##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2008
 Commission File Number 0-20842
 PLATO LEARNING, INC.
 (Exact name of Registrant as specified in its charter)
 Delaware
    
    36-3660532(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)
 10801 Nesbitt Avenue South, Bloomington, MN 55437  (Address of principal executive offices)
 (952) 832-1000  (Registrants telephone number, including area code)
 Not Applicable  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



PLATO LEARNING, INC.
Form 10-Q
Quarterly Period Ended April 30, 2008
 TABLE OF CONTENTS
 PagePART I.
FINANCIAL INFORMATIONITEM 1. Financial Statements:Condensed Consolidated Statements of Operations for the
Three and Six Months Ended April 30, 2008 and 2007 (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of
April 30, 2008 and October 31, 2007 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Six Months Ended April 30, 2008 and 2007 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21ITEM 4. Controls and Procedures
    
    
    21PART II.
OTHER INFORMATIONITEM 1A. Risk Factors
    
    
    22ITEM 4 Submission of Matters to a Vote of Security Holders
    
    
    22ITEM 6. Exhibits
    
    
    22SIGNATURES
    
    
    23Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PLATO Learning, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUESSubscriptions
    
    $
    8,475
    
    
    $
    5,360
    
    
    $
    16,444
    
    
    $
    10,513License fees
    
    
    1,509
    
    
    
    3,070
    
    
    
    3,760
    
    
    
    7,712Services
    
    
    6,261
    
    
    
    6,783
    
    
    
    12,176
    
    
    
    14,014Total revenues
    
    
    16,245
    
    
    
    15,213
    
    
    
    32,380
    
    
    
    32,239COST OF REVENUESSubscriptions
    
    
    4,816
    
    
    
    3,737
    
    
    
    9,465
    
    
    
    6,935License fees
    
    
    1,097
    
    
    
    1,864
    
    
    
    2,520
    
    
    
    4,146Services
    
    
    3,314
    
    
    
    3,159
    
    
    
    5,910
    
    
    
    6,341Total cost of revenues
    
    
    9,227
    
    
    
    8,760
    
    
    
    17,895
    
    
    
    17,422GROSS PROFIT
    
    
    7,018
    
    
    
    6,453
    
    
    
    14,485
    
    
    
    14,817OPERATING EXPENSESSales and marketing
    
    
    7,521
    
    
    
    7,382
    
    
    
    14,526
    
    
    
    15,103General and administrative
    
    
    2,701
    
    
    
    2,904
    
    
    
    5,651
    
    
    
    6,118Product maintenance and development
    
    
    1,101
    
    
    
    1,145
    
    
    
    2,177
    
    
    
    2,913Amortization of intangibles
    
    
    388
    
    
    
    457
    
    
    
    775
    
    
    
    914Restructuring charges
    
    
    1,635
    
    
    
    
    
    
    
    1,635
    
    
    
    Total operating expenses
    
    
    13,346
    
    
    
    11,888
    
    
    
    24,764
    
    
    
    25,048OPERATING LOSS
    
    
    (6,328
    )
    
    
    (5,435
    )
    
    
    (10,279
    )
    
    
    (10,231
    )Other income, net
    
    
    7
    
    
    
    279
    
    
    
    199
    
    
    
    699LOSS BEFORE INCOME TAXES
    
    
    (6,321
    )
    
    
    (5,156
    )
    
    
    (10,080
    )
    
    
    (9,532
    )Income tax expense
    
    
    152
    
    
    
    150
    
    
    
    304
    
    
    
    300NET LOSS
    
    $
    (6,473
    )
    
    $
    (5,306
    )
    
    $
    (10,384
    )
    
    $
    (9,832
    )NET LOSS PER SHAREBasic and diluted
    
    $
    (0.27
    )
    
    $
    (0.22
    )
    
    $
    (0.44
    )
    
    $
    (0.41
    )WEIGHTED AVERAGE COMMON
SHARES OUTSTANDINGBasic and diluted
    
    
    23,812
    
    
    
    23,747
    
    
    
    23,800
    
    
    
    23,739
 See Notes to Condensed Consolidated Financial Statements.
 3




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PLATO Learning, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets (Unaudited)
 (In thousands, except per share amounts)
 April 30,
    
    
    October 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,938
    
    
    $
    24,297Accounts receivable, net
    
    
    9,727
    
    
    
