10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          

Commission file number 1-32600

TUCOWS INC.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	23-2707366
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

96 Mowat Avenue,

Toronto, Ontario M6K 3M1, Canada

(Address of Principal Executive Offices) (Zip Code)

(416) 535-0123

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T §232.405 of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)
	Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes ☐ No ☒

As of August 6, 2018, there were 10,609,438 outstanding shares of common stock, no par value, of the registrant.

1

TUCOWS INC.

Form 10-Q Quarterly Report

INDEX

PART I FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets (unaudited) as of June 30, 2018 and December 31, 2017	3
	Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three and six months ended June 30, 2018 and 2017	4
	Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 30, 2018 and 2017	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

Tucows®, EPAG®, Hover®, OpenSRS®, Platypus®, Ting®, eNom®, Roam®, Roam Mobility®, Bulkregister® and YummyNames® are registered trademarks of Tucows Inc. or its subsidiaries. Other service marks, trademarks and trade names of Tucows Inc. or its subsidiaries may be used in this Quarterly Report on Form 10-Q (this “Quarterly Report”). All other service marks, trademarks and trade names referred to in this Quarterly Report are the property of their respective owners. Solely for convenience, any trademarks referred to in this Quarterly Report may appear without the ® or TM symbol, but such references are not intended to indicate, in any way, that we or the owner of such trademark, as applicable, will not assert, to the fullest extent under applicable law, our or its rights, or the right of the applicable licensor, to these trademarks.

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PART I.

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Tucows Inc.

Consolidated Balance Sheets

(Dollar amounts in thousands of U.S. dollars)

(unaudited)

	June 30,			December 31,
	2018			2017*
Assets
Current assets:
Cash and cash equivalents	$	11,161		$	18,049
Accounts receivable, net of allowance for doubtful accounts of $132 as of June 30, 2018 and $168 as of December 31, 2017		12,214			12,376
Inventory		3,248			2,944
Prepaid expenses and deposits		15,428			14,186
Prepaid domain name registry and ancillary services fees, current portion (note 11 (b))		94,754			103,302
Income taxes recoverable		3,137			3,004
Total current assets		139,942			153,861
Prepaid domain name registry and ancillary services fees, long-term portion (note 11 (b))		20,701			23,701
Property and equipment		34,538			24,620
Contract costs (note 11 (a))		1,354			-
Intangible assets (note 6)		53,693			58,414
Goodwill (note 6)		90,054			90,054
Total assets	$	340,282		$	350,650
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	7,340		$	7,026
Accrued liabilities		6,770			6,412
Customer deposits		12,934			15,255
Derivative instrument liability (note 5)		337			-
Deferred rent, current portion		21			21
Loan payable, current portion (note 7)		17,721			18,290
Deferred revenue, current portion		122,976			129,155
Accreditation fees payable, current portion		1,099			1,175
Income taxes payable		1,477			1,226
Total current liabilities		170,675			178,560
Derivative instrument liability, long-term portion (note 5)		27			-
Deferred revenue, long-term portion		29,075			31,427
Accreditation fees payable, long-term portion		269			289
Deferred rent, long-term portion		126			130
Loan payable, long-term portion (note 7)		51,012			58,634
Deferred gain		258			429
Deferred tax liability (note 8)		19,577			19,834
Redeemable non-controlling interest (note 4 (a))		-			1,136
Stockholders' equity (note 13)
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding		-			-
Common stock - no par value, 250,000,000 shares authorized; 10,603,366 shares issued and outstanding as of June 30, 2018 and 10,583,879 shares issued and outstanding as of December 31, 2017		15,548			15,368
Additional paid-in capital		2,931			2,167
Retained earnings		51,027			42,676
Accumulated other comprehensive income		(243	)		-
Total stockholders' equity		69,263			60,211
Total liabilities and stockholders' equity	$	340,282		$	350,650
Commitments and contingencies (note 16)

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

See accompanying notes to unaudited consolidated financial statements 

3

Tucows Inc.

Consolidated Statements of Operations and Comprehensive Income

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

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017*			2018			2017*
Net revenues (note 10)	$	81,087		$	84,223		$	176,882		$	153,791
Cost of revenues (note 10)
Cost of revenues		54,501			59,445			123,473			108,756
Network expenses		2,701			2,261			5,275			4,604
Depreciation of property and equipment		1,228			714			2,359			1,305
Amortization of intangible assets (note 6)		499			455			998			836
Total cost of revenues		58,929			62,875			132,105			115,501
Gross profit		22,158			21,348			44,777			38,290
Expenses:
Sales and marketing		7,852			7,447			16,217			14,667
Technical operations and development		2,355			1,798			4,450			3,492
General and administrative		4,256			3,285			8,786			6,742
Depreciation of property and equipment		102			165			203			331
Loss on disposition of property and equipment		-			2			-			2
Amortization of intangible assets (note 6)		1,827			1,608			3,659			2,989
Loss (gain) on currency forward contracts (note 5)		52			(27	)		49			(61	)
Total expenses		16,444			14,278			33,364			28,162
Income from operations		5,714			7,070			11,413			10,128
Other income (expense):
Interest expense, net		(951	)		(970	)		(1,847	)		(1,838	)
Other income, net		73			225			197			354
Total other income (expense)		(878	)		(745	)		(1,650	)		(1,484	)
Income before provision for income taxes		4,836			6,325			9,763			8,644
Provision for income taxes (note 8)		1,228			1,083			2,411			958
Net income before redeemable non-controlling interest		3,608			5,242			7,352			7,686
Redeemable non-controlling interest		-			(117	)		(26	)		(243	)
Net income attributable to redeemable non-controlling interest		-			117			26			243
Net income for the period		3,608			5,242			7,352			7,686
Other comprehensive income, net of tax
Unrealized income on hedging activities (note 5)		(273	)		143			(256	)		329
Net amount reclassified to earnings (note 5)		13			(17	)		13			(98	)
Other comprehensive income net of tax of $84 and and $71 for the three months ended June 30, 2018 and June 30, 2017, $78 and $131 for the six months ended June 30, 2018 and June 30, 2017 (note 5)		(260	)		126			(243	)		231
Comprehensive income for the period	$	3,348		$	5,368		$	7,109		$	7,917
Basic earnings per common share (note 9)	$	0.34		$	0.50		$	0.69		$	0.73
Shares used in computing basic earnings per common share (note 9)		10,597,228			10,528,219			10,592,994			10,501,407
Diluted earnings per common share (note 9)	$	0.33		$	0.49		$	0.68		$	0.71
Shares used in computing diluted earnings per common share (note 9)		10,803,007			10,793,031			10,797,017			10,785,685

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

See accompanying notes to unaudited consolidated financial statements

4

Tucows Inc.

Consolidated Statements of Cash Flows

(Dollar amounts in thousands of U.S. dollars)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017*			2018			2017*
Cash provided by:
Operating activities:
Net income for the period	$	3,608		$	5,242		$	7,352		$	7,686
Items not involving cash:
Depreciation of property and equipment		1,330			879			2,562			1,636
Loss on write off of property and equipment		-			9			-			9
Amortization of debt discount and issuance costs		69			80			139			147
Amortization of intangible assets		2,326			2,064			4,657			3,825
Change in capitalized contract costs		25			-			50			-
Deferred income taxes (recovery)		(445	)		(2,885	)		(492	)		(1,565	)
Excess tax benefits on share-based compensation expense		(197	)		(1,182	)		(341	)		(2,171	)
Amortization of deferred rent		(4	)		1			(4	)		5
Loss on disposal of domain names		28			7			65			18
Other income		(42	)		(128	)		(171	)		(257	)
Loss (gain) on change in the fair value of forward contracts		46			(163	)		43			(301	)
Stock-based compensation		615			313			1,193			631
Change in non-cash operating working capital:
Accounts receivable		471			(905	)		162			(864	)
Inventory		(350	)		(1,267	)		(304	)		(1,096	)
Prepaid expenses and deposits		(717	)		1,186			(1,242	)		(2,371	)
Prepaid domain name registry and ancillary services fees		204			2,976			11,548			(2,513	)
Income taxes recoverable		165			2,513			430			(147	)
Accounts payable		(1,862	)		(592	)		270			(4,038	)
Accrued liabilities		(401	)		(1,818	)		358			13
Customer deposits		(46	)		3,152			(2,321	)		3,068
Deferred revenue		1,067			(1,273	)		(8,531	)		8,968
Accreditation fees payable		(136	)		(78	)		(96	)		(149	)
Net cash provided by operating activities		5,754			8,131			15,327			10,534
Financing activities:
Proceeds received on exercise of stock options		32			85			39			105
Payment of tax obligations resulting from net exercise of stock options		(141	)		(609	)		(288	)		(1,322	)
Proceeds received on loan payable		2,500			-			2,500			86,998
Repayment of loan payable		(6,253	)		(4,572	)		(10,825	)		(10,830	)
Payment of loan payable costs		-			(13	)		(4	)		(604	)
Net cash (used in) provided by financing activities		(3,862	)		(5,109	)		(8,578	)		74,347
Investing activities:
Additions to property and equipment		(7,319	)		(2,909	)		(12,436	)		(6,602	)
Acquisition of a portion of the minority interest in Ting Virginia, LLC (note 4(a))		-			-			(1,200	)		(2,000	)
Acquisition of Enom Incorporated, net of cash (note 4(b))		-			-			-			(76,238	)
Acquisition of intangible assets		-			-			(1	)		-
Net cash (used in) investing activities		(7,319	)		(2,909	)		(13,637	)		(84,840	)
Decrease in cash and cash equivalents		(5,427	)		113			(6,888	)		41
Cash and cash equivalents, beginning of period		16,588			15,033			18,049			15,105
Cash and cash equivalents, end of period	$	11,161		$	15,146		$	11,161		$	15,146
Supplemental cash flow information:
Interest paid	$	961		$	975		$	1,862		$	1,848
Income taxes paid, net	$	2,240		$	2,663		$	3,577		$	5,006
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for	$	258		$	232		$	258		$	232

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

See accompanying notes to unaudited consolidated financial statements 

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization of the Company: 

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) provides simple useful services that help people unlock the power of the Internet. The Company provides U.S. consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. The Company is also a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.

2. Basis of presentation:

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at June 30, 2018 and the results of operations and cash flows for the interim periods ended June 30, 2018 and 2017. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for future periods.

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2017 included in Tucows' 2017 Annual Report on Form 10-K filed with the SEC on March 6, 2018 (the “2017 Annual Report”). There have been no material changes to our significant accounting policies and estimates during the six months ended June 30, 2018 as compared to the significant accounting policies and estimates described in our 2017 Annual Report, except for the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).  See Note 3 for more information.

Beginning with this Quarterly Report on Form 10-Q, all dollar values of current and comparative figures in the financial statements and accompanying tables have been rounded to the nearest thousand ($000), except when otherwise indicated.

3. Recent accounting pronouncements:

Recent Accounting Pronouncements Adopted

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

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

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

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

6

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

a)	When the amortization period for costs incurred to obtain a contract with a customer is less than one year, the Company has elected to apply a practical expedient to expense the costs as incurred; and
b)	For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied).

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

	June 30, 2018
Consolidated Balance Sheet (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606
Assets
Contract costs (note 11)	$	1,354	$	(1,354	)	$	(0	)
Total assets	$	340,282	$	(1,354	)	$	338,928
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	19,577	$	(329	)	$	19,248
Retained earnings		51,027		(1,025	)		50,002
Total Liabilities and Shareholders' Equity	$	340,282	$	(1,354	)	$	338,928

	Three months ended, June 30, 2018							Six months ended, June 30, 2018
Consolidated Statements of Operations and Comprehensive Income (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606		As reported		Adjustments			Balances without adoption of Topic 606
Expenses
Sales and marketing	$	7,852	$	(25	)	$	7,827	$	16,217	$	(50	)	$	16,167
Income before provision for income taxes		4,836		25			4,861		9,763		50			9,813
Provision for income tax (note 8)		1,228		6			1,234		2,411		12			2,423
Net income for the period	$	3,608	$	19		$	3,627	$	7,352	$	38		$	7,390

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	Three months ended, June 30, 2018									Six months ended, June 30, 2018
Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars)	As reported			Adjustments			Balances without adoption of Topic 606			As reported			Adjustments			Balances without adoption of Topic 606
Net income for the period	$	3,608		$	19		$	3,627		$	7,352		$	38		$	7,390
Items not involving cash
Amortization contract costs		25			(25	)		(0	)		50			(50	)		0
Deferred income taxes (recovery)		(445	)		6			(439	)		(492	)		12			(480	)
Net cash provided by operating activities	$	5,754		$	(0	)	$	5,754		$	15,327		$	-		$	15,327

Recent Accounting Pronouncements Not Yet Adopted

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

4. Acquisitions:

(a)  Blue Ridge Websoft

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

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

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

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(b)  eNom, Incorporated

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

5. Derivative instruments and hedging activities:

Foreign currency forward contracts

In October 2012, the Company entered into a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, rent, and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs. The Company does not use these forward contracts for trading or speculative purposes. These forward contracts typically mature between one and eighteen months.

The Company has designated certain of these transactions as cash flow hedges of forecasted transactions under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. For certain contracts, as the critical terms of the hedging instrument and the entire hedged forecasted transaction are the same in accordance with ASC Topic 815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk of being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income. The fair value of the contracts, as of June 30, 2018, is recorded as derivative instrument liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is reclassified from AOCI to earnings.

As of June 30, 2018, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $16.9 million, of which $14.9 million were designated as hedges. As of December 31, 2017 the Company held no contracts to trade U.S. dollars in exchange for Canadian dollars.

As of  June 30, 2018, we had the following outstanding forward exchange contracts to trade U.S. dollars in exchange for Canadian dollars: 

Maturity date (Dollar amounts in thousands of U.S. dollars)	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
July - September 2018		6,130		1.2851		(134	)
October - December 2018		6,049		1.2802		(144	)
January - March 2019		1,640		1.2852		(30	)
April - June 2019		1,599		1.2831		(29	)
July - September 2019		1,444		1.2809		(27	)
	$	16,862		1.2828	$	(364	)

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

The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do not include any income tax effects).

Fair value of derivative instruments in the consolidated balance sheets

		As of June 30, 2018			As of December 31, 2017
Derivatives (Dollar amounts in thousands of U.S. dollars)	Balance Sheet Location	Fair Value Asset (Liability)			Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	(321	)	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	(43	)	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	(364	)	$	-

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Movement in Accumulated Other Comprehensive Income ("AOCI") balance for the three months ended June 30, 2018 (Dollar amounts in thousands of U.S. dollars):

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – March 31. 2018	$	23		$	(6	)	$	17
Other comprehensive income (loss) before reclassifications		(361	)		88			(273	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the three months ended June 30, 2018		(344	)		84			(260	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

Movement in Accumulated Other Comprehensive Income ("AOCI") balance for the six months ended June 30, 2018 (Dollar amounts in thousands of U.S. dollars):

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	—		$	—		$	—
Other comprehensive income (loss) before reclassifications		(338	)		82			(256	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the six months ended June 30, 2018		(321	)		78			(243	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended June 30, 2018 and June 30, 2017 are as follows (Dollar amounts in thousands of U.S. dollars):

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2018	$	(260	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	24		Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2017	$	126		Cost of revenues	$	4		Cost of revenues		—

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Effects of derivative instruments on income and other comprehensive income (OCI) for the six months ended June 30, 2018 and June 30, 2017 are as follows (Dollar amounts in thousands of U.S. dollars):

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2018	$	(243	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	129		Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2017	$	231		Cost of revenues	$	25		Cost of revenues		—

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company recorded a loss on settlement of less than $0.1 million and a loss of less than $0.1 million for the change in fair value of outstanding contracts for the three months ended June 30, 2018, in the consolidated statement of operations and comprehensive income. The Company recorded a total gain of less than $0.1 million for the change in fair value of outstanding contracts and the settlement of contracts not designated as hedges for the three months ended June 30, 2017, in the consolidated statement of operations and comprehensive income. 

The Company has recorded a loss of less than $0.1 million upon settlement and a loss of less than $0.1 million for the change in fair value of outstanding contracts for the six months ended June 30, 2018, in the consolidated statement of operations and comprehensive income. The Company recorded a gain of less than $0.1 million upon settlement and a gain of less than $0.1 million for the change in fair value of the foreign currency forward contracts not designated as hedges for the six months ended June 30, 2017, in the consolidated statement of operations and comprehensive income.

6. Goodwill and Other Intangible Assets:

Goodwill

Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions.

