Note 12. Share Based Compensation

On May 24, 2022, the Board of Directors of Legato Merger Corp. II, a Delaware corporation, adopted the Southland Holdings, Inc. 2022 Equity Incentive Plan (“2022 Plan”). On June 25, 2024, the Company’s Board of Directors adopted a new compensation structure for the Company’s Named Executive Officers. Details of this new compensation structure were filed on Form 8-K with the Securities and Exchange Commission on July 1, 2024. A total of 2,220,392 shares of our common stock were reserved for issuance under the 2022 Plan of which 964,413 remained available as of June 30, 2025.

Restricted Stock Units (“RSUs”): RSUs are issued for compensatory purposes. RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant. We recognize stock compensation cost only for RSUs that we estimate will ultimately vest. We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust stock compensation cost based on changes in those estimates over time.

A summary of the changes in our RSUs during the six months ended June 30, 2025 and 2024 is as follows:

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Performance Stock Units (“PSUs”): PSUs provide for the issuance of shares upon vesting, which occurs following the end of the performance period based on achievement of certain metrics as established by the Board of Directors. The Company recognizes expense for PSUs based on the forecasted achievement of Company performance metrics, multiplied by the fair value of the total number of shares of common stock that the Company anticipates will be issued based on such achievement.

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A summary of the changes in our PSUs during the six months ended June 30, 2025 and 2024 is as follows:

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Compensation cost was $0.2 million and $0.7 million for the three and six months ended June 30, 2025, respectively, which is included in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations. Compensation cost was $0.6 million and $1.3 million for the three and six months ended June 30, 2024, respectively.

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As of June 30, 2025, there was a total of $3.4 million in unrecognized compensation cost which will be recognized over a remaining weighted-average period of 1.5 years.