    14,479Other current assets
    
    
    6,304
    
    
    
    7,759Total current assets
    
    
    28,969
    
    
    
    46,535Equipment and leasehold improvements, net
    
    
    4,756
    
    
    
    5,615Product development costs, net
    
    
    30,691
    
    
    
    30,266Goodwill
    
    
    71,865
    
    
    
    71,865Identified intangible assets, net
    
    
    6,798
    
    
    
    7,983Other long-term assets
    
    
    5,805
    
    
    
    5,039Total assets
    
    $
    148,884
    
    
    $
    167,303LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,041
    
    
    $
    4,608Accrued compensation
    
    
    4,569
    
    
    
    5,453Other accrued liabilities
    
    
    4,563
    
    
    
    4,245Deferred revenue
    
    
    31,500
    
    
    
    38,821Total current liabilities
    
    
    44,673
    
    
    
    53,127Long-term deferred revenue
    
    
    10,198
    
    
    
    10,302Deferred income taxes
    
    
    3,441
    
    
    
    3,139Total liabilities
    
    
    58,312
    
    
    
    66,568Stockholders equity:Common stock, $.01 par value, 50,000 shares authorized;
23,897 shares issued and 23,875 shares outstanding at
at April 30, 2008; 23,824 shares issued and 23,804
shares outstanding at October 31, 2007
    
    
    239
    
    
    
    238Additional paid-in capital
    
    
    170,119
    
    
    
    169,927Treasury stock at cost
    
    
    (209
    )
    
    
    (205
    )Accumulated deficit
    
    
    (78,278
    )
    
    
    (67,893
    )Accumulated other comprehensive loss
    
    
    (1,299
    )
    
    
    (1,332
    )Total stockholders equity
    
    
    90,572
    
    
    
    100,735Total liabilities and stockholders equity
    
    $
    148,884
    
    
    $
    167,303
 See Notes to Condensed Consolidated Financial Statements.
 4




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PLATO Learning, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (In thousands)
 Six Months EndedApril 30,2008
    
    
    2007OPERATING ACTIVITIES:Net loss
    
    $
    (10,384
    )
    
    $
    (9,832
    )Adjustments to reconcile net loss to net cash used in operating activities:Deferred income taxes
    
    
    304
    
    
    
    300Depreciation and amortization
    
    
    8,685
    
    
    
    7,711Provision for doubful accounts
    
    
    
    
    
    
    (174
    )Stock-based compensation
    
    
    76
    
    
    
    541Loss on disposal of equipment
    
    
    9
    
    
    
    5Changes in operating assets and liabilities:Accounts receivable
    
    
    4,093
    
    
    
    8,202Other current and long-term assets
    
    
    1,176
    
    
    
    1,039Accounts payable
    
    
    (567
    )
    
    
    (949
    )Other current and long-term liabilities
    
    
    (558
    )
    
    
    (3,286
    )Deferred revenue
    
    
    (7,425
    )
    
    
    (6,934
    )Total adjustments
    
    
    5,793
    
    
    
    6,455Net cash used in operating activities
    
    
    (4,591
    )
    
    
    (3,377
    )INVESTING ACTIVITIES:Capitalized internal product development costs
    
    
    (6,679
    )
    
    
    (7,419
    )Purchases of equipment and leasehold improvements
    
    
    (223
    )
    
    
    (1,237
    )Net cash used in investing activities
    
    
    (6,902
    )
    
    
    (8,656
    )FINANCING ACTIVITIES:Net proceeds from issuance of common stock, net of repurchases
    
    
    123
    
    
    
    116Repayments of capital lease obligations
    
    
    (20
    )
    
    
    (21
    )Net cash provided by financing activities
    
    
    103
    
    
    
    95EFFECT OF CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    31
    
    
    
    (108
    )Net decrease in cash and cash equivalents
    
    
    (11,359
    )
    
    
    (12,046
    )Cash and cash equivalents at beginning of period
    
    
    24,297
    
    
    
    33,094CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,938
    
    
    $
    21,048
 See Notes to Condensed Consolidated Financial Statements.
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PLATO LEARNING, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Note 1. General
 Basis of Presentation
  Consolidation
  Fiscal Periods
  Note 2. Summary of Significant Accounting Policies
 General
  
