S-Cube Financial Consulting Ltd.    

 ESO ADVISORY SERVICES

S-Cube provides cutting-edge consulting services for the design and administration of compensation and benefit programs and financial products that help companies manage their benefit liabilities while enhancing shareholder value.

Compensating employees is a delicate balance between meeting the employees' expectations and the company's financial goals. S-Cube assist companies find that balance by structuring equity incentive plans in many different forms from formal employee stock ownership plans (ESOP) to employee stock purchase plans (ESPP).

ESO Valuations

S-Cube can help establish appropriate inputs into the valuation process, regarding such issues as expected volatility, historical option exercise behavior, expected forfeitures, and estimated option lives. This information is fully supported by a detailed narrative report suitable for review by independent auditors, the Securities and Exchange Commission, the Internal Revenue Service and the Israel Securities Authority.

 We can value stock options and other equity based compensation for various purposes

•  Financial reporting, principally under ASC 718 
•  Divorce settlement agreements 
S-Cube Financial Services•  Other tax-related purposes

S-Cube has a reputation of the highest degree. Our clients include many large corporations and numerous legal and accounting firms that represent businesses, both large and small, in virtually every industry. We have extensive experience valuing all types of equity based compensation, from simple call options to more complex derivatives, including:

 

  • Employee Stock Purchase Plan (ESPP) 
  • Restricted stock 
  • Stock options with accreting exercise prices 
  • Profits units 
  • Outperformance units 
  • Contingent purchase price elements

 

 

We have valued instruments that are subject to vesting conditions including earnings targets, share price targets, total return targets and, of course, time-based vesting.

We apply a wide range of valuation techniques, including:

• Closed form models such as Black-Scholes-Merton 
• Lattice models, such as a binomial model 
• Synthetic option modeling 
• Monte Carlo simulations

 

 ESOP Planning

S-Cube provides several solutions to meet companies' ESO budget. These solutions include using European options, American options or Exotic options:

  • European Options – may be exercised only at the expiry date of the option.
  • American Options - may be exercised at any time before the expiry date.
  • Exotic Options – are options with unusual exercise styles such as Bermudan options, Canary options, swing options and other sophisticated options.

There are many other factors that influence the value of the options that should be considered when structuring an incentive plan. These factors include performance conditions, knock-in and knock-out prices, value cap and other conditions.

An additional way of reducing financial impact on companies' financial statements is using lattice models such as the Binomial model and Monte-Carlo Simulations. Given that these models take into account employee exercise patterns based on changes in the company’s stock price and other variables, and allows for the use of other dynamic assumptions, it may result in a reduced valuation of employee stock options.

 
 
       Address: 8 Shefa Tal Street. Tel-Aviv 67013, Israel       Phone: +972-3-5614929        Fax: +972-3-5422745          Created By S-Cube Ltd.