As filed with the Securities and Exchange Commission on June 29,July 26, 2004

Registration No. 333-115496

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 12

to

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

EDUCATE, INC.

(Exact Name of Registrant as Specified in Its Charter)

1001 Fleet Street

Baltimore, Maryland 21202

(410) 843-8000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

R. Christopher Hoehn-Saric

Chief Executive Officer

Educate, Inc.

1001 Fleet Street

Baltimore, Maryland 21202

(410) 843-8000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated June 29,July 26, 2004.

15,000,000 Shares

Common Stock

This is an initial public offering of shares of common stock of Educate, Inc.

Educate is offering 5,000,000 shares to be sold in this offering. The selling stockholders identified in this prospectus are offering an additional 10,000,000 shares. Educate will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $14.00 and $16.00. Application has been made for quotation on the NASDAQ National Market under the symbol “EEEE”.

See “Risk Factors” on page 910 to read more about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

To the extent that the underwriters sell more than 15,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 2,250,000 shares from the selling stockholders at the initial price to the public less the underwriting discount.

The underwriters expect to deliver the shares on                     , 2004.

JPMorgan

Banc of America Securities LLC                                    

Legg Mason Wood Walker

Incorporated

ThinkEquity Partners LLC

Prospectus dated                      , 2004.

TABLE OF CONTENTS

i

PROSPECTUS SUMMARY

This summary highlights key aspects of our business and this offering that are described more fully elsewhere in this prospectus. We urge you to read this entire prospectus carefully, including our consolidated financial statements and related notes appearing elsewhere in this prospectus and the “Risk Factors” section, before making an investment decision. All references in this prospectus to “Educate, Inc.,” “Educate,” “the Company,” “we,” “us,” or “our” refer to Educate, Inc. and its consolidated subsidiaries (other than Connections Academy, Inc.) and, where the context so indicates,. Any discussion regarding our business prior to June 30, 2003 refers to the pre-K-12 business acquired from Laureate Education, Inc. (formerly known as Sylvan Learning Systems, Inc.) (“Laureate”), except where the context indicates that such terms mean only Educate, Inc. Some financial data in this prospectus is presented on a pro forma rather than actual basis. For further information regarding the presentation of financial data, see “Corporate Information,“About this Prospectus,” below.on page 22.

Educate, Inc.

Overview

We believe we are a leading national provider of tutoring and other supplemental education services to pre-kindergarten through twelfth grade, or pre-K-12, students. For over 25 years, we have provided trusted, personalized instruction to our students. We operate through three business segments, Learning Center, Institutional Services and Online Learning Services, that together served more than 250,000 students in 2003.

Our North American learning centers are operated under the Sylvan^® brand name, which we believe is the most highly recognized brand name in the supplemental education services industry. Our learning centers are staffed by trained teachers who deliver high quality education programs that are personalized for each student based upon the results of extensive diagnostic tests. These centers are leading a significant shift in the provision of pre-K-12 supplemental education services, away from the traditional model in which individual tutors provide in-home homework help to students.

We have experienced significant growth in our business over the last five years. We expect that all three of our business segments will continue to benefit from increased national attention on the quality of pre-K-12 education. We believe that parents have become more proactive in seeking education services that supplement their children’s education and are increasingly willing to pay for these services. In addition, over the past ten years, the supplemental education services market has benefited from increased spending in both public and private schools. Further, increased education spending by governmental authorities has enjoyed continued bipartisan support. We believe these market forces have contributed to our substantial growth.

Business Segments

Learning Center

Our Learning Center segment develops and delivers trusted, personalized tutoring programs to pre-K-12 students through a network of more than 1,000 franchised and company-owned learning centers in North America operating under the Sylvan brand name and more than 950 European franchised and company-owned learning centers.

North American Learning Centers—Our Sylvan Learning Centers provide supplemental, remedial and enrichment instruction, primarily in reading and mathematics, and, to an increasing extent, writing, study skills and test preparation. Our programs feature an extensive series of standardized diagnostic

tests, personalized instruction, a student motivational program and ongoing involvement of parents and their child’s regular school teacher. Our North American learning center operations are comprised of franchised centers and company-owned centers.

European Learning Centers—Our European learning center business, which we acquired in 1998, operates under the Schülerhilfe name. Schülerhilfe has provided after school tutoring, consistingname and principally ofprovides homework support to primary and secondary students in Germany and Austria for over 30 years.students. As of March 31, 2004, Schülerhilfe operated 232 company-owned learning centers and 668 franchised centers in Germany, and 50 franchised centers in Austria.

Institutional Services

Since 1993, Catapult Learning, formerly known as Sylvan Education Solutions, has provided supplemental instruction programs, primarily in reading and math, to students in schools, school districts and private educational entities (primarily parochial schools) across the country. These programs encompass a wide variety of education services that supplement and expand those provided by these institutions. Our services are typically provided on location at the client school or a conveniently located community organization’s facility. These servicesinstitutions and are funded by federal, state and local governments.

Online Learning Services

eSylvan offers online tutoring programs modeled after those provided in our Sylvan Learning Centers. These online programs use a technologically sophisticated, internet-based application that enables teachers and students to talk and interact in real-time over a dial-up or broadband connection. eSylvan’s programs are provided to students primarily in the second through ninth grades.

Industry Overview

We believe the pre-K-12 supplemental education services industry is large, growing and fragmented and that the overall size of this industry has significant potential to grow as a result of a number of factors. These factors include favorable demographics, increasing parental dissatisfaction with the quality of public education and the heightened focus on school performance due to the continued failure of many students to achieve basic skills.

According to the U.S. Department of Education, enrollment in elementary and secondary schools rose 20% between 1985 and 2003 to more than 54 million students and is expected to rise by an additional two million students between 2003 and 2013. The most recent major federal legislation, the No Child Left Behind Act of 2001, or NCLB, increased federal funding for supplemental education

services by 33% from $8.8 billion in 2001 to $11.7 billion in 2003. NCLB also enacted sweeping changes, such as requiring a school district to set aside funds to support school choice and supplemental educational services, including tutoring provided by third parties, if a school in the district fails to achieve its adequate yearly progress goals for three consecutive years. We believe these changes will drive demand for the types of supplemental education services we provide.

Our Strengths

Leading Market Position and Powerful Sylvan Brand Name.    We believe our broad geographic reach, our industry-leading brand awareness and our trusted, personalized method of instruction have enabled us to become a leading national player in a highly fragmented market.

High Quality Instruction and Broad Service Offering.    We differentiate ourselves through ourOur proprietary learning systems that consistently produce positive results for our customers. Our high quality instruction, diversity of services and dedication to customer service reinforce our reputation as a trusted source of quality instruction.

Highly Effective Marketing.    Over the last five years, our coordinated national and local marketing strategy has resulted in approximately one out of every three inquiries leading to an enrollment in our Sylvan Learning Centers. Coordinated advertisingCenters and marketing enablehas enabled us to communicate a consistent brand image at the national and local level.

Strong Institutional Relationships.     As an established provider in the institutional market, we have positioned ourselves to take advantage of the government’s increased focus and spending on supplemental education services. Although most of our contracts with school districts are school-year contracts subject to annual renewal, we have had and continue to have high rates of repeat business with our institutional customers. We have developed a new program, Education Station, to provide tutoring services mandated under NCLB. In the 2003-2004 school year, our NCLB institutional business served approximately 16,700 students, compared to approximately 2,900 students in the 2002-2003 school year.

Strong Learning Center Franchise Model.    Franchising allows us to grow revenue with limited capital expenditures. Our franchise system is characterized by high demand for franchises and low franchisee concentration and center closures. Our franchisee selection process is highly competitive, attracting on average 4,000 applicants per year. We seek franchisees who prefer to be active owner-operators. We have had a low franchise center closing rate of approximately 1% over each of the last five years. We also maintain a very low franchisee ownership concentration, with 73% of our franchisees owning only one or two centers, and no franchisee owning more than 20 centers.

