10-Q

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 March 31, 2018

OR

☐ 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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 ☐
(Do not check if a 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 May 7, 2018, there were 10,594,645 outstanding shares of common stock, no par value, of the registrant.

1

TUCOWS INC.

Form 10-Q Quarterly Report

INDEX

PART I FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets (unaudited) as of March 31, 2018 and December 31, 2017	3
	Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three months ended March 31, 2018 and 2017	4
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2018 and 2017	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	41
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

Tucows®, EPAG®, Hover®, OpenSRS®, Platypus®, Ting®, eNom®, Roam®, Roam Mobility®, Bulkregister® 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.

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PART I.

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Tucows Inc.

Consolidated Balance Sheets

(Dollar amounts in U.S. dollars)

(unaudited)

	March 31,		December 31,
	2018		2017*
Assets
Current assets:
Cash and cash equivalents	$	16,587,886	$	18,049,164
Accounts receivable, net of allowance for doubtful accounts of $169,420 as of March 31, 2018 and $168,409 as of December 31, 2017		12,685,140		12,376,104
Inventory		2,898,383		2,944,246
Prepaid expenses and deposits		14,710,902		14,185,586
Derivative instrument asset, current portion (note 5)		21,515		-
Prepaid domain name registry and ancillary services fees, current portion		95,019,044		103,302,472
Income taxes recoverable		2,625,063		3,003,873
Total current assets		144,547,933		153,861,445
Derivative instrument asset, long-term portion (note 5)		4,588		-
Prepaid domain name registry and ancillary services fees, long-term portion		20,640,539		23,700,931
Property and equipment		28,688,762		24,620,298
Contract costs (note 11)		1,378,336		-
Intangible assets (note 6)		56,047,310		58,414,178
Goodwill (note 6)		90,053,483		90,053,483
Total assets	$	341,360,951	$	350,650,335
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	9,343,179	$	7,026,282
Accrued liabilities		7,171,475		6,412,578
Customer deposits		12,980,327		15,255,305
Deferred rent, current portion		21,048		20,991
Loan payable, current portion (note 7)		18,289,853		18,289,853
Deferred revenue, current portion		122,203,880		129,154,622
Accreditation fees payable, current portion		1,226,544		1,174,733
Income taxes payable		984,707		1,226,157
Total current liabilities		172,221,013		178,560,521
Deferred revenue, long-term portion		28,779,438		31,426,906
Accreditation fees payable, long-term portion		277,022		288,755
Deferred rent, long-term portion		129,885		129,777
Loan payable, long-term portion (note 7)		54,127,120		58,634,174
Deferred gain		300,580		429,400
Deferred tax liability (note 8)		20,116,385		19,833,678
Redeemable non-controlling interest (note 4 (a))		-		1,136,390
Stockholders' equity (note 13)
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding		-		-
Common stock - no par value, 250,000,000 shares authorized; 10,592,115 shares issued and outstanding as of March 31, 2018 and 10,583,879 shares issued and outstanding as of December 31, 2017		15,426,104		15,368,161
Additional paid-in capital		2,547,140		2,166,768
Retained earnings		47,418,839		42,675,805
Accumulated other comprehensive income		17,425		-
Total stockholders' equity		65,409,508		60,210,734
Total liabilities and stockholders' equity	$	341,360,951	$	350,650,335

Contingencies (note 16)

*The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated. 

See accompanying notes to unaudited consolidated financial statements 

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Tucows Inc.

Consolidated Statements of Operations and Comprehensive Income

(Dollar amounts in U.S. dollars)

(unaudited)

	Three months ended March 31,
	2018			2017*
Net revenues (note 10)	$	95,795,691		$	69,568,062
Cost of revenues (note 10)
Cost of revenues		68,972,220			49,310,712
Network expenses		2,574,087			2,343,196
Depreciation of property and equipment		1,131,143			590,347
Amortization of intangible assets (note 6)		499,032			380,162
Total cost of revenues		73,176,482			52,624,417
Gross profit		22,619,209			16,943,645
Expenses:
Sales and marketing		8,364,787			7,219,322
Technical operations and development		2,094,689			1,694,141
General and administrative		4,531,412			3,457,343
Depreciation of property and equipment		101,072			166,317
Amortization of intangible assets (note 6)		1,831,730			1,380,809
Loss (gain) on currency forward contracts (note 5)		(3,093	)		(34,425	)
Total expenses		16,920,597			13,883,507
Income from operations		5,698,612			3,060,138
Other income (expense):
Interest expense, net		(895,962	)		(867,993	)
Other income, net		123,960			128,897
Total other income (expense)		(772,002	)		(739,096	)
Income before provision for income taxes		4,926,610			2,321,042
Provision for income taxes (note 8)		1,182,918			(125,449	)
Net income before redeemable non-controlling interest		3,743,692			2,446,491
Redeemable non-controlling interest		(26,336	)		(125,764	)
Net income attributable to redeemable non-controlling interest		26,336			125,764
Net income for the period		3,743,692			2,446,491
Other comprehensive income, net of tax
Unrealized income on hedging activities (note 5)		17,425			186,229
Net amount reclassified to earnings (note 5)		-			(80,620	)
Other comprehensive income net of tax of $5,585 and $60,079 for the three months ended March 31, 2018 and March 31, 2017 (note 5)		17,425			105,609
Comprehensive income for the period	$	3,761,117		$	2,552,100
Basic earnings per common share (note 9)	$	0.35		$	0.23
Shares used in computing basic earnings per common share (note 9)		10,588,718			10,474,647
Diluted earnings per common share (note 9)	$	0.35		$	0.23
Shares used in computing diluted earnings per common share (note 9)		10,792,613			10,776,515

*The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated. 

See accompanying notes to unaudited consolidated financial statements

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Tucows Inc.

Consolidated Statements of Cash Flows

(Dollar amounts in U.S. dollars)

(unaudited)

	Three months ended March 31,
	2018			2017*
Cash provided by:
Operating activities:
Net income for the period	$	3,743,692		$	2,446,491
Items not involving cash:
Depreciation of property and equipment		1,232,215			756,664
Amortization of debt discount and issuance costs		69,533			67,105
Amortization of intangible assets		2,330,762			1,760,971
Change in capitalized contract costs		25,272			-
Deferred income taxes (recovery)		(47,034	)		1,199,661
Excess tax benefits on share-based compensation expense		(143,969	)		(989,332	)
Amortization of deferred rent		165			4,032
Loss on disposal of domain names		37,478			9,789
Other income		(128,820	)		(128,820	)
Loss (gain) on change in the fair value of forward contracts		(3,093	)		(17,949	)
Stock-based compensation		578,182			317,820
Change in non-cash operating working capital:
Accounts receivable		(309,036	)		41,721
Inventory		45,863			170,996
Prepaid expenses and deposits		(525,316	)		(3,557,508	)
Prepaid domain name registry and ancillary services fees		11,343,820			(5,489,422	)
Income taxes recoverable		264,829			(2,660,528	)
Accounts payable		2,132,453			(3,446,427	)
Accrued liabilities		758,897			1,830,922
Customer deposits		(2,274,978	)		(83,591	)
Deferred revenue		(9,598,210	)		10,240,649
Accreditation fees payable		40,078			(71,327	)
Net cash provided by operating activities		9,572,783			2,401,917
Financing activities:
Proceeds received on exercise of stock options		7,201			19,869
Payment of tax obligations resulting from net exercise of stock options		(147,068	)		(712,234	)
Proceeds received on loan payable		-			86,998,000
Repayment of loan payable		(4,571,843	)		(6,258,278	)
Payment of loan payable costs		(4,125	)		(591,175	)
Net cash (used in) provided by financing activities		(4,715,835	)		79,456,182
Investing activities:
Additions to property and equipment		(5,116,854	)		(3,692,893	)
Acquisition of a portion of the minority interest in Ting Virginia, LLC (note 4(a))		(1,200,000	)		(2,000,000	)
Acquisition of Enom Incorporated, net of cash (note 4(b))		-			(76,237,460	)
Acquisition of intangible assets		(1,372	)		-
Net cash (used in) investing activities		(6,318,226	)		(81,930,353	)
Decrease in cash and cash equivalents		(1,461,278	)		(72,254	)
Cash and cash equivalents, beginning of period		18,049,164			15,105,075
Cash and cash equivalents, end of period	$	16,587,886		$	15,032,821
Supplemental cash flow information:
Interest paid	$	901,344		$	872,645
Income taxes paid, net	$	1,337,123		$	2,342,916
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for	$	397,661		$	250,847

*The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated. 

See accompanying notes to unaudited consolidated financial statements 

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 U.S. consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. 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 March 31, 2018 and the results of operations and cash flows for the interim periods ended March 31, 2018 and 2017. 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, 2017 included in Tucows' 2017 Annual Report on Form 10-K filed with the SEC on March 6, 2018 (the “2017 Annual Report”). There have been no material changes to our significant accounting policies and estimates during the three months ended March 31, 2018 as compared to the significant accounting policies and estimates described in our 2017 Annual Report, except for the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).  See Note 3 for more information.

3. Recent accounting pronouncements:

Recent Accounting Pronouncements Adopted

On January 1, 2018, the Company adopted Accounting Standards Updates ("ASU") No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business and ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The adoption of these updates did not have a significant impact on the consolidated financial statements.  We also adopted ASU 2014-09 and the impact of such adoption is described in more detail below.

ASU 2014-09: Adoption of Revenue from Contracts with Customers (Topic 606)

On  January 1, 2018, the Company adopted ASU 2014-09 using the modified retrospective method by recognizing the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of equity as at January 1, 2018. The results for reporting periods beginning after  January 1, 2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policy, under ASC 605, Revenue Recognition (Topic 605).  The adoption of Topic 606 did not affect the Company’s cash flows from operating, investing, or financing activities. Furthermore, the impact on timing of revenue recognition was not material as the treatment of revenue for services rendered over time is consistent under Topic 606 and Topic 605. The details of the significant changes and quantitative impact of the changes are set out below. For a more comprehensive description of how the Company recognizes revenue under the new revenue standard in accordance with its performance obligations, see note 10.

The Company previously recognized commission fees related to Ting Mobile, Ting Internet, eNom domain registration and eNom domain related value-added service contracts as selling expenses when they were incurred. Under ASU 2014-09, when these commission fees are deemed incremental and are expected to be recovered, the Company capitalizes as an asset such commission fees as costs of obtaining a contract. These commission fees are amortized into income consistently with the pattern of transfer of the good or service to which the asset relates.  The estimation of the amortization period for the costs to obtain a contract required judgement.

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Under Topic 606, the Company has applied the following practical expedients: 

a)	When the amortization period for costs incurred to obtain a contract with a customer is less than one year, the Company has elected to apply a practical expedient to expense the costs as incurred; and
b)	For 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).

On January 1, 2018 as a result of adopting ASU 2014-09, the Company recorded a contract cost asset of $1.4 million with a corresponding increase to opening retained earnings and deferred tax liability of $1.1 million and $0.3 million, respectively, due to the deferral of costs of obtaining contracts. The impact of the changes to the Company’s financial statements in the current period are as follows:

	March 31, 2018
						Balances without
Consolidated Balance Sheet	As reported		Adjustments			adoption of Topic 606
Assets
Contract Costs (note 11)	$	1,378,336	$	(1,378,336	)	$	-
Total assets		341,360,951	$	(1,378,336	)	$	339,982,615
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	20,116,385	$	(346,900	)	$	19,769,485
Retained earnings		47,418,839		(1,031,436	)		46,387,403
Total Liabilities and Shareholders' Equity	$	341,360,951	$	(1,378,336	)	$	339,982,615

	Three months ended, March 31, 2018
						Balances without
Consolidated Statements of Operations and Comprehensive Income	As reported		Adjustments			adoption of Topic 606
Expenses
Sales and marketing	$	8,364,787	$	(25,272	)	$	8,339,515
Income before provision for income taxes		4,926,610		25,272			4,951,882
Provision for income tax (note 8)		1,182,918		(6,134	)		1,189,052
Net income for the period	$	3,743,692	$	19,138		$	3,762,830

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. More specifically, ASU 2016-02 requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018, which begins on January 1, 2019 for the Company. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company will adopt this guidance in the first quarter of fiscal 2019 and is in the process of evaluating the impact of the adoption of ASU 2016-02 will have on its consolidated financial statements.

4. Acquisitions:

(a)  Blue Ridge Websoft

On February 27, 2015, Ting Fiber, Inc., one of the Company’s wholly owned subsidiaries, acquired a 70% ownership interest in Ting Virginia, LLC and its subsidiaries, Blue Ridge Websoft, LLC (doing business as Blue Ridge Internet Works), Fiber Roads, LLC and Navigator Network Services, LLC (the "BRI Group") for consideration of approximately $3.5 million.

On February 1, 2017, under the terms of a call option in the agreement, Ting Fiber, Inc. acquired an additional 20% interest in Ting Virginia, LLC from the selling shareholders (the “Minority Shareholders”) for consideration of $2.0 million.

On February 13, 2018, the Company entered into an agreement Minority Shareholders pursuant to which the Minority Shareholders could immediately exercise their put option to sell their remaining 10% ownership interest in Ting Virginia, LLC for $1.2 million to the Company.  The put option was exercised on February 13, 2018 and the Company paid $1.2 million for the remaining 10% ownership interest and Ting Virginia, LLC became a wholly-owned subsidiary of the Company. 

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(b)  eNom, Incorporated

On January 20, 2017, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with its indirect wholly owned subsidiary, Tucows (Emerald), LLC, Rightside Group, Ltd., and Rightside Operating Co., pursuant to which Tucows (Emerald), LLC purchased from Rightside Operating Co. all of the issued and outstanding capital stock of eNom, Incorporated (“eNom”), a domain name registrar business. The purchase price was $77.8 million, which represented the agreed upon purchase of $83.5 million less an amount of $5.7 million related to the working capital deficiency acquired.

5. Derivative instruments and hedging activities:

Foreign currency forward contracts

In October 2012, the Company entered into 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, 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. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs. The Company does not use these forward contracts for trading or speculative purposes. These forward contracts typically mature between one and eighteen months.

The Company has designated certain of these transactions as cash flow hedges of forecasted transactions under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. For certain contracts, as the critical terms of the hedging instrument and 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. Accordingly, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income. The fair value of the contracts, as of March 31, 2018, is recorded as derivative instrument assets. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is reclassified from AOCI to earnings.

As of March 31, 2018, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $12.8 million, of which $11.3 million were designated as hedges as compared to the period as of December 31, 2017 when the Company held nil contracts to trade U.S. dollars in exchange for Canadian dollars.

As of  March 31, 2018, we had the following outstanding forward exchange contracts to trade U.S. dollars in exchange for Canadian dollars: 

Maturity date	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
April - June 2018		3,176,805		1.2919		7,737
July - September 2018		3,394,161		1.2893		7,165
October - December 2018		1,604,112		1.2873		3,421
January - March 2019		1,639,448		1.2852		3,192
April - June 2019		1,599,200		1.2831		2,788
July - September 2019		1,366,226		1.2809		1,800
	$	12,779,952		1.2875	$	26,103

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

		As of March 31, 2018		As of December 31, 2017
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	23,010	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	3,093	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	26,103	$	-

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Movement in Accumulated Other Comprehensive Income ("AOCI") balance for the three months ended March 31, 2018:

	Gains and losses on cash flow hedges		Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	-	$		-	$	-
Other comprehensive income (loss) before reclassifications		23,010		(5,585	)		17,425
Amount reclassified from accumulated other comprehensive income		-		-			-
Other comprehensive income (loss) for the three months ended March 31, 2018		23,010		(5,585	)		17,425
Ending AOCI balance – March 31, 2018	$	23,010	$	(5,585	)	$	17,425

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended March 31, 2018 and March 31, 2017 are as follows:

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)		Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
			Operating expenses	$	-	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2018	$	-	Cost of revenues	$	-	Cost of revenues		—
			Operating expenses	$	105,355	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2017	$	105,609	Cost of revenues	$	21,128	Cost of revenues		—

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company recorded a gain of $3,093 for the change in fair value of outstanding contracts for the three months ended March 31, 2018, in the consolidated statement of operations and comprehensive income. The Company has recorded a total gain of $34,425 for the change in fair value of outstanding contracts and the settlement of contracts  not designated as hedges for the three months ended March 31, 2017, in the consolidated statement of operations and comprehensive income. 

6. Goodwill and Other Intangible Assets:

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.

9

The Company's Goodwill balance is $90.1 million as of March 31, 2018 ( December 31, 2017 – $90.1 million). The Company's goodwill relates 98% ($87.9 million) to its Domain Services operating segment and 2% ($2.2 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.

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 March 31, 2018 and March 31, 2017, the Company assessed that certain domain names that were originally acquired in the June 2006 acquisition of Mailbank.com Inc. that were up for renewal, should be renewed.   

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

A summary of acquired intangible assets for the three months ended March 31, 2018 is as follows:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,209,912		$	1,552,354		$	10,792,790		$	32,185,398		$	2,112,500		$	561,224		$	58,414,178
Acquisition of customer relationships		-			-			-			1,372			-			-			1,372
Additions to/(disposals from) domain portfolio, net		(4,543	)		(32,935	)		-			-			-			-			(37,478	)
Amortization expense		-			-			(450,510	)		(1,381,220	)		(487,500	)		(11,532	)		(2,330,762	)
Balances March 31, 2018	$	11,205,369		$	1,519,419		$	10,342,280		$	30,805,550		$	1,625,000		$	549,692		$	56,047,310

The following table shows the estimated amortization expense in future periods, assuming no further additions to acquired intangible assets are made:

	Year ending December 31,
Remainder of 2018	$	6,910,060
2019		7,334,660
2020		7,172,160
2021		7,172,160
2022		7,172,160
Thereafter		7,561,322
Total	$	43,322,522

As of March 31, 2018, the accumulated amortization for the definite life intangible assets was $17.6 million.

7. Loan payable:

2017 Amended Credit Facility

On January 20, 2017, the Company entered into an amended and restated secured Credit Agreement (the “2017 Amended Credit Agreement”) with Bank of Montreal (“BMO” or the “Administrative Agent”), Royal Bank of Canada and Bank of Nova Scotia (collectively with “Lenders”) under which the Company increased its access to funds to an aggregate of $140 million. This amendment and restatement to the Company’s 2016 Credit Facility (defined below), among other things, reduced the existing Tucows non-revolving facility (such existing non-revolving facility, together with other existing facilities, the “Existing Facilities”) from $40.0 million to $35.5 million, and established a new non-revolving credit facility of $84.5 million (the “Facility D”). The Company immediately drew down $84.5 million under Facility D to fund the acquisition of eNom (note 4(b)). The “2016 Credit Facility” refers to the credit facility established under the Company’s secured credit agreement (the “2016 Credit Agreement”) among the Company, BMO and the Lenders, dated as of August 18, 2016.

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 In connection with the 2017 Amended Credit Agreement, the Company incurred $0.6 million of fees paid to lenders and 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.

The obligations of the Company under the 2017 Amended Credit Facility are secured by a first priority lien on substantially all of the personal property and assets of the Company.

The 2017 Amended Credit Facility has a four-year term. Under the 2017 Amended Credit Facility, the Company has access to an aggregate of up to $140 million in funds that are available as follows:

● a $5 million revolving credit facility (“Facility A”);

● a $15 million revolving reducing term facility (“Facility B”);

● a $35.5 million non-revolving facility (“Facility C”); and

● a $84.5 million non-revolving facility (“Facility D”).

