Exhibit 99.2

FINAL TRANSCRIPT
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Apr. 15. 2005 / 11:00AM, SCIL - Q4 2004 Scientific Learning Earnings Conference
Call
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Thomson StreetEvents(SM)

Conference Call Transcript

SCIL - Q4 2004 Scientific Learning Earnings Conference Call

Event Date/Time: Apr. 15. 2005 / 11:00AM ET
Event Duration: N/A

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CORPORATE PARTICIPANTS
Jane Freeman
Scientific Learning Corporation - SVP, CFO and Treasurer

Bob Bowen
Scientific Learning Corporation - Chairman and CEO

CONFERENCE CALL PARTICIPANTS
Kirsten Edwards
Think Equity Partners - Analyst

Robert Lancaster
ESO Holding - Analyst

Jeff Nixon
MCM - Analyst

PRESENTATION

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Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2004
Scientific Learning financial results conference call.

(Operator instructions)

I would now like to introduce the host for today's conference, Mr. Robert Bowen,
Chairman and CEO, and Ms. Jane Freeman, Chief Financial Officer of Scientific
Learning. Ms. Freeman, please proceed.

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Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Thank you. Before we proceed, I'd like to inform you that during the course of
this conference call, we'll make projections and other forward-looking
statements that are subject to the Safe Harbor created by the Federal Securities
Laws. They include statements relating to projected levels of revenue, sales,
margins, expenses, profit or loss, cash flow and other financial results and the
drivers behind them, friends in the K-12 education market, including available
funding, results that may be achieved by the use of our products and new product
introductions.

Such statements are subject to risks and uncertainties and the results may
differ from our projections. Our filings with the Securities and Exchange
Commission include additional information about factors that could cause future
results to differ from those discussed in this call. We will be filing a
transcript of this conference call with our press release in an 8-K next week.

During the call, we will be discussing booked sales, which is a non-GAAP
financial measure. We believe booked sales is a better measure of current
business activity than revenue. A reconciliation of booked sales, revenue and
deferred revenue is in the supplemental information posted with the earnings
release in the investor information section of our website at
www.scientificlearning.com.

Commercial reproduction and distribution of this conference call may be made
only after written permission. A replay will be available on our website and
welcome, everyone.

And I'd like to turn the call over to Bob.

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Thanks, Jane. Booked sales, which is one of the best indicators of the
business's overall health, were solid for the fourth quarter and the year. We
also ended the year with a sizeable cash position and no debt. Most importantly,
the awareness of our unique, patented family of Fast ForWord software is
growing.

Over 470,000 individuals have been enrolled in Fast ForWord. 3,200 schools have
been licensed to use the software along with 5,000 clinics. We also have nine
value-added resellers representing scientific learning in the international
market with the primary focus on English as a foreign language. Our private
provider segment is growing again and we also completed the restatement in the
quarter with no loss of focus on executing our strategic and operational plans.

K-12 booked sales for the fourth quarter were up 22% over 2003 and up 23% for
the year. This is within our targeted growth range of 20-30% and well above the
estimated industry growth rate of 4-5%. Our private provider segment grew for
the first time in four years.

Revenues for the quarter were up 17% and 4% for the full year. Late in 2004, we
made a strategic pricing change to our unique online diagnostic and monitoring
system, Progress Tracker. This change will require us to begin recognizing most
perpetual software license at shipment.

However, this change had a minimal impact on revenue in the quarter but will
have a significant effect in 2005.

We ended the year with over 10 million in cash. Cash flow from operating
activities increased over 45% compared to 2003. This demonstrates our continued
focus on effectively managing costs and expenses, as well as in improving DSO.
While generating these solid financial results, we continued to make excellent
progress on our three key strategic goals. First, making our unique family of
Fast ForWord software products an accepted solution in the mainstream reading
intervention market. Second, increasing the sales productivity of our direct
sales force. And third, continuing to build our scientific-based research
differentiation in the K-12 market.

One of the keys to establishing Fast ForWord products as a mainstream reading
intervention solution is focused on implementation effectiveness. We introduced
shortened daily protocols of 50 minutes for all Fast ForWord products after a
series of thorough research studies. These protocols fit much better into the
school day. We also continue to sell more professional services with each
transaction to ensure implementation effectiveness. Sales of professional
services increased 75% in 2004, and for transactions over $100,000, service
sales increased more than 130% for the year.

We have five full-time professional services staff working in Philadelphia, a
full-time person in Dade County schools in Miami, Florida and a full-time person
working in the D.C. public schools. Not only are we selling more services and
producing better implementations, but we also improved our service and support
margins from 29% in 2003 to 39% in 2004. This is solid progress, but there is
more work to do in achieving significantly improved success rates for our
customers and the struggling readers they serve.

We continue to attract leading educators from across North America to engage in
intensive investigation of the research that led to the development of the Fast
ForWord family of products.

