Plato Learning, Inc.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Odn4k43CVpcctf6pwh4AIzOe03q2JjpQmzU08UTtQjraeKptTSCdPi3ZDXExehzL vrYwOccqrWWsa7K3bG6+vA== 0000950134-03-000775.txt : 20030117 0000950134-03-000775.hdr.sgml : 20030117 20030117145932 ACCESSION NUMBER: 0000950134-03-000775 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20030117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLATO LEARNING INC CENTRAL INDEX KEY: 0000893965 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 363660532 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-72523 FILM NUMBER: 03517725 BUSINESS ADDRESS: STREET 1: 10801 NESBITT AVENUE SOUTH CITY: BLOOMINGTON STATE: MN ZIP: 55437 BUSINESS PHONE: 8477817800 MAIL ADDRESS: STREET 1: 10801 NESBITT AVENUE SOUTH CITY: BLOOMINGTON STATE: MN ZIP: 55437 FORMER COMPANY: FORMER CONFORMED NAME: TRO LEARNING INC DATE OF NAME CHANGE: 19940218 10-Q/A 1 c74081a1e10vqza.htm AMENDMENT NO. 1 TO FORM 10-Q Plato Learning, Inc.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment Number 1

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

For the quarterly period ended April 30, 2002

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)		(I.R.S. Employer Identification Number)

10801 Nesbitt Avenue South, Bloomington, MN		55437

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:		(952) 832-1000

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common stock, $.01 par value		16,198,775 shares

Class		Outstanding as of May 31, 2002

(This document contains 25 pages)

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Consolidated Statements of Earnings
	Consolidated Balance Sheets
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
	Management’s Discussion and Analysis
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EX-99.01 Certification Pursuant to 18 USC Sec 1350

PLATO Learning, Inc. and Subsidiaries

REASON FOR AMENDMENT

We hereby amend Part I, Items 1 and 2 and Part II, Item 6 of our Quarterly Report on Form 10-Q for the period ended April 30, 2002 filed with the Securities and Exchange Commission on June 14, 2002 (the “Original Filing”) to restate our consolidated balance sheets as described in Item 2 “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and in Note 2 to our Consolidated Financial Statements. The Original Filing, as amended hereby, speaks only as of the date set forth in the Original Filing. We have not updated any of the disclosures to speak to any later date.

INDEX


		Page Number

PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited):
	Consolidated Statements of Earnings for the Three and Six Months Ended April 30, 2002 and 2001		3
	Consolidated Balance Sheets as of April 30, 2002 and October 31, 2001		4
	Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2002 and 2001		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		*
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		*
Item 2.	Changes in Securities		*
Item 3.	Defaults Upon Senior Securities		*
Item 4.	Submission of Matters to a Vote of Security Holders		*
Item 5.	Other Information		*
Item 6.	Exhibits and Reports on Form 8-K		23
SIGNATURES			24
CERTIFICATIONS			25

* Previously filed

PART I. FINANCIAL INFORMATION

PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)


				Three Months Ended						Six Months Ended
				April 30,						April 30,

				2002			2001			2002			2001

Revenues:
	License fees			$	13,416		$	12,476		$	24,000		$	19,669
	Services				2,836			1,996			5,187			3,621
	Other				960			892			2,072			1,828

		Total revenues			17,212			15,364			31,259			25,118

Cost of revenues:
	License fees				947			443			1,783			695
	Services				306			272			577			510
	Other				815			754			1,763			1,743

		Total cost of revenues			2,068			1,469			4,123			2,948

		Gross profit			15,144			13,895			27,136			22,170

Operating expenses:
	Selling, general and administrative				11,960			10,157			23,476			18,894
	Product development and customer support				2,577			2,045			5,358			3,832
	Amortization of intangibles				168			386			362			594
	Special charges				—			—			—			1,260

		Total operating expenses			14,705			12,588			29,196			24,580

			Operating profit (loss)		439			1,307			(2,060	)		(2,410	)
Interest income					189			24			557			31
Interest expense					(31	)		(71	)		(73	)		(155	)
Other expense, net					(25	)		(37	)		(109	)		(97	)

			Earnings (loss) before income taxes		572			1,223			(1,685	)		(2,631	)
Income tax expense (benefit)					275			398			(625	)		(1,105	)

			Net earnings (loss)	$	297		$	825		$	(1,060	)	$	(1,526	)

Earnings (loss) per share:
	Basic and diluted			$	0.02		$	0.07		$	(0.06	)	$	(0.14	)

Weighted average common shares outstanding:
	Basic				16,448			11,352			16,430			11,184

	Diluted				17,140			12,273			16,430			11,184

See Notes to Consolidated Financial Statements

PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)


			April 30,			October 31,
			2002			2001
			(Unaudited)			(See Note)
			(Restated)			(Restated)

ASSETS
Current assets:
	Cash and cash equivalents		$	59,122		$	61,568
	Accounts receivable, less allowances of $2,085 and $2,545, respectively			25,803			28,739
	Prepaid expenses and other current assets			1,296			1,317
	Deferred income taxes			2,468			2,468

