~~FranklinCovey~~ Franklin Covey Co.
TABLE OF CONTENTS
PART I			2
	Item 1	Business	2
	Item 1A	Risk Factors	10
	Item 1B	Unresolved Staff Comments	20 19
	Item 2	Properties	21 20
	Item 3	Legal Proceedings	21 20
	Item 4	Mine Safety Disclosures	22 20
PART II			22 20
	Item 5	Market for the ~~Registrant's~~Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities	22 20
	Item 6	Selected Financial Data	25 23
	Item 7	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 24
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	51 43
	Item 8	Financial Statements and Supplementary Data	53 45
	Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~100~~ 91
	Item 9A	Controls and Procedures	~~100~~ 91
	Item 9B	Other Information	~~101~~ 92
PART III			~~101~~ 92
	Item 10	Directors, Executive Officers and Corporate Governance	~~101~~ 92
	Item 11	Executive Compensation	~~102~~ 93
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~102~~ 93
	Item 13	Certain Relationships and Related Transactions, and Director Independence	~~103~~ 94
	Item 14	Principal Accountant Fees and Services	~~103~~ 94
PART IV			~~104~~ 95
	Item 15	Exhibits and Financial Statement Schedules	95
	Item 16	Form 10-K Summary	98
	~~104~~
	Signatures		~~108~~ 99

PART I

Disclosure Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains ~~"forward-looking statements"~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and such forward-looking statements involve risks and uncertainties. Statements about future sales, costs, margins, cost savings, foreign currency exchange rates, earnings, earnings per share, cash flows, plans, objectives, expectations, growth, profitability, or ~~profitability~~recovery from the COVID-19 pandemic are forward-looking statements based on ~~management's~~management’s estimates, assumptions, and projections. Words such as ~~"could," "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates,"~~“could,” “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and variations on such words, including similar expressions, are used to identify these forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed in this, and other reports, filed with the Securities and Exchange Commission (SEC) and elsewhere. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Risks, uncertainties, and other factors that might cause such differences, some of which could be material, include, but are not limited to, the factors discussed under the section of this report entitled ~~"Risk~~“Risk Factors."”

Forward-looking statements in this report are based on ~~management's~~management’s current views and assumptions regarding future events and speak only as of the date when made. Franklin Covey Co. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by ~~the~~ federal securities laws.

In this Annual Report on Form 10-K, unless the context requires otherwise, the terms ~~"the~~“the Company,~~" "Franklin~~” “Franklin Covey,~~" "us,"~~” “us,” we,"” and ~~"our"~~“our” refer to Franklin Covey Co. and its subsidiaries.

ITEM 1. BUSINESS

General Information

Franklin Covey is a global company focused on organizational performance improvement. Our mission is to ~~"enable~~“enable greatness in people and organizations everywhere,"” and our global structure is designed to help individuals and organizations achieve sustained superior performance through changes in human behavior. From the foundational work of Dr. Stephen R. Covey in leadership and personal effectiveness, and Hyrum W. Smith in productivity and time management, we have developed deep expertise that extends to helping organizations and individuals achieve lasting behavioral ~~change in seven crucial areas: Leadership, Execution, Productivity, Trust, Sales Performance, Customer Loyalty, and Educational Improvement.~~change. We believe that our clients are able to utilize our content and offerings to create cultures whose hallmarks are high-performing, collaborative individuals, led by effective, trust building leaders who execute with excellence and deliver measurably improved results for all of their key stakeholders.

The Company was incorporated in 1983 under the laws of the state of Utah, and we merged with the Covey Leadership Center in 1997 to form Franklin Covey Co. Our consolidated net sales for the fiscal year ended August 31, ~~2017~~2020 totaled ~~$185.3~~$198.5 million and our shares of common stock are traded on the New York Stock Exchange (NYSE) under the ticker symbol ~~"FC."~~“FC.”

Our fiscal year ends on August 31 of each year. Unless otherwise noted, references to fiscal years apply to the 12 months ended August 31 of the specified year.

The ~~Company's~~Company’s principal executive offices are located at 2200 West Parkway Boulevard, Salt Lake City, Utah 84119-2331, and our telephone number is (801) 817‑1776. Our website is www.franklincovey.com.

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~~Recent~~

Business ~~Developments~~Development

Our business is currently structured around two divisions, the Enterprise Division and the Education Division. The Enterprise Division consists of our Direct Office and International Licensee segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Franklin Covey offerings delivered through the Enterprise Division are designed to help organizations and individuals achieve their own great results. Our Education Division is centered around the principles found in the Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.

During ~~fiscal~~ 2016, we introduced the All Access Pass (AAP), which we believe is a ground-breaking subscription service that allows our clients unlimited access to our content through an electronic portal. We believe the ~~All Access Pass~~AAP is a revolutionary and innovative way to deliver our content to clients of various sizes, including large, multinational ~~organizations.~~organizations, in a flexible and cost-effective manner. Clients may utilize complete offerings such as The 7 Habits of Highly Effective People and The 5 Choices to Extraordinary Productivity, or use individual concepts from any of our well-known offerings to create a custom solution to fit their organizational or individual training needs. During fiscal 2017, we invested significant capital to further develop the AAP offering and increase its usefulness to our clients. We are currently translating AAP materials into 15 additional languages and completing significant upgrades of the AAP portal. These enhancements to the AAP are expected to be launched in fiscal 2018.

~~While we anticipated that~~Since the introduction of the All Access Pass, we have invested in additional implementation specialists to provide our clients with the direction necessary to create meaningful impact journeys using our tools and content. An impact journey is a customized plan to utilize the content and offerings on the AAP ~~would~~to achieve a client’s specific goals and to provide them with the keys to obtain maximum value from the pass. We have also translated All Access Pass materials into numerous additional languages, which allows the AAP to be ~~disruptive~~used effectively by multinational entities and provides for greater international sales opportunities. The AAP is primarily sold through our Enterprise Division.

In our Education Division, we have launched the Leader in Me membership, which provides access to ~~our current business, especially during~~ the ~~transition~~Leader in Me online service, and authorizes use of Franklin Covey’s proprietary intellectual property. The Leader in Me online service provides access to ~~this new business model, we~~student leadership guides, leadership lessons, illustrated leadership stories, and a variety of other resources to enable an educational institution to effectively implement and utilize the Leader in Me program. We believe that the ~~AAP~~tools and resources available through the Leader in Me membership will provide ~~long-term benefits~~measurable results that are designed to develop student leadership, improve school culture, and increase academic proficiency.

We believe that continued investments in personnel, content, and technological innovation are key to subscription service renewals and the future growth of our clients and to our financial results. During the first quarter of fiscal 2017, we decided to allow new AAP agreements to receive updated content throughout the contracted period. As a result of this decision, we are required to defer substantially all AAP revenue at the inception of the agreement and recognize the revenue over the life of the corresponding contract. This decision had a significant impact on our fiscal 2017 financial statements, especially reported revenue, as we deferred significant AAP contract revenues. However, we anticipate that the recognition of deferred AAP sales will benefit future periods and reduce seasonal revenue fluctuations.offerings.

In addition to the ~~continued~~internal development of our offerings as previously described, we have sought to grow our sales through acquisitions of businesses and content licenses, and opening new international offices. Over previous years, these activities have included the following:

License of “Multipliers” Leadership Content – During late fiscal 2019, we obtained a license to develop and sell leadership offerings based on the bestselling book Multipliers by Liz Wiseman. We launched the new programs based on Multipliers content in August 2020. The initial term of this license will expire on August 31, 2029.

New Offices in Germany, Switzerland, and Austria – During fiscal 2019, we acquired the former independent licensee that provided services in these countries and transitioned the operations into directly owned offices. We believe that we will be able to significantly grow our business in these countries through this acquisition.

Impact of COVID-19 on Franklin Covey

COVID-19 was first identified in China during December 2019, and subsequently declared a pandemic by the World Health Organization. Since its discovery, COVID-19 has surfaced in nearly all regions of the world and has produced travel restrictions and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impacted our business globally, including our licensees, through office, government, and school closures. In particular, these closures impacted our third and fourth quarters of fiscal 2020 as described throughout this Annual Report on Form 10-K for fiscal 2020.

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After strong financial performance during the first two quarters of fiscal 2020, our financial results in the third and fourth quarters of fiscal 2020 were adversely impacted by the COVID-19 pandemic. We closed our corporate offices and restricted travel to protect the health and safety of our associates and clients in an effort to slow the spread of the pandemic. Our international direct offices also followed the same pattern of closures and restrictions on associate travel and delivery of our offerings. These actions, and similar steps taken by most of our clients, resulted in decreased sales during the third and fourth quarters as previously scheduled onsite events, client-facilitated presentations, and coaching days were postponed or canceled.

However, during the widespread closure of offices, schools, and other gathering places, we accelerated our connection and engagement with clients through the use of our digital delivery systems, including the All Access Pass in the Enterprise Division and the Leader in Me subscription service in the Education Division. Our subscription service clients are able to access content and programs from remote locations, which allows continued engagement of personnel and students during long periods of displacement from normal working or classroom conditions. To be successful in our industry, it is important to create effective learning environments for our clients and students, and we ~~made~~believe our previous investments in digital and remote delivery modalities are key to surviving and then thriving in the current environment. According to the Training magazine 2020 Training Industry Report, most companies expect to retain at least some aspects of remote learning after the COVID-19 pandemic is over. We believe our ability to deliver content and offerings over a ~~number~~broad array of ~~changes~~modalities to suit a client’s needs will prove to be a valuable strategic advantage, and we believe these capabilities will accelerate our ~~business in fiscal 2017, including~~recovery from the ~~following:~~

~~New China Offices~~ –On September 1, 2016 we opened three new sales offices in China. These offices are located in Beijing, Shanghai, and Guangzhou. Subsequent to August 31, 2017, we opened another sales office in Shenzhen, China. Our sales operations in China were previously managed by an independent licensee partner.

~~Acquisition of Robert Gregory Partners~~ – In May 2017, we acquired the assets of Robert Gregory Partners, LLC (RGP), a corporate coaching firm with expertise in executive coaching, transition acceleration coaching, leadership development coaching, implementation coaching, and consulting. We anticipate that RGP services and methodologies will become key offerings in our training and consulting business.

~~Acquisition of Jhana Education~~ – In July 2017, we acquired the stock of Jhana Education (Jhana), a company that specializes in the creation and dissemination of relevant, bite-sized content and learning tools for leaders and managers. We anticipate that the Jhana content and delivery methodologies acquired will become key features of our AAP offering.

~~License Rights for Intellectual Property~~ – During fiscal 2017, we acquired the license rights for certain intellectual property owned by Higher Moment, LLC. The intellectual property is in part based on works authored and developed by Dr. Clayton Christensen, a well-known author and lecturer, who is a member of our Board of Directors. As we seek to expand offerings available on the AAP, we anticipate additional purchases or licenses of intellectual propertyeffects of the pandemic and will generate increased opportunities in future periods.

For further information on the impacts of these activities on our operations, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations as found in Item 7 of this report, and our consolidated financial statements and related footnotes located in Item 8.

Franklin Covey Services ~~Overview~~and Offerings

We operate globally with one common brand and a business model designed to enable us to provide clients around the world with the same high level of service. To achieve this high level of service we have sales and support associates in various locations around the United States and Canada, and operate wholly owned subsidiaries in Australia, China, Japan, ~~and~~ the United ~~Kingdom.~~Kingdom, Germany, Switzerland, and Austria. In foreign

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locations where we do not have a directly owned office, we may contract with independent licensee partners who deliver our content and provide services in ~~over~~ 150 other countries and territories around the world.

Our mission is to ~~"enable~~“enable greatness in people and organizations everywhere,"” and we believe that we are experts at solving certain pervasive, intractable problems, each of which requires a change in human behavior. We seek to consistently deliver world-class content with the broadest and deepest distribution capabilities through the most flexible content delivery modalities. We believe these characteristics distinguish us from our competitors as follows:

World Class Content – Rather than rely on ~~"flavor~~“flavor of the ~~month"~~month” training fads, our content is principle-centered and based on natural laws of human behavior and effectiveness. Our content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets. When our content is applied consistently in an organization, we believe the culture of that organization will change to enable the organization to achieve its own great purposes. Our content is well researched, subjected to numerous field beta tests, and improved through a proven development process.

Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: ~~the~~The All Access Pass andLeader in Me membership, other intellectual property licensing arrangements, on-site training, training led through certified facilitators, on-line learning, blended learning, and organization-wide transformational processes, including consulting and ~~coaching.~~

coaching services.

Global Capability– We not only operate domestically with sales personnel in the United States and Canada, but we also deliver content through our directly owned international offices and independently owned international ~~licensee partners~~licensees who deliver our content in ~~over 150 other~~ countries ~~and territories around the world.~~not covered by a directly owned office. This capability allows us to deliver content to a wide range of customers, from large multinational corporations to smaller local entities.

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We hold ourselves responsible for and measure ourselves by our ~~clients'~~clients’ achievement of transformational results.

Our content and offerings are designed to help our clients achieve their own great purposes through a variety of resources, including best-selling books and audio, innovative and widely recognized thought leadership, and multiple delivery and teaching methods. These elements allow us to offer our clients training and consulting solutions that are designed to improve individual and organizational behaviors, deliver content that adapts to an organization's unique needs, and provide meaningful improvements in our clients' business performance. Further information about our content and services can be found on our website at ~~www.franklincovey.com~~.www.franklincovey.com. However, the information contained in, or that can be accessed through, our website does not constitute any part of this Annual Report.

~~Segment Information~~Seasonality

Our fourth quarter of each fiscal year typically has higher sales and operating income than other fiscal quarters primarily due to increased revenues in our Education Division (when school administrators and faculty have professional development days) and to increased sales that typically occur during that quarter from year-end incentive programs. Overall, training sales are ~~primarily comprised~~moderately seasonal because of the timing of corporate training, which is not typically scheduled as heavily during holiday and content sales and related products. During fiscal 2017, we managed our business in four segments, which are primarily focused on targeted client markets. These segments were as follows in fiscal 2017:

·	~~Direct Offices~~ – This segment consists of our sales force that serves the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; and our public programs group.

certain vacation periods.

·	~~Strategic Markets~~ – This segment includes our government services office, the Sales Performance practice, the Customer Loyalty practice, and the "Global 50" group, which is specifically focused on sales to large, multi-national organizations.

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·	~~Education practice~~ – This segment is comprised of our domestic and international Education practice operations, which are centered on sales to educational institutions such as elementary schools, high schools, and colleges and universities.

·	~~International Licensees~~ ~~– This segment is primarily comprised of our international licensees' royalty revenues.~~

~~For financial~~Our Industry and other information regarding our operating segments, refer to the notes to our consolidated financial statements (Note 17). For risks inherent in our foreign operations, refer to the risk factors identified in Item 1A and elsewhere in this Annual Report.

As we continue to transition to an AAP-focused business model, subsequent to August 31, 2017, we merged the Strategic Markets segment into the Direct Offices segment since our primary sales focus will be All Access Pass clients, Education clients, and our international licensee partners.

~~Industry Information~~Clients

According to the Training magazine ~~2017~~2020 Training Industry Survey, the total size of the U.S. training industry is estimated to be ~~$93.7 billion, which~~$82.5 billion. The training industry is highly fragmented and includes a ~~significant increase (32%) compared with the prior year. One~~wide variety of training and service providers of varying sizes. We believe our competitive advantages in this ~~highly fragmented~~ industry ~~stems~~stem from our fully integrated principle-centered training offerings, ~~measurement methodologies,~~our wide variety of delivery options, and various implementation tools to help organizations and individuals measurably improve their effectiveness. This advantage allows us to deliver not only training to both corporations and individuals, but also to implement the training through the use of powerful behavior-changing tools with the capability to then measure the impact of the delivered content and solutions.

~~Clients~~

We have a relatively broad base of clients, which includes thousands of organizational, governmental, educational, and individual clients in both the United States and in other countries that are served through our directly owned operations. We have thousands of additional organizational clients throughout the world, which are served through our global licensee partner network, and we believe that our content, in all its forms, delivers results that encourage strong client loyalty. We are not dependent on a single client or industry group, and during the periods presented in this report, none of our clients were responsible for more than ten percent of our consolidated revenues.

Over our history, we have provided content, services, and products to 97 of the Fortune 100 companies and more than 75 percent of the Fortune 500 companies. We also provide content and services to a number of U.S. and foreign governmental agencies, as well as numerous educational institutions. Due to the nature of our business, we do not have a significant backlog of orders. Nearly all of our deferred revenue is attributable to subscription services for which we recognize revenue over the lives of the corresponding agreements.

~~Competition~~

We operate in a highly competitive and rapidly changing global marketplace and compete with a variety of organizations of various sizes that offer services comparable with ~~those that we offer. The nature of the competition in the performance improvement industry, however, is highly fragmented with few large competitors.~~ours. Based upon our ~~fiscal 2017 consolidated~~annual sales, ~~of $185.3 million,~~ we believe that we are a ~~leading~~significant competitor in the performance skills and education market. Other significant comparative companies ~~in the performance improvement market are Development Dimensions~~that compete with our Enterprise Division include: Design Dimension International, ~~CRA International, Inc., Learning Tree International Inc.,~~ GP Strategies Corp., ~~FTI Consulting, Inc., American Management Association, Wilson~~LinkedIn Learning, ~~Forum Corporation, The Hackett Group, and the~~ Center for Creative ~~Leadership.~~Leadership, SkillSoft, and Vital Smarts. Our Education Division competes with entities such as: Character Counts, Responsive Classroom, 7 Mindsets, Second Step, and K12.

We believe that the principal competitive factors in the industry in which we compete include the following:

·	Quality of offerings, services, and solutions

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Skills and capabilities of people

·	~~Skills and capabilities of people~~

Innovative training and consulting services combined with effective products

·	~~Innovative training and consulting services combined with effective products~~

Ability to add value to client operations

·	~~Ability to add value to client operations~~

Reputation and client references

·	~~Reputation and client references~~

Pricing

~~Price~~

Availability of appropriate resources

·	~~Availability of appropriate resources~~

Global reach and scale

·	~~Global reach and scale~~

Branding and name recognition in our marketplace

·	~~Branding and name recognition in our marketplace~~

Given the relative ease of entry into the training market, the number of our competitors could increase, many of whom may imitate existing methods of distribution, or could offer similar content and programs at lower prices. However, we believe that we have several areas of competitive differentiation in our industry. We believe that our competitive advantages include: (1) the quality of our content, as indicated by our strong gross margins, branded content, and best-selling books; (2) the breadth of delivery options we are able to offer to customers for utilizing our content, including the ~~All Access Pass,~~AAP and Leader in Me membership, digital presentations hosted by live presenters, live presentations by our own training consultants, live presentations though Company certified client-employed facilitators, intellectual property licensing, other web-based presentations, and film-based presentations; (3) our global reach, which allows truly multinational clients to scale our content uniformly across the globe, through our mix of direct offices and our global licensee network; and (4) the significant impact which our offerings can have on our ~~clients'~~clients’ results. ~~Moreover,~~

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We have a relatively broad base of clients, which includes thousands of organizational, governmental, educational, and individual clients in both the United States and in other countries that are served through our directly owned operations. We have thousands of additional organizational clients throughout the world which are served through our global licensee partner network, and we believe that weour content, in all its forms, delivers results that encourage strong client loyalty. Our clients are in a ~~market leader in the U.S. in leadership, execution, productivity, and individual effectiveness content.~~

~~Seasonality~~

~~Our fourth quarter~~broad array of each fiscal year typically has higher sales and operating income than other fiscal quarters primarily due to increased revenues in our Education practice (when school administrators and faculty have professional development days) and to increased sales that typically occur during that quarter resulting from year-end incentive programs. Overall, training sales are moderately seasonal because of the timing of corporate training, which is not typically scheduled as heavily during holiday and certain vacation periods.

We believe that the recognition of deferred revenue from All Access Pass sales over the lives of the underlying arrangements will reduce some of the seasonality in our financial statements as described above. However, the underlying sales activity as described above will continue to produce some measure of seasonality in our financial statements in future periods.

~~Manufacturing and Distribution~~

~~We do not manufacture any of our products. We purchase our training materials and related products from various vendors and suppliers located both domestically and internationally,~~industries and we are not dependent ~~upon any one vendor for~~on a single client or industry group. During the ~~production~~periods presented in this report, none of our ~~training and related materials as the raw materials~~clients were responsible for ~~these products are readily available. We currently believe that we have good relationships with~~more than ten percent of our ~~suppliers and contractors. Our materials are primarily warehoused and distributed from an independent warehouse facility located in Des Moines, Iowa.~~consolidated revenues.

~~Trademarks, Copyrights, and~~Our Intellectual Property

Our success has resulted in part from our proprietary content, methodologies, and other intellectual property rights. We seek to protect our intellectual property through a combination of trademarks, copyrights, and confidentiality agreements. We claim rights for over ~~580~~640 trademarks in the United States and foreign countries, and we have obtained registration in the United States and numerous foreign countries for many of our trademarks including FranklinCovey, The 7 Habits of Highly Effective People, The 4 Disciplines of Execution, and The 7 Habits. We consider our trademarks and other proprietary rights to be important and material to our business.

We claim over ~~200~~220 registered copyrights, and own sole or joint copyrights on our books, manuals, text and other printed information provided in our training programs, and other electronic media

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products, including audio and video media. We may license, rather than sell, facilitator workbooks and other seminar and training materials in order to protect our intellectual property rights therein. We place trademark and copyright notices on our instructional, marketing, and advertising materials. In order to maintain the proprietary nature of our product information, we enter into written confidentiality agreements with certain executives, product developers, sales professionals, training consultants, other employees, and licensees.

~~Employees~~Our Products and Sustainability

~~One~~We offer training materials and related accessories in either digital or paper formats. Our printed training materials are primarily comprised of paper, which we believe is a renewable and sustainable resource. We purchase our training materials and related products from various vendors and suppliers located both domestically and internationally, and we are not dependent upon any one vendor for the production of our training and related materials as the raw materials for these products are readily available. Our training materials are primarily warehoused and distributed from an independent warehouse facility located in Des Moines, Iowa.

Human Capital

Our mission is to enable greatness in people and organizations everywhere. To fulfill that mission and successfully implement our strategy, we must attract, develop, and retain highly qualified associates for each role in the organization. Our goal is to have every employee feel they are a valued member of a winning team doing meaningful work in an environment of trust. To accomplish this goal, we are focused on attracting, developing, and retaining talent while looking through the lens of diversity, equity, and inclusion in each area. The following is a description of our efforts to manage human capital within our organization.

Attracting Talent

Our recruiting team and hiring managers begin with the creation of detailed job descriptions, containing clearly outlined skills and experience, necessary for success in each role. We believe these steps are essential to effectively interview for identifiable skillsets and not just “personality fits.” We have historically attracted “mission driven” people who care deeply about making a difference in the world. Our recruiting and hiring efforts cast a wide net when looking for candidates by partnering with many groups and agencies including, alumni organizations, multiple diversity job boards, diversity career fairs, the Utah Governor’s Committee on Employment of People with Disabilities and Business Relations, and ElevatHER – an organization designed to promote women in leadership. Through these efforts, from June 1, 2019 through May 31, 2020, which are the annual dates of our Affirmative Action Plan year, over 71 percent of our new hires were women. Currently, over 64 percent of our employee population are women and over 76 percent of our promotions during this same time period were women.

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We also remain steadfast in our commitment to being an Affirmative Action Employer and have an objective to increase the population of our Black, Indigenous, and People of Color (BIPOC) employees. In an effort to increase the population of BIPOC employees, we have expanded our recruitment efforts. We hope to increase the number of BIPOC applicants to ensure we are hiring the most ~~important assets is~~qualified people while increasing our ~~people.~~diversity. We are also actively engaged in ensuring that out employee promotions are fair and equitable.

Developing Talent

We currently have approximately 940 associates, nearly all of whom are full-time employees, around the world who are dedicated to providing the best service possible for our clients. The diverse and global makeup of our workforce allows us to serve a variety of clients with different needs on a worldwide basis. We believe that creating an environment which encourages continual learning and development is essential for us to maintain a high level of service and to achieve our goal to have every employee feel they are ~~committed~~a valued member of a winning team doing meaningful work in an environment of trust. Franklin Covey is one of the premier training and consulting organizations in the world, and we develop and deliver various offerings, including leadership and individual effectiveness, to clients around the globe. Our associates have unlimited access to our content and training through the All Access Pass, where they are able to experience the same high-quality solutions available to our clients. During their first year, we encourage new associates to participate in our foundational offering, The 7 Habits of Highly Effective People, which is used as the cultural operating system for our organization. We are currently delivering our new Unconscious Bias training to our associates. This program is designed to strengthen organizations by promoting the inclusion of various viewpoints from the natural talents and abilities of its people regardless of race, sexual orientation, gender, religion, or other differences.

In the event an employee is struggling with reaching their goals or producing the results required of their role, a thoughtful and thorough performance plan is created and implemented by their manager and our Chief People Officer. The intent of the performance plan is to help the associate recalibrate and bring their performance up to expectations. Through this transparent coaching process, struggling employees have been able to learn how to improve their performance and become engaged, successful contributors in their role. We believe this process strengthens our associate base while reducing the cost of finding and training new associates.

Retaining Talent

The war for talent is real, and talented people are always in high demand. During the period of June 1, 2019 through May 31, 2020, our employee turnover rate in the United States and Canada was 10.7 percent, which we believe is reasonable for our industry and the make-up of our workforce. To retain our associates, we believe it is critical to continually focus on making sure our employees are highly engaged and feel valued. We address these retention efforts in a number of ways, including training our leaders in our solution entitled, The 6 Critical Practices for Leading a Team. Our employee retention practices include holding consistent, effective one-on-one interviews, where leaders regularly take time to connect with their employees, and to understand what is working well for them and what is not working so well. Based on these interviews, leaders are encouraged to “clear the path” of those things which may be holding the employee back. We are also focused on creating a culture of feedback, where feedback for both leaders and employees is a normal and helpful part of how work gets done. We believe these efforts are key to creating an atmosphere of continuous improvement.

Our compensation plans are audited periodically to confirm ongoing pay equity. We provide a generous personal time off benefit as well as a flexible and inclusive holiday schedule, reflecting the diversity of our workforce and the celebration of various cultural and religious affiliations. We also offer 100% salary continuance for up to 12 weeks in a rolling 12-month period, for qualifying medical leaves, and provide many other “employee minded” benefits.

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Our focus on human capital has been a hallmark of FranklinCovey for decades, understanding that people truly are a company’s most valuable asset, and that culture is an organization’s ultimate competitive advantage. In 2017, our Organization and Compensation Committee determined to make Talent Stewardship a standing agenda item at committee meetings. The committee is actively involved in helping to determine best practices and implement new and innovative ways to help us continually improve in attracting, developing, and retaining quality personnel and actively strive to reinforce our employees' commitment to our clients, and to our mission, vision, culture, and values through the creation of a motivational and rewarding work environment.top talent for Franklin Covey.

We currently have approximately 850 associates. None of our associates are represented by a union or other collective bargaining group. Management believes that its relations with its associates are good and we do not currently foresee a shortage in qualified personnel needed to operate and grow our business.

Information About Our Executive Officers

~~The~~On November 7, 2019, we appointed Paul S. Walker as President and Chief Operating Officer of Franklin Covey Co. and on November 1, 2020, Scott J. Miller transitioned from his role as Executive Vice-President of Thought Leadership to that of an independent contractor and senior advisor to the Company’s thought leadership and marketing operations. Each of the executive officers of Franklin Covey Co. atlisted below served with the described responsibilities throughout the fiscal year ended August 31, ~~2017, were as follows:~~2020:

M. Sean Covey, ~~53,~~56, currently serves as ~~Executive Vice~~ President of ~~Global Solutions~~the Franklin Covey Education Division, and ~~Partnerships~~has led the growth of this Division from its infancy to its status today. The Education Division works with thousands of education entities throughout the world in Higher Education and ~~Education Practice Leader,~~the K-12 market. Mr. Covey previously ran the Franklin Covey international licensee network and has been an Executive Officer since September 2008. Sean ~~was formerly Senior~~also served as the Executive Vice President of Innovations ~~and Product Development~~ from ~~April 2006~~2003 to ~~September 2009,~~2018, where he led the development of ~~nearly all~~many of the ~~Company's current organizational~~Company’s offerings, ~~including:~~ ~~The 7 Habits~~ ~~curriculum;~~ xQ;including the The 4 Disciplines of Execution; and The Leader in Me~~; and~~ ~~Leadership Greatness~~. Prior to 2006, Sean ran the Franklin Covey retail chain of ~~stores, growing it~~stores. Previous to ~~$152 million in sales. Before joining~~ Franklin Covey, Sean worked for the Walt Disney Company, Trammel Crow Ventures, and Deloitte & Touche Consulting. ~~Sean~~Mr. Covey is also ~~the~~a New York Times best-selling author ofand has authored or coauthored several books, including The 4 Disciplines of Execution, ~~The 6 Most Important Decisions You'll Ever Make, the New York Times Best Seller~~ ~~The 7 Habits of Happy Kids~~, and the international bestseller The 7 Habits of Highly Effective Teens~~, which has been translated into 20 languages and has sold over 4 million copies.~~. Sean graduated ~~with honors~~ from Brigham Young University with a ~~Bachelor's~~Bachelor’s degree in English and ~~later~~ earned ~~his~~an MBA from ~~the~~ Harvard Business School. ~~Sean is the son of the late Dr. Stephen R. Covey.~~

Colleen Dom, ~~55,~~58, was appointed to be the Executive Vice-President of Operations in September 2013. Ms. Dom began her career with the Company in 1985 and served as the first ~~"Client~~“Client Service Coordinator,"” providing service and seminar support for some of the ~~Company's~~Company’s very first clients. Prior to her appointment as an Executive Vice President, Ms. Dom served as Vice President of Domestic Operations since 1997 where she had responsibility for the ~~Company's~~Company’s North American operations, including client support, supply chain, and feedback operations. During her time at Franklin Covey Co., ~~Ms. Dom~~Colleen has been instrumental in creating and implementing systems and processes that have supported the ~~Company's~~Company’s strategic objectives and has more than 3035 years of experience in client services, sales support, operations, management, and supply chain. Due to her valuable understanding of the ~~Company's~~Company’s global operations, Ms. Dom has been responsible for numerous key assignments that have enhanced client support, optimized operations, and built capabilities for future growth. Prior to joining the Company, ~~Ms. Dom~~Colleen worked in retail management and in the financial investment industry.

C. Todd Davis, ~~60,~~63, is an Executive Vice President and Chief People Officer, and has been an Executive Officer since September 2008. Todd has over 30 years of experience in training, training development, sales and marketing, human resources, coaching, and executive recruiting. He has been with Franklin Covey for ~~more than~~ the past 2024 years. Previously, ~~Todd~~Mr. Davis was a Director of our Innovations Group where he led the development of core offerings including The 7 Habits of Highly Effective People – Signature Program ~~and~~ ~~The 4 Disciplines of Execution~~. HeTodd also worked for several

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years as our Director of Recruitment and was responsible for attracting, hiring, and retaining top talent for the organization. Prior to joining Franklin Covey, Mr. Davis worked in the medical industry for 9 years where he recruited physicians and medical executives along with marketing physician services to hospitals and clinics throughout the country. Todd is the author of ~~the recently released~~The Wall Street Journal’s best-selling book, Get Better: 15 Proven Practices to Build Effective Relationships at Work and co-author of The Wall Street Journal’s best-selling book, .Everyone Deserves A Great Manager – The 6 Critical Practices for Leading A Team.

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Scott J. Miller, ~~49,~~52, is the Executive Vice-President of Thought Leadership at Franklin Covey. Mr. Miller, who has been with the Company for 24 years, was ~~appointed as~~previously the Executive Vice-President of Business Development and Marketing inand has served as an executive of the Company since March 2012. ~~Mr. Miller, who has been with Franklin Covey for nearly 19 years, previously served as Vice-President of Business Development and Marketing. Mr. Miller's~~Scott’s role as an Executive Vice-President caps 12 years on our front line, working with thousands of client facilitators across many markets and countries. Prior to his appointment as Vice-President of Business Development and Marketing, Mr. Miller served as the general manager of our central regional sales office for six years. Scott originally joined the Covey Leadership Center in 1996 as a client partner with the Education ~~division.~~Division. Mr. Miller started his professional career with the Disney Development Company, the real estate development division of the Walt Disney Company, in 1992. During his time with the Disney Development Company, Scott identified trends and industry best practices in community development, education, healthcare, architectural design, and technology. Mr. Miller received a Bachelor of Arts in Organizational Communication from Rollins College in 1996.

~~Shawn D. Moon~~, 50, was the Executive Vice-President of Strategic Markets, where he was responsible for the Company's Government Sales, Sales Performance Practice, Customer Loyalty Practice, and Global 50 team. Mr. Moon has been an Executive Officer since July 2010 and served previously as our Executive Vice-President of Global Sales and Delivery. Mr. Moon has more than twenty-nine years of experience in sales and marketing, program development, and consulting services. From November 2002 to June 2005, Shawn was a Principal with Mellon Financial Corporation where he was responsible for business development for their human resources outsourcing services. Shawn also coordinated activities within the consulting and advisory community for Mellon Human Resources and Investor Solutions. Prior to November 2002, he served as the Vice President of Business Development for our Training Process Outsourcing Group, managed vertical market sales for nine of our business units, and managed our eastern regional sales office. Shawn received a Bachelor of Arts from Brigham Young University in English Literature and he is the author of the books, ~~The Ultimate Competitive Advantage: Why Your People Make All the Difference and the 6 Practices You Need to Engage Them;~~ ~~and~~ ~~Talent Unleashed: Three Leadership Conversations for Tapping the Unlimited Potential of People~~.

In September 2017, Mr. Shawn D. Moon left his full-time role with the Company. Mr. Moon will continue to be involved with the Company on a part-time consulting basis in connection with the implementation of certain key initiatives, including speaking at key thought leadership events, helping to launch new books, and other activities.

Paul S. Walker, ~~42,~~45, is ~~a 17-year veteran of~~beginning his twenty-first year with Franklin Covey Co. ~~On September 1, 2015,~~Today, Mr. Walker ~~was appointed Executive Vice-President of Global Sales~~serves as the Company’s President and ~~Delivery. Mr. Walker~~Chief Operating Officer. Paul began his career with ~~Franklin Covey~~the Company in 2000 in the role of business developer, ~~was promoted~~and quickly moved to become a Client Partner and then to an Area Director. In 2007, Mr. Walker became General Manager of the ~~Company's central sales region, an 11-state area that also included Ontario, Canada. Prior~~North America Central Region. In 2014, Paul assumed responsibility for the Company’s United Kingdom operations in addition to ~~working for Franklin Covey,~~his role as General Manager of the Central Region. In 2016, Mr. Walker ~~was a senior sales partner for Alexander's Digital Printing~~relocated to the Company’s Salt Lake City, Utah headquarters where, prior to his current role, he served as Executive Vice President Global Sales and ~~a middle-market pilot coordinator with New York Life.~~Delivery and as President of the Company’s Enterprise Division. Mr. Walker graduated from Brigham Young University with a Bachelor of Arts in Communications.

Robert A. Whitman, ~~64,~~67, has served as Chairman of the Board of Directors since June 1999 and as ~~President and~~ Chief Executive Officer of the Company since January 2000. Mr. Whitman previously served as a director of the Covey Leadership Center from 1994 to 1997. Prior to joining us, Mr. Whitman served as President and Co‑Chief Executive Officer of The Hampstead Group from 1992 to 2000 and is a founding partner at Whitman Peterson. Mr. Whitman received his Bachelor of Arts degree in Finance from the University of Utah and his MBA from the Harvard Business School.

Stephen D. Young, ~~64,~~67, joined FranklinCovey as Executive Vice President of Finance, was appointed Chief Accounting Officer and Controller in January 2001, Chief Financial Officer in November 2002, and Corporate Secretary in March 2005. Prior to joining us, he served as Senior Vice-President of Finance, Chief Financial Officer, and director of international operations for Weider Nutrition for seven years; as Vice-President of Finance at First Health for ten years; and as an auditor at Fox and Company, a public accounting firm, for four years. Mr. Young has more than 3540 years of accounting and management experience and is a Certified Public Accountant. Mr. Young was awarded a Bachelor of Science in Accounting from Brigham Young University.

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Available Information

We regularly file reports with the SEC. These reports include, but are not limited to, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and security transaction reports on Forms 3, 4, or 5. The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room located at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of the ~~Company's~~Company’s reports, proxy and information statements, and other information that the Company files with the SEC on its website at ~~www.sec.gov~~.www.sec.gov.

The Company makes our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished with the SEC available to the public, free of charge, through our website at ~~www.franklincovey.com~~.www.franklincovey.com. These reports are provided through our website as soon as is reasonably practicable after we file or furnish these reports with the SEC.

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ITEM 1A. RISK FACTORS

Our business environment, current domestic and international economic conditions, ongoing impacts from the COVID-19 pandemic, geopolitical circumstances, and other specific risks may affect our future business decisions and financial performance. The matters discussed below may cause our future results to differ from past results or those described in forward-looking statements and could have a material ~~adverse~~ effect on our business, financial condition, liquidity, results of operations, and stock price, and should be considered in evaluating our Company.

The risks included here are not exhaustive. Other sections of this report may include additional risk factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing global environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

COVID-19 Pandemic Risks

Our results of operations have been adversely affected and could be materially impacted in the future by the COVID-19, or coronavirus, pandemic.

The global spread of COVID-19 has created significant volatility, uncertainty, and economic disruption during fiscal 2020. The extent to which the COVID-19 pandemic impacts our business, operations, and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration, scope, and severity of the pandemic; the ability to create effective vaccines and effective therapeutic treatments; governmental, business, and individuals’ actions that have been taken, and continue to be taken, in response to the pandemic; the impact of the pandemic on worldwide economic activity and actions taken in response; the effect on our clients, including educational institutions, and client demand for our services; our ability to sell and provide our services and solutions, including the impact of travel restrictions and from people working from home; the ability of our clients to pay for our services on a timely basis or at all; the ability to maintain sufficient liquidity and to access credit and capital markets as needed; and any closure of our offices. Any of these events, or related conditions, could cause or contribute to the risks and uncertainties described in this section of our Annual Report and could materially adversely affect our business, financial condition, results of operations, cash flows, and stock price.

Training Industry and Related Risks

We operate in an intensely competitive industry and our competitors may develop programs, services, or courses that adversely affect our ability to sell our offerings.

