other assets of the Soliloquy Learning business from JTT Holdings, Inc. Reading Assistant is a unique software tool that combines advanced speech recognition technology with scientifically-based interventions to help elementary and secondary students strengthen their reading fluency, vocabulary and comprehension toward becoming proficient, life-long readers.

“The acquisition of the Reading Assistant product line will bring a significant opportunity for us to combine speech verification technology with reading and neuroscience research. This unique innovation effectively addresses the difficult issue of providing every student with rigorous and consistent fluency training," said Robert C. Bowen, Chief Executive Officer and Chairman of Scientific Learning. “Scientific Learning has devoted more than a decade to bringing computer-based, neurological interventions to rapidly and permanently build brain processing efficiency to improve the academic achievement of struggling learners. Reading Assistant broadens our brain-based solutions and will give our growing direct sales organization increased access to the $3 billion mainstream reading market.”

Providing effective fluency training for all students is a challenge in the classroom because teachers do not have enough resources and/or time to give the consistent and rigorous one-on-one attention a child needs to improve his or her reading fluency. Reading Assistant solves this problem by acting as a personal tutor. The program listens as students read aloud, monitoring for signs of difficulty and providing immediate feedback and assistance when a child is challenged by a word. We expect that Reading Assistant combined with the Fast ForWord® Family of Products will enable students to rapidly build and maintain reading fluency as well as vocabulary while further strengthening reading comprehension for learners at all levels.

Soliloquy Reading Assistant has already been successfully implemented in 800 schools since 2001. “To build on the success of this product, we are very pleased to announce that the Soliloquy Learning team is expected to join Scientific Learning,” stated Mr. Bowen. “Our customers will have an even broader solution for achieving Adequate Yearly Progress in reading for all students. We believe that our combined solution will improve how the brain learns to read—specifically improving brain processing efficiency in the key areas of phonics, phonemic awareness, fluency, vocabulary and comprehension.”

Scientific Learning will pay approximately $11.0 million in cash for the assets of the Soliloquy Learning business. The acquisition is expected to close within 30 days. In 2006, the Soliloquy business generated estimated sales of $2.5 million and used cash in its operations of approximately $1.7 million. The Soliloquy Learning business has not historically prepared it’s financial statements in accordance with generally accepted accounting principles.

Business Outlook

“The addition of Reading Assistant to our product suite as well as growing demand for our unique family of Fast ForWord products are expected to result in strong revenue and cash flow growth in 2008,” said Mr. Bowen. “Next year will be an investment year for Reading Assistant and there will be significant non-cash charges associated with the acquisition of the Soliloquy Learning assets. We are revising our guidance for 2008.”

For the year ending December 31, 2008, revenue is expected to be in the range of $59.0 to $62.0 million. The Company expects to report a net profit of between $500,000 and $1.5 million. Fully diluted earnings per share in 2008 are expected to be in the range of $.03 to $.08. These estimates include estimated pretax expense of $2.3 million for stock-based compensation and $1.8 million of amortization expense associated with the acquisition.

The projections for 2008 include a tax rate of 50%. This rate reflects the differences between book and taxable income, and assumes a release of some portion of the valuation allowance for the deferred tax asset in 2007. Changes in the valuation allowance for the deferred tax asset in 2008 may also impact the reported tax rate, but are not included in this estimate. Scientific Learning is unable to estimate the magnitude of a change in the valuation allowance for the deferred tax asset at this time. The company estimates that its “cash” tax rate in 2008 will be approximately 20%.

The above targets represent the Company's current revenue and earnings goals as of the date of this release, are based on information current as of December 18, 2007 and assume that the proposed acquisition is closed within 30 days. Scientific Learning generally does not update the business outlook until the release of its next quarterly earnings announcement. However, the Company may update the business outlook or any portion thereof at any time for any reason.

Conference Call Information

The Company will host a conference call to discuss this acquisition at 5:00p.m. EST / 2:00 p.m. PST on Tuesday, December 18, 2007.The conference call will be available live on the Investor Information portion of the Company's web site at http://www.scilearn.com/investorinfo. The conference call can also be accessed at 877-604-9672 (domestic) and 719-325-4903 (international). Please dial in or visit the web site at least 10 minutes prior to the commencement of the call to ensure your participation. A replay of this teleconference will be made available on the Scientific Learning web site approximately two hours following the conclusion of the call. A telephone replay will be available at 8:00 pm ET until midnight, Tuesday January 1st. Please call 719-457-0820 (toll) 888-203-1112 (Toll free) and enter passcode: 4817585

About Soliloquy Learning

Soliloquy Learning has pioneered new and effective methods for improving reading and spoken language skills. The company’s flagship product, Soliloquy Reading Assistant™ introduced in 2002 provides one-on-one reading support using proprietary speech recognition technology to monitor and assist students through Guided Oral Reading, the research-proven best practice for fostering reading progress beyond the basics. Research on the efficacy of Soliloquy Reading Assistant has been sponsored through research grants from the National Institute of Health and Child Development and the US Department of Education – Institute for Education Sciences. Soliloquy Learning is part of JTT Holdings Inc. based in Waltham, Mass. www.soliloquylearning.com/

About Scientific Learning Corporation

Scientific Learning creates educational software that accelerates learning by improving the processing efficiency of the brain. The patented Fast ForWord® family of products provides struggling readers with computer-delivered interventions and intensive exercises that build the cognitive skills required to read and learn effectively. Based on more than 30 years of neuroscience and cognitive research, the Fast ForWord products apply patented technology and validated neuroscience principles of brain plasticity to help children, adolescents, and adults improve processing efficiency and achieve enduring gains. The efficacy of the products and the science behind them has been established by more than 550 research studies and publications. For more information, visit www.scientificlearning.com and www.brainconnection.com, or call toll-free 888-452-7323.

This press release contains projections and other forward-looking statements that are subject to the safe harbor created by the federal securities laws. Such statements include, among others, the statements relating to the timing of proposed acquisition of assets of the Soliloquy Learning business, the potential benefits to be achieved from the acquisition, and expected financial results for 2008 giving effect to the proposed acquisition. Such statements are subject to substantial risks and uncertainties. Actual events or results may differ materially as a result of many factors, including but not limited to: whether closing conditions will be satisfied; the timing of the closing of the acquisition; customer reaction to the proposed acquisition; risks associated with the integration of the acquired business; general economic conditions; the extent of acceptance and purchase of the Company's existing and acquired products by target customers; market seasonality and sales cycles; competition; availability of funding to purchase the Company's existing and acquired products and generally available to schools; the extent to which the Company's marketing, sales and implementation strategies are successful; the Company's ability to demonstrate the efficacy of its existing and acquired products, which depends on how the programs are administered, the demography of participants and other factors; the Company's ability to recruit and retain key personnel, including key employees of Soliloquy Learning; the Company's ability to timely execute its new product development strategies; and other risks detailed in the Company's SEC reports, including but not limited to the Report on Form 10Q for the third quarter of 2007 (Part II, Item 1A, Risk Factors), filed November 7, 2007. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise.

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