UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-32600

TUCOWS INC.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	23-2707366
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

96 Mowat Avenue,

Toronto, Ontario M6K 3M1, Canada

(Address of Principal Executive Offices) (Zip Code)

(416) 535-0123

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

TCX

NASDAQ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T §232.405 of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒

Non-accelerated filer ☐	Smaller reporting company ☐

Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of ~~August 4, 2020,~~May 3, 2021, there were ~~10,567,610~~10,624,415 outstanding shares of common stock, no par value, of the registrant.

Table of Contents

TUCOWS INC.

Form 10-Q Quarterly Report

INDEX

PART I FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3

	Consolidated Balance Sheets (unaudited) as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3

	Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

	Consolidated Statements of Cash Flows (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2622

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4843

Item 4.	Controls and Procedures	4944

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	5045

Item 1A.	Risk Factors	5045

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5146

Item 3.	Defaults Upon Senior Securities	5146

Item 4.	Mine Safety Disclosures	5146

Item 5.	Other Information	5146

Item 6.	Exhibits	5147

Signatures		5348

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

Tucows®, EPAG®, Hover®, OpenSRS®, Platypus®, Ting®, eNom®, Roam®, Roam Mobility®, Bulkregister®, Ascio®, Cedar®, and YummyNames® are registered trademarks of Tucows Inc. or its subsidiaries. Other service marks, trademarks and trade names of Tucows Inc. or its subsidiaries may be used in this Quarterly Report on Form 10-Q (this “Quarterly Report”). All other service marks, trademarks and trade names referred to in this Quarterly Report are the property of their respective owners. Solely for convenience, any trademarks referred to in this Quarterly Report may appear without the ® or TM symbol, but such references are not intended to indicate, in any way, that we or the owner of such trademark, as applicable, will not assert, to the fullest extent under applicable law, our or its rights, or the right of the applicable licensor, to these trademarks.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Tucows Inc.

Consolidated Balance Sheets

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

(unaudited)

	June 30,		December 31,		*March 31,*		*December 31,*
	2020		2019		*2021*		*2020*

Assets

Current assets:
Cash and cash equivalents	$	8,859	$	20,393	$	8,310	$	8,311
Accounts receivable, net of allowance for doubtful accounts of $214 as of June 30, 2020 and $131 as of December 31, 2019		7,506		14,564
Accounts receivable, net of allowance for doubtful accounts of $206 as of March 31, 2021 and $222 as of December 31, 2020						15,868		15,540
Inventory		965		3,457		2,317		1,875
Prepaid expenses and deposits		16,549		13,478		14,579		16,845
Derivative instrument asset, current portion (note 5)		1,080		731		2,893		3,860
Prepaid domain name registry and ancillary services fees, current portion (note 12)		96,322		91,252
Assets held-for-sale (note 9)		9,027		-
Deferred costs of fulfillment, current portion (note 11)						96,861		93,467
Income taxes recoverable		1,326		1,800		1,316		1,302
Total current assets		141,634		145,675		142,144		141,200

Prepaid domain name registry and ancillary services fees, long-term portion (note 12)		17,902		17,915
Deferred costs of fulfillment, long-term portion (note 11)						18,316		17,599
Derivative instrument asset, long-term portion (note 5)		611		-		65		0
Deferred tax asset		340		-		188		226
Property and equipment		101,292		82,121		129,846		117,530
Right of use operating lease asset		11,066		11,335		11,893		11,238
Contract costs		344		1,400		369		362
Intangible assets (note 6)		52,732		57,654		44,978		47,444
Goodwill (note 6)		116,270		109,818		116,304		116,304
Total assets	$	442,191	$	425,918	$	464,103	$	451,903


Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	6,511	$	6,671	$	9,969	$	6,329
Accrued liabilities		9,915		9,373		11,028		10,235
Customer deposits		14,468		14,074		15,527		15,402
Derivative instrument liability, current portion (note 5)		561		-		83		99
Liabilities held-for-sale (note 9)		751		-
Operating lease liability, current portion (note 13)		1,506		1,413
Deferred revenue, current portion (note 11)		129,072		123,101
Operating lease liability, current portion (note 12)						1,982		1,761
Deferred revenue, current portion (note 10)						132,427		127,336
Accreditation fees payable, current portion		1,018		952		1,023		940
Income taxes payable		1,291		1,324		14		863
Total current liabilities		165,093		156,908		172,053		162,965

Derivative instrument liability, long-term portion (note 5)		158		-		0		114
Deferred revenue, long-term portion (note 11)		26,228		26,202
Deferred revenue, long-term portion (note 10)						25,167		24,909
Accreditation fees payable, long-term portion		204		216		189		195
Operating lease liability, long-term portion (note 13)		9,169		9,424
Operating lease liability, long-term portion (note 12)						9,668		9,179
Loan payable, long-term portion (note 7)		113,608		113,503		121,802		121,733
Other long-term liability (note 4 (b))		3,244		-
Other long-term liability (note 4)						3,512		3,416
Deferred tax liability		27,113		25,471		24,298		24,694

Stockholders' equity (note 15)
Stockholders' equity (note 14)
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding		-		-		0		0
Common stock - no par value, 250,000,000 shares authorized; 10,570,360 shares issued and outstanding as of June 30, 2020 and 10,585,159 shares issued and outstanding as of December 31, 2019		18,865		16,633
Common stock - no par value, 250,000,000 shares authorized; 10,624,415 shares issued and outstanding as of March 31, 2021 and 10,612,414 shares issued and outstanding as of December 31, 2020						21,511		20,798
Additional paid-in capital		591		880		1,778		1,458
Retained earnings		77,322		76,208		82,255		80,106
Accumulated other comprehensive income (loss) (note 5)		596		473
Accumulated other comprehensive income (note 5)						1,870		2,336
Total stockholders' equity		97,374		94,194		107,414		104,698
Total liabilities and stockholders' equity	$	442,191	$	425,918	$	464,103	$	451,903

Contingencies (note 18)

Subsequent events (note 19)

See accompanying notes to consolidated financial statements

Table of Contents

Tucows Inc.

Consolidated Statements of Operations and Comprehensive Income

(Dollar amounts in thousands of U.S. dollars, except per share amounts)

(unaudited)

	*For the Three Months Ended June 30,*						*For the Six Months Ended June 30,*						*For the Three Months Ended March 31,*
	*2020*			*2019*			*2020*			*2019*			*2021*			*2020*


Net revenues (note 11)	$	82,122		$	84,117		$	166,107		$	163,070
Net revenues (note 10)													$	70,875		$	83,985

Cost of revenues (note 11)
Cost of revenues		51,790			54,873			104,978			106,805
Cost of revenues (note 10)
Direct cost of revenues														46,187			53,188
Network expenses		2,485			2,385			4,901			4,780			3,238			2,416
Depreciation of property and equipment		3,030			2,038			5,907			3,839			3,638			2,877
Amortization of intangible assets (note 6)		326			314			680			488			299			354
Impairment of property and equipment		1,525			-			1,525			-			60			0
Total cost of revenues		59,156			59,610			117,991			115,912			53,422			58,835

Gross profit		22,966			24,507			48,116			47,158			17,453			25,150

Expenses:
Sales and marketing		9,218			8,856			18,203			17,597			8,311			8,985
Technical operations and development		3,067			2,752			5,818			5,275			3,132			2,751
General and administrative		5,465			4,796			10,206			9,244			4,953			4,741
Depreciation of property and equipment		125			134			238			258			121			113
Amortization of intangible assets (note 6)		2,504			2,251			5,451			4,117			2,320			2,947
Impairment of definite life intangible assets (note 6)		1,431			-			1,431			-
Loss (gain) on currency forward contracts (note 5)		(381	)		(31	)		60			(110	)		(253	)		441
Total expenses		21,429			18,758			41,407			36,381			18,584			19,978

Income from operations		1,537			5,749			6,709			10,777			(1,131	)		5,172

Other income (expenses):
Interest expense, net		(846	)		(1,314	)		(1,996	)		(2,286	)		(936	)		(1,150	)
Gain on sale of Ting customer assets, net (note 17)														5,395			0
Other expense, net		(85	)		-			(172	)		-			(96	)		(87	)
Total other income (expenses)		(931	)		(1,314	)		(2,168	)		(2,286	)		4,363			(1,237	)

Income before provision for income taxes		606			4,435			4,541			8,491			3,232			3,935

Provision for income taxes (note 8)		449			1,819			1,550			3,076			1,083			1,101

Net income for the period		157			2,616			2,991			5,415			2,149			2,834

Other comprehensive income, net of tax
Unrealized income (loss) on hedging activities (note 5)		1,114			240			(120	)		789			368			(1,234	)
Net amount reclassified to earnings (note 5)		200			80			243			141			(834	)		43
Other comprehensive income net of tax expense of $398 and $103 for the three months ended June 30, 2020 and June 30, 2019, $32 and $298 for the six months ended June 30, 2020 and June 30, 2019 (note 5)		1,314			320			123			930
Other comprehensive income (loss) net of tax expense (recovery) of ($140) and ($366) for the three months ended March 31, 2021 and March 31, 2020, respectively (note 5)														(466	)		(1,191	)

Comprehensive income, net of tax for the period	$	1,471		$	2,936		$	3,114		$	6,345		$	1,683		$	1,643


Basic earnings per common share (note 10)	$	0.01		$	0.25		$	0.28		$	0.51
Basic earnings per common share (note 9)													$	0.20		$	0.27

Shares used in computing basic earnings per common share (note 10)		10,567,382			10,657,124			10,589,806			10,646,045
Shares used in computing basic earnings per common share (note 9)														10,617,807			10,612,230

Diluted earnings per common share (note 10)	$	0.01		$	0.24		$	0.28		$	0.50
Diluted earnings per common share (note 9)													$	0.20		$	0.26

Shares used in computing diluted earnings per common share (note 10)		10,653,527			10,840,005			10,684,304			10,837,456
Shares used in computing diluted earnings per common share (note 9)														10,796,762			10,713,678

See accompanying notes to consolidated financial statements

Table of Contents

Tucows Inc.

Consolidated Statements of Cash Flows

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

(unaudited)

	*For the Three Months Ended June 30,*						*For the Six Months Ended June 30,*						*For the Three Months Ended March 31,*
	*2020*			*2019*			*2020*			*2019*			*2021*			*2020*
Cash provided by:
Operating activities:
Net income for the period	$	157		$	2,616		$	2,991		$	5,415		$	2,149		$	2,834
Items not involving cash:
Depreciation of property and equipment		3,155			2,172			6,145			4,097			3,759			2,990
Impairment of property and equipment		1,525			-			1,525			22			60			0
Amortization of debt discount and issuance costs		67			90			134			168			67			67
Amortization of intangible assets		2,830			2,565			6,131			4,605			2,619			3,301
Net amortization contract costs		95			34			124			53			(7	)		29
Impairment of definite life intangible assets		1,431			-			1,431			-
Accretion of contingent consideration		85			-			172			-			96			87
Other		223			-			223			-
Deferred income taxes (recovery)		(917	)		1,449			(1,107	)		1,911			(220	)		(190	)
Excess tax benefits on share-based compensation expense		(164	)		(381	)		(344	)		(737	)		(172	)		(180	)
Net Right of use operating assets/Operating lease liability		291			79			112			49			55			(179	)
Loss on disposal of domain names		2			2			15			6			1			13
Loss (gain) on change in the fair value of forward contracts		(436	)		(70	)		(88	)		(188	)		166			348
Stock-based compensation		847			685			1,648			1,210			1,022			801
Change in non-cash operating working capital:
Accounts receivable		401			1,031			2,552			(157	)		(328	)		2,151
Inventory		900			108			1,804			516			(442	)		904
Prepaid expenses and deposits		(3,247	)		(2,524	)		(3,222	)		(2,914	)		2,266			25
Prepaid domain name registry and ancillary services fees		(2,204	)		1,651			(5,057	)		(65	)
Deferred costs of fulfillment														(4,111	)		(2,853	)
Income taxes recoverable		294			(1,639	)		794			(2,875	)		(689	)		500
Accounts payable		(1,521	)		(1,170	)		250			(384	)		1,451			1,771
Accrued liabilities		2,165			2,266			334			3,587			793			(1,831	)
Customer deposits		336			(808	)		394			(521	)		125			58
Deferred revenue		2,655			(1,131	)		5,997			2,138			5,349			3,342
Accreditation fees payable		(31	)		(46	)		54			34			77			85
Net cash provided by operating activities		8,939			6,979			23,012			15,970			14,086			14,073

Financing activities:
Proceeds received on exercise of stock options		29			122			46			194			229			17
Payment of tax obligations resulting from net exercise of stock options		(165	)		(185	)		(347	)		(524	)		(218	)		(182	)
Repurchase of common stock		(164	)		-			(3,281	)		-			0			(3,117	)
Proceeds received on loan payable		-			7,431			-			40,371
Repayment of loan payable		-			(3	)		-			(4,603	)
Payment of loan payable costs		(7	)		(434	)		(32	)		(641	)		0			(25	)
Net cash (used in) provided by financing activities		(307	)		6,931			(3,614	)		34,797
Net cash provided by (used in) financing activities														11			(3,307	)

Investing activities:
Additions to property and equipment		(12,150	)		(10,414	)		(22,093	)		(20,849	)		(13,944	)		(9,943	)
Acquisition of other assets		-			(2,501	)		-			(2,501	)
Acquisition of Cedar Holdings Group, net of cash of $66 (note 4(b))		-			-			(8,770	)		-
Acquisition of Ascio Technologies, net of cash of $1 (note 4(a))		-			-			-			(28,024	)
Acquisition of Cedar Holdings Group, net of cash of $66 (note 4)														0			(8,770	)
Acquisition of intangible assets		(69	)		(27	)		(69	)		(27	)		(154	)		0
Net cash used in investing activities		(12,219	)		(12,942	)		(30,932	)		(51,401	)		(14,098	)		(18,713	)

Increase (decrease) in cash and cash equivalents		(3,587	)		968			(11,534	)		(634	)		(1	)		(7,947	)

Cash and cash equivalents, beginning of period		12,446			11,035			20,393			12,637			8,311			20,393
Cash and cash equivalents, end of period	$	8,859		$	12,003		$	8,859		$	12,003		$	8,310		$	12,446



Supplemental cash flow information:
Interest paid	$	686		$	1,318		$	1,840		$	2,294		$	949		$	1,154
Income taxes paid, net	$	1,243		$	2,046		$	2,200		$	4,164		$	2,381		$	956
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for	$	635		$	674		$	635		$	674		$	3,320		$	1,102
Fair value of shares issued for acquisition of Cedar Holdings Group	$	-		$	-		$	2,000		$	-		$	0		$	2,000
Fair value of contingent consideration for acquisition of Cedar Holdings Group	$	7		$	-		$	3,072		$	-		$	0		$	3,065

See accompanying notes to consolidated financial statements

Table of Contents

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

1. Organization of the Company:

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) provides simple useful services that help people unlock the power of the Internet. The Company provides US consumers and small businesses with ~~mobile phone services nationally and~~ high-speed fixed Internet access in selected towns. The Company also offers Mobile Service Enabler ("MSE") solutions and professional services to retail mobile providers as well as its own retail mobile phone services. The Company is also a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.

2. Basis of Presentation:

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at ~~June 30, 2020~~March 31, 2021 and the results of operations and cash flows for the interim periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019~~2020. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for future periods.

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, ~~2019~~2020 included in Tucows' ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on March 3, 2021 (4,the “2020 ~~(the “~~~~2019~~ Annual Report”). There have been no material changes to our significant accounting policies and estimates during the three ~~and~~ ~~six~~months ended ~~June 30, 2020~~ March 31, 2021as compared to the significant accounting policies and estimates described in our ~~2019~~2020 Annual Report, except as described in Note 3 – Recent Accounting Pronouncements, ~~and~~ Note 913 - ~~Assets Held-for-sale.~~Segment Reporting.

3. Recent Accounting Pronouncements:

~~Recent Accounting Pronouncements Adopted~~

In ~~August 2018,~~ ~~the Financial Accounting Standards Board (“FASB”) issued ASU~~ ~~No.~~~~2018~~-~~15,~~~~Intangibles—Goodwill and Other—Internal-Use Software~~ ~~(Subtopic~~ ~~350~~-40~~): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU~~ ~~2018~~-~~15”~~~~). ASU~~ ~~2018~~-15 helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance on accounting for implementation costs when the cloud computing arrangement does ~~not~~ ~~include a license and is accounted for as a service contract. The amendments in ASU~~ ~~2018~~-15 require an entity (customer) in a hosting arrangement to assess which implementation costs to capitalize vs expense as it relates to a service contract. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU ~~2018~~-15 ~~is effective for fiscal years beginning after~~ ~~December 15, 2019,~~ ~~and interim periods within those fiscal years. The Company adopted ASU~~ ~~2018~~-15 ~~in the~~ ~~first~~ ~~quarter of~~ ~~2020~~ ~~to all implementation costs incurred after the date of adoption. The new guidance did~~ ~~not~~ ~~have a material impact on our consolidated financial statements.~~

~~Table of Contents~~

Recent Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden of reference rate reform on financial reporting. The amendments in ASU 2020-04 apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

	1.	Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate.
	2.	Modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts.
	3.	Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently charged interest and standby fees associated with its Amended 2019 Credit Facility (as defined below) based on LIBOR which are partially hedged by interest rate swaps, which are also based on LIBOR. Both the credit facility agreement and the interest rate swaps will need to be amended when an alternative reference rate is chosen, at which time we may adopt some of the practical expedients provided by ASU 2020-04.

4. Acquisitions:

~~(a)~~

~~Ascio~~

On ~~March 18, 2019,~~ the Company entered into an Asset Purchase Agreement to purchase all of the equity of Ascio Technologies, Inc. (“Ascio”), a domain registrar business, and all of CSC’s assets related to that business. For more information, see Note 3 ~~- Acquisitions of the~~ ~~2019~~ ~~Annual Report.~~

~~(b)~~

~~Cedar~~

~~In the~~On ~~fourth~~January 1, 2020, ~~quarter of~~ ~~2019,~~the Company entered into a Stock Purchase Agreement to purchase all of the issued and outstanding shares of Cedar Holdings Group, Incorporated (“Cedar”), a fiber Internet provider business based in Durango, Colorado. ~~The transaction closed on~~For more information, see Note ~~January 1, 2020,~~ 3following receipt of all regulatory approvals. The purchase price was $14.1 million, less an estimated purchase price adjustment of approximately $0.2 million relating to a working capital deficit and assessment - Acquisitions of the fair value of contingent consideration, for net purchase consideration of $13.9 million. In addition to $9.0 million cash consideration due at closing, the Company also issued 32,374 ($2.0 million) of Tucows Inc. shares with a ~~two~~~~-year restriction period at closing. Included in the agreement is contingent consideration totaling up to $4.0 million, due on the~~ ~~24th~~2020 ~~and~~ ~~36th~~ month anniversaries of the closing of the transaction dependent upon the achievement of certain milestones as defined in the Share Purchase Agreement. The fair value of the contingent consideration was determined to be $3.1 million using a discount rate of 11.2%. The Company has prepared a preliminary purchase price allocation of the assets acquired and the liabilities assumed of Cedar based on management’s best estimates of fair value. The final purchase price allocation ~~may~~ ~~vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities.~~Annual Report.

~~The amortization period for the customer relationships and network rights are~~ 7 ~~and~~ 15 ~~years, respectively.~~

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~~The following table shows the preliminary allocation of the purchase price for Cedar to the acquired identifiable assets and liabilities assumed (~~ ~~thousands of U.S. dollars~~):

Cash Consideration, including working capital adjustment
$ 8,836
Share-based payment
2,000
Fair value of contingent payments
3,072
Total estimated purchase price
13,908

Cash and Cash Equivalents
66
Accounts Receivables, net
47
Other current assets
22
Property and equipment
4,661
Right of use operating lease
18
Intangible assets, consisting of customer relationships and network rights
5,390
Total identifiable assets
10,204
Accounts payable and accrued liabilities
(362 )
Deferred tax liability
(2,373 )
Operating lease liability
(13 )
Total liabilities assumed
(2,748 )
Total net assets (liabilities) assumed
7,456
Total goodwill
$ 6,452

~~The goodwill related to this acquisition is primarily attributable to synergies expected to arise from the acquisition and is~~ ~~not~~ ~~deductible for tax purposes.~~

~~In connection with this acquisition, the Company incurred total acquisition related costs of $0.1 million, of which~~ ~~nil~~ ~~were included in General & Administrative expenses in the consolidated statements of Operations and comprehensive Income for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~.

~~The following table presents selected unaudited pro forma information for the Company assuming the acquisition of Cedar had occurred as of~~ ~~January 1, 2019.~~ ~~This pro forma information does~~ ~~not~~ ~~purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.~~

Unaudited

Unaudited

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2019

2019

Net revenues
$ 85,345 $ 165,526
Net income
2,740 5,440

Basic earnings per common share
0.26 0.51
Diluted earnings per common share
$ 0.25 $ 0.50

~~The amount of revenue recognized since the acquisition date included in the consolidated statements of operations and comprehensive income statement for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~is $1.2 million and $2.4 million, respectively.~~

~~The net income recognized since the acquisition date included in the consolidated statements of operations and comprehensive income for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~is a gain of $0.1 million and a loss of $0.2 million, respectively.~~

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5. Derivative Instruments and Hedging Activities:

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk.

Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Credit facility. The notional value of the interest rate swap was $70 million.

~~As part of its risk management strategy, the Company also uses derivative instruments to hedge a portion of the foreign exchange risk and interest rate risk associated with these costs.~~ The Company does not use ~~these~~hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between one and eighteen months, and the interest rate swap matures in June 2023.

The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU 2017- 12, Derivatives and Hedging (Topic 815) (“ASC Topic 815”). For certain contracts, as the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with ASC Topic 815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk of being hedged are expected to completely offset at inception and on an ongoing basis. The Company has also designated the interest rate swap as a cash flow hedge of expected future interest payments. Accordingly, for the foreign exchange and interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income and reclassified to earnings when the hedged transaction is recognized in earnings. Cash flows from hedging activities are classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the contracts, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings.

As of ~~June 30, 2020~~March 31, 2021, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was ~~$52.1~~$20.7 million, of which ~~$44.2~~$17.5 million met the requirements of ASC Topic 815 and were designated as hedges.

As of December 31, ~~2019~~2020, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars wa s ~~$30.5~~$31.8 million, of which ~~$26.1~~$26.8 million met the requirements of ASC Topic 815 and were designated as hedges.

As of ~~June 30, 2020~~March 31, 2021, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:

Maturity date (Dollar amounts in thousands of U.S. dollars)	*Notional amount of U.S. dollars*		*Weighted average exchange rate of U.S. dollars*		*Fair value*			*Notional amount of U.S. dollars*		*Weighted average exchange rate of U.S. dollars*		*Fair value Asset / (Liability)*

July - September 2020		10,656		1.3227		(273	)
October - December 2020		9,658		1.3227		(247	)
January - March 2021		11,124		1.4283		574
April - June 2021		9,878		1.4283		507			9,878		1.4283		1,352
July - September 2021		10,782		1.4362		611			10,781		1.4362		1,541
	$	52,098		1.3888	$	1,172		$	20,659		1.4324	$	2,893

As of ~~June 30,~~March 31, 2021 and December 31, 2020,, the notional amount of the Company's interest rate swap designated as a cash flow hedge was ~~$70~~$70 million. ~~As of~~ ~~December 31, 2019~~ ~~the Company had~~ ~~not~~ ~~entered into any interest rate swaps.~~

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Fair value of derivative instruments and effect of derivative instruments on financial performance

The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do not include any income tax effects).

