10-Q

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, 2007

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)

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 þ No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o            Accelerated filer þ            Non-accelerated filer o

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

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date. 23,796,960 shares of common stock, $.01 par value, outstanding as of May 31, 2007.

PLATO LEARNING, INC.
Form 10-Q
Quarterly Period Ended April 30, 2007

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Condensed Consolidated Statements of Operations for the Three and Six Months Ended April 30, 2007 and 2006 (Unaudited)		3
Condensed Consolidated Balance Sheets as of April 30, 2007 and October 31, 2006 (Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2007 and 2006 (Unaudited)		5
Notes to Condensed Consolidated Financial Statements (Unaudited)		6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		21
ITEM 4. Controls and Procedures		21
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors		22
ITEM 4. Submission of Matters to A Vote of Security Holders		22
ITEM 6. Exhibits		22
SIGNATURES		23
Employee Restricted Stock Agreement
302 Certification of Chief Executive Officer
302 Certification of Chief Financial Officer
906 Certification of Chief Executive Officer
906 Certification of Chief Financial Officer

2

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 Ended
	April 30,						April 30,
	2007			2006			2007			2006
REVENUES
Subscriptions	$	5,360		$	4,054		$	10,513		$	8,410
License fees		3,070			6,920			7,712			15,969
Services		6,783			9,001			14,014			19,082
Total revenues		15,213			19,975			32,239			43,461
COST OF REVENUES
Subscriptions		3,737			2,656			6,935			4,897
License fees		1,864			2,681			4,146			5,654
Services		3,159			4,480			6,341			9,262
Total cost of revenues		8,760			9,817			17,422			19,813
GROSS PROFIT		6,453			10,158			14,817			23,648
OPERATING EXPENSES
Sales and marketing		7,382			9,576			15,103			19,310
General and administrative		2,904			4,314			6,118			8,962
Product maintenance and development		1,145			1,225			2,913			2,764
Amortization of intangibles		457			933			914			1,902
Restructuring and other charges		—			259			—			339
Total operating expenses		11,888			16,307			25,048			33,277
OPERATING LOSS		(5,435	)		(6,149	)		(10,231	)		(9,629	)
Other income, net		279			400			699			833
LOSS BEFORE INCOME TAXES		(5,156	)		(5,749	)		(9,532	)		(8,796	)
Income tax expense		150			150			300			300
NET LOSS	$	(5,306	)	$	(5,899	)	$	(9,832	)	$	(9,096	)
LOSS PER SHARE
Basic and diluted	$	(0.22	)	$	(0.25	)	$	(0.41	)	$	(0.38	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		23,747			23,674			23,739			23,652

See Notes to Condensed Consolidated Financial Statements.

3

PLATO Learning, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share amounts)

	April 30,			October 31,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	21,048		$	33,094
Accounts receivable, net		10,502			18,529
Inventories		1,376			1,832
Other current assets		5,468			6,346
Total current assets		38,394			59,801
Equipment and leasehold improvements, net		6,326			6,308
Product development costs, net		27,777			25,363
Goodwill		71,865			71,865
Identified intangible assets, net		9,220			10,545
Other long-term assets		2,477			2,348
Total assets	$	156,059		$	176,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,736		$	4,685
Accrued compensation		4,614			5,990
Other accrued liabilities		4,823			6,622
Deferred revenue		27,139			33,736
Total current liabilities		40,312			51,033
Long-term deferred revenue		7,773			8,110
Deferred income taxes		2,831			2,531
Other long-term liabilities		—			106
Total liabilities		50,916			61,780
Stockholders’ equity:
Common stock, $.01 par value, 50,000 shares authorized; 23,817 shares issued and 23,797 shares outstanding at at April 30, 2007; 23,761 shares issued and 23,741 shares outstanding at October 31, 2006		238			237
Additional paid-in capital		169,232			168,597
Treasury stock at cost		(205	)		(205	)
Accumulated deficit		(62,849	)		(53,017	)
Accumulated other comprehensive loss		(1,273	)		(1,162	)
Total stockholders’ equity		105,143			114,450
Total liabilities and stockholders’ equity	$	156,059		$	176,230

See Notes to Condensed Consolidated Financial Statements.

4

PLATO Learning, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Six Months Ended
	April 30,
	2007			2006
OPERATING ACTIVITIES:
Net loss	$	(9,832	)	$	(9,096	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income taxes		300			300
Amortization of capitalized product development costs		5,005			3,526
Amortization of identified intangible and other long-term assets		1,492			2,672
Depreciation and amortization of equipment and leasehold improvements		1,214			1,288
Provision for doubtful accounts		(174	)		335
Stock-based compensation		541			803
Loss on disposal of equipment		5			83
Changes in operating assets and liabilities:
Accounts receivable		8,202			8,649
Inventories		456			696
Other current and long-term assets		583			1,529
Accounts payable		(949	)		(1,439	)
Other current and long-term liabilities		(3,286	)		(5,453	)
Deferred revenue		(6,934	)		(11,466	)
Total adjustments		6,455			1,523
Net cash used in operating activities		(3,377	)		(7,573	)
INVESTING ACTIVITIES:
Capitalized internal product development costs		(7,419	)		(6,160	)
Purchased product development		—			(2,000	)
Purchases of equipment and leasehold improvements		(1,237	)		(828	)
Net cash used in investing activities		(8,656	)		(8,988	)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		116			587
Repayments of capital lease obligations		(21	)		(58	)
Net cash provided by financing activities		95			529
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(108	)		(75	)
Net decrease in cash and cash equivalents		(12,046	)		(16,107	)
Cash and cash equivalents at beginning of period		33,094			46,901
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	21,048		$	30,794

See Notes to Condensed Consolidated Financial Statements.

