##### 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 July 31, 2008
 Commission File Number 0-20842
 PLATO LEARNING, INC.
 (Exact name of Registrant as specified in its charter)
 Delaware(State or other jurisdiction of incorporation or organization)
    
    36-3660532(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
    
    Smaller reporting company  o(Do not check if a smaller reporting company)
 o þ




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##### 



PLATO LEARNING, INC.
Form 10-Q
Quarterly Period Ended July 31, 2008
 TABLE OF CONTENTS
 PagePART I.
FINANCIAL INFORMATIONITEM 1. Financial Statements:Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended July 31, 2008 and 2007 (Unaudited)
    
    3Condensed Consolidated Balance Sheets as of
July 31, 2008 (Unaudited) and October 31, 2007
    
    4Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended July 31, 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
    
    14ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    22ITEM 4. Controls and Procedures
    
    22PART II.
OTHER INFORMATIONITEM 1A. Risk Factors
    
    23ITEM 6. Exhibits
    
    23SIGNATURES
    
    24Section 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Financial OfficerSection 906 Certification of Chief Executive OfficerSection 906 Certification of Chief Financial Officer
  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
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUESSubscriptions
    
    $
    9,247
    
    
    $
    6,532
    
    
    $
    25,691
    
    
    $
    17,045License fees
    
    
    3,353
    
    
    
    5,940
    
    
    
    7,113
    
    
    
    13,652Services
    
    
    6,038
    
    
    
    6,731
    
    
    
    18,214
    
    
    
    20,745Total revenues
    
    
    18,638
    
    
    
    19,203
    
    
    
    51,018
    
    
    
    51,442COST OF REVENUESSubscriptions
    
    
    4,593
    
    
    
    4,140
    
    
    
    14,058
    
    
    
    11,075License fees
    
    
    1,540
    
    
    
    2,066
    
    
    
    4,060
    
    
    
    6,212Services
    
    
    3,172
    
    
    
    3,496
    
    
    
    9,082
    
    
    
    9,837Total cost of revenues
    
    
    9,305
    
    
    
    9,702
    
    
    
    27,200
    
    
    
    27,124GROSS PROFIT
    
    
    9,333
    
    
    
    9,501
    
    
    
    23,818
    
    
    
    24,318OPERATING EXPENSESSales and marketing
    
    
    6,657
    
    
    
    7,579
    
    
    
    21,182
    
    
    
    22,682General and administrative
    
    
    2,258
    
    
    
    2,865
    
    
    
    7,909
    
    
    
    8,983Product maintenance and development
    
    
    1,128
    
    
    
    499
    
    
    
    3,306
    
    
    
    3,412Amortization of intangibles
    
    
    388
    
    
    
    438
    
    
    
    1,163
    
    
    
    1,352Restructuring charges (benefit)
    
    
    800
    
    
    
    (766
    )
    
    
    2,435
    
    
    
    (766
    )Total operating expenses
    
    
    11,231
    
    
    
    10,615
    
    
    
    35,995
    
    
    
    35,663OPERATING LOSS
    
    
    (1,898
    )
    
    
    (1,114
    )
    
    
    (12,177
    )
    
    
    (11,345
    )Other (loss) income, net
    
    
    (11
    )
    
    
    218
    
    
    
    188
    
    
    
    917LOSS BEFORE INCOME TAXES
    
    
    (1,909
    )
    
    
    (896
    )
    
    
    (11,989
    )
    
    
    (10,428
    )Income tax expense
    
    
    152
    
    
    
    150
    
    
    
    456
    
    
    
    450NET LOSS
    
    $
    (2,061
    )
    
    $
    (1,046
    )
    
    $
    (12,445
    )
    
    $
    (10,878
    )NET LOSS PER SHAREBasic and diluted
    
    $
    (0.09
    )
    
    $
    (0.04
    )
    
    $
    (0.52
    )
    
    $
    (0.46
    )WEIGHTED AVERAGE COMMON
SHARES OUTSTANDINGBasic and diluted
    
    
    23,881
    
    
    
    23,762
    
    
    
    23,825
    
    
    
    23,747
 See Notes to Condensed Consolidated Financial Statements.
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PLATO Learning, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 (In thousands, except per share amounts)
 July 31,
    
    
    October 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,838
    
    
    $
    24,297Accounts receivable, net
    
    
    16,744
    
    
    
