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10-K 1 tcx20141231_10k.htm FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 001-32600
Tucows Inc.
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania
(State or Other Jurisdiction of Incorporation or
Organization)
23-2707366
(I.R.S. Employer Identification No.)
96 Mowat Avenue
Toronto, Ontario, Canada
(Address of Principal Executive Offices)
M6K 3M1
(Zip Code)
Registrant’s telephone number, including area code: (416) 535-0123
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common stock, no par value NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files. Yes ☒ No ☐
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Table of contents

  • Page 1
    ...) 96 Mowat Avenue Toronto, Ontario, Canada M6K 3M1 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (416) 535-0123 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common stock, no par value Name of Each Exchange...

  • Page 2
    ... proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the...

  • Page 3
    ... closing sale price per share of $12.24 as reported on the NASDAQ on such date (after giving effect to the one for four reverse stock split of December 30, 2013). For purposes of making this calculation only, the registrant has defined affiliates as including all officers, directors and beneficial...

  • Page 4
    ...and Director Independence Principal Accountant Fees and Services PART IV Exhibits and Financial Statement Schedules 1 6 28 28 28 29 30 54 55 55 55 56 57 63 68 71 71 72 TRADEMARKS, TRADE NAMES AND SERVICE MARKS Tucows®, EPAG®, Hover®, OpenSRS®, Platypus®, Ting® and YummyNames® are registered...

  • Page 5
    tcx20141231_10k.htm Page 5 of 202 i https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 6
    ... statements. The forward-looking statements contained in this report include statements regarding, among other things, the number of new, renewed and transferred-in domain names, the competition we expect to encounter as our business develops and competes in a broad range of Internet services, the...

  • Page 7
    tcx20141231_10k.htm Page 7 of 202 We qualify all the forward-looking statements contained in this Annual Report on Form 10-K by the foregoing cautionary statements. ii https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 8
    ... 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...

  • Page 9
    ... 13,000 web hosts, Internet service providers ("ISPs") and other resellers around the world. In addition, we also derive revenue from the bulk sale of domain names and advertising from the OpenSRS Domain Expiry Stream and the Marketing Development Funds we receive from vendors from time-to-time to...

  • Page 10
    ... domain name suggestion tools and access to our premium domain names. We earn fees in connection with each new, renewed and transferred-in registration and from providing provisioning services to resellers and registrars on a monthly basis. Domain registrations are generally purchased for terms...

  • Page 11
    ... networks' assessment of the quality and performance characteristics of Internet traffic resulting from online advertisements rendered on their websites. We have no control over any of these quality assessments. Parked page vendors may from time to time change their existing, or establish new...

  • Page 12
    ... Reseller Services are generally either web hosts or ISPs. A small number are consultants and designers providing our services to their business clients. Both our Retail Domain Services and our Network Access Services customers are a very broad mix of consumers, small businesses and corporations...

  • Page 13
    ...result, many of our services (OpenSRS, Hover and Ting) may experience reduced demand during these times. For example, our experience shows that new domain registrations decline during the summer months and around the year-end holidays. Seasonality may also affect advertising, which may have a slight...

  • Page 14
    ... operations for end-users. Wholesale-oriented domain registrars, such as Rightside and Melbourne IT, who market services to resellers such as our customers. Wholesale Email Service providers, such as Google, Microsoft, Bluetie and MailTrust. US Mobile Phone Service providers such as AT&T, Verizon...

  • Page 15
    ... Registrant The following table sets forth the names, ages and titles of persons currently serving as our executive officers. Name Elliot Noss Michael Cooperman David Woroch Age 52 63 52 Title President and Chief Executive Officer Chief Financial Officer Executive Vice President, Sales and Support...

  • Page 16
    ... SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically at http://sec.gov. Our web site address is tucows.com. We make available through our web site, free of charge, copies of our Annual Reports on Form...

  • Page 17
    ... expanding the variety of services that they offer. These competitors include, among others, domain name registrars, website design firms, website hosting companies, Internet service providers, Internet portals and search engine companies, including Google, Microsoft, Web.com, GoDaddy, VeriSign and...

  • Page 18
    ... manage our response to any resulting changes in the business environment, it could adversely impact our competitive position or market share. Each registry and the ICANN regulatory body impose a charge upon the registrar for the administration of each domain registration. If these fees increase...

  • Page 19
    ...resellers' number of domain name registration customers which in turn would drive up their customer acquisition costs and harm our operating results. If resellers decide, for any reason, not to renew their registrations through us, it may in turn reduce the market to which our resellers could market...

  • Page 20
    ... currently do. Because certain Internet domain names are important assets, a failure to acquire or maintain such Internet domain names could adversely affect our financial results and our growth. Any impairment in the value of these important assets could cause our stock price to decline. 7 https...

  • Page 21
    ... maintain our reseller network, to sell more services through existing resellers and to develop our relationships with existing resellers by providing customer and sales support and additional products. Resellers have no obligations to distribute our services and may stop doing so at any time. If we...

  • Page 22
    ...registrar of domain names services, we may be subject to potential liability for illegal activities by our resellers' customers on their websites. We provide an automated service that enables users to register domain names. We do not monitor or review, nor does our accreditation agreement with ICANN...

  • Page 23
    ... infringement of its protected works by web pages for which we provide hosting services, and we fail to expeditiously remove or disable access to the allegedly infringing material, fail to post and enforce a digital rights management policy or a policy to terminate accounts of repeat infringers, or...

  • Page 24
    ... liability of online resellers for activities of customers and more stringent laws in foreign jurisdictions relating to the privacy and protection of third-party data; accreditation and other regulatory requirements to provide domain name registration, website hosting and other services in foreign...

