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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K





(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended October 1, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission file number 0-27248





LEARNING TREE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 95-3133814                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|1805 Library Street Reston, VA                                 |  | 20190                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(703)
709-9119

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



|                               |  |                                          
|------------------------------ |  | -----------------------------------------
|Title of each class            |  | Name of each exchange on which registered
|Common Stock, $.0001 par value |  | The Nasdaq Stock Market LLC              

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days:    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.   ̈

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|Non-accelerated filer   |  |  ̈  (do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

The aggregate market value of the common stock, $.0001 par value, held by non-affiliates of the registrant, as of April 2, 2010 was
$68,670,038. (Excludes 7,633,506 shares held by directors and officers of the registrant since such persons may be deemed to be affiliates.)

The number of shares of common stock, $.0001 par value, outstanding as of December 2, 2010, was 13,526,920.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy
Statement of the registrant to be delivered to stockholders in connection with the 2011 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.









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LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS



|              |  |                                                                                                              |    |      |    | 
|------------- |  | ------------------------------------------------------------------------------------------------------------ | -- | ---- | -- | 
|              |  |                                                                                                              |    | Page |   
|Part I        | 
|              |  |                                                                                                             
|Item 1.       |  | Business                                                                                                     |    |      | 4  | 
|Item 1A.      |  | Risk Factors                                                                                                 |    |      | 11 | 
|Item 1B.      |  | Unresolved Staff Comments                                                                                    |    |      | 19 | 
|Item 2.       |  | Properties                                                                                                   |    |      | 19 | 
|Item 3.       |  | Legal Proceedings                                                                                            |    |      | 20 | 
|Item 4.       |  | Reserved                                                                                                     |    |      | 20 | 
|             
|Part II       | 
|              |  |                                                                                                             
|Item 5.       |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |      | 21 | 
|Item 6.       |  | Selected Financial Data                                                                                      |    |      | 24 | 
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |    |      | 26 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |    |      | 42 | 
|Item 8.       |  | Financial Statements and Supplementary Data                                                                  |    |      | 44 | 
|Item 9.       |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure                         |    |      | 73 | 
|Item 9A.      |  | Controls and Procedures                                                                                      |    |      | 73 | 
|Item 9B.      |  | Other Information                                                                                            |    |      | 75 | 
|             
|Part III      | 
|              |  |                                                                                                             
|Item 10.      |  | Directors, Executive Officers and Corporate Governance                                                       |    |      | 76 | 
|Item 11.      |  | Executive Compensation                                                                                       |    |      | 76 | 
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |    |      | 76 | 
|Item 13.      |  | Certain Relationships and Related Transactions, and Director Independence                                    |    |      | 76 | 
|Item 14.      |  | Principal Accounting Fees and Services                                                                       |    |      | 76 | 
|             
|Part IV       | 
|              |  |                                                                                                             
|Item 15.      |  | Exhibits and Financial Statement Schedules                                                                   |    |      | 77 | 
|              | 
|Signatures    |  |                                                                                                              | 78 |     
|              | 
|Exhibit Index |  |                                                                                                              | 79 |     



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. You can find many (but not all) of these statements by looking for words such as approximates, believes, expects, anticipates,
estimates, intends, plans, would, may or other similar expressions in this Report. Our forward-looking statements relate to future events or our future performance and include, but are not
limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. Other statements contained in this report that are
not historical facts are also forward-looking statements.

We claim the protection of the safe harbor contained in the
Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on our beliefs, assumptions made by us and
information currently available to us. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we
believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences
may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those
expressed or implied by forward-looking statements include those related to the following:



| |  |  | the timely development, introduction, and customer acceptance of our courses;
| | - |  | -----------------------------------------------------------------------------



| |  |  | efficient delivery and scheduling of our courses;
| | - |  | -------------------------------------------------



| |  |  | technology development and new technology introduction;
| | - |  | -------------------------------------------------------



| |  |  | competition;
| | - |  | ------------



| |  |  | international operations, including currency fluctuations;
| | - |  | ----------------------------------------------------------



| |  |  | attracting and retaining qualified personnel;
| | - |  | ---------------------------------------------



| |  |  | intellectual property, including having to defend potential infringement claims;
| | - |  | --------------------------------------------------------------------------------



| |  |  | changing economic and market conditions; and
| | - |  | --------------------------------------------



| |  |  | adverse weather conditions, strikes, acts of war or terrorism and other external events.
| | - |  | ----------------------------------------------------------------------------------------

For further discussion of these and other factors see Managements Discussion and Analysis of Financial Condition and
Results of Operations and Risk Factors.

This Report and all subsequent written and oral
forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly
any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report.



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PART I



|Item 1. | BUSINESS
|------- | --------

As used in this
Report (unless the context otherwise requires) we, our, and us refer to Learning Tree International, Inc. and its subsidiaries.

Overview

Learning Tree International, Inc. is a leading worldwide
vendor-independent provider to business and government organizations for the training and education of their managers and information technology (IT) professionals. Since our founding in 1974, we have provided high-quality training to
over 2 million managers and IT professionals. In fiscal year 2010, we trained 76,176 course participants from more than 8,200 organizations worldwide, including large national and multinational companies, government organizations, and small and
medium-size companies.

As of October 1, 2010, we offered a broad proprietary library of intensive instructor-led courses
from one to five days in length, consisting of 214 different course titles representing 4,824 hours of training, including 137 IT course titles and 77 management course titles. Learning Tree courses provide education and training across a wide range
of technical and management disciplines, including operating systems, databases, computer networks, computer and network security, web development, programming languages, software engineering, open source applications, project management, business
skills, leadership and professional development.

We market and present our courses through locally staffed operations in the
United States, the United Kingdom, France, Canada, Sweden and Japan and generate approximately half of our revenues internationally. We coordinate, plan and deliver our courses at our own education centers, external hotel and conference facilities
and customer sites worldwide. During fiscal year 2010, we presented courses in 54 countries. In fiscal year 2009 we implemented our proprietary e-Learning platform, Learning Tree AnyWare, which allows individuals located anywhere in the world
to use their Internet browser to participate online in instructor-led classes being conducted live in Learning Tree Education Centers or at customer locations. During fiscal year 2010, we achieved strong acceptance of Learning Tree AnyWare with more
than 4,000 remote participants attending AnyWare course sessions.

We use a well-defined systematic approach to develop and
update the Learning Tree course library so as to provide training that is immediately relevant to course participants working in a broad range of applications and industries. After assessing market need, courses may be translated into French,
Swedish and Japanese. Our proprietary course development process also allows us to efficiently and effectively customize our courses for delivery at our customers sites.

Business Strategy

Our long-term objective is to sustain and grow
our position as a leading worldwide vendor-independent provider of training and education to managers and IT professionals and become the provider of choice for large national and multinational companies, small and medium-size companies and
government organizations. To that end, we focus on providing our customers employees with the knowledge and skills they need to contribute to their employers key business objectives and developing and maintaining long-term relationships
with our customers and course participants.

Commitment to Quality Training.For the past 36 years, we
have set the highest standards of excellence in educating and training managers and IT professionals throughout the world. We believe these standards have driven our long-term success. Our course participants have consistently rated Learning Tree
instructors and courses at the top end of the scale. These ratings reflect our ongoing commitment to quality and innovations in instructional delivery, including our patented MagnaLearn instructional enhancement system and Reality-Plus
management training methodology, as well as, the latest up-to-date hands-on course equipment, ongoing



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revision and updating of our course materials, and the ongoing training and coaching of our already superb instructors. Our AnyWare e-Learning platform extends the full range of Learning Tree
features and standards to our online participants, so that they enjoy the same results as our in-class participants.

High Quality Instructor Team. At October 1, 2010, we had 625 course instructors located around the world who
are practicing professionals with expert subject knowledge and who average nearly 26 years of hands-on, real world experience. Learning Tree instructors teach an average of approximately 9 course events per year on an
as-needed basis. During the rest of the year they work for other companies either as full-time employees or independent technical or management consultants. This on-demand structure enables us to quickly schedule additional
courses anywhere in the world and to respond efficiently to our customers needs for management and IT skills training. In addition, because Learning Tree instructors generally spend the majority of their time working in industry settings, they
provide our course participants with up-to-date, practical knowledge and skills in the latest technological and management developments, and provide us with unique access to a large pool of industry experts on management and IT trends throughout the
world that is especially valuable in our decisions and development process for new course titles.

Our success depends on our
ability to attract and retain highly skilled instructors. We use a highly systemized program in each of our local operating subsidiaries to identify, engage, train, coach, and evaluate our instructor team. Our instructors are highly loyal, as
evidenced by our annual instructor retention rate, which is approximately 90%.

Broad Proprietary
Course Library. We offer a broad, proprietary course library, which at October 1, 2010 totaled 214 instructor-led one- to five-day course titles comprising a total of 4,824 hours of classroom instruction covering a wide range of
management and IT topics. Based on their sophistication and quality, all Learning Tree courses are recommended for one to two semester hours of college credit by the American Council on Education. We are a trusted continuing professional education
(CPE) provider of the International Information Systems Security Certification Consortium (ISC)2. In addition, we are on the National Association of State Boards of Accountancy National Registry of CPE sponsors and are a Registered Education Provider of the Project Management Institute (PMI).

The following table itemizes the number of Learning Tree course titles by curriculum at October 1, 2010:



|                                          |  |                        |     |  |                        |  |       | 
|----------------------------------------- |  | ---------------------- | --- |  | ---------------------- |  | ----- | 
|Curriculum                                |  | Number ofCourse Titles |     |  | Total Hours ofTraining | 
|Windows Systems and Exchange              |  |                        | 18  |  |                        |  | 456   | 
|SQL Server                                |  |                        | 16  |  |                        |  | 372   | 
|Visual Studio and .NET Development        |  |                        | 15  |  |                        |  | 360   | 
|Networking, Cisco Networks and PC Support |  |                        | 14  |  |                        |  | 354   | 
|Project Management                        |  |                        | 16  |  |                        |  | 342   | 
|Business Analysis                         |  |                        | 17  |  |                        |  | 336   | 
|ITIL Certification                        |  |                        | 12  |  |                        |  | 288   | 
|Web Development and XML                   |  |                        | 13  |  |                        |  | 282   | 
|Software Engineering                      |  |                        | 12  |  |                        |  | 276   | 
|RDBMS, and Oracle Databases               |  |                        | 10  |  |                        |  | 270   | 
|Java, C++ and Perl Programming            |  |                        | 11  |  |                        |  | 264   | 
|Communication and Time Management         |  |                        | 15  |  |                        |  | 252   | 
|Security                                  |  |                        | 9   |  |                        |  | 228   | 
|Management and Leadership                 |  |                        | 10  |  |                        |  | 198   | 
|SharePoint                                |  |                        | 8   |  |                        |  | 180   | 
|UNIX and Linux                            |  |                        | 7   |  |                        |  | 162   | 
|Microsoft Office                          |  |                        | 4   |  |                        |  | 90    | 
|Disney Institute Courses                  |  |                        | 4   |  |                        |  | 60    | 
|Apple Macintosh Systems and Support       |  |                        | 2   |  |                        |  | 36    | 
|Cloud Computing                           |  |                        | 1   |  |                        |  | 18    | 
|                                          |  |                        |     |  |                        |  |       | 
|Total                                     |  |                        | 214 |  |                        |  | 4,824 | 
|                                          |  |                        |     |  |                        |  |       | 



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As a leading vendor-independent provider of IT training, we design our courses to provide
participants an unbiased perspective of both the strengths and limitations of software and hardware products and an understanding of how to compare and integrate multiple platforms and technologies from various vendors. Drawing from the expertise of
our international team of instructors, each course incorporates multiple points of view concerning IT applications used throughout the world. Our IT courses are designed to be highly interactive; most involve hands-on training on
networked state-of-the-art workstations so that participants can practice and assimilate the skills being taught. Participants spend a significant portion of each hands-on course working on computer-based exercises and participating in group
workshops and class interactions. As a result, they return to their jobs with the confidence to immediately apply the new skills and knowledge theyve gained. Participants receive extensive printed course materials that facilitate learning and
serve as a post-course reference tool.

Our management courses, while including core concepts and theory, focus heavily on
providing practical skills, tools, and techniques that participants can apply immediately upon returning to their jobs. Participants work extensively in group exercises that provide the opportunity for them to practice applying the key concepts in
real-world situations. These real-world scenarios are primarily delivered through RealityPlus, our proprietary performance-based management training platform. RealityPlus courses bring the real world to life in the classroom through the
use of computer-based and rich-media simulations, supplemented with substantial amounts of hands-on exercises and group activities, facilitated by experts in their respective fields. RealityPlus prepares participants to apply the skills and
knowledge they learn in our simulated projects to the real-life management tasks they will perform in the workplace.

As of
October 1, 2010, we offered 137 titles in our IT curriculum, representing 64.0% of our entire course library, compared to 143 titles, or 65.3% of our entire course library, at the end of fiscal year 2009. As of October 1, 2010, we offered
77 titles in our management curriculum, representing 36.0% of our entire course library, compared to 76 titles, or 34.7% of our entire course library, at the end of fiscal year 2009. Our spending on course development was $7.3 million in fiscal year
2010, $7.4 million in fiscal year 2009 and $9.7 million in fiscal year 2008.

To assist participants in their long-term
professional development, we offer 23 Learning Tree Professional Certification programs, in which participants earn their certification by successfully completing four Learning Tree courses in a particular field, and demonstrating mastery by passing
the examination for each course. Each Professional Certification Program is designed to teach all of the skills necessary to master a specific job function.

Over our 36-year history, we have developed and implemented a well-defined, systematic approach to rapidly develop, customize and update courses in the Learning Tree library and to translate our course
content into multiple languages. Courses are organized into curricula that reflect general topics or disciplines. We continuously update and expand our course curriculum structure and course content and add new course titles to keep pace with the
introduction of new technologies and to reflect the evolving training needs of our customers. To identify potential new courses for development, we incorporate feedback from the worldwide Learning Tree instructor team, course participants and
customers, and from the development groups of leading IT vendors. In fiscal year 2010, we developed 23 new course titles and retired 28 titles. We may or may not develop more titles than we retire in any period, and there can be no assurance that we
will develop courses that keep pace with the introduction of new hardware, software and networking technologies or the need for key business skills training. We expect course development costs to vary in the future, primarily depending on the number
of new titles we introduce in any period, as well as the overall size of the total course library we must maintain.

International Infrastructure and Logistics Capability. We meet customer demand for scheduling flexibility by delivering
course events frequently and at multiple locations throughout the world, and by making approximately three-quarter of our course titles available online through Learning Tree AnyWare. Our sophisticated infrastructure and logistics capability
allow us to coordinate, plan and deliver Learning Tree courses at our education centers and external hotel and conference facilities worldwide. We also present standard or customized courses on demand at customer facilities whenever and wherever
desired, with quality standards



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that are identical to those for courses presented in Learning Tree Education Centers. By using our team of 625 instructors, our course development and customization processes, our team of
customer support specialists, our logistics team and our thousands of classroom computer workstations, we can rapidly and effectively deliver any Learning Tree course to any location in the world.

In fiscal year 2010, we presented 5,907 course events at Learning Tree Education Centers and at third-party and customer sites in a total
of 54 countries. We currently operate wholly-owned subsidiaries in the United States (since 1974), France (since 1977), the United Kingdom (since 1978), Canada (since 1985), Sweden (since 1986) and Japan (since 1989). Each subsidiary is staffed by
local personnel responsible for the sale and delivery of courses in its local country as well as in other designated countries. As in most years, in fiscal year 2010, our international operations produced approximately half of our revenues. See Note
9 of Notes to Consolidated Financial Statements for certain financial data regarding operating segments and geographic regions. See Item 1A, Risk Factors for a description of the risks associated with our international
operations.

On an on-going basis, we evaluate the advisability of expansion or contraction of our operations both within
cities and countries with existing Learning Tree Education Centers and in new cities or countries.

Long-Term
Relationships with Global Customer Base. We have built long-standing relationships with our customer base of large national and multinational companies, small and medium-sized companies and government organizations throughout the world, and
seek to build continuing relationships both with these employers and with the individual employees who participate in our courses. Our customers operate in a wide range of sectors, including finance, computer, communications, electronics, systems
integration, aerospace, government and military, manufacturing, and energy. Every one of our 100 largest clients five years ago in fiscal year 2005 was still one of our clients five years later in fiscal year 2010. In fiscal year 2010, we provided
training to 76,176 course participants, and over 167 of our corporate and government customers purchased more than $100,000 of Learning Tree training. No customer accounted for 10% or more of our revenues in fiscal years 2010, 2009 or 2008.

In fiscal year 2010, we continued our efforts to develop enterprise-wide relationships with many of our large customers.
These relationships take various forms, but generally involve a modest discount to our list price in exchange for becoming a preferred supplier, which enables us to provide training services to the individual employees with lower sales and
administrative costs.

Backlog. Our sales backlog at November 30, 2010 was $26.4 million. This compares to
a sales backlog of $27.0 million at November 27, 2009. We reasonably expect the entire backlog to be filled within fiscal year 2011.

Multi-Tiered Sales and Marketing Organization. We employ a multi-tiered sales and marketing organization that integrates direct mail, electronic marketing, telemarketing and field sales to
market and sell our course offerings to existing customers and to attract new customers.

As we have since our inception, we
maintain a strong brand image for providing high-quality training for managers and IT professionals through the prominent use of our trademarks in our marketing and course materials. We market our courses primarily through direct mail and electronic
mail to our proprietary database of approximately 2.9 million technology professionals and managers who have attended, inquired about, or sent a staff member to Learning Tree courses, and we also use direct mail to reach other managers and IT
professionals on rented mailing lists. We also utilize targeted, personalized e-mails through our automated e-mail marketing system to advise prospective course participants of upcoming events. In addition, we use rented e-mail address lists to
augment our own database. We also market our products and services over the Internet on our website (www.learningtree.com). (Information contained on our website is not part of this Annual Report on Form 10-K.)

We have a telemarketing sales team that consisted of approximately 95 telemarketers and related support staff at October 1, 2010.
Our telemarketers call customer leads generated from direct mailings, e-mail marketing,



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website inquiries and other sales and marketing programs. In addition, our sales team follows up on customer inquiries, and works to identify key personnel at customers with the potential to
become major customers. We use our proprietary automated POSTTMtechniques to identify regions of our database that are profitable to mail, email and/or call, and those that are not.

At October 1, 2010, we employed a field sales team of 67 direct field sales representatives and related support staff. Our direct sales force primarily focuses on selling training that is delivered
on-site for our customers at their locations.

To remain successful, we must continue to expand our business with both
existing and new customers. To encourage repeat purchases from existing customers, we offer three different multiple-course discount programsLearning Tree Training Passports, Learning Tree 10-Day Passes, and Learning Tree
Training Vouchersand also provide Professional Certification Programs described earlier. We believe that in addition to generating revenues directly, these programs foster long-term relationships with participants and encourage
participants to recommend Learning Tree courses to their colleagues.

Learning Tree Training Passports permit an individual
Passport holder to attend up to a specified number of courses, generally three or four, during a one- to two-year period. List prices for Passports are significantly discounted from the list price of the equivalent number of individual courses.
Learning Tree 10-Day Passes permit an individual Pass holder to attend up to 10 days of training during a twelve-month period and are priced slightly lower than the Passports. The Learning Tree Training Voucher program allows corporate customers to
buy blocks of three or more Vouchers at a fixed discounted price, for future courses to be taken by any person in the customer organization over a six to twelve month period.

Markets and Competition

Instructor-Led Training. The
management and IT training markets include outside third-party providers, as well as in-house training conducted by organizations for their own employees. Third-party providers of IT training include vendor-dependent providers, who
deliver courses developed by the vendors of software and hardware technologies and who depend heavily on those vendors to market their courses. The IT training market also includes vendor-independent providers, such as Learning Tree, who
independently develop, market and deliver proprietary courses. In addition, third-party providers of management training include non-profit associations, as well as for-profit providers, who provide training largely as a professional
development service, and both for-profit and not-for-profit academic providers, who offer courses that lead to accredited undergraduate or graduate degrees.

We are a for-profit vendor-independent provider of management education and IT training. Some competitors offer course titles and programs similar to ours at lower prices. In addition, some competitors
have greater financial or other resources than we do.

Our main IT training competitors are vendor-dependent and include the
IT hardware and software vendors themselves. Many hardware and software vendors supply training, sometimes bundled in the prices of their products. Other vendor-dependent providers are Authorized Technical Education Centers and Certified Technical
Education Centers that deliver these vendors proprietary courses. Vendor-dependent providers may have, or claim, greater knowledge of upcoming developments in their products, and their certifications are widely recognized. We differentiate
ourselves from vendor-dependent providers by maintaining a vendor-independent posture and providing cross-platform training solutions. By being vendor-independent, we can address both the strengths and the weaknesses of a product and teach IT
professionals how to integrate one product with those of other vendors in a multi-vendor configuration. We leverage the expertise of Learning Tree instructors and authors, to ensure that we offer a level of expertise that matches or exceeds that of
vendor-dependent providers while also providing a vendor-independent platform that provides meaningful product comparisons.



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Our principal management education competitors include for-profit and not-for-profit
post-secondary educational providers, as well as not-for-profit management associations and training companies who focusas do weon providing continuing professional development programs to government and commercial organizations and the
employees of those organizations. We believe we differentiate ourselves from these competitors by adopting and implementing a more practical, results-oriented approach to management education than is typical in this market, as well as through our
focus on performance-based learning, our patented MagnaLearn Instructional Enhancement Technology, and our RealityPlus simulation-centric educational methodology.

We believe that many competitive third-party training providerswhether in management or ITare smaller organizations that often provide training as one of several services or product lines. We
differentiate ourselves from these providers based on our experience over more than three decades, the breadth and quality of our proprietary course library, our worldwide delivery capability, and the size, quality and experience of our instructor
force.

Internal training departments generally provide companies with the most control over the method and content of
training, enabling them to tailor programs to their specific needs. However, we believe that internal trainers find it difficult to keep pace with new technologies, lack the hands-on experience needed to teach the latest technological developments
and lack the capacity to meet demand for training, and therefore most organizations must supplement their internal training resources with externally supplied training. This is particularly critical when dealing with new or emerging technologies.
Additionally, internal training departments may not operate consistently on a worldwide basis, where we offer consistent management and IT courses, processes and quality around the globe.

Our customers are widely diversified across industries and geographies, with varying fiscal years including many whose fiscal years
coincide with the United States government September 30 budget year, many who are on the calendar year, and many whose fiscal years coincide with the UK and Canadian governments March 31 budget year. We also see seasonal variations
in our business as a result of other factors, including summer vacations, especially in Europe. For a discussion of the seasonal effects on our business, see Item 1A Risk Factors and Item 7 Managements Discussion
and Analysis of Financial Condition and Results of Operations.

E-Learning and Blended Learning.
Management and IT training are primarily delivered by classroom instructors, video, and technology-based training, including Internet-based e-learning and printed means. Based upon extensive research and use of pilot programs as well as our
experience, we believe that instructor-led training will continue to fill the largest portion of the market because it provides the greatest focus and ability for participants to learn, practice and receive feedback on their mastery of new knowledge
and skills. Course participants value the personalized interaction and problem solving with their instructor and fellow participants, and the opportunity to get expert advice on the application of the course material to their own projects.
Furthermore, instructor-led classroom training insulates course participants from workplace interruptions and accelerates their learning of new technologies. However, the use of technology-based IT training formats, such as Internet-based
e-learning, appears to have gained some acceptance in the IT and management training and education market.

We have continued
to investigate alternate, technology-based training formats and how they might effectively be integrated into our training programs. In fiscal year 2009, we developed Learning Tree AnyWare, our proprietary e-learning platform that integrates
participants in remote locations into live class events in another location. Remote attendees use an ordinary Internet connection to connect to our patent-pending classroom interface. Once logged in, remote AnyWare class participants see and hear
their classroom-based instructor and classmates in real time, and view the instructors annotations on the two in-class MagnaLearn projection screens in real-time. They are able to participate in discussions, ask questions, work in
breakout sessions, and complete the same hands-on exercises as their in-class counterparts. They gain the full benefit of our proprietary courseware, and achieve the same level of knowledge and skill transfer as in-class



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participants. Through AnyWare, we effectively apply technology to leverage the strengths of our classroom offerings. In fiscal year 2010, more than 4,000 remote participants have attended our
courses using Learning Tree AnyWare.

Employees

Our executive officers have extensive experience in the training and education industry with an average of over 16 years of experience with us and nearly 20 years of relevant industry experience.

On October 1, 2010, we had a total of 468 full-time equivalent employees, of whom 187 were employed outside the United
States. We also utilized the services of 625 expert instructors to teach our courses on an as-needed basis. We consider our relations with our employees and our instructors to be good.

Intellectual Property Rights

Our course development process and course titles are proprietary, and we rely on a combination of copyright, trademark and trade secret laws, customer licensing agreements, employee and third-party
nondisclosure agreements and other methods to protect those proprietary rights.

LEARNING TREE, LEARNING
TREE INTERNATIONAL, the Learning Tree Tree Design logo, LEARNING TREE INTERNATIONAL and Design, LEARNING TREE PROFESSIONAL CERTIFICATION and Design, LEARNING TREE ANYWARE BE THERE WITH ANYWARE
and Design, LEARNING TREE ANYWARE, LEARNING TREE ANYWARE ENTERPRISE, LEARNING TREE ANYWARE ENTERPRISE and Design, and LEARNING TREE ANYWARE YOUR EXPERTISE DELIVERED ANYWHERE! and Design,
EDUCATION IS OUR BUSINESS, EDUCATION YOU CAN TRUST, WE BRING EDUCATION TO LIFE, PRODUCTIVITY THROUGH EDUCATION, REALITYPLUS Design, REALITYPLUS MANAGEMENT EDUCATION FOR THE REAL
WORLD, TRAINING PASSPORT, TRAINING ADVANTAGE, ALUMNI GOLD, TRAINING YOU CAN TRUST, WE BRING LEARNING TO LIFE, WWW.LEARNINGTREE.COM, MAGNALEARN,
VENDOR INDEPENDENT TRAINING YOU CAN TRUST, LEARNING TREE UNIVERSITY CONSORTIUM and Design, ON-SITE COURSES and Design, 800-LRN-TREE, and 800-THE-TREE are among our trademarks and service
marks. In addition to our trademarks and service marks, this Annual Report on Form 10-K also contains trademarks and trade names of other companies.

We own the copyright to all course materials we develop. Our copyrighted course materials are a significant differentiator of our services from those of our competitors.

Our MagnaLearn Instructional Enhancement System is covered by various United States and international patents. The MagnaLearn
system gives Learning Tree instructors greater flexibility to customize and pace course presentations by allowing them to annotate, highlight and manipulate course materials on two independent projection screens, in real time. The system also
provides automated feedback to our course development resources, allowing constant improvement of courses and the ability to consistently update courses immediately on a world-wide basis.

We have applied for patent protection related to our recently introduced Learning Tree AnyWare e-Learning platform.

Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets for us. Various events
outside of our control could pose a threat to our intellectual property rights, as well as to our products and services. For example, effective intellectual property protection may not be available in every country in which our courses are
delivered. We cannot be certain that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar course titles or delivery methods unencumbered by our proprietary rights. If
substantial unauthorized use of our products were to occur,



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our business and results of operations could be materially adversely impacted. We may also have to defend against claims that our current or future courses infringe on the proprietary rights of
others, or have to pursue claims to protect our proprietary rights. Defending against and prosecuting these claims is costly and time consuming and could have a material adverse effect on our operating results.

Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these innovations.
Changes in patent law, foreign or domestic, may impact our ability to obtain patent protections. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent
may be deemed invalid or unenforceable.

We also seek to maintain certain intellectual property as trade secrets. The secrecy
could be compromised by outside parties, or by our employees or former employees, which would cause us to lose the competitive advantage resulting from these trade secrets.

Regulatory Environment

We are paid directly by the employers of
Learning Tree course participants and do not receive funding from any government student-aid or loan programs. As a result, we do not depend on government appropriations for programs and are generally exempt from the governmental regulation of
public education providers. In contrast, providers of education to the public must comply with many laws and regulations of Federal, state and international governments. However, our results of operations could be affected by current or future
licensing or regulatory requirements.

After certain corporate reorganizations, we became a Delaware corporation incorporated
in 1991.

Available Information

We make available on our website (www.learningtree.com), free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after such material is electronically filed or furnished to the
Securities and Exchange Commission. (Information contained on our website is not part of this Annual Report on Form 10-K.) Our Annual Report on Form 10-K may also be obtained free of charge by written request to the Chief Financial Officer, Learning
Tree International, Inc., 1805 Library Street, Reston, VA 20190.



|Item 1A. | RISK FACTORS
|-------- | ------------

You
should carefully consider the following discussion of various risks and uncertainties, keeping in mind that they are not the only ones that affect us. Additional risks that we do not presently consider material, or of which we are not currently
aware, may also have an adverse impact on us.