Outstanding Track Record of Growth and Financial Performance.    We have demonstrated significant growth in revenue and operating income, with revenue increasing from $154.9 million in 1999 to $242.3 million in 2003 and operating income growing from $15.4 million in 1999 to $31.4 million in 2003. For the same period, net income increased from $9.5 million to $10.9 million, reflecting the increase in operating income, offset by increased interest expense of $13.8 million and taxes of $1.6 million in 2003 as compared to 1999.

Experienced Management Team.    We have a strong and experienced management team with significant experience at Educate and the predecessor business, as well as expertise in marketing, finance, government and operations. The members of our senior management team have an average of seven years of experience with us. Our Chairman and Chief Executive Officer, R. Christopher Hoehn-Saric, has been with us since 1991.

Business Strategy

Our goal is to strengthen our position as a leading provider of tutoring and other supplemental education services. To further this goal, certain members of our management and affiliates of Apollo Advisors, L.P. (“Apollo”) acquired substantially all of the pre-K-12 business of Laureate. This acquisition has enabled us to focus our efforts and financial resources exclusively on developing and growing our business, whose revenues represented approximately 36% of Laureate’s revenues in 2002, the year prior to the acquisition. Prior tobusiness. Following our acquisition by Apollo, we were focused on providing similar pre-K-12 services but operated under a much larger company that had more of a post-secondary focus. Ourour strategy includeshas included the following elements:

Drive Organic Learning Center Growth.    We intend to drive same center sales and operating income growth by improving the effectiveness of our marketing, increasing revenues per student and controlling our costs.

Expand Our Sylvan Learning Center System.    We believe there is significant potential to establish new Sylvan Learning Centers, and we also intend to continue to acquire select franchised Sylvan Learning Centers.

Increase Our NCLB Penetration.    We intend to expand our NCLB business further by leveraging our strong institutional presence and building the leading brand in this emerging market.

Grow Our Online Business.    We intend to grow our online customer base and offer our online programs through our other two segments.

Extend Our Service Offerings.    We intend to continue to develop new programs based on the specific needs of our customers in each of our segments.

Expand Use of the Sylvan Brand.    We will continue to look for opportunities to expand the use of our brand, including potentially licensing it to educational book and software publishers and for other educational products.

Limited Operating History

We have a limited operating history as an independent company, which may make our business difficult to evaluate. When evaluating our historical financial results, you should carefully consider that we revalued the assets and liabilities that we acquired from Laureate, and accordingly, these assets and liabilities have a different historical basis.

Our Acquisition by Apollo

We were formed as a Delaware corporation in March 2003 by affiliates of Apollo, Advisors, L.P. (“Apollo”), together with certain members of our management, to acquire the pre-K-12 business of Laureate and certain of its subsidiaries. On June 30, 2003, our wholly owned subsidiary, Educate Operating Company, LLC, which we refer to as our “operating company,” purchased from Laureate and Sylvan Ventures, LLC (“Ventures”), a subsidiary of Laureate, substantially all of the operations comprising Laureate’s and Ventures’ pre-K-12 education business units, including eSylvan, Inc., which operates our Online Learning Services business, and Connections Academy, Inc., which operates virtual public and charter schools for K-8 students. Upon completion of the transactions, Laureate’s operations consisted principally of its post-secondary business units. For more information about our acquisition by Apollo, see “Certain Relationships and Related Transactions—Our Acquisition by Apollo.”

As of March 31, 2004, affiliates of Apollo owned 85.5% of our outstanding shares of common stock on a fully diluted basis (or 54.8% after giving effect to this offering and 50.0% if the underwriters’ over-allotment option is exercised in full). We referFollowing the consummation of this offering, Apollo will continue to have the right to nominate members of our Board of Directors and will be able to control all matters requiring stockholder approval. See “Management—Apollo as our “equity sponsor.”Approval of Certain Matters” and “Certain Relationships and Related Transactions—Nomination Agreement”.

We acquired Connections Academy, Inc. from a subsidiary of LaureateVentures as part of our acquisition by Apollo. Our Board of Directors has directed management to sell Connections Academy, and we intend to sell it to certain of our existing stockholders prior to the consummation of this offering. Following this sale, we will have no ongoing involvement with Connections Academy other than a customary transition services agreement. On June 29, 2004, we declared a dividend to our existing stockholders in the amount of $9 million. We expectanticipate that substantially all of the dividend may be used by these stockholders to retain an obligation to make payment to Laureate iffund the working capital needs of Connections Academy exceeds specified levels of EBITDA following the sale.Academy.

Corporate Information

We are a holding company and all of our operations are conducted through our operating subsidiaries. Our principal executive offices are located at 1001 Fleet Street, Baltimore, Maryland 21202. Our telephone number is (410) 843-8000.

In order to provide meaningful historical financial information, we use pro forma consolidated financial information and combined financial information for different periods throughout this prospectus. The financial data presented in this prospectus for periods prior to July 1, 2003 is combined financial data of the pre-K-12 business of Laureate. As used in this prospectus, “pro forma” or “pro forma consolidated” means that the information presented gives effect to our acquisition of the pre-K-12 business from Laureate on June 30, 2003, as if that transaction had occurred as of January 1, 2003. Unless otherwise indicated, references to our full-year results of operations for 2003 contained in this prospectus describe our pro forma consolidated results of operations for 2003.

The Offering

Except as otherwise indicated, all share information in this prospectus is based on the number of shares outstanding on March 31, 2004. See “About This Prospectus.”

Summary Consolidated Financial Data

You should read the following summary consolidated financial data together with our historical and pro forma consolidated financial statements and the related notes, the combined financial statements and the related notes of our predecessor, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus. References to our predecessor refer to the pre-K-12 business we acquired from Laureate.

The combined statement of operations data of our predecessor for the years ended December 31, 2001 and 2002 and the six months ended June 30, 2003, and our consolidated statement of operations data for the period from June 30, 2003 (date of inception) through December 31, 2003 are derived from financial statements audited by Ernst & Young LLP, independent registered public accounting firm, and are included elsewhere in this prospectus.

The combined statement of operations data of our predecessor for the three months ended March 31, 2003 and our consolidated statement of operations data for the three months ended March 31, 2004 are derived from unaudited interim financial statements which are included elsewhere in this prospectus and which, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of such financial statements. Quarterly financial information is not necessarily indicative of our annual results due to seasonality and other quarterly fluctuations that are inherent in our business.

The unaudited pro forma consolidated statement of operations data for the year ended December 31, 2003 and the three months ended March 31, 2003 are derived from our unaudited pro forma consolidated statements of income, which are included elsewhere in this prospectus. These pro forma financial statements give effect to our acquisition of the pre-K-12 business acquired from Laureate on June 30, 2003 as if such transaction occurred on January 1, 2003. Our unaudited consolidated pro forma financial data are based on currently available information and are not necessarily indicative of our financial position or results of operations had our acquisition by Apollo taken place on January 1, 2003, nor are they necessarily indicative of future results.

SUMMARY CONSOLIDATED FINANCIAL DATA

(dollars in thousands, except per share data)

RECENT DEVELOPMENTS

Comparison of results for the three months ended June 30, 2004 to the pro forma results for the three months ended June 30, 2003.

