Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
(unaudited)
September 30, December 31,
2007 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 5,915,732 $ 6,256,392
Restricted cash 255,000 1,019,423
Accounts receivable 3,971,950 2,969,997
Prepaid expenses and deposits 3,474,477 2,394,627
Prepaid domain name registry and other
Internet services fees, current portion 24,669,326 22,168,558
Cash held in escrow 1,058,620 -
Deferred tax asset, current portion 1,000,000 1,000,000
------------- -------------
Total current assets 40,345,105 35,808,997
Prepaid domain name registry and other
Internet services fees, long-term portion 10,559,073 9,511,341
Property and equipment 5,680,675 5,647,532
Deferred financing charges 142,600 -
Deferred tax asset, long-term portion 2,000,000 2,000,000
Intangible assets 22,363,906 18,554,436
Goodwill 17,762,228 12,094,817
Investment 353,737 353,737
Cash held in escrow - 694,579
------------- -------------
Total assets $ 99,207,324 $ 84,665,439
------------- -------------
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,870,124 $ 2,867,814
Accrued liabilities 3,038,887 2,567,012
Customer deposits 2,978,559 3,144,119
Promissory note payable, current portion 6,000,000 -
Loan payable, current portion 1,914,242 -
Deferred revenue, current portion 34,853,150 31,658,081
Accreditation fees payable, current portion 479,546 847,325
------------- -------------
Total current liabilities 51,134,508 41,084,351
Deferred revenue, long-term portion 14,994,772 13,478,525
Accreditation fees payable, long-term portion 181,484 163,988
Promissory note payable, long-term portion - 6,000,000
Loan payable, long-term portion 7,337,927 -
Deferred tax liability 5,396,000 5,396,000
Stockholders' equity:
Preferred stock - no par value,
1,250,000 shares authorized; none issued
and outstanding - -
Common stock - no par value,
250,000,000 shares authorized; 73,772,502
shares issued and outstanding at
September 30, 2007 and 75,978,502 shares
issued and outstanding at
December 31, 2006 15,250,235 15,395,381
Additional paid-in capital 48,514,852 50,359,906
Deficit (43,602,454) (47,212,712)
------------- -------------
Total stockholders' equity 20,162,633 18,542,575
------------- -------------
Total liabilities and stockholders' equity $ 99,207,324 $ 84,665,439
------------- -------------
------------- -------------
Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Net revenues $ 17,811,914 $ 16,864,320 $ 56,398,012 $ 47,830,296
Cost of revenues:
Cost of
revenues (*) 12,271,047 10,464,829 35,702,644 30,458,945
Depreciation of
property and
equipment 995,954 695,624 2,791,050 1,889,799
Amortization of
intangible
assets 83,060 66,550 210,132 143,628
------------- ------------- ------------- -------------
Total cost of
revenues 13,350,061 11,227,003 38,703,826 32,492,372
------------- ------------- ------------- -------------
Gross profit 4,461,853 5,637,317 17,694,186 15,337,924
Expenses:
Sales and
marketing (*) 1,712,676 1,706,951 4,537,198 4,738,397
Technical
operations and
development (*) 1,723,857 1,924,435 5,288,829 6,335,874
General and ad-
ministrative (*) 1,257,206 1,698,012 3,566,847 4,265,529
Depreciation of
property and
equipment 68,316 43,025 198,107 125,116
Amortization of
intangible
assets 322,781 230,291 778,823 436,175
------------- ------------- ------------- -------------
Total expenses 5,084,836 5,602,714 14,369,804 15,901,091
------------- ------------- ------------- -------------
Income (loss)
from operations (622,983) 34,603 3,324,382 (563,167)
Other income
(expenses):
Interest income
(expense), net (203,376) (70,297) (294,322) 135,256
Other income,
net 530,583 1,873,420 619,014 2,347,026
------------- ------------- ------------- -------------
Total other
income
(expense) 327,207 1,803,123 324,692 2,482,282
------------- ------------- ------------- -------------
Income before
provision for
income taxes (295,776) 1,837,726 3,649,074 1,919,115
Provision for
income taxes 14,816 (96,895) 38,816 (84,895)
------------- ------------- ------------- -------------
Net income (loss)
for the period $ (310,592) $ 1,934,621 $ 3,610,258 $ 2,004,010
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic earnings
per common share $ (0.00) $ 0.03 $ 0.05 $ 0.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing basic
earnings per
common share 74,100,911 75,706,078 74,548,903 73,418,358
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings
per common share $ (0.00) $ 0.02 $ 0.05 $ 0.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing diluted
earnings per
common share 77,525,973 78,214,560 77,413,998 75,852,576
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(*) Stock-based
compensation has
been included in
expenses as
follows:
Cost of
revenues $ 4,100 $ 2,200 $ 11,000 $ 7,700
Sales and
marketing $ 21,400 $ 23,200 $ 61,100 $ 79,200
Technical
operations
and
development $ 18,900 $ 14,800 $ 62,300 $ 50,800
General and
administ-
rative $ 33,900 $ 21,300 $ 118,100 $ 72,300
Tucows Inc.