Fair value of derivative instruments in the consolidated balance sheets

Derivatives (Dollar amounts in thousands of U.S. dollars)	*Balance Sheet Location*	*As of June 30, 2020 Fair Value Asset (Liability)*			*As of December 31, 2019 Fair Value Asset*		*Balance Sheet Location*	*As of March 31, 2021 Fair Value Asset (Liability)*			*As of December 31, 2020 Fair Value Asset (Liability)*
Foreign Currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	982		$	626	Derivative instruments	$	2,454		$	3,254
Interest rate swap contract designated as a cash flow hedge (net)	Derivative instruments		(200	)	$	-	Derivative instruments		(18	)	$	(213	)
Foreign Currency forward contracts not designated as cash flow hedges (net)	Derivative instruments		190			105	Derivative instruments		439			606
Total foreign currency forward contracts (net)	Derivative instruments	$	972		$	731
Total foreign currency and interest swap forward contracts (net)							Derivative instruments	$	2,875		$	3,647

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Movement in accumulated other comprehensive income (AOCI) balance for the three months ended ~~June 30, 2020~~~~(Dollar amounts in thousands of U.S. dollars)~~

Gains and losses on cash flow hedges

Tax impact

Total AOCI

Opening AOCI balance - March 31, 2020
$ (932 ) $ 214 $ (718 )
Other comprehensive income (loss) before reclassifications
1,453 (339 ) 1,114
Amount reclassified from AOCI
259 (59 ) 200
Other comprehensive income (loss) for the three months ended June 30, 2020
1,712 (398 ) 1,314

Ending AOCI Balance - June 30, 2020
$ 780 $ (184 ) $ 596

~~Movement in accumulated other comprehensive income (AOCI) balance for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~March 31, 2021 (Dollar amounts in thousands of U.S. dollars)

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance - December 31, 2020	$	3,038		$	(702	)	$	2,336
Other comprehensive income (loss) before reclassifications		480			(112	)		368
Amount reclassified from AOCI		(1,086	)		252			(834	)
Other comprehensive income (loss) for the three months ended March 31, 2021		(606	)		140			(466	)

Ending AOCI Balance - March 31, 2021	$	2,432		$	(562	)	$	1,870

Gains and losses on cash flow hedges

Tax impact

Total AOCI

Opening AOCI balance - December 31, 2019
$ 625 $ (152 ) $ 473
Other comprehensive income (loss) before reclassifications
(162 ) 42 (120 )
Amount reclassified from AOCI
317 (74 ) 243
Other comprehensive income (loss) for the six months ended June 30, 2020
155 (32 ) 123

Ending AOCI Balance - June 30, 2020
$ 780 $ (184 ) $ 596

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended ~~June 30, 2020~~March 31, 2021 are as follows (Dollar amounts in thousands of U.S. dollars)

Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income
Operating expenses $ (201 )
Foreign currency forward contracts for the three months ended June 30, 2020 $ 1,314 Cost of revenues $ (58 )

Interest rate swap contract for the three months ended June 30, 2020 $ - Interest expense, net $ -

Operating expenses $ (91 )
Foreign currency forward contracts for the three months ended June 30, 2019 $ 320 Cost of revenues $ (15 )

Interest rate swap contract for the three months ended June 30, 2019 $ - Interest expense, net $ -

~~Effects of derivative instruments on income and other comprehensive income (OCI) for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~are as follows (Dollar amounts in thousands of U.S. dollars)~~

Derivatives in Cash Flow Hedging Relationship

Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative

Location of Gain or (Loss) Reclassified from AOCI into Income

Amount of Gain or (Loss) Reclassified from AOCI into Income

Operating expenses
$ (246 )
Foreign currency forward contracts for the six months ended June 30, 2020
$ 123
Cost of revenues
$ (71 )

Interest rate swap contract for the six months ended June 30, 2020 $ - Interest expense, net $ -

Operating expenses
$ (154 )
Foreign currency forward contracts for the six months ended June 30, 2019
$ 930
Cost of revenues
$ (32 )

Interest rate swap contract for the six months ended June 30, 2019 $ - Interest expense, net $ -

Derivatives in Cash Flow Hedging Relationship	*Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative*			*Location of Gain or (Loss) Reclassified from AOCI into Income*	*Amount of Gain or (Loss) Reclassified from AOCI into Income*
				Operating expenses	$	949
Foreign currency forward contracts for the three months ended March 31, 2021	$	(615	)	Cost of revenues	$	156

Interest rate swap contract for the three months ended March 31, 2021	$	149		Interest expense, net	$	(19	)

				Operating expenses	$	(45	)
Foreign currency forward contracts for the three months ended March 31, 2020	$	(1,191	)	Cost of revenues	$	(13	)

Interest rate swap contract for the three months ended March 31, 2020	$	-		Interest expense, net	$	-

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company recorded the following fair value adjustments on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars):

	*Three Months Ended June 30,*						*Six Months Ended June 30,*						*Three Months Ended March 31,*
Forward currency contracts not designated as hedges:	*2020*			*2019*			*2020*			*2019*			*2021*			*2020*

Gain (loss) on settlement	$	(55	)	$	(39	)	$	(148	)	$	(78	)	$	420		$	(93	)

Gain (loss) on change in fair value	$	436		$	70		$	88		$	188		$	(167	)	$	(348	)

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6. Goodwill and Other Intangible Assets

~~Goodwill~~Goodwill:

Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions.

The Company's Goodwill balance is $116.3 million as of ~~June 30, 2020~~March 31, 2021 and ~~$109.8~~$116.3 million as of December 31, ~~2019~~2020. The Company's goodwill relates 7% ( $8.6 million) to its Fiber Internet Services operating segment, nil to its Mobile Services operating segment and 93% ( $107.7 million) to its Domain ~~Services operating segment and 7% ( $8.6 million) to its Network Access~~ Services operating segment.

Goodwill is not amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present. No impairment was recognized during the three ~~and~~ ~~six~~months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

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Other Intangible Assets:

Intangible assets consist of acquired brand, technology, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets are not amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended ~~June 30, 2020~~ March 31, 2021and ~~June 30, 2019,~~ March 31, 2020, the Company assessed that ~~certain~~all domain names that were originally acquired in the June 2006 acquisition of Mailbank.com Inc. that were up for renewal, should~~not~~ be renewed.

Intangible assets, comprising brand, technology, customer relationships and network rights are being amortized on a straight-line basis over periods of two to fifteen years.

In ~~June 2020,~~ ~~in light of developments in the economy and the business and leisure travel industries as a result of the novel strain of coronavirus (“COVID-~~~~19”~~) pandemic, the Company decided to discontinue the operation of Roam Mobility. As a consequence of the decision to shut down its Roam Mobility operations, the Company has recorded an impairment loss associated with Roam Mobility customer relationships of $1.4 million, as at ~~June 30, 2020.~~

In ~~June 2020,~~ ~~the Company committed to a plan to sell its Ting Mobile customer base and reclassified its mobile customer relationships totaling $2.6 million as held-for-sale assets (Note~~ 9~~). See Note~~ 19 ~~- Subsequent Events for more information on the Company’s sale of its Ting Mobile customer base.~~

~~Throughout the~~ ~~second~~ ~~quarter of~~ ~~2020,~~ the Company purchased several non-exclusive land easements, totaling $0.1 million, which are necessary for the Company to install fiber internet infrastructure in conjunction with its Fiber Internet business.

~~Acquired~~Net book value of acquired intangible assets consist of the following (Dollar amounts in thousands of U.S. dollars):

Surname domain names

Direct navigation domain names

Brand

Customer relationships

Technology

Network rights

Total

Amortization period

indefinite life

indefinite life

7 years

3 - 7 years

2 - 7 years

15 years

Balances, March 31, 2020
$ 11,162 $ 1,135 $ 8,573 $ 36,469 $ 1,189 $ 1,387 $ 59,915
Cedar Networks acquisition (Note 4 (b))
- - - 10 - (195 ) (185 )
Additions to/(disposals from) domain portfolio, net
(2 ) - - - - - (2 )
Impairment of definite life intangible asset - - - (1,431 ) - - (1,431 )
Other - - - (223 ) - - (223 )
Classified as assets held for-sale - - - (2,581 ) - - (2,581 )
Acquisition of Network rights 69 69
Amortization expense
- - (517 ) (1,987 ) (305 ) (21 ) (2,830 )
Balances, June 30, 2020
$ 11,160 $ 1,135 $ 8,056 $ 30,257 $ 884 $ 1,240 $ 52,732

	*Surname domain names*			*Direct navigation domain names*		*Brand*			*Customer relationships*			*Technology*			*Network rights*			*Total*
Amortization period	*indefinite life*			*indefinite life*		*7 years*			*3 - 7 years*			*2 - 7 years*			*15 years*

Balances, December 31, 2020	$	11,157		$	1,135	$	7,021		$	26,664		$	274		$	1,193		$	47,444
Acquisition of customer relationships		-			-		-			154			-			-			154
Additions to/(disposals from) domain portfolio, net		(1	)		0		-			-			-			-			(1	)
Amortization expense		-			-		(518	)		(1,802	)		(274	)		(25	)		(2,619	)
Balances, March 31, 2021	$	11,156		$	1,135	$	6,503		$	25,016		$	0		$	1,168		$	44,978

Surname domain names Direct navigation domain names Brand Customer relationships Technology Network rights Total
Amortization period indefinite life indefinite life 7 years 3 - 7 years 2 - 7 years 15 years

Balances, December 31, 2019 $ 11,166 $ 1,144 $ 9,091 $ 34,268 $ 1,516 $ 469 $ 57,654
Cedar Networks acquisition (Note 4 (b)) - - - 4,640 - 750 5,390
Additions to/(disposals from) domain portfolio, net (6 ) (9 ) - - - - (15 )
Impairment of definite life intangible asset - - - (1,431 ) - - (1,431 )
Other - - - (223 ) - - (223 )
Classifed as assets held for-sale - - - (2,581 ) - - (2,581 )
Acquisition of Network rights - - - - - 69 69
Amortization expense - - (1,035 ) (4,416 ) (632 ) (48 ) (6,131 )
Balances, June 30, 2020 $ 11,160 $ 1,135 $ 8,056 $ 30,257 $ 884 $ 1,240 $ 52,732

The following table shows the estimated amortization expense for each of the next 5 years, assuming no further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars):

	*Year ending*		*Year ending*
	*December 31,*		*December 31,*
Remainder of 2020	$	5,202
2021		11,783
Remainder of 2021			$	7,025
2022		10,839		9,364
2023		8,811		8,674
2024		2,399		3,226
2025				2,587
Thereafter		1,403		1,811
Total	$	40,437	$	32,687

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7. Loan Payable:

Amended 2019 Credit Facility

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC entered into an Amended and Restated Senior Secured Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company has access to an aggregate of up to $240 million in funds, which consists of $180 million guaranteed credit facility and a $60 million accordion facility. ~~The Amended~~ ~~2019~~ ~~Credit Facility replaced the Company’s~~ ~~2017~~ ~~Amended Credit Facility.~~ On November 27, 2019, the Company entered into Amending Agreement No. 1 to the Amended and Restated Senior Secured Credit Agreement (collectively with the Amended and Restated Senior Secured Credit Agreement, the “Amended 2019 Credit Facility”) to amend certain defined terms in connection with the Cedar acquisition.

The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the “2017 Amended Credit Facility”).

~~In connection with the Amended~~ ~~2019~~ Credit Facility, the Company incurred $0.4 million of fees paid to lenders are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million have been recorded in General and administrative expenses.

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term, maturing on June 13, 2023.

Credit Facility Terms

The Amended 2019 Credit Facility is revolving with interest only payments with no scheduled repayments during the term.

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The Amended 2019 Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The Amended 2019 Credit Facility requires that the Company to comply with the following financial covenants: (i) at all times, a Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Amended 2019 Credit Agreement) of 3.50:1; and (ii) with respect to each fiscal quarter, an Interest Coverage Ratio (as defined in the Amended 2019 Credit Agreement) of not less than 3.00:1. Further, the Company’s maximum annual Capital Expenditures cannot exceed 110% of the forecasted capital expenditures of its annual business plan. In addition, share repurchases require the Lenders’ consent if the Company’s Total Funded Debt to Adjusted EBITDA ratio exceeds 2.00:1. During the three months ended March 31, 2021, and the ~~six~~three months ended ~~June 30,~~March 31, 2020, the Company was in compliance with these covenants.

Borrowings under the Amended 2019 Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows:

	If Total Funded Debt to EBITDA is:
Availment type or fee	Less than 1.00			Greater than or equal to 1.00 and less than 2.00			Greater than or equal to 2.00 and less than 2.50			Greater than or equal to 2.50
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		1.50	%		1.85	%		2.35	%		2.85	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.25	%		0.60	%		1.10	%		1.60	%
Standby fees		0.30	%		0.37	%		0.47	%		0.57	%

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The following table summarizes the Company’s borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars):

	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020

Revolver	$	114,400		$	114,400		$	122,400		$	122,400
Less: unamortized debt discount and issuance costs		(792	)		(897	)		(598	)		(667	)
Total loan payable		113,608			113,503			121,802			121,733
Less: loan payable, current portion		-			-			0			0
Loan payable, long-term portion	$	113,608		$	113,503		$	121,802		$	121,733

The following table summarizes our scheduled principal repayments as of ~~June 30, 2020~~March 31, 2021 (Dollar amounts in thousands of U.S. dollars):

Remainder of 2020	$	-
2021		-
Remainder of 2021			$	0
2022		-		0
2023		114,400		122,400
	$	114,400	$	122,400

~~Other Credit Facilities~~

~~Prior to the Company entering into the Amended~~ ~~2019~~ ~~Credit Facility and the~~ ~~2017~~ Amended Credit Facility, the Company had credit agreements (collectively the “Prior Credit Facilities”) with BMO, which provided the Company with access to a treasury risk management facility and a credit card facility. All remaining credit facilities under the ~~2017~~ ~~Amended Credit Facility and the Prior Credit Facilities have been terminated.~~

8. Income Taxes:

For the three months ended ~~June 30, 2020~~March 31, 2021, we recorded an income tax expense of ~~$0.4~~$1.1 million on income before income taxes of ~~$0.6~~$3.2 million, using an estimated effective tax rate for the fiscal year ending December 31, ~~2020~~2021 (“Fiscal ~~2020”~~2021”) adjusted for certain minimum state taxes as well as the inclusion of a $0.2 mil~~$0.1~~lion ~~million~~ tax ~~recovery~~expense related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the three months ended ~~June 30, 2020~~March 31, 2021 is ~~also adversely affected~~impacted by discrete ~~losses~~adjustments resulting from finalization of ~~$3.7 million related to the impairment of Ting TV~~prior period tax filings, foreign exchange and ~~Roam Mobility assets, the tax benefit of which has only been partially recognized.~~ mark-to-market adjustments.

Comparatively, for the three months ended ~~June 30, 2019~~March 31, 2020, the Company recorded an income tax expense of ~~$1.8~~$1.1 million on income before taxes of ~~$4.4~~$3.9 million, using an estimated effective tax rate for the ~~2019~~2020 fiscal year and adjusted for the $~~0.3~~ ~~million tax recovery impact related to ASU~~ ~~2016~~-~~09.~~

~~For the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~~~, we recorded an income tax expense of $1.6 million on net income before income taxes of $4.5 million, using an estimated effective tax rate for Fiscal~~ ~~2020~~ ~~adjusted for certain minimum state taxes, as well as the inclusion of a $0.2 million tax recovery related to ASU~~ ~~No.~~~~2016~~-~~09—Compensation—Stock~~ ~~Compensation (Topic~~ ~~718~~~~): Improvements to Employee Share-Based Payment Accounting (“ASU~~ ~~2016~~-~~09”~~~~), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~is also adversely affected by discrete losses of $3.7 million related to the impairment of Ting TV and Roam Mobility assets, the tax benefit of which has only been partially recognized.~~

~~Comparatively, for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019~~~~, the Company recorded an income tax expense of $3.1 million on income before taxes of $8.5 million, using an estimated effective tax rate for the~~ ~~2019~~ ~~fiscal year and adjusted for the~~ ~~$0.7~~0.2 million tax recovery impact related to ASU 2016-09.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

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In connection with the eNom acquisition in 2017, we acquired deferred tax liabilities primarily composed of prepaid registry fees. As a result, we aligned our tax methodology pertaining to the deductibility of prepaid registry fees for our other subsidiaries. In the first quarter of 2019, we determined that we were in technical violation with respect to the administrative application of the accounting method change relating to the deductibility of prepaid registry fees for these additional subsidiaries. In February 2019, the Company filed an application for relief ("9100 Relief") to correct the issue. In November 2019, the Company was granted 9100 Relief and was given 30 days to file the appropriate forms based on prescribed instructions. The Company filed the forms in December 2019 and now awaits the final IRS response and acceptance of the change in accounting method. Management is of the view that it is more likely than not that the IRS will accept the 9100 Relief and filing of the prescribed forms. As such, no additional tax uncertainties or related interest or penalties have been recorded as at ~~June 30, 2020~~March 31, 2021.

The Company recognizes accrued interest and penalties related to income taxes in income tax expense. The Company did not have significant interest and penalties accrued at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, respectively.

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9. ~~Assets and liabilities held-for-sale:~~

~~Accounting Policy:~~

When the Company initiates the sale of long-lived assets, it assesses whether the assets meet the criteria to be considered assets held-for-sale. The review is based on whether the following criteria are met:

~~- Management and the Company's board of directors have committed to a plan to sell the asset;~~

~~- The subject assets are available for immediate sale in their present condition;~~

~~- The Company is actively locating buyers as well as other initiatives required to complete the sale;~~

~~- The sale is probable and the transfer is expected to qualify for recognition as a complete sale in~~ ~~one~~ ~~year;~~

~~- The long-lived asset is being actively marketed for sale at a price that is reasonable in relation to fair value; and~~

~~- Actions necessary to complete the plan indicate it is unlikely significant changes will be made to the plan or the plan will be withdrawn.~~

~~Description of asset groups held-for-sale:~~

If all the criteria are met, a long-lived asset or liabilities held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and the Company will cease recording depreciation. Any adjustment to the carrying amount is recorded as an impairment loss.

In ~~June 2020,~~ the Company committed to a plan to sell the Ting Mobile customer base and the Company's mobile inventory. Accordingly, any capitalized costs associated with the Ting Mobile customer base have been presented as a disposal group held for sale at ~~June 30, 2020.~~ ~~The sale of Tucows' mobile customer base was completed on~~ ~~August 1, 2020~~ ~~pursuant to an asset sale transaction with Dish Wireless L.L.C. (“DISH”). See Note~~ 19 ~~- Subsequent Events for more information on the details on the transaction with DISH.~~

~~As at~~ ~~June 30, 2020~~ ~~the disposal group comprised assets of $9.0 million and liabilities of $0.8 million comprised of the following assets and liabilities:~~

June 30, 2020

Device credits $ 99
Accounts receivable 4,554
Mobile inventory 861
Capitalized contract costs (net)
932
Customer relationship intangible assets (net)
2,581
Assets held for sale
$ 9,027

Accounts payable $ 594
Accrued liabilities 157
Liabilities held for sale
$ 751

No ~~impairment loss was recorded in the consolidated statements of operations and comprehensive income as a result of classifying the aforementioned assets as held for sale during the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020.~~

~~10.~~9. Basic and Diluted Earnings per Common Share:

The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation (Dollar amounts in thousands of US dollars, except for share data):

	*Three Months Ended March 31,*
	*2021*		*2020*

Numerator for basic and diluted earnings per common share:
Net income for the period	$	2,149	$	2,834

Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,617,807		10,612,230
Effect of outstanding stock options		178,955		101,448
Diluted weighted average number of shares outstanding		10,796,762		10,713,678

Basic earnings per common share	$	0.20	$	0.27

Diluted earnings per common share	$	0.20	$	0.26

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Numerator for basic and diluted earnings per common share:

Net income for the period
$ 157 $ 2,616 $ 2,991 $ 5,415

Denominator for basic and diluted earnings per common share:

Basic weighted average number of common shares outstanding
10,567,382 10,657,124 10,589,806 10,646,045
Effect of outstanding stock options
86,145 182,881 94,498 191,411
Diluted weighted average number of shares outstanding
10,653,527 10,840,005 10,684,304 10,837,456

Basic earnings per common share
$ 0.01 $ 0.25 $ 0.28 $ 0.51

Diluted earnings per common share
$ 0.01 $ 0.24 $ 0.28 $ 0.50

For the three months ended ~~June 30, 2020~~March 31, 2021, options to purchase ~~734,388~~4,004 common shares were not included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the three months ended ~~June 30, 2019~~March 31, 2020, where ~~260,700~~138,506 outstanding options were not included in the computation.

~~For the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~~~, options to purchas~~ ~~e 734,388 common shares were~~ ~~not~~ ~~included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019~~~~, where 260,700 outstanding options were~~ ~~not~~ ~~included in the computation.~~

~~11.~~10. Revenue:

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of ~~mobile and~~retail fiber Internet ~~services;~~services in our Fiber Internet Services segment, (b) the provisioning of wholesale mobile platform services, professional services and the provisioning of retail mobile services in our Mobile Services segment; and from ~~(b)~~(c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising ~~revenue.~~revenue in our Domain Services segment. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.

Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 1413 – Segment Reporting.

(a)

~~Network Access~~Fiber Internet Services

The Company generates ~~Network Access~~Fiber Internet Services revenues primarily through ~~the provisioning of mobile services, Ting Mobile. Other sources of revenue include~~ the provisioning of fixed high-speed Internet access, Ting Internet, as well as billing solutions to Internet Service Providers (“ISPs”).

~~Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the actual amount of monthly~~

Fiber Internet services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.

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~~Ting Internet~~(Ting Internet) contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.

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Ting Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet customers is computed based on the customer’s activation date. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

~~Both~~In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

(b)	Mobile Services

The Company generates Mobile Services revenues through the provisioning of mobile services to wholesale and retail customers. Mobile services consist of mobile platform services provided to wholesale customers to whom we also provide other professional services. Mobile services also consist of retail services provided to Ting Mobile customers.

Mobile platform services agreements contain both MSE services and professional services. MSE services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform and software solutions. As each month of providing access to the platform is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the performance obligation is comprised of a series of distinct service periods. Consideration for these arrangements is variable each month depending on the number of subscribers hosted on the platform. The Company also provides professional services as a part of the mobile platform services agreements. These professional services can include implementation, training, consulting or software development/modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s) and are recognized as the related services are performed. Consideration payable under the professional service arrangements is included with the variable consideration from the mobile platform services, which would represent variable consideration estimated using the most likely amount based on the range of hours expected to be incurred in providing the services. Where consideration for professional services is included in the consideration for mobile platform services, the Company estimates the standalone selling price (“SSP”) for professional services based on observable standalone sales, and applies the residual approach to estimate the SSP for mobile platform services. The total variable consideration is estimated at contract inception (considering any constraints that may apply and updating the estimates as new information becomes available) and the transaction price is allocated to the performance obligations based on the relative SSP basis and recognized over the period to which it relates.

Other professional services consist of professional service arrangements that are billed separately on a time-and-materials basis as well as revenues from the Transitional Services Agreement (“TSA”) with DISH Wireless L.L.C ("DISH"). For professional services billed separately on a time-and-materials basis, revenues are recognized based on the actual hours of services provided. Under the TSA, the Company will provide certain other services such as customer service, marketing and fulfillment services. DISH has the option to terminate services provided under the TSA throughout the term of the agreement, which is for five years effective August 1, 2020. Consideration payable under this arrangement is based on cost plus margin, and revenues are recognized as the services are provided to DISH each month under the ‘as-invoiced’ practical expedient.

Retail mobile services (Ting Mobile) wireless usage contracts grant customers access to standard talk, text and data mobile services. Some Ting ~~Internet access~~Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. Some contracts are billed a flat rate for unlimited talk and text plus a fixed amount of data. All customers are billed on a postpaid basis. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.

Ting Mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile and Ting Internet customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brands also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

~~(b)~~(c)

Domain Services

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized rateably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

Domain related value-added services like digital certifications, WHOIS privacy, website hosting and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

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The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.

Advertising revenue is derived through domain parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis, no estimation of variable consideration is required.

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Disaggregation of Revenue

The following is a summary of the Company’s revenue earned from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

	Three Months Ended June 30,				Six Months Ended June 30,					*Three Months Ended March 31,*
	2020		2019		2020			2019		*2021*		*2020*
Fiber Internet Services:
Fiber Internet Services										$	5,371	$	4,308

Network Access Services:
Mobile Services	$	17,567	$	20,986	$	37,715		$	41,795
Other Services		4,414		2,644		8,722			5,087
Total Network Access Services		21,981		23,630		46,437			46,882
Mobile Services:
Retail mobile services											2,014		20,148
Mobile platform services											349		0
Other professional services											1,916		0
Total Mobile											4,279		20,148

Domain Services:
Wholesale
Domain Services		46,206		46,485		92,169			89,076		46,991		45,964
Value Added Services		5,034		4,775		9,741			8,959		5,080		4,306
Total Wholesale		51,240		51,260		101,910			98,035		52,071		50,270
							��
Retail		8,567		8,783		17,017			17,425		9,154		9,259
Portfolio		334		444		743			728
Total Domain Services		60,141		60,487		119,670			116,188		61,225		59,529

	$	82,122	$	84,117	$	166,107		$	163,070	$	70,875	$	83,985

During the three ~~and~~ ~~six~~months ended ~~June 30, 2020~~March 31, 2021 and the three ~~and~~ ~~six~~months ended ~~June 30, 2019~~March 31, 2020 no customer accounted for more than 10% of total ~~revenue and~~ no ~~customer accounted for more than~~ ~~10%~~ ~~of accounts receivable.~~revenue.

At March 31, 2021, 1 customer represented 49% of accounts receivables.

The following is a summary of the Company’s cost of revenue from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

	*Three Months Ended June 30,*				*Six Months Ended June 30,*				*Three Months Ended March 31,*
	*2020*		*2019*		*2020*		*2019*		*2021*		*2020*

Network Access Services:
Mobile Services	$	8,660	$	10,806	$	18,517	$	21,549
Other Services		1,665		956		3,381		2,025
Total Network Access Services		10,325		11,762		21,898		23,574
Fiber Internet Services:
Fiber Internet Services									$	2,635	$	1,716

Mobile Services:
Retail mobile services										1,055		9,857
Mobile platform services										58		0
Other professional services										1,666		0
Total Mobile										2,779		9,857

Domain Services:
Wholesale
Domain Services		36,354		37,817		72,823		72,656		35,773		36,469
Value Added Services		762		738		1,547		1,531		599		757
Total Wholesale		37,116		38,555		74,370		74,187		36,372		37,226

Retail		4,219		4,409		8,453		8,768		4,401		4,389
Portfolio		130		147		257		276
Total Domain Services		41,465		43,111		83,080		83,231		40,773		41,615

Network Expenses:
Network, other costs		2,485		2,385		4,901		4,780		3,238		2,416
Network, depreciation and amortization costs		3,356		2,352		6,587		4,327		3,937		3,231
Network, impairment		1,525		-		1,525		-		60		0
Total Network Expenses		7,366		4,737		13,013		9,107		7,235		5,647

	$	59,156	$	59,610	$	117,991	$	115,912	$	53,422	$	58,835

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Contract Balances

The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does not have material streams of contracted revenue that have not been billed.

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions. To a lesser extent, deferred revenue also includes a portion of the transaction price received from mobile platform services, which is related to professional services.

Significant changes in deferred revenue for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 were as follows (Dollar amounts in thousands of U.S. dollars):

	*June 30, 2020*			*March 31, 2021*

Balance, beginning of period	$	149,303		$	152,245
Deferred revenue		120,647			66,981
Recognized revenue		(114,650	)		(61,632	)
Balance, end of period	$	155,300		$	157,594

Remaining Performance Obligations:

For retail mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) ~~(Dollar amounts in thousands of US dollars)~~.

Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our deferred revenue balance related to domain contracts is expected to be recognized within the next twelve months.

Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the next twelve months. ~~In connection with the shutdown~~

Professional service revenue related to mobile platform services is deferred over a maximum of ~~the Roam Mobility operations, all previously deferred revenue associated with the Roam Mobility operations has been recognized as of~~ ~~June 30, 2020.~~ twelve month periods.

~~12.~~11. Costs to obtain and fulfill a Contract

Deferred costs of fulfillment

Deferred costs to fulfill contracts ~~generally~~primarily consist of domain registration costs which have been paid to a domain registry, and are capitalized as ~~Prepaid domain name registry and ancillary services fees.~~deferred costs of fulfillment. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. The Company also defers certain technology design and data migration costs it incurs to fulfil its performance obligations contained in our MSE arrangements. For the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021, the Company capitalized ~~$88.2~~$52.1 million and also amortized ~~$83.1~~$48.0 million of contract costs. There was no impairment loss recognized in relation to the costs capitalized during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021. Amortization expense of deferred costs is primarily included in cost of revenue.

The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 is as follows (Dollar amounts in thousands of U.S. dollars).

June 30, 2020

Balance, beginning of period $ 109,167
Deferral of costs 88,194
Recognized costs (83,137 )
Balance, end of period $ 114,224

	*March 31, 2021*

Balance, beginning of period	$	111,066
Deferral of costs		52,063
Recognized costs		(47,952	)
Balance, end of period	$	115,177

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~~13.~~12. Leases

We lease datacenters, corporate offices and fiber-optic cables under operating leases. The Company does not have any leases classified as finance leases.

Our leases have remaining lease terms of 1 year to 20 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year.

The components of lease expense were as follows (Dollar amounts in thousands of U.S. dollars):

	*For the three months ended*		*For the three months ended*
	*March 31, 2021*		*March 31, 2020*
Operating Lease Cost (leases with a total term greater than 12 months)	$	534	$	547
Short-term Lease Cost (leases with a total term of 12 months or less)		50		244
Variable Lease Cost		176		128
Total Lease Cost	$	760	$	919

For the three months ended

For the three months ended

For the six months ended

For the six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Operating Lease Cost (leases with a total term greater than 12 months)
$ 527 $ 826 $ 1,074 $ 1,897
Short-term Lease Cost (leases with a total term of 12 months or less)
130 279 374 403
Variable Lease Cost
145 193 273 364
Total Lease Cost
$ 802 $ 1,298 $ 1,721 $ 2,664

Lease Cost is presented in general and administrative expenses and network expenses within our consolidated statements of operations and comprehensive income.

Information related to leases was as follows (Dollar amounts in thousands of U.S. dollars):

	*For the three months ended*		*For the three months ended*		*For the six months ended*		*For the six months ended*		*For the three months ended*		*For the three months ended*
Supplemental cashflow information:	*June 30, 2020*		*June 30, 2019*		*June 30, 2020*		*June 30, 2019*		*March 31, 2021*		*March 31, 2020*
Operating Lease - Operating Cash Flows (Fixed Payments)	$	429	$	834	$	987	$	1,885	$	551	$	559
Operating Lease - Operating Cash Flows (Liability Reduction)	$	359	$	703	$	797	$	1,651	$	472	$	438
New ROU Assets - Operating Leases	$	36	$	41	$	911	$	4,468	$	1,394	$	875

Supplemental balance sheet information related to leases:	*June 30, 2020*			*December 31, 2019*			*March 31, 2021*			*December 31, 2020*
Weighted Average Discount Rate		3.95	%		5.20	%		3.38	%		4.03	%
Weighted Average Remaining Lease Term	8.51 yrs			8.62 yrs			8.01 yrs			8.60 yrs

Maturity of lease liability as of ~~June 30, 2020~~March 31, 2021 (Dollar amounts in thousands of U.S. dollars):

	*June 30, 2020*		*March 31, 2021*
Remaining of 2020	$	973
2021		1,774
Remaining of 2021			$	1,724
2022		1,695		2,349
2023		1,657		2,287
2024		1,379		1,623
2025				1,078
Thereafter		5,068		4,130
Total future lease payments		12,546		13,191
Less imputed interest		1,871		1,541
Total	$	10,675	$	11,650

Operating lease payments include payments under the non-cancellable term, ~~and approximately~~ ~~$0.6~~ ~~million~~without any additional amounts related to options to extend lease terms that are reasonably certain of being exercised.

As of ~~June 30, 2020~~March 31, 2021,we havenot entered into lease agreements ~~for total payments of$1.1 million~~ that have not yet ~~commenced, and therefore are~~ ~~not~~ ~~included in the lease liability.~~commenced.

In ~~March 2020,~~ ~~the Company modified a corporate office lease to defer its~~ ~~April 2020~~ ~~rent payment to be paid later in~~ ~~four~~ ~~equal installments from~~ ~~September~~ to ~~December 2020.~~ The modification resulted in an increase to the right of use operating lease asset and right of use operating lease liability of $0.3 million and $0.6 million, respectively, which also included the foreign exchange re-measurement of the right of use asset at the date of modification. Foreign exchange revaluation on both the right of use asset and liability is presented in general and administrative expenses within our consolidated statements of operations and comprehensive income.

The Company has elected to use the single exchange rate approach when accounting for lease modifications. Under the single exchange rate approach, the entire right of use asset is revalued at the date of modification in the Company’s functional currency provided the re-measurement is not considered a separate contract or if the re-measurement is related to change the lease term or assessment of a lessee option to purchase the underlying asset being exercised.

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~~14.~~13. Segment Reporting:

~~(a)~~

Reportable operating segments:

We are organized and managed based on ~~two~~3 operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they ~~operate~~operate. No operating segments have been aggregated to determine our reportable segments.

During the first quarter of 2021, the Company completed a reorganization of its reporting structure into three operating and ~~are described as follows:~~

reportable segments: Fiber Internet Services, Mobile Services and Domain Services. Previously, we disclosed two operating and reportable segments: Network Access Services and Domain Services.

The change to our reportable operating segments was the result of a shift in our business and management structures that was initiated in 2020 and completed during the first quarter of 2021. The operations supporting what was previously known as our Network Access Services segment have become increasingly operationally distinct between our mobile services (which includes both retail mobile MNVO based services and wholesale MSE services) and our fiber Internet services which were also included in our Network Access Services segment. As a result, commencing in the first quarter of 2021, our Chief Executive Officer ("CEO"), who is also our chief operating decision maker, reviews the operating results of Mobile Services and Fiber Internet Services as two distinct segments in order to make key operating decisions as well as evaluate segment performance. Certain corporate costs are excluded from segment EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment, including Finance, Human Resources, Legal, Corporate IT, depreciation and amortization expense or impairments, interest expense, stock-based compensation and other income and expense items not monitored as part of our segment operations. Our comparative period financial results have also been reclassified to reflect the reorganized segment structure.

Our reportable operating segments and their principal activities consist of the following:

1. ~~Network Access~~Fiber Internet Services - This segment derives revenue from the retail high speed Internet access to individuals and small businesses primarily through the Ting website, and other revenues including billing solutions to small ISPs. Revenues are generated in the United States.

2. Mobile Services – This segment derives revenue from MSE platform services and professional services to wholesale customers. This segment also derives revenue from the retail sale of mobile phones, retail telephony services ~~high speed Internet access, billing solutions~~ to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States.

2.3. Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small ~~businesses; and by making its portfolio of domain names available for sale or lease.~~businesses. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States.

~~Table~~

Key measure of ~~Contents~~

segment performance:

The ~~Chief Executive Officer (the “CEO”) is~~CEO, as the chief operating decision maker, ~~and~~ regularly reviews the operations and performance by segment. The CEO reviews segment gross ~~profit~~margin and adjusted EBITDA (as defined below) as (i) a key ~~measure~~measures of performance for each segment and (ii) to make decisions about the allocation of resources. ~~Sales~~

During the first quarter of 2021, the Company changed its key measures of segment performance to segment gross margin and adjusted EBITDA. Previously, we disclosed one key measure of segment performance, gross profit.

The change to our key measures of segment performance was also a result of shift in our business and management structures that were completed in the first quarter of 2021, which created more distinction between the operations supporting each reportable operating segment. As a result, commencing in the first quarter of 2021, our CEO, who is also our chief operating decision maker now regularly reviews segment gross margin and segment adjusted EBITDA to evaluate segment performance and make key operating decisions.

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Our key measures of segment performance and their definitions are:

1. Segment gross margin - net revenues less Direct cost of revenues attributable to each segment.

2. Segment adjusted EBITDA - segment gross margin as well as the recurring gain on sale of Ting Customer Assets, less certain operating expenses attributable to each segment, such as sales and marketing, ~~expenses,~~ technical operations and development, ~~expenses,~~ general and ~~administrative~~administration expenses but excludes gains and losses from unrealized foreign currency, stock-based compensation and transactions that are one-time in nature and not indicative of on-going performance, including acquisition and transition costs. Certain corporate costs are excluded from segment adjusted EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment, including Finance, Human Resources, Legal, Corporate IT, depreciation and amortization expense or impairments, interest expense, stock-based compensation and other income and expense items not monitored as part of our segment operations.

Our comparative period financial results have also been reclassified to reflect the current key measures of segment performance.

The Company believes that both segment gross margin and adjusted EBITDA measures are important indicators of the operational strength and performance of its segments, by identifying those items that are not directly a reflection of each segment’s performance or indicative of ongoing operational and profitability trends. Segment gross margin and segment adjusted EBITDA both exclude depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets ~~gain on currency forward contracts and other expense net~~that are ~~organized along functional lines and are~~ ~~not~~ included in the measurement of ~~segment profitability.~~income before provision for income taxes pursuant to generally accepted accounting principles ("GAAP"). Accordingly, adjusted EBITDA should be considered in addition to, but not as a substitute for net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Total assets and total liabilities are centrally managed and are not reviewed at the segment level by the CEO. The Company follows the same accounting policies for the segments as those described in ~~Notes~~“Note 2 – ~~Basis of Presentation,~~Significant Accounting Policies”, and “Note 310 – ~~Recent Accounting Pronouncements, and~~ 11 ~~- Revenue.~~

Revenue”.

Information by reportable segments (with the exception of disaggregated revenue, which is discussed in ~~Note~~“Note 1110 – ~~Revenue)~~Revenue”), which is regularly reported to the chief operating decision maker, ~~is as follows~~and the reconciliations thereof to our income before taxes, are set out in the following tables (Dollar amounts in thousands of US dollars):

Network Access Services Domain Services Consolidated Totals
Three Months Ended June 30, 2020

Net Revenues $ 21,981 $ 60,141 $ 82,122

Cost of revenues
Cost of revenues 10,325 41,465 51,790
Network expenses 605 1,880 2,485
Depreciation of property and equipment 2,584 446 3,030
Amortization of intangible assets 21 305 326
Impairment of Property Plant and Equipment 1,525 - 1,525
Total cost of revenues 15,060 44,096 59,156
Gross Profit 6,921 16,045 22,966

Expenses:
Sales and marketing 9,218
Technical operations and development 3,067
General and administrative 5,465
Depreciation of property and equipment 125
Amortization of intangible assets 2,504
Impairment of definite life intangible assets 1,431
Loss (gain) on currency forward contracts (381 )
Income from operations 1,537
Other income (expenses), net (931 )
Income before provision for income taxes $ 606

Network Access Services

Domain Services

Consolidated Totals

Three Months Ended June 30, 2019

Net Revenues
$ 23,630 $ 60,487 $ 84,117

Cost of revenues

Cost of revenues
11,762 43,111 54,873
Network expenses
516 1,869 2,385
Depreciation of property and equipment
1,656 382 2,038
Amortization of intangible assets
12 302 314
Total cost of revenues
13,946 45,664 59,610
Gross Profit
9,684 14,823 24,507

Expenses:

Sales and marketing
8,856
Technical operations and development
2,752
General and administrative
4,796
Depreciation of property and equipment
134
Amortization of intangible assets
2,251
Loss (gain) on currency forward contracts
(31 )
Income from operations
5,749
Other income (expenses), net
(1,314 )
Income before provision for income taxes
$ 4,435

	*Fiber Internet Services*			*Mobile Services*		*Domain Services*		*Corporate*			*Consolidated Totals*
For the Three Months Ended March 31, 2021

Net Revenues	$	5,371		$	4,279	$	61,225	$	0		$	70,875
Direct cost of revenues		2,635			2,778		40,774		0			46,187
Segment Gross Margin		2,736			1,501		20,451		0			24,688

Adjusted EBITDA	$	(2,593	)	$	4,478	$	13,820	$	(2,981	)	$	12,724

	*Fiber Internet Services*			*Mobile Services*		*Domain Services*		*Corporate*			*Consolidated Totals*
For the Three Months Ended March 31, 2020

Net Revenues	$	4,308		$	20,148	$	59,529	$	0		$	83,985
Direct cost of revenues		1,716			9,857		41,615		0			53,188
Segment Gross Margin		2,592			10,291		17,914		0			30,797

Adjusted EBITDA	$	(1,062	)	$	4,989	$	11,547	$	(2,793	)	$	12,681

Reconciliation of Adjusted EBITDA to Income before Provision for Income Taxes	*Three Months Ended March 31,*
(In Thousands of US Dollars)	*2021*		*2020*
(unaudited)	(unaudited)		(unaudited)

Adjusted EBITDA	$	12,724	$	12,681
Depreciation of property and equipment		3,759		2,990
Impairment of property and equipment		60		0
Amortization of intangible assets		2,619		3,301
Interest expense, net		936		1,150
Accretion of contingent consideration		96		87
Stock-based compensation		1,022		801
Unrealized loss (gain) on change in fair value of forward contracts		166		348
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities		67		(42	)
Acquisition and other costs¹		767		111

Income before provision for income taxes	$	3,232	$	3,935

¹Acquisition and other costs represents transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisition of Ascio in March 2019, Cedar in January 2020, and the disposition of certain Ting Mobile assets in August 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

2017

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Network Access Services

Domain Services

Consolidated Totals

Six Months Ended June 30, 2020

Net Revenues
$ 46,437 $ 119,670 $ 166,107

Cost of revenues

Cost of revenues
21,898 83,080 104,978
Network expenses
1,143 3,758 4,901
Depreciation of property and equipment
4,998 909 5,907
Amortization of intangible assets
48 632 680
Impairment of Property Plant and Equipment 1,525 - 1,525
Total cost of revenues
29,612 88,379 117,991
Gross Profit
16,825 31,291 48,116

Expenses:

Sales and marketing
18,203
Technical operations and development
5,818
General and administrative
10,206
Depreciation of property and equipment
238
Amortization of intangible assets
5,451
Impairment of definite life intangible assets 1,431
Loss (gain) on currency forward contracts
60
Income from operations
6,709
Other income (expenses), net
(2,168 )
Income before provision for income taxes
$ 4,541

Network Access Services

Domain Services

Consolidated Totals

Six Months Ended June 30, 2019

Net Revenues
$ 46,882 $ 116,188 $ 163,070

Cost of revenues

Cost of revenues
23,574 83,231 106,805
Network expenses
1,038 3,742 4,780
Depreciation of property and equipment
3,109 730 3,839
Amortization of intangible assets
23 465 488
Total cost of revenues
27,744 88,168 115,912
Gross Profit
19,138 28,020 47,158

Expenses:

Sales and marketing
17,597
Technical operations and development
5,275
General and administrative
9,244
Depreciation of property and equipment
258
Amortization of intangible assets
4,117
Loss (gain) on currency forward contracts
(110 )
Income from operations
10,777
Other income (expenses), net
(2,286 )
Income before provision for income taxes
$ 8,491

~~Table of Contents~~

(b) The following is a summary of the Company’s property and equipment by geographic region (Dollar amounts in thousands of US dollars):

	*June 30, 2020*		*December 31, 2019*		*March 31, 2021*		*December 31, 2020*

Canada	$	1,112	$	2,319	$	2,435	$	2,521
United States		100,137		79,758		127,371		114,968
Europe		43		44		40		41
	$	101,292	$	82,121	$	129,846	$	117,530

(c) The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars):

	*June 30, 2020*		*December 31, 2019*		*March 31, 2021*		*December 31, 2020*

Canada	$	2,885	$	5,207	$	2,135	$	2,385
United States		37,552		40,137		30,552		32,767
	$	40,437	$	45,344	$	32,687	$	35,152

(d) The following is a summary of the Company’s deferred tax asset, net of valuation allowance, by geographic region (Dollar amounts in thousands of US dollars):

June 30, 2020 December 31, 2019

Canada $ 340 $ -
$ 340 $ -

	*March 31, 2021*		*December 31, 2020*

Germany	$	188	$	226
	$	188	$	226

(e) Valuation and qualifying accounts (Dollar amounts in thousands of US dollars):

Allowance for doubtful accounts	Balance at beginning of period		Charged to costs and expenses		Write-offs during period		Balance at end of period

Three Months Ended March 31, 2021	$	222	$	0	$	16	$	206
Twelve months ended December 31, 2020	$	131	$	91	$	0	$	222

Allowance for doubtful accounts Balance at beginning of period Charged to costs and expenses Write-offs during period Balance at end of period

Six Months Ended June 30, 2020 $ 131 $ 83 $ - $ 214
Twelve months ended December 31, 2019 $ 132 $ (1 ) $ - $ 131

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~~15.~~14. Stockholders' Equity:

The following table summarizes stockholders' equity transactions for the three-month period ended ~~June 30, 2020~~(Dollar amounts in thousands of U.S. dollars):

Accumulated

Additional

other

Total

Common stock

paid in

Retained

comprehensive

stockholders'

Number

Amount

capital

earnings

income (loss)

equity

Balances, March 31, 2020
10,562,774 18,751 - 77,323 (718 ) 95,356

Exercise of stock options
16,922 120 (91 ) - - 29
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration
(5,836 ) - (165 ) - - (165 )
Repurchase and retirement of shares
(3,500 ) (6 ) - (158 ) - (164 )
Stock-based compensation
- - 847 - - 847
Net income
- - - 157 - 157
Other comprehensive income (loss)
- - - - 1,314 1,314
Balances, June 30, 2020
10,570,360 $ 18,865 $ 591 $ 77,322 $ 596 $ 97,374

~~The following table summarizes stockholders' equity transactions for the~~ ~~six~~~~-month period ended~~ ~~June 30, 2020~~ ~~(Dollar amounts in thousands of U.S. dollars):~~

													*Accumulated*															*Accumulated*
							*Additional*						*other*		*Total*								*Additional*					*other*			*Total*
	*Common stock*						*paid in*			*Retained*			*comprehensive*		*stockholders'*			*Common stock*					*paid in*			*Retained*		*comprehensive*			*stockholders'*
	*Number*			*Amount*			*capital*			*earnings*			*income (loss)*		*equity*			*Number*			*Amount*		*capital*			*earnings*		*income (loss)*			*equity*

Balances, December 31, 2019		10,585,159			16,633			880			76,208			473		94,194
Balances, December 31, 2020																			10,612,414		$	20,798	$	1,458		$	80,106	$	2,336		$	104,698

Exercise of stock options		41,935			356			(310	)		-			-		46			28,337			713		(484	)		0		0			229
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration		(18,870	)		-			(347	)		-			-		(347	)		(16,336	)		0		(218	)		0		0			(218	)
Acquisition of Cedar Holdings Group		32,374			2,000			-			-			-		2,000
Repurchase and retirement of shares		(70,238	)		(124	)		(1,280	)		(1,877	)		-		(3,281	)
Stock-based compensation		-			-			1,648			-			-		1,648			-			0		1,022			0		0			1,022
Net income		-			-			-			2,991			-		2,991			-			-		-			2,149		-			2,149
Other comprehensive income (loss)		-			-			-			-			123		123			-			0		0			0		(466	)		(466	)
Balances, June 30, 2020		10,570,360		$	18,865		$	591		$	77,322		$	596	$	97,374
Balances, March 31, 2021																			10,624,415		$	21,511	$	1,778		$	82,255	$	1,870		$	107,414

2021 Stock Buyback Program

On February 9, 2021, the Company announced that its Board approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 10, 2021 and will terminate on or before February 9, 2022. For the three months ended March 31, 2021, the Company did not repurchase shares under this program.

2020 Stock Buyback Program

On February 12, 2020, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The ~~$40~~$40 million buyback program commenced on February 13, 2020 and ~~is expected to terminate~~terminated on February 12, 2021. For the three months ended ~~June 30,~~March 31, 2021, the Company did not repurchase shares under this program. For the three months ended March 31, 2020, the Company repurchased ~~3,500~~66,738 shares under this program for total consideration of ~~$0.2 million. For the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~~~, the Company repurchased 70,238 shares under this program for total consideration of $3.3~~$3.1 million.

2019 Stock Buyback Program

On February 13, 2019, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The ~~$40~~$40 million buyback program commenced on February 14, 2019 and terminated on February 13, 2020. During the three ~~and~~ ~~six~~months ended ~~June 30, 2019,~~ ~~as well as the~~ ~~six~~ ~~months ended~~ ~~June 30,~~March 31, 2020, the Company did not repurchase ~~any~~ shares under this program.

~~2018~~ ~~Stock Buyback Program~~

On ~~February 14,~~ ~~2018,~~ the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on ~~February 14,~~ ~~2018~~ ~~and terminated on~~ ~~February 13, 2019.~~ ~~During the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019,~~ ~~the Company did~~ ~~not~~ ~~repurchase any shares under this program.~~

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~~16.~~15. Share-based Payments:

Stock options

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company's common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

Details of stock option transactions for the three months ended ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019~~March 31, 2020 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Number of shares

Weighted average exercise price per share

Number of shares

Weighted average exercise price per share

Outstanding, beginning of period
730,037 $ 50.85 665,156 $ 44.46
Granted
190,025 59.53 144,300 62.12
Exercised
(16,922 ) 9.79 (25,316 ) 13.26
Forfeited
(4,826 ) 59.15 (8,550 ) 56.08
Expired
(1,036 ) 58.39 (675 ) 55.65
Outstanding, end of period
897,278 53.41 774,915 48.63
Options exercisable, end of period
390,868 $ 46.20 306,078 $ 33.97

~~Details of stock option transactions for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~and~~ ~~June 30, 2019~~ ~~are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):~~

	*Six Months Ended June 30, 2020*					*Six Months Ended June 30, 2019*					*Three Months Ended March 31, 2021*					*Three Months Ended March 31, 2020*
	*Number of shares*			*Weighted average exercise price per share*		*Number of shares*			*Weighted average exercise price per share*		*Number of shares*			*Weighted average exercise price per share*		*Number of shares*			*Weighted average exercise price per share*

Outstanding, beginning of period		754,497		$	49.94		702,337		$	43.80		845,020		$	55.31		754,497		$	49.94
Granted		195,525			59.19		144,300			62.12		0			0		5,500			47.35
Exercised		(41,935	)		16.23		(54,359	)		19.34		(28,337	)		47.03		(25,013	)		20.59
Forfeited		(8,315	)		60.23		(15,301	)		57.55		(8,064	)		60.72		(3,489	)		61.73
Expired		(2,494	)		59.86		(2,062	)		55.65		0			0		(1,458	)		60.91
Outstanding, end of period		897,278			53.41		774,915			48.63		808,619			55.55		730,037			50.85
Options exercisable, end of period		390,868		$	46.20		306,078		$	33.97		378,258		$	49.35		349,845		$	41.65

As of ~~June 30, 2020~~March 31, 2021, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as ~~follows:~~follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

Options outstanding Options exercisable
Exercise price Number outstanding Weighted average exercise price per share Weighted average remaining contractual life (years) Aggregate intrinsic value Number exercisable Weighted average exercise price per share Weighted average remaining contractual life (years) Aggregate intrinsic value

$10.16 - $19.95 62,090 $ 16.23 1.2 $ 2,551 62,090 $ 16.23 1.2 $ 2,551
$21.10 - $27.53 51,250 24.11 1.4 1,702 51,250 24.11 1.4 1,702
$35.25 - $37.35 14,375 35.89 2.9 308 13,125 35.95 2.9 280
$46.90 - $47.00 15,000 47.30 5.7 150 3,750 47.00 3.7 39
$51.82 - $58.65 340,878 55.52 4.0 640 175,527 55.69 3.8 310
$60.01 - $64.10 413,685 61.71 6.1 - 85,126 63.33 5.3 -
897,278 $ 53.41 4.7 $ 5,351 390,868 $ 46.20 3.4 $ 4,882

	Options outstanding								Options exercisable
Exercise price	Number outstanding		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value		Number exercisable		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value

$15.93 - $19.95		42,064	$	18.05		0.8	$	2,501		42,064	$	18.05		0.8	$	2,501
$21.10 - $27.53		36,250		23.76		1.2		1,948		36,250		23.76		1.2		1,948
$35.25 - $37.35		5,625		36.88		1.2		228		5,625		36.88		1.2		228
$46.90 - $48.00		13,000		47.36		4.8		392		6,000		47.17		3.5		182
$51.82 - $59.98		291,372		55.52		3.2		6,405		217,616		55.50		3.1		4,787
$60.01 - $68.41		400,308		62.07		5.3		6,177		70,703		63.32		4.6		1,002
$72.50 - $72.50		20,000		72.50		6.7		100		0		0		-		0
		808,619	$	55.55		4.1	$	17,751		378,258	$	49.35		2.9	$	10,648

Total unrecognized compensation cost relating to unvested stock options at ~~June 30, 2020~~March 31, 2021, prior to the consideration of expected forfeitures, is approxi mately $~~8.8~~6.0 m illion and is expected to be recognized over a weighted average period of ~~2.6~~2.2 years.

