TUCOWS INC PA

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

1. Organization of the Company:

Tucows Inc. (referred to as the “Company”, “Tucows”, “we”, “us” or through similar expressions) is a corporate parent, allocating capital and providing efficient shared services to itsthree businesses Ting, Wavelo and Tucows Domains Services. Ting provides retail consumers and small businesses with high-speed fixed Internet access in a number of towns and cities across the United States. Wavelo offers platform services which provide solutions to support Communication Service Providers ("CSPs") including subscription and billing management, network orchestration and provisioning, individual developer tools, and other professional services. Tucows Domains Services is 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. Significant Accounting Policies:

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars, except where otherwise noted.

(a) Basis of presentation

These consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated on consolidation.

(b) Use of estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its judgements and estimates, the recoverability of goodwill and intangible assets which requires judgment over qualitative indicators of impairment and loss contingencies. For acquired customer relationships, the Company estimates the fair value based on the income approach. The income approach is a valuation technique that calculates the fair value of an intangible asset based on the present value of future cash flows expected to be generated over the remaining useful life of the asset. This valuation involves significant subjectivity and estimation uncertainty, including assumptions related to future revenues attributable to acquired customer relationships, attrition rates and discount rates. Management bases its estimates on historical experience, available market information as applicable, and on various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company’s control.

(c) Cash and cash equivalents

All highly liquid investments, with an original term to maturity ofthree months or less are classified as cash and cash equivalents. This classification also extends to amounts in transit from payment providers and other clearing accounts. These in-transit balances have been initiated and collected from customers prior to the reporting date and are expected to settle shortly after the reporting date. Cash and cash equivalents are stated at cost which approximates market value.

(d) Restricted cash

Restricted cash is solely in connection with the2023 Term Notes as defined in"Note9 - Notes Payable" and consists of (i) securitized assets cash receipts held by trustee related to securitized assets and (ii) liquidity reserve funds. The non-current portion of the restricted cash is presented in "Secured notes reserve funds" on the Consolidated Balance Sheet.

(e) Inventory

Inventory primarily consists of Internet optical network terminals and customer installation equipment. All inventory is stated at the lower of cost or net realizable value. Cost is determined based on actual cost of the mobile device, accessory shipped or optical network terminals.

The net realizable value of inventory is analyzed for signs of obsolescence or damage on a regular basis. If assessments regarding the above factors adversely change, we* may*be required to write down the value of inventory.

(f) Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-line basis so as to depreciate the cost of depreciable assets over their estimated useful lives at the following rates:

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The Company reviews the carrying values of its property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. If the estimated undiscounted future cash flows expected to result from the use of the group of assets and their eventual disposition is less than their carrying amount, they are considered to be impaired. The amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset, with fair value being determined based upon discounted cash flows or appraised values, depending on the nature of the assets. In instances where inventory is found to be damaged, it is written off.

Additions to the fiber network are recorded at cost, including all material, labor, capitalized interest, vehicle and installation and construction costs associated with the construction of cable transmission and distribution facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the fiber network level andnot on a specific asset basis. For assets that are retired, the estimated historical cost and related accumulated depreciation is removed.

Additions to land are recorded at cost, and include any direct costs associated with the purchase, as well as any direct costs incurred to bring it to the condition necessary for its intended use, such as legal fees associated with the acquisition and the cost of permanent improvements. Land isnot depreciated.

We capitalize costs for software to be used internally when we enter the application development stage. This occurs when we complete the preliminary project stage, management authorizes and commits to funding the project, and it is feasible that the project will be completed and the software will perform the intended function. We cease to capitalize costs related to a software project when it enters the post implementation and operation stage.

Costs capitalized during the application development stage consist of payroll and related costs for employees who are directly associated with, and who devote time directly to, a project to develop software for internal use. External contractor costs who are directly associated with, and who devote time directly to, a project to develop software for internal use are also capitalized. Generally, we donot capitalize any general and administrative or overhead costs or costs incurred during the application development stage related to research and development, training or data conversion costs. Research and development costs and data conversion costs* maybe capitalized as Costs to fulfill a contract, if they relate to a specific professional services customer contract (see Note12* - Costs to obtain and fulfill a contract). Costs related to upgrades and enhancements to internal-use software, if those upgrades and enhancements result in additional functionality, are capitalized. If upgrades and enhancements donot result in additional functionality, those costs are expensed as incurred.

In determining and reassessing the estimated useful life over which the cost incurred for the software should be amortized, we consider the effects of obsolescence, technology, competition and other economic factors.

(g) Derivative Financial Instruments

The Company uses derivative financial instruments to manage foreign currency exchange risk.

The Company accounts for these instruments in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic815, “Derivatives and Hedging” ("Topic815"), which requires that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. Topic815 also requires that changes in our derivative financial instruments’ fair values be recognized in earnings, unless specific hedge accounting and documentation criteria are met (i.e., the instruments are accounted for as hedges). The Company recorded the effective portions of the gain or loss on derivative financial instruments that were designated as cash flow hedges in accumulated other comprehensive income in our accompanying Consolidated Balance Sheets.

For certain foreign currency contracts, when the Company hasnot complied with the documentation standards required for its forward foreign exchange contracts to be accounted for as hedges the Company accounts for such forward foreign exchange contracts at their fair values with the changes in fair value recorded in net income.

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The fair value of the forward exchange contracts is determined using an estimated credit adjusted mark-to-market valuation which takes into consideration the Company's and the counterparty's credit risk. The valuation technique used to measure the fair values of the derivative instruments is a discounted cash flow technique, with all significant inputs derived from or corroborated by observable market data, asno quoted market prices exist for the derivative instruments. The discounted cash flow techniques use observable market inputs, such as foreign currency spot, SOFR rates, forward currency and interest rates.

(h) Goodwill and Other Intangible assets

Goodwill

Goodwill represents the excess of purchase price over the fair values assigned to the net assets acquired in business combinations. The Company doesnot amortize goodwill. Impairment testing for goodwill is performed annually in thefourth quarter of each year or more frequently if impairment indicators are present. Impairment testing is performed at the operating segment level. The Company has determined that it hasthree operating segments, Ting, Wavelo and Tucows Domains.

The Company performs a qualitative assessment to determine whether there are events or circumstances which would lead to a determination that it is more likely thannot that goodwill has been impaired. If, after this qualitative assessment, the Company determines that it isnot more likely thannot that goodwill has been impaired, thenno further quantitative testing is necessary. In performance of the qualitative test, an evaluation is made of the impact of various factors to the expected future cash flows attributable to its operating segments and to the assumed discount rate which would be used to present value those cash flows. Consideration is given to factors such as macro-economic, industry and market conditions including the capital markets, the competitive environment, in addition to other internal factors including changes to our market capitalization, cash inflows, obligations and access to capital of our segments. In the event that the qualitative tests indicate that there* may*be impairment, quantitative impairment testing is required.

If required to perform the quantitative test, the Company uses a discounted cash flow or income approach in which future expected cash flows at the operating segment level are converted to present value using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis. The discount rate reflects a market-derived weighted average cost of capital. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the Company’s expected long-term operating and cash flow performance for its operating segment. The projections are based upon the Company’s best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures.

Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures and changes in future working capital. If assumptions and estimates used to allocate the purchase price or used to assess impairment prove to be inaccurate, future asset impairment charges could be required.

Intangibles AssetsNot Subject to Amortization

Intangible assetsnot subject to amortization consist of surname domain names and direct navigation domain names. While the domain names are renewed annually, through payment of a renewal fee to the applicable registry, the Company has the exclusive right to renew these names at its option. Renewals occur routinely and at a nominal cost. Moreover, the Company has determined that there are currentlyno legal, regulatory, contractual, economic or other factors that limit the useful life of these domain names on an aggregate basis and accordingly treat the portfolio of domain names as indefinite life intangible assets. The Company re-evaluates the useful life determination for domain names in the portfolio each year to determine whether events and circumstances continue to support an indefinite useful life.

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The Company reviews individual domain names in the portfolio for potential impairment throughout the fiscal year in determining whether a particular name should be renewed. Impairment is recognized for names that arenot renewed.

Intangible Assets Subject to Amortization

Intangible assets subject to amortization, consist of brand, customer relationships, technology and network rights and are amortized on a straight-line basis over their estimated useful lives as follows:

The Company continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful lives of its intangible assets subject to amortization* maywarrant revision or that the remaining balance of such assets may**not* be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable.

(i) Revenue recognition

See “Note11 – Revenue” for a description of the Company’s revenue recognition policy and a further description of the principal activities – separated by reportable segments – from which the Company generates its revenue.

