(12)    Stock-based compensation

Equity Incentive Plans

In June 2021, Skillsoft Corp adopted the 2020 Omnibus Incentive Plan (“2020 Plan”). The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other equity-based awards, and cash-based incentive awards to employees, directors, and consultants of the Company. Under the 2020 Plan, 13,105,902 shares were initially made available for issuance. The 2020 Plan includes an annual increase on January 1 each year beginning on January 1, 2022, in an amount equal to 5.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. The Compensation Committee may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of shares of common stock than provided for in the 2020 Plan. As of July 31, 2023, a total of 2,922,303 shares of common stock were available for issuance under the 2020 Plan.

Stock Options

Under the 2020 Plan all employees are eligible to receive incentive share options and all employees, directors and consultants are eligible to receive non-statutory share options. The options generally vest over four years and have a term of ten years. Vested options under the plan generally expire not later than 90 days following termination of employment or service or twelve months following an optionee's death or disability. The fair value of stock options is determined on the grant date and amortized over the vesting period on a straight-line basis.

The following summarizes the stock option activity for the six months ended July 31, 2023:

The total unrecognized equity-based compensation costs related to the stock options was $3.0 million based on the $2.29 weighted average grant date fair value of the options, which is expected to be recognized over a weighted-average period of 1.9 years.

Time-Based Restricted Stock Units

Restricted stock units (“RSUs”) represent a right to receive one share of the Company’s common stock that is both non-transferable and forfeitable unless and until certain conditions are satisfied. Other than restricted stock units granted to our non-employee directors, which vest upon the earlier of the anniversary of the grant date and the Company’s next annual meeting of stockholders, restricted stock units generally vest ratably over a three or four-year period, subject to continued employment through each anniversary. The fair value of restricted stock units is determined on the grant date and is amortized over the vesting period on a straight-line basis.

The following summarizes the time-based RSU activity for the six months ended July 31, 2023:

(1) In May 2023, 291,000 shares were granted to replace 388,000 shares of market-based RSUs. This modification resulted in stock-based compensation expense increasing by less than $0.1 million per quarter over a two-year period.

The total unrecognized stock-based compensation costs related to time-based RSUs was $51.8 million, which is expected to be recognized over a weighted-average period of 2.5 years.

Market-based Restricted Stock Units

Market-based restricted stock units (“MBRSUs”) vest over a three-year or four-year performance period, subject to continued employment through each anniversary and achievement of market conditions, specifically the Company's stock price and an objective relative total shareholder return. The fair value of MBRSUs that include vesting based on market conditions are estimated using the Monte Carlo valuation method. Compensation cost for these awards is recognized based on the grant date fair value which is recognized over the vesting period using the accelerated attribution method.

The following summarizes the MBRSUs activity for the six months ended July 31, 2023:

(1) In May 2023, 388,000 shares of market-based RSUs were canceled and replaced with 291,000 shares of time-based RSUs. This modification resulted in stock-based compensation expense increasing by less than $0.1 million per quarter over a two-year period.

The total unrecognized stock-based compensation costs related to MBRSUs was $7.0 million, which is expected to be recognized over a weighted-average period of 1.1 years.

Stock-based Compensation Expense

The following summarizes the classification of stock-based compensation expense in the condensed consolidated statements of operations (in thousands):

(1) Stock-based compensation expense during the three months ended July 31, 2023 was reduced by $2.1 million due to forfeitures of share-based payment awards.