5

PLATO LEARNING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. General

Basis of Presentation

     The accompanying unaudited condensed 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. The October 31, 2006 condensed consolidated balance sheet data was derived from our audited financial statements at that date. Accordingly, these financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. We have included all normal recurring and other adjustments considered necessary to give a fair statement 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, 2006.

Consolidation

     The accompanying unaudited condensed consolidated financial statements include the accounts of PLATO Learning, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Fiscal Periods

     Our fiscal year is from November 1 to October 31. Unless otherwise stated, references herein to our second quarter relate to the three month period ended April 30.

Note 2. Summary of Significant Accounting Policies

General

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 estimates, and have identified the policies relating to the following areas as the critical accounting policies and estimates that are significant to the financial statement presentation, and that require difficult, subjective, or complex judgments:

• Revenue recognition

• Capitalized product development costs

• Valuation of our deferred income taxes

• Valuation and impairment analysis of goodwill and identified intangible assets

     There have been no significant changes to our accounting policies during the first two quarters of 2007. For a more complete discussion of these policies refer to Note 2 to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2006.

6

License Agreements

     We have a variety of license agreements for third-party products and content that we license to our customers.

Loss Per Share

     Basic and diluted loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding during the periods as follows (in thousands):

	Three Months Ended April 30,						Six Months Ended April 30,
	2007			2006			2007			2006
Net loss	$	(5,306	)	$	(5,899	)	$	(9,832	)	$	(9,096	)
Basic and diluted weighted average common shares outstanding		23,747			23,674			23,739			23,652
Basic and diluted loss per share	$	(0.22	)	$	(0.25	)	$	(0.41	)	$	(0.38	)

     Potential common shares, which consist of stock options and warrants and restricted stock, are anti-dilutive in a net loss situation and are therefore disregarded in the calculation of diluted loss per share. Accordingly, the calculation of diluted loss per share for the periods presented for 2007 and 2006 exclude the effect of approximately 2,976,000 and 3,238,000 potential common shares from the conversion of outstanding options and warrants and restricted common shares, respectively.

New Accounting Pronouncements

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” (“SFAS No. 159”). This standard permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of SFAS No. 159 are effective beginning in our fiscal year 2009 and are currently not expected to have a material effect on our consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), to establish a consistent framework for measuring fair value and expand disclosures on fair value measurements. The provisions of SFAS No. 157 are effective beginning in our fiscal year 2009 and are currently not expected to have a material effect on our consolidated financial statements.

     In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes.” Interpretation 48 is effective for the first quarter fiscal year 2008 and is currently not expected to have a material effect on our consolidated financial statements.

7

Note 3. Stock-Based Compensation

     Effective at the beginning of our fiscal year 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), using the modified prospective transition application method. Under this method, compensation expense is recognized for employee awards granted, modified, or settled subsequent to October 31, 2005, and the unvested portion of awards granted to employees prior to November 1, 2005. We use the straight-line method to recognize compensation expense over the requisite service period of the award.

	Options Outstanding
Options outstanding at October 31, 2006		2,876
Options granted		184
Options exercised		—
Options forfeited or cancelled		(315	)
Options outstanding at April 30, 2007		2,745
Options exercisable at April 30, 2007		2,149

     Total stock-based compensation expense recorded for the three and six months ended April 30 was as follows (in thousands):

	2007		2006
Three months ended	$	439	$	481
Six months ended	$	541	$	803

     Stock option forfeitures reduced stock-based compensation expense in the first quarter of 2007 by approximately $225,000.

Note 4. Accounts Receivable

     The components of accounts receivable were as follows (in thousands):

	April 30,			October 31,
	2007			2006
Trade accounts receivable	$	10,722		$	18,450
Installment accounts receivable		480			1,007
Allowance for doubtful accounts		(700	)		(928	)
	$	10,502		$	18,529

     Installment receivables to be billed one year from the balance sheet date are included in other long-term assets on the consolidated balance sheets and were $46,000 at April 30, 2007 and $24,000 at October 31, 2006.

8

     A reconciliation of the allowance for doubtful accounts from the beginning of the fiscal year through the end of the second quarter is as follows (in thousands):

	2007			2006
Balance, beginning of fiscal year	$	928		$	1,647
Provision for doubtful accounts, net of other reserve adjustments		(174	)		335
Write-offs net of recoveries		(54	)		128
Balance, April 30	$	700		$	2,110

     The provision for doubtful accounts is included in general and administrative expense on the consolidated statements of operations.

