TUCOWS INC /PA/

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

1. Organization of the Company

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) 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. Basis of Presentation

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive loss and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as of* March 31, 2025* and the results of operations and cash flows for the interim periods ended* March 31, 2025* and2024. The results of operations presented in this Quarterly Report on Form10-Q arenot necessarily indicative of the results of operations that* may*be expected for future periods.

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in conformity with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and U.S. Generally Accepted Accounting Principles (“GAAP”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. These interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended* December 31,2024 included in Tucows'2024 Annual Report on Form10-K filed with the SEC on March**13,* 2025 (the “2024 Annual Report”). There have beenno material changes to our significant accounting policies and estimates during thethree months ended* March 31, 2025* as compared to the significant accounting policies and estimates described in our2024 Annual Report.

Change in Presentation of [Condensed] Consolidated Financial Statements

Effective with this Form10-Q, the Company has updated the format of its Condensed Consolidated Financial Statements, including the Balance Sheets, Statements of Operations and Comprehensive Income (Loss), and Statements of Cash Flows. This revision condenses certain previously displayed line items to streamline presentation and improve clarity for the users of the financial statements.

Change in presentation of Condensed Consolidated Balance Sheet

1. “Inventory”, “Asset held for sale” and “Income taxes recoverable” within the line item “Prepaid expenses and other”

2. “Investments” and “Contract costs” within the line item “Other Assets”

3. “Accounts payable” and “Accrued liabilities” within the line item “Accounts payable and accrued liabilities”

4. “Customer deposits”, “Accreditation fees payable” and “Income taxes payable” within the line item “Other Current Liabilities”

These line items are adjusted on the Company’s unaudited Condensed Consolidated Balance Sheets to conform to the current period presentation. The Company continues to present the condensed line item information in “Note20 – Additional Financial Information”.

Change in presentation of Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

1. “Network, depreciation of property and equipment” and “Network, amortization of intangible assets” within the line item “Network, depreciation and amortization”

2. “Network, impairment of intangible assets” within the line item “Network, other costs”

3. “Depreciation of property and equipment” and “Amortization of intangible assets” within the line item “Depreciation and amortization”

4. “Income earned on sale of transferred assets, net” within the line item “Other income (expense)”

These line items are adjusted on the Company’s unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) to conform to the current period presentation. Also, the Company provides additional disclosure related to “Income earned on sale of transferred assets, net” in “Note17 – Other income (expense)”

Change in presentation of Condensed Consolidated Statements of Cash flows

1. “Impairment of property and equipment”, “Net amortization contract costs”, “Net Right of use operating assets/Operating lease liability”, “Disposal of domain names”, “Contract assets”, “Inventory”, “Income taxes recoverable”, “Customer deposits” and “Accreditation fees payable” and “Undistributed earnings of equity method investee” within the line item “Other operating assets and liabilities”

These line items are adjusted on the Company’s unaudited Condensed Consolidated Statements of Cash flows to conform to the current period presentation.

These presentational changes donot impact previously reported financial results and are intended to improve readability and align with industry best practices. Comparative periods have been revised to conform to the current period’s presentation where applicable.

This revised format doesnot impact the totals reported in primary financial statement sections. Specifically, there areno changes to total assets, total liabilities, or stockholders' deficit within the Balance Sheets. Similarly, within the Statements of Operations and Comprehensive Income (Loss), total net revenues, total expenses, net income (loss), and earnings (loss) per share remain unchanged. Furthermore, the Statements of Cash Flows reflectsno alterations to the total cash flows from operating, investing, or financing activities.

This updated presentation represents the Company’s preferred format, ensuring adherence to relevant accounting standards, and will be consistently applied in future annual and interim filings.