    
    Revenue recognition
    
    Capitalized product development costs
    
    Valuation of our deferred income taxes
    
    Valuation and impairment analysis of goodwill and identified intangible assets
  6




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Loss per Share
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (6,473
    )
    
    $
    (5,306
    )
    
    $
    (10,384
    )
    
    $
    (9,832
    )Basic and diluted
weighted average common
shares outstanding
    
    
    23,812
    
    
    
    23,747
    
    
    
    23,800
    
    
    
    23,739Basic and diluted loss
per share
    
    $
    (0.27
    )
    
    $
    (0.22
    )
    
    $
    (0.44
    )
    
    $
    (0.41
    )
  New Accounting Pronouncements
 Determination of the
Useful Life of Intangible Assets
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
  7




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##### Table of Contents



Note 3. Stock-Based Compensation
 Share-Based Payment
  OptionsOutstandingOptions outstanding at October 31, 2007
    
    
    2,522Options granted
    
    
    492Options exercised
    
    
    Options forfeited or cancelled
    
    
    (168
    )Options outstanding at April 30, 2008
    
    
    2,846Options exercisable at April 30, 2008
    
    
    2,179
  2008
    
    2007Three months ended
    
    $
    238
    
    
    $
    439Six months ended
    
    $
    76
    
    
    $
    541
  Note 4. Accounts Receivable, Net
  April 30,
    
    
    October 31,2008
    
    
    2007Total trade accounts receivable
    
    $
    12,485
    
    
    $
    16,594Long-term installment accounts receivable
    
    
    (2,455
    )
    
    
    (1,796
    )Allowance for doubtful accounts
    
    
    (303
    )
    
    
    (319
    )Accounts receivable, net
    
    $
    9,727
    
    
    $
    14,479
  8




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##### Table of Contents





2008
    
    
    2007Balance, October 31
    
    $
    319
    
    
    $
    928Provision for doubtful accounts, net of other
reserve adjustments
    
    
    
    
    
    
    (174
    )Write-offs, net of recoveries
    
    
    (16
    )
    
    
    (54
    )Balance, April 30
    
    $
    303
    
    
    $
    700
  Note 5. Deferred Commissions
  Note 6. Product Development Costs
  Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingValue
    
    
    Amortization
    
    
    ValueBalance, October 31, 2007
    
    $
    51,376
    
    
    $
    (21,110
    )
    
    $
    30,266Capitalized internal product development costs
    
    
    6,679
    
    
    
    
    
    
    
    6,679Amortization
    
    
    
    
    
    
    (6,254
    )
    
    
    (6,254
    )Write-off of fully amortized costs
    
    
    (1,068
    )
    
    
    1,068
    
    
    
    Balance, April 30, 2008
    
    $
    56,987
    
    
    $
    (26,296
    )
    
    $
    30,691
  Note 7. Goodwill and Identified Intangible Assets
  9




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April 30, 2008
    
    
    October 31, 2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingValue
    
    
    Amortzation
    
    
    Value
    
    
    Value
    
    
    Amortzation
    
    
    ValueAcquired technology
    
    $
    13,563
    
    
    $
    (10,705
    )
    
    $
    2,858
    
    
    $
    13,563
    
    
    $
    (10,295
    )
    
    $
    3,268Trademarks and
tradenames
    
    
    1,380
    
    
    
    (1,380
    )
    
    
    
    
    
    
    1,380
    
    
    
    (1,380
    )
    
    
    Customer relationships
and lists
    
    
    19,800
    
    
    
    (15,860
    )
    
    
    3,940
    
    
    
    20,200
    
    
    
    (15,485
    )
    
    
    4,715$
    34,743
    
    
    $
    (27,945
    )
    
    $
    6,798
    
    
    $
    35,143
    
    
    $
    (27,160
    )
    
    $
    7,983
   Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Amortization of intangible assets included in:Cost of revenues
    
    $
    205
    
    
    $
    205
    
    
    $
    411
    
    
    $
    411Operating expenses
    
    
    388
    
    
    
    457
    
    
    
    775
    
    
    
    914$
    593
    
    
    $
    662
    
    
    $
    1,186
    
    
    $
    1,325
  Cost of
    
    
    OperatingRevenues
    
    
    Expense
    
    
    TotalRemainder of 2008
    
    $
    411
    
    
    $
    775
    
    
    $
    1,1862009
    
    
    749
    
    
    
    1,550
    
    
    
