Product-specific Q&A

1. What is included in the ESPP Black-Scholes Model and ESPP Bundle?

2. How can I purchase the model or bundle?

3. How do I Install the model or bundle?

4. How does it value option grants?

5. How did you verify that your calculations are correct?

6. What is the initial cost? Are there any additional costs?

7. Can multiple people use the product concurrently?

8. Can I share your templates?

ESPP Q&A

9. How is ASC 718/FAS123r Expense computed for ESPP shares?

Model Requirements Q&A

10. What do I need to use the Model?

11. What if I need additional help?

12. How do I install the Model?

Product-specific Q&A

1. What is included in the ESPP Black-Scholes Model and ESPP Bundle?

The ESPP Black-Scholes Model includes a rich Excel template with software to prevent user error and complete documentation. The specific model is the Black-Scholes-Merton model customized for use with company issued ESPP stock grants. The Model also includes extensive documentation.

You can also purchase the ESPP Black-Scholes Model along with our Volatility Tool and the ESPP Management Tool in the ESPP Bundle. The ESPP Management Tool is especially useful because it gives you a powerful yet convenient way to determine compensation expense related to your ESPP grants. This bundle provides a very economical way to manage your ESPP program.

2. How can I purchase the model?

The model is purchased from our website using PayPal and is available for immediate download. We're sorry but once you have downloaded the file, refunds will not be possible.

3. How do I Install the model?

We provide two installation methods for the model: Windows Installer and Self-Extracting Zip file. If you have Windows XP or later, we recommend using the Windows Installer option (you can also install the Microsoft Installer software on Windows 2000 and NT 4.0 platforms). The Bundle is provided exclusively in the Windows Installer format because of the additional software in the package.

The Self-Extracting Zip file is an executable that can be run on any Windows platform. You simply run the executable the same as any executable (.EXE file) from Window Explorer and the Zip file will prompt you to select a directory to install ('Extract To:'). You press the 'Start' button and files and directories are simply copied to the directory you select.

After installation on either method, a directory is created that contains the template file and documentation. Simply read the documentation PDF and you are ready to use the model.

Our model requires Microsoft® Office 2000 or later and can run on any Windows-based computer certified for use with the Office software. We recommend that you have at least 100MB of available disk space to store option grant valuations.

You may install the model on a server or multiple PC's/laptops but the model is only licensed for a single grantor (legal entity or company). Bulk licensing is available for CPA and Consulting firms. Contact sales@procognis.com for details.

4. How does the model value ESPP grants?

The ESPP BSM model is calculated using the simple and well established Black-Scholes-Merton formula. That formula is included in the documentation. It models both the Discount value (the upfront cost basis of the ESPP share including the discount as provided by the ESPP plan) and the Look-Back value of the shares following the Black-Scholes model. As the Look-Back value is heavily dependent on the expected volatility, the bundle includes our Volatility Tool for this purpose (see our Volatility Tool for more information).

5. How did you verify that your calculations are correct?

The ESPP Black-Scholes-Merton model (modified for ESPP grants) is a well-known formula (the exact formula is detailed in the documentation provided with the product in the Appendix). Our companion product, the stock option Black-Scholes model has proven to be very popular and is used by numerous public and private companies to value their stock options. Our model was tested against the example values listed in the SFAS 123r document and matched the values with the same inputs.

6. What is the initial cost? Are there any additional costs?

The base price for the model alone is $299 (US Dollars). The bundle can be purchased for $899 and includes the ESPP Management Tool and the Volatility Tool. You purchase either product by online payment with PayPal.

The license is per Company or legal entity that grants stock-based contracts (option 'grantor'). CPA firms, consulting firms or other entities that have business relationships with companies that issue stock options and that wish to use our products for their customers will need to purchase a license for each grantor. Please contact our sales team for more details and pricing for license packs or bulk licenses.

There are no ongoing maintenance costs. Once you have purchased the Model and/or Bundle, you own the license for it. Ongoing technical support services are on a per-incident basis with no support contract required.

We're sorry but returns cannot be accepted after the transaction has been completed.

7. Can multiple people use the product concurrently?

Yes. Any grants created with our software can be accessed or created by anyone with access to the software. However, the license is for one company and grantor so any use within the license is permitted.

You may install the model on a server or multiple PC's/laptops but the model is only licensed for a single legal entity or company (grantor).

8. Can I share your templates?

No. Our templates are proprietary. By purchasing the Model, you have been granted a license to use them for one company and grantor. If you have multiple subsidiaries, each must purchase a separate license.

ESPP Q&A

9. How is ASC 718/FAS123r Expense computed for ESPP shares?

ASC 718 (formerly FAS123r) requires that companies record stock-based compensation at fair value. Specific rules are defined for ESPP (Employer Stock Participation Plans). ESPP valuation of grants is split into two parts: the discount value and the look-back value.

The discount value is based on the beginning stock price, adjusted by the discount rate as defined in the ESPP plan and adjusted for expected dividends, if any. The discount rate is commonly 15%, which would allow an employee to purchase stock at a 15% discount off of the lesser of the stock price at the beginning or end of the contract term. The discount value uses the stock price, discount rate and dividend yield (if any) to find the value of the grant as if the stock price remains constant.

The look-back value treats the remaining portion of the stock value (the remaining percentage or 100% minus the discount rate percentage) as an option. Thus, the remaining portion can be valued using existing stock option models including Black-Scholes. Our model uses the well-known Black-Scholes formula to value this portion of the grant. The value is calculated using the beginning stock price, expected volatility, annual dividend yield and the contractual period (generally six months) as the expected life. These input produce an assumed value at the end of the contractual term. We then compute the present value of this amount using the resk free rate of return which results in the look-back value.

Both the discount and look-back values are summed to result in the per share value, which is multiplied by the shares granted to determine total compensation expense. This expense is managed by the ESPP Management Tool which considers all ESPP grants and their service periods, as well as expected forfeitures to determine how much expense to record in each period.

Model Requirements Q&A

10. What do I need to use the Model?

The model is based on an Excel template using embedded code. You will need Excel 10.0 or greater (Office XP or greater). You will also need to set Medium Macro security to allow Macros to run on each workstation. Disk space required will depend on the number of grants saved on the system. Each grant will require approximately 200KB and the base installation will require about 1MB.

11. What if I need additional help?

Technical support is available via email on a per-incident basis. If encounter technical issues, simply email us at support@procognis.com. We will make every effort to resolve your technical issues.

12. How do I install the Model?

Simply run the Installer file or the Executable you downloaded following the PayPal transaction. The installation software will ask you where you would like to install the files on your hard drive or network. Both applications default to installing the software in the current directory (where you saved the installation file). After installation is complete, a shortcut will be created on your desktop that will link to the working template file.

For the Windows Installer version, should you want to delete the installation, you should use the Add/Remove programs feature in the Control Panel or simply use the Remove option when re-running the installer.