Note 5. Inventories

     Supplemental information regarding our inventories is as follows (in thousands):

	April 30,		October 31,
	2007		2006
Third-party hardware	$	745	$	1,027
Media, documentation, and packaging materials		631		805
	$	1,376	$	1,832

Note 6. Product Development Costs

     A reconciliation of capitalized product development costs for the six month period ended April 30, 2007 is as follows (in thousands):

	Carrying			Accumulated			Net Carrying
	Value			Amortization			Value
Balance, October 31, 2006	$	40,577		$	(15,214	)	$	25,363
Capitalized product development costs		7,419			—			7,419
Write-off of fully amortized costs		(4,843	)		4,843			—
Amortization of product development costs		—			(5,005	)		(5,005	)
Balance, April 30, 2007	$	43,153		$	(15,376	)	$	27,777

9

Note 7. Goodwill and Identified Intangible Assets

     There were no changes in goodwill from October 31, 2006.

     Identified intangible assets subject to amortization were as follows (in thousands):

	April 30, 2007							October 31, 2006
	Gross							Gross
	Carrying		Accumulated			Net Carrying		Carrying		Accumulated			Net Carrying
	Value		Amortzation			Value		Value		Amortzation			Value
Acquired technology	$	13,563	$	(9,884	)	$	3,679	$	21,940	$	(17,850	)	$	4,090
Trademarks and tradenames		1,380		(1,331	)		49		2,892		(2,744	)		148
Customer relationships and lists		20,200		(14,708	)		5,492		21,100		(14,793	)		6,307
Noncompete agreements		—		—			—		1,000		(1,000	)		—
	$	35,143	$	(25,923	)	$	9,220	$	46,932	$	(36,387	)	$	10,545

     Amortization expense for the identified intangible assets presented above was as follows (in thousands):

	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2007		2006		2007		2006
Amortization of intangible assets included in:
Cost of revenues	$	205	$	302	$	411	$	603
Operating expenses		457		933		914		1,902
	$	662	$	1,235	$	1,325	$	2,505

     In the first quarter of 2007, we wrote off approximately $11.8 million of identified intangible assets and related accumulated amortization which as of November 1, 2006 was fully amortized and no longer considered substantially in use with existing products.

     The estimated future annual amortization expense for identified intangible assets is as follows (in thousands):

	Cost of		Operating
	Revenues		Expense		Total
Remainder of 2007	$	411	$	826	$	1,237
2008		821		1,550		2,371
2009		749		1,550		2,299
2010		647		1,550		2,197
2011		526		65		591
Thereafter		525		—		525
	$	3,679	$	5,541	$	9,220

     The future annual amortization amounts presented above are estimates. Actual amortization expense may be different due to the acquisition, impairment, or accelerated amortization of identified intangible assets, and other factors.

10

Note 8. Deferred Revenue

     The components of deferred revenue were as follows (in thousands):

	April 30,			October 31,
	2007			2006
Subscriptions	$	19,951		$	20,192
License fees		1,469			2,282
Services		13,492			19,372
Total		34,912			41,846
Less: long-term amounts		(7,773	)		(8,110	)
Current portion	$	27,139		$	33,736

Note 9. Restructuring and Other Charges

     Restructuring and other charges were $259,000 and $339,000 for the three and six months ended April 30, 2006. There were no restructuring charges in 2007.

     In the first quarter of 2006, we reduced headcount by 8 positions in the United States. These actions were a continuation of the restructuring activities initiated in October 2005. For more information on these activities and the restructuring and other charges incurred in 2006, refer to Note 14 to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2006.

     The restructuring reserve activity from October 31, 2006 through April 30, 2007 was as follows (in thousands):

	Severance
	and related			Facility
	costs			closings			Other			Total
Reserve balance at October 31, 2006	$	1,232		$	1,526		$	316		$	3,074
Provision for restructuring		—			—			—			—
Cash payments		(801	)		(230	)		(15	)		(1,046	)
Reserve balance at April 30, 2007	$	431		$	1,296		$	301		$	2,028

11

Note 10. Comprehensive Loss

     Total comprehensive loss was as follows (in thousands):

	Three Months Ended						Six Months Ended
	April 30,						April 30,
	2007			2006			2007			2006
Net Loss	$	(5,306	)	$	(5,899	)	$	(9,832	)	$	(9,096	)
Unrealized gains on available for sale securities		—			8			—			16
Foreign currency translation adjustments		(51	)		(39	)		(108	)		(69	)
Total comprehensive loss	$	(5,357	)	$	(5,930	)	$	(9,940	)	$	(9,149	)

     Income tax effects for the components of other comprehensive loss were not significant because our deferred tax assets are fully reserved. Accumulated other comprehensive loss was $1,273,000 and $1,162,000 at April 30, 2007 and October 31, 2006, respectively.