    2,2992010
    
    
    647
    
    
    
    1,550
    
    
    
    2,1972011
    
    
    526
    
    
    
    65
    
    
    
    5912012
    
    
    485
    
    
    
    
    
    
    
    485Thereafter
    
    
    40
    
    
    
    
    
    
    
    40$
    2,858
    
    
    $
    3,940
    
    
    $
    6,798
  10




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##### Table of Contents



Note 8. Deferred Revenue
  April 30,
    
    
    October 31,2008
    
    
    2007Subscriptions
    
    $
    29,964
    
    
    $
    32,938License fees
    
    
    1,319
    
    
    
    622Services
    
    
    10,415
    
    
    
    15,563Total
    
    
    41,698
    
    
    
    49,123Less: long-term portion
    
    
    (10,198
    )
    
    
    (10,302
    )Current portion
    
    $
    31,500
    
    
    $
    38,821
  Note 9. Restructuring and Other Charges
   Severanceand related
    
    
    Facilitycosts
    
    
    closings
    
    
    TotalReserve balance at October 31, 2007
    
    $
    424
    
    
    $
    616
    
    
    $
    1,040Provision for restructuring
    
    
    1,635
    
    
    
    
    
    
    
    1,635Cash payments
    
    
    (389
    )
    
    
    (56
    )
    
    
    (445
    )Translation adjustment
    
    
    
    
    
    
    (28
    )
    
    
    (28
    )Reserve balance at April 30, 2008
    
    $
    1,670
    
    
    $
    532
    
    
    $
    2,202
 11




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Note 10. Comprehensive Loss




Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (6,473
    )
    
    $
    (5,306
    )
    
    $
    (10,384
    )
    
    $
    (9,832
    )Foreign currency translation adjustments
    
    
    1
    
    
    
    (51
    )
    
    
    31
    
    
    
    (108
    )Total comprehensive loss
    
    $
    (6,472
    )
    
    $
    (5,357
    )
    
    $
    (10,353
    )
    
    $
    (9,940
    )
  Note 11. Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN
48).
  Note 12. Stockholders Equity
  12




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Business Description
    Critical Accounting Policies and Estimates
  
    
    Revenue recognition
    
    Capitalized product development costs
    
    Valuation of our deferred income taxes
    
    Valuation and impairment analysis of goodwill and identified intangible assets
  13




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##### Table of Contents



General Factors Affecting our Financial Results
  Revenue
  Gross Profit
 Operating Expenses
   14




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##### Table of Contents



Cash Balances and Cash Flow.
 15




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##### Table of Contents



Results of Operations
 Revenues
  Sales Order Information (in thousands):
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,Percent
    
    
    
    
    
    
    
    
    
    
    PercentIncrease
    
    
    
    
    
    
    
    
    
    
    Increase2008
    
    
    2007*
    
    
    (Decrease)
    
    
    2008
    
    
    2007*
    
    
    (Decrease)Order Value:SubscriptionsCourseware
    
    $
    6,869
    
    
    $
    5,135
    
    
    
    33.8
    %
    
    $
    11,912
    
    
    $
    8,773
    
    
    
    35.8
    %Assessment and other
    
    
    369
    
    
    
    784
    
    
    
    (52.9
    %)
    
    
    965
    
    
    
    1,422
    
    
    
    (32.1
    %)Total subscriptions
    
    
    7,238
    
    
    
    5,919
    
    
    
    22.3
    %
    
    
    12,877
    
    
    
    10,195
    
    
    
    26.3
    %License fees
    
    
    2,444
    
    
    
    2,563
    
    
    
    (4.6
    %)
    
    
    3,927
    
    
    
    6,803
    
    
    
    (42.3
    %)Services
    
    
    3,414
    
    
    
    4,164
    
    
    
    (18.0
    %)
    
    
    6,893
    
    
    
    8,446
    
    
    
    (18.4
    %)Total Order Value
    
    $
    13,096
    
    
    $
    12,646
    
    
    
    3.6
    %
    
    $
    23,697
    
    
    $
    25,444
    
    
    
    (6.9
    %)Percent of Total Order Value:SubscriptionsCourseware
    
    
    52.5
    %
    
    
    40.6
    %
    
    
    
    
    
    
    50.2
    %
    
    
    34.5
    %Assessment and other
    
    
    2.8
    %
    
    
    6.2
    %
    
    
    