(j) Contract balances

The Company accounts for contract assets and liabilities (deferred revenue) on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly. Contract assets are recorded for services delivered under contracts, to the extent that the services delivered exceed the services which have been billed to the customer at the reporting date. Contract assets are transferred to receivables when the rights to consideration become unconditional. Contract assets primarily relate to long-term mobile platform services contracts. Deferred revenue primarily relates to the unearned portion of revenues received in advance related to the unexpired term of registration fees from domain name registrations and other domain related Internet services, on both a wholesale and retail basis, net of external commissions. To a lesser extent, deferred revenue also includes a portion of the transaction price received from other professional services.

(k) Contract Costs

See “Note12 – Costs to obtain and fulfill a contract” for a description of the Company’s contract cost recognition policy.

(l) Contract Modifications

Contracts* maybe amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is considered to be a separate contract. If a contract modification isnot* accounted for as a separate contract, the Company accounts for the promised servicesnot yet transferred at the date of the contract modification (the remaining promised services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining services are distinct from the services transferred on or before the date of the contract modification. The Company accounts for a contract modification as if it were a part of the existing contract if the remaining services arenot distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

(m) Leases

Under ASC842, we determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities.

Certain lease agreements contain variable payments, which are expensed as incurred andnot included in the lease assets and liabilities. These amounts include payments affected by payments contingent on the number of Ting internet subscribers connected to a leased fiber network, and payments for maintenance and utilities.

We have elected to consider leases with a term of12 months or less as short-term, and as such these havenot been recognized on the balance sheet. We recognize lease expense for short-term leases on a straight-line basis over the lease term.

Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases isnot readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments.

Operating lease expense is recognized on a straight-line basis over the lease term.

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(n) Accreditation fees payable

In accordance with ICANN rules, the Company has elected to pay ICANN fees incurred on the registration of Generic Top-Level Domains on an annual basis. Accordingly, accreditation fees that relate to registrations completed prior to ICANN rendering a bill are accrued and reflected as accreditation fees payable.

(o) Translation of foreign currency transactions

The Company's functional currency is the United States dollar. Monetary assets and liabilities of the Company and of its wholly owned subsidiaries that are denominated in foreign currencies are translated into United States dollars at the exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities are translated at the historical exchange rates. Transactions included in operations are translated at the rate at the date of the transactions.

(p) Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income in the year that includes the enactment date. A valuation allowance is recorded if it isnot likely that a deferred tax asset will be realized.

The Company recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority and includes consideration of interest and penalties. An uncertain income tax position willnot be recognized if it has less than a50% likelihood of being sustained. The liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within12 months of the reporting date.

(q) Redeemable preferred units

See "Note14 - Redeemable preferred units" for the description and treatment of the Company's Series A Preferred Unit Purchase Agreement.

(r) Stock-based compensation

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest, reduced for estimated forfeitures. The Company recognizes stock based compensation for both public company stock and private subsidiary stock - see "Note16. Stock Option Plans."

(s) Earnings per common share

Basic earnings per common share has been calculated on the basis of net income for the year 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. When there is a net loss from operations, the Company considers all options anti-dilutive for the purposes of calculating a diluted earnings per share.

(t) Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, restricted cash, accounts receivable, forward foreign exchange contracts and pay-fixed, receive-variable interest rate swap contracts. Cash equivalents consist of deposits with major commercial banks, the maturities of which arethree months or less from the date of purchase. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically doesnot require collateral from them. The counterparty to any forward foreign exchange contracts is a major commercial bank which management believes doesnot represent a significant credit risk. Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information.

(u) Fair value measurement

Fair value of financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Thethree-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level1—Quoted prices in active markets for identical assets or liabilities

Level2—Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level3—No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and* may*affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The fair value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accreditation fees payable, customer deposits, accrued liabilities, syndicated revolver, notes payable and redeemable preferred units (level2 measurements) approximate their carrying values due to the relatively short periods to maturity of the instruments.

The fair value of the derivative financial instruments is determined using an estimated credit-adjusted mark-to-market valuation (a level2 measurement) which takes into consideration the Company and the counterparty credit risk.

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(v) Investments

The Company accounts for investment in entities over which it has the ability to exert significant influence, but doesnot control and isnot the primary beneficiary of, using the equity method of accounting. The Company includes the proportionate share of earnings (loss) of the equity method investees in Other Income in the Consolidated Statements of Comprehensive Income. The proportional shares of affiliate earnings or losses accounted for under the equity method of accounting werenot material for all periods presented. Equity investments without readily determinable fair value include ownership rights that donot provide the Company with control or significant influence. Such equity investments are recorded at cost, less any impairment, and adjusted for subsequent observable price changes as of the date that an observable transaction takes place. Subsequent adjustments are recorded in Other income (expense), net.

(w) Segment reporting

The Company operates inthree operating segments, Ting, Wavelo and Tucows Domains.No operating segments have been aggregated to determine our reportable segments.

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

Our segmented results include shared services allocations, including a profit margin, from Tucows Corporate for Finance, Human Resources and other technical services, to the operating units. In addition, Wavelo charges Ting a subscriber based monthly charge for services rendered. Financial impacts from these allocations and cross segment charges are eliminated as part of the Tucows Corporate results.

The Company’s assets are primarily located in Canada, the United States and Europe.

(x) Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

None.

Recent Accounting PronouncementsNot* Yet Adopted*

In* November 2023,the FASB issued ASU2023*-07, "Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures." The amendments in ASU2023-07 improve financial reporting by requiring disclosure of incremental segment information, including significant segment expenses, on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. Currently, Topic280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the Chief Operating Decision Maker (“CODM”) uses to assess segment performance and make decisions about allocating resources. Topic280 also requires other specified segment information, such as depreciation, amortization and depletion expense amounts, to be disclosed under certain circumstances. The amendments in ASU2023-07 donot change or remove those disclosure requirements. The amendments in ASU2023-07 also donot change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU2023-07 are effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.Early adoption is permitted. A public entity should apply the amendments in ASU2023*-07 retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In* December 2023,the FASB issued ASU2023*-09 "Income Taxes (Topic740): Improvements to Income Tax Disclosures." ASU2023-09 is intended to improve the disclosures for income taxes to allow investors to better assess, in their capital allocation decisions, how an entity's worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cashflows. The amendments in ASU2023-09 require consistent categories and greater disaggregation of information in the rate reconciliation disclosure as well as disclosure of income taxes paid disaggregated by jurisdiction. The amendments of ASU2023-09 are effective for annual periods beginning after* December 15, 2024,with early adoption permitted for annual financial statements that havenot* yet been issued or made available for issuance. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In* March 2024,the SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition risks, data, and opportunities. The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related to a registrant’s climate-related targets, goals, and/or transition plans, and (iii) disclosure on whether and how climate-related events and transition activities impact line items above a threshold amount on a registrant’s consolidate financial statements, including the impact of the financial estimates and the assumptions used. This new rule willfirst* be effective in our annual disclosures for the year ending* December 31, 2027.*We are in the process of assessing the impact on our consolidated financial statements and disclosures.

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3. Acquisitions:

On* October 1, 2021,*the Company acquired the domain registry related assets of UNR Corp., UNR Inc. and Uni Naming and Registry Ltd. (each a seller and collectively "UNR"). The purchase price was $3.0 million, less a purchase price adjustment of approximately $0.5 million relating to a working capital deficit, for net purchase consideration of $2.5 million.

The technology assets acquired are amortized over periods of 5 -7 years.

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On* November 8, 2021,the Company acquired 100% of Simply Bits, LLC via an Agreement and Plan of Merger withone* of our wholly owned subsidiaries. The purchase price was $25.0 million, plus a purchase price adjustment of approximately $0.8 million relating to a working capital surplus and the estimated fair value of contingent consideration, for net purchase consideration of $25.8 million. Included in the agreement was contingent consideration totaled up to $1.0 million, which was due 60 days from* December 31, 2021and was paid in2022.*

4. Property and Equipment:

Property and equipment consist of the following (Dollar amounts in thousands of U.S. dollars):

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Depreciation of property and equipment (Dollar amounts in thousands of U.S. dollars):

During the years ended* December 31, 2023*,2022, and2021 property, plant, and equipment with net book values of $4.8 million, $0.1 million, and $0.2 million, respectively, were written off and included in impairment of property and equipment in the consolidated statement of comprehensive income. The impairment losses incurred in2023 related to specific network assets that were identified as being damaged andno longer in use. The full cost of the identified assets was recorded as an impairment loss.

5. 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.