The training and consulting services industry is intensely competitive with relatively easy entry. Competitors continually introduce new programs, services, and ~~services~~delivery methods that may compete directly with our offerings, or that may make our offerings uncompetitive or obsolete. Larger competitors may have superior abilities to compete for clients and skilled professionals, reducing our ability to deliver quality work to our clients. Some of our competitors may have greater financial and other resources than we do. In addition, one or more of our competitors may develop and implement training courses or methodologies that may adversely affect our ability to sell our offerings and products to new clients. Any one of these circumstances could have an adverse effect on our ability to obtain new business and successfully deliver our services.

The introduction of the All Access Pass has been disruptive to our business and may continue to create both operational and financial challenges during the transition to an All Access Pass focused business model.

In fiscal 2016, we introduced the All Access Pass, which is an internet-based platform that allows our clients to purchase unlimited access to our intellectual property for a specified period. Clients may utilize entire training offerings or use individual portions of numerous programs to customize a training or personnel program that fits their needs. We expected that the change to an AAP focused business model would be disruptive in the short term as we transition to the new business model, but we believe the benefits of the AAP to our clients and to our business will prove beneficial in future periods.

The change to an AAP-focused business model has required a transition both operationally, as our sales force adapts its structure and strategy to sell the AAP, and from an accounting and reporting point of view. Operationally, the AAP sales cycle is typically longer than previous transactional type sales, such as facilitator and onsite programs. We believe this change reflects the strategic nature of the AAP sale and the need for additional approvals at our clients. In addition, we have reorganized our domestic sales force to focus on and support AAP sales and renewals. During the first quarter of fiscal 2017, we decided to allow new AAP intellectual property agreements to receive updated content throughout the contract period. Accordingly, we are required to defer substantially all AAP revenues at the inception of the contracts and recognize the revenue over the life of the corresponding arrangement.

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If we are unable to effectively adapt our sales force and sales strategy to sell the AAP, or if technological development of the AAP portal is delayed or not accepted by the market, the transition period to the AAP-focused business model may be lengthened and our financial results may be adversely affected.

~~The All Access Pass is an internet-based platform, and as such we are subject to increased risks of cyber-attacks and other security breaches that could have a material adverse effect on our business.~~

As part of selling the AAP, we collect, process, and retain a limited amount of sensitive and confidential information regarding our customers. Because the AAP is an internet-based platform, our facilities and systems associated with the AAP may be vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, stolen intellectual property, programming or human errors, or other similar events.

The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our own proprietary information, software, methodologies, and business secrets could result in significant legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems, products, and services, which could have a material adverse effect on our business, financial condition, or results of operations. To the extent we are involved in any future cyber-attacks or other breaches, our brand and reputation could be affected, and these conditions could also have a material adverse effect on our business, financial condition, or results of operations.

Our results of operations could be adversely affected by economic and political conditions and the effects of these conditions on our ~~clients'~~clients’ businesses and their levels of business activity.

Global economic and political conditions affect our ~~clients'~~clients’ businesses and the markets in which they operate. Our financial results are somewhat dependent on the amount that current and prospective clients budget for training. A serious and/or prolonged economic downturn combined with a negative or uncertain political climate could adversely affect our ~~clients'~~clients’ financial condition and the amount budgeted for training by our clients. These conditions may reduce the demand for our services or depress the pricing of those services and have an adverse impact on our results of operations. Changes in global economic conditions may also shift demand to services for which we do not have competitive advantages, and this could negatively affect the amount of business that we are able to obtain. Such economic, political, and client spending conditions are influenced by a wide range of factors that are beyond our control and that we have no comparative advantage in forecasting. If we are unable to successfully anticipate these changing conditions, we may be unable to effectively plan for and respond to those changes, and our business could be adversely affected.

Our business success also depends in part upon continued growth in the use of training and consulting services and the renewal of existing contracts by our clients. In challenging economic environments, our clients may reduce or defer their spending on new services and consulting solutions in order to focus on other priorities. At the same time, many companies have already invested substantial resources in their current means of conducting their business and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel and/or processes. If growth in the general use of training and consulting services in business or our ~~clients'~~clients’ spending on these items declines, or if we cannot convince our clients or potential clients to embrace new services and solutions, our results of operations could be adversely affected.

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In addition, our business tends to lag behind economic cycles and, consequently, the benefits of an economic recovery following a period of economic downturn may take longer for us to realize than other segments of the economy.

We have only a limited ability to protect our intellectual property rights, which are important to our success.

Our financial success is partially dependent on our ability to protect our proprietary offerings and other intellectual property. The existing laws of some countries in which we provide services might offer only limited protection of our intellectual property rights. To protect our intellectual property, we rely upon a combination of confidentiality policies, nondisclosure and other contractual arrangements, as well as copyright and trademark laws. The steps we take in this regard may not be adequate to prevent or deter infringement or other misappropriation of our intellectual property, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights, especially in foreign jurisdictions.

The loss of proprietary content or the unauthorized use of our intellectual property may create greater competition, loss of revenue, adverse publicity, and may limit our ability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or solution could cause us to lose revenue-generating opportunities and require us to incur additional expenses to develop new or modified solutions for future engagements.

~~We could have liability or our reputation could be damaged if we do not protect client data or if our information systems are breached.~~

We are dependent on information technology networks and systems to process, transmit, and store electronic information and to communicate between our locations around the world and with our clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and potential unauthorized disclosure of confidential information. We are also required at times to manage, utilize, and store sensitive or confidential client or employee data. As a result, we are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information, such as the various U.S. federal and state laws governing the protection of individually identifiable information. If any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines, and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether through systems failure, employee negligence, fraud, or misappropriation could damage our reputation and cause us to lose clients.

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changes in services, business practices, or internal systems that may result in increased costs, lower revenue, reduced efficiency, or greater difficulty in competing with foreign-based firms. Failure to comply with existing or new rules may result in significant penalties or orders to stop the alleged noncompliant activity.

We depend on key personnel, the loss of whom could harm our business.

Our future success will depend, in part, on the continued service of key executive officers and personnel. The loss of the services of any key individuals could harm our business. Our future success also depends on our ability to identify, attract, and retain additional qualified senior personnel. Competition for such individuals in our industry is intense, and we may not be successful in attracting and retaining such personnel.

If we are unable to attract, retain, and motivate high-quality employees, including sales personnel and training consultants, ~~and other key training representatives,~~ we may not be able to grow our business as projected or may not be able to compete effectively.

Our success and ability to grow are partially dependent on our ability to hire, retain, and motivate sufficient numbers of talented people with the increasingly diverse skills needed to serve our clients and grow our business. Competition for skilled personnel is intense at all levels of experience and seniority. There is a risk that we will find it difficult to hire and retain a sufficient number of employees with the skills or backgrounds we require, or that it will prove difficult to retain them in a competitive labor market. If we are unable to hire and retain talented sales and delivery employees with the skills, and in the locations, we require, we might not be able to grow our business at projected levels or may not be able to effectively deliver our content and services. If we need to hire additional personnel to maintain a specified number of sales personnel or are required to re-assign personnel from other geographic areas, it could increase our costs and adversely affect our profit margins. In addition, the inability of newly hired sales personnel to achieve projected sales levels may inhibit our ability to attain anticipated growth.

Our work with governmental clients exposes us to additional risks that are inherent in the government contracting process.

Our clients include national, state, provincial, ~~state,~~ and local governmental entities, and our work with these governmental entities has various risks inherent in the governmental contracting process. These risks include, but are not limited to, the following:

Governmental entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to change the scope of, or terminate, these projects for lack of approved funding and other discretionary reasons. Changes in governmental priorities or other political developments, including disruptions in governmental operations, could result in changes in the scope of, or in termination of, our existing contracts.

Governmental entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our government contracts. If the governmental entity finds that the costs are not reimbursable, then we will not be allowed to bill for those costs or the cost must be refunded to the client if it has already been paid to us. Findings from an audit also may result in our being required to prospectively adjust previously agreed upon rates for our work, which may affect our future margins.

Governmental entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our government contracts. Findings from an audit may result in our being required to prospectively adjust previously agreed upon rates for our work, which may affect our future margins.

If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions, or debarment from doing business with other agencies of that government.

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If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent or detect all improper or illegal activities, regardless of their adequacy.

·	Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed.

Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed.

The occurrences or conditions described above could affect not only our business with the particular governmental agency involved, but also our business with other agencies of the same or other governmental entities. Additionally, because of their visibility and political nature, governmental contracts may present a heightened risk to our reputation. Any of these factors could have an adverse effect on our business or our results of operations.

~~Our~~Cybersecurity and Information Technology Risks

The All Access Pass and Leader in Me online service are internet-based platforms, and as such we are subject to increased risks of cyber-attacks and other security breaches that could have a material adverse effect on our business.

As part of selling subscription-based services, we collect, process, and retain a limited amount of sensitive and confidential information regarding our customers. Because our subscription services are internet-based platforms, our facilities and systems may be vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, stolen intellectual property, programming or human errors, or other similar events.

The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our own proprietary information, software, methodologies, and business secrets could result in significant legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems, products, and services, which could have a material adverse effect on our business, financial condition, or results of ~~operations~~operations. To the extent we are involved in any future cyber-attacks or other breaches, our brand and ~~cash flows~~reputation could be affected, and these conditions could also have a material adverse effect on our business, financial condition, or results of operations.

We could incur additional liabilities or our reputation could be damaged if we do not protect client data or if our information systems are breached.

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Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve. For example, the European Union and the U.S. formally entered into a new framework in July 2016 that provided a mechanism for companies to transfer data from European Union member states to the U.S. On July 16, 2020, the Court of Justice of the European Union (the Court of Justice) invalidated the E.U.-U.S. Privacy Shield Framework on the grounds that the Privacy Shield failed to offer adequate protections to E.U. personal data transferred to the United States. On August 10, 2020, the U.S. Department of Commerce and the European Commission announced new discussions to evaluate the potential for an enhanced E.U.-U.S. Privacy Shield framework to comply with the July 16 judgment of the Court of Justice. The Privacy Shield and other data protection mechanisms face a number of legal challenges by both private parties and regulators, which may ~~be adversely affected if FC Organizational Products LLC is unable~~lead to ~~pay~~uncertainty about the ~~working capital settlement, reimbursable acquisition~~legal basis for data transfers across the Atlantic. Ongoing legal reviews may result in burdensome or inconsistent requirements affecting the location and movement of our customer and internal employee data as well as the management of that data. Compliance may require changes in services, business practices, or internal systems that may result in increased costs, lower revenue, reduced efficiency, or ~~reimbursable operating expenses.~~greater difficulty in competing with foreign-based firms. Failure to comply with existing or new rules may result in significant penalties or orders to stop the alleged noncompliant activity.

In ~~fiscal 2008,~~addition, during May 2018 the new General Data Protection Regulation (GDPR) became effective in the European Union. The GDPR imposes strict requirements on the collection, use, security, and transfer of personal information in and from European Union member states. The GDPR is designed to unify data protection within the European Union under a single law, which may result in significantly greater compliance burdens and costs related to our European Union operations and customers. Under GDPR, fines of up to 20 million Euros or up to four percent of the annual global revenues of the infringer, whichever is greater, could be imposed. Although GDPR applies across the European Union, local data protection authorities still have the ability to interpret GDPR, which may create inconsistencies in application on a country-by-country basis. Furthermore, as the United Kingdom transitions out of the European Union, we ~~sold our planning products operation~~may encounter additional complexity with respect to ~~FC Organizational Products, LLC (FCOP)~~data privacy and data transfers from the United Kingdom. We have implemented new controls and procedures, including a team dedicated to data protection, to comply with the Privacy Shield and the requirements of GDPR, which were effective for us in May 2018. However, these new procedures and controls may not be completely effective in preventing unauthorized breaches of personal data.

Other governmental authorities throughout the U.S. and around the world are considering similar types of legislative and regulatory proposals concerning data protection. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the CCPA), ~~an entity in~~ which ~~we own~~was effective on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of certain data sharing with third parties and provides a ~~19.5 percent interest. According~~new cause of action for data breaches. However, legislators have stated that they intend to propose amendments to the ~~agreements associated with~~CCPA, and it remains unclear what, if any, modifications will be made to the ~~sale, we were entitled~~CCPA or how it will be interpreted. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to receive a $1.2 million payment for working capital delivered on the closing date of the sale and to receive $2.3 million as reimbursement for specified costs necessary to complete the transaction. Payment for these costs was originally due in January 2009, but we extended the due date of the payment at FCOP's request and obtained a promissory note from FCOPimpose standards for the ~~amount owed, plus accrued interest. At the time we received the promissory note from FCOP, we believed that we~~online collection, use, dissemination and security of data. Each of these privacy, security, and data protection laws and regulations could ~~obtain payment for the amounts owed, based on prior year performance~~impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and ~~forecasted financial performance in 2009. However, the financial position of FCOP deteriorated significantly late in fiscal 2009 and the deterioration accelerated subsequent~~make our business more costly or less efficient to August 31, 2009. As a result of its deteriorating financial position, we reassessed the collectability of the promissory note. Based on revised expected cash flows and other operational issues, we recorded a $3.6 million impaired asset charge against these receivables.

We also receive reimbursement from FCOP for certain operating costs, such as rent, and, although not required by governing documents or our ownership interest, we have previously provided working capital and other advances to FCOP. At August 31, 2017, we had $1.7 million receivable from FCOP, net of related discount, which is recorded as an asset on our consolidated balance sheets. Although we believe that we will obtain payment from FCOP for these receivables, the valuation of amounts receivable from FCOP is dependent upon the estimated future earnings and cash flows of FCOP. If FCOP's estimated future earnings and cash flows decline, or if FCOP fails to pay amounts receivable and we fail to obtain payment on the previously impaired promissory note, our future cash flows and results of operations may be adversely affected.conduct.

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We employ global best practices in securing and monitoring code, applications, systems, processes and data, and our security practices are regularly reviewed and validated by an external auditing firm. However, these efforts may be insufficient to protect sensitive information against illegal activities and we may be exposed to additional liabilities from the various data protection laws enacted within the jurisdictions where we operate.

Our business is becoming increasingly dependent on information technology and will require additional cash investments in order to grow and meet the demands of our clients.

Since the introduction of our subscription services, our dependence on the use of sophisticated technologies and information systems has increased. Moreover, our technology platforms will require continuing cash investments by us to expand existing offerings, improve the client experience, and develop complementary offerings. Our future success depends in part on our ability to adapt our services and infrastructure while continuing to improve the performance, features, and reliability of our services in response to the evolving demands of the marketplace. Failure to adapt and improve these areas could have an adverse effect on our business, including our results of operations, financial position, and cash flows.

Liquidity and Capital Resource Risks

We may not be able to generate sufficient cash to service our indebtedness, and we may be forced to take other actions to satisfy our payment obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our indebtedness depends on our future performance, including the performance of our subsidiaries, which will be affected by financial, business and economic conditions, competition, and other factors. We are unable to control many of these factors, such as the general economy, economic conditions in the industries in which we operate, and competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our indebtedness and to meet our other obligations. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may be unsuccessful and we may not meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements, including our 2019 Credit Facility and subsequent modifications, may restrict us from pursuing any of these alternatives.

In the event that we need to refinance all or a portion of our outstanding indebtedness before maturity or as it matures, we may not be able to obtain terms as favorable as the terms of our existing indebtedness or refinance our existing indebtedness at all. If interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, we will incur higher interest expense. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our financial condition and financial results.

Failure to comply with the terms and conditions of our credit facility may have an adverse effect upon our business and operations.

Our secured credit agreement and subsequent modifications require us to be in compliance with customary non-financial terms and conditions as well as specified financial ratios. Failure to comply with these terms and conditions or maintain adequate financial performance to comply with specific financial ratios entitles the lender to certain remedies, including the right to immediately call due any amounts owed on the credit agreement. Such events would have an adverse effect upon our business and operations as there can be no assurance that we may be able to obtain other forms of financing or raise additional capital on terms that would be acceptable to us.

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We may need additional capital in the future, and this capital may not be available to us on favorable terms or at all.

We may need to raise additional funds through public or private debt offerings or equity financings in order to:

Develop new services, programs, or offerings

Take advantage of opportunities, including business acquisitions

Respond to competitive pressures

Going forward, we will continue to incur costs necessary for the day-to-day operation and potential growth of the business and may use our available revolving line of credit facility and other financing alternatives, if necessary, for these expenditures. We obtained a new credit agreement in August 2019 with our existing lender that expires in August 2024. We expect to regularly renew or amend our lending agreement in the future to maintain the availability of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt from public or private sources. If necessary, we will evaluate all of these options and select one or more of them depending on overall capital needs and the associated cost of capital.

Any additional capital raised through the sale of equity could dilute current shareholders’ ownership percentage in us. Furthermore, we may be unable to obtain the necessary capital on terms or conditions that are favorable to us, or at all.

Public Company Risks

We may fail to meet analyst expectations, which could cause the price of our stock to decline.

Our common stock is publicly traded on the NYSE, and at any given time various securities analysts follow our financial results and issue reports on us. These periodic reports include information about our historical financial results as well as the analysts’ estimates of our future performance. The analysts’ estimates are based on their own opinions and are often different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline. If our stock price is volatile, we may become involved in securities litigation following a decline in price. Any litigation could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business.

Our business performance may not be sufficient for us to meet the financial guidance that we provide publicly.

We may provide financial guidance to the public based upon expectations regarding our financial performance. While we believe that our annual financial guidance provides investors and analysts with insight into our view of the Company’s future performance, such financial guidance is based on assumptions that may not always prove to be accurate and may vary from actual results. If we fail to meet the full-year financial guidance that we provide, or if we find it necessary to revise such guidance during the year, the market value of our common stock could be adversely affected.

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Our future quarterly operating results are subject to factors that can cause fluctuations in our stock price.

Historically, our stock price has experienced significant volatility. We expect that our stock price may continue to experience volatility in the future due to a variety of potential factors that may include the following:

Fluctuations in our quarterly results of operations and cash flows

Increased overall market volatility

Variations between our actual financial results and market expectations

Changes in our key balances, such as cash and cash equivalents

Currency exchange rate fluctuations

Unexpected asset impairment charges

Increased or decreased analyst coverage

These factors may have an adverse effect upon our stock price in the future.

General Business Risks

Recent developments in international trade may have a negative effect on global economic conditions and our business, financial results, and financial condition.

The United States recently proposed and enacted certain tariffs. In addition, there have been ongoing discussions and activities regarding changes to other U.S. trade policies and treaties. In response, some countries in which we operate, including China, are threatening to implement or have already implemented tariffs on U.S. imports or otherwise imposed non-tariff barriers. These developments may have a material adverse effect on global economic conditions and the stability of global financial markets, and they may significantly reduce global trade and, in particular, trade between China and the United States. Any of these factors could depress economic activity, create anti-American consumer sentiment, restrict our access to suppliers or customers, and have a material adverse effect on our business, financial condition, and results of operations. In addition, any actions by non-U.S. markets to implement further trade policy changes, including limiting foreign investment or trade, increasing regulatory scrutiny or taking other actions which impact U.S. companies’ ability to obtain necessary licenses or approvals could negatively impact our business.

Our global operations pose complex management, foreign currency, legal, tax, and economic risks, which we may not adequately address.

We have sales offices in Australia, China, Japan, Germany, Switzerland, Austria, and the United Kingdom. We also have licensed operations in numerous other foreign countries. As a result of these foreign operations and their impact upon our financial statements, we are subject to a number of risks, including:

·	Restrictions on the movement of cash

·	~~Burdens of complying with a wide variety of national and local laws~~

·	~~The absence in some jurisdictions of effective laws to protect our intellectual property rights~~

·	~~Political instability~~

·	~~Currency exchange rate fluctuations~~

·	~~Longer payment cycles~~

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·	~~Price controls or restrictions on exchange of foreign currencies~~

Burdens of complying with a wide variety of national and local laws, including tax laws

The absence in some jurisdictions of effective laws to protect our intellectual property rights

Political instability

Currency exchange rate fluctuations

Longer payment cycles

Price controls or restrictions on exchange of foreign currencies

For instance, on June 23, 2016, the United Kingdom held a referendum in which a majority of voters chose to exit the European Union, commonly referred to as ~~"Brexit."~~“Brexit.” The outcome of this referendum produced significant currency exchange rate fluctuations and volatility in global stock ~~markets and it is expected that the~~markets. The British government ~~will commence~~has commenced negotiations to determine the terms of ~~Brexit.~~Brexit, but the terms have not yet been determined and the process and effects of such separation remain uncertain. Given the lack of comparable precedent, the implications of Brexit or how such implications might affect us are unclear. Brexit could, among other things, disrupt trade and the free movement of data, goods, services, and people between the United Kingdom and the European Union or other countries as well as create legal and global economic uncertainty. These and other potential implications of Brexit could adversely affect our business and financial results.

~~We may experience foreign currency gains and losses.~~

Our sales outside of the United States totaled $48.0 million, or approximately 26 percent of consolidated sales, for the fiscal year ended August 31, 2017. As our international operations grow and become a larger component of our overall financial results, our revenues and operating results may be adversely affected when the dollar strengthens relative to other currencies and may be favorably affected when the dollar weakens. In order to manage a portion of our foreign currency risk, we may make limited use of foreign currency derivative contracts to hedge certain transactions and translation exposure. However, there can be no guarantee that our foreign currency risk management strategy will be effective in reducing the risks associated with foreign currency transactions and translation.

Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business.

Because we provide services to clients in many countries, we are subject to numerous, and sometimes conflicting, regulations on matters as diverse as import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and disclosure control obligations, data privacy, and labor relations. Violations of these regulations in the conduct of our business could result in fines, criminal sanctions against us or our officers, prohibitions on doing business, and damage to our reputation. Violations of these regulations in connection with the performance of our obligations to our clients also could result in liability for monetary damages, fines, unfavorable publicity, and allegations by our clients that we have not performed our contractual obligations. Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws may be insufficient to protect our rights.

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In many parts of the world, including countries in which we operate, practices in the local business community might not conform to international business standards and could violate anticorruption regulations, including the United States Foreign Corrupt Practices Act, which prohibits giving anything of value intended to influence the awarding of government contracts. Although we have policies and procedures to ensure legal and regulatory compliance, our employees, licensee operators, and agents could take actions that violate these requirements. Violations of these regulations could subject us to criminal or civil enforcement actions, including fines and suspension or disqualification from United States federal procurement contracting, any of which could have an adverse effect on our business.

We have significant intangible assets, goodwill, and long-term asset balances that may ~~fail to meet analyst expectations, which could cause the price of our stock to~~be impaired if cash flows from related activities decline.

Due to the nature of our business, we have significant amounts of intangible assets, including goodwill, resulting from events such as the acquisition of businesses and the licensing of content. Our intangible assets are evaluated for impairment based on qualitative factors or upon cash flows and estimated royalties from revenue streams (indefinite-lived intangible assets) if necessary. Our goodwill is evaluated through qualitative factors and by comparing the fair value of the reporting units to the carrying value of our net assets if necessary. Although our current sales, cash flows, and market capitalization are sufficient to support the carrying basis of these long-lived assets, if our sales, cash flows, or common stock is publicly traded on the NYSE, and at any given time various securities analysts follow our financial results and issue reports on us. These periodic reports include information about our historical financial results as well as the analysts' estimates of our future performance. The analysts' estimates are based on their own opinions and are often different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price ~~could decline. If our stock price is volatile,~~decline, we may ~~become involved in securities litigation following a decline in price. Any litigation could result in substantial costs and a diversion of management's attention and resources~~be faced with significant asset impairment charges that ~~are needed to successfully run our business.~~

~~Our future quarterly operating results are subject to factors that can cause fluctuations in our stock price.~~

·	~~Fluctuations in our quarterly results of operations and cash flows~~

·	~~Increased overall market volatility~~

·	~~Variations between our actual financial results and market expectations~~

·	~~Changes in our key balances, such as cash and cash equivalents~~

·	~~Currency exchange rate fluctuations~~

·	~~Unexpected asset impairment charges~~

·	~~Increased or decreased analyst coverage~~

~~These factors may~~would have an adverse ~~effect~~impact upon our ~~stock price in the future.~~results of operations.

~~The sale of a large number of common shares by Knowledge Capital could depress the market price of our common stock.~~

Knowledge Capital Investment Group (Knowledge Capital), a related party primarily controlled by a member of our Board of Directors, holds 2.8 million shares, or approximately 21 percent, of our outstanding common shares. On January 26, 2015, the SEC declared effective a registration statement on Form S-3 to register shares held by Knowledge Capital. On May 20, 2015, Knowledge Capital sold 400,000 shares of our common stock on the open market and we did not purchase any of these shares. The sale or prospect of the sale of a substantial number of the shares held by Knowledge Capital may have an adverse effect on the market price of our common stock.

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~~Our profitability will suffer if we are not able to maintain our pricing and utilization rates.~~

The profit margin on our services is largely a function of the rates we are able to recover for our services and the utilization, or chargeability, of our trainers, client partners, and consultants. Accordingly, if we are unable to maintain sufficient pricing for our services or an appropriate utilization rate for our training professionals without corresponding cost reductions, our profit margin and overall profitability will suffer. The rates that we are able to recover for our services are affected by a number of factors that we may be unable to control, including:

·	~~Our clients' perceptions of our ability to add value through our programs and content~~

·	~~Competition~~

·	~~General economic conditions~~

·	~~Introduction of new programs or services by us or our competitors~~

·	~~Our ability to accurately estimate, attain, and sustain engagement sales, margins, and cash flows over longer contract periods~~

~~Our utilization rates are also affected by a number of factors, including:~~

·	~~Seasonal trends, primarily as a result of scheduled training~~

·	~~Our ability to forecast demand for our products and services and thereby maintain an appropriate headcount in our employee base~~

·	~~Our ability to manage attrition~~

There can be no assurance that we will be able to maintain favorable utilization rates in future periods. Additionally, we may not achieve a utilization rate that is optimal for us. If our utilization rate is too high, it could have an adverse effect on employee engagement and attrition. If our utilization rate is too low, our profit margin and profitability may suffer.

~~If we are unable to collect our accounts receivable on a timely basis, our results of operations and cash flows could be adversely affected.~~

Our business depends on our ability to successfully obtain timely payment from our clients of the amounts they owe us for services performed. We evaluate the financial condition of our clients and usually bill and collect on relatively short cycles. However, as our sales to governmental entities, including school districts, continue to grow, our collection cycle may take longer due to procurement and payment procedures at these clients. We maintain allowances against our receivables that we believe are adequate to reserve for potentially uncollectible amounts. Actual losses on client balances could differ from those that we currently anticipate and, as a result, we may need to adjust our allowances. In addition, there is no guarantee that we will accurately assess the creditworthiness of our clients. Macroeconomic conditions could also result in financial difficulties for our clients, and as a result could cause clients to delay payments to us, request modifications to their payment arrangements that could increase our receivables balance, or not pay their obligations to us. Timely collection of client balances also depends on our ability to complete our contractual commitments and bill and collect our invoiced revenues. If we are unable to meet our contractual requirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cash flows may be adversely affected.

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~~The Company's~~Company’s use of accounting estimates involves judgment and could impact our financial results.

Our most critical accounting estimates are described in ~~Management's~~Management’s Discussion and Analysis found in Item 7 of this report under the section entitled ~~"Use~~“Use of Estimates and Critical Accounting Policies."” In addition, as discussed in various footnotes to our financial statements as found in Item 8, we make certain estimates for loss contingencies, including decisions related to legal proceedings and reserves. Because, by definition, these estimates and assumptions involve the use of judgment, our actual financial results may differ from these estimates.

~~Failure to comply with the terms~~ If our estimates or assumptions underlying such contingencies and ~~conditions of our credit facility may have an adverse effect upon our business and operations.~~

Our secured credit facility requires us to be in compliance with customary non-financial terms and conditions as well as specified financial ratios. Failure to comply with these terms and conditions or maintain adequate financial performance to comply with specific financial ratios entitles the lender to certain remedies, including the right to immediately call due any amounts outstanding on the line of credit. Such events would have an adverse effect upon our business and operations as there can be no assurance thatreserves prove incorrect, we may be ~~able~~required to ~~obtain other forms of financing~~record additional adjustments or ~~raise additional capital on terms that~~losses relating to such matters, which would ~~be acceptable to us.~~

~~We may need additional capital in the future, and this capital may not be available to us on favorable terms or at all.~~

~~We may need to raise additional funds through public or private debt offerings or equity financings in order to:~~

·	~~Develop new services, programs, or offerings~~

·	~~Take advantage of opportunities, including business acquisitions~~

·	~~Respond to competitive pressures~~

Going forward, we will continue to incur costs necessary for the day-to-day operation and potential growth of the business and may use our available revolving line of credit facility and other financing alternatives, if necessary, for these expenditures. Our existing credit arrangement expires on March 31, 2020 and we expect to regularly renew our lending agreement to maintain the availability of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt from public or private sources. If necessary, we will evaluate all of these options and select one or more of them depending on overall capital needs and the associated cost of capital.

Any additional capital raised through the sale of equity could dilute current shareholders' ownership percentage in us. Furthermore, we may be unable to obtain the necessary capital on terms or conditions that are favorable to us, or at all.

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~~We may have exposure to additional tax liabilities.~~

As a multinational company, we are subject to income taxes as well as non-income based taxes in both the United States and various foreign tax jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the normal course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. As a result, we are routinely subject to audits by various taxing authorities. Although we believe that our tax estimates are reasonable, we cannot guarantee that the final determination of these tax audits will not be different from what is reflected in our historical income tax provisions and accruals.

We are also subject to non-income taxes such as payroll, sales, use, value-added, and property taxes in both the United States and various foreign jurisdictions. We are routinely audited by tax authorities with respect to these non-income taxes and may have exposure from additional non-income tax liabilities.

~~We have significant intangible assets, goodwill, and long-term asset balances that may be impaired if cash flows from related activities decline.~~

At August 31, 2017 we had $57.3 million of intangible assets, which were primarily generated from the fiscal 1997 merger with the Covey Leadership Center, and $24.2 million of goodwill. Our intangible assets are evaluated for impairment based on qualitative factors or upon cash flows (definite-lived intangible assets) and estimated royalties from revenue streams (indefinite-lived intangible assets) if necessary. Our goodwill is evaluated through qualitative factors and by comparing the fair value of the reporting units to the carrying value of our net assets if necessary. Our intangible assets, goodwill, and other long-term assets may become impaired if the corresponding cash flows associated with these assets decline in future periods or if our market capitalization declines significantly in future periods. Although our current sales, cash flows, and market capitalization are sufficient to support the carrying basis of these long-lived assets, if our sales, cash flows, or common stock price decline, we may be faced with significant asset impairment charges that would have an adverse impact upon our results of operations.

~~International hostilities, terrorist activities, and natural disasters may prevent us from effectively serving our clients and thus adversely~~negatively affect our ~~operating~~financial results.

Acts of terrorist violence, armed regional and international hostilities, and international responses to these hostilities, natural disasters, global health risks or pandemics, or the threat of or perceived potential for these events, could have a negative impact on our directly owned or licensee operations. These events could adversely affect our clients' levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and to physical facilities and operations around the world, whether the facilities are ours or those of our alliance partners or clients. By disrupting communications and travel and increasing the difficulty of obtaining and retaining highly skilled and qualified personnel, these events could make it difficult or impossible for us or our licensee partners to deliver services to clients. Extended disruptions of electricity, other public utilities, or network services at our facilities, as well as system failures at, or security breaches in, our facilities or systems, could also adversely affect our ability to serve our clients. While we plan and prepare to defend against each of these occurrences, we might be unable to protect our people, facilities, and systems against all such occurrences. In addition, our information systems' disaster recovery plan may be insufficient to maintain our business at acceptable levels. We generally do not have insurance for losses and interruptions caused by terrorist attacks, conflicts, and wars. If these disruptions prevent us from effectively serving our clients or maintaining our other operations, our operating results could be adversely affected.

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Ineffective internal controls could impact our business and operating results.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results may be harmed and we could fail to meet our financial reporting obligations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

2019

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ITEM 2. PROPERTIES

~~Our~~As of August 31, 2020, our principal executive offices ~~are located~~ in Salt Lake City, Utah occupy approximately 84,000 square feet of leased office space that is accounted for as a financing arrangement, which expires in 2025. This facility accommodates our executive team and corporate administration, as ~~of August 31, 2017, all of the facilities used in~~well as other professionals. The master lease agreement on our ~~operations are leased. Our~~principal executive offices contains six five-year renewal options that may be exercised at our discretion. Additionally, we occupy leased ~~facilities primarily consist of~~ sales and administrative offices both in the United States and various countries around the world ~~and we~~as shown below. These leased facilities are accounted for as operating leases.

We consider our existing facilities to be in good condition and suitable for our current and expected level of operations in the upcoming fiscal year and in future periods.

Our corporate headquarters lease is accounted for as a financing arrangement and all other facility lease agreements are accounted for as operating leases that expire at various dates through the year 2025.

~~Corporate Facilities~~

~~Corporate Headquarters and Administrative Offices:~~

~~Salt Lake City, Utah (7 buildings)~~

U.S./Canada Sales ~~Offices~~Office

~~Regional Sales Offices:~~

~~United States (2 locations)~~Columbus, Ohio

International ~~Facilities~~Sales Offices

~~International Administrative/Sales Offices:~~Banbury, England

~~England (1 location)~~Tokyo, Japan

~~Japan (1 location)~~

~~China (3 locations)~~

~~China (1 retail store)~~

~~In the third quarter of fiscal 2017, we restructured the operations of our domestic sales regions to focus on sales~~China: Beijing, Shanghai, Guangzhou, and support of the All Access Pass. As part of this restructuring, we closed our three remaining sales offices in Atlanta, Georgia; Chicago, Illinois; and Irvine, California. Our two remaining sales offices in the United States are used by Robert Gregory Partners and Jhana Education, two businesses that we acquired during fiscal 2017. During fiscal 2016, we restructured the operations of our Australian direct office. As part of the restructuring we closed our sales offices located in Brisbane, Sydney, and Melbourne. Sales personnel in Australia work from their home offices, similar to many of our sales personnel located in the U.S. and Canada. There were no other significant changes to the properties used for our operations for the periods presented in this report.

~~Subsequent to August 31, 2017, we opened a new office and retail store in~~ Shenzhen ~~China.~~

~~A significant portion of our corporate headquarters campus located in Salt Lake City, Utah is subleased to multiple unrelated entities.~~

ITEM 3. LEGAL PROCEEDINGS

WeFrom time to time, we are the subject of certain legal actions, which we consider routine to our business activities. At August 31, ~~2017,~~2020, we ~~believe~~were not party to any litigation or legal proceeding that, ~~after consultation with legal counsel, any potential liability to~~in the ~~Company under these actions will not materially affect~~current opinion of management, could have a material adverse effect on our financial position, liquidity, or results of operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expectations.

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ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

~~ITEM 5.~~

~~MARKET FOR REGISTRANT'S~~

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol ~~"FC." The following table sets forth the high and low sale prices per share of our common stock for the fiscal years ended August 31, 2017 and 2016.~~“FC.”

High Low
Fiscal Year Ended August 31, 2017:
Fourth Quarter $ 21.10 $ 17.35
Third Quarter 22.30 15.20
Second Quarter 21.45 16.95
First Quarter 22.45 15.44

Fiscal Year Ended August 31, 2016:
Fourth Quarter $ 17.53 $ 13.45
Third Quarter 18.14 13.83
Second Quarter 18.28 14.36
First Quarter 17.81 13.77

We did not pay or declare dividends on our common stock during the fiscal years ended August 31, ~~2017~~2020 or ~~2016.~~2019. Any determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our results of operations, financial condition, terms of our financing arrangements, and such other factors as the board deems relevant. We currently anticipate that we will retain all available funds to repay our ~~obligations,~~liabilities, finance future growth and business opportunities, and to repurchase outstanding shares of our common stock.

~~Although we have historically not paid a dividend on our common stock, since September 1, 2014, we have returned $63.4 million~~

Table of cash to our shareholders through the purchase of our shares by means of a $35.0 million tender offer, open market purchases, and from shares withheld for minimum statutory taxes on stock-based compensation awards.Contents

As of October 31, ~~2017,~~2020, we had ~~13,702,759~~14,025,413 shares of common stock outstanding, which were held by ~~557~~523 shareholders of record. A number of our shareholders hold their shares in street name; therefore, we believe that there are substantially more beneficial owners of our common stock.

Purchases of Common Stock by the Issuer

~~The following table summarizes the~~We did not have any purchases of our common stock ~~by monthly fiscal periods~~ during the fourth quarter ~~ended~~of fiscal 2020.

On November 15, 2019, our Board of Directors approved a new plan to repurchase up to $40.0 million of our outstanding common stock. The previously existing common stock repurchase plan was canceled and the new common share repurchase plan does not have an expiration date. Through August 31, ~~2017:~~

~~Table~~2020, we have purchased 5,000 shares of ~~Contents~~

Period

Total Number of
Shares Purchased

Average Price Paid
Per Share

Total Number of Shares Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Dollar Value of Shares That May Yet Be Purchased Under the
Plans or Programs⁽¹⁾
(in thousands)

June 1, 2017 to June 30, 2017
-
$ -
-
$ 16,394

July 1, 2017 to July 31, 2017
24,000

18.46

24,000

15,951

August 1, 2017 to August 31, 2017
153,089

18.14

153,089

13,174

Total Common Shares⁽²⁾

177,089
$ 18.18
177,089

⁽¹⁾

On January 23, 2015, our Board of Directors approved a new plan to repurchase up to $10.0 million of the Company's outstanding common stock. All previously existing common stock repurchase plans were canceled and the new common share repurchase plan does not have an expiration date. On March 27, 2015, our Board of Directors increased the aggregate value of shares of Company common stock that may be purchased under the January 2015 plan to $40.0 million so long as we have either $10.0 million in cash and cash equivalents or have access to debt financing of at least $10.0 million. Under the terms of this expanded common stock repurchase plan, we have purchased 1,539,828 shares of our common stock for $26.8 million through August 31, 2017.

our common stock for $0.2 million under the terms of this Board approved plan.

The actual timing, number, and value of common shares repurchased under this plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of common shares, and applicable legal requirements. ~~The Company has~~We have no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued, or modified at any time for any reason.

⁽²⁾

Amounts shown above exclude 6,365 shares of our common stock that were withheld for minimum statutory taxes on stock-based compensation awards issued to employees during the quarter ended August 31, 2017. The withheld shares were valued at the market price on the date that the shares were distributed to participants and were acquired at a weighted average price of $19.14 per share.

Performance Graph

The following graph demonstrates a five-year comparison of cumulative total returns for Franklin Covey Co. common stock, the S&P SmallCap 600 Index, and the S&P 600 Commercial & Professional Services Index. The graph assumes an investment of $100 on August 31, ~~2012~~2015 in each of our common stock, the stocks comprising the S&P SmallCap 600 Index, and the stocks comprising the S&P 600 Commercial & Professional Services Index. Each of the indices assumes that all dividends were reinvested.