The Company recorded stock-based compensation of $1.0 million for the three months ended March 31, 2021, and $0.8 million for the three months ended ~~June 30,~~March 31, 2020~~, and $0.7 million for the~~ ~~three~~ ~~months ended~~ ~~June 30, 2019~~, respectively.

The Company ~~recorded stock-based compensation of $1.6 million for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~~~, and $1.2 million for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019~~~~, respectively.~~

~~The Company~~ has not capitalized any stock-based compensation expense as part of the cost of an asset.

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~~17.~~16. Fair Value Measurement:

For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at ~~June 30, 2020~~March 31, 2021 (Dollar amounts in thousands of U.S. dollars):

June 30, 2020
Fair Value Measurement Using Assets (Liabilities)
Level 1 Level 2 Level 3 at Fair value

Derivative instrument asset $ - $ 1,691 $ - $ 1,691

Derivative instrument liability $ - $ (719 ) $ - $ (719 )

Total assets (liability) $ - $ 972 $ - $ 972

	*March 31, 2021*
	*Fair Value Measurement Using*						*Assets (Liabilities)*
	*Level 1*		*Level 2*		*Level 3*		*at Fair value*

Derivative instrument asset, net	$	0	$	2,875	$	0	$	2,875

Total assets, net	$	0	$	2,875	$	0	$	2,875

The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at December 31, ~~2019~~2020 (Dollar amounts in thousands of U.S. dollars):

December 31, 2019
Fair Value Measurement Using Assets (Liabilities)
Level 1 Level 2 Level 3 at Fair value

Derivative instrument liability $ - $ 731 $ - $ 731

Total liabilities $ - $ 731 $ - $ 731

	*December 31, 2020*
	*Fair Value Measurement Using*						*Assets (Liabilities)*
	*Level 1*		*Level 2*		*Level 3*		*at Fair value*

Derivative instrument asset, net	$	0	$	3,647	$	0	$	3,647

Total assets, net	$	0	$	3,647	$	0	$	3,647

~~18.~~17. ~~Contingencies:~~

From time to time, the Company has legal claims and lawsuits in connection with its ordinary business operations. The Company vigorously defends such claims. While the final outcome with respect to any actions or claims outstanding or pending as of ~~June 30, 2020~~ ~~cannot be predicted with certainty, management does~~ ~~not~~ ~~believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.~~

~~19.~~ ~~Subsequent Events:~~Other income:

On August 1, 2020, the Company entered into an Asset Purchase Agreement (the ~~“Purchase~~“DISH Purchase Agreement”), by and between the Company and DISH Wireless L.L.C.(“DISH”). Under the DISH Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to DISH its mobile customer accounts that are marketed and sold under the Ting brand (other than certain customer accounts associated with one network operator) (“Transferred Assets”). ~~Tucows will retain minimum revenue commitments totaling $51.5 million on the Mobile Network Operator (“MNO”) contract associated with the customers excluded from the definition~~For a period of ~~Transferred Assets. The Company will be able to continue adding customers under the excluded MNO contract working with DISH in order to meet the agreement.~~

The Purchase Agreement also sets forth certain rights and obligations with respect to intellectual property matters, including the right to use and purchase the name "Ting" and its associated domain name.

~~Approximately~~ 60 ~~days~~10 years following the execution of the ~~Purchase Agreement,~~ DISH and the Company will settle the working capital associated with the Transferred Assets and, upon such settlement, DISH will pay to the Company an amount in cash that is generally equal to (i) the accounts receivable related to the Transferred Assets plus (ii) the value of the transferred inventory minus (iii) the accounts payable and accrued liabilities received related to the Transferred Assets. In addition, for a period of 10 ~~years following the execution of the~~ Purchase Agreement, DISH will pay a monthly fee to the Company generally equal to an amount of net revenue received by DISH in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the DISH Purchase Agreement. The ~~aggregate purchase price for~~Company earned $5.4 million and nil under the ~~Transferred Assets is the working capital payment, the~~ 10~~-year payment stream and DISH’s assumption of certain liabilities related to the Transferred Assets.~~

~~Contemporaneously with the execution of the~~DISH Purchase Agreement onduring the ~~August 1,~~three months ended March 31, 2021 and March 31, 2020, the Company, through its wholly owned subsidiary Ting, Inc. entered a services agreement under which Ting will act as a mobile service enabler (“MSE Agreement”) with DISH in support of the DISH’s mobile network operations. The term of the agreement is ~~four~~ ~~years with an automatic~~ ~~one~~~~-year extension upon achievement of certain milestones. Under the terms of the MSE Agreement, the Company and its affiliates are permitted to sell mobile service enabler services to other~~ ~~third~~ ~~parties.~~

~~The Company also entered into the Transitional Services Agreement (“TSA”) on~~ ~~August 1, 2020~~ with DISH, under which the Company will provide certain other services such as customer service, marketing and fulfillment services. DISH has option to terminate services provided under the TSA throughout the term of the agreement, which is for ~~five~~ ~~years effective~~ ~~August 1, 2020.~~

respectively.

	Three Months Ended March 31,
	2021		2020
Income earned on sale of Transferred Assets		5,395		0
Gain on sale of Ting Customer Assets	$	5,395	$	0

18. Contingencies:

From time to time, the Company has legal claims and lawsuits in connection with its ordinary business operations. The Company vigorously defends such claims. While the final outcome with respect to any actions or claims outstanding or pending as of March 31, 2021 cannot be predicted with certainty, management does not believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, in addition to historical information, forward-looking statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “anticipate,” “believe,” “plan,” “estimate,” “expect” and “intend,” and other similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report include statements regarding, among other things: the competition we expect to encounter as our business develops and competes in a broader range of Internet services; the Company's foreign currency requirements, specifically for the Canadian dollar; ~~Ting mobile,~~Mobile Services Platform, and fixed Internet access subscriber growth and retention rates; our belief regarding the underlying platform for our domain services, our expectation regarding the trend of sales of domain names and advertising; our expectations regarding portfolio revenue, our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; ~~the revenue that our parked page vendor relationships may generate in the future;~~ our expectation regarding litigation; the potential impact of current and pending claims on our business; our valuations of certain deferred tax assets; our expectation to collect our outstanding receivables, net of our allowance for doubtful accounts; our expectation regarding fluctuations in certain expense and cost categories; our expectations regarding our unrecognized tax; our expectations regarding cash from operations to fund our business; the impact of cancellations of or amendments to market development fund programs under which we receive funds, our expectation regarding our ability to manage realized gains/losses from foreign currency contracts; our expectations regarding increased price competition among MVNO; our expectations regarding costs associated with migrating Ting customers using the Sprint platform to an alternative platform upon completion of our contract with Sprint; the impact of the COVID-19 outbreak on our business, operations and financial performance; and general business conditions and economic uncertainty. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Many factors affect our ability to achieve our objectives and to successfully develop and commercialize our services including:

•

~~Changes in the nature of key strategic relationships with our MVNO partners;~~

•

The effects of vigorous competition on a highly penetrated mobile telephony market, including the impact of competition on the price we are able to charge subscribers for services and devices and on the geographic areas served by our MVNO partner wireless networks;

•

~~Our ability to manage any potential increase in subscriber churn or bad debt expense;~~

	•	Our ability to continue to generate sufficient working capital to meet our operating requirements;

	•	Our ability to service our debt commitments;

	•	Our ability to maintain a good working relationship with our vendors and customers;

	•	The ability of vendors to continue to supply our needs;

	•	Actions by our competitors;

	•	Our ability to attract and retain qualified personnel in our business;

	•	Our ability to effectively manage our business;

	•	The effects of any material impairment of our goodwill or other indefinite-lived intangible assets;

	•	Our ability to obtain and maintain approvals from regulatory authorities on regulatory issues;

	•	Our ability to invest in the build-out of fiber networks into selected towns and cities to provide Internet access services to residential and commercial customers while maintaining the development and sales of our established services;

	•	Adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, including with respect to the impact of the Tax Cuts and Jobs Act of 2017;

	•	The application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;

	•	Our ability to effectively integrate acquisitions;

	•	Our ability to ~~attract and retain customers by securing access to the latest mobile network technology, and migrating existing customers when necessary;~~

	•	~~Our ability to migrate existing Sprint customers to one of our MVNO partners, in an efficient and cost-effective manner;~~

	•	~~Our ability to~~ monitor, assess and respond to the rapidly changing impacts of the COVID-19 pandemic. Our current assessment of expected impacts has been included below as part of the Opportunities, Challenges & Risks section. In the current period, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic;

	•	Our ability to collect anticipated payments from DISH in connection with the 10-year payment stream that is a function of the ~~revenue~~margin generated by the transferred subscribers over a 10-year period pursuant to the terms of the DISH Purchase Agreement;

	•	Pending or new litigation; and

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	•	Factors set forth below in Part II - Other Information under the caption "Item 1A Risk Factors" in this Quarterly Report on Form 10-Q related to our Mobile Services Enabler ("MSE") platform and business.

	•	Factors set forth under the caption “Item 1A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the SEC on March ~~4, 2020~~3, 2021 (the ~~“2019~~“2020 Annual Report”).

As previously disclosed the under the caption “Item 1A Risk Factors” in our ~~2019~~2020 Annual Report, data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.

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This list of factors that may affect our future performance and financial and competitive position and the accuracy of forward-looking statements is illustrative, but it is by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements included in this document are based on information available to us as of the date of this document, and we assume no obligation to update these cautionary statements or any forward-looking statements, except as required by law. These statements are not guarantees of future performance.

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

OVERVIEW

Our mission is to provide simple useful services that help people unlock the power of the Internet.

We accomplish this by reducing the complexity of our customers’ experience as they access the Internet (at home or on the go) and while using Internet services such as domain name registration, email and other Internet services. During the first quarter of 2021, the Company completed a reorganization of its reporting structure into three operating and reportable segments: Fiber Internet Services, Mobile Services and Domain Services. Previously, we disclosed two operating and reportable segments: Network Access Services and Domain Services. The change to our reportable operating segments was the result of a shift in our business and management structures that was initiated in 2020 and completed during the first quarter of 2021. The operations supporting what was previously known as our Network Access Services segment have become increasingly operationally distinct between our mobile services (which includes both retail mobile MNVO based services and wholesale MSE services) and our fiber Internet services which were also included in our Network Access Services segment. We are now organized, managed and report our financial results as ~~two~~three segments, ~~Network Access~~Fiber Internet Services, Mobile Services and Domain Services which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate.

Our management regularly reviews our operating results on a consolidated basis, principally to make decisions about how we utilize our resources and to measure our consolidated operating performance. To assist us in forecasting growth and to help us monitor the effectiveness of our operational strategies, our management regularly reviews ~~revenue~~revenues, operating results and performance for each of our service offerings in order to gain more depth and understanding of the key business metrics driving our business. Commencing in the first quarter of 2021, our Chief Executive Officer (CEO), who is also our chief operating decision maker, reviews the operating results of Mobile Services and Fiber Internet Services as two distinct segments in order to make key operating decisions as well as evaluate segment performance. Accordingly, effective January 1, 2021 we now report ~~Network Access~~Fiber Internet Services, Mobile Services and Domain Services revenue ~~separately~~separately. Additionally, we have adjusted segment reporting to include adjusted EBITDA as a key measure of segment performance in addition to our existing key measure of segment performance, gross profit.

For the three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 30, 2019,~~ we reported revenue of ~~$82.1~~$70.9 million and ~~$84.1 million, respectively.~~

~~For the six months ended June 30, 2020 and June 30, 2019, we reported revenue of $166.1 million and $163.1~~$84.0 million, respectively.

~~Network Access~~Fiber Internet Services

~~Network Access~~Fiber Internet Services includes ~~mobile,~~the provision of fixed high-speed Internet access services and other revenues, including billing solutions to small ISPs.

Our primary mobile service offering, Ting Mobile, is mainly distributed through the Ting website and to a lesser extent certain third-party retail stores and on-line retailers. We generate revenues from the sale of retail telephony services, mobile phone hardware and related accessories to individuals and small businesses through the Ting website. Ting Mobile’s primary focus is providing simple and easy to use services, including simple value pricing, in particular for multi-line accounts, and superior customer care. On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with DISH pursuant to which Ting sold its mobile customer relationships, and mobile handset and SIM inventory to DISH and granted DISH the right to use and purchase the Ting brand. The transferred assets under the Purchase Agreement do not include the technology platforms and related intellectual property and infrastructure necessary to enable or support the mobile customers. The Company will retain assets used to provide MSE services to DISH, as discussed below. Our Roam Mobility, Zipsim and Always Online Wireless brands (collectively “Roam Mobility brands”) operate as a MVNO on the same nationwide Global System for Mobile communications network as Ting Mobile. Roam Mobility brands cater to international travelers and distribute products through third-party retail stores and product branded websites. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic.

The Company also derives revenue from the sale of fixed high-speed Internet access, Ting Internet, in select towns throughout the United States, with further expansion underway to both new and existing Ting towns. Our primary sales channel of Ting Internet is through the Ting website. The primary focus of Ting Internet is to provide reliable Gigabit Internet services to consumer and business customers. On January 1, 2020, the Company closed its previously disclosed acquisition of Cedar. Cedar is a telecommunications provider serving multiple markets in the Western Slope of Colorado and northwestern New Mexico. Cedar has focused the last several years on building fiber to enterprise, anchor institution, and residential customers.

Revenues from Ting ~~Mobile and Ting~~ Internet are all generated in the U.S. and are provided on a monthly ~~basis with no fixed contract term. Revenues from Roam Mobility brands are generated in the U.S. and Canada on a prepaid usage basis with~~basis. Ting Internet services have no fixed contract terms.

AsMobile Services

Mobile Services includes the provision of ~~June 30, 2020, Ting managed~~Mobile Services Enabler ("MSE") platform and professional services, as well as the sale of retail mobile ~~telephony~~phone and retail telephone services for ~~approximately 257,000 subscribers~~a small subset of retail customers.

On August 1 2020, the Company and ~~150,000 accounts. For~~its wholly owned Subsidiary Ting, Inc. entered into an Asset Purchase Agreement (the "DISH Purchase Agreement”) with DISH pursuant to which Ting sold substantially all of its legacy retail mobile customer relationships, and mobile handset and SIM inventory to DISH and granted DISH the right to use and an option to purchase the Ting brand. The transferred assets under the DISH Purchase Agreement did not include the technology platforms and related intellectual property and infrastructure necessary to enable or support the mobile customers. The Company retained the assets used to provide MSE platform and other professional services to DISH, as discussed below. Revenues from our retail mobile services, MSE platform and professional services are all generated in the U.S. and are provided on a ~~discussion~~monthly basis. Our MSE customer agreements have set contract lengths with the underlying Mobile Virtual Network Operator ("MVNO"). As part of ~~subscribers~~the DISH Purchase Agreement, as a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH. This has been classified as Other Income and ~~how they impacted our financial results, see~~not considered revenue in the ~~Net Revenue discussion below.~~current period.

Domain Services

Domain Services includes wholesale and retail domain name registration services, as well as value added ~~services and portfolio~~ services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands. We earn revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small ~~businesses; and by making our portfolio of domain names available for sale or lease.~~businesses. Domain Services revenues are attributed to the country in which the contract originates, ~~mainly the Canadian~~which is primarily in Canada and the ~~U.S.~~U.S for OpenSRS and eNom brands. Ascio domain services contracts ~~which were acquired by the Company on March 18, 2019,~~ and EPAG agreements primarily originate in Europe.

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Our primary distribution channel is a global network of approximately 36,000 resellers that operate in over 150 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence. Our primary focus is serving the needs of this network of resellers by providing the broadest portfolio of generic top-level domain (“gTLD”) and the country code top-level domain options and related services, a white-label platform that facilitates the provisioning and management of domain names, a powerful Application Program Interface, easy-to-use interfaces, comprehensive management and reporting tools, and proactive and attentive customer service. Our services are integral to the solutions that our resellers deliver to their customers. We provide “second tier” support to our resellers by email, chat and phone in the event resellers experience issues or problems with our services. In addition, our Network Operating Center proactively monitors all services and network infrastructure to address deficiencies before customer services are impacted.

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We believe that the underlying platforms for our services are among the most mature, reliable and functional reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve these services for both resellers and end-users. Our business model is characterized primarily by non-refundable, up-front payments, which lead to recurring revenue and positive operating cash flow.

Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain service and from providing value-added services. The OpenSRS, eNom, EPAG and Ascio domain services manage ~~24.6~~25.7 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations, which has ~~decreased~~increased by ~~0.4~~1.9 million domain names since ~~June 30, 2019.~~March 31, 2020. The ~~decrease~~increase is driven by increased registrations experienced by our brands during COVID-19, as more businesses established an online presence, offset by the continued erosion of registrations related to non-core customers from our ~~Enom brand, offset by increased registrations experienced by our other brands during COVID-19, as more businesses established an online presence.~~eNom brand.

Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, ~~Internet hosting,~~ WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of 36,000 web hosts, ISPs, and other resellers around the world. In addition, we also derive revenue by monetizing domain names which are near the end of their lifecycle through advertising ~~revenue~~ or auction sale.

Retail, primarily the Hover and eNom portfolio of websites, including eNom, eNom Central and Bulkregister, derive revenues from the sale of domain name registration, ~~and~~ email services to individuals and small businesses. Retail also includes our Personal Names Service – based on over 36,000 surname domains – that allows roughly two-thirds of Americans to purchase ana surname based email ~~address based on their last name.~~

~~Portfolio generates revenue by offering names in our domain~~address. The retail segment now includes the sale of the rights to its portfolio ~~for resale through a number~~ of ~~distribution channels including our reseller network.~~

~~In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding~~ surname domains used in ~~the~~connection with our Realnames email ~~service. The~~service, however the Company expects surname portfolio revenue to materially decline inthrough Fiscal ~~2020~~2021 and thereafter.

Retail also includes our Exact Hosting Service, that provides Linux hosting services for websites of individuals and small businesses.

KEY BUSINESS METRICS AND NON-GAAP MEASURES

We regularly review a number of business metrics, including the following key metrics and non-GAAP measures, to assist us in evaluating our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, formulate financial projections and make strategic business decisions. The following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented:

Adjusted EBITDA

Tucows reports all financial information in accordance with United States generally accepted accounting principles (“GAAP”). Along with this information, to assist financial statement users in an assessment of our historical performance, we typically disclose and discuss a non-GAAP financial measure, adjusted EBITDA, on investor conference calls and related events that exclude certain non-cash and other charges as we believe that the non-GAAP information enhances investors’ overall understanding of our financial performance. Please see discussion of adjusted EBITDA in the Results of Operations section below.

Ting Mobile

June 30,(1)

2020

2019

(in '000's)

Ting mobile accounts under management
150 157
Ting mobile subscribers under management
257 280

Ting Internet	March 31,
	2021		2020
	(in '000's)
Ting Internet subscribers under management		17		12
Ting Internet serviceable addresses (¹)		65		45

~~(1)~~

~~For a discussion of these period-to-period changes in subscribers and devices under management and how they impacted our financial results, see the Net Revenues discussion below.~~

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Ting Internet

For the Three Months Ended June 30,

2020

2019

(in '000's)

Ting Internet accounts under management
13 9
Ting Internet serviceable addresses (1)
49 34

~~(1)~~(¹)

Defined as premises to which Ting has the capability to provide a customer connection in a service area.

Domain Services	For the Three Months Ended June 30,(1)				For the Three Months Ended March 31,(¹)
	2020		2019		2021		2020
	(in 000's)				(in 000's)
Total new, renewed and transferred-in domain name registrations provisioned		4,747		4,377		4,817		4,756
Domains under management

~~(1)~~(¹)

For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.

Domain Services

For the Six Months Ended June 30,(1)

2020

2019

(in 000's)

Total new, renewed and transferred-in domain name registrations provisioned
9,503 8,939
Domains under management

~~(1)~~

~~For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.~~

Domain Services

June 30,

2020

2019

(in 000's)

Registered using Registrar Accreditation belonging to the Tucows Group
19,385 19,852
Registered using Registrar Accreditation belonging to Resellers
5,207 5,158
Total domain names under management
24,592 25,010

Domain Services	March 31,
	2021		2020
	(in 000's)
Registered using Registrar Accreditation belonging to the Tucows Group		19,787		19,145
Registered using Registrar Accreditation belonging to Resellers		5,996		4,750
Total domain names under management		25,783		23,895

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OPPORTUNITIES, CHALLENGES AND RISKS

Our revenue is primarily realized in U.S. dollars and a major portion of our operating expenses are paid in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material effect on our business, financial condition and results from operations. In particular, we may be adversely affected by a significant weakening of the U.S. dollar against the Canadian dollar on a quarterly and an annual basis. Our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our Canadian dollar exposure. We may not always enter into such forward contracts and such contracts may not always be available and economical for us. Additionally, the forward rates established by the contracts may be less advantageous than the market rate upon settlement.

~~Network Access~~Fiber Internet Services

As a MVNO our Ting Mobile service is reliant on our Mobile Network Operators (“MNOs”) providing competitive networks. Our MNOs each continue to invest in network expansion and modernization to improve their competitive positions. Deployment of new and sophisticated technology on a very large-scale entails risks. Should they fail to implement, maintain and expand their network capacity and coverage, adapt to future changes in technologies and continued access to and deployment of adequate spectrum successfully, our ability to provide wireless services to our subscribers, to retain and attract subscribers and to maintain and grow our subscriber revenues could be adversely affected, which would negatively impact our operating margins.

Ting Mobile enjoyed rapid growth in its first four years of operation with the growth slowing for the past two years. During the rapid growth phase, we were able to continue to grow gross customer additions and maintain a consistent churn rate, which allowed us to maintain net new customer additions despite the impact of churn on a fast-growing customer base. We have also been able to supplement organic growth with bulk migrations of customer bases of other MVNOs. We expect price competition to grow more intense in the industry which could result in increased customer churn or reductions of customer acquisition rates either of which could result in a further slowing growth rate or in certain cases, our ability to maintain growth.

On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with DISH pursuant to which Ting sold its mobile customer relationships, and mobile handset and SIM inventory to DISH and granted the right to use and purchase the Ting brand. Select MNO agreements previously established to operate the Ting Mobile MVNO business will also be assigned to DISH as part of this Purchase Agreement. The transferred assets under the Purchase Agreement do not include the technology platforms and related intellectual property and infrastructure necessary to enable or support the mobile customers. The Company will retain assets used to provide MSE services to DISH, as discussed below.

Contemporaneously with the execution of the Purchase Agreement on August 1, 2020, the Company, through its wholly owned subsidiary Ting, Inc. entered into a services agreement under which Ting will act as a mobile service enabler (“MSE Agreement”) with DISH in support of DISH’s mobile network operations. Under the terms of the MSE Agreement, the Company and its affiliates are permitted to sell mobile service enabler services to other third parties.

As an ISP, we have invested and expect to continue to invest in new fiber to the home (“FTTH”) deployments in select markets in the United States. The investments are a reflection of our ongoing efforts to build FTTH network via public-private partnerships in communities we identify as having strong, unmet demand for FTTH services. Given the significant upfront build and operational investments for these FTTH deployments, there is risk that future technological and regulatory changes as well as competitive responses from incumbent local providers, may result in us not fully recovering these investments.

The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price.

Mobile Services

The prior year sale of substantially all of the Company’s mobile customer base and pivot from MVNO to MSE will be a strategic shift for our Mobile Services segment. At the start, DISH will be our sole customer and will represent 100% of our MSE platform revenues until such time that we are able to scale our services to other customers interested in our enablement services. With all our MSE platform and professional services revenues concentrated with one customer, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships in the future. Additionally, our revenues as an MSE are directly tied to the subscriber volumes of DISH's MVNO or MNO networks, so our profitability is contingent on the ability of DISH to continue to add subscribers onto our platform.

Additionally, as described above, the Company will be entitled to a 10-year payment stream that is a function of the margin generated by the transferred subscribers over the 10-year period. This consideration structure may not prove to be successful or profitable in the long-term to us if the existing subscriber base churns at an above average rate upon acquisition by DISH. Additionally, given DISH controls the revenues and costs incurred associated with the acquired subscribers, there could arise a situation where profitability for the subscriber base is diminished either by lower price points or cost inflation

As part of the transactions contemplated by the DISH Purchase agreement, the Company has retained a small number of customer accounts associated with one MNO agreement that was not reassigned to DISH at time of sale. We continue to be subject to the minimum revenue commitments previously agreed to with this excluded MNO agreement. The Company will be able to continue adding customers under the excluded MNO network working with DISH in order to meet the commitment. However, with no direct ability to change customer pricing or renegotiate contract costs or terms, the Company may be unable to meet the minimum commitments with this MNO partner and could incur significant and recurring penalties until such a time that the contract is complete. These penalties would negatively impact our operational performance and financial results if enforced by the MNO.

Domain Services

The increased competition in the market for Internet services in recent years, which we expect will continue to intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers.

Substantially all of our Domain Services revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of new gTLDs, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base. Growth in our Domain Services revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining, evolving and improving our provisioning platforms and customer service for both resellers and end-users. In addition, we also generate revenue through pay-per-click advertising and ~~the sale of names from our portfolio of domain names and~~ through the OpenSRS Domain Expiry Stream. The revenue associated with names sales and advertising has recently experienced flat to declining trends due to the uncertainty around the implementation of ICANN’s New gTLD Program, lower traffic and advertising yields in the marketplace, which we expect to continue.

From time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services. Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods.

