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Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
(unaudited)
September 30, December 31,
2008 2007
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Assets
Current assets:
Cash and cash equivalents $ 2,721,033 $ 8,093,476
Accounts receivable 3,656,567 3,422,180
Prepaid expenses and deposits 2,595,737 3,132,129
Prepaid domain name registry and other
Internet services fees, current portion 29,008,651 25,473,465
Cash held in escrow 1,088,793 1,070,632
Deferred tax asset, current portion 500,000 500,000
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Total current assets 39,570,781 41,691,882
Prepaid domain name registry and other
Internet services fees, long-term portion 11,713,428 10,765,862
Property and equipment 3,551,311 4,963,311
Deferred financing charges 89,800 128,200
Deferred tax asset, long-term portion 2,500,000 2,500,000
Intangible assets 20,597,060 22,150,738
Goodwill 17,490,807 17,490,807
Investment 353,737 353,737
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Total assets $ 95,866,924 $ 100,044,537
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,302,239 $ 2,689,346
Accrued liabilities 2,975,686 3,289,087
Customer deposits 3,119,092 3,267,784
Promissory note payable - 6,000,000
Loan payable, current portion 1,914,242 1,914,242
Deferred revenue, current portion 38,159,670 35,465,584
Accreditation fees payable, current
portion 513,989 483,090
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Total current liabilities 48,984,918 53,109,133
Deferred revenue, long-term portion 16,221,513 15,147,644
Accreditation fees payable, long-term
portion 190,811 181,345
Loan payable, long-term portion 4,423,685 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 September 30,
2008 and 73,888,542 shares issued and
outstanding at December 31, 2007 15,368,310 15,350,915
Additional paid-in capital 48,762,868 48,537,313
Deficit (43,481,181) (44,537,179)
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Total stockholders' equity 20,649,997 19,351,049
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Total liabilities and stockholders' equity $ 95,866,924 $ 100,044,537
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Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
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Net revenues $ 20,147,195 $ 17,811,914 $ 59,308,731 $ 56,398,012
Cost of revenues:
Cost of
revenues(*) 13,981,247 12,271,047 40,794,276 35,702,644
Depreciation of
property and
equipment 795,445 995,954 2,437,542 2,791,050
Amortization of
intangible
assets 29,199 83,060 134,597 210,132
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Total cost of
revenues 14,805,891 13,350,061 43,366,415 38,703,826
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Gross profit 5,341,304 4,461,853 15,942,316 17,694,186
Expenses:
Sales and
marketing(*) 1,705,512 1,712,676 5,132,380 4,537,198
Technical
operations and
development(*) 1,527,237 1,723,857 4,666,832 5,288,829
General and
administrative(*) 2,240,134 1,257,206 5,361,217 3,566,847
Depreciation of
property and
equipment 57,386 68,316 177,317 198,107
Loss on
disposition of
property and
equipment 498,529 - 498,529 -
Amortization of
intangible
assets 360,540 322,781 1,122,655 778,823
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Total expenses 6,389,338 5,084,836 16,958,930 14,369,804
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Income (loss) from
operations (1,048,034) (622,983) (1,016,614) 3,324,382
Other income
(expenses):
Interest income
(expense), net (90,859) (203,376) (467,264) (294,322)
Other income,
net 1,098,245 530,583 2,631,010 619,014
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Total other
income 1,007,386 327,207 2,163,746 324,692
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Income (loss)
before provision
for income taxes (40,648) (295,776) 1,147,132 3,649,074
Provision for
income taxes 30,000 14,816 91,134 38,816
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Net income (loss)
for the period $ (70,648) $ (310,592) $ 1,055,998 $ 3,610,258
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Basic earnings
(loss) per
common share $ (0.00) $ (0.00) $ 0.01 $ 0.05
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Shares used in
computing basic
earnings (loss)
per common share 73,923,542 74,100,911 73,903,998 74,548,903
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Diluted earnings
(loss) per common
share $ (0.00) $ (0.00) $ 0.01 $ 0.05
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Shares used in
computing diluted
earnings (loss)
per common share 73,923,542 74,100,911 75,245,047 77,417,506
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(*)Stock-based
compensation has
been included in
expenses as
follows:
Cost of
revenues $ 5,500 $ 4,100 $ 14,600 $ 11,000
Sales and
marketing $ 17,200 $ 21,400 $ 48,500 $ 61,100
Technical
operations and
development $ 13,100 $ 18,900 $ 41,800 $ 62,300
General and
administrative $ 52,500 $ 33,900 $ 128,600 $ 118,100
Tucows Inc.