  • Page 25
    ...technologies which could delay and increase the cost of product and service developments. We currently license certain technologies from third parties and incorporate them into certain of our services including email, anti-spam and anti-virus. The Internet services market is evolving and we may need...

  • Page 26
    ...additional debt or equity financing on favorable terms, or at all, at the time when we need that funding. In ...addition, even though we may have sufficient cash flow, we may still elect to sell... their percentage ownership of our company, and any new equity securities ...

  • Page 27
    ... our service offerings under four distinct brands namely "OpenSRS", "YummyNames", "Hover" and "Ting". We also believe that maintaining and enhancing the "Tucows" corporate brand and our service brands is critical to expanding our customer base. We anticipate that, as our market becomes increasingly...

  • Page 28
    ...we currently expect from our acquisition of expiring domain names. These intended and anticipated benefits include increasing our cash flow from operations, broadening our Internet service offerings and delivering services that strengthen our reseller relationships. 11 https://www.sec.gov/Archives...

  • Page 29
    .... Internet browsers may provide alternatives to the URL address box to locate web sites, and search engines may from time to time change and establish rules regarding the indexing and optimization of web sites. Product developments and market practices for these means of access to our web sites are...

  • Page 30
    ...process. As a result, we may face demands by third party trademark owners asserting infringement or dilution of their rights and seeking transfer of the domain names through the Uniform Domain Name Resolution Policy, or UDRP, adopted by ICANN... action under consumer protection laws may subject us to ...

  • Page 31
    ... overall number of registered domain names increases. These claims and any related litigation could result in significant costs of defense, liability for damages and diversion of management's time and attention. Any claims from third parties may also result in limitations on our ability to use the...

  • Page 32
    ... 32 of 202 From time to time, concerns have been expressed about whether our services compromise the privacy of our users and others. Concerns about our practices with regard to the collection, use, disclosure or security of personal information or other privacy-related matters, even if unfounded...

  • Page 33
    ... with us as required by GAAP. Typically, our domain name registration agreements have terms that range from one to ten years, and our website hosting agreements have annual or month-to-month terms. Accordingly, any increases or decreases in sales during a particular period do not translate into...

  • Page 34
    ...that one or more credit card associations may, at any time, assess penalties against us or terminate our ability to accept credit card payments from customers, which would have a material adverse effect on our business, financial condition and results of operations. 14 https://www.sec.gov/Archives...

  • Page 35
    ...Canada Revenue Agency and the U.S. Internal Revenue Service, challenging the validity of our arms- length related party transfer pricing policies or the validity of our contemporaneous documentation. changes in the valuation of our deferred tax assets; or changes in tax laws, regulations, accounting...

  • Page 36
    ... the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition. Our management...

  • Page 37
    ... levels or anticipate a decline in revenue from any of our services; our ability to identify and develop new technologies or services and to commercialize those technologies into new services in a timely manner; the mix of our services sold during the quarter or year; our ability to make appropriate...

  • Page 38
    ... name fees charged to us by Internet registries or ICANN, or other competitive pressures on selling prices; our ability to identify, hire, train, motivate and retain highly qualified personnel, and to achieve targeted productivity levels; market acceptance of Internet services generally and of new...

  • Page 39
    ...ability to identify, develop, deliver and introduce in a timely manner new and enhanced versions of our current service offerings that anticipate market demand and address customer needs; changes in foreign currency exchange rates and issues relating to the conversion to the Canadian dollar; foreign...

  • Page 40
    ... be successful or profitable in the long term. Ting's long-term success is dependent upon its sustained ability to generate sufficient revenue from its subscribers based on their use of its services and its ability to respond to churn by adding new customers. If Ting is unable to sustain or increase...

  • Page 41
    ... may also use their ownership of local wireline telecommunications facilities to introduce service features and calling plans, such as free wireless-to-landline calls, that we are unable to offer at similar cost. Their larger wireless customer bases may make discounted or free in-network calling...

  • Page 42
    ... its credit risk or generate sufficient revenue to cover its postpaid-related expenses, including losses arising from its customers' failure to make payments when due. Ting manages credit risk exposure using techniques that are designed to set terms and limits for the credit risk it accepts. The...

  • Page 43
    ... and ability to attract new customers may be adversely affected if we are unable to meet the increasing demands for our services in a timely and efficient manner, while adequately addressing the growing demands on our customer service, billing, and other back- office functions. Any change in...

  • Page 44
    ... Operators and their third-party affiliates of FCC authorizations in good standing; integration of new services into their nationwide networks; certification of new handsets for use on their nationwide networks; compliance with FCC, state E911 and other regulatory requirements; 19 https://www...

  • Page 45
    ...telephone numbers; maintenance of interconnection agreements; and compliance with applicable laws and regulations. Ting competes with our Network Operators' products. We compete with several of our Network Operators' products. In addition, our Network Operators may from time to time create products...

  • Page 46
    ... of 202 • since December 1, 1999, we have required our resellers to ensure that all registrants are bound to the UDRP as approved by ICANN. Despite these precautions, we cannot be assured that our indemnity and dispute resolution policies will be sufficient to protect us against claims asserted...

  • Page 47
    ... Page 47 of 202 New laws or regulations concerning domains and registrars may be adopted at any time. Our responses to uncertainty in the industry or new regulations could increase our costs or prevent us from delivering our domain registration services over the Internet, which could delay growth...

  • Page 48
    ...be derived from resellers in international markets and may suffer if Internet usage does not continue to grow globally. We believe that a major source of growth for Internet-based companies will come from individuals and businesses outside the United States where Internet access and use is currently...

  • Page 49
    ... and services and other proprietary technology involves significant technological and business risks and requires substantial expenditures and lead-time. We may be unable to use new technologies effectively or adapt our internally developed technology and transaction- processing systems to customer...