~~Sales of domain names from our domain portfolio have a negative impact on our advertising revenue as these names are no longer available for advertising purposes. In addition, the~~ timing of larger domain names portfolio sales is unpredictable and may lead to significant quarterly fluctuations in our Portfolio revenue. In the fourth quarter of 2019, the Company disposed of its remaining domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

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Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our ~~2019~~2020 Annual Report.For further information on our critical accounting policies and estimates, see Note 3 – Recent Accounting Pronouncements to the consolidated financial statements of the Company in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Current COVID-19 Response

Our Employees

Tucows is a global ~~business. Our first consideration during the global pandemic as a result of the disease caused by the COVID-19 outbreak is for the health~~business and ~~safety of our employees, our customers and their communities, all around the world. Tucows~~ has long encouraged a culture of remote work even prior to this global pandemic. Since the onset of this pandemic, ~~and on Sunday March 8, 2020 Tucows’ executive leadership announced that~~ all employees who could conceivably work from home were and continue to be encouraged to do so. Tucows iscontinues to actively and strongly ~~encouraging~~encourage its workforce to heed travel and all other emergency advisories, including social distancing and where appropriate, self-isolation. We expect our work from home policy to remain in effect until emergency state and governmental declarations where we have physical offices have ended and we believe the risk of community spread of the disease has subsided. Given our experience with remote work prior to COVID-19, we have not and do not expect to have productivity issues while the overwhelming majority of our office-based workforce is dispersed.

For the small group of employees who are unable work from home during this time, including our order fulfillment and Fiber installation teams, many of whom work in the field, they are encouraged to practice social distancing and to continue to follow hygiene best practices and safety protocols as outlined by the Centers for Disease Control and Prevention. AtIn the ~~initial stage of the COVID-19 outbreak, we took steps to cancel and reschedule all in-home installation and service appointments across our Ting Fiber footprint. Since then,~~prior year, the Ting Internet team ~~has~~ established an install solution for our employees and customers that minimizes risks associated with person-to-person ~~contact.~~contact and they continue to effectively deploy this install solution currently.

Our Customers

We recognize the important role we play within the Internet space and are committed to continue providing quality service during the COVID-19 outbreak. Across our three segments, Domain Name Services ~~like individual~~ and ~~wholesale domain names, email and hosting~~our Mobile Services segments do not rely on in-person interaction or the supply chain in the same way physical products and services do. We ~~are providing~~continue to provide uninterrupted services for all Domains ~~related services, across our OpenSRS, Enom, Ascio, EPAG & Hover brands.~~

Our Mobile services businesses are both without any physical storefronts, are similarly well-positioned to weather this event. While we have seen a drop in customer usage, we are fully prepared to continue providing uninterrupted services for alland Mobile related services, across our brands where demand for such services exists. We are committed to making sure no customer who is in need is without access to core mobile service while we work through this unprecedented situation together. In the current period, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic. All customers were notified of this shutdown and were appropriately refunded for any active prepaid service they were unable to use as a result of the shutdown. The operational and financial impacts of this shutdown are discussed in more detail below.

services. Our Fiber Internet business does not have bandwidth caps or other such limitations. Likewise, our networks are built with the capacity to accommodate future needs. To help our customers remain connected at home during this time, we upgraded all our lower-tier fiber customers to symmetrical gigabit access at no charge. Any additional traffic from our customers working from home has not had and is not expected to have any negative impact on connectivity. As discussed above, our ~~install~~modified safe-install solution was implemented in early May 2020. With this service limitation, new customer acquisition will remain slower than pre-pandemic levels of growth and installation. Even with an install solution that minimizes risks, customers may be unwilling to have service personnel visit their homes or offices.

Our Community

Tucows believes the Internet is essential infrastructure and an immensely powerful tool, especially in times of crises where coordination is essential.

From an early point in the current global crisis, it was clear to us that we were going to need to do something new and different in how we responded to COVID-19 related domain registrations. ~~Many~~We developed a strategy of these domains are registered for good, helpful purposes, such as community organization, dissemination of healthcare information, and recording people’s experiences through this pandemic. Others, however, purport to sell COVID-19 cures, vaccines, or tests, none of which are legitimately available on the market at the time of the registration and many of which pose a significant health risk to the general public. There arecompliance activities that encompassed three major ~~components to our COVID-19 activities related to domain registrations:~~components: (i) identification, (ii) assessment for harm, and (iii) stakeholder engagement. It is important to note that our response to each and every issue that we find is contextual and dependent on the specific circumstances. We expect to return to our regular procedures as the pandemic and corresponding risks subsides. Although this approach vastly increases the burden on our compliance staff and puts us in the uncomfortable position of having to assess the level of harm represented by a COVID-related domain and the website to which it resolves - we feel these circumstances are exceptional and are determined to do our part.

In order to provide Internet access and assistance to residents of cities and towns that are part of the Ting Fiber network, we have set up free, fiber-fed, drive-up Wi-Fi hotspots. These hotspots enable those with no home Internet access, or insufficient access, to access critical services like online learning and telehealth services, work remotely, check in on and access vital health, government and other services and generally access information. These hotspots will remain in operation as long as they are needed and as long as it is safe and prudent to do so.

We have not experienced any material resource constraints nor do we foresee requiring any material expenditures to continue to implement our business continuity plans described above.

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Current and expected COVID-19 Impacts

Financial & Operational Impacts

Further to the below discussion within this Quarterly Report around the financial condition and results of operations for the current period financial results, the current impact from COVID-19 has been limited so far in 2021. Over the past year, we've monitored the situation and it's impacts on our businesses but have ultimately seen trends stabilize, with some hints at recovery in U.S. markets due to ~~the Network Access - Mobile Services segment.~~large-scale vaccination programs. Management continues to assess the impact ~~on a daily basis and~~regularly but expects ~~continued~~limited impact through the ~~third quarter~~remainder of ~~2020,~~2021, should the COVID-19 pandemic persist. On a segment basis, our current assessment is as follows:

~~Network Access – Mobile Services~~:

Both our Mobile Services businesses are completely online and do not rely on physical storefronts to attract or service customers’ needs. While we have seen a drop in customer usage, we are fully prepared to continue providing uninterrupted services for all Mobile related services, across our brands where demand for such services exists. COVID-19 has impacted the demand for our Mobile services as customer usage patterns changed, which has had a corresponding negative impact on our revenues for this segment. We do not expect the impact to substantially worsen over the coming months as we have seen usage stabilize during the current period.

Ting Mobile, our primary post-paid Mobile Services brand is an MVNO operating across the United States. From the onset of the COVID-19 pandemic, we saw a moderate drop in data usage by our customers, with some small uptick in voice and messaging usage. This is a direct result of social distancing measures enacted by state and local authorities across the United States. With our customers staying indoors and working from home, they now rely on an increased use of home Wi-Fi networks rather than mobile data services. This reduced usage stabilized during the second quarter of 2020 and we expect it to only return to pre-pandemic usage levels once social distancing measures are relaxed. Additionally, at the onset of the pandemic, we saw an increased churn rate of low-margin business accounts as their own businesses came to a halt. This has not rebounded through the second quarter of 2020 as many social distancing measures and business closures remain in place across the United States and may continue as such given the increased uncertainty around secondary waves of shutdown as the pandemic progresses. Our core consumer customer base remains intact but have been experiencing minimal levels of both growth and churn. We do not foresee any increased risk of churn or collection risk given our current situation, but realize that collection risk could increase as government stimulus measures expire and impact a customer's ability to pay. Although we maintain minimum purchase guarantees with our MNOs, we do not expect any material shortfalls with respect to reduced usage from COVID-19.

Roam Mobility, our niche prepaid Mobile Services brand that provides Mobile Services for people travelling within the United States and Worldwide has accounted for the majority of the negative financial impact caused by COVID-19. The business relies on global travel as a key factor in its success. With travel restrictions and border closures essentially resulting in the halt of business and leisure travel, we saw new revenues for Roam Mobility trend toward zero through the end of the first quarter of 2020. Management monitored the situation closely through the second quarter and took substantial measures to reduce and eliminate any unnecessary costs within that business. Unfortunately, given the continued uncertainty around reopening of borders, easing of travel restrictions and consumers’ level of comfort with business and leisure travel in a post pandemic world, we made the decision to shut down operations of all Roam brands effective June 30, 2020. We will continue to refund active plans for existing customers through to August 31, 2020. The assets associated with Roam are insignificant to the consolidated Company total, with the total current period impairment charge related to the shutdown totaling $1.43 million.

~~Network Access – Other~~Fiber Internet Services:

As discussed above, ~~upon news of the COVID-19 outbreak, we took the major step to cancel and reschedule all in-home installation and service appointments across our Ting Fiber footprint. Since then,~~ the Ting Internet team ~~has~~ established a smart-install ~~solution.~~solution at the start of the pandemic. This smart-install solution is faster and more efficient than our existing process, all while protecting the health and safety of our employees and customers alike. Although new customer installations initially slowed ~~near~~at the ~~end~~start of the ~~first quarter of 2020,~~pandemic, we are now seeing returned growth in both subscribers under management as well as serviceable addresses relative to the prior quarter. ~~Additionally, our existing customer base and most recent acquisition~~

Table of ~~Cedar both continue~~Contents

Mobile Services:

The Company now only retains a small subset of customers to which it continues to provide ~~increased recurring~~retail mobile services. COVID-19 has impacted the demand for our Mobile Services as customer usage patterns have changed, which has had a corresponding negative impact on our revenues. However, we do not expect the impact to significantly worsen over the coming months or year as we have seen usage stabilize during the prior periods. We also expect that seasonally warmer weather for the second fiscal quarter of 2021 and continued vaccine roll-out across the U.S. will slowly help to normalize customer usage patterns. Our new MSE platform and professional services businesses are completely online and do not rely on physical storefronts to attract or service customers’ needs. We are fully prepared to continue providing uninterrupted Mobile related enablement services to our MVNO customers. We have not and do not expect a negative COVID-19 impact on our new MSE platform and professional services revenue, ~~for us~~nor do we expect any impact to ~~support this business.~~substantially worsen over the coming months.

Domain Services:

Domain Services are foundational to the functioning of the Internet. ~~As discussed above, services~~Services like individual and wholesale domain names, email and hosting do not rely on in-person interaction or the supply chain in the same way physical products and services do. We have not experienced any negative COVID-19 related impacts, either financially or operationally for Domains related services, across our OpenSRS, ~~Enom,~~eNom, Ascio, EPAG & Hover brands. As more businesses ~~face~~faced the reality of prolonged physical shutdown and ~~move~~moved to establish an online presence, we have seen growth in this segment over the course of the pandemic, primarily driven by large volume resellers in our OpenSRS brand where total domains under management increased ~~807,000~~by 0.5 million since ~~March~~December 31, 2020. This growth rate in domains under management was driven by the ~~Pandemic,~~pandemic, and may not be sustained in the future as domain registrations plateau. Our results of operations for the current period financial results are in line with management’s expectation for the period given product, customer mix and current brand trajectories. We will continue to monitor the impact but do not foresee any negative financial or operational impacts associated with this segment.

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Liquidity & Financial Resource Impacts

For a complete assessment of our liquidity and covenant positions please reference the relevant discussions within this Quarterly Report. We have experienced no significant change to our liquidity position or credit risk as a result of the financial and operational impacts related to COVID-19, as discussed above. Our cost or access to funding sources has not changed and is not reasonably likely to change in the near future as a result of the pandemic. Our sources and uses of cash have not been materially impacted and there is no known material uncertainty about our ongoing ability meet covenants or repayment terms of our credit agreements at this time.

Internal Controls over Financial Reporting

Tucows has long encouraged a culture of remote work even prior to COVID-19. Our financial reporting systems and our internal controls over financial reporting and disclosure controls and procedures are already adapted for a remote work environment. There have been no changes during the current period that, as a result of COVID-19, would affect our ability to maintain these systems and controls.

COVID-19 Related Assistance & Support

Currently, Tucows has not received any form of financial or resource related assistance from any government or local authority. There do exist programs in the regions in which we operate that are designed to support corporations like Tucows during this time, primarily in the form employee wage subsidization. Tucows will continue to review the applicability of these programs but does not expect to seek any assistance.

~~Across our businesses, we have been able to defer portions of installment taxes payable to various Government bodies as payment timelines have been extended in response to the pandemic.~~

Accounting Policy Impacts

~~Given~~Over the ~~rapidly changing nature~~past year of monitoring the COVID-19 ~~developments~~pandemic and assessing the ~~current uncertainty around the length and severity these developments could create,~~impacts on our business as discussed above, Tucows does not ~~have sufficient evidence to~~ anticipate a material impairment with respect to goodwill, intangible assets, long-lived assets, or right of use assets. We will continue to monitor the impacts closely as the situation continues to evolve and will approach the situation with cautious optimism about economic recovery resulting from widespread vaccination programs and will be mindful of any emerging risks as ~~more information becomes available.~~they arise. We do not foresee any changes in accounting judgements in relation to COVID-19 that will have a material impact on our financial statements.

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RESULTS OF OPERATIONS FOR THE ~~THREE AND SIX MONTHS ENDED JUNE 30,~~ ~~2020~~three months ended March 31, 2021 AS COMPARED TO THE ~~THREE AND SIX MONTHS ENDED JUNE 30, 2019~~three months ended March 31, 2020

NET REVENUES

~~Network Access~~Fiber Internet Services

~~The Company generates Network Access~~Fiber Internet Services ~~revenues primarily through the provisioning of mobile services. Other sources of revenue include the provisioning of fixed high-speed Internet access as well as billing solutions to ISPs.~~

~~Mobile Services~~

Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.

Ting Mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brands also offer standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the significant reduction in business and leisure travel caused by the COVID-19 pandemic.

~~Other services~~

~~Other services~~ derive revenues from providing Ting Internet to individuals and small businesses in select cities. In addition, we provide billing, provisioning and customer care software solutions to ISPs through our Platypus billing software. Ting Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. ~~Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access.~~

Ting Internet services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet access customers is computed based on the customer’s activation date. ~~In order to recognize~~Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company ~~satisfies~~performs its ~~obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle~~obligation to ~~the end of~~provide Internet access within each reporting period. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is not received at the time of sale, revenue is not recognized until contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

Mobile Services

Retail Mobile Services

Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the customer's selected rate plan, which can either be usage based or an unlimited plan. All rate plan options are charged to customers on a postpaid, monthly basis at the end of their billing cycle. As discussed previously, in the prior year the Company sold substantially all of its retail mobile customer relationships, and mobile handset and SIM inventory to DISH and granted the right to use and option to purchase the Ting brand. The Company only retains a small subset of customers to which it continues to provide retail mobile services. All future revenues associated with Retail Mobile Services stream will only be for this subset of customers retained by Ting, Inc.

Ting Mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer's monthly billing cycle. The Company's billing cycle for all Ting Mobile customers is computed based on the customer's activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

As a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH, over a period of 10 years. This has been classified as Other Income and not considered revenue in the current period

Mobile Platform Services

Tucows' MSE platform provides network access, provisioning and billing services for MVNOs. These platform fees are billed to our MVNO customers monthly, on a postpaid basis. The fees are based on the volume of their subscribers utilizing the platform during a given month. The Company recognizes revenue over this new revenue stream as the Company satisfies its obligations to provide MSE services on a monthly basis. For any bundled professional services where collection is collected before the service period as part of MSE Platform Revenues, the professional services revenue is initially deferred and recognized only as the Company performs its obligation to provide professional services.

Other Professional Services

This revenue stream includes any other professional services, including transitional services, earned in connection with Tucows' new MSE business. These are billed to our customers monthly at set and established rates for services provided in period. The Company recognizes revenue over this new revenue stream as the Company satisfies its obligations to provide professional services.

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Domain Services

Wholesale - Domain Services

Historically, our wholesale domain service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names. In addition, this service fuels other revenue categories as it often is the initial service for which a reseller will engage us, enabling us to follow on with other services and allowing us to add to our portfolio by purchasing names registered through us upon their expiration. Domain services will continue to be the largest portion of our business and will further fuel our ability to sell add-on services.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

Wholesale – Value-Added Services

We derive revenue from domain related value-added services like digital certifications, WHOIS privacy and hosted email and by providing our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.

We also derive revenue from other value-added services, which primarily consists of ~~Internet hosting services on~~proceeds from the OpenSRS, eNom and ~~eNom~~Ascio domain expiry streams.

Retail

We derive revenues mainly from Hover and eNom’s retail properties through the sale of retail domain name registration and email services to individuals and small businesses.

~~Portfolio~~

The Company ~~sells~~also provides Linux hosting services for websites through its Exact Hosting brand. The retail segment now includes the ~~rights~~sale of the rights to its portfolio ~~domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale~~ of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full. Domain portfolio names are sold through our premium domain name service, auctions or in negotiated sales. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in ~~the~~connection with our Realnames email ~~service. The~~service, however the Company expects surname portfolio revenue to materially decline inthrough Fiscal ~~2020~~2021 and thereafter.

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The following table presents our net revenues, by revenue source (Dollar amounts in thousands of U.S. dollars):

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,					For the Six Months Ended June 30,					For the Three Months Ended March 31,
	2020			2019		2020			2019		2021			2020

Network Access Services:
Mobile Services	$	17,567		$	20,986	$	37,715		$	41,795
Other Services		4,414			2,644		8,722			5,087
Total Network Access Services		21,981			23,630		46,437			46,882
Fiber Internet Services:
Fiber Internet Services											$	5,371		$	4,308

Mobile Services:
Retail mobile services												2,014			20,148
Mobile platform services												349			-
Other professional services												1,916			-
Total Mobile												4,279			20,148

Domain Services:
Wholesale
Domain Services		46,206			46,485		92,169			89,076		46,991			45,964
Value Added Services		5,034			4,775		9,741			8,959		5,080			4,306
Total Wholesale		51,240			51,260		101,910			98,035		52,071			50,270

Retail		8,567			8,783		17,017			17,425		9,154			9,259
Portfolio		334			444		743			728
Total Domain Services		60,141			60,487		119,670			116,188		61,225			59,529

	$	82,122		$	84,117	$	166,107		$	163,070	$	70,875		$	83,985
(Decrease) increase over prior period	$	(1,995	)			$	3,037				$	(13,110	)
(Decrease) increase - percentage		(2	)%				2	%				(16	)%

The following table presents our revenues, by revenue source, as a percentage of total revenues (Dollar amounts in thousands of U.S. dollars):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020

Fiber Internet Services:
Fiber Internet Services														8	%		5	%

Network Access Services:
Mobile Services		22	%		25	%		23	%		26	%
Other Services		5	%		3	%		5	%		3	%
Total Network Access Services		27	%		28	%		28	%		29	%
Retail mobile services														3	%		24	%
Mobile platform services														0	%		0	%
Other professional services														3	%		0	%
Total Mobile														6	%		24	%

Domain Services:
Wholesale
Domain Services		56	%		55	%		55	%		55	%		66	%		55	%
Value Added Services		6	%		6	%		6	%		5	%		7	%		6	%
Total Wholesale		62	%		61	%		61	%		60	%		73	%		61	%

Retail		11	%		10	%		11	%		11	%		13	%		10	%
Portfolio		0	%		1	%		0	%		0	%
Total Domain Services		73	%		72	%		72	%		71	%		86	%		71	%

		100	%		100	%		100	%		100	%		100	%		100	%

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Total net revenues for the three months ended ~~June 30, 2020~~March 31, 2021 decreased by ~~$2.0~~$13.1 million, or 2%16%, to ~~$82.1~~$70.9 million from ~~$84.1~~$84.0 million when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The three-month decrease in revenue was primarily driven by ~~$3.4~~$15.9 million of reduced revenues attributable to our Mobile Services ~~brands~~segment that was impacted by both the sale of the majority of the customer base of Ting Mobile to DISH Wireless and the shutdown of Roam Mobility ~~that were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when~~brands in late Fiscal 2020. When compared to the three months ended ~~June 30, 2019. Additionally, further decreases~~March 31, 2020, the Mobile Services segment in ~~domain name services~~the current period looks very different as a result of our shift from MVNO to MSE. As part of the DISH Purchase Agreement, as a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH over the 10-year term of the agreement. This has been classified as Other Income and not considered revenue ~~of $0.3 million, related to a continued erosion~~ in ~~Wholesale domain registrations by non-core customers primarily~~the current period. This decrease in overall revenues is offset with increases from ~~our existing~~both Domain Services ~~brands. These decreases were offset by~~and Fiber ~~access revenues which increased $1.8~~Internet Services of $1.7 million ~~driven by our recent first quarter acquisition~~and $1.1 million, respectively. For Domain Services this is reflective of ~~Cedar~~continued wholesale registration growth as ~~well as through~~a result of the ~~expansion~~COVID-19 pandemic creating the need for an online presence, and for Fiber Internet Services this is a result of the attraction of additional customers to Ting Internet from the continued buildout of our ~~existing Ting Internet footprint.~~

~~Total net revenues for~~Fiber network footprint across the six months ended June 30, 2020 increased by $3.0 million, or 2%, to $166.1 million from $163.1 million when compared to the six months ended June 30, 2019. The six-month increase in revenue was primarily driven by Fiber access revenues which increased $3.6 million driven by our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. Additionally, further increases of $3.5 million in revenues largely attributable to our prior year acquisition of Ascio. Ascio revenues, which now represent a full two quarters of earned revenue compared to the stub period of attributable revenue during the six months ended June 30, 2019. These increases were offset by Mobile Services revenue which decreased by $3.6 million due to a decrease in mobile subscribers and reduced usage related to COVID-19 as described above.United States.

Deferred revenue from domain name registrations and other Mobile and Internet services at ~~June 30, 2020~~March 31, 2021 increased by ~~$6.0~~$5.4 million to ~~$155.3~~$157.6 million from ~~$149.3~~$152.2 million at December 31, ~~2019~~2020. This increase was primarily driven by Domain Services, accounting for $4.8 million of the increase which is due to the increase in current period billings for domain name registration and service renewals. Our Mobile Services segment followed, driving $0.5 million of the increase to deferred revenue due to increased billings for bundled professional services offered in connection with our MSE business. Fiber Internet Services accounted for less than $0.1 million of the increase.

~~During the three and six months ended June 30, 2020, no~~No customer accounted for more than 10% of total ~~revenue. For~~revenue during the three ~~and six~~ months ended ~~June 30, 2019, no customer~~March 31, 2021 or the three months ended March 31, 2020. DISH accounted for ~~more than 10%~~49% of total ~~revenue. As~~accounts receivable as at ~~June 30, 2020~~March 31, 2021 and 59% of total accounts receivable as at December 31, ~~2019, no customer accounted for more than 10% of accounts receivable.~~2020. Though a significant portion of the Company’s domain services revenues are prepaid by our customers, where the Company does collect receivables, significant management judgment is required at the time revenue is recorded to assess whether the collection of the resulting receivables is reasonably assured. On an ongoing basis, we assess the ability of our customers to make required payments. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of allowance for doubtful accounts, to be fully collected.

~~Network Access~~Fiber Internet Services

Revenues from Ting Internet and billing solutions generated $5.4 million in revenue during the three months ended March 31, 2021, up $1.1 million or 26% compared to the three months ended March 31, 2020. This growth is driven by subscriber growth across our Fiber network relative to the three months ended March 31, 2020. As of March 31, 2021, Ting Internet had access to 65,000 serviceable addresses and 17,000 active subscribers under its management compared to having access to 45,000 serviceable addresses and 12,000 active subscribers under its management as of March 31, 2020. These figures include the increase in serviceable addresses and subscribers attributable to the acquisition of Cedar Holdings Group, Incorporated ("Cedar") in January 2020.

Mobile Services

Retail Mobile Services

Net revenues from ~~mobile phone equipment and services~~Retail Mobile Services for the three months ended ~~June 30, 2020~~March 31, 2021 decreased by ~~$3.4~~$18.1 million or ~~16%~~90% to ~~$17.6~~$2.0 million as compared to the three months ended ~~June 30, 2019.~~March 31, 2020. This decrease ~~reflects~~is a ~~decline~~result of the significant changes to our Mobile Services segment that occurred during Fiscal 2020 as we transitioned from MVNO to MSE. These changes include both the shutdown of the Roam Mobility brands in ~~mobile service revenue, which decreased~~the second quarter of 2020 followed by ~~$4.0 million compared~~the sale of substantially all of the Ting Mobile customer base on August 1, 2020 to~~June 30, 2019~~, DISH. In addition to ~~$15.5 million.~~these changes, subscriber churn and reduced usage related to the COVID-19 pandemic has also contributed to lower revenues relative to the three months ended March 31, 2020. Ting Mobile accounts for ~~$2.9~~$17.0 million of this decrease (of which $1.6 million is reduced device revenues and $15.4 million relates to service revenues), followed by Roam Mobility at $1.1 million of the total ~~decrease~~.decrease. The ~~decline in service~~ revenues earned from Retail Mobile Services for three months ended March 31, 2021 is ~~a result~~only reflective of the ~~decline in~~ mobile ~~subscribers~~telephony services and ~~reduced usage related to~~device revenues associated with the ~~COVID-19 pandemic. As at June 30, 2020,~~small group of customers retained by the Company ~~shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to lack of business and leisure travel caused by the pandemic. Revenues~~ from the sale of ~~mobile hardware~~historically larger Ting Mobile customer base to DISH. As mentioned above, the payout the Company receives from the aforementioned sale has been classified as Other Income and ~~related accessories~~not considered revenue in the current period.