The Company's Goodwill balance is $90.1 million as of June 30, 2018 (December 31, 2017 – $90.1 million). The Company's goodwill relates 98% ($87.9 million) to its Domain Services operating segment and 2% ($2.2 million) to its Network Access Services operating segment.

Goodwill is not amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present.

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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 are not amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended June 30, 2018 and June 30, 2017, the Company assessed that certain domain names that were originally acquired in the June 2006 acquisition of Mailbank.com Inc. that were up for renewal, should be renewed.   

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

A summary of acquired intangible assets for the three months ended June 30, 2018 is as follows (Dollar amounts in thousands of U.S. dollars):

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances March 31, 2018	$	11,205		$	1,519		$	10,342		$	30,806		$	1,625		$	550		$	56,047
Additions to/(disposals from) domain portfolio, net		(4	)		(24	)		-			-			-			-			(28	)
Amortization expense		-			-			(450	)		(1,377	)		(487	)		(12	)		(2,326	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

A summary of acquired intangible assets for the six months ended June 30, 2018 is as follows (Dollar amounts in thousands of U.S. dollars):

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,210		$	1,551		$	10,793		$	32,186		$	2,113		$	561		$	58,414
Acquisition of customer relationships		-			-			-			1			-			-			1
Additions to/(disposals from) domain portfolio, net		(9	)		(56	)		-			-			-			-			(65	)
Amortization expense		-			-			(901	)		(2,758	)		(975	)		(23	)		(4,657	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

The following table shows the estimated amortization expense in future periods, assuming no further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars):

	Year ending December 31,
Remainder of 2018	$	4,579
2019		7,338
2020		7,171
2021		7,171
2022		7,171
Thereafter		7,567
Total	$	40,997

As of June 30, 2018, the accumulated amortization for the definite life intangible assets was $20.0 million.

7. Loan payable:

2017 Amended Credit Facility

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

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 In connection with the 2017 Amended Credit Agreement, the Company incurred $0.6 million of fees paid to lenders and debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement.

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

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

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

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

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

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

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

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

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

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

 Borrowings under the 2017 Amended Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to EBITDA ratio and the availment type as follows:

	If Total Funded Debt to EBITDA is:
Availment type or fee	Less than 1.00			Greater than or equal to 1.00 and less than 2.00			Greater than or equal to 2.00 and less than 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

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

	June 30, 2018			December 31, 2017
Facility B		2,500			-
Facility C		3,554			5,930
Facility D		63,373			71,823
Less: unamortized debt discount and issuance costs		(694	)		(829	)
Total loan payable		68,733			76,924
Less: loan payable, current portion		17,721			18,290
Loan payable, long-term portion		51,012			58,634

The following table summarizes our scheduled principal repayments as of June 30, 2018 (Dollar amounts in thousands of U.S. dollars):

Remainder of 2018		8,771
2019		17,900
2020		17,900
2021		17,900
2022		5,225
Thereafter		1,731
	$	69,427

Other Credit Facilities

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

The treasury risk management facility under the Amended Credit Facility provides for a $3.5 million settlement risk line to assist the Company with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the Amended Credit Facility, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of June 30, 2018, the Company held contracts in the amount of $21.6 million to trade U.S. dollars in exchange for Canadian dollars (note 5).

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

8. Income taxes

For the three months ended June 30, 2018, we recorded an income tax expense of $1.2 million on income before income taxes of $4.8 million, using an estimated effective tax rate for the fiscal year ending December 31, 2018 (“Fiscal 2018”) adjusted for certain minimum state taxes as well as the inclusion of a $0.2 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Comparatively, for the three months ended June 30, 2017, the Company recorded an income tax expense of $1.1 million on income before taxes of $6.3 million, using an estimated effective tax rate for the 2017 fiscal year and adjusted for the $1.2 million tax recovery impact related to ASU 2016-09.

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For the six months ended June 30, 2018, we recorded an income tax expense of $2.4 million on income before income taxes of $9.8 million, using an estimated effective tax rate for Fiscal 2018 adjusted for certain minimum state taxes as well as the inclusion of a $0.3 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Comparatively, for the six months ended June 30, 2017, the Company recorded income tax expense of $1.0 million on income before taxes of $8.6 million, using an estimated effective tax rate for the 2017 fiscal year and adjusted for the $2.2 million tax recovery impact related to ASU 2016-09.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

The Company recognizes accrued interest and penalties related to income taxes in income tax expense. The Company did not have significant interest and penalties accrued at June 30, 2018 and December 31, 2017, respectively.

9. Basic and diluted earnings per common share:

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

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

	Three months ended June 30,				Six months ended June 30,
	2018			2017		2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,608	$	5,242	$	7,352	$	7,686
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,597,228		10,528,219		10,592,994		10,501,407
Effect of outstanding stock options		205,779		264,812		204,023		284,278
Diluted weighted average number of shares outstanding		10,803,007		10,793,031		10,797,017		10,785,685
Basic earnings per common share	$	0.34	$	0.50	$	0.69	$	0.73
Diluted earnings per common share	$	0.33	$	0.49	$	0.68	$	0.71

 

For the three months ended June 30, 2018, outstanding options to purchase 419,000 common shares were not included in the computation of diluted income per common share because all such options’ exercise price was greater than the average market price of the common shares for the period as compared to the three months ended June 30, 2017, where 18,500 outstanding options were not included in the computation.

For the six months ended June 30, 2018, outstanding options to purchase 449,000 common shares were not included in the computation of diluted income per common share because all such options’ exercise price was greater than the average market price of the common shares for the period as compared to the six months ended June 30, 2017, where 23,500 outstanding options were not included in the computation.

During the three and six months ended June 30, 2018, the Company did not repurchase any shares under the stock buyback program commenced on February 14, 2018, which will be terminated on or before February 13, 2019.

During the three and six months ended June 30, 2017 and the six months ended June 30, 2018, the Company did not repurchase any shares under the stock buyback program commenced on March 1, 2017, which terminated on February 14, 2018.

During the six months ended June 30, 2017, the company did not repurchase any shares under the stock buyback program commenced on February 10, 2016, which terminated on February 9, 2017.

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10. Revenue

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.

Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 12.

(a) Network Access Services 

The Company generates Network Access Services revenues primarily through the provisioning of mobile services. Other sources of revenue include the provisioning of fixed high-speed Internet access as well as billing solutions to Internet Service Providers (“ISPs”).

Ting wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting mobile usage based on the actual amount of monthly services utilized by each customer.

Ting fixed Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Fixed Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.

Both Ting mobile and fixed Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting mobile and fixed Internet access customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brand also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations. 

(b) Domain Services

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

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

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.

Advertising revenue is derived through domain parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis, no estimation of variable consideration is required.

Disaggregation of Revenue

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

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	22,411	$	20,379	$	44,283	$	38,341
Other Services		1,895		1,248		3,631		2,535
Total Network Access Services		24,306		21,627		47,914		40,876
Domain Services:
Wholesale
Domain Services		42,540		48,550		100,968		87,644
Value Added Services		4,601		5,415		9,035		9,322
Total Wholesale		47,141		53,965		110,003		96,966
Retail		8,477		7,663		16,913		14,064
Portfolio		1,163		968		2,052		1,885
Total Domain Services		56,781		62,596		128,968		112,915
	$	81,087	$	84,223	$	176,882	$	153,791

During the three months ended June 30, 2018, no customer accounted for more than 10% of total revenue. During the six months ended June 30, 2018, one customer accounted for 11% of total revenue, and for the three and six months ended June 30, 2017, no customer accounted for more than 10% of revenue. As at June 30, 2018 and December 31, 2017, no customer accounted for more than 10% of 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): 

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	11,978	$	10,702	$	23,243	$	20,269
Other Services		1,290		946		2,230		1,771
Total Network Access Services		13,268		11,648		25,473		22,040
Domain Services:
Wholesale
Domain Services		35,844		42,449		87,161		76,913
Value Added Services		748		615		1,605		1,191
Total Wholesale		36,592		43,064		88,766		78,104
Retail		4,446		4,548		8,855		8,165
Portfolio		195		185		379		447
Total Domain Services		41,233		47,797		98,000		86,716
Network Expenses:
Network, other costs		2,701		2,261		5,275		4,604
Network, depreciation and amortization costs		1,727		1,169		3,357		2,141
		4,428		3,430		8,632		6,745
	$	58,929	$	62,875	$	132,105	$	115,501

Contract Balances

The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does not have material streams of contracted revenue that have not been billed.

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions.

The opening balance of deferred revenue was $160.6 million as of January 1, 2018. Significant changes in deferred revenue were as follows (Dollar amounts in thousands of U.S. dollars):

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	150,983		$	160,582
Deferral of revenue		56,352			116,722
Recognition of deferred revenue 1		(55,284	)		(125,253	)
Balance, end of period	$	152,051		$	152,051

¹As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5, 2018, recognized revenue for the six months ended June 30, 2018 includes $14.6 million related to previously deferred revenue for these names.

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Remaining Performance Obligations:

As the Company fulfills its performance obligations, the following table includes revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) as at June 30, 2018 (Dollar amounts in thousands of U.S. dollars):

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) (Dollar amounts in thousands of US dollars).

	June 30, 2018
Remainder of 2018	$	85,722
2019		45,546
2020		8,640
2021		4,616
2022		2,987
Thereafter		4,321
Total	$	151,832

11. Contract Costs

(a)     Deferred costs of acquisition

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the period of benefit of those costs to be longer than one year and those costs are expected to be recoverable under the term of the contract. We have identified certain sales incentive programs that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $1.4 million at June 30, 2018.

Capitalized contract acquisition costs are amortized into operating expense based on the transfer of goods or services to which the assets relate which typically range 2 – 10 years. For the three months ended June 30, 2018, the Company capitalized $0.2 million and also amortized $0.3 million of contract costs, respectively, realizing net amortization of less than $0.1 million. For the six months ended June 30, 2018, the Company capitalized $0.4 million and also amortized $0.5 million of contract costs, respectively, realizing net amortization of less than $0.1 million. There was no impairment loss recognized in relation to the costs capitalized during the three or six months ending June 30, 2018. The breakdown of the movement in the contract costs balance for the three and six months ending June 30, 2018 is as follows (Dollar amounts in thousands of U.S. dollars):

	Three months ended June 30, 2018			Six months ended June 30, 2018 (1)
Balance, beginning of period	$	1,378		$	1,404
Capitalization of costs		244			439
Amortization of costs		(268	)		(489	)
Balance, end of period	$	1,354		$	1,354

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

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

(b)     Deferred costs of fulfillment

Deferred costs to fulfill contracts generally consist of domain registration costs which have been paid to a domain registry, and are capitalized as Prepaid domain name registry and ancillary services fees. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. For the three months ended June 30, 2018, the Company capitalized $41.2 million and also amortized $41.4 million of contract costs, respectively, realizing a net change in prepaid domain name registry and ancillary services fees of $0.2 million. For the six months ended June 30, 2018, the Company capitalized $87.2 million and also amortized $98.7 million of contract costs, respectively, realizing a net change in prepaid domain name registry and ancillary services fees of $11.5 million. There was no impairment loss recognized in relation to the costs capitalized during the three or six months ending June 30, 2018. Amortization expense is primarily included in cost of revenue.  The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the three and six months ended June 30, 2018 is as follows (Dollar amounts in thousands of U.S. dollars).

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	115,660		$	127,003
Deferral of costs		41,177			87,160
Recognition of costs 1		(41,380	)		(98,708	)
Balance, end of period	$	115,456		$	115,456

¹As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, recognized costs for the six months ended June 30, 2018 includes $14.5 million related to previously deferred revenue for these names.

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12. Segment reporting:

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

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

2.     Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses; and by making its portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

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

Information by operating segments (with the exception of disaggregated revenue, which is contained in Note 10), which is regularly reported to the CEO is as follows (Dollar amounts in thousands of U.S. dollars):

	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2018
Net Revenues	$	24,306	$	56,781	$	81,087
Cost of revenues
Cost of revenues		13,268		41,233		54,501
Network expenses		640		2,061		2,701
Depreciation of property and equipment		903		325		1,228
Amortization of intangible assets		11		488		499
Total cost of revenues		14,822		44,107		58,929
Gross Profit		9,484		12,674		22,158
Expenses:
Sales and marketing						7,852
Technical operations and development						2,355
General and administrative						4,256
Depreciation of property and equipment						102
Amortization of intangible assets						1,827
Loss (gain) on currency forward contracts						52
Income from operations						5,714
Other income (expenses), net						(878	)
Income before provision for income taxes					$	4,836

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	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2017
Net Revenues	$	21,627	$	62,596	$	84,223
Cost of revenues
Cost of revenues		11,648		47,797		59,445
Network expenses		410		1,851		2,261
Depreciation of property and equipment		489		225		714
Amortization of intangible assets		11		444		455
Total cost of revenues		12,558		50,317		62,875
Gross Profit		9,069		12,279		21,348
Expenses:
Sales and marketing						7,447
Technical operations and development						1,798
General and administrative						3,285
Depreciation of property and equipment						165
Loss on disposal of property and equipment						2
Amortization of intangible assets						1,608
Loss (gain) on currency forward contracts						(27	)
Income from operations						7,070
Other income (expenses), net						(745	)
Income before provision for income taxes					$	6,325

	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2018
Net Revenues	$	47,914	$	128,968	$	176,882
Cost of revenues
Cost of revenues		25,473		98,000		123,473
Network expenses		1,130		4,145		5,275
Depreciation of property and equipment		1,737		622		2,359
Amortization of intangible assets		23		975		998
Total cost of revenues		28,363		103,742		132,105
Gross Profit		19,551		25,226		44,777
Expenses:
Sales and marketing						16,217
Technical operations and development						4,450
General and administrative						8,786
Depreciation of property and equipment						203
Amortization of intangible assets						3,659
Loss (gain) on currency forward contracts						49
Income from operations						11,413
Other income (expenses), net						(1,650	)
Income before provision for income taxes					$	9,763

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	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2017
Net Revenues	$	40,876	$	112,915	$	153,791
Cost of revenues
Cost of revenues		22,040		86,716		108,756
Network expenses		951		3,653		4,604
Depreciation of property and equipment		916		389		1,305
Amortization of intangible assets		23		813		836
Total cost of revenues		23,930		91,571		115,501
Gross Profit		16,946		21,344		38,290
Expenses:
Sales and marketing						14,667
Technical operations and development						3,492
General and administrative						6,742
Depreciation of property and equipment						331
Loss on disposal of property and equipment						2
Amortization of intangible assets						2,989
Loss (gain) on currency forward contracts						(61	)
Income from operations						10,128
Other income (expenses), net						(1,484	)
Income before provision for income taxes					$	8,644

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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 U.S. dollars):

	June 30, 2018		December 31, 2017
Canada	$	1,518	$	1,176
United States		32,979		23,417
Germany		41		27
	$	34,538	$	24,620

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

	June 30, 2018		December 31, 2017
Canada	$	7,085	$	7,749
United States		33,895		37,783
Germany		17		120
	$	40,997	$	45,652

(d) Valuation and qualifying accounts (Dollar amounts in thousands of U.S. dollars):

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses			Write-offs during period		Balance at end of period
Six months ended June 30, 2018	$	168	$	(36	)	$	-	$	132
Year ended December 31, 2017	$	164	$	4		$	-	$	168

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13. Stockholders’ Equity:

The following unaudited table summarizes stockholders' equity transactions for the three-month period ended June 30, 2018 (Dollar amounts in thousands of U.S. dollars): 

											Accumulated
						Additional			Retained		other			Total
	Common stock					paid in			earnings		comprehensive			stockholders'
	Number			Amount		capital			(deficit)		income (loss)			equity
Balances, March 31, 2018		10,592,115		$	15,426	$	2,547		$	47,419	$	17		$	65,409
Exercise of stock options		16,153			122		(90	)		-		-			32
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,902	)				(141	)		-		-			(141	)
Stock-based compensation (note 14)		-			-		615			-		-			615
Net income		-			-		-			3,608		-			3,608
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			-		-			-
Other comprehensive loss		-			-		-			-		(260	)		(260	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027	$	(243	)	$	69,263

The following unaudited table summarizes stockholders' equity transactions for the six-month period ended June 30, 2018 (Dollar amounts in thousands of U.S. dollars): 

												Accumulated
						Additional			Retained			other			Total
	Common stock					paid in			earnings			comprehensive			stockholders'
	Number			Amount		capital			(deficit)			income (loss)			equity
Balances, December 31, 2017		10,583,879		$	15,368	$	2,167		$	42,676		$	-		$	60,211
Impact of Adoption of ASU 2014-09		-			-		-			1,063			-			1,063
Balance on January 1, 2018		10,583,879			15,368		2,167			43,739			-			61,274
Exercise of stock options		28,716			180		(141	)		-			-			39
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(9,229	)		-		(288	)		-			-			(288	)
Stock-based compensation (note 14)		-			-		1,193			-			-			1,193
Net income		-			-		-			7,352			-			7,352
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(64	)		-			(64	)
Other comprehensive loss		-			-		-			-			(243	)		(243	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027		$	(243	)	$	69,263

On February 14, 2018, the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and will terminate on or before February 13, 2019. During the three and six months ended June 30, 2018, the Company did not repurchase any shares under this program.