Borrowings under the 2017 Amended Credit Facility accrue interest and standby fees at variable rates based on borrowing elections by the Company and the Company’s Total Funded Debt to EBITDA as described below. The purpose of Facility A is for general working capital and general corporate requirements, while Facility B and Facility C support share repurchases, acquisitions and capital expenditures associated with the Company’s Fiber to the Home program (“FTTH”). Facility D was provided and used for the acquisition of eNom.

The repayment terms for Facility A require monthly interest payments with any final principal payment becoming due upon maturity of the 2017 Amended Credit Facility. Under the repayment terms for Facility B, at December 31st of each year, balances drawn during the year that remain outstanding will become payable on a quarterly basis commencing the first quarter of the following year, for the period of amortization based on the purpose of the draw. For Facilities C and D, each draw will become payable beginning the first full quarter post initial draw for the period of amortization based on the purpose of the draw. The amortization periods for Facilities B, C and D are based on the purposes of the draws as follows: draws for share repurchases are repaid over four years, draws for acquisitions over five years and draws for FTTH capital expenditures over seven years. The 2017 Amended Credit Facility also includes a mechanism that is triggered based on the Company’s Total Funded Debt to EBITDA calculation at the end of each fiscal year. If Total Funded Debt to EBITDA exceeds 2.25:1 at December 31 of each year during the term, the Company is obligated to make a repayment of 50% of Excess Cash Flow as defined under the agreement.

The 2017 Amended Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The 2017 Amended Credit Facility requires that the Company to comply with the following financial covenants at all times, which are to be calculated on a rolling four quarter basis: (i) maximum Total Funded Debt to EBITDA Ratio of 2.50:1 until September 30, 2018 and 2.25:1 thereafter; and (ii) minimum Fixed Charge Coverage Ratio of 1.20:1. Further, the Company’s maximum annual Capital Expenditures cannot exceed $50.0 million per year, which limit will be reviewed on an annual basis. In addition, funded share repurchases are not to exceed $20 million, or up to $40 million so long as the total loans related to share repurchases do not exceed 1.5 times of trailing twelve months EBITDA. As at and for the periods ending March 31, 2018, and March 31, 2017, the Company was in compliance with these covenants.

On  January 24, 2018, the Company entered into the Second Interim Amendment to First Amended and Restated Credit Agreement (the “Second Interim Amendment”) with BMO and the Lenders. The Second Interim Amendment provides that certain defined terms in Section 1.01 of the Credit Agreement are added and updated to reflect the inclusion of liabilities to Sprint Mobile similar to the previous inclusion of T-Mobile liabilities. The Second Interim Amendment also permits Tucows to retain bank accounts with Silicon Valley Bank with the aggregate amount held in such accounts not to exceed $3.0 million.

 Borrowings under the 2017 Amended Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to 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 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

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The following table summarizes the Company’s borrowings under the credit facilities:

	March 31, 2018			December 31, 2017
Facility C		5,582,775			5,930,338
Facility D		67,598,400			71,823,300
Less: unamortized debt discount and issuance costs		(764,202	)		(829,611	)
Total loan payable		72,416,973			76,924,027
Less: loan payable, current portion		18,289,853			18,289,853
Loan payable, long-term portion		54,127,120			58,634,174

The following table summarizes our scheduled principal repayments as of March 31, 2018:

Remainder of 2018		13,717,390
2019		18,289,853
2020		18,103,004
2021		17,542,457
2022		4,867,757
Thereafter		660,714
	$	73,181,175

Other Credit Facilities

Prior to the Company entering into the 2016 Credit Facility, the Company had credit agreements (collectively the “Amended Credit Facility”) with BMO that were amended on November 19, 2012, and which provided it with access to two revolving demand loan facilities (the “2012 Demand Loan Facilities”), a treasury risk management facility, an operating demand loan and a credit card facility. The Company continues to have access to the treasury risk management facility and credit card facility, with the remaining loan facilities having been extinguished.

The treasury risk management facility under the Amended Credit Facility 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 Amended Credit Facility, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of March 31, 2018, the Company held contracts in the amount of $12.8 million to trade U.S. dollars in exchange for Canadian dollars (note 5).

In Q4, 2017, the Company entered into a corporate credit card program with the Bank of Nova Scotia and the Lenders. The program provides that BMO and the Bank of Nova Scotia may establish corporate credit card facilities with the Company in an amount of up to $5 million.

8. Income taxes

For the three months ended March 31, 2018, we recorded an income tax expense of $1.2 million on income before income taxes of $4.9 million, using an estimated effective tax rate for the fiscal year ending December 31, 2018 (“Fiscal 2018”) adjusted for certain minimum state taxes as well as the inclusion of a $0.1 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. Comparatively, for the three months ended March 31, 2017, the Company recorded an income tax recovery of $0.1 million on income before taxes of $2.3 million, using an estimated effective tax rate for the 2017 fiscal year and adjusted for the $1.0 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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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 March 31, 2018 and December 31, 2017, respectively.

9. Basic and diluted earnings per common share:

Basic earnings per common share has been calculated on the basis of net income for the period divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share gives effect to all dilutive potential common shares outstanding at the end of the year assuming that they had been issued, converted or exercised at the later of the beginning of the year or their date of issuance. In computing diluted earnings per share, the treasury stock method is used to determine the number of shares assumed to be purchased from the conversion of common share equivalents or the proceeds of the exercise of options. 

The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation:

	Three months ended March 31,
	2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,743,692	$	2,446,491
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,588,718		10,474,647
Effect of outstanding stock options		203,895		301,868
Diluted weighted average number of shares outstanding		10,792,613		10,776,515
Basic earnings per common share	$	0.35	$	0.23
Diluted earnings per common share	$	0.35	$	0.23

For the three months ended March 31, 2018, outstanding options to purchase 333,300 common shares were not included in the computation of diluted income per common share because all such options’ exercise price was greater than the average market price of the common shares for the period as compared to the three months ended March 31, 2017, where 28,500 outstanding options were not included in the computation.

During the three months ended March 31, 2018 and 2017, no common shares were repurchased and cancelled under the terms of our stock repurchase programs announced in February 2018, ending in February 2019 or March 2017, ended in March 2018.

10. Revenue

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. 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 12.

 (a) Network Access Services 

The Company generates Network Access 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 Internet Service Providers (“ISPs”).

Ting 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.

13

Ting fixed Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Fixed 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.

Both Ting mobile and fixed 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 mobile and fixed Internet access 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 brand 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) 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 ratably 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 and hosted email provide our resellers and retail registrant customers 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.

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:

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	21,872,109	$	17,962,868
Other Services		1,736,116		1,286,917
Total Network Access Services		23,608,225		19,249,785
Domain Services:
Wholesale
Domain Services		58,427,707		39,091,817
Value Added Services		4,434,572		3,907,889
Total Wholesale		62,862,279		42,999,706
Retail		8,436,563		6,401,703
Portfolio		888,624		916,868
Total Domain Services		72,187,466		50,318,277
	$	95,795,691	$	69,568,062

During the three months ended March 31, 2018, one customer accounted for 18% of total revenue, and for the three months ended March 31, 2017, no customer accounted for more than 10% of revenue. As at March 31, 2018 and December 31, 2017, no customer accounted for more than 10% of accounts receivable.

The following is a summary of the Company’s cost of revenue from each significant revenue stream: 

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	11,265,767	$	9,567,160
Other Services		940,751		825,256
Total Network Access Services		12,206,518		10,392,416
Domain Services:
Wholesale
Domain Services		51,314,038		34,462,926
Value Added Services		857,268		575,923
Total Wholesale		52,171,306		35,038,849
Retail		4,409,742		3,617,402
Portfolio		184,654		262,045
Total Domain Services		56,765,702		38,918,296
Network Expenses:
Network, other costs		2,574,087		2,343,196
Network, depreciation and amortization costs		1,630,175		970,509
		4,204,262		3,313,705
	$	73,176,482	$	52,624,417

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.

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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.

The opening balance of deferred revenue was $160.6 million as of Jan 1, 2018. Significant changes in deferred revenue were as follows:

	March 31, 2018
Balance, beginning of period	$	160,581,528
Deferral of revenue		60,370,051
Recognition of revenue 1		(69,968,261	)
Balance, end of period	$	150,983,318

¹As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, recognized revenue for the three months ended March 31, 2018 includes $14.6 million related to previously deferred revenue for these names.

Remaining Performance Obligations:

As the Company fulfills its performance obligations, the following table includes revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) as at March 31, 2018:

	March 31, 2018
Remainder of 2018	$	108,710,643
2019		24,366,389
2020		7,116,720
2021		4,010,109
2022		2,561,121
Thereafter		3,658,053
Total	$	150,423,035

For 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).

11. Contract costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the period of benefit of those costs to be longer than one year and those costs are expected to be recoverable under the term of the contract. We have identified certain sales incentive programs that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $1.4 million at March 31, 2018.

Capitalized contract acquisition costs are amortized into operating expense based on the transfer of goods or services to which the assets relate which typically range 2 – 10 years. For the quarter ended March 31, 2018, the Company capitalized $195,408 and amortized $220,680 of contract costs, respectively, for a net expense impact of $25,272 to the Consolidated Statement of Operations and Comprehensive Income. There was no impairment loss recognized in relation to the costs capitalized during the three months ending March 31, 2018. The breakdown of the movement in the contract costs balance for the three months ending March 31, 2018 is as follows:

	March 31, 2018
Balance, beginning of period(1)	$	1,403,608
Capitalization of costs		195,408
Amortization of costs		(220,680	)
Balance, end of period	$	1,378,336

⁽¹⁾The beginning balance consists entirely of a cumulative adjustment recorded on January 1^st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.  

When the amortization period for costs incurred to obtain a contract with a customer is less than one year, we have elected to apply a practical expedient to expense the costs as incurred.  These costs include our internal sales compensation program and certain partner sales incentive programs.

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12. Segment reporting:

(a)  We are organized and managed based on two operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate and are described as follows:

1.     Network Access Services - This segment derives revenue from the sale of mobile phones, telephony services, high speed Internet access, billing solutions to individuals and small businesses primarily through the Ting website. Revenues are generated in the U.S.

2.     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. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

The Chief Executive Officer (the “CEO”) is the chief operating decision maker and regularly reviews the operations and performance by segment. The CEO reviews gross profit as (a) key measure of performance for each segment and (b) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses, general and administrative expenses, depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and are not included in the measurement of segment profitability. 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 2, 3 and 10 to these consolidated financial statements.

Information by operating segments (with the exception of disaggregated revenue, which is contained in Note 10), which is regularly reported to the CEO is as follows:

	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2018
Net Revenues	$	23,608,225	$	72,187,466	$	95,795,691
Cost of revenues
Cost of revenues		12,206,518		56,765,702		68,972,220
Network expenses		490,215		2,083,872		2,574,087
Depreciation of property and equipment		833,060		298,083		1,131,143
Amortization of intangible assets		11,532		487,500		499,032
Total cost of revenues		13,541,325		59,635,157		73,176,482
Gross Profit		10,066,900		12,552,309		22,619,209
Expenses:
Sales and marketing						8,364,787
Technical operations and development						2,094,689
General and administrative						4,531,412
Depreciation of property and equipment						101,072
Amortization of intangible assets						1,831,730
Loss (gain) on currency forward contracts						(3,093	)
Income from operations						5,698,612
Other income (expenses), net						(772,002	)
Income before provision for income taxes					$	4,926,610

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	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2017
Net Revenues	$	19,249,785	$	50,318,277	$	69,568,062
Cost of revenues
Cost of revenues		10,392,416		38,918,296		49,310,712
Network expenses		541,963		1,801,233		2,343,196
Depreciation of property and equipment		426,078		164,269		590,347
Amortization of intangible assets		11,532		368,630		380,162
Total cost of revenues		11,371,989		41,252,428		52,624,417
Gross Profit		7,877,796		9,065,849		16,943,645
Expenses:
Sales and marketing						7,219,322
Technical operations and development						1,694,141
General and administrative						3,457,343
Depreciation of property and equipment						166,317
Amortization of intangible assets						1,380,809
Loss (gain) on currency forward contracts						(34,425	)
Income from operations						3,060,138
Other income (expenses), net						(739,096	)
Income before provision for income taxes					$	2,321,042

(b) The following is a summary of the Company’s property and equipment by geographic region:

	March 31, 2018		December 31, 2017
Canada	$	1,555,813	$	1,176,371
United States		27,107,392		23,417,435
Germany		25,557		26,492
	$	28,688,762	$	24,620,298

(c) The following is a summary of the Company’s amortizable intangible assets by geographic region:

	March 31, 2018		December 31, 2017
Canada	$	7,414,822	$	7,748,940
United States		35,839,260		37,783,202
Germany		68,440		119,770
	$	43,322,522	$	45,651,912

(d) Valuation and qualifying accounts:

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses		Write-offs during period		Balance at end of period
Three months ended March 31, 2018	$	168,409	$	1,011	$	-	$	169,420
Year ended December 31, 2017	$	164,145	$	4,264	$	-	$	168,409

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13. Stockholders’ Equity:

The following unaudited table summarizes stockholders' equity transactions for the three-month period ended March 31, 2018: 

												Accumulated
						Additional			Retained			other		Total
	Common stock					paid in			earnings			comprehensive		stockholders'
	Number			Amount		capital			(deficit)			income (loss)		equity
Balances, December 31, 2017		10,583,879		$	15,368,161	$	2,166,768		$	42,675,805		$	-	$	60,210,734
Impact of Adoption of ASU 2014-09		-			-		-			1,062,952			-		1,062,952
Balance on January 1, 2018		10,583,879			15,368,161		2,166,768			43,738,757			-		61,273,686
Exercise of stock options		12,563			57,943		(50,742	)		-			-		7,201
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,327	)				(147,068	)		-			-		(147,068	)
Stock-based compensation (note 15)		-			-		578,182			-			-		578,182
Net income		-			-		-			3,743,692			-		3,743,692
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(63,610	)		-		(63,610	)
Other comprehensive income (loss)		-			-		-			-			17,425		17,425
Balances, March 31, 2018		10,592,115		$	15,426,104	$	2,547,140		$	47,418,839		$	17,425	$	65,409,508

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 will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and will terminate on or before February 13, 2019. During the three months ended March 31, 2018, the Company did not repurchase any shares under this program.

On March 1, 2017, the Company announced that its Board of Directors had 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 March 1, 2017 and terminated on February 14, 2018. During the three months ended March 31, 2018, the Company did not repurchase any shares under this program.

On February 9, 2016, the Company announced that its Board of Directors had 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 10, 2016 and terminated on February 9, 2017. During the three months ended March 31, 2017, the Company did not repurchase any shares under this program.

14. 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.

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Details of stock option transactions for the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three months ended March 31,					Three months ended March 31,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		11,000			58.52		32,875			40.56
Exercised		(12,563	)		7.79		(68,876	)		7.83
Forfeited		(17,125	)		42.54		(7,889	)		18.46
Expired		-			-		-			-
Outstanding, end of period		634,883			37.48		430,611			15.46
Options exercisable, end of period		245,933		$	16.62		264,753		$	10.72

As of March 31, 2018, the exercise prices, weighted average remaining contractual life and intrinsic values of outstanding options were as follows:

			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
$ 2.92	-	$ 8.92		81,695	$	6.81		0.7	$	4,018,538		81,695	$	6.81		0.7	$	4,018,538
$10.16	-	$19.95		117,013		16.31		2.5		4,644,246		90,613		15.93		2.3		3,631,248
$21.10	-	$27.53		75,000		23.67		3.1		2,424,562		55,000		24.61		2.8		1,726,562
$35.25	-	$37.35		14,375		35.89		4.4		289,094		10,625		36.11		4.2		211,281
$43.15	-	$47.00		18,500		44.19		5.1		218,475		8,000		43.75		5.1		97,988
$53.20	-	$58.65		328,300		55.51		5.4		188,055		-		-		-		-
				634,883	$	37.48		4.0	$	11,782,970		245,933	$	16.62		2.0	$	9,685,617

Total unrecognized compensation cost relating to unvested stock options at March 31, 2018, prior to the consideration of expected forfeitures, is approximately $5.8 million and is expected to be recognized over a weighted average period of 2.8 years.

The Company recorded stock-based compensation of $0.6 million for the three months ended March 31, 2018 and $0.3 million for the three months ended March 31, 2017, respectively.

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

15. 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 instrument assets and liabilities measured at fair value on a recurring basis at March 31, 2018:

	March 31, 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	26,103	$	-	$	26,103
Derivative instrument liability	$	-	$	-	$	-	$	-

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The following table provides a summary of the fair values of the Company's derivative instrument assets measured at fair value on a recurring basis as at December 31, 2017:

	December 31, 2017
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	-	$	-	$	-
Derivative instrument liability	$	-	$	-	$	-	$	-

16. Contingencies

On August 30, 2017, Namecheap, Inc. (“Namecheap”) filed a complaint against the Company, eNom, Inc., and unknown John Does in the United States District Court for the Western District of Washington alleging breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment (the “Namecheap Federal Action”).  Namecheap voluntarily dismissed the Namecheap Federal Action without prejudice on October 10, 2017. That same day, Namecheap filed a substantially similar complaint against Tucows Inc., eNom, LLC, and unknown John Does alleging breach of contract and breach of the implied duty of good faith and fair dealing in Washington State Court, King County (the “Namecheap State Action”). In the Namecheap State Action, Namecheap sought preliminary and ultimate equitable relief by way of the transfer of approximately 2.65 million domain names from the eNom, LLC platform to the Namecheap platform using BTAPPA. By Order dated November 15, 2017, the Court granted Namecheap’s Motion for Preliminary Injunction and the Company complied therewith in taking steps with Namecheap towards the BTAPPA. The Court ordered Namecheap to post a bond against damages sustained by the Company. The Company sought clarification from the Court on one BTAPPA requirement which the Court provided in the January 5, 2018 Order. The BTAPPA transfer was initiated on January 8, 2018 and completed on January 16, 2018. In addition to the equitable relief it has sought, Namecheap also seeks direct and consequential damages in the Namecheap State Action. The Company believes that the claims lack merit and intends to continue to defend them vigorously.  The Company does not believe that this litigation is a material pending legal proceeding.

The Company has other legal claims and lawsuits in connection with its ordinary business operations. The Company intends to vigorously defend these claims. While the final outcome with respect to any actions or claims outstanding or pending as of March 31, 2018 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; our expectation regarding the acquisition of eNom, the Company's foreign currency requirements, specifically for the Canadian dollar; Ting mobile, Roam mobile 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 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; 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 Mobile Virtual Network Operator ("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;

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• Pending or new litigation; and

• Factors set forth herein under the caption “Item 1A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

As previously disclosed the under the caption “Item 1A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.

Specifically, the European Commission has adopted the General Data Protection Regulation (the “GDPR”), which introduces numerous privacy-related changes for companies operating in the European Union, effective on May 25, 2018. The GDPR includes obligations around the procurement, processing, publication and sharing of personal data. Potential fines for violations of certain provisions of GDPR reach as high as 4% of a company’s annual total revenue, potentially including the revenue of its international affiliates. The interpretation and application of the GDPR is still unsettled for the industry. Our domain name registrar businesses, and the contracts we have with domain name registries and ICANN, require us to process and share personal data. The solutions we develop for GDRP-compliance may not be adequate in the views of regulatory authorities or ICANN, which may cause the loss of WHOIS privacy revenue or increase our costs of developing compliant solutions or subject us to litigation, liability, civil penalties, or loss of market share. As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways.

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. We are organized, managed and report our financial results as two segments, Network Access 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 for each of our service offerings in order to gain more depth and understanding of the key business metrics driving our business. Accordingly, we report Network Access Services and Domain Services revenue separately.

For the three months ended March 31, 2018 and March 31, 2017, we reported revenue of $95.8 million and $69.6 million, respectively. 