We conducted four national executive forums and two regional forums, attracting
district decision makers to meet with our scientists to explore this growing
body of neuroscience research on how the brain learns to read and, more
importantly, how these foundational cognitive skills required to read
effectively can be built quickly. And that these skills once built, endure over
time. In addition to these forums, our scientists, chief education officer,
senior clinician and educational consultants are being invited to speak at
numerous national and state educational conferences and meetings.

Early in 2004, we stabilized the Gateway Edition of Fast ForWord, giving our
customers a full appreciation for the significant improvements in ease of use
and in deployment of this new version. This important accomplishment has also
allowed our customers to enjoy all the functionality that have been included in
this new edition.

At the same time, we have continued our expansion of the product family with the
release in 2004 of Fast ForWord to Reading 1 and 2. In 2005, we anticipate
releasing Fast ForWord to Reading Prep and Fast ForWord to Reading 5, along with
Language Basics. These additions will provide school districts with a
broad-based reading intervention solution for students of all ages from Pre-K to
Grade 12. A sequence of Fast ForWord software is key to getting struggling
readers to grade level and beyond.

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We completed our first annual customer conference in Dallas, Texas. This
conference was one of the highlights of the year, serving to strengthen our
relationship with customers across North America, sharing best practices, and
building a renewed commitment to getting struggling readers through the Fast
ForWord content that is essential to building the foundational cognitive skills
required to read and learn effectively.

High customer satisfaction resulting from implementation effectiveness is
another key element of our expanding current district customers. Our annual and
quarterly customer surveys continue to demonstrate high customer satisfaction.
84% of our sales in 2004 came from existing customers.

Again, solid progress in gaining acceptance in the mainstream reading
intervention market, but there is more hard work ahead. We must continue to
improve our overall effectiveness at implementing Fast ForWord in the K-12
environment to move students through the content, while adhering to the
protocol. We must continue to find cost effective ways to share this powerful
body of neuroscience research.

We must also do a better job of selling the value of the entire product family
and the use of a sequence of Fast ForWord products. We have to do this while
continuing to improve our service margins and overall profitability. We have
made progress, but have a long way to go to reach approximately 20 million
struggling readers, 110,000 schools and 15,000 districts. There's a lot of room
for continued growth.

We also made excellent progress on our second strategic goal of continuing to
increase the productivity of our direct sales organization. We achieved our
average sales productivity goal for the year of 1.2 million. One of the big
factors in achieving this important goal was our success in continuing to close
large transactions. We closed 66 transactions over $100,000, compared to 59 last
year. Total sales from these large transactions were up 48% and the total number
of school sites increased 96%. We closed five transactions over $800,000,
compared to four in 2003 and closed the largest transaction in our history with
the School District of Philadelphia signing a $10.4 million, five-year contract.
We booked $6.0 million of the Philadelphia transaction to sale in 2004.

Another important factor in our sales force productivity is the growing number
of districts and schools that are having great success in reaching struggling
readers with the Fast ForWord family of software. We now have 15 national and 26
state reference accounts. These districts and schools take calls from other
school districts, as well as host site business. Educators talking to educators
is the most powerful of all the support sales tools.

We have added an experienced director of marketing and dedicated more resources
to improving the tools and collateral that our sales force and customers require
to more effectively communicate the research and unique capacity of the Fast
ForWord family of products. We are also increasing the number, as well as
improving the clarity of specific campaigns designed to generate high-quality
leads for our direct sales and telesales organizations. We have expanded our
telesales group with the focus on school districts with less than 2,500, on
targeted renewals and independent schools.

While we believe our sales productivity is among the best in the industry, we
were disappointed that we did not achieve our average number of sales
representatives for the year. This results from not recruiting and hiring a new
sales representative until an opening occurs. To address this issue, as well as
better capitalize on an improving K-12 market environment, we began an
initiative in the fourth quarter to increase our selling capacity in 2005 by
more than 30%.

At the end of March, we had 35 direct sales reps with an annual goal of 37. This
compares to the average for 2004 of 28 direct sales reps. We have also added a
dedicated focus on the correctional and adult market segment. This new
initiative will allow us to not only pursue this growing segment, but keep our
direct sales organization focused on K-12 school districts.

These important sales and marketing initiatives have increased spending in the
fourth quarter and the first quarter, but will allow us to continue our high
sales productivity while expanding our selling capacity at what we believe is
the right time, in an improving market with increasing demands for
accountability. This increased sales capacity will begin to pay off in the last
half of 2005, in line with the anticipated increase in funding from both federal
and state reading intervention initiatives. The biggest impact, of course, will
come in 2006 and 2007.

We also continue to make progress on our third key strategic goal of building
our research differentiation. Important articles about the efficacy of Fast
ForWord continue to appear in scientific publications, including major,
peer-reviewed scientific journals. More than 600 articles on Fast ForWord and
the foundational research that led to the development of Fast ForWord
applications have now been published. More than 100 research studies have been
published related to the efficacy of Fast ForWord. We also published 34 new,
independent school district studies on our website in 2004 and also make
abstracts on this research available to educators and other interested
individuals.