On March 1, 2017, the Company announced that its Board of Directors had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on March 1, 2017 and terminated on February 14, 2018. During the six months ended June 30, 2018, the Company did not repurchase any shares under this program.

On February 9, 2016, the Company announced that its Board of Directors had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 10, 2016 and terminated on February 9, 2017. During the six months ended June 30, 2017, the Company did not repurchase any shares under this program.

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14. Share-based payments

Stock options

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company's common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

Details of stock option transactions for the three months ended June 30, 2018 and June 30, 2017 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

	Three months ended June 30,					Three months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		634,883		$	37.48		430,611		$	15.46
Granted		128,566			64.10		-			-
Exercised		(16,153	)		12.26		(66,746	)		8.26
Forfeited		(13,100	)		55.04		(257	)		11.43
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

Details of stock option transactions for the six months ended June 30, 2018 and June 30, 2017 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

	Six months ended June 30,					Six months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		139,566			63.66		32,875			40.56
Exercised		(28,716	)		10.30		(135,622	)		8.04
Forfeited		(30,225	)		47.96		(8,146	)		18.24
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

As of June 30, 2018, the exercise prices, weighted average remaining contractual life and intrinsic values of outstanding options were as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

			Options outstanding								Options exercisable
Exercise price			Number outstanding		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value		Number exercisable		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value
$ 2.92	-	$ 8.92		75,367	$	6.94		1.2	$	4,048		75,367	$	6.94		1.2	$	4,048
$10.16	-	$19.95		109,488		16.38		3.0		4,847		83,288		15.99		2.8		3,720
$21.10	-	$27.53		72,500		23.76		3.6		2,674		52,500		24.78		3.2		1,883
$35.25	-	$37.35		14,375		35.89		4.9		356		10,625		36.11		4.7		261
$43.15	-	$47.00		18,500		44.19		5.6		305		8,000		43.75		5.6		135
$53.20	-	$58.65		315,400		55.51		5.9		1,622		-		-		-		-
$64.10	-	$64.10		128,566		64.10		6.9		-		-		-		-		-
				734,196	$	42.39		4.9	$	13,852		229,780	$	16.92		2.6	$	10,047

Total unrecognized compensation cost relating to unvested stock options at June 30, 2018, prior to the consideration of expected forfeitures, is approximately $8.0 million and is expected to be recognized over a weighted average period of 2.9 years.

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The Company recorded stock-based compensation of $0.6 million and $1.2 million for the three and six months ended June 30, 2018 and $0.3 million and $0.6 million for the three and six months ended June 30, 2017, respectively.

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

15. Fair value measurement:

For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides a summary of the fair values of the Company's derivative instrument assets and liabilities measured at fair value on a recurring basis at June 30, 2018 (Dollar amounts in thousands of U.S. dollars):

	June 30, 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	—	$	—	$	—	$	—
Derivative instrument liability	$	—	$	364	$	—	$	364

There were no derivative instrument assets or liabilities outstanding at December 31, 2017.

16. Contingencies

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

The Company has other legal claims and lawsuits in connection with its ordinary business operations. The Company intends to vigorously defend these claims. While the final outcome with respect to any actions or claims outstanding or pending as of June 30, 2018 cannot be predicted with certainty, management does not believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, in addition to historical information, forward-looking statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “anticipate,” “believe,” “plan,” “estimate,” “expect” and “intend,” and other similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report include statements regarding, among other things: the competition we expect to encounter as our business develops and competes in a broader range of Internet services; our expectation regarding the acquisition of eNom, the Company's foreign currency requirements, specifically for the Canadian dollar; Ting mobile, Roam mobile and fixed Internet access subscriber growth and retention rates; our belief regarding the underlying platform for our domain services, our expectation regarding the trend of sales of domain names and advertising; our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; the revenue that our parked page vendor relationships may generate in the future; our expectation regarding litigation; the potential impact of current and pending claims on our business; our valuations of certain deferred tax assets; our expectation to collect our outstanding receivables, net of our allowance for doubtful accounts; our expectation regarding fluctuations in certain expense and cost categories; our expectations regarding our unrecognized tax; our expectations regarding cash from operations to fund our business; the impact of cancellations of or amendments to market development fund programs under which we receive funds, our expectation regarding our ability to manage realized gains/losses from foreign currency contracts; and general business conditions and economic uncertainty. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Many factors affect our ability to achieve our objectives and to successfully develop and commercialize our services including:

• Changes in the nature of key strategic relationships with our Mobile Virtual Network Operator ("MVNO") partners;

• The effects of vigorous competition on a highly penetrated mobile telephony market, including the impact of competition on the price we are able to charge subscribers for services and devices and on the geographic areas served by our MVNO partner wireless networks;

• Our ability to manage any potential increase in subscriber churn or bad debt expense;

• Our ability to continue to generate sufficient working capital to meet our operating requirements;

• Our ability to service our debt commitments;

• Our ability to maintain a good working relationship with our vendors and customers;

• The ability of vendors to continue to supply our needs;

• Actions by our competitors;

• Our ability to attract and retain qualified personnel in our business;

• Our ability to effectively manage our business;

• The effects of any material impairment of our goodwill or other indefinite-lived intangible assets;

• Our ability to obtain and maintain approvals from regulatory authorities on regulatory issues;

• Our ability to invest in the build-out of fiber networks into selected towns and cities to provide Internet access services to residential and commercial customers while maintaining the development and sales of our established services;

• Adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, including with respect to the impact of the Tax Cuts and Jobs Act of 2017;

• The application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;

• Our ability to effectively integrate acquisitions;

27

• Pending or new litigation; and

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

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

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

This list of factors that may affect our future performance and financial and competitive position and the accuracy of forward-looking statements is illustrative, but it is by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements included in this document are based on information available to us as of the date of this document, and we assume no obligation to update these cautionary statements or any forward-looking statements, except as required by law. These statements are not guarantees of future performance.

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

OVERVIEW

Our mission is to provide simple useful services that help people unlock the power of the Internet.

We accomplish this by reducing the complexity of our customers’ experience as they access the Internet (at home or on the go) and while using Internet services such as domain name registration, email and other Internet services. We are organized, managed and report our financial results as two segments, Network Access Services and Domain Services, which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate.

Our management regularly reviews our operating results on a consolidated basis, principally to make decisions about how we utilize our resources and to measure our consolidated operating performance. To assist us in forecasting growth and to help us monitor the effectiveness of our operational strategies, our management regularly reviews revenue for each of our service offerings in order to gain more depth and understanding of the key business metrics driving our business. Accordingly, we report Network Access Services and Domain Services revenue separately.

For the three months ended June 30, 2018 and June 30, 2017, we reported revenue of $81.1 million and $84.2 million, respectively. 

For the six months ended June 30, 2018 and June 30, 2017, we reported revenue of $176.9 million and $153.8 million, respectively. 

Network Access Services

Network Access Services includes mobile, fixed high-speed Internet access services and other revenues, including, billing solutions to small ISPs.

Our primary mobile service offering (“Ting Mobile”) is mainly distributed through the Ting website and to a lesser extent certain third-party retail stores and on-line retailers. We generate revenues from the sale of retail telephony services, mobile phone hardware and related accessories to individuals and small businesses through the Ting website. Ting Mobile’s primary focus is providing simple and easy to use services, including simple value pricing, in particular for multi-line accounts, and superior customer care. In the third quarter of 2017, the Company acquired the consumer-related assets of Otono, Networks Inc. The consumer assets relate to the mobile roaming and instant activation eSIM business under the Roam Mobility, Zipsim and Always Online Wireless brands (collectively “Roam Mobility brands”). The acquired portfolio operates as a MVNO on the same nationwide Global System for Mobile communications (“GSM”) network as Ting Mobile and distributes through third-party retail stores and product branded websites. 

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The Company also derives revenue from the sale of fixed high-speed Internet access (“Ting Internet”) in select towns including Holly Springs, North Carolina, Westminster, Maryland, Sandpoint, Idaho and Charlottesville, Virginia, with further expansion underway in existing Ting towns as well as new Ting towns of Sandpoint, Idaho and Centennial, Colorado (collectively, the “Ting Towns”). Our primary sales channel of Ting Internet is through the Ting website. The primary focus of Ting Internet is to provide reliable Gigabit Internet services to consumer and business customers.

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

As of June 30, 2018, Ting managed mobile telephony services for approximately 282,000 subscribers and 163,000 accounts. For a discussion of subscribers and how they impacted our financial results, see the Net Revenue discussion below.

Domain Services

Domain Services includes wholesale and retail domain name registration services, value added services and portfolio services derived through our OpenSRS, eNom and Hover brands. We earn revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses; and by making our portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

Our primary distribution channel is a global network of approximately 38,000 resellers that operate in over 150 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.  Our primary focus is serving the needs of this network of resellers by providing the broadest portfolio of generic top-level domain (“gTLD”) and the country code top-level domain (“ccTLD”) options and related services, a white-label platform that facilitates the provisioning and management of domain names, a powerful Application Program Interface , easy-to-use interfaces, comprehensive management and reporting tools, and proactive and attentive customer service. Our services are integral to the solutions that our resellers deliver to their customers. We provide “second tier” support to our resellers by email, chat and phone in the event resellers experience issues or problems with our services. In addition, our Network Operating Center proactively monitors all services and network infrastructure to address deficiencies before customer services are impacted.

We believe that the underlying platforms for our services are among the most mature, reliable and functional reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve these services for both resellers and end-users. Our business model is characterized primarily by non-refundable, up-front payments, which lead to recurring revenue and positive operating cash flow.

Wholesale, primarily branded as OpenSRS and eNom, derives revenue from its domain service and from providing value-added services. The OpenSRS and eNom domain services manage approximately 24.1 million domain names under the Tucows and eNom ICANN registrar accreditations and for other registrars under their own accreditations.  The reduction from prior year is primarily due to the bulk transfer of 2.65 million domain names to Namecheap’s credentials.  The transfer was completed by January 16, 2018, after King County Superior court (Washington) granted Namecheap Inc. a preliminary injunction on January 5, 2018, requiring the Company to bulk transfer the domain names under management.  As a result of the bulk transfer, in the first quarter of 2018, the Company recognized, on an accelerated basis, $14.6 million of revenue and $14.5 million of cost of revenues sold related to previously deferred revenue and deferred prepaid registry fees. In addition, one of the resellers for which the Company registered domain names using the reseller’s accreditation, was acquired and the registrations were moved to the acquiring reseller, resulting in approximately 0.5 million domains being transferred in the first quarter of 2018. As the Company does not defer revenue associated with hosted registry services, there was no impact on deferred revenue as a result of the transfer. 

Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, Internet hosting, WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of 38,000 web hosts, ISPs, and other resellers around the world. In addition, we also derive revenue by monetizing domain names which are near the end of their lifecycle through advertising revenue or auction sale.

Retail, primarily the Hover and eNom portfolio of websites, including eNom, eNom Central and Bulkregister, derive revenues from the sale of domain name registration and email services to individuals and small businesses. Retail also includes our Personal Names Service – based on over 36,000 surname domains – that allows roughly two-thirds of Americans to purchase an email address based on their last name.

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

KEY BUSINESS METRICS

We regularly review a number of business metrics, including the following key metrics and non-GAAP measures, to assist us in evaluating our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, manage our operational cash flow, formulate financial projections and make strategic business decisions. The following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented:

Adjusted EBITDA

Tucows reports all financial information in accordance with U.S. generally accepted accounting principles (GAAP). Along with this information, to assist financial statement users in an assessment of our historical performance, we typically disclose and discuss a non-GAAP financial measure, adjusted EBITDA, on investor conference calls and related events that exclude certain non-cash and other charges as we believe that the non-GAAP information enhances investors' overall understanding of our financial performance. Please see discussion of adjusted EBITDA in the Results of Operations section below.

Network Access Services

	June 30,
	2018 (1)		2017 (1,2)
	(in 000s)
Ting mobile accounts under management		163		165
Ting mobile subscribers under management		282		278

(1)	For a discussion of these period to period changes in subscribers and devices under management and how they impacted our financial results, see the Net Revenue discussion below.
(2)	Subsequent to a review of our subscriber base, our comparative Q2 2017 accounts under management were reduced by approximately 6,000.

Domain Services

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

	Three months ended June 30,
	2018 (1)		2017 (1)
	(in 000's)
Total new, renewed and transferred-in domain name registrations provisioned		4,382		4,903

	Six months ended June 30,
	2018 (1)		2017 (1)
	(in 000's)
Total new, renewed and transferred-in domain name registrations provisioned		9,274		9,765

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

Domain names under management:

	June 30,
	2018 (1)		2017 (1)
	(in 000's)
Domain names under management:
Registered using Registrar Accreditation belonging to the Tucows Group		19,351		23,178
Registered using Registrar Accreditations belonging to Resellers		4,769		5,633
Total domain names under management		24,120		28,811

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

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OPPORTUNITIES, CHALLENGES AND RISKS

As a MVNO, our Ting and Roam services are reliant on our Mobile Network Operators ("MNOs") providing competitive networks. Our MNOs each continue to invest in network expansion and modernization to improve their competitive positions. Deployment of new and sophisticated technology on a very large-scale entails risks. Should they fail to implement, maintain and expand their network capacity and coverage, adapt to future changes in technologies and continued access to and deployment of adequate spectrum successfully, our ability to provide wireless services to our subscribers, to retain and attract subscribers and to maintain and grow our subscriber revenues could be adversely affected, which would negatively impact our operating margins.

Ting has also enjoyed rapid growth in its first six years of operation. During this growth phase, we have been able to continue to grow gross customer additions and maintain a consistent churn rate, which has allowed us to maintain net new customer additions despite the impact of churn on a fast-growing customer base. We expect price competition to grow more intense in the industry which could result in increased customer churn or reductions of customer acquisition rates either of which could result in slower growth rates or in certain cases, our ability to maintain growth.

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

The increased competition in the market for Internet services in recent years, which we expect will continue to intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers.

Substantially all of our Domain Services revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of new gTLDs, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base.  Growth in our Domain Services revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining, evolving and improving our provisioning platforms and customer service for both resellers and end-users. In addition, we also generate revenue through pay-per-click advertising and the sale of names from our portfolio of domain names and through the domain expiry stream. The revenue associated with names sales and advertising has recently experienced flat to declining trends due to lower traffic and advertising yields in the marketplace, which we expect to continue.  Expanding data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.  Specifically, the European Commission has adopted the General Data Protection Regulation (the “GDPR”), which introduces numerous privacy-related changes for companies operating in the European Union, effective on May 25, 2018.  The solutions we develop for GDRP-compliance may not be adequate in the views of regulatory authorities or ICANN, which may cause the loss of WHOIS privacy revenue or increase our costs of developing compliant solutions or subject us to litigation, liability, civil penalties, or loss of market share. As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways.

From time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services. Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods.

Sales of domain names from our domain portfolio have a negative impact on our advertising revenue as these names are no longer available for advertising purposes. In addition, the timing of larger domain names portfolio sales is unpredictable and may lead to significant quarterly and annual fluctuations in our Portfolio revenue.

Our revenue is primarily realized in U.S. dollars and a major portion of our operating expenses are paid in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material effect on our business, financial condition and results from operations. In particular, we may be adversely affected by a significant weakening of the U.S. dollar against the Canadian dollar on a quarterly and an annual basis. Our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our Canadian dollar exposure. We may not always enter into such forward contracts and such contracts may not always be available and economical for us. Additionally, the forward rates established by the contracts may be less advantageous than the market rate upon settlement.   

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Net Revenues

Network Access Services

The Company generates Network Access Services revenues primarily through the provisioning of mobile services. Other sources of revenue include the provisioning of fixed high-speed Internet access as well as billing solutions to ISP.