Goodwill consists of the following (Dollar amounts in thousands of U.S. dollars):

The Company's Goodwill balance is $130.4 million as of* December 31, 2023* and $130.4 million as of* December 31, 2022*. The Company's goodwill relates 83% ($107.7 million) to its Tucows Domains operating segment and 17% ($22.7 million) to its Ting operating segment.

Goodwill isnot amortized, but is subject to an annual impairment test. The Company performed an impairment analysis as outlined in “Note2(h) – Significant Accounting Policies” and there wereno indications of impairment for Fiscal2023 and Fiscal2022.

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 arenot amortized, but are subject to impairment assessments performed throughout the year. During Fiscal2023, we assessed whether the specific domain names acquired through the acquisition of Mailbank.com Inc. in* June 2006,which were due for renewal shouldnot* be renewed. Upon review, the Company decided to renew these domain names. During the years ended* December 31, 2023*,* December 31, 2022*, and* December 31, 2021*, no impairment of indefinite life intangible assets was recorded.

Finite-life intangible assets, comprising brand, technology, customer relationships and network rights are being amortized on a straight-line basis over periods oftwo tofifteen years.

Throughout2023, the Company purchased $0.5 million in customer relationship assets through hosting agreements whereby customer assets and domain names were obtained. These customer assets are being amortized over seven years.

Acquired intangible assets consist of the following (Dollar amounts in thousands of U.S. dollars):

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The following table shows the estimated amortization expense for each of the next5 years and thereafter, assumingno further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars):

6. 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 intothree broad levels. Level1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level2 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. Level3 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.

Equity investments without readily determinable fair value include ownership rights that donot provide the Company with control or significant influence. Such equity investments are recorded at cost, less any impairment, and adjusted for subsequent observable price changes as of the date that an observable transaction takes place. Subsequent adjustments are recorded in other income (expense), net.

The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at* December 31, 2023* (Dollar amounts in thousands of U.S. dollars):

The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at* December 31, 2022* (Dollar amounts in thousands of U.S. dollars):

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7. Derivative Instruments and Hedging Activities:

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

Since* October 2012,the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020,the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Second Amended2019* Credit Facility. The notional value of the interest rate swap was $70 million. During thethird quarter of fiscal year2022, the Company elected to discontinue its application of hedge accounting to its interest rate swaps prospectively. Until the interest rate swaps matured in* June 2023,the derivatives continued to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair value from the date of discontinuance recognized in current period earnings in Interest expense, net in the Consolidated Statements of Operations and Comprehensive Loss. Unrealized gains and losses in Accumulated other comprehensive income (AOCI) as of the date of discontinuance were realized in net income over the remaining term of the underlying forecasted interest payments into interest expense over the original term of the hedged debt. Prior to the discontinuance, for the interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts had been included in other comprehensive income (OCI) and reclassified to earnings when the hedged transaction settled. As of December 31, 2023,there areno* interest swaps held by the Company.

The Company doesnot use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature betweenone andtwelve months, and the interest rate swap fully matured as of* June 30, 2023.*

The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU2017-12, Derivatives and Hedging (Topic815): Targeted Improvements to Accounting for Hedging Activities (“ASC Topic815”). For certain contracts, as the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with ASC Topic815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. The Company designated the interest rate swap as a cash flow hedge of expected future interest payments at the inception of the contract. Accordingly, for the foreign exchange, unrealized gains or losses on the effective portion of these contracts were included within other comprehensive income and reclassified to earnings when the hedged transaction is settled. Cash flows from hedging activities were classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the contracts, as of* December 31, 2023* and* December 31, 2022*, is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions areno longer probable to occur, the loss on the associated forward contract is recognized in earnings.

As of* December 31, 2023*, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $61.4 million, of which $61.4 million met the requirements of ASC Topic815 and were designated as hedges.

As of* December 31, 2022* the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $49.7 million, of which $49.7 million met the requirements of ASC Topic815 and were designated as hedges.

As of* December 31, 2021the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $38.1 million, of which $26.8 million met the requirements of ASC Topic815* and were designated as hedges.

As of* December 31, 2023*, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:

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

The effect of these derivative instruments on our consolidated financial statements as of, and for the years ended* December 31, 2023* and2022, were as follows (amounts presented donot include any income tax effects).

Fair value of derivative instruments in the consolidated balance sheets (see“Note6 – Fair Value Measurement”)

F-20

Movement in AOCI balance for the year ended December 31, 2023* (Dollar amounts in thousands of U.S. dollars)*

Movement in AOCI balance for the year ended December 31, 2022* (Dollar amounts in thousands of U.S. dollars)*

Movement in AOCI balance for the year ended December 31, 2021* (Dollar amounts in thousands of U.S. dollars)*

Effects of derivative instruments on income and other comprehensive income (OCI) (Dollar amounts in thousands of U.S. dollars)

For those foreign currency forward contractsnot designated as hedges, the Company recorded the following fair value adjustments, on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars):

F-21

8. Syndicated Revolver:

Third Amended2019* Credit Facility*

In connection with entering into the2023 Credit Agreement, on* September 22, 2023,the Company paid off the principal balance, including accrued interest thereon, of the revolving loans outstanding under the Third Amended and Restated Credit Agreement (the “RBC Credit Agreement”), dated as of August 8, 2022,as amended, by and among the Company, certain subsidiaries of the Company as borrowers, certain other subsidiaries of the Company as guarantors, Royal Bank of Canada, as administrative agent (“RBC”), and the lenders party thereto, pursuant to which Tucows’ prior credit facility that provided the Borrowers with a $240 million revolving credit facility (the"2019* Credit Facility"). The RBC Credit Agreement automatically terminated upon the receipt by RBC of certain backstop letters of credit delivered by BMO.

Prior to entering into the2023 Credit Facility, during the year ended* December 31, 2023the Company made repayments of $16.3 million on the2019* Credit Facility.

2023 Credit Facility

On* September 22, 2023,the Company and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo, Inc. and Tucows (Emerald), LLC (each, a “Borrower” and together, the “Borrowers,” collectively with the Company, “Tucows”) and certain other subsidiaries of the Company, as guarantors, entered into the2023* Credit Agreement with Bank of Montreal, as administrative agent (“BMO” or the “Agent”), and the lenders party thereto, to, among other things, provide the Borrowers with a revolving credit facility in an aggregate amountnot to exceed $240 million (the*“2023* Credit Facility”). The Borrowers* mayrequest an increase to the2023* Credit Facility through new commitments of up to $60 million if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the2023 Credit Agreement) is less than 3.75:1.00. The2023 Credit Facility expires on* September 22, 2026,which is thethird* anniversary of the effective date of the2023 Credit Agreement.

In connection with the2023 Credit Facility, the Company incurred $0.9 million of fees paid to the lenders and $0.3 million of legal fees related to the debt issuance. These fees have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the2023 Credit Facility agreement. The Company evaluated the issuance of the2023 Credit Facility and the termination of the2019 Credit Facility (collectively referred to as the "Debt Transactions") under the loan modification and extinguishment guidance within ASC470. The Debt Transactions were accounted for as a partial modification, partial extinguishment and new debt issuance at the syndicated lender level. Based on the application of the loan modification and extinguishment guidance within ASC470 to the Debt Transactions, the Company has treated $50.9 million of the loan principal under the2019 Credit Facility as an extinguishment of debt and $50.9 million of the loan principal under the2023 Credit Facility as issuance of new debt. The remaining loan principal on the2023 Credit Facility was treated as a loan modification within the guidance of ASC470. In accordance with the debt extinguishment, the Company expensed $0.1 million of the unamortized debt issuance costs to Interest expense, net in the Consolidated Statements of Comprehensive Income.

2023 Credit Facility Terms

The2023 Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The2023 Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In addition, the Company has agreed to comply with the following financial covenants: (1) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio ofnot more than (i)4.50:1:00 at any time from and after the Closing Date to and including* December 30, 2023; (ii)4.25:1:00 from December 31, 2023to and including March 30, 2024; (iii)4.00:1.00 from March 31, 2024to and including June 29, 2024;and (iv)3.75:1.00 thereafter; and (2) an interest coverage ratio by maintaining as of the end of each rollingfour* financial quarter period, an Interest Coverage Ratio (as defined in the2023 Credit Agreement) ofnot less than 3.00:1.00. The required principal repayment of $211.9 million is due in2026.

During the years ended* December 31, 2023and December 31, 2022*the Company was in compliance with the covenants under its credit agreements in effect at the time.

During the year ended* December 31, 2023,the Company made net cash repayments of $17.8 million and $10.0 million under the2019* Credit Facility and the2023 Credit Facility respectively.