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The stock performance shown on the performance graph above is not necessarily indicative of future performance. The Company will not make ~~nor~~or endorse any predictions as to our future stock performance.

The performance graph above is being furnished solely to accompany this ~~report~~Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and is not being filed for purposes of Section 18 of the Exchange Act, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related footnotes as found in Item 8 of this ~~report~~Annual Report on Form 10-K.

August 31,	2017⁽¹⁾			2016			2015⁽²⁾			2014⁽²⁾			2013⁽²⁾			2020⁽¹⁾			2019			2018			2017⁽²⁾			2016
In thousands, except per-share data

Income Statement Data:
Net sales	$	185,256		$	200,055		$	209,941		$	205,165		$	190,924		$	198,456		$	225,356		$	209,758		$	185,256		$	200,055
Gross profit		122,667			133,154			138,089			138,266			128,989			145,370			159,314			148,289			122,667			133,154
Income (loss) from operations		(8,880	)		13,849			19,529			24,765			21,614			3,058			2,655			(3,366	)		(8,880	)		13,849
Income (loss) before income taxes		(10,909	)		11,911			17,412			21,759			19,398			796			592			(5,520	)		(10,909	)		11,911
Income tax benefit (provision)		3,737			(4,895	)		(6,296	)		(3,692	)		(5,079	)		(10,231	)		(1,615	)		(367	)		3,737			(4,895	)
Net income (loss)		(7,172	)		7,016			11,116			18,067			14,319			(9,435	)		(1,023	)		(5,887	)		(7,172	)		7,016

Earnings (loss) per share:
Basic	$	(.52	)	$	.47		$	.66		$	1.08		$	.83
Diluted		(.52	)		.47			.66			1.07			.80
Basic and diluted																$	(.68	)	$	(.07	)	$	(.43	)	$	(.52	)	$	.47

Balance Sheet Data:
Total current assets	$	91,835		$	89,741		$	95,425		$	93,016		$	81,108		$	101,664		$	119,340		$	100,163		$	91,835		$	89,741
Other long-term assets		16,925			13,713			14,807			14,785			9,875			15,611			10,039			12,935			16,005			13,713
Total assets		210,731			190,871			200,645			205,186			189,405			205,437			224,913			213,875			210,731			190,871

Long-term obligations		53,158			48,511			36,978			36,885			41,100			51,056			46,690			50,936			53,158			48,511
Total liabilities		125,666			97,156			75,139			78,472			82,899			145,984			142,899			133,375			125,666			97,156

Shareholders' equity		85,065			93,715			125,506			126,714			106,506
Shareholders’ equity																	59,453			82,014			80,500			85,065			93,715

Cash flows from operating activities	$	17,357		$	32,665		$	26,190		$	18,124		$	15,528		$	27,563		$	30,452		$	16,861		$	17,357		$	32,665

_______________________

⁽¹⁾

Our fiscal 2020 financial results were impacted by the COVID-19 pandemic, which adversely impacted sales during our third and fourth quarters as governments and individuals implemented measures to slow the spread of the virus, including widespread shut downs of economies, businesses, and schools. We reevaluated our deferred tax assets during fiscal 2020. Because of cumulative pre-tax losses over the past three fiscal years, combined with the expected continued disruptions and negative impact to our business resulting from uncertainties related to the recovery from the pandemic, we were unable to overcome accounting guidance that it is more-likely-than-not that insufficient taxable income will be available to realize all of our deferred tax assets before they expire, primarily foreign tax credit carryforwards and a portion of our net operating loss carryforwards. Accordingly, we added $11.3 million to the valuation allowances on our deferred tax assets in fiscal 2020. For more information on our income taxes, refer to the notes to our financial statements found in Item 8 of this report on Form 10-K.

⁽²⁾

During fiscal 2017 we decided to allow new All Access Pass ~~intellectual property~~ agreements to receive updated content throughout the contracted period. Accordingly, we defer substantially all AAP revenues at the inception of the agreements and recognize the revenue over the lives of the arrangements. The transition to the AAP model resulted in significantly reduced revenues and operating income during fiscal 2017.

~~(2)~~

We elected to amend previously filed U.S. federal income tax returns to claim foreign tax credits instead of foreign tax deductions and recognized significant income tax benefits which reduced our effective income tax rate during these years.

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Our required minimum payments for warehousing services contains an annual escalation based upon changes in the Employment Cost Index, the impact of which is not estimated in the above table. The warehousing services contract expires in June 2019.

Our contractual obligations presented above exclude ~~unrecognized~~uncertain tax ~~benefits of $2.4~~positions totaling $1.6 million for which we cannot make a reasonably reliable estimate of the amount and period of payment. For further information regarding our ~~unrecognized~~uncertain tax ~~benefits,~~positions, refer to the notes to our consolidated financial statements as presented in Part II, Item 8 of this report on Form 10-K.

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USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The significant accounting policies that we used to prepare our consolidated financial statements are outlined primarily in Note 1 and in Note 2 (revenue recognition policies) to the consolidated financial statements, which are presented in Part II, Item 8 of this Annual Report on Form 10-K. Some of those accounting policies require us to make assumptions and use judgments that may affect the amounts reported in our consolidated financial statements. Management regularly evaluates its estimates and assumptions and bases those estimates and assumptions on historical experience, factors that are believed to be reasonable under the circumstances, and requirements under accounting principles generally accepted in the United States of America. Actual results may differ from these estimates under different assumptions or conditions, including changes in economic and political conditions and other circumstances that are not inwithin our control, but which may have an impact on these estimates and our actual financial results.

The following items require the most significant judgment and often involve complex estimates:

Revenue Recognition

We ~~derive revenues primarily~~account for revenue in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). For the ~~following sources:~~

·	~~Training and Consulting Services~~ – We provide training and consulting services to both organizations and individuals in leadership, productivity, strategic execution, trust, sales force performance, customer loyalty, and communication effectiveness skills.

·	~~Products~~ ~~– We sell books, audio media, and other related products.~~

All Access Pass, judgment is required to determine whether the intellectual property and web-based functionality and content are considered distinct and accounted for separately, or not distinct and accounted for together.

We have determined to account for the AAP as a single performance obligation and recognize ~~revenue when: 1) persuasive evidence of an arrangement exists, 2) delivery of product has occurred or services have been rendered, 3)~~ the associated transaction price toratably over the ~~customer is fixed or determinable, and 4) collectability is reasonably assured. For training and service sales, these conditions are generally met upon presentation~~term of the ~~training seminar or delivery~~underlying contract beginning on the commencement date of each contract, which is the ~~consulting services based upon daily rates. For most of our product sales, these conditions~~date the Company’s platforms and resources are ~~met upon shipment of the product~~made available to the customer. ~~At times,~~This determination was reached after considering that our ~~customers may request access to~~web-based functionality and content, in combination with our intellectual property, ~~for~~each represent inputs that transform into a combined output that represents the flexibility to print certain training materials or to have access to certain training videos and other training aids at their convenience. For intellectual property license sales, the revenue recognition conditions are generally met at the later of deliveryintended outcome of the ~~content~~AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the ~~client or the effective date of the arrangement.~~All Access Pass platform.

Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements. A deliverable constitutes a separate unit of accounting when it has standalone value to our clients. We routinely enter into arrangements that can include various combinations of multiple training offerings, consulting services, and intellectual property licenses. The timing of delivery and performance of the elements typically varies from contract to contract. Generally, these items qualify as separate units of accounting because they have value to the customer on a standalone basis.

~~When the Company's training and consulting arrangements contain multiple deliverables, consideration~~Judgment is allocated at the inception of the arrangement to all deliverables based on their relative selling prices at the beginning of the agreement, and revenue is recognized as each curriculum, consulting service, or intellectual property license is delivered. We use the following selling price hierarchyrequired to determine the ~~fair value~~stand-alone selling price (SSP) for each distinct performance obligation in a revenue contract. Where we have more than one distinct performance obligation, we must allocate the transaction price to ~~be used for allocating revenue~~each performance obligation based on its relative SSP. The SSP is the price which we would sell a promised product or service separately to a customer. In determining the SSP, we consider the size and volume of transactions, price lists, historical sales, and contract prices. We may modify our pricing from time-to-time in the future, which could result in changes to the ~~elements: (i) vendor-specific objective evidence of fair~~

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~~value (VSOE), (ii) third-party evidence (TPE), and (iii) best estimate of~~stand-alone selling price (BESP). Generally, VSOE is based on established pricing and discounting practices for the deliverables when sold separately. In determining VSOE, we require that a substantial majority of the selling prices fall within a narrow range. When VSOE cannot be established, judgment is applied with respect to whether a selling price can be established based on TPE, which is determined based on competitor prices for similar offerings when sold separately. Our products and services normally contain a significant level of differentiation such that the comparable pricing of services with similar functionality cannot be obtained. When we are unable to establish a selling price using VSOE or TPE, BESP is used in our allocation of arrangement consideration. BESPs are established as best estimates of what the selling price would be if the deliverables were sold regularly on a stand-alone basis. Our process for determining BESPs requires judgment and considers multiple factors, such as market conditions, type of customer, geographies, stage of product lifecycle, internal costs, and gross margin objectives. These factors may vary over time depending upon the unique facts and circumstances related to each deliverable. However, we do not expect the effect of changes in the selling price or method or assumptions used to determine selling price to have a significant effect on the allocation of arrangement consideration.

~~Our multiple-element arrangements generally do not include performance, cancellation, termination, or refund-type provisions.~~

Our international strategy includes the use of independent licensees in countries where we do not have a wholly owned operation. Licensee companies are unrelated entities that have been granted a license to translate our content, adapt the content to the local culture, and sell our offerings and products in a specific country or region. Licensees are required to pay us royalties based upon a percentage of their sales to clients. We recognize royalty income each period based upon the sales information reported to us from our licensees. International royalty revenue is reported as a component of training and consulting service sales in our consolidated statements of operations.

~~Revenue is recognized as the net amount to be received after deducting estimated amounts for discounts and product returns.~~price.

Stock-Based Compensation

Our shareholders have approved performance-based long-term incentive plans (LTIPs) that provide for grants of stock-based performance awards to certain managerial personnel and executive management as directed by the Organization and Compensation Committee of the Board of Directors. The number of common shares that are vested and issued to LTIP participants is variable and is based upon the achievement of specified performance objectives during defined ~~performance~~service periods. Due to the variable number of common shares that may be issued under the LTIP, we reevaluate our LTIP grants on a quarterly basis and adjust the expected vesting dates and number of shares expected to be awarded based upon actual and estimated financial results of the Company compared with the performance goals set for the award. Adjustments to the number of shares awarded, and to the corresponding compensation expense, are made on a cumulative basis at the adjustment date based upon the new estimated probable number of common shares to be awarded.

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The analysis of our LTIP awards contains uncertainties because we are required to make assumptions and judgments about the timing and eventual number of shares that will vest in each LTIP grant. The assumptions and judgments that are essential to the analysis include forecasted sales and operating income levels during the LTIP service periods. These forecasted amounts may be difficult to predict over the life of the LTIP awards due to changes in our business, such as from the introduction of subscription-based services, or other external factors, such as the ~~All Access Pass~~COVID-19 pandemic, and ~~its~~their impact on ~~reported~~our financial results. ~~These business changes~~Events such as these may ~~also~~ leave some previously approved performance measures obsolete or unattainable. The evaluation of LTIP performance awards and the corresponding use of estimated amounts may produce additional volatility in our consolidated financial statements as we record cumulative adjustments to the estimated service periods and number of common shares to be awarded under the LTIP grants as described above.
For example, the impact of and expected recovery from the COVID-19 pandemic resulted in a significant reversal of previously recognized performance award stock-based compensation expense during the third quarter of fiscal 2020.

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Accounts Receivable Valuation

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Our allowance for doubtful accounts calculations contain uncertainties because the calculations require us to make assumptions and judgments regarding the collectability of customer accounts, which may be influenced by a number of factors that are not within our control, such as the financial health of each customer. We regularly review the collectability assumptions of our allowance for doubtful accounts calculation and compare them against historical collections. Adjustments to the assumptions may either increase or decrease our total allowance for doubtful ~~accounts.~~accounts and may adversely impact our financial results. For example, a 10 percent increase to our allowance for doubtful accounts at August 31, ~~2017~~2020 would ~~increase~~decrease our reported ~~loss~~income from operations by approximately ~~$0.2~~$0.4 million.

For further information regarding the calculation of our allowance for doubtful accounts, refer to the notes to our financial statements as presented in Item 8 of this report on Form 10-K.

~~Related Party Receivable~~

At August 31, 2017, we had receivables from FCOP, an entity in which we own 19.5 percent, for reimbursement of certain operating costs and for working capital and other advances, even though we are not obligated to provide advances to, or fund the losses of FCOP. We make use of estimates to account for these receivables, including estimates of the collectability of amounts receivable from FCOP in future periods and, based upon the timing of estimated collections, we were required to classify a portion of the receivable to long-term. In accordance with applicable accounting guidance, we are required to discount the long-term portion of the receivable to its net present value using an estimated effective borrowing rate for FCOP.

We estimated the effective risk-adjusted borrowing rate to discount the long-term portion of the receivable at 15 percent, which was recorded as a discount on a related party receivable in our consolidated statements of operations in certain periods. Our estimate of the effective borrowing rate required us to estimate a variety of factors, including the availability of debt financing for FCOP, projected borrowing rates for comparable debt, and the timing and realizability of projected cash flows from FCOP. These estimates were based on information known at the time of the preparation of these financial statements. A change in the assumptions and factors used, including estimated interest rates, may change the amount of discount taken.

Our assessments regarding the collectability of the FCOP receivable require us to make assumptions and judgments regarding the financial health of FCOP and are dependent on projected financial information for FCOP in future periods. Such financial information contains inherent uncertainties, and is subject to factors that are not within our control. Failure to receive projected cash flows from FCOP in future periods may result in adverse consequences to our liquidity, financial position, and results of operations. For instance, changes in expected cash flows during fiscal 2015 resulted in impaired asset charges and increased discount expense during that fiscal year.

~~For further information regarding our investment in FCOP, refer to the notes to our financial statements as presented in Item 8 of this report on Form 10-K.~~

~~Inventory Valuation~~

Our inventories are primarily comprised of training materials and related accessories. Inventories are reduced to their fair market value through the use of inventory valuation reserves, which are recorded during the normal course of business. Our inventory valuation calculations contain uncertainties because the calculations require us to make assumptions and judgments regarding a number of factors, including future inventory demand requirements and pricing strategies. During the evaluation process we consider historical sales patterns and current sales trends, but these may not be indicative of future inventory losses. While we have not made material changes to our inventory valuation methodology during the past three years, our inventory requirements may change based on projected customer demand, technological and product life cycle changes, longer or shorter than expected usage periods, and other

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factors that could affect the valuation of our inventories. If our estimates regarding consumer demand and other factors are inaccurate, we may be exposed to losses that may have an adverse impact upon our financial position and results of operations. For example, a 10 percent increase to our inventory valuation reserves at August 31, 2017 would increase our reported loss from operations by $0.1 million.

Due to a change in strategy designed to focus resources and efforts on sales of the All Access Pass in Japan, and declining sales and profitability of the publishing business, in the third quarter of fiscal 2017 we decided to exit the publishing business in Japan. As a result of this determination, we wrote off the majority of our book inventory located in Japan for $2.1 million, which was recorded as a component of product cost of sales in the accompanying consolidated statements of operations for fiscal 2017.

Valuation of Indefinite-Lived Intangible Assets and Goodwill

Intangible assets that are deemed to have an indefinite life and goodwill balances are not amortized, but rather are tested for impairment on an annual basis, or more often if events or circumstances indicate that a potential impairment exists. The Covey trade name intangible asset originated from the merger with the Covey Leadership Center in 1997 and has been deemed to have an indefinite life. This intangible asset is quantitatively tested for impairment using the present value of estimated royalties on trade name related revenues, which consist primarily of training seminars and related products, and international licensee royalties.

Goodwill is recorded when the purchase price for an acquisition exceeds the estimated fair value of the net tangible and identified intangible assets acquired. ~~During August 2017, we adopted Accounting Standards Update (ASU) 2017-04,~~ ~~Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. This guidance simplifies the subsequent measurement of goodwill and eliminates the two-step goodwill impairment test.~~ Under ~~the new~~current accounting guidance, an annual or interim goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting ~~unit's~~unit’s fair value. ~~The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and two-step goodwill impairment test.~~

WeDue to the impact of COVID-19, we tested goodwill for impairment during the third quarter of fiscal 2020 and at August 31, ~~2017~~2020 at the reporting unit level using a quantitative approach. The goodwill impairment testing process involves determining whether the estimated fair value of the reporting unit exceeds its respective book value. If the fair value exceeds the book value, goodwill of that reporting unit is not impaired. If the book value exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The estimated fair value of each reporting unit was calculated using a combination of the income approach (discounted cash flows) and the market approach (using market multiples derived from a set of companies with comparable market characteristics). The estimated fair values of the reporting units from these approaches were weighted in the determination of the total fair value.

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On an interim basis, we consider whether events or circumstances are present that may lead to the determination that goodwill may be impaired. These circumstances include, but are not limited to, the following:

·	significant underperformance relative to historical or projected future operating results;

·	~~significant change in the manner of our use of acquired assets or the strategy for the overall business;~~

·	~~significant change in prevailing interest rates;~~

·	~~significant negative industry or economic trend;~~

·	~~significant change in market capitalization relative to book value; and/or~~

·	~~significant negative change in market multiples of the comparable company set.~~

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significant change in the manner of our use of acquired assets or the strategy for the overall business;

significant change in prevailing interest rates;

significant negative industry or economic trend;

significant change in market capitalization relative to book value; and/or

significant negative change in market multiples of the comparable company set.

If, based on events or changing circumstances, we determine it is more likely than not that the fair value of a reporting unit does not exceed its carrying value, we would be required to test goodwill for impairment.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. Based on the results of our goodwill impairment testing during fiscal ~~2017,~~2020, we determined that no impairment existed at August 31, ~~2017,~~2020, as each reportable operating ~~segment's~~segment’s estimated fair value exceeded its carrying value. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.

Impairment of Long-Lived Assets

Long-lived tangible assets and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use an estimate of undiscounted future net cash flows of the assets over their remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the anticipated future cash flows of the assets, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based upon discounted cash flows over the estimated remaining useful life of the asset. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis, which is then depreciated or amortized over the remaining useful life of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets.

Our impairment evaluation calculations contain uncertainties because they require us to make assumptions and apply judgment in order to estimate future cash flows, forecast the useful lives of the assets, and select a discount rate that reflects the risk inherent in future cash flows. Although we have not made any material recent changes to our long-lived assets impairment assessment methodology, if forecasts and assumptions used to support the carrying value of our long-lived tangible and finite-lived intangible assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition.

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Acquisitions and Contingent Consideration Liabilities

We record acquisitions resulting in the consolidation of an enterprise using the purchase method of accounting. Under this method, the acquiring company records the assets acquired, including intangible assets that can be identified and named, and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase price in excess of the fair value of the assets acquired and liabilities assumed is recorded as goodwill. If the assets acquired, net of liabilities assumed, are greater than the purchase price paid, then a bargain purchase has occurred and the ~~company~~Company will recognize the gain immediately in earnings. Among other sources of relevant information, we use independent appraisals or other valuations to assist in determining the estimated fair values of the assets and liabilities. Various assumptions are used in the determination of these estimated fair values including discount rates, market and volume growth rates, product or service selling prices, cost structures, royalty rates, and other prospective financial information.

Additionally, we are required us to reassess the fair value of contingent consideration liabilities resulting from business acquisitions at each reporting period. Although subsequent changes to the contingent consideration liabilities do not affect the goodwill generated from the acquisition transaction, the valuation of expected contingent consideration often requires us to estimate future sales ~~and~~and/or profitability. These estimates require the use of numerous assumptions, many of which may change frequently and lead to increased or decreased operating income in future periods. For instance, during fiscal ~~2017~~2020 we recorded ~~$1.9 million~~approximately $49,000 of net decreases to the fair value of ~~the~~our contingent consideration ~~liability related~~liabilities compared with $1.3 million of increases during fiscal 2019. Changes to the fair value of contingent consideration liabilities are recorded as a ~~business acquisition from a previous period, which resulted in a corresponding decrease in~~component of selling, general, and administrative expenses.

~~Impairment of Long-Lived Assets~~

Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use an estimate of undiscounted future net cash flows of the assets over their remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the anticipated future cash flows of the assets, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based upon discounted cash flows over the estimated remaining useful life of the asset. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis, which is then depreciated or amortized over the remaining useful life of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets.

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Our impairment evaluation calculations contain uncertainties because they require us to make assumptions and apply judgment in order to estimate future cash flows, forecast the useful lives of the assets, and select a discount rate that reflects the risk inherent in future cash flows. Although we have not made any material recent changes to our long-lived assets impairment assessment methodology, if forecasts and assumptions used to support the carrying value of our long-lived tangible and definite-lived intangible assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition.

Income Taxes

We regularly evaluate our United States federal and various state and foreign jurisdiction income tax exposures. We account for certain aspects of our income tax provision using the provisions of ~~FASC~~ASC 740-10-05, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon final settlement. The provisions of ~~FASC~~ASC 740-10-05 also provide guidance on de-recognition, classification, interest, and penalties on income taxes, accounting for income taxes in interim periods, and require increased disclosure of various income tax items. Taxes and penalties are components of our overall income tax provision.

We record previously unrecognized tax benefits in the financial statements when it becomes more likely than not (greater than a 50 percent likelihood) that the tax position will be sustained. To assess the probability of sustaining a tax position, we consider all available evidence. In many instances, sufficient positive evidence may not be available until the expiration of the statute of limitations for audits by taxing jurisdictions, at which time the entire benefit will be recognized as a discrete item in the applicable period.

Our unrecognized tax benefits result from uncertain tax positions about which we are required to make assumptions and apply judgment to estimate the exposures associated with our various tax filing positions. The calculation of our income tax provision or benefit, as applicable, requires estimates of future taxable income or losses. During the course of the fiscal year, these estimates are compared to actual financial results and adjustments may be made to our tax provision or benefit to reflect these revised estimates. Our effective income tax rate is also affected by changes in tax law and the results of tax audits by various jurisdictions. Although we believe that our judgments and estimates discussed herein are reasonable, actual results could differ, and we could be exposed to losses or gains that could be material.

We establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets will not be realized. The determination of whether valuation allowances are needed on our deferred income tax assets contains uncertainties because we must project future income, including the use of tax-planning strategies, by individual tax jurisdictions. Changes in industry and economic conditions and the competitive environment may impact the accuracy of our projections. We regularly assess the likelihood that our deferred tax assets will be realized and determine if adjustments to our valuation allowance are necessary.

~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT~~

~~In January 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment~~. This guidance simplifies the subsequent measurement of goodwill and eliminates the two-step goodwill impairment test. Under the new guidance, an annual or interim goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and two-step goodwill impairment test. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted

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~~for interim~~For example, in consideration of the relevant accounting guidance, we reevaluated our deferred tax assets during fiscal 2020 and considered both positive and negative evidence in determining whether it is more likely than not that some portion or ~~annual goodwill impairment tests performed on testing dates after January 1, 2017. We have elected, as permitted by~~all of our deferred tax assets will be realized. Because of the cumulative pre-tax losses over the past three fiscal years, combined with the expected continued disruptions and negative impact to our business resulting from uncertainties related to the recovery from the pandemic, we were unable to overcome accounting guidance indicating that it is more-likely-than-not that insufficient taxable income will be available to ~~early adopt ASU No. 2017-04~~realize all of ~~August 31, 2017 to be effective for~~ our ~~annual goodwill impairment testing. The adoption~~deferred tax assets before they expire, which are primarily foreign tax credit carryforwards and a portion of ~~this standard did not have a material effect on~~ our ~~consolidated goodwill balance at August 31, 2017.~~net operating loss carryforwards. Accordingly, we increased the valuation allowance against our deferred tax assets in fiscal 2020.

RECENT ACCOUNTING PRONOUNCEMENTS ~~ISSUED NOT YET ADOPTED~~

~~On May 28, 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers. This new standard was issued in conjunction with the International Accounting Standards Board (IASB) and is designed~~Refer to create a single, principles-based process by which all businesses calculate revenue. The core principle of this standard is that an entity should recognize revenue for the transfer of goods or services equalNote 1 to the amount that it expects to be entitled to receive for those goods or services. The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The new standard replaces numerous individual, industry-specific revenue rules found in generally accepted accounting principles in the United States. We are required to adopt this standard on September 1, 2018, and apply the new guidance during interim periods within fiscal 2019. The new standard may be adopted using the "full retrospective" or "modified retrospective" approach. We are continuing to assess the impact of adopting ASU 2014-09 on our financial position, results of operations, and related disclosures, and we have not yet determined the method of adoption nor the full impact that the standard will have on our reported revenue or results of operations. We currently believe that the adoption of ASU No. 2014-09 will not significantly change the recognition of revenues associated with the delivery of onsite presentations and facilitator material sales. However, the recognition of revenues associated with intellectual property licenses, such as our All Access Pass, and other revenue streams may be more significantly impacted by the new standard. The Company will continue to assess the new standard along with industry trends and additional interpretive guidance, and it may adjust its implementation plan accordingly. We do not expect the adoption of ASU 2014-09 to have any impact on our operating cash flows.

~~In April 2016, the FASB issued ASU 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing~~. The guidance in ASU 2016-10 clarifies aspects of Topic 606 related to identifying performance obligations and the licensing implementation guidance, while retaining the related core principles for those areas. The effective date and transition requirements for ASU 2016-10 are the same as the effective date and transition requirements for Topic 606 (ASU 2014-09) discussed above. As of August 31, 2017, we have not yet determined the full impact that ASU No. 2016-10 will have on our reported revenue or results of operations.

~~On February 25, 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~. The new lease accounting standard is the result of a collaborative effort with the IASB (similar to the new revenue standard described above), although some differences remain between the two standards. This new standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. For public companies, the new lease standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While we expect the adoption of this new standard will increase reported assets and liabilities, as of August 31, 2017, we have not yet determined the full impact that the adoption of ASU 2016-02 will have on our financial statements.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting~~. The guidance in ASU 2016-09 simplifies several aspects of the accounting for stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of items on the statement of cash flows. ASU 2016-09 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted subject to certain requirements, and the method of application (i.e., retrospective, modified retrospective or prospective) depends on the transaction area that is being amended. Following adoption, the primary impact on our consolidated financial statements ~~will be the recognition of excess tax benefits in the provision~~ for ~~income taxes rather than additional paid-in capital, which will likely result in increased volatility in the reported amounts of income tax expense and net income. For example, during fiscal~~

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2017 we recorded $0.2 million of excess income tax benefits to additional paid-in capital. If we would have early adopted ASU 2016-09, this amount would have been recorded as a component of our consolidated income tax benefit for fiscal 2017. As of August 31, 2017, we have not completed the full evaluation of the impact of ASU 2016-09information on ~~our results of operations or cash flows.~~

recent accounting pronouncements.

REGULATORY COMPLIANCE

We are registered in states in which we do business that have a sales tax and we collect and remit sales or use tax on sales made in these jurisdictions. Compliance with environmental laws and regulations has not had a material effect on our operations.

INFLATION AND CHANGING PRICES

Inflation has not had a material effect on our operations. However, future inflation may have an impact on the price of materials used in the production of training products and related accessories, including paper and related raw materials. We may not be able to pass on such increased costs to our customers.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain ~~written and oral~~ statements made by usthe Company in this report are ~~"forward-looking statements"~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 as amended (the Exchange Act). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as ~~"believe," "anticipate," "expect," "estimate," "project,"~~“believe,” “anticipate,” “expect,” “estimate,” “project,” or words or phrases of similar meaning. In our reports and filings we may make forward-looking statements regarding, among other things, our expectations about future ~~reported revenues~~sales levels and ~~operating~~financial results, ~~future sales growth,~~expected effects from the ~~expected completion~~COVID-19 pandemic, including effects on how we conduct our business and our results of ~~our new ERP system~~operations, the timing and ~~new AAP portal,~~duration of the ~~expected introduction of new or refreshed offerings, including additions to~~recovery from the ~~All Access Pass and improvements to our Education segment,~~COVID-19 pandemic, future training and consulting sales activity, ~~the impact of multi-year contracts for~~expected benefits from the All Access Pass ~~renewal~~and the electronic delivery of ~~existing contracts,~~our content, anticipated renewals of subscription offerings, the impact of new accounting standards on our financial condition and results of operations, the amount and timing of capital expenditures, anticipated expenses, including SG&A expenses, depreciation, and amortization, future gross margins, the release ~~and success~~ of new ~~publications, the expected growth of our business in China, anticipated expenses,~~services or products, the adequacy of existing capital resources, projected cost reduction and strategic initiatives, expected levels of depreciation and amortization expense, expectations regarding tangible and intangible asset valuations, the seasonality of future sales, the seasonal fluctuations in cash used for and provided by operating activities, future compliance with the terms and conditions of our ~~Restated Credit Agreement, the~~ ability to ~~borrow on, and~~ renew or extend our ~~Restated Credit Agreement, expectations regarding income tax expenses as well as tax assets and credits and~~line of credit facility, the amount of cash expected to be paid for income taxes, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the seasonality of future sales, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collection of accounts receivable, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets. These, and other forward-looking statements, are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are disclosed from time to time in reports filed by us with the SEC, including reports on Forms 8-K, 10-Q, and 10-K. Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of this annual report on Form 10-K for the fiscal year ended August 31, ~~2017,~~2020, entitled ~~"Risk~~“Risk Factors."” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the ~~new AAP portal;~~All Access Pass; competition; the impact of foreign ~~currency~~ exchange rates; ~~competition;~~ the number and nature of customers and their product orders, including changes in the timing or mix of product or training orders; pricing of our products and services and those of competitors; adverse publicity; ~~adverse effects on certain licensee's performance due to civil unrest in some of the countries where our licensees operate;~~ and other factors which may adversely affect our business.

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The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors may emerge and it is not possible for our management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any single factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

The market price of our common stock has been and may remain volatile. In addition, the stock markets in general have experienced increased volatility. Factors such as quarter-to-quarter variations in revenues and earnings or losses and our failure to meet expectations could have a significant impact on the market price of our common stock. In addition, the price of our common stock can change for reasons unrelated to our performance. Due to our relatively low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage and fewer potential investors.

Forward-looking statements are based on ~~management's~~management’s expectations as of the date made, and the Company does not undertake any responsibility to update any of these statements in the future except as required by law. Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in our filings with the SEC.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk of Financial Instruments

We are exposed to financial instrument market risk primarily through fluctuations in foreign currency exchange rates and interest rates. To manage risks associated with foreign currency exchange and interest rates, we may make limited use of derivative financial instruments. Derivatives are financial instruments that derive their value from one or more underlying financial instruments. As a matter of policy, our derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures. In addition, we do not enter into derivative contracts for trading or speculative purposes, nor are we party to any leveraged derivative instrument. ~~The notional amounts of derivatives do~~However, during the fiscal years ended August 31, 2020, 2019, and 2018, we were not ~~represent actual amounts exchanged by the parties~~party to ~~the instrument; and thus are not a measure of exposure to us through our use of derivatives. Additionally, we enter into~~any foreign exchange contracts, interest rate swap agreements, or similar derivative ~~agreements only with highly rated counterparties and we do not expect to incur any losses resulting from non-performance by other parties.~~instruments.

Foreign Exchange Sensitivity

Due to the global nature of our operations, we are subject to risks associated with transactions that are denominated in currencies other than the United States dollar, as well as the effects of translating amounts denominated in foreign currencies to United States dollars as a normal part of the reporting process. The objective of our foreign currency risk management activities is to reduce foreign currency risk in the consolidated financial statements. In order to manage foreign currency risks, we may make limited use of foreign currency forward contracts and other foreign currency related derivative instruments. ~~However, we did not utilize any foreign currency forward or related derivative contracts during fiscal 2017, fiscal 2016, or fiscal 2015.~~

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Interest Rate Sensitivity

Our long-term liabilities primarily consist of term loans payable obtained from the lender on our ~~Restated~~2019 Credit Agreement, a long-term lease agreement (financing obligation) associated with the previous sale of our corporate headquarters, ~~facility,~~ amounts borrowed on our revolving credit facility, deferred income taxes,

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and contingent consideration payments resulting from our business acquisitions. Our overall interest rate sensitivity is primarily influenced by any amounts borrowed on term loans or on our revolving line of credit facility, and the prevailing interest rate on these instruments. The effective interest rate on the term loans and our revolving line of credit facility was ~~3.1~~3.5 percent at August 31, ~~2017,~~2020, and we may incur additional expense if interest rates increase in future periods. For example, a one percent increase in the interest rate on our term loans ~~and the amount outstanding on our revolving credit facility~~payable at August 31, ~~2017~~2020 would result in approximately $0.2 million of additional interest expense in fiscal ~~2018.~~2021. We did not have borrowings on our revolving credit facility at August 31, 2020. Our financing obligation has a payment structure equivalent to a long-term leasing arrangement with a fixed interest rate of 7.7 percent. Our other long-term liabilities do not include an interest component.

FRANKLIN COVEY CO.

CONSOLIDATED BALANCE SHEETS


AUGUST 31,	2017			2016			2020			2019
In thousands, except per-share data

ASSETS
Current assets:
Cash and cash equivalents	$	8,924		$	10,456		$	27,137		$	27,699
Accounts receivable, less allowance for doubtful accounts of $2,310 and $1,579		66,343			65,960
Receivable from related party		1,020			1,933
Accounts receivable, less allowance for doubtful accounts of $4,159 and $4,242								56,407			73,227
Inventories		3,353			5,042			2,974			3,481
Income taxes receivable		259			-
Prepaid expenses		3,569			2,949			3,646			3,906
Other current assets		8,367			3,401			11,500			11,027
Total current assets		91,835			89,741			101,664			119,340

Property and equipment, net		19,730			16,083			15,723			18,579
Intangible assets, net		57,294			50,196			47,125			47,690
Goodwill		24,220			19,903			24,220			24,220
Long-term receivable from related party		727			1,235
Deferred income tax assets								1,094			5,045
Other long-term assets		16,925			13,713			15,611			10,039
	$	210,731		$	190,871		$	205,437		$	224,913

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of term notes payable							$	5,000		$	5,000
Current portion of financing obligation	$	1,868		$	1,662			2,600			2,335
Current portion of term notes payable		6,250			3,750
Accounts payable		9,119			10,376			5,622			9,668
Deferred revenue		40,772			20,847
Income taxes payable								-			764
Deferred subscription revenue								59,289			56,250
Other deferred revenue								7,389			5,972
Accrued liabilities		22,617			17,422			22,628			23,555
Total current liabilities		80,626			54,057			102,528			103,544

Line of credit		4,377			-
Term notes payable, less current portion								15,000			15,000
Financing obligation, less current portion		21,075			22,943			14,048			16,648
Term notes payable, less current portion		12,813			10,313
Other liabilities		5,742			3,173			9,110			7,527
Deferred income tax liabilities		1,033			6,670			5,298			180
Total liabilities		125,666			97,156			145,984			142,899

Commitments and contingencies (Notes 7 and 8)
Commitments and contingencies (Note 9)

Shareholders' equity:
Shareholders’ equity:
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued		1,353			1,353			1,353			1,353
Additional paid-in capital		212,484			211,203			211,920			215,964
Retained earnings		69,456			76,628			49,968			59,403
Accumulated other comprehensive income		667			1,222			641			269
Treasury stock at cost, 13,414 shares and 13,332 shares		(198,895	)		(196,691	)
Total shareholders' equity		85,065			93,715
Treasury stock at cost, 13,175 shares and 13,087 shares								(204,429	)		(194,975	)
Total shareholders’ equity								59,453			82,014
	$	210,731		$	190,871		$	205,437		$	224,913

~~See accompanying notes to consolidated financial~~ ~~statements~~.