Mobile

Ting wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting mobile usage based on the actual amount of monthly services utilized by each customer.

Ting mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting mobile customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brand also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Other services

Other services derive revenues from providing Ting fixed high-speed internet access to individuals and small businesses in select cities. In addition, we provide billing, provisioning and customer care software solutions to ISPs through our Platypus billing software. Ting fixed Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Fixed Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.

Fixed Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting fixed Internet access customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is not received at the time of sale, revenue is not recognized until contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations. 

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Domain Services

Wholesale

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

Historically, our wholesale domain service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names. In addition, this service fuels other revenue categories as it often is the initial service for which a reseller will engage us, enabling us to follow on with other services and allowing us to add to our portfolio by purchasing names registered through us upon their expiration. With the acquisition of eNom and its 24,000-reseller network, domain services will continue to be the largest portion of our business and will further fuel our ability to sell add-on services.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

Wholesale – Value-Added Services

We derive domain related value-added services like digital certifications, WHOIS privacy and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.

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

Retail

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

Portfolio

We derive revenue from our portfolio of domain names parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month.

The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full. Domain portfolio names are sold through our premium domain name service, auctions or in negotiated sales. The size of our domain name portfolio varies over time, as we acquire and sell domains on a regular basis to maximize the overall value and revenue generation potential of our portfolio. In evaluating names for sale, we consider the potential foregone revenue from pay-per-click advertising, as well as other factors. The name will be offered for sale if, based on our evaluation, the name is deemed non-essential to our business and management believes that deriving proceeds from the sale is strategically more beneficial to the Company.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017, except for the adoption of Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was adopted using the modified retrospective basis. Accordingly, comparative figures have not been restated. The adoption of ASU 2014-09 did not have a material impact on the timing of revenue recognition. For further information on our critical accounting policies and estimates, see Note 3 to the consolidated financial statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AS COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2017

NET REVENUES

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

	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Network Access Services:
Mobile Services	$	22,411		$	20,379	$	44,283		$	38,341
Other Services		1,895			1,248		3,631			2,535
Total Network Access Services		24,306			21,627		47,914			40,876
Domain Services:
Wholesale
Domain Services		42,540			48,550		100,968			87,644
Value Added Services		4,601			5,415		9,035			9,322
Total Wholesale		47,141			53,965		110,003			96,966
Retail		8,477			7,663		16,913			14,064
Portfolio		1,163			968		2,052			1,885
Total Domain Services		56,781			62,596		128,968			112,915
	$	81,087		$	84,223	$	176,882		$	153,791
(Decrease) increase over prior period	$	(3,136	)			$	23,091
(Decrease) increase - percentage		-4	%				15	%

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

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Network Access Services:
Mobile Services		28	%		24	%		25	%		25	%
Other Services		2	%		1	%		2	%		2	%
Total Network Access Services		30	%		25	%		27	%		27	%
Domain Services:
Wholesale
Domain Services		53	%		59	%		57	%		57	%
Value Added Services		6	%		6	%		5	%		6	%
Total Wholesale		59	%		65	%		62	%		63	%
Retail		10	%		9	%		10	%		9	%
Portfolio		1	%		1	%		1	%		1	%
Total Domain Services		70	%		75	%		73	%		73	%
		100	%		100	%		100	%		100	%

Total net revenues for the three months ended June 30, 2018 decreased by $3.1 million or 4% to $81.1 million when compared to the three months ended June 30, 2017.  The three-month decrease was primarily driven by the $14.6 million of accelerated recognition of domains revenue associated with the Namecheap bulk transfer of 2.65 million names in the first quarter of 2018, and partially offset by the impact of the acquisition of the mobile roaming assets of Otono Networks in September 2017.

Total net revenues for the six months ended June 30, 2018 increased by $23.1 million or 15% to $176.9 million when compared to the six months ended June 30, 2017.  The six-month increase primarily resulted from $14.6 million of accelerated recognition of domains revenue associated with the Namecheap bulk transfer of 2.65 million names in the first quarter of 2018. In addition, revenues increased due to the January 20, 2017 acquisition of eNom and the impact the acquisition of the mobile roaming assets of Otono Networks in September 2017.

Deferred revenue from domain name registrations and other Internet services at June 30, 2018 decreased to $152.1 million from $160.6 million at December 31, 2017, primarily due to the bulk transfer discussed above. 

During the three months ended June 30, 2018, no customer accounted for more than 10% of total revenue. During the six months ended June 30, 2018, one customer accounted for 11% of total revenue, and for the three and six months ended June 30, 2017, no customer accounted for more than 10% of revenue. As at June 30, 2018 and December 31, 2017, no customer accounted for more than 10% of accounts receivable. Significant management judgment is required at the time revenue is recorded to assess whether the collection of the resulting receivables is reasonably assured. On an ongoing basis, we assess the ability of our customers to make required payments. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of allowance for doubtful accounts, to be fully collected. 

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Network Access Services

Net revenues from mobile phone equipment and services for the three months ended June 30, 2018 increased by $2.0 million or 10% to $22.4 million as compared to the three months ended June 30, 2017. This increase primarily reflects the growth in service revenues by $1.9 million to $20.1 million as compared to the three months ended June 30, 2017, due to the impact of the larger Ting subscriber base is having on Ting mobile service revenue and acquisition of the roaming assets of Otono Networks in the third quarter of 2017.  Revenues from the sale of mobile hardware and related accessories increased by $0.1 million to $2.3 million as compared to the three months ended June 30, 2017. This increase was due to increased mix of higher priced devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in May of 2017.  

Net revenues from mobile phone equipment and services for the six months ended June 30, 2018 increased by $5.9 million or 16% to $44.3 million as compared to the six months ended June 30, 2017. This increase primarily reflects the growth in service revenues by $5.2 million to $39.8 million as compared to the six months ended June 30, 2017, due to the impact of the larger Ting subscriber base is having on Ting mobile service revenue and acquisition of the roaming assets of Otono Networks in the third quarter of 2017.  Revenues from the sale of mobile hardware and related accessories increased by $0.7 million to $4.5 million as compared to the six months ended June 30, 2017. This increase was due to increased mix of higher priced devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in May of 2017.  

Other revenues from high speed Internet access and billing solutions generated $1.9 million in revenue during the three months ended June 30, 2018, up $0.6 million from the three months ended June 30, 2017. Growth in high speed Internet access revenues was as a result of the increased Ting Internet footprint in Charlottesville, VA, Westminster, MD and Holly Springs, NC.  In the second quarter of 2018, Ting began offering high speed internet services in Sandpoint, ID. The Company also is constructing fiber networks in Centennial, CO and expects to launch high speed Internet access services in that market in the second half of 2018. 

Other revenues from high speed Internet access and billing solutions generated $3.6 million in revenue during the six months ended June 30, 2018, up $1.1 million from the six months ended June 30, 2017. Growth in High speed Internet access revenues was as a result of the increased Ting Internet footprint in Charlottesville, VA, Westminster, MD and Holly Springs, NC. The Company is currently constructing fiber networks in Sandpoint, ID and Centennial, CO and expects to launch high speed Internet access services in those markets in the second half of 2018. 

 As of June 30, 2018, Ting mobile had 163,000 accounts under management and 282,000 subscribers under management compared to 165,000 accounts and 278,000 subscribers under management as of June 30, 2017. 

Wholesale

During the three months ended June 30, 2018, domain services revenue decreased by $6.0 million or 12% to $42.5 million when compared to the three months ended June 30, 2017. The decrease was primarily driven by the $14.6 million of accelerated recognition of wholesale domain revenue associated with the Namecheap bulk transfer of 2.65 million names in the first quarter of 2018 from the bulk transfer of domains.  During the six months ended June 30, 2018, domain services revenue increased by $13.3 million or 15% to $101.0 million when compared to the six months ended June 30, 2017. This increases primarily resulted from $14.6 million of accelerated recognition of wholesale domain revenue associated with the Namecheap bulk transfer of 2.65 million names that took place during the first quarter of 2018. In addition, revenues increased compared to the six months ended June 30, 2017 due to the January 20, 2017 acquisition of eNom. eNom revenues and gross margins in 2017 were negatively impacted by amortizing into revenue, deferred revenue that was recorded at fair value at the acquisition date which was approximately 10% lower than the historical cost basis of eNom.

The increase in revenue from the acquisition of eNom has been offset by the continued and ongoing migration of a few large, low margin customers. These customers have been moving their domain management and domain transaction processing to their own accreditations and in-house systems. As previously discussed, in the first quarter of 2018 the Company completed a bulk transfer of 2.65 million domain names to Namecheap’s credentials, which is the most significant migration of this nature.  In addition, one of the resellers for which the Company registered domain names using the reseller’s accreditation, was acquired by a third party and the registrations were moved to the acquiring reseller, resulting in approximately 0.5 million domains being transferred in the first quarter of 2018.  Due to these factors, total domains that we manage decreased to 24.1 million as of June 30, 2018, when compared to 28.8 million at June 30, 2017. While we anticipate that the number of new, renewed and transferred-in domain name registrations will continue to incrementally increase in the long term, the volatility of these factors could affect the growth of domain names that we manage.

During the three months ended June 30, 2018, value added services revenue decreased by $0.8 million to $4.6 million when compared to the three months ended June 30, 2017. During the six months ended June 30, 2018, value added services revenue decreased by $0.3 million to $9.0 million when compared to the six months ended June 30, 2017. Both the three and six month decreases were primarily driven by the Namecheap bulk transfer of 2.65 million domain names, which lowered the absolute number of expiring domain names available for the Company’s expiry revenue stream.  

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Retail

Net revenues from retail for the three months ended June 30, 2018, as compared to the three months ended June 30, 2017, increased by $0.8 million, or 11%, to $8.5 million. Net revenues from retail for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017, increased by $2.8 million, or 20%, to $16.9 million. These increases were largely due to the success that our retail marketing initiatives and improved websites are having on our ability to attract new customers and retain existing ones.  In addition, our revenues and gross margins in 2017 were negatively impacted by amortizing into revenue, deferred revenue that was recorded at fair value at the acquisition date which was approximately 10% lower than the historical basis of eNom.

Portfolio

Net revenues from portfolio for the three months ended June 30, 2018, increased by $0.2 million to $1.2 million, as compared to the three months ended June 30, 2017.

Net revenues from portfolio for the six months ended June 30, 2018, increased by $0.2 million to $2.1 million, as compared to the six months ended June 30, 2017.

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COST OF REVENUES

Network Access Services 

Mobile

Cost of revenues for mobile services includes the costs of provisioning mobile services, which is primarily our customers' voice, messaging, data usage provided by our MNOs, and the costs of providing mobile phone hardware, which is the cost of mobile phone devices and SIM cards sold to our customers, order fulfillment related expenses, and inventory write-downs.

Other Services

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

Wholesale

Domain Service

Cost of revenues for domain registrations represents the amortization of registry and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely ratably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are initially recorded as prepaid domain registry fees. This accounting treatment reasonably approximates a recognition pattern that corresponds with the provision of the services during the period. Market development funds that do not represent a payment for distinct goods or services provided by the Company, and thus do not meet the criteria for revenue recognition under ASU 2014-09, are reflected as cost of goods sold and are recognized as earned.

Value-Added Services

Costs of revenues for value-added services include licensing and royalty costs related to the provisioning of certain components of related to hosted email, third-party hosting services. Fees payable for trust certificates are amortized on a basis consistent with the provision of service, generally one year, while email hosting fees and monthly printing fees are included in cost of revenues in the month they are incurred.

Retail

Costs of revenues for our provision and management of Internet services through our retail sites, Hover.com and the eNom branded sites, include the amortization of registry and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely ratably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are recorded as prepaid domain registry fees.

Portfolio

Costs of revenues for our portfolio represent the amortization of registry fees for domains added to our portfolio over the renewal period, which is generally one year, the value attributed under intangible assets to any domain name sold and any impairment charges that may arise from our assessment of our domain name intangible assets. As the total names in our portfolio continue to grow, this cost will become a more significant component of our cost of revenues. Payments for domain registrations are payable for the full term of service at the time of activation of service and are recorded as prepaid domain registry fees and are expensed ratably over the renewal term.

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Network expenses

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

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

	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Network Access Services:
Mobile Services	$	11,978		$	10,702	$	23,243		$	20,269
Other Services		1,290			946		2,230			1,771
Total Network Access Services		13,268			11,648		25,473			22,040
Domain Services:
Wholesale
Domain Services		35,844			42,449		87,161			76,913
Value Added Services		748			615		1,605			1,191
Total Wholesale		36,592			43,064		88,766			78,104
Retail		4,446			4,548		8,855			8,165
Portfolio		195			185		379			447
Total Domain Services		41,233			47,797		98,000			86,716
Network Expenses:
Network, other costs		2,701			2,261		5,275			4,604
Network, depreciation and amortization costs		1,727			1,169		3,357			2,141
		4,428			3,430		8,632			6,745
	$	58,929		$	62,875	$	132,105		$	115,501
(Decrease) increase over prior period	$	(3,946	)			$	16,604
(Decrease) increase - percentage		-6	%				14	%

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

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Network Access Services:
Mobile Services		20	%		17	%		18	%		18	%
Other Services		2	%		2	%		2	%		2	%
Total Network Access Services		22	%		19	%		20	%		20	%
Domain Services:
Wholesale
Domain Services		61	%		67	%		65	%		66	%
Value Added Services		1	%		1	%		1	%		1	%
Total Wholesale		62	%		68	%		66	%		67	%
Retail		8	%		7	%		7	%		7	%
Portfolio		0	%		0	%		0	%		0	%
Total Domain Services		70	%		75	%		73	%		74	%
Network Expenses:
Network, other costs		5	%		4	%		4	%		4	%
Network, depreciation and amortization costs		3	%		2	%		3	%		2	%
		8	%		6	%		7	%		6	%
		100	%		100	%		100	%		100	%

Total cost of revenues for the three months ended June 30, 2018, decreased by $3.9 million, or 6%, to $58.9 million when compared to the three months ended June 30, 2017. The decrease was primarily driven by the $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names in the first quarter of 2018. Total cost of revenues for the six months ended June 30, 2018, increased by $16.6 million, or 14%, to $132.1 million when compared to the six months ended June 30, 2017. These increases primarily resulted from $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names during the first quarter of 2018.  Additionally, the six months ended June 30, 2017 were lower due to the January 20, 2017 acquisition of eNom and the impact the acquisition of the mobile roaming assets of Otono Networks in September 2017.  Prepaid domain registration and other Internet services fees as of June 30, 2018 decreased to $115.5 million from $127.0 million as of December 31, 2017, primarily due to the bulk transfer discussed above. 

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Network Access Services

Mobile and Other Services

Cost of revenues from mobile phone equipment and services for the three months ended June 30, 2018, as compared to the three months ended June 30, 2017, increased by $1.3 million or 12% to $12.0 million. This increase primarily reflects the impact the subscriber base had on Ting mobile service cost of revenue as well as the acquisition of the mobile roaming assets of Otono Networks in September 2017 which combined grew by $1.0 million to $9.6 million as compared to the three months ended June 30, 2017.  Mobile hardware and related accessories costs increased by $0.3 million compared to the three months ended June 30, 2017, to $2.4 million reflecting an increased mix of higher cost devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in May of 2017.   

In addition, during the three months ended June 30, 2018, we incurred costs of $1.3 million in provisioning high speed Internet access and billing solutions as compared to $0.9 million during the three months ended June 30, 2017. The increase in costs was primarily due primarily to the expansion of the Ting Fiber foot print and increasing subscriber base.

Cost of revenues from mobile phone equipment and services for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017, increased by $3.0 million or 15% to $23.2 million. This increase primarily reflects the impact the subscriber base had on Ting mobile service cost of revenue as well as the acquisition of the mobile roaming assets of Otono Networks in September 2017 which combined grew by $2.3 million to $18.5 million as compared to the six months ended June 30, 2017.  Mobile hardware and related accessories costs increased by $0.7 million compared to the six months ended June 30, 2017, to $4.7 million reflecting an increased mix of higher cost devices attributed to the increased sales of new Apple mobile devices under the direct supply agreement signed in May of 2017.   

 In addition, during the six months ended June 30, 2018, we incurred costs of $2.2 million in provisioning high speed Internet access and billing solutions as compared to $1.8 million during the six months ended June 30, 2017. The increase in costs was primarily due primarily to the expansion of the Ting Fiber foot print and increasing subscriber base.

