NOTE 5 – 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 27,		February 28,		February 27,
		2017		2016		2017		2016
Performance awards	$	1,391	$	966	$	2,469	$	1,591
Unvested share awards		125		113		237		225
Employee stock purchase plan		33		32		56		58
Fully-vested share awards		15		-		15		-
	$	1,564	$	1,111	$	2,777	$	1,874

During the quarter and two quarters ended February 28, 2017, we issued 124,304 shares and 137,843 shares, respectively, of our common stock to employees for stock-based compensation awards. The following is a description of the developments in our stock-based compensation plans during the quarter ended February 28, 2017.

Performance Awards

On October 18, 2016, the Organization and Compensation Committee (the Compensation Committee) of the Board of Directors granted new performance-based awards for our executive officers and members of senior management. A total of 183,381 shares may be earned by the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) and trailing four-quarter gross All Access Pass (AAP) sales as shown below.



	Adjusted EBITDA				Gross AAP Sales
	Award				Award
	Goal	Number of	Tranche		Goal	Number of	Tranche
	(thousands)	Shares	Status		(thousands)	Shares	Status
$	36,672	42,789	not vested	$	30,052	18,338	target achieved
	41,806	42,789	not vested		35,419	18,338	target achieved
	47,658	42,789	not vested		40,758	18,338	not vested
		128,367				55,014

The fiscal 2017 long-term performance awards have a maximum life of six years and compensation expense is recognized as we determine it is probable that the shares will vest. Adjustments to compensation expense to reflect the timing of and the number of shares expected to be awarded will be made on a cumulative basis at the date of the adjustment. During the quarter ended February 28, 2017, the award targets were achieved for the first two gross AAP sales tranches. Subject to Compensation Committee approval, these tranches award a total of 36,676 shares of common stock to the participants. These shares are expected to be distributed during the third quarter of fiscal 2017.

In fiscal 2016, we introduced the All Access Pass, which allows our clients to access our intellectual property through an electronic portal. Based on guidance for multiple-element revenue arrangements, we defer a significant portion of AAP sales over the life of the client’s contract. Accordingly, sales of the All Access Pass have significantly impacted our financial results since the second quarter of fiscal 2016. On October 18, 2016, the Compensation Committee approved a modification to the fiscal 2012 through fiscal 2016 performance awards to include the change in deferred revenue, less certain costs, in Adjusted EBITDA in the vesting calculations. Our share price on October 18, 2016 was less than the share prices used to recognize stock-based compensation expense on the fiscal 2012 through fiscal 2016 performance awards and no incremental stock-based compensation expense was recognized from this modification.

Compensation expense recognized during the quarter and two quarters ended February 28, 2017, 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 2017 award, each eligible director received a whole-share grant equal to $75,000 with a one-year vesting period. Our unvested share activity during the two quarters ended February 28, 2017 consisted of the following:



			Weighted-Average
			Grant Date
	Number of		Fair Value
	Shares		Per Share
Unvested stock awards at
August 31, 2016	25,032	$	17.98
Granted	29,834		17.60
Forfeited	-		-
Vested	(25,032)		17.98
Unvested stock awards at
February 28, 2017	29,834	$	17.60

At February 28, 2017, there was approximately $0.4 million of unrecognized compensation expense associated with the fiscal 2017 Board of Director unvested share award.

Stock Options

Stock option activity for the two quarters ended February 28, 2017 was as follows:



			Weighted
			Avg. Exercise
	Number of		Price Per
	Stock Options		Share
Outstanding at August 31, 2016	631,250	$	11.41
Granted	-		-
Exercised	(62,500)		9.00
Forfeited	-		-

Outstanding at February 28, 2017	568,750	$	11.67

Options vested and exercisable at
February 28, 2017	568,750	$	11.67

During the quarter ended February 28, 2017, our Chief Executive Officer (CEO) exercised 62,500 options on a “net” basis and received 30,079 shares of the Company’s common stock with an aggregate intrinsic value of $0.5 million. The shares received by the CEO were reduced by 10,021 shares, which were withheld for minimum statutory taxes.

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, 2017, we issued 7,238 shares and 18,281 shares of our common stock to participants in the ESPP.