F-22

Borrowings under the2023 Credit Agreement will accrue interest and standby fees based on the Company's Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows:

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

The following table summarizes our scheduled principal repayments as of* December 31, 2023* (Dollar amounts in thousands of U.S. dollars):

9. Notes Payable:

2023 Term Notes

On* May 4, 2023 (the “Closing Date”), Tucows Inc. through its indirect and wholly owned subsidiaries, including Ting Fiber, LLC entered into a definitive agreement relating to a securitized financing facility related the2023* Term Notes. On the Closing Date, Ting Issuer LLC, a Delaware limited liability company (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company issued (i) $168,357,000 of its 5.95% Secured Fiber Revenue Notes, Series2023-1, Class A-2, (ii) $23,289,000 of its 7.40% Secured Fiber Revenue Notes, Series2023-1, Class B and (iii) $46,859,000 initial principal amount of 9.95% Secured Fiber Revenue Notes, Series2023-1, Class C, together, the*“2023* Term Notes”. The offering was exempt from registration under the Securities Act of1933, as amended (the “Securities Act”). The net proceeds from the issuance of the2023 Term Notes were $220.5 million, after deducting a debt discount of $11.2 million and issuing costs of $6.7 million.

The debt discount and issuance costs of the2023 Term Notes are being amortized using the straight line method over afive-year period between the Closing date and the anticipated repayment date. During the year ended* December 31, 2023,the Company recognized $2.4 million of interest expense related to the amortization of the debt discount and issuance costs of the2023* Term Notes.

The2023 Term Notes are issued under an indenture, dated* May 4, 2023 (the “Base Indenture”) between the Issuer and Citibank, N.A., as trustee (the “Indenture Trustee”) as supplemented by the Series2023*-1 supplemental indenture dated* May 4, 2023, (the “Series2023*-1 Supplement” and, together with the Base Indenture, the “Indenture”), between the Issuer and the Trustee. Interest payments on the2023 Term Notes are payable on a monthly basis. The legal final maturity date of the2023 Term Notes is in* Aprilof2053,* but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the2023 Term Notes will be in* April 2028.If the Issuer hasnot* repaid or refinanced the2023 Term Notes prior to the anticipated repayment date, additional interest will accrue on the2023 Term Notes in an amount equal to the greater of (A)5.00% per annum and (B) a per annum interest rate equal to the excess, if any, by which the sum of the following exceeds the original interest rate of such2023 Term Note (i) the yield to maturity (adjusted to a “mortgage equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) on such anticipated repayment date of the United States Treasury Security having a term closest to 10 years, plus (ii)5.00%, plus (iii) (x) for the2023 Class A-2 Notes,3.50%, (y) for the2023 Class B Notes,5.00% and (z) for the2023 Class C Notes,7.82%.

The2023 Term Notes are secured by certain of the Company’s revenue-generating assets, consisting principally of fiber-network related agreements, fiber-network assets and customer contracts (collectively, the “Securitized Assets”) that are owned by certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company that act as the Guarantors (collectively with the Issuer, the “Obligor”) under the Base Indenture. The2023 Term Notes are subject to a series of covenants, restrictions and other investor protections including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the2023 Term Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, (iii) certain indemnification payments (iv) the guarantors comply with standard bankruptcy-remoteness covenants, includingnot guaranteeing or being liable for other affiliates debts or liabilities and (v) covenants relating to recordkeeping, access to information, and similar matters.

F-23

As of* December 31, 2023,the Company was in compliance with all required covenants. As of December 31, 2023,the Company's scheduled principal repayments for the2023* Term Notes are set to occur after2027.

The following table summarizes Ting's borrowings under the2023 Term Notes (Dollar amounts in thousands of U.S. dollars):

(1) The Company capitalizes interest expenses directly attributable to the development of qualifying assets. Qualifying assets include internally use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC350. During the year ended* December 31, 2023,the Company capitalized$1.0 million of interest expenses pertaining to the2023* Term Notes directly attributable to the development of certain AUC assets, respectively.

Restricted Cash

Under the terms of the Indenture, revenues generated from the Securitized Assets are deposited into accounts controlled by the Indenture Trustee withintwo business days of receipt. The Company hasno access to or control of the funds held in trust until they are disbursed by the Indenture Trustee on the20th day of each calendar month (the “Payment Date”). In accordance with the Indenture, on each Payment Date the Indenture Trustee disburses, on behalf of the Obligor, administration fees to service providers, interest payments to the noteholders, liquidity reserve top-ups (if required), and the remaining funds to accounts controlled by the Obligor. Funds held in trust with the Indenture Trustee at the reporting date are presented as “Restricted cash” on the Company’s Consolidated Balance Sheet.

At* December 31, 2023,*Restricted cash totaled $3.6 million.

Under the terms of the Indenture, the Company is also required to maintain a liquidity reserve fund equal to the sum of (A)six times the total amount of fund administration fees payable on each payment date after* May 20, 2023and (B)six times the total amount of monthly interest on the2023* Notes due and payable on each payment date after* May 20, 2023.The liquidity reserve is maintained with the Indenture Trustee until the maturity of the2023* Term Notes and the balance is presented as “Secured notes reserve funds” on the Company’s Consolidated Balance Sheet.

At* December 31, 2023*Secured notes reserve funds totaled $8.7 million.

10. Income Taxes:

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 21% for the years ended* December 31, 2023*,* December 31, 2022* and* December 31, 2021*, to income before provision for income taxes as a result of the following (Dollar amounts in thousands of U.S. dollars):

Our effective tax rate is mainly driven by changes in valuation allowance on net operating losses, interest expense limitation that we arenot expected to realize in future years, and the impact of foreign earnings.

F-24

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of* December 31, 2023*, and* December 31, 2022* are presented below (Dollar amounts in thousands of U.S. dollars):

In assessing the need for valuation allowance, historical and future levels of income, expectations and risks associated with estimates of future taxable income and tax planning strategies are considered. In2023, we have determined that it isnot more likely thannot that we will ultimately be able to fully utilize the net operating losses, foreign tax credits and interest expense limitation in future years. As of* December 31, 2023,*a valuation allowance of $28.8 million is recorded against net deferred tax assets. The increase in the valuation allowance was primarily attributable to an increase in deferred tax assets resulting from the loss from operations and interest expense limitation. Should our operating results continue to improve and projections to show utilization of the deferred tax assets, we would take the positive evidence into consideration and reassess our valuation allowance position.

As of* December 31, 2023,*the Company had net federal and state operating loss carryforwards of approximately $230.1 million and interest expense carryforwards of $18.9 million respectively. The majority of the net operating loss and interest expense carryforwards can be carried forward indefinitely.

As of* December 31, 2023,the Company had foreign tax credit carryforwards of $13.0 million. The foreign tax credit will expire beginning in the year ending December 31, 2027ifnot* utilized.

The Company hadnil total gross unrecognized tax benefits as of both* December 31, 2023and December 31, 2022.The Company doesnot* expect its total gross unrecognized tax benefits will change within the next12 months.

The Company recognizes interest and penalties related to income tax matters within the provision for income taxes. As of* December 31, 2023,the Company recorded $0.8 million of interest in income taxes, primarily due to Sec.453A interest on deferred tax liability for U.S. tax purposes. No material interest and penalties were recognized as of December 31, 2022.*

11. Revenue:

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services through Ting, (b) the CSP solutions and professional services through Wavelo; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue through Tucows Domains Services. Certain revenues are disclosed under Tucows Corporate as they are considered non-core business activities including retail mobile services, Transition Services Agreement ("TSA") revenue and eliminations of intercompany 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 ofthird 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 Note21 – Segment Reporting.

F-25

The Company generates Ting revenues primarily through the provisioning of fixed high-speed Internet access, Ting Internet.

Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company doesnot 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.

Ting Internet access services are primarily contracted through the Ting website, forone month at a time and containno commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet customers is computed based on the customer’s activation date. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment isnot received at the time of sale, revenue isnot 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.

The Company generates Wavelo revenues by providing billing and provisioning platform services to Communication Service Providers ("CSPs") to whom we also provide other professional services.