Mobile Platform Services

Net revenues from Mobile Platform Services for the three months ended March 31, 2021 increased by ~~$0.6~~to $0.3 million ~~compared to~~ ~~June 30, 2019, to $2.0 million. The increase in device revenue was primarily driven by strong sales and refreshed product mix for devices~~as compared to the three months ended ~~June 30, 2019.~~

~~Net revenues from mobile phone equipment and services for the six months ended June 30, 2020 decreased by $4.1 million or 10% to $37.7 million as compared to the six months ended June 30, 2019.~~March 31, 2020. This ~~decrease reflects a decline in mobile service revenue, which decreased by~~ ~~$4.8 million compared to~~ ~~June 30, 2019, to $34.1 million. Ting Mobile accounts for $3.4 million of this decrease, followed by Roam Mobility at $1.4 million of the total decrease. The decline in service revenues~~increase is a result of new MSE business created as a result of the ~~decline~~DISH Purchase Agreement in ~~mobile subscribers and reduced usage related to~~ the ~~COVID-19 pandemic. Revenues from~~prior year. No such comparable revenue stream existed for the ~~sale of mobile hardware and related accessories increased by~~ ~~$0.7 million compared to~~three ~~June 30, 2019, to $3.6 million. The increase in device revenue was primarily driven by strong sales and refreshed product mix for devices compared to the six~~ months ended ~~June 30, 2019.~~

AsMarch 31, 2020. Tucows' MSE platform provides network access, provisioning and billing services for MVNOs, of ~~June 30, 2020, Ting Mobile,~~which DISH is currently our post-paid Mobile Services brand had 150,000 mobile accounts and 257,000 subscribers under its management compared to 157,000 accounts and 280,000 subscribers under its management as of June 30, 2019. sole customer.

Other Professional Services

~~Other~~Net revenues from ~~Ting Internet and billing solutions generated $4.4 million in revenue during~~Other Professional Services for the three months ended ~~June 30, 2020, up $1.8~~March 31, 2021 increased to $1.9 million ~~or 69%~~as compared to the three months ended ~~June 30, 2019.~~March 31, 2020. This ~~growth~~increase is ~~driven by the recent first quarter acquisition~~a result of ~~Cedar. Cedar contributed $1.2 million~~new MSE business created as a result of the ~~increase~~DISH Purchase Agreement in the prior year. No such comparable revenue ~~during~~stream existed for the ~~current period, with $0.6 million related to the continued expansion of our Ting Internet footprint in existing Ting towns throughout the United States.~~

~~Other revenues from Ting Internet and billing solutions generated $8.7 million in revenue during the six~~ three months ended ~~June 30,~~March 31, 2020 ~~up $3.6 million or 71% compared to the six months ended June 30, 2019. This growth~~. Tucows' professional services include IT system development and other transitional services including sales, marketing, customer support, order fulfillment, and data analytics for MVNOs, of which DISH is ~~driven by the recent first quarter acquisition of Cedar. Cedar contributed $2.4 million of the increase in revenue during the current period, with $1.2 million related to the continued expansion of~~currently our ~~Ting Internet footprint in existing Ting towns throughout the United States.~~

As of June 30, 2020, Ting Internet had access to 49,000 serviceable addresses and 13,000 active accounts under its management compared to having access to 34,000 serviceable addresses and 9,000 active accounts under its management as of June 30, 2019. These figures include the increase in serviceable addresses and accounts attributable to the prior quarter Cedar acquisition. sole customer.

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Domain Services

Wholesale - Domain Services

During the three months ended ~~June 30, 2020,~~March 31, 2021, Wholesale domain services revenue ~~decreased~~increased by ~~$0.3~~$1.0 million or 1%2% to ~~$46.2~~$47.0 million, when compared to the three months ended ~~June 30, 2019. The three-month decrease was primarily~~March 31, 2020. Increases from Wholesale domain registration of $2.1 million from OpenSRS, EPAG, and Ascio brands driven by a $1.2 million decrease in Wholesale domain revenue, driven by a decline in domain registrations by non-core customers from our eNom and Ascio brands. This decrease on eNom and Ascio was offset by increased Wholesale domain revenues of $0.9 million from our other domain services brands, namely OpenSRS and EPAG. This offsetting increase is a result of increased domains under management for these brands associated with an uptick in registrations during the second quarter of 2020 in connection with COVID-19. As more businesses establish an online presence during this time, we have seenCOVID-19 registration growth from large volume resellers across these brands. This has had a marginal impact on revenue in the current period but will have a carryforward impact in subsequent periods as revenues are recognized from previously deferred billings.

During the six months ended June 30, 2020, Wholesale domain services revenue increased by $3.1 million or 3% to $92.2 million, when compared to the six months ended June 30, 2019. The six-month increase was primarily driven by a $5.0 million increase in revenue related to the prior year acquisition of Ascio. Ascio revenues now represent a full two quarters of earned revenue compared to the stub period of attributable revenue during the six months ended June 30, 2019. Additionally, we saw a further increase in Wholesale domain revenues of $1.2 million from our other domain services brands, namely OpenSRS and EPAG due to the increased registrations as a result of COVID-19 discussed above. These increases were offset by ~~a decrease~~decreases of ~~$3.1~~$1.1 million ~~in Wholesale domain revenues related~~from the eNom brands, which continues to ~~our eNom brand, driven by continued~~see a decline in ~~domain~~ registrations by non-core customers relative to the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

Total domains that were managed under the OpenSRS, eNom, EPAG, and Ascio domain services ~~decreased~~increased by ~~0.4~~1.9 million domain names to ~~24.6~~25.8 million as of ~~June 30, 2020,~~March 31, 2021, when compared to ~~25.0~~23.9 million at ~~June 30, 2019.~~March 31, 2020. The ~~decrease~~increase is a driven by the continued ~~erosion~~growth in registrations over this period as a result of ~~registrations related to non-core customers from our eNom brand. All increases~~the COVID-19 pandemic, as discussed ~~above related to our other~~ above.

Wholesale ~~domain brands have not increased at a rate equal to the erosion experienced by eNom, thus resulting in a net decrease in total domains under management for the period in comparison.~~ - Value Added Services

During the three months ended ~~June 30, 2020,~~March 31, 2021, value-added services revenue increased by ~~$0.2~~$0.8 million to ~~$5.0~~$5.1 million compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The ~~three-month increases were~~increase was primarily driven by ~~an increase in~~increased expiry revenue of ~~$0.5~~$0.9 million from both OpenSRS and eNom domain expiry streams. This increase was offset by ~~a decrease in hosting revenue of $0.1 million and decrease~~other small decreases in Digital Certificates, Email and Other revenues of $0.1 million.

During the six months ended June 30, 2020, value-added services increased by $0.7 million to $9.7 million compared to the six months ended June 30, 2019. The six-month increases were primarily driven by an increase in expiry revenue of $1.2 million, offset by a decrease in hosting revenue of $0.3 million and decrease in Digital Certificates revenue of $0.1 million.

Retail

~~Net revenues from retail for~~During the three months ended ~~June 30, 2020, as~~March 31, 2021, retail domain services revenue decreased by $0.1 million or 1% to $9.2 million compared to the three months ended ~~June 30, 2019, decreased by less than $0.2 million to $8.6 million. Revenue decreased as a result of a shrinking eNom customer base,~~March 31, 2020. The was driven by ~~non-core customers.~~

~~Net~~decreased revenues ~~from retail for the six months ended June 30, 2020, as compared~~related to ~~the six months ended June 30, 2019, decreased by less than $0.4 million to $17.0 million. Revenue decreased as a result~~Realnames email service and related surname portfolio sales of ~~a shrinking eNom customer base, driven by non-core customers.~~

~~Portfolio~~

~~Net revenues from portfolio for the three months ended June 30, 2020, decreased by~~ $0.1 million ~~to $0.3 million, as compared to the three months ended June 30, 2019, due to lower proceeds from individual portfolio sales compared to the three months ended June 30, 2019. In the fourth quarter~~and decreased Exact Hosting revenues of ~~2019, the Company disposed~~$0.1 million. These increases were offset by a small increase in retail domain name registrations of ~~its entire domain portfolio, excluding surname domains used in the Realnames email service.~~ $0.1 million. The Company expects all Realnames surname portfolio ~~revenue~~related sales to materially decline in Fiscal ~~2020 and thereafter.~~

~~Net revenues from portfolio for the six months ended June 30, 2020 were flat as compared to the six months ended June 30, 2019. I~~n the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 20202021 and thereafter.

COST OF REVENUES

~~Network Access~~Fiber Internet Services

Cost of revenues primarily includes the costs for provisioning high speed Internet access, which is comprised of network access fees paid to third-parties to use their network, leased circuit costs to directly support enterprise customers, the personnel and related expenses (net of capitalization) related to the physical planning, design, construction and build out of the physical Fiber network and as well as personnel and related expenses (net of capitalization) related to the installation, repair, maintenance and overall field service delivery of the Fiber business. Hardware costs include the cost of equipment sold to end customers, including routers, ONTs, and IPTV products, and any inventory adjustments on this inventory. Other costs include field vehicle expenses, small sundry equipment and supplies consumed in building the Fiber network and fees paid to third-party service providers primarily for printing services in connection with billing services to ISPs.

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Mobile Services

Retail Mobile Services

Cost of revenues for ~~mobile services~~Retail Mobile Services includes the costs of provisioning mobile services, which is primarily our customers' voice, messaging, data usage provided by our Network ~~Operators,~~Operator, and the costs of providing mobile phone hardware, which is the cost of mobile phone devices and SIM cards sold to our customers, order fulfillment related expenses, and inventory write-downs.

~~Other~~Mobile Platform Services

Cost of revenues, ~~for other~~if any, to provide the MSE Platform services ~~primarily includes the costs for provisioning high speed Internet access, which is comprised of~~including network access, ~~fees~~provisioning and ~~software licenses and the costs~~billing services for MVNOs.

Other Professional Services

Cost of ~~providing hardware. Hardware costs are comprised of network routers sold~~revenues to provide professional services, including transitional services, to our MVNO customers ~~order fulfillment related expenses, inventory write-downs~~to help support their businesses. This includes any personnel and contractor fees ~~paid to third-party~~for any client service ~~providers primarily for printing services in connection with billing~~resources retained by the Company. Only a subset of the Company's employee base provides professional services to ~~ISPs.~~

~~Table~~our MVNO customers. This cost reflects that group of ~~Contents~~

resources.

Domain Services

Wholesale

- Domain ~~Service~~Services

Cost of revenues for domain registrations represents the amortization of registry and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely rateably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are initially recorded as prepaid domain registry fees. This accounting treatment reasonably approximates a recognition pattern that corresponds with the provision of the services during the period. Market development funds that do not represent a payment for distinct goods or services provided by the Company, and thus do not meet the criteria for revenue recognition under ASU 2014-09, are reflected as cost of goods sold and are recognized as earned.

Wholesale - Value-Added Services

Costs of revenues for value-added services include licensing and royalty costs related to the provisioning of certain components of related to hosted email and fees paid to third-party hosting services. Fees payable for trust certificates are amortized on a basis consistent with the provision of service, generally one year, while email hosting fees and monthly printing fees are included in cost of revenues in the month they are incurred.

Retail

Costs of revenues for our provision and management of Internet services through our retail sites, Hover.com and the eNom branded sites, include the amortization of registry fees on a basis consistent with the recognition of revenues from our customers, namely rateably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are recorded as prepaid domain registry ~~fees.~~

~~Portfolio~~

fees and are expensed rateably over the renewal term. Costs of revenues for our surname portfolio represent the amortization of registry fees for domains added to our portfolio over the renewal period, which is generally one year, the value attributed under intangible assets to any domain name sold and any impairment charges that may arise from our assessment of our domain name intangible assets. Payments for domain registrations are payable for the full term of service at the time of activation of service and are recorded as prepaid domain registry fees and are expensed rateably over the renewal term.

~~Table of Contents~~

Network expenses

Network expenses include personnel and related expenses related to the network operations, IT infrastructure and supply chain teams that support our various business segments. It also includes network depreciation and amortization, communication and productivity tool costs, and equipment maintenance ~~stock-based compensation~~costs. Communication and ~~employee and related~~productivity tool costs ~~directly associated with the management and maintenance of our network. Communication costs include~~includes collaboration, customer support, bandwidth, co-location and provisioning costs we incur to support the supply of all our services.

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The following table presents our cost of revenues, by revenue source:

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,					For the Six Months Ended June 30,					For the Three Months Ended March 31,
	2020			2019		2020			2019		2021			2020

Network Access Services:
Mobile Services	$	8,660		$	10,806	$	18,517		$	21,549
Other Services		1,665			956		3,381			2,025
Total Network Access Services		10,325			11,762		21,898			23,574
Fiber Internet Services:
Fiber Internet Services											$	2,635		$	1,716

Mobile Services:
Retail mobile services												1,055			9,857
Mobile platform services												58			-
Other professional services												1,666			-
Total Mobile												2,779			9,857

Domain Services:
Wholesale
Domain Services		36,354			37,817		72,823			72,656		35,773			36,469
Value Added Services		762			738		1,547			1,531		599			757
Total Wholesale		37,116			38,555		74,370			74,187		36,372			37,226

Retail		4,219			4,409		8,453			8,768		4,401			4,389
Portfolio		130			147		257			276
Total Domain Services		41,465			43,111		83,080			83,231		40,773			41,615

Network Expenses:
Network, other costs		2,485			2,385		4,901			4,780		3,238			2,416
Network, depreciation and amortization costs		3,356			2,352		6,587			4,327		3,937			3,231
Network, impairment		1,525			-		1,525			-		60			-
		7,366			4,737		13,013			9,107		7,235			5,647

	$	59,156		$	59,610	$	117,991		$	115,912	$	53,422		$	58,835
(Decrease) increase over prior period	$	(454	)			$	2,079				$	(5,413	)
(Decrease) increase - percentage		-1	%				2	%				-9	%

The following table presents our cost of revenues, as a percentage of total cost of revenues for the periods presented:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020

Network Access Services:
Mobile Services		15	%		18	%		16	%		18	%
Other Services		3	%		2	%		3	%		2	%
Total Network Access Services		18	%		20	%		19	%		20	%
Fiber Internet Services:
Fiber Internet Services														5	%		3	%


Mobile Services:
Retail mobile services														2	%		17	%
Mobile platform services														0	%		0	%
Other professional services														3	%		0	%
Total Mobile														5	%		17	%

Domain Services:
Wholesale
Domain Services		64	%		64	%		63	%		63	%		68	%		63	%
Value Added Services		1	%		1	%		1	%		1	%		1	%		1	%
Total Wholesale		65	%		65	%		64	%		64	%		69	%		64	%

Retail		7	%		7	%		7	%		8	%		8	%		7	%
Portfolio		0	%		0	%		0	%		0	%
Total Domain Services		72	%		72	%		71	%		72	%		77	%		71	%

Network Expenses:
Network, other costs		4	%		4	%		4	%		4	%		6	%		4	%
Network, depreciation and amortization costs		6	%		4	%		6	%		4	%		7	%		5	%
Network, impairment														0	%		0	%
		10	%		8	%		10	%		8	%		13	%		9	%

		100	%		100	%		100	%		100	%		100	%		100	%

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Total cost of revenues for the three months ended ~~June 30, 2020,~~March 31, 2021, decreased by ~~$0.4~~$5.4 million, or 1%9%, to ~~$59.2~~$53.4 million from ~~$59.6~~$58.8 million in the three months ended ~~June 30, 2019.~~March 31, 2020. The three-month decrease in cost of revenues was primarily driven by ~~$2.1~~$7.1 million of reduced costs attributable to our Mobile Services ~~brands.~~segment. As discussed above in the Net Revenue section, our Mobile Services segment was impacted by both the sale of the majority of the customer base of Ting Mobile to DISH Wireless and the shutdown of Roam Mobility ~~were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when~~brands in late Fiscal 2020. When compared to the three months ended ~~June 30, 2019.~~March 31, 2020, the Mobile Services segment in the current period looks very different as a result of our shift from MVNO to MSE. Both these factors contribute to the three months ended March 31, 2021 having significantly lower costs. Additionally, further decreases in ~~domain name services~~Domain Services costs of ~~$1.6~~$0.8 million ~~related~~driven by registry cost rebates earned in connection with strong performance and additions to ~~continued erosion~~domains under management as a result of the COVID-19 pandemic. This decrease in ~~Wholesale and Retail domain registrations by non-core customer primarily~~overall cost of revenues is offset with increases from ~~our existing Domain~~Fiber Internet Services ~~brands, namely eNom. These decreases were offset by increased network expenses from continued Fiber network expansion~~costs as well as ~~a $1.5~~Network Expenses of $0.9 million ~~impairment~~and $1.6 million, respectively. This increase is related to Ting TV, a product under development for Ting Fiber that was discontinued. Additional increases in Fiber access costs of $0.7 million, driven by both our recent first quarter acquisition of Cedar as well as through the continued expansion of our existing Ting Internet footprint.

~~Total cost~~Deferred costs of ~~revenues for the six months ended June 30, 2020,~~fulfillment as of March 31, 2021 increased by ~~$2.1~~$4.1 million, or 2%4%, to ~~$118.0~~$115.2 million from $115.9 million in the six months ended June 30, 2019. The six-month increase was driven by increased network expenses from continued Fiber network expansion as well as a $1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued. Additional increases in Fiber access costs of $1.4 million, driven by both our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. These increases were offset by $3.0 million of reduced costs attributable to our Mobile Services brands. As discussed above in the Net Revenue section, Ting Mobile and Roam Mobility were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when compared to the three months ended June 30, 2019. Additionally, there were further decreases in domain name services costs of $0.2 million, related to continued erosion in Wholesale and Retail domain registrations by non-core customers primarily from our existing Domain Services brands, namely eNom.

~~Prepaid domain registration and other Internet services fees as of June 30, 2020 increased by $5.0 million, or 5%, to $114.2 million from $109.2~~$111.1 million at December 31, ~~2019~~2020. This increase was primarily driven by Domain Services, accounting for $3.6 million of the increase which is due to the increase in current period costs for domain name registration and ~~annual~~ service renewals.

~~Table~~ Our Mobile Services segment followed, driving $0.5 million of ~~Contents~~

the increase due to the increased capitalization of costs incurred in connection with the fulfillment of our MSE agreement with DISH.

~~Network Access~~Fiber Internet Services

~~Mobile Services~~

Cost of revenues from mobile phone equipment and services for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, decreased by $2.1 million or 20% to $8.7 million. This decrease reflects a decline in mobile service costs, which decreased by $3.0 million compared to June 30, 2019~~, to $6.1 million. Ting Mobile accounts for $2.4 million of this decrease, followed by Roam Mobility at $0.6 million of the total decrease~~. The decline in service costs of $2.4 million for Ting Mobile was primarily driven by a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic; which attributed to a decrease in costs of $1.7 million. Additionally, the decline in Ting Mobile service costs included reduced minimum commitment charges with network operators, which decreased by $0.7 million as compared to the three months ended June 30, 2019. The decline in service costs of $0.6 million attributable to Roam Mobility was entirely related to COVID-19 and related shut-down costs. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to lack of business and leisure travel caused by the pandemic. Costs from the sale of mobile hardware and related accessories increased by $0.9 million c~~ompared to~~ ~~June 30, 2019, to $2.5 mi~~llion. The increase in device costs was primarily driven by strong sales and refreshed product mix for devices compared to the three months ended June 30, 2019. A portion of this increase is related to Roam Mobility, attributable to an increase of $0.2 million in device costs. This is a result of write-off of SIM card inventory upon shut down of the Roam Mobility brands on June 30, 2020.

Cost of revenues from mobile phone equipment and services for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, decreased by $3.0 million or 14% to $18.5 million. The decrease reflects a decline in mobile service costs, which decreased by $4.0 million compared to June 30, 2019, to $14.1 million. Ting Mobile accounts for $3.0 million of this decrease, followed by Roam Mobility at $1.0 million of the total decrease. The decline in service costs of $3.0 million for Ting Mobile was primarily driven by a decline in minimum commitment charges with network operators, which decreased by $1.7 million as compared to the six months ended June 30, 2019. Additionally, the remaining decline in Ting Mobile service costs was driven by a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. This was attributable to a decrease in costs of $1.3 million. The decline in service costs of $1.0 attributable to Roam Mobility was entirely related to COVID-19 and related shut-down costs. Costs from the sale of the mobile hardware and related accessories increased by $1.0 million compared to ~~June 30, 2019, to $4.4 mi~~llion. The increase in device costs was primarily driven by strong sales and refreshed product mix for devices compared to the six months ended June 30, 2019. A portion of this increase is related to Roam Mobility, attributable to an increase of $0.2 million in device costs. This is a result of write-off of SIM card inventory upon shut down of the Roam Mobility brands on June 30, 2020.

~~Other Services~~

During the three months ended ~~June 30, 2020,~~March 31, 2021, costs related to provisioning high speed Internet access and billing solutions increased ~~$0.7~~$0.9 million or ~~70%~~53%, to ~~$1.7~~$2.6 million as compared to ~~$1.0~~$1.7 million during three months ended ~~June 30, 2019.~~March 31, 2020. The increase in costs were primarily driven by increased direct costs and bandwidth costs related to the continued expansion of the Ting Fiber network. Although directionally aligned with the experienced growth in revenue over the same period, the outpaced increase in cost of revenues for Fiber Internet services is a result of the necessary upfront investment and expenditure needed to build out the network ~~for both existing towns and cities as well as those acquired via the Cedar acquisition.~~in advance of anticipated revenue growth in any particular location.

~~During~~Mobile Services

Retail Mobile Services

Cost of revenues from Retail Mobile Services for the ~~six~~three months ended ~~June 30, 2020, costs related to provisioning high speed Internet access and billing solutions increased $1.4~~March 31, 2021 decreased by $8.8 million or ~~70%~~89%, to ~~$3.4~~$1.1 million from $9.9 million in the three months ended March 31, 2020. Consistent with the above discussion around net revenues, this decrease is a result of the significant changes to our Mobile Services segment that occurred during Fiscal 2020 as we transitioned from MVNO to MSE. Ting Mobile accounts for $8.3 million of this decrease (of which $1.9 million is reduced device costs and $6.4 million relates to reduced service costs), followed by Roam Mobility at $0.5 million of the total decrease. The cost of revenues incurred from Retail Mobile Services for three months ended March 31, 2021 is only reflective of the mobile telephony services and device costs associated with the small group of customers retained by the Company from the sale of historically larger Ting Mobile customer base to DISH.

Mobile Platform Services

Cost of revenues from Mobile Platform Services for the three months ended March 31, 2021 increased to $0.1 million as compared to ~~$2.0 million during six~~the three months ended ~~June 30, 2019. The~~March 31, 2020. This increase is a result of new MSE business created as a result of the DISH Purchase Agreement in the prior year. No such comparable cost of revenues existed for the three months ended March 31, 2020. Tucows' MSE platform provides network access, provisioning and billing services for MVNOs, of which DISH is currently our sole customer. Costs incurred represent the amortization of previously capitalized costs ~~were primarily driven by~~incurred to fulfill the DISH MSE agreement over the term of the agreement.

Other Professional Services

Cost of revenues from Other Professional Services for the three months ended March 31, 2021 increased ~~direct costs and bandwidth costs related~~to $1.7 million as compared to the ~~continued expansion~~three months ended March 31, 2020. This increase is a result of new MSE business created as a result of the ~~Ting Fiber network,~~DISH Purchase Agreement in the prior year. No such comparable cost of revenues existed for ~~both existing towns~~the three months ended March 31, 2020. Tucows' professional services include IT system development and ~~cities as well as those acquired via~~other transitional services including sales, marketing, customer support, order fulfillment, and data analytics for MVNOs, of which DISH is currently our sole customer. Costs incurred represent the ~~Cedar acquisition.~~personnel and related expenses of employees providing professional services to DISH.

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Domain Services

Wholesale

- Domain ~~Service~~Services

Costs for Wholesale domain services for the three months ended ~~June 30, 2020~~March 31, 2021 decreased by ~~$1.4~~$0.7 million to ~~$36.4~~$35.8 million, when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. This was primarily driven by a ~~$2.0 million decrease~~large registry cost rebates earned in ~~wholesale domain services costs driven by the erosion in registrations by non-core customers for our eNom~~connection with strong performance and Ascio brands. This decrease on eNom and Ascio was offset by increased Wholesale domain service costs of $0.5 million from our other domain services brands, namely OpenSRS and EPAG. This offsetting increase is a result of increasedadditions to domains under management ~~for these brands associated with an uptick in registrations during~~over this same period as a results of the ~~second quarter of 2020 in connection with COVID-19.~~COVID-19 pandemic. As more businesses establish an online presence during this time, we have seen growth from large volume resellers across these brands. This has had a marginal impact on costs in the current period and will have a carryforward impact in subsequent periods as costs are recognized from previously deferred billed costs.

~~Costs for~~ Wholesale domain services for the six months ended June 30, 2020 increased by $0.1 million to $72.8 million, when compared to the six months ended June 30, 2019. This was primarily driven by a $3.5 million decrease in wholesale domain services costs driven by the erosion in registrations by non-core customers for our eNom brand. This decrease on eNom was offset by increased Wholesale domain service costs of $3.7 million from our other domain services brands, namely OpenSRS, EPAG and Ascio. The offsetting increase is largely a result of the prior year acquisition of Ascio, where Ascio costs now represent a full two quarters compared to the stub period of attributable costs during the six months ended June 30, 2019. To a lesser extent any residual increase was a result of increased domains under management for OpenSRS as a result of COVID-19 impacts discussed above.

- Value-Added Services

Costs for wholesale value-added services for the three months ended ~~June 30, 2020 remained flat at $0.8~~March 31, 2021 decreased by $0.2 million to $0.6 million, when compared to the three months ended ~~June 30, 2019.~~

~~Costs for wholesale value-added services for~~March 31, 2020. This was driven by decreases in Digital Certificates, Email and Other revenues of $0.1 million during the ~~six~~three months ended ~~June 30,~~March 31, 2020 ~~remained flat at $1.5 million, when compared to~~consistent with the ~~six months ended June 30, 2019.~~decrease in revenue described above.