Common Stock Price Fluctuations

Historically, our common stock price has fluctuated, and we expect fluctuations to continue in the future.

General Factors. We believe some of the reasons for past fluctuations in the price of our stock related to factors such as:



| |  |  | announcements of developments related to our business;
| | - |  | ------------------------------------------------------



| |  |  | announcements concerning new products or enhancements by us or our competitors;
| | - |  | -------------------------------------------------------------------------------



| |  |  | developments in our relationships with our customers;
| | - |  | -----------------------------------------------------



| |  |  | market perceptions of new means of delivering training, such as the Internet;
| | - |  | -----------------------------------------------------------------------------



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| |  |  | variations in our revenues, gross margins, earnings or other financial results;
| | - |  | -------------------------------------------------------------------------------



| |  |  | fluctuations in general conditions in the economy, our market, and the markets served by our customers; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | introductions of new technologies both by our customers and technology vendors.
| | - |  | -------------------------------------------------------------------------------

In addition, prices in the stock market, particularly for technology-related stocks, have been volatile in recent years. In some cases,
the fluctuations have been unrelated to the operating performance of the affected companies. As a result, the price of our common stock could fluctuate in the future without regard to our operating performance.

Future Sales of Our Common Stock. Sales of our common stock by our founders, officers, directors and employees could adversely and
unpredictably affect the price of shares of our common stock. Additionally, the price could be affected even by the potential for sales by these persons. In addition to the 13,526,920 shares outstanding as of December 2, 2010, as of that date
we are authorized to issue up to 215,357 shares of common stock upon the exercise of outstanding options and vesting of restricted stock units, and an additional 721,888 shares of common stock remained available for issuance of equity awards under
our 2007 Equity Incentive Plan. We cannot predict the effect that any future sales of our common stock, or the potential for those sales, will have on our share price.

Fluctuations in Operating Results

Historically, our operating results
have fluctuated, and we expect fluctuations to continue in the future.

Fluctuations in our historical operating results
have resulted from many factors, some of which are beyond our control. In the future, these or other factors could have a material adverse impact on our operating results and cause our stock price to decrease. For example:

Timing of Course Development, and Sales and Marketing Expenditures. We try to adjust our expenditures for course development and
sales and marketing to maintain our long-term profitability, including our assessment of the potential to influence future customer demand, market conditions, and other factors. This may mean accepting reduced margins in poor economic periods, as we
must commit to much of our spending before our attendees enroll in our courses. If revenues fall short of our expectations, we may not be able to adjust our expenditures quickly enough to compensate for lower than anticipated revenues. This could
compound the impact of any revenue shortfall and further affect our operating results and the price of our common stock.

Course Scheduling and Marketing Activities. The timing and content of our courses and our marketing activities can affect the
number of participants who attend our courses. Some of the activities that can contribute to fluctuations in our operating results include:



| |  |  | the frequency of our course events;
| | - |  | -----------------------------------



| |  |  | the number of weeks during which our courses can be conducted in a quarter;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the timing, timely delivery, frequency and size of, and the response to, our direct mail marketing and advertising campaigns;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing of introduction of new course titles;
| | - |  | ------------------------------------------------



| |  |  | the average length of courses, based on the current mix of course titles, which affects the average revenue per attendee; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the mix between course events held at customer locations and course events held in our education centers and hotels due to differing gross profit
margins.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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Seasonal Factors. Our quarterly revenues and income fluctuate due to the seasonal
spending patterns of our customers, which are affected by factors such as:



| |  |  | cyclic or one-time budgetary considerations;
| | - |  | --------------------------------------------



| |  |  | factors specific to their business or industry; and
| | - |  | ---------------------------------------------------



| |  |  | weather, holiday and vacation considerations.
| | - |  | ---------------------------------------------

Use of Accounting Estimates. The preparation of our financial statements in conformity with Generally Accepted Accounting Principles requires us to make estimates and assumptions in calculating our
financial results. As one example, we currently offer our customers a multiple-course sales discount referred to as a Training Passport, which allows an individual passport holder to attend up to a specified number of Learning Tree courses over a
one to two-year period for a fixed price. For a Training Passport, the amount of revenue we recognize for each attendance in one of our courses is based upon the selling price of the Training Passport, the list price of the course taken, the average
list price of all courses taken, and our estimate of the average number of courses a Passport holder will actually attend. After expiration of a Training Passport, we record the difference, if any, between the revenue previously recognized and the
Training Passport selling price. For example, if a Passport holder attends more courses than we had estimated, we would make a negative adjustment to revenues at the expiration of that Passport. We base our estimate of the average number of course
events that a Training Passport holder will attend on historical trends. However, these historical trends may not accurately predict the actual number of course events that a Training Passport holder will attend in the future. If average Training
Passport attendance rates were to increase, for example, we would have to make negative adjustments to our revenue, which could be significant. For a summary of some of our key accounting estimates, please see our Critical Accounting Estimates
and Policies in Managements Discussion and Analysis of Financial Condition and Results of Operations.

Changing
Regulation of Corporate Governance and Public Disclosure. Changing laws, regulations and standards relating to corporate governance and public disclosure can result in uncertainty regarding compliance matters and higher costs incurred with
ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a
diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, our reputation may be harmed.

Introductions and Adoption of New
Technology. Our customers tend to increase their training at times when new technology is being introduced. During periods when fewer new technologies are being introduced, demand for our training courses may decrease, which could have a
material adverse effect on our operating results and stock price.

Other Factors. Other factors that may affect our
operating results include:



| |  |  | competitive forces within our current and anticipated future markets;
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to attract customers and meet their expectations;
| | - |  | -------------------------------------------------------------



| |  |  | currency fluctuations and other risks inherent in international operations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | general economic conditions;
| | - |  | ----------------------------



| |  |  | differences in the timing of our spending on the marketing of our courses, as well as the timing of our spending on the development of our courses and
other areas; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | excess capacity and/or unused space in our education centers and/or administrative office facilities, and our ability to sublease or find other uses
for it.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



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All or any of these and similar factors could cause our operating results to differ
substantially from the expectations of public market analysts and investors, which would likely have a material adverse impact on our stock price.

Risks Associated with Technology Changes

If we do not adequately
anticipate or respond to changes in technology, it could have a material adverse effect on our operating results and stock price.

Changes in technology can affect our business in at least two principal ways. First, we must anticipate and keep pace with the introduction of new hardware, software and other information technologies and
develop courses that effectively train customers in the technologies they use now and will use in the future. Second, we must adapt to changes in the technologies by which we can deliver training to our customers employees. As a result of
technology developments, we may have to make substantial and unanticipated expenditures to develop new course titles, buy new equipment, or invest in further course development software and processes to deliver our courses. Further, we may not
adequately anticipate or respond successfully to technology changes for many reasons, including misjudging the impact of technology changes, as well as financial, technological or other constraints. A lack of adequate response on our part to changes
in information technology platforms, customer preferences or software technology could have a material adverse impact on our operating results and stock price.

Competition

If our customers decide that they prefer training offered
by new or existing competitors, it could have a material adverse effect on our operating results and stock price.

The IT
and management training markets are highly fragmented, with low barriers to entry. No single competitor holds a dominant market share. We face intense competition from both established entities and new entries in the market. Our primary competitors
include:



| |  |  | internal training departments within our current and potential customers;
| | - |  | -------------------------------------------------------------------------



| |  |  | computer hardware and software vendors and their Authorized Training and Education Center partners;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | independent education and training companies;
| | - |  | ---------------------------------------------



| |  |  | academic providers; and
| | - |  | -----------------------



| |  |  | software systems integrators.
| | - |  | -----------------------------

Some of our competitors offer course titles and programs similar to ours at lower prices. In addition, some competitors have greater financial and other resources than us. Additionally, hardware and
software vendors, as well as software systems integrators, may combine IT education and training with sales of their products or other services, which could allow them to offer training at lower prices than we do. Furthermore, future consolidation
of IT vendors or training companies could have a material impact on our future operations.

The risk of outsourcing of
corporate IT administration and software development overseas to countries or firms not currently served by us could have a material adverse impact on our future operations.

Although instructor-led classroom training continues to dominate the worldwide IT and management training markets, technology-based education and training formats, such as Internet-based distance
learning, have gained some acceptance. Accordingly, our future results may also depend on the extent to which the market will continue to accept instructor-led IT and management training and on our ability to develop and market instructor-led
courses that compete effectively against technology-based courses offered by our competitors.



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Risks Associated with International Operations

Approximately half of our annual revenue is generated by courses conducted outside the United States. Therefore, if we do not
adequately anticipate and respond to the risks inherent in international operations, it could have a material adverse effect on our operating results and stock price.

Foreign Currency Fluctuations. Our consolidated financial statements are prepared in U.S. dollars, while the operations of our foreign subsidiaries are conducted in their respective local
currencies. Consequently, changes in exchange rates can unpredictably and adversely affect our consolidated operating results and could result in exchange losses. We do not hedge against the risks associated with fluctuations in exchange rates. Even
if we were to use hedging techniques in the future, we might not be able to eliminate or reduce the effects of currency fluctuations. Thus, exchange rate fluctuations could have a material adverse impact on our operating results and stock price.

Other Risks Associated with International Operations. Additionally, our results of operations may be adversely
affected by other international risks, such as:



| |  |  | difficulties in translating our courses into foreign languages;
| | - |  | ---------------------------------------------------------------



| |  |  | international political and economic conditions;
| | - |  | ------------------------------------------------



| |  |  | changes in government regulation in various countries;
| | - |  | ------------------------------------------------------



| |  |  | trade barriers;
| | - |  | ---------------



| |  |  | difficulty in staffing our foreign offices, and in training and retaining foreign instructors;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | adverse income tax and transfer pricing consequences; and
| | - |  | ---------------------------------------------------------



| |  |  | potential costs associated with expansion into new territories.
| | - |  | ---------------------------------------------------------------

We expect that international revenues will continue to be a significant portion of our total revenues. A lack of anticipation and
response to the risks associated with international operations could have a material adverse effect on our operating results and stock price.

Dependence on Key Personnel

If we are unable to recruit and retain
qualified personnel, it could have a material adverse effect on our operating results and stock price.

Our success
depends in large part on the continued services of our executive officers, our senior managers and other key personnel. The loss of these people, especially without advance notice, could have a material adverse impact on our results of operations.
It is also very important that we attract and retain highly skilled personnel, including course instructors, to accommodate growth, new course titles and to replace personnel who leave. Competition for qualified personnel can be intense, especially
in information technology industries and/or in certain geographic areas, and there are a limited number of people with the requisite knowledge and experience. Under these conditions, we could be unable to recruit, train and retain instructors and
employees. If we cannot attract and retain qualified personnel, it could have a material adverse impact on our operating results and stock price.

Risks Associated with Intellectual Property

If substantial unauthorized
use of our courses occurs or if we must defend against infringement claims, it could have a material adverse effect on our operating results and stock price.

Our success depends in part on our ability to protect our intellectual property and confidential information. Our course development process and course titles are proprietary and we rely primarily on a
combination of statutory and common law copyright, trademark and trade secret laws, customer licensing agreements, employee



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and third-party nondisclosure agreements and other methods to protect those proprietary rights. Our course materials generally do not include any mechanisms to prohibit or prevent unauthorized
use. As a result, someone could copy or otherwise obtain and use our course materials without authorization, either for educational use or to develop competing courses. In addition, we operate in countries that do not provide protection of
proprietary rights to the same extent as the United States. Finally, our intellectual property rights will not prevent competitors from independently developing similar course titles or delivery methods. If substantial unauthorized use of our
products were to occur, our results of operations and price of our common stock could be materially adversely impacted.

We
may also have to defend against claims that our current or future courses infringe on the proprietary rights of others. If such a claim succeeded, we might have to change or eliminate courses and could be required to pay damages or royalties. In
addition, litigation over intellectual property rights, whether brought by us or by someone else, could be time-consuming and expensive, even if we were ultimately to succeed. Accordingly, defending and prosecuting these claims could have a material
adverse effect on our operating results and stock price.

Although we seek to obtain patent protection for our innovations, it
is possible we may not be able to protect some of these innovations. Changes in patent law, foreign or domestic, may impact our ability to obtain patent protections. Furthermore, there is always the possibility, despite our efforts, that the scope
of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. We also seek to maintain certain intellectual property as trade secrets. The secrecy could be compromised by outside parties, or by our
employees or former employees, which would cause us to lose the competitive advantage resulting from these trade secrets.

Risks Associated with Laws and Regulations

Laws and regulations can affect our operations and may limit our ability to operate in certain states.

Providers of educational programs to the public must comply with many laws and regulations of Federal, state and international governments. Generally, we are exempt from this type of regulation because we
contract with the employer of the participants in our courses, and we do not participate in any Federal or state student aid or loan programs. However, state laws and regulations targeting educational providers could affect our operations in the
future and could limit our ability to obtain authorization to operate in certain states. If we were found in violation of a states current or future licensing or regulatory requirements, we could be subject to civil or criminal sanctions,
including monetary penalties, and we could also be barred from providing educational services in that state. In addition, laws and regulatory decisions in many areas other than education could also adversely affect our operations. Complying with
current or future legal requirements could have a material adverse effect on our operating results and stock price.

We are
subject to tax audits by state, federal and foreign jurisdictions. Such audits are to be expected and may result in adjustments as a result of the accretion of tax jurisdiction interpretations and changes in operational practices. Any such audits
may result in additional taxes being assessed or in the refund of taxes previously paid. Such changes could have a material adverse effect on our operating results and stock price.

Control by Management

Senior personnel, especially our founders, own a majority of our outstanding shares and may therefore have significant influence over our policies and affairs and may be in a position to determine the
outcome of corporate actions.

As of December 2, 2010, our executive officers and directors collectively beneficially
own approximately 56.5% of our outstanding shares of common stock. As of that date, Mr. Garen, our Chairman of the Board of Directors, beneficially owned approximately 25.0% of our outstanding shares of common stock. Dr. Collins, our



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Vice Chairman of the Board of Directors, beneficially owned approximately 31.0% of our outstanding shares of common stock as of December 2, 2010. Consequently, senior personnel, and
Mr. Garen and Dr. Collins in particular, have significant influence over, and may control, our policies and affairs and may be in a position to determine the outcome of corporate actions requiring stockholder approval. These may include,
for example, the election of directors, the adoption of amendments to our corporate documents and the approval of mergers and sales of our assets.

Risks Associated with Possible Acquisitions and Other Strategic Transactions

If we cannot successfully implement any future acquisitions or other strategic transactions, it could have a material adverse effect on
our operating results and stock price.

On occasion, we evaluate business opportunities and other strategic transactions
that appear to fit within our overall business strategy. We could decide to pursue one or more of these opportunities by acquisition or internal development. Acquisitions and other strategic transactions involve many risks, including:



| |  |  | the difficulty of integrating acquired technologies, operations and personnel with our existing operations;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the difficulty of developing and marketing new products and services;
| | - |  | ---------------------------------------------------------------------



| |  |  | the diversion of our managements attention as a result of evaluating, negotiating and integrating acquisitions or new business ventures;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our exposure to unforeseen liabilities of acquired companies; and
| | - |  | -----------------------------------------------------------------



| |  |  | the loss of key employees of an acquired operation.
| | - |  | ---------------------------------------------------

In addition, an acquisition or other strategic transactions could adversely impact cash flows and/or operating results, and dilute shareholder interests, for many reasons, including:



| |  |  | charges to our income to reflect the amortization of acquired intangible assets;
| | - |  | --------------------------------------------------------------------------------



| |  |  | write-offs for the impairment of the carrying value of goodwill or other intangible assets;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | interest costs and debt service requirements for any debt incurred in connection with an acquisition or new business venture; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | any issuance of securities in connection with an acquisition or other strategic transactions that dilutes or lessens the rights of our current common
stockholders.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have had no significant experience in executing and implementing acquisitions. Although we
have implemented other strategic transactions, those ventures have not always been successful, and we may not succeed in the future. The risks associated with acquisitions and other strategic transactions could have a material adverse impact on our
operating results and stock price.

Risks Associated with Changing Economic Conditions

General domestic and international economic conditions could have a material adverse effect on our operating results and common stock
price.As a result of the current economic downturn and macro-economic challenges currently affecting the economy of the United States and other parts of the world, some of our customers may choose to delay or postpone purchases of courses from
us until the economy and their businesses strengthen.

Domestic and/or International Economic Downturns. A significant
part of our revenues comes from Fortune 1000-level companies, their international equivalents, and government organizations. During weak economic conditions, our sales grow slower or can even diminish. If the domestic and/or international economy
were to continue to weaken, the demand for our services could decline, which could have a material adverse effect on our operating results and stock price.



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Industry-Specific Slowdowns. Our customers generally operate in the finance,
computer, communications, electronics, systems integration, aerospace, government and military, manufacturing, and energy sectors. When one or more of these industries experiences a slowdown, it can have a material adverse effect on our operating
results and stock price.

Globalization Issues. Our operations are concentrated in Europe and North America, which have
traditionally been the centers of IT development and implementation. In recent years, there has been increasing IT activity in other parts of the world, such as China and India. If this trend adversely affects IT jobs in regions in which we have our
principal operations, it could have a material adverse effect on our operating results and stock price.

Anti-Takeover
Provisions

Certain provisions of our Restated Certificate of Incorporation, our Bylaws and Delaware law could adversely
impact the interests of our stockholders.

Certain provisions of our Restated Certificate of Incorporation, our Bylaws and
Delaware law could, together or separately, discourage, delay or prevent a third party from acquiring us, even if doing so might benefit our stockholders. These provisions may also affect the price investors would receive for their shares of our
common stock. Some examples of these provisions in our Restated Certificate of Incorporation and Bylaws are:



| |  |  | the division of our board of directors into three classes;
| | - |  | ----------------------------------------------------------



| |  |  | the right of our board of directors to issue preferred stock with rights and privileges that are senior to the common stock, without prior stockholder
approval;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certain limitations of the rights of stockholders to call a special meeting of stockholders; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the prohibition of stockholder actions by written consent.
| | - |  | ----------------------------------------------------------

Natural Disasters, External Strikes, Acts of War or Terrorism and Other External Events

Since our founding in 1974, various natural disasters, external labor disruptions, acts of war or terrorism and other adverse external factors have from time to time impaired our ability to conduct our
business, resulted in the loss of revenue or otherwise affected our operating results. When these or other external events occur in the future, they could have a material adverse effect on our operating results and stock price.

Natural Disasters. Natural disasters can affect our business. For example, severe weather has at times prevented our course
participants from traveling to our courses. In these situations, we try to transfer the course participants to later courses, but we may still lose some revenue. Similarly, both weather and floods have also disrupted the printing and transportation
of the catalogs we use in our direct mail campaigns. The resulting delays in our mailings may reduce or delay the revenue we realize from courses listed in those catalogs.

External Strikes. We have had to react to postal, transportation, and other strikes in the countries where we operate. Postal strikes delay or reduce the delivery of our direct mail marketing
materials, which may result in reduced enrollments in upcoming course events. Transportation strikes can make it difficult for our course participants or our instructors to reach course facilities. Although we try to employ strategies to mitigate
the impact of external strikes, these alternative means are rarely completely effective and generally increase our costs, which could adversely affect our operating results.

Acts of War or Terrorism. Threats or acts of war or terrorism can adversely affect our business. The terrorist attacks in the United States on September 11, 2001, the declaration of war by the
United States against terrorism, and continuing hostilities in the Middle East and elsewhere have created significant instability and uncertainty in the world. These and future events may have a material adverse effect on world financial markets,
including



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financial markets in the United States. In addition, threats or acts of war or terrorism can cause course participants to be reluctant regarding or prevented from traveling to our course
facilities, thereby resulting in lower attendance rates. Additionally, our direct mail marketing materials may be delayed or disrupted from reaching our customers; and suppliers and service providers may be unable to provide required services or
materials. These impacts could happen after we have committed to all the costs of our course, so that we would be unable to quickly adjust our cost structure to reflect the changes in revenues caused by these events, which could materially and
adversely affect our operating results and stock price.

Other External Factors. Other factors outside our control can
affect our operations, including those related to our suppliers and service providers. For example, disruptions of telephone networks can prevent customers from enrolling in our courses; disruptions in transportation services can prevent customers
from reaching our facilities, and power outages can prevent us from delivering courses. Similarly, if commodities (for example, the paper used in the printing of our catalogs) that we or our customers need become scarce or more expensive, our
operating results may be adversely affected.



|Item 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|Item 2. | PROPERTIES
|------- | ----------

Our
headquarters are located at 1805 Library Street, Reston, VA 20190.

We own a 38,500 square foot office facility in Reston, VA,
which is occupied by the sales, administrative and operations groups of our United States subsidiary. We lease all of our other offices and education center classroom facilities. The leases expire at various dates over the next 11 years. We also
present our courses at rented hotel and conference facilities and customer sites. We typically provide all of the software, hardware and networking systems required for use in our courses.

We believe that our facilities are adequate and suitable for our needs. In general, at current attendee levels, we have some excess
capacity at most of our education centers. We have been seeking to deal with excess capacity by reducing the size of some of our facilities and by renting excess classrooms.

We present our classroom courses at Learning Tree Education Centers in Atlanta, Chicago, Los Angeles, New York City, the Washington, D.C. area (three locations), Ottawa, Toronto, London, Paris, Stockholm,
and Tokyo as well as in other rented facilities in those and other cities worldwide as well as at our clients facilities.



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The following table contains certain information regarding Learning Tree Education Centers
and offices at October 1, 2010:



|                             |  |                             |  |                     |     |  |                          |  |         |    
|---------------------------- |  | --------------------------- |  | ------------------- | --- |  | ------------------------ |  | ------- | ---
|Location (Metropolitan Area) |  | Function(s)                 |  | Number ofClassrooms |     |  | Total Area inSquare Feet | 
|Atlanta, GA                  |  | Education Center            |  |                     | 9   |  |                          |  | 16,903  |    
|Chicago, IL                  |  | Education Center            |  |                     | 5   |  |                          |  | 11,017  |    
|Los Angeles, CA              |  | Education Center & Office   |  |                     | 5   |  |                          |  | 22,697  |    
|New York, NY                 |  | Education Center            |  |                     | 19  |  |                          |  | 41,724  |    
|Washington, DC area          |  | Education Centers (3 sites) |  |                     | 37  |  |                          |  | 87,958  |    
|Reston, VA                   |  | Offices (3 sites)           |  |                     |    |  |                          |  | 45,959  | (a)
|Powell, OH                   |  | Office                      |  |                     |    |  |                          |  | 400     |    
|Kennett Square, PA           |  | Office                      |  |                     |    |  |                          |  | 440     |    
|Paris, France                |  | Education Center & Office   |  |                     | 19  |  |                          |  | 36,813  |    
|London, England              |  | Education Center            |  |                     | 34  |  |                          |  | 54,977  | (b)
|Leatherhead, England         |  | Office                      |  |                     |    |  |                          |  | 23,209  | (c)
|Ottawa, Canada               |  | Education Center & Office   |  |                     | 6   |  |                          |  | 20,006  |    
|Toronto, Canada              |  | Education Center            |  |                     | 10  |  |                          |  | 17,207  |    
|Stockholm, Sweden            |  | Education Center & Office   |  |                     | 12  |  |                          |  | 27,790  |    
|Tokyo, Japan                 |  | Education Center & Office   |  |                     | 2   |  |                          |  | 3,096   |    
|                             |  |                             |  |                     |     |  |                          |  |         |    
|                             |  |                             |  |                     | 158 |  |                          |  | 410,196 |    
|                             |  |                             |  |                     |     |  |                          |  |         |    



|(a) | Includes a 38,500 square foot office facility which we own; all other facilities are leased.
|--- | --------------------------------------------------------------------------------------------

|(b) | Excludes 57,023 square feet that we sublease to various subtenants. Subleases end at various dates prior to the end of our prime lease. See Note 4 of Notes to
Consolidated Financial Statements for details on subleases. Some subtenants may opt for early termination based on their sublease agreements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Excludes 7,000 square feet that we sublease to a single subtenant. Sublease ends co-terminus with our prime lease which ends in December 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are
not involved in any pending or threatened legal proceedings, other than routine legal proceedings and claims incidental to our business, that we believe could reasonably be expected to have a material adverse effect on our financial condition or
results of operations.



|Item 4. | 
|------- | 

RESERVED.



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PART II



|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Price Range of Common Stock

Our Common Stock trades on the NASDAQ Stock Market under the symbol LTRE. The following table sets forth, for the periods indicated, the range of high and low sales prices for our Common Stock
on the NASDAQ Stock Market:



|                 |  |      |       |  |     |   |       | 
|---------------- |  | ---- | ----- |  | --- | - | ----- | 
|                 |  | High |       |  | Low |  
|Fiscal Year 2009 |  |      |       |  |     |   |       | 
|First Quarter    |  | $    | 12.78 |  |     | $ | 7.52  | 
|Second Quarter   |  |      | 10.25 |  |     |   | 6.20  | 
|Third Quarter    |  |      | 11.09 |  |     |   | 8.10  | 
|Fourth Quarter   |  |      | 11.58 |  |     |   | 9.63  | 
|                 |  |     
|Fiscal Year 2010 |  |      |       |  |     |   |       | 
|First Quarter    |  | $    | 12.52 |  |     | $ | 10.52 | 
|Second Quarter   |  |      | 14.85 |  |     |   | 10.97 | 
|Third Quarter    |  |      | 16.44 |  |     |   | 10.47 | 
|Fourth Quarter   |  |      | 12.63 |  |     |   | 8.41  | 

On December 6,
2010, the number of holders of our Common Stock was 1,132, consisting of 64 record holders and 1,068 stockholders whose stock is held by a bank, broker or other nominee.

Dividends

On August 9, 2010, our Board of Directors declared a
special dividend of $2.20 per share (approximately $29.9 million) which was paid on September 10, 2010, to stockholders of record as of August 20, 2010. No other dividends have been declared or paid by us during fiscal year 2010 or 2009.
We have no plans to pay any other cash dividends in the foreseeable future. The declaration and payment of dividends are subject to the discretion of our Board of Directors and to compliance with applicable laws. Any determination as to the payment
of dividends in the future will depend upon, among other things, general business conditions, the effect such payment would have on our financial condition and other factors that our Board of Directors may in the future consider to be relevant.

Sales of Unregistered Securities.

During fiscal year 2010, we did not make any unregistered sales of our securities.

Purchases of Equity Securities

The following table summarizes information regarding shares purchased during the three months ended October 1, 2010.



|                                    |  |                                |         |  |                             |   |       | 
|----------------------------------- |  | ------------------------------ | ------- |  | --------------------------- | - | ----- | 
|Period                              |  | Total Numberof SharesPurchased |         |  | Average PricePaid per Share |  
|July 3, 2010  July 31, 2010        |  |                                | 54,918  |  |                             | $ | 11.38 | 
|August 1, 2010  August 31, 2010    |  |                                | 86,848  |  |                             | $ | 9.06  | 
|September 1, 2010  October 1, 2010 |  |                                |        |  |                             | $ |      | 
|                                    |  |                                |         |  |                             |   |       | 
|Total                               |  |                                | 141,766 |  |                             | $ | 9.96  | 



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All Common Stock repurchases were made in open-market transactions and not pursuant to any
publicly announced plans. We may choose to make additional purchases of our Common Stock in the future, but have no commitment to do so.

Securities Authorized for Issuance under Equity Compensation Plans



|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 
|--------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------ | - | ----- | ----------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Plan Category                                             |  | Number of Securitiesto be Issued UponExercise
ofOutstanding Options,Warrants and Rights |         |  | Weighted-AverageExercise Price ofOutstanding Options,Warrants and
Rights |   |       | Number of SecuritiesRemaining Availablefor Future IssuanceUnder
EquityCompensation Plan(Excluding SecuritiesReflected in the firstColumn) | 
|Equity compensation plan approved by security holders     |  |                                                                                         | 159,986 |  |                                                                          | $ | 13.66 |                                                                                                                                           |  |  | 721,888 | 
|Equity compensation plan not approved by security holders |  |                                                                                         |        |  |                                                                          |   |      |                                                                                                                                           |  |  |        | 
|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 
|Total                                                     |  |                                                                                         | 159,986 |  |                                                                          | $ | 13.66 |                                                                                                                                           |  |  | 721,888 | 
|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 

For a description of the other material features of our equity compensation plan, see Note 6 of Notes
to Consolidated Financial Statements.



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COMPANY STOCK PERFORMANCE

The information contained below shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the Exchange Act), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we
specifically incorporate this information by reference) and shall not otherwise be deemed soliciting material or filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of
Section 18 of the Exchange Act (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).

The following graph compares the cumulative total stockholder return on our Common Stock from October 1, 2005 to October 1,
2010 with the cumulative total return on the NASDAQ Stock Market Composite Index and an appropriate peer group index (assuming the investment of $100 in our Common Stock and in each of the indexes on October 1, 2005.)