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3. Recent Accounting Pronouncements

Recent Accounting PronouncementsNot* Yet Adopted*

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 cash flows. 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* November 2024,the FASB issued ASUNo.* 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses” (ASU2024-03), which requires that a public entity disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization included in each relevant expense caption presented on the face of the income statement. The standard also requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that arenot separately disaggregated quantitatively as well as disclose the total amount of selling expenses and, annually, the entity’s definition of selling expenses. ASU2024-03 will be effective for annual periods beginning after* December 15, 2026,*with either retrospective or prospective application. The standard allows for early adoption of these requirements and we are currently evaluating the disclosure impacts of our adoption.

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4. 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 formerly 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. The Company doesnot* use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature betweenone andtwelve months.

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. 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 foreign exchange contract, as of* March 31, 2025* and* December 31,*2024, 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* March 31, 2025*, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $11.2 million, of which $11.2 million met the requirements of ASC Topic815 and were designated as hedges.

As of* December 31,*2024, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $29.4 million, of which $29.4 million met the requirements of ASC Topic815 and were designated as hedges.

As of* March 31, 2025*, 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 were as follows (amounts presented donot include any income tax effects).

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Fair value of derivative instruments in the consolidated balance sheets

Movement in Accumulated other comprehensive income (AOCI) balance for thethree* months ended* March 31, 2025** (Dollar amounts in thousands of U.S. dollars)

Effects of derivative instruments on income and OCI for thethree* months ended* March 31, 2025and2024* are as follows (Dollar amounts in thousands of U.S. dollars)*

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.

The Company's Goodwill balance remained consistent at*$130.4* million as of* March 31, 2025* and* December 31,*2024. The Company's goodwill relates 83% ($107.7 million) to the Tucows Domains operating segment and 17% ($22.7 million) to the Ting operating segment.

Goodwill isnot amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present. No impairment charge was recognized during thethree months ended* March 31, 2025and2024*.

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Other Intangible Assets:

Intangible assets consist of acquired brand, technology, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets arenot amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended* March 31, 2025* and* March 31, 2024*, the Company assessed that all domain names that were originally acquired in the* June 2006*acquisition of Mailbank.com Inc. that were up for renewal, should be renewed.

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. The weighted average amortization period for all finite-life intangible assets is 5.4 years.

For thethree months ended* March 31, 2025*, the Company acquired customer relationship assets through hosting agreements for NIL. These assets are being amortized over seven years.

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

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):

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6. Syndicated Revolver

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 a Credit Agreement (the“2023* 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 the Credit Facility through new commitments of up to $60 million if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Credit Agreement) is less than 3.75:1.00. 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 Agreement. The Credit Facility expires on* September 22, 2026,which is thethird* anniversary of the effective date of the Credit Agreement.

During thethree months ended* March 31, 2025and March 31, 2024,* the Company made repaymentsof $2.5 million and $5.5 million on the2023 Credit Facility.

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 the Credit Agreement) ofnot less than 3.00:1.00. The required principal repayment of $192.9 million is due in* September 2026.*

During thethree months ended* March 31, 2025*, and thethree months ended* March 31, 2024* the Company was in compliance with the covenants under its credit agreements in effect at the time. During thethree months ended* March 31, 2025and March 31, 2024,the Company recognized$0.1 million and $0.1 million of interest expense related to the amortization of the debt issuance costs of the2023* Credit Facility.

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 Tucows Businesses excluding-Ting's borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars):

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7. 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 to a privately placed securitization transaction. 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 issuance 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.

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%.

2024 Term Notes

On* August 20, 2024,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 to a privately placed securitization transaction. On August 20, 2024,Ting Issuer LLC, the Issuer, a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company, issued: (i) $55,000,000 of its 5.63% Secured Fiber Revenue Notes, Series2024*-1, Class A-2 (the*“2024* Class A-2 Notes”), (ii) $8,000,000 of its 6.85% Secured Fiber Revenue Notes, Series2024-1, Class B (the*“2024* Class B Notes”), and (iii) $16,000,000 initial principal amount of 9.15% Secured Fiber Revenue Notes, Series2024-1, (the “Class C Notes” together with the2024 Class A-2 Notes and the2024 Class B Notes, the*“2024* Term Notes”). The Tranche C notes werenot sold in this transaction, and they remain available for future sale depending on market conditions. The net proceeds from the issuance of the2024 Term Notes were $61.0 million, after deducting a debt discount of NIL and issuance costs of $2.0 million.

