15. Stock Option Plans:

2006 Tucows Equity Compensation Plan

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 had initially 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 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 set aside for issuance by an additional 0.75 million shares to 2.475 million shares. In November 2020, the 2006 Plan was amended to increase the number of shares set aside for issuance by an additional 1.53 million shares to 4.0 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 nonqualified 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 nonqualified 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 ("Company Option") 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 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 Company Options granted during the years ended December 31, 2025,  December 31, 2024 and  December 31, 2023 was estimated using the following weighted average assumptions: 

Details of Company Option transactions are as follows: 

As of December 31, 2025, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Company Options were as follows:

The Company recorded stock-based compensation for Company options amounting to $4.1 million, $5.2 million and $6.0 million for the years ended December 31, 2025, 2024 and 2023 respectively. Stock-based compensation for the Company stock has been included in operating expenses as follows (Dollar amounts in thousands of U.S. dollars): 

The fair value of stock options granted during the year ended  December 31, 2025 was estimated using the following weighted average assumptions: 

Details of Wavelo's stock option transactions are as follows:

During the year ended December 31, 2025 and December 31, 2024, the total intrinsic value of the Wavelo stock options exercised was $0.1 million, and the cash received from the exercise of those stock options was $0.1 million, respectively.

As of December 31, 2025, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Wavelo stock options were as follows:

Total unrecognized compensation cost relating to unvested Wavelo stock options at December 31, 2025, prior to the consideration of expected forfeitures, is approximately $2.2 million and is expected to be recognized over a weighted average period of 2.9 years.

The Company recorded stock-based compensation for Wavelo options amounting to $1.6 million, $1.6 million and $1.8 million for the years ended December 31, 2025, 2024 and 2023, respectively. Stock-based compensation for the Wavelo stock has been included in operating expenses as follows (Dollar amounts in thousands of U.S. dollars): 

2022 Ting Equity Compensation Plan 

On January 16, 2023, the Board of Ting Fiber, LLC approved Ting's Equity Compensation Plan (Ting ECP), which has been established for the benefit of the employees, officers, directors and certain consultants of Ting or Tucows. The Ting stock options were introduced in order to provide variable compensation that helps retain executives and ensure that our executives' interests are aligned with those stakeholders of the business to grow the long-term value. The maximum number of Ting common units that have been set aside for issuance under the plan is 10 million units, currently there are 100 million common units outstanding. Generally, options issued under the ECP vest over a four-year period and have a term not exceeding seven years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share based instrument.

The Company calculates expected volatility based on the actual volatility of comparable publicly traded companies. 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 assumes the expected dividend yield to be zero.

The fair value of stock options granted during the year ended  December 31, 2025 was estimated using the following weighted average assumptions: 

Details of Ting's stock option transactions are as follows:

As of December 31, 2025, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Ting stock options were as follows:

Total unrecognized compensation cost relating to unvested stock options at December 31, 2025, prior to the consideration of expected forfeitures, is approximately $0.4 million and is expected to be recognized over a weighted average period of 1.2 years.

The Company recorded stock-based compensation for Ting options amounting to $1.5 million, $0.2 million and $0.3 million for the years ended December 31, 2025, 2024 and 2023 respectively. Stock-based compensation for the Ting stock has been included in operating expenses as follows (Dollar amounts in thousands of U.S. dollars): 

The Company recorded stock-based compensation expense of $7.1 million for year ended December 31, 2025 and $7.0 million and $8.1 million for the years ended December 31, 2024 and December 31, 2023, respectively. The Company details of the stock-based compensation expense are as follows:

The Company capitalizes stock-based compensation costs directly attributable to the development of qualifying assets. Qualifying assets include internal use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC 350. During the year ended December 31, 2025 and December 31, 2024, the Company capitalized $0.2 million and $0.3 million of stock-based compensation respectively, directly attributable to the development of certain IUS assets.

During the fourth quarter of Fiscal 2025, the Company identified an immaterial error in stock-based compensation expense related to the omission from the financial statements of a stock-based compensation arrangement. The Company determined that this stock-based compensation agreement should have been accounted for under ASC 718 as a liability measured as of each reporting period at fair value, with a corresponding stock-based compensation expense recorded in the Consolidated Statements of Comprehensive Loss over the service period to June 2027. As a result, the Company recorded a cumulative adjustment in the fourth quarter of Fiscal 2025 to recognize a catch-up expense totaling $1.4 million, with a corresponding long-term liability on the balance sheet. The adjustment was recorded in the current period as the error was not material to previously issued financial statements.