Our revenue increased 29% in the second quarter of 2004 primarily driven by growth of the NCLB program ($7.3 million); the acquisition of Progressus Therapy ($5.7 million); expansion of company-owned learning centers ($2.4 million); and franchised center royalty growth ($1.1 million). Total segment profit increased 14% in response to expansion of services and revenue growth. Learning Center segment profit margins remained constant in the second quarter of 2004 in comparison to the prior year comparable period at 33%. Institutional Services segment profit margins decreased to 13% in the second quarter of 2004 from 17% in the prior year comparable period as a result of the acquisition of Progressus Therapy (3%) and investment in development of NCLB services (1%). Corporate expenses increased primarily due to a non-cash stock compensation expense related to granting of restricted stock and options to purchase common stock to employees and directors during the period at prices or exercise prices less than the estimated fair value of our common stock. Interest expense in the 2004 period declined ($0.8 million) primarily as a result of refinancing the senior term loan and repayment of the subordinated note payable to Laureate. Upon replacement of the senior term loan, $4.8 million of previously capitalized debt issuance costs and other financing costs related to a terminated financing transaction were expensed. Income from continuing operations declined in the 2004 period due to the non-cash stock compensation expense and refinancing expenses.

Comparison of results for the six months ended June 30, 2004 to the pro forma results for the six months ended June 30, 2003.

Our revenue increased 33% in the six months ended June 30, 2004 primarily driven by growth of the NCLB program ($18.5 million); the acquisition of Progressus Therapy ($11.4 million); the expansion of company-owned learning centers ($3.4 million); and franchised center royalty growth ($2.6 million). Total segment profit increased 30% in response to expansion of services and revenue growth. Learning Center segment profit margins remained constant in the 2004 period in comparison to the prior year comparable period at 29%. Institutional Services segment profit margins decreased to 14% in the 2004 period from 15% in the prior year comparable period as a result of the acquisition of Progressus Therapy. Corporate expenses increased primarily due to a non-cash stock compensation expense related to granting of restricted stock and options to purchase common stock to employees and directors during the period at prices or exercise prices less than the estimated fair value of our common stock. Interest expense in the 2004 period declined ($0.7 million) primarily as a result of refinancing the senior term loan and repayment of the subordinated note payable to Laureate. Upon replacement of the senior term loan, $4.8 million of previously capitalized debt issuance costs and other financing costs related to a terminated financing transaction were expensed. Income from continuing operations declined in the 2004 period due to the non-cash stock compensation expense and refinancing expenses.

RISK FACTORS

Before deciding to invest in our common stock, you should carefully consider each of the following risk factors and all of the other information set forth in this prospectus. The following risks and those described elsewhere in the prospectus, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” could materially harm our business, financial condition, future results and cash flow. If that occurs, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Relating to Our Learning Center Segment

Our inability to adequately manage our growth could have an adverse effect on our operations.

We have increased the number of our company-owned Sylvan Learning Centers from 82 as of January 1, 2000 to 138 as of March 31, 2004. We intend to continue increasing the number of company-owned centers by opening new centers and acquiring franchised centers. We may not be able to integrate centers acquired from franchisees into our other operations without substantial costs, delays or other operational or financial problems. In addition, as our business grows, more resources will be required to support our operations, including hiring teachers, directors of education, center directors and area managers, particularly if this growth occurs outside of the 16 markets in which we now operate company-owned centers. Our inability to manage our anticipated growth may adversely affect the quality and consistency of our programs, our ability to integrate new personnel and our ability to capitalize on new business opportunities.

Actions of teachers, instructors and other personnel could lead to liability claims and damage to our reputation, which could cause us to incur substantial costs and strain our relationships with franchisees.

We could become liable for the actions of teachers and other personnel at our company-owned learning centers or other areas in which we provide services, including schools and students’ homes. In the event of accidents or injuries or other harm to students, we could face claims alleging that we were negligent, provided inadequate supervision or were otherwise liable for the injuries. A liability claim against us or any of our employees could adversely affect our reputation with our customers, which could adversely affect our enrollment and revenue. Even if unsuccessful, such a claim could create unfavorable publicity, cause us to incur substantial expenses and divert the time and attention of management. Unfavorable publicity resulting from a liability claim against us or any of our employees may also adversely affect our franchisees’ businesses, which could strain our relationships with franchisees.

Our business may be harmed by actions taken by our franchisees.

Our business is dependent upon our franchisees and the manner in which they operate their franchised centers under our licensed brand. If a franchisee were to engage in unauthorized or unlawful conduct, the general public may associate this conduct with our brand, and negative publicity associated with this conduct could affect the reputation and success of all of our centers. Our business

may also be adversely affected if our franchisees do not operate their centers and provide tutoring services in a manner consistent with our standards and requirements or do not hire and train qualified teachers. Our license agreements with our franchisees do not require them to conduct background

checks on prospective employees. In addition, a liability claim against a franchised center or any center personnel may result in unfavorable publicity for all of our learning centers, whether or not the claim is successful.

Our ability to grow may be hindered and our business may suffer if our franchisees do not adopt and effectively implement improved programs and business practices we develop.

We are dependent on the willingness of our franchisees to adopt and effectively implement improved programs and business practices we develop in order to increase franchised center-based revenues and resulting royalties paid to us. However, franchisees often are not required to adopt these practices and they may adopt and implement our programs and business practices more slowly than we anticipate, or not at all. Any of these delays or failures could result in lower franchised center-based revenues and royalties paid to us, thus limiting our growth.

Our failure to maintain good relationships with our franchisees could significantly reduce our revenue and income.

We derive significant revenue from franchised operations, which comprised 18% of our revenue in 2003. Our relationships with our franchisees may deteriorate in the future. Any deterioration in our relationship with our franchisees could significantly reduce our revenue and require management to direct their time and effort to rebuild strained relationships with franchisees. If management’s attention is focused on repairing relationships with franchisees instead of developing new programs and processes to increase revenue and income, our business and prospects may be adversely affected.

If we fail to sell licenses for new franchise territories, our financial performance and growth prospects may be adversely affected.

The growth of our business is dependent upon increasing the number of our franchised centers by selling licenses for new territories. Damage to our reputation and competition from other franchised supplemental education service providers may adversely affect our ability to sell licenses for additional franchise territories. If this were to occur, continued expansion would require the opening of a larger number of company-owned centers than we currently have planned which would require significantly more time and capital expenditures by us and could hinder or prevent our expansion.

The sale of licenses for new franchise territories could harm our relationship with existing franchisees.

Some or our franchisees presently benefit from being located adjacent to unlicensed territories. If we sell licenses for those unlicensed territories, the existing franchisees may have an adverse reaction, potentially straining our relationship with them.

We intend to open additional learning centers in targeted geographic areas, creating the risk that we may over-saturate a particular market.

As part of our growth strategy, we intend to open additional company-owned learning centers in areas that we believe have a low center density, as measured by centers per child. There can be no guarantee that any incremental revenue we realize from this strategy will exceed the increase in our operating costs resulting from opening and operating additional centers. If the incremental revenue generated by new centers is less than the added costs of opening and operating additional centers, our operating income will decrease.

We rely on the accuracy of the unaudited financial information we receive from our franchisees, over which we do not have direct supervision or control and which we do not routinely audit.

Under their license agreements with us, our franchisees are required to report financial and other data to us, including their learning center revenues and results of operations. We rely on franchisee data to make important business decisions. However, we do not routinely audit the information that our franchisees report to us, and we do not have direct supervision over the reporting of our franchisees. Therefore, we are unable to ensure that the data reported by our franchisees is accurate. If the data reported by our franchisees is not accurate, it may cause determinations made by us in reliance on the reported data to be inaccurate and may result in less informed business decisions by management.

Franchise regulations could limit our ability to terminate or replace unproductive franchises, which could result in lower franchise royalties.

