La Rosa Holdings Corp. Stock Compensation Disclosure

Note 9 — Equity Incentive Plan

 

On January 10, 2022, the Company adopted the La Rosa Holdings Corp. 2022 Equity Incentive Plan (the “2022 Plan”) pursuant to which a maximum of 5,000,000 shares of Common Stock of the Company were authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance units and performance shares. Persons eligible to receive awards under the 2022 Plan include employees, consultants, and directors of the Company. The plan is administered by the Compensation Committee of the Board of Directors. On October 20, 2023, the Company filed a Form S-8 to register the securities in the 2022 Plan. As of December 31, 2024, there are 7,031,674 shares available for issuance.

 

Issuance of Common Shares to Consultants

 

In the fourth quarter of 2023, the Company executed six consulting agreements with third-party service providers to supply certain services to the Company. The Company issued 594,000 shares of the Company’s Common Stock under the Company’s 2022 Equity Incentive Plan between October 26, 2023 and November 2, 2023, with a weighted-average value of $1.20 per share.

 

Stock Option Awards

 

Stock options are awards issued to employees and directors that entitle the holder to purchase Common Stock of the Company at a fixed price. Options issued prior to the Company’s IPO on October 12, 2023 have a strike price equal to the IPO price of $5.00 per share.

 

On November 1, 2023, the Company issued stock options to its non-management Board of Directors in lieu of paying the directors their cash board fees they had accrued since the initiation of their term through September 30, 2023, which totaled $375,052. The options cover 412,125 shares of the Company’s Common Stock at a strike price of $1.28, the closing price of the Company’s Common Stock on the previous business day from the grant date. The options immediately vested upon grant and have a ten-year term. The Company extinguished the accrued liability recorded at September 30, 2023.

 

On December 7, 2023, the Company issued a non-qualified stock option to the Company’s CEO in accordance with the CEO’s employment agreement. The option covers 900,000 shares of the Company’s Common Stock at a strike price of $2.09, the closing price of the Company’s Common Stock on the previous business day from the grant date. The option immediately vested upon grant and has a ten-year term.

 

The Company recorded stock-based compensation related to options of $3,267,088 and $1,816,188 for the year ended December 31, 2024 and 2023, respectively. The Company did not realize any tax benefits associated with share-based compensation for the years ended December 31, 2024 and 2023, as the Company recorded a valuation allowance on all deferred tax assets.

 

At December 31, 2024, options outstanding that have vested and are expected to vest are as follows:

 

										Weighted
										Average
						Weighted				Remaining
		Number				Average				Contractual				Aggregate
		of				Exercise				Life				Intrinsic
		Shares				Price				(in years)				Value
Vested			3,766,740			$	1.58				9.2			$	104,460
Expected to vest			140,000				1.10				9.5				—
Total			3,906,740			$	1.56				9.2			$	104,460

 

Additional information with respect to stock option activity:

 

						Weighted
		Number				Average
		of				Exercise
		Shares				Price
Balance — December 31, 2022			80,000			$	5.00
Granted			1,312,125				1.84
Expired or forfeited			—				—
Balance — December 31, 2023			1,392,125			$	2.02
Granted			3,133,185				1.36
Expired or forfeited			(618,570	)			1.78
Balance — December 31, 2024			3,906,740			$	1.56

The weighted average fair value and the assumptions used in calculating the stock options granted during fiscal year 2024 and 2023 were based on estimates at the date of grant as follows:

 

		December 31,				December 31,
		2024				2023
Weighted average fair value		$	1.04			$	1.36
Dividend yield			—				—
Expected volatility factor			68.5	%			67.2	%
Risk-free interest rate			4.1	%			4.3	%
Expected life (in years)			9.6				9.0

 

For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation for employees awards of $3.292 million and $3.814 million, respectively. The Company did not realize any tax benefits associated with share-based compensation for these periods, as the Company recorded a valuation allowance on all deferred tax assets.

 

As of December 31, 2024, unrecognized compensation expense related to stock option awards totaled $92,892. As of December 31, 2023, there was no unrecognized compensation expense related to stock option awards.

 

Restricted Stock Units (RSUs)

 

During July 2022, the Company made agreements with 89 real estate agents and employees, who provide services to the Company, that they would be issued RSUs under the 2022 Plan covering $1,959,860 of value, when the Company’s Common Stock began trading on the Nasdaq stock exchange. The Company’s stock started trading on October 10, 2023, and the RSUs vested immediately upon issuance, which covered 391,972 common shares. To cover employees’ payroll withholding tax liability, the Company netted 35,466 shares of Common Stock from the employee awards for a total issuance of 356,506 shares.

 

A restricted stock unit covering 4,000 shares of Common Stock issued to the Company’s Chief Technology Officer (CTO) vested on February 1, 2023. In addition, the CTO will receive a future grant of 4,000 restricted stock units on February 1, 2024, which will be issued under the 2022 Plan. The Company records stock-based compensation expense for the new grant ratably over the one-year vesting period. The Company also valued the new award using the assumed IPO price of $5.00 a share. For the year ended December 31, 2023, the Company recorded $38,247 of share-based compensation expense for the CTO’s RSUs, and as of December 31, 2023, unrecognized compensation expense related to the award was $1,753, which will be recognized in 2024. The Company did not realize any tax benefits associated with share-based compensation for the year ended December 31, 2023, as the Company recorded a valuation allowance on all deferred tax assets.

 

On February 1, 2024, a Restricted Stock Unit (“RSU”) covering 4,000 shares granted to the Company’s Chief Technology Officer (“CTO”) vested. The Company withheld 1,187 shares to cover payroll tax withholding and issued 2,813 shares to the executive. The Company also granted a new RSU to the CTO on February 1, 2024, which will vest on the first anniversary of the grant.

 

For the years ending December 31, 2024 and 2023, the Company recorded $23,144 and $1,820,741, respectively, of share-based compensation expense related to the RSUs. For the years ending December 31, 2024 and 2023, unrecognized compensation expense related to the awards was $86,722 and $1,753, respectively.

 

The Company did not realize any tax benefits associated with share-based compensation for the years ending December 31, 2024 and 2023, as the Company recorded a valuation allowance on all deferred tax assets.