Note 11. Subsequent Events

     On June 4, 2007, we entered into a three-year senior secured credit facility which provides us with a revolving line of credit up to the lesser of $20 million or the Company’s trailing twelve months subscription and maintenance revenue. The Company has the option of selecting an interest rate for any drawdown under the facility equal to the applicable Prime or Libor Rate plus a sliding margin that is based on the amount of borrowings outstanding. Borrowings under the agreement are secured by all of the assets of the Company. Financial covenants are limited to minimum quarterly thresholds of earnings before interest, taxes, depreciation and amortization (EBITDA) that are tested only when the unused portion of the line of credit plus our cash and cash equivalents on hand is less than $12.5 million.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Description

     PLATO Learning, Inc. is a leading provider of computer and web-based instruction, curriculum planning and management, assessment, and related professional development and support services to K–12 schools. We also provide these products and services to two- and four-year colleges, teacher education programs, correctional institutions, and military education programs. Our courseware and web-based accountability and assessment software are designed to help educators meet the demands of the No Child Left Behind (“NCLB”) and Reading First federal legislation, as well as U.S. Department of Education initiatives on mathematics, including Math Now, and science, special education, and ensuring teacher quality. We also offer online and onsite staff professional development, alignment, and correlation services to ensure optimal classroom integration of our products and to help schools meet their accountability requirements and school improvement plans.

     Our research-based courseware library includes thousands of hours of mastery-based instruction covering discrete learning objectives in the subject areas of reading, writing, language arts, mathematics, science, and social studies. Our web-based assessment and alignment tools ensure that instruction is differentiated and targeted and that curriculum is aligned to state and national standards. Educators are able to identify each student’s instructional needs and prescribe an individual learning program using PLATO Learning courseware and assessments, educational web sites, and the school’s own textbooks and other core and supplemental instructional materials. A variety of reports are available to help educators identify gaps in student understanding and ensure that standards are being addressed. The web-based accountability and assessment products involve parents, students, teachers, and administrators in the learning process.

     We operate our principal business in one industry segment, which is the development and marketing of educational software and related services.

Critical Accounting Policies and Estimates

     Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 estimates, and have identified the policies relating to the following areas as the critical accounting policies and estimates that are significant to the financial statement presentation, and that require difficult, subjective, or complex judgments:

• Revenue recognition

• Capitalized product development costs

• Valuation of our deferred income taxes

• Valuation and impairment analysis of goodwill and identified intangible assets

     There have been no significant changes to our accounting policies in these areas during the first six months of 2007. For a complete discussion of these policies refer to Note 2 to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2006.

13

General Factors Affecting our Financial Results

     There are a number of general factors that affect our results from period to period. These factors are discussed below.

     Revenue. We are strategically transitioning our business model from one that emphasized the sale of one-time perpetual licenses to our software, for which revenue is generally recognized up-front upon delivery, to one that emphasizes the sale of internet-based subscription courseware products, for which revenue is recognized over the subscription period. As a result, this transition will affect the comparability of our revenues from period to period until it is complete. The transition became most evident in the third quarter of 2006 when many of our new internet-based subscription courseware products became available. As subscription revenues grow as a percentage of total revenues, we expect our period to period revenues to become more comparable.

     Until our transition to internet-based subscription courseware products is closer to completion, a meaningful portion of our revenues will continue to be derived from perpetual licenses sales of our software products. These revenues are reported as license fees in our consolidated statement of operations. Changes in the quantity and size of individual license fee transactions can have a significant impact on revenues in a period. In addition, as is common with many software companies, a large portion of our customer orders tend to occur in the final weeks or days of each fiscal quarter. As a result, license revenues can be heavily influenced by events such as funding approvals that may be outside our control during this short span of time. Our business is also seasonal, with the largest portion of our license fees typically coming in the third and fourth quarters of our fiscal year, and professional service fees being the greatest during periods in which schools are in session. While this seasonality does not generally impact the comparability of our annual results, it can significantly impact our results from quarter to quarter.

     Gross Profit. Our gross profit during a period is dependent on a number of factors. License fee revenues have high gross profit due to the low direct cost of delivering these products. As a result, the mix of license fee revenues to total revenues in a given period significantly influences reported total gross profit. In addition, a large portion of our costs of revenue are fixed in nature. These costs include amortization of capitalized software development and purchased technology, depreciation and other infrastructure costs to support our hosted subscription services, customer support operations, and full-time professional services personnel who deliver our training services. Accordingly, increases in revenues allow us to leverage these costs resulting in higher gross profit, while decreases in revenues have the opposite effect.

     Operating Expenses. Incentive compensation is a significant variable component of our sales and marketing expenses, approximating 8% to 9% of total revenues in any given period. Sales and marketing expenses also include costs such as travel, tradeshows, and conferences that can vary with revenue activity or individual events that occur during the period.

     General and administrative expenses are substantially fixed in nature. However, certain components such as our provision for bad debts, professional fees, and other expenses can vary based on business results, individual events, or initiatives we may be pursuing at various times throughout the year.

     Product maintenance and development expense in our consolidated statement of operations does not reflect our total level of spending on product activities. Costs to enhance or maintain existing products, or to develop products prior to achieving technological feasibility, are charged to product maintenance and development expense as incurred. Costs incurred to develop new products after technological feasibility is achieved, which represent the majority of our total development spending, are

14

capitalized and amortized to cost of revenues. Product maintenance and development expense in our consolidated statement of operations can fluctuate from period to period, in terms of both total dollars and as a percentage of revenue, based on the nature and timing of activities occurring during the period.

     Amortization of intangibles represents the amortization of certain identified intangible assets acquired through various acquisitions. While these expenses are generally predictable from period to period because they are fixed over the course of their individual useful lives, they can be affected by events and other factors that result in impairment of these assets and a corresponding reduction in future amortization.