The2024 Term Notes were issued under the Base Indenture (the “Base Indenture”) dated* May 4, 2023,and the related Series2024*-1 Supplement (the “Series2024-1 Supplement”), dated* August 20, 2024,by and between the Issuer, the asset parties thereto, and Citibank, N.A., as trustee (in such capacity, the “Indenture Trustee”) and securities intermediary. The Base Indenture and the Series2024*-1 Supplement allow the Issuer to issue additional series of notes in the future, subject to certain conditions set forth therein. Interest payments on the2024 Term Notes are payable on a monthly basis. The legal final maturity date of the2024 Term Notes is in* Augustof2054,* but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the2024 Term Notes will be in* August 2029.*

The debt discount and issuance costs of the2024 Term Notes are being amortized using the straight-line method over afive-year period between* August 20, 2024*and the anticipated repayment date.

The2023 Term Notes and2024 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 and2024 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 and2024 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.

As of* March 31, 2025,the Company was in compliance with all required covenants. As of March**31,* 2025, the Company’s scheduled principal repayments for the2023 Term Notes of $238.5 million is due on* April 2028and2024* Term Notes of $63.0 million is due on* August 2029.*

During thethree months ended* March 31, 2025and March 31, 2024,the Company recognized$1.0 million and $0.3 million of interest expense related to the amortization of the debt discount and issuance costs of the2023* and2024 Notes.

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The following table summarizes Ting's borrowings under the2023 and2024 Term Notes (Dollar amounts in thousands of U.S. dollars):

(1) During thethree months ended* March 31, 2025and March 31, 2024,the Company capitalized$0.1 millionand $0.5 million of interest expenses pertaining to the2023* and2024 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.

As of* March 31, 2025,and December 31, 2024,*Restricted cash totaled $5.1 million and $4.6 million, respectively.

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* and2024 Term 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* and2024 Term Notes and the balance is presented as “Secured notes reserve funds” on the Company’s Consolidated Balance Sheet.

As of* March 31, 2025,and December 31, 2024,*secured notes reserve funds totaled $11.8 million and $11.7 million, respectively.

8. Income Taxes

The Company’s provision for income taxes for interim periods is determined by using an estimated annual effective tax rate, adjusted for discrete items arising during the quarter. At each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to volatility due to several factors, including accurately forecasting the Company’s net income before tax, taxable income or loss, the mix of tax jurisdictions to which they relate, intercompany transactions, and changes in statutes, regulations, and case law.

For thethree months ended* March 31, 2025*, the Company recorded an income tax expense of $2.2 million on net loss before income taxes of $13.0 million, using an estimated effective tax rate for the fiscal year ending* December 31, 2025.Our effective tax rates for thethree* months ended* March 31, 2025* differ from the U.S. federal statutory rate primarily due an increase in valuation allowance on net operating losses and the impact of foreign earnings.

Comparatively, for thethree months ended* March 31, 2024,the Company recorded an income tax expense of $1.8 million on net loss before income taxes of $24.7 million, using an estimated effective tax rate for the fiscal year ending December 31, 2024adjusted for certain minimum state taxes. Our effective tax rates for thethree* months ended* March 31, 2024*differ from the U.S. federal statutory rate primarily due to an increase in valuation allowance on net operating losses and the impact of foreign earnings.

9. Basic and Diluted Earnings (Loss) per Common Share:

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

For thethree months ended* March 31, 2025and March 31, 2024,*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.

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10. 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 Corporate and all other 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 contract liabilities. All products are generally sold without the right of return or refund.

Revenue is measured based on the 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 Note13 – Segment Reporting.