LOGO



|                                               |  |                   |     |  |                   |   |     |                   |  |   |                |  |  |                |     |  |                |   |     |  |  |   |     | 
|---------------------------------------------- |  | ----------------- | --- |  | ----------------- | - | --- | ----------------- |  | - | -------------- |  |  | -------------- | --- |  | -------------- | - | --- |  |  | - | --- | 
|                                               |  | Fiscal Year Ended |    
|                                               |  | September 30,2005 |     |  | September 29,2006 |   |     | September 28,2007 |  |   | October 3,2008 |  |  | October 2,2009 |     |  | October 1,2010 |  
|Learning Tree International, Inc.              |  |                   |     |  |                   |   |     |                   |  |   |                |  |  |                |     |  |                |   |     |  |  |   |     | 
|Common Stock                                   |  | $                 | 100 |  |                   | $ | 62  |                   |  | $ | 135            |  |  | $              | 94  |  |                | $ | 86  |  |  | $ | 96  | 
|NASDAQ Stock Exchange                          |  |                   |     |  |                   |   |     |                   |  |   |                |  |  |                |     |  |                |   |     |  |  |   |     | 
|Composite Index                                |  | $                 | 100 |  |                   | $ | 106 |                   |  | $ | 128            |  |  | $              | 100 |  |                | $ | 102 |  |  | $ | 115 | 
|Peer Group Index (1)                           |  | $                 | 100 |  |                   | $ | 86  |                   |  | $ | 122            |  |  | $              | 116 |  |                | $ | 144 |  |  | $ | 100 | 
|Peer Group + Learning Tree International, Inc. |  | $                 | 100 |  |                   | $ | 86  |                   |  | $ | 122            |  |  | $              | 116 |  |                | $ | 143 |  |  | $ | 100 | 



Data and graph provided by Zacks Investment Research, Inc. Copyright© 2010, NASDAQ, Inc. All rights reserved. Used with permission.



|(1) | Peer Group index includes: Apollo Group, Inc.; Corinthian Colleges Inc.; DeVry, Inc.; and, ITT Education Services, Inc. The returns of each issuer within the Peer Group
Index have been weighted according to such issuers respective stock market capitalization at the beginning of the period presented.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following selected consolidated financial data is qualified in its entirety by reference to, and should be read in conjunction with,
the audited consolidated financial statements and notes thereto and other financial data included elsewhere in this Annual Report on Form 10-K. The statement of operations data set forth below for the years ended October 3, 2008,
October 2, 2009 and October 1, 2010, and the balance sheet data as of October 2, 2009 and October 1, 2010, are derived from our consolidated financial statements, which are included elsewhere herein. The statement of operations
data set forth below for the years ended September 29, 2006 and September 28, 2007, and the balance sheet data as of September 29, 2006, September 28, 2007 and October 3, 2008, are derived from our audited financial
statements that are not included in this annual report on Form 10-K. These historical results are not necessarily indicative of the results to be expected in the future. See Managements Discussion and Analysis of Financial Condition and
Results of Operations.

We follow a 52- or 53-week fiscal year. Our year-end and quarter-end dates are on the Friday
nearest the end of the calendar quarter. Accordingly, our fiscal year 2008 ended on October 3, 2008, fiscal year 2009 ended on October 2, 2009 and fiscal year 2010 ended on October 1, 2010. Fiscal years 2006 and 2007 each consisted of
52 weeks, fiscal year 2008 consisted of 53 weeks and fiscal years 2009 and 2010 consisted of 52 weeks.



|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|------------------------------------------- |  | -------------------------------------------------------------- | ------- | - | ----------------- | - | ------- | -------------- |  | - | -------------- |  |  | -------------- | ------- |  |  | - | ------- | 
|                                            |  | Fiscal Year Ended(dollars in
thousands, except per share data) |        
|                                            |  | September 29,2006                                              |         |   | September 28,2007 |   |         | October 3,2008 |  |   | October 2,2009 |  |  | October 1,2010 |        
|SELECTED STATEMENT OF OPERATIONS DATA:      |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Revenues                                    |  | $                                                              | 154,049 |   |                   | $ | 167,193 |                |  | $ | 181,278        |  |  | $              | 132,559 |  |  | $ | 127,470 | 
|Cost of revenues                            |  |                                                                | 76,164  |   |                   |   | 72,936  |                |  |   | 76,807         |  |  |                | 59,243  |  |  |   | 59,198  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Gross profit                                |  |                                                                | 77,885  |   |                   |   | 94,257  |                |  |   | 104,471        |  |  |                | 73,316  |  |  |   | 68,272  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Operating expenses:                         |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Course development                          |  |                                                                | 10,080  |   |                   |   | 8,613   |                |  |   | 9,656          |  |  |                | 7,442   |  |  |   | 7,304   | 
|Sales and marketing                         |  |                                                                | 42,503  |   |                   |   | 41,094  |                |  |   | 43,596         |  |  |                | 31,962  |  |  |   | 30,461  | 
|General and administrative                  |  |                                                                | 27,944  |   |                   |   | 30,041  |                |  |   | 33,532         |  |  |                | 31,929  |  |  |   | 25,310  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Total operating expenses                    |  |                                                                | 80,527  |   |                   |   | 79,748  |                |  |   | 86,784         |  |  |                | 71,333  |  |  |   | 63,075  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Income (loss) from operations               |  |                                                                | (2,642  | ) |                   |   | 14,509  |                |  |   | 17,687         |  |  |                | 1,983   |  |  |   | 5,197   | 
|Other income, net                           |  |                                                                | 3,373   |   |                   |   | 4,236   |                |  |   | 4,001          |  |  |                | 1,048   |  |  |   | 557     | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Income before provision for income taxes    |  |                                                                | 731     |   |                   |   | 18,745  |                |  |   | 21,688         |  |  |                | 3,031   |  |  |   | 5,754   | 
|Provision for income taxes                  |  |                                                                | 3,853   |   |                   |   | 1,755   |                |  |   | 7,888          |  |  |                | 1,828   |  |  |   | 1,366   | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Net income (loss)                           |  | $                                                              | (3,122  | ) |                   | $ | 16,990  |                |  | $ | 13,800         |  |  | $              | 1,203   |  |  | $ | 4,388   | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Income (loss) per common sharebasic        |  | $                                                              | (0.19   | ) |                   | $ | 1.03    |                |  | $ | 0.84           |  |  | $              | 0.08    |  |  | $ | 0.32    | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Income (loss) per common sharediluted      |  | $                                                              | (0.19   | ) |                   | $ | 1.03    |                |  | $ | 0.83           |  |  | $              | 0.08    |  |  | $ | 0.32    | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Weighted average shares outstandingbasic   |  |                                                                | 16,583  |   |                   |   | 16,498  |                |  |   | 16,516         |  |  |                | 15,181  |  |  |   | 13,722  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Weighted average shares outstandingdiluted |  |                                                                | 16,583  |   |                   |   | 16,498  |                |  |   | 16,580         |  |  |                | 15,181  |  |  |   | 13,739  | 
|                                            |  |                                                                |         |   |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 

In fiscal year 2008, we incurred expense on a since discontinued effort to sell our business of $1.0 million
as well as $0.9 million for certain tax and financial services consulting. In fiscal year 2009, we incurred expense of $4.2 million for the settlement of a claim, $1.3 million for the restructuring of our business and $0.7 million for the since
discontinued effort to sell our business. In fiscal year 2010, we incurred $1.3 million for an expected vacancy due to the exercise of an option to terminate by one of our London education center subtenants.



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|                                         |  |                             |         |  |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|---------------------------------------- |  | --------------------------- | ------- |  | ----------------- | - | ------- | -------------- |  | - | -------------- |  |  | -------------- | ------- |  |  | - | ------- | 
|                                         |  | As of(dollars in
thousands) |        
|                                         |  | September 29,2006           |         |  | September 28,2007 |   |         | October 3,2008 |  |   | October 2,2009 |  |  | October 1,2010 |        
|SELECTED BALANCE SHEET DATA:             |  |                             |         |  |                   |   |         |                |  |   |                |  |  |                |         |  |  |   |         | 
|Cash and cash equivalents                |  | $                           | 44,401  |  |                   | $ | 49,732  |                |  | $ | 51,853         |  |  | $              | 44,313  |  |  | $ | 34,449  | 
|Available for sale securities            |  | $                           | 27,800  |  |                   | $ | 38,775  |                |  | $ | 18,909         |  |  | $              | 29,497  |  |  | $ | 4,997   | 
|Income tax receivable                    |  | $                           | 243     |  |                   | $ | 4,224   |                |  | $ | 2,475          |  |  | $              | 265     |  |  | $ | 230     | 
|Total current assets                     |  | $                           | 98,715  |  |                   | $ | 120,861 |                |  | $ | 101,294        |  |  | $              | 96,743  |  |  | $ | 64,765  | 
|Available for sale securities, long-term |  | $                           |        |  |                   | $ |        |                |  | $ | 23,440         |  |  | $              |        |  |  | $ |        | 
|Total assets                             |  | $                           | 137,200 |  |                   | $ | 163,976 |                |  | $ | 172,424        |  |  | $              | 136,820 |  |  | $ | 100,173 | 
|Deferred revenues                        |  | $                           | 47,678  |  |                   | $ | 50,216  |                |  | $ | 47,712         |  |  | $              | 38,103  |  |  | $ | 35,745  | 
|Total current liabilities                |  | $                           | 70,005  |  |                   | $ | 76,924  |                |  | $ | 70,065         |  |  | $              | 60,430  |  |  | $ | 52,229  | 
|Total long-term liabilities              |  | $                           | 10,261  |  |                   | $ | 9,844   |                |  | $ | 15,961         |  |  | $              | 13,528  |  |  | $ | 13,172  | 
|Total stockholders equity               |  | $                           | 56,934  |  |                   | $ | 77,208  |                |  | $ | 86,398         |  |  | $              | 62,862  |  |  | $ | 34,772  | 

In fiscal years 2009
and 2010 we repurchased shares of our stock for approximately $25.2 million and $4.8 million, respectively. In fiscal year 2010 we declared a special dividend of $2.20 per share which we paid (approximately $29.9 million) on September 10, 2010,
to stockholders of record as of August 20, 2010.



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##### Table of Contents

|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This Managements Discussion and Analysis of Financial Condition and Results of Operations includes many forward-looking
statements. For cautions about relying on such forward-looking statements, please refer to the section entitled Special Note Regarding Forward-Looking Statements at the beginning of this Report immediately prior to
Part I-Item 1.

OVERVIEW

Nature of the Business. Learning Tree International is a leading worldwide vendor-independent provider of training and education to business and government organizations for their managers and IT
professionals. Since our founding in 1974, we have provided high-quality training to over 2 million managers and IT professionals. In fiscal year 2010 we trained 76,176 course participants from more than 8,200 organizations worldwide, including
large national and multinational companies, government organizations, and small and medium-size companies.

As of
October 1, 2010, we offered a broad proprietary library of intensive instructor-led courses from one to five days in length, consisting of 214 different course titles representing 4,824 hours of training, including 137 IT course titles and 77
management course titles. Learning Tree courses provide both breadth and depth of education and training across a wide range of technical and management disciplines, including operating systems, databases, computer networks, computer and network
security, web development, programming languages, software engineering, open source applications, project management, business skills, leadership and professional development.

We market and present our courses through locally staffed operations in the United States, the United Kingdom, France, Canada, Sweden and Japan and generate approximately half of our revenues
internationally. We coordinate, plan and deliver our courses at our own education centers, external hotel and conference facilities and customer sites worldwide. During fiscal year 2010, we presented courses in 54 countries. In fiscal year 2009 we
implemented our proprietary e-Learning platform, Learning Tree AnyWare, which allows individuals located anywhere in the world to use their Internet browser to participate online in instructor-led classes being conducted live in Learning Tree
Education Centers or at customer locations. During fiscal year 2010, we achieved strong acceptance of Learning Tree AnyWare with more than 4,000 remote participants attending AnyWare course sessions.

We use a well-defined systematic approach to develop and update the Learning Tree course library so as to provide training that is
immediately relevant to course participants working in a broad range of applications and industries. After assessing market need, courses are translated into French, Swedish and Japanese. Our proprietary course development process also allows us to
customize our courses for delivery at our customers sites.

We design our own vendor-independent IT courses to provide
participants an unbiased perspective regarding software and hardware products and the ability to compare and integrate multiple platforms and technologies from various vendors. All Learning Tree courses are highly interactive, and incorporate
extensive hands-on exercises or case study workshops. While addressing core concepts and theory, all of our technical and management courses focus primarily on providing skills, tools, and technologies that participants can apply immediately upon
returning to their jobs. To accomplish this objective, many of our RealityPlus management courses utilize extensive multi-media simulations to teach practical management techniques. This innovative methodology provides an environment in which
RealityPlus course participants learn entirely by doing. Throughout these courses, they gain extensive experience applying new management skills in life-like, challenging situations, within the confines of the classroom and under the guidance
of an expert instructor. As a result, RealityPlus course participants can achieve greater mastery of effective management techniques as well as the confidence needed to apply them, and thus return to their jobs both ready and willing to
immediately apply their expanded skills in their workplaces.



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We had 625 instructors as of October 1, 2010, who are practicing professionals with
expert subject knowledge, and who average nearly 26 years of hands-on, real world experience. Learning Tree instructors teach an average of approximately 9 course events per year on an as-needed basis. During the rest of the
year they apply the skills that they teach, either as full-time employees for other companies or as independent consultants. When they are not teaching, Learning Tree instructors are using and honing their management and IT skills as either
full-time employees for other companies or as independent consultants.

We have structured our business so that the majority
of our course delivery costs are variable and depend primarily upon the number of course events conducted. We schedule our course events throughout the year based on our assessment of demand. Since Learning Tree instructors typically work full-time
or as consultants for other business and industry employers, or in the case of management instructors as industry consultants and facilitators, they teach our course events as needed and thus, our instructor-related costs are largely variable.
However, expenses associated with our own education centers and course equipment are largely fixed.

We adjust our
expenditures for sales and marketing depending on our strategic objectives, which generally include an assessment of our expectations for influencing future customer demand, market conditions and other factors. However, if our expectations regarding
the results of our marketing efforts prove to be wrong, any significant revenue shortfall would have a material adverse effect on our results of operations.

As we have for the past 36 years, we continue to emphasize excellence in educating and training managers and IT professionals from government and commercial organizations around the world. We believe that
quality is a significant differentiator in the eyes of our customers, and that our proven long-term record of exceptional performance is a reason for our clients tremendous loyalty. It is worth noting that all of our top 100 customers from
five years ago in our fiscal year 2005 were still our customers five years later in fiscal year 2010. We continue our emphasis on excellence by focusing on our core strengths: our expert instructors, proprietary content library, state-of-the-art
classrooms, application of technology to education, and worldwide course delivery systems.

Our customers have continued to
respond positively to our increase in the breadth and depth of our management course offerings. At October 1, 2010, we offered 77 titles in our management curriculum representing 36.0% of our entire course library, compared to 76 titles, which
represented 34.7% of our course library, at the end of fiscal year 2009.

We follow a 52- or 53-week fiscal year. Our year-end
and quarter-end dates are on the Friday nearest the end of the calendar quarter. Accordingly, our fiscal year 2008 ended on October 3, 2008, our fiscal year 2009 ended on October 2, 2009, and our fiscal year 2010 ended on October 1,
2010. Our fiscal years 2010 and 2009 consisted of 52 weeks, and our fiscal year 2008 was a 53-week fiscal year.



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RESULTS OF OPERATIONS

The following table summarizes our consolidated statements of operations for the periods indicated expressed as percentages of revenues:



|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|---------------------------------------- |  | ----------------- | ----- | - | -------------- |  | ----- | -------------- |  |  | ----- | -
|                                         |  | Fiscal Year Ended |      
|                                         |  | October 3,2008    |       |   | October 2,2009 |  |       | October 1,2010 | 
|Revenues                                 |  |                   | 100.0 | % |                |  | 100.0 | %              |  |  | 100.0 | %
|Cost of revenues                         |  |                   | 42.4  |   |                |  | 44.7  |                |  |  | 46.4  |  
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|Gross profit                             |  |                   | 57.6  |   |                |  | 55.3  |                |  |  | 53.6  |  
|Operating expenses:                      |  |                   |       |   |                |  |       |                |  |  |       |  
|Course development                       |  |                   | 5.3   |   |                |  | 5.6   |                |  |  | 5.7   |  
|Sales and marketing                      |  |                   | 24.0  |   |                |  | 24.1  |                |  |  | 23.9  |  
|General and administrative               |  |                   | 18.5  |   |                |  | 24.1  |                |  |  | 19.9  |  
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|Total operating expenses                 |  |                   | 47.8  |   |                |  | 53.8  |                |  |  | 49.5  |  
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|Income from operations                   |  |                   | 9.8   |   |                |  | 1.5   |                |  |  | 4.1   |  
|Other income, net                        |  |                   | 2.2   |   |                |  | 0.8   |                |  |  | 0.4   |  
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|Income before provision for income taxes |  |                   | 12.0  |   |                |  | 2.3   |                |  |  | 4.5   |  
|Provision for income taxes               |  |                   | 4.4   |   |                |  | 1.4   |                |  |  | 1.1   |  
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  
|Net income                               |  |                   | 7.6   | % |                |  | 0.9   | %              |  |  | 3.4   | %
|                                         |  |                   |       |   |                |  |       |                |  |  |       |  

FISCAL YEAR 2010 COMPARED WITH FISCAL YEAR 2009

Our fiscal year 2010 began October 3, 2009, and from the outset was significantly impacted by the global financial crisis and
subsequent economic downturn. In fiscal year 2010, our revenues decreased by 3.8% to $127.5 million compared to $132.6 million in fiscal year 2009. Income from operations increased by 162.1% to $5.2 million in fiscal year 2010 compared to $2.0
million in fiscal year 2009. Net income for fiscal year 2010 increased by 264.8% to $4.4 million compared to $1.2 million in fiscal year 2009.

Revenues. Our fiscal year 2010 revenues decreased by 3.8% compared to fiscal year 2009. The decrease in revenues was primarily due to a 0.5% decrease in the number of participants in our courses
and a 3.6% decrease in average revenue per participant. The decrease in revenue per participant was primarily the result of the fact that in fiscal year 2010 compared to fiscal year 2009, we had a higher percentage of participants at courses held at
customer locations, where the average revenue per participant is lower than for courses held in our own education centers, as well as a higher percentage of participants at our management courses, which have a shorter average length than our IT
courses and accordingly a lower average revenue per participant. These decreases were partially offset by a 1.8% increase due to the effect of changes in foreign exchange rates.

Revenues in the first half of fiscal year 2010 declined by 11.2% from the comparable period in fiscal year 2009; in contrast, revenues
grew by 1.6% in the third quarter of fiscal year 2010 compared to the same quarter of fiscal year 2009 and, even after a 1.5% adverse effect from foreign exchange rate changes, by 6.6% in the fourth quarter of fiscal year 2010 compared to the same
quarter of fiscal year 2009.

During fiscal year 2010, we provided 264,514 attendee-days of training, a decrease of 2% from
the 269,854 attendee-days in fiscal year 2009. In our management courses in fiscal year 2010, we provided 114,481 attendee-days of training, a 19.2% increase over the 96,020 attendee-days in fiscal year 2009. In our IT courses during fiscal year
2010, we provided 150,033 attendee-days of IT training, a 13.7% decrease from the 173,834 attendee-days in fiscal year 2009.

Revenues in the United States increased 1.1% from $64.9 million in fiscal year 2009 to $65.6 million in fiscal year 2010, primarily due
to an increase in the number of course participants. Revenues from our



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international operations decreased 8.5% from $67.7 million in fiscal year 2009 to $61.9 million fiscal year 2010, primarily due to a decrease in the number of course participants, which was
partially offset by a 1.8% positive effect of changes in foreign exchange rates.

Cost of Revenues.Our cost of
revenues primarily includes the costs of course instructors and their travel expenses, course materials and equipment, freight, classroom facilities and refreshments. During fiscal year 2010, we presented 5,907 events compared to 6,082 events during
fiscal year 2009. Our cost of revenues for fiscal years 2009 and 2010 was $59.2 million. Our cost of revenues as a percentage of our revenues increased to 46.4% for fiscal year 2010 from 44.7% in fiscal year 2009.

Changes in exchange rates do not materially affect our gross profit percentages since exchange rates have essentially the same impact on
both revenues and cost of revenues in any time period.

The increase in cost of revenues as a percentage of revenues in fiscal
year 2010 reflected a 1.2% decrease in average revenue per event as well as a 2.9% increase in average cost per event. The decrease in our average revenue per event was the result of the higher percentage of participants at courses held at customer
locations and the higher percentage of participants at our management courses discussed above. The increase in average cost per event in fiscal year 2010 principally resulted from the effect of changes in foreign exchange rates and the decrease in
our average number of days per event held compared to fiscal year 2009, somewhat offset by proportionately higher fixed costs per event due to having fewer events during fiscal year 2009 over which to allocate the expenses associated with our
education centers.

Gross profit in the United States decreased 3.2% from $35.3 million in fiscal year 2009 to $34.2 million
in fiscal year 2010, primarily due to the higher percentage of participants at courses held at customer locations and at our management courses, both of which have lower average revenue per participant, and due to the proportionately higher fixed
costs per event due to having fewer events during fiscal year 2010 over which to allocate the expenses associated with our education centers. Gross profit from our international operations decreased 10.3% from $38.0 million in fiscal year 2009 to
$34.1 million in fiscal year 2010, primarily due to a decrease in the number of course participants.

Course Development
Expenses. We maintain a disciplined process to develop new courses and update our existing courses. All costs incurred in that process, principally for internal product development staff and for subject matter experts, are expensed when incurred
and are included in course development expenses.

During fiscal year 2010, largely due to the decline in our revenues, course
development expenses were 5.7% of revenues compared to 5.6% during fiscal year 2009. In fiscal year 2010, we decreased our overall spending on course development by 1.9% to $7.3 million compared with $7.4 million in fiscal year 2009. This net
decrease reflected a reduction of $0.3 million in course author expense offset by increases of $0.1 million in consulting expense related to AnyWare and $0.1 million in various other costs.

We introduced 11 new management course titles in fiscal year 2010 compared with 25 in fiscal year 2009. During fiscal year 2010 we
introduced 12 new IT courses compared with 25 in fiscal year 2009. Based on our research and development efforts on various approaches to delivering hybrid learning, which combines instructor-led classroom training with web-based
e-learning, in fiscal year 2009 we introduced Learning Tree AnyWare, our e-learning platform that allows individuals located anywhere to attend a live instructor-led class being conducted in a Learning Tree Education Center or at a customer
location.

At the end of fiscal year 2010, the Learning Tree library of instructor-led courses numbered 214 titles, comprising
4,824 hours of training, compared with 219 titles at the end of fiscal year 2009. The decrease in the number of titles in fiscal year 2010 reflected the net effect of introducing 23 new titles and retiring 28 titles. In general, titles are retired
when the profits they generate no longer justify the ongoing cost of marketing them and maintaining their content. Thus, we may or may not develop more titles than we retire in any period.



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At October 1, 2010, we had 77 management titles in our course library, compared with 76
management titles at the end of fiscal year 2009. Our library of IT titles numbered 137 as of October 1, 2010 compared to 143 at the end of fiscal year 2009.

Sales and Marketing Expenses. Sales and marketing expenses primarily include the cost of designing, producing and distributing direct mail and media advertisements, marketing e-mails
and our website; compensation and travel-related costs for sales and marketing personnel; and the cost of information systems to support these activities. Our sales and marketing expense, and in particular our expenditure on course catalogs, is one
of our largest expenditures. We have adjusted the market sectors to which we mail our catalogs, and are presently evaluating a number of additional ways to increase the efficiency of our marketing expenditures by spending less without materially
affecting the response to that marketing.

Our sales and marketing expenses were 23.9% and 24.1% of revenues in fiscal years
2010 and 2009, respectively. Sales and marketing expenses decreased by $1.5 million from $32.0 million in fiscal year 2009 to $30.5 million in fiscal year 2010. During fiscal year 2010, we reduced the number of catalogs produced and mailed, lowering
our expenses by $1.9 million. Reduction of personnel and benefits accounted for an additional reduction of $1.0 million. These decreases were offset by: increases in sales commissions of $0.5 million, recruiting expense of $0.3 million, professional
service fees of $0.3 million for website redesign and AnyWare and for initial sales support for our Veterans Administration contract of $0.3 million. Changes in foreign exchange rates caused our overall sales and marketing expenses to increase
by about 1.6%.

General and Administrative Expenses. Our general and administrative expenses in fiscal year 2010
decreased by $6.6 million, from $31.9 million in fiscal year 2009 to $25.3 million in fiscal year 2010. Additionally, fiscal years 2010 and 2009 included the following significant items not associated with current operations.



| |  |  | Fiscal year 2010 included a charge of $1.3 million for an expected period of vacancy due to the exercise of an option to terminate by one of our London
education center subtenants on October 7, 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fiscal year 2009 included a charge of $4.2 million to settle a contract dispute with the United States Government, which was paid at $4.5 million on
April 7, 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fiscal year 2009 included $1.3 million of restructuring costs incurred as a result of staff reductions in November 2008 and April 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fiscal year 2009 included $0.7 million of costs associated with exploring a potential sale of the company, including non-contingent transaction
contribution bonuses for certain employees principally in our finance and accounting department, as well as legal fees and special committee fees.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other decreases included: $0.4 million in professional services fees, primarily for auditing services; $0.4 million in software amortization and depreciation, primarily for our accounting software; $0.3
million in rent expense; $0.3 million for the reversal of an asset retirement obligation from the renegotiation of a lease; and $0.3 million in personnel and benefits.

During fiscal year 2010, changes in foreign exchange rates caused total general and administrative expenses to increase by about 1.0% compared with fiscal year 2009.

Other Income (Expense), Net.Other income (expense), net in fiscal year 2010 decreased by $0.4 million over the prior fiscal year,
from $1.0 million to $0.6 million. This change was primarily due to a decrease in interest income of $0.9 million due to lower interest rates and lower outstanding cash balances offset by a decrease in foreign exchange losses of $0.2 million.

Income Taxes. In fiscal year 2010, our income tax provision was $1.4 million compared to $1.8 million in fiscal year
2009. Our effective rate for fiscal year 2010 was 23.7% compared to 60.3% in fiscal year 2009. The



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lower effective rate for fiscal year 2010 was primarily attributable to the reduction in uncertain tax positions due to the expiration of the statute of limitations in fiscal year 2010 which
resulted in a $1.1 million decrease. The higher effective rate for fiscal year 2009 was primarily attributable to United States income taxes on the repatriation of cash from our foreign subsidiaries, the write off of deferred tax assets related to
equity compensation and other nondeductible items, which collectively increased tax expense by approximately $1.4 million. These increases were partially offset by the tax benefits from valuation allowance reversals of approximately $0.5
million.

We did not provide for United States federal income and foreign withholding taxes of international
subsidiaries undistributed earnings as of October 1, 2010, because we currently intend to reinvest such earnings indefinitely. The undistributed earnings were approximately $20.8 million as of October 1, 2010. If these earnings were
distributed, we would incur approximately $0.3 million of foreign withholding taxes. Because of the availability of United States foreign tax credits, it is not practicable to determine the United States federal income tax liability that would be
payable if such earnings were not reinvested.

FISCAL YEAR 2009 COMPARED WITH FISCAL YEAR 2008

In fiscal year 2009, our revenues decreased by 26.9% to $132.6 million compared to $181.3 million in fiscal year 2008. Income from
operations decreased by 88.8% to $2.0 million in fiscal year 2009 compared to $17.7 million in fiscal year 2008. Net income for fiscal year 2009 decreased by 91.3% to $1.2 million compared to $13.8 million in fiscal year 2008.

Revenues. Our fiscal year 2009 revenues decreased by 26.9% compared to fiscal year 2008. The decrease in revenues is primarily due
to a 19.0% decrease in the number of participants in our courses and a 10.0% decrease in average revenue per participant. The decrease in revenue per participant was primarily the result of a negative 7.5% effect of changes in foreign exchange rates
and the fact that in fiscal year 2009 compared to fiscal year 2008, we had a higher percentage of participants at courses held at customer locations, where the average revenue per participant is lower than for courses held in our own education
centers, as well as a higher percentage of participants at our management courses, which have a shorter average length than our IT courses and accordingly a lower average revenue per participant. These decreases were partially offset by price
increases.

During fiscal year 2009, we provided 269,854 attendee-days of training, a decrease of 21.9% from the 345,615
attendee-days in fiscal year 2008. In our management courses in fiscal year 2009, we provided 96,020 attendee-days of training, a 9.8% decrease over the 106,501 attendee-days in fiscal year 2008. In our IT courses during fiscal year 2009, we
provided 173,834 attendee-days of IT training, a 27.3% decrease from the 239,114 attendee-days in fiscal year 2008. Because of our 52/53 week accounting convention, our fiscal year 2009 had 52 weeks, while our fiscal year 2008 had 53 weeks.