Domain Services

Wholesale

Costs for wholesale and value-added services for the three months ended June 30, 2018 decreased by $6.5 million, or 15%, to $36.6 million when compared to the three months ended June 30, 2017. The three-month decrease resulted from $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names during the first quarter of 2018, a portion of which would have otherwise been recognized in Q2 2018. Costs for wholesale and value-added services for the six months ended June 30, 2018 increased by $10.7 million, or 14%, to $88.8 million when compared to the six months ended June 30, 2017. The six-month increase primarily resulted from $14.5 million of accelerated recognition of prepaid domain registry fees associated with the Namecheap bulk transfer of 2.65 million names during the first quarter of 2018. In addition, cost of revenues increased due to the January 20, 2017 acquisition of eNom.

Retail

Costs for retail for the three months ended June 30, 2018 decreased by $0.1 million, to $4.4 million when compared to the three months ended June 30, 2017. Costs for Retail for the six months ended June 30, 2018 increased by $0.7 million, to $8.9 million when compared to the six months ended June 30, 2017. The six-month increase resulted primarily from the acquisition of eNom on January 20, 2017 and to a lesser extent the increased cost of additional volume in Hover services.

Portfolio

Costs for portfolio for the three months ended June 30, 2018 remained flat at $0.2 million, when compared to the three months ended June 30, 2017. Costs for portfolio for the six months ended June 30, 2018 decreased by $0.1 million to $0.4 million, when compared to the six months ended June 30, 2017.

Network Expenses

Network costs for the three months ended June 30, 2018 increased by $1.0 million to $4.4 million when compared to the three months ended June 30, 2017. The three-month increase was driven by the expansion of the Company’s network infrastructure. Costs for the six months ended June 30, 2018 increased by $1.9 million to $8.6 million when compared to the six months ended June 30, 2017.  The six-month increase is primarily due to the acquisition of eNom on January 20, 2017, including acquired developed platform technology.

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SALES AND MARKETING

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

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Sales and marketing	$	7,852		$	7,447		$	16,217		$	14,667
Increase over prior period	$	405					$	1,550
Increase - percentage		5	%					11	%
Percentage of net revenues		10	%		9	%		9	%		10	%

Sales and marketing expenses for the three months ended June 30, 2018 increased by $0.4 million, or 5%, to $7.9 million when compared to the three months ended June 30, 2017. This three-month increase related primarily to an increase of $1.1 million in workforce and stock-based compensation related costs, which have primarily been driven by workforce increases to support mobile and network access related growth, and foreign exchange impacts. The increase was offset by a $0.7 million decrease in marketing and contract service costs, largely due to timing of expenditures.

Sales and marketing expenses for the six months ended June 30, 2018 increased by $1.6 million, or 11%, to $16.2 million when compared to the six months ended June 30, 2017. This six-month increase related primarily to an increase of $2.9 million increased workforce and stock-based compensation related costs, which have primarily been driven by workforce increases to support mobile and network access related growth, and foreign exchange impacts. The increase was offset by a $1.3 million decrease in marketing and contract service costs, largely due to timing of expenditures. 

TECHNICAL OPERATIONS AND DEVELOPMENT

Technical operations and development expenses consist primarily of personnel costs and related expenses required to support the development of new or enhanced service offerings and the maintenance and upgrading of existing infrastructure. This includes expenses incurred in the research, design and development of technology that we use to register domain names, network access services, email, retail, domain portfolio and other Internet services, as well as to distribute our digital content services. All technical operations and development costs are expensed as incurred.

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Technical operations and development	$	2,355		$	1,798		$	4,450		$	3,492
Increase over prior period	$	557					$	958
Increase - percentage		31	%					27	%
Percentage of net revenues		3	%		2	%		3	%		2	%

Technical operations and development expenses for the three months ended June 30, 2018 increased by $0.6 million, or 31%, to $2.4 million when compared to the three months ended June 30, 2017.  The increase in costs relates primarily to increased salaries and benefits driven by an expanding workforce and wage inflation.

Technical operations and development expenses for the six months ended June 30, 2018 increased by $1.0 million, or 27%, to $4.5 million when compared to the six months ended June 30, 2017. The increase in costs relate primarily to increased salaries and benefits driven by an expanding workforce and wage inflation, as well as the eNom technical operations and development workforce that were included as of January 20, 2017.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation and related costs for managerial and administrative personnel, fees for professional services, public listing expenses, rent, foreign exchange and other general corporate expenses.

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
General and administrative	$	4,256		$	3,285		$	8,786		$	6,742
Increase over prior period	$	971					$	2,044
Increase - percentage		30	%					30	%
Percentage of net revenues		5	%		4	%		5	%		4	%

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General and administrative expenses for the three months ended June 30, 2018 increased by $1.0 million, or 30%, to $4.3 million when compared to the three months ended June 30, 2017.  Workforce, contract services, travel and stock-based compensation increased $0.4 million, while foreign exchanges expenses recorded on foreign exchange revaluation of our foreign denominated monetary assets and liabilities as well as expenses unrelated to foreign currency exchange hedging transactions increased by $0.5 million. Other expenses, including credit card processing fees related to growth of network access services and facilities costs increased $0.1 million.

General and administrative expenses for the six months ended June 30, 2018 increased by $2.0 million, or 30%, to $8.8 million when compared to the six months ended June 30, 2017. Workforce, contract services, travel and stock-based compensation increased $0.8 million, while foreign exchanges expenses recorded on foreign exchange revaluation of our foreign denominated monetary assets and liabilities as well as expenses unrelated to foreign currency exchange hedging transactions increased by $0.8 million. Other expenses, including credit card processing fees related to growth of network access services and facilities costs increased $0.4 million.

DEPRECIATION OF PROPERTY AND EQUIPMENT

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Depreciation of property and equipment	$	102		$	165		$	203		$	331
Decrease over prior period	$	(63	)				$	(128	)
Decrease - percentage		(38	)%					(39	)%
Percentage of net revenues		0	%		0	%		0	%		0	%

Depreciation costs decreased by $0.1 million to $0.1 million as compared to the three months ended June 30, 2017.

Depreciation costs decreased by $0.1 million to $0.2 million as compared to the six months ended June 30, 2017.

AMORTIZATION OF INTANGIBLE ASSETS

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Amortization of intangible assets	$	1,827		$	1,608		$	3,659		$	2,989
Increase over prior period	$	219					$	670
Increase - percentage		14	%					22	%
Percentage of net revenues		2	%		2	%		2	%		2	%

Amortization of intangible assets for the three months ended June 30, 2018 increased $0.2 million to $1.8 million as compared to the three months ended June 30, 2017. The three-month increase is primarily due to the acquisition of the mobile roaming assets of Otono Networks, Inc. in September 2017. Amortization of intangible assets for the six months ended June 30, 2018 increased $0.7 million to $3.7 million as compared to the six months ended June 30, 2017. The six-month increase was due to the full two-quarter impact of the acquisition of eNom as well as acquisition of the mobile roaming assets of Otono Networks, Inc. in September 2017.

LOSS (GAIN) ON CURRENCY FORWARD CONTRACTS

Although our functional currency is the U.S. dollar, a major portion of our fixed expenses are incurred in Canadian dollars. Our goal with regard to foreign currency exposure is, to the extent possible, to achieve operational cost certainty, manage financial exposure to certain foreign exchange fluctuations and to neutralize some of the impact of foreign currency exchange movements. Accordingly, we enter into foreign exchange contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Loss (gain) on currency forward contracts	$	52		$	(27	)	$	49		$	(61	)
Increase over prior period	$	79					$	110
Increase - percentage		293	%					(180	)%
Percentage of net revenues		0	%		0	%		0	%		0	%

As of June 30, 2018, we have entered into certain forward exchange contracts that do not comply with the requirements of hedge accounting to meet a portion of our future Canadian dollar requirements through September 2019. The Company recorded a net loss of $0.1 million on the change in fair value of outstanding contracts as well as realized income on matured contracts, for the three months ended June 30, 2018, as compared to a net gain of $27,000 for the change in fair value of outstanding contracts and the settlement of contracts not designated as hedges for the three months ended June 30, 2017.

The Company recorded a net loss of $49,000 on the change in fair value of outstanding contracts as well as realized income on matured contracts, compared to a net gain of $0.1 million for the six months ended June 30, 2017.

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At June 30, 2018, our balance sheet reflects a net derivative instrument liability of $0.4 million as a result of our existing foreign exchange contracts.

OTHER INCOME AND EXPENSES

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Other income (expense), net	$	(878	)	$	(745	)	$	(1,650	)	$	(1,484	)
Increase over prior period	$	(133	)				$	(166	)
Increase - percentage		18	%					11	%
Percentage of net revenues		1	%		1	%		(1	)%		(1	)%

Other expenses during the three months ended June 30, 2018 was $0.9 million and $1.7 million for the six months ended June 30, 2018, as compared to other expense of $0.7 and $1.5 million for the three and six months ended June 30, 2017. Other expense consists primarily of the interest we incur in connection with our 2017 Amended Credit Facility (as discussed below), which was partially offset by income from the amortization of a $1.5 million Joint Marketing Agreement commencing in November 2015. The interest incurred primarily relates to our loan balances related to the acquisition of eNom and funding for expenditures associated with the Company’s Fiber to the Home program.

INCOME TAXES

	Three months ended June 30,						Six months ended June 30,
	2018				2017			2018			2017
Provision for income taxes	$	1,228		$	1,083		$	2,411		$	958
Increase in provision over prior period	$	145					$	1,453
Increase - percentage		13	%					152	%
Effective tax rate		25	%		17	%		25	%		11	%

For the three months ended June 30, 2018, we recorded an income tax expense of $1.2 million on income before income taxes of $4.8 million, using an estimated effective tax rate for Fiscal 2018 adjusted for certain minimum state taxes as well as the inclusion of a $0.2 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense.  Comparatively, for the three months ended June 30, 2017, we recorded an income tax expense of $1.1 million on income before taxes of $6.3 million, using an estimated effective tax rate for the 2017 fiscal year and reflecting the $1.2 million tax recovery impacted related to ASU 2016-09.

For the six months ended June 30, 2018, we recorded an income tax expense of $2.4 million on income before income taxes of $9.8 million, using an estimated effective tax rate for Fiscal 2018 adjusted for certain minimum state taxes as well as the inclusion of a $0.3 million tax recovery related to the adoption of ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense on a prospective basis. Comparatively, for the six months ended June 30, 2017, we recorded an income tax expense of $1.0 million on income before income taxes of $8.6 million, using an estimated effective tax rate for Fiscal 2017 adjusted for certain minimum state taxes as well as the inclusion of a $2.2 million tax recovery related to the adoption of ASU 2016-09.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

We recognize accrued interest and penalties related to income taxes in income tax expense. We did not have significant interest and penalties accrued at June 30, 2018 and December 31, 2017, respectively.

ADJUSTED EBITDA

We believe that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management. We use adjusted EBITDA to measure our performance and prepare our budgets. Because adjusted EBITDA is a non-GAAP financial performance measure, our calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. Because adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. See the Consolidated Statements of Cash Flows included in the attached financial statements. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. We endeavor to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on U.S. GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

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Our adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provision, interest expense (net), stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and infrequently occurring items. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding unhedged foreign currency contracts, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

The following table reconciles net income to adjusted EBITDA (dollars in thousands):

Reconciliation of Net income to Adjusted EBITDA
(In Thousands of US Dollars)
(unaudited)
	Three months ended June 30,					Six months ended June 30,
	2018 (unaudited)		2017 (unaudited)			2018 (unaudited)		2017 (unaudited)
Net income for the period	$	3,608	$	5,242			7,352	$	7,686
Depreciation of property and equipment		1,330		879			2,562		1,636
Amortization of intangible assets		2,326		2,063			4,657		3,825
Interest expense, net		951		970			1,847		1,838
Provision for income taxes		1,228		1,083			2,411		958
Stock-based compensation		615		313			1,193		631
Unrealized loss (gain) on change in fair value of forward contracts		46		(20	)		43		(38	)
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities		282		(283	)		459		(334	)
Acquisition and other costs1		802		127			1,043		509
Adjusted EBITDA	$	11,188	$	10,374			21,567	$	16,711

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

Adjusted EBITDA increased to $11.2 million in the three months ended June 30, 2018 from $10.4 million in the three months ended June 30, 2017. The increase in adjusted EBITDA from period-to-period was primarily driven an increased contribution by eNom and growth in Ting Mobile. 

Adjusted EBITDA increased to $21.6 million in the six months ended June 30, 2018 from $16.7 million in the six months ended June 30, 2017. The increase in adjusted EBITDA from period to period was primarily driven by the acquisition of eNom on January 20, 2017, growth in domain services and Ting Mobile offset by the continued investment in the Company’s Fiber to the Home program.

OTHER COMPREHENSIVE INCOME (LOSS)

To mitigate the impact of the change in fair value of our foreign exchange contracts on our financial results, in October 2012 we began applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis.

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

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Other comprehensive income (loss)	$	(260	)	$	126		$	(243	)	$	231
Decrease over prior period	$	(386	)				$	(474	)
Decrease - percentage		(306	)%					(205	)%
Percentage of net revenues		(0	)%		0	%		(0	)%		0	%

The impact of the fair value adjustments on outstanding hedged contracts for the three months ended June 30, 2018 was a loss in other comprehensive income of $0.3 million as compared to a gain of $0.1 million for the three months ended June 30, 2017. The impact of the fair value adjustment on outstanding hedged contracts for the six months ended June 30, 2018 was a loss of $0.3 million compared to a net gain of $0.3 million for the six months ended June 30, 2017.

The net amount reclassified to earnings during the three months ended June 30, 2018 was a gain of less than $0.1 million compared to a loss of less than $0.1 million during the three months ended June 30, 2018.  The net amount reclassified to earnings during the six months ended June 30, 2018 was a gain of less than $0.1 million compared to a loss of $0.1 million during the six months ended June 30, 2017.

43

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2018, our cash and cash equivalents balance decreased to $11.2 million when compared to December 31, 2017.  Our principal uses of cash were $10.8 million in loan repayments, $1.2 million for the remaining 10% interest in Ting Virginia, LLC, $0.3 million of other costs, including tax payment associated with stock option exercises and continued investment in property and equipment of $12.4 million. These uses of cash were offset by proceeds from an advances of $2.5 million from our 2017 Amended Credit Facility (defined below) to fund Fiber to the Home program (“FTTH”) and cash provided by operating activities of $15.3 million for the six months ended June 30, 2018. 

2017 Amended Credit Facility

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

Borrowings under the 2017 Amended Credit Agreement accrue interest and standby fees at variable rates based on borrowing elections by the Company and the Company’s total funded debt to EBITDA as described as described more fully in Note 7 of the unaudited Consolidated Financial Statements of the Company.

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

The 2017 Amended Credit Agreement contains customary events of default and affirmative and negative covenants and restrictions, including certain financial maintenance covenants such as a maximum total funded debt to EBITDA ratio and a minimum fixed charge ratio. As of June 30, 2018, we were in compliance with all our covenants.

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

Other Credit Facilities

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

The treasury risk management facility under the 2012 Amended Credit Agreement provides for a $3.5 million settlement risk line to assist the Company with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the 2012 Amended Credit Agreement, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of June 30, 2018, the Company held contracts in the amount of $16.9 million to trade U.S. dollars in exchange for Canadian dollars.

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

44

Cash Flow from Operating Activities

Net cash provided by operating activities during the six months ended June 30, 2018 was $15.3 million, as compared to $10.5 million during the six months ended June 30, 2017.

Net income, after adjusting for non-cash charges, during the six months ended June 30, 2018 was $15.1 million. Net income included non-cash charges and recoveries of $7.7 million such as depreciation, amortization, stock-based compensation, excess tax benefits on stock-based compensation, unrealized gains on currency forward contracts, other income, and an expense for deferred tax. In addition, changes in our working capital provided $0.3 million.  Positive contributions of $12.8 million from movements in domain registry fees, accounts receivable, accounts payable, accrued liabilities, and income taxes recoverable were offset by $12.5 million utilized in changes from prepaid expenses, inventory, customer deposits, accreditation fees payable and deferred revenue.

Cash Flow from Financing Activities

Net cash outflows from financing activities during the six months ended June 30, 2018 totaled $8.6 million as compared to cash inflows of $74.3 million during the six months ended June 30, 2017.  Cash outflows of $10.8 million related to principal repayments relating to our 2017 Amended Credit Facility and a $0.3 million outflow from the net impact of exercise of stock options, offset by cash inflows of $2.5 million from advances from our 2017 Amended Credit Facility. During the six months ended June 30, 2017, the net cash inflow of $74.3 million was primarily related to the $87.0 million draw on the 2017 Amended Credit Facility to fund the acquisition of eNom and to fund FTTH capital expenditures, offset by $12.7 million in loan principal and cost payments as well as tax obligations related to the net exercise of stock options.