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One of these studies was from the School District of Philadelphia involving 358
elementary and middle school struggling readers. Students were placed in either
one of two Fast ForWord experimental groups or a control group. All students
were given a pre-test with a nationally norm reading test, and after six months
were given a post-test. The Fast ForWord students achieved nine months of gain
over this six-month period while the control group achieved four months. More
than 34,000 students have been involved in Fast ForWord research, 14,000 in
experimental groups and 21,000 in control groups.

We also had three leading reading researchers visit with our scientists over the
course of 2004 to review the latest research, as well as our new Fast ForWord
applications. These were very positive and constructive sessions with specific
feedback on future areas of research to be considered, as well as the fit of our
applications with reading trends and legislative requirements. I believe it is
fair to say these researchers were surprised and pleased to see the addition of
our Fast ForWord to Reading series which they believe is a good fit with the
Reading First legislation. I hope you will agree with me that 2004 was a very
good year for Scientific Learning and our unique family of Fast ForWord
software.

Turning to 2005, with the growing awareness of Fast ForWord in the market,
improving implementation success, growing research that supports the efficacy of
Fast ForWord in schools, an improved K-12 market, and increased demands for
accountability, we believe we can continue to profitably grow K-12 sales in the
20-30% range while moving toward achievement of our business model. We believe
that our growth in 2005 will come in the second half of the year with the first
half flat to down slightly.

This second half shift is driven by two factors. The first half of 2004 was
unusually strong and resulted in a sales pattern that is well outside our
historical experience. Even beyond Philadelphia, the second quarter was
unusually strong. In addition, the four hurricanes in the southeast produced an
unusually soft third quarter in 2004, and Florida was still not back to full
strides in purchasing activities by the fourth quarter. We believe the third and
fourth quarters will move back to a more typical historical pattern.

A second important factor is our increased sales capacity of more than 30% along
with increased federal and state funding in the second half. The increased sales
capacity will take time to become productive and we should see the effects of
this in the second half. Booked sales will continue to be a challenge to predict
by quarter, since a few large transactions can make a big difference for an
individual quarter. Given the political environment in which K-12 buying
decisions are made and processed, it is a challenge to predict the exact period
a transaction will close. However, we close the vast majority of the
transactions that are forecasted, but not always in the period that are
initially forecasted by our sales managers.

Jane will be providing specific guidance on revenue and profit, which will be up
substantially. However, I would point out that we expect our revenue to also
become more volatile within quarters, particularly as we enter 2006, where we
anticipate sales and revenue will be closer. Because of the change in
recognizing most perpetual software licenses at shipment, the large deferred
revenue balance and strong sales growth, we are projecting dramatic changes in
revenue and profits in 2005. We are anticipating that cash will be solid again
in 2005. In this changing environment, book sales and cash will continue to be
the best indicator of overall business strength.

I would now like to ask Jane Freeman to provide you with a more in-depth review
of the 2004 numbers and the outlook for 2005, as well as her own perspective on
the business.

Jane?

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Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Thanks, Bob. Hi, everybody. We had a very solid operating year in 2004. Overall
sales were up 21% to $37.3 million and K-12 sales were up 22% to $34.3 million.
In addition to the largest sale in the company's history to Philadelphia, we
also had two other school districts, Miami Dade and Cumberland County, North
Carolina, that purchased more than $1 million of our software and services. That
was one more than the previous year and we expect to see good progress on that
this year as well.

We also made continued strides on selling and services to both new and existing
customers. And that will continue to be an initiative going forward because it's
important for customers to have resources to help them interpret data and
motivate students. For the year, revenue increased 4% to $31 million. We
continue to see the trends we talked about in previous periods, in which we have
a higher proportion of sales from multiyear transactions recognized over a
longer period of time. And in addition, we made continued progress this year in
convincing our customers to buy Progress Tracker and so we have less revenue
that was delivered during the period it was sold.

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The difference between the $37.3 million in sales and the $3.1 million in
revenue was added to the deferred revenue balance with $6.3 million of
additional deferred revenue and deferred revenue totaled $25.8 million, an
increase of 32% at year-end. So, it was pretty close to the overall revenue
level and it gives us good visibility going into 2005.

Product revenue for the year declined 7%. This really reflects both more
multiyear transactions with a product revenue as recognized over a longer period
of time and increased volume discounting associated with larger transactions.
But we don't discount services and support, so any volume discounts are
reflected in product sales. Gross margins improved for both products and
services during the year. However, the higher proportion of services resulted in
overall gross margins declining to 78 from 80% last year. In 2005, we expect
gross margins for both products and service and support to continue to increase
and for an increase in overall gross margins for the year.

Operating expenses increased 19% for the year to $25 million. Excluding about
$550 for the cost of the restatement, operating expenses rose 16%. We continue
to see good leverage on the difference between sales and operating spending. The
biggest driver in the increase in operating expenses was in sales and marketing,
which grew 24% and Bob has discussed the investments that we're making there. As
a result of this, we had good cash flow from operating activities of $6.7
million, which increased more than 45% and we ended the year with a $10.3
million cash balance.