    14,479Other current assets
    
    
    7,591
    
    
    
    7,759Total current assets
    
    
    36,173
    
    
    
    46,535Equipment and leasehold improvements, net
    
    
    4,241
    
    
    
    5,615Product development costs, net
    
    
    29,707
    
    
    
    30,266Goodwill
    
    
    71,865
    
    
    
    71,865Identified intangible assets, net
    
    
    6,205
    
    
    
    7,983Other long-term assets
    
    
    6,620
    
    
    
    5,039Total assets
    
    $
    154,811
    
    
    $
    167,303LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,642
    
    
    $
    4,608Accrued compensation
    
    
    4,238
    
    
    
    5,453Other accrued liabilities
    
    
    4,766
    
    
    
    4,245Deferred revenue
    
    
    38,852
    
    
    
    38,821Total current liabilities
    
    
    50,498
    
    
    
    53,127Long-term deferred revenue
    
    
    11,796
    
    
    
    10,302Deferred income taxes
    
    
    3,592
    
    
    
    3,139Total liabilities
    
    
    65,886
    
    
    
    66,568Stockholders equity:Common stock, $.01 par value, 50,000 shares authorized;
24,024 shares issued and 23,966 shares outstanding at
at July 31, 2008; 23,824 shares issued and 23,804
shares outstanding at October 31, 2007
    
    
    240
    
    
    
    238Additional paid-in capital
    
    
    170,643
    
    
    
    169,927Treasury stock at cost
    
    
    (315
    )
    
    
    (205
    )Accumulated deficit
    
    
    (80,339
    )
    
    
    (67,893
    )Accumulated other comprehensive loss
    
    
    (1,304
    )
    
    
    (1,332
    )Total stockholders equity
    
    
    88,925
    
    
    
    100,735Total liabilities and stockholders equity
    
    $
    154,811
    
    
    $
    167,303
 See Notes to Condensed Consolidated Financial Statements.
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PLATO Learning, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (In thousands)
 Nine Months EndedJuly 31,2008
    
    
    2007OPERATING ACTIVITIES:Net loss
    
    $
    (12,445
    )
    
    $
    (10,878
    )Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Deferred income taxes
    
    
    456
    
    
    
    450Depreciation and amortization
    
    
    12,868
    
    
    
    11,860Provision for doubful accounts
    
    
    
    
    
    
    (539
    )Stock-based compensation
    
    
    559
    
    
    
    888Loss on disposal of equipment
    
    
    105
    
    
    
    (26
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,642
    )
    
    
    3,895Other current and long-term assets
    
    
    (238
    )
    
    
    742Accounts payable
    
    
    (1,967
    )
    
    
    (428
    )Other current and long-term liabilities
    
    
    (686
    )
    
    
    (2,793
    )Deferred revenue
    
    
    1,526
    
    
    
    (193
    )Total adjustments
    
    
    8,981
    
    
    
    13,856Net cash (used in) provided by operating activities
    
    
    (3,464
    )
    
    
    2,978INVESTING ACTIVITIES:Capitalized internal product development costs
    
    
    (8,741
    )
    
    
    (11,718
    )Purchases of equipment and leasehold improvements
    
    
    (318
    )
    
    
    (1,471
    )Net cash used in investing activities
    
    
    (9,059
    )
    
    
    (13,189
    )FINANCING ACTIVITIES:Net proceeds from issuance of common stock, net of repurchases
    
    
    60
    
    
    
    155Payment of debt financing fees
    
    
    
    
    
    
    (523
    )Repayments of capital lease obligations
    
    
    (22
    )
    
    
    (34
    )Net cash provided by (used in) financing activities
    
    
    38
    
    
    
    (402
    )EFFECT OF CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    26
    
    
    
    (130
    )Net decrease in cash and cash equivalents
    
    
    (12,459
    )
    
    
    (10,743
    )Cash and cash equivalents at beginning of period
    
    
    24,297
    
    
    
    33,094CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    11,838
    
    
    $
    22,351
 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 July 31,
    
    
    Nine Months Ended July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (2,061
    )
    
    $
    (1,046
    )
    
    $
    (12,445
    )
    
    $
    (10,878
    )Basic and diluted weighted average common
shares outstanding
    
    
    23,881
    
    
    
    23,762
    
    
    
    23,825
    
    
    