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~~FRANKLIN COVEY CO.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

YEAR ENDED AUGUST 31, 2017 2016 2015
In thousands, except per-share amounts
Net sales:
Training and consulting services $ 177,816 $ 189,661 $ 198,695
Products 3,881 6,009 6,885
Leasing 3,559 4,385 4,361
185,256 200,055 209,941
Cost of sales:
Training and consulting services 56,557 59,158 66,370
Products 3,990 3,206 3,306
Leasing 2,042 2,537 2,176
62,589 64,901 71,852
Gross profit 122,667 135,154 138,089

Selling, general, and administrative 121,148 113,589 108,802
Impaired assets - - 1,302
Contract termination costs 1,500 - -
Restructuring costs 1,482 776 587
Depreciation 3,879 3,677 4,142
Amortization 3,538 3,263 3,727
Income (loss) from operations (8,880 ) 13,849 19,529

Interest income 379 325 383
Interest expense (2,408 ) (2,263 ) (2,137 )
Discount on related-party receivables - - (363 )
Income (loss) before income taxes (10,909 ) 11,911 17,412
Benefit (provision) for income taxes 3,737 (4,895 ) (6,296 )
Net income (loss) $ (7,172 ) $ 7,016 $ 11,116

Net income (loss) per share:
Basic and diluted $ (0.52 ) $ 0.47 $ 0.66

Weighted average number of common shares:
Basic 13,819 14,944 16,742
Diluted 13,819 15,076 16,923

COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ (7,172 ) $ 7,016 $ 11,116
Foreign currency translation adjustments, net of income
tax benefit of $37, $115, and $52 (555 ) 1,030 (1,259 )
Comprehensive income (loss) $ (7,727 ) $ 8,046 $ 9,857

~~See accompanying notes to consolidated financial statements.~~

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~~FRANKLIN COVEY CO.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

YEAR ENDED AUGUST 31, 2017 2016 2015
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (7,172 ) $ 7,016 $ 11,116
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 7,443 6,943 7,875
Amortization of capitalized curriculum development costs 3,745 3,865 4,093
Deferred income taxes (5,594 ) 1,854 3,665
Stock-based compensation expense 3,658 3,121 2,536
Impairment of assets - - 1,302
Excess tax expense (benefit) from stock-based compensation (168 ) 52 (137 )
Increase (decrease) in contingent consideration liabilities (1,936 ) 1,538 35
Changes in assets and liabilities, net of effect of acquired businesses:
Decrease (increase) in accounts receivable, net 164 (576 ) (4,355 )
Decrease (increase) in inventories 1,583 (908 ) 2,239
Decrease in receivable from related party 1,421 820 620
Increase in prepaid expenses and other assets (4,861 ) (1,119 ) (2,010 )
Increase (decrease) in accounts payable and accrued liabilities 676 2,264 (5,654 )
Increase in deferred revenue 19,142 8,112 2,481
Increase (decrease) in income taxes payable/receivable (249 ) (316 ) 2,548
Decrease in other liabilities (495 ) (1 ) (164 )
Net cash provided by operating activities 17,357 32,665 26,190

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (7,187 ) (3,993 ) (2,446 )
Capitalized curriculum development costs (6,466 ) (2,236 ) (2,166 )
Acquisition of businesses, net of cash acquired (7,272 ) - (262 )
Acquisition of license rights (750 ) - -
Net cash used for investing activities (21,675 ) (6,229 ) (4,874 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit borrowings 34,320 46,454 -
Payments on line of credit borrowings (29,943 ) (46,454 ) -
Proceeds from term notes payable financing 10,000 15,000 -
Principal payments on term notes payable (5,000 ) (937 ) -
Principal payments on financing obligation (1,662 ) (1,472 ) (1,302 )
Purchases of common stock for treasury (5,431 ) (43,586 ) (14,427 )
Payment of contingent consideration liability - (2,167 ) -
Income tax benefit (expense) recorded in paid-in capital 168 (52 ) 137
Proceeds from sales of common stock held in treasury 682 679 689
Net cash provided by (used for) financing activities 3,134 (32,535 ) (14,903 )
Effect of foreign currency exchange rates on cash and cash equivalents (348 ) 321 (662 )
Net increase (decrease) in cash and cash equivalents (1,532 ) (5,778 ) 5,751
Cash and cash equivalents at beginning of the year 10,456 16,234 10,483
Cash and cash equivalents at end of the year $ 8,924 $ 10,456 $ 16,234

Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 2,562 $ 3,410 $ 2,383
Cash paid for interest 2,314 2,231 2,130

Non-cash investing and financing activities:
Purchases of property and equipment financed by accounts payable $ 697 $ 334 $ 134

~~See accompanying notes to consolidated financial statements.~~

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~~FRANKLIN COVEY CO.~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

Accumulated
Other
Common Common Additional Retained Comprehensive Treasury Treasury
Stock Shares Stock Amount Paid-In Capital Earnings Income Stock Shares Stock Amount
In thousands
Balance at August 31, 2014 27,056 $ 1,353 $ 207,148 $ 58,496 $ 1,451 (10,266 ) $ (141,734 )
Issuance of common stock from
treasury (847 ) 111 1,536
Purchase of treasury shares (778 ) (14,427 )
Unvested share award (336 ) 24 336
Stock-based compensation 2,536
Cumulative translation
adjustments (1,259 )
Tax benefits recorded in
paid-in capital 137
Other (3 ) 3
Net income 11,116

Balance at August 31, 2015 27,056 1,353 208,635 69,612 192 (10,909 ) (154,286 )
Issuance of common stock from
treasury (143 ) 57 823
Purchase of treasury shares (2,505 ) (43,586 )
Unvested share award (356 ) 25 356
Stock-based compensation 3,121
Cumulative translation
adjustments 1,030
Tax expense recorded in
paid-in capital (52 )
Other (2 ) 2
Net income 7,016

Balance at August 31, 2016 27,056 1,353 211,203 76,628 1,222 (13,332 ) (196,691 )
Issuance of common stock from
treasury (2,103 ) 188 2,785
Purchase of treasury shares (300 ) (5,431 )
Unvested share award (442 ) 30 442
Stock-based compensation 3,658
Cumulative translation
adjustments (555 )
Tax benefit recorded in
paid-in capital 168
Other
Net loss (7,172 )

Balance at August 31, 2017 27,056 $ 1,353 $ 212,484 $ 69,456 $ 667 (13,414 ) $ (198,895 )

See accompanying notes to consolidated financial statements.

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FRANKLIN COVEY CO.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


YEAR ENDED AUGUST 31,	2020			2019			2018
In thousands, except per-share amounts

Net sales	$	198,456		$	225,356		$	209,758
Cost of sales		53,086			66,042			61,469
Gross profit		145,370			159,314			148,289

Selling, general, and administrative		129,979			140,530			138,280
Stock-based compensation		(573	)		4,789			2,846
Restructuring costs		1,636			-			-
Depreciation		6,664			6,364			5,161
Amortization		4,606			4,976			5,368
Income (loss) from operations		3,058			2,655			(3,366	)

Interest income		56			37			104
Interest expense		(2,318	)		(2,358	)		(2,676	)
Discount accretion on related-party receivables		-			258			418
Income (loss) before income taxes		796			592			(5,520	)
Provision for income taxes		(10,231	)		(1,615	)		(367	)
Net loss	$	(9,435	)	$	(1,023	)	$	(5,887	)

Net loss per share:
Basic and diluted	$	(0.68	)	$	(0.07	)	$	(0.43	)

Weighted average number of common shares:
Basic and diluted		13,892			13,948			13,849


COMPREHENSIVE LOSS:
Net loss	$	(9,435	)	$	(1,023	)	$	(5,887	)
Foreign currency translation adjustments, net of income
tax benefit (provision) of $16, $(5), and $(75)		372			(72	)		(326	)
Comprehensive loss	$	(9,063	)	$	(1,095	)	$	(6,213	)

See accompanying notes to consolidated financial statements.

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FRANKLIN COVEY CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS


YEAR ENDED AUGUST 31,	2020			2019			2018
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,435	)	$	(1,023	)	$	(5,887	)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization		11,270			11,359			10,525
Amortization of capitalized curriculum development costs		3,949			4,954			5,280
Deferred income taxes		9,094			(1,051	)		(2,535	)
Stock-based compensation expense		(573	)		4,789			2,846
Change in the fair value of contingent consideration liabilities		(49	)		1,334			1,014
Amortization of right-of-use operating lease assets		331			-			-
Changes in assets and liabilities, net of effect of acquired businesses:
Decrease (increase) in accounts receivable, net		17,142			(1,770	)		(5,679	)
Decrease (increase) in inventories		552			(260	)		157
Decrease in receivable from related party		26			535			213
Decrease (increase) in prepaid expenses and other assets		(767	)		32			(1,335	)
Increase (decrease) in accounts payable and accrued liabilities		(5,464	)		2,932			1,746
Increase in deferred revenue		2,806			8,828			11,613
Increase (decrease) in income taxes payable/receivable		(794	)		889			109
Decrease in other liabilities		(525	)		(1,096	)		(1,206	)
Net cash provided by operating activities		27,563			30,452			16,861

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(4,183	)		(4,153	)		(6,528	)
Capitalized curriculum development costs		(5,082	)		(2,688	)		(2,998	)
Purchase of note receivable from bank (Note 17)		(2,600	)		-			-
Acquisition of businesses, net of cash acquired		-			(32	)		(1,108	)
Net cash used for investing activities		(11,865	)		(6,873	)		(10,634	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit borrowings		14,870			82,282			93,391
Payments on line of credit borrowings		(14,870	)		(93,619	)		(86,431	)
Proceeds from term notes payable financing		5,000			20,000			-
Principal payments on term notes payable		(5,000	)		(12,813	)		(6,250	)
Principal payments on financing obligation		(2,335	)		(2,092	)		(1,868	)
Purchases of common stock for treasury		(13,971	)		(12	)		(2,006	)
Payment of contingent consideration liabilities		(1,297	)		(653	)		(2,323	)
Proceeds from sales of common stock held in treasury		1,046			975			808
Net cash used for financing activities		(16,557	)		(5,932	)		(4,679	)
Effect of foreign currency exchange rates on cash and cash equivalents		297			(101	)		(319	)
Net increase (decrease) in cash and cash equivalents		(562	)		17,546			1,229
Cash and cash equivalents at beginning of the year		27,699			10,153			8,924
Cash and cash equivalents at end of the year	$	27,137		$	27,699		$	10,153

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	2,057		$	1,778		$	2,512
Cash paid for interest		2,280			2,386			2,655

Non-cash investing and financing activities:
Purchases of property and equipment financed by accounts payable	$	35		$	410		$	1,018
License rights acquired through royalties payable financing		4,009			-			-
Use of notes receivable to modify revenue contract (Note 17)		3,246			-			-
Consideration for business acquisition from liabilities of acquiree		-			798			-

See accompanying notes to consolidated financial statements.

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FRANKLIN COVEY CO.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


											Accumulated
	Common		Common		Additional						Other			Treasury			Treasury
	Stock Shares		Stock Amount		Paid-In Capital			Retained Earnings			Comprehensive Income			Stock Shares			Stock Amount
In thousands
Balance at August 31, 2017		27,056	$	1,353	$	212,484		$	69,456		$	667			(13,414	)	$	(198,895	)
Issuance of common stock from
treasury						(3,702	)								337			4,510
Purchase of treasury shares															(105	)		(2,006	)
Restricted share award						(348	)								23			348
Stock-based compensation						2,846
Cumulative translation
adjustments												(326	)
Net loss									(5,887	)
Balance at August 31, 2018		27,056		1,353		211,280			63,569			341			(13,159	)		(196,043	)
Issuance of common stock from
treasury						321									43			654
Purchase of treasury shares															1			(12	)
Restricted share award						(426	)								28			426
Stock-based compensation						4,789
Cumulative translation
adjustments												(72	)
Cumulative effect of new
accounting principle									(3,143	)
Net loss									(1,023	)
Balance at August 31, 2019		27,056		1,353		215,964			59,403			269			(13,087	)		(194,975	)
Issuance of common stock from
treasury						(3,138	)								291			4,184
Purchase of treasury shares															(400	)		(13,971	)
Restricted share award						(333	)								21			333
Stock-based compensation						(573	)
Cumulative translation
adjustments												372
Net loss									(9,435	)

Balance at August 31, 2020		27,056	$	1,353	$	211,920		$	49,968		$	641			(13,175	)	$	(204,429	)

See accompanying notes to consolidated financial statements.

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FRANKLIN COVEY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Franklin Covey Co. (hereafter referred to as we, us, our, or the Company) is a global company specializing in organizational performance improvement. We help individuals and organizations achieve results that require a change in human behavior and our mission is to ~~"enable~~“enable greatness in people and organizations everywhere." Our expertise is in the following seven areas: Leadership, Execution, Productivity, Trust, Sales Performance, Customer Loyalty, and Educational improvement. Our offerings are described in further detail at ~~www.franklincovey.com~~ ~~and elsewhere in this report.~~” We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training and products based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, The Leader In Me, ~~and~~ The Four Disciplines of Execution, and Multipliers, and proprietary content in the areas of Execution, Sales Performance, Productivity, Customer Loyalty, and Educational improvement. Our offerings are described in further detail at www.franklincovey.com and elsewhere in this report. Through our organizational research and curriculum development efforts, we seek to consistently create, develop, and introduce new services and products that help individuals and organizations achieve their own great purposes.

Fiscal Year

Our fiscal year ends on August 31 of each ~~year. During fiscal 2017, our Board of Directors approved a change to~~year and our fiscal quarter ending dates from a modified 52/53-week calendar in which quarterly periods ended on different dates from year to year, to the last day of the calendar month in each quarter. Beginning with the second quarter of fiscal 2017, our fiscal quarters ~~now~~ end on the last day of November, February, and May. Unless otherwise noted, references to fiscal years apply to the 12 months ended August 31 of the specified year.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, which consist of Franklin Development Corp., and our offices in Japan, China, the United Kingdom, Australia, Germany, Switzerland, and ~~Australia.~~Austria. Intercompany balances and transactions are eliminated in consolidation.

Pervasiveness of Estimates

The preparation of financial statements in conformity with ~~accounting principles~~ generally accepted ~~in the United States of America~~accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, ~~and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of~~shareholders’ equity, revenues, and ~~expenses during the reporting periods.~~expenses. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made in our prior period financial statements to conform with the current period presentation. On our consolidated statements of operations and comprehensive loss for the fiscal years ended August 31, 2019 and 2018, we have separately presented stock-based compensation, which was previously included within selling, general, and administrative expense (Note 12).

Cash and Cash Equivalents

Some of our cash is deposited with financial institutions located throughout the United States of America and at banks in foreign countries where we operate subsidiary offices, and at times may exceed insured limits. We consider all highly liquid debt instruments with a maturity date of three months or less to be cash equivalents. We did not hold a significant amount of investments that would be considered cash equivalent instruments at either August 31, ~~2017~~2020 or ~~2016.~~2019. Of our ~~$8.9~~$27.1 million in cash at August 31, ~~2017, $7.3~~2020, $12.2 million was held outside the U.S. by our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position.

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Inventories

Inventories are stated at the lower of cost or ~~market,~~net realizable value, cost being determined using the first-in, first-out method. Elements of cost in inventories generally include raw materials and direct labor. Cash flows from the sale of inventory are included in cash flows provided by operating activities in our consolidated statements of cash flows. Our inventories are comprised primarily of training materials, books, and ~~related~~training-related accessories, and consisted of the following (in thousands):


AUGUST 31,	2017		2016		2020		2019
Finished goods	$	3,306	$	5,002	$	2,947	$	3,434
Raw materials		47		40		27		47
	$	3,353	$	5,042	$	2,974	$	3,481

Provision is made to reduce excess and obsolete inventories to their estimated net realizable value. In assessing the valuation of our inventories, we make judgments regarding future demand requirements and compare these estimates with current and committed inventory levels. Inventory requirements may change based on projected customer demand, training curriculum life-cycle changes, and other factors that could affect the valuation of our inventories.

~~During the third quarter of fiscal 2017, we decided to exit the publishing business in Japan (Note 13) and wrote off the majority of our book inventory located in Japan, which totaled $2.1 million.~~

Other Current Assets

Significant components of our other current assets were as follows (in thousands):


AUGUST 31,	2017		2016		2020		2019
Deferred commissions	$	6,150	$	1,664	$	8,897	$	8,337
Other current assets		2,217		1,737		2,603		2,690
	$	8,367	$	3,401	$	11,500	$	11,027

We defer commission expense on ~~All Access Pass and other subscription~~subscription-based sales and recognize the commission expense with the recognition of the corresponding revenue.

Property and Equipment

Property and equipment are recorded at cost. Depreciation expense, which includes depreciation on our corporate campus that is accounted for as a financing obligation (Note 6)7), ~~and the amortization of assets recorded under capital lease obligations,~~ is calculated using the straight-line method over the lesser of the expected useful life of the asset or the contracted lease period. We generally use the following depreciable lives for our major classifications of property and equipment:

Description	Useful Lives
Buildings	20 years
Machinery and equipment	5–7 years
Computer hardware and software	3–5 years
Furniture, fixtures, and leasehold improvements	5–7 years

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Our property and equipment were comprised of the following (in thousands):


AUGUST 31,	2017			2016			2020			2019
Land and improvements	$	1,312		$	1,312		$	1,312		$	1,312
Buildings		30,044			32,201			30,038			30,038
Machinery and equipment		2,119			2,279			900			1,162
Computer hardware and software		22,647			18,552			29,691			28,665
Furniture, fixtures, and leasehold
improvements		8,319			9,292			9,129			8,409
		64,441			63,636			71,070			69,586
Less accumulated depreciation		(44,711	)		(47,553	)		(55,347	)		(51,007	)
	$	19,730		$	16,083		$	15,723		$	18,579

~~Leasehold improvements are amortized over the lesser of the useful economic life of the asset or the contracted lease period.~~ We expense costs for repairs and maintenance as incurred. Gains and losses resulting from the sale of property and equipment are recorded in ~~operating~~ income or (loss). from operations. Depreciation of capitalized subscription portal costs is included in depreciation expense in the accompanying consolidated statements of operations and comprehensive loss. During fiscal ~~2017,~~2018, we capitalized $0.1 million of interest expense in connection with the installation of our new enterprise resource planning ~~software~~ system and the development of our ~~new~~improved All Access Pass (AAP) portal.

Impairment of Long-Lived Assets

Long-lived tangible assets and ~~definite-lived~~finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the anticipated future cash flows of the assets, we recognize an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires us to use estimates of future cash flows. If forecasts and assumptions used to support the realizability of our long-lived tangible and ~~definite-lived~~finite-lived intangible assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition. ~~For more information regarding our impaired asset charges in fiscal 2015, refer to Note 12.~~

Indefinite-Lived Intangible Assets and Goodwill Impairment Testing

Intangible assets that are deemed to have an indefinite life and acquired goodwill are not amortized, but rather are tested for impairment on an annual basis or more often if events or circumstances indicate that a potential impairment exists. The Covey trade name intangible asset has been deemed to have an indefinite life. This intangible asset is tested for impairment using qualitative factors or the present value of estimated royalties on trade name related revenues, which consist primarily of training seminars and work sessions, international licensee sales, and related products. Based on the fiscal ~~2017~~2020 evaluation of the Covey trade name, we believe the fair value of the Covey trade name substantially exceeds its carrying value. No impairment charges were recorded against the Covey trade name during the ~~fiscal years ended August 31, 2017, 2016, or 2015.~~periods presented in this report.

Goodwill is recorded when the purchase price for an acquisition exceeds the estimated fair value of the net tangible and identified intangible assets acquired. ~~During August 2017, we adopted Accounting Standards Update (ASU) 2017-04,~~ ~~Intangibles—Goodwill~~An annual (or interim test if events and ~~Other: Simplifying the Test for Goodwill Impairment. This guidance simplifies the subsequent measurement of goodwill and eliminates the two-step goodwill impairment test. Under the new guidance, an annual or interim~~circumstances indicate a test should be performed) goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting ~~unit's~~unit’s fair value. ~~The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and two-step goodwill impairment test.~~

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We tested goodwill for impairment at August 31, ~~2017~~2020 at the reporting unit level using a quantitative approach. The goodwill impairment testing process involves determining whether the estimated fair value of the reporting unit exceeds its respective book value. If the fair value exceeds the book value, goodwill of that reporting unit is not impaired. If the book value exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The estimated fair value of each reporting unit was calculated using a combination of the income approach (discounted cash flows) and the market approach (using market multiples derived from a set of companies with comparable market characteristics).

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On an interim basis, we consider whether events or circumstances are present that may lead to the determination that goodwill may be impaired. If, based on events or changing circumstances, we determine it is more likely than not that the fair value of a reporting unit does not exceed its carrying value, we ~~would be~~are required to test goodwill for impairment.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. Based on the results of our goodwill impairment testing, ~~during fiscal 2017,~~ we determined that no impairment existed at either of August 31, ~~2017~~2020 or ~~2016,~~2019 as each reporting ~~unit's~~unit’s estimated fair value exceeded its carrying value. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present. For more information regarding our intangible assets and goodwill, refer to Note 4.5.

Capitalized Curriculum Development Costs

During the normal course of business, we develop training courses and related materials that we sell to our clients. Capitalized curriculum development costs include certain expenditures to develop course materials such as video segments, course manuals, and other related materials. Our capitalized curriculum development spending in fiscal ~~2017,~~2020, which totaled ~~$6.5~~$5.1 million, was primarily for various Education practice offerings ~~related to~~and courses for the All Access Pass, including new ~~The Leader In Me~~Multipliers~~, our Leadership content, and for various other offerings. Generally, curriculum~~ content. Curriculum costs are capitalized when there is a major revision to an existing course that requires a significant re-write of the course ~~materials or curriculum.~~materials. Costs incurred to maintain existing offerings are expensed when incurred. In addition, development costs incurred in the research and development of new ~~curriculum~~offerings and software products to be sold, leased, or otherwise marketed are expensed as incurred until economic and technological feasibility has been established.

Capitalized development costs are amortized over three- to five-year useful lives, which are based on numerous factors, including expected cycles of major changes to our content. Capitalized curriculum development costs are reported as a component of other long-term assets in our consolidated balance sheets and totaled ~~$11.6~~$8.1 million and ~~$8.9~~$7.0 million at August 31, ~~2017~~2020 and ~~2016.~~2019. Amortization of capitalized curriculum development costs is reported as a component of cost of sales in the accompanying consolidated statements of ~~operations.~~operations and comprehensive loss.

Accrued Liabilities

Significant components of our accrued liabilities were as follows (in thousands):


AUGUST 31,	2020		2019
Accrued compensation	$	9,597	$	14,003
Other accrued liabilities		13,031		9,552
	$	22,628	$	23,555

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AUGUST 31, 2017 2016
Accrued compensation $ 10,611 $ 8,810
Other accrued liabilities 12,006 8,612
$ 22,617 $ 17,422

~~We reclassified approximately $4,000 of income taxes payable at August 31, 2016 to accrued liabilities.~~

Contingent Consideration Payments from Business Acquisitions

~~Acquisitions~~Business acquisitions may include contingent consideration payments based on various future financial measures related to anthe acquired ~~company.~~entity. Contingent consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired company and estimated probabilities of achievement. ~~At each reporting date,~~Based on updated estimates and projections, the contingent consideration liabilities are ~~revalued~~adjusted at each reporting date to their estimated fair ~~value and changes~~value. Changes in fair value subsequent to the acquisition date are ~~reflected~~reported in selling, general, and administrative expense in our consolidated statements of operations and ~~could~~comprehensive loss, and may have a material impact on our operating results. ~~Changes~~Variations in the fair value of contingent consideration liabilities may result from changes in discount periods or rates, changes in the timing and amount of earnings estimates, and changes in probability assumptions with respect to the likelihood of achieving various payment criteria.

Foreign Currency Translation and Transactions

The functional currencies of our foreign operations are the reported local currencies. Translation adjustments result from translating our foreign ~~subsidiaries'~~subsidiaries’ financial statements into United States dollars. The balance sheet accounts of our foreign subsidiaries are translated into United States dollars using the exchange rate in effect at the balance sheet ~~date.~~dates. Revenues and expenses are translated using average exchange rates for each month during the fiscal year. The resulting translation differences are recorded as a component of accumulated other comprehensive income in ~~shareholders'~~shareholders’ equity. Foreign currency transaction losses totaled $0.1 million, $0.2 million, ~~$0.3 million,~~ and ~~$1.1~~$0.5 million for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015,~~2018, respectively, and are included as a component of selling, general, and administrative expenses in our consolidated statements of ~~operations.~~

~~Sales Taxes~~

We collect sales tax on qualifying transactions with customers based upon applicable sales tax rates in various jurisdictions. We account for sales taxes collected using the net method; accordingly, we do not include sales taxes in net sales reported in our consolidated statements of operations.operations and comprehensive loss.

Revenue Recognition

We ~~recognize~~account for revenue in accordance with Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on September 1, 2018 using the modified retrospective method (see also Note 2).

Prior to the adoption of Topic 606, we recognized revenue when: 1) persuasive evidence of an arrangement ~~exists,~~existed, 2) delivery of the product ~~has~~ occurred or the services ~~have been~~were rendered, 3) the price to the customer iswas fixed or determinable, and 4) collectability iswas reasonably assured. These principles governed our revenue recognition policies and procedures for fiscal 2018 as presented in this report. For training and service sales, these conditions ~~are~~were generally met upon presentation of the training seminar or delivery of the consulting services based upon daily rates. For most of our product sales, these conditions ~~are~~were met upon shipment of the product to the customer. At times, our customers may request access to our intellectual property for the flexibility to print certain training materials or to have access to certain training videos and other training aids at their convenience. For intellectual property license sales, the revenue recognition conditions ~~are~~were generally met at the later of delivery of the content to the client or the effective date of the arrangement. Our subscription revenues from the All Access Pass and the Leader in Me membership were recognized over the duration of the underlying contracts since our clients had the right to content updates during the contracted period.

Revenue recognition for multiple-element arrangements ~~requires~~required judgment to determine if multiple elements ~~exist,~~existed, whether elements ~~can~~could be accounted for as separate units of accounting, and if so, the fair value for each of the elements. A deliverable ~~constitutes~~constituted a separate unit of accounting when it ~~has~~had standalone value to our clients. We ~~routinely enter~~entered into arrangements that ~~can include~~included various combinations of multiple training offerings, consulting services, and intellectual property licenses. The

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timing of delivery and performance of the elements typically ~~varies~~varied from contract to contract. Generally, these items ~~qualify~~qualified as separate units of accounting because they ~~have~~had value to the customer on a standalone basis.

When the Company's training and consulting arrangements contain multiple deliverables, consideration is allocated at the inception of the arrangement to all deliverables based on their relative selling prices at the beginning of the agreement, and revenue is recognized as each offering, consulting service, or intellectual property license is delivered. We ~~use the following selling price hierarchy to determine~~determined the fair value to be used for allocating revenue to the ~~elements:~~elements based on (i) vendor-specific objective evidence of fair value (VSOE), (ii) third-party evidence (TPE), and (iii) best estimate of selling price (BESP). Generally, VSOE is based on established pricing and discounting practices for the deliverables when sold separately. In determining VSOE, we require that a substantial majority of the selling prices fall within a narrow range. When VSOE cannot be established, judgment is applied with respect to whether a selling price can be established based on TPE, which is determined based on competitor prices for similar offerings when sold separately. Our products and services normally contain a significant level of differentiation such that the comparable pricing of services with similar functionality cannot be obtained. When we are unable to establish a selling price using VSOE or TPE, BESP is used in our allocation of arrangement consideration. BESPs are established as best estimates of what the selling price would be if the deliverables were sold regularly on a stand-alone basis. Our process for determining BESPs requires judgment and considers multiple factors, such as market conditions, type of customer, geographies, stage of product lifecycle, internal costs, and gross margin objectives. These factors may vary over time depending upon the unique facts and circumstances related to each deliverable. However, we do not expect the effect of changes in the selling price or method or assumptions used to determine selling price to have a significant effect on the allocation of arrangement consideration.

~~Our multiple-element arrangements generally do not include performance, cancellation, termination, or refund-type provisions.~~

Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office. Licensee companies are unrelated entities that have been granted a license to translate our content and offerings, adapt the content to the local culture, and sell our content in a specific country or region. Licensees are required to pay us royalties based upon a percentage of their sales to clients. We recognize royalty income each period based upon the sales information reported to us from our licensees. ~~Licensee~~Refer to the disaggregated revenue information presented in Note 16 for our royalty revenues ~~are included as a component of training sales and totaled $10.6 million, $14.4 million, and $13.7 million for~~in the fiscal years ~~ended August 31, 2017, 2016, and 2015. The decrease~~presented in ~~international licensee royalties in fiscal 2017 was primarily due to the conversion~~this report.

Table of ~~our licensee operations in China into direct offices.~~Contents

Revenue is recognized as the net amount to be received after deducting estimated amounts for discounts and product returns.

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Stock-Based Compensation

We record the compensation expense for all stock-based payments, ~~to employees and non-employees,~~ including grants of stock options and the compensatory elements of our employee stock purchase plan, in our consolidated statements of operations and comprehensive loss based upon their fair values over the requisite service period. For more information on our stock-based compensation plans, refer to Note ~~11.~~12.

Shipping and Handling Fees and Costs

All shipping and handling fees billed to customers are recorded as a component of net sales. All costs incurred related to the shipping and handling of products are recorded in cost of sales.

Advertising Costs

Costs for advertising are expensed as incurred. Advertising costs included in selling, general, and administrative expenses totaled ~~$6.4~~$3.3 million, ~~$6.6~~$4.6 million, and ~~$7.4~~$6.9 million for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018.

Restructuring Costs

During the fourth quarter of fiscal 2020, we restructured certain information technology, central operations, and marketing functions. We incurred $1.6 million of severance costs related to these restructuring activities. At August 31, 2020, we had $1.2 million of remaining accrued restructuring costs, which are expected to be paid during fiscal 2021.

Income Taxes

Our income tax provision has been determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The income tax provision represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred income taxes result from differences between the financial and tax bases of our assets and liabilities and are adjusted for tax rates and tax laws when changes are enacted. A valuation allowance is provided against deferred income tax assets when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. Interest and penalties related to uncertain tax positions are recognized as components of income tax benefit or expense in our consolidated statements of ~~operations.~~operations and comprehensive loss.

We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

We provide for income taxes, net of applicable foreign tax credits, on temporary differences in our investment in foreign subsidiaries, which consist primarily of unrepatriated earnings.

~~Comprehensive Income~~

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Comprehensive ~~income~~Loss

Comprehensive loss includes changes to equity accounts that were not the result of transactions with shareholders. Comprehensive ~~income~~loss is comprised of net income or loss and other comprehensive income and loss items. Our other comprehensive income and losses generally consist of changes in the cumulative foreign currency translation adjustment, net of tax.

Accounting Pronouncements Issued and Adopted

Leases

In ~~January 2017,~~February 2016, the Financial Accounting Standards Board (FASB) issued ASU ~~2017-04,~~No. 2016-02, ~~Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment~~Leases (Topic 842), which supersedes FASB Accounting Standards Codification (ASC) Topic 840, Leases. ~~This~~The new guidance ~~simplifies~~requires lessees to recognize a lease liability and corresponding right-of-use asset for all leases greater than 12 months. Recognition, measurement, and presentation of expenses depends upon whether the ~~subsequent measurement of goodwill and eliminates the two-step goodwill impairment test. Under~~lease is classified as a finance or operating lease. We adopted the new lease guidance ~~an annual or interim goodwill impairment test is performed by comparing~~prospectively on September 1, 2019. As part of the ~~fair value~~adoption of ~~a reporting unit with its carrying amount,~~ASU 2016-02, we elected to apply the package of practical expedients, which allows us to not reassess prior conclusions related to lease classification, not to recognize short-term leases on our balance sheet, and ~~an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments also eliminate the~~

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~~requirements for any reporting unit with a zero or negative carrying amount~~not to ~~perform a qualitative assessment~~separate lease and two-step goodwill impairment test. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We have elected, as permitted by the guidance, to early adopt ASU No. 2017-04 to be effectivenon-lease components for our ~~annual goodwill impairment testing at August 31, 2017. The~~leases. On September 1, 2019, the adoption of ~~this standard did not have a material effect~~ASU 2016-02 resulted in the recognition of $1.5 million of lease liabilities and right-of-use assets on our consolidated ~~goodwill~~ balance ~~at August 31, 2017.~~sheets for operating leases. For lessors, accounting for leases is substantially the same as in prior periods and there was no impact from the adoption of ASU 2016-02 for those leases where we are the lessor. Refer to Note 8, Leases for further information on our leasing activity.

~~Accounting Pronouncements Issued Not Yet Adopted~~The lease on our corporate campus has historically been accounted for as a financing obligation and related building asset on our consolidated balance sheets, as the contract did not meet the criteria for application of sale-leaseback accounting under previous leasing guidance. In transition to Topic 842, we reassessed whether the contract met the sale criteria under the new leasing standard. Based on this assessment, we determined that the sale criteria under the new leasing standard was not met and we will continue to account for the corporate campus lease as a finance obligation on our consolidated balance sheet in future periods.

OnRevenue Recognition

In May ~~28,~~ 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard was issued in conjunction with the International Accounting Standards Board (IASB) and is designed to create a single, principles-based process by which all businesses calculate revenue. The core principle of this standard is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The new standard replaces numerous individual, industry-specific revenue rules found in generally accepted accounting principles in the United States. We ~~are required to adopt this standard~~adopted ASU No. 2014-09 on September 1, 2018 ~~and apply~~using the “modified retrospective” approach. Under this transition method, we applied the new ~~guidance~~standard to contracts that were not completed as of the adoption date and recognized a cumulative effect adjustment which reduced our retained earnings by $4.1 million ($3.1 million, net of tax) on September 1, 2018, which primarily consisted of initial licensing fees on international locations. The comparative period information for fiscal 2018 has not been restated and continues to be presented according to accounting standards for revenue recognition in effect during that fiscal year.

The primary impact of ASU No. 2014-09 on our revenue recognition policies is a change in the way we account for our initial license fee associated with licensing an international location. The Company previously recorded the non-refundable initial license fee from licensing an international location as revenue at the time the license period begins if all other revenue requirements had been met. However, under Topic 606, the Company recognizes revenue on the upfront license fees over the duration of the contract.

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Under Topic 606, we account for the All Access Pass as a single performance obligation and recognize the associated transaction price on a straight-line basis over the term of the underlying contract. This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform.

We do not expect the accounting for fulfillment costs or costs incurred to obtain a contract to be materially affected in any period due to the adoption of ASU 2014-09. Refer to Note 2 for further details regarding our revenue recognition accounting policies under Topic 606.

The cumulative after-tax effects of the changes made to our consolidated balance sheet from the adoption of Topic 606 were as follows (in thousands):


	August 31,		ASC 606			September 1,
	2018		Adjustments			2018
Assets:
Other current assets	$	10,893	$	109		$	11,002
Deferred income tax assets		3,222		1,005			4,227

Liabilities and Shareholders' Equity:
Deferred subscription revenue		47,417		1,453			48,870
Other deferred revenue		4,471		555			5,026
Other liabilities		5,501		2,249			7,750
Retained earnings		63,569		(3,143	)		60,426

The following line items in our consolidated statement of operations and comprehensive loss were impacted by the adoption of the new revenue recognition standard for the year ended August 31, 2019 (in thousands, except per-share data):


	August 31,			August 31,
	2019			2019			Impact of
	As Reported			Without ASC 606			ASC 606
Net sales	$	225,356		$	225,222		$	134
Cost of sales		66,042			66,042			-
Selling, general, and administrative		140,530			140,540			(10	)
Income tax provision		(1,615	)		(1,580	)		(35	)
Net loss		(1,023	)		(1,132	)		109

Net loss per share:
Basic and diluted	$	(0.07	)	$	(0.08	)

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Selected consolidated balance sheet line items as of August 31, 2019, which were impacted by the adoption of the new standard, were as follows (in thousands):


	August 31,		August 31,
	2019		2019		Impact of
	As Reported		Without ASC 606		ASC 606
Assets:
Other current assets	$	11,027	$	10,908	$	119
Deferred income tax assets		5,045		4,075		970
Total assets		224,913		223,824		1,089

Liabilities and Shareholders' Equity:
Deferred subscription revenue	$	56,250	$	55,247	$	1,003
Other deferred revenue		5,972		5,417		555
Other liabilities		7,527		4,961		2,566
Retained earnings		59,403		62,438		(3,035	)
Total liabilities and shareholders' equity		224,913		223,824		1,089

The adoption of ASC Topic 606 did not have a material impact on our cash flows from operating, investing, or financing activities.

Accounting Pronouncements Issued Not Yet Adopted

Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This accounting standard changes the methodology for measuring credit losses on financial instruments, including trade accounts receivable, and the timing of when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal ~~2019. The new standard may be adopted using~~years, and interim periods within those years, beginning after December 15, 2018. We expect to adopt the ~~"full retrospective" or "modified retrospective" approach. We are continuing~~provisions of ASU No. 2016-13 on September 1, 2020 and do not expect this guidance to ~~assess the~~have a material impact ~~of adopting ASU 2014-09~~ on our financial position, results of operations, and ~~related disclosures,~~disclosures.

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and ~~we have not yet determined~~Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). This guidance clarifies the ~~method of~~accounting for implementation costs in a cloud computing arrangement that is a service contract and aligns the requirements for capitalizing those costs with the capitalization requirements for costs incurred to develop or obtain internal-use software. The new standard is effective for interim and annual periods beginning after December 15, 2019, and early adoption ~~nor~~is permitted. We are currently evaluating the ~~full impact that the standard will have on our reported revenue or results of operations. We currently believe that~~effects, if any, the adoption of ASU ~~No. 2014-09 will not significantly change~~2018-15 may have on our financial position, results of operations, cash flows, or disclosures.

2.	REVENUE RECOGNTION

We account for revenue in accordance with ASC Topic 606, which was adopted on September 1, 2018 using the ~~recognition of revenues associated~~modified retrospective method (Note 1). We earn revenue from contracts with customers primarily through the delivery of ~~onsite presentations and facilitator material sales. However, the recognition of revenues associated with intellectual property licenses, such as~~ our All Access Pass and ~~other revenue streams may be more significantly impacted by~~ the ~~new standard. The~~Leader in Me membership subscription offerings, through the delivery of training days and training course materials (whether digitally or in person), and through the licensing of rights to sell our content into geographic locations where the Company ~~will continue to assess the new standard along with industry trends~~does not maintain a direct office. We also earn revenues from leasing arrangements that are not accounted for under Topic 606. Returns and ~~additional interpretive guidance,~~refunds are generally immaterial, and ~~it may adjust its implementation plan accordingly. We~~we do not ~~expect the adoption of ASU 2014-09 to~~ have any ~~impact on our operating cash flows.~~significant warranty obligations.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting~~. The guidance in ASU 2016-09 simplifies several aspects of the accounting for stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of items on the statement of cash flows. ASU 2016-09 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted subject to certain requirements, and the method of application (i.e., retrospective, modified retrospective or prospective) depends on the transaction area that is being amended. Following adoption, the primary impact on our consolidated financial statements will be the recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital, which will likely result in increased

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Under Topic 606, we recognize revenue upon the transfer of control of promised products and services to customers in an amount equal to the consideration we expect to receive in exchange for those products or services. Although rare, if the consideration promised in a contract includes variable amounts, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained. We include the variable consideration in the transaction price only to the extent that it is probable a significant reversal of the amount of cumulative revenue recognized will not occur.

We determine the amount of revenue to be recognized through application of the following steps:

Identification of the contract with a customer

~~volatility~~

Identification of the performance obligations in the ~~reported amounts~~contract

Determination of ~~income tax benefit~~the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when the Company satisfies the performance obligations

Taxes assessed by a government authority that are collected from a customer are excluded from net revenue.

Services and Products

We deliver Company-led training days from our offerings, such as The 7 Habits of Highly Effective People, at a customer’s location or ~~expense~~live-online based upon a daily consultant rate and ~~net income (loss). For example, during fiscal 2017, we~~a set price for training materials. These revenues are recognized as the training days occur and the services are performed. Customers also have the option to purchase training materials and present our offerings through internal facilitators and not through the use of a Franklin Covey consultant. Revenue is recognized from these product sales when the materials are shipped. Shipping revenues associated with product sales are recorded ~~$0.2 million of excess income tax benefits to additional paid-in capital. If we would have early adopted ASU 2016-09, this amount would have been~~in revenue with the corresponding shipping cost being recorded as a component of ~~our consolidated income tax benefit~~cost of sales.

Subscription Revenues

Subscription revenues primarily relate to the Company’s All Access Pass and the Leader in Me membership offerings. We have determined that it is most appropriate to account for ~~fiscal 2017. As of August 31, 2017, we have not completed~~ the ~~full evaluation~~AAP as a single performance obligation and recognize the associated transaction price ratably over the term of the underlying contract beginning on the commencement date of each contract, which is the date the Company’s platforms and resources are made available to the customer. This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform.

We typically invoice our customers annually upon execution of the contract or subsequent renewals. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or revenue, depending on whether transfer of control has occurred.

Our Leader in Me offering is bifurcated into a portal membership obligation and a coaching delivery obligation. We have determined that it is appropriate to recognize revenue related to the portal membership over the term of the underlying contract and to recognize revenue from coaching as those services are performed. The combined contract amount is recorded in deferred subscription revenue until the performance obligations are satisfied. Any additional coaching or training days which are contracted independent of the Leader in Me membership are recorded as revenue in accordance with our general policy for services and products as previously described.