Overview of Financial Results

     Total orders for the second quarter of 2007 were $12.6 million compared to $16.0 million in 2006. Orders for our internet-based subscription courseware products – which are the foundation of the Company’s growth strategy — increased $3.1 million, or 157% over the second quarter of 2006. However, this increase was not sufficient to offset a $5.1 million decline in orders for our legacy products sold on a perpetual license basis. This continuing transition from our legacy perpetual license products to our new subscription products also contributed to the decline in year to date orders to $25.4 million in 2007 from $32.3 million for the same period last year.

     Revenues for the second quarter of 2007 were $15.2 million, a decline of $4.8 million, or 23.8%, from the second quarter of 2006. Year to date revenue was $32.2 million compared to $43.5 million for the six-month period in 2006. These revenue declines primarily reflect the continuing transition from sales of perpetual license products, for which revenue is recognized upon delivery, to sales of subscription license products for which revenue is recognized over the subscription period.

     Cost of revenues and operating expenses combined declined by $5.5 million in the second quarter compared to the same period last year as we continued to drive efficiencies into our business and lower our cost structure. As a result, our second quarter net loss improved by $0.6 million, from ($5.9) million, or ($0.25) cents per share in 2006, to ($5.3) million or ($0.22) per share in 2007. On a year to date basis, our net loss increased by $0.7 million to ($9.8) million, or ($0.41) per share in 2007 from ($9.1) million, or ($0.38) per share in 2006 as the $10.6 million decline in total cost of revenues and operating expenses was not sufficient to offset the $11.2 million decline in revenue.

15

Results of Operations

Revenues

     The following tables summarize certain key information to aid in the understanding of our discussion and analysis of revenues:

U.S. Sales Order Information (in thousands)

	Three Months Ended									Six Months Ended
	April 30,									April 30,
							Percent									Percent
							Increase									Increase
	2007			2006			(Decrease)			2007			2006			(Decrease)
Order Value:
Subscriptions
Courseware	$	5,016		$	1,953			156.8	%	$	8,574		$	3,315			158.6	%
Assessment and other		903			1,458			(38.1	%)		1,621			2,684			(39.6	%)
Total subscriptions		5,919			3,411			73.5	%		10,195			5,999			69.9	%
License fees		2,563			7,649			(66.5	%)		6,803			15,201			(55.2	%)
Services		4,164			4,974			(16.3	%)		8,446			11,137			(24.2	%)
	$	12,646		$	16,034			(21.1	%)	$	25,444		$	32,337			(21.3	%)
Percent of Total Order Value:
Subscriptions
Courseware		39.7	%		12.2	%					33.7	%		10.3	%
Assessment and other		7.1	%		9.1	%					6.4	%		8.3	%
Total subscriptions		46.8	%		21.3	%					40.1	%		18.6	%
License fees		20.3	%		47.7	%					26.7	%		47.0	%
Services		32.9	%		31.0	%					33.2	%		34.4	%
		100.0	%		100.0	%					100.0	%		100.0	%

Orders Greater Than $100,000

	Three Months Ended							Six Months Ended
	April 30,							April 30,
	2007		2006		% Change			2007		2006		% Change
Number		16		19		(15.8	%)		33		45		(26.7	%)
Value ($000)	$	3,126	$	4,046		(22.7	%)	$	6,134	$	9,371		(34.5	%)
Average Value ($000)	$	195	$	213		(8.5	%)	$	186	$	208		(10.6	%)

16

Revenue By Category (in thousands):

	Three Months Ended							Six Months Ended
	April 30,							April 30,
	2007		2006		% Change			2007		2006		% Change
Subscriptions	$	5,360	$	4,054		32.2	%	$	10,513	$	8,410		25.0	%
License fees		3,070		6,920		(55.6	%)		7,712		15,969		(51.7	%)
Services		6,783		9,001		(24.6	%)		14,014		19,082		(26.6	%)
	$	15,213	$	19,975		(23.8	%)	$	32,239	$	43,461		(25.8	%)

     Total revenues for the second quarter of 2007 declined 23.8% to $15.2 million, from $20.0 million for the same period in 2006, reflecting a significant decrease in license fee orders and revenues. The decline in license fee orders reflects our continuing transition from sales of legacy perpetual license products for which revenue is recognized upon delivery, to sales of subscription products for which revenue is recognized over the subscription period. This transition also accounts for the year-to-date revenue decline from $43.5 million in 2006 to $32.2 million in 2007.

     Subscription revenue in the second quarter of 2007 increased 32.2%, partially offsetting the decline in revenue from license fees. The increase in subscription revenue reflects our growing base of subscription customers. Revenue from services decreased 24.6% to $6.8 million in the second quarter of 2007, from $9.0 million for the same period in 2006. More than one half of the decline relates to Supplemental Educational Services, a service offering we discontinued in 2006. Training services revenues also contributed to the decline, due to lower orders for these services during the first quarter of 2007 relative to same period in 2006. For the first six months of 2007, subscription revenue increased 25% to $10.5 million and license and service revenue declined 51.7% and 26.6% respectively, over the prior year for largely the same factors as those affecting second quarter revenues.

Gross Margin

Percentage of Total Revenue

	Three Months Ended						Six Months Ended
	April 30,						April 30,
Revenue Category	2007			2006			2007			2006
Subscriptions		35.2	%		20.3	%		32.6	%		19.4	%
License fees		20.2	%		34.6	%		23.9	%		36.7	%
Services		44.6	%		45.1	%		43.5	%		43.9	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Gross Margin Percentage

	Three Months Ended April 30,									Six Months Ended April 30,
							Increase									Increase
Revenue Category	2007			2006			(Decrease)			2007			2006			(Decrease)
Subscriptions		30.3	%		34.5	%		(4.2	%)		34.0	%		41.8	%		(7.8	%)
License fees		39.3	%		61.3	%		(22.0	%)		46.2	%		64.6	%		(18.4	%)
Services		53.4	%		50.2	%		3.2	%		54.7	%		51.5	%		3.2	%
Total		42.4	%		50.9	%		(8.5	%)		46.0	%		54.4	%		(8.4	%)

17

     Total gross margin decreased to 42.4% for the second quarter of 2007, from 50.9% for the same period in 2006. The decline in license fees gross margin from 61.3% to 39.3% over this period had the most significant effect on total gross margin. This decline reflects lower license fee revenues on a relatively fixed cost base.

     Subscription gross margin decreased to 30.3% in the second quarter 2007 from 34.5% for the same period in 2006. The decline reflects very low margins on incremental subscription revenues, as the $1.3 million revenue increase was largely offset by a $1.2 million increase in product development amortization related to new subscription products released in the second half of 2006 and early 2007. Product amortization expense is recognized on a straight-line basis, whereas related subscription revenues are expected to increase over time as new subscriptions are sold and others are renewed. Accordingly, subscription gross margins are generally expected to be lower early in the life cycle of new products and increase over time as subscription revenues grow.

     Services gross margin in the second quarter increased to 53.4% in 2007 from 50.2% in 2006. This improvement was driven by an increase in the mix of higher margin software support services revenues which have low variable costs.

     The total gross margin for the six month period was 46.0% compared to 54.4% for the same period last year. Similar factors as those identified above that affected second quarter gross margins also impacted the year to date gross margins.

Operating Expenses

     The following table summarizes the percentage of total revenue and percentage change in total spending from the previous year for certain operating expense line items. This information is provided as an aid to the understanding of our discussion and analysis of our operating expenses.

	Percentage of									Percentage of
	Total Revenue						Percent			Total Revenue						Percent
	Three Months Ended						Increase			Six Months Ended						Increase
	April 30,						(Decrease)			April 30,						(Decrease)
	2007			2006			in Amount			2007			2006			in Amount
Sales and marketing		48.5	%		47.9	%		(22.9	%)		46.8	%		44.4	%		(21.8	%)
General and administrative		19.1	%		21.6	%		(32.7	%)		19.0	%		20.6	%		(31.7	%)
Product maintenance and development		7.5	%		6.1	%		(6.5	%)		9.0	%		6.4	%		5.4	%
Amortization of intangibles		3.0	%		4.7	%		(51.0	%)		2.8	%		4.4	%		(51.9	%)
Subtotal		78.1	%		80.3	%		(25.9	%)		77.6	%		75.8	%		(24.0	%)
Restructuring and other charges		0.0	%		1.3	%		(100.0	%)		0.0	%		0.8	%		(100.0	%)
Total operating expenses		78.1	%		81.6	%		(27.1	%)		77.6	%		76.6	%		(24.7	%)

     Total operating expenses were $11.9 million for the second quarter of 2007, a decrease of 27.1% from the $16.3 million reported for the same period in 2006. On a year to date basis total operating expenses declined $8.2 million or 24.7%.

     Sales and marketing expenses decreased 22.9%, or $2.2 million, from the second quarter of 2006 to the second quarter of 2007 and 21.8%, or $4.2 million for the corresponding six month periods. These declines reflect the reorganization and cost reduction activities we initiated at the end of 2006, and to a lesser extent lower variable incentive compensation expense due to lower revenues.

18

     General and administrative expenses were $2.9 million in the second quarter of 2007, a decrease of 32.7% or $1.4 million compared to 2006. For the six month period ended April 30, 2007, general and administrative expenses declined $2.8 million or 31.7% over the prior year. These declines reflect decreases in Sarbanes-Oxley compliance costs, lower external audit fees, reduced bad debt expense and other cost reduction activities we initiated at the end of 2006.

     Product maintenance and development expenses in the second quarter of 2007 were comparable to the same period in 2006. Declining maintenance costs associated with legacy products were offset by early-stage development costs on new products and support costs associated with the launch of our new instructional management system late in 2006. Year to date product development expenses increased slightly over the prior year for similar reasons.

     Amortization of intangibles expenses for the second quarter decreased 51.0%, or $0.5 million compared to 2006 and $1.0 million for the comparable six month period. This decrease reflects the impairment write-down in the fourth quarter of 2006 of certain customer and trademark intangible assets acquired in previous acquisitions.