		Total current assets		88,689			94,092
	Equipment and leasehold improvements, less accumulated depreciation of $4,414 and $3,829, respectively			4,116			2,803
	Product development costs, less accumulated amortization of $14,036 and $12,094, respectively			11,274			9,949
	Deferred income taxes			3,926			2,832
	Goodwill, less accumulated amortization of $1,831			16,171			16,152
	Identified intangible assets, less accumulated amortization of $1,113 and $601, respectively			3,122			3,634
	Other assets			3,173			2,449

		Total assets	$	130,471		$	131,911

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	248		$	242
	Accounts payable			1,486			2,216
	Accrued employee salaries and benefits			4,182			4,539
	Accrued liabilities			2,757			3,883
	Deferred revenue			9,601			9,163

		Total current liabilities		18,274			20,043
Long-term debt				590			720
Deferred revenue				1,398			1,170
Other liabilities				36			79

		Total liabilities		20,298			22,012

Stockholders’ equity:
	Common stock, $.01 par value, 50,000 shares authorized; 16,779 shares issued and 16,496 shares outstanding at April 30, 2002; 16,689 shares issued and 16,411 shares outstanding at October 31, 2001			165			164
	Paid-in capital			115,183			113,767
	Treasury stock at cost, 283 and 278 shares, respectively			(4,986	)		(4,914	)
	Retained earnings			726			1,786
	Accumulated other comprehensive loss			(915	)		(904	)

		Total stockholders’ equity		110,173			109,899

		Total liabilities and stockholders’ equity	$	130,471		$	131,911

Note: The balance sheet at October 31, 2001 has been derived from the restated audited
financial statements at that date. See Notes to Consolidated Financial Statements.

PLATO LEARNING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)


					Six Months Ended
					April 30,

					2002			2001

Operating activities:
	Net loss				$	(1,060	)	$	(1,526	)

	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization				3,102			2,369
		Deferred income taxes				(625	)		(1,105	)
		Provision for doubtful accounts				901			600
		Stock-based compensation				36			536
		Loss on disposal of equipment				88			17
		Changes in assets and liabilities, net of effect of acquisition:
			Accounts receivable			2,035			(25	)
			Prepaid expenses and other current and noncurrent assets			(772	)		(692	)
			Accounts payable			(730	)		(32	)
			Accrued liabilities, accrued employee salaries and benefits and other liabilities			(1,526	)		(502	)
			Deferred revenue			666			736

				Total adjustments		3,175			1,902

				Net cash provided by operating activities		2,115			376

Investing activities:
	Capitalization of product development costs					(3,262	)		(1,952	)
	Capital expenditures					(2,013	)		(527	)
	Acquisition, net of cash acquired of $279					—			(4,327	)

			Net cash used in investing activities			(5,275	)		(6,806	)

Financing activities:
	Net proceeds from issuance of common stock					962			360
	Repayments of capital lease obligations					(124	)		—
	Repurchase of common stock					(72	)		—
	Net proceeds from short-term borrowings					—			825

		Net cash provided by financing activities				766			1,185

Effect of foreign currency on cash						(52	)		(99	)

Net decrease in cash and cash equivalents						(2,446	)		(5,344	)
Cash and cash equivalents at beginning of period						61,568			6,415

Cash and cash equivalents at end of period					$	59,122		$	1,071

Cash paid for interest					$	128		$	129
Cash paid for income taxes						50			237
Non-cash investing and financing activities:
	Common stock issued for acquisition					—			12,000
	Assets acquired in acquisition					—			595
	Liabilities assumed in acquisition					—			557
	Capital lease obligations incurred					—			722
	Debt converted to common stock					—			600

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

PLATO Learning, Inc. and its subsidiaries provide computer-based and e-learning instruction software and related services, offering basic to advanced level courseware in reading, writing, math, science, social studies and life and job skills. Our PLATO^® Learning System and PLATO^® Web Learning Network provide more than 3,500 hours of objective-based, problem solving courseware and include assessment, alignment and management tools to create standards-based curricula and facilitate the learning process. PLATO courseware is delivered via networks, CD-ROM, private intranets and the Internet. In addition, single topic PLATO courseware is available through our e-commerce Web site and distributors. We market our courseware products and services to K-12 schools, colleges, job training programs, correctional institutions, military education programs, corporations and individuals.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. We have included all normal recurring adjustments considered necessary to give a fair presentation of our operating results for the interim periods shown. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2001.

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation and had no impact on net earnings (loss), cash flows or stockholders’ equity.

Revenue Recognition

We recognize revenue in accordance with the provisions of Statement of Position No. 97-2, “Software Revenue Recognition”, as amended and modified, and Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”.

Revenue from the sale of courseware licenses and computer hardware is recognized upon meeting the following criteria: (i) a written customer order is executed, (ii) courseware and hardware are delivered, (iii) the license fee is fixed or determinable and (iv) collectibility of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Revenue Recognition, Continued

proceeds is probable. For software arrangements that include more than one element, we allocate the total arrangement fee among each deliverable based on vendor-specific objective evidence of the relative fair value of each deliverable. Vendor-specific objective evidence of fair value is determined using the price charged when that element is sold separately. Upon delivery, future service costs, if any, are accrued. Future service costs represent our problem resolution and support “hotline” services for a one-year period. Service revenue includes software support, which is deferred and recognized ratably over the support period, and revenue from installation and training services, which is recognized as services are performed. Installation and training services are customarily billed at a fixed daily rate. Deferred revenue represents the portion of billings made or payments received in advance of services being performed or products being delivered.

