Creating a Stock Option Expense Report

Before you create a Stock Option Expense report, be sure to set employee/non-employee status on the Shareholder page. Once you’ve ensured that the status for each shareholder is set, do the following:
 
From the Dashboard, click “Stock Expense Reports.”
(If you don’t see this option listed in your menu, you may have “view” access only to the cap table. Contact support@capshare.com for help.)
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If you haven’t yet paid for this add-on feature, click “Get Started” and you will be prompted to do so. 
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STEP 1: Enter a name for this report and a date range. (Annual reports should be set to run from 12/31 to 12/31).

If you wish to use an alternate version of this cap table, click “select cap table” to choose that version.

Your corporate tax rate is used for the calculation of your company’s deferred tax asset. Deferred tax assets are created by employee NSOs (Non-Qualified Stock Options). Click Next. 

NOTE: Capshare will auto-save each step, so you can exit before generating the report. When you’re ready to come back, click “Stock Expense Reports” from the Dashboard.

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STEP 2: Select the grants to use for this expense report. Generally, you will want to expense all of your options. If you click the top check box (next to “ID”), you will select all grants listed accross all pages. Use the up/down arrows next to a column header to sort by that column. Click Next.

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STEP 3: If you have previously recorded valuations on Capshare, they will be shown here. If not, you may enter those valuations now. The price per share of common stock is required for determining the fair value an option (it is an input in Black-Scholes Model for pricing options). It is imperative to input all historical prices into Capshare, as employee options are expensed as of the grant date (using the value of common stock as of the grant date). Non-employee options will be expensed on a mark-to-market basis, using the most recent valuation of common stock. Click Next.

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STEP 4: We calculate volatility based on manual inputs or public companies. To calculate using public companies, enter the ticker symbol for each company in the box next to “add.” You can also change the volatility term (standard, one year minimum term, five year maximum term, and/or round term to nearest whole year).

NOTE: If you are unsure what comparable companies to use, we recommend consulting your most recent 409A report (comparable companies are often used in 409A valuations).

Alternatively, you can choose to manually input a 1, 2, and 5 year volatility by changing the “volatility source” from “public comps” to “manual inputs”.

Click Next.

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STEP 5: Enter your assumed forfeiture rate for each grant year. This is the last step. 

We calculate your historical forfeiture rate here and also show averages for startups. You are welcome to use whatever rates make the most sense for your company.

Here’s how to read this page: the average forfeiture rate (at a startup) for a 1-year-old grant is 35%. After two years, the forfeiture rate is 15%, and so on.

Click “Generate” to create the report.

NOTE: Once you press “Generate” you are free to navigate away from this page (the report will continue to generate). Depending on the amount of grants selected, reports take 5-15 minutes to process. Once it processes, the report will be waiting for you on the “Stock Expense Reports” page.

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