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, revenue from sale of internet hardware to subscribers is recognized when control transfers, which occurs upon shipment. 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 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 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. Professional services provided under platform service arrangements can include implementation, training, consulting or software development/modification services. Platform services and professional services are considered to be separate performance obligations.

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 a fixed component of platform payments and credits.

Platform payments and associated credits are 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.

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, therefore, the performance obligation consists of a series of distinct service periods. Accordingly, the platform services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform. Accordingly, the platform payment revenue allocated to platform services is recognized evenly over the term of the contract. Variable subscriber fees are allocated to the platform services and are recognized as the fees are invoiced.

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.

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.

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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. The domain expiry stream involves domain names whose registration has expired and as per ICANN regulations are placed into a40-day grace period. Though the domain names donot belong to the registrant during the40-day grace period, the Company is restricted from allowing others to register them. The Company monetizes its domain expiry stream both through the sale of names and by allowing advertisers to place parked pages advertisements on the domains. 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, surname domains and direct navigation 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):

One customer in the Company's Wavelo operating segment accounted for 12% ($10.9 million) and 10.5% ($9.2 million)of total revenue during thethree months ended* March 31, 2025and March 31, 2024,*respectively.

At* March 31, 2025*, one customer represented 55% of accounts receivables. As of* December 31, 2024,*one customer represented 56% of total accounts receivable.

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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 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 recorded as contract liabilities.

Contract liabilities primarily relate 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.

Significant changes in contract liabilities for thethree months ended* March 31, 2025* were as follows (Dollar amounts in thousands of U.S. dollars):

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Remaining Performance Obligations

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 contract liabilities balance related to domain contracts is expected to be recognized within the next twelve months.

Professional services revenue related to platform services agreement is deferred and recognized as hours are incurred over the contract term. Any revenue for unused professional service hours is recognized as revenue at the end of the contract period.

11. Costs to obtain and fulfill a Contract

Deferred costs of fulfillment

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 fulfill its performance obligations contained in our platform services arrangements. There wereno impairment losses recognized in relation to the costs capitalized during thethree months ended* March 31, 2025.*Amortization expense is included in cost of revenue.

The breakdown of the movement in the deferred costs of fulfillment balance for thethree months ended* March 31, 2025* is as follows (Dollar amounts in thousands of U.S. dollars).

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12. Leases

We lease datacenters, corporate offices, antenna towers 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 expense is presented in general and administrative expenses and network expenses within our consolidated statements of operations and comprehensive loss.

Variable lease payments are determined based on specific terms and conditions outlined in the lease agreements. These* may*include payments for utilities, which are based on actual usage, and maintenance costs, which are determined based on expenses incurred.

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

Maturity of lease liability as of* March 31, 2025* (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 are reasonably certain of being exercised.

As of* March 31, 2025*, we havenot entered into 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.

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13. 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.

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

1. Ting - This segment derives revenue from providing retail high speed Internet access services to individuals and small businesses. 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, 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 consolidation.** **

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 Adjusted EBITDA (as defined below) as (i) key measures of performance for each segment and (ii) to make decisions about the allocation of resources. 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 measure of segment performance is Segment Adjusted EBITDA.

We calculate this as segment revenue together with recurring income earned on sale of transferred assets, less cost of revenue, network expenses and certain operating expenses attributable to each segment, such as sales and marketing, technical operations and development, general and administration expenses. Segment Adjusted EBITDA excludes unrealized gains (losses) on foreign exchange, stock-based compensation and transactions that arenot indicative of on-going performance, including acquisition and transition costs. Certain revenues and expenses 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 Adjusted EBITDA is an important indicator 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.

The CODM uses Adjusted EBITDA to evaluate the overall recurring profitability of each operating segment after accounting for overhead costs. Adjusted EBITDA is evaluated by the CODM by comparing current period to historical and forecasted results and is used to inform strategic decisions over segment profitability, operational efficiency, pricing strategies, cost optimization, customer churn, competitor benchmarking and cash flow.