Applicable laws may delay or prevent us from terminating an unproductive franchise or withholding our consent to renew or transfer a franchise, which could result in lower franchise royalties. As a franchisor, we are subject to federal, state and international laws regulating the offer and sale of franchises. These laws also frequently apply substantive standards to the relationship between franchisor and franchisee and limit the ability of a franchisor to terminate or refuse to renew a franchise. Compliance with federal, state and international franchise laws can be costly and time consuming, and we cannot be certain that we will not encounter delays, expenses or other difficulties in this area. Further, the nature and effect of any future legislation or regulation of our franchise operations cannot be predicted.

The provision of NCLB services under the Ace It! or Sylvan brands by our franchisees may harm our reputation and negatively affect our financial condition.

Our franchisees will be able to provide NCLB services commencing in the 2004-2005 school year under the Ace It! or Sylvan brands. If our franchisees are unsuccessful in providing NCLB services, or are disqualified as providers of these services, the reputation and success of Education Station and our Sylvan Learning Center business could be adversely affected if consumers associate the provision of such services by our franchisees with the services provided through our Sylvan or Education Station businesses.

Economic, political and other risks associated with our European and Canadian centers could adversely affect our business.

Our European and Canadian centers are subject to a number of risks inherent to operating in foreign countries. For example, risks affecting our European and Canadian centers include:

Most of these risks are beyond our control. We cannot predict the nature or likelihood of any such events. However, if such an event should occur, it could adversely affect our business, financial condition and results of operations.

Risks Relating to Our Institutional Services Segment

Our Institutional Services segment conducts business largely with local education authorities, the composition of which change from time to time. As a result, our relationship can be adversely affected, leading to reductions in business and harm to our reputation.

A substantial and growing portion of our revenue, 33% in 2003, is generated by our Institutional Services segment. This segment provides services to government agencies, primarily to school districts, and therefore is exposed to the risks associated with government contracting. Many of our contracts with school districts are school-year contracts subject to annual renewal at the option of the school district, and in many instances the school district can terminate or modify the contracts at their convenience. Any negative publicity, whether or not the reason for such publicity is within our control, could cause a school district to terminate or fail to renew a contract. Changes in the composition of local school boards or changes in school district administration may adversely affect a school district’s willingness to contract with us. In addition, any termination or non-renewal of a contract with a school district could have an adverse effect on our results of operations, and a termination or non-renewal caused by our failure to improve the poor academic performance of students enrolled in our programs could adversely effect our ability to secure contracts with other school districts.

Changes in Federal and state laws reducing or eliminating funding for third-party suppliers of supplemental education services could adversely affect our business.

Our Institutional Services segment relies almost exclusively on government-funded programs. The federal government and state governments may, at any time, reduce, or lower the rate of growth of, funding under the Elementary and Secondary Education Act (ESEA), the Individuals with Disabilities Education Act (IDEA) or similar programs. The U.S. Congress may modify or repeal the ESEA (currently reauthorized as the No Child Left Behind Act) or modify the IDEA, thus reducing the amount of federal money available to fund our programs. The Federal and state governments may eliminate or specifically limit the amount of funds spent on third-party supplemental education services. Any such reduction, limitation or elimination of funding could adversely affect our Institutional Services revenue.

If we fail to comply with applicable state and federal regulations, we may face government sanctions.

As a result of providing services funded by government programs, we are subject to state and federal regulations. Compliance with state and federal regulations can be costly and time consuming, and we cannot be sure that we will not encounter delays, expenses or other difficulties. Further, our failure to comply with these regulations could result in financial penalties or restrictions on our operations.

The growth and development of our NCLB services is dependent on our ability to establish and maintain our presence in and quickly implement our programs in new markets.

Education Station is a new program in the Institutional Services segment that will provide NCLB services to eligible children. The growth and development of our Education Station program is dependent on our ability to hire and train an adequate number of qualified teachers, establish our presence and

implement our programs at eligible schools in a short period of time. If we are unable to do so in a manner that is acceptable to our customers, they may terminate or not renew our relationship. As a result, we may incur significant start-up costs prior to our receipt of revenue if we are unable to roll out our Education Station program in the school district in a manner that is acceptable to our customers. If that occurs, our business, financial condition and results of operations may be adversely affected.

If we are not selected by parents as a provider of NCLB services or our Education Station program is otherwise unsuccessful, our reputation and the success of our other programs may be adversely affected.

Education Station will provide NCLB services through the development and implementation of new procedures and programs that differ significantly from the proven services we provide through our

learning centers. Parents of eligible students have the option to choose the provider of NCLB supplemental education services from a list of state-approved providers. We may not be chosen by a sufficient number of these parents to cover our costs or to achieve the level of profitability we anticipate. In addition, any state may decide to disqualify us from continuing as a provider of NCLB services, whether or not the reasons for such disqualification are within our control. Consequently, Education Station may not be as successful as we expect. If this were to occur, our reputation and the success of our other businesses may be adversely affected if consumers associate Education Station with our Sylvan brand.

Risks Relating to Our Online Learning Segment

Our future success depends in part on our ability to expand our eSylvan business, which may not develop as expected. Conversely, if our eSylvan business grows more rapidly than we anticipate, we may have to make costly upgrades that may reduce our operating profit.

An important aspect of our strategy for growth is the expansion of our eSylvan business. A number of factors could limit the growth of this business. The Internet may not develop into an effective online educational delivery system, because of inadequate infrastructure, security and privacy concerns or student or parent preferences. Furthermore, the Internet is characterized by relatively low start-up costs and rapid technological change. Thus, we can expect competition from other online providers of educational services, and we may not have the capital resources necessary to compete with the rapidly changing technologies that are being, or may in the future be, developed by our competitors. For example, as broadband penetration grows, our competitors will not face the bandwidth constraints that our application was designed to overcome and, therefore, they may be able to develop better technology at lower cost and our current technology may become obsolete.

Conversely, if we succeed in achieving rapid growth in our eSylvan business, we will need to upgrade our programs and materials and increase our human resources, which may exceed our budgeted amounts. In addition, our existing infrastructure may not be able to handle adequately the increased volume of transactions that would result from increased growth, causing us to make significant expenditures to expand our infrastructure to keep up with demand. Our failure to successfully implement, improve and integrate new programs, materials, personnel and procedures could substantially limit the success of our eSylvan business.

Additional Risks Relating to Our Business and Industry

Our operating results may vary significantly from quarter to quarter as a result of seasonal and other variations to which our business is subject. This may result in volatility or adversely affect our stock price.

We experience seasonality in results of operations primarily as a result of changes in the level of student enrollments during the course of the school year and the duration of the school year. Also, we recognize franchise royalty revenue based upon our cash receipts from franchisees, in accordance with the terms of our franchise agreements. Because many parents prepay for their children’s programs at the time of enrollment, the timing of our franchise royalty revenues tends to correspond to student enrollment dates. In our company-owned center and other businesses, however, we recognize revenue as we deliver services. We typically generate the largest portion of our Learning Center and Institutional Services revenue in the second quarter, and we experience lower revenues from franchise royalties in the fourth quarter as a result of prepayments by customers to our franchisees in other quarters. As our institutional and learning center revenue grows at varying rates, these seasonal fluctuations may become more evident. As a result, we believe that quarter-to-quarter comparisons of our results of operations may not be a fair indicator and should not be relied upon as a measure of future performance.

Our historical results of operations may not be indicative of future performance, which is difficult to forecast. We expect our results to vary from quarter to quarter.

