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Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
(unaudited)
June 30 December 31,
2008 2007
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Assets
Current assets:
Cash and cash equivalents $ 2,947,069 $ 8,093,476
Accounts receivable 3,138,257 3,422,180
Prepaid expenses and deposits 3,237,366 3,132,129
Prepaid domain name registry and other
Internet services fees, current portion 28,479,571 25,473,465
Cash held in escrow 1,083,397 1,070,632
Deferred tax asset, current portion 500,000 500,000
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Total current assets 39,385,660 41,691,882
Prepaid domain name registry and other
Internet services fees, long-term portion 11,466,553 10,765,862
Property and equipment 4,887,720 4,963,311
Deferred financing charges 102,000 128,200
Deferred tax asset, long-term portion 2,500,000 2,500,000
Intangible assets 20,991,504 22,150,738
Goodwill 17,490,807 17,490,807
Investment 353,737 353,737
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Total assets $ 97,177,981 $100,044,537
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,329,112 $ 2,689,346
Accrued liabilities 2,627,816 3,289,087
Customer deposits 3,286,783 3,267,784
Promissory note payable - 6,000,000
Loan payable, current portion 1,914,242 1,914,242
Deferred revenue, current portion 38,354,640 35,465,584
Accreditation fees payable, current portion 510,900 483,090
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Total current liabilities 50,023,493 53,109,133
Deferred revenue, long-term portion 16,036,242 15,147,644
Accreditation fees payable, long-term portion 187,655 181,345
Loan payable, long-term portion 4,902,246 6,859,366
Deferred tax liability 5,396,000 5,396,000
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; 73,923,542 shares issued
and outstanding at June 30, 2008 and
73,888,542 shares issued and outstanding at
December 31, 2007 15,368,310 15,350,915
Additional paid-in capital 48,674,568 48,537,313
Deficit (43,410,533) (44,537,179)
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Total stockholders' equity 20,632,345 19,351,049
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Total liabilities and stockholders' equity $ 97,177,981 $100,044,537
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Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended June 30, Six months ended June 30,
2008 2007 2008 2007
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Net revenues $ 20,450,329 $ 20,814,881 $ 39,161,536 $ 38,586,098
Cost of revenues:
Cost of
revenues(*) 13,663,097 12,198,808 26,813,029 23,431,597
Depreciation of
property and
equipment 816,260 985,430 1,642,097 1,795,096
Amortization of
intangible assets 31,941 63,540 105,398 127,072
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Total cost of
revenues 14,511,298 13,247,778 28,560,524 25,353,765
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Gross profit 5,939,031 7,567,103 10,601,012 13,232,333
Expenses:
Sales and
marketing(*) 1,730,736 1,480,078 3,426,868 2,824,522
Technical
operations and
development(*) 1,573,741 1,752,693 3,139,595 3,564,972
General and
administrative(*) 1,326,218 810,872 3,121,083 2,309,641
Depreciation of
property and
equipment 58,861 68,267 119,931 129,791
Amortization of
intangible assets 376,954 222,741 762,115 456,042
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Total expenses 5,066,510 4,334,651 10,569,592 9,284,968
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Income (loss) from
operations 872,521 3,232,452 31,420 3,947,365
Other income
(expenses):
Interest income
(expense), net (166,421) (49,297) (376,405) (90,946)
Other income, net 1,532,765 - 1,532,765 88,431
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Total other
income
(expense) 1,366,344 (49,297) 1,156,360 (2,515)
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Income before
provision for
income taxes 2,238,865 3,183,155 1,187,780 3,944,850
Provision for
income taxes 30,000 12,000 61,134 24,000
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Net income for
the period $ 2,208,865 $ 3,171,155 $ 1,126,646 $ 3,920,850
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Basic earnings per
common share $ 0.03 $ 0.04 $ 0.02 $ 0.05
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Shares used in
computing basic
earnings per
common share 73,899,695 74,447,018 73,894,119 74,950,621
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Diluted earnings
per common share $ 0.03 $ 0.04 $ 0.01 $ 0.05
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Shares used in
computing diluted
earnings per
common share 75,348,108 77,375,096 75,439,926 77,633,136
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(*) Stock-based
compensation
has been
included in
expenses as
follows:
Cost of
revenues $ 4,800 $ 4,400 $ 9,100 $ 6,900
Sales and
marketing $ 13,000 $ 25,500 $ 31,300 $ 39,700
Technical
operations
and
develop-
ment $ 8,000 $ 23,300 $ 28,700 $ 43,400
General and
adminis-
trative $ 47,200 $ 58,300 $ 76,100 $ 84,200
Tucows Inc.
