Tucows 2012 Annual Report Download - page 97

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F-21
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 5.0 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 1.9 million shares to 6.9 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 are immediately exercisable and have a five year term.
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, 2012, 2011 and 2010 was
estimated using the following assumptions:
Year ended December 31,
2012 2011 2010
Volatility 52.1% 73.7% 71.9%
Risk-free interest rate 0.5% 0.8% 1.9%
Expected life (in years) 4.0 4.0 4.4
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 $ 0.56 $ 0.38 $ 0.39
Details of stock option transactions are as follows:
Year ended
December 31, 2012
Year ended
December 31, 2011
Year ended
December 31, 2010
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 8,746,041 $ 0.57 8,272,249 $ 0.56 7,213,977 $ 0.56
Granted 779,000 1.36 706,000 0.74 1,804,000 0.69
Exercised (766,340) 0.55 (73,708) 0.43 (33,678) 0.44
Forfeited (163,001) 0.80 (98,500) 0.69 (204,959) 0.66
Expired (3,014) 0.44 (60,000) 0.80 (507,091) 1.02
Outstanding, end of year 8,592,686 $ 0.64 8,746,041 $ 0.57 8,272,249 $ 0.56
Options exercisable, end of year 7,090,892 $ 0.57 7,042,415 $ 0.54 6,205,248 $ 0.51
The stock options expire at various dates through 2019.