However, because revenue growth was so modest, we reported a net loss for the
year of $693,000 and $0.04 compared to $2.1 million and $0.13 of net profit last
year. For the fourth quarter, sales increased 18% for both K-12 and our other
businesses. So, we're now seeing, you may recall that our business was - speech
and language professionals and other private providers has been - had been hurt
by the economy. And we're seeing both improvements there, we think, from an
economic recovery and also from some new product introductions that we're going
to be providing to that group this year.

Revenue increased 17% to $8.2 million. Product revenue was up 9% in the fourth
quarter to $5.9 million. As Bob said, we made a pricing change late in the
fourth quarter. This had a modest, positive effect on product revenue and will
have a significant effect on revenue in 2005. Service and support revenue
increased 45% during the quarter to $2.3 million. Gross margins actually
improved in the fourth quarter to 79% compared to 78% last year, primarily due
to improved service and support margins, which increased from 27% to 44% due to
better leverage on fixed overhead. So, we're quite pleased with that as well.

Operating expenses in the fourth quarter were $7.6 million compared to $5.0
million last year with a 52% increase and 41%, excluding the restatement
expenses. As you know, the fourth quarter is a period in which you true up
annual expenses and that had a big impact on our fourth quarter, as it did in
2003, primarily related to compensation expense for the sales force. You might
recall that in 2003, we had a big decline in sales and marketing expenses in the
fourth quarter compared to 2002 as we trued up commissions and incentive
compensations for what was really a pretty tough year. We had the reverse of
that this year and if you look at it on a two-year basis or you look at it on an
annual basis, it's pretty consistent with our normal experience.

We've started to invest more in growing our sales force and expanding our
telemarketing capacity. Both of those had an effect on sales and marketing
expenses in the fourth quarter overall. As a result of the leverage between
sales and operating expenses, we reported an operating loss for the quarter of
$1.1 million compared to a $424,000 operating profit in the fourth quarter of
last year. Our net loss for the quarter was $1.0 million, compared to $162,000
of profit in 2003, and we had a loss of $0.06 in primary EPS, which included
four cents from the restatement compared to net income of a penny last year.

DSOs at year end were 64 days compared to 66 days the prior year. And we had
$10.3 million in cash compared to $3.6 million last year. For 2005, we expect
sales growth to be in the range of $44-47 million, an increase of 15-25%. The
significant growth drivers for the year are a better spending environment in
schools and further increases in accountability requirements, an increase in the
sales force. We expected to average close to 37 for the year compared to an
average of about 28 for the year in 2004, an increase in our expansion of our
inside sales capacity. That's really just starting to ramp up now. We've got
some things we need to put in place for them, technologically, to help them be
more effective. And we'll probably be evaluating that late in the year to see
how we want to expand it in 2006.

We also have an expanded product suite and in the second quarter, Fast ForWord
Language Prep and Fast ForWord to Reading Basics are due out. And in the third
quarter, Fast ForWord to Reading 5 is due. Fast ForWord to Reading 5 will be
particularly useful to us in the middle and high school markets. And we expect,
with a more complete suite of reading products, that we should see good growth
in that area for the year as a whole. Sales comparisons in the first half are
very challenging. Sales increased over 50% in the first half last year, in a
very unusual seasonal pattern, and we don't expect to exceed that this year.

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Turning to revenue, the change that we made that will allow us to recognize
perpetual licenses during the quarter in which we book them, in most cases, will
have a significant effect on revenue for the year. Depending on the quarter,
we'll probably pick up between 45-60% of the sales dollars in the quarter and
what that will mean is that it will compound our normal seasonal pattern.
Historically, revenue, on a ratable basis, has been pretty stable through the
year and now we expect to see big seasonal variations along with sales. We'll
also pick up about $15 million in current deferred revenue and, as a result, we
expect revenue for the year to be above sales.

Revenue for the year is expected to be between $46-49 million. Partly because of
that and partly because of the environment in which we find ourselves, where we
think spending will accelerate and the timing is good, we expect operating
expenses to grow between 20-25% faster than sales for the first time in many
years. Most of that will be in sales and marketing, but we also expect a big
increase in R&D and a more modest increase in G&A. As you know, based on the
SEC's decisions yesterday, we will no longer be required to adopt FAS 123R,
which is a stock option expensing requirement in 2005. However, we have not made
a decision yet on whether we'll adopt early and the guidance that we're
providing to you includes an estimate of about $1.5 million for that expense.

At this point, we also don't know if we'll be required to adopt Sarbanes-Oxley
404, which is the internal controls requirement. Obviously, after our
restatement, internal controls is an important focus for us, but the actual
compliance process for 404 is very expensive and very time consuming. So, that
it's possible that will get pushed out. But right now, our assumptions include
the cost for that. Just as a kind of sideline on that note, the estimate we've
received from our auditors, just for 404 compliance, is equal to the size of the
audit. We expect that net income will be in the range of $6.2-6.8 million and
earnings per share in the range of 37-40 cents.