We expect results of operations to fluctuate in response to factors in addition to seasonal fluctuations. These factors include the timing of receipt of payment from our customers, including those under government contracts funded under Title I and other legislation, changes in the percentage of customers prepaying in our franchised centers and the timing of revenue recognition of franchise license fees. Changes in the pattern of customer prepayments in our franchised centers would cause fluctuations of operating results because these changes impact our franchise royalty revenues. In the Institutional Services segment, there are often significant delays in payment by the school districts. Also, as we continue to develop our Education Station program, we anticipate that each year we will experience a significant increase in our costs in the third and fourth quarters of our fiscal year in order to market our services to parents of eligible children and to build the necessary infrastructure to provide these services in new markets. For example, we incur costs to build the necessary infrastructure based on our expectations of the number of students who will enroll in our program. However, we have no assurance that these students will actually attend the program. If they fail to attend, we will not receive sufficient revenue to offset our expenditures. Moreover, any revenue that we realize from the provision of services under NCLB may not materialize, if at all, until the first and second quarters of the following year because we are not paid until a parent selects us to provide NCLB services and the services have been performed.

We have a limited operating history as an independent company, which may make our business difficult to evaluate.

We commenced operations as an independent company in 2003. As a result, we have only a limited operating history as an independent company upon which you can evaluate our business and prospects. We will encounter risks, uncertainties and difficulties frequently experienced by other similarly situated companies, such as maintaining adequate internal controls and procedures and managing the expansion of our operations. If we do not successfully manage these risks, our business, financial condition and results of operations will be adversely affected.

We expect that new products and programs we develop will expose us to risks that may be difficult to identify until such products or programs are implemented.

We are currently developing, and in the future will continue to develop, new products and programs, the risks of which will be difficult to ascertain until these future programs are implemented. For example, we are developing new programs and procedures through which our Sylvan Learning Center franchisees may choose to offer NCLB services, under the name Ace It! or Sylvan. These new programs and procedures will differ significantly from the services our Sylvan Learning Center franchisees currently provide in their learning centers. Any negative events or results that may arise as we develop new products or programs may adversely affect our reputation, business, financial condition and results of operations.

New products and programs we develop may compete with our current programs.

We are presently developing, and will likely in the future develop, programs that compete with our existing programs. For example, as discussed above, our Sylvan Learning Center franchisees may offer NCLB services under the name Ace It! or Sylvan beginning in the 2004–2005 school year. These services will be similar to those offered by Catapult Learning under the Education Station program. We cannot assure you that the franchisees who choose to provide NCLB services, under the name Ace It! or Sylvan, will not compete directly with our Education Station program.

Our success depends on our ability to recruit and retain necessary personnel.

Our success also depends, in large part, upon our ability to attract and retain highly qualified personnel. For example, our Progressus Therapy business must recruit qualified occupational therapists, physical therapists and speech language pathologists to administer the specialized services we provide. A shortage of qualified therapists and pathologists currently exists, which may inhibit us from satisfying demand and could limit our growth. In addition, as a result of higher elementary school enrollment and the retirement of veteran teachers, a shortage of teachers may develop over the next decade. Similar shortages have occurred in the past. We may have difficulty locating and hiring qualified teachers and retaining such personnel once hired.

We depend on key personnel, including R. Christopher Hoehn-Saric, Peter Cohen, Mary Foster, Jeffrey Cohen and Kevin Shaffer, to effectively operate our business. If any of our key personnel left our company and we failed to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, our business, financial condition and results of operations could adversely be affected.

Our substantial indebtedness could adversely affect our financial condition and impact our business and growth prospects.

As of AprilJune 30, 2004, our total indebtedness was approximately $170 million. Our substantial indebtedness could have important consequences to you. For example, it could:

Furthermore, all of our indebtedness under our secured credit facility bears interest at variable rates. If these rates were to increase significantly, our interest expense would increase, our ability to borrow additional funds may be reduced and the risks related to our substantial indebtedness would intensify.

The terms of our operating company’s current secured credit facility restrict us from engaging in many activities and require us to satisfy various financial tests, and we expect that any credit facilities that we obtain in the future will contain similar restrictions and requirements.

Our operating company, Educate Operating Company, LLC, has borrowed $170 million under a $200 million secured credit facility that contains covenants that restrict, among other things, our ability to incur additional debt, pay cash dividends, create liens, change our fundamental organization or lines of business, make investments and engage in transactions with affiliates and that contains events of default that are triggered, among other things, if there is a change of control of us or our subsidiaries and for certain changes in the composition of our Board of Directors, all of which may adversely affect our ability to grow and to pursue new business opportunities. The secured credit facility also requires us to maintain specific financial ratios. Events beyond our control could affect our ability to meet those

financial ratios, and we cannot assure you that we will meet them. A breach of any of the covenants contained in our operating company’s secured credit facility could allow the lenders to declare all amounts outstanding under the secured credit facility to be immediately due and payable. We have pledged substantially all of our assets to the lenders as collateral under our operating company’s secured credit facility. The lenders could proceed against the collateral granted to them if our operating company is unable to meet its debt service obligations. If the amounts outstanding under our operating company’s secured credit facility are accelerated, we may be forced to restructure or refinance our obligations, obtain equity financing or sell assets, which we may be unable to accomplish in a timely manner, on terms satisfactory to us or at all. If we are unable to restructure or refinance our obligations, we may default under our obligations.

In order to replace our existing secured credit facility or raise additional capital, we and/or our operating company may seek to obtain one or more credit facilities in the future. We expect that any credit facilities we enter into in the future will contain restrictions and requirements similar to those described above.

Risks Relating to this Offering

Our controlling stockholders may take actions that conflict with your interests.

Immediately following this offering, 54.8% of our common stock on a fully diluted basis (or 50.0% if the underwriters’ over-allotment option is exercised in full) will be beneficially owned by affiliates of Apollo Advisors, L.P. Because of these holdings, and certain agreements we have entered into with Apollo, Apollo will be able to control all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. Until such time that affiliates of Apollo no longer beneficially own at least 33% of our outstanding common stock and have sold at least one share of common stock other than in this offering, Apollo will have the right to nominate four designees to our Board of Directors and certain important matters will require the approval of the majority of directors nominated by Apollo. Apollo also will have the right to nominate additional directors to our Board of Directors, until such time that

affiliates of Apollo no longer beneficially own at least 50% of our outstanding common stock and have sold at least one share of common stock other than in this offering. As a result, the directors nominated by Apollo will be able to control decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, and limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. A sale of a substantial number of shares of our stock by Apollo in the future could cause our stock price to decline.

Our audit committee initially will not be comprised solely of independent directors, which may create conflicts of interest.

We intend to avail ourselves of the transition periods provided for under the applicable NASDAQ Marketplace Rules for issuers listing in conjunction with their initial public offering. As such, our audit committee is not required to consist solely of independent directors until one year following the consummation of this offering. Mr. Laurence Berg and Mr. Aaron Stone, two members of our audit committee, do not meet the independence requirement for audit committees under the requirements of NASDAQ and the SEC. Mr. Berg and Mr. Stone are affiliates of Apollo and were nominated to our Board of Directors by Apollo. As a result of their position on our audit committee, Mr. Berg and Mr. Stone will have the ability to exert significant influence over our activities and decisions and our internal audit function. As affiliates of Apollo, Mr. Berg and Mr. Stone may have goals or views that may differ from those of our other stockholders or our management and, accordingly, their substantial influence over our affairs may create conflicts of interest.

Certain provisions of our charter documents and agreements and Delaware law could discourage, delay or prevent a merger or acquisition at a premium price.

Our certificate of incorporation and bylaws permit us to issue, without any further vote or action by the stockholders, up to 20,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares, constituting the series and the designation of the series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of the series. Our bylaws also require approval of a majority of directors nominated by Apollo for certain important matters including mergers and acquisitions. In addition, Apollo will be able to control all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions and will have control over our management and policies. See “Management—Apollo Approval of Certain Matters.”

Section 203 of the Delaware General Corporation Law, or the DGCL, also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. See “Description of Capital Stock—Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law that May Have an Anti-Takeover Effect.”