Network Access Services

Network Access Services includes mobile, 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. In the third quarter of 2017, the Company acquired the consumer-related assets of Otono, Networks Inc. The consumer assets relate to the mobile roaming and instant activation eSIM business under the Roam Mobility, Zipsim and Always Online Wireless brands (collectively “Roam Mobility brands”). The acquired portfolio operates as a MVNO on the same nationwide Global System for Mobile communications (“GSM”) network as Ting Mobile and distributes through third-party retail stores and product branded websites.

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The Company also derives revenue from the sale of fixed high-speed Internet access (“Ting Internet”) in select towns including Holly Springs, North Carolina, Westminster, Maryland and Charlottesville, Virginia, with further expansion underway in existing Ting towns as well as new Ting towns of Sandpoint, Idaho and Centennial, Colorado (collectively, the “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.

Revenues from Ting Mobile and Ting Internet are generated in the U.S. and are provided on a monthly basis with no fixed contract term. Revenues from Roam Mobility are generated in the United U.S., Canada and the United Kingdom on a prepaid usage basis with no fixed contract terms.

As of March 31, 2018, Ting managed mobile telephony services for approximately 286,000 subscribers and 165,000 accounts. For a discussion of subscribers and how they impacted our financial results, see the Net Revenue discussion below.

Domain Services

Domain Services includes wholesale and retail domain name registration services, value added services and portfolio services derived through our OpenSRS, eNom 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. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

Our primary distribution channel is a global network of approximately 39,000 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 (“ccTLD”) 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.

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 and eNom, derives revenue from its domain service and from providing value-added services. The OpenSRS and eNom domain services manage approximately 24.4 million domain names under the Tucows and eNom ICANN registrar accreditations and for other registrars under their own accreditations.  The reduction from prior year is primarily due to the bulk transfer of 2.65 million domain names to Namecheap’s credentials.  The transfer was completed by January 16, 2018, after King County Superior court (Washington) granted Namecheap Inc. a preliminary injunction on January 5, 2018, requiring the Company to bulk transfer the domain names under management.  As a result of the bulk transfer, in the first quarter of 2018, the Company recognized, on an accelerated basis, $14.6 million of revenue and $14.5 million of cost of revenues sold related to previously deferred revenue and deferred prepaid registry fees. In addition, one of the resellers for which the Company registered domain names using the reseller’s accreditation, was acquired and the registrations were moved to the acquiring reseller, resulting in approximately 0.5 million domains being transferred in the first quarter of 2018. As the Company does not defer revenue associated with hosted registry services, there was no impact on deferred as a result of the transfer. 

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 39,000 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 an email address based on their last name.

Portfolio generates revenue by offering names in our domain portfolio for resale through a number of distribution channels including our reseller network. We also generate advertising revenue from our portfolio.

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KEY BUSINESS METRICS

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, manage our operational cash flow, 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 U.S. 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.

Network Access Services

	March 31,
		2018 (1)	2017 (1,2)
	(in 000s)
Ting mobile accounts under management		165	171
Ting mobile subscribers under management		286	280

(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 Revenue discussion below.
(2)	Subsequent to a review of our subscriber base, our comparative Q1 2017 accounts under management were reduced by approximately 4,000.

Domain Services

Total new, renewed and transferred-in domain name registrations:

	Three months ended March 31,
	2018 (1)		2017 (1)
	(in 000's)
Total new, renewed and transferred-in domain name registrations provisioned		4,892		4,863

(1) For a discussion of these period to period changes in the domain names provisioned and how they impacted our financial results, see the Net Revenues discussion below.

Domain names under management:

	March 31,
		2018 (1)	2017 (1)
	(in 000's)
Domain names under management:
Registered using Registrar Accreditation belonging to the Tucows Group		19,489	23,895
Registered using Registrar Accreditations belonging to Resellers		4,861	5,694
Total domain names under management		24,350	29,589

(1) For a discussion of these period to period changes in domain names under management and how they impacted our financial results, see the Net Revenue discussion below.

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OPPORTUNITIES, CHALLENGES AND RISKS

As a MVNO, our Ting and Roam services are 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 has also enjoyed rapid growth in its first six years of operation. During this growth phase, we have been able to continue to grow gross customer additions and maintain a consistent churn rate, which has allowed us to maintain net new customer additions despite the impact of churn on a fast-growing customer base. 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 slower growth rates or in certain cases, our ability to maintain growth.

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

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 domain expiry stream. The revenue associated with names sales and advertising has recently experienced flat to declining trends due to lower traffic and advertising yields in the marketplace, which we expect to continue.  Expanding data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.  Specifically, the European Commission has adopted the General Data Protection Regulation (the “GDPR”), which introduces numerous privacy-related changes for companies operating in the European Union, effective on May 25, 2018.  The solutions we develop for GDRP-compliance may not be adequate in the views of regulatory authorities or ICANN, which may cause the loss of WHOIS privacy revenue or increase our costs of developing compliant solutions or subject us to litigation, liability, civil penalties, or loss of market share. As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways.

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 and annual fluctuations in our Portfolio revenue.

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.  

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Net Revenues

Network Access Services

The Company generates Network Access 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 ISP.

Mobile

Ting 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 brand 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.

Other services

Other services derive revenues from providing Ting fixed high-speed internet access 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 fixed Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Fixed 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. 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.

Fixed 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 fixed Internet access 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 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. 

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Domain Services

Wholesale

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 ratably 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.

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. With the acquisition of eNom and its 24,000-reseller network, 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 domain related value-added services like digital certifications, WHOIS privacy 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.

We also derive revenue from other value-added services primarily from Internet hosting services, advertising from the OpenSRS and eNom domain expiry streams.

Retail

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

Portfolio

We derive revenue from our portfolio of domain names 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.

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. Domain portfolio names are sold through our premium domain name service, auctions or in negotiated sales. The size of our domain name portfolio varies over time, as we acquire and sell domains on a regular basis to maximize the overall value and revenue generation potential of our portfolio. In evaluating names for sale, we consider the potential foregone revenue from pay-per-click advertising, as well as other factors. The name will be offered for sale if, based on our evaluation, the name is deemed non-essential to our business and management believes that deriving proceeds from the sale is strategically more beneficial to the Company.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. 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 Annual Report on Form 10-K for the year ended December 31, 2017, except for the adoption of Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was adopted using the modified retrospective basis. Accordingly, comparative figures have not been restated. The adoption of ASU 2014-09 did not have a material impact on the timing of revenue recognition. For further information on our critical accounting policies and estimates, see Note 3 to the consolidated financial statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2018 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2017

NET REVENUES

The following table presents our net revenues, by revenue source:

	Three months ended March 31,
	2018			2017
Network Access Services:
Mobile Services	$	21,872,109		$	17,962,868
Other Services		1,736,116			1,286,917
Total Network Access Services		23,608,225			19,249,785
Domain Services:
Wholesale
Domain Services		58,427,707			39,091,817
Value Added Services		4,434,572			3,907,889
Total Wholesale		62,862,279			42,999,706
Retail		8,436,563			6,401,703
Portfolio		888,624			916,868
Total Domain Services		72,187,466			50,318,277
	$	95,795,691		$	69,568,062
Increase over prior period	$	26,227,629
Increase - percentage		38	%

The following table presents our revenues, by revenue source, as a percentage of total revenues:

	Three months ended March 31,
	2018			2017
Network Access Services:
Mobile Services		23	%		26	%
Other Services		2	%		2	%
Total Network Access Services		25	%		28	%
Domain Services:
Wholesale
Domain Services		60	%		56	%
Value Added Services		5	%		6	%
Total Wholesale		65	%		62	%
Retail		9	%		9	%
Portfolio		1	%		1	%
Total Domain Services		75	%		72	%
		100	%		100	%

Total net revenues for the three months ended March 31, 2018 increased by $26.2 million or 38% to $95.8 million when compared to the three months ended March 31, 2017.  This increase primarily resulted from $14.6 million of accelerated recognition of domains revenue associated with the Namecheap bulk transfer of 2.65 million names.  In addition, revenues increased due to the January 20, 2017 acquisition of eNom and the impact the acquisition of the mobile roaming assets of Otono Networks in September 2017.

Deferred revenue from domain name registrations and other Internet services at March 31, 2018 decreased to $151.0 million at from $160.6 million at December 31, 2017, primarily due to the bulk transfer discussed above. 

During the three months ended March 31, 2018, one customer accounted for 18% of total revenue, and for the three months ended March 31, 2017 no customer accounted for more than 10% of revenue. As at March 31, 2018 and December 31, 2017, no customer accounted for more than 10% of accounts receivable. 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.

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Network Access Services

Net revenues from mobile phone equipment and services for the three months ended March 31, 2018 increased by $3.9 million or 22% to $21.9 million as compared to the three months ended March 31, 2017. This increase primarily reflects the growth in service revenues by $3.3 million to $19.7 million as compared to the three months ended March 31, 2017, due to the impact of the larger Ting subscriber base is having on Ting mobile service revenue and acquisition of the roaming assets of Otono Networks in the third quarter of 2017.  Revenues from the sale of mobile hardware and related accessories increased by $0.6 million to $2.2 million as compared to the three months ended March 31, 2017. This increase was due to increased mix of higher priced devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in the second quarter of 2017.  

Other revenues from high speed Internet access and billing solutions generated $1.7 million in revenue during the three months ended March 31, 2018, up $0.4 million from the three months ended March 31, 2017. Growth in High speed Internet access revenues was as a result of the increased Ting Internet footprint in Charlottesville, VA, Westminster, MD and Holly Springs, NC.  The Company is currently constructing fiber networks in Sandpoint, ID and Centennial, CO and expects to launch high speed Internet access services in those markets in the second half of 2018. 

As of March 31, 2018, Ting mobile had 165,000 accounts under management and 286,000 subscribers under management compared to 171,000 accounts and 280,000 subscribers under management as of March 31, 2017. 

Wholesale

During the three months ended March 31, 2018, domain services revenue increased by $19.3 million or 49% to $58.4 million and the number of transactions from all new, renewed and transferred-in domain name registrations we remained relatively flat at 4.9 million when compared to the three months ended March 31, 2017.   This increase primarily resulted from $14.6 million of accelerated recognition of wholesale domain revenue associated with the Namecheap bulk transfer of 2.65 million names.  In addition, revenues increased due to the January 20, 2017 acquisition of eNom and that our revenues and gross margins in 2017 were negatively impacted by amortizing into revenue, deferred revenue that was recorded at fair value at the acquisition date which was approximately 10% lower than the historical cost basis of eNom.

The increase in revenue from the acquisition has been offset by the continued and ongoing migration of a few large, low margin customers. These customers have been moving their domain management and domain transaction processing to their own accreditations and in-house systems. As previously discussed, the Company completed a bulk transfer of 2.65 million domain names to Namecheap’s credentials, which is the most significant migration of this nature.  In addition, one of the resellers for which the Company registered domain names using the reseller’s accreditation, was acquired and the registrations were moved to the acquiring reseller, resulting in approximately 0.5 million domains being transferred in the first quarter of 2018.  Due to these factors, total domains that we manage decreased to 24.4 million as of March 31, 2018, when compared to 29.6 million at March 31, 2017. While we anticipate that the number of new, renewed and transferred-in domain name registrations will continue to incrementally increase in the long term, the volatility of these factors could affect the growth of domain names that we manage.

During the three months ended March 31, 2018, value added services revenue increased by $0.5 million to $4.4 million when compared to the three months ended March 31, 2017.  This increase was due to the acquisition of eNom on January 20, 2017.  In addition, our revenues and gross margins in 2017 were negatively impacted by amortizing into revenue, deferred revenue that was recorded at fair value at the acquisition date which was approximately 10% lower than the historical basis of eNom.  

Retail

Net revenues from retail for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017, increased by $2.0 million, or 32%, to $8.4 million.  These increases were largely due to the acquisition of eNom on January 20, 2017 and to a lesser extent due to the success that our retail marketing initiatives and improved websites are having on our ability to attract new customers and retain existing ones.  In addition, our revenues and gross margins in 2017 were negatively impacted by amortizing into revenue, deferred revenue that was recorded at fair value at the acquisition date which was approximately 10% lower than the historical basis of eNom.

Portfolio

Net revenues from portfolio for the three months ended March 31, 2018, remained relatively flat at $0.9 million, as compared to the three months ended March 31, 2017.

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COST OF REVENUES

Network Access Services 

Mobile

Cost of revenues for mobile services includes the costs of provisioning mobile services, which is primarily our customers' voice, messaging, data usage provided by our MNOs, 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 Services

Cost of revenues for other services includes the costs for provisioning high speed Internet access, comprised of network access fees and software licenses, the costs of providing hardware, comprised of the cost of network routers sold to our customers, order fulfillment related expenses, and inventory write-downs and fees paid to third-party service providers, primarily for printing services in connection with billing services to ISPs.

Wholesale

Domain Service

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 ratably 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 Tucows, 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.

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, 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 and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely ratably 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

Costs of revenues for our 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. As the total names in our portfolio continue to grow, this cost will become a more significant component of our cost of revenues. 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 ratably over the renewal term.

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Network expenses

Network expenses include personnel and related expenses, depreciation and amortization, communication costs, equipment maintenance, stock-based compensation and employee and related costs directly associated with the management and maintenance of our network. Communication costs include bandwidth, co-location and provisioning costs we incur to support the supply of all our services.

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

	Three months ended March 31,
	2018			2017
Network Access Services:
Mobile Services	$	11,265,767		$	9,567,160
Other Services		940,751			825,256
Total Network Access Services		12,206,518			10,392,416
Domain Services:
Wholesale
Domain Services		51,314,038			34,462,926
Value Added Services		857,268			575,923
Total Wholesale		52,171,306			35,038,849
Retail		4,409,742			3,617,402
Portfolio		184,654			262,045
Total Domain Services		56,765,702			38,918,296
Network Expenses:
Network, other costs		2,574,087			2,343,196
Network, depreciation and amortization costs		1,630,175			970,509
		4,204,262			3,313,705
	$	73,176,482		$	52,624,417
Increase over prior period	$	20,552,065
Increase - percentage		39	%

The following table presents our cost of revenues, as a percentage of total of cost of revenues:

	Three months ended March 31,
	2018			2017
Network Access Services:
Mobile Services		15	%		18	%
Other Services		1	%		2	%
Total Network Access Services		16	%		20	%
Domain Services:
Wholesale
Domain Services		71	%		66	%
Value Added Services		1	%		1	%
Total Wholesale		72	%		67	%
Retail		6	%		7	%
Portfolio		0	%		0	%
Total Domain Services		78	%		74	%
Network Expenses:
Network, other costs		4	%		4	%
Network, depreciation and amortization costs		2	%		2	%
		6	%		6	%
		100	%		100	%

Total cost of revenues for the three months ended March 31, 2018, increased by $20.6 million, or 39%, to $73.2 million when compared to the three months ended March 31, 2017. This increase primarily resulted from $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names.  In addition, cost of revenues increased due to the January 20, 2017 acquisition of eNom and the impact the acquisition of the mobile roaming assets of Otono Networks in September 2017.  Prepaid domain registration and other Internet services fees as of March 31, 2018 decreased to $115.7 million from $127.0 million as of December 31, 2017, primarily due to the bulk transfer discussed above. 

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Network Access Services

Mobile and Other Services

Cost of revenues from mobile phone equipment and services for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017, increased by $1.7 million or 18% to $11.3 million. This increase primarily reflects the impact the subscriber base had on Ting mobile service cost of revenue as well as the acquisition of the mobile roaming assets of Otono Networks in September 2017 which combined grew by $1.2 million to $9.0 million as compared to the three months ended March 31, 2017.  Mobile hardware and related accessories costs increased by $0.5 million compared to the three months ended March 31, 2017, to $2.3 million reflecting an increased mix of higher cost devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in the second quarter of 2017.   

In addition, during the three months ended March 31, 2018, we incurred costs of $0.9 million in provisioning high speed Internet access and billing solutions as compared to $0.8 million during the three months ended March 31, 2017. The increase in costs was primarily due primarily to the expansion of the Ting Fiber foot print and increasing subscriber base.

Domain Services

Wholesale

Costs for wholesale and value-added services for the three months ended March 31, 2018 increased by $17.1 million, or 49%, to $52.2 million when compared to the three months ended March 31, 2017. This increase primarily resulted from $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names. In addition, cost of revenues increased due to the January 20, 2017 acquisition of eNom.

Retail

Costs for retail for the three months ended March 31, 2018 increased by $0.8 million, to $4.4 million when compared to the three months ended March 31, 2017. This increase resulted primarily from the acquisition of eNom on January 20, 2017 and to a lesser extent the increased cost of additional volume in Hover services.

Portfolio

Costs for portfolio for the three months ended March 31, 2018 were decreased by $0.1 million to $0.2 million, when compared to the three months ended March 31, 2017.

Network Expenses

Network costs for the three months ended March 31, 2018 increased by $0.9 million to $4.2 million when compared to the three months ended March 31, 2017. The increase is primarily due to the acquisition of eNom on January 20, 2017, including acquired developed platform technology.

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.

	Three months ended March 31,
	2018			2017
Sales and marketing	$	8,364,787		$	7,219,322
Increase over prior period	$	1,145,465
Increase - percentage		16	%
Percentage of net revenues		9	%		10	%

Sales and marketing expenses for the three months ended March 31, 2018 increased by $1.1 million, or 16%, to $8.4 million when compared to the three months ended March 31, 2017. This increase related primarily to an increase of $1.4 million in workforce, stock-based compensation and travel related costs due partly to the full quarter impact of the acquisition of eNom as well as workforce increases to support network access related growth.  Marketing costs decreased $0.3 million largely due to timing of expenditures.

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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. All technical operations and development costs are expensed as incurred.

	Three months ended March 31,
	2018			2017
Technical operations and development	$	2,094,689		$	1,694,141
Increase over prior period	$	400,548
Increase - percentage		24	%
Percentage of net revenues		2	%		2	%

Technical operations and development expenses for the three months ended March 31, 2018 increased by $0.4 million, or 24%, to $2.1 million when compared to the three months ended March 31, 2017.  The increase in costs relate primarily to increased salaries and benefits associated with the full quarter impact of the eNom technical operations and development workforce that were included as of January 20, 2017.

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.

	Three months ended March 31,
	2018			2017*
General and administrative	$	4,531,412		$	3,457,343
Increase over prior period	$	1,074,069
Increase - percentage		31	%
Percentage of net revenues		5	%		5	%

General and administrative expenses for the three months ended March 31, 2018 increased by $1.1 million, or 31%, to $4.5 million when compared to the three months ended March 31, 2017.  Workforce, travel and stock-based compensation increased $0.1 million, software and collaboration tools increased $0.2 million, professional fees increased $0.2 million primarily due to increased accounting and taxation related services. Other expenses, including credit card processing fees related to growth of network access services and facilities costs increased $0.3 million. In addition, during the three months ended March 31, 2018, we experienced losses of $0.2 million on foreign exchange revaluation of our foreign denominated monetary assets and liabilities compared to a gain of $0.1 million for the three months ended March 31, 2017.

DEPRECIATION OF PROPERTY AND EQUIPMENT

	Three months ended March 31,
	2018			2017
Depreciation of property and equipment	$	101,072		$	166,317
Decrease over prior period	$	(65,245	)
Decrease - percentage		(39	)%
Percentage of net revenues		0	%		0	%

Depreciation costs decreased to $0.1 million from $0.17 million as compared to the three months ended March 31, 2017.