Information by reportable segments (with the exception of disaggregated revenue, which is discussed in “Note10 – 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) Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation.

(2) Network Costs in segment reports provided to the CODM include certain construction expenses for Ting, which are reported as Direct Costs of Revenue in the Consolidated Statements of Operations and Comprehensive Loss.

(3) Other segment items for each reportable segment includes other income, as well as adjustments to add back (deduct): gains and losses from unrealized foreign currency, stock-based compensation expense and acquisition and transition costs, which are included in other line items but are excluded from our definition of Segment Adjusted EBITDA.

The following table reconciles Segment Adjusted EBITDA for the period to Net loss before tax for thethree months ended* March 31, 2025and March 31, 2024*

(1) Items that 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.

(2) Acquisition and other costs represent transaction-related expenses and transitional expenses. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Revenue from sources outside of Canada and The United States of America comprises less than10% of our total operating revenue.

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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):

Under ASC326, the Company assesses the adequacy of its allowance for expected credit losses based on historical loss experience, current economic conditions and reasonable forecasts. Our evaluation considers the short-term nature of our receivables and the high credit quality of our customer base, which mitigates significant credit risk exposure.

(d) The following table summarizes our expected credit losses ("ECL") (Dollar amounts in thousands of US dollars):

14. Stockholders' Deficit

The following table summarizes stockholders' deficit transactions for thethree months ended* March 31, 2025 (*Dollar amounts in thousands of U.S. dollars):

(1) 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 thethree months ended* March 31, 2025and March 31, 2024,*the Company capitalized $0.1 millionand $0.1 million of stock-based compensation directly attributable to the development of certain IUS assets.

2025 Stock Buyback Program

On* February 13, 2025,the Company announced that its Board of Directors (“Board”) 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 14, 2025and is expected to terminate on February 13, 2026.For thethree* months ended* March 31, 2025*, the Company didnot repurchase shares under this program.

2024 Stock Buyback Program

On* February 22, 2024,the Company announced that its Board has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 23, 2024and terminated on February 22, 2025.For thethree* months ended* March 31, 2025and March 31, 2024,*the Company didnot repurchase shares under this program.

2023 Stock Buyback Program

On* February 9,2023, the Company announced that its Board approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 10,2023 and was terminated on February 9, 2024.For thethree* months ended* March 31, 2024*the Company didnot repurchase shares under this program.

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15. Share-based Payments

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 had initially been 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 Company calculates expected volatility based on historical volatility of the Company’s common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

Details of Company stock option transactions for thethree months ended* March 31, 2025* and* March 31, 2024* are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

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As of* March 31, 2025*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

Total unrecognized compensation cost relating to unvested stock options at* March 31, 2025*, prior to the consideration of expected forfeitures, is approxi mately$3.6 million and is expected to be recognized over a weighted average periodof 2.5 years.

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 25 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.

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Details of Wavelo's stock option transactions for thethree months ended* March 31, 2025* and* March 31, 2024* are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

As of* March 31, 2025*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

Total unrecognized compensation cost relating to unvested stock options at* March 31, 2025*, prior to the consideration of expected forfeitures, is approxi mately$2.1 million and is expected to be recognized over a weighted average periodof 1.8 years.

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2022 Ting Equity Compensation Plan

On* January 16, 2023,the 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 ensure 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 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 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.

Details of Ting's stock option transactions for thethree months ended* March 31, 2025* and* March 31, 2024* are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

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As of* March 31, 2025*, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

Total unrecognized compensation cost relating to unvested stock options at* March 31, 2025*, prior to the consideration of expected forfeitures, is approxi mately$0.1 million and is expected to be recognized over a weighted average period of 1.6 years.

The Company recorded total stock-based compensation expense of $1.5 million and $1.9 million for thethree months ended* March 31, 2025*, and* March 31, 2024*, respectively. The Company details of the stock-based compensation expense are as follows:

During thethree months ended* March 31, 2025and March 31, 2024,*the Company capitalized $0.1 million and $0.1 million of stock based compensation directly attributable to the development of certain IUS assets, respectively.