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Royalties

Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office. Licensee companies are unrelated entities that have been granted a license to translate our content and offerings, adapt the content to the local culture, and sell our content in a specific country or region. Licensees are required to pay us royalties based upon a percentage of their sales to clients. We recognize royalty income each reporting period based upon the sales information reported to us from our licensees. When sales information is not received from a particular licensee at the end of a reporting period, the Company estimates the amount of royalties to be received for the period that is being reported based upon prior forecasts and historical performance. These estimated royalties are recorded as revenue and are adjusted in the subsequent period.

The primary impact of ASU ~~2016-09~~No. 2014-09 on our ~~results~~financial statements is a change in the way we account for the initial license fee associated with licensing an international location. The Company previously recorded the non-refundable initial license fee from licensing an international location as revenue at the time the license period began if all other revenue requirements had been met. However, under Topic 606, we recognize revenue on the upfront fees over the term of ~~operations~~the initial contract.

Contracts with Multiple Performance Obligations

We periodically enter into contracts that include multiple performance obligations. A performance obligation is a promise in a contract to transfer products or services that are distinct, or that are distinct within the context of the contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. Determining whether products and services meet the distinct criteria that should be accounted for separately or combined as one unit of accounting requires significant judgment.

When determining whether goods and services meet the distinct criteria, we consider various factors for each agreement including the availability of the services and the nature of the offerings and services. We allocate the transaction price to each performance obligation on a relative standalone selling price (SSP) basis. Judgment is required to determine the SSP for each distinct performance obligation. The SSP is the price which the Company would sell a promised product or service separately to a customer. In determining the SSP, we consider the size and volume of transactions, price lists, historical sales, and contract prices. We may modify our pricing from time-to-time in the future, which could result in changes to the SSP.

Contract Balances

As described above, subscription revenue is generally recognized ratably over the term of the underlying contract beginning on the commencement date of each agreement. The timing of when these contracts are invoiced, cash ~~flows.~~is collected, and revenue is recognized impacts our accounts receivable and deferred revenue accounts. We generally bill our clients in advance for subscription offerings or within the month that the training and products are delivered. As such, consideration due to the Company for work performed is included in accounts receivable and we do not have a significant amount of contract assets. Our receivables are generally collected within 30 to 120 days but typically no longer than 12 months. Deferred revenue primarily consists of billings or payments received in advance of revenue being recognized from our subscription offerings. Furthermore, our clients, to expend funds in a particular budget cycle, may prepay for services or products which are also a component of our consolidated deferred revenue. Our deferred revenue totaled $68.9 million at August 31, 2020 and $65.8 million at August 31, 2019, of which $2.2 million and $3.6 million were classified as components of other long-term liabilities at August 31, 2020 and August 31, 2019, respectively. The amount of deferred revenue that was generated from subscription offerings totaled $60.6 million at August 31, 2020 and $58.2 million at August 31, 2019. During the fiscal years ended August 31, 2020 and 2019, we recognized $86.5 million and $74.7 million of previously deferred subscription revenue.

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Remaining Performance Obligations

When possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period. Topic 606 introduced the concept of remaining transaction price which represents contracted revenue that has not yet been recognized, including unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as seasonality, the average length of the contract term, and the ability of the Company to continue to enter multi-year non-cancellable contracts. At August 31, 2020 we had $100.2 million of remaining performance obligations, including $60.6 million of deferred revenue related to our subscription offerings. The remaining performance obligation does not include other deferred revenue as amounts included in other deferred revenue include items such as deposits that are generally refundable at the client’s request prior to the satisfaction of the obligation.

Costs Capitalized to Obtain Contracts

We capitalize the incremental costs of obtaining non-cancellable subscription revenue, primarily from the All Access Pass and the Leader in Me membership offerings. These incremental costs consist of sales commissions paid to our sales force and include the associated payroll taxes and fringe benefits. As the same commission rates are paid annually when the customer renews their contract, the capitalized commission costs are generally amortized ratably on an annual basis consistent with the recognition of the corresponding subscription revenue. At August 31, 2020, we have capitalized $9.7 million of direct commissions, of which $8.9 million is included in other current assets and $0.8 million is in other long-term assets based on the expected recognition of the commission expense. At August 31, 2019, we had $9.0 million of capitalized direct sales commissions with $8.3 million included in other current assets and $0.7 million included in other long-term liabilities. During the fiscal year ended August 31, 2020, we capitalized $13.7 million of commission costs to obtain revenue contracts and amortized $13.0 million of deferred commissions to selling, general, and administrative expense.

During fiscal 2020, we recorded $3.2 million of consideration paid for an amendment to the license agreement with FC Organizational Products (Note 17) as a capitalized cost of the license and will reduce our royalty revenue from this license agreement by amortizing this amount over the remainder of the initial term of the license agreement, which ends in approximately 30 years.

Refer to Note 16 (Segment Information) to these consolidated financial statements for our disaggregated revenue information.

2.3.	BUSINESS ACQUISITIONS

~~Robert Gregory Partners, LLC~~

On ~~May 15, 2017,~~December 5, 2018, we ~~acquired~~purchased all of the ~~assets~~equity of ~~Robert Gregory Partners, LLC (RGP),~~Leadership Institut GmbH, a ~~Dublin, Ohio~~Munich, Germany based ~~corporate coaching firm, for $3.5~~company with wholly owned subsidiary companies in Switzerland and Austria. Leadership Institut GmbH previously operated as an independent licensee that provided our training and products to Germany, Switzerland, and Austria (GSA). We transitioned the GSA licensee operation into a directly owned office operation during fiscal 2019. The purchase price was $0.2 million in cash, plus ~~potential~~$0.8 million in forgiveness of liabilities owed to the Company from the pre-existing relationship at the purchase date. There is no contingent or other additional consideration ~~totaling $4.5 million. Robert Gregory Partners is a corporate coaching firm~~associated with expertise in executive coaching, transition acceleration coaching, leadership development coaching, implementation coaching, and consulting. We anticipate that RGP services and methodologies will become key offerings in our training and consulting business. The financial results of RGP have been included in our consolidated financial statements since the ~~date~~purchase of the ~~acquisition.~~

former GSA licensee. We accounted for the acquisition of Leadership Institut Gmbh as a business combination in the second quarter of fiscal 2019. We incurred costs for severance, legal, and other related acquisition expenses which totaled $0.5 million and were expensed in selling, general, and administrative expense during fiscal 2019. The acquisition of the GSA licensee provides us the opportunity to operate a directly owned office in one of the world’s largest economic markets and is expected to provide significant future growth opportunities. The total purchase price consisted of the following (in thousands):

Cash paid to RGP at closing $ 3,500
Fair value of contingent consideration 1,413
Total purchase price $ 4,913

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Cash paid at closing	$	159
Accounts receivable from GSA licensee		798
Total purchase price	$	957

The major classes of assets and liabilities to which we have allocated the ~~preliminary~~ purchase price were as follows (in thousands):


Cash acquired				$	127
Accounts receivable	$	458			564
Prepaid expenses		136
Inventories					80
Prepaid expenses and other current assets					45
Intangible assets		3,811			741
Goodwill		1,232
Property and equipment					27
Other long-term assets					11
Assets acquired		5,637			1,595

Accounts payable		(51	)		(208	)
Accrued expenses		(80	)
Deferred revenues		(593	)
Accrued liabilities					(383	)
Income taxes payable					(47	)
Liabilities assumed		(724	)		(638	)
	$	4,913		$	957

The goodwill generated from the RGP acquisition was allocated to each of our operating segments. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of RGP's coaching methodologies into our services and offerings. All of the goodwill from the RGP acquisition is expected to be deductible for income tax purposes.

The payment of contingent consideration is based on the achievement of specified financial results and the delivery of "add-on coaching services" content that will be included in our All Access Pass offering. During the quarter ended August 31, 2017, we paid the former owners of RGP $0.5 million of the contingent consideration for delivery of the content that has been integrated into our AAP offering. Due to the timing of the $0.5 million payment for add-on coaching services, this amount was included in the investing activities section of the accompanying consolidated statement of cash flows for fiscal 2017. Refer to Note 10 for further information regarding the fair value of the contingent consideration liability resulting from the RGP acquisition.

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~~Following are the details~~allocation of the purchase price ~~allocated~~ to the intangible assets acquired ~~(in thousands):~~

Weighted Average
Description Amount Life
Customer list $ 2,249 10 years
Content 461 5 years
Trade name 341 5 years
Non-compete agreements 328 2 years
Deferred contract revenue 237 2 years
Coach relationships 150 10 years
Acquired technology 45 3 years
$ 3,811 8 years

Our consolidated financial statements include $1.2 million of revenue and $0.4 million of income from operations, excluding amortization of intangible assets, attributable to RGP since the date of the acquisition. For the twelve months ended December 31, 2016, RGP had revenues of $3.3 million (unaudited) and operating income of $1.1 million (unaudited). The costs to acquire RGP totaled approximately $0.1 million and were expensed as components of selling, general, and administrative expense in our consolidated financial statements.

~~Jhana Education~~

On July 11, 2017, we acquired all of the outstanding stock of Jhana Education (Jhana), a San Francisco based company that specializes in the creation and dissemination of relevant, bite-sized content and learning tools for leaders and managers. We anticipate that the Jhana content and delivery methodologies acquired will become key features of our AAP offering. The purchase price was $3.5 million in cash plus up to $7.2 million of contingent consideration. The financial results of Jhana have been included in our consolidated financial statements since the date of the acquisition.

~~The total purchase price consisted of the following (in thousands):~~

Cash paid to Jhana at closing $ 3,525
Fair value of contingent consideration 6,052
Total purchase price $ 9,577

~~The major classes of assets and liabilities to which we have allocated the preliminary purchase price were~~ as follows (in thousands):

Cash $ 253
Accounts receivable 195
Prepaid expenses and other current assets 86
Deferred tax asset 3,138
Intangible assets 6,076
Goodwill 3,085
Assets acquired 12,833

Accounts payable (185 )
Accrued expenses (19 )
Deferred tax liability (2,257 )
Deferred revenues (795 )
Liabilities assumed (3,256 )
$ 9,577


Description	Amount		Weighted Average Life
Reacquisition of license rights	$	360	3 years
Localized content		202	3 years
Customer relationships		179	3 years
	$	741

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~~Following are~~We have included the ~~details~~financial results of the ~~purchase price allocated to~~former GSA licensee in our financial results since the ~~intangible assets acquired (in thousands):~~

Weighted Average
Description Amount Life
Content $ 3,097 5 years
Acquired technology 1,474 3 years
Customer list 1,016 5 years
Trade name 445 5 years
Non-compete agreements 44 3 years
$ 6,076 5 years

date of acquisition. The ~~goodwill from the Jhana~~ acquisition was assigned to the Direct Offices, Strategic Markets, and International Licensee segments. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of Jhana's content and delivery methodologies into our services and offerings, especially in the All Access Pass. None of the ~~goodwill from the Jhana acquisition is expected~~former GSA licensee was immaterial to ~~be deductible~~our financial statements and pro forma financial information was not deemed necessary for ~~income tax purposes.~~

The first two contingent payments of $1.0 million each are expected to be paid during the first and second quarters of fiscal 2018 based on the specified measures in the acquisition agreement. The payment of the remaining $5.2 million of contingent consideration is based on Company revenues and AAP revenues over the measurement period, which ends in July 2026. Refer to Note 10 for further information regarding the fair value of contingent consideration resulting from the Jhanathis acquisition.

The acquisition of Jhana had an immaterial impact on our consolidated financial statements for the fiscal year ended August 31, 2017. For the year ending December 31, 2016, Jhana had revenues of $1.6 million (unaudited) and a loss before income taxes of $3.1 million (unaudited). The costs to acquire Jhana totaled approximately $0.1 million and were expensed as incurred. The acquisition costs were included in our selling, general, and administrative expenses.

~~Unaudited Pro Forma Information~~

The following are supplemental consolidated financial results of Franklin Covey Co. on an unaudited pro forma basis as if the acquisitions of RGP and Jhana had been completed on September 1, 2015 (in thousands, except per share amounts):

YEAR ENDED
AUGUST 31, 2017 2016
Revenue $ 187,745 $ 204,505
Net income (loss) (7,976 ) 4,863
Diluted earnings (loss) per share (0.58 ) 0.32

These pro forma results were based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had we been a combined company during the periods presented, and are not necessarily indicative of our consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting, primarily the amortization of intangible assets, interest expense, and inclusion of acquisition costs.

3.4.	ACCOUNTS RECEIVABLE

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents our best estimate of the amount of probable credit losses in the existing accounts receivable balance, and we review the adequacy of the allowance for doubtful accounts on a

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regular basis. We determine the allowance for doubtful accounts using historical write-off experience based on the age of the receivable balances, ~~and~~ current general economic conditions, ~~in general.~~and other specific factors which may delay collection, such as the COVID-19 pandemic. Receivable balances past due over 90 days, which exceed a specified dollar amount, are reviewed individually for collectability. As we increase sales to governmental organizations, including school districts, and offer longer payment terms on certain contracts (which are still within our normal payment terms), our collection cycle may increase in future periods. If the risk of non-collection increases for ~~such~~our receivable balances, there may be additional charges to expense to increase the allowance for doubtful accounts.

We classify receivable amounts as current or long-term based on expected payment and record long-term accounts receivable at their net present value. During the fourth quarter of fiscal 2015, we became aware of financial difficulties at a contracting partner from whom we receive payment for services rendered on a large federal government contract. Subsequent to August 31, 2015 we received a $1.8 million payment from this entity and entered into discussions to convert the remaining receivable, which totaled $2.9 million, into a note receivable. Based on expected payment terms as of August 31, 2015, we reclassified this amount to other current assets and other long-term assets on our consolidated balance sheets based on expected principal payments. During fiscal 2017, the note receivable terms were extended an additional two years. This note receivable continues to bear interest at 5.0 percent per year.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers nor do we generally require collateral or other security agreements from our customers.

Activity in our allowance for doubtful accounts was comprised of the following for the periods indicated (in thousands):

YEAR ENDED
AUGUST 31, 2017 2016 2015
Beginning balance $ 1,579 $ 1,333 $ 918
Charged to costs and expenses 1,747 2,022 699
Deductions (1,016 ) (1,776 ) (284 )
Ending balance $ 2,310 $ 1,579 $ 1,333

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YEAR ENDED
AUGUST 31,	2020			2019			2018
Beginning balance	$	4,242		$	3,555		$	2,310
Charged to costs and expenses		2,023			1,212			2,029
Deductions		(2,106	)		(525	)		(784	)
Ending balance	$	4,159		$	4,242		$	3,555

Deductions on the foregoing table represent the write-off of amounts deemed uncollectible during the fiscal year presented. Recoveries of amounts previously written off were insignificant for the periods presented.

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4.5.	INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Our intangible assets were comprised of the following (in thousands):


	Gross Carrying			Accumulated			Net Carrying		Gross Carrying		Accumulated			Net Carrying
AUGUST 31, 2017	Amount			Amortization			Amount
Definite-lived intangible assets:
AUGUST 31, 2020									Amount		Amortization			Amount
Finite-lived intangible assets:
Acquired content									$	62,327	$	(50,749	)	$	11,578
License rights	$	27,750		$	(17,802	)	$	9,948		32,137		(21,321	)		10,816
Acquired content		62,094			(43,864	)		18,230
Customer lists		20,092			(16,935	)		3,157		20,280		(18,926	)		1,354
Acquired technology		3,568			(2,136	)		1,432		3,568		(3,568	)		-
Trade names		2,036			(1,163	)		873		2,036		(1,759	)		277
Non-compete agreements and other		758			(104	)		654		759		(659	)		100
		116,298			(82,004	)		34,294		121,107		(96,982	)		24,125
Indefinite-lived intangible asset:
Covey trade name		23,000			-			23,000		23,000		-			23,000
	$	139,298		$	(82,004	)	$	57,294	$	144,107	$	(96,982	)	$	47,125

AUGUST 31, 2016
Definite-lived intangible assets:
AUGUST 31, 2019
Finite-lived intangible assets:
Acquired content									$	62,307	$	(48,449	)	$	13,858
License rights	$	27,000		$	(16,790	)	$	10,210		28,099		(20,063	)		8,036
Acquired content		58,564			(42,175	)		16,389
Customer lists		16,827			(16,529	)		298		20,266		(18,450	)		1,816
Acquired technology		2,049			(2,049	)		-		3,568		(3,149	)		419
Trade names		1,250	��		(951	)		299		2,036		(1,602	)		434
Non-compete agreements and other										758		(631	)		127
		105,690			(78,494	)		27,196		117,034		(92,344	)		24,690
Indefinite-lived intangible asset:
Covey trade name		23,000			-			23,000		23,000		-			23,000
	$	128,690		$	(78,494	)	$	50,196	$	140,034	$	(92,344	)	$	47,690

Our intangible assets are amortized over the estimated useful life of the asset. The range of remaining estimated useful lives and weighted-average amortization period over which we are amortizing the major categories of ~~definite-lived~~finite-lived intangible assets at August 31, ~~2017~~2020 were as follows:

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Category of Intangible Asset		Range of Remaining Estimated Useful Lives		Weighted Average Original Amortization Period

~~License rights~~ Acquired content	5	1 to 97 years	30	25 years
~~Acquired content~~ License rights		2 to 9 years	25	26 years
Customer lists		1 to 106 years		12 years
Acquired technology	~~3 years~~	None		3 years
Trade names		1 to 53 years		5 years
Non-compete agreements and other		1 to 107 years		4 years

Our aggregate amortization expense from ~~definite-lived~~finite-lived intangible assets totaled ~~$3.5~~$4.6 million, ~~$3.3~~$5.0 million, and ~~$3.7~~$5.4 million for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018. Amortization expense from our intangible assets over the next five years is expected to be as follows (in thousands):


YEAR ENDING
AUGUST 31,
2018	$	5,368
2019		4,790
2020		4,324
2021		3,809	$	4,492
2022		3,498		4,025
2023				3,054
2024				3,054
2025				3,053

Multipliers License Rights

~~Table~~We obtained an exclusive license (with certain exceptions) to develop and sell leadership offerings based on the bestselling book Multipliers, by Liz Wiseman. We launched the new Multipliers-based offerings in August 2020, which started minimum required royalty payments of ~~Contents~~

$0.6 million per year through the expiration of the initial term of the license on August 31, 2029. The initial term of the Multipliers license may be extended over an additional five years, subject to the provisions of the license agreement. In August 2020, we recorded an increase to our intangible assets of $4.0 million, which is the present value of the minimum required royalty payments discounted at 5.0 percent. We will amortize the Multipliers license rights on a straight-line basis over the initial license period, which ends on August 31, 2029.

Goodwill

~~Activity in~~There were no changes to our consolidated goodwill ~~was as follows~~balance during fiscal ~~2017~~2020 and ~~2016 (in thousands):~~

Balance at August 31, 2015 $ 19,903
Accumulated impairments -
Balance at August 31, 2016 19,903
Acquisition of RGP (Note 2) 1,232
Acquisition of Jhanna (Note 2) 3,085
Accumulated impairments -
Balance at August 31, 2017 $ 24,220

Wewe do not have any accumulated impairment charges against the carrying value of our goodwill. At August 31, 2020 and 2019, goodwill was allocated ~~the goodwill generated from our fiscal 2017 business acquisitions~~ to our ~~operating~~ segments ~~based on their relative fair values~~ as shown below (in thousands):


Direct offices							$	16,825
International licensees								5,065
Education practice								2,330
			Allocated				$	24,220
AUGUST 31,	2016		Goodwill		2017
Direct offices	$	10,790	$	2,592	$	13,382
Strategic markets		2,930		513		3,443
Education practice		2,176		154		2,330
International licensees		4,007		1,058		5,065
	$	19,903	$	4,317	$	24,220

5.6.	TERM LOANS PAYABLE AND REVOLVING LINE OF CREDIT

~~During fiscal 2011,~~On August 7, 2019, we entered into ~~an amended and restated secured~~a new credit agreement (the ~~Restated~~2019 Credit Agreement) with our existing ~~lender.~~lender, which replaced the amended and restated credit agreement dated March 2011 (the Original Credit Agreement). The ~~Restated~~2019 Credit Agreement provides ~~us with~~up to $25.0 million in term loans and a $15.0 million revolving line of ~~credit facility and~~credit. Upon entering into the ~~ability to borrow on other instruments, such as term loans. We generally renew the Restated~~2019 Credit Agreement, ~~on a regular basis~~we borrowed $20.0 million of the available term loan and used the proceeds to ~~maintain~~repay all indebtedness under the ~~long-term availability of this credit facility.~~Original Credit Agreement.

~~On May 24, 2016,~~

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During November 2019, we borrowed the remaining $5.0 million of available term loan capacity on the 2019 Credit Agreement.

The 2019 Credit Agreement is secured by substantially all of the assets of the Company and certain of our subsidiaries, and contains customary representations, warranties, and covenants. We incurred approximately $0.1 million of legal fees to obtain the 2019 Credit Agreement.

First Modification Agreement

To address potential covenant compliance issues associated with the uncertainties surrounding the economic recovery from the COVID-19 pandemic, on July 8, 2020, we entered into the ~~Fifth~~First Modification Agreement to the ~~Restated~~2019 Credit Agreement. The primary ~~purposes~~purpose of the ~~Fifth~~First Modification Agreement ~~were~~is to ~~(i) obtain a term loan~~provide temporary alternative borrowing covenants for ~~$15.0 million; (ii) increase~~ the ~~maximum principal amount~~fiscal quarters ending August 31, 2020 through May 31, 2021. These new covenants consist of the revolving line of credit from $30.0 million to $40.0 million; (iii) extend the maturity date of the Restated Credit Agreement from March 31, 2018 to March 31, 2019; (iv) permit the Company to convert balances outstanding from time to time under the revolving line of credit to term loans; and (v) adjust the fixed charge coverage ratio from 1.40 to 1.15.following:

~~During fiscal 2017, we entered into~~

1.	Minimum Liquidity – We must maintain consolidated minimum liquidity of not less than $13.0 million from August 31, 2020 through February 28, 2021 and $8.0 million at May 31, 2021.

2.	Minimum Adjusted EBITDA – We must maintain rolling four-quarter adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) not less than the amount set forth below at the end of the specified quarter (in thousands).


Quarter Ending	Amount
August 31, 2020	$	11,000
November 30, 2020		8,500
February 28, 2021		5,000
May 31, 2021		15,000

Adjusted EBITDA for purposes of this calculation may not be the ~~Sixth, Seventh, and Eighth Modification Agreements to~~same as reported by the ~~Restated Credit Agreement.~~Company in our earnings releases. The ~~Sixth Modification and Eighth Modification agreements adjusted the definition of EBITDAR~~amounts in the ~~funded debt to EBITDAR and fixed charge coverage ratios applicable to our debt covenants to include the change~~table above exclude amortization of capitalized development costs which is classified in ~~deferred revenue. The Seventh Modification Agreement extended the maturity date~~cost of ~~the Restated Credit Agreement to March 31, 2020.~~sales.

3.	Capital Expenditures – We may not make capital expenditures, including capitalized development costs, in an amount exceeding $8.5 million in aggregate for any fiscal year.

In ~~connection with these Modification Agreements obtained during fiscal 2017~~addition to the new financial covenants described above, we are prohibited from making certain restricted payments, including dividend payments on our common stock and ~~2016,~~open-market purchases of our common stock until we have ~~entered into a security agreement, repayment guaranty agreements, and a pledge and security agreement. These agreements pledge substantially all of our assets located~~been in ~~the United States to the lender as collateral for borrowings under the Restated Credit Agreement and subsequent amendments.~~

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~~The effective interest rate on our term loans and revolving line of credit was 3.1 percent at August 31, 2017 and 2.3 percent at August 31, 2016.~~

~~Term Loans Payable~~

~~In connection~~compliance with the Fifth Modification Agreement, we obtained a $15.0 million term loan and have the ability to obtain additional term loans in increments of $5.0 million up to a maximum of $40.0 million. Each additional term loan reduces the amountpreviously existing financial covenants for two consecutive quarters. The available ~~to borrow~~credit on the revolving line of credit ~~facility on a dollar-for-dollar basis. We obtained a $5.0 million term loan during each of September 2016 and August 2017.~~ remains the same as under the 2019 Credit Agreement.

Interest on all borrowings under the ~~term loans~~2019 Credit Agreement is ~~payable monthly at LIBOR plus 1.85 percent per annum and each term loan matures in three years. Interest is payable monthly and principal payments are~~ due and payable on the first day of each ~~January, April, July, and October. Principal payments are equal~~month. Our interest rate under the First Modification Agreement increased to LIBOR plus 3.0 percent from LIBOR plus 1.85 percent under the original ~~amount of each~~2019 Credit Agreement. Our unused credit commitment fee under the First Modification Agreement increased from 0.2 percent to 0.5 percent. The effective interest rate on our term loan divided by 16 and any remaining principal at the maturity date is immediately payable or may be rolled into a new term loan. The proceeds from each term loan may be used for general corporate purposes and each term loan may be repaid sooner than the maturity date at our discretion. The following information applies to our term loans payableobligations was 3.5 percent at August 31, ~~2017 (in thousands):~~2020 and 4.1 percent at August 31, 2019.

Original Principal Quarterly Principal Outstanding
Maturity Date Amount Payment Amount Principal
May 24, 2019 $ 15,000 $ 938 $ 10,313
August 29, 2019 5,000 313 3,750
August 29, 2020 5,000 313 5,000
$ 19,063

~~Principal payments by fiscal year through the maturity dates of the term loans are as follows (in thousands):~~

YEAR ENDING
AUGUST 31,
2018 $ 6,250
2019 10,313
2020 2,500
$ 19,063

~~Revolving Line of Credit~~

~~The key terms and conditions of our revolving line of credit are as follows:~~

·	~~Available Credit~~ – The maximum available credit was $40.0 million. The amount of available credit has been reduced to $30.0 million as of August 31, 2017 by the $5.0 million term loans (as discussed above) obtained during fiscal 2017.

·	~~Maturity Date~~ – ~~The maturity date of the Revolving Line of Credit is March 31, 2020.~~

·	~~Interest Rate~~ – ~~The effective interest rate continues to be LIBOR plus 1.85 percent per annum and the unused credit fee on the line of credit remains 0.25 percent per annum.~~

~~Financial Covenants~~ – The Restated Credit Agreement requires us to be in compliance with specified financial covenants, including (a) a funded debt to EBITDAR (earnings before interest, taxes, depreciation, amortization, and rental expense) ratio of less than 3.00 to 1.00; (b) a fixed charge coverage ratio greater than 1.15 to 1.0; (c) an annual limit on capital expenditures (not including capitalized curriculum development) of $8.0 million; and (d) outstanding borrowings on the Revolving Line of Credit may not exceed 150 percent of consolidated accounts receivable.

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In the event of noncompliance with these financial covenants and other defined events of default, the lender is entitled to certain remedies, including acceleration of the repayment of any amounts outstanding on the ~~Restated~~2019 Credit Agreement. At August 31, ~~2017,~~2020, we believe that we were in compliance with the terms and covenants applicable to the ~~Eighth~~2019 Credit Agreement and the First Modification Agreement. ~~We had $4.4~~

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The previously existing financial covenants, which include (i) a Funded Indebtedness to Adjusted EBITDAR Ratio of less than 3.00 to 1.00; (ii) a Fixed Charge Coverage ratio not less than 1.15 to 1.00; (iii) an annual limit on capital expenditures (excluding capitalized curriculum development costs) of $8.0 million; and (iv) consolidated accounts receivable of not less than 150% of the aggregate amount of the outstanding borrowings on the revolving line of credit, the undrawn amount of outstanding letters of credit, and the amount of unreimbursed letter of credit disbursements remain in effect except for the quarterly periods covered by the First Modification Agreement.

Term Loans Payable

As previously described, we have borrowed the available $25.0 million ~~outstanding~~of term loans on the 2019 Credit Agreement. Principal payments of $1.25 million are due and payable on the first day of each January, April, July, and October until the term loans obligation is repaid in 2024. At August 31, 2020, the principal payments due on our term loans are as follows (in thousands):


YEAR ENDING
AUGUST 31,
2021	$	5,000
2022		5,000
2023		5,000
2024		5,000
	$	20,000

Revolving Line of Credit

The key terms and conditions of our revolving line of credit associated with the 2019 Credit Agreement are as follows:

Available Credit – $15.0 million less outstanding standby letters of credit, which totaled $10,000 at August 31, ~~2017,~~2020.

Maturity Date – August 7, 2024.

Interest Rate – The effective interest rate is LIBOR plus 3.0 percent per annum and ~~had no~~the unused commitment fee on the line of credit is 0.5 percent per annum. The interest rate and commitment fee were modified by the First Modification Agreement as described above.

We did not have any borrowings ~~outstanding~~ on the revolving line of credit at either August 31, ~~2016.~~2020 or 2019.

6.7.	FINANCING OBLIGATION

~~In connection with the sale and leaseback of~~We previously sold our corporate headquarters ~~facility~~campus located in Salt Lake City, Utah, weand entered into a 20-year master lease agreement with the purchaser, an unrelated private investment group. The 20-year master lease agreement ~~also~~ contains six additional five-year renewal options that ~~will~~ allow us to maintain our operations at the current location for up to 50 years. Although the corporate headquarters facility was sold and ~~the Company has~~we have no legal ownership of the property, ~~under~~the applicable accounting guidance ~~we were~~ prohibited us from recording the transaction as a sale since we ~~have~~ subleased a significant portion of the property that was sold. ~~Accordingly,~~In transition to the new lease accounting guidance in ASC 842, we reassessed whether the contract met the sale criteria under the new leasing standard. Based on this assessment, we determined that the sale criteria under the new leasing standard was not met and we will continue to account for the ~~sale~~corporate campus lease as a financing ~~transaction, which requires us to continue reporting the corporate headquarters facility as an asset and to record a financing~~ obligation ~~for the sale price.~~on our consolidated balance sheet in future periods.

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The financing obligation on our corporate campus was comprised of the following (in thousands):


AUGUST 31,	2017			2016			2020			2019
Financing obligation payable in
monthly installments of $297 at
August 31, 2017, including
monthly installments of $315 at
August 31, 2020, including
principal and interest, with two
percent annual increases
(imputed interest at 7.7%),
through June 2025	$	22,943		$	24,605		$	16,648		$	18,983
Less current portion		(1,868	)		(1,662	)		(2,600	)		(2,335	)
Total financing obligation,
less current portion	$	21,075		$	22,943		$	14,048		$	16,648

Future principal maturities of our financing obligation were as follows at August 31, ~~2017~~2020 (in thousands):


YEAR ENDING
AUGUST 31,
2018	$	1,868
2019		2,092
2020		2,335
2021		2,600	$	2,600
2022		2,887		2,887
2023				3,199
2024				3,538
2025				4,424
Thereafter		11,161		-
	$	22,943	$	16,648

Our remaining future minimum payments under the financing obligation in the initial 20-year lease term are as follows (in thousands):

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YEAR ENDING
AUGUST 31,
2018	$	3,579
2019		3,651
2020		3,724
2021		3,798		$	3,798
2022		3,874			3,874
2023					3,952
2024					4,031
2025					3,301
Thereafter		11,283			-
Total future minimum financing
obligation payments		29,909			18,956
Less interest		(8,278	)		(3,620	)
Present value of future minimum
financing obligation payments	$	21,631		$	15,336

The $1.3 million difference between the carrying value of the financing obligation and the present value of the future minimum financing obligation payments represents the carrying value of the land sold in the financing transaction, which is not depreciated. At the conclusion of the master lease agreement, the remaining financing obligation and carrying value of the land will be offset and written off of our consolidated financial statements.

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7.8.	~~OPERATING~~ LEASES

~~Lease Expense~~Lessee Obligations

In the normal course of business, we ~~lease office space and warehouse and distribution facilities under non-cancelable operating lease agreements. We~~ rent office space, primarily for international ~~and domestic regional~~ sales administration offices, in commercial office complexes that are conducive to sales and administrative operations. We also rent warehousing and distribution facilities that are designed to provide secure storage and efficient distribution of our training products, books, and ~~accessories. These~~accessories, and certain office equipment such as copiers. All of these leases are classified as operating leases. Operating lease ~~agreements often~~assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. Since most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For operating leases, expense is recognized on a straight-line basis over the lease term. We do not have significant amounts of variable lease payments.

Some of our operating leases contain renewal options that may be exercised at our discretion after the completion of the base rental term. ~~In addition, many of the rental agreements provide for regular increases to the base rental rate at specified intervals, which usually occur on an annual basis.~~ At August 31, ~~2017,~~2020, we had operating leases with remaining terms ranging from less than one year to approximately ~~eight~~five years. The ~~following table summarizes~~amounts of assets and liabilities (in thousands) and other information related to our ~~future~~operating leases follows:


	Balance Sheet Caption	Amount
Assets:
Operating lease right of use assets	Other long-term assets	$	1,203

Liabilities:
Current:
Operating lease liabilities	Accrued liabilities		695
Long-Term:
Operating lease liabilities	Other long-term liabilities		508
		$	1,203

Weighted Average Remaining Lease Term:
Operating leases (years)			2.7

Weighted Average Discount Rate:
Operating leases			4.2	%

In fiscal 2020, we obtained $1.5 million of right-of-use operating lease assets in exchange for operating lease liabilities. Future minimum lease payments under our operating ~~lease agreements~~leases at August 31, ~~2017~~2020, are as follows (in thousands):


YEAR ENDING
AUGUST 31,
2018	$	866
2019		321
2020		84
2021		84	$	751
2022		84		208
2023				121
2024				97
2025				87
Thereafter		268		14
	$	1,707
Total operating lease payments				1,278
Less imputed interest				(75	)
Present value of operating lease liabilities			$	1,203

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We recognize lease expense on a straight-line basis over the life of the lease agreement. ~~Contingent rent expense is recognized as it is incurred and was insignificant for the periods presented.~~ Total rent expense recorded in selling, general, and administrative expense from ~~operating~~our lease agreements ~~was $1.8~~totaled $1.5 million, ~~$2.2~~$1.5 million, and ~~$2.3~~$1.6 million for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018.

~~Lease Income~~As previously disclosed in our fiscal 2019 Form 10-K under the prior guidance of ASC 840, minimum payments under operating lease agreements as of August 31, 2019 were as follows (in thousands):


YEAR ENDING
AUGUST 31,
2020	$	752
2021		472
2022		112
2023		97
2024		79
Thereafter		92
	$	1,604

Lessor Accounting

We have subleased the majority of our corporate headquarters campus located in Salt Lake City, Utah to multiple ~~unrelated tenants~~tenants. These sublease agreements are accounted for as ~~well as to FC Organizational Products (FCOP, refer to Note 18).~~operating leases. We recognize sublease income on a straight-line basis over the life of the sublease agreement. The cost basis of our corporate campus was ~~$34.1~~$36.0 million, which had a carrying value of ~~$7.9~~$5.9 million at August 31, ~~2017.~~2020. The following future minimum lease payments due to us from our sublease agreements at August 31, ~~2017 include lease income of approximately $0.7 million per year from FCOP. The majority of contracted lease income after fiscal 2021 is from FCOP~~2020, are as follows (in thousands):

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YEAR ENDING
AUGUST 31,
2018	$	3,648
2019		3,359
2020		3,448
2021		1,814	$	3,965
2022		638		3,720
2023				2,085
2024				1,551
2025				1,292
Thereafter		1,767		-
	$	14,674	$	12,613

Sublease revenue totaled ~~$3.6~~$3.9 million, ~~$4.4~~$3.9 million, and ~~$4.4~~$3.5 million during the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018.

8.9.	COMMITMENTS AND CONTINGENCIES

~~Information Systems and~~ Warehouse Outsourcing Contract

~~Prior to July 2016, we had an outsourcing contract with HP Enterprise Services to provide information technology system support and product warehousing and distribution services.~~ Effective July 1, 2016, we entered into a ~~new~~ warehousing services agreement with an independent warehouse and distribution company to provide product kitting, warehousing, and order fulfillment services at a facility in Des Moines, Iowa. Under the terms of ~~the new~~this contract, we ~~pay~~paid a fixed charge of ~~$18,000~~approximately $19,000 per month for account management services and variable charges for other warehousing services based on specified activities, including shipping charges. The warehouse charges may be increased each year of the contract based upon changes in the Employment Cost Index. The ~~new~~original warehousing and distribution contract ~~expires~~expired on June 30, ~~2019.~~2019, and we extended the contract with essentially the same terms until June 30, 2020. We are currently negotiating a new warehouse services agreement with the same facility in Des Moines and expect that contract to be completed in fiscal 2021. Until a new agreement is reached, we are accounting for these services on a month-to-month basis.

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During fiscal years ~~2017, 2016,~~2020, 2019, and ~~2015,~~2018, we expensed ~~$2.6~~$2.1 million, ~~$3.8~~$3.1 million, and ~~$4.9~~$2.9 million for services provided under the terms of our warehouse and distribution outsourcing contract. The total amount expensed each year ~~under these contracts include~~includes freight charges, which are billed to ~~the Company~~us based upon activity. Freight charges included in the warehouse and distribution outsourcing costs totaled ~~$1.5~~$1.3 million, ~~$1.8~~$2.1 million, and $1.9 million during the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018. Because of the variable component of the agreement, our payments for warehouse and distribution services may fluctuate in the future ~~periods based upon~~due to changes in sales and levels of specified activities.

Purchase Commitments

During the normal course of business, we issue purchase orders to various vendors for products and services. At August 31, ~~2017,~~2020, we had open purchase commitments totaling ~~$6.6~~$4.8 million for products and services to be delivered primarily in fiscal 2018. The increase over prior years is primarily due to commitments for enterprise risk planning software and AAP portal development activities. Other purchase commitments for materials, supplies, and other items incidental to the ordinary conduct of business were immaterial, both individually and in aggregate, to the Company's operations at August 31, 2017.2021.

Letters of Credit

At August 31, ~~2017~~2020 and ~~2016,~~2019, we had standby letters of credit totaling $10,000 and $0.1 million. These letters of credit were ~~primarily~~ required to secure commitments for certain insurance ~~policies and expire in January 2018.~~policies. No amounts were drawn on the letters of credit at either August 31, ~~2017~~2020 or August 31, ~~2016.~~

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2019.

Legal Matters and Loss Contingencies

We are the subject of certain legal actions, which we consider routine to our business activities. At August 31, ~~2017,~~2020, we believe that, after consultation with legal counsel, any potential liability to us under these other actions will not materially affect our financial position, liquidity, or results of operations.

9.10.

~~SHAREHOLDERS'~~SHAREHOLDERS’ EQUITY

Preferred Stock

We have 14.0 million shares of preferred stock authorized for issuance. At August 31, ~~2017~~2020 and ~~2016,~~2019, no shares of preferred stock were issued or outstanding.