AMORTIZATION OF INTANGIBLE ASSETS

	Three months ended March 31,
	2018			2017
Amortization of intangible assets	$	1,831,730		$	1,380,809
Increase over prior period	$	450,921
Increase - percentage		33	%
Percentage of net revenues		2	%		2	%

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Amortization of intangible assets for the three months ended March 31, 2018 increased $0.5 million to $1.8 million as compared to the three months ended March 31, 2017 due to the full quarter impact of the acquisition of eNom as well as acquisition of the mobile roaming assets of Otono Networks, Inc. in September 2017.

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.

	Three months ended March 31,
	2018			2017
Loss (gain) on currency forward contracts	$	(3,093	)	$	(34,425	)
Increase over prior period	$	31,332
Increase - percentage		(91	)%
Percentage of net revenues		0	%		0	%

As of March 31, 2018, we have entered into certain forward exchange contracts that do not comply with the requirements of hedge accounting to meet a portion of our future Canadian dollar requirements through September 2019. The Company recorded a gain of $3,093 for the change in fair value of outstanding contracts for the three months ended March 31, 2018, as compared to a total gain of $34,425 for the change in fair value of outstanding contracts and the settlement of contracts not designated as hedges for the three months ended March 31, 2017.

At March 31, 2018, our balance sheet reflects a net derivative instrument asset of $26,103 as a result of our existing foreign exchange contracts.

OTHER INCOME AND EXPENSES

	Three months ended March 31,
	2018			2017
Other income (expense), net	$	(772,002	)	$	(739,096	)
Increase over prior period	$	(32,906	)
Increase - percentage		4	%
Percentage of net revenues		(1	)%		(1	)%

Other expense during the three months ended March 31, 2018 was $0.8 million, as compared to other expense of $0.7 million for the three months ended March 31, 2017. Other expense consists primarily of the interest we incur in connection with our 2017 Amended Credit Facility (as discussed below), which was partially offset by income from the amortization of a $1.5 million Joint Marketing Agreement commencing in November 2015. The interest incurred primarily relates to our loan balances related to the acquisition of eNom and funding for expenditures associated with the Company’s Fiber to the Home program.

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INCOME TAXES

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

	Three months ended March 31,
	2018			2017
Provision for income taxes	$	1,182,918		$	(125,449	)
Increase in provision over prior period	$	1,308,367
Increase - percentage		1,043	%
Effective tax rate		24.0	%		0	%

For the three months ended March 31, 2018, we recorded an income tax expense of $1.2 million on income before income taxes of $4.9 million, using an estimated effective tax rate for Fiscal 2018 adjusted for certain minimum state taxes as well as the inclusion of a $0.1 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.  Comparatively, for the three months ended March 31, 2017, we recorded a provision for income tax recovery of $0.1 million on income before taxes of $2.3 million, using an estimated effective tax rate for the 2017 fiscal year and reflecting the $1.0 million tax recovery impacted 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 March 31, 2018 and December 31, 2017, respectively.

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. Because 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 U.S. 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), stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and infrequently occurring items. 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, 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 net income to adjusted EBITDA (dollars in thousands):

Reconciliation of Net income to Adjusted EBITDA (In Thousands of US Dollars) (unaudited)
	Three months ended March 31,
	2018 (unaudited)			2017 (unaudited)
Net income for the period	$	3,744		$	2,446
Depreciation of property and equipment		1,232			757
Amortization of intangible assets		2,331			1,761
Interest expense, net		896			868
Provision for income taxes		1,183			(125	)
Stock-based compensation		578			318
Unrealized loss (gain) on change in fair value of forward contracts		(3	)		(18	)
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities		176			(50	)
Acquisition and other costs1		241			382
Adjusted EBITDA	$	10,378		$	6,339

¹Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to our acquisition of eNom in January 2017.   Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Adjusted EBITDA increased to $10.4 million in the three months ended March 31, 2018 from $6.3 million in the three months ended March 31, 2017. The increase in adjusted EBITDA from period-to-period was primarily driven by the acquisition of eNom on January 20, 2017 and growth in Ting Mobile. 

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 began applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis. The impact of the fair value adjustment on outstanding hedged contracts for the three months ended March 31, 2018 was a net gain in other comprehensive income of less than $0.1 as compared to a net gain of $0.2 million for the three months ended March 31, 2017.

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

	Three months ended March 31,
	2018			2017
Other comprehensive income (loss)	$	17,425		$	105,609
Decrease over prior period	$	(88,184	)
Decrease - percentage		(84	)%
Percentage of net revenues		0	%		0	%

37

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2018, our cash and cash equivalents balance decreased to $16.6 million when compared to December 31, 2017.  Our principal uses of cash were $4.6 million in loan repayments, $1.2 million for the remaining 10% interest in Ting Virginia, LLC, $0.1 million of other costs, including tax payment associated with stock option exercises and continued investment in property and equipment of $5.1 million.   Our principal source of liquidity was cash provided by operating activities for the three months ended March 31, 2018 of $9.6 million. 

2017 Amended Credit Facility

On January 20, 2017, the Company and certain of its subsidiaries entered into a First Amended and Restated Secured Credit Agreement (the “2017 Amended Credit Agreement”) with Bank of Montreal (“BMO”), Royal Bank of Canada (“RBC”) and Bank of Nova Scotia (the “Lenders”) under which the Company increased its access to funds to an aggregate of $140 million. The 2017 Amended Credit Agreement amends and restates the Company’s Credit Agreement, dated as of August 18, 2016, with BMO and RBC (the “2016 Credit Agreement”). The 2017 Amended Credit Agreement, among other things, reduced the existing Tucows non-revolving facility (such existing non-revolving facility, together with other existing facilities, the “Existing Facilities”) from $40.0 million to $35.5 million, and established a new non-revolving credit facility of $85 million (the “New Facility”), and together with the Existing Facilities, the “2017 Amended Credit Facility”). The obligations of the Company under the 2017 Amended Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company.

Borrowings under the 2017 Amended Credit Agreement accrue interest and standby fees at variable rates based on borrowing elections by the Company and the Company’s total funded debt to EBITDA as described as described more fully in Note 8 of the unaudited Consolidated Financial Statements of the Company.

The 2017 Amended Credit Agreement. includes an additional repayment mechanism that is triggered based on the Company’s total funded debt to EBITDA calculation at the end of each fiscal year. If total funded debt to EBITDA exceeds 2.25:1 at December 31 of each year during the term, the Company is obligated to make a repayment of 50% of excess cash flow, all as set forth in the 2017 Amended Credit Agreement.

The 2017 Amended Credit Agreement contains customary events of default and affirmative and negative covenants and restrictions, including certain financial maintenance covenants such as a maximum total funded debt to EBITDA ratio and a minimum fixed charge ratio. As of March 31, 2018, we were in compliance with all our covenants.

For more information on the 2017 Amended Credit Agreement, see Note 7 to the Consolidated Financial Statements of the Company.

Other Credit Facilities

In addition to the 2017 Amended Credit Agreement, the company is party to a Loan Agreement with BMO, as amended from time to time, most recently in June 2017 (the “2012 Amended Credit Agreement”), pursuant to which the Company currently maintains a treasury risk management facility and credit card facility.

The treasury risk management facility under the 2012 Amended Credit Agreement 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 2012 Amended Credit Agreement, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of March 31, 2018, the Company held contracts in the amount of $12.8 million to trade U.S. dollars in exchange for Canadian dollars.

In Q4, 2017, the Company entered into a corporate credit card program with the Bank of Nova Scotia and the remaining Lenders. The program provides that BMO and the Bank of Nova Scotia may establish corporate credit card facilities with the Company in an amount of up to $5 million.

38

Cash Flow from Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2018 was $9.6 million, as compared to $2.4 million during the three months ended March 31, 2017.

Net income, after adjusting for non-cash charges, during the three months ended March 31, 2018 was $7.7 million. Net income included non-cash charges and recoveries of $4.0 million such as depreciation, amortization, stock-based compensation, excess tax benefits on stock-based compensation, unrealized gains on currency forward contracts, other income, and an expense for deferred tax. In addition, changes in our working capital provided $1.9 million.  Positive contributions of $14.6 million from movements in domain registry fees, accounts payables, accrued liabilities, accreditation fees payable, inventory and income taxes recoverable were offset by $12.7 million utilized in changes from accounts receivable, prepaid expenses, customer deposits and deferred revenue.

Cash Flow from Financing Activities

Net cash outflows from financing activities during the three months ended March 31, 2018 totaled $4.7 million as compared to cash inflows of $79.5 million during the three months ended March 31, 2017.  Cash outflows of $4.6 million related to principal repayments relating to our 2017 Credit Amended Credit Facility and a $0.1 million outflow from the net impact of exercise of stock options. During the three months ended March 31, 2017, the net cash inflow of $79.5 million was primarily related to the $87.0 million draw on the 2017 Amended Credit Facility to fund the acquisition of eNom and to fund FTTH capital expenditures.

Cash Flow from Investing Activities

Investing activities during the three months ended March 31, 2018 used net cash of $6.3 million as compared to using $81.9 million during the three months ended March 31, 2017.

On February 14, 2018, the Company acquired the remaining 10% interest in Ting Virginia, LLC. for a consideration of $1.2 million. The consideration was funded through cash flow from operations. For additional details, see note 4(a) to the interim unaudited financial statements included in this report.

 In addition, the Company invested $5.1 million in property and equipment, primarily to support the continued expansion of our fiber footprint. The Company continues to invest in our existing Ting Towns of Charlottesville, VA, Holly Springs, NC and Westminster, MD as well ramping construction in Sandpoint, ID and Centennial, CO, 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 increase significantly during Fiscal 2018.

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 choose or need to raise 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 March 31, 2018, 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 Annual Report on Form 10-K for the year ended December 31, 2017, we disclosed our contractual obligations.

As of March 31, 2018, there have been no other material changes to those contractual obligations outside the ordinary course of business.

 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 March 31, 2018. We are also subject to market risk exposure related to changes in interest rates under our 2017 Amended Credit Facility. We do not expect that any changes in interest rates will be material during fiscal 2018; 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.

39

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 contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

At March 31, 2018, we had the following outstanding forward exchange contracts to trade U.S. dollars in exchange for Canadian dollars:

Maturity date	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
April - June 2018		3,176,805		1.2919		7,737
July - September 2018		3,394,161		1.2893		7,165
October - December 2018		1,604,112		1.2873		3,421
January - March 2019		1,639,448		1.2852		3,192
April - June 2019		1,599,200		1.2831		2,788
July - September 2019		1,366,226		1.2809		1,800
	$	12,779,952		1.2875	$	26,103

As of March 31, 2018, the Company had $12.8 million of outstanding foreign exchange forward contracts which will convert to CDN $16.4 million. Of these contracts, $11.3 million met the requirements for hedge accounting (December 31, 2017 - the Company held nil contracts to trade U.S. dollars in exchange for Canadian dollars.

We have performed a sensitivity analysis model for foreign exchange exposure over the three months ended March 31, 2018. 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 March 31, 2018. 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 March 31, 2018 of approximately $0.9 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.

Interest rate risk

Our exposure to interest rate fluctuations relate primarily to our 2017 Amended Credit Facility.

As of March 31, 2018, we had an outstanding balance of $72.4 million on the 2017 Amended Credit Facility.  The 2017 Amended Credit Facility bears a base interest rate based on borrowing elections by the Company and the Company’s total Funded Debt to EBITDA plus LIBOR.  As of March 31, 2018, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on 2017 Amended Credit Facility by approximately $0.7 million, assuming that the loan balance as of March 31, 2018 is outstanding for the entire period.

40

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 annual report, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2018 our disclosure controls and procedures were effective at the reasonable assurance level.

(b)    Changes in Internal Control over Financial Reporting

The adoption of ASU 2014-09 did not require any material changes in our internal control over financial reporting. There were no other changes made in our internal controls over financial reporting during the three months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

41

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.

On August 30, 2017, Namecheap, Inc. (“Namecheap”) filed a complaint against the Company, eNom, Inc., and unknown John Does in the United States District Court for the Western District of Washington alleging breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment (the “Namecheap Federal Action”). Namecheap voluntarily dismissed the Namecheap Federal Action without prejudice on October 10, 2017. That same day, Namecheap filed a substantially similar complaint against Tucows Inc., eNom, LLC, and unknown John Does alleging breach of contract and breach of the implied duty of good faith and fair dealing in Washington State Court, King County (the “Namecheap State Action”). In the Namecheap State Action, Namecheap sought preliminary and ultimate equitable relief by way of the transfer of approximately 2.65 million domain names from the eNom, LLC platform to the Namecheap platform using BTAPPA. By Order dated November 15, 2017, the Court granted Namecheap’s Motion for Preliminary Injunction and the Company complied therewith in taking steps with Namecheap towards the BTAPPA. The Court ordered Namecheap to post a bond against damages sustained by the Company. The Company sought clarification from the Court on one BTAPPA requirement which the Court provided in the January 5, 2018 Order. The BTAPPA transfer was initiated on January 8, 2018 and completed on January 16, 2018. In addition to the equitable relief it has sought, Namecheap also seeks direct and consequential damages in the Namecheap State Action. The Company believes that the claims lack merit and intends to continue to defend them vigorously. The Company does not believe that this litigation is a material pending legal proceeding.

Item 1A. Risk Factors

In addition to the risk factor and other information set forth in this Quarterly Report, you should also carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, all of which could materially affect our business, financial condition or operating results and should be considered before making an investment decision regarding our securities. The risks described in this Quarterly Report and in our Annual Report on Form 10-K 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.

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

On March 1, 2017, The Company announced that its Board of Directors had 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 March 1, 2017 and terminated on February 14, 2018.  During the three months ended March 31, 2018, the Company did not repurchase any shares under this 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 will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and will terminate on or before February 13, 2019.  During the three months ended March 31, 2018, the Company did not repurchase any shares under this program.

Item 3.  Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

42

Item 6. Exhibits

(a) Exhibits.

Exhibit 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	Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
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	XBRL Instance *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation *
101.DEF	XBRL Taxonomy Extension Definition *
101.LAB	XBRL Taxonomy Extension Labels *
101.PRE	XBRL Taxonomy Extension Presentation *

* Filed herewith.

† Furnished herewith.

43

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: May 9, 2018	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)

44

EXHIBIT INDEX

Exhibit 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, as filed with the SEC on August 14, 2012).
31.1	Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
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	XBRL Instance *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation *
101.DEF	XBRL Taxonomy Extension Definition *
101.LAB	XBRL Taxonomy Extension Labels *
101.PRE	XBRL Taxonomy Extension Presentation *

* Filed herewith.

† Furnished herewith.

45

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Elliot Noss, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date May 9, 2018		/s/ ELLIOT NOSS
		Elliot Noss
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Davinder Singh, certify that: 

1.	I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date May 9, 2018		/s/ DAVINDER SINGH
		Davinder Singh
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elliot Noss, President and Chief Executive Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2018	/s/ ELLIOT NOSS
	Elliot Noss
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Davinder Singh, Chief Financial Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(3) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(4) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2018	/s/ DAVINDER SINGH
	Davinder Singh
	Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 07, 2018
Document Information [Line Items]
Entity Registrant Name	TUCOWS INC /PA/
Entity Central Index Key	0000909494
Trading Symbol	tcx
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		10,594,645
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 16,587,886	$ 18,049,164	[1]
Accounts receivable, net of allowance for doubtful accounts of $169,420 as of March 31, 2018 and $168,409 as of December 31, 2017	12,685,140	12,376,104	[1]
Inventory	2,898,383	2,944,246	[1]
Prepaid expenses and deposits	14,710,902	14,185,586	[1]
Derivative instrument asset, current portion (note 5)	21,515		[1]
Prepaid domain name registry and ancillary services fees, current portion	95,019,044	103,302,472	[1]
Income taxes recoverable	2,625,063	3,003,873	[1]
Total current assets	144,547,933	153,861,445	[1]
Derivative instrument asset, long-term portion (note 5)	4,588		[1]
Prepaid domain name registry and ancillary services fees, long-term portion	20,640,539	23,700,931	[1]
Property and equipment	28,688,762	24,620,298	[1]
Contract costs (note 11)	1,378,336	1,403,608	[2]
Intangible assets (note 6)	56,047,310	58,414,178	[1]
Goodwill (note 6)	90,053,483	90,053,483
Total assets	341,360,951	350,650,335	[1]
Current liabilities:
Accounts payable	9,343,179	7,026,282	[1]
Accrued liabilities	7,171,475	6,412,578	[1]
Customer deposits	12,980,327	15,255,305	[1]
Deferred rent, current portion	21,048	20,991	[1]
Loan payable, current portion (note 7)	18,289,853	18,289,853	[1]
Deferred revenue, current portion	122,203,880	129,154,622	[1]
Accreditation fees payable, current portion	1,226,544	1,174,733	[1]
Income taxes payable	984,707	1,226,157	[1]
Total current liabilities	172,221,013	178,560,521	[1]
Deferred revenue, long-term portion	28,779,438	31,426,906	[1]
Accreditation fees payable, long-term portion	277,022	288,755	[1]
Deferred rent, long-term portion	129,885	129,777	[1]
Loan payable, long-term portion (note 7)	54,127,120	58,634,174	[1]
Deferred gain	300,580	429,400	[1]
Deferred tax liability (note 8)	20,116,385	19,833,678	[1]
Redeemable non-controlling interest (note 4 (a))		1,136,390	[1]
Stockholders' equity (note 13)
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding	0	0	[1]
Common stock - no par value, 250,000,000 shares authorized; 10,592,115 shares issued and outstanding as of March 31, 2018 and 10,583,879 shares issued and outstanding as of December 31, 2017	15,426,104	15,368,161	[1]
Additional paid-in capital	2,547,140	2,166,768	[1]
Retained earnings	47,418,839	42,675,805	[1]
Accumulated other comprehensive income	17,425		[1]
Total stockholders' equity	65,409,508	60,210,734	[1]
Total liabilities and stockholders' equity	$ 341,360,951	$ 350,650,335	[1]

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The beginning balance consists entirely of a cumulative adjustment recorded on January 1st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accounts receivable, allowance for doubtful accounts	$ 169,420	$ 168,409
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,250,000	1,250,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	10,592,115	10,583,879
Common stock, shares outstanding (in shares)	10,592,115	10,583,879

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net revenues (note 10)	$ 95,795,691	$ 69,568,062	[1]
Cost of revenues (note 10)
Cost of revenues	68,972,220	49,310,712	[1]
Network expenses	2,574,087	2,343,196	[1]
Depreciation of property and equipment	1,131,143	590,347	[1]
Amortization of intangible assets (note 6)	499,032	380,162	[1]
Total cost of revenues	73,176,482	52,624,417	[1]
Gross profit	22,619,209	16,943,645	[1]
Expenses:
Sales and marketing	8,364,787	7,219,322	[1]
Technical operations and development	2,094,689	1,694,141	[1]
General and administrative	4,531,412	3,457,343	[1]
Depreciation of property and equipment	101,072	166,317	[1]
Amortization of intangible assets (note 6)	1,831,730	1,380,809	[1]
Loss (gain) on currency forward contracts (note 5)	(3,093)	(34,425)	[1]
Total expenses	16,920,597	13,883,507	[1]
Income from operations	5,698,612	3,060,138	[1]
Other income (expense):
Interest expense, net	(895,962)	(867,993)	[1]
Other income, net	123,960	128,897	[1]
Total other income (expense)	(772,002)	(739,096)	[1]
Income before provision for income taxes	4,926,610	2,321,042	[1]
Provision for income taxes (note 8)	1,182,918	(125,449)
Net income before redeemable non-controlling interest	3,743,692	2,446,491	[1]
Redeemable non-controlling interest	(26,336)	(125,764)	[1]
Net income attributable to redeemable non-controlling interest	26,336	125,764	[1]
Net income for the period	3,743,692	2,446,491	[1],[2]
Other comprehensive income, net of tax
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion)	17,425	186,229	[1]
Net amount reclassified to earnings (note 5)		(80,620)	[1]
Other comprehensive income net of tax of $5,585 and $60,079 for the three months ended March 31, 2018 and March 31, 2017 (note 5)	17,425	105,609	[1]
Comprehensive income for the period	$ 3,761,117	$ 2,552,100	[1]
Basic earnings per common share (note 9) (in dollars per share)	$ 0.35	$ 0.23	[1]
Shares used in computing basic earnings per common share (note 9) (in shares)	10,588,718	10,474,647	[1]
Diluted earnings per common share (note 9) (in dollars per share)	$ 0.35	$ 0.23	[1]
Shares used in computing diluted earnings per common share (note 9) (in shares)	10,792,613	10,776,515	[1]