  • Page 50
    ... caused by breaches. Eliminating computer viruses and alleviating other security problems may require interruptions, delays or cessation of service to users accessing our websites and the web pages that deliver our content services. An information technology systems security breach may lead to...

  • Page 51
    ... on Tucows or on our customers. New or revised taxes and, in particular, sales taxes, would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal...

  • Page 52
    ... result in additional expense, loss of subscribers and revenue, interruption of our services or a delay in the roll-out of new technology. We have entered into agreements with unrelated parties for the day-to-day execution of services, the development and maintenance of certain systems necessary for...

  • Page 53
    ..., our subscribers' information may be lost, disclosed, accessed, used, corrupted, destroyed or taken without the subscribers' consent. In addition, we and third-party service providers process and maintain our proprietary business information and data related to our business-to-business customers or...

  • Page 54
    ... may refuse to recognize ICANN's authority or support its policies, which could create instability in the domain registration system; some of ICANN's policies and practices, and the policies and practices adopted by registries and registrars, could be found to conflict with the laws of one or more...

  • Page 55
    ... Page 55 of 202 • ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees received for each ICANN accredited registrar and/or domain name registration managed by those registries; ICANN or any registries may implement policy changes that would impact...

  • Page 56
    ....htm Page 56 of 202 of their laws. Because of the increasing popularity and use of the Internet, federal, state and foreign governments may adopt laws or regulations in the future concerning commercial online services and the Internet, with respect to user privacy; children; copyrights...

  • Page 57
    ...over terms and conditions of service, including certain billing practices and consumer-related issues that may not be pre-empted by federal law. If imposed, these regulations could make it more difficult and expensive to implement national sales and marketing programs and could increase the costs of...

  • Page 58
    ...to, at an attractive price. Our share price has varied recently and the price of our common stock may decrease in the future, regardless of our operating performance. Investors may be unable to resell their common stock following periods of volatility because of the market's adverse reaction to this...

  • Page 59
    .... Future sales of shares of our common stock by our existing shareholders could cause our share price to fall. If our shareholders sell substantial amounts of common stock in the public market, the market price of the common stock could fall. The perception among investors that these sales will...

  • Page 60
    ...not own any real property. Our principal administrative, engineering, marketing and sales office totals approximately 26,900 square feet and is located in Toronto, Ontario under a lease that expires on December 31, 2020. In addition, we also maintain offices of approximately 14,100 square feet in St...

  • Page 61
    ... the range of high and low sales prices for our common stock for the periods indicated, as adjusted to reflect the reverse stock split: Year 2015 2014 Fiscal Quarter Ended January 1, 2015 through March 6, 2015 March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 March 31, 2013 June 30...

  • Page 62
    ... retail domain name registration services; value added services and portfolio services. We earn revenues primarily 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...

  • Page 63
    ... domain names under the Tucows ICANN registrar accreditation and for other registrars under their own accreditations. Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, publishing tools and reseller billing...

  • Page 64
    ...: Domain Services Year ended December 31, (1) 2014 2013 2012 (in '000's) Total new, renewed and transferred-in domain name registrations provisioned Domain names under management Registered using the Tucows Registrar Accreditation Registered using our Resellers' Registrar Accreditations Total domain...

  • Page 65
    ... market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new...

  • Page 66
    ... from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of New gTLDs, particularly...

  • Page 67
    ... 67 of 202 Domain Services Wholesale - OpenSRS Domain Service Historically, our OpenSRS Domain Service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names. In...

  • Page 68
    ... and advertising from the OpenSRS Domain Expiry Stream. In addition, we provide billing, provisioning and customer care software solutions to ISPs through our Platypus billing software. Retail - Hover We derive revenues from Hover's sale of retail Internet domain name registration and email services...

  • Page 69
    tcx20141231_10k.htm Page 69 of 202 Portfolio names are sold through our premium domain name service, auctions or in negotiated sales. The size of our domain name portfolio varies over time, as we acquire and sell domains on a regular basis to maximize the overall value and revenue generation ...

  • Page 70
    ... - Ting (sale of retail mobile phones and services). With respect to the sale of domain registrations and other value-added services, we earn registration fees in connection with each new, renewed and transferred-in registration and from providing provisioning services to resellers and registrars on...

  • Page 71
    ... from provisioning mobile phone service to individuals and small businesses through the Ting website, are recognized once services have been provided. This is based upon either usage (e.g., minutes of traffic/bytes of data processed), period of time (e.g., monthly service fees), various regulatory...

  • Page 72
    ...We report our financial results as two operating segments, Domain Services with three distinct service offerings, being wholesale and retail domain name registration services, value added services and portfolio, and Network Access Services which derives revenue from the sale of retail mobile phones...

  • Page 73
    ... not to renew certain under-performing domain names and an ...Domain Services operating segment and to the assumed discount rate which would be used to present value those cash flows. Consideration was given to factors such as macro-economic, industry and market conditions including the capital markets...

  • Page 74
    ... taxable income. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require possible material adjustments to these deferred tax assets, impacting net income or net loss in...

  • Page 75
    ...2014 2013 Domain Services: Wholesale Domain Services Value Added Services Total Wholesale Retail Portfolio Total Domain Services Network Access Services: Ting Total Network Access Services...Deferred revenue from domain name registrations and other Internet services at December 31, 2014 increased to $...

  • Page 76
    ... of ICANN's New gTLD Program will have on the market. While we anticipate that the number of new, renewed and transferred-in domain name registrations will continue to incrementally increase in the long term, the volatility of these factors could affect the growth of domain names that we manage. As...