Platform service agreements contain both platform services and professional services. Platform services offer a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools through a single, cloud based service. Consideration under platform service arrangements includes both a variable component that changes each month depending on the number of subscribers hosted on the platform, as well as platform payments and credits. The Company estimates platform payment and credit consideration over the term of the contract and recognizes the portion related to platform services evenly over the term of the contract. The Company recognizes variable subscriber fees, as the fees are invoiced. Platform services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform. As each month of providing access to the platform is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the performance obligation consists of a series of distinct service periods. Professional services provided under platform service arrangements can include implementation, training, consulting or software development/modification services. Revenues related to professional services are distinct from the other promises in the contract(s) and are recognized as the related services are performed, on the basis of hours consumed. Platform payment and credit consideration is allocated between the platform services and professional services performance obligations by estimating the standalone selling price (“SSP”) of each performance obligation. The Company estimates the SSP of professional services based on observable standalone sales. The SSP of platform services is derived using the residual approach by estimating the total contract consideration and subtracting the SSP of professional services. Total contract consideration is estimated at contract inception, considering any constraints that* may*apply and updating the estimates as new information becomes available.

Other professional services consist of professional service arrangements with platform services customers which are billed based on separate Statement of Work (“SOW”) arrangements for bespoke feature development. Revenues for professional services contracted through separate SOWs are recognized at a point-in-time when the final acceptance criteria have been met.

F-26

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

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company doesnot 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 withthird-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 (Dollar amounts in thousands of U.S. dollars):

As of* December 31, 2023*, one customer represented 39% of total accounts receivable. As of* December 31, 2022* one customer represented 46% of total accounts receivable. As of* December 31, 2021*, one customer represented 46% of total accounts receivable.

During the year ended* December 31, 2023* one customer accounted for 10.7% of revenue amounting to $36.2 million, within the Wavelo segment. For the years ended* December 31, 2022* and* December 31, 2021* no customer accounted for more than10% of total revenue.

F-27

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

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.

Some of the Company’s long-term contracts with customers are billed in advance of service, such as domain contracts and some professional service contracts. Consideration received from customers related to performance obligations which havenot yet been satisfied are contract liabilities and recorded as deferred revenues.

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 $145.1 million as of* January 1,*2023. Significant changes in deferred revenue were as follows (Dollar amounts in thousands of U.S. dollars):

F-28

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* December 31, 2023* (Dollar amounts in thousands of U.S. dollars)

For retail mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration ofone year or less (typicallyone month), the Company has elected to apply a practical expedient tonot disclose revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied).

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

Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the nexttwelve months.

Professional service revenue related to platform services* maybe deferred over the periodnot* exceeding the term of the contract.

12. Costs to obtain and fulfill a contract

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 thanone year and those costs are expected to be recoverable under the term of the contract. We have identified certain sales incentive programs and other customer acquisition fees that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $2.6 million at* December 31, 2023*.

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 fromtwo –ten years. For the year ended* December 31, 2023*, the Company capitalized $2.0 million and also amortized $1.2 million of contract costs, respectively. The breakdown of the movement in the deferred costs of acquisition balance for the year ended* December 31, 2023* is as follows (Dollar amounts in thousands of U.S. dollars):

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

Deferred costs to fulfill contracts primarily consist of domain registration costs which have been paid to a domain registry, and are capitalized as deferred costs of fulfillment. These costs are deferred and amortized over the life of the domain which generally ranges fromone toten years. The Company also defers certain technology design and data migration costs it incurs to fulfil its performance obligations contained in our platform services arrangements. For the year ended* December 31, 2023*, the Company capitalized $179.5 million and also amortized $179.1 million of contract costs. There wereno impairment losses recognized in relation to the costs capitalized during the year ended* December 31, 2023*. Amortization expense is primarily included in cost of revenue. The breakdown of the movement in the deferred costs of fulfillment balance for the year ended* December 31, 2023* is as follows (Dollar amounts in thousands of U.S. dollars).

F-29

13. Leases

We lease datacenters, corporate offices, antenna tower and fiber-optic cables under operating leases. The Company doesnot have any leases classified as finance leases.

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

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

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

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

Maturity of lease liability as of* December 31, 2023* (Dollar amounts in thousands of U.S. dollars):

Operating lease payments include payments under the non-cancellable term, without any additional amounts related to options to extend lease terms that arenot reasonably certain of being exercised.

As of* December 31, 2023*, we havenot entered into any lease agreements that havenot yet commenced, and therefore arenot included in the lease liability.

The Company has elected to use the single exchange rate approach when accounting for lease modifications. Under the single exchange rate approach, the entire right of use asset is revalued at the date of modification in the Company’s functional currency provided the re-measurement isnot considered a separate contract or if the re-measurement is related to change the lease term or assessment of a lessee option to purchase the underlying asset being exercised.

F-30

14. Redeemable preferred units:

The Company entered into a Series A Preferred Unit Purchase Agreement (the “Unit Purchase Agreement”) with Generate TF Holdings, LLC, a Delaware limited liability company (“Generate”) on* August 8, 2022 (the "Effective Date"), and closed the transaction contemplated thereby on August 11, 2022 (the "Transaction Close") pursuant to which the Company issued and sold 10,000,000 units of its Series A Preferred Units to Generate at a cash purchase price of $6.00 per unit ("Initial Funding"). Under the Unit Purchase Agreement, after the Transaction Close until thethird* anniversary of the Effective Date (the "End Date") and upon the achievement of pre-determined operational and financial drawdown milestones, the Company will issue and sell in subsequent fundings an aggregate of 23,333,333.34 units of additional Series A Preferred Units on the same terms and conditions as in the Initial Funding ("Milestone Fundings"). The investment provided the Company with $60 million of capital upon the Initial Funding, with an additional $140 million of capital commitments available to the Company over the subsequentthree-year period if the milestones are achieved. From the Transaction Close until the earlier of (i) the End Date and (ii) the date upon which Generate has paid $140 million pursuant to Milestone Fundings, the Company is required to pay Generate a standby fee at a rate of 0.50% of any portion of the unpaid $140 million capital commitment which will be paid quarterly. The Series A Preferred Units accrue a preferred return to the holder at a rate of 15% per annum, subject to adjustments based on the value of approved projects under the Equity Capital Contribution Agreement (the “ECC Agreement”). The preferred return on the Series A Preferred Units purchased under the Unit Purchase Agreement* maybe adjusted down to a floor of 13% or up to a ceiling of 17% per annum based on commitment and contribution amounts under the ECC Agreement. The preferred return accrues daily, and is compounded quarterly. The preferred return accrued during thefirst* two years isnot payable unless and until the Series A Preferred Units are redeemed. The preferred return accrued after thesecond anniversary of the Transaction Close is payable by the Company quarterly. If the Company should redeem the Series A Preferred Units prior to thefourth anniversary of the Transaction Close, the Company is required to pay a make-whole premium, which is calculated as the cumulative and compounded preferred return that would have accrued (at the preferred return rate in effect immediately prior to such redemption) on the outstanding unreturned capital balance with respect to the Series A Preferred Units through and including thesix-year anniversary of the Transaction Close had such Series A Preferred Unitnot been redeemed, discounted at an agreed upon treasury rate plus50 basis points, compounded quarterly (the "Make-Whole-Premium").

The Company's Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"), states that in the event that (i) the Company fails to pay the preferred return fortwo consecutive quarters, (ii) the Company fails to pay the redemption price in connection with any redemption of the Series A Preferred Units, (iii) the Company materially breaches its obligations under the LLC Agreement, (iv) there occurs an event of default (or similar term) under Tucows Inc.’s or its affiliates’ credit agreement, (v) there occurs material breach ifnot cured or otherwise remedied in accordance with the terms of any credit facility (taking into account any cure periods), by the Company or any of its Subsidiaries under any debt facilities where the Company or any of its Subsidiaries incurs indebtedness for borrowed money, or (vi) the Company breaches any covenant under the Unit Purchase Agreement, Generate has the option to either (i) convert Series A Preferred Units based on the Redemption Price into common units of the Company based on the then applicable conversion price ; or (ii) compelling the sale of certain assets of the Company or its subsidiaries of equal value to the Redemption Price.

Under the terms of the LLC Agreement, the Company is mandatorily required to redeem the redeemable preferred units prior to the earliest of (i) a sale of the Company, (ii) a public offering, (iii) an event of default (or similar term) by Tucows Inc. or any of its affiliates under, (iv) a material breach ifnot cured or otherwise remedied in accordance with the terms of any credit facility (taking into account any cure periods), by the Company or any of its Subsidiaries under any debt facilities where the Company or any of its Subsidiaries incurs indebtedness for borrowed money, (v) the Company failed to pay the preferred return fortwo consecutive quarters, and (vi) thesix-year anniversary of the Transaction Close. Due to the fact that the redeemable preferred units are mandatorily redeemable, the redeemable preferred units are classified as a liability in the accompanying consolidated balance sheets. The liability was initially recorded at fair value and subsequently recorded at the present value of the settlement amount, which includes the preferred return payments required until the instrument's expected maturity on thesixth anniversary of the Transaction Close,* August 10, 2028using the implicit rate of return of the instrument,15%. The Company recorded a$16.6 million accretion expense on the redeemable preferred units for the year ended December 31, 2023,*recorded as interest expense, net in the accompanying consolidated statements of comprehensive income.