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) (Parentheticals) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Other comprehensive income (loss), tax	$ 5,585	$ 60,079

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018		Mar. 31, 2017	[1]
Operating activities:
Net income for the period	$ 3,743,692		$ 2,446,491	[2]
Items not involving cash:
Depreciation of property and equipment	1,232,215		756,664
Amortization of debt discount and issuance costs	69,533		67,105
Amortization of intangible assets	2,330,762		1,760,971
Change in capitalized contract costs	25,272
Deferred income taxes (recovery)	(47,034)		1,199,661
Excess tax benefits on share-based compensation expense	(143,969)		(989,332)
Amortization of deferred rent	165		4,032
Loss on disposal of domain names	37,478		9,789
Other income	(128,820)		(128,820)
Loss (gain) on change in the fair value of forward contracts	(3,093)		(17,949)
Stock-based compensation	578,182		317,820
Change in non-cash operating working capital:
Accounts receivable	(309,036)		41,721
Inventory	45,863		170,996
Prepaid expenses and deposits	(525,316)		(3,557,508)
Prepaid domain name registry and ancillary services fees	11,343,820		(5,489,422)
Income taxes recoverable	264,829		(2,660,528)
Accounts payable	2,132,453		(3,446,427)
Accrued liabilities	758,897		1,830,922
Customer deposits	(2,274,978)		(83,591)
Deferred revenue	(9,598,210)		10,240,649
Accreditation fees payable	40,078		(71,327)
Net cash provided by operating activities	9,572,783		2,401,917
Financing activities:
Proceeds received on exercise of stock options	7,201		19,869
Payment of tax obligations resulting from net exercise of stock options	(147,068)		(712,234)
Proceeds received on loan payable			86,998,000
Repayment of loan payable	(4,571,843)		(6,258,278)
Payment of loan payable costs	(4,125)		(591,175)
Net cash (used in) provided by financing activities	(4,715,835)		79,456,182
Investing activities:
Additions to property and equipment	(5,116,854)		(3,692,893)
Acquisition of a portion of the minority interest in Ting Virginia, LLC (note 4(a))	(1,200,000)		(2,000,000)
Acquisition of Enom Incorporated, net of cash (note 4(b))			(76,237,460)
Acquisition of intangible assets	(1,372)
Net cash (used in) investing activities	(6,318,226)		(81,930,353)
Decrease in cash and cash equivalents	(1,461,278)		(72,254)
Cash and cash equivalents, beginning of period	18,049,164	[3]	15,105,075
Cash and cash equivalents, end of period	16,587,886		15,032,821
Supplemental cash flow information:
Interest paid	901,344		872,645
Income taxes paid, net	1,337,123		2,342,916
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for	$ 397,661		$ 250,847

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[3] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

XML

Note 1 - Organization of the Company

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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 U.S. consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. 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.

XML

Note 2 - Basis of Presentation

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Basis of Accounting [Text Block]

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

March 31, 2018

and the results of operations and cash flows for the interim periods ended

March 31, 2018

and

2017.

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, 2017

included in Tucows'

2017

Annual Report on Form 

10

-K filed with the SEC on

March 

6,

2018

(the

“2017

Annual Report”). There have been

no

material changes to our significant accounting policies and estimates during the

three

months ended

March 31, 2018

as compared to the significant accounting policies and estimates described in our

2017

Annual Report, except for the adoption of Accounting Standards Update (“ASU”)

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

(“ASU

2014

-

09”

).  See Note

3

for more information.

XML

Note 3 - Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

3.

Recent accounting pronouncements:

Recent Accounting Pronouncements Adopted

On

January 1, 2018,

the Company adopted Accounting Standards Updates ("ASU") 

No.

2017

-

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business

and ASU

2015

-

16,

Simplifying the Accounting for Measurement-Period Adjustments.

The adoption of these updates did

not

have a significant impact on the consolidated financial statements.  We also adopted ASU

2014

-

09

and the impact of such adoption is described in more detail below.

ASU

2014

-

09:

Adoption of Revenue from Contracts with Customers (Topic

606

)

On 

January 

1,

2018,

the Company adopted ASU

2014

-

09

using the modified retrospective method by recognizing the cumulative effect of initially applying ASU

2014

-

09

as an adjustment to the opening balance of equity as at

January 1, 2018.

The results for reporting periods beginning after 

January 

1,

2018

 are presented under ASU

2014

-

09,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting policy, under ASC

605,

Revenue Recognition (Topic

605

).  The adoption of Topic

606

did

not

affect the Company’s cash flows from operating, investing, or financing activities. Furthermore, the impact on timing of revenue recognition was

not

material as the treatment of revenue for services rendered over time is consistent under Topic

606

and Topic

605.

The details of the significant changes and quantitative impact of the changes are set out below. For a more comprehensive description of how the Company recognizes revenue under the new revenue standard in accordance with its performance obligations, see note

10.

The Company previously recognized commission fees related to Ting Mobile, Ting Internet, eNom domain registration and eNom domain related value-added service contracts as selling expenses when they were incurred. Under ASU

2014

-

09,

when these commission fees are deemed incremental and are expected to be recovered, the Company capitalizes as an asset such commission fees as costs of obtaining a contract. These commission fees are amortized into income consistently with the pattern of transfer of the good or service to which the asset relates.  The estimation of the amortization period for the costs to obtain a contract required judgement.

Under Topic

606,

the Company has applied the following practical expedients: 

a)	When the amortization period for costs incurred to obtain a contract with a customer is less than one year, the Company has elected to apply a practical expedient to expense the costs as incurred; and
b)	For 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).

On

January 1, 2018

as a result of adopting ASU

2014

-

09,

the Company recorded a contract cost asset of

$1.4

million with a corresponding increase to opening retained earnings and deferred tax liability of

$1.1

million and

$0.3

million, respectively, due to the deferral of costs of obtaining contracts. The impact of the changes to the Company’s financial statements in the current period are as follows:

	March 31, 2018
						Balances without
Consolidated Balance Sheet	As reported		Adjustments			adoption of Topic 606
Assets
Contract Costs (note 11)	$	1,378,336	$	(1,378,336	)	$	-
Total assets		341,360,951	$	(1,378,336	)	$	339,982,615
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	20,116,385	$	(346,900	)	$	19,769,485
Retained earnings		47,418,839		(1,031,436	)		46,387,403
Total Liabilities and Shareholders' Equity	$	341,360,951	$	(1,378,336	)	$	339,982,615

	Three months ended, March 31, 2018
						Balances without
Consolidated Statements of Operations and Comprehensive Income	As reported		Adjustments			adoption of Topic 606
Expenses
Sales and marketing	$	8,364,787	$	(25,272	)	$	8,339,515
Income before provision for income taxes		4,926,610		25,272			4,951,882
Provision for income tax (note 8)		1,182,918		(6,134	)		1,189,052
Net income for the period	$	3,743,692	$	19,138		$	3,762,830

Recent Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the Financial Accounting Standards Board issued ASU

No.

2016

-

02,

 

Leases (Topic

842

)

(“ASU

2016

-

02”

).  ASU

2016

-

02

requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. More specifically, ASU

2016

-

02

requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after

December 15, 2018,

which begins on

January 1, 2019

for the Company. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company will adopt this guidance in the

first

quarter of fiscal

2019

and is in the process of evaluating the impact of the adoption of ASU

2016

-

02

will have on its consolidated financial statements.

XML

Note 4 - Acquisitions

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4.

Acquisitions:

(a)  Blue Ridge Websoft

On

February 27, 2015,

Ting Fiber, Inc.,

one

of the Company’s wholly owned subsidiaries, acquired a

70%

ownership interest in Ting Virginia, LLC and its subsidiaries, Blue Ridge Websoft, LLC (doing business as Blue Ridge Internet Works), Fiber Roads, LLC and Navigator Network Services, LLC (the "BRI Group") for consideration of approximately

$3.5

million.

On

February 1, 2017,

under the terms of a call option in the agreement, Ting Fiber, Inc. acquired an additional

20%

interest in Ting Virginia, LLC from the selling shareholders (the “Minority Shareholders”) for consideration of

$2.0

million.

On

February 13, 2018,

the Company entered into an agreement Minority Shareholders pursuant to which the Minority Shareholders could immediately exercise their put option to sell their remaining

10%

ownership interest in Ting Virginia, LLC for

$1.2

million to the Company.  The put option was exercised on

February 13, 2018

and the Company paid

$1.2

million for the remaining

10%

ownership interest and Ting Virginia, LLC became a wholly-owned subsidiary of the Company. 

(b)  eNom, Incorporated

On

January 20, 2017,

the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with its indirect wholly owned subsidiary, Tucows (Emerald), LLC, Rightside Group, Ltd., and Rightside Operating Co., pursuant to which Tucows (Emerald), LLC purchased from Rightside Operating Co. all of the issued and outstanding capital stock of eNom, Incorporated (“eNom”), a domain name registrar business. The purchase price was

$77.8

million, which represented the agreed upon purchase of

$83.5

million less an amount of

$5.7

million related to the working capital deficiency acquired.

XML

Note 5 - Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.

Derivative instruments and hedging activities:

Foreign currency forward contracts

In

October 2012,

the Company entered into 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, 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. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs. The Company does

not

use these forward contracts for trading or speculative purposes. These forward contracts typically mature between

one

and

eighteen

months.

The Company has designated certain of these transactions as cash flow hedges of forecasted transactions under Accounting Standards Codification (“ASC”) Topic 

815,

Derivatives and Hedging

. For certain contracts, as the critical terms of the hedging instrument and 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. Accordingly, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income. The fair value of the contracts, as of

March 31, 2018,

is recorded as derivative instrument assets. For certain contracts where the hedged transactions are

no

longer probable to occur, the loss on the associated forward contract is reclassified from AOCI to earnings.

As of

March 31, 2018,

the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was

$12.8

 million, of which

$11.3

 million were designated as hedges as compared to the period as of

December 31, 2017

when the Company held

nil

contracts to trade U.S. dollars in exchange for Canadian dollars.

As of 

March 31, 2018,

we had the following outstanding forward exchange contracts to trade U.S. dollars in exchange for Canadian dollars: 

Maturity date	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
April - June 2018		3,176,805		1.2919		7,737
July - September 2018		3,394,161		1.2893		7,165
October - December 2018		1,604,112		1.2873		3,421
January - March 2019		1,639,448		1.2852		3,192
April - June 2019		1,599,200		1.2831		2,788
July - September 2019		1,366,226		1.2809		1,800
	$	12,779,952		1.2875	$	26,103

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

		As of March 31, 2018		As of December 31, 201 7
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	23,010	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	3,093	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	26,103	$	-

Movement in Accumulated Other Comprehensive

Income ("AOCI") balance for the

three

months ended

March 31, 2018

:

	Gains and losses on cash flow hedges		Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	-	$		-	$	-
Other comprehensive income (loss) before reclassifications		23,010		(5,585	)		17,425
Amount reclassified from accumulated other comprehensive income		-		-			-
Other comprehensive income (loss) for the three months ended March 31, 2018		23,010		(5,585	)		17,425
Ending AOCI balance – March 31, 2018	$	23,010	$	(5,585	)	$	17,425

Effects of derivative instruments on income and other comprehensive income (OCI) for the

three

months ended

March 31, 2018

and

March 31, 2017

are as follows:

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)		Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
			Operating expenses	$	-	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2018	$	-	Cost of revenues	$	-	Cost of revenues		—
			Operating expenses	$	105,355	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2017	$	105,609	Cost of revenues	$	21,128	Cost of revenues		—

In addition to the above, for those foreign currency forward contracts

not

designated as hedges, the Company recorded a gain of

$3,093

for the change in fair value of outstanding contracts for the

three

months ended

March 31, 2018,

in the consolidated statement of operations and comprehensive income. The Company has recorded a total gain of

$34,425

for the change in fair value of outstanding contracts and the settlement of contracts  

not

designated as hedges for the

three

months ended

March 31, 2017,

in the consolidated statement of operations and comprehensive income. 

XML

Note 6 - Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

6.

Goodwill and Other Intangible Assets:

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

$90.1

million as of

March 31, 2018 (

December 31, 2017 –

$90.1

million). The Company's goodwill relates

98%

(

$87.9

million) to its Domain Services operating segment and

2%

(

$2.2

 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.

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

March 31, 2018

and

March 31, 2017,

the Company assessed that certain domain names that were originally acquired in the

June 2006

acquisition of Mailbank.com Inc. that were up for renewal, should be renewed.   

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

four

to

fifteen

years.

A summary of acquired intangible assets for the

three

months ended

March 31, 2018

is as follows:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,209,912		$	1,552,354		$	10,792,790		$	32,185,398		$	2,112,500		$	561,224		$	58,414,178
Acquisition of customer relationships		-			-			-			1,372			-			-			1,372
Additions to/(disposals from) domain portfolio, net		(4,543	)		(32,935	)		-			-			-			-			(37,478	)
Amortization expense		-			-			(450,510	)		(1,381,220	)		(487,500	)		(11,532	)		(2,330,762	)
Balances March 31, 2018	$	11,205,369		$	1,519,419		$	10,342,280		$	30,805,550		$	1,625,000		$	549,692		$	56,047,310

The following table shows the estimated amortization expense in future periods, assuming

no

further additions to acquired intangible assets are made:

	Year ending December 31,
Remainder of 2018	$	6,910,060
2019		7,334,660
2020		7,172,160
2021		7,172,160
2022		7,172,160
Thereafter		7,561,322
Total	$	43,322,522

As of

March 31, 2018,

the accumulated amortization for the definite life intangible assets was

$17.6

 million.

XML

Note 7 - Loan Payable

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

7.

Loan payable:

2017

Amended Credit Facility

On

January 20, 2017,

the Company entered into an amended and restated secured Credit Agreement (the

“2017

Amended Credit Agreement”) with Bank of Montreal (“BMO” or the “Administrative Agent”), Royal Bank of Canada and Bank of Nova Scotia (collectively with “Lenders”) under which the Company increased its access to funds to an aggregate of

$140

million. This amendment and restatement to the Company’s

2016

Credit Facility (defined below), among other things, reduced the existing Tucows non-revolving facility (such existing non-revolving facility, together with other existing facilities, the “Existing Facilities”) from

$40.0

million to

$35.5

million, and established a new non-revolving credit facility of

$84.5

million (the “Facility D”). The Company immediately drew down

$84.5

million under Facility D to fund the acquisition of eNom (note

4

(b)). The

“2016

Credit Facility” refers to the credit facility established under the Company’s secured credit agreement (the

“2016

Credit Agreement”) among the Company, BMO and the Lenders, dated as of

August 18, 2016.

 In connection with the

2017

Amended Credit Agreement, the Company incurred

$0.6

million of fees paid to lenders and 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.

The obligations of the Company under the

2017

Amended Credit Facility are secured by a

first

priority lien on substantially all of the personal property and assets of the Company.

The

2017

Amended Credit Facility has a

four

-year term. Under the

2017

Amended Credit Facility, the Company has access to an aggregate of up to

$140

million in funds that are available as follows:

● a $5 million revolving credit facility (“Facility A”);

● a $15 million revolving reducing term facility (“Facility B”);

● a $35.5 million non-revolving facility (“Facility C”); and

● a $84.5 million non-revolving facility (“Facility D”).

Borrowings under the

2017

Amended Credit Facility accrue interest and standby fees at variable rates based on borrowing elections by the Company and the Company’s Total Funded Debt to EBITDA as described below. The purpose of Facility A is for general working capital and general corporate requirements, while Facility B and Facility C support share repurchases, acquisitions and capital expenditures associated with the Company’s Fiber to the Home program (“FTTH”). Facility D was provided and used for the acquisition of eNom.

The repayment terms for Facility A require monthly interest payments with any final principal payment becoming due upon maturity of the

2017

Amended Credit Facility. Under the repayment terms for Facility B, at

December

31st

 of each year, balances drawn during the year that remain outstanding will become payable on a quarterly basis commencing the

first

quarter of the following year, for the period of amortization based on the purpose of the draw. For Facilities C and D, each draw will become payable beginning the

first

full quarter post initial draw for the period of amortization based on the purpose of the draw. The amortization periods for Facilities B, C and D are based on the purposes of the draws as follows: draws for share repurchases are repaid over

four

years, draws for acquisitions over

five

years and draws for FTTH capital expenditures over

seven

years. The

2017

Amended Credit Facility also includes a mechanism that is triggered based on the Company’s Total Funded Debt to EBITDA calculation at the end of each fiscal year. If Total Funded Debt to EBITDA exceeds

2.25:1

at

December 31

of each year during the term, the Company is obligated to make a repayment of

50%

of Excess Cash Flow as defined under the agreement.

The

2017

Amended Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The

2017

Amended Credit Facility requires that the Company to comply with the following financial covenants at all times, which are to be calculated on a rolling

four

quarter basis: (i) maximum Total Funded Debt to EBITDA Ratio of

2.50:1

until

September 30, 2018

and

2.25:1

thereafter; and (ii) minimum Fixed Charge Coverage Ratio of

1.20:1.

Further, the Company’s maximum annual Capital Expenditures cannot exceed

$50.0

million per year, which limit will be reviewed on an annual basis. In addition, funded share repurchases are

not

to exceed

$20

million, or up to

$40

million so long as the total loans related to share repurchases do

not

exceed

1.5

times of trailing

twelve

months EBITDA. As at and for the periods ending

March 31, 2018,

and

March 31, 2017,

the Company was in compliance with these covenants.

On 

January 24, 2018,

the Company entered into the Second Interim Amendment to First Amended and Restated Credit Agreement (the “Second Interim Amendment”) with BMO and the Lenders. The Second Interim Amendment provides that certain defined terms in Section 

1.01

 of the Credit Agreement are added and updated to reflect the inclusion of liabilities to Sprint Mobile similar to the previous inclusion of T-Mobile liabilities. The Second Interim Amendment also permits Tucows to retain bank accounts with Silicon Valley Bank with the aggregate amount held in such accounts 

not

 to exceed 

$3.0

 million.

 Borrowings under the

2017

Amended Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to 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 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

The following table summarizes the Company’s borrowings under the credit facilities:

	March 31, 2018			December 31, 2017
Facility C		5,582,775			5,930,338
Facility D		67,598,400			71,823,300
Less: unamortized debt discount and issuance costs		(764,202	)		(829,611	)
Total loan payable		72,416,973			76,924,027
Less: loan payable, current portion		18,289,853			18,289,853
Loan payable, long-term portion		54,127,120			58,634,174

The following table summarizes our scheduled principal repayments as of

March 31, 2018:

Remainder of 2018		13,717,390
2019		18,289,853
2020		18,103,004
2021		17,542,457
2022		4,867,757
Thereafter		660,714
	$	73,181,175

Other Credit Facilities

Prior to the Company entering into the

2016

Credit Facility, the Company had credit agreements (collectively the “Amended Credit Facility”) with BMO that were amended on

November 19, 2012,

and which provided it with access to

two

revolving demand loan facilities (the

“2012

Demand Loan Facilities”), a treasury risk management facility, an operating demand loan and a credit card facility. The Company continues to have access to the treasury risk management facility and credit card facility, with the remaining loan facilities having been extinguished.