    23,747Basic and diluted net loss per share
    
    $
    (0.09
    )
    
    $
    (0.04
    )
    
    $
    (0.52
    )
    
    $
    (0.46
    )
  New Accounting Pronouncements
    7




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Note 3. Stock-Based Compensation
  8




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OptionsOutstandingOptions outstanding at October 31, 2007
    
    
    2,522Options granted
    
    
    492Options exercised
    
    
    Options forfeited or cancelled
    
    
    (195
    )Options outstanding at July 31, 2008
    
    
    2,819Options exercisable at July 31, 2008
    
    
    2,157
  2008
    
    2007Three months ended
    
    $
    483
    
    
    $
    347Nine months ended
    
    $
    559
    
    
    $
    888
  Note 4. Accounts Receivable, Net
  July 31,
    
    
    October 31,2008
    
    
    2007Total trade accounts receivable
    
    $
    20,202
    
    
    $
    16,594Long-term installment accounts receivable
    
    
    (3,174
    )
    
    
    (1,796
    )Allowance for doubtful accounts
    
    
    (284
    )
    
    
    (319
    )Accounts receivable, net
    
    $
    16,744
    
    
    $
    14,479
  9




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2008
    
    
    2007Balance, beginning of fiscal year
    
    $
    319
    
    
    $
    928Provision for doubtful accounts, net of other
reserve adjustments
    
    
    
    
    
    
    (539
    )Write-offs, net of recoveries
    
    
    (35
    )
    
    
    (64
    )Balance, July 31
    
    $
    284
    
    
    $
    325
  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
    
    
    8,741
    
    
    
    
    
    
    
    8,741Amortization
    
    
    
    
    
    
    (9,300
    )
    
    
    (9,300
    )Write-off of fully amortized costs
    
    
    (1,068
    )
    
    
    1,068
    
    
    
    Balance, July 31, 2008
    
    $
    59,049
    
    
    $
    (29,342
    )
    
    $
    29,707
  10




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Note 7. Goodwill and Identified Intangible Assets
  July 31, 2008
    
    
    October 31, 2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingValue
    
    
    Amortzation
    
    
    Value
    
    
    Value
    
    
    Amortzation
    
    
    ValueAcquired technology
    
    $
    13,563
    
    
    $
    (10,911
    )
    
    $
    2,652
    
    
    $
    13,563
    
    
    $
    (10,295
    )
    
    $
    3,268Trademarks and
tradenames
    
    
    1,380
    
    
    
    (1,380
    )
    
    
    
    
    
    
    1,380
    
    
    
    (1,380
    )
    
    
    Customer relationships
and lists
    
    
    19,800
    
    
    
    (16,247
    )
    
    
    3,553
    
    
    
    20,200
    
    
    
    (15,485
    )
    
    
    4,715$
    34,743
    
    
    $
    (28,538
    )
    
    $
    6,205
    
    
    $
    35,143
    
    
    $
    (27,160
    )
    
    $
    7,983
   Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Amortization of intangible assets included in:Cost of revenues
    
    $
    205
    
    
    $
    205
    
    
    $
    616
    
    
    $
    616Operating expenses
    
    
    388
    
    
    
    439
    
    
    
    1,163
    
    
    
    1,353$
    593
    
    
    $
    644
    
    
    $
    1,779
    
    
    $
    1,969
  Cost of
    
    
    OperatingRevenues
    
    
    Expenses
    
    
    TotalRemainder of 2008
    
    $
    205
    
    
    $
    388
    
    
    $
    5932009
    
    
    749
    
    
    
    1,550
    
    
    
    2,2992010
    
    
    647
    
    
    
    1,550
    
    
    
    2,1972011
    
    
    526
    
    
    
    65
    
    
    
    5912012
    
    
    485
    
    
    
    
    
    
    
    485Thereafter
    
    
    40
    
    
    
    
    
    
    
    40$
    2,652
    
    
    $
    3,553
    
    
    $
    6,205
  11




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Note 8. Deferred Revenue
  July 31,
    
    
    October 31,2008
    
    
    2007Subscriptions
    
    $
    38,413
    
    
    $
    32,938License fees
    
    
    349
    
    
    
    622Services
    
    
    11,886
    
    
    
    15,563Total
    
    
    50,648
    
    
    
    49,123Less: long-term portion
    
    
    (11,796
    )
    