    
    
    
    4.1
    %
    
    
    5.6
    %Total subscriptions
    
    
    55.3
    %
    
    
    46.8
    %
    
    
    
    
    
    
    54.3
    %
    
    
    40.1
    %License fees
    
    
    18.6
    %
    
    
    20.3
    %
    
    
    
    
    
    
    16.6
    %
    
    
    26.7
    %Services
    
    
    26.1
    %
    
    
    32.9
    %
    
    
    
    
    
    
    29.1
    %
    
    
    33.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 
 *
    
    Certain 2007 amounts previously reported as assessment orders have been
reclassified to courseware orders to conform to the current period
presentation. Orders Greater Than $100,000:
 Three Months Ended
    
    Six Months EndedApril 30,
    
    April 30,2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeNumber
    
    
    15
    
    
    
    16
    
    
    
    (6.3
    %)
    
    
    27
    
    
    
    33
    
    
    
    (18.2
    %)Value ($000)
    
    $
    3,113
    
    
    $
    3,126
    
    
    
    (0.4
    %)
    
    $
    5,065
    
    
    $
    6,134
    
    
    
    (17.4
    %)Average Value ($000)
    
    $
    208
    
    
    $
    195
    
    
    
    6.7
    %
    
    $
    188
    
    
    $
    186
    
    
    
    1.1
    %
 16




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##### Table of Contents



Revenue by Category (in thousands):
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeSubscriptions
    
    $
    8,475
    
    
    $
    5,360
    
    
    
    58.1
    %
    
    $
    16,444
    
    
    $
    10,513
    
    
    
    56.4
    %License fees
    
    
    1,509
    
    
    
    3,070
    
    
    
    (50.8
    %)
    
    
    3,760
    
    
    
    7,712
    
    
    
    (51.2
    %)Services
    
    
    6,261
    
    
    
    6,783
    
    
    
    (7.7
    %)
    
    
    12,176
    
    
    
    14,014
    
    
    
    (13.1
    %)Total revenues
    
    $
    16,245
    
    
    $
    15,213
    
    
    
    6.8
    %
    
    $
    32,380
    
    
    $
    32,239
    
    
    
    0.4
    %
    Gross Margin
 Revenue Mix  Percentage of Total Revenue
 Three Months Ended
    
    Six Months EndedApril 30,
    
    April 30,Revenue Category
    
    2008
    
    2007
    
    2008
    
    2007Subscription
    
    
    52.2
    %
    
    
    35.2
    %
    
    
    50.8
    %
    
    
    32.6
    %License fee
    
    
    9.3
    %
    
    
    20.2
    %
    
    
    11.6
    %
    
    
    23.9
    %Services
    
    
    38.5
    %
    
    
    44.6
    %
    
    
    37.6
    %
    
    
    43.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Gross Margin Percentage
 Three Months Ended April 30,
    
    Six Months Ended April 30,Increase
    
    
    
    
    
    
    
    
    
    IncreaseRevenue Category
    
    2008
    
    2007
    
    (Decrease)
    
    2008
    
    2007
    
    (Decrease)Subscriptions
    
    
    43.2
    %
    
    
    30.3
    %
    
    
    12.9
    %
    
    
    42.4
    %
    
    
    34.0
    %
    
    
    8.4
    %License fees
    
    
    27.3
    %
    
    
    39.3
    %
    
    
    (12.0
    %)
    
    
    33.0
    %
    
    
    46.2
    %
    
    
    (13.2
    %)Services
    
    
    47.1
    %
    
    
    53.4
    %
    
    
    (6.3
    %)
    
    
    51.5
    %
    
    
    54.7
    %
    
    
    (3.2
    %)Total
    
    
    43.2
    %
    
    
    42.4
    %
    
    
    0.8
    %
    
    
    44.7
    %
    
    
    46.0
    %
    
    
    (1.3
    %)
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##### Table of Contents



Operating Expenses
  Percentage of
    
    
    
    
    
    Percentage ofTotal Revenue
    
    Percent
    
    Total Revenue
    
    PercentThree Months Ended
    
    Increase
    
    Six Months Ended
    
    IncreaseApril 30,
    
    (Decrease)
    