Revenues in the United States decreased 19.3% from $80.4 million in fiscal year 2008 to $64.9 million in fiscal year 2009,
primarily due to a decrease in the number of course participants. Revenues from our international operations decreased 32.9% from $100.9 million in fiscal year 2008 to $67.7 million fiscal year 2009, primarily due to a decrease in the number of
course participants and to a 7.5% negative effect of changes in foreign exchange rates.

Cost of Revenues.During
fiscal year 2009, we presented 6,082 events compared to 7,097 events during fiscal year 2008. Our cost of revenues for fiscal year 2009 was $59.2 million compared to $76.8 million in fiscal year 2008. Our cost of revenues as a percentage of our
revenues increased to 44.7% for fiscal year 2009 from 42.4% in fiscal year 2008.

Changes in exchange rates do not materially
affect our gross profit percentages since exchange rates have essentially the same impact on both revenues and cost of revenues in any time period.



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The increase in cost of revenues as a percentage of revenues in fiscal year 2009 reflected a
15.0% decrease in average revenue per event partly offset by a 10.0% decrease in average cost per event. The decrease in our average revenue per event was the result of a 7.5% effect of changes in foreign exchange rates, and a 5.5% decrease in
average participants per event and the decrease in average revenue per participant discussed above. The decrease in average cost per event principally resulted from the effect of changes in foreign exchange rates and the decrease in our average
number of days per event held compared to fiscal year 2008, somewhat offset by proportionately higher fixed costs per event due to having fewer events during fiscal year 2009 over which to allocate the expenses associated with our education centers.

Gross profit in the United States decreased 20.0% from $44.1 million in fiscal year 2008 to $35.3 million in fiscal year
2009, primarily due to a decrease in the number of course participants. Gross profit from our international operations decreased 37.1% from $60.4 million in fiscal year 2008 to $38.0 million in fiscal year 2009, primarily due to a decrease in the
number of course participants.

Course Development Expenses. During fiscal year 2009, largely due to the decline in our
revenues, course development expenses were 5.6% of revenues compared to 5.3% during fiscal year 2008. In fiscal year 2009, we decreased our overall spending on course development by 22.9% to $7.4 million compared with $9.7 million in fiscal year
2008. This decrease reflected both the reduction in costs associated with the development of new titles in fiscal year 2009 compared to the prior fiscal year as well as cost savings in the development process. Our development costs for a course are
incurred well before the date the course is first taught. We introduced 25 new management course titles in fiscal year 2009 compared with nine in fiscal year 2008. During each of fiscal years 2009 and 2008 we introduced 25 new IT courses.

At the end of fiscal year 2009, the Learning Tree library of instructor-led courses numbered 219 titles, comprising over
4,986 hours of training, compared with 185 titles at the end of fiscal year 2008. The increase in the number of titles in fiscal year 2009 reflected the net effect of introducing 50 new titles and retiring 16 titles.

At October 2, 2009, we had 76 management titles in our course library, compared with 54 management titles at the end of fiscal year
2008. Our library of IT titles numbered 143 as of October 2, 2009 compared to 131 at the end of fiscal year 2008.

Sales and Marketing Expenses. Our sales and marketing expenses were 24.1% and 24.0% of revenues in fiscal years 2009
and 2008, respectively. Sales and marketing expenses decreased to $32.0 million in fiscal year 2009 compared to $43.6 million in fiscal year 2008. The decrease in sales and marketing expenses in fiscal year 2009 compared to fiscal year 2008
included: $6.0 million in costs associated with printing and mailing our catalogs; $3.6 million in personnel-related expenses; $1.0 million in professional service fees; $0.3 million in trade show and advertising expense; and $0.7 million for
decreases in travel and living, general office expenditures and other items.

General and Administrative Expenses. Our
general and administrative expenses in fiscal year 2009 decreased by $1.6 million, from $33.5 million in fiscal year 2008 to $31.9 million in fiscal year 2009. In the fourth quarter of fiscal year 2009, we recorded a charge of $4.2 million related
to a contract dispute. Offsetting this increase to general and administrative expenses, were decreases related to: $2.1 million in payroll and benefits; $1.2 million in incentive and stock compensation; $1.1 million in professional service fees; and
$0.8 million in facilities and other net decreases. Additionally, fiscal years 2009 and 2008 included the following significant items not associated with current operations:



| |  |  | Fiscal year 2009 included $1.3 million of restructuring costs associated with reconfiguring our business to meet the challenges of the current business
environment and $0.7 million for costs associated with the since-discontinued effort to explore the sale of the company, primarily for non-contingent transaction contribution bonuses for certain employees.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Fiscal year 2008 included $1.0 million for costs associated with the since-discontinued effort to explore the sale of the company, primarily for
non-contingent transaction contribution bonuses for certain employees; professional service fees of $0.9 million for tax services and financial consulting; $0.3 million related to lapsed options; $0.2 million for contingency accruals; and $0.2
million for severance.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During fiscal year 2009, changes in foreign exchange rates caused total general and
administrative expenses to decline by about 5.2% compared with the same period of fiscal year 2008. Despite the reduction in our absolute expenditure on general and administrative items, the reduction in revenues resulted in general and
administrative expenses of 24.1% of revenues in fiscal year 2009 compared with 18.5% in the prior fiscal year.

Other
Income (Expense), Net.Other income (expense), net in fiscal year 2009 decreased by $3.0 million over the prior fiscal year, from $4.0 million to $1.0 million. This change was primarily due to a decrease in interest income of $2.6 million due to
lower interest rates and lower outstanding cash balances as well as a decrease of $0.2 million because in fiscal year 2008 we recorded the proceeds from the liquidation of our investment in Collegis, Inc.

Income Taxes. In fiscal year 2009, our income tax provision was $1.8 million compared to $7.9 million in fiscal year 2008. Our
effective rate for fiscal year 2009 was 60.3% compared to 36.4% in fiscal year 2008. The higher effective rate for fiscal year 2009 was primarily attributable to approximately $0.7 million in United States income taxes on the repatriation of
approximately $17.5 million in cash from our foreign subsidiaries, the write off of deferred tax assets related to equity compensation and other nondeductible items, which collectively increased tax expense by approximately $1.4 million. These
increases were partially offset by the tax benefits from valuation allowance reversals of approximately $0.5 million.

As of
the end of the fourth quarter of fiscal year 2009, we reversed the valuation allowance for our foreign tax credit carryovers and for our deferred tax assets in a foreign jurisdiction. Because of changes we made to our intercompany agreements with
our foreign subsidiaries and the improved financial performance of their operations, we determined that it is more likely than not that the benefits from the foreign tax credit carryovers will be realized. We also determined that it is more likely
than not that we will realize the benefits for the deferred tax assets in the foreign jurisdiction because of the improved financial performance of our operations in the foreign jurisdiction. The reversal of the valuation allowances for these items
resulted in a net benefit of approximately $0.5 million.

We did not provide for United States federal income and foreign
withholding taxes of international subsidiaries undistributed earnings as of October 2, 2009, because as of that date we intended to reinvest such earnings indefinitely. The undistributed earnings were approximately $18.6 million as of
October 2, 2009. If these earnings would have been distributed, we would have incurred approximately $0.2 million of foreign withholding taxes. Because of the availability of United States foreign tax credits, it is not practicable to determine
the United States federal income tax liability that would have been payable if such earnings were not reinvested.

GEOGRAPHIC DATA

Learning Tree Education Centers are located in six countries and we have historically derived roughly half of our revenues
from outside the United States. The United States operations recorded revenues of $65.6 million in fiscal year 2010 compared to revenues of $64.9 million in fiscal year 2009. Revenues from our European operations were $46.8 million in fiscal year
2010 compared to $51.6 million in fiscal year 2009. Canadian operations recorded revenues of $13.0 million in fiscal year 2010 compared to revenues of $13.5 million in fiscal year 2009 and our Asian operations recorded revenues of $2.1 million in
fiscal year 2010 compared to $2.6 million in fiscal year 2009. See Note 9 of Notes to Consolidated Financial Statements for further information on segment reporting.



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Although our consolidated financial statements are stated in U.S. dollars, all of our
subsidiaries other than in the United States have functional currencies other than the U.S. dollar. Gains and losses arising from the translation of the balance sheets of our subsidiaries from the functional currencies to U.S. dollars are reported
as adjustments to stockholders equity. Fluctuations in exchange rates may also have an effect on our results of operations. Since both revenues and expenses are generally denominated in the subsidiarys local currency, changes in exchange
rates that have an adverse effect on our foreign revenues are partially offset by a favorable effect on our foreign expenses, and vice versa. The impact of future exchange rates on our results of operations cannot be accurately predicted. To date,
we have not sought to hedge the risks associated with fluctuations in exchange rates and therefore we continue to be subject to such risks. In the future, we may undertake such hedging transactions. There can be no assurance that any hedging
techniques we implement would be successful in eliminating or reducing the effects of currency fluctuations.

INFLATION

Inflation and changing prices do not have a significant impact on our net sales, revenues and income from continuing operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2010, the Financial Accounting Standards Board (FASB) issued amended guidance (included in Accounting Standards Codification (ASC) 855) for subsequent events, which was
effective for us in February 2010. In accordance with the revised guidance, a Securities and Exchange Commission filer will no longer be required to disclose the date through which subsequent events have been evaluated in issued and revised
financial statements. The adoption of this revised guidance did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued standards (included in ASC 820) that provide new disclosures about fair value measurements. These include disclosing transfers in and out of Levels 1 and 2 as well as the
reasons for the transfers and identifying the activity in Level 3 fair value measurements provided in reconciliation. The standards also provide clarification of existing standards on the level of disaggregation for each class of assets and
liabilities and disclosures about inputs and valuation techniques. We adopted these standards on January 2, 2010, with no material effect on our consolidated financial statements.

In October 2008, the FASB issued standards (included in ASC 820) that provide a common definition of fair value and establish a framework
to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. These standards do not require new fair value measurements, but apply to other standards that require fair value measurement; expanded
disclosures are also required. In February 2008, the FASB delayed the effective date of these standards to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized
or disclosed at fair value in the financial statements on a recurring basis (at least annually). We adopted the standards for nonfinancial assets and nonfinancial liabilities on October 3, 2009, with no material effect on our consolidated
financial statements.

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force),
the American Institute of Certified Public Accountants and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements.

QUARTERLY RESULTS OF OPERATIONS

Historically, our quarterly operating
results have fluctuated, and that is expected to continue in the future. Typically, our first and third fiscal quarters have higher revenues and income from operations than do our second and fourth fiscal quarters. The fluctuations may be caused by
many factors such as: (i) the frequency of course



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events; (ii) the number of weeks during which courses can be conducted in a quarter; (iii) the timing, timely delivery, frequency and size of and response to our direct mail marketing
and advertising campaigns; (iv) the timing of the introduction of new course titles; (v) the mix between course events held at customer sites and course events held in our education centers and hotels due to differing gross profit margins;
(vi) competitive forces within markets we serve; (vii) our ability to attract customers and meet their expectations; (viii) currency fluctuations and other risks inherent in international operations; (ix) natural disasters,
external strikes, acts of war or terrorism and other external factors; and (x) general economic conditions and industry-specific slowdowns. Fluctuations in quarter-to-quarter results also occur as a result of differences in the timing of our
spending on the marketing and development of our courses.

See Note 14 of Notes to Consolidated Financial
Statements for our unaudited quarterly financial data for the eight fiscal quarters ended October 1, 2010. Our operating results for any quarter are not necessarily indicative of the results for any future period.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity at October 1, 2010 included cash and cash equivalents on hand of $34.4 million. During fiscal year 2010, the total of our cash and cash equivalents decreased by $9.9
million, largely as a result of the payment of $29.9 million of cash dividends, the expenditure of $4.8 million for repurchases of our common stock and $3.0 million of purchases of fixed assets, partly offset by $26.5 million of net proceeds from
the sales of available for sale securities, $0.8 million of cash provided by operations and $0.5 million of proceeds from the exercise of stock options.

Cash Flows. Our cash and cash equivalents decreased $9.9 million to $34.4 million at October 1, 2010 from $44.3 million at October 2, 2009.



|                                                       |  |                   |       |   |                |   |       |                |  |   |               |   |  |               |       |   |  |   |      |  
|------------------------------------------------------ |  | ----------------- | ----- | - | -------------- | - | ----- | -------------- |  | - | ------------- | - |  | ------------- | ----- | - |  | - | ---- | -
|                                                       |  | Fiscal Year Ended |       |   | Net Change     |  
|                                                       |  | October 3,2008    |       |   | October 2,2009 |   |       | October 1,2010 |  |   | 2009 vs. 2008 |   |  | 2010 vs. 2009 |      
|Cash provided by operating activities                  |  | $                 | 18.0  |   |                | $ | 7.5   |                |  | $ | 0.8           |   |  | $             | (10.5 | ) |  | $ | (6.7 | )
|Cash (used in) provided by investing activities        |  |                   | (12.8 | ) |                |   | 10.8  |                |  |   | 23.6          |   |  |               | 23.6  |   |  |   | 12.8 |  
|Cash provided by (used in) financing activities        |  |                   |      |   |                |   | (25.2 | )              |  |   | (34.3         | ) |  |               | (25.2 | ) |  |   | (9.1 | )
|Effects of exchange rates on cash and cash equivalents |  |                   | (3.1  | ) |                |   | (0.6  | )              |  |   |              |   |  |               | 2.5   |   |  |   | 0.6  |  
|                                                       |  |                   |       |   |                |   |       |                |  |   |               |   |  |               |       |   |  |   |      |  
|Increase (decrease) in cash and cash equivalents       |  | $                 | 2.1   |   |                | $ | (7.5  | )              |  | $ | (9.9          | ) |  | $             | (9.6  | ) |  | $ | (2.4 | )
|                                                       |  |                   |       |   |                |   |       |                |  |   |               |   |  |               |       |   |  |   |      |  

Cash provided by operating activities declined by $6.7 million to $0.8 million in fiscal year 2010 from $7.5
million in fiscal year 2009. Cash provided by operating activities in fiscal year 2010 was reduced by a payment of $4.5 million for the settlement of a contract dispute (see Note 4 of Notes to Consolidated Financial Statements). Cash
provided by investing activities improved $12.8 million during fiscal year 2010 compared to fiscal year 2009 due primarily to higher net proceeds from the disposition of available for sale securities and fewer purchases of equipment and other
capital assets. Cash used in financing activities was $34.3 million due to repurchases of our common stock and payment of cash dividends during fiscal year 2010. The negative effect of exchange rates on cash and cash equivalents decreased by $0.6
million in fiscal year 2010 from $(0.6) million in fiscal year 2009.

In fiscal year 2010, free cash flow, which
we define as net cash provided by operating activities minus purchases of equipment, property and leasehold improvements was $(2.2) million. This compares to $5.4 million of free cash flow in fiscal year 2009. The decline in free cash flow for
fiscal year 2010 is primarily due to payment of the $4.5 million related to a contract dispute. We believe that free cash flow is useful for investors to understand our liquidity. Free cash flow is a non-GAAP financial measure and accordingly should
be considered



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only as a supplement to, and not a replacement of, cash provided by operating activities as a measure of our liquidity. The following is a reconciliation of free cash flow to cash provided
by operating activities computed in accordance with GAAP:



|                                                                  |  |                |      |   |                |   |      |                |  |   |      |  
|----------------------------------------------------------------- |  | -------------- | ---- | - | -------------- | - | ---- | -------------- |  | - | ---- | -
|                                                                  |  | Fiscal Year    |     
|                                                                  |  | October 3,2008 |      |   | October 2,2009 |   |      | October 1,2010 | 
|Cash provided by operating activities                             |  | $              | 18.0 |   |                | $ | 7.5  |                |  | $ | 0.8  |  
|Less: Purchases of equipment, property and leasehold improvements |  |                | (6.9 | ) |                |   | (2.1 | )              |  |   | (3.0 | )
|                                                                  |  |                |      |   |                |   |      |                |  |   |      |  
|Free cash flow                                                    |  | $              | 11.1 |   |                | $ | 5.4  |                |  | $ | (2.2 | )
|                                                                  |  |                |      |   |                |   |      |                |  |   |      |  

Liquidity. At October 1, 2010 our net working capital (current assets minus current liabilities)
was $12.6 million, a $23.7 million decrease from our working capital balance at October 2, 2009. The change in net working capital was primarily due to $29.9 million of cash dividends and the expenditure of $4.8 million for repurchases of our
common stock and the payment of $4.5 million for the settlement of a contract dispute.

At October 2, 2009 we had $17.0
million in face value of Auction Rate Securities (ARS). Under the terms of our repurchase agreement with UBS, we sold them at their stated value as follows: $0.6 million in the first quarter of fiscal year 2010 and $16.4 million in the
third quarter of fiscal year 2010. The $73.8 million of cash and available for sale securities reported at October 2, 2009, was reduced by $2.4 million for the temporary impairment of these ARS. This temporary impairment was reversed in the
third quarter of fiscal year 2010.

We have no outstanding debt or line-of-credit agreements. We anticipate we will continue
to rely primarily on our balance of cash and cash equivalents on hand and cash flows from operations to finance our operating cash needs. We believe that such funds will be sufficient to satisfy our anticipated cash requirements for the foreseeable
future.

Capital Requirements. During fiscal year 2010, we made capital expenditures of $3.0 million for the purchase
of equipment worldwide, mostly computers. We will continue to invest in our infrastructure to accommodate any increased customer demand, to continue improving the quality and effectiveness of our course delivery, and to incorporate significant
changes in technology. We have a number of operating leases for our administrative offices and education center classroom facilities located worldwide. These leases expire at various dates over the next 11 years. In addition to requiring monthly
payments for rent, some of the leases contain asset retirement provisions whereby we are required to return the leased facility back to a specified condition at the expiration of the lease.

The following table summarizes our contractual commitments at October 1, 2010:



|                                         |  |                                       |        |  |                               |   |        |                                |  |   |                              |  |  |                                       |        |  |  |   |        | 
|---------------------------------------- |  | ------------------------------------- | ------ |  | ----------------------------- | - | ------ | ------------------------------ |  | - | ---------------------------- |  |  | ------------------------------------- | ------ |  |  | - | ------ | 
|                                         |  | Payments Due by Period (in thousands) |       
|Contractual Obligations                  |  | Total                                 |        |  | Less than 1 year(Fiscal 2011) |   |        | 1-2 years(Fiscal2012 and 2013) |  |   | 3-5 years(Fiscal2014 - 2016) |  |  | More than 5 
years(Fiscal2017 - 2022) |       
|Operating leases (i)                     |  | $                                     | 84,043 |  |                               | $ | 12,361 |                                |  | $ | 21,375                       |  |  | $                                     | 29,306 |  |  | $ | 21,001 | 
|Purchase commitments                     |  |                                       | 413    |  |                               |   | 217    |                                |  |   | 189                          |  |  |                                       | 7      |  |  |   |       | 
|Other lease contractual obligations (ii) |  |                                       | 7,745  |  |                               |   | 105    |                                |  |   | 208                          |  |  |                                       | 348    |  |  |   | 7,084  | 
|                                         |  |                                       |        |  |                               |   |        |                                |  |   |                              |  |  |                                       |        |  |  |   |        | 
|Total                                    |  | $                                     | 92,201 |  |                               | $ | 12,683 |                                |  | $ | 21,772                       |  |  | $                                     | 29,661 |  |  | $ | 28,085 | 
|                                         |  |                                       |        |  |                               |   |        |                                |  |   |                              |  |  |                                       |        |  |  |   |        | 



|(i) | Amounts exclude future minimum sublease rental proceeds of $10.4 million due in the future under non-cancelable subleases. See Note 4 of Notes to Consolidated
Financial Statements for further details.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | Represents estimated cash flows to satisfy contractual obligations to restore leased space to specified conditions at expiry of the leases. Amounts include $0.7 million
expected to be recovered from subtenants.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

Managements discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. The following list of critical accounting estimates and policies is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are more fully
described in Note 1 of Notes to Consolidated Financial Statements. The following represents a summary of our critical accounting estimates and policies, defined as those policies that we believe are the most important to the portrayal of
our financial condition and results of operations, and/or require managements significant judgments and estimates.

Critical
Accounting Estimates

Revenue Recognition. We offer our customers a multiple-course sales discount referred to as a
Learning Tree Training Passport. A Learning Tree Training Passport allows an individual Passport holder to attend up to a specified number of courses over a one- to two-year period for a fixed price. For a Training Passport, the amount of revenue
recognized for each course attendance is based upon the selling price of the Training Passport, the list price of the course taken, the weighted average list price of all courses taken and the estimated average number of courses all Passport holders
will actually attend. Upon expiration of each individual Training Passport, we record the difference, if any, between the revenues previously recognized and that specific Training Passports total invoiced price. The estimated attendance rate
is based upon the historical experience of the average number of course events that Training Passport holders have been attending. The actual Training Passport attendance rate is reviewed at least semi-annually, and if the Training Passport
attendance rates change, the revenue recognition rate for active Training Passports and for Training Passports sold thereafter is adjusted prospectively.

We believe it is appropriate to recognize revenues on this basis in order to most closely match revenue and related costs, as the substantial majority of our Passport holders do not attend the maximum
number of course events permitted under their Training Passports. We believe that the use of recent historical data is reasonable and appropriate because of the relative stability of the average actual number of course events attended by Passport
holders.

The average actual attendance rate for all expired Training Passports has closely approximated the estimated rate we
utilize. Although we have seen no material changes in the historical rates as the number of course titles has changed, we monitor such potential effects. In general, determining the estimated average number of course events that will be attended by
a Training Passport holder is based on historical trends that may not continue in the future. These estimates could differ in the near term from amounts used in arriving at the reported revenue. If the estimates are wrong, we would record the
difference between the revenues previously recognized for that Training Passport and the Training Passport selling price upon expiration of that Training Passport. Thus, the timing of revenue recognition may be affected by an inaccurate estimation,
but the inaccuracy would have no effect on the aggregate revenue recognized over the one- to two-year life of each Training Passport.

For newer Passport products for which historical utilization data is not available, we assume that the estimated average number of courses to be attended is equal to the number of courses available on the
Passport. This assumed utilization rate may be revised in future periods after sufficient time has passed to amass historical trends.



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Allowance for Doubtful Accounts Receivable. Trade accounts receivable are reduced by
an allowance for amounts that may become uncollectible in the future. We use estimates in determining the allowance for doubtful accounts receivable, based on our analysis of various factors, including our historical collection experience, current
trends, specific identification of invoices which are considered doubtful and a percentage of our past due accounts receivable. Although our estimates for this reserve have in the past been reasonably accurate, these estimates could differ from
actual collection experience and are subject to adjustment. Our trade accounts receivable are written off when they are deemed uncollectible.

Lease Termination Costs. We lease education center and administrative office space under various operating lease agreements. Certain of these operating leases include space that is not used and
that is currently subleased. We calculate and record a liability related to those leases based on the difference between the present value of the net aggregate sublease rental income and the present value of the prime lease costs for the subleased
space throughout the remaining term of the leases. Periodically, we evaluate the nature and extent of each of the individual provisions and make adjustments as appropriate, as new information becomes available or subsequent developments occur.

In 1999, we entered into a 20-year lease on a building in London to house our United Kingdom Education Center. This building
has space in addition to that required for our current needs, which we attempt to sublet. When space is vacant from time to time, we must estimate the fair value of the liability for the vacant space based upon the remaining lease costs as defined
by our operating lease agreement reduced by estimated future sublease rental income that could be reasonably obtained for the property based upon prevailing real estate market conditions. The computed short and long-term portions of such liabilities
are recorded as deferred facilities rent in the accompanying consolidated financial statements. Amounts are paid under the master lease to the landlord, netted against subtenant sublease receipts, and applied to our accrued lease liability, reducing
the amount of liability recorded with an offset to General and Administrative expenses.

Asset Retirement Obligations.
We record a liability equal to the fair value of the estimated future cost to retire an asset. For us, most asset retirement obligation (ARO) liabilities are primarily associated with education facilities leasehold improvements which, at
the end of a lease, we are obligated to remove in order to restore the facility back to a condition specified in the lease agreement. At the inception of such a lease, we record the ARO as a liability and also record a leasehold improvement asset in
an amount equal to the fair value of the liability. The capitalized leasehold improvement asset is then depreciated on a straight-line basis over 20 years or the term of the lease, whichever is shorter. Any difference between the actual costs
incurred for the eventual retirement and the estimated liability previously recorded will be recognized as a gain or loss in our statement of operations at the termination of the lease.

The fair value of any such ARO liability is estimated in three steps: (1) the costs of leasehold restoration are estimated as if
they were to be performed at the inception of the lease, (2) the cost is forecast into the future by applying an inflation rate in effect at the time of adoption together with a market-risk premium for a contractors risk for performing
the work in the future, and (3) the present value of this future cost is computed by discounting it at our credit worthiness interest rate (determined at the inception of the lease).

The ARO liability is subsequently increased annually by interest accretion throughout the term of the lease. In future periods we may
also make adjustments to the ARO liability as a result of the availability of new information, technology changes, changes in labor costs and other factors. The estimate of the ARO liability is based on a number of assumptions requiring professional
judgment. We cannot predict what revisions to these assumptions will be required in future periods.

The ARO liability is
based on a number of assumptions requiring professional judgment. These include estimates for: (1) expected future cash flows related to contractual obligations, primarily to restore leased space back to open floor layouts as required by the
lease agreements; (2) our credit-adjusted risk free rate that considers



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our estimated credit rating as of the date of lease inception; (3) the market risk premium that we determine based on the length of the individual leases; and (4) the relevant inflation
factor in each affected country. For the more significant AROs we obtain third-party restoration estimates specific to those leases. We cannot predict the type of revisions to these assumptions that will be required in future periods due to the
availability of additional information, technology changes, the price of labor costs and other factors.

Critical Accounting Policies

Revenue Recognition. See Critical Accounting Estimates for significant policies on revenue recognition.

In addition to our Learning Tree Training Passports, we also offer a multiple-course sales discount referred to as Learning
Tree Training Vouchers. With Learning Tree Training Vouchers, a customer buys the right to send a specified number of attendees to Learning Tree courses over a six to twelve-month period for a fixed price. Revenue is recognized on a pro rata basis
for each attendance. For the majority of Training Vouchers with unused seats at the expiration of the Voucher, we record the pro rata selling price of the expired unused seats as revenue. At times we make a business decision to extend a Training
Voucher beyond the normal twelve month expiration date. Training Vouchers purchased under government rate schedules have no expiration date.

To provide additional flexibility to meet our customers training needs, we offer a multiple-training day sales discount referred to as Learning Tree 10-Day Passes. With Learning Tree 10-Day Passes,
a customer buys the right to take up to 10 days of training over a one-year period for a fixed price. Revenue is recognized on a pro rata basis for each attendance day. If a 10-Day Pass has unused days at expiration, we record the pro-rata value of
the unused days as revenue.

Stock-Based Compensation. We estimate the fair value of share-based payment awards on the
date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statements of operations. Our determination of
fair value of share-based payment awards on the date of grant using an option-pricing model is affected by assumptions regarding a number of variables including our expected stock price volatility, expected term and risk-free interest rates.

We analyzed our historical volatility to estimate the expected volatility. The risk-free interest rate assumption is based on
the U.S. Treasury rate at the date of grant, which most closely resembles the expected life of our options. The estimated expected life represents the weighted-average period the stock options are expected to remain outstanding and has been
determined based on the simplified method under ASC 718. We do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated pre-vesting forfeitures.
Forfeitures were estimated based on historical experience. During fiscal year 2009, we reduced to zero the estimated forfeiture rate for executive personnel. The forfeiture rate for fiscal year 2010 was zero.

Long-Lived Assets.We periodically review the carrying value of our long-lived assets, such as equipment, property and leasehold
improvements, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In making such evaluations, we compare the expected future cash flows to the carrying amount of the assets. If the
total of the expected future cash flows is less than the carrying amount of the assets, we are required to make estimates of the fair value of the long-lived assets in order to calculate the impairment loss equal to the difference between the fair
value and the carrying value of the assets. We make significant assumptions and estimates in this process regarding matters that are inherently uncertain, such as estimating cash flows, remaining useful lives, discount rates and growth rates. The
resulting cash flows are computed over an extended period of time, which subjects those assumptions and estimates to an even larger degree of uncertainty. While we believe that our estimates are reasonable, different assumptions regarding such cash
flows could materially affect the valuation of long-lived assets.



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Income Taxes. We provide for income taxes under the provisions of FASB ASC 740,
Income Taxes. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and the basis reported in our consolidated financial statements. Deferred tax liabilities and assets are determined based on
the difference between financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. We must then also assess the likelihood that our deferred tax assets
will be recovered from future taxable income, and, to the extent we believe that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we must establish a valuation allowance. To the extent we establish
a valuation allowance or change the allowance in a period, we must reflect the corresponding increase or decrease within the tax provision in the statement of operations.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48; codified primarily in FASB ASC 740, Income Taxes). ASC 740
clarifies the accounting for income taxes by prescribing the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. ASC 740 is effective for fiscal years beginning after
December 15, 2006.