    
    (10,302
    )Current portion
    
    $
    38,852
    
    
    $
    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
    
    
    
    707
    
    
    
    2,342Cash payments
    
    
    (1,637
    )
    
    
    (239
    )
    
    
    (1,876
    )Translation adjustment
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )Reserve balance at July 31, 2008
    
    $
    422
    
    
    $
    1,054
    
    
    $
    1,476
 12




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Note 10. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (2,061
    )
    
    $
    (1,046
    )
    
    $
    (12,445
    )
    
    $
    (10,878
    )Foreign currency translation adjustments
    
    
    (5
    )
    
    
    (22
    )
    
    
    26
    
    
    
    (130
    )Total comprehensive loss
    
    $
    (2,066
    )
    
    $
    (1,068
    )
    
    $
    (12,419
    )
    
    $
    (11,008
    )
  Note 11. Income Taxes
   Note 12. Stockholders Equity
  13




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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
  14




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General Factors Affecting our Financial Results
  Revenue
  Gross Profit
 Operating Expenses
   15




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Cash Balances and Cash Flow.
 16




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##### Table of Contents



Results of Operations
 Revenues
  Sales Order Information (in thousands):
 Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,Percent
    
    
    
    
    
    
    
    
    
    
    PercentIncrease
    
    
    
    
    
    
    
    
    
    
    Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    2008
    
    
    2007
    
    
    (Decrease)Order Value:Subscriptions
    
    
    17,709
    
    
    
    12,514
    
    
    
    41.5
    %
    
    
    30,586
    
    
    
    22,709
    
    
    
    34.7
    %License fees
    
    
    2,457
    
    
    
    5,503
    
    
    
    (55.4
    %)
    
    
    6,384
    
    
    
    12,306
    
    
    
    (48.1
    %)Services
    
    
    7,508
    
    
    
    8,276
    
    
    
    (9.3
    %)
    
    
    14,401
    
    
    
    16,722
    
    
    
    (13.9
    %)Total Order Value
    
    $
    27,674
    
    
    $
    26,293
    
    
    
    5.3
    %
    
    $
    51,371
    
    
    $
    51,737
    
    
    
    (0.7
    %)Percent of Total Order Value:Subscriptions
    
    
    64.0
    %
    
    
    47.6
    %
    
    
    
    
    
    
    59.6
    %
    
    
    43.9
    %License fees
    
    
    8.9
    %
    
    
    20.9
    %
    
    
    
    
    
    
    12.4
    %
    
    
    23.8
    %Services
    
    
    27.1
    %
    
    
    31.5
    %
    
    
    
    
    
    
    28.0
    %
    
    
    32.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 Orders Greater Than $100,000:
 Three Months Ended
    
    Nine Months EndedJuly 31,
    
    July 31,2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeNumber
    
    
    40
    
    
    
    38
    
    
    
    5.3
    %
    
    
    67
    
    
    
    71
    
    
    
    (5.6
    %)Value ($000)
    
    $
    8,183
    
    
    $
    7,640
    
    
    
    7.1
    %
    
    $
    13,248
    
    
    $
    13,774
    
    
    
    (3.8
    %)Average Value ($000)
    
    $
    205
    
    
    $
    201
    
    
    
    2.0
    %
    
    $
    198
    
    
    $
    194
    
    
    
    2.1
    %
 Revenue by Category (in thousands):
 Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeSubscriptions
    
    $
    9,247
    
    
    $
    6,532
    
    
    
    41.6
    %
    
    $
    25,691
    
    
    $
    17,045
    
    
    
    50.7
    %License fees
    
    
    3,353
    
    
    
    5,940
    
    
    
    (43.6
    %)
    
    
    7,113
    
    
    
    13,652
    
    
    
    (47.9
    %)Services
    
    
    6,038
    
    
    
    6,731
    
    
    
    (10.3
    %)
    
    
    18,214
    
    
    
    20,745
    
    
    
    (12.2
    %)Total revenues
    
    $
    18,638
    
    
    $
    19,203
    
    
    
    (2.9
    %)
    
    $
    51,018
    
    
    $
    51,442
    
    
    