  • Page 77
    ... and 147,000 mobile devices under its management compared to 48,000 subscribers and 74,000 devices under management as of December 31, 2013. COST OF REVENUES Wholesale OpenSRS Domain Service Cost of revenues for domain registrations represents the amortization of registry fees on a basis consistent...

  • Page 78
    tcx20141231_10k.htm Page 78 of 202 consistent with the provision of service, generally one year, while email hosting fees and monthly printing fees are included in cost of revenues in the month they are incurred. 38 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10...

  • Page 79
    ... domain registry fees and are expensed ratably over the renewal term. Costs of revenues for our larger ad-supported content site include the fees paid to third-party service providers, primarily for digital certificates sold through our content sites and content license fees. Network Access Services...

  • Page 80
    tcx20141231_10k.htm Page 80 of 202 Network Expenses: Network, other costs Network, depreciation and amortization costs 4,554,635 699,670 5,254,305 $ $ 107,115,307 $ 8,607,284 9% 4,835,939 711,763 5,547,702 98,508,023 Increase over prior period Increase - ...

  • Page 81
    ...This increase was primarily the result of increased network access service expenses due to the impact Ting's larger subscriber base is having on service costs. Prepaid domain registration and other Internet services fees as of December 31, 2014 increased by $0.4 million, or 1%, to $56.4 million from...

  • Page 82
    ... the impact our larger subscriber base is having on service costs. Network Expenses Network expenses decreased by $0.3 million for Fiscal 2014, to $5.3 million as compared to Fiscal 2013. These results reflect our improved efficiency in operating and managing our co-location facilities, which has...

  • Page 83
    ... that we use to register domain names, email, retail, domain portfolio and other Internet services, as well as to distribute our digital content services. Editorial costs relating to the rating and review of the software content libraries are included in the costs of product development. All...

  • Page 84
    ... in increased credit card processing fees and bad debts, largely related to the growth of Ting and $0.6 million in increased professional fees as compared to Fiscal 2013. The professional fee increase included additional SOX compliance work that we have undertaken for the first time as well as pre...

  • Page 85
    ... prior period $ $ - As part of our normal renewal process during Fiscal 2014, we assessed that certain domain names acquired in the June 2006 acquisition of Mailbank.com Inc. should not be renewed and were allowed to expire. Accordingly, these domain names, with a book value of $0.6 million, have...

  • Page 86
    ...We have entered into certain forward exchange contracts that do not comply with the requirements of hedge accounting to meet a portion of our future Canadian dollar requirements through December 2015. The impact of the fair value adjustment on outstanding contracts for Fiscal 2014 was a net loss of...

  • Page 87
    ... are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Fiscal 2014 includes tax on profits of $3.4 million, offset by a recovery of $0.3 million related to investment tax credits. Fiscal 2013...

  • Page 88
    ... for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis. The impact of the fair value adjustment on outstanding hedged contracts for Fiscal 2014 was a net loss in other comprehensive income of $0.4 million compared to $0.3 million for Fiscal...

  • Page 89
    ...Domain Services: Wholesale Domain Services Value Added Services Total Wholesale Retail Portfolio Total Domain Services Network Access Services: Ting Total Network Access Services...Fiscal 2012"). Deferred revenue from domain name registrations and other Internet services at December 31, 2013 decreased ...

  • Page 90
    ... 90 of 202 revenue has been impacted by the transfer of a significant number of names by certain of our customers from our registrar accreditation to their own registrar accreditation, no longer registering new domain names on our platform. No customer accounted for more than 10% of revenue during...

  • Page 91
    ... under our management continue to be impacted by two customers who have acquired their own accreditation no longer registering new domain names on our platform. In addition, we provide provisioning services on a monthly basis to accredited registrars who use our technical systems to process domain...

  • Page 92
    ... Ting mobile phone services and equipment for Fiscal 2013, as compared to Fiscal 2012, increased by $12.6 million to $16.5 million and primarily reflects the impact of Ting's growing subscriber base. As of December 31, 2013, Ting had 48,000 subscribers and 74,000 mobile devices under its management...

  • Page 93
    ...December 31, 2013 2012 Domain Services: Wholesale Domain Services Value Added Services Total Wholesale Retail Portfolio Total Domain Services Network Access Services: Ting Total Network Access Services Network Expenses: Network, other costs Network, depreciation and amortization costs $ 73,468,824...

  • Page 94
    ...million from $57.5 million at December 31, 2012. Prepaid domain registration and other Internet services fees have been impacted by certain of our customers, who have acquired their own registrar accreditation, no longer registering new domain names on our platform. 46 https://www.sec.gov/Archives...

  • Page 95
    ...Sales and marketing expenses consist primarily of personnel costs. These costs include commissions and related expenses of our sales, product management, public relations, call center, support and marketing personnel. Other sales and marketing expenses include customer acquisition costs, advertising...

  • Page 96
    ... that we use to register domain names, email, retail, domain portfolio and other Internet services, as well as to distribute our digital content services. Editorial costs relating to the rating and review of the software content libraries are included in the costs of product development. All...

  • Page 97
    ... 4,302,820 (144,217) (3)% 3% 4% Technical operations and development expenses for Fiscal 2013 decreased by $0.1 million, or 3%, to ...related costs for managerial and administrative personnel, fees for professional services, public listing expenses, rent, foreign exchange and other general corporate...

  • Page 98
    tcx20141231_10k.htm Page 98 of 202 As part of our ongoing initiatives to improve the efficiency of our production environment, we retired some older computer hardware at our co-location facilities during Fiscal 2012, which resulted in a loss on the disposition of such equipment. 48 https://www....

  • Page 99
    ...) ON CURRENCY FORWARD CONTRACTS Although our functional currency is the U.S. dollar, a major portion of our fixed expenses are incurred in Canadian dollars. Our goal with regard to foreign currency exposure is, to the extent possible; to achieve operational cost certainty, manage financial exposure...