Product Development, Enhancement and Maintenance Costs

Costs incurred in the development, enhancement and routine maintenance of our current generation courseware products are expensed as incurred. Costs incurred in establishing the technological feasibility of new courseware products are expensed as incurred. Once technological feasibility has been established, costs incurred in the development of new generation courseware products are capitalized. Technological feasibility is established when we have completed all planning, designing, coding and testing activities.

Capitalized costs are amortized to product development and customer support expense over the estimated useful life of the new courseware products, which is generally three years. Amortization begins when the product is available for general release to our customers. Unamortized costs determined to be in excess of the net realizable value of the product, if any, are expensed at the date of such determination.

Amortization expense related to capitalized product development costs was $1,001 and $759 for the three months and $1,940 and $1,251 for the six months ended April 30, 2002 and 2001, respectively.

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common and, where dilutive, potential common shares outstanding during the period. Potential common shares include options and warrants.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

2. RESTATEMENT OF FINANCIAL INFORMATION RELATED TO DEFERRED INCOME TAXES

The effect of the restatement on the consolidated balance sheets at April 30, 2002 and October 31, 2001 was as follows:


	April 30, 2002						October 31, 2001

	Deferred						Deferred
	Income			Retained			Income			Retained
	Taxes			Earnings			Taxes			Earnings

Balance, previously reported	$	7,926		$	4,726		$	6,832		$	5,786
Adjustment to deferred income taxes		(4,000	)		(4,000	)		(4,000	)		(4,000	)

Balance, restated	$	3,926		$	726		$	2,832		$	1,786

3. ACQUISITION

In April 2001, we acquired Wasatch Interactive Learning Corporation (“Wasatch”). For further information regarding this acquisition, refer to Note 3 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2001, as amended.

Our unaudited pro form consolidated results of operations, as if the Wasatch acquisition had occurred at the beginning of the period presented, were as follows:


	Six Months Ended
	April 30, 2001

	(Unaudited)
Revenues	$	25,651

Net loss	$	(4,434	)

Diluted loss per share	$	(0.37	)

The unaudited pro forma consolidated results of operations are for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the period presented or the results which may occur in the future.

4. ACCOUNTS RECEIVABLE

Accounts receivable include installment receivables of $16,216 and $16,087 at April 30, 2002 and October 31, 2001, respectively. Installment receivables to be billed beyond one year from the balance sheet date were $2,750 and $2,021 at April 30, 2002 and October 31, 2001, respectively, and are included in other assets on the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective November 1, 2001, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).

Goodwill

Under SFAS 142, goodwill is no longer amortized to expense and must be periodically reviewed for impairment with any related losses recognized when incurred. We have completed the transitional impairment test of goodwill as of November 1, 2001 and the carrying value of goodwill was not impaired. The carrying value of our goodwill was $16,152 at November 1, 2001 and $16,171 at April 30, 2002.

For the three and six months ended April 30, 2002, $651 and $1,277 of goodwill amortization expense was not recognized that would have been recognized had SFAS 142 not been adopted. For the full fiscal year 2002, we expect that $2,578 of goodwill amortization expense will not be recognized that would have been recognized had SFAS 142 not been adopted. For the three and six months ended April 30, 2001, $283 and $414 of goodwill amortization expense was recorded.

The following table presents the impact of SFAS 142 on net income (loss) and the related per share amounts as if it had been in effect for the three and six months ended April 30, 2001:


	Three Months Ended				Six Months Ended
	April 30, 2001				April 30, 2001

			Per Share					Per Share
			(Basic and Diluted)					(Basic and Diluted)

Reported net income (loss)	$	825	$	0.07	$	(1,526	)	$	(0.14	)
Add back goodwill amortization (net of tax)		160		0.01		240			0.02

Adjusted net income (loss)	$	985	$	0.08	$	(1,286	)	$	(0.12	)

Other Intangible Assets

Acquired intangible assets subject to amortization at April 30, 2002 were as follows:


	Gross Carrying		Accumulated
	Value		Amortization			Net Carrying Value

Acquired technology	$	1,452	$	(398	)	$	1,054
Trademark		1,380		(345	)		1,035
Customer list		900		(214	)		686
Employment agreement		413		(78	)		335
Noncompete agreements		90		(78	)		12

	$	4,235	$	(1,113	)	$	3,122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Other Intangible Assets, Continued

Amortization expense for intangible assets was $243 and $512 for the three and six months ended April 30, 2002, respectively, of which $75 and $150 was included in product development and customer support expense for each period. Amortization expense for the three and six months ended April 30, 2001 was $128 and $205, respectively, of which $25 was included in product development and customer support expense for each period.

