TUCOWS FINANCIAL STATEMENTS, Q2 2004

Tucows Inc. Consolidated Balance Sheets (Dollar amounts in U.S. dollars)
		June 30, 2004 (unaudited)		December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	11,918,720	$	12,912,811
Restricted cash		361,250		132,500
Accounts receivable		638,604		486,289
Prepaid expenses and deposits		2,047,274		2,061,948
Prepaid domain name registry fees, current portion		15,309,091		13,204,566
Total current assets		30,274,939		28,798,114
Prepaid domain name registry fees, long-term portion		6,327,869		5,136,194
Property and equipment		824,195		1,048,400
Intangible assets		2,324,787		-
Investments		353,737		353,737
Cash held in escrow		1,000,000		-
Total assets	$	41,105,527	$	35,336,445
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,283,037	$	1,632,294
Accrued liabilities		2,062,852		2,088,235
Customer deposits		2,173,090		2,160,601
Deferred revenue, current portion		23,554,350		20,715,191
Total current liabilities		29,073,329		26,596,321
Deferred revenue, long-term portion		9,411,802		7,874,001
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; 66,597,688 shares issued and outstanding as of June 30, 2004 and 64,626,429 shares issued and outstanding as of December 31, 2003		9,459,696		8,540,687
Additional Paid-in Capital		49,992,129		49,992,129
Deferred stock–based compensation		-		(20,593)
Deficit		(56,831,429)		(57,646,100)
Total stockholders' equity		2,620,396		866,123
Total liabilities and stockholders' equity	$	41,105,527	$	35,336,445

Tucows Inc. Consolidated Statements of Operations (Dollar amounts in U.S. dollars) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2004		2003		2004		2003
Net revenues	$	10,638,965	$	9,167,299	$	20,813,874	$	18,164,213
Cost of revenues		6,558,400		5,682,722		13,003,815		11,259,365
Gross profit		4,080,565		3,484,577		7,810,059		6,904,848
Operating expenses:
Sales and marketing (*)		1,124,726		956,887		2,345,260		1,869,223
Technical operations and development		1,140,870		1,018,925		2,152,292		1,850,694
General and administrative(*)		834,503		1,155,219		1,907,575		1,778,199
Depreciation of property and equipment		317,331		441,951		630,317		876,916
Amortization of intangible assets		39,680		-		39,680		-
Total operating expenses		3,457,110		3,572,982		7,075,124		6,375,032
income from operations		623,455		(88,405)		734,935		529,816
Other Income
Interest income, net		42,103		30,047		79,736		56,496
Gain on disposal of Liberty Registry Management Services Inc.		-		636,277		-		871,890
Total other income		42,103		666,324		79,736		928,386
Income before provision for income taxes		665,558		577,919		814,671		1,458,202
Provision for income taxes		-		-		-		-
Net income for the period	$	665,558	$	577,919	$	814,671	$	1,458,202
Basic and diluted earnings per common share	$	0.01	$	0.01	$	0.01	$	0.02
Shares used in computing basic earnings per common share		65,991,867		64,626,429		65,341,377		64,626,429
Shares used in computing diluted earnings per common share		72,370,411		64,674,737		72,144,584		64,652,926
(*) Stock-based compensation has been included in operating expenses as follows:
Sales and marketing	$	-	$	27,406	$	16,834	$	54,511
General and administrative	$	-	$	13,158	$	3,759	$	26,171

Tucows Inc. Consolidated Statements of Cash Flows (Dollar amounts in U.S. dollars) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2004		2003		2004		2003
Cash provided by:
Operating activities:
Net income for the period	$	665,558	$	577,919	$	814,671	$	1,458,202
Items not involving cash:
Depreciation of property and equipment		317,331		441,951		630,317		876,916
Amortization of intangible assets		39,680		-		39,680		-
Gain on change in the fair value of forward contracts		(110,148)		(337,358)		(91,263)		(884,228)
Stock-based compensation		-		40,564		20,593		80,682
Gain on disposal of Liberty Registry Management Services		-		(636,277)		-		(871,890)
Change in non-cash operating working capital:
Accounts receivable		(11,616)		(38,260)		(74,284)		34,114
Prepaid expenses and deposits		75,495		2,262		110,615		(3,577)
Prepaid domain name registry fees		(1,259,188)		(709,212)		(3,296,200)		(1,668,636)
Accounts payable		26,192		(9,148)		(349,257)		(210,571)
Accrued liabilities		32,939		479,410		(222,482)		296,638
Customer deposits		50,481		143,523		3,600		141,709
Deferred revenue		1,569,497		844,488		4,376,960		2,260,190
Cash provided by operating activities		1,396,221		799,862		1,962,950		1,509,549
Financing activities:
Proceeds received on exercise of stock options		491,407		-		644,469		-
Cash provided by financing activities		491,407		-		644,469		-
Investing activities:
Additions to property and equipment		(245,106)		(152,425)		(353,250)		(620,622)
(Increase) decrease in restricted cash - being margin security against forward exchange contracts		(361,250)		225,000		(228,750)		450,000
Acquisition of Boardtown Corporation, net of cash acquired		(2,019,510)		-		(2,019,510)		-
Increase in cash held in escrow		(1,000,000)		-		(1,000,000)		-
Proceeds on disposal of Liberty Registry Management Services Inc., net of cash disposed		-		636,277		-		871,890
Cash provided by (used in) investing activities		(3,625,866)		708,852		(3,601,510)		701,268
(Decrease) increase in cash and cash equivalents		(1,738,238)		1,508,714		(994,091)		2,210,817
Cash and cash equivalents, beginning of period		13,656,958		9,546,932		12,912,811		8,844,829
Cash and cash equivalents, end of period	$	11,918,720	$	11,055,646	$	11,918,720	$	11,055,646
Supplemental cash flow information:
Interest paid	$	53	$	144	$	53	$	316
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued on the acquisition of Boardtown Corporation	$	274,540	$	-	$	274,540	$	-