Treasury Stock

~~Open Market Purchases~~

On ~~January 23, 2015,~~November 15, 2019, our Board of Directors approved a new plan to repurchase up to ~~$10.0~~$40.0 million of ~~the Company's~~our outstanding common stock. ~~All~~The previously existing common stock repurchase ~~plans were~~plan was canceled and the new common share repurchase plan does not have an expiration date. ~~On March 27, 2015, our Board of Directors increased the aggregate value of shares of Company common stock that may be~~During fiscal 2020, we purchased under the January 2015 plan to $40.0 million so long as we have either $10.0 million in cash and cash equivalents or have access to debt financing of at least $10.0 million. Through August 31, 2017, we have purchased 1,539,8285,000 shares of our common stock for ~~$26.8~~$0.2 million under the terms of this ~~expanded common stock repurchase~~Board approved plan. The actual timing, number, and value of common shares repurchased under this plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of our common shares, and applicable legal requirements. ~~The Company has~~We have no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued, or modified at any time for any reason.

The cost of common stock purchased for treasury as shown on our consolidated statement of cash flows for the year ending August 31, ~~2017 includes the cost~~2020 is comprised of ~~51,156~~284,608 shares ~~that were~~purchased from Knowledge Capital Investment Group (Note 17), 109,896 shares withheld for ~~minimum~~ statutory income taxes on various stock-based compensation ~~awards issued to participants during~~plans, and 5,000 shares purchased under the terms of our fiscal ~~2017.~~2020 Board-approved purchase plan described above. The shares withheld ~~shares~~for income taxes were valued at the market price on the date the stock-based plan shares were distributed to participants, which totaled ~~$0.9~~$3.7 million. For the fiscal years ended August 31, ~~2016~~2019 and ~~2015,~~2018, we withheld ~~2,260~~561 shares and ~~17,935~~104,699 shares for ~~minimum~~ statutory taxes on stock-based compensation awards, which had a total market value of ~~$38,000~~approximately $12,000 and ~~$0.3~~$2.0 million, respectively.

~~Fiscal 2016 Tender Offer~~

On December 8, 2015, we announced that our Board of Directors approved a modified Dutch auction tender offer for up to $35.0 million in value of shares of our common stock at a price within (and including) the range of $15.50 to $17.75 per share. The tender offer commenced on December 14, 2015, and expired at 11:59 p.m. Eastern time, on January 12, 2016. The tender offer was fully subscribed and we acquired 1,971,832 shares of our common stock at $17.75 per share. Including fees to complete the tender offer, the total cost of the tendered shares was $35.3 million, which was financed by existing cash and proceeds from our revolving line of credit facility. For further information regarding the terms and conditions of this completed tender offer, refer to information in the Tender Offer Statement on Schedule TO filed with Securities and Exchange Commission on December 14, 2015 and subsequent amendments thereto.

7871

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~~10.~~11.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken down into the following three levels based on reliability:

·	~~Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date.~~

Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date.

·	Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following:

Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following:

a.	quoted prices for similar, but not identical, instruments in active markets;

b.	quoted prices for identical or similar instruments in markets that are not active;

c.	inputs other than quoted prices that are observable for the instrument; or

d.	inputs that are derived principally from or corroborated by observable market data by correlation or other means.

·	~~Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.~~

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.

The book ~~value~~values of our financial instruments at August 31, ~~2017~~2020 and ~~2016~~2019 approximated their fair values. The assessment of the fair values of our financial instruments is based on a variety of factors and assumptions. Accordingly, the fair values may not represent the actual values of the financial instruments that could have been realized at August 31, ~~2017~~2020 or ~~2016,~~2019, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement. The following methods and assumptions were used to determine the fair values of our financial instruments, none of which were held for trading or speculative ~~purposes:~~purposes.

Cash, Cash Equivalents, and Accounts Receivable – The carrying amounts of cash, cash equivalents, and accounts receivable approximate their fair values due to the liquidity and short-term maturity of these instruments.

Other Assets – Our other assets, including notes receivable, were recorded at the net realizable value of estimated future cash flows from these instruments.

Debt Obligations – At August 31, ~~2017,~~2020, our debt obligations consisted primarily of a variable-rate term ~~notes payable and borrowings on our variable-rate revolving line of credit. The~~note payable. Our term ~~notes~~note payable and revolving line of credit (Note 5)6) are negotiated components of our ~~Restated~~2019 Credit Agreement, which ~~is renewed on a regular basis to maintain the long-term borrowing capability of the agreement.~~was completed in August 2019 and modified in July 2020. Accordingly, the applicable interest rates on the term ~~loans~~loan and revolving line of credit are reflective of current market conditions, and the carrying value of term loan and revolving line of credit (when applicable) obligations therefore approximate their fair value.

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Contingent Consideration Liabilities from Business Acquisitions

We have contingent consideration liabilities ~~resulting~~arising from ~~our~~previous business acquisitions. We measure the fair values of ~~the~~our contingent consideration liabilities at each reporting date based on ~~various~~ valuation models as described below. Changes to the fair value of the contingent consideration liabilities are recorded as components of our selling, general, and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss in the period of adjustment. The fair value of the contingent consideration liabilities from the acquisition of Robert Gregory Partners (RGP) and Jhana Education (Jhana) changed as follows during the fiscal year ended August 31, 2020 (in thousands):


				Change in
AUGUST 31,	2019			Fair Value				Payments				2020
RGP contingent liability		$	1,761		$	(445	)		$	(500	)		$	816
Jhana contingent liability			3,468			396				(797	)			3,067
		$	5,229		$	(49	)		$	(1,297	)		$	3,883

79At each quarterly reporting date, we estimate the fair value of the contingent liabilities from both the RGP and Jhana acquisitions through the use of Monte Carlo simulations. Based on the timing of expected payments, all of the RGP and $0.8 million of the Jhana contingent consideration liabilities were recorded as components of accrued liabilities on our consolidated balance sheet at August 31, 2020. The remainder of our contingent consideration liabilities are classified as other long-term liabilities. The following additional information is for our recurring contingent consideration liabilities shown above.

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Robert Gregory Partners – ~~On May 15, 2017, we acquired the assets of RGP (Note 2).~~ The purchase price of RGP included contingent consideration payments to ~~the~~its former owners ~~of RGP~~ of up to $4.5 million, based on the achievement of specified levels of ~~earnings before interest, income taxes, depreciation, and amortization expense (EBITDA)~~EBITDA and the delivery of ~~"add-on~~“add-on coaching services ~~content"~~content” for our AAP as set forth in the purchase agreement. During fiscal 2019, we amended the RGP acquisition agreement to reflect events and implementation issues that have occurred since the acquisition date. The ~~specified levels of EBITDA include measures for RGP coaching services plus earnings from add-on coaching services sold through the AAP. The fair value of~~amended contract increased the contingent consideration onliability from the RGP acquisition ~~date was $1.4~~by $1.1 million ~~of which $0.5 was paid~~ during the ~~fourth~~third quarter ~~for~~of fiscal 2019, but did not increase the ~~successful delivery~~total amount of contingent consideration potentially payable to the ~~add-on coaching services content.~~former owners of RGP. The fair value of the RGP contingent liability is estimated using a Monte Carlo simulation method, which considers numerous potential financial outcomes using estimated variables such as expected revenues, growth rates, and a discount rate. This fair value measurementconsideration is considered a Level 3 measurement because we estimate qualifying revenues and ~~corresponding~~ expected growth rates at each ~~period.~~valuation date. The measurement period of the RGP contingent consideration ends on May 31, 2021 and the following range of growth rates were used to calculate the initial fair value of the contingent consideration:


	Likely			Minimum			Maximum
RGP growth rate - Year 1		14.8	%		(12.0	)%		35.0	%
RGP growth rate - Year 2		10.0	%		(12.0	)%		35.0	%
RGP growth rate - Year 3		10.0	%		(12.0	)%		35.0	%

Add-on services growth rate - Year 1		60.0	%		(20.0	)%		130.0	%
Add-on services growth rate - Year 2		50.0	%		(20.0	)%		130.0	%
Add-on services growth rate - Year 3		40.0	%		(20.0	)%		130.0	%

~~At August 31, 2017, the estimated fair value of the RGP contingent consideration was $0.9 million, which was recorded as a component of other long-term assets.~~

Jhana Education – On July 11, 2017, we acquired the stock of ~~Jhana Education (Note 2).~~Jhana. The purchase price included potential contingent consideration of $7.2 million through the measurement period, which ends in July 2026. The first two payments of $1.0 million each are payable during the first half of fiscal 2018, based on specified dates and objectives. The payment of the remaining $5.2 million is based on a percentage of consolidated Company and total AAP sales. The fair value of the Jhana contingent consideration ~~was calculated using a probability weighted expected return methodology, which~~ is a Level 3 measurement because we estimate projected consolidated Company and AAP sales over the measurement period. ~~Probabilities were applied to each potential sales outcome~~Changes in expected qualifying revenues over the measurement period influence the timing and ~~the resulting values were discounted using a rate that considered Jhana's weighted average cost~~amount of ~~capital and specific risk premiums associated with the potential~~these contingent consideration. At August 31, 2017, the fair value of the contingent consideration was $6.1 million, with $2.7 million recorded in accrued liabilities and the remaining $3.4 million recorded in other long-term liabilities.

~~Ninety Five 5, LLC~~ – ~~In fiscal 2013, we acquired Ninety Five 5, LLC (NinetyFive5). The purchase price included contingent consideration~~ payments to the former owners ~~up to a maximum~~ of $8.5 million, based on cumulative EBITDA as set forth in the purchase agreement. The contingent consideration measurement period ended on August 31, 2017. During the measurement period, we reassessed the fair value of the contingent consideration liability each period using the probability weighted expected return method. This fair value measurement is considered a Level 3 measurement because we estimated projected earnings during measurement period utilizing various potential pay-out scenarios. Probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considered Ninety Five 5's weighted average cost of capital as well as a specific risk premium associated with the riskiness of the contingent consideration itself, the related projections, and the overall business.Jhana.

Based on achieved EBITDA results through the first half of fiscal 2016, we paid the former owners of NinetyFive5 $2.2 million in the third quarter of fiscal 2016. No further contingent consideration payments were made or are expected to be made to the former owners of NinetyFive5 since the measurement period ended on August 31, 2017. During the fiscal

~~Table of Contents~~

~~years ended August 31, 2017 and 2016, the NinetyFive5 contingent consideration liability was comprised of the following activity (in thousands):~~

Contingent consideration liability at August 31, 2015 $ 2,565
Payment of first contingent consideration award (2,167 )
Increase in contingent consideration liability 1,538
Contingent consideration liability at August 31, 2016 1,936
Decrease in contingent consideration liability (1,936 )
Contingent consideration liability at August 31, 2017 $ -

~~11.~~73

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12. STOCK-BASED COMPENSATION PLANS

Overview

We utilize various stock-based compensation plans as integral components of our overall compensation and associate retention strategy. Our shareholders have approved various stock incentive plans that permit us to grant performance awards, ~~unvested share~~restricted stock awards, stock options, fully-vested stock awards, and employee stock purchase plan (ESPP) shares. ~~In addition, our Board of Directors and shareholders may, from time to time, approve fully vested stock awards.~~ The Organization and Compensation Committee of the Board of Directors (the Compensation Committee) has responsibility for the approval and oversight of our stock-based compensation plans.

On January ~~23, 2015,~~25, 2019, our shareholders approved the ~~2015~~Franklin Covey Co. 2019 Omnibus Incentive Plan (the ~~2015~~2019 Plan), which authorized an additional ~~1.0 million~~700,000 shares of common stock for issuance to employees and members of the Board of Directors as stock-based payments. ~~We believe that the 2015 Plan will provide sufficient available shares to grant awards over the next several years, based on current expectations of grants in future periods.~~ A more detailed description of the ~~2015~~2019 Plan is set forth in ~~the Company's~~our Definitive Proxy Statement filed with the SEC on December ~~22, 2014.~~20, 2018. At August 31, ~~2017,~~2020, the ~~2015~~2019 Plan had approximately ~~494,000~~511,000 shares available for future grants.

~~On May 31, 2017, our Board~~Our employee stock purchase plan (ESPP) is administered under the terms of ~~Directors approved~~ the Franklin Covey Co. 2017 Employee Stock Purchase Plan, ~~(the~~which was approved by our shareholders at the annual meeting of shareholders held on January 26, 2018. For additional information regarding the Franklin Covey Co. 2017 ~~ESPP Plan). The 2017 ESPP~~Employee Stock Purchase Plan, ~~authorized a new tranche of 1,000,000 shares~~please refer to be issued to ESPP participants and modernized some aspects of the ESPP (e.g., allowing for electronic communication with participants), but all other key terms and conditions of the 2017 ESPP Plan remain consistentour definitive Proxy Statement as filed with the prior plan (e.g., discount percentage, purchase date, etc.). We intend to submit the 2017 ESPP Plan to a vote of shareholders at our next annual shareholders' meeting, which is expected to be held in January 2018.SEC on December 22, 2017. At August 31, ~~2017, the 2017 ESPP Plan~~2020, we had approximately ~~987,000~~862,000 shares ~~remaining~~available for purchase by plan ~~participants.~~participants under the terms of the current shareholder-approved ESPP.

The total compensation expense of our stock-based compensation plans was as follows (in thousands):


YEAR ENDED
AUGUST 31,	2017		2016		2015		2020			2019		2018
Performance awards	$	2,902	$	2,492	$	1,890	$	(1,518	)	$	3,853	$	2,034
Unvested stock awards		500		450		400
Restricted stock awards								700			700		642
Compensation cost of the ESPP								185			176		155
Fully vested stock awards		135		60		125		60			60		15
Compensation cost of the ESPP		121		119		121
	$	3,658	$	3,121	$	2,536	$	(573	)	$	4,789	$	2,846

~~The compensation expense~~At each quarterly or annual reporting date, we evaluate number and probability of shares expected to vest in each of our performance-based long-term incentive plan (LTIP) awards and adjust our stock-based compensation ~~plans was included in selling, general, and administrative expenses~~expense to correspond with the number of shares expected to vest over the anticipated service period. Due to the significant impact of the COVID-19 pandemic on our results of operations in the ~~accompanying consolidated statements~~third quarter of ~~operations,~~fiscal 2020 and nothe uncertainties surrounding the recovery of the world’s economies and our business, we determined that the LTIP award tranches which are based on qualified Adjusted EBITDA for our fiscal 2015, 2016, 2017, 2019, and 2020 LTIP awards would not vest before the end of the respective service periods. We therefore reversed the previously recognized stock-based compensation expense associated with these awards during fiscal 2020, which resulted in a credit to stock-based compensation for the year.

No stock-based compensation was capitalized during the fiscal years ~~2017, 2016, or 2015.~~presented in this report. We recognize forfeitures of stock-based compensation instruments as they occur. During fiscal ~~2017,~~2020, we issued ~~217,581~~311,452 shares of our common stock from shares held in treasury for various stock-based compensation ~~plans. Certain of our~~arrangements. Our stock-based compensation plans allow ~~recipients~~shares to ~~have shares~~be withheld from the award to pay ~~minimum~~ statutory income tax liabilities. We withheld ~~51,156~~109,896 shares of our common stock (Note 10) for ~~minimum~~ statutory income taxes during fiscal ~~2017.~~2020.

~~Table of Contents~~

The following is a description of our stock-based compensation plans.

Table of Contents

Performance Awards

~~Due to the significant change in our business resulting sales of the All Access Pass, on October 18, 2016, the~~The Compensation Committee ~~approved a modification to the fiscal 2012 through fiscal 2016 performance~~has awarded various performance-based stock compensation awards to include the change in deferred revenue, less certain costs, in adjusted earnings before interest, taxes, depreciation, and amortization (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 2015 performance awards and no incremental stock-based compensation expense was recognized from this modification for those awards. The incremental compensation expense recorded in fiscal 2017 as a result of this modification for the fiscal 2016 LTIP award was approximately $0.6 million.

~~In fiscal 2015, the Compensation Committee approved a modification to exclude the effects of foreign exchange on the measurement of performance criteria on the outstanding tranches~~members of our senior management as long-term incentive plan (LTIP) ~~awards. Accordingly, we calculated incremental compensation expense~~compensation. These awards vest to the participants based upon the ~~fair value~~achievement of (closing price) our common stock on the modification date, which totaled $0.7 million. We recognized $0.5 million of the incremental compensation expense during fiscal 2015 for service provided in the current and previous fiscal years associated with the modification.

~~Each of the LTIP~~specified performance ~~awards described below have a maximum life of six years and compensation~~criteria. 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 are made on a cumulative basis at the date of the adjustment. ~~Award tranches that have~~We reevaluate the likelihood of shares vesting under performance awards at each reporting date.

No LTIP awards vested ~~and shares distributed~~ to participants are marked as "vested" in the tables below. Tranches that have met the performance criteria, but are awaiting Compensation Committee approval are marked as "criteria met," and tranches that have been determined to not be probableduring fiscal 2020 or fiscal 2019. The following is a description of ~~vesting are marked as "not probable" in the tables below. The status for the tranches presented in the tables below is~~our performance-based LTIP awards as of August 31, ~~2017.~~2020.

Fiscal 2020 LTIP Award – On October 18, 2019, the Compensation Committee of the Board of Directors granted a new LTIP award to our executive officers and members of senior management. The fiscal 2020 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) the achievement of specified levels of qualified Adjusted EBITDA; and 3) the achievement of specified levels of subscription service sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche does not fluctuate based on financial measures. The number of shares granted in this tranche totals 25,101 shares. The remaining two tranches of the award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2022. 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 150,630 shares. The fiscal 2020 LTIP has a three-year life and expires on August 31, 2022.

Fiscal 2019 LTIP Award – On October 1, 2018, the Compensation Committee granted a performance-based LTIP award to our executive officers and members of senior management, which is similar to the fiscal 2020 LTIP described above. The fiscal 2019 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 qualified Adjusted EBITDA; and 3) the achievement of certain levels of subscription service 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 36,470 shares. The remaining two tranches of the fiscal 2019 award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2021. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum 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 218,818 shares. The fiscal 2019 LTIP has a three-year life and expires on August 31, 2021.

Fiscal 2019 Time-Based Award – On January 25, 2019, the Compensation Committee approved an incentive plan award for the Chief Executive Officer, Chief Financial Officer, and Chief People Officer that has a two-year time-based vesting (service) condition. A total of 11,915 shares were issued to the participants in connection with this award. The fair value of this award was calculated by multiplying the number of shares times the closing price of the Company’s common stock on the grant date, which was $24.54 per share. The fair value of this award totals $0.3 million, which is being expensed evenly over the two-year service period.

Table of Contents

Fiscal 2018 LTIP Award – On November 14, 2017, the Compensation Committee granted a performance-based 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 specified levels of qualified Adjusted EBITDA; and 3) the achievement of specified levels of subscription service 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 fiscal 2018 award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2020. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award up to 200 percent of the participant’s award. The maximum number of shares that may be awarded in connection with these tranches totals 257,300 shares. Based on financial results achieved in the three-year period ended August 31, 2020, a total of 221,067 shares were earned by participants in the fiscal 2018 LTIP. The shares earned in the fiscal 2018 LTIP were distributed to participants in the first quarter of fiscal 2021.

Fiscal 2017 LTIP Award– On October 18, 2016, the Compensation Committee granted 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 EBITDA and trailing four-quarter gross All Access Pass ~~sales as shown below.~~sales. As of August 31, 2020, four tranches of this award have vested, totaling 97,803 shares. The 2017 LTIP has a six-year life and expires on August 31, 2022.

Adjusted EBITDA All Access Pass Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 36.7 42,789 amortizing $ 30.1 18,338 vested
$ 41.8 42,789 amortizing $ 35.4 18,338 vested
$ 47.7 42,789 amortizing $ 40.8 18,338 vested
128,367 55,014

Fiscal 2016 LTIP Award – OnThe fiscal 2016 LTIP was granted on November 12, 2015, ~~the Compensation Committee granted performance-based awards for~~to our executive officers and members of senior management. A total of 231,276 shares may be awarded to the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and increased sales of Organizational Development Suite (OD Suite) ~~offerings as shown below.~~offerings. The OD Suite is defined as Leadership, Productivity, and Trust practice sales.

~~Table~~ As of ~~Contents~~

August 31, 2020, four tranches of the fiscal 2016 LTIP have vested to participants, totaling 123,348 shares. The 2016 LTIP has a six-year life and expires on August 31, 2021.

Adjusted EBITDA OD Suite Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 36.0 53,964 amortizing $ 107.0 23,128 vested
$ 40.0 53,964 amortizing $ 116.0 23,128 criteria met
$ 44.0 53,964 amortizing $ 125.0 23,128 criteria met
161,892 69,384

Fiscal 2015 LTIP Award – During fiscal 2015, the Compensation Committee granted a performance-based award for our executive officers and certain members of senior management. A total of 112,464 shares ~~may~~were eligible to be awarded to ~~the~~ participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and increased sales of OD Suite ~~sales as shown below.~~

Adjusted EBITDA OD Suite Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 39.6 26,241 amortizing $ 107.0 11,247 vested
$ 45.5 26,241 amortizing $ 118.0 11,247 criteria met
$ 52.3 26,241 not probable $ 130.0 11,247 amortizing
78,723 33,741

~~Fiscal 2014 LTIP Award~~ ~~– During the first quarter~~sales. As of ~~fiscal 2014, the Compensation Committee granted performance-based equity awards for our executive officers. A~~August 31, 2020, a total of ~~89,418~~59,980 shares, may be awarded to the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and trailing four-quarter increased salesor four tranches, of ~~courses related to~~ ~~The 7 Habits of Highly Effective People~~ ~~(the~~ ~~7 Habits~~).

Adjusted EBITDA
7 Habits Increased Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 37.0 20,864 vested $ 5.0 8,942 vested
$ 43.0 20,864 amortizing $ 10.0 8,942 vested
$ 49.0 20,864 not probable $ 12.5 8,942 criteria met
62,592 26,826

~~Fiscal 2013 LTIP Award~~ – During the first quarter of fiscal 2013, the Compensation Committee granted a performance-based equity award for the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and the Chief People Officer (CPO). A total of 68,085 shares may be issued to the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and Productivity Practice sales.

Adjusted EBITDA Productivity Practice Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 33.0 15,887 vested $ 23.5 6,808 vested
$ 40.0 15,887 amortizing $ 26.5 6,808 not probable
$ 47.0 15,887 not probable $ 29.5 6,808 not probable
47,661 20,424

~~Table of Contents~~

~~Fiscal 2012 LTIP Award~~ ~~- During fiscal 2012, the Compensation Committee granted a performance-based equity award for the CEO, CFO, and CPO similar to~~ the fiscal ~~2013 executive award described above. A total of 106,101 shares may be issued~~2015 LTIP vested to ~~the participants based on six individual vesting conditions~~participants. The 2015 LTIP had a six-year life that ~~are divided into two performance measures, Adjusted EBITDA and Productivity Practice sales. The fiscal 2012 LTIP award measurement period ended~~concluded on August 31, ~~2017.~~2020 and the remaining award tranches, totaling 52,484 shares, expired unvested to the participants.

Adjusted EBITDA Productivity Practice Sales
Award Award
Goal Number of Tranche Goal Number of Tranche
(millions)

Shares

Status

(millions)

Shares

Status
$ 26.0 24,757 vested $ 20.5 10,610 vested
$ 33.0 24,757 vested $ 23.5 10,610 vested
$ 40.0 24,757 not vested $ 26.5 10,610 not vested
74,271 31,830

~~Unvested~~Restricted Stock Awards

The annual Board of Director ~~unvested~~restricted stock award, which is administered under the terms of the Franklin Covey Co. ~~2015~~2019 Omnibus Incentive Plan, 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. Each eligible director is entitled to receive a whole-share grant equal to ~~$75,000~~$100,000 with a one-year vesting period, which is generally granted in January (following the Annual ~~Shareholders'~~Shareholders’ Meeting) of each year. Shares granted under the terms of this annual award ~~are ineligible to~~may not be voted or participate in any common stock dividends until they are vested.

~~Under the terms of this program, we~~We issued ~~29,834~~21,420 shares, ~~25,032~~28,525 shares, and ~~24,210~~23,338 shares of our common stock to eligible members of the Board of Directors during ~~the~~ fiscal ~~years ended August 31, 2017, 2016,~~2020, fiscal 2019, and ~~2015.~~fiscal 2018 as restricted stock awards. The fair value of shares awarded to the directors was ~~$0.5~~$0.7 million in each of ~~those years~~fiscal 2020, fiscal 2019, and fiscal 2018 as calculated on the grant date of the awards. The corresponding compensation cost of each award is recognized over the ~~vesting~~service period of the ~~awards,~~award, which is one year. The cost of the common stock issued from treasury for these awards was $0.3 million in fiscal 2020, $0.4 million in fiscal ~~2017,~~2019, and $0.3 million in ~~each of the~~ fiscal ~~years ended August 31, 2016 and 2015.~~2018. The following information applies to our ~~unvested~~restricted stock awards for the fiscal year ended August 31, ~~2017:~~2020:

Weighted-
Average Grant-
Date Fair
Number of Value Per
Shares 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
August 31, 2017 29,834 $ 17.60

Table of Contents


				Weighted-
				Average Grant-
				Date Fair
	Number of			Value Per
	Shares			Share
Restricted stock awards at
August 31, 2019		28,525		$	24.54
Granted		21,420			32.68
Forfeited		-			-
Vested		(28,525	)		24.54
Restricted stock awards at
August 31, 2020		21,420		$	32.68

At August 31, ~~2017,~~2020, there was $0.2 million of unrecognized compensation cost ~~related to unvested~~on our restricted stock awards, which is expected to be recognized over the remaining ~~weighted-average vesting~~service period of approximately four months. The total recognized income tax benefit from ~~unvested~~restricted stock awards totaled $0.2 million for ~~fiscal 2017 and $0.1 million for~~ each of the ~~fiscal~~ years ended August 31, ~~2016~~2020, 2019, and ~~2015.~~2018. The intrinsic value of our ~~unvested~~restricted stock awards at August 31, ~~2017~~2020 was ~~$0.6~~$0.4 million.

~~Table of Contents~~

Stock Options

We have an incentive stock option plan whereby options to purchase shares of our common stock may be issued to key employees at an exercise price not less than the fair market value of the ~~Company's~~Company’s common stock on the date of grant. At August 31, 2020, there was no remaining unrecognized compensation expense related to our stock options and the remaining stock options outstanding expire in January 2021. Information related to our stock option activity during the fiscal year ended August 31, ~~2017~~2020 is presented below:


						Weighted									Weighted
				Weighted		Average							Weighted		Average
				Avg. Exercise		Remaining		Aggregate					Avg. Exercise		Remaining		Aggregate
	Number of			Price Per		Contractual		Intrinsic Value		Number of			Price Per		Contractual		Intrinsic Value
	Stock Options			Share		Life (Years)		(thousands)		Stock Options			Share		Life (Years)		(thousands)
Outstanding at August 31, 2016		631,250		$	11.41
Outstanding at August 31, 2019											568,750		$	11.67
Granted		-			-						-			-
Exercised		(62,500	)		9.00						(350,000	)		11.73
Forfeited		-			-						-			-
Outstanding at August 31, 2017		568,750		$	11.67		2.8	$	4,055
Outstanding at August 31, 2020											218,750		$	11.57		0.4	$	1,787

Options vested and exercisable at
August 31, 2017		568,750		$	11.67		2.8	$	4,055
August 31, 2020											218,750		$	11.57		0.4	$	1,787

~~During~~The stock options exercised during fiscal ~~2017, we had 62,500 stock options~~2020 were exercised on a net ~~share~~ basis (no cash was paid to exercise the options) and we withheld 102,656 shares of our common stock for statutory income taxes, which had ~~an aggregate~~a fair value of $3.6 million. The intrinsic value of ~~$0.5 million. At August 31, 2017, there was no remaining unrecognized compensation expense related to our stock~~the exercised options totaled $8.0 million and nowe recognized an income tax benefit of $1.8 million from the exercise of these options. No options were exercised during either fiscal ~~2016~~2019 or ~~2015.~~2018.

Table of Contents

The following additional information applies to our stock options outstanding at August 31, ~~2017:~~2020:

Weighted
Number Average Options
Outstanding Remaining Weighted Exercisable at Weighted
at August 31, Contractual Average August 31, Average
Exercise Prices 2017 Life (Years) Exercise Price 2017 Exercise Price
$ 9.00 62,500 3.4 $ 9.00 62,500 $ 9.00
$ 10.00 168,750 2.8 $ 10.00 168,750 $ 10.00
$ 12.00 168,750 2.8 $ 12.00 168,750 $ 12.00
$ 14.00 168,750 2.8 $ 14.00 168,750 $ 14.00
568,750 568,750

~~Fully Vested Stock Awards~~

~~Client Partner and Consultant Award~~ – During fiscal 2011, we implemented a new fully vested stock-based award program that is designed to reward our client partners and training consultants for exceptional long-term performance. The program grants shares of our common stock with a total value of $15,000 to each client partner who has sold over $20.0 million in cumulative sales or training consultant who has delivered over 1,500 days of training during their career. During fiscal 2017, nine individuals qualified for this award; four individuals qualified for this award in fiscal 2016; and five individuals earned this award in fiscal 2015.

In the fourth quarter of fiscal 2015, the Compensation Committee approved a fully vested award equal to $10,000 for each general manager or area director that achieved a specified sales goal. Five individuals achieved their sales goals and qualified for the award. This award was only for fourth quarter fiscal 2015 sales performance and no additional awards may be granted under the terms of this award.

~~Table of Contents~~


				Weighted
		Number		Average				Options
		Outstanding		Remaining		Weighted		Exercisable at		Weighted
		at August 31,		Contractual		Average		August 31,		Average
Exercise Prices		2020		Life (Years)		Exercise Price		2020		Exercise Price
$	9.00		31,250		0.4	$	9.00		31,250	$	9.00
$	10.00		62,500		0.4	$	10.00		62,500	$	10.00
$	12.00		62,500		0.4	$	12.00		62,500	$	12.00
$	14.00		62,500		0.4	$	14.00		62,500	$	14.00
			218,750						218,750

Employee Stock Purchase Plan

We have an employee stock purchase plan 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 quarter. ~~We issued~~ESPP participants purchased a total of ~~43,199~~41,409 shares, ~~49,375~~43,073 shares, and ~~42,687~~40,941 shares ~~to ESPP participants~~our stock during the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015,~~2018, which had a corresponding cost basis of $0.6 million ~~$0.7 million, and $0.6 million, respectively.~~each year. We received cash proceeds for these shares from ESPP participants totaling ~~$0.7~~$1.0 million in ~~each~~fiscal 2020; $1.0 million during fiscal 2019; and $0.8 million in fiscal 2018.

Fully Vested Stock Awards

We have a stock-based incentive program that is designed to reward our client partners and training consultants for exceptional long-term performance. The program grants shares of ~~the~~our common stock to client partners who have achieved certain cumulative sales goals and to training consultants who have delivered a specified number of training days during their career. During fiscal ~~years ended August 31, 2017, 2016,~~2020, four employees qualified for this award program; four individuals qualified in fiscal 2019; and ~~2015.~~one individual qualified for this award in fiscal 2018.

~~12.~~

~~IMPAIRED ASSETS~~

~~Our impaired asset charges during fiscal 2015 consisted of the following (in thousands):~~

Long-term receivables from FCOP $ 541
Capitalized curriculum 414
Investment cost method subsidiary 220
Prepaid expenses and other long-term assets 127
$ 1,302

~~The following is a description of the circumstances regarding the impairment of these long-lived assets.~~

~~Long-Term Receivables From FCOP~~ – We determined that the operating agreements between the Company and FCOP allow us to collect reimbursement for certain rental expenses prior to the annual required distribution of earnings to FCOP's creditors. Such rents were previously treated as lower in priority and therefore, were considered long-term receivables. Although this determination improved our cash flows and collections of rents receivable from FCOP in the short term, it reduced the amount of cash we were expecting to receive from the required distribution of earnings to pay long-term receivable balances. After this determination was made, the present value of our previously recorded long-term receivables was more than the present value of expected corresponding cash flows. Accordingly, we recalculated our discount on the long-term receivables and impaired the remaining balance.

~~Capitalized Curriculum~~ – During fiscal 2015, we determined that it would be beneficial to discontinue a component of one of our existing offerings and we received legal notice that another offering contained names trademarked by another entity. Since we currently offer a similar program, the decision was made to discontinue the offering rather than modify the curriculum as required by applicable trademark law. Accordingly, we impaired the remaining unamortized carrying value of these offerings. These items were classified as components of other long-term assets on our consolidated balance sheets.

~~Investment in Cost Method Subsidiary~~ – In the fourth quarter of fiscal 2015, we became aware of financial difficulties at an entity in which we had an investment accounted for under the cost method. Based on discussions with management of the entity, we determined that the investment in this subsidiary would not be recoverable in future periods due to going concern considerations. Accordingly, we impaired the carrying value of the investment in this entity. The investment in this entity was previously classified as a component of other long-term assets in our consolidated balance sheets.

~~Prepaid Expenses and Other Long-Term Assets~~ – In connection with a component of one of our offerings that was discontinued (as described above), we had prepaid royalties to an unrelated developer. Based on the decision to impair the content, we determined that the probability of receiving cash flows sufficient to recover the prepaid royalties was remote and we expensed the carrying value of these prepaid assets. Approximately $60,000 of this balance was previously included in other long-term assets.

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13.	~~CONTRACT TERMINATION AND RESTRUCTURING COSTS~~

~~Contract Termination Costs~~

During fiscal 2017, we entered into a new 10-year license agreement for Education practice content in a foreign country, with minimum required royalties payable to us totaling $16.1 million (at current exchange rates) over the life of the arrangement. Under a previously existing profit-sharing agreement, we would have been obligated to pay one-third of the new minimum royalty stream, or $5.4 million, plus one-third of any royalties in excess of the contractual minimums to the licensee that owns the rights for that country. In exchange for a $1.5 million payment, we terminated the previously existing profit-sharing agreement and we will not owe any further profit sharing-payments to the international licensee. For example, during fiscal 2017, we received $0.9 million of royalty revenues from this agreement. Under the previous profit sharing arrangement, we would have been required to pay $0.3 million to the licensee. Based on the guidance for contract termination costs, we expensed the $1.5 million payment during the second quarter of fiscal 2017.

~~Restructuring Costs~~

~~Fiscal 2017 Restructuring Costs~~

During the third quarter of fiscal 2017, we determined to exit the publishing business in Japan and restructured our U.S./Canada direct office operations in order to support new sales and renewals of the All Access Pass. We expensed $3.6 million related to these changes during fiscal 2017 as described below. The majority of these costs were attributable to our Direct Offices operating segment.

~~Exit Japan Publishing Business~~

Due to a change in strategy designed to focus resources and efforts on sales of the All Access Pass in Japan, and declining sales and profitability of the publishing business, we decided to exit the publishing business in Japan. As a result of this determination, we wrote off the majority of our book inventory located in Japan for $2.1 million, which was recorded as a component of product cost of sales in the accompanying consolidated statements of operations for fiscal 2017.

~~U.S./Canada Direct Office Restructuring~~

We restructured the operations of our U.S/Canada direct offices to create new smaller regional teams which are focused on selling the All Access Pass, helping clients strategically implement the AAP, and providing services to further develop long-term client relationships. Accordingly, we determined that our three remaining sales offices located in Atlanta, Georgia; Irvine, California; and Chicago, Illinois were unnecessary since most client partners work from home-based offices; restructured the operations of the Sales Performance and Winning Customer Loyalty Practices; and eliminated certain functions to reduce costs in future periods. The $1.5 million restructuring charge associated with these operational changes was comprised of the following (in thousands):

Description Amount
Severance costs $ 986
Office closure costs 496
$ 1,482

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As of August 31, 2017, all of the severance costs have been paid and the remaining office closure cost accrual totaled $0.5 million, which is included as a component of accrued liabilities on the accompanying consolidated balance sheet.

~~Fiscal 2016 Restructuring Costs~~

In the fourth quarter of fiscal 2016, we restructured the operations of certain of our domestic sales offices. The cost of this restructuring was $0.4 million and was primarily comprised of employee severance costs, which were paid in August and September 2016.

We also restructured the operations of our Australian direct office. The restructuring was designed to reduce ongoing operating costs by closing the sales offices in Brisbane, Sydney, and Melbourne, and by reducing headcount for administrative and certain sales support functions. Our remaining sales and support personnel in Australia now work from home offices, similar to many of our sales personnel located in the U.S. and Canada. The Australia office restructure cost $0.4 million and was primarily comprised of office closure costs, including remaining lease expense on the offices that were closed, and for employee severance costs. The severance costs included the restructuring charge totaled less than $40,000. As of August 31, 2017 substantially all of the remaining accrued restructuring costs were paid.

~~Fiscal 2015 Restructuring Costs~~

During the fourth quarter of fiscal 2015, we realigned our regional sales offices that serve the United States and Canada. As a result of this realignment, we closed our northeastern regional sales office located in Pennsylvania and created new geographic sales regions. In connection with this restructuring, we incurred costs related to involuntary severance and office closure costs. The restructuring charge taken during the fiscal year ended August 31, 2015 was comprised of the following (in thousands):

Description Amount
Severance costs $ 570
Office closure costs 17
$ 587

~~The majority of these costs were paid prior to August 31, 2015 and there were no remaining costs from the fiscal 2015 restructuring accrued as of August 31, 2017.~~

~~14.~~

EMPLOYEE BENEFIT PLANS

Profit Sharing Plans

We have defined contribution profit sharing plans for our employees that qualify under Section 401(k) of the Internal Revenue Code. These plans provide retirement benefits for employees meeting minimum age and service requirements. Qualified participants may contribute up to 75 percent of their gross wages, subject to certain limitations. These plans also provide for matching contributions to the participants that are paid by the Company. The matching contributions, which were expensed as incurred, totaled ~~$1.9~~$2.3 million, ~~$1.9~~$2.2 million, and ~~$1.7~~$2.1 million during the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018, respectively. We do not sponsor or participate in any defined-benefit pension plans.

Non-Qualified Deferred Compensation Plan

We had a non-qualified deferred compensation (NQDC) plan that provided certain key officers and employees the ability to defer a portion of their compensation until a later date. Deferred compensation amounts used to pay benefits were held in a ~~"rabbi~~“rabbi trust,"” which invested in insurance contracts, various

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mutual funds, and shares of our common stock as directed by the plan participants. However, due to legal changes resulting from the American Jobs Creation Act of 2004, we determined to cease compensation deferrals to the NQDC plan after December 31, 2004. Following the cessation of deferrals to the NQDC plan, the number of participants remaining in the plan declined steadily, and our Board of Directors decided to partially terminate the NQDC plan. Following this decision, all of the ~~plan's~~plan’s assets were liquidated, the ~~plan's~~plan’s liabilities were paid, and the only remaining items in the NQDC plan are shares of our common stock owned by the remaining plan participants. At August 31, ~~2017~~2020 and ~~2016,~~2019, the cost basis of the shares of our common stock held by the rabbi trust was ~~$0.4~~$0.1 million and $0.2 million. Shares of our common stock held in the rabbi trust are included as components of treasury stock on the accompanying consolidated balance sheets.