Reconciliation of EBITDA and Adjusted Net (Loss) Income
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
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Net income (loss)
for the period $ (70,648) $ (310,592) $ 1,055,998 $ 3,610,258
Depreciation of
property and
equipment 852,831 1,064,270 2,614,859 2,989,157
Amortization of
intangible
assets 389,739 405,841 1,257,252 988,955
Interest income
(expense), net 90,859 203,376 467,264 294,322
Provision for
income taxes 30,000 14,816 91,134 38,816
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EBITDA 1,292,781 1,377,711 5,486,507 7,921,508
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Adjustments to
EBITDA(1)
Change in prepaid
domain name
registry and other
Internet services
fees (775,955) (795,949) (4,482,752) (3,548,500)
Change in deferred
revenue (9,699) 834,795 3,767,955 4,711,315
Loss on disposition
of property and
equipment 498,529 - 498,529 -
Dividend income (176,861) (530,583) (353,722) (619,014)
Transitional costs - 244,336 - 244,336
Reversal of
contingencies - - - (451,249)
Sale of customer
relationships (921,384) - (2,042,449) -
Other Income - - (234,839) -
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Subtotal
Adjustments
to EBITDA (1,385,370) (247,401) (2,847,278) 336,888
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Adjusted Net
Income (Loss) $ (92,589) $ 1,130,310 $ 2,639,229 $ 8,258,396
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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 Nine months ended
September 30, September 30,
2008 2007 2008 2007
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Cash provided by
(used in):
Operating
activities:
Net income (loss)
or the period $ (70,648) $ (310,592) $ 1,055,998 $ 3,610,258
Items not
involving cash:
Depreciation
of property
and equipment 852,831 1,064,270 2,614,859 2,989,157
Loss on
disposition of
property and
equipment 498,529 - 498,529 -
Amortization of
deferred financing
charges 12,200 (142,600) 38,400 (142,600)
Amortization of
intangible assets 389,739 405,841 1,257,252 988,955
Gain on sale of
customer
relationships (921,384) - (2,042,449) -
Disposal of
domain names 4,705 - 4,705 -
Unrealized change
in the fair
value of forward
exchange
contracts 525,571 (61,673) 555,364 (1,164,114)
Stock-based
compensation 88,300 78,300 233,500 252,500
Change in non-cash
operating working
capital:
Accounts
receivable (518,310) 87,922 (234,387) (975,729)
Prepaid expenses
and deposits 641,629 875,841 536,392 (161,669)
Prepaid fees for
domain name
registry and other
Internet services
fees (775,955) (795,949) (4,482,752) (3,548,500)
Accounts payable (480,839) (161,037) (231,770) (906,624)
Accrued
liabilities (177,701) 218,368 (868,765) 651,189
Customer deposits (167,691) 204,906 (148,692) (165,560)
Deferred revenue (9,699) 834,795 3,767,955 4,711,315
Accreditation fees
payable 6,245 (34,255) 40,365 (350,283)
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Net cash (used in)
provided by
operating
activities (102,478) 2,264,137 2,594,504 5,788,295
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Financing activities:
Proceeds received
on exercise of
stock options - 17,912 9,450 204,255
Repurchase of shares - - - (2,446,955)
Proceeds received on
loan payable - 9,571,209 - 9,571,209
Repayment of
promissory note and
loan payable (478,561) (319,040) (8,435,681) (319,040)
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Net cash (used in)
provided by
financing
activities (478,561) 9,270,081 (8,426,231) 7,009,469
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Investing activities:
Cost of domain names
acquired - - (8,944) (18,425)
Additions to
property and
equipment (627,024) (200,213) (1,922,764) (3,093,366)
Proceeds on
disposition of
property and
equipment 66,039 - 66,039 -
Decrease in
restricted cash -
being margin
security against
forward exchange
contracts - 255,000 - 764,423
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)
Acquisition of Innerwise
Inc., net of cash
acquired - (10,332,065) - (10,332,065)
Sale of customer
relationships 921,384 - 2,343,114 -
(Decrease) increase
in cash held in
escrow (5,396) (1,058,620) (18,161) (364,041)
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Net cash provided
by (used in)
investing
activities 355,003 (11,335,898) 459,284 (13,138,424)
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(Decrease) increase
in cash and cash
equivalents (226,036) 198,320 (5,372,443) (340,660)
Cash and cash
equivalents,
beginning of
period 2,947,069 5,717,412 8,093,476 6,256,392
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Cash and cash
equivalents, end
of period $ 2,721,033 $ 5,915,732 $ 2,721,033 $ 5,915,732
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Supplemental cash
flow information:
Interest paid $ 100,060 $ 274,369 $ 552,298 $ 484,368
Supplementary
disclosure of
non-cash investing
activity:
Capital assets
acquired during
the period not yet
paid for $ 117,733 $ 293,205 $ 117,733 $ 293,205
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