Based on our intangible assets as of October 31, 2001, the estimated future amortization expense for intangible assets is as follows:


	2002	$	990
	2003		931
	2004		756
	2005		497
	2006		312
Thereafter			148

		$	3,634

6. DEBT

Revolving Loan

We closed a new revolving loan agreement on December 20, 2001 that provides for a maximum $12,500 line of credit through July 1, 2003. Substantially all of our assets are pledged as collateral under the agreement.

Borrowings are limited by the available borrowing base, as defined, consisting of certain accounts receivable and bear interest at the prime rate plus 0.25% or the London Interbank Offered Rate (LIBOR) plus 1.75 to 2.75%, depending on cash flow leverage, as defined, at our option pursuant to the agreement. A commitment fee is payable quarterly based on the unused portion of the line of credit. The agreement contains restrictive financial covenants (including Minimum Tangible Net Worth, Minimum Debt Service Coverage, Maximum Leverage, Maximum Cash Flow Leverage, Minimum Current Ratio and Maximum Annual Capital Expenditures) and restrictions on additional borrowings, asset sales and dividends, as defined.

A commitment fee of approximately $63 was paid upon commencement of the new facility.

At April 30, 2002, there were no borrowings outstanding under the revolving loan agreement. The unused borrowing capacity was approximately $11,976.

Capital Lease Obligations

At April 30, 2002, our only debt consisted of various capital lease obligations for equipment. Amounts due in the next twelve months under these leases are classified as a current liability in the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

7. STOCKHOLDERS’ EQUITY

We issued approximately 123,000 shares of common stock upon the exercise of outstanding stock options during the six months ended April 30, 2002.

In December 2001, our Board of Directors approved a stock repurchase plan that authorizes us to repurchase up to $15,000 of our common stock in the open market and in privately negotiated transactions. The plan has no set termination date and the timing of any repurchases will be dependent on prevailing market conditions and alternative uses of capital. For the six months ended April 30, 2002, we repurchased 5,000 shares of our common stock for $72 and the repurchase had no significant impact on our reported net earnings (loss) per share. See Note 10 regarding significant stockholders’ equity transactions in May 2002.

8. EARNINGS (LOSS) PER SHARE


		Three Months Ended				Six Months Ended
		April 30,				April 30,

		2002		2001		2002			2001

Basic:
Net earnings (loss)		$	297	$	825	$	(1,060	)	$	(1,526	)

Weighted average common shares outstanding			16,448		11,352		16,430			11,184

Basic earnings (loss) per share		$	0.02	$	0.07	$	(0.06	)	$	(0.14	)

Diluted:
Net earnings (loss)		$	297	$	825	$	(1,060	)	$	(1,526	)

Weighted average common shares outstanding			16,448		11,352		16,430			11,184
Potential common shares:
	Stock options and warrants		692		921		—			—

Weighted average common and potential common shares outstandng for diluted earnings (loss) per share			17,140		12,273		16,430			11,184

Diluted earnings (loss) per share		$	0.02	$	0.07	$	(0.06	)	$	(0.14	)

We incurred a net loss for each of the six months ended April 30, 2002 and 2001, and potential common shares are antidilutive and excluded from the calculation of diluted loss per share. The number of potential common shares excluded from the diluted loss per share calculation was approximately 647,000 and 947,000 for the six months ended April 30, 2002 and 2001, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

9. COMPREHENSIVE INCOME (LOSS)

Total comprehensive income (loss) was as follows:


		Three Months Ended					Six Months Ended
		April 30,					April 30,

		2002		2001			2002			2001

Net income (loss)		$	297	$	825		$	(1,060	)	$	(1,526	)
Cumulative foreign currency translation gains (losses)			95		(43	)		(11	)		(89	)

	Total comprehensive income (loss)	$	392	$	782		$	(1,071	)	$	(1,615	)

10. SUBSEQUENT EVENTS

Acquisition of NetSchools Corporation

In May 2002, we acquired NetSchools Corporation (“NetSchools”), a provider of Internet-based e-learning software and services solutions for the K-12 market. NetSchools offers a web-based curriculum and instructional management delivery platform that facilitates delivery of school curriculum aligned to local, state and national standards and facilitates online assessment, lesson planning and content delivery. This acquisition will enhance our ability to provide enterprise-wide solutions that align classroom education across all standards and deliver compelling and effective content through NetSchools’ instructional management platform.

We acquired all the shares of NetSchools for $6,000 in cash; 800,000 shares of our common stock; 200,000 warrants to purchase shares of our common stock; assumed liabilities and transaction expenses; and additional consideration of up to approximately $6,000, contingent on the NetSchools’ product and services revenues generated through October 2004. After adding transaction costs, this acquisition had a total value of approximately $27,000. Total cash usage related to this acquisition in 2002 is expected to be approximately $15,000.

Repurchases of Common Stock

During May 2002, we repurchased approximately 325,000 shares of our common stock for an aggregate cost of approximately $4,125. See Note 7 for additional information on stock repurchases.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

RESTATEMENT OF FINANCIAL INFORMATION RELATED TO DEFERRED
INCOME TAXES

We have restated our consolidated balance sheets as a result of a miscalculation of our accumulated net operating loss carryforward beginning with the fourth quarter of our fiscal year ended October 31, 1999. The restatement reflects the reduction of the income tax benefit recognized in the fourth quarter of fiscal year 1999 from $10 million to $6 million and reduces our net deferred income tax asset by $4 million at each balance sheet date as of and subsequent to October 31, 1999. The restatement had no impact on the previously reported net earnings (loss) and related per share amounts for the three and six months ended April 30, 2002 and 2001. See Note 2 to Consolidated Financial Statements.