The treasury risk management facility under the Amended Credit Facility 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 Amended Credit Facility, the Company

may

enter into such agreements at market rates with terms

not

to exceed

18

 months. As of

March 31, 2018,

the Company held contracts in the amount of

$12.8

 million to trade U.S. dollars in exchange for Canadian dollars (note

5

).

In

Q4,

2017,

the Company entered into a corporate credit card program with the Bank of Nova Scotia and the Lenders. The program provides that BMO and the Bank of Nova Scotia

may

establish corporate credit card facilities with the Company in an amount of up to

$5

million.

XML

Note 8 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8.

Income taxes

For the

three

months ended

March 31, 2018,

we recorded an income tax expense of

$1.2

million on income before income taxes of

$4.9

million, using an estimated effective tax rate for the fiscal year ending

December 31, 2018 (

“Fiscal

2018”

) adjusted for certain minimum state taxes as well as the inclusion of a

$0.1

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. Comparatively, for the

three

months ended

March 31, 2017,

the Company recorded an income tax recovery of

$0.1

million on income before taxes of

$2.3

million, using an estimated effective tax rate for the

2017

fiscal year and adjusted for the

$1.0

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.

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

March 31, 2018

and

December 31, 2017,

respectively.

XML

Note 9 - Basic and Diluted Earnings Per Common Share

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

9.

Basic and diluted earnings per common share:

Basic earnings per common share has been calculated on the basis of net income for the period divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share gives effect to all dilutive potential common shares outstanding at the end of the year assuming that they had been issued, converted or exercised at the later of the beginning of the year or their date of issuance. In computing diluted earnings per share, the treasury stock method is used to determine the number of shares assumed to be purchased from the conversion of common share equivalents or the proceeds of the exercise of options. 

The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation:

	Three months ended March 31,
	2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,743,692	$	2,446,491
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,588,718		10,474,647
Effect of outstanding stock options		203,895		301,868
Diluted weighted average number of shares outstanding		10,792,613		10,776,515
Basic earnings per common share	$	0.35	$	0.23
Diluted earnings per common share	$	0.35	$	0.23

For the

three

months ended

March 31, 2018,

outstanding options to purchase

333,300

common shares were

not

included in the computation of diluted income per common share because all such options’ exercise price was greater than the average market price of the common shares for the period as compared to the

three

months ended

March 31, 2017,

where

28,500

outstanding options were

not

included in the computation.

During the

three

months ended

March 31, 2018

and

2017,

no

common shares were repurchased and cancelled under the terms of our stock repurchase programs announced in

February 2018,

ending in

February 2019

or

March 2017,

ended in

March 2018.

XML

Note 10 - Revenue

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

10.

Revenue

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. 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 ser

v

ices

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

12.

 (a) Network Access Services 

The Company generates Network Access 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 Internet Service Providers (“ISPs”).

Ting 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 fixed Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Fixed 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.

Both Ting mobile and fixed 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 mobile and fixed Internet access 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 brand 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) 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 ratably 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 and hosted email provide our resellers and retail registrant customers 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.

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.

Disaggregation of Revenue

The following is a summary of the Company’s revenue earned from each significant revenue stream:

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	21,872,109	$	17,962,868
Other Services		1,736,116		1,286,917
Total Network Access Services		23,608,225		19,249,785
Domain Services:
Wholesale
Domain Services		58,427,707		39,091,817
Value Added Services		4,434,572		3,907,889
Total Wholesale		62,862,279		42,999,706
Retail		8,436,563		6,401,703
Portfolio		888,624		916,868
Total Domain Services		72,187,466		50,318,277
	$	95,795,691	$	69,568,062

During the 

three

months ended

March 31, 2018,

one

customer accounted for

18%

of total revenue, and for the

three

months ended

March 31, 2017,

no

customer accounted for more than

10%

of revenue. As at

March 31, 2018

and

December 31, 2017,

no

customer accounted for more than

10%

of accounts receivable.

The following is a summary of the Company’s cost of revenue from each significant revenue stream: 

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	11,265,767	$	9,567,160
Other Services		940,751		825,256
Total Network Access Services		12,206,518		10,392,416
Domain Services:
Wholesale
Domain Services		51,314,038		34,462,926
Value Added Services		857,268		575,923
Total Wholesale		52,171,306		35,038,849
Retail		4,409,742		3,617,402
Portfolio		184,654		262,045
Total Domain Services		56,765,702		38,918,296
Network Expenses:
Network, other costs		2,574,087		2,343,196
Network, depreciation and amortization costs		1,630,175		970,509
		4,204,262		3,313,705
	$	73,176,482	$	52,624,417

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.

The opening balance of deferred revenue was

$160.6

million as of

Jan 1, 2018.

Significant changes in deferred revenue were as follows:

	March 31,  2018
Balance, beginning of period	$	160,581,528
Deferral of revenue		60,370,051
Recognition of revenue 1		(69,968,261	)
Balance, end of period	$	150,983,318

1

As a result of the bulk transfer of

2.65

million domain names to Namecheap on

January

5th,

2018,

recognized revenue for the

three

months ended

March 31, 2018

includes

$14.6

million related to previously deferred revenue for these names.

Remaining Performance Obligations

:

As the Company fulfills its performance obligations, the following table includes revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) as at

March 31, 2018:

	March 31, 2018
Remainder of 2018	$	108,710,643
2019		24,366,389
2020		7,116,720
2021		4,010,109
2022		2,561,121
Thereafter		3,658,053
Total	$	150,423,035

For 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).

XML

Note 11 - Contract Costs

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Capitalized Contract Costs [Text Block]

11.

Contract costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the period of benefit of those costs to be longer than

one

year and those costs are expected to be recoverable under the term of the contract. We have identified certain sales incentive programs that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of

$1.4

million at

March 31, 2018.

Capitalized contract acquisition costs are amortized into operating expense based on the transfer of goods or services to which the assets relate which typically range

2

–

10

years. For the quarter ended

March 31, 2018,

the Company capitalized

$195,408

 and amortized

$220,680

 of contract costs, respectively, for a net expense impact of

$25,272

to the Consolidated Statement of Operations and Comprehensive Income. There was

no

impairment loss recognized in relation to the costs capitalized during the

three

months ending

March 31, 2018.

The breakdown of the movement in the contract costs balance for the

three

months ending

March 31, 2018

is as follows:

	March 31, 2018
Balance, beginning of period (1)	$	1,403,608
Capitalization of costs		195,408
Amortization of costs		(220,680	)
Balance, end of period	$	1,378,336

(

1

)

The beginning balance consists entirely of a cumulative adjustment recorded on

January 1

st

,

2018

as a result of the modified retrospective adoption of ASU

2014

-

09.

See note

3

for additional information.  

When the amortization period for costs incurred to obtain a contract with a customer is less than

one

year, we have elected to apply a practical expedient to expense the costs as incurred.  These costs include our internal sales compensation program and certain partner sales incentive programs.

XML

Note 12 - Segment Reporting

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

1

2

. Segment reporting:

(a)  We are organized and managed based on

two

operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate and are described as follows:

1.

     Network Access Services - This segment derives revenue from the sale of mobile phones, telephony services, high speed Internet access, billing solutions to individuals and small businesses primarily through the Ting website. Revenues are generated in the U.S.

2.

     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. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

The Chief Executive Officer (the “CEO”) is the chief operating decision maker and regularly reviews the operations and performance by segment. The CEO reviews gross profit as (a) key measure of performance for each segment and (b) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses, general and administrative expenses, depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and are 

not

 included in the measurement of segment profitability. 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

2,

3

and

10

to these consolidated financial statements.

Information by operating segments (with the exception of disaggregated revenue, which is contained in Note

10

), which is regularly reported to the CEO is as follows:

	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2018
Net Revenues	$	23,608,225	$	72,187,466	$	95,795,691
Cost of revenues
Cost of revenues		12,206,518		56,765,702		68,972,220
Network expenses		490,215		2,083,872		2,574,087
Depreciation of property and equipment		833,060		298,083		1,131,143
Amortization of intangible assets		11,532		487,500		499,032
Total cost of revenues		13,541,325		59,635,157		73,176,482
Gross Profit		10,066,900		12,552,309		22,619,209
Expenses:
Sales and marketing						8,364,787
Technical operations and development						2,094,689
General and administrative						4,531,412
Depreciation of property and equipment						101,072
Amortization of intangible assets						1,831,730
Loss (gain) on currency forward contracts						(3,093	)
Income from operations						5,698,612
Other income (expenses), net						(772,002	)
Income before provision for income taxes					$	4,926,610

	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2017
Net Revenues	$	19,249,785	$	50,318,277	$	69,568,062
Cost of revenues
Cost of revenues		10,392,416		38,918,296		49,310,712
Network expenses		541,963		1,801,233		2,343,196
Depreciation of property and equipment		426,078		164,269		590,347
Amortization of intangible assets		11,532		368,630		380,162
Total cost of revenues		11,371,989		41,252,428		52,624,417
Gross Profit		7,877,796		9,065,849		16,943,645
Expenses:
Sales and marketing						7,219,322
Technical operations and development						1,694,141
General and administrative						3,457,343
Depreciation of property and equipment						166,317
Amortization of intangible assets						1,380,809
Loss (gain) on currency forward contracts						(34,425	)
Income from operations						3,060,138
Other income (expenses), net						(739,096	)
Income before provision for income taxes					$	2,321,042

(b) The following is a summary of the Company’s property and equipment by geographic region:

	March 31, 2018		December 31, 2017
Canada	$	1,555,813	$	1,176,371
United States		27,107,392		23,417,435
Germany		25,557		26,492
	$	28,688,762	$	24,620,298

(c) The following is a summary of the Company’s amortizable intangible assets by geographic region:

	March 31, 2018		December 31, 2017
Canada	$	7,414,822	$	7,748,940
United States		35,839,260		37,783,202
Germany		68,440		119,770
	$	43,322,522	$	45,651,912

(d) Valuation and qualifying accounts:

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses		Write-offs during period		Balance at end of period
Three months ended March 31, 2018	$	168,409	$	1,011	$	-	$	169,420
Year ended December 31, 2017	$	164,145	$	4,264	$	-	$	168,409

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Note 13 - Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

1

3

. Stockholders’ Equity:

The following unaudited table summarizes stockholders' equity transactions for the

three

-month period ended

March 31, 2018: 

												Accumulated
						Additional			Retained			other		Total
	Common stock					paid in			earnings			comprehensive		stockholders'
	Number			Amount		capital			(deficit)			income (loss)		equity
Balances, December 31, 2017		10,583,879		$	15,368,161	$	2,166,768		$	42,675,805		$	-	$	60,210,734
Impact of Adoption of ASU 2014-09		-			-		-			1,062,952			-		1,062,952
Balance on January 1, 2018		10,583,879			15,368,161		2,166,768			43,738,757			-		61,273,686
Exercise of stock options		12,563			57,943		(50,742	)		-			-		7,201
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,327	)				(147,068	)		-			-		(147,068	)
Stock-based compensation (note 15)		-			-		578,182			-			-		578,182
Net income		-			-		-			3,743,692			-		3,743,692
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(63,610	)		-		(63,610	)
Other comprehensive income (loss)		-			-		-			-			17,425		17,425
Balances, March 31, 2018		10,592,115		$	15,426,104	$	2,547,140		$	47,418,839		$	17,425	$	65,409,508

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 will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on

February 14, 

2018

and will terminate on or before

February 13, 2019.

During the

three

months ended

March 31, 2018,

the Company did

not

repurchase any shares under this program.

On

March 1, 

2017,

the Company announced that its Board of Directors had 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

March 1, 

2017

and terminated on

February 14, 2018.

During the

three

months ended

March 31, 2018,

the Company did

not

repurchase any shares under this program.

On

February 

9,

 

2016,

the Company announced that its Board of Directors had 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 

10,

 

2016

and terminated on

February 9, 2017.

During the

three

months ended

March 31, 2017,

the Company did

not

repurchase any shares under this program.

XML

Note 14 - Share-based Payments

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

1

4

. 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

March 31, 2018

and

March 31, 2017

are as follows:

	Three months ended March 31,					Three months ended March 31,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		11,000			58.52		32,875			40.56
Exercised		(12,563	)		7.79		(68,876	)		7.83
Forfeited		(17,125	)		42.54		(7,889	)		18.46
Expired		-			-		-			-
Outstanding, end of period		634,883			37.48		430,611			15.46
Options exercisable, end of period		245,933		$	16.62		264,753		$	10.72

As of

March 31, 2018,

the exercise prices, weighted average remaining contractual life and intrinsic values of outstanding options were as follows:

			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
$ 2.92	-	$ 8.92		81,695	$	6.81		0.7	$	4,018,538		81,695	$	6.81		0.7	$	4,018,538
$10.16	-	$19.95		117,013		16.31		2.5		4,644,246		90,613		15.93		2.3		3,631,248
$21.10	-	$27.53		75,000		23.67		3.1		2,424,562		55,000		24.61		2.8		1,726,562
$35.25	-	$37.35		14,375		35.89		4.4		289,094		10,625		36.11		4.2		211,281
$43.15	-	$47.00		18,500		44.19		5.1		218,475		8,000		43.75		5.1		97,988
$53.20	-	$58.65		328,300		55.51		5.4		188,055		-		-		-		-
				634,883	$	37.48		4.0	$	11,782,970		245,933	$	16.62		2.0	$	9,685,617

Total unrecognized compensation cost relating to unvested stock options at

March 31, 2018,

prior to the consideration of expected forfeitures, is approximately

$5.8

 million and is expected to be recognized over a weighted average period of

2.8

years.

The Company recorded stock-based compensation of

$0.6

million for the

three

months ended

March 31, 2018

and 

$0.3

million for the

three

months ended

March 31, 2017,

respectively.

The Company has

not

capitalized any stock-based compensation expense as part of the cost of an asset.

XML

Note 15 - Fair Value Measurement

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

1

5

. 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 instrument assets and liabilities measured at fair value on a recurring basis at

March 31, 2018:

	March 31, 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	26,103	$	-	$	26,103
Derivative instrument liability	$	-	$	-	$	-	$	-

The following table provides a summary of the fair values of the Company's derivative instrument assets measured at fair value on a recurring basis as at

December 31, 2017:

	December 31, 2017
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	-	$	-	$	-
Derivative instrument liability	$	-	$	-	$	-	$	-

XML

Note 16 - Contingencies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

16.

Contingencies

On

August 30, 2017,

Namecheap, Inc. (“Namecheap”) filed a complaint against the Company, eNom, Inc., and unknown John Does in the United States District Court for the Western District of Washington alleging breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment (the “Namecheap Federal Action”).  Namecheap voluntarily dismissed the Namecheap Federal Action without prejudice on

October 10, 2017.

That same day, Namecheap filed a substantially similar complaint against Tucows Inc., eNom, LLC, and unknown John Does alleging breach of contract and breach of the implied duty of good faith and fair dealing in Washington State Court, King County (the “Namecheap State Action”). In the Namecheap State Action, Namecheap sought preliminary and ultimate equitable relief by way of the transfer of approximately

2.65

million domain names from the eNom, LLC platform to the Namecheap platform using BTAPPA. By Order dated

November 15, 2017,

the Court granted Namecheap’s Motion for Preliminary Injunction and the Company complied therewith in taking steps with Namecheap towards the BTAPPA. The Court ordered Namecheap to post a bond against damages sustained by the Company. The Company sought clarification from the Court on

one

BTAPPA requirement which the Court provided in the

January 5, 2018

Order. The BTAPPA transfer was initiated on

January 8, 2018

and completed on

January 16, 2018.

In addition to the equitable relief it has sought, Namecheap also seeks direct and consequential damages in the Namecheap State Action. The Company believes that the claims lack merit and intends to continue to defend them vigorously.  The Company does

not

believe that this litigation is a material pending legal proceeding.

The Company has other legal claims and lawsuits in connection with its ordinary business operations. The Company intends to vigorously defend these claims. While the final outcome with respect to any actions or claims outstanding or pending as of

March 31, 2018

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.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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

March 31, 2018

and the results of operations and cash flows for the interim periods ended

March 31, 2018

and

2017.

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, 2017

included in Tucows'

2017

Annual Report on Form 

10

-K filed with the SEC on

March 

6,

2018

(the

“2017

Annual Report”). There have been

no

material changes to our significant accounting policies and estimates during the

three

months ended

March 31, 2018

as compared to the significant accounting policies and estimates described in our

2017

Annual Report, except for the adoption of Accounting Standards Update (“ASU”)

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

(“ASU

2014

-

09”

).  See Note

3

for more information.