    (0.8
    %)
  17




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##### Table of Contents



Gross Margin
 Revenue Mix  Percentage of Total Revenue
 Three Months Ended
    
    Nine Months EndedJuly 31,
    
    July 31,Revenue Category
    
    2008
    
    2007
    
    2008
    
    2007Subscription
    
    
    49.6
    %
    
    
    34.0
    %
    
    
    50.4
    %
    
    
    33.1
    %License fee
    
    
    18.0
    %
    
    
    30.9
    %
    
    
    13.9
    %
    
    
    26.6
    %Services
    
    
    32.4
    %
    
    
    35.1
    %
    
    
    35.7
    %
    
    
    40.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Gross Margin Percentage
 Three Months Ended July 31,
    
    Nine Months Ended July 31,Increase
    
    
    
    
    
    
    
    
    
    IncreaseRevenue Category
    
    2008
    
    2007
    
    (Decrease)
    
    2008
    
    2007
    
    (Decrease)Subscriptions
    
    
    50.3
    %
    
    
    36.6
    %
    
    
    13.7
    %
    
    
    45.3
    %
    
    
    35.0
    %
    
    
    10.3
    %License fees
    
    
    54.1
    %
    
    
    65.2
    %
    
    
    (11.1
    %)
    
    
    42.9
    %
    
    
    54.5
    %
    
    
    (11.6
    %)Services
    
    
    47.5
    %
    
    
    48.1
    %
    
    
    (0.6
    %)
    
    
    50.1
    %
    
    
    52.6
    %
    
    
    (2.5
    %)Total
    
    
    50.1
    %
    
    
    49.5
    %
    
    
    0.6
    %
    
    
    46.7
    %
    
    
    47.3
    %
    
    
    (0.6
    %)
     18




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##### Table of Contents



Operating Expenses
  Percentage of
    
    
    
    
    
    Percentage ofTotal Revenue
    
    Percent
    
    Total Revenue
    
    PercentThree Months Ended
    
    Increase
    
    Nine Months Ended
    
    IncreaseJuly 31,
    
    (Decrease)
    
    July 31,
    
    (Decrease)2008
    


    2007
    

    in Amount
    

    2008
    



2007
    

    in AmountSales and marketing
    
    
    35.7
    %
    
    
    39.5
    %
    
    
    (12.2
    %)
    
    
    41.5
    %
    
    
    44.1
    %
    
    
    (6.6
    %)General and administrative
    
    
    12.1
    %
    
    
    14.9
    %
    
    
    (21.2
    %)
    
    
    15.5
    %
    
    
    17.5
    %
    
    
    (12.0
    %)Product maintenance and
development
    
    
    6.1
    %
    
    
    2.6
    %
    
    
    126.1
    %
    
    
    6.5
    %
    
    
    6.6
    %
    
    
    (3.1
    %)Amortization of intangibles
    
    
    2.1
    %
    
    
    2.3
    %
    
    
    (11.4
    %)
    
    
    2.3
    %
    
    
    2.6
    %
    
    
    (14.0
    %)Subtotal
    
    
    56.0
    %
    
    
    59.3
    %
    
    
    (8.3
    %)
    
    
    65.8
    %
    
    
    70.8
    %
    
    
    (7.9
    %)Restructuring charges (benefit)
    
    
    4.3
    %
    
    
    (4.0
    %)
    
    
    
    *
    
    
    4.8
    %
    
    
    (1.5
    %)
    
    
    
    *Total operating expenses
    
    
    60.3
    %
    
    
    55.3
    %
    
    
    5.8
    %
    
    
    70.6
    %
    
    
    69.3
    %
    
    
    0.9
    %
 
 *
    
    Not meaningful    Other (Loss) Income, Net
  19




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##### Table of Contents



Liquidity and Capital Resources
 Cash and Cash Equivalents
  Working Capital and Liquidity
    Contractual Obligations and Commercial Commitments
   20




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##### Table of Contents



Recent Accounting Pronouncements
  Disclosures about Off-Balance Sheet Arrangements
  Forward-Looking Statements
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  22




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##### Table of Contents



PART II.
 
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
 Exhibit Number and Description
 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.
 
 23




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##### Table of Contents



SIGNATURES
  PLATO LEARNING, INC.      





                                                     By
    /s/ MICHAEL A. MORACHESeptember 9, 2008
    Michael A. MorachePresident and Chief Executive Officer

(principal executive officer)/s/ ROBERT J. RUECKLRobert J. RuecklVice President and Chief Financial Officer
(principal financial officer) 24