I'd now like to turn the call back over to Bob to wrap up.

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Thanks, Jane. It was another strong year for Scientific Learning and our unique,
patented family of software products. K-12 sales grew 22% in a slow growing
market. Cash flow increased over 45%, demonstrating good leverage on our
operating expenses and costs, as well as improved DSO performance in the fourth
quarter. We have come through a tough restatement period with no damage or loss
of focus for the business. We have made progress on all three of our key
strategic objectives. Awareness and acceptance of the Fast ForWord message is
growing. We achieved our aggressive sales productivity goals and are now
significantly increasing our sales capacity in line with an improving market and
stronger accountability demands for school districts.

Our large body of scientific-based studies continues to grow, demonstrating the
capacity of these unique brain-based applications to not only alter the key
cognitive skills required to read and learn, but also to significantly increase
results on state assessment and nationally-norm reading tests. We have faced
many challenges as a business and continue to learn from these challenges how we
can best improve our execution against key strategic and operating goals. We
continually evaluate our performance against our commitments to build lasting
solutions that meet the tough accountability requirements of our customers and
create great lasting value for our shareholders, while making Scientific
Learning a great place to work for our employees.

We thank you for taking time to listen to this update on the business.

Operator, we will be happy to take questions.

QUESTION AND ANSWER

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Operator

Yes, sir.

(Operator Instructions)

And your first question comes from the line of Kirsten Edwards from ThinkEquity
Partners.

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Kirsten Edwards - Think Equity Partners - Analyst

Hi, Jane and Bob.

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

How are you?

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Kirsten Edwards - Think Equity Partners - Analyst

I'm good. Thanks. My question is regarding some of the funding pools that you
have access to. If I recall, there was a change in a rule about special
education dollars being used by normal schools for prevention of children
entering into special education programs. Has that change flowed through to
school buying patterns yet and, if it hasn't, is that something you expect to
see in front of the 2005-06 school year buying season.

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

That legislation will go into effect this fall. And up to 15% of the IDA money
is that special ed can be now used for prevention. In other words, before a
trial, a candidate that might be put into special ed, can go through a
prevention or intervention program to try to prevent the classification from
occurring.

That will have a very positive effect because we have numerous research studies
that are out and more coming out that show the number of special education
students can be reduced through the use of Fast ForWord coupled with other
reading programs. So, we think this is a great application and, of course,
special education dollars, along with Title I, are two of our big funding
sources and the projected increase in funding for the coming year is an increase
of about a billion dollars - about $5 million in each.

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Kirsten Edwards - Think Equity Partners - Analyst

But that's okay. So, would that be reflected, potentially, in your sales in this
third quarter?

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

We think we'll start to see that in the third and fourth quarters. You have to
think this way, what happens is this money comes out and the states have a year
to allocate it out and let the district spend it. They'll be able to spend it
over the beginning of the 2005 school year and the end of 2006. The spending
should start in the October timeframe and it will conclude sometime in the June
timeframe even though, technically, they would have until the following
September. But the schools' budgets don't run in July and they typically get
their money spent by June, before the school year ends.

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Kirsten Edwards - Think Equity Partners - Analyst

That's great. My other question has to do with one of your major goals to move
Fast ForWord into the mainstream reading intervention market. How are you going
to see evidence that that is being successful? Are you going to actually have
sales coming from Reading First dollars and, if so, have you seen any of those
yet?

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Not so much Reading First. What will be more evident of that, Kirsten, are large
implementations, district-wide implementations or most school implementations,
certainly all schools that are struggling in districts. Killeen, Texas;
Philadelphia; Dallas; Dade County; Christina; these are all good examples. In a
growing number of these where, clearly, Fast ForWord has become an integral part
of their literacy program and one of the elements of their intervention
strategy. So, it's not sitting off in just one program. The school district is
saying we have an overall literacy strategy

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because we are now required and are accountable for universal literacy. And Fast
ForWord is part of that. It's not being used in just an isolated program or in a
few schools. It's being used across the board.

The funding source is not really an indicator because what the school districts
really do when they start to look at these broad-based literacy programs. You
can see this in Dallas. They take money from special ed, they take it from
Reading First, they take it from the state, they take it from Title I. They pool
all of this money to fund their broad-based literacy initiative. And that's the
indication you're really becoming mainstream. We need to see this continued
trend of wide use within districts, whether it's a district of 10,000 or a
district of 300,000 students, and determine if Fast ForWord is really an
integral part of their literacy program.

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Kirsten Edwards - Think Equity Partners - Analyst

Okay, great. And then, one last question about your new products you were
introducing to us here. The Fast ForWord 5 will come out in the third quarter.
Does that mean that it will be in front of the major selling season for the
'05-'06 year?

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Bob Bowen - Scientific Learning Corporation - Chairman and CEO

We're already selling it.

