Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)

  Three months ended
December 31,		 Year ended
December 31,
  2006
 2005
 2006
 2005
                 
Net revenues $ 17,199,194 $ 12,658,399 $ 65,029,490 $ 48,517,039
                 
Cost of revenues:                
Cost of revenues (*)   11,076,018   8,160,474   41,534,963   30,645,004
Depreciation of property and equipment   865,937   167,082   2,755,736   751,613
Amortization of intangible assets   63,540
  -
  207,168
  -
Total cost of revenues   12,005,495
  8,327,556
  44,497,867
  31,396,617
                 
Gross profit   5,193,699   4,330,843   20,531,623   17,120,422
                 
Operating expenses:                
Sales and marketing (*)   1,247,510   1,185,865   5,985,907   4,855,050
Technical operations and development (*)   1,816,264   1,479,959   8,152,138   5,627,426
General and administrative (*)   1,624,594   987,877   5,890,123   4,346,224
Depreciation of property and equipment   98,015   52,445   223,131   200,079
Amortization of intangible assets   233,301
  59,040
  669,476
  236,160
Total operating expenses   5,019,684
  3,765,186
  20,920,775
  15,264,939
                 
Income (loss) from operations   174,015   565,657   (389,152)   1,855,483
                 
Other income (expenses):                
Interest income (expenses), net   (24,731)   165,565   110,525   462,424
Other income   -
  302,734
  2,347,026
  302,734
Total other income   (24,731)
  468,299
  2,457,551
  765,158
                 
Income before provision for income taxes   149,284   1,033,956   2,068,399   2,620,641
                 
Recovery of income taxes   (7,140)   -   (92,035)   (151,975)
     
    
    
    
 Net income for the period  $ 156,424
 $ 1,033,956
 $ 2,160,434
 $ 2,772,616
                 
                 
Basic earnings per share $ 0.00
$ 0.01
$ 0.03
$ 0.04
                 
Shares used in computing basic earnings per common share   75,856,208
  71,898,247
  74,032,830
  69,077,329
                 
Diluted earnings per share $ 0.00
$ 0.01
$ 0.03
$ 0.02
         
Shares used in computing diluted earnings per common share   78,186,255
  74,810,799
  76,489,381
  72,481,204
         
                 
(*) Stock-based compensation has been included in operating expenses as follows:                
 Cost of revenues $ 2,000 $ - $ 9,700 $ -
Sales and marketing $ 14,100 $ - $ 64,900 $ -
Technical operations and development $ 19,400 $ - $ 91,700 $ -
General and administrative $ 52,540 $ - $ 131,740 $ -
                 
                 


Tucows Inc.
Reconciliation of EBITDA and Adjusted EBITDA
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended
December 31,		 Year ended
December 31,
2006
 2005
 2006
 2005
Net income for the period $ 156,424 $ 1,033,956 $ 2,160,434 $ 2,772,616
Depreciation of property and equipment 963,952 219,527 2,978,867 951,692
Amortization of intangible assets 296,841 59,040 876,644 236,160
Interest income(expense), net (24,731) 165,565 110,525 462,424
Recovery of income taxes (7,140)
-
 (92,035)
(151,975)
EBITDA 1,385,346
1,478,088
6,034,435
4,270,917
Adjustments to EBITDA (1)
Change in prepaid fees for domain name registry and other Internet services fees (572,164) (430,973) (5,801,972) (3,804,225)
Change in deferred revenue 400,162 550,242 7,102,935 4,618,723
Transitional costs - - 1,278,842 -
Other income -
 (302,734)
 (2,347,026)
 (302,734)
Subtotal Adjustments to EBITDA (172,002)
(183,465)
232,779
511,764
Adjusted Net Income $ 1,213,344
$ 1,294,623
$ 6,267,214
$ 4,782,681
(1) Adjustments to EBITDA
We define Adjusted Net Income as net income adjusted for depreciation, amortization, interest, taxes and further adjusted for certain cash and non-cash charges. For the year ended December 31, 2006, we incurred $1,278,842 of transitional costs in connection with our acquisition of the Hosted Messaging assets of Critical Path. In addition, during the year ended December 31, 2006, we received $2,347,026 in connection with settlements related to patents we acquired in the merger with Infonautics in 2001. The net amount of cash we collected for domain registrations and other Internet services paid for the full term at the time of activation and deferred, amounted to $1,300,963 for the year ended December 31, 2006 compared to $814,498 for the year ended December 31, 2005.


Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
(unaudited)
  Three months ended
December 31,		 Year ended
December 31,
  2006
 2005
 2006
 2005
Cash provided by (used in):                
Operating activities:                
 Net income for the period  $ 156,424 $ 1,033,956 $ 2,160,434 $ 2,772,616
Items not involving cash:                
Depreciation of property and equipment   963,952   219,527   2,978,867   951,692
Amortization of intangible assets   296,841   59,040   876,644   236,160
Unrealized change in the fair value of forward exchange contracts   625,487   212,668   574,762   30,119
Stock-based compensation   88,040   -   298,040   -
Change in non-cash operating working capital:                
Interest receivable   -   76,165   39,574   (39,574)
Accounts receivable   2,787,229   (76,442)   (1,475,715)   (328,247)
Prepaid expenses and deposits   (225,711)   (524,722)   141,897   126,763
Prepaid fees for domain name registry and other Internet services fees   (572,163)   (430,973)   (5,801,972)   (3,804,225)
Accounts payable   (111,467)   (60,214)   745,581   171,652
Accrued liabilities   (1,158,124)   (326,808)   44,828   (1,271,703)
Customer deposits   292,691   106,747   867,482   29,375
Deferred revenue   400,162   550,242   7,102,935   4,618,723
Accreditation fees payable   354,150
  302,241
  264,716
  570,297
Cash (used in) provided by operating activities   3,897,511
  1,141,427
  8,818,073
  4,063,648
                 
Financing activities:                
Proceeds received on exercise of stock options   107,648   49,254   206,608   300,870
Net proceeds received on issuance of common stock, net of issue costs   -   -   -   1,574,675
Repayment of promissory note payable   -
  -
  (2,122,930)
  -
Cash (used in) provided by financing activities   107,648
  49,254
  (1,916,322)
  1,875,545
                 
Investing activities:                
Additions to property and equipment   (528,525)   (349,445)   (4,607,774)   (1,477,126)
Decrease (increase) in investment in short-term investments   -   5,999,884   1,771,569   (1,771,569)
Decrease (increase) in restricted cash - being margin security against forward exchange contracts   (756,588)   240,000   (959,423)   400,398
Deferred acquisition costs   -   (46,034)   -   (46,034)
Acquisition of Mailbank.com Inc., net of cash acquired   -   -   (6,486,732)   -
Acquisition of Hosted Messaging Assets, net of cash acquired   (95,532)   -   (7,552,320)   -
Acquisition of Boardtown Corporation, net of cash acquired   (22,200)   -   (44,900)   -
(Increase) decrease in cash held in escrow   107,145
  (2,330)
  (113,867)
   388,238
Cash used in investing activities   (1,295,700)
   5,842,075
  (17,993,447)
   (2,506,093)
                 
Increase (decrease) in cash and cash equivalents   2,709,459   7,032,756   (11,091,696)   3,433,100
Cash and cash equivalents, beginning of period   3,546,933
  10,315,332
  17,348,088
  13,914,988
Cash and cash equivalents, end of period $ 6,256,392
$ 17,348,088
$ 6,256,392
$ 17,348,088
                 
Supplemental information:                
Non-cash investing activity                
Acquisition of property and equipment included in accounts payable   384,270   -   384,270   -
                 
                 


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