OVERVIEW

We enhance the learning process by providing computer-based and e-learning instruction software and related services, offering basic to advanced level courseware in reading, writing, math, science, social studies and life and job skills. Our PLATO^® Learning System and PLATO^® Web Learning Network provide more than 3,500 hours of objective-based, problem solving courseware and include assessment, alignment and management tools to create standards-based curricula and facilitate the learning process. PLATO courseware is delivered via networks, CD-ROM, private intranets and the Internet. In addition, single topic PLATO courseware is available through our e-commerce web site and distributors. We market our courseware products and services to K-12 schools, colleges, job training programs, correctional institutions, military education programs, corporations and individuals.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of results of operations and financial condition is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We continually evaluate our critical accounting policies and have identified revenue recognition, the valuation of accounts receivable, the capitalization of product development costs and the valuation of our deferred tax asset as the critical accounting policies that are significant to the financial statement presentation and require difficult, subjective and complex judgments.

Revenue Recognition

Revenue recognition rules for software companies are very complex. We follow specific and detailed guidelines in determining the proper amount of revenue to be recorded; however, certain judgments affect the application of our revenue recognition policy. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

CRITICAL ACCOUNTING POLICIES, Continued

Revenue Recognition, Continued

The most significant judgments for revenue recognition typically involve whether there are any significant uncertainties regarding customer acceptance and whether collectibility can be considered reasonably assured. In addition, our transactions often consist of multiple element arrangements which must be analyzed to determine the relative fair value of each element, the amount of revenue to be recognized upon shipment, if any, and the period and conditions under which deferred revenue should be recognized.

For additional description of our revenue recognition policy, see Note 1 to Consolidated Financial Statements.

Allowance for Doubtful Accounts

We determine an allowance for doubtful accounts based upon an analysis of the collectibility of specific accounts, historical experience and the aging of the accounts receivable. Bad debt expense is recorded as an operating expense in our consolidated statement of earnings. The assumptions and estimates used to determine the allowance are subject to constant revision. The primary factors that impact these assumptions include the efficiency and effectiveness of our billing and collection functions and our credit assessment process. Actual collection results could differ materially from those estimated and have a significant impact on our results of operations and financial condition.

Capitalization of Product Development Costs

Our product development expense includes costs related to the development, enhancement and maintenance of our courseware products, and the effect of product development cost capitalization and amortization. We capitalize our product development costs when the projects under development reach technological feasibility, as defined by the accounting standards, and amortize these costs over the estimated useful lives of the courseware products.

The most significant judgments regarding capitalization of product development costs typically involve the determination of when development efforts reach technological feasibility and the recoverability of capitalized costs. We continually evaluate our capitalized costs to determine if the unamortized balance related to any given product exceeds the estimated net realizable value of that product. Estimating net realizable value requires us to estimate future cash flows to be generated by the product and to use judgment in quantifying the amount, if any, to be written off. Actual cash flows and amounts realized from the courseware products could differ materially from those estimated. In addition, any future changes to our courseware product offerings could result in write-offs of previously capitalized costs and have a significant impact on our results of operations and financial condition.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

CRITICAL ACCOUNTING POLICIES, Continued

Capitalization of Product Development Costs, Continued

For additional description of our policy regarding product development, enhancement and maintenance costs, see Note 1 to Consolidated Financial Statements.

Deferred Tax Asset

We account for deferred income taxes based upon differences between the financial reporting and income tax bases of our assets and liabilities. The measurement of the deferred tax asset is adjusted by a valuation allowance, if necessary, to recognize the extent to which the future tax benefits will be recognized.

At April 30, 2002 we have a net deferred tax asset of approximately $6,400. This deferred tax asset is net of a valuation allowance related to a foreign net operating loss carryforward. A substantial portion of the deferred tax asset relates to our net operating loss carryforward in the United States. We have recorded the net deferred tax asset as we believe that it is more likely than not that we will be able to realize the asset through generation of future taxable income in the United States. We base this belief upon the levels of taxable income generated historically as well as projections of future taxable income. If future levels of taxable income in the United States are not consistent with our expectations, we may be required to record a valuation allowance, which could reduce our net income by a material amount.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

RESULTS OF OPERATIONS

Operating Results as a Percentage of Revenue


			Three Months Ended						Six Months Ended
			April 30,						April 30,

			2002			2001			2002			2001

Revenues:
	License fees			77.9	%		81.2	%		76.8	%		78.3	%
	Services			16.5			13.0			16.6			14.4
	Other			5.6			5.8			6.6			7.3

		Total revenues		100.0			100.0			100.0			100.0
Cost of revenues				12.0			9.6			13.2			11.7