- --------------------------------------------------------------------------------
Kirsten Edwards - Think Equity Partners - Analyst

Okay.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

It's a little complex. We're actually quoting and have shown what we're going to
be doing with Reading 5 as well as Reading Prep and Language Basic. In many
cases, if schools are implementing in middle and high school, it's already in
proposals.

What that will mean to us from a revenue point of view is if we take that sale
in the second quarter and Fast ForWord to Reading 5 is part of the proposal and
part of the contract, we would book the sale now. Let's say that occurs in the
second quarter - we would book the sale in the second quarter, but we would not
take any revenue from that sale until the third quarter, when we ship Reading 5.
Because you've got to ship, you've got to get, you've got to put out. You've got
to release all the things that the customer bought before you can start taking
revenue. But we're already selling the product, and we will start to see Reading
5 in our fiscal 2005.

- --------------------------------------------------------------------------------

Kirsten Edwards - Think Equity Partners - Analyst

Okay. So, is it fair to say that some of the larger purchases will be pushed
into the third quarter for that reason?

- --------------------------------------------------------------------------------
Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Not booked sales, but it could be revenue. Those proposals are active and we
really don't have a scope yet on how many of the big ones will include Reading
5. But it will only affect the revenue. It will not affect the booked sales.

- --------------------------------------------------------------------------------

Kirsten Edwards - Think Equity Partners - Analyst

Okay. Great.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Kirsten, if I could just add to that. Reading 5, although it's tied to the fifth
grade reading standards and one might think that that means it was an elementary
school product, since we're focused on the intervention market, the primary
market per Reading 5 is going to be in middle schools and

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high schools. So, most of our business still tends to be elementary based. And
typically, those orders would not include Fast ForWord to Reading 5. So, we'll
see some flop over into the third quarter in terms of revenue. Don't expect that
to dominate what's going to happen.

- --------------------------------------------------------------------------------

Kirsten Edwards - Think Equity Partners - Analyst

Okay. Great. Thanks a lot. I'll pass it on.

- --------------------------------------------------------------------------------

Operator

And once again, ladies and gentlemen, star, one with any questions. And your
next question comes from the line of Robert Lancaster (ph) from ESO Holding
(ph).

- --------------------------------------------------------------------------------

Robert Lancaster - ESO Holding - Analyst

Good morning.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Good morning.

- --------------------------------------------------------------------------------

Robert Lancaster - ESO Holding - Analyst

My question really has to do with your sales force, given the critical nature of
a sales force to a software company. Can you talk about your current 28 sales
people? Are you happy with each and every one of them? What has the turnover
been? Are they - how are they paid? Are they being incentivized correctly, in
our opinion? Have you thought about incentivizing them differently?

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Actually, there are - we averaged 28 last year. At the end of March, we had 35
direct sales reps.

- --------------------------------------------------------------------------------

Robert Lancaster - ESO Holding - Analyst

Okay.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

We ended the fourth quarter with 30, so that's when we started our increased
hiring activity and we've now set at 35. So, We've added seven over the average
of last year and we hope to get to 37. I think the sales management and direct
sales force is one of the real strengths of scientific learning. My 35 years
experience in the industry says that for selling a new high-price solution,
knowledge and relationships in the K-12 marketplace are essential. That's
embodied in our direct sales organization and the support structures.

We are very pleased with this. When I arrived here in 2002, the leader of that
group had worked for me previously and is a very experienced individual. He has
been in the industry a long time, as have almost all of our sales managers and
our direct sales personnel. Also, because of the use of Scientific Learning, our
sales force is maturing. The core of our sales force is maturing, which is a
great thing. Probably 60% of our sales force now has more than three years of
experience with Scientific Learning and many of them have five years of
experience. That's another essential ingredient.

Our skill set, in getting experienced sales reps up faster, is very good. I can
tell you that we look at our turnover across the organizations in two buckets.
We have what we call positive turnover and we have negative turnover. Negative
turnover is when you lose a person you really do not want to lose. Positive
turnover is when you lose an employee that, for whatever reason, didn't fit.

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In selling Fast ForWord, we are selling a unique product that is very different
and it is a conceptual sale. You're not selling a traditional reading program
where you're just telling why your elements are a little better than someone
else, but it's basically the same kind of product. In this case, that has very
different research. We are, in fact, building a skill set that has not typically
been focused on in schools, the cognitive skills.

So sometimes, sales reps, even though they all come with very good experience
and very good track records, don't fit. So, we're pretty aggressive at pushing,
in a very positive way, to determine if a new sales representative is a good fit
and also if the company is a good fit for them.

We've been aggressive on that. But the reason we didn't reach our goal last year
of 29 - we were at 28 - is because when we move a sales rep out of the
organization, we start the recruiting process and it takes a period of time to
do the recruiting. So, we're now actually targeted above our number so we can
make sure that we hit our 37 and we don't come in below that.