  • Page 100
    ... increased by $0.7 million, to $0.4 million, as compared with Fiscal 2012. During Fiscal 2013 we made interest payments of $0.4 million pursuant to the terms of our credit facility with the Bank of Montreal. During Fiscal 2012, we sold certain intangible assets with no book value for $0.5 million...

  • Page 101
    ...Valuation allowances are established when necessary to reduce... benefit relates primarily ...Statements included in this Annual Report on Form 10-K....accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis. The impact of the fair value adjustment...

  • Page 102
    tcx20141231_10k.htm Page 102 of 202 50 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 103
    ... losses on currency forward contracts, excess tax benefit related to stock-based compensation and a recovery for deferred tax. In addition, changes in our working capital generated $3.0 million. Positive contributions of $5.4 million from movements in deferred registration costs, income taxes...

  • Page 104
    ... utilizing $4.0 million to fund deferred registration costs, deposits with registries, accounts receivable and prepaid expenses. Cash Flow from Financing Activities Year ended December 31, 2014 Net cash used in financing activities during Fiscal 2014 totaled $4.1 million as compared to $1.4 million...

  • Page 105
    ... 2014 used net cash of $8.2 million to fund our contribution for the auction and registry seed capital costs for the .online gTLD joint venture, as well as the escrow accounts that were established to fund our proposed acquisition of a controlling interest in an independent Internet service provider...

  • Page 106
    ... Ridge InternetWorks. The BRI Group provides high speed internet access, Internet hosting and network consulting services to over 3,000 customers in central Virginia. We will satisfy the purchase price through an advance under our 2012 DLR Loan facility. (e) In February 2015, we waived our rights...

  • Page 107
    ...,000 642,000 1,731,000 $29,614,000 Purchase obligations include all other legally binding service contracts for mobile telephone services and other operational agreements to be delivered during Fiscal 2015 and subsequent years. 53 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707...

  • Page 108
    ... 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of expenses are incurred in Canadian dollars. Our financial results could be affected...

  • Page 109
    ... major banks and financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of...

  • Page 110
    ... compliance with the policies or procedures may deteriorate. Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, our management used the criteria...

  • Page 111
    ... journal entries were independently reviewed and approved for validity, accuracy and completeness. Account analysis and support. The design and operating effectiveness of our controls were inadequate to ensure detailed reviews and verification of inputs and calculations related to the analysis of...

  • Page 112
    ..., our independent registered public accounting firm, has audited our consolidated financial statements and expressed an unqualified opinion thereon. KPMG LLP has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2014 and issued an...

  • Page 113
    ... 2006, he was Chairman of Netidentity.com, an Internet email and web hosting company, where he led corporate strategy and development until the firm's sale in 2006. Mr. Ralls currently serves on the Board of Directors of a number of companies, including Savoya, LLC, IntraOp Medical, Knowledge Factor...

  • Page 114
    ... company in Japan (Tokyo Stock Exchange 4337). He served on the board of ICANN, a U.S. non-profit corporation, from December 2004 until December 2007. ICANN manages the domain name registration system that Tucows uses for its domain name business and ICANN receives fees from Tucows for domain name...

  • Page 115
    ...Before that, from April 1997 to May 1999, Mr. Noss served as Vice President of Corporate Services of Tucows Interactive Ltd., which was acquired by Tucows Delaware in May 1999. Mr. Noss's lengthy service as our Chief Executive Officer has provided him with extensive knowledge of, and experience with...

  • Page 116
    ....htm Page 116 of 202 Our directors are elected annually and serve until the election or appointment and qualification of their successors or their earlier death, resignation or removal. Executive Officers The required information regarding our executive officers is set forth in Part I hereof...

  • Page 117
    ... principals are published on our website at tucows.com. Amendments and waivers of our Code of Ethics will either be posted on our website or filed with the SEC on a Current Report on Form 8-K. Mr. Karp and Mr. Ralls, two of our independent directors, serve as Co-Chairmen of the Board. The Board does...

  • Page 118
    ... also took action by unanimous written consent on one occasion during Fiscal 2014. The audit committee's purposes are: • To assist the Board of Directors in its oversight of (1) our accounting and financial reporting processes and the audits of our financial statements, and (2) our compliance with...

  • Page 119
    ...the rules prescribed by the listing standards of the NASDAQ Capital Market and which is available at tucows.com. In considering candidates for nomination, our Board of Directors shall seek individuals who evidence strength of character, mature judgment and the ability to work collegially with others...

  • Page 120
    ...the Company's shareholders shall be timely submitted, along with the following to the attention of the Chairperson of the corporate governance, nominating and compensation committee at 96 Mowat Avenue, Toronto, Ontario M6K 3M1 Canada, the following: • the candidate's name and the information about...

  • Page 121
    ... financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the ethics policy for senior officers can be obtained without charge from our Internet web site at tucows.com. Communications with the Board of Directors We provide an informal process...

  • Page 122
    ... non-employee directors receive the following meeting attendance fees: Director meeting attendance fees: May Board Meeting Personal Attendance Fee (inclusive of Committee fees) November Board Meeting Personal Attendance Fee (inclusive of Committee fees) Regularly Scheduled Telephonic Board Meeting...

  • Page 123
    ... 2014, reports of transactions by all directors, officers and such beneficial holders were filed timely with the exception of Ms. Goertz, who failed to timely file her Form 4 with respect to the acquisition of 5,000 shares of common stock in the open market. In making this statement, the Company...