Other Income, Net

     Other income consists primarily of interest income on our cash and cash equivalent balances. Other income declined $0.1 million for both the second quarter and first six months of 2007 due to the decrease in our average cash and cash equivalents over the prior year.

Liquidity and Capital Resources

Cash and Cash Equivalents

     At April 30, 2007, cash and cash equivalents were $21.0 million, a decrease of $12.1 million from October 31, 2006. This decrease during this period primarily represents the investments made in new product development of $7.4 million and equipment and leasehold improvements of $1.2 million. The balance of the decrease reflects net cash used in operations of $3.4 million.

Working Capital and Liquidity

     At April 30, 2007, our principal sources of liquidity included cash and cash equivalents of $21.0 million, and net accounts receivable of $10.5 million. Subsequent to the end of the quarter, we entered into a three-year senior secured credit facility which provides us up to $20 million in additional liquidity. See Note 11 to condensed consolidated financial statements for a further description of this credit facility.

     Working capital, defined as current assets less current liabilities, was ($1.9) million at April 30, 2007 and $8.8 million at October 31, 2006. The decrease in working capital was primarily due to the decrease in cash and cash equivalents of $12.1 million as discussed above, and a decrease in net accounts receivable of $8.0 million, offset by a decrease in accounts payable of $1.0 million,

19

accrued compensation, and other accrued liabilities of $3.2 million and deferred revenue of $6.6 million. Accounts receivable decreased due to seasonally low order volume in the second quarter compared to the fourth quarter. Accounts payable and accrued compensation decreased due to payment of amounts accrued at October 31, 2006, including year-end commissions and bonuses. Deferred revenue, which is satisfied through delivery of products and services rather than cash, decreased as more of these products and services were delivered than were added through new business, due to the seasonally lower order volume mentioned earlier.

     Our future liquidity needs will depend on, among other factors, the timing and extent of product development expenditures, order volume, and the timing and collection of receivables. We believe that existing cash and marketable securities balances, anticipated cash flow from operations and availability under our line of credit will be sufficient to fund our operations for the foreseeable future.

Contractual Obligations and Commercial Commitments

     Our contractual obligations and commercial commitments consist primarily of future minimum payments due under operating leases, royalty and software license agreements, and capital lease obligations. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended October 31, 2006 for a table showing our contractual obligations. There were no significant changes to our contractual obligations during the first six months ended April 30, 2007.

     At April 30, 2007, we had no significant commitments for capital expenditures.

Disclosures about Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements as of April 30, 2007.

Forward-Looking Statements

     In addition to historical information, this Form 10-Q contains forward-looking statements. These forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (“the Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Act. Forward-looking statements include, among others, statements about our future performance, the sufficiency of our sources of capital for future needs, and the expected impact of recently issued accounting pronouncements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Part II Item 1A of this Form 10-Q and Part I Item 1A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2006. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements based on circumstances or events, which occur in the future. Readers should carefully review the risk factors described in this report on Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission.

Interest Rate Risk

     We have no financial instruments or obligations that subject us to interest rate risk.

20

Foreign Currency Exchange Rate Risk

     Our foreign operations are not a significant component of our business, and as a result, risks relating to foreign currency fluctuation are considered minimal.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See the information set forth under the captions, “Interest Rate Risk” and “Foreign Currency Exchange Rate Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

     There was no change in our internal control over financial reporting during our first six months of fiscal 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

21

PART II.

ITEM 1A. RISK FACTORS

          Our business is subject to a number of risks and uncertainties which we discussed in detail in Part I, Item 1A of our 2006 Annual Report on Form 10-K.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Our Annual Meeting of Stockholders was held on March 21, 2007. There were 23,756,622 shares of our common stock entitled to vote at the meeting and a total of 22,740,557 shares (95.7%) were represented at the meeting. Voting was as follows:

1.	Election of Director Ruth L. Greenstein: For 21,682,299 and Withheld 949,806.
2.	Election of Director Susan E. Knight: For 21,683,392 and Withheld 948,713.
3.	Election of Director Warren Simmons: For 20,366,202 and Withheld 2,265,903.
4.	Election of Director David W. Smith: For 21,596,782 and Withheld 1,035,323.
5.	Approval to an increase of 250,000 authorized shares of Common Stock for the 1993 Employee Stock Purchase Plan: For 19,015,746, Against 1,134,251, Abstain 9,904 and Broker Non-Vote 2,580,656.
6.	Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ending October 31, 2007: For 22,642,562, Against 13,239 and Abstain 84,755.

ITEM 6. EXHIBITS

Exhibit Number and Description

10.01	PLATO Learning Inc. Employee Restricted Stock Agreement
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.

22

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.

PLATO LEARNING, INC. June 11, 2007	By	/s/ MICHAEL A. MORACHE Michael A. Morache
		President and Chief Executive Officer
		(principal executive officer)
		/s/ ROBERT J. RUECKL Robert J. Rueckl
		Vice President and Chief Financial Officer
		(principal financial officer)

23

EX-10.01

Exhibit 10.01

PLATO LEARNING, INC.
EMPLOYEE RESTRICTED STOCK AGREEMENT

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to                     (the “Employee”) on this ___day of ___,___(the “Grant Date”), pursuant to the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”), an award (the “Award”) of                      shares of the Company’s Common Stock, $.01 par value (“Stock”), subject to the terms and conditions set forth below.