XML

Note 3 - Recent Accounting Pronouncements (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	March 31, 2018
						Balances without
Consolidated Balance Sheet	As reported		Adjustments			adoption of Topic 606
Assets
Contract Costs (note 11)	$	1,378,336	$	(1,378,336	)	$	-
Total assets		341,360,951	$	(1,378,336	)	$	339,982,615
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	20,116,385	$	(346,900	)	$	19,769,485
Retained earnings		47,418,839		(1,031,436	)		46,387,403
Total Liabilities and Shareholders' Equity	$	341,360,951	$	(1,378,336	)	$	339,982,615

	Three months ended, March 31, 2018
						Balances without
Consolidated Statements of Operations and Comprehensive Income	As reported		Adjustments			adoption of Topic 606
Expenses
Sales and marketing	$	8,364,787	$	(25,272	)	$	8,339,515
Income before provision for income taxes		4,926,610		25,272			4,951,882
Provision for income tax (note 8)		1,182,918		(6,134	)		1,189,052
Net income for the period	$	3,743,692	$	19,138		$	3,762,830

XML

Note 5 - Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Derivative Instruments [Table Text Block]

Maturity date	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
April - June 2018		3,176,805		1.2919		7,737
July - September 2018		3,394,161		1.2893		7,165
October - December 2018		1,604,112		1.2873		3,421
January - March 2019		1,639,448		1.2852		3,192
April - June 2019		1,599,200		1.2831		2,788
July - September 2019		1,366,226		1.2809		1,800
	$	12,779,952		1.2875	$	26,103

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

		As of March 31, 2018		As of December 31, 201 7
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	23,010	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	3,093	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	26,103	$	-

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Gains and losses on cash flow hedges		Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	-	$		-	$	-
Other comprehensive income (loss) before reclassifications		23,010		(5,585	)		17,425
Amount reclassified from accumulated other comprehensive income		-		-			-
Other comprehensive income (loss) for the three months ended March 31, 2018		23,010		(5,585	)		17,425
Ending AOCI balance – March 31, 2018	$	23,010	$	(5,585	)	$	17,425

Derivative Instruments, Gain (Loss) [Table Text Block]

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)		Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
			Operating expenses	$	-	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2018	$	-	Cost of revenues	$	-	Cost of revenues		—
			Operating expenses	$	105,355	Operating expenses	$	—
Foreign currency forward contracts for the three months ended March 31, 2017	$	105,609	Cost of revenues	$	21,128	Cost of revenues		—

XML

Note 6 - Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,209,912		$	1,552,354		$	10,792,790		$	32,185,398		$	2,112,500		$	561,224		$	58,414,178
Acquisition of customer relationships		-			-			-			1,372			-			-			1,372
Additions to/(disposals from) domain portfolio, net		(4,543	)		(32,935	)		-			-			-			-			(37,478	)
Amortization expense		-			-			(450,510	)		(1,381,220	)		(487,500	)		(11,532	)		(2,330,762	)
Balances March 31, 2018	$	11,205,369		$	1,519,419		$	10,342,280		$	30,805,550		$	1,625,000		$	549,692		$	56,047,310

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Year ending December 31,
Remainder of 2018	$	6,910,060
2019		7,334,660
2020		7,172,160
2021		7,172,160
2022		7,172,160
Thereafter		7,561,322
Total	$	43,322,522

XML

Note 7 - Loan Payable (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Standby Fees Based on Total Funded Debt to EBITDA Ratio [Table Text Block]

	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 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

Schedule of Debt [Table Text Block]

	March 31, 2018			December 31, 2017
Facility C		5,582,775			5,930,338
Facility D		67,598,400			71,823,300
Less: unamortized debt discount and issuance costs		(764,202	)		(829,611	)
Total loan payable		72,416,973			76,924,027
Less: loan payable, current portion		18,289,853			18,289,853
Loan payable, long-term portion		54,127,120			58,634,174

Schedule of Maturities of Long-term Debt [Table Text Block]

Remainder of 2018		13,717,390
2019		18,289,853
2020		18,103,004
2021		17,542,457
2022		4,867,757
Thereafter		660,714
	$	73,181,175

XML

Note 9 - Basic and Diluted Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended March 31,
	2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,743,692	$	2,446,491
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,588,718		10,474,647
Effect of outstanding stock options		203,895		301,868
Diluted weighted average number of shares outstanding		10,792,613		10,776,515
Basic earnings per common share	$	0.35	$	0.23
Diluted earnings per common share	$	0.35	$	0.23

XML

Note 10 - Revenue (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	21,872,109	$	17,962,868
Other Services		1,736,116		1,286,917
Total Network Access Services		23,608,225		19,249,785
Domain Services:
Wholesale
Domain Services		58,427,707		39,091,817
Value Added Services		4,434,572		3,907,889
Total Wholesale		62,862,279		42,999,706
Retail		8,436,563		6,401,703
Portfolio		888,624		916,868
Total Domain Services		72,187,466		50,318,277
	$	95,795,691	$	69,568,062

Schedule of Cost of Revenues by Revenue Stream [Table Text Block]

	Three months ended March 31,
	2018		2017
Network Access Services:
Mobile Services	$	11,265,767	$	9,567,160
Other Services		940,751		825,256
Total Network Access Services		12,206,518		10,392,416
Domain Services:
Wholesale
Domain Services		51,314,038		34,462,926
Value Added Services		857,268		575,923
Total Wholesale		52,171,306		35,038,849
Retail		4,409,742		3,617,402
Portfolio		184,654		262,045
Total Domain Services		56,765,702		38,918,296
Network Expenses:
Network, other costs		2,574,087		2,343,196
Network, depreciation and amortization costs		1,630,175		970,509
		4,204,262		3,313,705
	$	73,176,482	$	52,624,417

Contract with Customer, Asset and Liability [Table Text Block]

	March 31,  2018
Balance, beginning of period	$	160,581,528
Deferral of revenue		60,370,051
Recognition of revenue 1		(69,968,261	)
Balance, end of period	$	150,983,318

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Table Text Block]

	March 31, 2018
Remainder of 2018	$	108,710,643
2019		24,366,389
2020		7,116,720
2021		4,010,109
2022		2,561,121
Thereafter		3,658,053
Total	$	150,423,035

XML

Note 11 - Contract Costs (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Capitalized Contract Cost [Table Text Block]

	March 31, 2018
Balance, beginning of period (1)	$	1,403,608
Capitalization of costs		195,408
Amortization of costs		(220,680	)
Balance, end of period	$	1,378,336

XML

Note 12 - Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Condensed Income Statement [Table Text Block]

	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2018
Net Revenues	$	23,608,225	$	72,187,466	$	95,795,691
Cost of revenues
Cost of revenues		12,206,518		56,765,702		68,972,220
Network expenses		490,215		2,083,872		2,574,087
Depreciation of property and equipment		833,060		298,083		1,131,143
Amortization of intangible assets		11,532		487,500		499,032
Total cost of revenues		13,541,325		59,635,157		73,176,482
Gross Profit		10,066,900		12,552,309		22,619,209
Expenses:
Sales and marketing						8,364,787
Technical operations and development						2,094,689
General and administrative						4,531,412
Depreciation of property and equipment						101,072
Amortization of intangible assets						1,831,730
Loss (gain) on currency forward contracts						(3,093	)
Income from operations						5,698,612
Other income (expenses), net						(772,002	)
Income before provision for income taxes					$	4,926,610

	Network Access Services		Domain Services		Consolidated Totals
Three months ended March 31, 2017
Net Revenues	$	19,249,785	$	50,318,277	$	69,568,062
Cost of revenues
Cost of revenues		10,392,416		38,918,296		49,310,712
Network expenses		541,963		1,801,233		2,343,196
Depreciation of property and equipment		426,078		164,269		590,347
Amortization of intangible assets		11,532		368,630		380,162
Total cost of revenues		11,371,989		41,252,428		52,624,417
Gross Profit		7,877,796		9,065,849		16,943,645
Expenses:
Sales and marketing						7,219,322
Technical operations and development						1,694,141
General and administrative						3,457,343
Depreciation of property and equipment						166,317
Amortization of intangible assets						1,380,809
Loss (gain) on currency forward contracts						(34,425	)
Income from operations						3,060,138
Other income (expenses), net						(739,096	)
Income before provision for income taxes					$	2,321,042

Schedule of Property Plant and Equipment by Geographic Region [Table Text Block]

	March 31, 2018		December 31, 2017
Canada	$	1,555,813	$	1,176,371
United States		27,107,392		23,417,435
Germany		25,557		26,492
	$	28,688,762	$	24,620,298

Schedule of Acquired Intangible Assets by Major Class [Table Text Block]

	March 31, 2018		December 31, 2017
Canada	$	7,414,822	$	7,748,940
United States		35,839,260		37,783,202
Germany		68,440		119,770
	$	43,322,522	$	45,651,912

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses		Write-offs during period		Balance at end of period
Three months ended March 31, 2018	$	168,409	$	1,011	$	-	$	169,420
Year ended December 31, 2017	$	164,145	$	4,264	$	-	$	168,409

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Note 13 - Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

												Accumulated
						Additional			Retained			other		Total
	Common stock					paid in			earnings			comprehensive		stockholders'
	Number			Amount		capital			(deficit)			income (loss)		equity
Balances, December 31, 2017		10,583,879		$	15,368,161	$	2,166,768		$	42,675,805		$	-	$	60,210,734
Impact of Adoption of ASU 2014-09		-			-		-			1,062,952			-		1,062,952
Balance on January 1, 2018		10,583,879			15,368,161		2,166,768			43,738,757			-		61,273,686
Exercise of stock options		12,563			57,943		(50,742	)		-			-		7,201
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,327	)				(147,068	)		-			-		(147,068	)
Stock-based compensation (note 15)		-			-		578,182			-			-		578,182
Net income		-			-		-			3,743,692			-		3,743,692
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(63,610	)		-		(63,610	)
Other comprehensive income (loss)		-			-		-			-			17,425		17,425
Balances, March 31, 2018		10,592,115		$	15,426,104	$	2,547,140		$	47,418,839		$	17,425	$	65,409,508

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Note 14 - Share-based Payments (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Three months ended March 31,					Three months ended March 31,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		11,000			58.52		32,875			40.56
Exercised		(12,563	)		7.79		(68,876	)		7.83
Forfeited		(17,125	)		42.54		(7,889	)		18.46
Expired		-			-		-			-
Outstanding, end of period		634,883			37.48		430,611			15.46
Options exercisable, end of period		245,933		$	16.62		264,753		$	10.72

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

			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
$ 2.92	-	$ 8.92		81,695	$	6.81		0.7	$	4,018,538		81,695	$	6.81		0.7	$	4,018,538
$10.16	-	$19.95		117,013		16.31		2.5		4,644,246		90,613		15.93		2.3		3,631,248
$21.10	-	$27.53		75,000		23.67		3.1		2,424,562		55,000		24.61		2.8		1,726,562
$35.25	-	$37.35		14,375		35.89		4.4		289,094		10,625		36.11		4.2		211,281
$43.15	-	$47.00		18,500		44.19		5.1		218,475		8,000		43.75		5.1		97,988
$53.20	-	$58.65		328,300		55.51		5.4		188,055		-		-		-		-
				634,883	$	37.48		4.0	$	11,782,970		245,933	$	16.62		2.0	$	9,685,617

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Note 15 - Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	March 31, 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	26,103	$	-	$	26,103
Derivative instrument liability	$	-	$	-	$	-	$	-

	December 31, 2017
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	-	$	-	$	-	$	-
Derivative instrument liability	$	-	$	-	$	-	$	-

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Note 3 - Recent Accounting Pronouncements (Details Textual) - USD ($)	Mar. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Capitalized Contract Cost, Net, Total	$ 1,378,336	$ 1,400,000	$ 1,403,608	[1]
Retained Earnings (Accumulated Deficit), Ending Balance	47,418,839		42,675,805	[2]
Deferred Tax Liabilities, Net, Noncurrent	20,116,385		$ 19,833,678	[2]
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Capitalized Contract Cost, Net, Total	(1,378,336)
Retained Earnings (Accumulated Deficit), Ending Balance	(1,031,436)	(1,100,000)
Deferred Tax Liabilities, Net, Noncurrent	$ (346,900)	$ (300,000)

[1] The beginning balance consists entirely of a cumulative adjustment recorded on January 1st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 3 - Recent Accounting Pronouncements - Impact of Changes to Financial Statements (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017		Jan. 01, 2018	Dec. 31, 2017
Assets
Contract costs (note 11)	$ 1,378,336			$ 1,400,000	$ 1,403,608	[1]
Total assets	341,360,951				350,650,335	[2]
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	20,116,385				19,833,678	[2]
Retained earnings	47,418,839				42,675,805	[2]
Total Liabilities and Shareholders' Equity	341,360,951				$ 350,650,335	[2]
Sales and marketing	8,364,787	$ 7,219,322	[3]
Income before provision for income taxes	4,926,610	2,321,042	[3]
Provision for income taxes (note 8)	1,182,918	(125,449)
Net income for the period	3,743,692	$ 2,446,491	[3],[4]
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Assets
Contract costs (note 11)	(1,378,336)
Total assets	(1,378,336)
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	(346,900)			(300,000)
Retained earnings	(1,031,436)			$ (1,100,000)
Total Liabilities and Shareholders' Equity	(1,378,336)
Sales and marketing	(25,272)
Income before provision for income taxes	25,272
Provision for income taxes (note 8)	(6,134)
Net income for the period	19,138
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Assets
Contract costs (note 11)
Total assets	339,982,615
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	19,769,485
Retained earnings	46,387,403
Total Liabilities and Shareholders' Equity	339,982,615
Sales and marketing	8,339,515
Income before provision for income taxes	4,951,882
Provision for income taxes (note 8)	1,189,052
Net income for the period	$ 3,762,830

[1] The beginning balance consists entirely of a cumulative adjustment recorded on January 1st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[3] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[4] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 4 - Acquisitions (Details Textual) - USD ($) $ in Millions	Feb. 13, 2018	Feb. 01, 2017	Jan. 20, 2017	Feb. 27, 2015
Ting Virginia LLC [Member]
Business Combination, Consideration Transferred, Total	$ 1.2
Payments for Repurchase of Redeemable Noncontrolling Interest	$ 1.2
Repurchase of Redeemable Noncontrolling Interest, Percentage	10.00%
Ting Virginia LLC [Member]
Business Acquisition, Percentage of Voting Interests Acquired		20.00%		70.00%
Business Combination, Consideration Transferred, Total		$ 2.0		$ 3.5
Ting Virginia LLC [Member] | Exercisable by the Minority Shareholders [Member]
Business Combination, Interest Subject to Call Option, Not Exercised in Period		10.00%
eNom, Incorporated [Member]
Business Combination, Consideration Transferred, Total			$ 77.8
Payments to Acquire Businesses, Gross			83.5
Business Combination, Consideration Transferred, Estimated Price Adjusments			$ 5.7

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Note 5 - Derivative Instruments and Hedging Activities (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Derivative, Notional Amount	$ 12,779,952
Foreign Exchange Forward [Member]
Derivative, Notional Amount	12,800,000		$ 0
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments	3,093	$ 34,425
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member]
Derivative, Notional Amount	$ 11,300,000

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Note 5 - Derivative Instruments and Hedging Activities - Foreign Currency Forward Contracts (Details)	Mar. 31, 2018 USD ($)
Notional amount of U.S. dollars	$ 12,779,952
Weighted average exchange rate of U.S. dollars	1.2875
Fair value	$ 26,103
Foreign Exchange Forward 1 [Member]
Notional amount of U.S. dollars	$ 3,176,805
Weighted average exchange rate of U.S. dollars	1.2919
Fair value	$ 7,737
Foreign Exchange Forward 2 [Member]
Notional amount of U.S. dollars	$ 3,394,161
Weighted average exchange rate of U.S. dollars	1.2893
Fair value	$ 7,165
Foreign Exchange Forward 3 [Member]
Notional amount of U.S. dollars	$ 1,604,112
Weighted average exchange rate of U.S. dollars	1.2873
Fair value	$ 3,421
Foreign Exchange Forward 4 [Member]
Notional amount of U.S. dollars	$ 1,639,448
Weighted average exchange rate of U.S. dollars	1.2852
Fair value	$ 3,192
Foreign Exchange Forward 5 [Member]
Notional amount of U.S. dollars	$ 1,599,200
Weighted average exchange rate of U.S. dollars	1.2831
Fair value	$ 2,788
Foreign Exchange Forward 6 [Member]
Notional amount of U.S. dollars	$ 1,366,226
Weighted average exchange rate of U.S. dollars	1.2809
Fair value	$ 1,800

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Note 5 - Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments in the Consolidated Balance Sheets (Details) - Derivative Instruments [Member] - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Foreign currency forward contracts	$ 26,103
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Foreign currency forward contracts	23,010
Not Designated as Hedging Instrument [Member]
Foreign currency forward contracts	$ 3,093

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Note 5 - Derivative Instruments and Hedging Activities - Movement in AOCI Balance (Details) - USD ($)		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017	[2]
AOCI balance, Gains and losses on cash flow hedges
Other comprehensive income (loss) before reclassifications, Gains and losses on cash flow hedges		23,010
Amount reclassified from accumulated other comprehensive income, Gains and losses on cash flow hedges
Other comprehensive income (loss) for the three months ended March 31, 2018		23,010
AOCI balance, Gains and losses on cash flow hedges		23,010
AOCI balance, Tax impact
Other comprehensive income (loss) before reclassifications, Tax impact		(5,585)
Amount reclassified from accumulated other comprehensive income, Tax impact
Other comprehensive income (loss) for the three months ended March 31, 2018		(5,585)
AOCI balance, Tax impact		(5,585)
AOCI balance	[1]
Other comprehensive income (loss) before reclassifications		17,425	$ 186,229
Amount reclassified from accumulated other comprehensive income			$ (80,620)
Other comprehensive income (loss) for the three months ended March 31, 2018		17,425
AOCI balance		$ 17,425

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 5 - Derivative Instruments and Hedging Activities - Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion)	$ 17,425	$ 186,229	[1]
Operating Expense [Member]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		105,355
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cost of Sales [Member]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		21,128
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion)		$ 105,609

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 6 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Goodwill, Ending Balance	$ 90,053,483	$ 90,053,483
Finite-Lived Intangible Assets, Accumulated Amortization	$ 17,600,000
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	4 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	15 years
Domain Services Operating Segment [Member]
Goodwill, Ending Balance	$ 87,900,000
Goodwill Percentage Related to Operating Segments	98.00%
Network Access Services [Member]
Goodwill, Ending Balance	$ 2,200,000
Goodwill Percentage Related to Operating Segments	2.00%

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Note 6 - Goodwill and Other Intangible Assets - Acquired Intangible Assets by Major Class (Details) - USD ($)		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017	[2]
Balances	[1]	$ 58,414,178
Finite-lived intangible assets acquired		1,372
Additions to/(disposals from) domain portfolio, net		(37,478)	$ (9,789)
Amortization expense		(2,330,762)	$ (1,760,971)
Balances		56,047,310
Brand [Member]
Balances		10,792,790
Finite-lived intangible assets acquired
Additions to/(disposals from) domain portfolio, net
Amortization expense		(450,510)
Balances		10,342,280
Customer Relationships [Member]
Balances		32,185,398
Finite-lived intangible assets acquired		1,372
Additions to/(disposals from) domain portfolio, net
Amortization expense		(1,381,220)
Balances		30,805,550
Technology-Based Intangible Assets [Member]
Balances		2,112,500
Finite-lived intangible assets acquired
Additions to/(disposals from) domain portfolio, net
Amortization expense		(487,500)
Balances		1,625,000
Network Rights [Member]
Balances		561,224
Finite-lived intangible assets acquired
Additions to/(disposals from) domain portfolio, net
Amortization expense		(11,532)
Balances		549,692
Surname Domain Names [Member]
Balances		11,209,912
Finite-lived intangible assets acquired
Additions to/(disposals from) domain portfolio, net		(4,543)
Amortization expense
Balances		11,205,369
Direct Navigation Domain Names [Member]
Balances		1,552,354
Finite-lived intangible assets acquired
Additions to/(disposals from) domain portfolio, net		(32,935)
Amortization expense
Balances		$ 1,519,419

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 6 - Goodwill and Other Intangible Assets - Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Remainder of 2018	$ 6,910,060
2019	7,334,660
2020	7,172,160
2021	7,172,160
2022	7,172,160
Thereafter	7,561,322
Total	$ 43,322,522	$ 45,651,912

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Note 7 - Loan Payable (Details Textual)		3 Months Ended
	Jan. 20, 2017 USD ($)	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	[1]	Oct. 01, 2018	Sep. 30, 2018	Jan. 24, 2018 USD ($)	Jan. 19, 2017 USD ($)
Payments of Financing Costs, Total	$ 600,000	$ 4,125	$ 591,175
Foreign Exchange Risk [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 3,500,000
Line of Credit Facility Covenant Period		1 year 180 days
Derivative Asset, Fair Value, Gross Asset, Total		$ 12,800,000
Second Interim Amendment [Member]
Credit Agreement, Maximum Aggregate Amount Held in Account With Certain Bank							$ 3,000,000
Bank of Montreal and Royal Bank of Canada [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 140,000,000
Debt Instrument, Term	4 years
Maximum Total Funded Debt to EBITDA Ratio	2.25
Repayment Obligation, Percentage of Excess Cash Flow	50.00%
Minimum Fixed Charge Coverage Ratio		1.2
Maximum Annual Capital Expenditures Requirement		$ 50,000,000
Line of Credit Facility, Maximum Funded Share Repurchases Ceiling		$ 20,000,000
Maximum Ratio of Funded Share Repurchases to 12 Months Trailing EDITDA		1.5
Bank of Montreal and Royal Bank of Canada [Member] | Scenario, Forecast [Member]
Maximum Total Funded Debt to EBITDA Ratio					2.25	2.5
Bank of Montreal and Royal Bank of Canada [Member] | Total Loans Do Not Exceed 1.5 Times of Trailing 12 Months EBITDA [Member]
Line of Credit Facility, Maximum Funded Share Repurchases Ceiling		$ 40,000,000
Bank of Montreal and Royal Bank of Canada [Member] | Non-revolving Facility C [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 35,500,000							$ 40,000,000
Bank of Montreal and Royal Bank of Canada [Member] | Non-revolving Facility D [Member]
Line of Credit Facility, Maximum Borrowing Capacity	84,500,000
Long-term Line of Credit, Total	84,500,000
Bank of Montreal and Royal Bank of Canada [Member] | Revolving Credit Facility A [Member]
Line of Credit Facility, Maximum Borrowing Capacity	5,000,000
Bank of Montreal and Royal Bank of Canada [Member] | Revolving Reducing Term Facility B [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 15,000,000
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for Share Repurchases [Member]
Debt Instrument, Term	4 years
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for Acquisitions [Member]
Debt Instrument, Term	5 years
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for FFTH Capital Expenditures [Member]
Debt Instrument, Term	7 years
Bank of Nova [member] | Corporate Credit Card Program [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 5,000,000