Retail

Costs for retail domain services for the three months ended ~~June 30, 2020 decreased by $0.2 million, to $4.2 million as compared to the three months ended June 30, 2019. The decrease was a result of an overall declining volume of transactions related to the eNom retail brands.~~

~~Costs for retail for the six months ended June 30, 2020 decreased by $0.3 million, to $8.5 million as compared to the six months ended June 30, 2019. The decrease was a result of an overall declining volume of transactions related to the eNom retail brands.~~

~~Portfolio~~

~~Costs for portfolio for the three months ended June 30, 2020~~March 31, 2021 remained flat at ~~$0.1~~$4.4 million when compared to the three months ended ~~June 30, 2019.~~ In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio cost of revenue to materially decline in Fiscal 2020.

~~Costs for portfolio for the six months ended June 30, 2020 remained flat at $0.3 million when compared to the six months ended June 30, 2019.~~ In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio cost of revenue to materially decline in Fiscal 2020.March 31, 2020.

Network Expenses

Network costs for the three months ended ~~June 30, 2020~~March 31, 2021 increased by ~~$2.7~~$1.6 million to ~~$7.4~~$7.2 million when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The three-month increase was driven by depreciation as a result of the expansion of the Company’s increased network infrastructure associated with the continuing expansion of the Ting Fiber footprint ~~as well as a~~ ~~$1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued~~and an increase in ~~the current period.~~

~~Network~~communication and productivity tool costs for the six months ended June 30, 2020 increased by $3.9 million to $13.0 million when compared to the six months ended June 30, 2019. The six-month increase was driven by depreciation as a result of the expansion of the Company’s increased network infrastructure ~~associated with the continuing expansion of the Ting Fiber footprint as well as a~~across our service lines. ~~$1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued in the current period.~~

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SALES AND MARKETING

Sales and marketing expenses consist primarily of personnel costs. These costs include commissions and related expenses of our sales, product management, public relations, call center, support and marketing personnel. Other sales and marketing expenses include customer acquisition costs, advertising and other promotional costs.

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Sales and marketing	$	9,218		$	8,856		$	18,203		$	17,597		$	8,311		$	8,985
Increase over prior period	$	362					$	606
Increase - percentage		4	%					3	%
Decrease over prior period													$	(674	)
Decrease - percentage														(8	)%
Percentage of net revenues		11	%		11	%		11	%		11	%		12	%		11	%

Sales and marketing expenses for the three months ended ~~June 30, 2020 increased~~March 31, 2021 decreased by ~~$0.4~~$0.7 million, or 4%8%, to ~~$9.2~~$8.3 million as compared to the three months ended ~~June 30, 2019.~~March 31, 2020. This three-month ~~increase~~decrease primarily related to a ~~$0.7 million increase~~savings in ~~people costs driven by both the acquisition of Cedar in the first quarter of~~ ~~2020~~ , which attributed to this increase $0.4 million of additional costs, as well as an incremental $0.3 million related to an expanded Product Management personnel across our Ting Mobile & Internet teams. Stock-based compensation expenses also increased $0.1 million to attract and retain labor. The overall increase in sales and marketing expense was partially offset by a decrease in other marketing related expenses ~~of $0.4 million.~~

~~Sales and marketing expenses~~ for ~~the six months ended June 30, 2020 increased by $0.6 million, or 3%, to $18.2 million as compared~~Mobile Services due to the ~~six months ended June 30, 2019. This six-month increase primarily related~~sale of the Ting Mobile customer base to ~~a $1.4 million increase in people costs driven by the acquisition~~DISH and shutdown of ~~Cedar~~Roam Mobility brands in the ~~first quarter of~~ ~~2020, inclusion of a full two quarters of people~~prior year, which reduced marketing costs ~~related to workforce acquired~~for our Mobile Services segment in the ~~Ascio acquisition on March 18, 2019, as well as expanded Product Management personnel as discussed above. Stock-based compensation expenses also increased $0.3 million in~~ ~~2020~~ to attract and retain labor. The overall increase in sales and marketing expense was partially offset by a decrease in other marketing and travel related expenses of $0.9 million and $0.2 million, respectively.current period.

TECHNICAL OPERATIONS AND DEVELOPMENT

Technical operations and development expenses consist primarily of personnel costs and related expenses required to support the development of new or enhanced service offerings and the maintenance and upgrading of existing infrastructure. This includes expenses incurred in the research, design and development of technology that we use to register domain names, network access services, email, retail, domain portfolio and other Internet services, as well as to distribute our digital content services. ~~Editorial costs relating to the rating and review of the software content libraries are included in the costs of product development.~~ All technical operations and development costs are expensed as incurred.

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Technical operations and development	$	3,067		$	2,752		$	5,818		$	5,275		$	3,132		$	2,751
Increase over prior period	$	315					$	543					$	381
Increase - percentage		11	%					10	%					14	%
Percentage of net revenues		4	%		3	%		4	%		3	%		4	%		3	%

Technical operations and development expenses for the three months ended ~~June 30, 2020~~March 31, 2021 increased by ~~$0.3~~$0.4 million, or ~~11%~~ 14%, to $3.1 million when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The increase in costs relates primarily to increased salaries and benefits driven by an expanding workforce and wage inflation focused on our shared services and engineering ~~teams, as well as~~teams. In addition to an increase in internal resource costs, a substantial portion of this overall increase was driven from increased spending ~~related~~on external contractors to provide development resources to assist our ~~cloud migration activities.~~

Technical operations and development expenses for the six months ended June 30, 2020 increased by $0.5 million, or 10%, to $5.8 million when compared to the six months ended June 30, 2019. The increase in costs relates primarily to increased salaries and benefits driven by an expanding workforce and wage inflation focused on ourinternal shared services and engineering teams ~~as well as increased spending related to our cloud migration activities. Additionally,~~with development aspects of the six months ended June 30, 2020 reflected a full two quarters of people costs related to the workforce acquired in the Ascio acquisition on March 18, 2019, as compared to a stub period of costs in the six months ended June 30, 2019.MSE platform.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation and related costs for managerial and administrative personnel, fees for professional services, public listing expenses, rent, foreign exchange and other general corporate expenses.

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
General and administrative	$	5,465		$	4,796		$	10,206		$	9,244		$	4,953		$	4,741
Increase over prior period	$	669					$	962					$	212
Increase - percentage		14	%					10	%					4	%
Percentage of net revenues		7	%		6	%		6	%		6	%		7	%		6	%

General and administrative expenses for the three months ended ~~June 30, 2020~~March 31, 2021 increased by ~~$0.7~~$0.2 million, or ~~14%~~4% to ~~$5.5~~$5.0 million as compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The increase was primarily driven by an increase in ~~people costs~~personnel and related expenses of ~~$0.4~~$0.8 million and an increase in foreign exchange ~~expense~~related expenses of ~~$0.6 million, and an increase in professional fees in connection with the Purchase Agreement with Dish of $0.1~~$0.3 million. These increases in general and administrative expenses ~~was~~were offset by a decrease in ~~facility~~both Mobile Services credit card fees as a result of the DISH Purchase Agreement that closed in the prior year and ~~transitional costs related to Ascio and eNom of $0.2 million and $0.2 million, respectively.~~

General and administrative expenses for the six months ended June 30, 2020 increased by $1.0 million, or 10%, to $10.2 million as compared to the six months ended June 30, 2019. The increase was primarily driven by an increase in people costs of $0.7 million and an increase in foreign exchange expense of $0.9 million. The increase in general and administrative expenses was offset by a decrease in other expenses including travel and facility ~~and transitional~~ costs, ~~related to Ascio and eNom~~including the closure of ~~$0.3~~our St. Catharines, Ontario office, in the amounts of $0.5 million and ~~$0.3~~$0.4 million, ~~respectively~~respectively.

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DEPRECIATION OF PROPERTY AND EQUIPMENT

(Dollar amounts in thousands of U.S. dollars)	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Depreciation of property and equipment	$	125		$	134		$	238		$	258		$	121		$	113
Decrease over prior period	$	(9	)				$	(20	)
Decrease - percentage		(7	)%					(8	)%
Increase over prior period													$	8
Increase - percentage														7	%
Percentage of net revenues		0	%		0	%		0	%		0	%		0	%		0	%

Depreciation costs remained flat for the three months ended ~~June 30, 2020~~March 31, 2021 at $0.1 million when compared to the three months ended ~~June 30, 2019.~~

~~Depreciation costs remained flat for the six months ended June 30, 2020 at $0.2 million when compared to the six months ended June 30, 2019.~~

~~LOSS ON DISPOSAL OF PROPERTY AND EQUIPMENT~~

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2020

2019

2020

2019

Loss on disposition of property and equipment
$ - $ - $ - $ -
Decrease over prior period
$ - $ -
Decrease - percentage
N/A N/A
Percentage of net revenues
-
%
-
%
-
%
-
%
~~There were no losses on disposal costs during the three months ended June 30, 2020 and June 30, 2019.~~
~~There were no losses on disposal costs during the six months ended June 30, 2020 and June 30, 2019.~~March 31, 2020.

AMORTIZATION OF INTANGIBLE ASSETS

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended March 31,

2020

2019

2020

2019

2021

2020

Amortization of intangible assets
$ 2,504 $ 2,251 $ 5,451 $ 4,117 $ 2,320 $ 2,947
Increase over prior period
$ 253 $ 1,334
Increase - percentage
11
%
32
%

Decrease over prior period
$ (627 )
Decrease - percentage
(21
)%

Percentage of net revenues
3
%
3
%
3
%
3
%
3
%
4
%

Amortization of intangible assets for the three months ended ~~June 30, 2020 increased~~March 31, 2021 decreased by ~~$0.3~~$0.6 million to ~~$2.5~~$2.3 million as compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The ~~increase~~decrease is driven by ~~a $0.3 million increase~~write-off of Mobile Services related intangible assets in connection with the both the sale of the Ting Mobile customer base and the shutdown of Roam Mobility in the prior year. These decreases in amortization expense of $0.4 million, were accompanied by a further decrease related to ~~FreedomPop customer~~the prior year acquisition ~~that closed~~of Cedar which accounted for a $0.2 million decrease in ~~July 2019.~~amortization expense. Network rights, brand and customer relationships acquired in connection with the following acquisitions are amortized on a straight-line basis over a range of two to seven years: eNom in January 2017, ~~Roam Mobility brands in September 2017,~~ Ascio in March ~~2019, FreedomPop in July~~ 2019, and Cedar in January 2020. As discussed above, the balance of the Roam Mobility brands was fully impaired as at June 30, 2020 as part of shut down of the Roam brands. This is reflected below in the impairment of definite life intangible assets of $1.4 million.
Amortization of intangible assets for the six months ended June 30, 2020 increased $1.3 million to $5.5 million as compared to the six months ended June 30, 2019. The increase is driven by a full two quarters of amortization related to the acquisition of Ascio of $0.4 million, amortization of $0.3 million related to the prior quarter acquisition of Cedar and $0.6 million in amortization related to FreedomPop customer acquisition that closed in July 2019. Network rights, brand and customer relationships acquired in connection with the following acquisitions are amortized on a straight-line basis over a range of two to seven years: eNom in January 2017, Roam Mobility brands in September of 2017, Ascio in March of 2019, FreedomPop in July 2019, and Cedar in January 2020. As discussed above, the balance of the Roam Mobility brands was fully impaired as at June 30, 2020 as part of shut down of the Roam brands. This is reflected below in the impairment of definite life intangible assets of $1.4 million.
~~IMPAIRMENT OF DEFINITE LIFE INTANGIBLE ASSETS~~
(Dollar amounts in thousands of U.S. dollars)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2020

2019

2020

2019

Impairment of definite life intangible assets
$ 1,431 $ - $ 1,431 $ -
Increase over prior period
$ 1,431 $ 1,431
Increase - percentage
N/A
%
N/A
%

Percentage of net revenues
2
%
-
%
1
%
-
%
Impairment of definite life intangible assets for the three and six months ended June 30, 2020 increased by $1.4 million as compared to the three and six months ended June 30, 2019. The increase is driven by the write-off of customer relationships acquired in connection with our Roam Mobility Brands. As discussed above, Roam Mobility saw a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. As at June 30, 2020, the Company decided to shut down the Roam Mobility brands and related business as a result of this lack of demand for SIM-enabled roaming services due to the continued decrease of both business and leisure travel caused by the pandemic. As part of that shut down, the associated customer relationships previously acquired were written off in period.

LOSS (GAIN) ON CURRENCY FORWARD CONTRACTS

Although our functional currency is the U.S. dollar, a major portion of our fixed expenses are incurred in Canadian dollars. Our goal with regard to foreign currency exposure is, to the extent possible, to achieve operational cost certainty, manage financial exposure to certain foreign exchange fluctuations and to neutralize some of the impact of foreign currency exchange movements. Accordingly, we enter into foreign exchange contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended March 31,

2020

2019

2020

2019

2021

2020

Loss (gain) on currency forward contracts
$ (381 ) $ (31 ) $ 60 $ (110 ) $ (253 ) $ 441
Decrease over prior period
$ (350 ) $ 170 $ (694 )
Decrease - percentage
1,129
%
155
%
157
%

Percentage of net revenues
0
%
0
%
0
%
0
%
0
%
1
%

The Company recorded a net gain of ~~$0.4~~$0.3 million on the change in fair value of outstanding contracts as well as realized on matured contracts during the three months ended ~~June 30, 2020.~~
~~The Company recorded~~March 31, 2021, compared to a net loss of ~~$0.1~~$0.4 million ~~on the change in fair value of outstanding contracts as well as~~ ~~realized on matured contracts~~ during the ~~six~~three months ended ~~June 30,~~March 31, 2020.

At ~~June 30, 2020,~~March 31, 2021, our balance sheet reflects a derivative instrument asset of ~~$1.7~~$3.0 million and a liability of ~~$0.7~~$0.1 million as a result of our existing foreign exchange contracts. Until their respective maturity dates, these contracts will fluctuate in value in line with movements in the Canadian dollar relative to the U.S. dollar.

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OTHER INCOME (EXPENSES)

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended March 31,

2020

2019

2020

2019

2021

2020

Other income (expense), net
$ (931 ) $ (1,314 ) $ (2,168 ) $ (2,286 ) $ 4,363 $ (1,237 )
Increase over prior period
$ 383 $ 118 $ 5,600
Increase - percentage
(29
)%
(5
)%
(453 )%
Percentage of net revenues
1
%
2
%
1
%
1
%
6
%
1
%

Other ~~expenses~~Income during the three months ended ~~June 30, 2020 decreased~~March 31, 2021 increased by ~~$0.4~~$5.6 million when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. This was primarily due to the $5.4 million increase due to the gain on sale of Ting Customer Assets to DISH in the current period. As described above, the Company receives a payout on the margin associated with the legacy customer base sold to DISH over the 10 year term of the agreement, as form of consideration for the sale of the legacy customer relationships. In addition to this, another contributing factor in the increase was lower interest incurred on our credit facility with the majority of the borrowings on the credit facility to support the build-out of the Ting Fiber network. Other expense consists primarily of the interest we incur in connection with our Amended 2019 Credit Facility. The interest incurred primarily relates to our loan balances obtained to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures associated with the Company’s Fiber to the Home build program.

Other expenses during the six months ended June 30, 2020 decreased by $0.1 million when compared to the six months ended June 30, 2019. This was primarily due to lower interest incurred on our credit facility with the majority of the borrowings on the credit facility to support the build-out of the Ting Fiber network. Other expense consists primarily of the interest we incur in connection with our Amended 2019 Credit Facility. The interest incurred primarily relates to our loan balances obtained to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures associated with the Company’s Fiber to the Home program.
INCOME TAXES

The following table presents our provision for income taxes for the periods presented:

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended March 31,

2020

2019

2020

2019

2021

2020

Provision for income taxes
$ 449 $ 1,819 $ 1,550 $ 3,076 $ 1,083 $ 1,101
Decrease in provision over prior period
$ (1,370 ) $ (1,526 ) $ (18 )
Decrease - percentage
(75
)%
(50
)%
(2
)%

Effective tax rate
74
%
41
%
34
%
36
%
34
%
28
%

We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax. Losses incurred in one jurisdiction cannot be used to offset income taxes payable in another jurisdiction. Our ability to use income tax loss carry forwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which such losses or deductions arise. Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement carrying values and tax base of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

For the three months ended ~~June 30, 2020,~~March 31, 2021, we recorded an income tax expense of ~~$0.4~~$1.1 million on income before income taxes of ~~$0.6~~$3.2 million, using an estimated effective tax rate for Fiscal ~~2020~~2021 adjusted for certain minimum state taxes as well as the inclusion of a ~~$0.1~~$0.2 million tax ~~recovery~~expense related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the three months ended ~~June 30, 2020~~March 31, 2021 is ~~also adversely affected~~impacted by discrete ~~losses~~adjustments resulting from finalization of ~~$3.7 million related to Ting TV~~prior period tax filings, foreign exchange and ~~Roam Mobility the tax benefit of which has only been partially recognized.~~mark-to-market adjustments. Comparatively, for the three months ended ~~June 30, 2019,~~March 31, 2020, we recorded an income tax expense of ~~$1.8~~$1.1 million on income before taxes of ~~$4.4~~$3.9 million, using an estimated effective tax rate for the ~~2019~~2020 fiscal year and reflecting the ~~$0.4 million tax recovery impact related to ASU 2016-09.~~
For the six months ended June 30, 2020, we recorded an income tax expense of $1.6 million on income before income taxes of $4.5 million, using an estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state taxes as well as the inclusion of a $0.2 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the six months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to Ting TV and Roam Mobility the tax benefit of which has only been partially recognized. Comparatively, for the six months ended June 30, 2019, we recorded an income tax expense of $3.1 million on income before taxes of $8.5 million, using an estimated effective tax rate for the 2019 fiscal year and reflecting the $0.7 million tax recovery impact related to ASU 2016-09.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

We recognize accrued interest and penalties related to income taxes in income tax expense. We did not have significant interest and penalties accrued at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.
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ADJUSTED EBITDA

We believe that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management. We use adjusted EBITDA to measure our performance and prepare our budgets. Since adjusted EBITDA is a non-GAAP financial performance measure, our calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. Because adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. See the Consolidated Statements of Cash Flows included in the attached financial statements. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. We endeavor to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

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Our adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provision, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and ~~infrequently occurring items.~~costs that are one-time in nature and not indicative of on-going performance (profitability), including acquisition and transition costs. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding ~~unhedged~~ foreign currency contracts not designated in accounting hedges, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

The following table reconciles adjusted EBITDA to net ~~income to adjusted EBITDA:~~income:

Reconciliation of Net income to Adjusted EBITDA

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of Adjusted EBITDA to Income before Provision for Income Taxes

Three Months Ended March 31,

(In Thousands of US Dollars)

2020

2019

2020

2019

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net income for the period
$ 157 $ 2,616 $ 2,991 $ 5,415
Adjusted EBITDA $ 12,724 $ 12,681
Depreciation of property and equipment
3,155 2,172 6,145 4,097 3,759 2,990
Impairment of property and equipment 1,525 - 1,525 - 60 -
Amortization of intangible assets
2,830 2,565 6,131 4,605 2,619 3,301
Impairment of definite life intangible assets 1,431 - 1,431 -
Interest expense, net
846 1,314 1,996 2,286 936 1,150
Accretion of contingent consideration
85 - 172 - 96 87
Provision for income taxes
449 1,819 1,550 3,076
Stock-based compensation
847 685 1,648 1,210 1,022 801
Unrealized loss (gain) on change in fair value of forward contracts
(436 ) (70 ) (88 ) (188 ) 166 348
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities
441 (162 ) 399 (490 ) 67 (42 )
Acquisition and other costs1
845 547 956 906
Acquisition and other costs¹
767 111

Adjusted EBITDA
$ 12,175 $ 11,486 $ 24,856 $ 20,917
Income before provision for income taxes
$ 3,232 $ 3,935

¹Acquisition and other costs represents transaction-related expenses, transitional expenses, such as ~~duplicative~~redundant post-acquisition expenses, primarily related to our acquisition of ~~eNom in January 2017,~~ Ascio in March 2019, Cedar in January 2020, ~~the shut-down of Roam Mobility in June of 2020~~ and the ~~costs associated with various DISH agreements executed~~disposition of certain Ting Mobile assets in August of 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Adjusted EBITDA increased by ~~$0.7~~less than $0.1 million ~~or 6%~~ to ~~$12.2~~$12.7 million for the three months ended ~~June 30, 2020~~March 31, 2021 when compared to the three months ended ~~June 30, 2019.~~March 31, 2020. The increase in adjusted EBITDA from period-to-period was primarily driven by an increased contribution from ~~Ting Fiber. The overall increase in EBITDA was partially~~wholesale domain registrations, offset by decreased ~~contribution from the erosion of wholesale and retail registrations from our eNom brand as well as lower~~EBITDA contribution from Ting ~~Mobile and Roam Mobility,~~Fiber due to the current period reflecting a considerable ramp up of expenditures related to ~~a decreasing subscriber base~~the Fiber network build and ~~lower usage related to COVID-19.~~expansion plan.

Adjusted EBITDA increased by $4.0 million, or 19% to $24.9 million for the six months ended June 30, 2020 when compared to the six months ended June 30, 2019. The increase in adjusted EBITDA from period-to-period was primarily driven by an increased contribution from Ascio, which is the result
40
Table of increased operating cost synergies realized during the first two quarters of 2020, as well as an increased contribution from Ting Fiber. The overall increase in EBITDA was partially offset by decreased contribution from the erosion of wholesale and retail registrations from our eNom brand as well as lower contribution from Ting Mobile and Roam Mobility, related to a decreasing subscriber base and lower usage related to COVID-19.
Contents

OTHER COMPREHENSIVE INCOME (LOSS)

To mitigate the impact of the change in fair value of our foreign exchange contracts on our financial results, in October 2012 we begun applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis.

The following table presents other comprehensive income for the periods presented:

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended March 31,

2020

2019

2020

2019

2021

2020

Other comprehensive income (loss)
$ 1,314 $ 320 $ 123 $ 930 $ (466 ) $ (1,191 )
Increase over prior period
$ 994 $ (807 ) $ 725
Increase - percentage
311
%
(87
)%
(61
)%

Percentage of net revenues
2
%
0
%
0
%
1
%
(1
)%
(1
)%

The impact of the fair value adjustments on outstanding hedged contracts for the three months ended ~~June 30, 2020~~March 31, 2021 was a ~~gain~~loss in OCI of ~~$1.1~~$0.5 million as compared to a ~~gain~~loss of ~~$0.2~~$1.2 million for the three months ended ~~June 30, 2019.~~March 31, 2020.

The net amount reclassified to earnings during the three months ended ~~June 30, 2020~~March 31, 2021 was a ~~loss~~gain of ~~$0.2~~$0.8 million compared to a loss of less than $0.1 million during the three months ended ~~June 30, 2019.~~March 31, 2020.

The impact of the fair value adjustments on outstanding hedged contracts for the six months ended June 30, 2020 was a loss in OCI of $0.1 million as compared to a gain of $0.8 million for the six months ended June 30, 2019.
~~The net amount reclassified to earnings during the six months ended June 30, 2020 was a loss of $0.2 million compared to a loss of $0.1 million during the six months ended June 30, 2019.~~
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LIQUIDITY AND CAPITAL RESOURCES

As of ~~June 30, 2020,~~March 31, 2021, our cash and cash equivalents balance ~~decreased $11.5 million~~remained flat when compared to December 31, ~~2019.~~2020. Our principal uses of cash were ~~$22.1~~$13.9 million for the continued investment in property and equipment, ~~$8.8~~$0.2 million for ~~the Acquisition of Cedar, $3.3 million in stock repurchases, and $0.4 million of other costs, including~~ tax ~~payment~~payments associated with stock option exercises, and ~~loan payable costs.~~$0.2 million for the acquisition of intangible assets. These uses of cash were offset by cash provided by operating activities of ~~$23.0 million.~~$14.1 million and $0.2 million of proceeds received on exercise of stock options.

Amended 2019 Credit Facility

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC, entered into an Amended and Restated Senior Secured Credit Agreement with RBC, as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company has access to an aggregate of up to $240 million in funds, ~~inclusive~~which consists of $180 million guaranteed credit facility and a $60 million accordion facility. ~~The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the “2017 Amended Credit Facility”).~~
On November 27, 2019, the Company entered into Amending Agreement No. 1 to the Amended and Restated Senior Secured Credit Agreement (collectively with the Amended and Restated Senior Secured Credit Agreement, the “Amended 2019 Credit Facility”) to amend certain defined terms in connection with the Cedar acquisition.

~~In connection with the~~The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the ~~Company incurred an additional $0.3 million of fees paid to lenders and $0.2 million of legal fees related to the debt issuance. Of these fees,~~ ~~$0.4~~ ~~million are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million have been recorded in General and administrative expenses.~~“2017 Amended Credit Facility”).

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year ~~term.~~
~~Other Credit Facilities~~
Prior to the Company entering into the Amended 2019 Credit Facility and the 2017 Amended Credit Facility, the Company had credit agreements (collectively the “Prior Credit Facilities”) with BMO, which provided the Company with continued access to a treasury risk management facility and a credit card facility. All remaining credit facilities under the 2017 Amended Credit Facility and the Prior Credit Facilities have been terminated.
The treasury risk management facility under the Prior Credit Facilities provides for a $3.5 million settlement risk line to assist the Company with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the Prior Credit Facilities, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As ofterm, maturing on June ~~30, 2020, the Company held contracts in the amount of $52.1 million to trade U.S. dollars in exchange for Canadian dollars.~~13, 2023.