These provisions may discourage, delay or prevent a merger or acquisition at a premium price.

There has been no prior market for our common stock, and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value and increase the volatility of your shares. An inactive market may also impair our ability to

raise capital by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

The price of our common stock may fluctuate substantially.

The initial public offering price for the shares of our common stock sold in this offering will be determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

In addition, the stock market in general, and the NASDAQ National Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources, which could materially and adversely harm our financial condition and results of operations.

We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

We currently do not plan to declare dividends on shares of our common stock in the foreseeable future, except prior to the consummation of this offering in connection with the sale of Connections Academy. See “Certain Relationships and Related Transactions—Sale of Connections Academy.” Further, the payment of dividends by us is restricted by our operating company’s secured credit facility. See “Dividend Policy” for more information. Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit. There is no guarantee that the price of our common stock that will prevail in the market after this offering will ever exceed the price that you pay.

Future sales of our common stock may depress our share price.

Based on the number of shares outstanding as of March 31, 2004, after this offering, we will have 41,800,000 shares of common stock outstanding. The 15,000,000 shares sold in this offering, or 17,250,000 shares if the underwriters’ over-allotment is exercised in full, will be freely tradable without restriction or further registration under federal securities laws unless purchased by our affiliates. The remaining shares of common stock outstanding after this offering will be available for sale in the public market as follows:

The above table assumes the effectiveness of the lock-up agreements under which our executive officers, directors and certain holders of our common stock have agreed not to sell or otherwise dispose of their shares of common stock and that we do not waive compliance with our securities trading policy, which restricts employees that are not party to lock-up agreements from selling common stock for 180 days following the date of this prospectus. Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representatives of the underwriters may, at any time without notice, release all or any portion of the securities subject to the lock-up agreements.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales may occur, could cause the market price of our common stock to decline. After the lock-up agreements and other restrictions pertaining to this offering expire, additional stockholders, including our majority stockholders, will be able to sell their shares in the public market, subject to legal restrictions on transfer. As soon as practicable after the closing of this offering, we also intend to file a registration statement covering shares of our common stock issued or reserved for issuance under our stock option plan. In addition, under our registration rights agreement, some of our stockholders are entitled to registration rights. Subject to the terms of the lock-up agreements and our securities trading policy, registration of the sale of these shares of our common stock would generally permit their sale into the market immediately after registration. The registration rights of our stockholders could impair our ability to raise capital by depressing the price at which we could sell our common stock. We may also sell additional shares of common stock in subsequent public offerings, which may adversely affect market prices for our common stock. See “Shares Eligible for Future Sale” for more information.

As a new investor, you will experience substantial dilution in the net tangible book value of your shares.

The initial public offering price of our common stock is considerably more than the net tangible book value per share of our outstanding common stock. Accordingly, investors purchasing shares of common stock in this offering will:

To the extent outstanding stock options are exercised or future stock options are issued and exercised, there will be further dilution to new investors. See “Dilution” for more information.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements made in this prospectus are forward-looking statements. These forward-looking statements are based upon our current expectations and projections about future events. When used in this prospectus, the words “believe,” “anticipate,” “intend,” “estimate,” “expect, “will,” “should,” “may” and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this prospectus are primarily located in the material set forth under the headings “Prospectus Summary,” “Risk Factors,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations or may affect the value of our common stock include, but are not limited to:

ABOUT THIS PROSPECTUS

Throughout this prospectus, we use market data and industry forecasts and projections which we have obtained from market research, publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. Similarly, we believe that the surveys and market research others have performed are reliable, but we have not independently verified this information. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry, and there is no assurance that any of the projected results will be achieved. We derive some of the information contained in this prospectus from financial and other data reported by our franchisees. Our franchisees are contractually obligated to provide this financial and other data to us, but we do not routinely audit it.

This prospectus refers to brand names, trademarks, servicemarks and trade names of other companies and organizations, and these brand names, trademarks, servicemarks and trade names are the property of their respective holders.

In order to provide meaningful historical financial information, we use pro forma consolidated financial information and combined financial information for different periods throughout this prospectus, rather than actual financial data. The financial data presented in this prospectus for periods prior to July 1, 2003 is combined financial data of the pre-K-12 business of Laureate. As used in this prospectus, “pro forma” or “pro forma consolidated” means that the information presented gives effect to our acquisition of the pre-K-12 business from Laureate on June 30, 2003, as if that transaction had occurred as of January 1, 2003. Unless otherwise indicated, references to our full-year results of operations for 2003 contained in this prospectus describe our pro forma consolidated results of operations for 2003.

Except as otherwise indicated, all share information in this prospectus is based on the number of shares outstanding on March 31, 2004 and:

USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $67.5 million based on an assumed initial public offering price of $15.00 per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders.

We plan to use our net proceeds to repay approximately $67.5 million of indebtedness under our operating company’s secured credit facility. JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities Inc., is a lender and administrative agent for the other lenders under the secured credit facility, Merrill Lynch Capital, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated is a lender and documentation agent for the other lenders under the secured credit facility and Bank of America N.A., an affiliate of Banc of America Securities LLC, is a lender under the secured credit facility. Our operating company had outstanding borrowings under this facility of $170 million as of AprilJune 30, 2004, bearing interest at variable interest rates that are adjustable based on our performance (4.13% at AprilJune 30, 2004). We incurred the borrowings under this facility to fund our acquisition by Apollo.

DIVIDEND POLICY

We currently do not anticipate paying any cash dividends in the foreseeable future. Instead, we anticipate that all of our earnings, if any, in the foreseeable future will be used to repay debt, for working capital, to support our operations and to finance the growth and development of our business. Any future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including restrictions in our debt instruments, our future earnings, capital requirements, financial condition, future prospects and the General Corporation Law of the State of Delaware, which provides that dividends are only payable out of surplus or current net profits. Other than the dividend described in the following paragraph, we are currently restricted from declaring or paying cash dividends pursuant to the terms of our operating company’s secured credit facility.

On June 29, 2004 we declared a dividend of $9 million. See “Certain Relationships and Related Transactions—Sale of Connections Academy.”

CAPITALIZATION

The following table summarizes our capitalization as of March 31, 2004 on:

You should read the following table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

The table above excludes the following shares of common stock:

Subsequent to March 31, 2004, we increased the number of shares available for issuance under the plan and issued 604,000 shares of restricted stock and granted options to purchase 305,200 shares of our common stock. 130,750 shares remain available for future issuance under our 2003 Omnibus Stock Incentive Plan and on                 , 2004, our Board of Directors adopted a new 2004 Omnibus Stock Incentive Plan, which allows the issuance of an additional                  shares.

DILUTION

Dilution is the amount by which the initial public offering price paid by the purchasers of common stock in this offering exceeds the net tangible book value per share of common stock following this offering. Our pro forma net tangible book value per share represents our tangible assets, or total assets less intangible assets, less our total liabilities, divided by the number of shares of our common stock outstanding as of March 31, 2004, after giving effect to the payment of a dividend in the amount of $9 million to our stockholders in June 2004. As of March 31, 2004, our pro forma net tangible book value was approximately $(136.8) million, or $(3.72) per share of common stock. After giving effect to the sale of shares of common stock by us at the assumed initial public offering price of $15.00 per share, and after deducting the underwriting discounts, commissions and estimated offering expenses payable by us, our as adjusted pro forma net tangible book value at March 31, 2004 would have been approximately $(69.3) million, or $(1.66) per share of common stock. After giving effect to the offering, our pro forma as adjusted net tangible book value represents an immediate increase in the pro forma net tangible book value of $2.06 per share to existing stockholders and an immediate dilution in the pro forma as adjusted net tangible book value of $16.66 per share to the investors who purchase our common stock in this offering. The following table illustrates this per share dilution:

The table below summarizes, as of March 31, 2004, the differences for our existing stockholders and investors in this offering with respect to the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid before deducting fees and expenses.