	Gross profit			88.0			90.4			86.8			88.3

Operating expenses:
	Selling, general and administrative			69.5			66.1			75.1			75.2
	Product development and customer support			15.0			13.3			17.1			15.3
	Amortization of intangibles			1.0			2.5			1.2			2.4
	Special charges			—			—			—			5.0

		Total operating expenses		85.5			81.9			93.4			97.9

Operating profit (loss)				2.5			8.5			(6.6	)		(9.6	)
	Interest income and interest and other expense, net			0.8			(0.5	)		1.2			(0.9	)

Earnings (loss) before income taxes				3.3			8.0			(5.4	)		(10.5	)
	Income tax expense (benefit)			1.6			2.6			(2.0	)		(4.4	)

Net earnings (loss)				1.7	%		5.4	%		(3.4	)%		(6.1	)%

Revenues

Total Revenues. Total revenues increased 12.0% to $17,212 for the three months ended April 30, 2002 from $15,364 for the same period in 2001. The increase was primarily due to the $940 increase in license fees revenues and the $840 increase in services revenues. Total revenues increased 24.4% to $31,259 for the six months ended April 30, 2002 from $25,118 for the same period in 2001. The increase was primarily due to the $4,331 increase in license fees revenues and the $1,566 increase in services revenues.

License Fees. Revenues from license fees increased 7.5% to $13,416 for the three months ended April 30, 2002 from $12,476 for the same period in 2001. As a percentage of total revenues, license fees revenues were 77.9% for the three months ended April 30, 2002, down from 81.2% for the same period in 2001. Revenues from license fees increased 22.0% to $24,000 for the six months ended April 30, 2002 from $19,669 for the same period in 2001. As a percentage of total revenues, license fees revenues were 76.8% for the six months ended April 30, 2002, down from 78.3% for the same period in 2001. This revenue growth was achieved primarily through increased sales volume to both new and existing customers driven by increased acceptance of our courseware products. Sales of our PLATO Web Learning Network (PWLN) product continue to grow. Our order intake for PWLN during the three months ended April 30, 2002 was approximately $1,500 of which we recognized $760 of revenue. This compares to $935 of order intake and $100 of recognized revenue in the comparable period of 2001. Since launching this

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

RESULTS OF OPERATIONS, Continued

Revenues, Continued

product, we have taken orders for $5,500 of PWLN product and have recognized only $2,400 of revenues through April 30, 2002. New products from the acquisitions of Wasatch Interactive Learning Corporation in April 2001 and TeachMaster Technologies, Inc. in September 2001 contributed approximately $1,500 and $2,200 of revenue for the three and six months ended April 30, 2002, respectively.

Services. Revenues from services increased 42.1% to $2,836 for the three months ended April 30, 2002 from $1,996 for the same period in 2001. As a percentage of total revenues, services revenues were 16.5% for the three months ended April 30, 2002 up from 13.0% for the same period in 2001. Revenues from services increased 43.2% to $5,187 for the six months ended April 30, 2002 from $3,621 for the same period in 2001. As a percentage of total revenues, services revenues were 16.6% for the six months ended April 30, 2002 up from 14.4% for the same period in 2001. This revenue increase resulted primarily from the continued growth in license fees revenues and customer acceptance of our training and technical support services. New services from the acquisitions of Wasatch Interactive Learning Corporation in April 2001 and TeachMaster Technologies, Inc. in September 2001 contributed approximately $200 and $300 of revenue for the three and six months ended April 30, 2002, respectively.

Other. Other revenues, including hardware and third-party courseware products, increased 7.6% to $960 for the three months ended April 30, 2002 from $892 for the same period in 2001. As a percentage of total revenues, other revenues were 5.6% for the three months ended April 30, 2002 and 5.8% for the same period in 2001. Other revenues increased 13.3% to $2,072 for the six months ended April 30, 2002 from $1,828 for the same period in 2001. As a percentage of total revenues, other revenues were 6.6% for the six months ended April 30, 2002 and 7.3% for the same period in 2001.

Cost of Revenues

Total cost of revenues increased 40.8% to $2,068 for the three months ended April 30, 2002 from $1,469 for the same period in 2001. Total cost of revenues increased 39.9% to $4,123 for the six months ended April 30, 2002 from $2,948 for the same period in 2001. The increase was primarily due to the increase in license fees revenues and third party courseware product royalties. Gross profit margin was 88.0% for the three months ended April 30, 2002, down from 90.4% for the same period in 2001, and was 86.8% for the six months ended April 30, 2002, down from 88.3% for the same period in 2001. This decrease in gross profit margin resulted primarily from a higher proportion of third party products included in our product sales mix. License fees and services, which have high margins, were offset slightly by increased royalties on third party courseware products. Our future gross profit margin will be dependent primarily on the product mix of our revenues.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

RESULTS OF OPERATIONS, Continued

Operating Expenses

Selling, General and Administrative. Selling, general and administrative expenses increased 17.8% to $11,960 for the three months ended April 30, 2002 from $10,157 for the same period in 2001. Selling, general and administrative expenses increased 24.3% to $23,476 for the six months ended April 30, 2002 from $18,894 for the same period in 2001. The increased expenses resulted from a number of factors including increased headcount from the acquisitions of Wasatch Interactive Learning Corporation in April 2001 and TeachMaster Technologies, Inc. in September 2001, increased commissions due to the growth in revenue, increased marketing costs necessary to generate revenue growth, and additions to our management team and infrastructure necessary to grow the business. As a percentage of total revenues, selling, general and administrative expenses were 69.5% for the three months ended April 30, 2002, up from 66.1% for the same period in 2001, and 75.1% for the six months ended April 30, 2002 comparable to 75.2% for the same period in 2001. Our ability to continue to leverage our cost structure and improve profitability is primarily dependent on our ability to increase revenues and achieve our sales targets.

