Consolidated Balance Sheets (Dollar amounts in thousands ...

Tucows Inc. Consolidated Balance Sheets (Dollar amounts in thousands of U.S. dollars)

Assets

Current assets: Cash and cash equivalents Accounts receivable Contract asset, current portion Inventory Prepaid expenses and deposits Derivative instrument asset, current portion Deferred costs of fulfillment, current portion Income taxes recoverable Total current assets

Deferred costs of fulfillment, long-term portion Derivative instrument asset, long-term portion Property and equipment Right of use operating lease asset Contract costs Deferred tax asset Intangible assets Goodwill Investment

Total assets

Liabilities and Stockholders' Equity

Current liabilities: Accounts payable Accrued liabilities Customer deposits Derivative instrument liability, current portion Operating lease liability, current portion Deferred revenue, current portion Accreditation fees payable, current portion Income taxes payable Total current liabilities

Derivative instrument liability, long-term portion Deferred revenue, long-term portion Accreditation fees payable, long-term portion Operating lease liability, long-term portion Loan payable, long-term portion Other long-term liability Deferred tax liability

Stockholders' equity: Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding Common stock - no par value, 250,000,000 shares authorized; 10,696,779 shares issued and outstanding as of September 30, 2021 and 10,612,414 shares issued and outstanding as of December 31, 2020 Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total stockholders' equity

Total liabilities and stockholders' equity

September 30, 2021

(unaudited)

December 31, 2020

(unaudited)

$

5,535 $

8,311

14,822

15,540

2,783

-

3,111

1,875

18,719

16,845

-

3,860

94,970

93,467

3,892

1,302

143,832

141,200

18,226

17,599

78

-

155,236

117,530

16,138

11,238

806

362

153

226

40,413

47,444

116,304

116,304

2,012

-

$ 493,198 $ 451,903

$

9,260

12,176

15,139

453

2,588

127,792

913

62

168,383

$

6,329

10,235

15,402

99

1,761

127,336

940

863

162,965

24,195

177 11,103 149,937

3,703 22,481

114 24,909

195 9,179 121,733 3,416 24,694

-

-

25,520

20,798

2,550

1,458

85,437

80,106

(288)

2,336

113,219

104,698

$ 493,198 $ 451,903

Tucows Inc. Consolidated Statements of Operations and Comprehensive Income

(Dollar amounts in thousands of U.S. dollars)

Net revenues

Cost of revenues: Direct cost of revenues Network expenses (*) Depreciation of property and equipment Amortization of intangible assets Impairment of property and equipment Total cost of revenues

Gross profit

Expenses: Sales and marketing (*) Technical operations and development (*) General and administrative (*) Depreciation of property and equipment Loss on disposition of property and equipment Amortization of intangible assets Impairment of definite life intangible assets Loss (gain) on currency forward contracts Total expenses

Income from operations

Other income (expenses): Interest expense, net Gain on sale of Ting Customer Assets, net Other expense, net Total other income (expenses)

Income before provision for income taxes

Provision for income taxes Net income before redeemable non-controlling interest

Redeemable non-controlling interest

Net income attributable to redeemable non-controlling interest Net income for the period

Other comprehensive income, net of tax Unrealized income (loss) on hedging activities Net amount reclassified to earnings

Other comprehensive income net of tax expense (recovery) of $(419) and $230 for the three months ended September 30, 2021 and September 30, 2020, ($794) and $262 for the nine months ended September 30, 2021 and Septmeber 30, 2020

Comprehensive income, net of tax for the period

Basic earnings per common share

Shares used in computing basic earnings per common share

Diluted earnings per common share

Shares used in computing diluted earnings per common share

Three months ended September 30,

2021

2020

(unaudited)

$

75,893

$ 74,311

49,540 3,445 4,622 21 241

57,869

18,024

48,330 2,612 2,985 330 113

54,370

19,941

$

9,892

$

8,318

3,742

3,162

5,069

4,868

136

125

229

-

2,267

2,315

-

-

(87)

(159)

21,248

18,629

(3,224)

1,312

(1,169) 5,564

(95) 4,300

1,076

(299) 1,375

-

1,375

(760) 1,090

(86) 244

1,556

840 716

-

716

(501)

729

(884)

46

(1,385)

$

(10)

$

0.13

10,679,309

$

0.13

10,819,716

775

$

1,491

$

0.07

10,577,731

$

0.07

10,682,808

Nine months ended September 30,

2021

2020

(unaudited)

$ 221,861

$ 240,418

144,860 10,295 12,344 344 302

168,145

53,716

153,308 7,513 8,892 1,010 1,638

172,361

68,057

$

27,579

$

26,521

10,044

8,980

15,232

15,074

384

363

234

-

6,909

7,766

-

1,431

(277)

(99)

60,105

60,036

(6,389)

8,021

(3,108) 15,767

(274) 12,385

5,996

665 5,331

-

5,331

(2,756) 1,090 (258) (1,924)

6,097

2,390 3,707

-

3,707

115

609

(2,739)

289

(2,624)

$

2,707

$

0.50

10,643,798

$

0.49

10,800,361

898

$

4,605

$

0.35

10,585,785

$

0.35

10,679,162

(*) Stock-based compensation has been included in expenses as follows:

Network expenses

$

Sales and marketing

$

Technical operations and development

$

General and administrative

$

131

$

443

$

209

$

344

$

138

$

457

$

208

$

214

$

400

$

1,498

$

610

$

849

$

333 1,203

558 570

Cash provided by: Operating activities:

Net income for the period Items not involving cash:

Depreciation of property and equipment Impairment of property and equipment Amortization of debt discount and issuance costs Amortization of intangible assets Net amortization contract costs Impairment of definite life intangible assets Other Accretion of contingent consideration Deferred income taxes (recovery) Excess tax benefits on share-based compensation expense Net Right of use operating assets/Operating lease liability Loss on disposal of domain names Loss (gain) on change in the fair value of forward contracts Write-down on disposal of Ting Mobile customer assets Stock-based compensation Change in non-cash operating working capital: Accounts receivable Contract asset Inventory Prepaid expenses and deposits Deferred costs of fulfillment Income taxes recoverable Accounts payable Accrued liabilities Customer deposits Deferred revenue Accreditation fees payable Net cash provided by operating activities

Financing activities: Proceeds received on exercise of stock options Payment of tax obligations resulting from net exercise of stock options Repurchase of common stock Proceeds received on loan payable Payment of loan payable costs Net cash (used in) provided by financing activities

Investing activities: Cost of Domain Names acquired Additions to property and equipment Gross proceeds from the waiver of rights to .online registry Acquisition of other assets Acquisition of Cedar Holdings Group, net of cash of $66 Acquisition of Ascio Technologies Inc. (net of cash of $1,437) Acquisition of intangible assets Investment in securities Net cash used in investing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period

Supplemental cash flow information: Interest paid Income taxes paid, net

Tucows Inc. Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars)

Three months ended September 30,

2021

2020

(unaudited)

Nine months ended September 30

2021

2020

(unaudited)

$

1,375 $

716 $

5,331 $

3,707

4,758 241 68

2,288 (189)

96 (488) (323) (2,378) 249 1,126

3,110 113 68

2,645 (15) 86 180 (164) 137 (175)

3,513 1,016

12,728 302 202

7,253 (444)

287 (1,368) (868) (2,149) 1 606 3,357

9,255 1,638

202 8,776

109 1,431

223 258 (927) (508) 249

15 (263) 3,513 2,664

(11) (2,783)

(275) 918 1,442 532 271 (1,828) (673) (2,873) (51) 1,492

118 -

(123) 2,905

984 (2,475)

509 (668)

69 (1,070)

(47) 11,432

718 (2,783) (1,236) (1,874) (2,130) (2,502) 2,289 1,941

(263) (258) (45) 19,095

2,670 -

1,681 (317) (4,073) (1,681) 759 (334) 463 4,927

7 34,444

1,368

(89) -

10,000 -

11,279

632

(132) -

500

2,844

(387) -

28,000 -

30,457

678

(479) (3,281)

(32) (3,114)

(14,488)

(6) (14,494)

(1,723)

7,258

$

5,535 $

(10,636)

(10,636)

1,296

8,859 10,155 $

(50,093)

(223) (2,012) (52,328)

(2,776)

8,311 5,535 $

(32,729)

(8,770) (69) (41,568)

(10,238)

20,393 10,155

$

1,144 $

$

212 $

635 $ 3,249 $

3,038 $ 6,008 $

2,638 5,449

Supplementary disclosure of non-cash investing and financing activities:

Property and equipment acquired during the period not yet paid for

$

Fair value of shares issues for acquisition of Cedar Holdings Group

Fair value of contingent consideration for acquisition of Cedar Holdings

Group

1,772 $ -$

-$

1,697 $ -$

-$

1,772 $ -$

-$

1,697 2,000

3,072

Reconciliation of Net income to Adjusted EBITDA (In Thousands of U.S. Dollars)

(unaudited)

Three months ended September 30,

2021 (unaudited)

2020 (unaudited)

Nine months ended September 30,

2021 (unaudited)

2020 (unaudited)

Net income for the period

$

Depreciation of property and equipment

Impairment of property and equipment

Amortization of intangible assets

Impairment of indefinite life intangible assets

Write-down on disposal of Ting Mobile assets

Interest expense, net

Accretion of contingent consideration

Provision for income taxes

Stock-based compensation

Unrealized loss (gain) on change in fair value of forward contracts

Unrealized loss (gain) on foreign exchange revaluation of foreign

denominated monetary assets and liabilities

Acquisition and other costs1

Adjusted EBITDA

$

1,375 $ 4,758

470 2,288

1,169 96 (299) 1,126 249 72

901

12,205 $

716 $ 3,110

113 2,645

3,513

760 86 840 1,016 (175) 81

565

13,270 $

1Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses. Expenses include severance and transitional costs associated with department, operational, or overall company restructuring efforts, including geographic alignments.

5,331 $ 12,728

536 7,253

3,108 287 665 3,357 606 178

2,034

36,083 $

3,707 9,255 1,638 8,776 1,431 3,513 2,756

258 2,390 2,664 (263)

479

1,520

38,124

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