  • Page 124
    ... Canadian dollars for each U.S. dollar, which represents the average Bank of Canada exchange rate for 2014. Stock Awards Name and Principal Position (a) Elliot Noss President and Chief Executive Officer Michael Cooperman Chief Financial Officer David Woroch Vice President, Sales (1) Year (b) 2014...

  • Page 125
    tcx20141231_10k.htm Page 125 of 202 Elliot Noss Michael Cooperman David Woroch 2014 2013 2014 2013 2014 2013 ($) 1,357 1,454 1,357 1,454 1,357 1,454 8,144 8,722 7,601 8,140 6,515 6,977 - - 2,172 2,326 - - 9,501 10,176 11,130 11,920 7,872 8,431 63 ...

  • Page 126
    ...Page 126 of 202 Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning stock options held by the named executive officers as of December 31, 2014: Number of Securities Underlying Unexercised Options (#) Exercisable 11,000 32,000 6,562 3,750 6,250 3,125 62...

  • Page 127
    tcx20141231_10k.htm Page 127 of 202 64 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 128
    ...agreements that require us to provide compensation to our named executive officers in the event of a termination of employment or a change in control of Tucows. These agreements...Account Healthclub $ David Woroch (1) 2014...an annual base salary at the executive's level as of December 31, 2014 (2) https...

  • Page 129
    ...of December 30, 2014, minus the exercise price, multiplied by the number of unvested shares of our common stock that would vest. The closing market value of our common stock on December 31, 2014 was $19.41. Pay for unused vacation, extended health, matching registered retirement savings plan benefit...

  • Page 130
    ... entitled to receive a lump sum payment based upon the fair market value of the Company on the effective date of the "change in control" as determined by our Board of Directors in the exercise of good faith and reasonable judgment taking into account, among other things, the nature of the "change in...

  • Page 131
    ... of 202 value of the company, the lump sum payments range from $375,000 to $2 million in the case of Mr. Noss, and from $187,500 to $1 million in the case of Mr. Cooperman. In addition to the lump sum payments, all stock options held by the executive officers will be immediately and...

  • Page 132
    ... unless certain requirements are met regarding continuing ownership of our outstanding common stock. "Good reason" is defined to include the occurrence of one or more of the following: • the executive's position, management responsibilities or working conditions are diminished from those in effect...

  • Page 133
    ...Michael Cooperman David Woroch Allen Karp Rawleigh Ralls Robin Chase Erez Gissin Joichi Ito Jeffrey Schwartz All directors and executive officers as a group (11 persons) * (1) Less than 1%. Based on 11,090,790 shares outstanding as of March 5, 2015, adjusted for shares of common stock beneficially...

  • Page 134
    tcx20141231_10k.htm Page 134 of 202 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 135
    ... stock as of March 17, 2014. Beneficial Ownership of Common Stock Number of Shares Beneficially Percent of Owned Class (1) 960,269 8.7% Name and Address of Beneficial Owner Osmium Partners, LLC 300 Drakes Landing Road, Suite 172 Greenbrae, CA 94904 Renaissance Technologies LLC 800 Third Avenue New...

  • Page 136
    tcx20141231_10k.htm Page 136 of 202 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 137
    ...Information at Fiscal Year Ended December 31, 2014 Our 2006 Amended and Restated Equity Compensation Plan has 1.725 million shares set aside for issuance. Number... by security holders Total Number of securities to Weighted be issued average upon exercise exercise price of of outstanding outstanding ...

  • Page 138
    ...Market. In this Annual Report on Form 10-K, each of these eight directors are referred to individually as an "independent director" and collectively as the "independent directors." ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES A summary of the fees of KPMG LLP for the years ended December 31, 2014...

  • Page 139
    ... upon the approval of the chairman. The chairman is required to inform the full audit committee of the services at its next meeting. If the aggregate fees for such services are estimated to be greater than $25,000, our chief financial officer will submit the request to the full audit committee for...

  • Page 140
    ...28, 2004). Lease between 707932 Ontario Limited and Tucows International Corporation, dated December 10, 1999 (Incorporated by reference to exhibit number 10.9 filed with Tucows' Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the SEC on April 1, 2002). Lease extension...

  • Page 141
    ...Fiscal 2004 At Risk Compensation Plan (Incorporated by reference to Exhibit 10.9 filed with Tucows' Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 24, 2005). 72 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13...

  • Page 142
    ...on July 31, 2007). Operating Loan Agreement, dated September 10, 2010, between Tucows.com Co. and the Bank of Montreal. (Incorporated by reference to Exhibit 10.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on September 13, 2010). Offer Letter, dated August 30, 2010, between...

  • Page 143
    ... LLP, Independent Registered Public Accounting Firm. Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification. Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification. Chief Executive Officer's Section 1350 Certification. Chief Financial Officer's Section 1350 Certification. XBRL...

  • Page 144
    ... 101.PRE** XBRL Taxonomy Extension Presentation * Management or compensatory contract required to be filed pursuant to Item 15(c) of the requirements for Form 10-K reports. **XBRLInformation is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11...

  • Page 145
    ...Consolidated Financial Statements of Tucows Inc. Management's Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2014 and 2013 Consolidated...

  • Page 146
    ...Public Company Accounting Oversight Board Auditing Standard No. 5 on the effectiveness of our internal control over financial reporting, following below in this Annual Report in Form 10-K. /s/ ELLIOT NOSS Elliot Noss President and Chief Executive Officer (Principal Executive Officer) March 11, 2015...

  • Page 147
    ... 147 of 202 Report of the Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Tucows Inc. We have audited the accompanying consolidated balance sheets of Tucows Inc. as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive...

  • Page 148
    ... 148 of 202 Report of the Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Tucows Inc. We have audited Tucows Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework...

