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Note 12 - Stock Option Plans

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

12. Stock option plans:

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 2,787,500 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 shareholders 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; no options were issued from this plan after that date.

On November 22, 2006, the shareholders of the Company approved the Company’s 2006 Equity Compensation Plan (the “2006 Plan”), which was amended and restated effective July 29, 2010 and which serves as a successor to the 1996 Plan. The 2006 Plan has been established for the benefit of the employees, officers, directors and certain consultants of the Company. The maximum number of common shares which have been set aside for issuance under the 2006 Plan is 1.25 million shares. On October 8, 2010, the 2006 Plan was amended to increase the number of shares which have been set aside for issuance by an additional 0.475 million shares to 1.725 million shares. In September 2015, the 2006 Plan was amended to increase the number of shares which have been set aside for issuance by an additional 0.75 million shares to 2.475 million shares. Generally, options issued under the 2006 Plan vest over a four-year period and have a term not exceeding seven years, except for automatic formula grants of non-qualified stock options, which vest after one year and have a five year term. Prior to the September 2015 amendment to the 2006 Plan, automatic formula grants of non-qualified stock options vested immediately upon grant.

Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option holder can be paid for by having the option holder tender back to the Company a number of shares at fair value equal to the amounts due. These transactions are accounted for by the Company as a purchase and retirement of shares.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. 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 Tucows Inc. common shares at the date of grant.

The fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 was estimated using the following weighted average assumptions:

		Year ended December 31,
		2015				2014				2013

Volatility			44.1	%			56.1	%			69.4	%
Risk-free interest rate			1.3	%			1.3	%			1.1	%
Expected life (in years)			4.0	%			4.0	%			4.0	%
Dividend yield			-	%			-	%			-	%
The weighted average grant date fair value for options issued, with the exercise price equal to market value on the date of grant		$	7.40			$	7.02			$	4.52

Details of stock option transactions are as follows:

		Year ended								Year ended								Year ended
		December 31, 2015								December 31, 2014								December 31, 2013
		Number of shares				Weighted average exercise price per share				Number of shares				Weighted average exercise price per share				Number of shares				Weighted average exercise price per share

Outstanding, beginning of year			976,062			$	5.41				1,407,639			$	3.80				2,148,170			$	2.56
Granted			67,500				21.26				102,475				15.78				180,375				8.36
Exercised			(517,998	)			3.53				(502,061	)			2.95				(890,034	)			1.80
Forfeited			(10,323	)			13.30				(28,366	)			6.60				(29,684	)			4.88
Expired			(1,875	)			2.40				(3,625	)			3.36				(1,188	)			1.44
Outstanding, end of year			513,366				9.24				976,062				5.41				1,407,639				3.80
Options exercisable, end of year			321,155			$	6.49				725,392			$	4.03				1,045,475			$	3.14

As of December 31, 2015, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows:

					Options outstanding																Options exercisable
Exercise price					Number outstanding				Weighted average exercise price per share				Weighted average remaining contractual life (years)				Aggregate intrinsic value				Number exercisable				Weighted average exercise price per share				Weighted average remaining contractual life (years)				Aggregate intrinsic value

$ 2.80	-	$ 2.92				118,490			$	2.84				1.8			$	2,163,787				118,490			$	2.84				1.8			$	2,163,787
$ 3.00	-	$ 5.76				148,348				5.18				2.8				2,361,720				110,841				5.08				2.5				1,775,898
$ 8.56	-	$10.16				92,253				9.05				4.2				1,111,453				43,374				8.92				3.9				528,510
$ 14.67	-	$24.96				154,275				18.18				5.3				538,064				48,450				16.46				4.8				224,724
						513,366			$	9.24				3.6			$	6,175,024				321,155			$	6.49				2.8			$	4,692,919

Total unrecognized compensation cost relating to unvested stock options at December 31, 2015, prior to the consideration of expected forfeitures, is approximately $0.9 million and is expected to be recognized over a weighted average period of 1.8 years.

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $0.5 million, $0.9 million and $1.1 million, respectively. Cash received from the exercise of stock options during the years ended December 31, 2015, 2014 and 2013 was $0.8 million, $1.5 million and $1.5 million respectively.

The Company recorded stock-based compensation amounting to $0.5 million, $0.5 million and $0.4 million for the years ended December 31, 2015, 2014 and 2013 respectively. Stock-based compensation has been included in operating expenses as follows:

		Year ended December 31, 2015				Year ended December 31, 2014				Year ended December 31, 2013
Network expenses		$	28,915			$	30,938			$	31,664
Sales and marketing			188,035				143,514				129,302
Technical operations and development			111,239				85,904				78,800
General and administrative			197,836				282,382				191,137
		$	526,025			$	542,738			$	430,903