14.

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 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;

options were issued from this plan after that date.

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

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,

2019,

2018

and

2017

was estimated using the following weighted average assumptions:

	Year Ended December 31,
	2019			2018			2017
Volatility		36.5	%		37.9	%		41.6	%
Risk-free interest rate		2.0	%		2.7	%		1.8	%
Expected life (in years)		4.50			4.48			4.55
Dividend yield		0.0	%		0.0	%		0.0	%
The weighted average grant date fair value for options issued, with the exercise price equal to market value on the date of grant	$	20.20		$	22.22		$	20.08

Details of stock option transactions are as follows:

	Twelve months ended December 31, 2019					Twelve months ended December 31, 2018					Twelve months ended December 31, 2017
	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 period		702,337		$	43.80		653,571		$	36.69		474,501		$	12.67
Granted		180,800			60.56		163,366			62.80		370,025			54.10
Exercised		(80,319	)		16.90		(63,886	)		12.86		(172,759	)		7.88
Forfeited		(31,986	)		59.35		(50,714	)		52.33		(18,196	)		37.70
Expired		(16,335	)		47.51		-			-		-			-
Outstanding, end of period		754,497			49.94		702,337			43.80		653,571			36.69
Options exercisable, end of period		356,066		$	40.64		326,937		$	28.91		243,771		$	14.79

As of

December

31,

2019

, 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

$ 8.56 - $ 8.56		19,535	$	8.56		0.4	$	1,040		19,535	$	8.56		0.4	$	1,039
$10.16 - $19.95		74,465		16.42		1.7		3,378		73,215		16.36		1.7		3,326
$21.10 - $27.53		58,750		23.73		2.1		2,236		48,750		24.27		1.9		1,829
$35.25 - $37.35		14,375		35.89		3.4		372		11,875		36.02		3.3		306
$47.00 - $47.00		5,000		47.00		4.2		74		2,500		47.00		4.2		37
$53.20 - $58.65		340,078		55.53		4.5		2,124		172,802		55.68		4.2		1,053
$61.33 - $64.10		242,294		62.99		6.0		-		27,389		64.10		5.4		-
		754,497	$	49.94		4.4	$	9,224		356,066	$	40.64		3.2	$	7,590

Total unrecognized compensation cost relating to unvested stock options at

December 31,

2019

, prior to the consideration of expected forfeitures, is approxi

mately

$6.6

illion and is expected to be recognized over a weighted average period

2.3

ears.

The total intrinsic value of options exercised during the years ended

December

31,

2019

2018

and

2017

$3.9

million,

$2.9

million and

$7.6

million, respectively. Cash received from the exercise of stock options during the years ended

December

31,

2019

2018

and

2017

was

$0.4

million,

$0.1

million and

$0.2

million respectively.

The Company recorded stock-based compensation amounting to

$2.9

million,

$2.6

million and

$1.5

million for the years ended

December

31,

2019

2018

and

2017

respectively. Stock-based compensation has been included in operating expenses as follows (Dollar amounts in thousands of US dollars):

	Year Ended December 31,
	2019		2018		2017
Network expenses	$	307	$	223	$	110
Sales and marketing		1,251		1,025		573
Technical operations and development		596		636		360
General and administrative		722		690		414
	$	2,876	$	2,574	$	1,457