  • Page 149
    tcx20141231_10k.htm Page 149 of 202 Chartered Professional Accountants, Licensed Public Accountants Toronto, Canada March 11, 2015 F-4 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 150
    ... assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $125,766 as of December 31, 2014 and $91,226 as of December 31, 2013 Inventory Prepaid expenses and deposits Prepaid domain name registry and ancillary services fees, current portion Other assets (note...

  • Page 151
    tcx20141231_10k.htm Page 151 of 202 Common stock - no par value, 250,000,000 shares authorized;11,329,732 shares issued and outstanding as of December 31, 2014 and 10,907,063 shares issued and outstanding as of December 31, 2013 Additional paid-in capital 29,090,058 28,632,311 Deficit (6,955,283) ...

  • Page 152
    ...2014 Net revenues (note 17) Cost of revenues (note 17): Cost of revenues Network expenses Depreciation of property and equipment Amortization of intangible assets Total cost of revenues Gross profit Expenses: Sales and marketing Technical operations and development...115,307 40,551,800 92,960,321 4,...

  • Page 153
    ....htm Page 153 of 202 Basic earnings per common share (note 14) Shares used in computing basic earnings per common share (note 14) Diluted earnings per common share (note 14) Shares used in computing diluted earnings per common share (note 14) $ 0.57 $ 0.40 $ 0.39 11,220,874 $ 0.54...

  • Page 154
    ... of shares (note 10) (79,392) (95,033) (1,086,825) Income tax effect related to stock options exercised 1,888,734 Stock-based compensation (note 11) 542,738 Net income 6,374,096 Other comprehensive loss 11,329,732 $14,130,059 $29,090,058 $ (6,955,283) $ Balances, December 31, 2014 See accompanying...

  • Page 155
    tcx20141231_10k.htm Page 155 of 202 F-7 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 156
    ... of forward contracts Stock-based compensation Change in non-cash operating working capital: Accounts receivable Inventory Prepaid expenses and deposits Prepaid domain name registry and ancillary services fees Income taxes recoverable Accounts payable Accrued liabilities Customer deposits Deferred...

  • Page 157
    ...147,511) 12,418,888 8,271,377 $ 6,003,209 6,415,679 12,418,888 $ 7,470 6,408,209 6,415,679 $ Supplemental cash flow information: Interest paid Income taxes paid, net Supplementary disclosure of non-cash investing and financing activities: Property and equipment acquired during the period not yet...

  • Page 158
    ... of Internet Service Providers, web hosting companies and other providers of Internet services to end-users. In addition, the Company derives Network Access Services devices revenue from the sale of retail mobile phones and services to individuals and small businesses through the Ting website using...

  • Page 159
    ... at the lower of cost or net realizable value. Cost is determined based on actual cost of the mobile device or accessory shipped. The net realizable value of inventory is analyzed on a regular basis. This analysis includes assessing obsolescence, sales forecasts, product life cycle, marketplace and...

  • Page 160
    ... 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...

  • Page 161
    ... 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...

  • Page 162
    ... with each new, renewed and transferred-in registration and from providing provisioning of other Internet services to resellers and registrars on a monthly basis. Service has been provided in connection with registration fees once the Company has confirmed that the requested domain name has been...

  • Page 163
    tcx20141231_10k.htm Page 163 of 202 Revenue generated from the sale of domain names, earned from transferring the rights to domain names under the Company's control, are recognized once the rights have been transferred and payment has been received in full. F-11 https://www.sec.gov/Archives/...

  • Page 164
    ... Domain Expiry Stream domains and the Company's Portfolio Domains. In addition, the Company uses third party partners to derive pay-per-click advertising on the Tucow.com website. Advertising revenue is recognized on a monthly basis based on the number of cost-per-action services that were provided...

  • Page 165
    ...'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 ...

  • Page 166
    ... flow technique uses observable market inputs, such as foreign currency spot and forward rates. (m) Product development costs Product development costs are expensed as incurred. The Company accounts for the costs of computer software developed or obtained for internal use as follows: costs that are...

  • Page 167
    ... by Canadian Income Tax legislation. These ITCs relate primarily to research and development expenses. The ITCs are recognized as a reduction in income tax expense once the Company has reasonable assurance that the amounts will be realized. (o) Stock-based compensation Stock-based compensation...

  • Page 168
    ... reporting The Company operates in two business segments, Domain Services and Network Access Services. The Company's revenues are attributed to the country in which the contract originates, primarily Canada. Revenues from domain names issued from the Toronto, Canada location are attributed to Canada...

  • Page 169
    ...Page 169 of 202 The Company's assets are located in Canada, the United States, Germany and the Netherlands. All of the Company's goodwill and intangible assets are allocated to the Domain Services business segment. Recent Accounting Pronouncements Adopted On January 1, 2014, the Company adopted the...

  • Page 170
    ... and International Financial Reporting Standards. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information...

  • Page 171
    tcx20141231_10k.htm Page 171 of 202 Depreciation of property and equipment Year ended Year ended Year ended December 31, December 31, December 31, 2014 2013 2012 $ 926,102 $ 843,420 $ 802,060 F-15 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 172
    ...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...

  • Page 173
    ... Direct Surname navigation domain domain Customer names names ...Company utilizes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets...

  • Page 174
    tcx20141231_10k.htm Page 174 of 202 F-17 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 175
    ... domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs...

  • Page 176
    tcx20141231_10k.htm Page 176 of 202 Total foreign currency forward contracts Derivative instruments $ (1,115,805) $ (491,098) F-18 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 177
    tcx20141231_10k.htm Page 177 of 202 Movement in AOCI balance for the year ended December 31, 2014 Gains and losses on cash flow hedges Opening AOCI balance - December 31, 2013 Other comprehensive income (loss) before reclassifications Amount reclassified from accumulated other comprehensive income...

