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Note 13 - Share-Based Payments
9 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
13. SHARE-BASED PAYMENTS

 
(a)
Stock options

The Company’s 1996 Stock Option Plan (the “1996 Plan”) was established for the benefit of the employees, officers, directors and certain consultants of the Company. The maximum number of common shares which may be set aside for issuance under the 1996 Plan was 11,150,000 shares, provided that the Board of Directors of the Company has the right, from time to time, to increase such number subject to the approval of the stockholders of the Company when required by law or regulatory authority. Generally, options issued under the 1996 Plan vest over a four-year period. The 1996 Plan expired on February 25, 2006 and no options have been issued from the 1996 Plan after that date.

The Company’s Amended and Restated 2006 Equity Compensation Plan (the “2006 Plan”), serves as a successor to the 1996 Plan. The 2006 Plan was established for the benefit of the employees, officers, directors and certain consultants of the Company. The Plan was amended and restated at the Annual General Meeting of the Stockholders on September 7, 2010 to extend the term thereof to September 6, 2020 and to increase the number of shares of common stock authorized for issuance thereunder from 5,000,000 to 6,900,000. The 6,900,000 common shares that have been set aside for issuance under the 2006 Plan are to provide eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in Tucows. Generally, options issued under the 2006 Plan vest over a four-year period and have a term not exceeding seven years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, consistent with the guidance on stock compensation. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company’s common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of our common shares at the date of grant.

During the three months ended September 30, 2011, stock options to purchase 706,000 common shares were granted, compared to options to purchase 200,000 common shares granted during the three months ended September 30, 2010.

During the nine months ended September 30, 2011, stock options to purchase 706,000 common shares were granted, compared to options to purchase 1,794,000 common shares granted during the nine months ended September 30, 2010.

The stock options granted during the three and nine months ended September 30, 2011 expire on various dates through 2018.

Details of stock option transactions for the three months ended September 30, 2011 and September 30, 2010 are as follows:

   
Three months ended
   
Three months ended
 
   
September 30, 2011
   
September 30, 2010
 
         
Weighted
         
Weighted
 
         
Average
         
Average
 
   
Number of
   
exercise price
   
Number of
   
exercise price
 
   
Shares
   
per share
   
Shares
   
per share
 
Outstanding, beginning of period
    8,237,124     $ 0.55       8,224,083     $ 0.56  
Granted
    706,000       0.74       220,000       0.62  
Exercised
    (22,583 )     0.47       —       —  
Forfeited
    (24,875 )     0.75       (61,042 )     0.65  
Expired
    —       —       —       —  
Outstanding, end of period
    8,895,666     $ 0.54       8,383,041     $ 0.56  
Options exercisable, end of period
    7,155,916     $ 0.54       6,267,541     $ 0.51  

Details of stock option transactions for the nine months ended September 30, 2011 and September 30, 2010 are as follows:

   
Nine months ended
   
Nine months ended
 
   
September 30, 2011
   
September 30, 2010
 
         
Weighted
         
Weighted
 
         
Average
         
Average
 
   
Number of
   
exercise price
   
Number of
   
exercise price
 
   
Shares
   
per share
   
Shares
   
per share
 
Outstanding, beginning of period
    8,272,249     $ 0.56       7,203,977     $ 0.56  
Granted
    706,000       0.74       1,794,000       0.69  
Exercised
    (29,833 )     0.47       (33,678 )     0.44  
Forfeited
    (52,750 )     0.72       (99,167 )     0.66  
Expired
    —       —       (482,091 )     1.02  
Outstanding, end of period
    8,895,666     $ 0.54       8,383,041     $ 0.56  
Options exercisable, end of period
    7,155,916     $ 0.54       6,267,541     $ 0.51  

As of September 30, 2011, the exercise prices, weighted average remaining contractual life and intrinsic values of outstanding options were as follows:

     
Options outstanding
   
Options exercisable
 
                 
Weighted
                         
           
Weighted
   
average
               
Weighted
       
           
average
   
remaining
   
Aggregate
         
average
   
Aggregate
 
Exercise price
   
outstandingNumber
   
exercise price
per share
   
contractual
life (years)
   
intrinsic
value
   
Number
exercisable
   
exercise price
per share
   
intrinsic
value
 
$ 0.31-$0.49       3,667,712     $ 0.38       1.8     $ 1,386,302       3,667,712     $ 0.38     $ 1,386,302  
$ 0.56-$0.75       4,110,454     $ 0.66       4.6       423,364       2,370,704     $ 0.63       315,672  
$ 0.80-$0.99       1,117,500     $ 0.86       2.3       —       1,117,500     $ 0.86       —  
          8,895,666     $ 0.57       3.1     $ 1,809,666       7,155,916     $ 0.54     $ 1,701,974  

Total unrecognized compensation cost relating to unvested stock options at September 30, 2011, prior to the consideration of expected forfeitures, was approximately $597,000 and is expected to be recognized over a weighted average period of 2.8 years.

The Company recorded stock-based compensation of $120,685 and $155,570 for the three months ended September 30, 2011 and 2010, respectively.

The Company recorded stock-based compensation of $248,058 and $313,055 for the nine months ended September 30, 2011 and 2010, respectively.

The Company has not capitalized any stock-based compensation expense as part of the cost of an asset.

 
(b)
Restricted stock awards

During the three and nine months ended September 30, 2011, no restricted stock awards were granted to any employees of the Company.

Restricted stock awards generally vest annually over a four year period. Holders of restricted stock may not sell, assign, transfer, pledge or otherwise dispose of an unvested stock. Unvested shares of restricted stock are held in escrow by the Company until the holder’s interest in such shares vests.

Holders of restricted stock have full stockholder rights with respect to any shares of Company stock issued to the participant under a stock award, whether or not the holder’s interest in those shares is vested. Accordingly, the holder has the right to vote such shares and to receive any regular cash dividends paid on such shares.

Total unrecognized compensation cost relating to unvested restricted stock awards at September 30, 2011, prior to the consideration of expected forfeitures, was approximately $1,100 and is expected to be recognized over a weighted average period of 1.5 years.

The Company recorded stock-based compensation associated with restricted stock awards of $202 and $216 for the three months ended September 30, 2011 and 2010, respectively.

The Company recorded stock-based compensation associated with restricted stock awards of $558 and $633 for the nine months ended September 30, 2011 and 2010, respectively.