The Company incurred $0.8 million of legal fees related to the redeemable preferred unit issuance, which have been reflected as a reduction to the carrying amount of the redeemable preferred unit balance and will be amortized to interest expense, net in the accompanying consolidated statements of operations and comprehensive income (loss) over the expectedsix-year term instrument.

On* January 30, 2023,*the Company issued and sold an additional 5,000,000 units of its Series A Preferred Units to Generate at a cash purchase price of $6.00 per unit. The Milestone Funding provided the Company with an additional $30.0 million of capital.

On* April 21, 2023,*the Company issued and sold an additional 833,333 units of Series A Preferred Units to Generate at a cash purchase price of $6.00 per unit pursuant to the Unit Purchase Agreement. The Milestone Funding provided the Company with an additional $5.0 million of capital and reduced Generate's future capital commitment under the Unit Purchase Agreement to $77.5 million.

On* May 4, 2023,Ting Fiber, LLC executed the Ting Class C Notes - Redemption Agreement (the "Redemption Agreement") and the Ting Class C Notes – Side Letter (the "Side Letter Agreement") with Generate. Under the terms of the Redemption Agreement, Ting Fiber, LLC redeemed 5,173,067 Series A Preferred Units held by Generate at $6 per unit, totaling a redemption of $31 million. The terms of the redemption were modified by the Side Letter Agreement, which granted a 30% discount on the make-whole premium which amounted to $14.7 million for a total redemption price of $45.7 million inclusive of the make-whole premium. The Company has accounted for the redemption of the preferred units as an extinguishment of debt in accordance with ASC470* - Debt. The resulting loss on debt extinguishment has been recognized as 'Other Income/Expense' in the financial statements. Terms of the Side Letter Agreement also preclude Ting Fiber, LLC from issuing additional Series A Preferred Units for365 days from the closing of the Redemption Agreement during which time standby fees will be suspended.

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As of* December 31, 2023,the redeemable preferred units have an aggregate liquidation preference of$91.5 million, plus a Make-Whole Premium should redemption occur before thefourth* anniversary of the Transaction Date and are senior to the Ting Fiber, LLC common shares with respect to sale, dissolution, liquidation or winding up of the Company.

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

(1) The Company capitalizes interest expenses directly attributable to the development of qualifying assets. Qualifying assets include internally use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC350. During the year ended* December 31, 2023,*the Company capitalized $2.4 million of interest expenses pertaining to the redeemable preferred units directly attributable to the development of certain AUC assets, respectively.

The following table summarizes our scheduled repayments as of* December 31, 2023 (*Dollar amounts in thousands of U.S. dollars):

15. Common Shares

The Company’s authorized common share capital is 250 million shares of common stock without nominal or par value. On* December 31, 2023*, there were 10,903,405 shares of common stock outstanding (* December 31, 2022*:10,817,110).

Repurchase of common shares:

(a) Normal Course Issuer Bids:

2024 Stock Buyback Program

On* February 22,2024, the Company announced that its Board of Directors (“Board”) has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 23, 2024and is expected to terminate on February 22, 2025.*

2023 Stock Buyback Program

On* February 9,2023, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 10, 2023andterminated on February 9, 2024.* The Company didnot repurchase shares under this program.

2022 Stock Buyback Program

On* February 10,* 2022, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on* February 11, 2022and terminated on February 9, 2023.*The Company didnot repurchase shares under this program.

2021 Stock Buyback Program

On* February 9,2021, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 10, 2021and terminated on February 9, 2022.*The Company didnot repurchase shares under this program.

2020 Stock Buyback Program

On* February 12,2020, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 13, 2020and terminated on February 9, 2021.The Company didnot repurchase shares under this program during the year ended December 31, 2021.*

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(b) Net Exercise of Stock Options

Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option holder can be paid for by having the option holder tender back to the Company a number of shares at fair value equal to the amounts due. These transactions are accounted for by the Company as a purchase and retirement of shares and are included in the table on the following page as common stock received in connection with share-based compensation.

The following table summarizes our share repurchase activity for the periods covered below (Dollar amounts in thousands of US dollars, except for share data):

16. Stock Option Plans:

2006 Tucows Equity Compensation Plan

On* November 22, 2006,the shareholders of the Company approved the Company’s2006* Equity Compensation Plan (the*“2006* Plan”), which was amended and restated effective* July 29, 2010and which serves as a successor to the1996* Plan. The2006 Plan has been established for the benefit of the employees, officers, directors and certain consultants of the Company. The maximum number of common shares which have initially set aside for issuance under the2006 Plan is 1.25 million shares. On* October 8, 2010,the2006* Plan was amended to increase the number of shares set aside for issuance by an additional 0.475 million shares to 1.725 million shares. In* September 2015,the2006* Plan was amended to increase the number of shares set aside for issuance by an additional 0.75 million shares to 2.475 million shares. In* November 2020,the2006* Plan was amended to increase the number of shares set aside for issuance by an additional 1.53 million shares to 4.0 million shares. Generally, options issued under the2006 Plan vest over afour-year period and have a termnot exceeding seven years, except for automatic formula grants of non-qualified stock options, which vest afterone year and have afive-year term. Prior to the* September 2015amendment to the2006* Plan, automatic formula grants of non-qualified stock options vested immediately upon grant.

Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option holder can be paid for by having the option holder tender back to the Company a number of shares at fair value equal to the amounts due. These transactions are accounted for by the Company as a purchase and retirement of shares.

The fair value of each option grant ("Company Option") 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.

The fair value of Company Options granted during the years ended* December 31, 2023*,* December 31, 2022* and* December 31, 2021* was estimated using the following weighted average assumptions:

Details of Company Option transactions are as follows:

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As of* December 31, 2023*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Company Options were as follows:

Total unrecognized compensation cost relating to unvested Company Options at * December 31, 2023* , prior to the consideration of expected forfeitures, is approxi mately $5.5 million and is expected to be recognized over a weighted average period of 2.8 years.

There wereno exercises of Company Options during the year ended* December 31, 2023*. The total intrinsic value of Company Options exercised during the years ended* December 31, 2022* and* December 31, 2021* was$0.8 million and $6.4 million, respectively. Cash received from the exercise of stock options during the years ended* December 31, 2022* and* December 31, 2021* was $1.1 million and $4.8 million respectively.

The Company recorded stock-based compensation for Company options amounting to $6.0 million, $5.8 million and $4.6 million for the years ended* December 31, 2023*,2022 and2021 respectively. Stock-based compensation for the Company stock has been included in operating expenses as follows (Dollar amounts in thousands of US dollars):

2022 Wavelo Equity Compensation Plan

On* November 9, 2022the Board of Wavelo approved Wavelo's Equity Compensation Plan (Wavelo ECP), which has been established for the benefit of the employees, officers, directors and certain consultants of Wavelo or Tucows. The Wavelo stock options were introduced in order to provide variable compensation that helps retain executives and ensures that our executives' interests are aligned with those stakeholders of the business to grow long-term value. Wavelo is a wholly owned subsidiary of Tucows. The maximum number of Wavelo common shares which have been set aside for issuance under the2022* Plan is 20 million shares, currently there are 100 million shares outstanding. The options issued under the ECP primarily vest over a period ofthree years and have a 7-year term. For the initial grants under the plan, thefirst 25% became exercisable withinthree months and vesting ratably monthly thereafter, subsequently forthree years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur.

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 Company calculates expected volatility based on the actual volatility of comparable publicly traded companies. 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 assumes the expected dividend yield to be zero.

The fair value of stock options granted during the year ended* December 31, 2023* was estimated using the following weighted average assumptions:

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Details of Wavelo's stock option transactions are as follows:

As of* December 31, 2023*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Wavelo stock options were as follows:

Total unrecognized compensation cost relating to unvested Wavelo stock options at* December 31, 2023*, prior to the consideration of expected forfeitures, is approxi mately$4.5 million and is expected to be recognized over a weighted average period of 2.2 years.