The share amounts in this table exclude 3,372,800 shares of our common stock that were subject to outstanding options as of March 31, 2004 at a weighted average exercise price of $3.71 per share of common stock. To the extent that any options are exercised, there will be further dilution to new investors. If all of our outstanding options as of March 31, 2004 had been exercised, the pro forma as adjusted net tangible book value per share after this offering would be $(1.26) per share, representing an immediate increase in pro forma net tangible book value of $2.46 per share to our existing stockholders and an immediate decrease in the net tangible book value to our new investors of $16.26.

Selected Consolidated Financial Data

You should read the following selected consolidated financial data together with our historical and pro forma consolidated financial statements and the related notes, the combined financial statements and the related notes of our predecessor, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus. References to our predecessor refer to the pre-K-12 business we acquired from Laureate.

The statement of operations data of our predecessor for the years ended December 31, 1999 and 2000 and the balance sheet data as of December 31, 1999, 2000 and 2001 are derived from our unaudited consolidated financial statements that are not included in this prospectus. The combined statement of operations data of our predecessor for the years ended December 31, 2001 and 2002 and the six months ended June 30, 2003, and our consolidated statement of operations data for the period from June 30, 2003 (date of inception) through December 31, 2003 are derived from financial statements audited by Ernst & Young LLP, independent registered public accounting firm, and are included elsewhere in this prospectus.

The combined statement of operations data of our predecessor for the three months ended March 31, 2003 and our consolidated statement of operations data for the three months ended March 31, 2004 are derived from unaudited interim consolidated financial statements, which are included elsewhere in this prospectus and which, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of such financial statements. Quarterly financial information is not necessarily indicative of our annual results due to seasonality and other quarterly fluctuations that are inherent in our business.

The unaudited pro forma consolidated statement of operations data for the year ended December 31, 2003 and the three months ended March 31, 2003 is derived from our unaudited pro forma consolidated statements of income which are included elsewhere in this prospectus. These pro forma financial statements give effect to our acquisition of the pre-K-12 business acquired from Laureate on June 30, 2003 as if such transaction occurred on January 1, 2003. Our unaudited consolidated pro forma financial data is based on currently available information and is not necessarily indicative of our financial position or results of operations had our acquisition by Apollo taken place on January 1, 2003, nor are they necessarily indicative of future results.

SELECTED CONSOLIDATED FINANCIAL DATA

(dollars in thousands, except share, per share and other data)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. The following discussion gives effect to our acquisition of the pre-K-12 business of Laureate and certain of its subsidiaries as of June 30, 2003.

Overview

We believe we are a leading national provider of tutoring and other supplemental education services to pre-K-12 students. We operate through three business segments that offer distinct supplemental education services from which we earn revenues. Through our Learning Center segment, we deliver diagnostic, prescriptive tutoring programs, principally through a network of more than 1,000 franchised and company-owned learning centers in North America. We also provide tutoring, as well as other supplemental education services and special needs services, to public and private schools through government-funded contracts in our Institutional Services segment. Our Online Learning Services segment provides tutoring programs modeled after those offered in our Sylvan Learning Centers in an online environment.

We were formed as a Delaware corporation in March 2003 by affiliates of Apollo Advisors, L.P., to acquire the pre-K-12 education business units of Laureate and Sylvan Ventures, LLC (“Ventures”), one of its subsidiaries. Our acquisition of the pre-K-12 business of Laureate and Ventures was completed on June 30, 2003. The aggregate purchase price was approximately $282 million, consisting of cash, a subordinated note issued to Laureate (which has since been repaid with the proceeds of our new secured credit facility), the surrender of Laureate and Ventures securities held by affiliates of Apollo and a deferred portion of the purchase price of $2.3 million. In addition, we are required to pay Laureate up to $10.0 million of additional consideration if Connections Academy exceeds specified levels of EBITDA any time prior to December 31, 2007. We expect that the buyer of Connections Academy will assume this obligation upon the sale of Connections Academy.

On March 26, 2004, our Board of Directors directed management to sell Connections Academy within the next 12 months. We expect to retain the obligation to pay Laureate the additional consideration described above following the sale. We expect to enter into a transition services agreement with Connections Academy after the sale. The operations of Connections Academy are classified as discontinued operations as a result of our Board’s decision to sell it and our expected absence of continuing involvement in the business to be sold.

Simultaneously with the closing of our acquisition by Apollo, our operating company entered into a $130 million secured credit facility with a syndicate of lenders. The secured credit facility consisted of a $110 million term loan facility and a $20 million revolving credit facility. We funded the cash portion of the purchase price through the $110 million term loan facility and a $20 million equity contribution from our equity sponsor and certain members of our management team. We also sold additional shares of our common stock to our equity sponsor in exchange for certain Laureate and Ventures securities held by our equity sponsor. We contributed these securities to our operating company, which in turn surrendered the securities to Laureate and Ventures as a portion of the purchase price for our acquisition by Apollo.

In April 2004, our operating company entered into a new secured credit facility with a syndicate of lenders. The new secured credit facility consists of a $170 million term loan facility and a $30 million revolving credit facility. Our operating company borrowed the full $170 million under the term loan facility primarily to repay all amounts outstanding under the subordinated note issued to Laureate in our acquisition by Apollo and to refinance borrowings under the old secured credit facility. As of AprilJune 30, 2004, we had incurred no borrowings under the revolving credit facility.

Our consolidated financial statements reflect our financial position as of December 31, 2003 and the results of operations and cash flows for the period June 30, 2003 (the date of our inception) to December 31, 2003, and the financial position of the pre-K-12 business of our predecessor entity, as of December 31, 2002 and the combined results of operations and cash flows for the years ended December 31, 2001 and 2002 and for the period January 1, 2003 to June 30, 2003. Educate, Inc. had no operating activity prior to our acquisition by Apollo on June 30, 2003. The financial data presented below for periods prior to July 1, 2003 is combined financial data of the pre-K-12 business of Laureate. As used in this prospectus, “pro forma” or “pro forma consolidated” means that the information presented gives effect to our acquisition of the pre-K-12 business from Laureate on June 30, 2003 as if that transaction had occurred as of January 1, 2003.

For purposes of this management’s discussion and analysis, we compare the combined results of operations of our predecessor for the years ended December 31, 2001 and 2002 to the unaudited pro forma consolidated results of operations for the year ended December 31, 2003. We also compare our unaudited results of operations for the three months ended March 31, 2004 to the unaudited pro forma results of operations for the three months ended March 31, 2003. Our pro forma consolidated results of operations for the year ended December 31, 2003 are not comparable in certain respects to the results of operations of our predecessor for the years ended December 31, 2002 and 2001 as a result of our application of purchase accounting to the assets and liabilities that we acquired. Our operations and our predecessor’s operations were substantially the same during these periods, except for the effects on depreciation, amortization and interest expense resulting from our acquisition of the pre-K-12 business of Laureate and our financing of our acquisition by Apollo. Our depreciation and amortization expense will differ from the amounts reported by our predecessor because we recorded our property and equipment and intangible assets at fair value upon the acquisition of our business from our predecessor. In addition, we financed the acquisition of our business by borrowing $167.3 million, whereas our predecessor had insignificant amounts of debt. You should read our “Unaudited Pro Forma Consolidated Statements of Income” included elsewhere in this prospectus for additional information on the effects of our acquisition of the business from our predecessor on our operating results.