As of the beginning of fiscal year 2008, we adopted ASC 740. The cumulative effect of the adoption
was a $1.2 million reduction to retained earnings. As of the date of adoption, the amount of unrecognized tax benefits was $1.4 million, all of which would have had an impact on our effective tax rate if recognized. Our continuing practice is to
recognize interest and penalties related to income tax matters in income tax expense. As of the date of adoption, we had $0.6 million accrued for interest and $0.6 million accrued for penalties.

OUTLOOK

Effect of
Exchange Rates. Approximately half of our business annually is conducted in currencies other than U.S. dollars and fluctuations in exchange rates will affect future revenues and expenses when translated into dollars. The U.S. dollar strengthened
against most foreign currencies during our first three quarters of fiscal year 2010 and since then it has weakened. If the exchange rates of December 2, 2010 remain constant for the remainder of our first quarter of fiscal year 2011, we would
expect to report an unfavorable effect of approximately 1.0% on our revenues during our first quarter of fiscal year 2011 compared to the same quarter of fiscal year 2010. Of course, we would also see a favorable effect from exchange rates on our
overall expenses, though this effect is less pronounced because more of our expenses are denominated in dollars, including our corporate management and centralized IT, marketing and course development activities which are located here in the United
States.

First Quarter Revenues. We currently expect revenues for our first quarter of fiscal year 2011 of between
$34.2 million and $35.7 million, which would represent an increase of between 5.2% and 9.8% from revenues of $32.5 million in our first quarter of fiscal year 2010, even after the 1.0% unfavorable effect of changes in foreign exchange rates
discussed earlier.

First Quarter Gross Profit.We expect a gross profit percentage in our first quarter of fiscal year
2011 of between 53.9% and 55.2% compared to 56.8% in our first quarter of fiscal year 2010, largely because a greater proportion of classes will be held at customer locations than in our first quarter of fiscal year 2010.

First Quarter Operating Expenses. We expect overall operating expenses for our first quarter of fiscal year 2011 to be between
$16.0 million and $16.5 million, an increase of between 9.6% and 13.0% compared to $14.6 million in the same quarter a year earlier.

First Quarter Income From Operations. As a result of the above factors, we expect to achieve first quarter operating income of between $2.0 million and $3.5 million compared with $3.9 million in
our first quarter of fiscal year 2010.

First Quarter Interest Income. We expect first quarter interest income to be
less than $0.1 million.



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First Quarter Pre-Tax Income. Overall, we expect to report pre-tax income for our
first quarter of fiscal year 2011 of between $2.0 million and $3.5 million, compared with $4.1 million in the first quarter of fiscal year 2010.

Effective Tax Rate. We estimate that our effective tax rate in our first quarter of fiscal year 2011 will be approximately 34.5%.



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|Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We are exposed to market risk from changes in interest rates and foreign currency exchange rates. For purposes of specific risk analysis, we use sensitivity analysis to determine the effects that market
risk exposures may have.

Interest Rate Risk. Our cash equivalents and available for sale securities are diversified
and consist primarily of investment grade securities of high-quality financial institutions and corporations. The fair value of our portfolio of marketable securities would not be significantly affected by either a 10% increase or decrease in the
rates of interest due primarily to the short-term nature of the portfolio. We do not hold or issue derivative financial instruments.

Foreign Currency Risk. We are exposed to the impact of foreign currency fluctuations. The exposure to exchange rates relates primarily to our foreign subsidiaries. Subsidiaries with material
foreign currency exposure are in Canada, the United Kingdom, Sweden and France. For our foreign subsidiaries, exchange rates can have an impact on the U.S. dollar value of their reported earnings as well as on the intercompany transactions with the
United States and other subsidiaries.

Our consolidated financial statements are prepared in U.S. dollars, while the
operations of our foreign subsidiaries are conducted in their respective local currencies. Fluctuations in the value of foreign currencies against the U.S. dollar may have a significant impact on our reported results. Revenues and expenses
denominated in foreign currencies are translated monthly into U.S. dollars at the weighted average exchange rate. Consequently, as the value of the Dollar strengthens or weakens relative to other currencies in our major markets the resulting
translated revenues, expenses and operating profits become lower or higher, respectively. A hypothetical appreciation of the Canadian Dollar, Euro, British Pound and Swedish Krona of 10% would result in a $0.2 million increase to our consolidated
fiscal year 2010 results. This was estimated using a 10% appreciation factor to the average monthly exchange rates applied to the net income or loss for each of our subsidiaries in the respective period.

Fluctuations in currency exchange rates also can have an impact on the U.S. dollar amount of our stockholders equity. The assets
and liabilities of our non United States subsidiaries are translated into U.S. dollars at the exchange rate of the balance sheet for the respective reporting period. The resulting translation adjustments are recorded in stockholders equity as
accumulated other comprehensive income or loss. Due to unfavorable changes in the U.S. dollar relative to the Canadian Dollar, the Euro, the British Pound and the Swedish Krona, the foreign currency translation component of accumulated other
comprehensive income declined $0.1 million during fiscal year 2010.

Additionally, we are exposed to the impact of foreign
currency gains or losses due to short term intercompany transactions between the United States and its consolidated subsidiaries. While these intercompany balances are eliminated in consolidation, exchange rate changes do affect consolidated
earnings. These balances generated a foreign exchange loss of $0.1 million in fiscal year 2010. To perform a sensitivity analysis, we assessed the risk of loss in fair values from the effect of a hypothetical 10% change in the value of foreign
currencies, assuming no change in interest rates. As of October 1, 2010, the result of a uniform 10% change in the values of foreign currency exchange rates against the U.S. dollar for intercompany exposures with all other variables held
constant would be immaterial to our results of operations.

To date, we have not sought to hedge the risks associated with
fluctuations in exchange rates. In the future, we may undertake such transactions; however, any hedging techniques we might implement might not be successful in eliminating or reducing the effects of currency fluctuations.

Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of investments
in available for sale securities, restricted interest bearing long-term investments and



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trade accounts receivable. We have policies that limit investments to investment grade securities and the amount of credit exposure to any one issuer. We do not require collateral or other
security to support client receivables since most of our customers are large, well-established companies and government agencies. Our credit risk is also mitigated because our customer base is diversified both by geography and industry, and no
single customer accounted for more than 10% of our consolidated revenues on an annual or quarterly basis during fiscal year 2010. We maintain an allowance for doubtful accounts for any potential credit losses related to our trade receivables. We do
not use foreign exchange contracts to hedge the risk in receivables denominated in foreign currencies and we do not hold or issue derivative financial instruments for trading or speculative purposes.



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|Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                      |  |      |    | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                      |  | Page |   
|Report of Independent Registered Public Accounting Firm                                                                                               |  |      | 45 | 
|                                                                                                                                                      | 
|Consolidated Balance Sheets at October 2, 2009 and October 1, 2010                                                                                    |  |      | 46 | 
|                                                                                                                                                      | 
|Consolidated Statements of Operations for fiscal years ended October 3, 2008, 
October 2, 2009 and October 1, 2010                                    |  |      | 47 | 
|                                                                                                                                                      | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income for fiscal years ended October 3,
 2008, October 2, 2009 and October 1, 2010 |  |      | 48 | 
|                                                                                                                                                      | 
|Consolidated Statements of Cash Flows for fiscal years ended October 3, 2008, 
October 2, 2009 and October 1, 2010                                    |  |      | 49 | 
|                                                                                                                                                      | 
|Notes to Consolidated Financial Statements                                                                                                            |  |      | 50 | 



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Learning Tree International, Inc.

Reston, Virginia

We have audited the accompanying consolidated balance sheets of Learning Tree International, Inc. and subsidiaries as of October 1,
2010 and October 2, 2009 and the related consolidated statements of operations, stockholders equity and comprehensive income, and cash flows for each of the three years in the period ended October 1, 2010. These financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Learning Tree International, Inc. and subsidiaries at October 1, 2010 and October 2, 2009, and the results of their operations and their cash flows for each of the three years in the period ended October 1, 2010, in
conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), Learning Tree International, Inc. and subsidiaries internal control over financial reporting as of October 1, 2010, based on criteria established in
Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated December 9, 2010 expressed an unqualified opinion thereon.

/s/    BDO USA, LLP

Bethesda, Maryland

December 9, 2010



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LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)



|                                                                                                                                    |  |                |         |   |                |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                    |  | October 2,2009 |         |   | October 1,2010 |  
|Assets                                                                                                                              |  |                |         |   |                |   |         |  
|Current Assets:                                                                                                                     |  |                |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                           |  | $              | 44,313  |   |                | $ | 34,449  |  
|Available for sale securities                                                                                                       |  |                | 29,497  |   |                |   | 4,997   |  
|Trade accounts receivable, less allowances of $224 and $241, respectively                                                           |  |                | 15,157  |   |                |   | 18,311  |  
|Income taxes receivable                                                                                                             |  |                | 265     |   |                |   | 230     |  
|Prepaid expenses                                                                                                                    |  |                | 4,601   |   |                |   | 4,649   |  
|Deferred income taxes                                                                                                               |  |                | 1,461   |   |                |   | 55      |  
|Other current assets                                                                                                                |  |                | 1,449   |   |                |   | 2,074   |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total current assets                                                                                                                |  |                | 96,743  |   |                |   | 64,765  |  
|Equipment, Property and Leasehold Improvements:                                                                                     |  |                |         |   |                |   |         |  
|Education and office equipment                                                                                                      |  |                | 40,379  |   |                |   | 42,111  |  
|Transportation equipment                                                                                                            |  |                | 231     |   |                |   | 204     |  
|Property and leasehold improvements                                                                                                 |  |                | 28,134  |   |                |   | 28,446  |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|                                                                                                                                    |  |                | 68,744  |   |                |   | 70,761  |  
|Less: accumulated depreciation and amortization                                                                                     |  |                | (49,068 | ) |                |   | (53,897 | )
|                                                                                                                                    |  |                |         |   |                |   |         |  
|                                                                                                                                    |  |                | 19,676  |   |                |   | 16,864  |  
|Restricted interest-bearing investments                                                                                             |  |                | 9,387   |   |                |   | 9,367   |  
|Deferred income taxes                                                                                                               |  |                | 9,558   |   |                |   | 8,141   |  
|Other assets                                                                                                                        |  |                | 1,456   |   |                |   | 1,036   |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total assets                                                                                                                        |  | $              | 136,820 |   |                | $ | 100,173 |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Liabilities                                                                                                                         |  |                |         |   |                |   |         |  
|Current Liabilities:                                                                                                                |  |                |         |   |                |   |         |  
|Trade accounts payable                                                                                                              |  | $              | 8,229   |   |                | $ | 7,578   |  
|Deferred revenues                                                                                                                   |  |                | 38,103  |   |                |   | 35,745  |  
|Accrued payroll, benefits and related taxes                                                                                         |  |                | 4,023   |   |                |   | 4,464   |  
|Other accrued liabilities                                                                                                           |  |                | 7,831   |   |                |   | 2,729   |  
|Income taxes payable                                                                                                                |  |                | 1,091   |   |                |   | 415     |  
|Current portion of deferred facilities rent and other                                                                               |  |                | 1,153   |   |                |   | 1,298   |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total current liabilities                                                                                                           |  |                | 60,430  |   |                |   | 52,229  |  
|Asset retirement obligations                                                                                                        |  |                | 3,458   |   |                |   | 3,291   |  
|Deferred income taxes                                                                                                               |  |                | 283     |   |                |   | 293     |  
|Deferred facilities rent and other                                                                                                  |  |                | 4,756   |   |                |   | 6,435   |  
|Noncurrent tax liabilities                                                                                                          |  |                | 5,031   |   |                |   | 3,153   |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total liabilities                                                                                                                   |  |                | 73,958  |   |                |   | 65,401  |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Commitments and contingencies                                                                                                       |  |                |         |   |                |   |         |  
|                                                                                                                                    |  |               
|Stockholders Equity                                                                                                                |  |                |         |   |                |   |         |  
|Preferred stock, $.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding                                     |  |                |        |   |                |   |        |  
|Common stock, $.0001 par value; 75,000,000 shares authorized; 13,942,750 and 13,512,027 shares issued and outstanding,
respectively |  |                | 1       |   |                |   | 1       |  
|Additional paid-in capital                                                                                                          |  |                | 3,875   |   |                |   | 4,933   |  
|Accumulated other comprehensive (loss) income                                                                                       |  |                | (1,085  | ) |                |   | 180     |  
|Retained earnings                                                                                                                   |  |                | 60,071  |   |                |   | 29,658  |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total stockholders equity                                                                                                          |  |                | 62,862  |   |                |   | 34,772  |  
|                                                                                                                                    |  |                |         |   |                |   |         |  
|Total liabilities and stockholders equity                                                                                          |  | $              | 136,820 |   |                | $ | 100,173 |  
|                                                                                                                                    |  |                |         |   |                |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)



|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -------------- |  | - | ------- | -
|                                            |  | Fiscal Year Ended |        
|                                            |  | October 3,2008    |         |   | October 2,2009 |   |         | October 1,2010 | 
|Revenues                                    |  | $                 | 181,278 |   |                | $ | 132,559 |                |  | $ | 127,470 |  
|Cost of revenues                            |  |                   | 76,807  |   |                |   | 59,243  |                |  |   | 59,198  |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Gross profit                                |  |                   | 104,471 |   |                |   | 73,316  |                |  |   | 68,272  |  
|                                            |  |                   |        
|Operating expenses:                         |  |                   |         |   |                |   |         |                |  |   |         |  
|Course development                          |  |                   | 9,656   |   |                |   | 7,442   |                |  |   | 7,304   |  
|Sales and marketing                         |  |                   | 43,596  |   |                |   | 31,962  |                |  |   | 30,461  |  
|General and administrative                  |  |                   | 33,532  |   |                |   | 31,929  |                |  |   | 25,310  |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|                                            |  |                   | 86,784  |   |                |   | 71,333  |                |  |   | 63,075  |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Income from operations                      |  |                   | 17,687  |   |                |   | 1,983   |                |  |   | 5,197   |  
|                                            |  |                   |        
|Other income (expense), net:                |  |                   |         |   |                |   |         |                |  |   |         |  
|Interest income, net                        |  |                   | 4,133   |   |                |   | 1,502   |                |  |   | 649     |  
|Foreign exchange losses                     |  |                   | (373    | ) |                |   | (347    | )              |  |   | (109    | )
|Other                                       |  |                   | 241     |   |                |   | (107    | )              |  |   | 17      |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|                                            |  |                   | 4,001   |   |                |   | 1,048   |                |  |   | 557     |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Income before provision for income taxes    |  |                   | 21,688  |   |                |   | 3,031   |                |  |   | 5,754   |  
|Provision for income taxes                  |  |                   | 7,888   |   |                |   | 1,828   |                |  |   | 1,366   |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Net income                                  |  | $                 | 13,800  |   |                | $ | 1,203   |                |  | $ | 4,388   |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Income per common sharebasic               |  | $                 | 0.84    |   |                | $ | 0.08    |                |  | $ | 0.32    |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Income per common sharediluted             |  | $                 | 0.83    |   |                | $ | 0.08    |                |  | $ | 0.32    |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Weighted average shares outstandingbasic   |  |                   | 16,516  |   |                |   | 15,181  |                |  |   | 13,722  |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  
|Weighted average shares outstandingdiluted |  |                   | 16,580  |   |                |   | 15,181  |                |  |   | 13,739  |  
|                                            |  |                   |         |   |                |   |         |                |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

AND COMPREHENSIVE INCOME

(amounts in thousands)



|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ----------------- | ------ | - | ------------------------ | - | -- | ------------------------------------------ |  | - | ---------------- |  |  | ------------------------ | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Common Stock      |        |   | AdditionalPaid-InCapital |   |    | AccumulatedOtherComprehensiveIncome (Loss) |  |   | RetainedEarnings |  |  | TotalStockholdersEquity |       
|                                                             |  | SharesOutstanding |        |   | Amount                   |   |    |                                            |  |  
|Balance, September 28, 2007                                  |  |                   | 16,534 |   |                          | $ | 2  |                                            |  | $ | 2,128            |  |  | $                        | 3,622  |   |  | $ | 71,456  |   |  | $ | 77,208  |  
|Comprehensive income:                                        |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Net income                                                   |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | 13,800  |   |  |   | 13,800  |  
|Unrealized loss on available-for sale securities, net of tax |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | (1,595 | ) |  |   |        |   |  |   | (1,595  | )
|Foreign currency translation                                 |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | (2,879 | ) |  |   |        |   |  |   | (2,879  | )
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Comprehensive income                                         |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   | 9,326   |  
|Stock options exercised                                      |  |                   | 2      |   |                          |   |   |                                            |  |   | 24               |  |  |                          |       |   |  |   |        |   |  |   | 24      |  
|Share based compensation                                     |  |                   |       |   |                          |   |   |                                            |  |   | 1,068            |  |  |                          |       |   |  |   |        |   |  |   | 1,068   |  
|ASC 740 adoption                                             |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | (1,228  | ) |  |   | (1,228  | )
|Restricted stock grants                                      |  |                   | 21     |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   |        |   |  |   |        |  
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Balance, October 3, 2008                                     |  |                   | 16,557 |   |                          |   | 2  |                                            |  |   | 3,220            |  |  |                          | (852   | ) |  |   | 84,028  |   |  |   | 86,398  |  
|Comprehensive income:                                        |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Net income                                                   |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | 1,203   |   |  |   | 1,203   |  
|Unrealized gain on available-for sale securities, net of tax |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | 187    |   |  |   |        |   |  |   | 187     |  
|Foreign currency translation                                 |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | (420   | ) |  |   |        |   |  |   | (420    | )
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Comprehensive income                                         |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   | 970     |  
|Share based compensation                                     |  |                   |       |   |                          |   |   |                                            |  |   | 655              |  |  |                          |       |   |  |   |        |   |  |   | 655     |  
|Restricted stock grants                                      |  |                   | 28     |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   |        |   |  |   |        |  
|Stock repurchases                                            |  |                   | (2,642 | ) |                          |   | (1 | )                                          |  |   |                  |  |  |                          |        |   |  |   | (25,160 | ) |  |   | (25,161 | )
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Balance, October 2, 2009                                     |  |                   | 13,943 |   |                          |   | 1  |                                            |  |   | 3,875            |  |  |                          | (1,085 | ) |  |   | 60,071  |   |  |   | 62,862  |  
|Comprehensive income:                                        |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Net income                                                   |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | 4,388   |   |  |   | 4,388   |  
|Unrealized gain on available-for sale securities, net of tax |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | 1,407  |   |  |   |        |   |  |   | 1,407   |  
|Foreign currency translation                                 |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          | (142   | ) |  |   |        |   |  |   | (142    | )
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Comprehensive income                                         |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   | 5,653   |  
|Share based compensation                                     |  |                   |       |   |                          |   |   |                                            |  |   | 459              |  |  |                          |       |   |  |   |        |   |  |   | 459     |  
|Restricted stock grants not earned                           |  |                   | (43    | ) |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   |        |   |  |   |        |  
|Net shares issued for bonuses                                |  |                   | 4      |   |                          |   |   |                                            |  |   | 57               |  |  |                          |       |   |  |   | (21     | ) |  |   | 36      |  
|Stock options exercised                                      |  |                   | 49     |   |                          |   |   |                                            |  |   | 542              |  |  |                          |       |   |  |   |        |   |  |   | 542     |  
|Shares surrendered in lieu of tax withholding                |  |                   | (2     | ) |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | (23     | ) |  |   | (23     | )
|Dividend                                                     |  |                   |       |   |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | (29,918 | ) |  |   | (29,918 | )
|Stock repurchases                                            |  |                   | (439   | ) |                          |   |   |                                            |  |   |                 |  |  |                          |       |   |  |   | (4,839  | ) |  |   | (4,839  | )
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  
|Balance, October 1, 2010                                     |  |                   | 13,512 |   |                          | $ | 1  |                                            |  | $ | 4,933            |  |  | $                        | 180    |   |  | $ | 29,658  |   |  | $ | 34,772  |  
|                                                             |  |                   |        |   |                          |   |    |                                            |  |   |                  |  |  |                          |        |   |  |   |         |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



48



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##### Table of Contents

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)



|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -------------- |  | - | ------- | -
|                                                                                  |  | Fiscal Year Ended |        
|                                                                                  |  | October 3,2008    |         |   | October 2,2009 |   |         | October 1,2010 | 
|Cash flowsoperating activities:                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Net income                                                                        |  | $                 | 13,800  |   |                | $ | 1,203   |                |  | $ | 4,388   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                   |         |   |                |   |         |                |  |   |         |  
|Depreciation and amortization                                                     |  |                   | 6,522   |   |                |   | 6,061   |                |  |   | 5,736   |  
|Share based compensation                                                          |  |                   | 1,068   |   |                |   | 655     |                |  |   | 516     |  
|Deferred income taxes                                                             |  |                   | 382     |   |                |   | (139    | )              |  |   | 2,093   |  
|Provision for doubtful accounts                                                   |  |                   | 103     |   |                |   | 151     |                |  |   | 80      |  
|Accretion of asset retirement obligations                                         |  |                   | 201     |   |                |   | 180     |                |  |   | 178     |  
|Loss on disposals of equipment and leasehold improvements                         |  |                   | 10      |   |                |   | 47      |                |  |   | 6       |  
|Gain on liquidation of investment in Collegis, Inc.                               |  |                   | (232    | ) |                |   |        |                |  |   |        |  
|Unrealized foreign exchange (gain) loss                                           |  |                   | 411     |   |                |   | (6      | )              |  |   | 4       |  
|Deferred facilities rent and other charges                                        |  |                   | (98     | ) |                |   | (711    | )              |  |   | 1,833   |  
|Gain on settlement of asset retirement obligation                                 |  |                   | (86     | ) |                |   |        |                |  |   | (332    | )
|Change in operating assets and liabilities:                                       |  |                   |         |   |                |   |         |                |  |   |         |  
|Trade accounts receivable                                                         |  |                   | (1,255  | ) |                |   | 4,365   |                |  |   | (3,277  | )
|Prepaid expenses and other assets                                                 |  |                   | (620    | ) |                |   | 3,262   |                |  |   | 351     |  
|Income taxes receivable / payable                                                 |  |                   | (924    | ) |                |   | 708     |                |  |   | (2,883  | )
|Trade accounts payable                                                            |  |                   | (2,059  | ) |                |   | (1,345  | )              |  |   | (647    | )
|Deferred revenues                                                                 |  |                   | 342     |   |                |   | (8,662  | )              |  |   | (2,563  | )
|Asset retirement obligations                                                      |  |                   | 49      |   |                |   |        |                |  |   |        |  
|Other accrued liabilities                                                         |  |                   | 417     |   |                |   | 1,725   |                |  |   | (4,635  | )
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Net cash provided by operating activities                                         |  |                   | 18,031  |   |                |   | 7,494   |                |  |   | 848     |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Cash flowsinvesting activities:                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Purchases of equipment, property and leasehold improvements                       |  |                   | (6,859  | ) |                |   | (2,134  | )              |  |   | (2,979  | )
|Purchases of available for sale securities                                        |  |                   | (24,601 | ) |                |   | (8,587  | )              |  |   | (64,385 | )
|Sales of available for sale securities                                            |  |                   | 18,350  |   |                |   | 21,466  |                |  |   | 90,897  |  
|Sales of equipment and leasehold improvements                                     |  |                   | 59      |   |                |   | 2       |                |  |   | 18      |  
|Liquidation of investment in Collegis, Inc.                                       |  |                   | 232     |   |                |   |        |                |  |   |        |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Net cash (used in) provided by investing activities                               |  |                   | (12,819 | ) |                |   | 10,747  |                |  |   | 23,551  |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Cash flowsfinancing activities:                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Repurchases of common stock                                                       |  |                   |        |   |                |   | (25,161 | )              |  |   | (4,839  | )
|Payment of cash dividends                                                         |  |                   |        |   |                |   |        |                |  |   | (29,918 | )
|Proceeds from exercise of stock options                                           |  |                   | 24      |   |                |   |        |                |  |   | 497     |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Net cash provided by (used in) financing activities                               |  |                   | 24      |   |                |   | (25,161 | )              |  |   | (34,260 | )
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Effects of exchange rates on cash and cash equivalents                            |  |                   | (3,115  | ) |                |   | (620    | )              |  |   | (3      | )
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                   | 2,121   |   |                |   | (7,540  | )              |  |   | (9,864  | )
|Cash and cash equivalents at the beginning of the fiscal year                     |  |                   | 49,732  |   |                |   | 51,853  |                |  |   | 44,313  |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Cash and cash equivalents at the end of the fiscal year                           |  | $                 | 51,853  |   |                | $ | 44,313  |                |  | $ | 34,449  |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Supplemental disclosures:                                                         |  |                   |         |   |                |   |         |                |  |   |         |  
|Income taxes paid                                                                 |  | $                 | 13,169  |   |                | $ | 4,616   |                |  | $ | 3,426   |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  
|Interest paid                                                                     |  | $                 | 4       |   |                | $ | 1       |                |  | $ | 4       |  
|                                                                                  |  |                   |         |   |                |   |         |                |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)



|1. | NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ---------------------------------------------------------------------



|a. | Nature of the Business
|-- | ----------------------

Learning Tree International, Inc. and subsidiaries (we, us, or our) develop, market and deliver a broad proprietary library of instructor-led classroom courses that are
designed to meet the professional development needs of managers and information technology (IT) professionals worldwide. These courses are delivered primarily at our leased education centers located in the United States, the United
Kingdom, Canada, France, Sweden and Japan. Such course events are also conducted in hotel and conference facilities and at customer sites throughout the world. In fiscal year 2009, we began offering some of our courses to individuals located
worldwide through Learning Tree AnyWare, our patent-pending e-Learning interface that allows individuals at any location to attend a live instructor-led Learning Tree class via the Internet. Our courses provide both breadth and depth of
education across a wide range of technical and management disciplines, including operating systems, databases, computer networks, computer and network security, web development, programming languages, software engineering, open source applications,
project management, business skills, and leadership and professional development.

We follow a 52- or 53-week fiscal year,
with our quarter-end dates on the Friday nearest the end of the calendar quarter and our year-end dates on the Friday nearest the end of September. Accordingly, our fiscal year 2008 ended on October 3, 2008, our fiscal year 2009 ended on
October 2, 2009, and our fiscal year 2010 ended on October 1, 2010. Thus, these consolidated financial statements report our consolidated financial position as of October 2, 2009, and October 1, 2010 and the related consolidated
statements of operations, stockholders equity and comprehensive income and cash flows for the fiscal years ended October 3, 2008, October 2, 2009 and October 1, 2010. Fiscal years 2009 and 2010 were 52-week years, while
fiscal year 2008 was a 53-week year.



|b. | Principles of Consolidation
|-- | ---------------------------

The accompanying consolidated financial statements include the accounts of Learning Tree International, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been
eliminated. The following is a list of our subsidiaries:

Learning Tree International USA, Inc. (U.S.)

Learning Tree International, K.K. (Japan)

Learning Tree International, Ltd. (United Kingdom)

Learning Tree Limited (United
Kingdom)

Learning Tree International S.A. (France)

Learning Tree International AB (Sweden)

Learning Tree International Inc. (Canada)

Learning Tree International Ltd. (Hong Kong)

Advanced Technology Marketing, Inc. (U.S.)



|c. | Revenue Recognition and Accounts Receivable
|-- | -------------------------------------------

Our revenues are received from business entities and government agencies for the professional training of their employees. Course events range in length from one to five days, and average approximately
three and a half



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days. As stated above, we follow a 52- or 53-week fiscal year. This method is used in order to better align our external financial reporting with the way we operate our business. Since all
courses have a duration of five days or less, and all courses begin and end within the same calendar week, under the 52- or 53-week fiscal year method all revenues and related direct costs for each course event are recognized in the week and the
fiscal quarter in which the event takes place.

We offer our customers a multiple-course sales discount referred to as a
Learning Tree Training Passport. A Learning Tree Training Passport allows an individual Passport holder to attend up to a specified number of Learning Tree courses over a one or two-year period for a fixed price. For a Training Passport,
the amount of revenue recognized for each attendance in a course is based upon the selling price of the Training Passport, the list price of the course taken, the weighted average list price of all courses taken and the estimated average number of
courses Passport holders will actually attend. Upon expiration of each individual Training Passport, we record the difference, if any, between the revenues previously recognized and that specific Training Passports total invoiced price. The
estimated attendance rate is based upon the historical experience of the average number of course events that Training Passport holders have been attending. The actual Training Passport attendance rate is reviewed at least semi-annually, and if the
Training Passport attendance rates change the revenue recognition rate for active Training Passports and for Training Passports sold thereafter is adjusted prospectively.

We believe it is appropriate to recognize revenues on this basis in order to most closely match revenue and related costs, as the substantial majority of our Passport holders do not attend the maximum
number of course events permitted under their Training Passport. We believe that the use of recent historical data is reasonable and appropriate because of the relative stability of the average actual number of course events attended by Passport
holders.