Stock-based compensation for the Wavelo stock options has been included in operating expenses as follows (Dollar amounts in thousands of US dollars):

2022 Ting Equity Compensation Plan

On* January 16, 2023the Board of Ting Fiber, LLC approved Ting's Equity Compensation Plan (Ting ECP), which has been established for the benefit of the employees, officers, directors and certain consultants of Ting or Tucows. The Ting stock options were introduced in order to provide variable compensation that helps retain executives and ensures that our executives' interests are aligned with those stakeholders of the business to grow the long-term value. The maximum number of Ting common units that have been set aside for issuance under the plan is 10 million units, currently there are 100 million common units outstanding. Generally, options issued under the ECP vest over afour-year period and have a termnot* exceeding seven years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share based instrument.

The Company calculates expected volatility based on the actual volatility of comparable publicly traded companies. 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 assumes the expected dividend yield to be zero.

The fair value of stock options granted during the year ended* December 31, 2023* was estimated using the following weighted average assumptions:

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Details of Ting's stock option transactions are as follows:

As of* December 31, 2023*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Ting stock options were as follows:

Total unrecognized compensation cost relating to unvested stock options at* December 31, 2023,*prior to the consideration of expected forfeitures, is approximately $0.6 million and is expected to be recognized over a weighted average period of 2.5 years.

Stock-based compensation for the Ting stock options has been included in operating expenses as follows (Dollar amounts in thousands of US dollars):

The Company recorded stock-based compensation expense of $8.1 millionfor year ended* December 31, 2023and $7.6 million and $4.6 million for the years ended December 31, 2022and December 31, 2021,*respectively. The Company details of the stock-based compensation expense are as follows:

The Company capitalizes stock-based compensation costs directly attributable to the development of qualifying assets. Qualifying assets include internal use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC350. During the year ended* December 31, 2023,*the Company capitalized $0.3 million of stock based compensation directly attributable to the development of certain IUS assets.

17. Foreign Exchange:

A foreign exchange loss amounting to$0.1 million has been recorded in general and administrative expenses during the year ended* December 31, 2023*. A foreign exchange loss amounting to$0.2 millionhas been recorded in general and administrative expenses during the year ended* December 31, 2022*. A foreign exchange gain amounting to $0.4 million has been recorded in general and administrative expenses during the year ended* December 31, 2021*.

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18. Other Income (Expenses):

On* August 1, 2020,the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), by and between the Company and DISH Wireless L.L.C.(“DISH”). Under the Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to DISH its mobile customer accounts that are marketed and sold under the Ting brand (other than certain customer accounts associated withone* network operator) (“Transferred Assets”). For a period of 10 years following the execution of the Purchase Agreement, DISH will pay a monthly fee to the Company generally equal to an amount of net revenue received by DISH in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the Purchase Agreement. During the year ended* December 31, 2023*, the Company earned $17.0 million under the Purchase Agreement.

The Company recorded interest income amounting to $4.5 million, $0.1 million andnil for the years ended* December 31, 2023*,2022 and2021 respectively. This significant increase in2023 was primarily due to the strategic investment of excess2023 Term Notes proceeds into Money Market Deposit Accounts ("MMDAs") and Certificates of Deposit ("CDs"), which generated $4.3 million in interest income. Interest expense, net has been included in "Other Income" as follows (Dollar amounts in thousands of US dollars):

19. Earnings Per Common Share:

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

For the year ended* December 31, 2023*, and* December 31, 2022* the Company recorded a net loss, thus all outstanding options were considered anti-dilutive and excluded from the computation of diluted income per common share.

For the year ended* December 31, 2021,options to purchase 39,889 common shares were outstanding but werenot* included in the computation of diluted income per common share because the options' exercise price was greater than the average market price of the common shares for the year.

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20. Commitments and Contingencies:

(a) The Company has several non-cancelable lease and purchase obligations primarily for general office facilities, service contracts for mobile telephone services and equipment that expire over the nextten years. Future minimum payments under these agreements are as follows (Dollar amounts in thousands of US dollars):

(1) Purchase obligations include all other legally binding service contracts for mobile telephone services and other operational agreements to be delivered during Fiscal 2024 and subsequent years. (2) Purchase obligations include minimum revenue commitments of $30.5 million with the Company's MNO partner between 2024 and 2026.

(b) On* February 9, 2015*Ting Fiber, Inc.(“Ting”) entered into a lease and network operation agreement with the City of Westminster, Maryland (the “City”) relating to the deployment of a new fiber network throughout the Westminster area (“WFN”).

Under the agreement, the City will finance, construct, and maintain the WFN which will be leased to Ting for a period often years. The network will be constructed in phases, the scope and timing of which shall be determined by the City, in cooperation with Ting.

Under the terms of the agreement, Ting* maybe required to advance funds to the City in the event of a quarterly shortfall between the City’s revenue from leasing the network to Ting and the City’s debt service requirements relating to financing of the network. Ting could be responsible for shortfalls between $50,000 and $150,000 per quarter. In Fiscal2016,* the City has entered into financing for the construction of the WFN which allows the City to draw up to $21.0 million, from their lenders, over the next five years with interest only payments during that period with a loan maturity of 30 years. As of* December 31, 2023*, the City has drawn $16.2 million and the City’s revenues from Ting exceed the City’s debt service requirements. The Company doesnot believe it will be responsible for any shortfall in Fiscal2024.

(c)On* September 17, 2018*Ting entered into a non-exclusive access and use agreement with SiFi Networks Fullerton, LLC (“SiFi”). The agreement memorializes a long-term (15-year) relationship wherein Ting will be granted the non-exclusive right to act as an Internet service provider for a fiber-optic network to be constructed in the city of Fullerton, California. Under the terms of the agreement, SiFi is fully responsible for constructing, operating and maintaining a wholesale fiber-optic network, as well as the financing of those activities.

Ting is responsible for paying a fee per subscriber to SiFi. Through a “take or pay” arrangement, Ting has agreed to certain minimum charges based on minimum subscriber rates. These minimum fees are variable based on the percentage completion of the fiber optic network, and thus havenot been considered an unconditional purchase obligation for the purposes of the table in Note20 (a).

(d)On* November 4, 2019Ting entered into an access and use agreement with Netly, LLC (“Netly”). The agreement memorializes a long-term (12-year) relationship wherein Ting will be granted the right to act as an Internet service provider for fiber-optic networks to be constructed in and around the cities of Solana Beach, California. Under the terms of the agreement, Ting will have a3*-year “Headstart” period over each completed segment of the network, whereby Ting shall be the exclusive provider of services to subscribers during the “Headstart” period. Netly is fully responsible for constructing, operating and maintaining a wholesale fiber optic network, as well as the financing of those activities.

Ting is responsible for paying a fee per subscriber to Netly, as well as an unlit door fee for each serviceable addressnot subscribed. Through a “take or pay” arrangement, Ting has agreed to certain minimum charges based on minimum subscriber rates. To the extent that construction of the fiber optic network is complete, our minimum commitments have been included in the contractual lease obligations of the table in Note20 (a). With respect to future obligations based on the future construction of the fiber optic network, these minimum fees are variable and thus havenot been considered an unconditional purchase obligation for the purposes of the table in Note20 (a).

(e) On* January 7, 2022,Ting Fiber, Inc., entered into a25*-year lease agreement with Colorado Springs Utilities (“CSU”), a municipally owned utility. The lease agreement named Ting Fiber the anchor tenant on a city-wide fiber network that is intended to pass200,000 homes in Colorado Springs, Colorado. CSU began construction inQ2 of2023. The lease obligates Ting, and its ultimate parent Tucows, Inc., to pay a per month fee for addresses passed by the network (as they are passed and become serviceable for customers to connect to the network) and for certain fiber infrastructure, including co-location space. Total costs of the lease, over itstwenty-five-year term, are approximately $593,000,000 based on a fully completed fiber-to-the-home network, however the minimum fees are variable based on the percentage completion of the fiber optic network. Future committed fees associated with completed portions of the network have been included in the contractual lease obligations of the table in Note20(a). Future fees associated with portions of the network that have yet to be constructed havenot been considered an unconditional purchase obligation for the purposes of the table in Note20(a).

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(f) On* May 11, 2022,Ting Fiber, LLC, entered into a "Rights-of-Way" agreement with the City of Alexandria, Virginia whereby the City granted Ting Fiber the right to install, place, construct, maintain, operate, upgrade, repair, and replace a Communications System to provide Broadband Services within the Public Rights-of-Way (a space in, upon, above, along, across, over and below the public and City-owned property that is used as a public rights-of-way) for a fee. Per the agreement, Ting Fiber is to pay the City throughout the20*-year term of the agreement, an amount equal to3% of Ting Fiber's Broadband Revenues once the network is live, and subscribers are obtained, and this fee is to be paid on a quarterly basis. The agreement commenced once Ting Fiber launched its network in Alexandria in* March 2023.Since these fees are currently variable in nature, they havenot* been considered an unconditional purchase obligation for the purposes of the table in Note20 (a).