Some of the information contained in this section and elsewhere in this prospectus, including information with respect to our plans and strategies for our business, includes forward-looking statements. Our historical and expected financial performance is influenced by several important trends.

revenues in our company-owned centers by significantly increasing average revenues per student despite a decrease in the number of absolute new enrollments per center. In 2003, we refined this strategy as we worked to achieve the optimal balance between program length and number of new enrollments. We did this by improving our consultative sales process to more closely tailor recommended program length to a family’s particular circumstances. Along with the implementation of this sales strategy, we focused increased attention on enhancing operating income in our company-owned centers through improved labor management methods, cost containment and other operating efficiencies. The combination of our sales strategy and cost management initiatives resulted in a significant increase in operating income and operating margin of our company-owned centers from 2001 to 2003. We expect our franchisees will also adopt our sales strategy over time, and we expect to receive higher royalties as a result.

In order to properly incentivize our employees, we have continued the practice of granting options to our key employees. At the time of our acquisition by Apollo, we granted options to purchase 3.4 million shares of our common stock to members of our management team and other key employees. During 2004, we granted 604,000 shares of restricted stock and options to acquire in the aggregate an additional 305,200 shares as of June 29,28, 2004 at prices less than the estimated fair value of our common stock; therefore, we will incur $10.3 million of stock compensation expense over the periods the awards vest in accordance with our accounting policies for stock-based compensation arrangements. See Note 15 to our consolidated financial statements, included elsewhere in this prospectus. We intend to make future grants of stock and stock options to our key employees.

Components of Revenues and Expenses

Revenues.    We operate through three business segments that offer distinct supplemental education services from which we earn revenues. Our Learning Center segment earns revenues principally by tutoring students in our company-owned learning centers and from franchise services fees. Our franchise services revenue consists principally of monthly franchise royalty fees, and also includes licensing fees for the sales of franchise territories, and sales of learning programs and related materials to franchised learning centers. Our Institutional Services segment earns revenue principally from school-year contracts to provide supplemental remedial services to public and non-public schools. Our Online Learning segment earns revenue from the delivery of supplemental education services to students through the Internet. Our revenue recognition policies are discussed more fully in the section below entitled “Critical Accounting Policies and Estimates” and in Note 2 to our consolidated financial statements included elsewhere in this prospectus. In order to provide a more meaningful basis for comparison of same center growth for our customers in company-owned and franchised centers, we also analyze same center cash receipt growth of our company-owned Sylvan Learning Centers, which is calculated based upon the receipt of payment rather than delivery of services. Accordingly, it is more comparable to growth in franchised same center royalties, which are based on franchisee cash receipts. We also believe that same center cash receipt growth is a reasonably good indicator of our expected same center revenue growth for company-owned centers over the following two quarters, the period over which the services are typically delivered.

Instructional and Franchise Operations Costs.    Our instructional and franchise operations costs include company-owned center operating costs, principally comprised of labor costs for instructors and center management personnel, facility rent expense and instructional materials and supplies. We also include in this caption the costs of managing our extensive network of franchised learning centers, which consists principally of labor costs. Instructional costs associated with our Institutional Services and Online Learning Services segments also consist primarily of labor costs to provide our services.

Marketing and Advertising.    We incur significant marketing and advertising costs to market our services to our customers in each segment. These costs are expensed when incurred.

Depreciation and Amortization.    Depreciation and amortization are the expenses we record each period from depreciating our property and equipment over estimated useful lives that range from two to ten years. We also amortize certain intangible assets that we acquired from our predecessor on June 30, 2003 over periods not exceeding five years. Prior to 2002, our predecessor also amortized goodwill it had recorded from acquiring certain businesses. Beginning in 2002, the goodwill of our predecessor and goodwill we recorded upon the acquisition of our predecessor is no longer amortized because of changes to accounting principles generally accepted in the United States.

General and Administrative Expenses.    Our general and administrative expenses are general management and related administrative costs that we incur to manage our segments. These costs consist of labor costs associated with our executive, accounting, human resource, legal and information technology staffs. Also included in general and administrative expenses are professional fees, insurance and rent associated with our centralized management functions. We do not allocate our general and administrative expenses to our three segments when determining segment profit.

Interest Expense.    Interest expense consists principally of interest expense related to the $167.3 million of debt that we incurred when we acquired our predecessor. Our predecessor did not incur significant interest expense as it financed its activities from cash flows from operations and capital contributions from Laureate.

Income Tax Expense.    We incur income tax expense related to our consolidated domestic operations and our operations in Europe that are taxed principally in Germany. Our predecessor operated the business comprising the Online Learning Services segment through a subsidiary that filed separate income tax returns. This subsidiary of our predecessor incurred significant operating losses

that did not result in recorded income tax benefits for our predecessor because their realization was not reasonably assured. Consequently, the historical results of operations for our predecessor reflects unusually high effective income tax rates. See the notes to the combined financial statements of our predecessor for additional information regarding the computation of our predecessor’s income tax expense.

Loss From Discontinued Operations.    In March 2004, we committed to sell the common stock of our subsidiary Connections Academy, Inc. Because this subsidiary has discrete operations in which we will have no further continuing involvement after the sale, and because we are committed to completing the sale within one year, we have classified the operating results of Connections Academy as a separate component of our consolidated operating results in our financial statements and the financial statements of our predecessor for all periods presented. See Note 6 to our consolidated financial statements for additional information about Connections Academy and our accounting policies in connection with the pending sale of this subsidiary.

Seasonality and Other Quarterly Fluctuations

Like other companies that provide tutoring and other supplemental education services, we are subject to seasonality in our revenue streams that can affect our results of operations. This seasonality arises from a number of factors, primarily driven by the timing of school semester cycles. Our quarterly results also have been affected by our license agreements with franchisees that require the payment of royalties to us based on a percentage of their cash receipts, a significant portion of which consist of prepayments by customers for services to be provided by our franchises more than a month in the future.

First Quarter.    In our Learning Center segment, we experience increased enrollments as a result of the initiation of advertising and increased parental focus on their children’s performance associated with the receipt of academic results from the first part of the school year. Our royalties increase as our franchisees begin to receive advance payment for services to be provided in the summer time period. In our Institutional Services segment, we deliver services under NCLB and other programs during this quarter.

Second Quarter.    In our Learning Center segment, we experience a higher level of revenues as we benefit from our continued investment in advertising, delivery of services in our company-owned centers and increased receipts of franchise royalties due to prepayment for summer programs. In our Institutional Services segment, we complete delivery of our NCLB and other institutional services in conjunction with the ending of the school year.

Third Quarter.    The third quarter marks the peak delivery of services in our Learning Center segment. We recognize revenue as we deliver these services in our company-owned centers.

However, with respect to our franchised centers, our royalties decline as the cash receipts our franchisees receive from their customers decline from peak second quarter levels. Due to summer vacation, we do not provide many services in our Institutional Services segment during this period, which results in the lowest segment revenue for the year. However, we gain significant visibility for the upcoming year because the majority of our institutional contracts are renewed during the third quarter.

Fourth Quarter.    In our Learning Center segment, enrollments are at their lowest levels of the year as a result of lower advertising expenditures, students taking a greater number of vacations during the holiday season and parental optimism towards their children’s improved school performance associated with the beginning of a new school year. In addition, we experience lower revenues from franchise royalties in the fourth quarter as a result of prepayments by our franchisees’ customers in earlier quarters. In our Institutional Services segment, we incur significant start-up costs in connection with preparation of our NCLB programs.

Other.    The timing of school year contracts, advertising spending and critical enrollment periods can affect our revenues at any time during the year.

As a result of the foregoing factors, we believe that quarter-to-quarter comparisons of our results of operations may not be a fair indicator and should not be relied upon as a measure of our future performance.

Results of Operations

The following table provides an overview of the consolidated results of our continuing operations: