NOTE 4 – STOCK-BASED COMPENSATION

The cost of our stock-based compensation plans is included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. The total cost of our stock-based compensation plans was as follows for the periods presented (in thousands):



		Quarter Ended			Two Quarters Ended
		February 28,		February 28,		February 28,		February 28,
		2018		2017		2018		2017
Performance awards	$	582	$	1,391	$	1,373	$	2,469
Unvested share awards		160		125		292		237
Employee stock purchase plan		37		33		71		56
Fully-vested share awards		-		15		-		15
	$	779	$	1,564	$	1,736	$	2,777

During the quarter and two quarters ended February 28, 2018, we issued 40,814 shares and 292,048 shares of our common stock to employees for stock-based compensation awards. Our stock-based compensation plans allow shares to be withheld to cover statutory income taxes if so elected by the award recipient. During the quarter and two quarters ended February 28, 2018, we withheld 1,934 shares and 104,699 shares, respectively, of our common stock to cover statutory taxes on stock-based compensation awards that vested during fiscal 2018. The following is a description of the developments in our stock-based compensation plans during the quarter and two quarters ended February 28, 2018.

Performance Awards

On November 14, 2017, the Organization and Compensation Committee (the Compensation Committee) of the Board of Directors granted a new performance-based long-term incentive plan (LTIP) award to our executive officers and members of senior management. The fiscal 2018 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) the achievement of certain levels of fiscal 2020 qualified adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA); and 3) fiscal 2020 subscription sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche will not fluctuate based on financial measures. The number of shares granted in this tranche totals 42,883 shares. The remaining two tranches of the award are divided between the achievement of certain levels of Adjusted EBITDA and subscription sales recognized in fiscal 2020. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum award threshold) up to 200 percent of the participant’s award (maximum threshold). The maximum number of shares that may be awarded in connection with these tranches totals 257,300 shares.

The fiscal 2018 LTIP has a three-year life and expires on August 31, 2020.

Compensation expense recognized during the quarter and two quarters ended February 28, 2018, for performance awards includes expense related to awards granted in previous periods for which the performance conditions are probable of being achieved.

Unvested Share Awards

Our annual unvested share award granted to non-employee members of the Board of Directors is administered under the terms of the 2015 Omnibus Incentive Plan, and is designed to provide our non-employee directors, who are not eligible to participate in our employee stock purchase plan, an opportunity to obtain an interest in the Company through the acquisition of shares of our common stock. The annual unvested award is granted in January (following the annual shareholders’ meeting) of each year. For the fiscal 2018 award, each eligible director received a whole-share grant equal to $100,000 with a one-year vesting period. Our unvested share activity during the two quarters ended February 28, 2018 consisted of the following:



			Weighted-Average
			Grant Date
	Number of		Fair Value
	Shares		Per Share
Unvested stock awards at
August 31, 2017	29,834	$	17.60
Granted	23,338		30.00
Forfeited	-		-
Vested	(29,834)		17.60
Unvested stock awards at
February 28, 2018	23,338	$	30.00

At February 28, 2018, there was approximately $0.6 million of unrecognized compensation expense remaining on the fiscal 2018 Board of Director unvested share award.

Employee Stock Purchase Plan

We have an employee stock purchase plan (ESPP) that offers qualified employees the opportunity to purchase shares of our common stock at a price equal to 85 percent of the average fair market value of our common stock on the last trading day of each fiscal quarter. During the quarter and two quarters ended February 28, 2018, we issued 11,204 shares and 21,091 shares, respectively, of our common stock to participants in the ESPP.

At the annual meeting shareholders held on January 26, 2018, our shareholders approved the Franklin Covey Co. 2017 Employee Stock Purchase Plan (the Plan). The Plan replaced the Franklin Covey Co. 2004 Employee Stock Purchase Plan, which previously expired. The Plan authorized an additional 1,000,000 shares, subject to certain adjustments, of common stock for issuance to ESPP participants. For further information regarding the Plan, including the full text of the Plan, please refer to our definitive Proxy Statement as filed with the SEC on December 22, 2017.