K12, Inc., [NYSE:LRN] the promoter of virtual education programs, has submitted an application to establish a statewide academic network in North Carolina. If the North Carolina Virtual Academy School is approved, K12, Inc., will have an entree to state and local education agency [school district] funds. A North Carolina student is worth approximately $6,753 according to K12, Inc. business plan application. K12, Inc. expects to enroll 2,750 students in the coming year.
Educations funds cannot be paid directly to for-profit companies, so interested parties create closely-related entities to circumvent the rules. K12, Inc. intends to register North Carolina Learns, Inc. as its non-profit partner. The financial plan, as outlined in the application, is as follows: North Carolina Learns, Inc., the recipient of state education money then pays K12, Inc. for its services by way of a Educational Products and Services contract.
North Carolina Learns Inc. and the K12 Virtual Schools LLC Financial Arrangement
The cosignatories, North Carolina Learns, Inc, a non-profit benefit company and Virtual Schools LLC, a Delaware limited liability company, agree that if the North Carolina Virtual Academy venture is profitable the amount due K12 will be determined as follows:
i. Of the first $100,000 or less of the Positive Net Asset Position, the amount due K12 will be 25% of such amount, not to exceed $25,000.
ii. Of the second $100,000 or less of the Positive Net Asset Position, if any, the amount due K12 will be 50% of such $100,000 or $50,000. The amount due K12 will not exceed $75,000, for the first $200,000 of Positive Net Assets.
iii. If the Positive Net Asset Position exceeds $200,000 the amount due K12 will be 75% of the amount over $200,000 plus the $75,000 noted in the point immediately above.