Reconciliation of EBITDA and Adjusted Net Income
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Net income (loss)
for the period $ (310,592) $ 1,934,621 $ 3,610,258 $ 2,004,010
Depreciation of
property and
equipment 1,064,270 738,649 2,989,157 2,014,915
Amortization of
intangible
assets 405,841 296,841 988,955 579,803
Interest income
(expense), net 203,376 70,297 294,322 (135,256)
Provision for
income taxes 14,816 (96,895) 38,816 (84,895)
------------- ------------- ------------- -------------
EBITDA 1,377,711 2,943,513 7,921,508 4,378,577
------------- ------------- ------------- -------------
Adjustments to
EBITDA (1)
Change in
prepaid domain
name registry
and other
Internet
services fees (795,949) (1,058,139) (3,548,500) (5,229,809)
Change in
deferred
revenue 834,795 1,506,423 4,711,315 6,702,773
Dividend income (530,583) - (619,014) -
Transitional
costs 244,336 - 244,336 1,278,842
Other income - (1,873,420) - (2,347,026)
Reversal of
contingencies - - (451,249) -
------------- ------------- ------------- -------------
Subtotal
Adjustments to
EBITDA (247,401) (1,425,136) 336,888 404,780
------------- ------------- ------------- -------------
Adjusted Net
Income $ 1,130,310 $ 1,518,377 $ 8,258,396 $ 4,783,357
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(1) Adjustments to EBITDA
We define Adjusted EBITDA as net income adjusted for depreciation,
amortization, interest, taxes and further adjusted for certain cash and
non-cash charges.
The net amount of cash we collected for domain registrations and other
Internet services paid for the full term at the time of activation and
deferred amounted to $1,162,815 for the nine months ended September 30,
2007 compared to $1,472,964 for the nine months ended September 30, 2006.
For the three and nine months ended September 30, 2007, we incurred
$244,336 of transitional costs in connection with our acquisition of
Innersie Inc.
For the nine months ended September 30, 2006, we incurred $1.3 million of
transitional costs in connection with our acquisition of the Hosted
Messaging assets of Critical Path. In addition, during the nine months
ended September 30, 2006, we received $2.3 million in connection with
settlements related to patents we acquired in the merger with Infonautics
in 2001.
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Cash provided
by (used in):
Operating
activities:
Net income
(loss) for
the period $ (310,592) $ 1,934,621 $ 3,610,258 $ 2,004,010
Items not
involving
cash:
Depreciation
of property
and equipment 1,064,270 738,649 2,989,157 2,014,915
Amortization
of intangible
assets 405,841 296,841 988,955 579,803
Unrealized
change in the
fair value of
forward
exchange
contracts (61,673) 145,177 (1,164,114) (50,725)
Stock-based
compensation 78,300 61,500 252,500 210,000
Change in
non-cash
operating
working
capital:
Interest
receivable - 5,027 - 39,574
Accounts
receivable 87,922 (2,100,231) (975,729) (4,262,944)
Prepaid
expenses and
deposits 875,841 388,487 (161,669) 367,608
Prepaid fees
for domain
name registry
and other
Internet
services fees (795,949) (1,058,139) (3,548,500) (5,229,809)
Deferred
financing
charges (142,600) - (142,600) -
Accounts
payable (161,037) (2,213,494) (906,624) 857,048
Accrued
liabilities 218,368 135,838 651,189 1,202,952
Customer
deposits 204,906 6,534 (165,560) 574,791
Deferred
revenue 834,795 1,506,423 4,711,315 6,702,773
Accreditation
fees payable (34,255) 19,402 (350,283) (89,434)
------------- ------------- ------------- -------------
Cash provided by
(used in)
operating
activities 2,264,137 (133,365) 5,788,295 4,920,562
------------- ------------- ------------- -------------
Financing
activities:
Proceeds
received on
exercise of
stock options 17,912 43,550 204,255 98,960
Repurchase of
shares - - (2,446,955) -
Repayment of
promissory note
payable - (2,122,930) - (2,122,930)
Proceeds
received on
loan payable,
net of
repayments 9,252,169 - 9,252,169 -
------------- ------------- ------------- -------------
Cash provided by
(used in)
financing
activities 9,270,081 (2,079,380) 7,009,469 (2,023,970)
------------- ------------- ------------- -------------
Investing
activities:
Cost of domain
names acquired - - (18,425) -
Additions to
property and
equipment (200,213) (787,824) (3,093,366) (4,079,249)
Decrease in
investment in
short-term
investments - - - 1,771,569
Decrease
(increase) in
restricted
cash - being
margin security
against forward
exchange
contracts 255,000 159,623 764,423 (202,835)
Acquisition of
Mailbank.com Inc.,
net of cash
acquired - (655,830) - (6,486,732)
Acquisition of
Hosted Messaging
Assets from
Critical Path Inc.,
net of cash
acquired - (1,037,303) (90,050) (7,456,788)
Acquisition of
Boardtown
Corporation, net
of cash acquired - (22,700) (4,900) (22,700)
Acquisition of
Innerwise Inc.,
net of cash
acquired (10,332,065) - (10,332,065) -
Increase in cash
held in escrow (1,058,620) 1,563,999 (364,041) (221,012)
------------- ------------- ------------- -------------
Cash used in
investing
activities (11,335,898) (780,035) (13,138,424) (16,697,747)
------------- ------------- ------------- -------------
Increase (decrease)
in cash and cash
equivalents 198,320 (2,992,780) (340,660) (13,801,155)
Cash and cash
equivalents,
beginning of
period 5,717,412 6,539,713 6,256,392 17,348,088
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of period $ 5,915,732 $ 3,546,933 $ 5,915,732 $ 3,546,933
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplemental cash
flow information:
Interest paid $ 274,368 $ - $ 484,368 $ -
Supplementary
disclosure of
non-cash investing
activity:
Capital assets
acquired during
the period not
yet paid for $ 293,205 $ - $ 293,205 $ -
Common stock
issued on the
acquisition of
Mailbank.com
Inc. $ - $ - $ - $ 2,877,070
Promissory notes
issued on the
acquisition of
Mailbank.com
Inc. $ - $ - $ - $ 8,122,930
Loan taken on
the
acquisition of
Innerwise Inc. $ 9,571,209 $ - $ 9,571,209 $ -