    April 30,
    
    (Decrease)2008
    
    2007
    
    in Amount
    
    2008
    
    2007
    
    in AmountSales and marketing
    
    
    46.3
    %
    
    
    48.5
    %
    
    
    1.9
    %
    
    
    44.9
    %
    
    
    46.8
    %
    
    
    (3.8
    %)General and administrative
    
    
    16.6
    %
    
    
    19.1
    %
    
    
    (7.0
    %)
    
    
    17.5
    %
    
    
    19.0
    %
    
    
    (7.6
    %)Product maintenance and
development
    
    
    6.8
    %
    
    
    7.5
    %
    
    
    (3.8
    %)
    
    
    6.7
    %
    
    
    9.0
    %
    
    
    (25.3
    %)Amortization of intangibles
    
    
    2.4
    %
    
    
    3.0
    %
    
    
    (15.1
    %)
    
    
    2.4
    %
    
    
    2.8
    %
    
    
    (15.2
    %)Subtotal
    
    
    72.1
    %
    
    
    78.1
    %
    
    
    (1.5
    %)
    
    
    71.5
    %
    
    
    77.6
    %
    
    
    (7.7
    %)Restructuring charges
    
    
    10.1
    %
    
    
    0.0
    %
    
    NM
    
    
    
    5.0
    %
    
    
    0.0
    %
    
    NMTotal operating expenses
    
    
    82.2
    %
    
    
    78.1
    %
    
    
    12.3
    %
    
    
    76.5
    %
    
    
    77.6
    %
    
    
    (1.1
    %)
  18




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##### Table of Contents



Other Income, Net
  Liquidity and Capital Resources
 Cash and Cash Equivalents
  Working Capital and Liquidity
   19




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##### Table of Contents



Contractual Obligations and Commercial Commitments
   Disclosures about Off-Balance Sheet Arrangements
  Forward-Looking Statements
  Interest Rate Risk
  20




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##### Table of Contents



Foreign Currency Exchange Rate Risk
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk Foreign Currency
Exchange Rate Risk
 
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  21




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##### Table of Contents



PART II.
 
 ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of Director Joseph E. Duffy: For 21,524,501 and Withheld 1,801,521.2.
    
    Election of Director Michael A. Morache: For 19,014,157 and Withheld 4,311,865.3.
    
    Election of Director Robert S. Peterkin: For 12,439,136 and Withheld 10,886,886.4.
    
    Ratification of the appointment of Grant Thornton LLP as the Companys independent
registered public accounting firm for the fiscal year ending October 31, 2008: For
23,312,231, Against 8,955 and Abstain 4,836.
  
 ITEM 6. EXHIBITS
 Exhibit Number and Description
 10.1
    
    Fiscal 2008 Executive Annual Equity Incentive Plan, as filed as exhibit
10.29 to our Current Report on Form 8-K (filed March 31, 2008) and incorporated
herein by reference.10.2
    
    Form of stock option agreement, as filed as exhibit 10.30 to our
Current Report on Form 8-K (filed March 31, 2008) and incorporated herein by
reference.10.3
    
    Form of performance shares agreement, as filed as exhibit 10.31 to our
Current Report on Form 8-K (filed March 31, 2008) and incorporated herein by
reference.10.4
    
    Form of stock appreciation rights agreement, as filed as exhibit 10.32
to our Current Report on Form 8-K (filed March 31, 2008) and incorporated herein by
reference.10.5
    
    Board of Directors Compensation Plan, as filed as exhibit 10.33 to our
Current Report on Form 8-K (filed March 31, 2008) and incorporated herein by
reference.10.6
    
    Form of employee restricted stock unit agreement, as filed as exhibit
10.29 to our Current Report on Form 8-K (filed May 19, 2008) and incorporated
herein by reference.31.01
    
    Certification of Chief Executive Officer under Rule 13a-14(a) adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.02
    
    Certification of Chief Financial Officer under Rule 13a-14(a) adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.01
    
    Certification of Chief Executive Officer under 18 U.S.C. 1350 pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.02
    
    Certification of Chief Financial Officer under 18 U.S.C. 1350 pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
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##### Table of Contents



SIGNATURES
  PLATO LEARNING, INC.
June 9, 2008
    
    By
    
    /s/ MICHAEL A. MORACHE

Michael A. MorachePresident and Chief Executive Officer
(principal executive officer)/s/ ROBERT J. RUECKL

Robert J. RuecklVice President and Chief Financial Officer
(principal financial officer)
 23