16. Fair Value Measurement

For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs 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. The classification of a financial asset or liability 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 of* March 31, 2025* (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 of* December 31,*2024 (Dollar amounts in thousands of U.S. dollars):

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17. Other income (expense)

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. ("EchoStar", DISH's post-merger parent). Under the Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to EchoStar 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, EchoStar will pay a monthly fee to the Company generally equal to an amount of net revenue received by EchoStar in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the Purchase Agreement.

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.

The Company earned the amounts noted in the table below during thethree months ended* March 31, 2025and March**31,* 2024.

The following table provides additional information relating to Interest expense, net (Dollar amounts in thousands of US dollars):

18. 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") the Company will, upon the achievement of pre-determined operational and financial drawdown milestones 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 Nil million and $4.2 million of accretion expense on the redeemable preferred units for thethree* months ended* March 31, 2025,and March 31, 2024*as interest expense, net in the accompanying consolidated statements of operations and comprehensive loss.

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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 loss over the expectedsix-year term instrument. During thethree months ended* March 31, 2025and March 31, 2024,*the Company recognized $0.1 million and $0.1 million of interest expense related to the amortization of legal fees related to the redeemable preferred unit issuance.

As of* March 31, 2025,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 Close and are senior to the Ting Fiber, LLC common units with respect to sale, dissolution, liquidation or winding up of the Ting Fiber, LLC.

The following table summarizes the Company’s borrowings under the Unit Purchase 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 internal use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC350. During thethree months ended* March 31, 2025and March 31, 2024,*the Company capitalized$0.1 millionand $0.4 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* March 31, 2025 (*Dollar amounts in thousands of U.S. dollars):

19. Restructuring Costs

**** February 2024Workforce Reduction**

On* February 7, 2024,Ting committed to the February 2024workforce reduction ( “February 2024Workforce Reduction”) which aimed to realign the Company's operational structure within the Ting operating segment and reduce Ting's workforce by 13%, or 7% of the Company’s total workforce, to better align with strategic objectives. The February 2024Workforce Reduction was designed to streamline operations and reduce operating expenses within the Ting operating segment. All of the employees impacted by the workforce reduction were notified on February 7, 2024*and have since exited the Company.

During thethree months ended* March 31, 2025and March 31, 2024,the Company incurred NIL and $2.6 million in costs related to this restructuring, which were accounted for underASC420 - Exit or Disposal Cost Obligations.These costs associated with the February 2024Workforce Reduction predominantly consisted ofone*-time termination benefits for the terminated employees associated with the restructuring, and to a lesser extent, continuation of benefits and outplacement costs.

The components of the restructuring charges were as follows (Dollar amounts in thousands of U.S. dollars):

2024 Capital Efficiency Plan

On* October 30, 2024,the Company expanded its cost-reduction efforts with the implementation of a2024* Capital Efficiency Plan (the*"2024* Capital Efficiency Plan"). The Plan was designed to further align operations with strategic priorities, improve operational efficiency, and reduce operating expenses within Ting.

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In connection with the2024 Capital Efficiency Plan, the Company incurred restructuring charges of $7.7 million during the year ended* December 31, 2024.*These charges primarily consisted of termination benefits for the terminated employees associated with the restructuring, continuation of benefits, outplacement costs and professional services.

The liability for the2024 Capital Efficiency Plan was included in Accrued liabilities in the consolidated balance sheet, and the following table summarizes the related activity for the2024 Capital Efficiency Plan for thethree months ended* March 31, 2025 (*Dollar amounts in thousands of U.S. dollars):

20. Additional Financial Information

The following tables provide additional financial information related to our consolidated financial statements:

Inventories

The components of the inventories as of* March 31, 2025and December 31, 2024*were as follows (Dollar amounts in thousands of U.S. dollars):

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