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Note 20 - Stock-based Compensation

12 Months Ended

Jan. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(20) Stock-based compensation

Equity Incentive Plans

In June 2021, Skillsoft Corp adopted the 2020 Omnibus Incentive Plan (“2020 Plan”) and issued Stock Options, RSUs and PSU’s to employees. 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 herein. As of January 31, 2023, a total of 10,859,179 shares of common stock were available for issuance under the 2020 Plan.

Stock Options

Under the 2020 Plan all employees, directors, and consultants are eligible to receive incentive share options or 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 optionees’ 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 table summarizes the stock option activity for the fiscal year ended January 31, 2023:

										*Weighted*
						*Weighted*				*Average*
						*Average*				*Remaining*				*Aggregate*
						*Exercise*				*Contractual*				*Intrinsic Value*
		*Shares*				*Price*				*Term (Years)*				*(In thousands)*
Outstanding, January 31, 2022			2,825,752			$	10.76				9.4			$	—
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			(503,776	)			10.86				—				—
Expired			—				—				—				—
Outstanding, January 31, 2023			2,321,976				10.74				8.4				—

Vested and Exercisable, January 31, 2023			948,226				10.72				8.4				—

The total unrecognized equity-based compensation costs related to the stock options was $4.3 million based on the $3.36 weighted average grant date fair value of the options, which is expected to be recognized over a weighted-average period of 2.4 years.

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 table summarizes the RSU activity for the fiscal year ended January 31, 2023:

						*Weighted-*				*Aggregate*
						*Average Grant*				*Intrinsic Value*
		*Shares*				*Date Fair Value*				*(in thousands)*
Unvested balance, January 31, 2022			5,091,852			$	10.76			$	37,782
Granted			12,953,973				5.01
Vested			(2,612,810	)			10.68
Forfeited			(3,266,892	)			6.68
Unvested balance, January 31, 2023			12,166,123				6.01				23,359

The total unrecognized stock-based compensation costs related to RSUs was $63.6 million, which is expected to be recognized over a weighted-average period of 2.6 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, especially 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 table summarizes the MBRSU activity for the fiscal year ended January 31, 2023:

						*Weighted-*				*Aggregate*
						*Average Grant*				*Intrinsic Value*
		*Shares*				*Date Fair Value*				*(in thousands)*
Unvested balance, January 31, 2022			1,095,978			$	8.43			$	8,132
Granted			2,115,551				5.07
Vested			—				—
Forfeited			(953,071	)			6.59
Unvested balance, January 31, 2023			2,258,458				6.75				4,336.2

The total unrecognized stock-based compensation costs related to MBRSUs was $10.7 million, which is expected to be recognized over a weighted-average period of 1.0 years.

Performance-based Restricted Stock Units

The Company issued 49,876 performance-based restricted stock units that have a grant-date fair value of $0.5 million during the period from June 12, 2021 through January 31, 2022 (Successor). The awards vest upon the achievement of specified corporate goals. Of the 49,876 performance-based restricted stock units, 12,500 shares were vested and 12,500 shares were canceled on January 31, 2022. The remaining 24,876 shares were vested when the specified corporate goals were achieved in June 2022. In the year ended January 31, 2023, $0.3 million in stock-based compensation expense was recognized for these remaining shares.

Stock-based Compensation Expense

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

		*Fiscal 2023*				*Fiscal 2022*								*Fiscal 2021*
		*Successor*				*Successor*				*Predecessor (SLH)*				*Predecessor (SLH)*				*Predecessor (PL)*
		*From*				*From*				*From*				*From*				*From*
		*February 1, 2022 to*				*June 12, 2021 to*				*February 1, 2021*				*August 28, 2020*				*February 1, 2020*
		*January 31, 2023*				*January 31, 2022*				*to June 11, 2021*				*January 31, 2021*				*to August 27, 2020*
Cost of revenues		$	232			$	—			$	—			$	—			$	—
Content and software development			8,850				895				—				—				—
Selling and marketing			7,336				2,043				—				—				—
General and administrative			20,204				11,726				—				—				—
Total		$	36,622			$	14,664			$	—			$	—			$	—

The stock-based compensation for the fiscal year ended January 31, 2023 (Successor) includes $1.6 million of fair value adjustment for the cash consideration exceeded the fair value of the legacy Codecademy options, which is classified as a post-combination expense.

Stock-based compensation expense for the period from June 12, 2021 through January 31, 2022 (Successor) includes $2.8 million attributable to 1,000,000 warrants issued to the chief executive officer that vested upon completion of the merger and his commencement of employment with the Company.