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 7 - Loan Payable - Schedule of Standby Fees Based on Total Funded Debt to EBITDA Ratio (Details)	3 Months Ended
	Mar. 31, 2018
Debt to EBITDA is Less Than 1 [Member]
Standby fees	0.40%
Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Standby fees	0.45%
Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Standby fees	0.55%
Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Standby fees	0.65%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Less Than 1 [Member]
Basis Spread on Variable Rate	2.00%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Basis Spread on Variable Rate	2.25%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Basis Spread on Variable Rate	2.75%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Basis Spread on Variable Rate	3.25%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Less Than 1 [Member]
Basis Spread on Variable Rate	0.75%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Basis Spread on Variable Rate	1.00%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Basis Spread on Variable Rate	1.50%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Basis Spread on Variable Rate	2.00%

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Note 7 - Loan Payable - Schedule of Loans Payable (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Loans payable	$ 72,416,973	$ 76,924,027
Less: unamortized debt discount and issuance costs	(764,202)	(829,611)
Less: loan payable, current portion	18,289,853	18,289,853
Loan payable, long-term portion	54,127,120	58,634,174	[1]
Non-revolving Facility C [Member]
Loans payable	5,582,775	5,930,338
Non-revolving Facility D [Member]
Loans payable	$ 67,598,400	$ 71,823,300

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 7 - Loan Payable - Principal Repayments (Details)	Mar. 31, 2018 USD ($)
Remainder of 2018	$ 13,717,390
2019	18,289,853
2020	18,103,004
2021	17,542,457
2022	4,867,757
Thereafter	660,714
	$ 73,181,175

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Note 8 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Income Tax Expense (Benefit), Total	$ 1,182,918	$ (125,449)
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest, Total	4,900,000	2,300,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	0		$ 0
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit), Total	$ 100,000	$ 1,000,000

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Note 9 - Basic and Diluted Earnings Per Common Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock Repurchased and Retired During Period, Shares	0	0
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	333,300	28,500

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Note 9 - Basic and Diluted Earnings Per Common Share - Summary of Basic and Diluted Earnings Per Common Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$ 3,743,692	$ 2,446,491	[1],[2]
Basic weighted average number of common shares outstanding (in shares)	10,588,718	10,474,647	[2]
Effect of outstanding stock options (in shares)	203,895	301,868
Diluted weighted average number of shares outstanding (in shares)	10,792,613	10,776,515	[2]
Basic earnings per common share (in dollars per share)	$ 0.35	$ 0.23	[2]
Diluted earnings per common share (in dollars per share)	$ 0.35	$ 0.23	[2]

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 10 - Revenue (Details Textual)			3 Months Ended		12 Months Ended
		Jan. 05, 2018 USD ($)	Mar. 31, 2018 USD ($)	Mar. 31, 2017	Dec. 31, 2017 USD ($)	Jan. 01, 2018 USD ($)
Contract with Customer, Liability, Total			$ 150,983,318		$ 160,581,528	$ 160,600,000
Contract with Customer, Liability, Revenue Recognized	[1]		$ (69,968,261)
Namecheap, Inc. [Member]
Domain Name Transfer to Counter Party		2,650,000
Contract with Customer, Liability, Revenue Recognized		$ 14,600,000
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Number of Customers			1	0
Concentration Risk, Percentage			18.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Customers			0		0

[1] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, the Company recognized deferred revenue includes $14.6 million related to previously deferred revenue.

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Note 10 - Revenue - Disaggregation of Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net revenues (note 10)	$ 95,795,691	$ 69,568,062	[1]
Network Access Services [Member]
Net revenues (note 10)	23,608,225	19,249,785
Domain Name Services [Member]
Net revenues (note 10)	72,187,466	50,318,277
Domain Name Services [Member] | Wholesale [Member]
Net revenues (note 10)	62,862,279	42,999,706
Domain Name Services [Member] | Retail Services [Member]
Net revenues (note 10)	8,436,563	6,401,703
Domain Name Services [Member] | Portfolio [Member]
Net revenues (note 10)	888,624	916,868
Mobile Services [Member] | Network Access Services [Member]
Net revenues (note 10)	21,872,109	17,962,868
Other Services [Member] | Network Access Services [Member]
Net revenues (note 10)	1,736,116	1,286,917
Domain Services [Member] | Domain Name Services [Member] | Wholesale [Member]
Net revenues (note 10)	58,427,707	39,091,817
Value Added Services [Member] | Domain Name Services [Member] | Wholesale [Member]
Net revenues (note 10)	$ 4,434,572	$ 3,907,889

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 10 - Revenue - Cost of Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cost of revenues	$ 68,972,220	$ 49,310,712	[1]
Network, other costs	2,574,087	2,343,196	[1]
Cost of revenues	73,176,482	52,624,417	[1]
Network Expenses [Member]
Network, other costs	2,574,087	2,343,196
Network, depreciation and amortization costs	1,630,175	970,509
Cost of revenues	4,204,262	3,313,705
Network Access Services [Member]
Cost of revenues	12,206,518	10,392,416
Network, other costs	490,215	541,963
Cost of revenues	13,541,325	11,371,989
Network Access Services [Member] | Mobile Services [Member]
Cost of revenues	11,265,767	9,567,160
Network Access Services [Member] | Other Services [Member]
Cost of revenues	940,751	825,256
Domain Name Services [Member]
Cost of revenues	56,765,702	38,918,296
Network, other costs	2,083,872	1,801,233
Cost of revenues	59,635,157	41,252,428
Domain Name Services [Member] | Wholesale [Member]
Cost of revenues	52,171,306	35,038,849
Domain Name Services [Member] | Retail Services [Member]
Cost of revenues	4,409,742	3,617,402
Domain Name Services [Member] | Portfolio [Member]
Cost of revenues	184,654	262,045
Domain Name Services [Member] | Domain Services [Member] | Wholesale [Member]
Cost of revenues	51,314,038	34,462,926
Domain Name Services [Member] | Value Added Services [Member] | Wholesale [Member]
Cost of revenues	$ 857,268	$ 575,923

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 10 - Revenue - Contract Balances (Details)	3 Months Ended
	Mar. 31, 2018 USD ($)
Balance, beginning of period	$ 160,581,528
Deferral of revenue	60,370,051
Recognition of revenue 1	(69,968,261)	[1]
Balance, end of period	$ 150,983,318

[1] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, the Company recognized deferred revenue includes $14.6 million related to previously deferred revenue.

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Note 10 - Revenue - Remaining Performance Obligations (Details)	Mar. 31, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01
Remaining performance obligations	$ 108,710,643
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Remaining performance obligations	24,366,389
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Remaining performance obligations	7,116,720
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Remaining performance obligations	4,010,109
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Remaining performance obligations	2,561,121
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Remaining performance obligations	3,658,053
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil)
Remaining performance obligations	$ 150,423,035

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Note 11 - Contract Costs (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	[2]	Jan. 01, 2018	Dec. 31, 2017	[1]
Capitalized Contract Cost, Net, Total	$ 1,378,336			$ 1,400,000	$ 1,403,608
Increase (Decrease) in Capitalized Costs	195,408
Capitalized Contract Cost, Amortization	220,680
Change in Capitalized Contract Costs	25,272
Capitalized Contract Cost, Impairment Loss	$ 0
Minimum [Member]
Capitalized Contract Cost, Amortization Period	2 years
Maximum [Member]
Capitalized Contract Cost, Amortization Period	10 years

[1] The beginning balance consists entirely of a cumulative adjustment recorded on January 1st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 11 - Contract Costs - Capitalized Contract Costs Activity (Details)	3 Months Ended
	Mar. 31, 2018 USD ($)
Balance, beginning of period(1)	$ 1,403,608	[1]
Capitalization of costs	195,408
Amortization of costs	(220,680)
Balance, end of period	$ 1,378,336

[1] The beginning balance consists entirely of a cumulative adjustment recorded on January 1st, 2018 as a result of the modified retrospective adoption of ASU 2014-09. See note 3 for additional information.

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Note 12 - Segment Reporting (Details Textual)	3 Months Ended
	Mar. 31, 2018
Number of Operating Segments	2

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Note 12 - Segment Reporting - Information by Reportable Segments (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net Revenues	$ 95,795,691	$ 69,568,062	[1]
Cost of revenues	68,972,220	49,310,712	[1]
Network expenses	2,574,087	2,343,196	[1]
Depreciation of property and equipment	1,131,143	590,347	[1]
Amortization of intangible assets	499,032	380,162	[1]
Total cost of revenues	73,176,482	52,624,417	[1]
Gross Profit	22,619,209	16,943,645	[1]
Sales and marketing	8,364,787	7,219,322	[1]
Technical operations and development	2,094,689	1,694,141	[1]
General and administrative	4,531,412	3,457,343	[1]
Depreciation of property and equipment	101,072	166,317	[1]
Amortization of intangible assets	1,831,730	1,380,809	[1]
Loss (gain) on currency forward contracts	(3,093)	(34,425)	[1]
Income from operations	5,698,612	3,060,138	[1]
Other income (expenses), net	(772,002)	(739,096)	[1]
Income before provision for income taxes	4,926,610	2,321,042	[1]
Network Access Services [Member]
Net Revenues	23,608,225	19,249,785
Cost of revenues	12,206,518	10,392,416
Network expenses	490,215	541,963
Depreciation of property and equipment	833,060	426,078
Amortization of intangible assets	11,532	11,532
Total cost of revenues	13,541,325	11,371,989
Gross Profit	10,066,900	7,877,796
Domain Name Services [Member]
Net Revenues	72,187,466	50,318,277
Cost of revenues	56,765,702	38,918,296
Network expenses	2,083,872	1,801,233
Depreciation of property and equipment	298,083	164,269
Amortization of intangible assets	487,500	368,630
Total cost of revenues	59,635,157	41,252,428
Gross Profit	$ 12,552,309	$ 9,065,849

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 12 - Segment Reporting - Summary of Property and Equipment by Geographic Region (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Property and equipment	$ 28,688,762	$ 24,620,298	[1]
CANADA
Property and equipment	1,555,813	1,176,371
UNITED STATES
Property and equipment	27,107,392	23,417,435
GERMANY
Property and equipment	$ 25,557	$ 26,492

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 12 - Segment Reporting - Summary of Amortizable Intangible Assets by Geographic Region (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Amortizable intangible assets	$ 43,322,522	$ 45,651,912
CANADA
Amortizable intangible assets	7,414,822	7,748,940
UNITED STATES
Amortizable intangible assets	35,839,260	37,783,202
GERMANY
Amortizable intangible assets	$ 68,440	$ 119,770

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Note 12 - Segment Reporting - Summary of Valuation and Qualifying Accounts (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Balance at beginning of period	$ 168,409	$ 164,145
Charged to (recovered) costs and expenses	1,011	4,264
Balance at end of period	$ 169,420	$ 168,409

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Note 13 - Stockholders' Equity (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Feb. 14, 2018	Mar. 01, 2017	Feb. 09, 2016
Stock Repurchased and Retired During Period, Shares	0	0
Stock Buyback Program 2018 [Member]
Stock Repurchase Program, Authorized Amount			$ 40
Stock Repurchased and Retired During Period, Shares	0
Stock Buyback Program 2017 [Member]
Stock Repurchase Program, Authorized Amount				$ 40
Stock Repurchased and Retired During Period, Shares	0
Stock Buyback Program 2016 [Member]
Stock Repurchase Program, Authorized Amount					$ 40
Stock Repurchased and Retired During Period, Shares		0

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Note 13 - Stockholders' Equity - Stockholders' Equity Transactions (Details) - USD ($)		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Balances	[1]	$ 60,210,734
Impact of Adoption of ASU 2014-09		1,062,952
Balance on January 1, 2018		$ 61,273,686
Exercise of stock options (in shares)		12,563	68,876
Exercise of stock options		$ 7,201
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(147,068)
Stock-based compensation (note 15)		578,182
Net income for the period		3,743,692	$ 2,446,491	[2],[3]
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		(63,610)
Other comprehensive income (loss)		17,425	$ 105,609	[3]
Balances		$ 65,409,508
Common Stock [Member]
Balances (in shares)		10,583,879
Balances		$ 15,368,161
Impact of Adoption of ASU 2014-09
Balance on January 1, 2018		$ 15,368,161
Exercise of stock options (in shares)		12,563
Exercise of stock options		$ 57,943
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration (in shares)		(4,327)
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 15)
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive income (loss)
Balances (in shares)		10,592,115
Balances		$ 15,426,104
Additional Paid-in Capital [Member]
Balances		2,166,768
Impact of Adoption of ASU 2014-09
Balance on January 1, 2018		2,166,768
Exercise of stock options		(50,742)
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(147,068)
Stock-based compensation (note 15)		578,182
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive income (loss)
Balances		2,547,140
Retained Earnings [Member]
Balances		42,675,805
Impact of Adoption of ASU 2014-09		1,062,952
Balance on January 1, 2018		43,738,757
Exercise of stock options
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 15)
Net income for the period		3,743,692
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		(63,610)
Other comprehensive income (loss)
Balances		47,418,839
AOCI Attributable to Parent [Member]
Balances
Impact of Adoption of ASU 2014-09
Balance on January 1, 2018
Exercise of stock options
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 15)
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive income (loss)		17,425
Balances		$ 17,425

[1] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[2] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

[3] The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.

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Note 14 - Share-based Payments (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 5,800
Allocated Share-based Compensation Expense, Total	600	$ 300
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount	$ 0	$ 0
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 292 days

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Note 14 - Share-based Payments - Stock Option Transactions (Details) - $ / shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Outstanding, Number of shares (in shares)	653,571	474,501
Granted, Number of shares (in shares)	11,000	32,875
Exercised, Number of shares (in shares)	(12,563)	(68,876)
Forfeited, Number of shares (in shares)	(17,125)	(7,889)
Expired, Number of shares (in shares)
Outstanding, Number of shares (in shares)	634,883	430,611
Options exercisable, Number of shares (in shares)	245,933	264,753
Outstanding, Weighted average exercise price per share (in dollars per share)	$ 36.69	$ 12.67
Granted, Weighted average exercise price per share (in dollars per share)	58.52	40.56
Exercised, Weighted average exercise price per share (in dollars per share)	7.79	7.83
Forfeited, Weighted average exercise price per share (in dollars per share)	42.54	18.46
Expired, Weighted average exercise price per share (in dollars per share)
Outstanding, Weighted average exercise price per share (in dollars per share)	37.48	15.46
Options exercisable, Weighted average exercise price per share (in dollars per share)	$ 16.62	$ 10.72

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Note 14 - Share-based Payments - Summary of Exercise Prices, Weighted Average Remaining Contractual Life and Intrinsic Values of Outstanding Options (Details)	3 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares
Number outstanding (in shares) | shares	634,883
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 37.48
Weighted average remaining contractual life, options outstanding (Year)	4 years
Aggregate intrinsic value, options outstanding | $	$ 11,782,970
Number exercisable (in shares) | shares	245,933
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 16.62
Weighted average remaining contractual life, options exercisable (Year)	2 years
Aggregate intrinsic value, options exercisable | $	$ 9,685,617
Exercise Price Range 01 [Member]
Exercise price - lower (in dollars per share)	$ 2.92
Exercise price - higher (in dollars per share)	$ 8.92
Number outstanding (in shares) | shares	81,695
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 6.81
Weighted average remaining contractual life, options outstanding (Year)	255 days
Aggregate intrinsic value, options outstanding | $	$ 4,018,538
Number exercisable (in shares) | shares	81,695
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 6.81
Weighted average remaining contractual life, options exercisable (Year)	255 days
Aggregate intrinsic value, options exercisable | $	$ 4,018,538
Exercise Price Range 02 [Member]
Exercise price - lower (in dollars per share)	$ 10.16
Exercise price - higher (in dollars per share)	$ 19.95
Number outstanding (in shares) | shares	117,013
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 16.31
Weighted average remaining contractual life, options outstanding (Year)	2 years 182 days
Aggregate intrinsic value, options outstanding | $	$ 4,644,246
Number exercisable (in shares) | shares	90,613
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 15.93
Weighted average remaining contractual life, options exercisable (Year)	2 years 109 days
Aggregate intrinsic value, options exercisable | $	$ 3,631,248
Exercise Price Range 03 [Member]
Exercise price - lower (in dollars per share)	$ 21.10
Exercise price - higher (in dollars per share)	$ 27.53
Number outstanding (in shares) | shares	75,000
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 23.67
Weighted average remaining contractual life, options outstanding (Year)	3 years 36 days
Aggregate intrinsic value, options outstanding | $	$ 2,424,562
Number exercisable (in shares) | shares	55,000
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 24.61
Weighted average remaining contractual life, options exercisable (Year)	2 years 292 days
Aggregate intrinsic value, options exercisable | $	$ 1,726,562
Exercise Price Range 04 [Member]
Exercise price - lower (in dollars per share)	$ 35.25
Exercise price - higher (in dollars per share)	$ 37.35
Number outstanding (in shares) | shares	14,375
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 35.89
Weighted average remaining contractual life, options outstanding (Year)	4 years 146 days
Aggregate intrinsic value, options outstanding | $	$ 289,094
Number exercisable (in shares) | shares	10,625
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 36.11
Weighted average remaining contractual life, options exercisable (Year)	4 years 73 days
Aggregate intrinsic value, options exercisable | $	$ 211,281
Exercise Price Range 05 [Member]
Exercise price - lower (in dollars per share)	$ 43.15
Exercise price - higher (in dollars per share)	$ 47
Number outstanding (in shares) | shares	18,500
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 44.19
Weighted average remaining contractual life, options outstanding (Year)	5 years 36 days
Aggregate intrinsic value, options outstanding | $	$ 218,475
Number exercisable (in shares) | shares	8,000
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 43.75
Weighted average remaining contractual life, options exercisable (Year)	5 years 36 days
Aggregate intrinsic value, options exercisable | $	$ 97,988
Exercise Price Range 06 [Member]
Exercise price - lower (in dollars per share)	$ 53.20
Exercise price - higher (in dollars per share)	$ 58.65
Number outstanding (in shares) | shares	328,300
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 55.51
Weighted average remaining contractual life, options outstanding (Year)	5 years 146 days
Aggregate intrinsic value, options outstanding | $	$ 188,055
Number exercisable (in shares) | shares
Weighted average exercise price per share, options exercisable (in dollars per share)
Weighted average remaining contractual life, options exercisable (Year)
Aggregate intrinsic value, options exercisable | $

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Note 15 - Fair Value Measurement - Summary of the Fair Values of the Company's Derivative Instrument Liabilities (Details) - Fair Value, Measurements, Recurring [Member] - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Derivative instrument asset	$ 26,103
Derivative instrument liability
Fair Value, Inputs, Level 1 [Member]
Derivative instrument asset
Derivative instrument liability
Fair Value, Inputs, Level 2 [Member]
Derivative instrument asset	26,103
Derivative instrument liability
Fair Value, Inputs, Level 3 [Member]
Derivative instrument asset
Derivative instrument liability

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Note 16 - Contingencies (Details Textual) xbrli-pure in Thousands	Jan. 05, 2018
Litigation Case with Namecheap [Member]
Domain Name Transfer to Counter Party	2,650