The average attendance rate for all expired Training Passports has closely approximated the estimated rate we
utilize. Although we have seen no material changes in the historical rates as the number of course titles has changed, we monitor such potential effects. In general, determining the estimated average number of course events that will be attended by
a Training Passport holder is based on historical trends that may not continue in the future. These estimates could differ in the near term from amounts used in arriving at the reported revenue. If the estimates are wrong, we would record the
difference between the revenues previously recognized for that Training Passport and the Training Passport selling price upon expiration of that Training Passport. Thus, the timing of revenue recognition may be affected by an inaccurate estimation,
but the inaccuracy would have no effect on the aggregate revenue recognized over the one- to two-year life of each Training Passport.

For newer Passport products for which historical utilization data is not available, we assume that the estimated average number of courses to be attended is equal to the number of courses available on the
Passport. This assumed utilization rate may be revised in future periods after sufficient time has passed to amass historical trends.

In addition to our Learning Tree Training Passports, we also offer a multiple-course sales discount referred to as Learning Tree Training Vouchers. With Learning Tree Training Vouchers, a customer buys
the right to send a specified number of attendees to Learning Tree courses over a six to twelve-month period for a fixed price. Revenue is recognized on a pro rata basis for each attendance. For the majority of Training Vouchers with unused seats at
the expiration of the Voucher, we record the pro rata selling price of the expired unused seats as revenue. At times we make a business decision to extend a Training Voucher beyond the normal twelve month expiration date. Training Vouchers purchased
under government rate schedules have no expiration date.

To provide additional flexibility to meet our customers
training needs, we offer a multiple-training day sales discount referred to as Learning Tree 10-Day Passes. With Learning Tree 10-Day Passes, a customer buys the right to take up to 10 days of training over a one-year period for a fixed price.
Revenue is recognized on a pro rata basis for each attendance day. If a 10-Day Pass has unused days at expiration, we record the pro rata value of the unused days as revenue.



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Trade accounts receivable are reduced by an allowance for amounts that may become
uncollectible in the future. We use estimates in determining the allowance for doubtful accounts receivable, based on our analysis of various factors, including our historical collection experience, current trends, specific identification of
invoices which are considered doubtful, and a percentage of our past due accounts receivable. These estimates could differ from actual collection experience and are subject to adjustment. Our trade accounts receivable are written off when they are
deemed uncollectible.



|d. | Stock-Based Compensation
|-- | ------------------------

We estimate the fair value of share-based option awards on the date of grant using an option-pricing model. We estimate the fair value of share-based restricted stock units and restricted stock grants
using the closing price of our stock on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statements of operations. Our
determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by assumptions regarding a number of variables, including our expected stock price volatility, expected term and risk-free
interest rates.

We analyzed our historical volatility to estimate the expected volatility. The risk-free interest rate
assumption is based on the U.S. Treasury rate at the date of grant, which most closely resembles the expected life of our options. The estimated expected life represents the weighted-average period the stock options are expected to remain
outstanding and has been determined based on the simplified method under Accounting Standards Codification (ASC) 718. We do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately
expected to vest, it has been reduced for estimated pre-vesting forfeitures. Forfeitures were estimated based on historical experience. During fiscal year 2009, we reduced to zero the estimated forfeiture rate for executive personnel. The forfeiture
rate for fiscal year 2010 was zero.



|e. | Course Development Costs
|-- | ------------------------

Course development costs are charged to operations in the period incurred.



|f. | Advertising
|-- | -----------

Advertising costs are charged to expense in the period incurred. Advertising costs totaled $1,021, $759 and $731 in fiscal years 2008,
2009 and 2010, respectively.



|g. | Cash and Cash Equivalents, Available for Sale Securities, and Interest-bearing Investments
|-- | ------------------------------------------------------------------------------------------

We consider highly liquid investments with remaining maturities of ninety days or less when purchased to be cash equivalents.

We classify certain of our investments in marketable securities as available for sale. We do not have any investments
classified as trading or held-to-maturity. Our policy is to invest cash with issuers that have high credit ratings and to limit the amount of credit exposure to any one issuer.

As of October 1, 2010, we had a total of available for sale securities of $4,997 stated at fair market value, net of unrealized
gains and losses. Those available for sale securities were highly liquid investments. We may sell our investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration or for duration management. These
investments consist primarily of municipal bonds, municipal floating rate securities, United States government agencies securities, both state taxable and tax-exempt issues.



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As of October 2, 2009 current available for sale securities also included $14,500 (at
fair value) of auction rate securities (ARS) all of which were sold at their stated value in fiscal year 2010. Proceeds from sales of available-for-sale securities during fiscal years 2008, 2009 and 2010 were $18,350, $21,466 and $90,897
respectively. We earned interest income on these securities which was recorded as interest income in the consolidated statements of operations.

Restricted interest-bearing investments at October 1, 2010 consisted of cash deposits of $7,917 (5,000 British Pounds) and $1,450 which were pledged as collateral to secure our obligations under
leases for education center facilities located in the United Kingdom and the United States, respectively. The deposits are in our name and are in interest-bearing accounts with interest accruing to us and paid on an annual basis in the United
Kingdom and on a monthly basis in the United States.

In the United Kingdom, our representatives and the landlords
representatives control the deposit (all are solicitors). They act jointly in the operation of the deposit account. The deposit will be released to us at the earlier of the end of the lease period or when certain financial ratios have been met.

In the United States, the deposit will be returned at the end of the lease term.



|h. | Prepaid Marketing Expenses
|-- | --------------------------

Prepaid marketing expenses primarily include the external costs associated with the design, printing, postage, list rental and handling of direct mail advertising materials to be mailed in the future.
These costs are charged to expense in the month in which the advertising materials are mailed since the benefit period for such costs is short and the amount of future benefit is not practically measurable. Marketing expenses for fiscal years 2008,
2009 and 2010 were $22,141, $14,793 and $12,446, respectively.



|i. | Equipment, Property and Leasehold Improvements
|-- | ----------------------------------------------

Equipment, property and leasehold improvements are recorded at cost and depreciated or amortized using the straight-line method over the following estimated useful lives:



|                               |  |                                              
|------------------------------ |  | ---------------------------------------------
|Education and office equipment |  | 3 to 5 years                                 
|Transportation equipment       |  | 4 years                                      
|Accounting software            |  | 7 years                                      
|Leasehold improvements         |  | 20 years or the life of the lease, if shorter
|Building                       |  | 30 years                                     

Land, stated at cost, amounted
to $1,342 during all periods presented.

Software amortization amounted to $435, $494, and $4 in fiscal years 2008, 2009 and
2010, respectively. Total depreciation and amortization expense amounted to $6,522, $6,061, and $5,736 in fiscal years 2008, 2009, and 2010, respectively. Costs of normal maintenance and repairs and minor replacements are normally charged to expense
as incurred. In those instances where we have determined we are contractually obligated to incur recurring repairs and maintenance costs related to our leased facilities, a provision is made in the financial statements at the earlier of the date the
expense is incurred or the date of the obligation. The costs of assets sold or retired are eliminated from the accounts along with the related accumulated depreciation or amortization, and any resulting gain or loss is included in the statements of
operations.

The fair value of a liability for an asset retirement obligation associated with a leased facility is recorded as
an asset (leasehold improvements) and a liability when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated. See also Note 2 relating to asset retirement obligations.



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|j. | Long-Lived Assets
|-- | -----------------

We periodically review the carrying value of our long-lived assets, such as equipment, property and leasehold improvements for impairment
or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In making such evaluations, we compare the expected future cash flows to the carrying amount of the assets. If the total of the expected future
cash flows is less than the carrying amount of the assets, we are required to make estimates of the fair value of the long-lived assets in order to calculate the impairment loss equal to the difference between the fair value of the assets and their
book value. We make significant assumptions and estimates in this process regarding matters that are inherently uncertain, such as estimating cash flows, remaining useful lives, discount rates and growth rates. The resulting cash flows are computed
over an extended period of time, which subjects those assumptions and estimates to an even larger degree of uncertainty. While we believe that our estimates are reasonable, different assumptions regarding such cash flows could materially affect the
valuation of long-lived assets.



|k. | Deferred Revenues
|-- | -----------------

Deferred revenues primarily relate to unearned revenues associated with Training Passports, Training Vouchers and advance payments
received from customers for course events to be held in the future.



|l. | Comprehensive Income
|-- | --------------------

We report comprehensive income in the Consolidated Statements of Stockholders Equity and Comprehensive Income. Other comprehensive income (loss) represents changes in stockholders equity from
non-owner sources and is comprised of foreign currency translation adjustments and unrealized losses on available-for-sale securities, net of tax. At the end of fiscal year 2010, accumulated other comprehensive income (loss) consisted of foreign
currency translation adjustments of $181 and unrealized losses on available for sale securities of $(1), compared to foreign currency translation adjustments of $323 and unrealized losses on available for sale securities of $(1,408) in fiscal year
2009.



|m. | Income Taxes
|-- | ------------

We
provide for income taxes under the provisions of Financial Accounting Standards Board (FASB) ASC 740, Income Taxes. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and the basis
reported in our consolidated financial statements. Deferred tax liabilities and assets are determined based on the difference between financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the
year in which the differences reverse. Valuation allowances are provided against assets, including net operating losses, if it is anticipated that some or the entire asset may not be realized through future taxable earnings or implementation of tax
planning strategies.



|n. | Foreign Currency
|-- | ----------------

We translate the financial statements of our foreign subsidiaries from the local (functional) currencies to U.S. dollars. The rates of
exchange at each fiscal year end are used for translating the assets and liabilities and the average monthly rates of exchange for each year are used for the statements of operations. Gains or losses arising from the translation of the foreign
subsidiaries financial statements are included in the accompanying consolidated balance sheets as a separate component of stockholders equity. Gains or losses resulting from foreign currency transactions are included in the consolidated
statements of operations.

To date, we have not sought to hedge the risk associated with fluctuations in currency exchange
rates, and therefore we continue to be subject to such risk.



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|o. | Deferred Facilities Rent
|-- | ------------------------

Operating Lease Activities:

We lease education center and administrative
office space under various operating lease agreements. Certain lease agreements include provisions that provide for cash incentives, graduated rent payments and other inducements. We recognize rent expense on a straight-line basis over the related
terms of such leases. The value of lease incentives and/or inducements, along with the excess of the rent expense recognized over the rentals paid, is recorded as deferred facilities rent in the accompanying consolidated balance sheets.

Lease Termination Activities:

We record liabilities for costs that will be incurred under a contract without economic benefit at estimated fair value. In the United Kingdom we have vacated space in leased facilities subject to
operating leases and recorded the estimated liability associated with future rentals at the cease-use date. The fair value of the liability at the cease-use date was determined based on the remaining cash flows for lease rentals, and minimum lease
payments, reduced by estimated sublease rentals and certain subtenant reimbursements that could be reasonably obtained for the property, discounted using a credit-adjusted risk-free rate. The liability is adjusted for changes, if any, resulting from
revisions to estimated cash flows after the cease-use date, measured using the original historical credit-adjusted risk-free rate. Changes due to the passage of time are recognized as an increase in the carrying amount of the liability and as
accretion expense. During fiscal year 2010, our general and administrative expense included a charge for $1,274 for an expected period of vacancy due to the exercise of an option to terminate by one of our London education center subtenants.



|p. | Fair Value of Financial Instruments
|-- | -----------------------------------

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair values because of the short-term nature of these instruments.
Available for sale securities are carried at market or appraised value.



|q. | Use of Estimates
|-- | ----------------

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.



|r. | Deferred Facilities Rent and Other
|-- | ----------------------------------

The following tables show details of the following line items in our consolidated balance sheets.

Current Portion of Deferred Facilities Rent and Other



|                       |  |                |       |  |                |   |       | 
|---------------------- |  | -------------- | ----- |  | -------------- | - | ----- | 
|                       |  | October 2,2009 |       |  | October 1,2010 |  
|Deferred rent          |  | $              | 1,079 |  |                | $ | 505   | 
|Sublease loss accruals |  |                | 74    |  |                |   | 793   | 
|                       |  |                |       |  |                |   |       | 
|                       |  | $              | 1,153 |  |                | $ | 1,298 | 
|                       |  |                |       |  |                |   |       | 



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Deferred Facilities Rent and Other



|                             |  |                |       |  |                |   |       | 
|---------------------------- |  | -------------- | ----- |  | -------------- | - | ----- | 
|                             |  | October 2,2009 |       |  | October 1,2010 |  
|Deferred rent                |  | $              | 3,896 |  |                | $ | 4,913 | 
|Sublease loss accruals       |  |                | 339   |  |                |   | 938   | 
|Other minimum lease payments |  |                | 521   |  |                |   | 584   | 
|                             |  |                |       |  |                |   |       | 
|                             |  | $              | 4,756 |  |                | $ | 6,435 | 
|                             |  |                |       |  |                |   |       | 



|s. | Recently Issued Accounting Pronouncements
|-- | -----------------------------------------

In February 2010, the FASB issued amended guidance (included in ASC 855) for subsequent events, which was effective for us in February 2010. In accordance with the revised guidance, an SEC filer will no
longer be required to disclose the date through which subsequent events have been evaluated in issued and revised financial statements. The adoption of this revised guidance did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued standards (included in ASC 820) that provide new disclosures about fair value measurements.
These include disclosing transfers in and out of Levels 1 and 2 as well as the reasons for the transfers and identifying the activity in Level 3 fair value measurements provided in reconciliation. The standards also provide clarification of existing
standards on the level of disaggregation for each class of assets and liabilities and disclosures about inputs and valuation techniques. We adopted these standards on January 2, 2010, with no material effect on our consolidated financial
statements.

In October 2008, the FASB issued standards (included in ASC 820) that provide a common definition of fair value
and establish a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. These standards do not require new fair value measurements, but apply to other standards that require fair
value measurement; expanded disclosures are also required. In February 2008, the FASB delayed the effective date of these standards to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except
for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We adopted the standards for nonfinancial assets and nonfinancial liabilities on October 3, 2009, with no material
effect on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including the
Emerging Issues Task Force), the American Institute of Certified Public Accountants and the Securities and Exchange Commission did not, or management believes will not, have a material impact on our present or future consolidated financial
statements.



|2. | ASSET RETIREMENT OBLIGATIONS
|-- | ----------------------------

We record a liability equal to the fair value of the estimated cost to retire an asset. The asset retirement obligation (ARO) liability is recorded in the period in which the obligation meets
the definition of a liability, which is generally when the asset is placed in service and whereby we have contractual commitments to remove leasehold improvements and to return the leased facility back to a specified condition when the lease
terminates. For a facility lease, this is typically at the inception of the lease.

When the ARO liability is initially
recorded, we increase the carrying amount of the related long-lived asset (leasehold improvements) by an amount equal to the calculated liability. The liability is subsequently accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset, which is the lease term. The ARO liability is recorded at fair value, and accretion expense (included in general and administrative expenses) is recognized over time as the discounted liability
is accreted to its expected settlement value. The fair value of the ARO liability is measured using the expected future cash outflows related to the lease



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and calculated by using inflation rates in effect at the time of adoption and incorporating a market-risk premium, and discounted at our credit-adjusted risk-free interest rate at the time of
adoption. Any difference between costs incurred upon settlement of an asset retirement obligation and the recorded liability will be recognized as a gain or loss in our earnings.

Each ARO liability is based on a number of assumptions requiring judgment. We cannot predict the type of revisions to these assumptions
that will be required in future periods due to the availability of additional information, technology changes, the price of labor costs and other factors.

The following table presents the activity for our AROs, which primarily consist of classroom facilities at our education centers:



|                                    |  |                   |       |   |                |   |       |  
|----------------------------------- |  | ----------------- | ----- | - | -------------- | - | ----- | -
|                                    |  | Fiscal Year Ended |      
|                                    |  | October 2,2009    |       |   | October 1,2010 |  
|ARO balance, beginning of year      |  | $                 | 3,319 |   |                | $ | 3,458 |  
|Liabilities incurred                |  |                   | 233   |   |                |   |      |  
|Accretion expense                   |  |                   | 180   |   |                |   | 178   |  
|Gain on settlement of ARO liability |  |                   |      |   |                |   | (332  | )
|Foreign currency translation        |  |                   | (274  | ) |                |   | (13   | )
|                                    |  |                   |       |   |                |   |       |  
|ARO balance, end of year            |  | $                 | 3,458 |   |                | $ | 3,291 |  
|                                    |  |                   |       |   |                |   |       |  



|3. | INCOME TAXES
|-- | ------------

We file a
consolidated United States Federal income tax return which includes all of our domestic operations. Our domestic subsidiaries also file income tax returns based on our operations in certain state and local jurisdictions. We file separate tax returns
for each of our foreign subsidiaries in the countries in which they operate.

Income before provision for income taxes
consists of the following:



|         |  |                   |        |  |                |   |       |                |  |   |       | 
|-------- |  | ----------------- | ------ |  | -------------- | - | ----- | -------------- |  | - | ----- | 
|         |  | Fiscal Year Ended |       
|         |  | October 3,2008    |        |  | October 2,2009 |   |       | October 1,2010 | 
|Domestic |  | $                 | 14,358 |  |                | $ | (748  | )              |  | $ | 2,519 | 
|Foreign  |  |                   | 7,330  |  |                |   | 3,779 |                |  |   | 3,235 | 
|         |  |                   |        |  |                |   |       |                |  |   |       | 
|Total    |  | $                 | 21,688 |  |                | $ | 3,031 |                |  | $ | 5,754 | 
|         |  |                   |        |  |                |   |       |                |  |   |       | 



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The provision for income taxes consists of the following:



|                           |  |                   |       |   |                |   |       |                |  |   |        |  
|-------------------------- |  | ----------------- | ----- | - | -------------- | - | ----- | -------------- |  | - | ------ | -
|                           |  | Fiscal Year Ended |      
|                           |  | October 3,2008    |       |   | October 2,2009 |   |       | October 1,2010 | 
|Current tax provision:     |  |                   |       |   |                |   |       |                |  |   |        |  
|U.S. Federal               |  | $                 | 5,345 |   |                | $ | 1,061 |                |  | $ | (2,228 | )
|State                      |  |                   | 509   |   |                |   | 197   |                |  |   | 381    |  
|Foreign                    |  |                   | 1,652 |   |                |   | 709   |                |  |   | 1,119  |  
|                           |  |                   |       |   |                |   |       |                |  |   |        |  
|                           |  |                   | 7,506 |   |                |   | 1,967 |                |  |   | (728   | )
|                           |  |                   |       |   |                |   |       |                |  |   |        |  
|Deferred tax provision:    |  |                   |       |   |                |   |       |                |  |   |        |  
|U.S. Federal               |  |                   | 304   |   |                |   | 295   |                |  |   | 2,179  |  
|State                      |  |                   | (10   | ) |                |   | (217  | )              |  |   | (25    | )
|Foreign                    |  |                   | 88    |   |                |   | (217  | )              |  |   | (60    | )
|                           |  |                   |       |   |                |   |       |                |  |   |        |  
|                           |  |                   | 382   |   |                |   | (139  | )              |  |   | 2,094  |  
|                           |  |                   |       |   |                |   |       |                |  |   |        |  
|Provision for income taxes |  | $                 | 7,888 |   |                | $ | 1,828 |                |  | $ | 1,366  |  
|                           |  |                   |       |   |                |   |       |                |  |   |        |  

The following is a reconciliation of the provision for income taxes to the United States Federal statutory
tax rate:



|                                         |  |                   |       |   |                    |  |    |                |  |   |                    |   |  |                |     |   |                    |   |        |   |  |  |     |  
|---------------------------------------- |  | ----------------- | ----- | - | ------------------ |  | -- | -------------- |  | - | ------------------ | - |  | -------------- | --- | - | ------------------ | - | ------ | - |  |  | --- | -
|                                         |  | Fiscal Year Ended |      
|                                         |  | October 3,2008    |       |   | EffectiveTax rate% |  |    | October 2,2009 |  |   | EffectiveTax rate% |   |  | October 1,2010 |     |   | EffectiveTax rate% |  
|Income taxes at the U.S. statutory rate  |  | $                 | 7,591 |   |                    |  | 35 | %              |  | $ | 1,061              |   |  |                | 35  | % |                    | $ | 2,014  |   |  |  | 35  | %
|Tax-exempt interest                      |  |                   | (253  | ) |                    |  | (1 | )              |  |   | (114               | ) |  |                | (4  | ) |                    |   | (47    | ) |  |  | (1  | )
|Equity compensation                      |  |                   | 167   |   |                    |  | 1  |                |  |   | 482                |   |  |                | 16  |   |                    |   | 335    |   |  |  | 6   |  
|Penalties                                |  |                   | 1     |   |                    |  |   |                |  |   | 140                |   |  |                | 5   |   |                    |   | 1      |   |  |  |    |  
|Other permanent differences              |  |                   | 120   |   |                    |  |   |                |  |   | 124                |   |  |                | 4   |   |                    |   | 166    |   |  |  | 3   |  
|Effects of foreign taxes and tax credits |  |                   | 72    |   |                    |  |   |                |  |   | (131               | ) |  |                | (4  | ) |                    |   | (205   | ) |  |  | (3  | )
|Dividend from foreign subsidiaries       |  |                   |      |   |                    |  |   |                |  |   | 666                |   |  |                | 22  |   |                    |   |       |   |  |  |    |  
|State income taxes                       |  |                   | 492   |   |                    |  | 2  |                |  |   | (21                | ) |  |                | (1  | ) |                    |   | 168    |   |  |  | 3   |  
|Uncertain tax positions                  |  |                   | (81   | ) |                    |  |   |                |  |   | 90                 |   |  |                | 3   |   |                    |   | (1,066 | ) |  |  | (19 | )
|Change in valuation allowance            |  |                   | (221  | ) |                    |  | (1 | )              |  |   | (469               | ) |  |                | (16 | ) |                    |   |       |   |  |  |    |  
|                                         |  |                   |       |   |                    |  |    |                |  |   |                    |   |  |                |     |   |                    |   |        |   |  |  |     |  
|Total provision for income taxes         |  | $                 | 7,888 |   |                    |  | 36 | %              |  | $ | 1,828              |   |  |                | 60  | % |                    | $ | 1,366  |   |  |  | 24  | %
|                                         |  |                   |       |   |                    |  |    |                |  |   |                    |   |  |                |     |   |                    |   |        |   |  |  |     |  



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Deferred income tax assets and liabilities consist of the following:



|                                              |  |                   |        |   |                |   |       |  
|--------------------------------------------- |  | ----------------- | ------ | - | -------------- | - | ----- | -
|                                              |  | Fiscal Year Ended |       
|                                              |  | October 2,2009    |        |   | October 1,2010 |  
|Domestic operations:                          |  |                   |        |   |                |   |       |  
|Deferred tax assets:                          |  |                   |        |   |                |   |       |  
|Deferred facilities rent charges              |  | $                 | 1,475  |   |                | $ | 1,876 |  
|Foreign tax credit carryforwards              |  |                   | 342    |   |                |   | 286   |  
|State tax operating loss carryforwards        |  |                   | 3      |   |                |   | 4     |  
|Accrued vacation                              |  |                   | 366    |   |                |   | 425   |  
|Equity compensation                           |  |                   | 568    |   |                |   | 300   |  
|Investments                                   |  |                   | 922    |   |                |   |      |  
|Depreciation and amortization                 |  |                   | 2,159  |   |                |   | 2,468 |  
|Deferred benefits for uncertain tax positions |  |                   | 2,259  |   |                |   | 1,792 |  
|Accrued legal settlement                      |  |                   | 1,519  |   |                |   |      |  
|Other                                         |  |                   | 58     |   |                |   | 68    |  
|Deferred tax liabilities:                     |  |                   |        |   |                |   |       |  
|Prepaids                                      |  |                   | (481   | ) |                |   | (438  | )
|                                              |  |                   |        |   |                |   |       |  
|Domestic net deferred tax assets              |  |                   | 9,190  |   |                |   | 6,781 |  
|Foreign operations:                           |  |                   |        |   |                |   |       |  
|Deferred tax assets:                          |  |                   |        |   |                |   |       |  
|Deferred benefits for uncertain positions     |  |                   | 637    |   |                |   | 172   |  
|Depreciation and other                        |  |                   | 1,137  |   |                |   | 1,243 |  
|Deferred tax liabilities:                     |  |                   |        |   |                |   |       |  
|Deferred revenue                              |  |                   | (228   | ) |                |   | (272  | )
|Depreciation and other                        |  |                   |       |   |                |   | (21   | )
|                                              |  |                   |        |   |                |   |       |  
|Foreign net deferred tax assets               |  |                   | 1,546  |   |                |   | 1,122 |  
|                                              |  |                   |        |   |                |   |       |  
|Domestic and foreign deferred tax assets      |  |                   | 10,736 |   |                |   | 7,903 |  
|Valuation allowances                          |  |                   |       |   |                |   |      |  
|                                              |  |                   |        |   |                |   |       |  
|Net deferred tax assets                       |  | $                 | 10,736 |   |                | $ | 7,903 |  
|                                              |  |                   |        |   |                |   |       |  

As of October 1, 2010, we had foreign tax credit carry-forwards of approximately $286, which expire, if
unused, in the years 2014 to 2020.

Significant management judgment is required in determining our provision for income taxes
and in determining whether any deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or foreign tax credit carry-forwards will
not be realized, a valuation allowance must be established for the amount of the deferred tax assets that cannot be realized. Realization is based on our ability to generate sufficient future taxable income.

As of September 28, 2007, we maintained valuation allowances in the United States related to foreign tax credit carryovers and
certain state deferred tax assets, and we continued to maintain a valuation allowance for certain deferred tax assets in a foreign jurisdiction.

As of the end of the fourth quarter of fiscal year 2008, we reversed the valuation allowance for certain state deferred tax assets because we determined that it was more likely than not that these
deferred tax assets would be recoverable because of the improved financial performance in the relevant jurisdictions. The reversal of the valuation allowance resulted in a net benefit of approximately $242. As of October 3, 2008, we continued
to maintain valuation allowances in the United States related to the foreign tax credit carryovers, and we continued to maintain valuation allowances for our deferred tax assets in a foreign jurisdiction.



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As of the end of the fourth quarter of fiscal year 2009, we reversed the valuation allowance
for our foreign tax credit carryovers and for our deferred tax assets in a foreign jurisdiction. Because of changes we made to our intercompany agreements with our foreign subsidiaries and the improved financial performance of their operations, we
determined that it was more likely than not that the benefits from the foreign tax credit carryovers would be realized. We also determined that it was more likely than not that we would realize the benefits for the deferred tax assets in the foreign
jurisdiction because of the improved financial performance of our operations in the foreign jurisdiction. The reversal of the valuation allowances for these items resulted in a net benefit of approximately $469.

We adopted FIN 48 (codified primarily in FASB ASC 740, Income Taxes) as of the beginning of fiscal year 2008. ASC 740 clarifies
the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The cumulative effect of the adoption was a $1,228 reduction to retained
earnings. As of the date of adoption, the net amount of unrecognized tax benefits was $1,418, all of which would have had an impact on our effective tax rate if recognized. The gross amount of unrecognized benefits was $6,690, which was reduced by
deferred tax benefits associated with the uncertain tax positions of $5,272. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. As of the date of adoption, we had $642 accrued for
interest and $623 accrued for penalties.

The aggregate change in the balance of gross unrecognized tax benefits, which
excludes interest and penalties, is as follows:



|                                                                   |  |                   |        |   |                |   |        |                |  |   |        |  
|------------------------------------------------------------------ |  | ----------------- | ------ | - | -------------- | - | ------ | -------------- |  | - | ------ | -
|                                                                   |  | Fiscal Year Ended |       
|                                                                   |  | October 3,2008    |        |   | October 2,2009 |   |        | October 1,2010 | 
|Balance, beginning of year                                         |  | $                 |       |   |                | $ | 5,391  |                |  | $ | 3,808  |  
|Increases related to tax positions taken during a prior period     |  |                   | 6,690  |   |                |   |       |                |  |   |       |  
|Decreases related to tax positions taken during a prior period     |  |                   |       |   |                |   |       |                |  |   |       |  
|Increases related to tax positions taken during the current period |  |                   |       |   |                |   | 20     |                |  |   | 20     |  
|Decreases related to settlements with taxing authorities           |  |                   |       |   |                |   |       |                |  |   |       |  
|Decreases related to expiration of the statute of limitations      |  |                   | (1,299 | ) |                |   | (1,603 | )              |  |   | (1,795 | )
|                                                                   |  |                   |        |   |                |   |        |                |  |   |        |  
|Balance end of year                                                |  | $                 | 5,391  |   |                | $ | 3,808  |                |  | $ | 2,033  |  
|                                                                   |  |                   |        |   |                |   |        |                |  |   |        |  

For fiscal year 2010, $1,066 of our released unrecognized tax benefits favorably affected our effective tax
rate. As of October 1, 2010, $1,121 of our total unrecognized tax benefits would favorably affect our effective tax rate if recognized. For fiscal year 2010, we recognized a benefit of $423 attributable to interest and penalties for uncertain
tax positions. As of October 1, 2010, we had $711 accrued for interest and $409 accrued for penalties for uncertain tax positions. We do not believe it is reasonably possible that the amount of unrecognized tax benefits will significantly
change within the next 12 months due to changes in circumstances other than the normal expiration of the statute of limitations.