We are currently pleased with our incentive structure. We think it rewards the
right behavior in our sales organization. And as they reach quota, their
commission pay is increased. We're all driven to deliver against our quotas and
plans, and the sales managers and the drug sales reps reporting to them are
rewarded for getting to quota, and exceeding quota, their payouts are better.

Of course, we evaluate this every year. We fine tune it and adjust it, based on
our strategic goals. We'll want to continue to do that because, in my
experience, it's a very important thing to do. We have very rigorous annual
reviews in our strategic planning process. Then, operationally, we look again
very precisely at the incentive program. But we, at this point, we are pleased
with it.

- --------------------------------------------------------------------------------

Robert Lancaster - ESO Holding - Analyst

Great. Thank you. Nice job.

- --------------------------------------------------------------------------------

Operator

And your next question comes from the line of Jeff Nixon with MCM.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Good morning.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Hey, Jeff. How are you?

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Good. Just a couple of questions on the - well, first of all, on the book
revenue for '05 - well, your estimates for '05. How much is corrections and
error?

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

It's very small.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Less than a million dollars?

- --------------------------------------------------------------------------------

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- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

I'd say in the million dollar range.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Yes, okay. And in K-12, how much is Language and Language to Reading as opposed
to the new reading programs?

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Well, it's hard to look at it that way, Jeff, because the way we price Fast
ForWord, the first three products you buy are very, very expensive. And the
add-ons are not as expensive. What we're trying to do is go to a full site
license with all products, which is now in the $85,000 range. And as we release
up, this is going to be moving to the $100,000 range, if you buy everything.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Eighty-five thousand gives you a site license for all products.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

That would give you a site license for all current products.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

As many computers as you like.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

That's right. You've got a full site license now.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

And then, of course, you have your ongoing charge for progress tracker and your
ongoing charge for support and your ongoing charges for services. Each year that
would be an additional charge coming out that school. And that ongoing flow of
revenue runs in the 20-25% range.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. I guess what I'm really kind of getting at is it seems like you have two
unique products, right? Language and Language to Reading, and there are a few
other people, Earobics, for example, that say they do the same thing. But
basically, you kind of own that capability.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Correct.

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- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

With Reading 1-5, there are other programs that are trying to do the same thing
and although they may not be using your methodology, but they are trying to
achieve the same thing. Whereas, with Language and Language to Reading, no one
is even trying to achieve what you are trying to achieve. Is that true?

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Actually, no. We are not trying to teach the traditional reading skills. What we
are now doing is continuing to build these critical cognitive skills of
attention, working memory, processing speed and sequencing, but in context of
the standard-based reading skills. Our intent is not to teach those skills.
There is no strategy in terms of instruction. We don't provide direct
instruction on the under girding strategies behind those because that's
occurring in the regular reading programs. What we're doing is going after this
fluency and proficiency that comes from these cognitive skills so they can
efficiently and proficiently handle those reading skills.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay.

- --------------------------------------------------------------------------------
Bob Bowen - Scientific Learning Corporation - Chairman and CEO

So, it is very, very different. And when you think of Eaerobic, Eaerobic would
be more like Reading 1 and 2.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. And so, really, it's not interchangeable with a Waterford.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Absolutely not.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

It would support a Waterford.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

It would support. Okay.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

You could use Fast ForWord and Waterford. You could use Fast ForWord and Voyager
and you can use Fast ForWord with any intervention or reading programs. We're a
great complement that's being used - Read 180 is being used in the Philadelphia
in the middle and high schools. And we're being used.

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- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. And Philadelphia has Reading 1-4, as well?

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

No. Because they bought in June, I believe they have Reading 3 and 4. They do
not yet have Reading 1& 2.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. But they have the reading program.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Oh, yes. Absolutely.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Yes, okay. Jane, a couple of questions for you.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Sure.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

How much of that 26 million odd is going to run off and not be replaced? Because
I guess there's a certain core that's progress tracker stuff that will be
running off and then be replaced. But from what I understand now, a portion of
that is licenses that will not be replaced.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Right.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

How much is that? And then, what is the kind of annual amortizing rate of that?

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Well, right now, on the balance sheet, we've got about $15 million of current
deferred revenue. It's hard to put things on an apples to apples basis. But we
think we probably would have $4-6 million less of that if we had been
recognizing revenue, really, at shipment last year. So, that's in terms of the
impact on 2005.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

So, five million.

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- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Yes.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Around there, right?

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

You have to recalculate everything to figure out the exact number. But that's a
pretty good number. So, in a sense, that will get replaced with sales that we
make this year. Where we would actually expect you to look is in the long-term
deferred because, for example, the Philadelphia software is in long-term
deferred revenue. So, we would expect that long-term deferred revenue will
probably drift down over the next couple of years and stabilize. And again, it
will depend on the net. The guidance that we've given you has deferred revenue
only declining $2 million year over year. And that's because we generate
deferred revenue from a normal maintenance stream, a normal progress tracker
stream and the normal sale of services, which you just don't deliver all of when
you sell them.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

So, basically, in your guidance, you are attributing two million to, kind of,
Ernst & Young change. And that's two million of revenues that you wouldn't have
had.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

No ...