Product Development and Customer Support. Product development and customer support expenses increased 26.0% to $2,577 for the three months ended April 30, 2002 from $2,045 for the same period in 2001. Product development and customer support expenses increased 39.8% to $5,358 for the six months ended April 30, 2002 from $3,832 for the same period in 2001. As a percentage of total revenues, product development and customer support expenses were 15.0% for the three months ended April 30, 2002, up from 13.3% for the same period in 2001, and 17.1% for the six months ended April 30, 2002, up from 15.3% for the same period in 2001. These increases reflect our increased spending to enhance and replace certain existing courseware products and to develop a new standards-based reference network. As part of our growth strategy, we intend to introduce a number of new products and product improvements. The extent of our future product development spending and the amount of our future capitalized product development costs and related amortization are dependent on our ability to introduce new products and product improvements on a cost-effective and timely basis. Capitalized development costs were $1,917 and $3,262 for the three and six months ended April 30, 2002, respectively, compared to $1,067 and $1,952 for the same periods in 2001. Amortization of previously capitalized development costs was $1,001 and $1,940 for the three and six months ended April 30, 2002, respectively, up from $759 and $1,251 for the same periods in 2001, as projects completed during prior periods are now being amortized to expense.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

RESULTS OF OPERATIONS, Continued

Operating Expenses, Continued

Amortization of Intangibles. Expense for the three and six months ended April 30, 2002 represented amortization of intangible assets, other than goodwill, from our previous acquisitions. Effective November 1, 2001, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Under SFAS 142, goodwill is no longer amortized to expense and must be periodically reviewed for impairment with any related losses recognized when incurred. We have completed the transitional impairment test of goodwill as of November 1, 2001 and the carrying value of goodwill was not impaired. Expense for the same periods in 2001 included $283 and $414 of goodwill amortization and $103 and $180 of intangible amortization, respectively.

Special Charge. The special charge in 2001 represented costs associated with the retirement of our founder and former chief executive officer and included non-cash amounts of $463 for the accelerated vesting of stock options.

Interest Income

Interest income was $189 and $557 for the three and six months ended April 30, 2002 compared to $24 and $31 for the same periods in 2001. The increased interest income is the result of higher invested balances in 2002. We completed a public stock offering in June 2001, which significantly increased our cash and cash equivalent balances.

Income Taxes

Our effective income tax rate for the six months ended April 30, 2002 was 37%, compared to the 42% effective rate for the same period in 2001. Our fiscal year 2002 effective tax rate will be highly dependent upon the taxable income in each of our taxable jurisdictions.

FINANCIAL CONDITION

Liquidity and Capital Resources

At April 30, 2002, our principal sources of liquidity included cash and cash equivalents of $59,122, net accounts receivable of $25,803, and our unused line of credit. We had total installment receivables of $18,966 at April 30, 2002, of which $16,216 is to be billed within one year from the balance sheet date and is included in net accounts receivable. Working capital was $70,415 at April 30, 2002, a decrease of $3,634 from October 31, 2001, due primarily to decreased cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and increased deferred revenue. Cash and cash equivalents decreased primarily due to the seasonality of the business as we typically use cash in the first half of the year.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

FINANCIAL CONDITION, Continued

Liquidity and Capital Resources, Continued

Cash flows from operations were used principally to fund our working capital requirements. Net cash provided by operating activities was $2,115 for the six months ended April 30, 2002 and $376 for the same period in 2001. The increase in operating cash flows is due primarily to the improvement in operating results and the decrease in accounts receivable, slightly offset by the decrease in accounts payable and accrued expenses.

Net cash used in our investing activities was $5,275 for the six months ended April 30, 2002 compared to $6,806 for the same period in 2001. The decrease in net cash used was due to our increased capital expenditures in 2002, primarily related to the installation of a new enterprise resource planning system that is expected to be completed in 2002, and our increased investment in capitalized product development costs as we continue to develop new courseware products, offset by our acquisition of Wasatch Interactive Learning Corporation in April 2001.