(g) On* November 1, 2023,the Company, entered into a Network Access and Use Agreement with Blue Suede Networks, LLC, which granted Ting Fiber the right to use the fiber communications network to be constructed by Blue Suede Networks, LLC to provide high-speed broadband Internet Access services to end-user residential and small and medium sized business customers in the city of Memphis, Tennessee. The agreement grants the Company an exclusivity period of5* years. The agreement requires the Company to pay the greater of a minimum revenue commitment based on minimum subscriber rates and a revenue share. Future fees associated with portions of the network havenot been considered an unconditional purchase obligation for the purposes of the table in Note20(a).

(h) In the normal course of its operations, the Company becomes involved in various legal claims and lawsuits. The Company intends to vigorously defend these claims. While the final outcome with respect to any actions or claims outstanding or pending as of* December**31,* 2023 cannot be predicted with certainty, management doesnot believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company’s financial position.

21. Segment Reporting:

Reportable operating segments:

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

Certain revenues and expenses disclosed under the Corporate category are excluded from segment Adjusted EBITDA results as they are centrally managed andnot monitored by or reported to our CEO by segment, including retail mobile services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT.

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

1. Ting - This segment derives revenue from the retail high speed Internet access to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States.

2. Wavelo – This segment derives revenue from platform and other professional services related to communication service providers, including Mobile Network Operators and Internet Service Providers, and are primarily generated in the United States.

3. Tucows Domains – 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. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States.

Our segmented results include shared services allocations, including a profit margin, from Tucows Corporate for Finance, Human Resources and other technical services, to the operating units. In addition, Wavelo charges Ting a subscriber based monthly charge services rendered. Financial impacts from these allocations and cross segment charges are eliminated as part of the Tucows Corporate results.

Key measure of segment performance:

The CEO, as the chief operating decision maker, regularly reviews the operations and performance by segment. The CEO reviews segment revenue, gross margin and Adjusted EBITDA (as defined below) as (i) key measures of performance for each segment and (ii) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses and general and administrative expenses andnot reviewed or managed by the CEO separate from Adjusted EBITDA, and are thusnot included as separate measurements of segment profitability. Depreciation of property and equipment, amortization of intangible assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and arenot included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and arenot reviewed at the segment level by the CEO.

Our key measures of segment performance and their definitions are:

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

2. Segment Adjusted EBITDA - segment gross margin as well as the recurring income earned on sale of transferred assets, less network expenses and certain operating expenses attributable to each segment, such as sales and marketing, technical operations and development, general and administration expenses but excludes gains and losses from unrealized foreign currency, stock-based compensation and transactions that arenot indicative of on-going performance, including acquisition and transition costs. Certain revenues and expenses disclosed under the Tucows Corporate category are excluded from segment Adjusted EBITDA results as they are centrally managed andnot monitored by or reported to our CEO by segment, including mobile retail services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT.

The Company believes that both segment gross margin and Adjusted EBITDA measures are important indicators of the operational strength and performance of its segments, by identifying those items that arenot directly a reflection of each segment’s performance or indicative of ongoing operational and profitability trends. Segment gross margin and segment Adjusted EBITDA both exclude depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets that are included in the measurement of income before provision for income taxes pursuant to generally accepted accounting principles ("GAAP"). Total assets and total liabilities are centrally managed and arenot reviewed at the segment level by the CEO.

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Information by reportable segments (with the exception of disaggregated revenue, which is discussed in “Note11 – Revenue”), which is regularly reported to the chief operating decision maker, and the reconciliations thereof to our income before taxes, are set out in the following tables (Dollar amounts in thousands of US dollars):

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1 Acquisition and other costs represents transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisition of Cedar in* January 2020and Simply Bits in November 2021and the disposition of certain Ting Mobile assets in August 2020.*Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

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

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

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

22. Subsequent Events:

2024 Stock Buyback Program

On* February 22, 2024,the Company announced that its Board of Directors (“Board”) has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The$40* million buyback program commenced on* February 23, 2024and is expected to terminate on February 22, 2025.The previously announced $40 million buyback program for the period February 10, 2023to February 9, 2024*was terminated.

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CONDENSED FINANCIAL STATEMENTS OF TUCOWS INC.

(PARENT COMPANY)

All operating activities of Tucows Inc. (the “Parent Company”) are primarily conducted by its operating subsidiaries, Tucows.com Co (“Tucows.com Co”), eNom LLC ("eNom"), EPAG Domainservices GmbH (“EPAG”), Ascio Technologies, Corp (“Ascio”), Ting Inc. (“Ting Inc”), Wavelo, Inc. (“Wavelo”) and Ting Fiber, LLC (“Ting Fiber”).

The Parent Company holds a direct 100% ownership interest in Tucows (Delaware) Inc. ("Tucows Delaware"), which holds the Parent Company’s interest in its operating subsidiaries. The Parent Company is a holding company that doesnot conduct any substantive business operations and doesnot have any assets or liabilities other than cash and cash equivalents, accounts receivables, prepaid expenses, intangible assets, derivative instruments, accounts payables, accrued liabilities, investments in its subsidiaries and due to related party. The operations of Ting Fiber, LLC are partially funded through Redeemable preferred units which have restrictions on the ability to pay dividends, loan funds and make other upstream distributions to the Parent Company without prior approval by the holder of the Redeemable preferred units.

These Condensed Parent Company financial statements have been prepared using the same accounting principles and policies described in the notes to the Consolidated Financial Statements. Refer to the Consolidated Financial Statements and notes presented above for additional information and disclosures with respect to these condensed financial statements.

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SCHEDULE I - CONDENSED BALANCE SHEETS

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SCHEDULE I - CONDENSED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

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SCHEDULE I - CONDENSED STATEMENTS OF CASH FLOWS

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SCHEDULE I - NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE1. BASIS OF PRESENTATION

Tucows Inc. (the “Parent Company”) is a holding company that conducts substantially all of its business operations through its subsidiaries. The Parent Company holds a direct 100% ownership interest in Tucows (Delware) Inc., which holds the Parent Company’s interest in Tucows.com Co (“Tucows.com Co”), eNom LLC ("eNom"), EPAG Domainservices GmbH (“EPAG”), Ascio Technologies, Corp (“Ascio”), Ting Inc. (“Ting Inc”), Wavelo, Inc. (“Wavelo”) and Ting Fiber, LLC (“Ting Fiber”).

The Parent Company was incorporated under the laws of the Commonwealth of Pennsylvania in* November 1992under the name Infonautics, Inc. In August 2001,*we completed our acquisition of Tucows Inc., a Delaware corporation, and we changed our name from Infonautics, Inc. to Tucows Inc.

The Parent Company was established to allocate capital and manage internet and telecom infrastructure businesses. Through its operating subsidiaries, the Parent Company offers a broad range of services including fixed Internet access, billing and subscription management platform services for communication service providers and distribution of global internet services through the provision of domain name registrations, digital certificates and email services.

As of* December 31, 2023*the restricted net assets for Ting Fiber LLC totaled $89.3 million. The restrictions on these net assets primarily affect our ability to transfer funds from our subsidiaries without violating contractual agreements. The Company continuously evaluates the impact of these restrictions on our liquidity and capital resource planning.

The Company operates within a consolidated tax group, comprising the Parent Company and its wholly-owned subsidiaries. Deferred taxes arenot separately identified and recorded at the parent level.

No dividends have been received from any of our subsidiaries in the pastthree years.

NOTE2. COMMITMENTS AND CONTINGENCIES

The Parent Company and its subsidiaries, excluding Ting Fiber, LLC, have revolving credit facilities throughthird-party financial institutions. The total available amount on the credit facilities is $240 million, and as at* December 31, 2023,*$211.9 million was drawn on the credit facilities. The Parent Company hadno other material commitments or contingencies during the reported periods.

NOTE3. SHARE CAPITAL

The Company's authorized common share capital is 250 million shares of common stock without nominal or par value. As of* December 31, 2023,and2022,* the number of outstanding shares of common stock was 10,903,405 and 10,817,110, respectively. The Parent Company issued 86,295,40,459, andnil common stock during thetwelve months ended* December 31, 2023*,* December 31, 2022* and* December 31, 2021*, respectively related to stock based compensation. The Parent Company retirednil, 3,053 and 45,824 common stock during thetwelve months ended* December 31, 2023*,* December 31, 2022* and* December 31, 2021*, respectively related to stock options exercised.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of behalf of the registrant and in the capacities and on the dates indicated.