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

If you've been running the business the way you're going to run it in 2005,
historically, this year, your guidance would have been two million lower.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

No, it would be $4-6 million lower. That's the, kind of, excess current
deferred.

- --------------------------------------------------------------------------------
Jeff Nixon - MCM - Analyst

Four to six million. Okay. And there's no expense associated with that.

- --------------------------------------------------------------------------------
Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

There's some expense associated with that because we pay royalties. And there
are other expenses that get amortized against that. What we've said before is
that the short-form number to look at against that is we take about 90% of it
into profit.

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- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. It a big unusual year in '05, dropping off substantially in '06? Or when
does is kind of drop off your books?

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Well, we'll see it drop off in pieces. But I think it will drop off slowly,
assuming we make our sales targets. So, in 2006, when we've looked at the
numbers, we'll see sales grow faster than revenue. That pattern will kind of
reverse. But we'll still see good revenue growth.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay. And then, you're also saying that 35-40 cents guidance includes a
million-and-a-half of options expense?

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

That's right.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay, because people are all over the lot with that, but I think a large number
like that will probably be showing superbly on the P&L and then most people will
take it out.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Actually, what we've been told is that you basically embed it with your other
compensation. It will run through, in fact, the individual departments and roll
up into sales and marketing and R&D and G&A. But what we'll also do is we'll
disclose it separately, so you know what it is.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

So, really, pre-that, your guidance is almost 45-50 cents.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

That's right.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

And that's a non-taxed number.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

That's right.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Okay, great. Thank you very much.

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- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Two percent AMT

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Sorry?

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Two percent AMT.

- --------------------------------------------------------------------------------

Jeff Nixon - MCM - Analyst

Oh, 2%. Okay. Yes, great. Thank you.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Thanks, Jeff.

- --------------------------------------------------------------------------------

Operator

And ladies and gentlemen, as a final reminder, it is star, one with any
question. And with no further questions, I would now like to turn the call over
for closing remarks.

- --------------------------------------------------------------------------------

Bob Bowen - Scientific Learning Corporation - Chairman and CEO

Thank you again, everyone, for your time. We appreciate the opportunity to
update you and we'll keep you posted during the year. I am on the road today and
next week, but Jane is in the office today and doesn't go on the road until next
week. If you have any further questions for me, you can call Jane and she will
let me know that you called and I'll make sure to give you a call back.

Next week, you can call our office phones. We will checking e-mail and we'll be
sure we get back to you, even though we're out on the road working with our
customers. Our annual Users Conference is next week. So again, we appreciate
your time and please let us know if you have follow-up questions. Thank you.

- --------------------------------------------------------------------------------

Jane Freeman - Scientific Learning Corporation - SVP, CFO and Treasurer

Thanks a lot.

- --------------------------------------------------------------------------------

Operator

Ladies and gentlemen, we thank you for your participation on today's conference.
This concludes the presentation and you may now disconnect. Good day.

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Scientific Learning Corporation
Supplemental Information

Reconciliation of Booked Sales, Revenue and Change in Deferred Revenue

$s in thousands

Fourth Quarter Year Ended December 31,
-------------------- --------------------------------------------------
2004 2003 2005 Estimated Range 2004A 2003
-------------------- ----------------------- ------- -------

Booked Sales $ 8,212 $ 6,972 $ 44,000 $ 47,000 $37,260 $30,704
Less Revenue 8,153 6,966 46,000 49,000 30,976 29,916
------- ------- -------- -------- ------- -------
Net (Decrease) increase in current and
long-term deferred $ 59 $ 6 $ (2,000) $ (2,000) $ 6,284 $ 788
======= ======= ======== ======== ======= =======

Beginning balance in current and
long-term deferred 25,725 19,494 25,784 25,784 19,500 18,712
Ending balance in current and
long-term deferred $25,784 $19,500 $ 23,784 $ 23,784 $25,784 $19,500

Booked sales is a non-GAAP financial measure that we believe to be a useful
measure of the current level of business activity both for management and for
investors. Booked sales equals the total value (net of allowances) of software
and services invoiced in the period. Because a significant portion of our
revenue is recognized over a period of months, booked sales is a better
indicator of current activity. The table above shows the reconciliation of
booked sales, revenue, and changes in deferred revenue.

The information included above for 2005 is a projection, subject to the safe
harbor created by Section 27A of the federal securities law. This projection is
subject to substantial risks and uncertainties. Actual results may differ
materially as a result of many factors, including but not limited to: general
economic conditions; the extent of acceptance and purchase of the Company's
products by target customers; seasonality and sales cycles in Scientific
Learning's markets; competition; availability of funding to purchase the
Company's 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 continue to demonstrate the efficacy of its 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; the
Company's ability to timely execute its new product development strategies;
pricing pressures; and other risks detailed in the Company's SEC reports.

April 14, 2005