     1. Award Subject to Acceptance of Agreement. The Award shall become null and void unless the Employee shall accept this Agreement by executing it in the space provided below and return it to the Company within 60 days following the Grant Date.

     2. Vesting of Shares; Forfeiture. Except as otherwise provided in the Plan and this Section 2, the Award shall vest in four installments, each equal to 25% of the Stock subject to the Award, on each of the first four anniversaries of the Grant Date, contingent upon the Participant having provided continuous employment to the Company or an Affiliate from the Grant Date through each such anniversary. Any portion of the Stock subject to the Award that is not vested upon the termination of the Participant’s employment for any reason shall be forfeited automatically as of such date. Notwithstanding the foregoing; all unvested awards shall vest if the Company terminates the Employee’s employment without “Cause” or the Employee terminates employment for “Good Reason” within 24 months following a “Change in Control” (as each term is defined in the Employee’s employment agreement with the Company of even date herewith, as may be subsequently amended or superseded). For purposes of this Agreement, “Vest” “Vested” and “Vesting” means that a share of Restricted Stock ceases to be subject to a risk of forfeiture.

     3. Additional Terms and Conditions of Award.

     3.1 Section 83(b) Election. The Employee may elect within thirty (30) days after the Grant Date, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in his gross income for a taxable year in which the stock is purchased the excess of (a) the fair market value of the shares covered by the Award on the purchase date over (b) the purchase price paid for such shares.

     3.2 Withholding Taxes. As a condition precedent to the Award, the Employee shall, upon request by the Company, pay to the Company such amount of cash as the Company may be required, under all applicable federal, state or local laws or regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the Award. The Employee may elect to satisfy such withholding tax obligation by having the Company withhold Stock having a fair market value equal to the Company’s minimum withholding obligation. If the Employee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Employee, either in cash or in Stock.

-2-

     3.3 Tax Consequences. The Employee has reviewed with the Employee’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Employee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Employee understands that the Employee (and not the Company) shall be responsible for the Employee’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

     3.4 Stock. A certificate or shares in book entry evidencing the Award shall be issued by the Company in the Employee’s name, pursuant to which Employee shall have voting rights and shall be entitled to receive all dividends unless and until the Award are forfeited pursuant to the provisions of this Agreement. The certificate or shares in book entry shall bear a legend evidencing the nature of the Award, and the Company will cause the certificate to be delivered upon issuance to the Secretary of the Company or to such other depository as may be designated by the Company as a depository for safekeeping until the Stock vests or is forfeited pursuant to the terms of the Plan and this Agreement. The Employee shall deliver to the Company a stock power, endorsed in blank, relating to the Award then subject to the forfeiture restrictions. Upon vesting of the Award, the Company shall cause a new certificate or certificates or shares in book entry form to be issued without legend in the name of the Employee for the shares then vested. Notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether subject to restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares. The Company shall not be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

     3.5 Award Confers No Right to Continued Employment. In no event shall the granting of the Award or its acceptance by the Employee give or be deemed to give the Employee any right to continued employment by the Company.

     3.6 Status of Award. The Employee agrees that the Award will not be sold or otherwise disposed of in any manner, which would constitute a violation of any applicable federal or state securities laws. The Employee also agrees that Award may not be sold, transferred or otherwise alienated or hypothecated by the Employee other than by will or the laws of descent and distribution until the restrictions are removed or lapse. Employee also agrees (i) that the certificates representing the Award may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the Award on the stock transfer records of the Company if such proposed transfer would be in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Award.

     3.7 Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

-3-

     3.8 Agreement Subject to Plan. This Agreement is subject to the provisions of the Plan, and shall be interpreted in accordance therewith, except where specifically provided otherwise in this Agreement. The Employee hereby acknowledges receipt of a copy of the Plan.

PLATO LEARNING, INC.
By:
	Michael A. Morache

Accepted this                      day of

                                        , 200                     

[Name of Employee]

EX-31.01

Exhibit 31.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
UNDER RULE 13a-14(a) ADOPTED
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. Morache, President and Chief Executive Officer of PLATO Learning, Inc., certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of PLATO Learning, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2007	/s/MICHAEL A. MORACHE Michael A. Morache
	President and Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER
UNDER RULE 13a-14(a) ADOPTED
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Robert J. Rueckl, Vice President and Chief Financial Officer of PLATO Learning, Inc., certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of PLATO Learning, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2007	/s/ROBERT J. RUECKL Robert J. Rueckl
	Vice President and Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
UNDER 18 U.S.C. 1350
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PLATO Learning, Inc. (the “Company”) for the six months ended April 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Morache, President and Chief Executive 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 my 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: June 11, 2007	/s/ MICHAEL A. MORACHE Michael A. Morache
	President and Chief Executive Officer

EX-32.02

Exhibit 32.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER
UNDER 18 U.S.C. 1350
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PLATO Learning, Inc. (the “Company”) for the six months ended April 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Rueckl, Vice President and 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 my 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: June 11, 2007	/s/ ROBERT J. RUECKL Robert J. Rueckl
	Vice President and Chief Financial Officer