Cash Flow from Investing Activities

Investing activities during the six months ended June 30, 2018 used net cash of $13.6 million as compared to using $84.8 million during the six months ended June 30, 2017.

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

 In addition, the Company invested $12.4 million in property and equipment, primarily to support the continued expansion of our fiber footprint. The Company continues to invest in our existing Ting Towns of Charlottesville, VA, Holly Springs, NC and Westminster, MD as well ramping construction in Sandpoint, ID and Centennial, CO, as we seek to extend both our current network and expand to new towns. We expect our capital expenditures on building and expanding our fiber network to increase significantly during Fiscal 2018.

Based on our operations, we believe that our cash flow from operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and our loan repayments for at least the next 12 months.

We may choose or need to raise additional funds or seek other financing arrangements to facilitate more rapid expansion, develop new or enhance existing products or services, respond to competitive pressures or acquire or invest in complementary businesses, technologies, services or products.

We may also evaluate potential acquisitions of other businesses, products and technologies. We currently have no commitments or agreements regarding the acquisition of other businesses. If additional financing is required, we may need additional equity or debt financing and any additional financing may be dilutive to existing investors. We may not be able to raise funds on acceptable terms, or at all.

Off-Balance Sheet Arrangements

As of June 30, 2018, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Contractual Obligations

In our Annual Report on Form 10-K for the year ended December 31, 2017, we disclosed our contractual obligations.

As of June 30, 2018, there have been no other material changes to those contractual obligations outside the ordinary course of business.

45

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of expenses are incurred in Canadian dollars. Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Our interest income is sensitive to changes in the general level of Canadian and U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Based on the nature of our short-term investments, we have concluded that there is no material interest rate risk exposure as of June 30, 2018. We are also subject to market risk exposure related to changes in interest rates under our 2017 Amended Credit Facility. We do not expect that any changes in interest rates will be material during fiscal 2018; however, fluctuations in interest rates are beyond our control. We will continue to monitor and assess the risks associated with interest expense exposure and may take additional actions in the future to mitigate these risks.

Although our functional currency is the U.S. dollar, a substantial portion of our fixed expenses are incurred in Canadian dollars. Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. Exchange rates are, however, subject to significant and rapid fluctuations, and therefore we cannot predict the prospective impact of exchange rate fluctuations on our business, results of operations and financial condition. Accordingly, we have entered into foreign exchange contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

At June 30, 2018, we had the following outstanding forward exchange contracts to trade U.S. dollars in exchange for Canadian dollars:

Maturity date	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
July - September 2018		6,130		1.2851		(134	)
October - December 2018		6,049		1.2802		(144	)
January - March 2019		1,639		1.2852		(30	)
April - June 2019		1,599		1.2831		(29	)
July - September 2019		1,444		1.2809		(27	)
	$	16,862		1.2828	$	(364	)

As of June 30, 2018, the Company had $16.9 million of outstanding foreign exchange forward contracts which will convert to CDN $21.6 million. Of these contracts, $14.9 million met the requirements for hedge accounting (December 31, 2017 - the Company held nil contracts to trade U.S. dollars in exchange for Canadian dollars.

We have performed a sensitivity analysis model for foreign exchange exposure over the six months ended June 30, 2018. The analysis used a modeling technique that compares the U.S. dollar equivalent of all expenses incurred in Canadian dollars, at the actual exchange rate, to a hypothetical 10% adverse movement in the foreign currency exchange rates against the U.S. dollar, with all other variables held constant. Foreign currency exchange rates used were based on the market rates in effect during the three months ended June 30, 2018. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in net income for the three months ended June 30, 2018 of approximately $0.9 million, before the effects of hedging. Fluctuations of exchange rates are beyond our control. We will continue to monitor and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these risks.

Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign exchange contracts and accounts receivable. Our cash, cash equivalents and short-term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as highly creditworthy, and commercial paper. Similarly, we enter into our foreign exchange contracts with major banks and financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of future losses.

Interest rate risk

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

As of June 30, 2018, we had an outstanding balance of $68.7 million on the 2017 Amended Credit Facility.  The 2017 Amended Credit Facility bears a base interest rate based on borrowing elections by the Company and the Company’s total Funded Debt to EBITDA plus LIBOR.  As of June 30, 2018, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on 2017 Amended Credit Facility by approximately $0.7 million, assuming that the loan balance as of June 30, 2018 is outstanding for the entire period.

46

Item 4. Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this annual report, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2018 our disclosure controls and procedures were effective at the reasonable assurance level.

(b)    Changes in Internal Control over Financial Reporting

The adoption of ASU 2014-09 did not require any material changes in our internal control over financial reporting. There were no other changes made in our internal controls over financial reporting during the six months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

47

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, individually or in the aggregate, in our opinion, will materially harm our business. We cannot assure that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of our attention.

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

Item 1A. Risk Factors

In addition to the risk factor and other information set forth in this Quarterly Report, you should also carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, all of which could materially affect our business, financial condition or operating results and should be considered before making an investment decision regarding our securities. The risks described in this Quarterly Report and in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.

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

On March 1, 2017, The Company announced that its Board of Directors had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.  Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on March 1, 2017 and terminated on February 14, 2018.  During the six months ended June 30, 2018, the Company did not repurchase any shares under this program.

On February 14, 2018, the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and will terminate on or before February 13, 2019.  During the six months ended June 30, 2018, the Company did not repurchase any shares under this program.

Item 3.  Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

48

Item 6. Exhibits

(a) Exhibits.

Exhibit No.	Description
3.1.1	Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on November 29, 2007).
3.1.2	Articles of Amendment to Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on January 3, 2014).
3.2	Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.2 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 29, 2007).
3.3	Amendment No. 1 to Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by Reference to Exhibit 3.3 filed with Tucows’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).
31.1	Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
31.2	Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification *
32.1	Chief Executive Officer's Section 1350 Certification †
32.2	Chief Financial Officer's Section 1350 Certification †
101.INS	XBRL Instance *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation *
101.DEF	XBRL Taxonomy Extension Definition *
101.LAB	XBRL Taxonomy Extension Labels *
101.PRE	XBRL Taxonomy Extension Presentation *

* Filed herewith.

† Furnished herewith.

49

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 8, 2018	TUCOWS INC.
	By:	/s/ ELLIOT NOSS
		Elliot Noss
		President and Chief Executive Officer
	By:	/s/ DAVINDER SINGH
		Davinder Singh Chief Financial Officer
		(Principal Financial and Accounting Officer)

50

EXHIBIT INDEX

Exhibit No.	Description
3.1.1	Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on November 29, 2007).
3.1.2	Articles of Amendment to Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on January 3, 2014).
3.2	Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.2 filed with Tucows' Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 29, 2007).
3.3	Amendment No. 1 to Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.3 filed with Tucows’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filed with the SEC on August 14, 2012).
31.1	Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *
31.2	Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification *
32.1	Chief Executive Officer's Section 1350 Certification †
32.2	Chief Financial Officer's Section 1350 Certification †
101.INS	XBRL Instance *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation *
101.DEF	XBRL Taxonomy Extension Definition *
101.LAB	XBRL Taxonomy Extension Labels *
101.PRE	XBRL Taxonomy Extension Presentation *

* Filed herewith.

† Furnished herewith.

51

EX-31.1

Exhibit 31.1

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

I, Elliot Noss, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date August 8, 2018		/s/ ELLIOT NOSS
		Elliot Noss
		President and Chief Executive Officer

EX-31.2

 Exhibit 31.2

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

I, Davinder Singh, certify that: 

1.	I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date August 8, 2018		/s/ DAVINDER SINGH
		Davinder Singh
		Chief Financial Officer

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elliot Noss, President and Chief Executive Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: August 8, 2018	/s/ ELLIOT NOSS
	Elliot Noss
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Davinder Singh, Chief Financial Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: August 8, 2018	/s/ DAVINDER SINGH
	Davinder Singh
	Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 08, 2018
Document Information [Line Items]
Entity Registrant Name	TUCOWS INC /PA/
Entity Central Index Key	0000909494
Trading Symbol	tcx
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		10,608,971
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 11,161,000	$ 18,049,000	[1]
Accounts receivable, net of allowance for doubtful accounts of $132 as of June 30, 2018 and $168 as of December 31, 2017	12,214,000	12,376,000	[1]
Inventory	3,248,000	2,944,000	[1]
Prepaid expenses and deposits	15,428,000	14,186,000	[1]
Prepaid domain name registry and ancillary services fees, current portion (note 11 (b))	94,754,000	103,302,000	[1]
Income taxes recoverable	3,137,000	3,004,000	[1]
Total current assets	139,942,000	153,861,000	[1]
Prepaid domain name registry and ancillary services fees, long-term portion (note 11 (b))	20,701,000	23,701,000	[1]
Property and equipment	34,538,000	24,620,000	[1]
Contract costs (note 11 (a))	1,354,000		[1]
Intangible assets (note 6)	53,693,000	58,414,000	[1]
Goodwill (note 6)	90,054,000	90,054,000
Total assets	340,282,000	350,650,000	[1]
Current liabilities:
Accounts payable	7,340,000	7,026,000	[1]
Accrued liabilities	6,770,000	6,412,000	[1]
Customer deposits	12,934,000	15,255,000	[1]
Derivative instrument liability (note 5)	337,000		[1]
Deferred rent, current portion	21,000	21,000	[1]
Loan payable, current portion (note 7)	17,721,000	18,290,000	[1]
Deferred revenue, current portion	122,976,000	129,155,000	[1]
Accreditation fees payable, current portion	1,099,000	1,175,000	[1]
Income taxes payable	1,477,000	1,226,000	[1]
Total current liabilities	170,675,000	178,560,000	[1]
Derivative instrument liability, long-term portion (note 5)	27,000		[1]
Deferred revenue, long-term portion	29,075,000	31,427,000	[1]
Accreditation fees payable, long-term portion	269,000	289,000	[1]
Deferred rent, long-term portion	126,000	130,000	[1]
Loan payable, long-term portion (note 7)	51,012,000	58,634,000	[1]
Deferred gain	258,000	429,000	[1]
Deferred tax liability (note 8)	19,577,000	19,834,000	[1]
Redeemable non-controlling interest (note 4 (a))		1,136,000	[1]
Stockholders' equity (note 13)
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding	0	0	[1]
Common stock - no par value, 250,000,000 shares authorized; 10,603,366 shares issued and outstanding as of June 30, 2018 and 10,583,879 shares issued and outstanding as of December 31, 2017	15,548,000	15,368,000	[1]
Additional paid-in capital	2,931,000	2,167,000	[1]
Retained earnings	51,027,000	42,676,000	[1]
Accumulated other comprehensive income	(243,000)		[1]
Total stockholders' equity	69,263,000	60,211,000	[1]
Total liabilities and stockholders' equity	340,282,000	350,650,000	[1]
Commitments and contingencies (note 16)			[1]

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

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	[1]
Accounts receivable, allowance for doubtful accounts	$ 132	$ 168
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,250,000	1,250,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	10,603,366	10,583,879
Common stock, shares outstanding (in shares)	10,603,366	10,583,879

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

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Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Net revenues (note 10)	$ 81,087,000	$ 84,223,000	[1]	$ 176,882,000	$ 153,791,000	[1]
Cost of revenues (note 10)
Cost of revenues	54,501,000	59,445,000	[1]	123,473,000	108,756,000	[1]
Network expenses	2,701,000	2,261,000	[1]	5,275,000	4,604,000	[1]
Depreciation of property and equipment	1,228,000	714,000	[1]	2,359,000	1,305,000	[1]
Amortization of intangible assets	499,000	455,000	[1]	998,000	836,000	[1]
Total cost of revenues	58,929,000	62,875,000	[1]	132,105,000	115,501,000	[1]
Gross profit	22,158,000	21,348,000	[1]	44,777,000	38,290,000	[1]
Expenses:
Sales and marketing	7,852,000	7,447,000	[1]	16,217,000	14,667,000	[1]
Technical operations and development	2,355,000	1,798,000	[1]	4,450,000	3,492,000	[1]
General and administrative	4,256,000	3,285,000	[1]	8,786,000	6,742,000	[1]
Depreciation of property and equipment	102,000	165,000	[1]	203,000	331,000	[1]
Loss on disposal of property and equipment		2,000	[1]		2,000	[1]
Amortization of intangible assets (note 6)	1,827,000	1,608,000	[1]	3,659,000	2,989,000	[1]
Loss (gain) on currency forward contracts (note 5)	52,000	(27,000)	[1]	49,000	(61,000)	[1]
Total expenses	16,444,000	14,278,000	[1]	33,364,000	28,162,000	[1]
Income from operations	5,714,000	7,070,000	[1]	11,413,000	10,128,000	[1]
Other income (expense):
Interest expense, net	(951,000)	(970,000)	[1]	(1,847,000)	(1,838,000)	[1]
Other income, net	73,000	225,000	[1]	197,000	354,000	[1]
Total other income (expense)	(878,000)	(745,000)	[1]	(1,650,000)	(1,484,000)	[1]
Income before provision for income taxes	4,836,000	6,325,000	[1]	9,763,000	8,644,000	[1]
Provision for income tax (note 8)	1,228,000	1,083,000		2,411,000	958,000
Net income before redeemable non-controlling interest	3,608,000	5,242,000	[1]	7,352,000	7,686,000	[1]
Redeemable non-controlling interest		(117,000)	[1]	(26,000)	(243,000)	[1]
Net income attributable to redeemable non-controlling interest		117,000	[1]	26,000	243,000	[1]
Net income for the period	3,608,000	5,242,000	[1],[2]	7,352,000	7,686,000	[1],[2]
Other comprehensive income, net of tax
Unrealized income on hedging activities (note 5)	(273,000)	143,000	[1]	(256,000)	329,000	[1]
Net amount reclassified to earnings (note 5)	13,000	(17,000)	[1]	13,000	(98,000)	[1]
Other comprehensive income net of tax of $84 and and $71 for the three months ended June 30, 2018 and June 30, 2017, $78 and $131 for the six months ended June 30, 2018 and June 30, 2017 (note 5)	(260,000)	126,000	[1]	(243,000)	231,000	[1]
Comprehensive income for the period	$ 3,348,000	$ 5,368,000	[1]	$ 7,109,000	$ 7,917,000	[1]
Basic earnings per common share (note 9) (in dollars per share)	$ 0.34	$ 0.50	[1]	$ 0.69	$ 0.73	[1]
Shares used in computing basic earnings per common share (note 9) (in shares)	10,597,228	10,528,219	[1]	10,592,994	10,501,407	[1]
Diluted earnings per common share (note 9) (in dollars per share)	$ 0.33	$ 0.49	[1]	$ 0.68	$ 0.71	[1]
Shares used in computing diluted earnings per common share (note 9) (in shares)	10,803,007	10,793,031	[1]	10,797,017	10,785,685	[1]

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

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

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Consolidated Statements of Operations and Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Other comprehensive income (loss), tax	$ 84	$ 71	[1]	$ 78	$ 131	[1]

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

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	[2]	Jun. 30, 2018		Jun. 30, 2017	[2]
Operating activities:
Net income for the period	$ 3,608	$ 5,242	[1]	$ 7,352		$ 7,686	[1]
Items not involving cash:
Depreciation of property and equipment	1,330	879		2,562		1,636
Loss on write off of property and equipment		(9)				(9)
Amortization of debt discount and issuance costs	69	80		139		147
Amortization of intangible assets	2,326	2,064		4,657		3,825
Change in capitalized contract costs	25			50
Deferred income taxes (recovery)	(445)	(2,885)		(492)		(1,565)
Excess tax benefits on share-based compensation expense	(197)	(1,182)		(341)		(2,171)
Amortization of deferred rent	(4)	1		(4)		5
Loss on disposal of domain names	28	7		65		18
Other income	(42)	(128)		(171)		(257)
Loss (gain) on change in the fair value of forward contracts	46	(163)		43		(301)
Stock-based compensation	615	313		1,193		631
Change in non-cash operating working capital:
Accounts receivable	471	(905)		162		(864)
Inventory	(350)	(1,267)		(304)		(1,096)
Prepaid expenses and deposits	(717)	1,186		(1,242)		(2,371)
Prepaid domain name registry and ancillary services fees	204	2,976		11,548		(2,513)
Income taxes recoverable	165	2,513		430		(147)
Accounts payable	(1,862)	(592)		270		(4,038)
Accrued liabilities	(401)	(1,818)		358		13
Customer deposits	(46)	3,152		(2,321)		3,068
Deferred revenue	1,067	(1,273)		(8,531)		8,968
Accreditation fees payable	(136)	(78)		(96)		(149)
Net cash provided by operating activities	5,754	8,131		15,327		10,534
Financing activities:
Proceeds received on exercise of stock options	32	85		39		105
Payment of tax obligations resulting from net exercise of stock options	(141)	(609)		(288)		(1,322)
Proceeds received on loan payable	2,500			2,500		86,998
Repayment of loan payable	(6,253)	(4,572)		(10,825)		(10,830)
Payment of loan payable costs		(13)		(4)		(604)
Net cash (used in) provided by financing activities	(3,862)	(5,109)		(8,578)		74,347
Investing activities:
Additions to property and equipment	(7,319)	(2,909)		(12,436)		(6,602)
Acquisition of a portion of the minority interest in Ting Virginia, LLC (note 4(a))				(1,200)		(2,000)
Acquisition of Enom Incorporated, net of cash (note 4(b))						(76,238)
Acquisition of intangible assets				(1)
Net cash (used in) investing activities	(7,319)	(2,909)		(13,637)		(84,840)
Decrease in cash and cash equivalents	(5,427)	113		(6,888)		41
Cash and cash equivalents, beginning of period	16,588	15,033		18,049	[3]	15,105
Cash and cash equivalents, end of period	11,161	15,146		11,161		15,146
Supplemental cash flow information:
Interest paid	961	975		1,862		1,848
Income taxes paid, net	2,240	2,663		3,577		5,006
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for	$ 258	$ 232		$ 258		$ 232

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

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

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

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Note 1 - Organization of the Company

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

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

1.