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Cash Flow from Operating Activities
Net cash inflows from operating activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was ~~$23.0~~$14.1 million, ~~an increase of 44%~~flat when compared to the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.
Net income, after adjusting for non-cash charges, during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was ~~$19.1~~$9.6 million, ~~an increase~~a decrease of ~~15%~~3% when compared to the prior year. Net income included non-cash charges and recoveries of ~~$19.1~~$7.4 million such as depreciation, amortization, stock-based compensation, ~~deferred income taxes,~~ excess tax benefits on stock-based compensation, ~~other~~deferred income ~~unrealized gains~~taxes, loss on change in fair value of currency forward contracts, accretion of contingent consideration, amortization of debt discount and issuance costs, impairment of property and equipment, net right of use operating asset or liability, net amortization of contract costs, and loss on disposal of domain names. In addition, changes in our working capital provided ~~$3.9~~$4.5 million. Positive contributions of ~~$12.2~~$10.1 million from movements in deferred revenue, ~~accounts receivable,~~prepaid expenses and deposits, accounts payable, accrued liabilities, ~~inventory,~~customer deposits, and accreditation fees payable ~~customer deposits, and income taxes recoverable~~ were offset by ~~$8.3~~$5.6 million utilized in changes from ~~prepaid domain name fees,~~deferred costs of fulfillment, income taxes recoverable, inventory, and ~~prepaid expenses and deposits.~~accounts receivable.

Cash Flow from Financing Activities

Net cash outflows from financing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$3.6~~less than $0.1 million as compared to cash ~~inflows~~outflows of ~~$34.8~~$3.3 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Total cash outflows ~~of $3.6 million~~ were driven by ~~$3.3~~$0.2 million related to ~~the stock repurchases, in addition to a $0.4 million outflow for~~ the payment of tax obligations resulting from the net exercise of stock options and loan payable costs. ~~These~~This cash ~~outflows were~~outflow was offset by ~~minor~~ cash inflows related to the proceeds received on exercise of stock ~~options.~~options of $0.2 million.

Cash Flow from Investing Activities

Investing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 used net cash of ~~$30.9~~$14.1 million as compared to using ~~$51.4~~$18.7 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Cash outflows of ~~$8.8~~$13.9 million related to the ~~acquisition of Cedar, in addition to $22.1 million invested~~investment in property and equipment, primarily to support the continued expansion of our ~~fiber~~Fiber footprint. The Company continues to invest in our existing Ting Towns of Centennial, ~~CO,~~Colorado, Charlottesville, ~~VA,~~Virginia, Fuquay-Varina, ~~NC,~~North Carolina, Wake Forest, North Carolina, Holly Springs, ~~NC,~~North Carolina, and Sandpoint, IDIdaho as well ramping construction in Roaring Fork, ~~CO,~~Colorado, Rolesville, ~~NC,~~North Carolina and ~~Wake Forest, NC,~~Culver City, California as we seek to extend both our current network and expand to new towns. We expect our capital expenditures on building and expanding our fiber network to continue to increase during Fiscal ~~2020.~~ 2021. In addition to investment in property and equipment, the current period used $0.2 million for the acquisition of other intangible assets.

Based on our operations, we believe that our cash flow from operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and our loan repayments for at least the next 12 months.

We may need additional funds or seek other financing arrangements to facilitate more rapid expansion, develop new or enhance existing products or services, respond to competitive pressures or acquire or invest in complementary businesses, technologies, services or products. We may also evaluate potential acquisitions of other businesses, products and technologies. We currently have no commitments or agreements regarding the acquisition of other businesses. If additional financing is required, we may need additional equity or debt financing and any additional financing may be dilutive to existing investors. We may not be able to raise funds on acceptable terms, or at all.

Off Balance Sheet Arrangements

As of ~~June 30, 2020~~March 31, 2021 we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Contractual Obligations

In our 2020 Annual Report, ~~on Form 10-K for the year ended December 31, 2019,~~ we disclosed our contractual obligations. As of ~~June 30, 2020,~~March 31, 2021, other than the items mentioned above, there have been no other material changes to those contractual obligations outside the ordinary course of business.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of expenses are incurred in Canadian dollars. Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Our interest income is sensitive to changes in the general level of Canadian and U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Based on the nature of our short-term investments, we have concluded that there is no material interest rate risk exposure as of ~~June 30, 2020.~~ March 31, 2021.
We are also subject to market risk exposure related to changes in interest rates under our Amended 2019 Credit Facility.
In an effort to mitigate a portion of our market risk exposure the Company has entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Amended 2019 Credit facility. The notional value of the swap ~~was~~at March 31, 2021 is $70 ~~million.~~million, consistent with December 31, 2020.

We do not expect that any changes in interest rates will be ~~material;~~material through Fiscal 2021; however, fluctuations in interest rates are beyond our control. We will continue to monitor and assess the risks associated with interest expense exposure and may take additional actions in the future to mitigate these risks.

Although our functional currency is the U.S. dollar, a substantial portion of our fixed expenses are incurred in Canadian dollars. Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. Exchange rates are, however, subject to significant and rapid fluctuations, and therefore we cannot predict the prospective impact of exchange rate fluctuations on our business, results of operations and financial condition. Accordingly, we have entered into foreign exchange forward contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

As of ~~June 30, 2020,~~March 31, 2021, we had the following outstanding foreign exchange forward contracts to trade U.S. dollars in exchange for Canada dollars:

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

Notional amount of U.S. dollars

Weighted average exchange rate of U.S. dollars

Fair value

Notional amount of U.S. dollars

Weighted average exchange rate of U.S. dollars

Fair value Asset / (Liability)

July - September 2020 10,656 1.3227 (273 )
October - December 2020
9,658 1.3227 (247 )
January - March 2021
11,124 1.4283 574
April - June 2021
9,878 1.4283 507 9,878 1.4283 1,352
July - September 2021
10,782 1.4362 611 10,781 1.4362 1,541
$ 52,098 1.3888 $ 1,172 $ 20,659 1.4324 $ 2,893

As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~$52.1~~$20.7 million of outstanding foreign exchange forward contracts which will convert to ~~$72.4~~$29.6 million Canadian dollars. Of these contracts, ~~$44.2~~$17.5 million met the requirements for hedge accounting. As of December 31, ~~2019,~~2020, the Company held contracts in the amount of ~~$30.5~~$31.8 million to trade U.S. dollars in exchange for ~~$40.5~~$45.5 million Canadian dollars. Of these contracts, ~~$26.1~~$26.8 million met the requirements for hedge accounting.

We have performed a sensitivity analysis model for foreign exchange exposure over the three months ended ~~June 30, 2020.~~March 31, 2021. The analysis used a modeling technique that compares the U.S. dollar equivalent of all expenses incurred in Canadian dollars, at the actual exchange rate, to a hypothetical 10% adverse movement in the foreign currency exchange rates against the U.S. dollar, with all other variables held constant. Foreign currency exchange rates used were based on the market rates in effect during the three months ended ~~June 30, 2020.~~March 31, 2021. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in net income for the three months ended ~~June 30, 2020~~March 31, 2021 of approximately ~~$1.0~~ $1.4 million, before the effects of hedging. Fluctuations of exchange rates are beyond our control. We will continue to monitor and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these risks.

Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign exchange contracts and accounts receivable. Our cash, cash equivalents and short-term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as highly creditworthy and commercial paper. Similarly, we enter into our foreign exchange contracts with major banks and financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of future losses.

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Table of Contents
Interest rate risk

Our exposure to interest rate fluctuations relate primarily to our Amended 2019 Credit Facility.

As of ~~June 30, 2020,~~March 31, 2021, we had an outstanding balance of ~~$114.4~~ $122.4million on the Amended 2019 Credit Facility. The Amended 2019 Credit Facility bears a base interest rate based on borrowing elections by the Company ~~and~~with a marginal rate calculated as a function of the ~~Company’s~~Company's total Funded Debt to EBITDA plus ~~LIBOR.~~the LIBOR rate. In ~~addition, as discussed above,~~May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to the variable interest payments on the ~~Amended 2019~~ Credit facility. AsThe notional value of ~~June 30, 2020,~~ the ~~notional amount of the Company's~~ interest rate swap ~~designated as a cash flow hedge~~ was $70 ~~million.~~million as of March 31, 2021, consistent with December 31, 2020. The Company does not use the interest rate swap for trading or speculative purposes. The contract is coterminous with the Credit facility, maturing in June 2023. As of ~~June 30, 2020,~~March 31, 2021, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on Amended 2019 Credit Facility by approximately ~~$0.4~~$0.5 million, after the effects of hedging, assuming that the loan balance as of ~~June 30, 2020~~March 31, 2021 is outstanding for the entire period.

48

~~Table~~
The Company is currently charged interest and standby fees based on LIBOR, a key global reference interest rate. These interest and standby fees are partially hedged by interest rate swaps held by the Company, which are also based on LIBOR. Currently, LIBOR’s regulator and administrators are seeking to discontinue the publication of ~~Contents~~
LIBOR. Global markets working groups around the World continue to search and recommend an alternative reference rate for LIBOR. In the U.S, the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate as its preferred alternative rate for USD LIBOR, however work continues across all jurisdictions to evaluate alternatives and establish transition plans and timelines. Both the credit facility agreement and the interest rate swaps will need to be amended when an alternative reference rate is chosen, at which time we may adopt some of the practical expedients provided by ASU 2020-04. As mentioned above, the Company has assessed which existing contracts reference LIBOR and we will continue to monitor the situation and recommendations for an alternative reference rate as they become available. Additionally, the Company will continue proactive discussions and renegotiations with counterparties around the reference rate change as appropriate.

Item 4. Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June 30, 2020~~March 31, 2021 our disclosure controls and procedures were effective at the reasonable assurance level. Management’s assessment of disclosure controls and procedures excluded consideration of Cedar’s internal control over financial reporting. Cedar was acquired during the first quarter of 2020, and the exclusion is consistent with guidance provided by the SEC staff that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting for up to one year from the date of acquisition, subject to specified conditions. Cedar’s total assets were approximately $17.1 million as June 30, 2020; its revenues during the three and six months ended June 30, 2020 were approximately $1.2 million and $2.4 million, respectively.

(b)    Changes in Internal Control over Financial Reporting

There were no changes made in our internal controls over financial reporting during the three months ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of our acquisition of Cedar, we are in the process of evaluating Cedar’s internal controls to determine the extent to which modifications to Cedar’s internal controls would be appropriate.

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PART II.
OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, individually or in the aggregate, in our opinion, will materially harm our business. We cannot assure that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of our attention.

Item 1A. Risk Factors

The following risk factors are provided to update the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The risks described in this Quarterly Report and in our Annual Report on Form 10-K and other Quarterly Reports are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.Not applicable.

Health epidemics, including the recent COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, operations and financial results, and the markets and communities in which we and our employees, Mobile Network Operators (“MNOs”), vendors and customers operate.
Our business, operations and financial results could be adversely affected by health epidemics, including the recent COVID-19 pandemic, impacting the markets and communities in which we and our employees, MNOs, vendors and customers operate. In December 2019, a disease referred to as COVID-19 was reported and has since spread to many countries worldwide, including the United States and Canada.
The ongoing global COVID-19 pandemic has adversely impacted, and may continue to adversely impact, many aspects of our business. With respect to our Network Access business segment, Roam Mobility, our niche prepaid Mobile Services brand that relies on global travel as a key factor in its success, has accounted for the majority of the negative financial impact caused by COVID-19. Ting Mobile, our primary post-paid Mobile Services brand, has experienced a drop in customer data usage and an increased churn rate of low-margin business accounts. We do not know when Ting Mobile customer data usage and business account churn rates will return to pre-pandemic levels, if ever, and continued declines and increases, respectively, could harm our Network Access business. Also within our Network Access business segment, although we have implemented certain smart, reduced-risk installs for our Ting Fiber customers, we do not expect new customer installations to return to pre-pandemic levels in the near term. A continued decline in new customer growth and installations could harm our Network Access business.
In response to the COVID-19 pandemic, many state, local, and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders, and similar government orders and restrictions in order to control the spread of the disease. Such orders or restrictions, or the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions, and cancellation or postponement of events, among other effects, that could negatively impact productivity and disrupt our operations and those of our MNOs, vendors and customers. We continue to implement a work-from-home policy for substantially all of our employees, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we determine are in our best interests. While most of our operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed, many employees may have additional personal needs to attend to (such as looking after children as a result of school closures or family who become sick), and employees may become sick themselves and be unable to work. Decreased effectiveness of our team could adversely affect our results due to our inability to meet in person with vendors and service providers, longer time periods to provide services related to domain registrations, longer time to respond to Network Access customer service issues, extended timelines for Network Access customer installations and repairs, or other decreases in productivity that could harm our business.
The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation closely. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, operations, financial results or the global economy as a whole. While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.
~~Risk associated with contingent consideration in the Asset Purchase Agreement with Dish Wireless LLC~~
On August 1, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Dish Wireless LLC (“DISH”), whereby it sold certain assets of Ting Inc. its wholly owned subsidiary, primarily its customer relationships and inventory. In addition, the Company will be entitled to a 10-year payment stream that is a function of the revenue generated by the transferred subscribers over the 10-year period.   Subscribers are able to accept offers, plans or pricing from DISH.   This consideration structure may not prove to be successful or profitable in the long-term to us if the existing subscriber base churns at an above average rate upon acquisition by DISH. Additionally, given DISH controls the revenues and costs incurred associated with the acquired subscribers, there could arise a situation where profitability for the subscriber base is diminished either by lower price points or cost inflation. If any of these events occur, our operational performance and financial results may be adversely affected.
~~Risk associated with sharing the Ting brand with Dish Wireless LLC~~
Included in the Purchase Agreement, the Company grants the purchaser the right to use the name "Ting" and its associated domain name. DISH will use the Ting brand to provision Ting Mobile services, provided by DISH. Contemporaneously, the Company will continue to use the Ting brand with Ting Fiber, the Company's existing Fiber Internet service. This could cause a misassociation in the minds of consumers and the market who could associate either Company as the single service provider of both services. Additionally, any actions taken by DISH as part of the transactions contemplated by the Purchase Agreement may impact the Ting brand and by extension - the Ting brand's reputation. These actions could range from poor service quality, bad customer experience, privacy concerns, data breaches, and other events that could negatively impact the Ting brand permanently. The Ting brand could then carry negative connotation with consumers and impact our ability to continue to grow our Fiber Internet business under the Ting brand. If any of these events occur, our operational performance and financial results, in particular those of our Fiber Internet business may be adversely affected.
~~Risk that we are unable to meet our minimum commitments with MNO partners for remaining contracts not assigned to DISH~~
As part of the transactions contemplated by the Purchase agreement, we will reassign MNO partner contracts currently used to facilitate the Ting Mobile MVNO business (other than a contract associated with one network operator). The Company will retain customer accounts associated with the excluded MNO provider, and the minimum revenue commitments under the excluded MNO contract. The Company will be able to continue adding customers under the excluded MNO contract working with DISH in order to meet the commitment. However, with no direct relationship with the subscriber, the Company may be unable to meet the minimum commitments with this MNO partner and could incur significant and recurring penalties until such a time that the contract is complete. These penalties would negatively impact our operational performance and financial results if enforced by the MNO.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~(Dollar amounts in thousands of U.S. dollars, except per share amounts)~~
Period

Total Number of Shares Repurchased

Average Price Paid per share

Total Number of Shares repurchased as part of a publicly announced program(1)

Approximate Dollar value of shares that may yet be purchased under the program

April 1-30, 2020 3,500 $ 46.87 70,238 $ 36,719
May 1-31, 2020 - $ - - $ 36,719
June 1-30, 2020 - $ - - $ 36,719
~~(1)~~ The Company's $40 million buyback program (the "2020 Buyback Program") which commenced on February 13, 2020, terminated on February 12, 2021. On February ~~12, 2020,~~9, 2021, the Company announced that its Board ~~has~~ approved a stock buyback program (the "2021 Buyback Program") to repurchase up to $40 million of its common stock in the open market. Purchases ~~are to~~will be made exclusively through the facilities of the NASDAQ Capital Market. The ~~$40 million~~stock buyback program commenced on February ~~12, 2020~~10, 2021 and ~~is expected to~~will terminate on or before February ~~12, 2021. During~~9, 2022. For the three months ended ~~June 30, 2020,~~March 31, 2021, the Company ~~repurchased and cancelled 3,500~~did not repurchase shares under the ~~terms of this program for a total of $0.2 million. During~~2020 Buyback Program or the ~~six months ended June 30, 2020, the Company repurchased and cancelled 70,238 shares under the terms of this program for a total of $3.3 million.~~2021 Buyback Program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

No.

Description

3.1.1

Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on November 29, 2007).
3.1.2

Articles of Amendment to Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on January 3, 2014).
3.2

Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.2 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 29, 2007).
3.3

Amendment No. 1 to Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by Reference to Exhibit 3.3 filed with Tucows’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).
~~31.1~~31.1#

Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
~~31.2~~31.2#

Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification *
32.1†

Chief Executive Officer's Section 1350 Certification †
32.2†

Chief Financial Officer's Section 1350 Certification †
~~101.INS~~101.INS#

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
~~101.SCH~~101.SCH#

Inline XBRL Taxonomy Extension Schema Document
~~101.CAL~~101.CAL#

Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~101.DEF#

Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~101.LAB#

Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~101.PRE#

Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~104# Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*
~~Management or compensatory contract.~~Schedules and Exhibits to the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplementary copies of any of the omitted schedules upon request by the SEC.
#
Filed herewith.
†
Furnished herewith.

5247

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~August~~May 6, ~~2020~~2021
TUCOWS INC.



By:
/s/ ELLIOT NOSS


Elliot Noss


President and Chief Executive Officer




By:
/s/ DAVINDER SINGH


Davinder Singh
Chief Financial Officer


(Principal Financial and Accounting Officer)

5348

Cash Consideration, including working capital adjustment	$	8,836
Share-based payment		2,000
Fair value of contingent payments		3,072
Total estimated purchase price		13,908

Cash and Cash Equivalents		66
Accounts Receivables, net		47
Other current assets		22
Property and equipment		4,661
Right of use operating lease		18
Intangible assets, consisting of customer relationships and network rights		5,390
Total identifiable assets		10,204
Accounts payable and accrued liabilities		(362	)
Deferred tax liability		(2,373	)
Operating lease liability		(13	)
Total liabilities assumed		(2,748	)
Total net assets (liabilities) assumed		7,456
Total goodwill	$	6,452

	Unaudited		Unaudited
	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019		2019

Net revenues	$	85,345	$	165,526
Net income		2,740		5,440

Basic earnings per common share		0.26		0.51
Diluted earnings per common share	$	0.25	$	0.50

	*Gains and losses on cash flow hedges*			*Tax impact*			*Total AOCI*
Opening AOCI balance - March 31, 2020	$	(932	)	$	214		$	(718	)
Other comprehensive income (loss) before reclassifications		1,453			(339	)		1,114
Amount reclassified from AOCI		259			(59	)		200
Other comprehensive income (loss) for the three months ended June 30, 2020		1,712			(398	)		1,314

Ending AOCI Balance - June 30, 2020	$	780		$	(184	)	$	596

	June 30, 2020

Device credits	$	99
Accounts receivable		4,554
Mobile inventory		861
Capitalized contract costs (net)		932
Customer relationship intangible assets (net)		2,581
Assets held for sale	$	9,027


Accounts payable	$	594
Accrued liabilities		157
Liabilities held for sale	$	751

	*June 30, 2020*

Balance, beginning of period	$	109,167
Deferral of costs		88,194
Recognized costs		(83,137	)
Balance, end of period	$	114,224

	*Network Access Services*		*Domain Services*		*Consolidated Totals*
Three Months Ended June 30, 2020

Net Revenues	$	21,981	$	60,141	$	82,122

Cost of revenues
Cost of revenues		10,325		41,465		51,790
Network expenses		605		1,880		2,485
Depreciation of property and equipment		2,584		446		3,030
Amortization of intangible assets		21		305		326
Impairment of Property Plant and Equipment		1,525		-		1,525
Total cost of revenues		15,060		44,096		59,156
Gross Profit		6,921		16,045		22,966

Expenses:
Sales and marketing						9,218
Technical operations and development						3,067
General and administrative						5,465
Depreciation of property and equipment						125
Amortization of intangible assets						2,504
Impairment of definite life intangible assets						1,431
Loss (gain) on currency forward contracts						(381	)
Income from operations						1,537
Other income (expenses), net						(931	)
Income before provision for income taxes					$	606

	Network Access Services		Domain Services		Consolidated Totals
Three Months Ended June 30, 2019

Net Revenues	$	23,630	$	60,487	$	84,117

Cost of revenues
Cost of revenues		11,762		43,111		54,873
Network expenses		516		1,869		2,385
Depreciation of property and equipment		1,656		382		2,038
Amortization of intangible assets		12		302		314
Total cost of revenues		13,946		45,664		59,610
Gross Profit		9,684		14,823		24,507

Expenses:
Sales and marketing						8,856
Technical operations and development						2,752
General and administrative						4,796
Depreciation of property and equipment						134
Amortization of intangible assets						2,251
Loss (gain) on currency forward contracts						(31	)
Income from operations						5,749
Other income (expenses), net						(1,314	)
Income before provision for income taxes					$	4,435

Allowance for doubtful accounts	*Balance at beginning of period*		*Charged to costs and expenses*			*Write-offs during period*		*Balance at end of period*

Six Months Ended June 30, 2020	$	131	$	83		$	-	$	214
Twelve months ended December 31, 2019	$	132	$	(1	)	$	-	$	131

	*Three Months Ended June 30, 2020*					*Three Months Ended June 30, 2019*
	*Number of shares*			*Weighted average exercise price per share*		*Number of shares*			*Weighted average exercise price per share*

Outstanding, beginning of period		730,037		$	50.85		665,156		$	44.46
Granted		190,025			59.53		144,300			62.12
Exercised		(16,922	)		9.79		(25,316	)		13.26
Forfeited		(4,826	)		59.15		(8,550	)		56.08
Expired		(1,036	)		58.39		(675	)		55.65
Outstanding, end of period		897,278			53.41		774,915			48.63
Options exercisable, end of period		390,868		$	46.20		306,078		$	33.97

Ting Mobile	June 30,(1)
	2020		2019
	(in '000's)
Ting mobile accounts under management		150		157
Ting mobile subscribers under management		257		280

Domain Services	For the Six Months Ended June 30,(1)
	2020		2019
	(in 000's)
Total new, renewed and transferred-in domain name registrations provisioned		9,503		8,939
Domains under management

Reconciliation of Net income to Adjusted EBITDA	Three Months Ended June 30,						Six Months Ended June 30,
Reconciliation of Adjusted EBITDA to Income before Provision for Income Taxes													Three Months Ended March 31,
(In Thousands of US Dollars)	2020			2019			2020			2019			2021		2020
(unaudited)	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)		(unaudited)

Net income for the period	$	157		$	2,616		$	2,991		$	5,415
Adjusted EBITDA													$	12,724	$	12,681
Depreciation of property and equipment		3,155			2,172			6,145			4,097			3,759		2,990
Impairment of property and equipment		1,525			-			1,525			-			60		-
Amortization of intangible assets		2,830			2,565			6,131			4,605			2,619		3,301
Impairment of definite life intangible assets		1,431			-			1,431			-
Interest expense, net		846			1,314			1,996			2,286			936		1,150
Accretion of contingent consideration		85			-			172			-			96		87
Provision for income taxes		449			1,819			1,550			3,076
Stock-based compensation		847			685			1,648			1,210			1,022		801
Unrealized loss (gain) on change in fair value of forward contracts		(436	)		(70	)		(88	)		(188	)		166		348
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities		441			(162	)		399			(490	)		67		(42	)
Acquisition and other costs1		845			547			956			906
Acquisition and other costs¹														767		111

Adjusted EBITDA	$	12,175		$	11,486		$	24,856		$	20,917
Income before provision for income taxes													$	3,232	$	3,935

Maturity date (Dollar amounts in thousands of U.S. dollars)	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value			Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value Asset / (Liability)

July - September 2020		10,656		1.3227		(273	)
October - December 2020		9,658		1.3227		(247	)
January - March 2021		11,124		1.4283		574
April - June 2021		9,878		1.4283		507			9,878		1.4283		1,352
July - September 2021		10,782		1.4362		611			10,781		1.4362		1,541
	$	52,098		1.3888	$	1,172		$	20,659		1.4324	$	2,893

Period	Total Number of Shares Repurchased		Average Price Paid per share		Total Number of Shares repurchased as part of a publicly announced program(1)		Approximate Dollar value of shares that may yet be purchased under the program
April 1-30, 2020		3,500	$	46.87		70,238	$	36,719
May 1-31, 2020		-	$	-		-	$	36,719
June 1-30, 2020		-	$	-		-	$	36,719

No.		Description

3.1.1		Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on November 29, 2007).
3.1.2		Articles of Amendment to Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on January 3, 2014).
3.2		Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.2 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 29, 2007).
3.3		Amendment No. 1 to Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by Reference to Exhibit 3.3 filed with Tucows’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).
~~31.1~~31.1#		Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
~~31.2~~31.2#		Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification *
32.1†		Chief Executive Officer's Section 1350 Certification †
32.2†		Chief Financial Officer's Section 1350 Certification †
~~101.INS~~101.INS#		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
~~101.SCH~~101.SCH#		Inline XBRL Taxonomy Extension Schema Document
~~101.CAL~~101.CAL#		Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~101.DEF#		Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~101.LAB#		Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~101.PRE#		Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~104#		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	~~Management or compensatory contract.~~Schedules and Exhibits to the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplementary copies of any of the omitted schedules upon request by the SEC.
#	Filed herewith.
†	Furnished herewith.

Date: ~~August~~May 6, ~~2020~~2021	TUCOWS INC.

	By:	/s/ ELLIOT NOSS
		Elliot Noss
		President and Chief Executive Officer

	By:	/s/ DAVINDER SINGH
		Davinder Singh Chief Financial Officer
		(Principal Financial and Accounting Officer)