Net cash provided by our financing activities was $766 for the six months ended April 30, 2002 compared to $1,185 for the same period in 2001. Cash received from the exercise of stock options was partially offset by repayments of capital lease obligations and, in 2002, the repurchase of common stock. Additionally, in 2001, we borrowed funds under our revolving loan agreement. We have resources available under our revolving loan agreement to provide borrowings up to $12,500, as determined by the available borrowing base. At April 30, 2002, there were no borrowings outstanding and the unused borrowing capacity was approximately $11,976.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

FINANCIAL CONDITION, Continued

Liquidity and Capital Resources, Continued

In December 2001, our Board of Directors approved a stock repurchase plan that authorizes us to repurchase up to $15,000 of our common stock in the open market and in privately negotiated transactions. The plan has no set termination date and the timing of any repurchases will be dependent on prevailing market conditions and alternative uses of capital. For the six months ended April 30, 2002, we repurchased 5,000 shares of our common stock for $72 and the repurchase had no significant impact on our reported net earnings (loss) per share. In May 2002, we repurchased approximately 325,000 shares of our common stock at various times for an aggregate cost of approximately $4,125.

We maintain adequate cash balances and credit facilities to meet our anticipated working capital, capital expenditure and business investment requirements.

Disclosures about Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments consist of future payments due under capital lease obligations and operating leases. For the full fiscal year 2002, payments of approximately $242 are due under capital lease obligations and payments of approximately $1,437 are due under operating leases.

Factors Affecting Quarterly Operating Results

Our quarterly operating results fluctuate as a result of a number of factors including the business and sales cycle, the amount and timing of new product introductions, client spending patterns, budget cycles and fiscal year ends and promotional programs. We historically have experienced our lowest revenues in the first quarter and increasingly higher levels of revenues in each of the next three quarters. Because of these factors, the results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year.

Interest Rate Risk

Our borrowing capacity primarily consists of a revolving loan with interest rates that fluctuate based upon market indexes. At April 30, 2002, we did not have any outstanding borrowings under this revolving loan. In addition, our only debt consisted of capital lease obligations at fixed interest rates. As a result, risk relating to interest fluctuation is considered minimal.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)

Foreign Currency Exchange Rate Risk

We market our products and services worldwide and have operations in Canada and the United Kingdom. As a result, financial results and cash flows could be affected by changes in foreign currency exchange rates or weak economic conditions in foreign markets. Working funds necessary to facilitate the short-term operations of our foreign subsidiaries are kept in local currencies in which they do business. Approximately 8% of our total revenues were denominated in currencies other than the U.S. dollar for the six months ended April 30, 2002.

CAUTIONARY STATEMENTS

Except for historical information contained herein, the disclosures in this Quarterly Report on Form 10-Q are forward-looking statements made under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties include: the availability and unpredictability of government funding on which our customers are dependent, the capital and operating spending patterns of our customers, the ability to attract and retain customers, the size, timing and product mix of customer orders, the introduction and acceptance of competitive products, our ability to adapt to technological changes and meet evolving industry standards, and our ability to economically introduce new products on a timely basis. These risks and other relevant risks are described in more detail in our Annual Report on Form 10-K for the fiscal year ended October 31, 2001.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit Number and Description


3.04	Certificate of Amendment of Amended Certificate of Incorporation, filed April 24, 2000 is incorporated by reference to the corresponding exhibit to our Annual Report on Form 10-K for the year ended October 31, 2001

3.05	Certificate of Amendment of Certificate of Incorporation, filed November 6, 1992

3.06	Certificate of Amendment of Amended Certificate of Incorporation, filed March 20, 2002

The exhibits listed above were previously filed with the Original Filing

99.01	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

No reports on Form 8-K were filed for the quarter ended April 30, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on January 16, 2003.

PLATO LEARNING, INC.

By /s/ John Murray

President and
Chief Executive Officer
(principal executive officer)

/s/ Gregory J. Melsen

Vice President Finance and
Chief Financial Officer
(principal financial officer)

/s/ Mary Jo Murphy

Vice President, Corporate
Controller and
Chief Accounting Officer
(principal accounting officer)

CERTIFICATIONS

Each of the undersigned, in his capacity as an officer of PLATO Learning, Inc., provides the following certifications required by 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and 17 C.F.R.ss.240.13a-14.

I, John Murray, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q/A, Amendment Number 1 of PLATO Learning, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.


Date: January 16, 2003		/s/ John Murray

		President and Chief Executive Officer

I, Gregory J. Melsen, certify that:


Date: January 16, 2003		/s/ Gregory J. Melsen

		Vice President Finance and Chief Financial Officer

EXPLANATORY NOTE REGARDING CERTIFICATIONS: Representations 4, 5 and 6 of the Certifications as set forth in Form 10-Q have been omitted, consistent with the Transition Provisions of SEC Exchange Act Release No. 34-46427, because this Quarterly Report on Form 10-Q/A covers a period ending before the Effective Date of Rules 13a-14 and 15d-14.

25 EX-99.01 3 c74081a1exv99w01.txt EX-99.01 CERTIFICATION PURSUANT TO 18 USC SEC 1350 Exhibit 99.01 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q/A, Amendment Number 1 of PLATO Learning, Inc. (the "Company") for the period ended July 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of John Murray, the President and Chief Executive Officer of the Company, and Gregory J. Melsen, the Chief Financial Officer of the Company, hereby certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 16, 2003 /s/ John Murray ---------------------------------- President and Chief Executive Officer /s/ Gregory J. Melsen ---------------------------------- Vice President Finance and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

1.		I have reviewed this Quarterly Report on Form 10-Q/A, Amendment Number 1 of PLATO Learning, Inc.;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.