Organization of the Company: 

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) provides simple useful services that help people unlock the power of the Internet. The Company provides U.S. consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. The Company is also a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.

XML

Note 2 - Basis of Presentation

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Basis of Accounting [Text Block]

2.

Basis of presentation:

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at

June 30, 2018

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

June 30, 2018

and

2017.

The results of operations presented in this Quarterly Report on Form 

10

-Q are

not

necessarily indicative of the results of operations that

may

be expected for future periods.

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended

December 31, 2017

included in Tucows'

2017

Annual Report on Form 

10

-K filed with the SEC on

March 

6,

2018

(the

“2017

Annual Report”). There have been

no

material changes to our significant accounting policies and estimates during the

six

months ended

June 30, 2018

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

2017

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

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

(“ASU

2014

-

09”

).  See Note

3

for more information.

Beginning with this Quarterly Report on Form 

10

-Q, all dollar values of current and comparative figures in the financial statements and accompanying tables have been rounded to the nearest thousand (

$000

), except when otherwise indicated.

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Note 3 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

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

3.

Recent accounting pronouncements:

Recent Accounting Pronouncements Adopted

On

January 1, 2018,

the Company adopted Accounting Standards Updates ("ASU") 

No.

2017

-

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business

and ASU

2015

-

16,

Simplifying the Accounting for Measurement-Period Adjustments.

The adoption of these updates did

not

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

2014

-

09

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

ASU

2014

-

09:

Adoption of Revenue from Contracts with Customers (Topic

606

)

On

January 

1,

2018,

the Company adopted ASU

2014

-

09

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

2014

-

09

as an adjustment to the opening balance of equity as at

January 1, 2018.

The results for reporting periods beginning after

January 

1,

2018

 are presented under ASU

2014

-

09,

while prior period amounts are

not

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

605,

Revenue Recognition (Topic

605

).  The adoption of Topic

606

did

not

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

not

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

606

and Topic

605.

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

10.

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

2014

-

09,

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

Under Topic

606,

the Company has applied the following practical expedients: 

a)	When the amortization period for costs incurred to obtain a contract with a customer is less than one year, the Company has elected to apply a practical expedient to expense the costs as incurred; and
b)	For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied).

On

January 1, 2018

as a result of adopting ASU

2014

-

09,

the Company recorded a contract cost asset of

$1.4

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

$1.1

million and

$0.3

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

	June 30, 2018
Consolidated Balance Sheet (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606
Assets
Contract costs (note 11)	$	1,354	$	(1,354	)	$	(0	)
Total assets	$	340,282	$	(1,354	)	$	338,928
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	19,577	$	(329	)	$	19,248
Retained earnings		51,027		(1,025	)		50,002
Total Liabilities and Shareholders' Equity	$	340,282	$	(1,354	)	$	338,928

	Three months ended, June 30, 2018							Six months ended, June 30, 2018
Consolidated Statements of Operations and Comprehensive Income (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606		As reported		Adjustments			Balances without adoption of Topic 606
Expenses
Sales and marketing	$	7,852	$	(25	)	$	7,827	$	16,217	$	(50	)	$	16,167
Income before provision for income taxes		4,836		25			4,861		9,763		50			9,813
Provision for income tax (note 8)		1,228		6			1,234		2,411		12			2,423
Net income for the period	$	3,608	$	19		$	3,627	$	7,352	$	38		$	7,390

	Three months ended, June 30, 2018									Six months ended, June 30, 2018
Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars)	As reported			Adjustments			Balances without adoption of Topic 606			As reported			Adjustments			Balances without adoption of Topic 606
Net income for the period	$	3,608		$	19		$	3,627		$	7,352		$	38		$	7,390
Items not involving cash
Amortization contract costs		25			(25	)		(0	)		50			(50	)		0
Deferred income taxes (recovery)		(445	)		6			(439	)		(492	)		12			(480	)
Net cash provided by operating activities	$	5,754		$	(0	)	$	5,754		$	15,327		$	-		$	15,327

Recent Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the Financial Accounting Standards Board issued ASU

No.

2016

-

02,

 

Leases (Topic

842

)

(“ASU

2016

-

02”

).  ASU

2016

-

02

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

2016

-

02

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

December 15, 2018,

which begins on

January 1, 2019

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

first

quarter of fiscal

2019.

The Company is currently in the process of evaluating the impact of transition methods. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for administrative office operating leases.

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Note 4 - Acquisitions

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4.

Acquisitions:

(a)  Blue Ridge Websoft

On

February 27, 2015,

Ting Fiber, Inc.,

one

of the Company’s wholly owned subsidiaries, acquired a

70%

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

$3.5

million.

On

February 1, 2017,

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

20%

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

$2.0

million.

On

February 13, 2018,

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

10%

ownership interest in Ting Virginia, LLC for

$1.2

million to the Company.  The put option was exercised on

February 13, 2018

and the Company paid

$1.2

million for the remaining

10%

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

(b)  eNom, Incorporated

On

January 20, 2017,

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

$77.8

million, which represented the agreed upon purchase of

$83.5

million less an amount of

$5.7

million related to the working capital deficiency acquired.

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Note 5 - Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.

Derivative instruments and hedging activities:

Foreign currency forward contracts

In

October 2012,

the Company entered into a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, rent, and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs. The Company does

not

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

one

and

eighteen

months.

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

815,

Derivatives and Hedging

. For certain contracts, as the critical terms of the hedging instrument and the entire hedged forecasted transaction are the same in accordance with ASC Topic

815,

the Company has been able to conclude that changes in fair value and cash flows attributable to the risk of being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income. The fair value of the contracts, as of

June 30, 2018,

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

no

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

As of

June 30, 2018,

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

$16.9

 million, of which

$14.9

 million were designated as hedges. As of

December 31, 2017

the Company held

no

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

As of 

June 30, 2018,

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

Maturity date (Dollar amounts in thousands of U.S. dollars)	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
July - September 2018		6,130		1.2851		(134	)
October - December 2018		6,049		1.2802		(144	)
January - March 2019		1,640		1.2852		(30	)
April - June 2019		1,599		1.2831		(29	)
July - September 2019		1,444		1.2809		(27	)
	$	16,862		1.2828	$	(364	)

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

 

The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do

not

include any income tax effects).

Fair value of derivative instruments in the consolidated balance sheets

		As of June 30 , 2018			As of December 31, 2017
Derivatives (Dollar amounts in thousands of U.S. dollars)	Balance Sheet Location	Fair Value Asset (Liability)			Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	(321	)	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	(43	)	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	(364	)	$	-

Movement in Accumulated Othe

r Comprehensive Income ("AOCI") balance for the

three

months ended

June 30, 2018

(Dollar amounts in thousands of U.S. dollars)

:

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – March 31. 2018	$	23		$	(6	)	$	17
Other comprehensive income (loss) before reclassifications		(361	)		88			(273	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the three months ended June 30, 2018		(344	)		84			(260	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

Movement in Accumulated Othe

r Comprehensive Income ("AOCI") balance for the

six

months ended

June 30, 2018

(Dollar amounts in thousands of U.S. dollars)

:

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	—		$	—		$	—
Other comprehensive income (loss) before reclassifications		(338	)		82			(256	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the six months ended June 30, 2018		(321	)		78			(243	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

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

three

months ended

June 30, 2018

and

June 30, 2017

are as follows (Dollar amounts in thousands of U.S. dollars):

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2018	$	(260	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	24		Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2017	$	126		Cost of revenues	$	4		Cost of revenues		—

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

six

months ended

June 30, 2018

and

June 30, 2017

are as follows

(Dollar amounts in thousands of U.S. dollars)

:

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2018	$	(243	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	129		Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2017	$	231		Cost of revenues	$	25		Cost of revenues		—

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

not

designated as hedges, the Company recorded a loss on settlement of less than

$0.1

million and a loss of less than

$0.1

million for the change in fair value of outstanding contracts for the

three

months ended

June 30, 2018,

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

$0.1

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

not

designated as hedges for the

three

months ended

June 30, 2017,

in the consolidated statement of operations and comprehensive income. 

The Company has recorded a loss of less than

$0.1

million upon settlement and a loss of less than

$0.1

million for the change in fair value of outstanding contracts for the

six

months ended

June 30, 2018,

in the consolidated statement of operations and comprehensive income. The Company recorded a gain of less than

$0.1

million upon settlement and a gain of less than

$0.1

million for the change in fair value of the foreign currency forward contracts

not

designated as hedges for the

six

months ended

June 30, 2017,

in the consolidated statement of operations and comprehensive income.

XML

Note 6 - Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

6.

Goodwill and Other Intangible Assets:

Goodwill

Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions.

The Company's Goodwill balance is

$90.1

million as of

June 30, 2018 (

December 31, 2017 –

$90.1

million). The Company's goodwill relates

98%

(

$87.9

million) to its Domain Services operating segment and

2%

(

$2.2

 million) to its Network Access Services operating segment.

Goodwill is

not

amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present.

Other Intangible Assets:

Intangible assets consist of acquired brand, technology, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets are

not

amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended

June 30, 2018

and

June 30, 2017,

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

June 2006

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

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

four

to

fifteen

years.

A summary of acquired intangible assets for the

three

months ended

June 30, 2018

is as follows

(Dollar amounts in thousands of U.S. dollars)

:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances March 31, 2018	$	11,205		$	1,519		$	10,342		$	30,806		$	1,625		$	550		$	56,047
Additions to/(disposals from) domain portfolio, net		(4	)		(24	)		-			-			-			-			(28	)
Amortization expense		-			-			(450	)		(1,377	)		(487	)		(12	)		(2,326	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

A summary of acquired intangible assets for the

six

months ended

June 30, 2018

is as follows

(Dollar amounts in thousands of U.S. dollars)

:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,210		$	1,551		$	10,793		$	32,186		$	2,113		$	561		$	58,414
Acquisition of customer relationships		-			-			-			1			-			-			1
Additions to/(disposals from) domain portfolio, net		(9	)		(56	)		-			-			-			-			(65	)
Amortization expense		-			-			(901	)		(2,758	)		(975	)		(23	)		(4,657	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

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

no

further additions to acquired intangible assets are made

(Dollar amounts in thousands of U.S. dollars)

:

	Year ending December 31,
Remainder of 2018	$	4,579
2019		7,338
2020		7,171
2021		7,171
2022		7,171
Thereafter		7,567
Total	$	40,997

As of

June 30, 2018,

the accumulated amortization for the definite life intangible assets was

$20.0

 million.

XML

Note 7 - Loan Payable

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

7.

Loan payable:

2017

Amended Credit Facility

On

January 20, 2017,

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

“2017

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

$140

million. This amendment and restatement to the Company’s

2016

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

$40.0

million to

$35.5

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

$84.5

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

$84.5

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

4

(b)). The

“2016

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

“2016

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

August 18, 2016.

 In connection with the

2017

Amended Credit Agreement, the Company incurred

$0.6

million of fees paid to lenders and debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement.

The obligations of the Company under the

2017

Amended Credit Facility are secured by a

first

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

The

2017

Amended Credit Facility has a

four

-year term. Under the

2017

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

$140

million in funds that are available as follows:

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

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

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

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

Borrowings under the

2017

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

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

2017

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

December

31st

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

first

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

first

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

four

years, draws for acquisitions over

five

years and draws for FTTH capital expenditures over

seven

years. The

2017

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

2.25:1

at

December 31

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

50%

of Excess Cash Flow as defined under the agreement.

The

2017

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

2017

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

four

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

2.50:1

until

September 30, 2018

and

2.25:1

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

1.20:1.

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

$50.0

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

not

to exceed

$20

million, or up to

$40

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

not

exceed

1.5

times of trailing

twelve

months EBITDA. As at and for the periods ending

June 30, 2018,

and

June 30, 2017,

the Company was in compliance with these covenants.

On

January 24, 2018,

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

1.01

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

not

 to exceed 

$3.0

 million.

 Borrowings under the

2017

Amended Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to EBITDA ratio and the availment type as follows:

	If Total Funded Debt to EBITDA is:
Availment type or fee	Less than 1.00			Greater than or equal to 1.00 and less than 2.00			Greater than or equal to 2.00 and less than 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

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

)

:

	June 3 0 , 2018			December 31, 2017
Facility B		2,500			-
Facility C		3,554			5,930
Facility D		63,373			71,823
Less: unamortized debt discount and issuance costs		(694	)		(829	)
Total loan payable		68,733			76,924
Less: loan payable, current portion		17,721			18,290
Loan payable, long-term portion		51,012			58,634

The following table summarizes our scheduled principal repayments as of

June 30, 2018 (

Dollar amounts in thousands of U.S. dollars):

Remainder of 2018		8,771
2019		17,900
2020		17,900
2021		17,900
2022		5,225
Thereafter		1,731
	$	69,427

Other Credit Facilities

Prior to the Company entering into the

2016

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

November 19, 2012,

and which provided it with access to

two

revolving demand loan facilities (the

“2012

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

The treasury risk management facility under the Amended Credit Facility provides for a

$3.5

million settlement risk line to assist the Company with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the Amended Credit Facility, the Company

may

enter into such agreements at market rates with terms

not

to exceed

18

 months. As of

June 30, 2018,

the Company held contracts in the amount of

$21.6

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

5

).

In

Q4,

2017,

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

may

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

$5

million.

XML

Note 8 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8.

Income taxes

For the

three

months ended

June 30, 2018,

we recorded an income tax expense of

$1.2

million on income before income taxes of

$4.8

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

December 31, 2018 (

“Fiscal

2018”

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

$0.2

million tax recovery related to ASU

2016

-

09,

which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Comparatively, for the

three

months ended

June 30, 2017,

the Company recorded an income tax expense of

$1.1

million on income before taxes of

$6.3

million, using an estimated effective tax rate for the

2017

fiscal year and adjusted for the

$1.2

million tax recovery impact related to ASU

2016

-

09.

For the

six

months ended

June 30, 2018,

we recorded an income tax expense of

$2.4

million on income before income taxes of

$9.8

 million, using an estimated effective tax rate for Fiscal

2018

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

$0.3

million tax recovery related to ASU

2016

-

09,

which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Comparatively, for the

six

months ended

June 30, 2017,

the Company recorded income tax expense of

$1.0

million on income before taxes of

$8.6

million, using an estimated effective tax rate for the

2017

fiscal year and adjusted for the

$2.2

million tax recovery impact related to ASU

2016

-

09.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

The Company recognizes accrued interest and penalties related to income taxes in income tax expense. The Company did

not

have significant interest and penalties accrued at

June 30, 2018

and

December 31, 2017,

respectively.

XML

Note 9 - Basic and Diluted Earnings Per Common Share

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

9.