  • Page 178
    tcx20141231_10k.htm Page 178 of 202 F-19 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 179
    ..., and which provide it with access to two revolving demand loan facilities (the "2012 Demand Loan Facilities"), a treasury risk management facility and an operating demand loan. Two Revolving Demand Loan Facilities. The 2012 Demand Loan Facilities are governed by the terms of the Offer Letter, dated...

  • Page 180
    tcx20141231_10k.htm Page 180 of 202 finance repurchases of Company common stock. The 2012 Demand Loan Facilities are subject to an undrawn aggregate standby fee of 0.20% following the first draw, which such fee is payable quarterly in arrears. F-20 https://www.sec.gov/Archives/edgar/data/909494/...

  • Page 181
    ...with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the Amended Credit Facility, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of December 31, 2014, the Company held contracts...

  • Page 182
    ...deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment. The Company had approximately $0.1 million of total gross unrecognized tax benefit as of December 31, 2014 and...

  • Page 183
    tcx20141231_10k.htm Page 183 of 202 F-22 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 184
    ... of investors and reposition the company's trading metrics. All share information related to shares outstanding and earnings per share have been retroactively adjusted to reflect this stock consolidation. Repurchase of common shares: (a) Modified Dutch Tender Offers: On December 8, 2014 the Company...

  • Page 185
    ...of 202 On March 5, 2014, the Company announced a stock buyback program. Under this buyback program, the Company may repurchase up to $20 million of the Company's common stock over the 12-month period that commenced on March 4, 2014. The Company repurchased 6,092 shares under this program during the...

  • Page 186
    .... 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 stock options granted during the years ended December 31, 2014, 2013 and 2012 was estimated using the...

  • Page 187
    tcx20141231_10k.htm Page 187 of 202 Exercised Forfeited Expired Outstanding, end of year Options exercisable, ...2,148,170 $ 1,772,723 $ 2.20 3.20 1.76 2.56 2.28 The stock options expire at various dates through 2021. F-24 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... ...

  • Page 188
    ... compensation cost relating to unvested stock options at December 31, 2014, prior...2014 2013 2012 $ 30,938 $ 31,664 $ 24,480 143,514 129,302 92,168 85,904 78,800 59,141 282,382 191,137 184,910 $ 542,738 $ 430,903 $ 360,699 Network expenses Sales and marketing Technical operations and development...

  • Page 189
    ...average market price of the common shares. The options which expire in years 2018 to 2020 were still outstanding at the end of 2014. 15. Commitments and contingencies: (a) The Company has several non-cancelable lease and purchase obligations primarily for general office facilities, service contracts...

  • Page 190
    ...Dutch auction tender offer" that was previously announced on December 8, 2014. Under the terms of the offer, the Company repurchased an aggregate of 193,907 shares of its common stock at a purchase price of $18.50 per share, for a total of $3,587,280, excluding transaction costs of approximately $60...

  • Page 191
    ... 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...

  • Page 192
    tcx20141231_10k.htm Page 192 of 202 follows the same accounting policies for the segments as those described in note 2 to these consolidated financial statements. F-27 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 193
    ... regularly reported to the chief operating decision maker is as follows: Domain Name Services $ 111,780,102 85,244,527 26,535,575 Network Access Services 35,887,005 21,870,780 14,016,225 Year Ended December 31, 2014 Net Revenues Cost of Revenues Gross Profit Expenses: Sales and marketing Technical...

  • Page 194
    tcx20141231_10k.htm Page 194 of 202 Loss on disposition of property and equipment Amortization of intangibles Gain on currency forward contracts Income from operations Other income, net Income before provision for income taxes 118,944 876,120 (682,851) 6,091,450 336,848 6,428,298 F-...

  • Page 195
    ... 2012, no customers accounted for more than 10% of accounts receivable. (c) The following is a summary of the Company's cost of revenues from each significant revenue stream: Year ended December 31, 2014 2013 2012 Wholesale Domain Services Value Added Services Total Wholesale Retail Portfolio $ 72...

  • Page 196
    tcx20141231_10k.htm Page 196 of 202 https://www.sec.gov/Archives/edgar/data/909494/000143774915004707/tcx20141231_10... 9/13/2016

  • Page 197
    ... is a summary of the Company's deferred tax asset, net of valuation allowance, by geographic region: Year ended December 31, 2014 2013 7,378,619 $ 6,451,563 7,378,619 $ 6,451,563 Canada $ $ 18. Valuation and qualifying accounts: Charged to (recovered) costs and expenses Balance at beginning...

  • Page 198
    ...28, 2004). Lease between 707932 Ontario Limited and Tucows International Corporation, dated December 10, 1999 (Incorporated by reference to exhibit number 10.9 filed with Tucows' Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the SEC on April 1, 2002). Lease extension...

  • Page 199
    ...on July 31, 2007). Operating Loan Agreement, dated September 10, 2010, between Tucows.com Co. and the Bank of Montreal. (Incorporated by reference to Exhibit 10.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on September 13, 2010). Offer Letter, dated August 30, 2010, between...

  • Page 200
    ... Subsidiaries of Tucows Inc. Consent of KPMG LLP, Independent Registered Public Accounting Firm. Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification. Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification. Chief Executive Officer's Section 1350 Certification. Chief Financial...

  • Page 201
    ... 101.PRE** XBRL Taxonomy Extension Presentation * Management or compensatory contract required to be filed pursuant to Item 15(c) of the requirements for Form 10-K reports. **XBRLInformation is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11...

  • Page 202
    ...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. Signature /s/ ELLIOT NOSS Elliot Noss Title President, Chief Executive Officer (Principal Executive Officer) and Director Date March 11, 2015 /s/ MICHAEL...