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~~15.~~

14. INCOME TAXES

Our ~~benefit (provision)~~provision for income taxes consisted of the following (in thousands):


YEAR ENDED
AUGUST 31,	2017			2016			2015			2020			2019			2018
Current:
Federal	$	69		$	(380	)	$	(220	)	$	(15	)	$	93		$	29
State		(71	)		(197	)		(208	)		(87	)		(14	)		210
Foreign		(2,320	)		(2,553	)		(2,691	)		(1,145	)		(2,745	)		(2,947	)
		(2,322	)		(3,130	)		(3,119	)		(1,247	)		(2,666	)		(2,708	)

Deferred:
Federal		(1,227	)		(1,584	)		(3,239	)		2,306			3,112			1,426
State		(17	)		70			(138	)		98			102			(314	)
Foreign		468			50			200			(77	)		(120	)		(281	)
Operating loss carryforward		6,964			-			-			(50	)		(1,625	)		2,636
Adjustment for changes in U.S.
income tax rates											-			-			1,654
Valuation allowance		(129	)		(301	)		-			(11,261	)		(418	)		(2,780	)
		6,059			(1,765	)		(3,177	)		(8,984	)		1,051			2,341
	$	3,737		$	(4,895	)	$	(6,296	)	$	(10,231	)	$	(1,615	)	$	(367	)

The allocation of our total income tax provision ~~(benefit)~~ is as follows (in thousands):


YEAR ENDED
AUGUST 31,	2017		2016			2015			2020			2019			2018
Net income (loss)	$	3,737	$	(4,895	)	$	(6,296	)
Other comprehensive income		37		115			52
Net loss									$	(10,231	)	$	(1,615	)	$	(367	)
Other comprehensive income (loss)										16			(5	)		(75	)
	$	3,774	$	(4,780	)	$	(6,244	)	$	(10,215	)	$	(1,620	)	$	(442	)

Income (loss) before income taxes consisted of the following (in thousands):


YEAR ENDED
AUGUST 31,	2017			2016		2015		2020			2019			2018
United States	$	(10,126	)	$	9,328	$	15,073	$	3,062		$	(1,910	)	$	(8,960	)
Foreign		(783	)		2,583		2,339		(2,266	)		2,502			3,440
	$	(10,909	)	$	11,911	$	17,412	$	796		$	592		$	(5,520	)

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The differences between income taxes at the statutory federal income tax rate and the consolidated income tax rate reported in our consolidated statements of operations and comprehensive loss were as follows:

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YEAR ENDED AUGUST 31,	2020			2019			2018
Federal statutory income tax rate		(21.0	)%		(21.0	)%		25.7	%
State income taxes, net of federal effect		16.9			(5.4	)		2.6
Effect of change in U.S. federal tax rate		-			-			30.0
Valuation allowance		(1,412.9	)		(70.8	)		(50.4	)
Executive stock options		199.9			-			-
Foreign jurisdictions tax differential		1.4			(72.8	)		(6.8	)
Tax differential on income subject to both U.S. and foreign taxes		11.9			(64.7	)		2.3
Uncertain tax positions		13.8			34.0			(5.1	)
Non-deductible executive compensation		(18.2	)		(8.8	)		(2.7	)
Non-deductible meals and entertainment		(22.3	)		(52.9	)		(8.9	)
Payout of deferred compensation (NQDC)		6.1			0.3			4.4
Other		(59.3	)		(10.7	)		2.2
		(1,283.7	)%		(272.8	)%		(6.7	)%

Due to the near break-even amount of pre-tax income during fiscal 2020 and 2019, the effect of non-temporary items on our effective income tax rate was greatly amplified.

YEAR ENDED
AUGUST 31,

2017

2016

2015

Federal statutory income tax rate 35.0 % (35.0 )% (35.0 )%
State income taxes, net of federal effect
2.3

(1.9
)
(2.3
)
Valuation allowance (1.2 ) (2.5 ) -
Foreign jurisdictions tax differential (1.9 ) 0.6
(1.2
)
Tax differential on income subject to both U.S. and foreign taxes
0.4

(1.9
)
(0.5
)
Effect of claiming foreign tax credits instead of deductions for prior years
-

-
3.2
Uncertain tax positions 4.4 0.4 0.9
Non-deductible executive compensation (1.6 )
-

(0.2
)
Non-deductible meals and entertainment (2.2 )
(1.6
)
(1.1
)
Other (0.9 ) 0.8 -
34.3 % (41.1 )% (36.2 )%

In ~~prior~~consideration of the relevant accounting guidance, we reevaluated our deferred tax assets during fiscal years, we elected to take deductions on our U.S. federal income tax returns for foreign income taxes paid, rather than claiming foreign tax credits. During those years we either generated or used net operating loss carryforwards2020 and were therefore unable to utilize foreign tax credits. In fiscal 2011, we began claiming foreign tax credits on our U.S. federal income tax returns. Although we could not utilize the credits we claimed for fiscal 2012considered both positive and ~~fiscal 2011~~negative evidence in ~~those respective years, we concluded~~determining whether it ~~was~~is more likely than not that ~~these~~some portion or all of our deferred tax assets will be realized. Because of the cumulative pre-tax losses over the past three fiscal years, combined with the expected continued disruptions and negative impact to our business resulting from uncertainties related to the recovery from the pandemic, we were unable to overcome accounting guidance indicating that it is more-likely-than-not that insufficient taxable income will be available to realize all of our deferred tax assets before they expire, primarily foreign tax ~~credits will be utilized in~~credit carryforwards and a portion of our net operating loss carryforwards. Based on this assessment, we increased the ~~future.~~

~~Our overall U.S. taxable income and foreign source income for fiscal 2014 and 2013 were sufficient to utilize all~~valuation allowance against our deferred tax assets, which generated $11.3 million of ~~the foreign tax credits generated during those fiscal years, plus~~ additional credits generated in prior years. Accordingly, we amended our U.S. federal income tax returns from fiscal 2003 through fiscal 2010 to claim foreign tax credits instead of foreign tax deductions. In fiscal 2015, we finalized the calculations of the impact of amending previously filed federal income tax returns to realize foreign tax credits previously treated as expired under the tax positions taken in the original returns. The income tax benefit recognized from these foreign tax credits totaled $0.6 million in fiscal 2015.

~~We recognized tax benefits from deductions for stock-based compensation in excess of the corresponding expense recorded for financial statement purposes. Instead of reducing our~~ income tax expense in fiscal 2020.

The Tax Cut and Jobs Act (the 2017 Tax Act) was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate income tax code by, among other things, lowering the statutory corporate tax rate from 35 percent to 21 percent; eliminating certain deductions; imposing a mandatory one-time transition tax, or deemed repatriation tax, on accumulated earnings of foreign subsidiaries as of 2017 that were previously tax deferred; introducing new tax regimes; and changing how foreign earnings are subject to U.S. tax.

Since we have an August 31 fiscal year end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of 25.7 percent for ~~these benefits,~~fiscal 2018 and a 21 percent rate for fiscal 2019 and subsequent years. Other provisions of the 2017 Tax Act became effective for us in fiscal 2019, including limitations on the deductibility of interest and executive compensation as well as anti-deferral provisions on Global Intangible Low-Taxed Income (GILTI). We have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”).

In fiscal 2020, we recorded $0.2 million ~~and~~of income tax expense resulting from limitations added by the 2017 Tax Act on the deductibility of executive compensation. Because of losses in foreign jurisdictions, we recorded no income tax expense in fiscal 2020 under the GILTI provisions. During fiscal 2019, we recorded income tax expense of $0.3 million under the GILTI provisions. We recorded $0.1 million ~~for~~of tax expense resulting from limitations added by the 2017 Tax Act on the deductibility of executive compensation.

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In fiscal ~~years ending August 31,~~2018, we recorded income tax benefits totaling $1.7 million, including a one-time income tax benefit of $0.9 million as of the date of enactment. We recognized $0.8 million of the one-time benefit from re-measuring our net deferred tax liabilities at the reduced U.S. federal tax rate and $0.2 million of the benefit from other changes enacted by the 2017 ~~and 2015.~~ Tax Act. These benefits were partially offset by $0.1 million of expense ~~related to stock-based compensation recorded in additional paid-in capital for fiscal 2016 was insignificant. Following~~from the ~~adoption~~deemed repatriation of accumulated earnings from our foreign subsidiaries.

On September 1, 2017, we adopted the provisions of ASU 2016-09, ~~in fiscal 2018,~~which requires that the benefits ~~and~~of deductions resulting from stock-based compensation in excess of the corresponding book expense ~~will~~ be recorded as a component of our income tax provision or benefit for the ~~period.~~

~~Table~~period, instead of ~~Contents~~

being recorded to additional paid-in capital. In fiscal 2020, as a result of our CEO and CFO’s exercise of stock options, we recorded an income tax benefit of $1.8 million for stock-based compensation deductions that were greater than the corresponding book expense. We recorded income tax expense of $0.1 million in fiscal 2019 and an immaterial amount of income tax expense in fiscal 2018 for stock-based compensation deductions that were less than the corresponding book expense.

The significant components of our deferred tax assets and liabilities were ~~comprised of the following~~as follows (in thousands):


AUGUST 31,	2017			2016			2020			2019
Deferred income tax assets:
Foreign income tax credit
carryforward							$	9,150		$	8,140
Net operating loss carryforward	$	10,310		$	-			7,694			7,516
Sale and financing of corporate
headquarters		8,420			9,013			3,939			4,431
Foreign income tax credit
carryforward		4,382			2,784
Bonus and other accruals								1,607			1,622
Stock-based compensation		2,954			2,674			1,431			1,973
Inventory and bad debt reserves		1,643			1,147			1,328			1,376
Bonus and other accruals		1,574			1,017
Deferred revenue		510			405			1,268			829
Other		337			617			530			264
Total deferred income tax assets		30,130			17,657			26,947			26,151
Less: valuation allowance		(612	)		(301	)		(15,076	)		(3,815	)
Net deferred income tax assets		29,518			17,356			11,871			22,336

Deferred income tax liabilities:
Intangibles step-ups – indefinite lived		(8,539	)		(8,528	)		(5,494	)		(5,424	)
Intangibles step-ups – definite lived		(7,607	)		(6,003	)
Intangibles step-ups – finite lived								(2,786	)		(3,406	)
Intangible asset impairment and
amortization		(4,875	)		(4,505	)		(3,306	)		(2,906	)
Deferred commissions								(2,231	)		(2,056	)
Property and equipment depreciation		(4,960	)		(3,367	)		(1,904	)		(2,880	)
Deferred commissions		(2,195	)		-
Unremitted earnings of foreign
subsidiaries		(492	)		(574	)		(354	)		(456	)
Other		(236	)		(399	)		-			(343	)
Total deferred income tax liabilities		(28,904	)		(23,376	)		(16,075	)		(17,471	)
Net deferred income taxes	$	614		$	(6,020	)	$	(4,204	)	$	4,865

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Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands):


AUGUST 31,	2017			2016			2020			2019
Other long-term assets	$	1,647		$	650
Long-term assets							$	1,094		$	5,045
Long-term liabilities		(1,033	)		(6,670	)		(5,298	)		(180	)
Net deferred income tax liability	$	614		$	(6,020	)
Net deferred income tax asset (liability)							$	(4,204	)	$	4,865

As of August 31, 2016, we had utilized all of our U.S. federal net operating loss carryforwards. However, we incurred a federal net operating loss of $17.5 million in fiscal 2017 and acquired a federal net operating loss carryforward of $7.7 million in connection with the purchase of the stock of Jhana Education (Note 2) in fiscal 2017. Our U.S. federal net operating loss carryforwards were comprised of the following at August 31, ~~2017~~2020 (in thousands):

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				Loss		Loss		Operating					Loss			Loss			Operating
Loss Carryforward	Loss Carryforward			Deductions		Deductions		Loss Carried		Loss Expires			Deductions			Deductions			Loss Carried
for Year Ended	Expires August 31,	Amount		in Prior Years		in Current Year		Forward		August 31,	Amount		in Prior Years			in Current Year			Forward
December 31, 2012	2031	$	243	$	-	$	-	$	243
December 31, 2013	2032		553		-		-		553
December 31, 2014	2033		1,285		-		-		1,285	2033	$	1,285	$	(1,019	)	$	(266	)	$	-
December 31, 2015	2034		1,491		-		-		1,491	2034		1,491		-			(580	)		911
December 31, 2016	2035		3,052		-		-		3,052	2035		3,052		-			-			3,052
July 15, 2017	2036		1,117		-		-		1,117
Acquired NOL			7,741		-		-		7,741	2036		1,117		-			-			1,117
												6,945		(1,019	)		(846	)		5,080
August 31, 2017	2037		17,500		-		-		17,500	2037		16,361		(6,627	)		(1,366	)		8,368
August 31, 2018										2038		10,506		-			-			10,506
		$	25,241	$	-	$	-	$	25,241		$	33,812	$	(7,646	)	$	(2,212	)	$	23,954

We have U.S. state net operating loss carryforwards generated in fiscal 2009 and before in various jurisdictions that expire primarily between September 1, ~~2017~~2020 and August 31, 2029. The U.S. state net operating loss carryforwards generated in fiscal 2017 and fiscal 2018 primarily expire on August 31, ~~2037.~~2037 and 2038, respectively. The state net operating loss carryforwards acquired through the purchase of Jhana Education stock expire between August 31, ~~2031~~2033 and August 31, 2036.

Our U.S. foreign income tax credit carryforwards were comprised of the following at August 31, ~~2017~~2020 (in thousands):


Credit Generated in				Credits Used			Credits Used		Credits					Credits Used			Credits Used		Credits
Fiscal Year Ended	Credit Expires	Credits		in Prior			in Fiscal		Carried		Credit Expires	Credits		in Prior			in Current		Carried
August 31,	August 31,	Generated		Years			2017		Forward		August 31,	Generated		Years			Year		Forward
2011	2021	$	3,445	$	(859	)	$	-	$	2,586	2021	$	3,445	$	(414	)	$	-	$	3,031
2012	2022		2,563		(2,563	)		-		-	2022		2,563		(2,563	)		-		-
2013	2023		2,815		(2,815	)		-		-	2023		2,815		(2,815	)		-		-
2014	2024		1,378		(1,378	)		-		-	2024		1,378		(1,378	)		-		-
2015	2025		1,422		(1,422	)		-		-	2025		1,422		(1,422	)		-		-
2016	2026		1,569		(1,569	)		-		-	2026		1,569		(1,569	)		-		-
2017	2027		1,796		-			-		1,796	2027		1,804		-			-		1,804
2018											2028		1,727		-			-		1,727
2019											2029		1,578		-			-		1,578
2020											2030		1,010		-			-		1,010
		$	14,988	$	(10,606	)	$	-	$	4,382		$	19,311	$	(10,161	)	$	-	$	9,150

In fiscal 2020, we increased our valuation allowance on our deferred income tax assets as previously explained. During ~~the year ended August 31, 2016,~~fiscal 2019, we determined that it was more likely than not that deferred income tax assets of acertain foreign ~~subsidiary~~subsidiaries would not be ~~realized. Accordingly,~~realized and we ~~recorded a $0.3 million~~increased the valuation allowance accordingly. In fiscal 2018, we established a valuation allowance of $3.0 million against ~~these~~our foreign tax credit carryforward from fiscal 2011, after concluding it is more likely than not that the carryforward will expire unused at the end of fiscal 2021. Our emphasis of the All Access Pass has generated, and will likely continue to generate, substantial amounts of deferred revenue for both book and tax purposes. This situation has produced a cumulative U.S. domestic pre-tax loss for the past three fiscal years and a more-likely-than-not presumption that insufficient taxable income will be available to realize the fiscal 2011 foreign tax carryforward, which expires at the end of fiscal 2021.

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Activity in our deferred income tax asset valuation allowance was as follows for the periods indicated (in thousands):


YEAR ENDED
AUGUST 31,	2020			2019			2018
Beginning balance	$	3,815		$	3,397		$	612
Charged to costs and expenses		11,269			663			3,035
Deductions		(8	)		(245	)		(250	)
Ending balance	$	15,076		$	3,815		$	3,397

Except for the deferred tax assets ~~in fiscal 2016. During fiscal 2017, we increased this valuation allowance by $0.1 million~~subject to ~~$0.4 million, which reduced our income tax benefit for the year by $0.1 million.~~

We acquired federal and state net operating loss carryforwards in connection with the purchase of Jhana Education stock during fiscal 2017. Section 382 of the Internal Revenue Code limits our ability to use these acquired losses. Accordingly, we recorded valuation allowances, ~~in the amount of $0.2 million against the related deferred tax assets. Our income tax benefit for fiscal 2017 was unaffected by this valuation allowance.~~

Wewe have determined that projected future taxable income is adequate to allow for realization of all deferred tax ~~assets, except for the assets subject to the valuation allowances.~~assets. We considered sources of taxable income, including ~~future~~ reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and reasonable, practical tax-planning strategies to generate additional taxable income. Based on the factors described above, we concluded that realization of our deferred tax assets, except those subject to the valuation ~~allowance as~~allowances described above, is more likely than not at August 31, ~~2017.~~2020.

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A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):


YEAR ENDED
AUGUST 31,	2017			2016			2015			2020			2019			2018
Beginning balance	$	3,024		$	3,115		$	3,491		$	1,895		$	2,111		$	2,359
Additions based on tax positions
related to the current year		10			199			244			172			157			27
Additions for tax positions in
prior years		85			3			144			10			7			367
Reductions for tax positions of prior
years resulting from the lapse of
applicable statute of limitations		(634	)		(212	)		(339	)		(289	)		(370	)		(253	)
Other reductions for tax positions of
prior years		(126	)		(81	)		(425	)		(148	)		(10	)		(389	)
Ending balance	$	2,359		$	3,024		$	3,115		$	1,640		$	1,895		$	2,111

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1.3 million at August 31, 2020, and $1.6 million at August 31, ~~2017, and $2.1 million at August 31, 2016.~~2019. Included in the ending balance of gross unrecognized tax benefits at August 31, ~~2017~~2020 is ~~$2.4~~$1.6 million related to individual ~~states'~~states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense. The net accruals and reversals of interest and penalties increased or decreased our income tax expense by an insignificant amount in each of fiscal ~~2017,~~2020, fiscal ~~2016~~2019, and fiscal ~~2015.~~2018. The balance of interest and penalties included in other long-term liabilities on our consolidated balance sheets at each of August 31, ~~2017~~2020 and ~~2016~~2019 was ~~$0.3 million at each date.~~$0.2 million.

During the next 12 months, we expect a decrease in unrecognized tax benefits totaling ~~$0.2~~$0.1 million relating to non-deductible expenses and state net operating loss deductions upon the lapse of the applicable statute of limitations.

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We file United States federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The tax years that remain subject to examinations for our major tax jurisdictions are shown below.

~~2010-2017~~ 2013-2020	Canada and Australia
~~2012-2017~~ 2014-2020	Japan ~~and the United Kingdom~~
~~2013-2017~~ 2015-2020	Germany, Switzerland, and Austria
2016-2020	China
2016-2020	United Kingdom, Singapore
2016-2020	United States – state and local income tax
~~2014-2017~~ 2017-2020	United States – federal income tax
~~2016-2017~~	~~China~~
~~2017~~	~~Singapore~~

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~~16.~~

~~EARNINGS (LOSS)~~15. LOSS PER SHARE

The following ~~is a reconciliation from basic earnings (loss)~~schedule shows the calculation of loss per share ~~(EPS) to diluted EPS~~for the periods presented (in thousands, except per-share amounts).



YEAR ENDED
AUGUST 31,	2017			2016		2015		2020			2019			2018
Numerator for basic and
diluted earnings per share:
Net income (loss)	$	(7,172	)	$	7,016	$	11,116
Net loss								$	(9,435	)	$	(1,023	)	$	(5,887	)

Denominator for basic and
diluted earnings per share:
Basic weighted average shares
outstanding		13,819			14,944		16,742		13,892			13,948			13,849
Effect of dilutive securities:
Stock options and other
stock-based awards		-			132		181		-			-			-
Diluted weighted average shares
outstanding		13,819			15,076		16,923		13,892			13,948			13,849

EPS Calculations:
Net income (loss) per share:
Basic	$	(0.52	)	$	0.47	$	0.66
Diluted		(0.52	)		0.47		0.66
Net loss per share:
Basic and diluted								$	(0.68	)	$	(0.07	)	$	(0.43	)

Since we incurred a net loss for the fiscal year ended August 31, ~~2017,~~2020, no potentially dilutive securities were included in the calculation of our ~~earnings~~loss per share because the inclusion of these securities would be antidilutive. The number of dilutive securities that would have been included at August 31, ~~2017 would have been~~2020 was approximately ~~0.2 million~~65,000 shares. Other securities, including performance stock-based compensation instruments, may have a dilutive effect on our future EPS ~~calculation in future periods~~calculations if our financial results reach specified targets (Note ~~11)~~12).

~~17.~~

16. SEGMENT INFORMATION

Reportable Segments

Our ~~revenues~~sales are primarily ~~obtained from the sale~~comprised of training and consulting services and ~~related products. During fiscal 2017, we managed~~ our ~~business based on~~internal reporting structure is comprised of three reportable operating segments and a corporate services group. Our internal reporting structure and reportable segments are organized primarily around the client channels which produce the Company’s revenues. The following ~~four operating~~is a brief description of our reportable segments:

·	~~Direct Offices~~ – This division includes our geographic sales offices that serve the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; and our public programs group.

·	~~Strategic Markets~~ – This division includes our government services office, the Sales Performance practice, the Customer Loyalty practice, and the "Global 50" group, which is specifically focused on sales to large, multi-national organizations.

·	~~Education practice~~ – ~~This division includes our domestic and international Education practice operations, which are centered on sales to educational institutions.~~

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Direct Offices – This segment includes our sales personnel that serve the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, Australia, Germany, Switzerland, and Austria; our governmental sales channel; our coaching operations; and our books and audio sales channel.

International Licensees – This segment is primarily comprised of our international licensees’ royalty revenues.

~~International Licensees~~ – ~~This division is primarily comprised of our international licensees' royalty revenues.~~

Education Practice – This group includes our domestic and international Education practice operations, which are focused on sales to educational institutions.

Corporate and Other – Our corporate and other information includes royalty revenue from Franklin Planner Corporation (Note 17), leasing operations, shipping and handling revenues, and certain corporate administrative expenses.

We have determined that the ~~Company's~~Company’s chief operating decision maker iscontinues to be the CEO, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts calculated by other companies. For reporting purposes, our consolidated Adjusted EBITDA can be calculated as our income or loss from operations excluding stock-based compensation, ~~contract termination costs, restructuring charges, depreciation expense, amortization expense, and certain other items such as impaired asset charges and adjustments for~~ changes in the fair value of contingent consideration liabilities from business ~~acquisitions.~~acquisitions, restructuring charges, depreciation expense, amortization expense, and certain other unusual or infrequent items.

Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the divisions for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes.

All prior period segment information has been revised to conform to our current organizational structure, assigned responsibilities, and primary internal reports. We account for our segment information on the same basis as the accompanying consolidated financial ~~statements.~~statements (in thousands).

Sales to
Fiscal Year Ended External Adjusted
August 31, 2017 Customers Gross Profit EBITDA

Direct offices $ 96,662 $ 65,950 $ 6,134
Strategic markets 22,974 13,601 (2,005 )
Education practice 44,122 27,916 6,043
International licensees 13,571 10,483 6,005
Total 177,329 117,950 16,177
Corporate and eliminations 7,927 4,717 (8,478 )
Consolidated $ 185,256 $ 122,667 $ 7,699

Fiscal Year Ended
August 31, 2016

Direct offices $ 103,605 $ 74,632 $ 17,791
Strategic markets 29,819 18,791 3,559
Education practice 40,844 24,513 4,787
International licensees 17,113 13,152 8,646
Total 191,381 131,088 34,783
Corporate and eliminations 8,674 4,066 (7,889 )
Consolidated $ 200,055 $ 135,154 $ 26,894

Fiscal Year Ended
August 31, 2015

Direct offices $ 113,087 $ 81,057 $ 18,801
Strategic markets 37,039 21,680 8,418
Education practice 33,681 19,350 3,084
International licensees 16,547 12,343 6,645
Total 200,354 134,430 36,948
Corporate and eliminations 9,587 3,659 (5,090 )
Consolidated $ 209,941 $ 138,089 $ 31,858

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	Sales to
Fiscal Year Ended	External				Adjusted
August 31, 2020	Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	139,780	$	108,144	$	17,694
International licensees		8,451		6,679		2,406
		148,231		114,823		20,100
Education Division		43,405		27,099		(90	)
Corporate and eliminations		6,820		3,448		(5,726	)
Consolidated	$	198,456	$	145,370	$	14,284

Fiscal Year Ended
August 31, 2019
Enterprise Division:
Direct offices	$	157,754	$	116,755	$	19,455
International licensees		12,896		10,231		6,072
		170,650		126,986		25,527
Education Division		48,880		30,373		3,553
Corporate and eliminations		5,826		1,955		(8,474	)
Consolidated	$	225,356	$	159,314	$	20,606

Fiscal Year Ended
August 31, 2018
Enterprise Division:
Direct offices	$	145,890	$	108,140	$	13,254
International licensees		13,226		10,031		5,081
		159,116		118,171		18,335
Education Division		45,272		28,654		2,710
Corporate and eliminations		5,370		1,464		(9,167	)
Consolidated	$	209,758	$	148,289	$	11,878

A reconciliation of Adjusted EBITDA to consolidated net ~~income (loss)~~loss is provided below (in thousands):


YEAR ENDED
AUGUST 31,	2017			2016			2015			2020			2019			2018
Enterprise Adjusted EBITDA	$	16,177		$	34,783		$	36,948
Segment Adjusted EBITDA										$	20,010		$	29,080		$	21,045
Corporate expenses		(8,478	)		(7,889	)		(5,090	)		(5,726	)		(8,474	)		(9,167	)
Consolidated Adjusted EBITDA		7,699			26,894			31,858			14,284			20,606			11,878
Stock-based compensation		(3,658	)		(3,121	)		(2,536	)		573			(4,789	)		(2,846	)
Reduction (increase) in
contingent consideration liability		1,936			(1,538	)		(35	)
Costs to exit Japan publishing business		(2,107	)		-			-
Contract termination costs		(1,500	)		-			-
contingent consideration liabilities											49			(1,334	)		(1,014	)
Restructuring costs		(1,482	)		(776	)		(587	)		(1,636	)		-			-
Gain from insurance settlement											933			-			-
Government COVID assistance											514			-			-
Knowledge Capital wind-down costs											(389	)		-			-
ERP system implementation costs		(1,404	)		(448	)		-			-			-			(855	)
China office start-up costs		(505	)		(222	)		-
Business acquisition costs		(442	)		-			-
Impaired assets		-			-			(1,302	)
Licensee transition costs											-			(488	)		-
Depreciation		(3,879	)		(3,677	)		(4,142	)		(6,664	)		(6,364	)		(5,161	)
Amortization		(3,538	)		(3,263	)		(3,727	)		(4,606	)		(4,976	)		(5,368	)
Income (loss) from operations		(8,880	)		13,849			19,529			3,058			2,655			(3,366	)
Interest income		379			325			383			56			37			104
Interest expense		(2,408	)		(2,263	)		(2,137	)		(2,318	)		(2,358	)		(2,676	)
Discount on related party receivable		-			-			(363	)
Accretion of discount on related
party receivable											-			258			418
Income (loss) before income taxes		(10,909	)		11,911			17,412			796			592			(5,520	)
Benefit (provision) for income taxes		3,737			(4,895	)		(6,296	)
Net income (loss)	$	(7,172	)	$	7,016		$	11,116
Provision for income taxes											(10,231	)		(1,615	)		(367	)
Net loss										$	(9,435	)	$	(1,023	)	$	(5,887	)

~~Geographic Information~~

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Disaggregated Revenue

Our revenues are derived primarily from the United States. However, we also operate ~~wholly owned~~directly-owned offices or contract with licensees to provide our services in various countries throughout the world. Our consolidated revenues were derived from the following countries/regions (in thousands):

YEAR ENDED
AUGUST 31, 2017 2016 2015
United States $ 137,219 $ 155,153 $ 162,594
Japan 14,482 14,997 14,446
China 11,552 3,884 2,424
United Kingdom 4,754 7,716 8,997
Canada 4,372 4,357 6,460
Australia 2,704 3,404 3,774
Western Europe 1,679 1,503 1,364
Thailand 1,147 1,226 1,055
Denmark/Scandinavia 775 863 729
Mexico/Central America 751 917 974
Middle East 723 584 670
Singapore 722 1,143 1,397
India 701 677 708
Central/Eastern Europe 638 644 492
Indonesia 614 579 651
Brazil 410 319 321
Malaysia 364 384 511
The Philippines 324 332 327
Others 1,325 1,373 2,047
$ 185,256 $ 200,055 $ 209,941


YEAR ENDED
AUGUST 31,	2020		2019		2018
Americas	$	160,989	$	173,784	$	159,595
Asia Pacific		11,845		14,457		12,715
Europe/Middle East/Africa		25,622		37,115		37,448
	$	198,456	$	225,356	$	209,758

The following table presents our revenue disaggregated by our significant revenue generating activities. Sales of services and products include training and consulting services and related products such as training manuals. Subscription sales include revenues from our subscription services such as the All Access Pass and Leader in Me membership. We receive royalty revenue from our international licensees and from other sources such as book publishing arrangements. Corporate royalties are amounts received from Franklin Planner Co. pursuant to a new licensing arrangement obtained in fiscal 2020 (Note 17). Leases and other revenue is primarily comprised of lease revenues from sub-leases for space at our corporate headquarters campus and from shipping and handling revenues (in thousands).


Fiscal Year Ended	Services and						Leases and
August 31, 2020	Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	75,580	$	60,954	$	3,246	$	-	$	139,780
International licensees		1,411		-		7,040		-		8,451
		76,991		60,954		10,286		-		148,231
Education Division		15,107		25,587		2,711		-		43,405
Corporate and eliminations		-		-		1,985		4,835		6,820
Consolidated	$	92,098	$	86,541	$	14,982	$	4,835	$	198,456

Fiscal Year Ended
August 31, 2019
Enterprise Division:
Direct offices	$	102,557	$	52,536	$	2,661	$	-	$	157,754
International licensees		2,439		-		10,457		-		12,896
		104,996		52,536		13,118		-		170,650
Education Division		23,779		22,151		2,950		-		48,880
Corporate and eliminations		-		-		-		5,826		5,826
Consolidated	$	128,775	$	74,687	$	16,068	$	5,826	$	225,356

Fiscal Year Ended
August 31, 2018
Enterprise Division:
Direct offices	$	100,730	$	42,465	$	2,695	$	-	$	145,890
International licensees		2,484		-		10,742		-		13,226
		103,214		42,465		13,437		-		159,116
Education Division		26,061		15,587		3,624		-		45,272
Corporate and eliminations		-		-		-		5,370		5,370
Consolidated	$	129,275	$	58,052	$	17,061	$	5,370	$	209,758

Inter-segment sales were immaterial for the periods presented and were eliminated in consolidation.

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Other Geographic Information

At August 31, ~~2017,~~2020, we had wholly owned direct offices in Australia, China, Japan, ~~and~~ the United ~~Kingdom. Our China direct offices opened on September 1, 2016.~~Kingdom, Germany, Switzerland, and Austria. Our long-lived assets, excluding intangible assets ~~goodwill,~~ and ~~the long-term portion of the related party receivable~~goodwill, were held in the following locations for the periods indicated (in thousands):

AUGUST 31, 2017 2016
United States/Canada $ 33,146 $ 27,288
Japan 2,350 2,045
Australia 466 349
China 301 -
United Kingdom 240 114
Singapore 152 -
$ 36,655 $ 29,796

~~Inter-segment sales were immaterial and were eliminated in consolidation.~~


AUGUST 31,	2020		2019
United States/Canada	$	28,327	$	31,129
Japan		1,537		1,456
China		1,307		441
United Kingdom		720		207
Germany, Switzerland, and Austria		240		10
Singapore		158		370
Australia		139		164
	$	32,428	$	33,777

~~18.~~

17. RELATED PARTY TRANSACTIONS

Knowledge Capital Investment Group

In December 2019, Knowledge Capital Investment Group (Knowledge Capital), an investor which held ~~a warrant to purchase 5.9~~2.8 million shares of our common stock ~~exercised~~stemming from its ~~warrant at various dates according~~initial investment in Franklin Covey over 20 years ago, wound up its operations and distributed its assets to investors. On December 9, 2019, prior to the ~~terms~~distribution of ~~a fiscal 2011 exercise agreement, and received a total of 2.2 million~~its assets to investors, we purchased 284,608 shares of our common stock from ~~shares held in treasury. Two members~~Knowledge Capital at $35.1361 per share, for an aggregate purchase price of $10.1 million, including legal costs. Our CEO and a member of our Board of Directors ~~including our CEO, have an equity~~each owned a partnership interest in Knowledge Capital.

~~Pursuant to a fiscal 2011 warrant exercise agreement with~~ At August 31, 2020, Knowledge Capital we filed a registration statement with the SEC on Form S-3 to register shares held by Knowledge Capital. This registration statement was declared effective on January 26, 2015. On May 20, 2015, Knowledge Capital sold 400,000 shares of our common stock on the open market and we diddoes not ~~purchase~~own any ~~of these shares. At each of August 31, 2017 and 2016, Knowledge Capital held 2.8 million~~ shares of our common stock.

FC Organizational Products

~~During the fourth quarter of fiscal 2008, we joined with Peterson Partners to create~~We previously owned a ~~new company,~~19.5 percent interest in FC Organizational Products ~~LLC. This new company~~(FCOP), an entity that purchased substantially all ~~of the assets~~ of our consumer solutions business unit ~~with~~assets in fiscal 2008 for the ~~objective~~purpose of ~~expanding the worldwide sales of FCOP as governed by~~selling planners and related organizational products under a comprehensive license agreement between us and FCOP. On the date of the sale closing, we invested approximately $1.8 million to purchase a 19.5 percent voting interest in FCOP, and made a $1.0 million priority capital contribution with a 10 percent return. At the time of the transaction, we determined that FCOP was not a variable interest entity.

licensing agreement. As a result of ~~FCOP's~~FCOP’s structure as a limited liability company with separate owner capital accounts, we determined that our investment in FCOP iswas more than minor and ~~that~~ we ~~are~~were required to account for our investment in FCOP using the equity method of accounting. We have not recorded our share of ~~FCOP's~~FCOP’s losses in the accompanying consolidated statements of operations and comprehensive loss because we have impaired and written off investment balances, as defined within the applicable accounting guidance, in ~~previous periods in~~ excess of our share of ~~FCOP's~~FCOP’s losses.

Due to significant operating losses ~~through August 31, 2017.~~

~~Table~~incurred after the establishment of ~~Contents~~

~~Based on changes to FCOP's debt agreements and certain other factors in fiscal 2012,~~FCOP, we reconsidered whether FCOP was a variable interest entity as defined under ~~FASC~~ASC 810, and determined that FCOP was a variable interest entity. Although the changes to the debt agreements did not modify the governing documents of FCOP, the changes were substantial enough to raise doubts regarding the sufficiency of FCOP's equity investment at risk. We further determined that we ~~are~~were not the primary beneficiary of FCOP because we dodid not have the ability to direct the activities that most significantly impact ~~FCOP's~~FCOP’s economic performance, which primarily ~~consist~~consisted of the day-to-day sale of planning products and related accessories, and we dodid not have an obligation to absorb losses or the right to receive benefits from FCOP that could ~~potentially be~~have been significant. ~~Our voting rights and management board representation approximate our ownership interest and we are unable to exercise control through voting interests or through other means.~~

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On November 4, 2019, FCOP sold substantially all of its assets to Franklin Planner Corporation (FPC), a new unrelated entity, and FCOP was dissolved. FPC has continued FCOP’s business of selling planners and other related consumer products based on the license agreement which granted FCOP the exclusive rights described below.

In connection with this transaction, we exchanged approximately $3.2 million of receivables from FCOP to amend the term and royalty provisions of the existing license agreement. The ~~operations~~$3.2 million of consideration included a $2.6 million note receivable, which represented FCOP’s third-party bank debt that we purchased directly from the bank on the transaction date. The amended license agreement grants the exclusive right to use certain of our trademarks and other intellectual property in connection with certain consumer products and provides us with minimum royalties of approximately $1.3 million per year. We are also entitled to receive additional variable royalties if certain FPC financial metrics exceed specified levels. FPC assumed the amended license agreement from FCOP upon the purchase of FCOP ~~are primarily financed by~~assets. We recorded the sale of planning products and accessories, and our primary exposure related to FCOP is from amounts owed to us by FCOP. We receive reimbursement from FCOP for certain operating costs and rental payments$3.2 million consideration for the ~~office space that FCOP occupies.~~amendment to the license agreement as a capitalized cost of the license agreement (Note 2) and will reduce our royalty revenue by amortizing this amount over the remainder of the initial term of the license agreement, which ends in approximately 30 years. During the fiscal year ended August 31, 2020, we recognized $2.0 million of net royalty revenues from the amended license agreement with FPC.

We ~~classify our receivables from FCOP based upon expected payment. Long-term receivable balances are discounted at 15 percent, which was~~do not have an ownership interest in FPC, do not have any obligation to provide additional subordinated support to FPC, do not have control over the ~~estimated risk-adjusted borrowing rate~~day-to-day operations of FCOP. This rate was based on a variety of factors including, but not limited to, current market interest rates for various qualities of comparable debt, discussions with FCOP's lenders, and an evaluation of the realizability of FCOP's future cash flows. In fiscal 2013, we began to accrete this long-term receivable and the majority of our interest income from fiscal 2015 through fiscal 2017 is attributable to the accretion of interest on long-term receivables.