We file income tax returns in the United States and various state, local, and foreign jurisdictions, and remain subject to examinations by these jurisdictions for fiscal years 2006 through 2010.

We have not provided for United States federal income and foreign withholding taxes of international subsidiaries
undistributed earnings as of October 1, 2010, because such earnings are intended to be reinvested indefinitely. The undistributed earnings were approximately $20,800 as of October 1, 2010. If these earnings were distributed, we would incur
approximately $275 of foreign withholding taxes. Because of the availability of United States foreign tax credits, it is not practicable to determine the United States federal income tax liability that would be payable if such earnings were not
reinvested.



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|4. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------



|a. | Commitments
|-- | -----------

We
have various non-cancelable operating leases for facilities that expire at various dates through 2019 and certain leases for office equipment requiring annual payments as follows:



|                   |  |                      |        |  |                      |   |        |                      |  |   |        | 
|------------------ |  | -------------------- | ------ |  | -------------------- | - | ------ | -------------------- |  | - | ------ | 
|Fiscal Year Ending |  | MinimumLeasePayments |        |  | LessSubleaseProceeds |   |        | Net LeaseCommitments | 
|2011               |  | $                    | 12,361 |  |                      | $ | 2,122  |                      |  | $ | 10,239 | 
|2012               |  |                      | 11,097 |  |                      |   | 2,090  |                      |  |   | 9,007  | 
|2013               |  |                      | 10,279 |  |                      |   | 2,090  |                      |  |   | 8,189  | 
|2014               |  |                      | 10,246 |  |                      |   | 2,018  |                      |  |   | 8,228  | 
|2015               |  |                      | 9,765  |  |                      |   | 813    |                      |  |   | 8,952  | 
|Thereafter         |  |                      | 30,295 |  |                      |   | 1,301  |                      |  |   | 28,994 | 
|                   |  |                      |        |  |                      |   |        |                      |  |   |        | 
|                   |  | $                    | 84,043 |  |                      | $ | 10,434 |                      |  | $ | 73,609 | 
|                   |  |                      |        |  |                      |   |        |                      |  |   |        | 

Rental expense, not including sublease income, was $14,219, $12,693 and $12,123 for fiscal years 2008, 2009
and 2010, respectively. Sublease rental income for fiscal years 2008, 2009, and 2010 was $2,889, $2,806 and $2,625, respectively.



|b. | Contingencies
|-- | -------------

Currently, and from time to time, we are involved in litigation incidental to the conduct of our business. We are not a party to any
lawsuit or proceeding that, in the opinion of management, is likely to have a material adverse effect on our consolidated financial position or results of operations, except as noted below.

As previously disclosed, on April 7, 2010 we paid $4.5 million to settle a contract dispute. The terms of the settlement were
consistent with our previously disclosed reserves, $0.2 million accrued in fiscal year 2008 and $4.3 million accrued in fiscal year 2009, and accordingly did not have an impact on our financial statements in fiscal year 2010.



|5. | STOCKHOLDERS EQUITY
|-- | --------------------

During fiscal year 2008, we did not make any repurchases of our Common Stock. During fiscal year 2009 we purchased 2,642,386 shares of
Common Stock at a cost of $25,161. During fiscal year 2010 we purchased 438,853 shares of Common Stock at a cost of $4,839. All of our Common Stock repurchases were made in open-market transactions and not pursuant to any publicly traded plans. We
may make purchases of common stock in the future, but we have no commitments to do so.



|6. | STOCK-BASED COMPENSATION
|-- | ------------------------

Effective January 23, 2007, our stockholders approved the 2007 Equity Incentive Plan (our 2007 Plan). Our 2007 Plan is
administered by the Compensation and Stock Option Committee of our Board of Directors. Our 2007 Plan permits the granting of nonqualified stock options, incentive stock options, stock appreciation rights (or SARs), restricted stock, restricted stock
units, performance units and performance shares to our employees, officers, directors and consultants in an amount up to an aggregate of 1,000,000 shares of Common Stock. Option awards have been granted with an exercise price equal to the market
price of our stock at the date of grant and generally vest one third per year over three years (in some instances, subject to achieving certain financial targets in the year with respect to which they are granted) and have five-year contractual
terms. However, the exercise



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price, vesting schedule and period required for full exercisability of the options is at the discretion of the Compensation and Stock Option Committee of our Board of Directors. We recognize
compensation cost for these awards on a straight-line basis (or, on a graded basis for those options with performance conditions) over the requisite service period for the entire award, which is equal to the vesting period. We have a policy of
issuing new shares of Common Stock to satisfy share option exercises.

Our 1999 Stock Option Plan terminated upon shareholder
approval of our 2007 Plan, and no further grants of awards can be made under that plan although the rights of holders of options previously granted and outstanding under that plan were not affected. The fair value of each option award was estimated
on the date of grant using a Black-Scholes option-pricing formula that used the assumptions noted in the following table. Expected volatilities were based on the historical volatility of our stock measured over a period commensurate with the
expected life of granted stock options. The expected term of options represented the period of time that options granted were expected to be outstanding and was determined based on the simplified method as discussed in ASC 718, as we do not have
sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate assumption was based on the U.S. Treasury rate at the date of the grant, which most closely resembled the expected
life of options. The expected dividend yield was 0%.



|                         |  |                           |  |                          
|------------------------ |  | ------------------------- |  | -------------------------
|                         |  | Year EndedOctober 3, 2008 |  | Year EndedOctober 2, 2009
|Expected volatility      |  | 28% - 36%                 |  | 41% - 46%                
|Expected dividends       |  |                          |  |                         
|Expected life (in years) |  | 3.40 - 3.60               |  | 3.60 - 3.70              
|Risk-free interest rate  |  | 2.5% - 4.3%               |  | 1.3% - 2.2%              

A
summary of option activity under the 2007 Plan and previous plans during fiscal years 2008, 2009, and 2010 is presented below:



|                                               |  |        |          |   |                                 |   |       |                                          |  |  |                          |  |  |   |   | 
|---------------------------------------------- |  | ------ | -------- | - | ------------------------------- | - | ----- | ---------------------------------------- |  |  | ------------------------ |  |  | - | - | 
|Options                                        |  | Shares |          |   | Weighted-Average Exercise Price |   |       | Weighted-AverageRemainingContractualTerm |  |  | AggregateIntrinsic Value | 
|Outstanding at September 28, 2007              |  |        | 800,000  |   |                                 | $ | 13.94 |                                          |  |  |                          |  |  |   |   | 
|Options granted                                |  |        | 120,000  |   |                                 | $ | 19.09 |                                          |  |  |                          |  |  |   |   | 
|Options exercised                              |  |        | (2,000   | ) |                                 | $ | 12.77 |                                          |  |  |                          |  |  |   |   | 
|Options forfeited, expired and unearned        |  |        | (275,000 | ) |                                 | $ | 13.95 |                                          |  |  |                          |  |  |   |   | 
|                                               |  |        |          |   |                                 |   |       |                                          |  |  |                          |  |  |   |   | 
|Outstanding at October 3, 2008                 |  |        | 643,000  |   |                                 | $ | 14.04 |                                          |  |  |                          |  |  |   |   | 
|Options granted                                |  |        | 225,000  |   |                                 | $ | 10.52 |                                          |  |  |                          |  |  |   |   | 
|Options exercised                              |  |        |         |   |                                 |   |      |                                          |  |  |                          |  |  |   |   | 
|Options forfeited, expired and unearned        |  |        | (476,000 | ) |                                 | $ | 12.97 |                                          |  |  |                          |  |  |   |   | 
|                                               |  |        |          |   |                                 |   |       |                                          |  |  |                          |  |  |   |   | 
|Outstanding at October 2, 2009                 |  |        | 392,000  |   |                                 | $ | 13.32 |                                          |  |  |                          |  |  |   |   | 
|Options granted                                |  |        |         |   |                                 |   |      |                                          |  |  |                          |  |  |   |   | 
|Options exercised                              |  |        | (49,000  | ) |                                 | $ | 10.97 |                                          |  |  |                          |  |  |   |   | 
|Options forfeited, expired and unearned        |  |        | (183,000 | ) |                                 | $ | 13.65 |                                          |  |  |                          |  |  |   |   | 
|                                               |  |        |          |   |                                 |   |       |                                          |  |  |                          |  |  |   |   | 
|Outstanding at October 1, 2010                 |  |        | 160,000  |   |                                 | $ | 13.66 |                                          |  |  | 2.2                      |  |  | $ |  | 
|Vested and expected to vest at October 1, 2010 |  |        | 160,000  |   |                                 | $ | 13.66 |                                          |  |  | 2.2                      |  |  | $ |  | 
|Exercisable at October 1, 2010                 |  |        | 114,000  |   |                                 | $ | 14.07 |                                          |  |  | 1.8                      |  |  | $ |  | 

The weighted average
grant-date fair value of options granted during fiscal years 2008 and 2009 was $5.28 and $3.57, respectively. There were no options granted in fiscal year 2010. The total intrinsic value of options exercised during fiscal years 2008 and 2010 was $10
and $102, respectively. There were no options exercised in fiscal year 2009.



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We had 46,052 non-vested options outstanding as of October 1, 2010.

Stock-based compensation expense related to employee stock options is included in cost of revenues and operating expenses consistent with
the respective employee salary costs. These costs totaled $785, $559 and $106 for fiscal years 2008, 2009 and 2010, respectively. As stock-based compensation expense recognized in the consolidated statement of operations is based on awards
ultimately expected to vest, it has been reduced for estimated pre-vesting forfeitures. During fiscal year 2009, we reduced to zero the estimated forfeiture rate for executive personnel.

The total income tax benefit relating to stock options and recognized in the consolidated statement of operations was $247, $187 and $187
for fiscal years 2008, 2009 and 2010, respectively. As of October 1, 2010, there was $81 of total unrecognized compensation costs related to non-vested stock options granted under the 2007 Plan. That cost is expected to be recognized over a
weighted-average remaining period of 1.0 years.

During fiscal year 2010 we received $497 for the exercise of stock options.

Restricted Stock

As noted above, our 2007 Plan permits us to grant shares of restricted stock. Shares awarded under the plan entitle the shareholder to all rights of common stock ownership except that the shares may not
be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period, and may be repurchased by us for nominal consideration if the employee ceases to be employed by us during that period. The restriction period is
determined by the Compensation and Stock Option Committee of our Board of Directors.

During fiscal year 2008, we issued
22,291 shares of restricted common stock to certain employees and outside directors. The vesting of these shares was subject to meeting certain financial performance targets during fiscal year 2008, which were not fully met. As a result, only 8,301
shares were earned; one third of these shares vested on December 31, 2008 and one third of these shares vested on December 31, 2009. Subject to continued employment of the grantee, the remaining shares will vest on December 31, 2010.

During fiscal year 2009, we issued 42,519 shares of restricted stock to certain employees and outside directors. The vesting
of these shares was subject to meeting certain financial performance targets during fiscal year 2009, which were not met. As a result, none of these shares will vest.

We did not issue any shares of restricted stock during fiscal year 2010.



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The fair value of our restricted stock awards is equal to the market price of our stock on
the date of grant. The following table provides a summary of restricted stock activity for fiscal years 2008, 2009 and 2010:



|                                |  |        |         |   |                                      |   |       | 
|------------------------------- |  | ------ | ------- | - | ------------------------------------ | - | ----- | 
|                                |  | Shares |         |   | Weighted AverageGrant Date FairValue |  
|Nonvested at September 28, 2007 |  |        | 25,914  |   |                                      | $ | 12.66 | 
|Granted                         |  |        | 22,291  |   |                                      | $ | 20.70 | 
|Vested                          |  |        | (8,632  | ) |                                      | $ | 12.66 | 
|Cancelled and forfeited         |  |        | (15,746 | ) |                                      | $ | 20.36 | 
|                                |  |        |         |   |                                      |   |       | 
|Nonvested at October 3, 2008    |  |        | 23,827  |   |                                      | $ | 15.10 | 
|Granted                         |  |        | 42,519  |   |                                      | $ | 10.61 | 
|Vested                          |  |        | (10,705 | ) |                                      | $ | 14.46 | 
|Cancelled and forfeited         |  |        | (42,519 | ) |                                      | $ | 10.61 | 
|                                |  |        |         |   |                                      |   |       | 
|Nonvested at October 2, 2009    |  |        | 13,122  |   |                                      | $ | 15.61 | 
|Granted                         |  |        |        |   |                                      |   |      | 
|Vested                          |  |        | (10,711 | ) |                                      | $ | 14.47 | 
|Cancelled and forfeited         |  |        | (131    | ) |                                      | $ | 20.70 | 
|                                |  |        |         |   |                                      |   |       | 
|Nonvested at October 1, 2010    |  |        | 2,280   |   |                                      | $ | 20.70 | 
|                                |  |        |         |   |                                      |   |       | 

For fiscal years 2008, 2009 and 2010 we recognized $283, $96 and $29, respectively, in
compensation costs related to restricted stock awards. Unrecognized compensation cost related to nonvested restricted stock awards totaled approximately $4 as of October 1, 2010 and is expected to be recognized over a weighted-average period of
0.3 years.

Restricted Stock Units

As noted above, our 2007 Plan permits us to grant restricted stock units, which entitle holders to receive shares of common stock upon vesting. During fiscal year 2010, we granted 57,135 restricted stock
units to certain employees and outside directors. These stock units were earned subject to meeting certain financial performance targets during fiscal year 2010, which were met. As a result, these stock units will vest ratably on November 2,
over the next three fiscal years. A summary of the stock unit activity is as follows:



|                             |  |                       |        |   |                                      |   |       | 
|---------------------------- |  | --------------------- | ------ | - | ------------------------------------ | - | ----- | 
|                             |  | Restricted StockUnits |        |   | Weighted AverageGrant Date FairValue |  
|Nonvested at October 2, 2009 |  |                       |       |   |                                      |   |      | 
|Granted                      |  |                       | 57,135 |   |                                      | $ | 10.52 | 
|Vested                       |  |                       |       |   |                                      |   |      | 
|Forfeited                    |  |                       | (1,764 | ) |                                      | $ | 10.52 | 
|                             |  |                       |        |   |                                      |   |       | 
|Nonvested at October 1, 2010 |  |                       | 55,371 |   |                                      | $ | 10.52 | 
|                             |  |                       |        |   |                                      |   |       | 



|7. | EMPLOYEE BENEFIT PLANS
|-- | ----------------------

We have adopted a defined contribution plan for the benefit of our domestic employees who have met the eligibility requirements. The
Learning Tree International 401(k) Plan (our 401(k) Plan) is a profit-sharing plan qualifying under Section 401(k) of the Internal Revenue Code.

Qualified employees may elect to contribute to our 401(k) Plan on a pre-tax basis. The maximum amount of employee contribution is subject only to statutory limitations. Prior to April 1, 2009, we
made contributions at a rate of 75% of the first 6% of employee compensation contributed. Starting April 1, 2009 we made contributions



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at a rate of 50% of the first 2% of employee compensation contributed. Starting October 1, 2010 we make contributions at a rate of 30% of the first 6% of employee compensation contributed.
We contributed $741, $532 and $158 to our 401(k) Plan for fiscal years 2008, 2009, and 2010, respectively.

We have adopted or
participate in country-sponsored defined contribution plans for the benefit of our employees of all of our foreign subsidiaries. Contributions to these plans are subject to tenure and compensation level criteria, as well as certain limitations. For
fiscal years 2008, 2009 and 2010 our cost for these plans was approximately $663, $576, and $531, respectively.



|8. | EARNINGS PER SHARE
|-- | ------------------

Income per sharebasic is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during
the period. Income per sharediluted includes the dilutive effect, if any, of nonvested restricted stock grants and of outstanding options to purchase common stock, using the treasury stock method. For fiscal years 2008, 2009, and 2010, 31,302,
391,949 and 159,986 stock options, respectively, were anti-dilutive and excluded from the Income per sharediluted calculation. For fiscal years 2008, 2009 and 2010, nonvested restricted common stock grants of 23,827, 13,122 and 0 respectively,
were anti-dilutive and excluded from the Income per sharediluted calculation. None of the nonvested restricted stock units granted in fiscal year 2010 were anti-dilutive.

The following table sets forth the calculation of basic and diluted earnings per share:



|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 
|----------------------------------------------------------------------------- |  | ----------------- | ------ |  | -------------- | - | ------ | -------------- |  | - | ------ | 
|                                                                              |  | Fiscal Year Ended |       
|                                                                              |  | October 3,2008    |        |  | October 2,2009 |   |        | October 1,2010 | 
|Numerator:                                                                    |  |                   |        |  |                |   |        |                |  |   |        | 
|Net income                                                                    |  | $                 | 13,800 |  |                | $ | 1,203  |                |  | $ | 4,388  | 
|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 
|                                                                              |  |                   |       
|Denominator:                                                                  |  |                   |        |  |                |   |        |                |  |   |        | 
|Weighted-average shares outstandingbasic                                     |  |                   | 16,516 |  |                |   | 15,181 |                |  |   | 13,722 | 
|Dilutive effect of stock options, restricted stock and restricted stock units |  |                   | 64     |  |                |   |       |                |  |   | 17     | 
|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 
|Weighted-average shares outstandingdiluted                                   |  |                   | 16,580 |  |                |   | 15,181 |                |  |   | 13,739 | 
|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 
|                                                                              |  |                   |       
|Income Per Share:                                                             |  |                   |        |  |                |   |        |                |  |   |        | 
|Income per common sharebasic                                                 |  | $                 | 0.84   |  |                | $ | 0.08   |                |  | $ | 0.32   | 
|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 
|Income per common sharediluted                                               |  | $                 | 0.83   |  |                | $ | 0.08   |                |  | $ | 0.32   | 
|                                                                              |  |                   |        |  |                |   |        |                |  |   |        | 



|9. | OPERATING SEGMENT INFORMATION
|-- | -----------------------------

Our worldwide operations involve the design and delivery of instructor-led classroom training courses and related services to business and government organizations. The training and education we offer is
presented by our instructors in a virtually identical manner in every country in which we operate, regardless of whether presented in leased classroom space or external facilities, of the content of the class being taught, the language of the
presentation or the printed course materials, or of the location or method of distribution. We did not have sales to any single customer that amounted to 10% or more of our revenues in fiscal years 2008, 2009 or 2010.

We conduct and manage our business globally, and our management makes financial decisions and allocates resources based on the
information we receive from our internal management systems. Our reportable segments are: the United States, Canada, the United Kingdom, France, Sweden and Japan. As a measure of segment performance, our Chief Operating Decision Maker reviews
revenues and gross profit for each segment. Intersegment sales were $1,109, $605 and $1,216 in fiscal years 2008, 2009 and 2010, respectively.



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Summarized financial information by reportable segment for fiscal years 2008, 2009 and 2010,
is as follows:



|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|--------------------------------------------------------- |  | ----------------- | ------- |  | -------------- | - | ------- | -------------- |  | - | ------- | 
|                                                          |  | Fiscal Year Ended |        
|                                                          |  | October 3,2008    |         |  | October 2,2009 |   |         | October 1,2010 | 
|Revenues:                                                 |  |                   |         |  |                |   |         |                |  |   |         | 
|United States                                             |  | $                 | 80,437  |  |                | $ | 64,939  |                |  | $ | 65,624  | 
|Canada                                                    |  |                   | 19,491  |  |                |   | 13,468  |                |  |   | 13,025  | 
|United Kingdom                                            |  |                   | 47,225  |  |                |   | 30,651  |                |  |   | 27,899  | 
|France                                                    |  |                   | 19,247  |  |                |   | 14,535  |                |  |   | 12,344  | 
|Sweden                                                    |  |                   | 11,826  |  |                |   | 6,333   |                |  |   | 6,539   | 
|Japan                                                     |  |                   | 3,052   |  |                |   | 2,633   |                |  |   | 2,039   | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                                                     |  | $                 | 181,278 |  |                | $ | 132,559 |                |  | $ | 127,470 | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|Gross profit:                                             |  |                   |         |  |                |   |         |                |  |   |         | 
|United States                                             |  | $                 | 44,082  |  |                | $ | 35,347  |                |  | $ | 34,231  | 
|Canada                                                    |  |                   | 12,810  |  |                |   | 8,487   |                |  |   | 7,826   | 
|United Kingdom                                            |  |                   | 26,117  |  |                |   | 15,438  |                |  |   | 13,763  | 
|France                                                    |  |                   | 11,720  |  |                |   | 8,520   |                |  |   | 7,019   | 
|Sweden                                                    |  |                   | 7,790   |  |                |   | 3,765   |                |  |   | 4,024   | 
|Japan                                                     |  |                   | 1,952   |  |                |   | 1,759   |                |  |   | 1,409   | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                                                     |  | $                 | 104,471 |  |                | $ | 73,316  |                |  | $ | 68,272  | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|Depreciation and amortization (included in gross profit): |  |                   |         |  |                |   |         |                |  |   |         | 
|United States                                             |  | $                 | 2,019   |  |                | $ | 2,130   |                |  | $ | 2,321   | 
|Canada                                                    |  |                   | 373     |  |                |   | 323     |                |  |   | 316     | 
|United Kingdom                                            |  |                   | 1,129   |  |                |   | 935     |                |  |   | 958     | 
|France                                                    |  |                   | 467     |  |                |   | 491     |                |  |   | 332     | 
|Sweden                                                    |  |                   | 219     |  |                |   | 166     |                |  |   | 163     | 
|Japan                                                     |  |                   | 18      |  |                |   | 21      |                |  |   | 26      | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                                                     |  | $                 | 4,225   |  |                | $ | 4,066   |                |  | $ | 4,116   | 
|                                                          |  |                   |         |  |                |   |         |                |  |   |         | 



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Summarized financial information by reportable segment for fiscal years 2008, 2009 and 2010
is as follows:



|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|--------------------- |  | ----------------- | ------- |  | -------------- | - | ------- | -------------- |  | - | ------- | 
|                      |  | Fiscal Year Ended |        
|                      |  | October 3,2008    |         |  | October 2,2009 |   |         | October 1,2010 | 
|Total assets:         |  |                   |         |  |                |   |         |                |  |   |         | 
|United States         |  | $                 | 105,055 |  |                | $ | 92,505  |                |  | $ | 55,356  | 
|Canada                |  |                   | 15,993  |  |                |   | 5,374   |                |  |   | 5,311   | 
|United Kingdom        |  |                   | 33,348  |  |                |   | 23,381  |                |  |   | 23,898  | 
|France                |  |                   | 8,280   |  |                |   | 9,035   |                |  |   | 8,221   | 
|Sweden                |  |                   | 8,403   |  |                |   | 5,115   |                |  |   | 5,806   | 
|Japan                 |  |                   | 1,345   |  |                |   | 1,410   |                |  |   | 1,581   | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                 |  | $                 | 172,424 |  |                | $ | 136,820 |                |  | $ | 100,173 | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|Long-lived assets:    |  |                   |         |  |                |   |         |                |  |   |         | 
|United States         |  | $                 | 16,403  |  |                | $ | 13,397  |                |  | $ | 11,974  | 
|Canada                |  |                   | 1,038   |  |                |   | 601     |                |  |   | 426     | 
|United Kingdom        |  |                   | 6,261   |  |                |   | 4,624   |                |  |   | 3,852   | 
|France                |  |                   | 1,788   |  |                |   | 1,919   |                |  |   | 1,280   | 
|Sweden                |  |                   | 774     |  |                |   | 494     |                |  |   | 275     | 
|Japan                 |  |                   | 124     |  |                |   | 97      |                |  |   | 93      | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                 |  | $                 | 26,388  |  |                | $ | 21,132  |                |  | $ | 17,900  | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|Capital expenditures: |  |                   |         |  |                |   |         |                |  |   |         | 
|United States         |  | $                 | 3,894   |  |                | $ | 952     |                |  | $ | 1,992   | 
|Canada                |  |                   | 463     |  |                |   | 72      |                |  |   | 200     | 
|United Kingdom        |  |                   | 1,643   |  |                |   | 376     |                |  |   | 434     | 
|France                |  |                   | 626     |  |                |   | 687     |                |  |   | 264     | 
|Sweden                |  |                   | 160     |  |                |   | 46      |                |  |   | 64      | 
|Japan                 |  |                   | 73      |  |                |   | 1       |                |  |   | 25      | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 
|Total                 |  | $                 | 6,859   |  |                | $ | 2,134   |                |  | $ | 2,979   | 
|                      |  |                   |         |  |                |   |         |                |  |   |         | 



|10. | AVAILABLE FOR SALE SECURITIES
|--- | -----------------------------

Securities are classified consistent with how we manage, monitor, and measure them on the basis of the nature and risks of the security. The amortized cost of these securities and their respective fair
values are as follows:



|                                      |  |                     |       |  |                      |   |   |                       |  |   |            |  |  |   |       | 
|------------------------------------- |  | ------------------- | ----- |  | -------------------- | - | - | --------------------- |  | - | ---------- |  |  | - | ----- | 
|October 1, 2010:                      |  | AmortizedCost Basis |       |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | Fair Value | 
|Commercial Paper                      |  | $                   | 4,997 |  |                      | $ |  |                       |  | $ |           |  |  | $ | 4,997 | 
|U.S. Government and Agency Securities |  |                     |      |  |                      |   |  |                       |  |   |           |  |  |   |      | 
|Municipal Securities                  |  |                     |      |  |                      |   |  |                       |  |   |           |  |  |   |      | 
|Corporate Securities                  |  |                     |      |  |                      |   |  |                       |  |   |           |  |  |   |      | 
|Auction Rate Securities               |  |                     |      |  |                      |   |  |                       |  |   |           |  |  |   |      | 
|                                      |  |                     |       |  |                      |   |   |                       |  |   |            |  |  |   |       | 
|                                      |  | $                   | 4,997 |  |                      | $ |  |                       |  | $ |           |  |  | $ | 4,997 | 
|                                      |  |                     |       |  |                      |   |   |                       |  |   |            |  |  |   |       | 



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|                                      |  |                     |        |  |                      |   |    |                       |  |   |           |   |  |   |        | 
|------------------------------------- |  | ------------------- | ------ |  | -------------------- | - | -- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                      |  |                     |        | 
|October 2, 2009:                      |  | AmortizedCost Basis |        |  | GrossUnrealizedGains |   |    | GrossUnrealizedLosses |  |   | FairValue |  
|Commercial Paper                      |  | $                   |       |  |                      | $ |   |                       |  | $ |          |   |  | $ |       | 
|U.S. Government and Agency Securities |  |                     |       |  |                      |   |   |                       |  |   |          |   |  |   |       | 
|Municipal Securities                  |  |                     | 13,822 |  |                      |   | 62 |                       |  |   |          |   |  |   | 13,884 | 
|Corporate Securities                  |  |                     | 1,006  |  |                      |   | 7  |                       |  |   |          |   |  |   | 1,013  | 
|Auction Rate Securities               |  |                     | 17,000 |  |                      |   |   |                       |  |   | (2,400    | ) |  |   | 14,600 | 
|                                      |  |                     |        |  |                      |   |    |                       |  |   |           |   |  |   |        | 
|                                      |  | $                   | 31,828 |  |                      | $ | 69 |                       |  | $ | (2,400    | ) |  | $ | 29,497 | 
|                                      |  |                     |        |  |                      |   |    |                       |  |   |           |   |  |   |        | 

The scheduled maturities of available for sale securities were as follows as of October 1, 2010:



|                                       |  |            |       | 
|-------------------------------------- |  | ---------- | ----- | 
|                                       |  | Fair Value |      
|Due within a year                      |  | $          | 4,997 | 
|Due after one year through five years  |  |            |      | 
|Due after five years through ten years |  |            |      | 
|Due after ten years                    |  |            |      | 
|                                       |  |            |       | 
|                                       |  | $          | 4,997 | 
|                                       |  |            |       | 

Net proceeds from sales of available for sale securities less purchases of available for sale securities for
the year ended October 1, 2010 were $26,512, including recognized gains of $17. Net proceeds of available for sale securities for the year ended October 2, 2009 were $12,879, including recognized gains of $22.