Reconciliation of EBITDA and Adjusted Net Income
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended June 30, Six months ended June 30,
2008 2007 2008 2007
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Net income for
the period $ 2,208,865 $ 3,171,155 $ 1,126,646 $ 3,920,850
Depreciation of
property and
equipment 875,121 1,053,697 1,762,028 1,924,887
Amortization of
intangible
assets 408,895 286,281 867,513 583,114
Interest income
(expense), net 166,421 49,297 376,405 90,946
Provision for
income taxes 30,000 12,000 61,134 24,000
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EBITDA 3,689,302 4,572,430 4,193,726 6,543,797
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Adjustments to
EBITDA(1)
Change in
prepaid domain
name registry
and other
Internet
services fees (1,176,196) (771,898) (3,706,797) (2,752,551)
Change in deferred
revenue 798,720 979,595 3,777,654 3,876,520
Dividend income (176,861) - (176,861) (88,431)
Reversal of
contingencies - (93,749) - (451,249)
Sale of customer
relationships (1,121,065) - (1,121,065) -
Other Income (234,839) - (234,839) -
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Subtotal Adjustments
to EBITDA (1,910,241) 113,948 (1,461,908) 584,289
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Adjusted Net
Income $ 1,779,061 $ 4,686,378 $ 2,731,818 $ 7,128,086
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(1) Adjustments to EBITDA
We define Adjusted EBITDA as net income adjusted for depreciation,
amortization, interest, taxes and further adjusted for certain cash and non-
cash charges.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended June 30, Six months ended June 30,
2008 2007 2008 2007
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Cash provided by
(used in):
Operating
activities:
Net income or
the period $ 2,208,865 $ 3,171,155 $ 1,126,646 $ 3,920,850
Items not
involving
cash:
Depreciation of
property and
equipment 875,121 1,053,697 1,762,028 1,924,887
Amortization of
deferred
financing
charges 12,700 - 26,200 -
Amortization of
intangible
assets 408,895 286,281 867,513 583,114
Gain on sale of
customer
relationships (1,121,065) - (1,121,065) -
Unrealized
change in the
fair value of
forward exchange
contracts (225,640) (885,652) 29,793 (1,102,441)
Stock-based
compensation 73,000 111,500 145,200 174,200
Change in non-cash
operating working
capital:
Accounts
receivable 350,043 (211,028) 283,923 (1,063,651)
Prepaid expenses
and deposits (244,926) (310,274) (105,237) (1,037,510)
Prepaid fees for
domain name
registry and
other Internet
services fees (1,176,196) (771,898) (3,706,797) (2,752,551)
Accounts payable 682,896 (337,450) 249,069 (745,587)
Accrued
liabilities (159,226) (216,318) (691,064) 432,821
Customer deposits 119,589 (195,342) 18,999 (370,466)
Deferred revenue 798,720 979,595 3,777,654 3,876,520
Accreditation
fees payable (22,696) (315,320) 34,120 (316,028)
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Net cash provided
by operating
activities 2,580,080 2,358,946 2,696,982 3,524,158
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Financing activities:
Proceeds received
on exercise of
stock options 9,450 85,272 9,450 186,343
Repurchase of
shares - (1,119,455) - (2,446,955)
Repayment of
promissory note
and loan
payable (7,478,560) - (7,957,120) -
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Net cash used in
financing
activities (7,469,110) (1,034,183) (7,947,670) (2,260,612)
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Investing activities:
Cost of domain
names acquired (2,524) 10,303 (8,944) (18,425)
Additions to
property and
equipment (1,084,209) (1,690,523) (1,295,740) (2,893,153)
Decrease in
restricted cash
- being margin
security against
forward exchange
contracts - 257,785 - 509,423
Acquisition of
Hosted Messaging
Assets from
Critical Path
Inc., net of cash
acquired - - - (90,050)
Acquisition of
Boardtown
Corporation, net
of cash acquired - (4,900) - (4,900)
Sale of customer
relationships 1,421,730 - 1,421,730 -
(Decrease) increase
in cash held in
escrow (5,366) - (12,765) 694,579
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Net cash provided
by (used in)
investing
activities 329,631 (1,427,335) 104,281 (1,802,526)
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Decrease in cash
and cash
equivalents (4,559,399) (102,572) (5,146,407) (538,980)
Cash and cash
equivalents,
beginning of
period 7,506,468 5,819,984 8,093,476 6,256,392
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Cash and cash
equivalents, end
of period $ 2,947,069 $ 5,717,412 $ 2,947,069 $ 5,717,412
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Supplemental cash
flow information:
Interest paid $ 192,900 $ 105,000 $ 452,237 $ 210,000
Supplementary
disclosure of
non-cash investing
activity:
Capital assets
acquired during
the period not
yet paid for $ 663,767 $ 163,169 $ 663,767 $ 163,169
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