During fiscal 2015, we determined that we will receive payment from FCOP for certain rent expenses earlier than previously estimated and we recognized additional leasing revenues from FCOP totaling $0.2 million due to the change in the priority of the payment of these items. Although we were able to record additional leasing revenues and our cash flows on current related party receivables will improve in the short term, the present value of our share of cash distributions to cover remaining long-term receivables was reduced and was less than the present value of the receivables previously recordedFPC, and accordingly ~~the Company recalculated its discount on the long-term receivables~~do not account for FPC as a variable interest entity. We receive payments for royalties and ~~impaired the remaining balance, which totaled $0.5 million.~~

rented space from FPC. At August 31, ~~2017 and 2016,~~2020, we had $1.7 million ~~(net of $0.7~~receivable from FPC and at August 31, 2019, we had $1.0 million ~~discount) and $3.2 million (net of $0.8 million discount)~~ receivable from FCOP, each of which ~~have been classified~~are recorded in current ~~assets~~assets. Since most of FPC’s sales and ~~long-term assets in~~cash flows are seasonal and occur between October and January, we expect to receive the majority of the required cash payments for royalties and outstanding receivables during our ~~consolidated balance sheets based on expected~~second and third quarters of each fiscal year. During fiscal 2020, we received $1.4 million of cash from FPC as payment ~~dates. We also owed FCOP approximately $9,000~~for royalties and $0.1 million at August 31, 2017 and 2016, respectively, for items purchased in the ordinary course of business. These liabilities were classified in accounts payable in the accompanying consolidated balance sheets.reimbursable operating costs.

CoveyLink Acquisition and Contractual Payments

~~During fiscal 2009, we~~We previously acquired the assets of CoveyLink Worldwide, LLC (CoveyLink). CoveyLink conducts training and provides consulting based upon the book The Speed of Trust by Stephen M.R. Covey, who is the brother of one of our executive officers.

~~We accounted for the acquisition of CoveyLink using the guidance found in Statement of Financial Accounting Standards No. 141,~~ ~~Business Combinations~~. The previous owners of CoveyLink were entitled to earn annual contingent payments based upon earnings growth during the five years following the acquisition. During fiscal 2015, we completed a review of the contingent consideration payments and determined that we owed the former owners of CoveyLink an additional $0.3 million for performance during the measurement period. We do not anticipate any further payments related to the acquisition of CoveyLink. The annual contingent payments were classified as goodwill in our consolidated balance sheets under the accounting guidance applicable at the time of the acquisition.

Prior to the acquisition date, CoveyLink had granted us a non-exclusive license for content related to The Speed of Trust book and related training courses for which we paid CoveyLink specified royalties. As part

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of the CoveyLink acquisition, we signed an amended and restated license for intellectual property ~~was signed~~ that granted us an exclusive, perpetual, worldwide, transferable, royalty-bearing license to use, reproduce, display, distribute, sell, prepare derivative works of, and perform the licensed material in any format or medium and through any market or distribution channel. We are required to pay ~~the brother of one of our executive officers~~Stephen M.R. Covey royalties for the use of certain intellectual property developed by him. The amount expensed for these royalties totaled ~~$1.5~~$1.6 million, ~~$1.4~~$1.7 million, and ~~$1.4~~$1.8 million during the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015.~~2018. As part of the acquisition of CoveyLink, we signed an amended license agreement as well as a speaker services agreement. Based on the provisions of the ~~speakers'~~speakers’ services agreement, we pay ~~the brother of one of our executive officers~~Stephen M.R. Covey a portion of the speaking revenues received for his presentations. We expensed $0.8 million, $1.2 million, ~~$1.3 million,~~ and ~~$1.0~~$0.9 million for payment on these presentations during the fiscal years ~~2017, 2016~~ended August 31, 2020, 2019 and ~~2015.~~2018. We had ~~$0.7~~$0.2 million and $0.6 million accrued for these royalties and speaking fees at ~~each of~~ August 31, ~~2017~~2020 and ~~2016,~~2019, respectively, which were included as components of accrued liabilities inon our consolidated balance sheets.

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Acquired License Rights for Intellectual Property

During ~~the third quarter of~~ fiscal 2017, we acquired the license rights for certain intellectual property owned by Higher Moment, LLC for $0.8 million. The intellectual property is in part based on works authored and developed by Dr. Clayton Christensen, a well-known author and lecturer, who iswas a member of our Board of ~~Directors.~~Directors prior to his passing in January 2020. However, Dr. Christensen ~~does~~did not have an ownership interest in Higher Moment, LLC. The initial license period is five years and the agreement may be renewed for successive five-year periods for $0.8 million at each renewal date. The agreement may be terminated by either party at any time, but if we choose to terminate the agreement prior to the third renewal date, we are required to pay $0.3 million to Higher Moment, LLC.

Other Related Party Transactions

We pay an executive officer of the Company a percentage of the royalty proceeds received from the sales of certain books authored by him in addition to his annual salary. During the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015,~~2018, we expensed ~~$0.2~~$0.1 million, ~~$0.3~~$0.1 million, and $0.2 million for these ~~royalties,~~royalties. We had an insignificant amount accrued to this executive officer at August 31, 2020 and ~~we had~~ $0.1 ~~million and $0.2~~ million accrued at August 31, ~~2017 and 2016~~2019 as payable under the terms of these arrangements. These amounts are included as ~~a component~~components of accrued liabilities in our consolidated balance sheets.

We pay a company owned by the ~~estate~~brother of a member of our executive management team for the ~~late Dr. Stephen R. Covey a percentage~~production of video segments used in our offerings. During the ~~royalty proceeds received from the sale of certain books that were authored by him. We expensed $0.1 million in each of~~ fiscal ~~2016 and fiscal 2015 for royalties under these agreements. At~~years ended August 31, ~~2016,~~2020 and 2019, we ~~had $0.2~~paid $1.0 million ~~accrued~~and $0.8 million to this company for payment to the estate of the former Vice-Chairman under these royalty agreements. Amounts payable to the estate of Dr. Stephen R. Covey are included as components of accrued liabilities in our consolidated balance sheets.services provided.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in the ~~Company's~~Company’s reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the ~~SEC's~~SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to the ~~Company's~~Company’s management, including the ~~Company's~~Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

An evaluation was conducted under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this report.

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

~~Management's~~Management’s Report on Internal Control Over Financial Reporting

The management of Franklin Covey Co. is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (including its consolidated subsidiaries) and all related information appearing in the ~~Company's annual report~~Company’s Annual Report on Form 10-K. The ~~Company's~~Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that:

1.	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of management and/or of our Board of Directors; and

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3.	provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth in Internal Control—Integrated Framework as issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO Framework). Based upon this evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the period covered by this ~~annual report~~Annual Report on Form 10-K.

Our independent registered public accounting firm, Deloitte & Touche LLP, has audited the consolidated financial statements included in this annual report on Form 10-K and, as part of their audit, has issued an audit report, included herein, on the effectiveness of our internal control over financial reporting. Their report is included in Item 8 of this Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the fourth quarter ended August 31, ~~2017~~2020 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information required by this Item is incorporated by reference to the sections entitled ~~"Nominees~~“Nominees for Election to the Board of Directors,~~" "Section~~” “Delinquent Section 16(a) ~~Beneficial Ownership Reporting Compliance," "Corporate~~Reports,” “Corporate Governance,"” and ~~"Board~~“Board of Director ~~Meetings~~Committees and ~~Committees"~~Meetings” in our definitive Proxy Statement for the annual meeting of shareholders, which is scheduled to be held on January ~~26, 2018.~~22, 2021. The definitive Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. Executive officer biographies may be found in Item 1, under the section entitled ~~"Executive~~“Information About Our Executive Officers,"” of this report on Form 10-K.

The Board of Directors has determined that one of the Audit Committee members, Mr. Michael Fung, is a ~~"financial expert"~~“financial expert” as defined in Regulation S-K 407(d)(5) adopted under the Securities Exchange Act of 1934, as amended. Our Board of Directors has also determined that Mr. Fung is an ~~"independent director"~~“independent director” as defined by the ~~New York Stock Exchange (NYSE).~~NYSE.

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We have adopted a code of ethics for our senior financial officers that include the Chief Executive Officer, the Chief Financial Officer, and other members of our financial leadership team. This code of ethics is available on our website at ~~www.franklincovey.com~~.www.franklincovey.com. We intend to satisfy any disclosure requirements under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of this Code of Business Conduct and Ethics by posting such information on our web site at the address and location specified above.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the sections entitled ~~"Compensation~~“Compensation Discussion and Analysis,~~" "Compensation~~” “Compensation Committee Interlocks and Insider Participation,"” and ~~"Compensation~~“Compensation Committee ~~Report"~~Report” in our definitive Proxy Statement for the annual meeting of shareholders, which is scheduled to be held on January ~~26, 2018.~~22, 2021.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

[a] [b] [c]

Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a])
(in thousands) (in thousands)
Equity compensation plans approved by security holders⁽¹⁾⁽⁴⁾
1,129
⁽²⁾
$ 11.41 1,481
⁽³⁾

Securities Authorized for Issuance Under Equity Compensation Plans

[a]

[b]

[c]

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants, and rights

Weighted-average exercise price of outstanding options, warrants, and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a])

(in thousands)

Equity compensation plans approved by security holders

1,049

⁽¹⁾⁽²⁾

11.57

1,373

⁽³⁾⁽⁴⁾

⁽¹⁾	Excludes ~~29,834~~21,420 shares of ~~unvested (restricted)~~restricted stock awards ~~and stock units~~ that are subject to forfeiture.

⁽²⁾

Amount includes ~~560,110~~829,840 performance share awards that may be awarded under the terms of various long-term incentive plans. The number of shares eventually awarded to participants through our long-term incentive plans is variable and based upon the achievement of specified financial goals. For performance-based compensation awards where the number of shares may fluctuate within a range based on the achievement of the specified goal, this amount includes the maximum number of shares that may be awarded to participants. The actual number of shares issued to participants therefore, may be less than the amount disclosed. The weighted average exercise price of outstanding options, warrants, and rights does not include the impact of performance ~~awards.~~awards or restricted stock units. For further information on our ~~share-based~~stock-based compensation plans, refer to the notes to our financial statements as presented in Item 8 of this report.

⁽³⁾

Amount is ~~based upon~~comprised of the remaining shares authorized under our 2019 Omnibus Incentive Plan and 2017 Employee Stock Purchase Plan. The number of performance-based plan shares expected to be awarded at August 31, ~~2017 and~~2020 may change in future periods based upon the achievement of specified goals and revisions to estimates.

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⁽⁴⁾	At August 31, ~~2017,~~2020, we had approximately ~~987,000~~862,000 shares authorized for purchase by participants in our Employee Stock Purchase Plan.

Beneficial Ownership of Company Stock

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The remaining information required by this Item is incorporated by reference to the section entitled ~~"Principal~~“Principal Holders of Voting ~~Securities"~~Securities” in our definitive Proxy Statement for the annual meeting of shareholders, which is scheduled to be held on January ~~26, 2018.~~22, 2021.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to the section entitled ~~"Certain~~“Certain Relationships and Related ~~Transactions"~~Transactions” and ~~"Corporate Governance"~~“Corporate Governance” in our definitive Proxy Statement for the annual meeting of shareholders, which is scheduled to be held on January ~~26, 2018.~~22, 2021.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to the section entitled ~~"Principal~~“Principal Accountant ~~Fees"~~Fees” in our definitive Proxy Statement for the annual meeting of shareholders, which is scheduled to be held on January ~~26, 2018.~~22, 2021.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)List of documents filed as part of this report:

1.	Financial Statements. The consolidated financial statements of the Company and Report of Independent Registered Public Accounting Firm thereon included in the Annual Report to Shareholders on Form 10-K for the year ended August 31, ~~2017,~~2020, are as follows:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at August 31, ~~2017~~2020 and ~~2016~~2019

Consolidated Statements of Operations and Statements of Comprehensive ~~Income (Loss)~~Loss for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015~~2018

Consolidated Statements of Cash Flows for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015~~2018

Consolidated Statements of ~~Shareholders'~~Shareholders’ Equity for the fiscal years ended August 31, ~~2017, 2016,~~2020, 2019, and ~~2015~~2018

Notes to Consolidated Financial Statements

2.	Financial Statement Schedules.

Other financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the financial statements or notes thereto, or contained in this report.

3.	Exhibit List.

Exhibit No.	Exhibit	Incorporated By Reference	Filed Herewith	Exhibit	Incorporated By Reference	Filed Herewith
2.1	Master Asset Purchase Agreement between Franklin Covey Products, LLC and Franklin Covey Co. dated May 22, 2008	(9)		Master Asset articles of restatement march 4, 2005Purchase Agreement between Franklin Covey Products, LLC and Franklin Covey Co. dated May 22, 2008	(8)
2.2	Amendment to Master Asset Purchase Agreement between Franklin Covey Products, LLC and Franklin Covey Co. dated May 22, 2008	(10)		Amendment to Master Asset Purchase Agreement between Franklin Covey Products, LLC and Franklin Covey Co. dated May 22, 2008	(9)
3.1	Articles of Restatement dated March 4, 2005 amending and restating the Company's Articles of Incorporation	(4)		Articles of Restatement dated March 4, 2005 amending and restating the Company’s Articles of Incorporation	(4)
3.2	Amendment to Amended and Restated Articles of Incorporation of Franklin Covey (Appendix C)	(7)		Amendment to Amended and Restated Articles of Incorporation of Franklin Covey (Appendix C)	(7)
3.3	Amended and Restated Bylaws of Franklin Covey Co.	(16)		Amended and Restated Bylaws of Franklin Covey Co.	(14)
4.1	Specimen Certificate of the Registrant's Common Stock, par value $.05 per share	(2)		Specimen Certificate of the Registrant’s Common Stock, par value $.05 per share	(2)

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4.2	Stockholder Agreements, dated May 11, 1999 and June 2, 1999	(3)	Stockholder Agreements, dated May 11, 1999 and June 2, 1999	(3)
4.3	Registration Rights Agreement, dated June 2, 1999	(3)	Registration Rights Agreement, dated June 2, 1999	(3)
4.4	Amended and Restated Shareholders Agreement, dated as of March 8, 2005, between the Company and Knowledge Capital Investment Group	(4)	Amended and Restated Shareholders Agreement, dated as of March 8, 2005, between the Company and Knowledge Capital Investment Group	(4)
4.5	Amended and Restated Registration Rights Agreement, dated as of March 8, 2005, between the Company and Knowledge Capital Investment Group	(4)	Amended and Restated Registration Rights Agreement, dated as of March 8, 2005, between the Company and Knowledge Capital Investment Group	(4)
4.6			Description of Securities Registered Under Section 12 of the Exchange Act	(20)
10.1*	Amended and Restated 2004 Employee Stock Purchase Plan	(8)	Forms of Nonstatutory Stock Options	(1)
10.2*	Forms of Nonstatutory Stock Options	(1)
10.2			Master Lease Agreement, dated June 17, 2005, between Franklin SaltLake LLC (Landlord) and Franklin Development Corporation (Tenant)	(5)
10.3	Master Lease Agreement, dated June 17, 2005, between Franklin SaltLake LLC (Landlord) and Franklin Development Corporation (Tenant)	(5)	Purchase and Sale Agreement and Escrow Instructions between Levy Affiliated Holdings, LLC (Buyer) and Franklin Development Corporation (Seller) and Amendments	(5)
10.4	Purchase and Sale Agreement and Escrow Instructions between Levy Affiliated Holdings, LLC (Buyer) and Franklin Development Corporation (Seller) and Amendments	(5)	Redemption Extension Voting Agreement between Franklin Covey Co. and Knowledge Capital Investment Group, dated October 20, 2005	(6)
10.5	Redemption Extension Voting Agreement between Franklin Covey Co. and Knowledge Capital Investment Group, dated October 20, 2005	(6)	Master License Agreement between Franklin Covey Co. and Franklin Covey Products, LLC	(10)
10.6	Master License Agreement between Franklin Covey Co. and Franklin Covey Products, LLC	(11)	Master Shared Services Agreement between The Franklin Covey Products Companies and the Shared Services Companies	(10)
10.7	Supply Agreement between Franklin Covey Products, LLC and Franklin Covey Product Sales, Inc.	(11)	Amended and Restated Operating Agreement of Franklin Covey Products, LLC	(10)
10.8	Master Shared Services Agreement between The Franklin Covey Products Companies and the Shared Services Companies	(11)	Sublease Agreement between Franklin Development Corporation and Franklin Covey Products, LLC	(10)
10.9	Amended and Restated Operating Agreement of Franklin Covey Products, LLC	(11)	Sub-Sublease Agreement between Franklin Covey Co. and Franklin Covey Products, LLC	(10)
10.10	Sublease Agreement between Franklin Development Corporation and Franklin Covey Products, LLC	(11)	Asset Purchase Agreement by and Among Covey/Link, LLC, CoveyLink Worldwide LLC, Franklin Covey Co., and Franklin Covey Client Sales, Inc. dated December 31, 2008	(11)
10.11	Sub-Sublease Agreement between Franklin Covey Co. and Franklin Covey Products, LLC	(11)	Amended and Restated License of Intellectual Property by and Among Franklin Covey Co. and Covey/Link, LLC, dated December 31, 2008	(11)
10.12	Asset Purchase Agreement by and Among Covey/Link, LLC, CoveyLink Worldwide LLC, Franklin Covey Co., and Franklin Covey Client Sales, Inc. dated December 31, 2008	(12)
10.12*			Franklin Covey Co. Second Amended and Restated 1992 Stock Incentive Plan	(12)
10.13	Amended and Restated License of Intellectual Property by and Among Franklin Covey Co. and Covey/Link, LLC, dated December 31, 2008	(12)	Agreement dated July 26, 2011, between Franklin Covey Co., and Knowledge Capital Investment Group	(13)
10.14*	Franklin Covey Co. Second Amended and Restated 1992 Stock Incentive Plan	(13)	Form of Change in Control Severance Agreement	(15)
10.15	Amended and Restated Credit Agreement by and between JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated March 14, 2011	(14)
10.15*			Franklin Covey Co. 2015 Omnibus Incentive Plan	(16)

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10.16
Amended and Restated Security Agreement by and among Franklin Covey Co., Franklin Development Corporation, Franklin Covey Travel, Inc., Franklin Covey Client Sales, Inc., and JPMorgan Chase Bank, N.A., dated March 14, 2011

(14)

10.17
Amended and Restated Repayment Guaranty by and among Franklin Development Corporation, Franklin Covey Travel, Inc., Franklin Covey Client Sales, Inc., and JPMorgan Chase Bank, N.A., dated March 14, 2011

(14)

10.18
Agreement dated July 26, 2011, between Franklin Covey Co., and Knowledge Capital Investment Group

(15)

10.19
First Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated March 13, 2012

(17)

10.20
Second Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated June 15, 2012

(18)

10.21*
Form of Change in Control Severance Agreement

(19)

10.22
Asset Purchase Agreement made as of March 11, 2013 by and among NinetyFive 5 LLC and Franklin Covey Client Sales, Inc. and other parties thereto

(20)

10.23
Third Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co. dated March 25, 2013

(21)

10.24*
Franklin Covey Co. 2015 Omnibus Incentive Plan

(22)

10.25
Fourth Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co. dated March 31, 2015

(23)

10.26
Fifth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated May 24, 2016

(24)

10.27
Secured Promissory Note between Franklin Covey Co. and JPMorgan Chase Bank, N.A., for $15 million term loan, dated May 24, 2016

(24)

10.28
Sixth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated February 28, 2017

(25)

10.29
Seventh Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated May 31, 2017

(26)

10.30
Eighth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated August 29, 2017

(27)

10.31
Consent and Agreement of Guarantor by and between JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated August 29, 2017

(27)

10.16*	Franklin Covey Co. 2017 Employee Stock Purchase Plan (incorporated by reference to Appendix A in the Company’s Proxy Statement (File No. 001-11107) filed with the Securities and Exchange Commission on December 22, 2017)	(17)
10.17*	Franklin Covey Co. 2019 Omnibus Incentive Plan	(18)
10.18	Credit Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors party thereto, dated August 7, 2019	(19)
10.19	Pledge and Security Agreement by and between JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors party thereto, dated August 7, 2019	(19)
10.20	First Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated July 8, 2020	(21)
21	Subsidiaries of the Registrant		éé
23	Consent of Independent Registered Public Accounting Firm		éé
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer		éé
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer		éé
32	Section 1350 Certifications		éé
101.INS	XBRL Instance Document		éé
101.SCH	XBRL Taxonomy Extension Schema		éé
101.CAL	XBRL Taxonomy Extension Calculation Linkbase		éé
101.DEF	XBRL Taxonomy Extension Definition Linkbase		éé
101.LAB	XBRL Taxonomy Extension Label Linkbase		éé
101.PRE	XBRL Extension Presentation Linkbase		éé

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21	~~Subsidiaries of the Registrant~~	éé
~~23.1~~	~~Consent of Independent Registered Public Accounting Firm~~	éé
~~23.2~~	~~Consent of Independent Registered Public Accounting Firm~~	éé
~~31.1~~	~~Rule 13a-14(a) Certification of the Chief Executive Officer~~	éé
~~31.2~~	~~Rule 13a-14(a) Certification of the Chief Financial Officer~~	éé
32	~~Section 1350 Certifications~~	éé
~~101.INS~~	~~XBRL Instance Document~~	éé
~~101.SCH~~	~~XBRL Taxonomy Extension Schema~~	éé
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase~~	éé
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase~~	éé
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~	éé
~~101.PRE~~	~~XBRL Extension Presentation Linkbase~~	éé

(1)	Incorporated by reference to Registration Statement on Form S-1 filed with the Commission on April 17, 1992, Registration No. 33-47283.

(2)	Incorporated by reference to Amendment No. 1 to Registration Statement on Form S-1 filed with the Commission on May 26, 1992, Registration No. 33-47283.

(3)	Incorporated by reference to Schedule 13D (CUSIP No. 534691090 as filed with the Commission on June 14, 1999). Registration No. 005-43123.

(4)	Incorporated by reference to Report on Form 8-K filed with the Commission on March 10, 2005.**

(5)	Incorporated by reference to Report on Form 8-K filed with the Commission on June 27, 2005.**

(6)	Incorporated by reference to Report on Form 8-K filed with the Commission on October 24, 2005.**

(7)	Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A filed with the Commission on December 12, 2005.**

(8)	Incorporated by reference to Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on February 1, 2005.**

~~(9)~~

Incorporated by reference to Report on Form 8-K/A filed with the Commission on May 29, 2008.**

~~(10)~~

(9)

Incorporated by reference to Report on Form 10-Q filed July 10, 2008, for the Quarter ended May 31, 2008.**

~~(11)~~

(10)

Incorporated by reference to Report on Form 8-K filed with the Commission on July 11, 2008.**

~~(12)~~

(11)

Incorporated by reference to Report on Form 10-Q filed with the Commission on April 9, 2009.**

~~(13)~~

(12)

Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 15, 2010.**

~~(14)~~

Incorporated by reference to Report on Form 8-K filed with the Commission on March 17, 2011.**

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~~(15)~~

(13)

Incorporated by reference to Report on Form 8-K filed with the Commission on July 28, 2011.**

~~(16)~~

(14)

Incorporated by reference to Report on Form 8-K filed with the Commission on February 1, 2012.**

~~(17)~~

(15)

Incorporated by reference to Report on Form 8-K filed with the Commission on March 15, 2012.**

~~(18)~~

Incorporated by reference to Report on Form 8-K filed with the Commission on June 19, 2012.**

~~(19)~~

Incorporated by reference to Report on Form 8-K filed with the Commission on March 14, 2012.**

~~(20)~~

(16)

Incorporated by reference to ~~Report on Form 8-K filed with~~ the Commission on March 14, 2013.**

~~(21)~~

Incorporated by reference to Report on Form 8-K filed with the Commission on March 27, 2013.**

~~(22)~~

~~Incorporated by reference to~~ Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 22, 2014.**

~~(23)~~

(17)

Incorporated by reference to ~~Report~~the Definitive Proxy Statement on Form ~~8-K~~DEF 14A (Appendix A) filed with the Commission on April 2, 2015.**

~~(24)~~

Incorporated by reference to Report on Form 8-K filed with the Commission on May 24, 2016.**

~~(25)~~

~~Incorporated by reference to Report on Form 8-K filed with the Commission on March 3,~~December 22, 2017.**

~~(26)~~

(18)

Incorporated by reference to ~~Report~~the Definitive Proxy Statement on Form ~~8-K~~DEF 14A (Appendix A) filed with the Commission on ~~June 1, 2017.~~December 20, 2018.**

~~(27)~~

(19)

Incorporated by reference to Report on Form 8-K filed with the Commission on August ~~29, 2017.~~8, 2019.**

(20)	Incorporated by reference to Report on Form 10-K/A filed with the Commission on December 12, 2019.**

(21)	Incorporated by reference to Report on Form 8-K filed with the Commission on July 10, 2020.**

éé Filed herewith and attached to this report.

* Indicates a management contract or compensatory plan or agreement.

** Registration No. 001-11107.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 November ~~14, 2017.~~16, 2020.

FRANKLIN COVEY CO.

	By:	/s/ Robert A. Whitman
		Robert A. Whitman Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Robert A. Whitman	Chairman of the Board and Chief Executive Officer	November ~~14, 2017~~16, 2020
Robert A. Whitman
/s/ Anne Chow	Director	November ~~14, 2017~~16, 2020
Anne Chow
~~/s/ Clayton M. Christensen~~	~~Director~~	~~November 14, 2017~~
~~Clayton M. Christensen~~
/s/ Michael Fung	Director	November ~~14, 2017~~16, 2020
Michael Fung
/s/ Dennis G. Heiner	Director	November ~~14, 2017~~16, 2020
Dennis G. Heiner
/s/ Donald J. McNamara	Director	November ~~14, 2017~~16, 2020
Donald J. McNamara
/s/ Joel C. Peterson	Director	November ~~14, 2017~~16, 2020
Joel C. Peterson
/s/ Nancy Phillips	Director	November 16, 2020
Nancy Phillips
/s/ E. Kay Stepp	Director	November ~~14, 2017~~16, 2020
E. Kay Stepp
/s/ Derek van Bever	Director	November 16, 2020
Derek van Bever
/s/ Stephen D. Young	Chief Financial Officer and Chief Accounting Officer	November ~~14, 2017~~16, 2020
Stephen D. Young


☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, ~~2017~~2020
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___


Utah	1-11107	87-0401551
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(IRS Employer Identification No.)

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $.05 Par Value	FC	New York Stock Exchange

Large ~~accelerated filer~~Accelerated Filer	☐	Accelerated Filer	☑
Non-accelerated Filer	☐	£ Smaller Reporting Company	☑
Emerging growth company			~~Accelerated filer~~	☑	☐

	Year Ended August 31, 2020		% of Sales		Year Ended August 31, 2019		% of Sales		Change
Sales	$	139,780		100.0	$	157,754		100.0	$	(17,974	)
Cost of sales		31,636		22.6		40,999		26.0		(9,363	)
Gross profit		108,144		77.4		116,755		74.0		(8,611	)
SG&A expenses		90,450		64.7		97,300		61.7		(6,850	)
Adjusted EBITDA	$	17,694		12.7	$	19,455		12.3	$	(1,761	)

	High		Low
Fiscal Year Ended August 31, 2017:
Fourth Quarter	$	21.10	$	17.35
Third Quarter		22.30		15.20
Second Quarter		21.45		16.95
First Quarter		22.45		15.44

Fiscal Year Ended August 31, 2016:
Fourth Quarter	$	17.53	$	13.45
Third Quarter		18.14		13.83
Second Quarter		18.28		14.36
First Quarter		17.81		13.77

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs⁽¹⁾ (in thousands)
June 1, 2017 to June 30, 2017		-	$	-	-		$	16,394

July 1, 2017 to July 31, 2017		24,000		18.46		24,000		15,951

August 1, 2017 to August 31, 2017		153,089		18.14		153,089		13,174

Total Common Shares⁽²⁾		177,089	$	18.18		177,089

YEAR ENDED AUGUST 31,	2017		Percent change			2016		Percent change			2015
Sales by Category:
Training and consulting services	$	177,816		(6	)	$	189,661		(5	)	$	198,695
Products		3,881		(35	)		6,009		(13	)		6,885
Leasing		3,559		(19	)		4,385		1			4,361
	$	185,256		(7	)	$	200,055		(5	)	$	209,941

Sales by Segment:
Direct offices	$	96,662		(7	)	$	103,605		(8	)	$	113,087
Strategic markets		22,974		(23	)		29,819		(19	)		37,039
Education practice		44,122		8			40,844		21			33,681
International licensees		13,571		(21	)		17,113		3			16,547
Corporate and other		7,927		(9	)		8,674		(10	)		9,587
	$	185,256		(7	)	$	200,055		(5	)	$	209,941

YEAR ENDED AUGUST 31,	2020		% change		2019		% change		2018
Enterprise Division:
Direct offices	$	139,780		(11)	$	157,754		8	$	145,890
International licensees		8,451		(34)		12,896		(3)		13,226
		148,231		(13)		170,650		7		159,116
Education Division		43,405		(11)		48,880		8		45,272
Corporate and other		6,820		17		5,826		8		5,370
Consolidated sales	$	198,456		(12)	$	225,356		7	$	209,758

YEAR ENDED AUGUST 31, 2017 (unaudited)
	November 26			February 28			May 31			August 31
Net sales	$	39,787		$	42,196		$	43,751		$	59,523
Gross profit		25,308			28,031			27,341			41,988
Selling, general, and administrative		29,095			29,370			30,713			31,970
Contract termination costs		-			1,500			-			-
Restructuring costs		-			-			1,335			147
Depreciation		866			928			949			1,136
Amortization		722			721			835			1,261
Income (loss) from operations		(5,375	)		(4,488	)		(6,491	)		7,474
Income (loss) before income taxes		(5,879	)		(5,002	)		(7,023	)		6,995
Net income (loss)		(3,958	)		(3,333	)		(4,541	)		4,659

Net income (loss) per share:
Basic	$	(.29	)	$	(.24	)	$	(.33	)	$	.34
Diluted		(.29	)		(.24	)		(.33	)		.33

YEAR ENDED AUGUST 31, 2016 (unaudited)
YEAR ENDED AUGUST 31, 2020 (unaudited)
	November 28			February 27			May 28			August 31		November 30			February 29			May 31			August 31
Net sales	$	45,218		$	45,269		$	44,738		$	64,831	$	58,613		$	53,745		$	37,105		$	48,994
Gross profit		30,071			29,854			29,562			45,667		42,029			38,666			26,821			37,854
Selling, general, and administrative		26,489			27,936			29,095			30,069		39,399			36,221			24,150			29,636
Restructuring costs		-			376			-			400		-			-			-			1,636
Depreciation		912			894			1,003			868		1,619			1,653			1,652			1,739
Amortization		910			909			722			721		1,170			1,170			1,164			1,102
Income (loss) from operations		1,760			(261	)		(1,258	)		13,609		(159	)		(378	)		(145	)		3,741
Income (loss) before income taxes		1,296			(730	)		(1,741	)		13,086		(760	)		(922	)		(748	)		3,226
Net income (loss)		790			(448	)		(1,052	)		7,726		(544	)		1,097			(10,968	)		980

Net income (loss) per share:
Basic and diluted	$	.05		$	(.03	)	$	(.07	)	$	.55	$	(.04	)	$	.08		$	(.79	)	$	.07

YEAR ENDED AUGUST 31, 2019 (unaudited)
												November 30			February 28			May 31			August 31
Net sales												$	53,829		$	50,356		$	56,006		$	65,165
Gross profit													36,783			35,366			39,664			47,502
Selling, general, and administrative													34,644			35,925			38,713			36,037
Depreciation													1,554			1,697			1,556			1,558
Amortization													1,238			1,300			1,259			1,179
Income (loss) from operations													(653	)		(3,556	)		(1,864	)		8,728
Income (loss) before income taxes													(1,257	)		(3,927	)		(2,418	)		8,194
Net income (loss)													(1,357	)		(3,517	)		(2,024	)		5,875

Net income (loss) per share:
Basic												$	(.10	)	$	(.25	)	$	(.14	)	$	.42
Diluted													(.10	)		(.25	)		(.14	)		.41

	Fiscal		Fiscal		Fiscal		Fiscal		Fiscal						Fiscal		Fiscal		Fiscal		Fiscal		Fiscal
Contractual Obligations	2018		2019		2020		2021		2022		Thereafter		Total		2021		2022		2023		2024		2025		Thereafter		Total
Term loans payable to bank⁽¹⁾															$	5,605	$	5,430	$	5,255	$	5,080	$	-	$	-	$	21,370
Required lease payments on corporate campus	$	3,579	$	3,651	$	3,724	$	3,798	$	3,874	$	11,283	$	29,909		3,798		3,874		3,952		4,031		3,301		-		18,956
Term loans payable to bank⁽¹⁾		6,736		10,581		2,557		-		-		-		19,874
Jhana Education contingent consideration payments⁽²⁾		2,371		599		831		1,020		1,160		1,219		7,200
Purchase obligations		6,608		-		-		-		-		-		6,608		4,761		-		-		-		-		-		4,761
Jhana contingent consideration payments⁽²⁾																845		998		1,128		381		-		-		3,352
Minimum operating lease payments		866		321		84		84		84		268		1,707		751		208		121		97		87		14		1,278
Robert Gregory Partners, LLC contingent consideration payments⁽²⁾		-		1,000		-		-		-		-		1,000
Minimum required payments for warehousing services⁽³⁾		216		180		-		-		-		-		396
RGP contingent consideration payments⁽²⁾																816		-		-		-		-		-		816
Total expected contractual obligation payments	$	20,376	$	16,332	$	7,196	$	4,902	$	5,118	$	12,770	$	66,694	$	16,576	$	10,510	$	10,456	$	9,589	$	3,388	$	14	$	50,533


Cash paid to RGP at closing	$	3,500
Fair value of contingent consideration		1,413
Total purchase price	$	4,913


			Weighted Average
Description	Amount		Life
Customer list	$	2,249	10 years
Content		461	5 years
Trade name		341	5 years
Non-compete agreements		328	2 years
Deferred contract revenue		237	2 years
Coach relationships		150	10 years
Acquired technology		45	3 years
	$	3,811	8 years


Cash paid to Jhana at closing	$	3,525
Fair value of contingent consideration		6,052
Total purchase price	$	9,577


Cash	$	253
Accounts receivable		195
Prepaid expenses and other current assets		86
Deferred tax asset		3,138
Intangible assets		6,076
Goodwill		3,085
Assets acquired		12,833

Accounts payable		(185	)
Accrued expenses		(19	)
Deferred tax liability		(2,257	)
Deferred revenues		(795	)
Liabilities assumed		(3,256	)
	$	9,577


Balance at August 31, 2015	$	19,903
Accumulated impairments		-
Balance at August 31, 2016		19,903
Acquisition of RGP (Note 2)		1,232
Acquisition of Jhanna (Note 2)		3,085
Accumulated impairments		-
Balance at August 31, 2017	$	24,220


	Original Principal		Quarterly Principal		Outstanding
Maturity Date	Amount		Payment Amount		Principal
May 24, 2019	$	15,000	$	938	$	10,313
August 29, 2019		5,000		313		3,750
August 29, 2020		5,000		313		5,000
					$	19,063


Contingent consideration liability at August 31, 2015	$	2,565
Payment of first contingent consideration award		(2,167	)
Increase in contingent consideration liability		1,538
Contingent consideration liability at August 31, 2016		1,936
Decrease in contingent consideration liability		(1,936	)
Contingent consideration liability at August 31, 2017	$	-


Adjusted EBITDA					All Access Pass Sales
Award					Award
Goal		Number of		Tranche	Goal		Number of		Tranche
(millions)		Shares		Status	(millions)		Shares		Status
$	36.7		42,789	amortizing	$	30.1		18,338	vested
$	41.8		42,789	amortizing	$	35.4		18,338	vested
$	47.7		42,789	amortizing	$	40.8		18,338	vested
			128,367					55,014


Adjusted EBITDA					OD Suite Sales
Award					Award
Goal		Number of		Tranche	Goal		Number of		Tranche
(millions)		Shares		Status	(millions)		Shares		Status
$	36.0		53,964	amortizing	$	107.0		23,128	vested
$	40.0		53,964	amortizing	$	116.0		23,128	criteria met
$	44.0		53,964	amortizing	$	125.0		23,128	criteria met
			161,892					69,384


Adjusted EBITDA					7 Habits Increased Sales
Award					Award
Goal		Number of		Tranche	Goal		Number of		Tranche
(millions)		Shares		Status	(millions)		Shares		Status
$	37.0		20,864	vested	$	5.0		8,942	vested
$	43.0		20,864	amortizing	$	10.0		8,942	vested
$	49.0		20,864	not probable	$	12.5		8,942	criteria met
			62,592					26,826


Adjusted EBITDA					Productivity Practice Sales
Award					Award
Goal		Number of		Tranche	Goal		Number of		Tranche
(millions)		Shares		Status	(millions)		Shares		Status
$	33.0		15,887	vested	$	23.5		6,808	vested
$	40.0		15,887	amortizing	$	26.5		6,808	not probable
$	47.0		15,887	not probable	$	29.5		6,808	not probable
			47,661					20,424

Long-term receivables from FCOP	$	541
Capitalized curriculum		414
Investment cost method subsidiary		220
Prepaid expenses and other long-term assets		127
	$	1,302


Description	Amount
Severance costs	$	986
Office closure costs		496
	$	1,482

10.16	Amended and Restated Security Agreement by and among Franklin Covey Co., Franklin Development Corporation, Franklin Covey Travel, Inc., Franklin Covey Client Sales, Inc., and JPMorgan Chase Bank, N.A., dated March 14, 2011	(14)
10.17	Amended and Restated Repayment Guaranty by and among Franklin Development Corporation, Franklin Covey Travel, Inc., Franklin Covey Client Sales, Inc., and JPMorgan Chase Bank, N.A., dated March 14, 2011	(14)
10.18	Agreement dated July 26, 2011, between Franklin Covey Co., and Knowledge Capital Investment Group	(15)
10.19	First Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated March 13, 2012	(17)
10.20	Second Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated June 15, 2012	(18)
10.21*	Form of Change in Control Severance Agreement	(19)
10.22	Asset Purchase Agreement made as of March 11, 2013 by and among NinetyFive 5 LLC and Franklin Covey Client Sales, Inc. and other parties thereto	(20)
10.23	Third Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co. dated March 25, 2013	(21)
10.24*	Franklin Covey Co. 2015 Omnibus Incentive Plan	(22)
10.25	Fourth Modification Agreement by and among JPMorgan Chase Bank, N.A. and Franklin Covey Co. dated March 31, 2015	(23)
10.26	Fifth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated May 24, 2016	(24)
10.27	Secured Promissory Note between Franklin Covey Co. and JPMorgan Chase Bank, N.A., for $15 million term loan, dated May 24, 2016	(24)
10.28	Sixth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated February 28, 2017	(25)
10.29	Seventh Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated May 31, 2017	(26)
10.30	Eighth Modification Agreement by and among JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated August 29, 2017	(27)
10.31	Consent and Agreement of Guarantor by and between JPMorgan Chase Bank, N.A., Franklin Covey Co., and the subsidiary guarantors signatory thereto, dated August 29, 2017	(27)