The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized-loss position for less than 12
months and for 12 months or more, and are not other than temporarily impaired, are as follows:



|                        |  |                     |   |  |                      |   |   |            |  |   |                |  |  |            |        |   |                |   |        |  |  |   |        |  
|----------------------- |  | ------------------- | - |  | -------------------- | - | - | ---------- |  | - | -------------- |  |  | ---------- | ------ | - | -------------- | - | ------ |  |  | - | ------ | -
|                        |  | Less than 12 months |   |  | 12 Months or Greater |   |   | Total      | 
|October 1, 2010:        |  | Fair Value          |   |  | UnrealizedLoss       |   |   | Fair Value |  |   | UnrealizedLoss |  |  | Fair Value |        |   | UnrealizedLoss |  
|Auction Rate Securities |  |                     |  |  |                      |   |  |            |  |   |               |  |  |            |       |   |                |   |       |  |  |   |       |  
|                        |  |                     |   |  |                      |   |   |            |  |   |                |  |  |            |        |   |                |   |        |  |  |   |        |  
|                        |  | $                   |  |  |                      | $ |  |            |  | $ |               |  |  | $          |       |   |                | $ |       |  |  | $ |       |  
|                        |  |                     |   |  |                      |   |   |            |  |   |                |  |  |            |        |   |                |   |        |  |  |   |        |  
|                        |  |                     |  
|                        |  | Less than 12 months |   |  | 12 Months or Greater |   |   | Total      | 
|October 2, 2009:        |  | Fair Value          |   |  | UnrealizedLoss       |   |   | Fair Value |  |   | UnrealizedLoss |  |  | Fair Value |        |   | UnrealizedLoss |  
|Auction Rate Securities |  |                     |  |  |                      |   |  |            |  |   | 14,500         |  |  |            | (2,400 | ) |                |   | 14,500 |  |  |   | (2,400 | )
|                        |  |                     |   |  |                      |   |   |            |  |   |                |  |  |            |        |   |                |   |        |  |  |   |        |  
|                        |  | $                   |  |  |                      | $ |  |            |  | $ | 14,500         |  |  | $          | (2,400 | ) |                | $ | 14,500 |  |  | $ | (2,400 | )
|                        |  |                     |   |  |                      |   |   |            |  |   |                |  |  |            |        |   |                |   |        |  |  |   |        |  

At October 2, 2009 we had $17.0 million in face value of ARS, against which we took a temporary
impairment charge of $2.4 million. All of these were sold at their stated value during fiscal year 2010 under our repurchase agreement with UBS, and we reversed the temporary impairment.



|11. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

We adopted the provisions of FASB ASC 820, Fair Value Measurements and Disclosure (FASB ASC 820) in the first quarter
of fiscal year 2009 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FASB ASC 820 defines fair
value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.



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Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability.
The fair value is measured on assumptions that market participants would use, including assumptions about non performance risk and credit risk.

FASB ASC 820 establishes a fair value hierarchy for valuation inputs and prioritizes them based on the extent to which the inputs are observable in the marketplace. Categorization is based on the lowest
level of input that is available and significant to the measurement. These levels are:

Level 1Quoted prices in active
markets for identical assets and liabilities.

Level 2Observable inputs other than quoted prices in active markets,
including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
and market corroborated inputs.

Level 3Unobservable inputs that reflect managements assumptions about the
estimates and risks that market participants would use in pricing the asset or liability.

The following sections describe the
valuation methodologies we use to measure different financial assets at fair value.



| |  |  | Commercial PaperBecause of the readily available markets for these instruments, we use quoted prices and other relevant information
generated by market transactions involving identical or comparable assets provided by our investment broker/advisor to establish fair values.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | United States Government and Agency SecuritiesBecause of the readily available markets for these instruments, we use quoted prices
and other relevant information generated by market transactions involving identical or comparable assets provided by our investment broker/advisor to establish fair values.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Municipal SecuritiesSince these securities are not as liquid, with the assistance of our investment broker/advisor, the fair values
are determined using valuation models that include assumptions about interest rates, yield curves, credit risks, and default rates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate SecuritiesBecause of the readily available markets for these instruments, we use quoted prices and other relevant
information generated by market transactions involving identical or comparable assets provided by our investment broker/advisor, as well as our independent research, to establish fair values.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Auction Rate SecuritiesGiven the complexity of our investments in ARS, we engaged an independent investment advisor to assist in
determining the fair value of our investments. We, with the assistance of our advisor, estimated the fair value of the ARS based on the following: (i) the underlying structure of each security; (ii) the present value of future principal
and interest payments discounted at rates consistent with current market conditions; (iii) consideration of the probabilities of default, auction failure, or repurchase at par for each period; and (iv) estimates of the recovery rates in
the event of default for each security. The estimated fair values were subject to changes based on market conditions after the date of valuation.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Assets Measured at Fair Value on a Recurring Basis

The following table presents our assets measured at fair value on a recurring basis at October 1, 2010 and October 2, 2009:



|                                   |  |                                                           |       |  |                                           |   |        |                                         |  |   |        | 
|---------------------------------- |  | --------------------------------------------------------- | ----- |  | ----------------------------------------- | - | ------ | --------------------------------------- |  | - | ------ | 
|Fiscal year ended October 1, 2010: |  | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |       |  | SignificantOtherObservableInputs(Level 2) |   |        | SignificantUnobservableInputs(Level
 3) | 
|Commercial Paper                   |  | $                                                         | 4,997 |  |                                           | $ |       |                                         |  | $ |       | 
|Municipal Securities               |  |                                                           |      |  |                                           |   |       |                                         |  |   |       | 
|Corporate Securities               |  |                                                           |      |  |                                           |   |       |                                         |  |   |       | 
|Auction Rate Securities            |  |                                                           |      |  |                                           |   |       |                                         |  |   |       | 
|                                   |  |                                                           |       |  |                                           |   |        |                                         |  |   |        | 
|                                   |  | $                                                         | 4,997 |  |                                           | $ |       |                                         |  | $ |       | 
|                                   |  |                                                           |       |  |                                           |   |        |                                         |  |   |        | 
|                                   |  |                                                           |      
|Fiscal year ended October 2, 2009: |  | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |       |  | SignificantOtherObservableInputs(Level 2) |   |        | SignificantUnobservableInputs(Level
 3) | 
|Commercial Paper                   |  | $                                                         |      |  |                                           | $ |       |                                         |  | $ |       | 
|Municipal Securities               |  |                                                           |      |  |                                           |   | 13,884 |                                         |  |   |       | 
|Corporate Securities               |  |                                                           | 1,013 |  |                                           |   |       |                                         |  |   |       | 
|Auction Rate Securities            |  |                                                           |      |  |                                           |   |       |                                         |  |   | 14,600 | 
|                                   |  |                                                           |       |  |                                           |   |        |                                         |  |   |        | 
|                                   |  | $                                                         | 1,013 |  |                                           | $ | 13,884 |                                         |  | $ | 14,600 | 
|                                   |  |                                                           |       |  |                                           |   |        |                                         |  |   |        | 

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis

The following table presents the changes in level 3 assets measured on a recurring basis for the year ended October 1, 2010. During
fiscal year 2010, all of our level 3 assets consisted of ARS, with changes in fair value included in other comprehensive income (loss).



|                                                                            |  |                        |         |  
|--------------------------------------------------------------------------- |  | ---------------------- | ------- | -
|                                                                            |  | Auction RateSecurities |        
|Balance, beginning of period                                                |  | $                      | 14,600  |  
|Transfers into Level 3                                                      |  |                        |        |  
|Transfers out of Level 3                                                    |  |                        |        |  
|Total gains or losses                                                       |  |                        |         |  
|Included in earnings (or changes in net assets)                             |  |                        |        |  
|Included in other comprehensive income                                      |  |                        | 2,400   |  
|Purchases, issuances, sales and settlements                                 |  |                        |         |  
|Purchases                                                                   |  |                        |        |  
|Issuances                                                                   |  |                        |        |  
|Sales                                                                       |  |                        | (17,000 | )
|Settlements                                                                 |  |                        |        |  
|                                                                            |  |                        |         |  
|Balance, end of period                                                      |  | $                      |        |  
|                                                                            |  |                        |         |  
|Change in unrealized gains relating to assets still held at October 1, 2010 |  | $                      |        |  
|                                                                            |  |                        |         |  



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Non Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure our AROs at fair value on a nonrecurring basis, when we believe there has been an indication the fair value has changed. We did
not adjust the values of those liabilities during the year ended October 1, 2010.



|12. | VALUATION AND QUALIFYING ACCOUNTS
|--- | ---------------------------------

Activity with respect to our provision for doubtful accounts is summarized as follows:



|                                |  |                   |      |   |                |   |      |                |  |   |     |  
|------------------------------- |  | ----------------- | ---- | - | -------------- | - | ---- | -------------- |  | - | --- | -
|                                |  | Fiscal Year Ended |     
|                                |  | October 3,2008    |      |   | October 2,2009 |   |      | October 1,2010 | 
|Beginning balance               |  | $                 | 195  |   |                | $ | 194  |                |  | $ | 224 |  
|Provision for doubtful accounts |  |                   | 103  |   |                |   | 151  |                |  |   | 80  |  
|Charges against allowance       |  |                   | (100 | ) |                |   | (140 | )              |  |   | (77 | )
|Other                           |  |                   | (4   | ) |                |   | 19   |                |  |   | 14  |  
|                                |  |                   |      |   |                |   |      |                |  |   |     |  
|Ending balance                  |  | $                 | 194  |   |                | $ | 224  |                |  | $ | 241 |  
|                                |  |                   |      |   |                |   |      |                |  |   |     |  

Activity with respect to our valuation allowance for deferred tax assets is summarized as follows:



|                          |  |                   |      |   |                |   |      |                |  |   |   | 
|------------------------- |  | ----------------- | ---- | - | -------------- | - | ---- | -------------- |  | - | - | 
|                          |  | Fiscal Year Ended |     
|                          |  | October 3,2008    |      |   | October 2,2009 |   |      | October 1,2010 | 
|Beginning balance         |  | $                 | 690  |   |                | $ | 469  |                |  | $ |  | 
|Provisions                |  |                   | (221 | ) |                |   | (469 | )              |  |   |  | 
|Charges against allowance |  |                   |     |   |                |   |     |                |  |   |  | 
|                          |  |                   |      |   |                |   |      |                |  |   |   | 
|Ending balance            |  | $                 | 469  |   |                | $ |     |                |  | $ |  | 
|                          |  |                   |      |   |                |   |      |                |  |   |   | 



|13. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

Dr. David C. Collins, our Vice Chairman and former Chief Executive Officer, oversees (with the concurrence of the Nominating and
Governance Committee of our Board of Directors) a charitable program under which we donated $150, $180, and $96 during fiscal years 2008, 2009 and 2010, respectively, to charitable organizations.



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|14. | QUARTERLY DATA (UNAUDITED)
|--- | --------------------------



|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|--------------------------------------------------------- |  | ---------------- | ------ |  | -------------- | - | ------ | ------------- |  | - | ----------------- |  |  | - | ------ | -
|                                                          |  | Q1January 2,2009 |        |  | Q2April 3,2009 |   |        | Q3July 3,2009 |  |   | Q4October 2,2009* | 
|Revenues                                                  |  | $                | 37,966 |  |                | $ | 30,526 |               |  | $ | 32,279            |  |  | $ | 31,788 |  
|Cost of revenues                                          |  |                  | 16,317 |  |                |   | 14,398 |               |  |   | 14,439            |  |  |   | 14,089 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Gross profit                                              |  |                  | 21,649 |  |                |   | 16,128 |               |  |   | 17,840            |  |  |   | 17,699 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Operating expenses:                                       |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Course development                                        |  |                  | 2,211  |  |                |   | 1,977  |               |  |   | 1,627             |  |  |   | 1,627  |  
|Sales and marketing                                       |  |                  | 9,111  |  |                |   | 8,846  |               |  |   | 6,994             |  |  |   | 7,011  |  
|General and administrative                                |  |                  | 7,655  |  |                |   | 7,766  |               |  |   | 6,022             |  |  |   | 10,486 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Total operating expenses                                  |  |                  | 18,977 |  |                |   | 18,589 |               |  |   | 14,643            |  |  |   | 19,124 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Income (loss) from operations                             |  |                  | 2,672  |  |                |   | (2,461 | )             |  |   | 3,197             |  |  |   | (1,425 | )
|Other income, net                                         |  |                  | 378    |  |                |   | 344    |               |  |   | 295               |  |  |   | 31     |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Income (loss) before provision (benefit) for income taxes |  |                  | 3,050  |  |                |   | (2,117 | )             |  |   | 3,492             |  |  |   | (1,394 | )
|Provision (benefit) for income taxes                      |  |                  | 1,208  |  |                |   | (756   | )             |  |   | 1,352             |  |  |   | 24     |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Net income (loss)                                         |  | $                | 1,842  |  |                | $ | (1,361 | )             |  | $ | 2,140             |  |  | $ | (1,418 | )
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Income (loss) per common sharebasic                      |  | $                | 0.11   |  |                | $ | (0.09  | )             |  | $ | 0.15              |  |  | $ | (0.10  | )
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  
|Income (loss) per common sharediluted                    |  | $                | 0.11   |  |                | $ | (0.09  | )             |  | $ | 0.15              |  |  | $ | (0.10  | )
|                                                          |  |                  |        |  |                |   |        |               |  |   |                   |  |  |   |        |  



|* | In the fourth quarter of fiscal year 2009, we increased general and administrative expense by $4,233 to reflect the anticipated cost of the settlement of a previously
disclosed claim made by the U.S. Government (see also Note 4) and we paid approximately $666 of U.S. income taxes on tax dividends from foreign subsidiaries.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|--------------------------------------------------------- |  | ---------------- | ------ |  | -------------- | - | ------ | ------------- |  | - | ---------------- | - |  | - | ------ | -
|                                                          |  | Q1January 1,2010 |        |  | Q2April 2,2010 |   |        | Q3July 2,2010 |  |   | Q4October 1,2010 |  
|Revenues                                                  |  | $                | 32,505 |  |                | $ | 28,293 |               |  | $ | 32,781           |   |  | $ | 33,891 |  
|Cost of revenues                                          |  |                  | 14,027 |  |                |   | 13,696 |               |  |   | 15,713           |   |  |   | 15,762 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Gross profit                                              |  |                  | 18,478 |  |                |   | 14,597 |               |  |   | 17,068           |   |  |   | 18,129 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Operating expenses:                                       |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Course development                                        |  |                  | 1,717  |  |                |   | 1,873  |               |  |   | 1,768            |   |  |   | 1,946  |  
|Sales and marketing                                       |  |                  | 6,801  |  |                |   | 7,679  |               |  |   | 7,777            |   |  |   | 8,204  |  
|General and administrative                                |  |                  | 6,076  |  |                |   | 7,215  |               |  |   | 6,215            |   |  |   | 5,804  |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Total operating expenses                                  |  |                  | 14,594 |  |                |   | 16,767 |               |  |   | 15,760           |   |  |   | 15,954 |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Income (loss) from operations                             |  |                  | 3,884  |  |                |   | (2,170 | )             |  |   | 1,308            |   |  |   | 2,175  |  
|Other income, net                                         |  |                  | 223    |  |                |   | 137    |               |  |   | 235              |   |  |   | (38    | )
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Income (loss) before provision (benefit) for income taxes |  |                  | 4,107  |  |                |   | (2,033 | )             |  |   | 1,543            |   |  |   | 2,137  |  
|Provision (benefit) for income taxes                      |  |                  | 1,684  |  |                |   | (762   | )             |  |   | (526             | ) |  |   | 970    |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Net income (loss)                                         |  | $                | 2,423  |  |                | $ | (1,271 | )             |  | $ | 2,069            |   |  | $ | 1,167  |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Income (loss) per common sharebasic                      |  | $                | 0.18   |  |                | $ | (0.09  | )             |  | $ | 0.15             |   |  | $ | 0.08   |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  
|Income (loss) per common sharediluted                    |  | $                | 0.18   |  |                | $ | (0.09  | )             |  | $ | 0.15             |   |  | $ | 0.08   |  
|                                                          |  |                  |        |  |                |   |        |               |  |   |                  |   |  |   |        |  



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|15. | SUBSEQUENT EVENTS
|--- | -----------------

We
have evaluated all events subsequent to the balance sheet date of October 1, 2010 and have determined there are no subsequent events that require disclosure.



|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed
or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms,
and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

An evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of October 1, 2010. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 1, 2010.

Managements Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) under the Exchange Act. Under Section 404 of the Sarbanes-Oxley Act of 2002, our management is required to assess the effectiveness of our internal control over financial reporting as of the end of each fiscal year and report, based
on that assessment, whether our internal control over financial reporting is effective.

Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with United States generally accepted
accounting principles. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted a review, evaluation, and assessment of the effectiveness of our internal control
over financial reporting as of October 1, 2010, based upon the criteria set forth in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on these review activities, our management concluded that our internal control over financial reporting was effective as of
October 1, 2010.

BDO USA, LLP, the independent registered public accounting firm who also audited our consolidated
financial statements, has issued an attestation report on the effectiveness of internal control over financial reporting as of October 1, 2010, which is filed herewith.

Changes in Internal Control over Financial Reporting

There has been no
change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of fiscal year 2010 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.



73



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Learning
Tree International, Inc.

Reston, VA

We have audited Learning Tree International, Inc. and subsidiaries internal control over financial reporting as of October 1, 2010, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Learning Tree International, Inc. and subsidiaries management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Managements Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Learning Tree
International, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of October 1, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Learning Tree International, Inc. and subsidiaries as of October 1, 2010 and October 2, 2009, and the related consolidated statements of operations, stockholders equity and comprehensive income, and cash flows for
each of the three years in the period ended October 1, 2010 and our report dated December 9, 2010 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

Bethesda, Maryland

December 9, 2010



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##### Table of Contents



|Item 9B. | OTHER INFORMATION
|-------- | -----------------

None.



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PART III



|Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our 2011 Annual Meeting of Stockholders.



|Item 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in
connection with our 2011 Annual Meeting of Stockholders.



|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 
|--------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------ | - | ----- | ----------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Plan Category                                             |  | Number of Securitiesto be Issued UponExercise ofOutstanding Options,Warrants
and Rights |         |  | Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights |   |       | Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation
Plan(Excluding SecuritiesReflected in the firstColumn) | 
|Equity compensation plan approved by security holders     |  |                                                                                         | 159,986 |  |                                                                          | $ | 13.66 |                                                                                                                                           |  |  | 721,888 | 
|Equity compensation plan not approved by security holders |  |                                                                                         |        |  |                                                                          |   |      |                                                                                                                                           |  |  |        | 
|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 
|Total                                                     |  |                                                                                         | 159,986 |  |                                                                          | $ | 13.66 |                                                                                                                                           |  |  | 721,888 | 
|                                                          |  |                                                                                         |         |  |                                                                          |   |       |                                                                                                                                           |  |  |         | 

The remaining information required by this item is incorporated by reference to our definitive Proxy
Statement to be delivered to stockholders in connection with our 2011 Annual Meeting of Stockholders.



|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our 2011 Annual Meeting of Stockholders.



|Item 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our 2011 Annual Meeting of Stockholders.



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PART IV



|Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|(a) | Financial Statements and Schedules
|--- | ----------------------------------

The financial statements of Learning Tree International, Inc. as set forth under Item 8 are filed as part of this report.

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are omitted because such schedules are not required under the related
instructions, are not applicable or the required information is given in the financial statements.



|(b) | Exhibits
|--- | --------

The
exhibits set forth in the Exhibit Index are filed as part of this Annual Report on Form 10-K.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant, Learning
Tree International, Inc., a corporation organized and existing under the laws of the State of Delaware, has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Reston,
Commonwealth of Virginia, on the 9th day of December 2010.



LEARNING TREE INTERNATIONAL, INC.By:

/S/    NICHOLAS R.
SCHACHTName:

Nicholas R. SchachtTitle:

President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.



|                                                       |  |                                                     |  |                 
|------------------------------------------------------ |  | --------------------------------------------------- |  | ----------------
|Signature                                              |  | Title                                               |  | Date            
|                                                       |  |                                                    
|/S/    ERIC R.
GAREN Eric R. Garen                     |  | Chairman of the Board                               |  | December 9, 2010
|                                                       |  |                                                    
|/S/    DAVID C. COLLINS,
PH.D. David C. Collins, Ph.D. |  | Vice Chairman of the Board                          |  | December 9, 2010
|                                                       |  |                                                    
|/S/    NICHOLAS R.
SCHACHT Nicholas R. Schacht         |  | President, Chief Executive Officer and Director     |  | December 9, 2010
|                                                       |  |                                                    
|/S/    CHARLES R.
WALDRON Charles R. Waldron           |  | Chief Financial Officer andChief Accounting Officer |  | December 9, 2010
|                                                       |  |                                                    
|/S/    W. MATHEW
JUECHTER W. Mathew Juechter           |  | Director                                            |  | December 9, 2010
|                                                       |  |                                                    
|/S/    HOWARD A. BAIN
III Howard A. Bain III           |  | Director                                            |  | December 9, 2010
|                                                       |  |                                                    
|/S/    CURTIS A.
HESSLER Curtis A. Hessler             |  | Director                                            |  | December 9, 2010
|                                                       |  |                                                    
|/S/    STEFAN C.
RIESENFELD Stefan C. Riesenfeld       |  | Director                                            |  | December 9, 2010
|                                                       |  |                                                    
|/S/    GEORGE T.
ROBSON George T. Robson               |  | Director                                            |  | December 9, 2010



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                   
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                                                       
|**            |  | This exhibit is a management contract, compensatory plan or arrangement.                                                                                                                                                          
|              | 
|3.1           |  | Restated Certificate of Incorporation, filed October 6, 1995, as amended by Certificate of Amendment filed June 6, 1997, Certificate of Amendment filed January 24, 2002, and
Certificate of Amendment filed June 19, 2007 (xviii)
|              | 
|3.4           |  | Bylaws of Registrant, adopted August 29, 1995, as amended through November 8, 2006 (ix)                                                                                                                                           
|              | 
|4.1           |  | Form of Common Stock Certificate (xviii)                                                                                                                                                                                          
|              | 
|10.1          |  | Employment Agreement between Registrant and Eric R. Garen, dated November 16, 2003 (ii) **                                                                                                                                        
|              | 
|10.2          |  | Written description of amended oral agreement between Registrant and Dr. David C. Collins (xviii) **                                                                                                                              
|              | 
|10.3          |  | Employment Agreement between Registrant and Nicholas R. Schacht, dated as of October 1, 2005 (v) **                                                                                                                               
|              | 
|10.4          |  | Employment Agreement between Registrant and Magnus Nylund, dated as of October 1, 2005 (v) **                                                                                                                                     
|              | 
|10.5          |  | Employment Agreement between Registrant and Charles R. Waldron, dated as of August 29, 2007 (xiv) **                                                                                                                              
|              | 
|10.6          |  | Employment Agreement between Registrant and David A. Booker, dated as of October 15, 2007 (xv) **                                                                                                                                 
|              | 
|10.7          |  | 2007 Equity Incentive Plan (xiii) **                                                                                                                                                                                              
|              | 
|10.8          |  | Amendment of 2007 Equity Incentive Plan adopted December 30, 2009 (xix) **                                                                                                                                                        
|              | 
|10.9          |  | 2007 Equity Incentive Plan Form of Restricted Stock Award Agreement (xvi) **                                                                                                                                                      
|              | 
|10.10         |  | 2007 Equity Incentive Plan Form of Stock Option Award Agreement (xvi) **                                                                                                                                                          
|              | 
|10.11         |  | 2007 Equity Incentive Plan Form of Stock Award Agreement (xvii) **                                                                                                                                                                
|              | 
|10.12         |  | 2007 Equity Incentive Plan Form of Stock Award Agreement (xxii) **                                                                                                                                                                
|              | 
|10.13         |  | Lease between Learning Tree International Limited and Westinghouse Brake and Signal Holdings Limited (iv)                                                                                                                         
|              | 
|10.14         |  | Office Lease between Registrant and Metropolitan Life Insurance Company (iv)                                                                                                                                                      
|              | 
|10.15         |  | Lease between Registrant and Bombardier Transportation International Limited (iv)                                                                                                                                                 
|              | 
|10.16         |  | Rental Lease between Registrant and Förvaltningsbolaget Marievik HB (iv)                                                                                                                                                          
|              | 
|10.17         |  | Facility Sublease between Learning Tree International Limited and Metronet Rail BCV Limited (vi)                                                                                                                                  
|              | 
|10.18         |  | Facility Lease Agreement between Learning Tree International Inc. and T.E.C. Leaseholds Limited (vii)                                                                                                                             
|              | 
|10.19         |  | Amendment of Facility Lease Agreement between Learning Tree International Inc. and TEC Leaseholds Limited effective January 6, 2010 (xxi)                                                                                         
|              | 
|10.20         |  | Office Lease between Registrant and TrizecHahn One NY Plaza LLC (viii)                                                                                                                                                            
|              | 
|10.21         |  | Lease among Registrant, Learning Tree International Limited and Courtlands Developments Limited (viii)                                                                                                                            



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|              |  |                                                                                                                                          
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                              
|10.22         |  | Office Underleases between Learning Tree International Limited and Digital Equipment Co. Limited (viii)                                  
|              | 
|10.23         |  | First Amendment to Leasing Agreement by and between Registrant and PRIM 1801 Rockville Pike, LLC (x)                                     
|              | 
|10.24         |  | Lease between Learning Tree International Limited and Westinghouse Brake and Signal Holdings Limited (xi)                                
|              | 
|10.25         |  | Counterpart Guarantee and Rent Deposit Deed among Registrant, Learning Tree International Limited and Courtlands Developments Limited (v)
|              | 
|10.26         |  | Lease Agreement (Deed of Lease) by and between Registrant and Carlyle-Lane-CFRI Venture II, LLC (xii)                                    
|              | 
|10.27         |  | Lease Agreement between Registrant and Reston Town Center Property LLC (xx)                                                              
|              | 
|10.28         |  | Form of Indemnification Agreement (iii) **                                                                                               
|              | 
|14            |  | Code of Business Conduct and Ethics (i)                                                                                                  
|              | 
|21.1          |  | Subsidiaries of the Registrant (ix)                                                                                                      
|              | 
|23.1          |  | Consent of BDO USA, LLP Independent Registered Public Accounting Firm (filed herewith)                                                   
|              | 
|31.1          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith)                                                       
|              | 
|31.2          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith)                                                       
|              | 
|32.1          |  | Section 1350 Certification by Principal Executive Officer (filed herewith)                                                               
|              | 
|32.2          |  | Section 1350 Certification by Chief Financial Officer (filed herewith)                                                                   



|(i) | Incorporated by reference from Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------

|(ii) | Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the period ended December 31, 2003.
|---- | -----------------------------------------------------------------------------------------------------------------

|(iii) | Incorporated by reference from Registrants Annual Report on Form 10-K for the fiscal year ended October 1, 2004.
|----- | -----------------------------------------------------------------------------------------------------------------

|(iv) | Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the period ended July 1, 2005.
|---- | ------------------------------------------------------------------------------------------------------------

|(v) | Incorporated by reference from Registrants Current Report on Form 8-K filed October 3, 2005.
|--- | ---------------------------------------------------------------------------------------------

|(vi) | Incorporated by reference from Registrants Current Report on Form 8-K filed October 11, 2005.
|---- | ----------------------------------------------------------------------------------------------

|(vii) | Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the period ended December 30, 2005.
|----- | -----------------------------------------------------------------------------------------------------------------

|(viii) | Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the period ended March 31, 2006.
|------ | --------------------------------------------------------------------------------------------------------------

|(ix) | Incorporated by reference from Registrants Annual Report on Form 10-K for the fiscal year ended September 29, 2006.
|---- | --------------------------------------------------------------------------------------------------------------------

|(x) | Incorporated by reference from Registrants Current Report on Form 8-K filed March 1, 2007.
|--- | -------------------------------------------------------------------------------------------

|(xi) | Incorporated by reference from Registrants Current Report on Form 8-K filed March 23, 2007.
|---- | --------------------------------------------------------------------------------------------

|(xii) | Incorporated by reference from Registrants Current Report on Form 8-K filed May 4, 2007.
|----- | -----------------------------------------------------------------------------------------

|(xiii) | Incorporated by reference from Registrants Definitive Proxy Statement Amendment #2 on Schedule 14A filed May 7, 2007.
|------ | ----------------------------------------------------------------------------------------------------------------------

|(xiv) | Incorporated by reference from Registrants Current Report on Form 8-K filed August 29, 2007.
|----- | ---------------------------------------------------------------------------------------------

|(xv) | Incorporated by reference from Registrants Annual Report on Form 10-K filed December 11, 2007.
|---- | -----------------------------------------------------------------------------------------------

|(xvi) | Incorporated by reference from Registrants Registration Statement on Form S-8 filed January 9, 2008.
|----- | -----------------------------------------------------------------------------------------------------



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|(xvii) | Incorporated by reference from Registrants Current Report on Form 8-K filed November 6, 2009.
|------ | ----------------------------------------------------------------------------------------------

|(xviii) | Incorporated by reference from Registrants Annual Report on Form 10-K for the fiscal year ended October 2, 2009.
|------- | -----------------------------------------------------------------------------------------------------------------

|(xix) | Incorporated by reference from Registrants Current Report on Form 8-K filed January 4, 2010.
|----- | ---------------------------------------------------------------------------------------------

|(xx) | Incorporated by reference from Registrants Current Report on Form 8-K filed January 11, 2010.
|---- | ----------------------------------------------------------------------------------------------

|(xxi) | Incorporated by reference from Registrants Current Report on Form 8-K filed April 9, 2010.
|----- | -------------------------------------------------------------------------------------------

|(xxii) | Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the period ended April 2, 2010.
|------ | -------------------------------------------------------------------------------------------------------------



81