Basic and diluted earnings per common share:

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

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

	Three months ended June 30,				Six months ended June 30,
	2018			2017		2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,608	$	5,242	$	7,352	$	7,686
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,597,228		10,528,219		10,592,994		10,501,407
Effect of outstanding stock options		205,779		264,812		204,023		284,278
Diluted weighted average number of shares outstanding		10,803,007		10,793,031		10,797,017		10,785,685
Basic earnings per common share	$	0.34	$	0.50	$	0.69	$	0.73
Diluted earnings per common share	$	0.33	$	0.49	$	0.68	$	0.71

For the

three

months ended

June 30, 2018,

outstanding options to purchase

419,000

common shares were

not

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

three

months ended

June 30, 2017,

where

18,500

outstanding options were

not

included in the computation.

For the

six

months ended

June 30, 2018,

outstanding options to purchase

449,000

common shares were

not

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

six

months ended

June 30, 2017,

where

23,500

outstanding options were

not

included in the computation.

During the

three

and

six

months ended

June 30, 2018,

the Company did

not

repurchase any shares under the stock buyback program commenced on

February 14, 2018,

which will be terminated on or before

February 13, 2019.

During the

three

and

six

months ended

June 30, 2017

and the

six

months ended

June 30, 2018,

the Company did

not

repurchase any shares under the stock buyback program commenced on

March 1, 2017,

which terminated on

February 14, 2018.

During the

six

months ended

June 30, 2017,

the company did

not

repurchase any shares under the stock buyback program commenced on

February 10, 2016,

which terminated on

February 9, 2017.

XML

Note 10 - Revenue

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

10.

Revenue

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.

Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of

third

parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note

12.

(a) Network Access Services 

The Company generates Network Access Services revenues primarily through the provisioning of mobile services. Other sources of revenue include the provisioning of fixed high-speed Internet access as well as billing solutions to Internet Service Providers (“ISPs”).

Ting wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting mobile usage based on the actual amount of monthly services utilized by each customer.

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

not

consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.

Both Ting mobile and fixed Internet access services are primarily contracted through the Ting website, for

one

 month at a time and contain

no

commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting mobile and fixed Internet access customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but

not

billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brand also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is

not

received at the time of sale, revenue is

not

recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations. 

(b) Domain Services

Domain registration contracts, which can be purchased for terms of

one

to

ten

years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

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

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does

not

recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.

Advertising revenue is derived through domain parking monetization, whereby the Company contracts with

third

-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis,

no

estimation of variable consideration is required.

Disaggregation of Revenue

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

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	22,411	$	20,379	$	44,283	$	38,341
Other Services		1,895		1,248		3,631		2,535
Total Network Access Services		24,306		21,627		47,914		40,876
Domain Services:
Wholesale
Domain Services		42,540		48,550		100,968		87,644
Value Added Services		4,601		5,415		9,035		9,322
Total Wholesale		47,141		53,965		110,003		96,966
Retail		8,477		7,663		16,913		14,064
Portfolio		1,163		968		2,052		1,885
Total Domain Services		56,781		62,596		128,968		112,915
	$	81,087	$	84,223	$	176,882	$	153,791

During the 

three

months ended

June 30, 2018,

no

customer accounted for more than

10%

of total revenue. During the

six

months ended

June 30, 2018,

one

customer accounted for

11%

of total revenue, and for the

three

and

six

months ended

June 30, 2017,

no

customer accounted for more than

10%

of revenue. As at

June 30, 2018

and

December 31, 2017,

no

customer accounted for more than

10%

of accounts receivable.

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

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	11,978	$	10,702	$	23,243	$	20,269
Other Services		1,290		946		2,230		1,771
Total Network Access Services		13,268		11,648		25,473		22,040
Domain Services:
Wholesale
Domain Services		35,844		42,449		87,161		76,913
Value Added Services		748		615		1,605		1,191
Total Wholesale		36,592		43,064		88,766		78,104
Retail		4,446		4,548		8,855		8,165
Portfolio		195		185		379		447
Total Domain Services		41,233		47,797		98,000		86,716
Network Expenses:
Network, other costs		2,701		2,261		5,275		4,604
Network, depreciation and amortization costs		1,727		1,169		3,357		2,141
		4,428		3,430		8,632		6,745
	$	58,929	$	62,875	$	132,105	$	115,501

Contract Balances

The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does

not

have material streams of contracted revenue that have

not

been billed.

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions.

The opening balance of deferred revenue was

$160.6

million as of

January 1, 2018.

Significant changes in deferred revenue were as follows (Dollar amounts in thousands of U.S. dollars):

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	150,983		$	160,582
Deferral of revenue		56,352			116,722
Recognition of deferred revenue 1		(55,284	)		(125,253	)
Balance, end of period	$	152,051		$	152,051

1

As a result of the bulk transfer of

2.65

million domain names to Namecheap on

January 5, 2018,

recognized revenue for the

six

months ended

June 30, 2018

includes

$14.6

million related to previously deferred revenue for these names.

Remaining Performance Obligations:

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

June 30, 2018 (

Dollar amounts in thousands of U.S. dollars):

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of

one

year or less (typically

one

month), the Company has elected to apply a practical expedient to

not

disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) (Dollar amounts in thousands of US dollars).

	June 30, 2018
Remainder of 2018	$	85,722
2019		45,546
2020		8,640
2021		4,616
2022		2,987
Thereafter		4,321
Total	$	151,832

XML

Note 11 - Contract Costs

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Capitalized Contract Costs [Text Block]

11.

Contract Costs

(a)     Deferred costs of acquisition

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

one

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

$1.4

million at

June 30, 2018.

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

2

–

10

years. For the

three

months ended

June 30, 2018,

the Company capitalized

$0.2

million and also amortized

$0.3

million of contract costs, respectively, realizing net amortization of less than

$0.1

million. For the

six

months ended

June 30, 2018,

the Company capitalized

$0.4

million and also amortized

$0.5

million of contract costs, respectively, realizing net amortization of less than

$0.1

million. There was

no

impairment loss recognized in relation to the costs capitalized during the

three

or

six

months ending

June 30, 2018.

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

three

and

six

months ending

June 30, 2018

is as follows (Dollar amounts in thousands of U.S. dollars):

	Three months ended June 30, 2018			Six months ended June 30, 2018 (1 )
Balance, beginning of period	$	1,378		$	1,404
Capitalization of costs		244			439
Amortization of costs		(268	)		(489	)
Balance, end of period	$	1,354		$	1,354

(

1

)

The beginning balance consists entirely of a cumulative adjustment recorded on

January 1, 2018

as a result of the modified retrospective adoption of ASU

2014

-

09.

See note

3

for additional information.

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

one

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

(b)     Deferred costs of fulfillment

Deferred costs to fulfill contracts generally consist of domain registration costs which have been paid to a domain registry, and are capitalized as Prepaid domain name registry and ancillary services fees. These costs are deferred and amortized over the life of the domain which generally ranges from

one

to

ten

years. For the

three

months ended

June 30, 2018,

the Company capitalized

$41.2

million and also amortized

$41.4

million of contract costs, respectively, realizing a net change in prepaid domain name registry and ancillary services fees of

$0.2

million. For the

six

months ended

June 30, 2018,

the Company capitalized

$87.2

million and also amortized

$98.7

million of contract costs, respectively, realizing a net change in prepaid domain name registry and ancillary services fees of 

$11.5

million. There was

no

impairment loss recognized in relation to the costs capitalized during the

three

or

six

months ending

June 30, 2018.

Amortization expense is primarily included in cost of revenue.  The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the

three

and

six

months ended

June 30, 2018

is as follows (Dollar amounts in thousands of U.S. dollars).

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	115,660		$	127,003
Deferral of costs		41,177			87,160
Recognition of costs 1		(41,380	)		(98,708	)
Balance, end of period	$	115,456		$	115,456

1

As a result of the bulk transfer of

2.65

million domain names to Namecheap on

January

5th,

2018,

recognized costs for the

six

months ended

June 30, 2018

includes

$14.5

million related to previously deferred revenue for these names.

XML

Note 12 - Segment Reporting

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

12.

Segment reporting:

(a)  We are organized and managed based on

two

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

1.

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

2.

     Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses; and by making its portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the U.S.

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

not

 included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and are 

not

 reviewed at the segment level by the CEO. The Company follows the same accounting policies for the segments as those described in Notes

2,

3

and

10

to these consolidated financial statements.

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

10

), which is regularly reported to the CEO is as follows (Dollar amounts in thousands of U.S. dollars):

	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2018
Net Revenues	$	24,306	$	56,781	$	81,087
Cost of revenues
Cost of revenues		13,268		41,233		54,501
Network expenses		640		2,061		2,701
Depreciation of property and equipment		903		325		1,228
Amortization of intangible assets		11		488		499
Total cost of revenues		14,822		44,107		58,929
Gross Profit		9,484		12,674		22,158
Expenses:
Sales and marketing						7,852
Technical operations and development						2,355
General and administrative						4,256
Depreciation of property and equipment						102
Amortization of intangible assets						1,827
Loss (gain) on currency forward contracts						52
Income from operations						5,714
Other income (expenses), net						(878	)
Income before provision for income taxes					$	4,836

	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2017
Net Revenues	$	21,627	$	62,596	$	84,223
Cost of revenues
Cost of revenues		11,648		47,797		59,445
Network expenses		410		1,851		2,261
Depreciation of property and equipment		489		225		714
Amortization of intangible assets		11		444		455
Total cost of revenues		12,558		50,317		62,875
Gross Profit		9,069		12,279		21,348
Expenses:
Sales and marketing						7,447
Technical operations and development						1,798
General and administrative						3,285
Depreciation of property and equipment						165
Loss on disposal of property and equipment						2
Amortization of intangible assets						1,608
Loss (gain) on currency forward contracts						(27	)
Income from operations						7,070
Other income (expenses), net						(745	)
Income before provision for income taxes					$	6,325

	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2018
Net Revenues	$	47,914	$	128,968	$	176,882
Cost of revenues
Cost of revenues		25,473		98,000		123,473
Network expenses		1,130		4,145		5,275
Depreciation of property and equipment		1,737		622		2,359
Amortization of intangible assets		23		975		998
Total cost of revenues		28,363		103,742		132,105
Gross Profit		19,551		25,226		44,777
Expenses:
Sales and marketing						16,217
Technical operations and development						4,450
General and administrative						8,786
Depreciation of property and equipment						203
Amortization of intangible assets						3,659
Loss (gain) on currency forward contracts						49
Income from operations						11,413
Other income (expenses), net						(1,650	)
Income before provision for income taxes					$	9,763

	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2017
Net Revenues	$	40,876	$	112,915	$	153,791
Cost of revenues
Cost of revenues		22,040		86,716		108,756
Network expenses		951		3,653		4,604
Depreciation of property and equipment		916		389		1,305
Amortization of intangible assets		23		813		836
Total cost of revenues		23,930		91,571		115,501
Gross Profit		16,946		21,344		38,290
Expenses:
Sales and marketing						14,667
Technical operations and development						3,492
General and administrative						6,742
Depreciation of property and equipment						331
Loss on disposal of property and equipment						2
Amortization of intangible assets						2,989
Loss (gain) on currency forward contracts						(61	)
Income from operations						10,128
Other income (expenses), net						(1,484	)
Income before provision for income taxes					$	8,644

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

	June 30, 2018		December 31, 2017
Canada	$	1,518	$	1,176
United States		32,979		23,417
Germany		41		27
	$	34,538	$	24,620

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

	June 30, 2018		December 31, 2017
Canada	$	7,085	$	7,749
United States		33,895		37,783
Germany		17		120
	$	40,997	$	45,652

(d) Valuation and qualifying accounts (Dollar amounts in thousands of U.S. dollars):

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses			Write-offs during period		Balance at end of period
Six months ended June 30, 2018	$	168	$	(36	)	$	-	$	132
Year ended December 31, 2017	$	164	$	4		$	-	$	168

XML

Note 13 - Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

13.

Stockholders’ Equity:

The following unaudited table summarizes stockholders' equity transactions for the

three

-month period ended

June 30, 2018 (

Dollar amounts in thousands of U.S. dollars): 

											Accumulated
						Additional			Retained		other			Total
	Common stock					paid in			earnings		comprehensive			stockholders'
	Number			Amount		capital			(deficit)		income (loss)			equity
Balances, March 31, 2018		10,592,115		$	15,426	$	2,547		$	47,419	$	17		$	65,409
Exercise of stock options		16,153			122		(90	)		-		-			32
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,902	)				(141	)		-		-			(141	)
Stock-based compensation (note 14)		-			-		615			-		-			615
Net income		-			-		-			3,608		-			3,608
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			-		-			-
Other comprehensive loss		-			-		-			-		(260	)		(260	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027	$	(243	)	$	69,263

The following unaudited table summarizes stockholders' equity transactions for the

six

-month period ended

June 30, 2018 (

Dollar amounts in thousands of U.S. dollars): 

												Accumulated
						Additional			Retained			other			Total
	Common stock					paid in			earnings			comprehensive			stockholders'
	Number			Amount		capital			(deficit)			income (loss)			equity
Balances, December 31, 2017		10,583,879		$	15,368	$	2,167		$	42,676		$	-		$	60,211
Impact of Adoption of ASU 2014-09		-			-		-			1,063			-			1,063
Balance on January 1, 2018		10,583,879			15,368		2,167			43,739			-			61,274
Exercise of stock options		28,716			180		(141	)		-			-			39
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(9,229	)		-		(288	)		-			-			(288	)
Stock-based compensation (note 14)		-			-		1,193			-			-			1,193
Net income		-			-		-			7,352			-			7,352
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(64	)		-			(64	)
Other comprehensive loss		-			-		-			-			(243	)		(243	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027		$	(243	)	$	69,263

On

February 14, 

2018,

the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to

$40

million of its common stock in the open market. Purchases will be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on

February 14, 

2018

and will terminate on or before

February 13, 2019.

During the

three

and

six

months ended

June 30, 2018,

the Company did

not

repurchase any shares under this program.

On

March 1, 

2017,

the Company announced that its Board of Directors had approved a stock buyback program to repurchase up to

$40

million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on

March 1, 

2017

and terminated on

February 14, 2018.

During the

six

months ended

June 30, 2018,

the Company did

not

repurchase any shares under this program.

On

February 

9,

 

2016,

the Company announced that its Board of Directors had approved a stock buyback program to repurchase up to

$40

million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on

February 

10,

 

2016

and terminated on

February 9, 2017.

During the

six

months ended

June 30, 2017,

the Company did

not

repurchase any shares under this program.

XML

Note 14 - Share-based Payments

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

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

14.

Share-based payments

Stock options

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company's common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

Details of stock option transactions for the

three

months ended

June 30, 2018

and

June 30, 2017

are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

	Three months ended June 30,					Three months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		634,883		$	37.48		430,611		$	15.46
Granted		128,566			64.10		-			-
Exercised		(16,153	)		12.26		(66,746	)		8.26
Forfeited		(13,100	)		55.04		(257	)		11.43
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

Details of stock option transactions for the

six

months ended

June 30, 2018

and

June 30, 2017

are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

	Six months ended June 30,					Six months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		139,566			63.66		32,875			40.56
Exercised		(28,716	)		10.30		(135,622	)		8.04
Forfeited		(30,225	)		47.96		(8,146	)		18.24
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

As of

June 30, 2018,

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

			Options outstanding								Options exercisable
Exercise price			Number outstanding		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value		Number exercisable		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value
$ 2.92	-	$ 8.92		75,367	$	6.94		1.2	$	4,048		75,367	$	6.94		1.2	$	4,048
$10.16	-	$19.95		109,488		16.38		3.0		4,847		83,288		15.99		2.8		3,720
$21.10	-	$27.53		72,500		23.76		3.6		2,674		52,500		24.78		3.2		1,883
$35.25	-	$37.35		14,375		35.89		4.9		356		10,625		36.11		4.7		261
$43.15	-	$47.00		18,500		44.19		5.6		305		8,000		43.75		5.6		135
$53.20	-	$58.65		315,400		55.51		5.9		1,622		-		-		-		-
$64.10	-	$64.10		128,566		64.10		6.9		-		-		-		-		-
				734,196	$	42.39		4.9	$	13,852		229,780	$	16.92		2.6	$	10,047

Total unrecognized compensation cost relating to unvested stock options at

June 30, 2018,

prior to the consideration of expected forfeitures, is approximately

$8.0

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

2.9

years.

The Company recorded stock-based compensation of

$0.6

million and

$1.2

million for the

three

and

six

months ended

June 30, 2018

and 

$0.3

million and

$0.6

million for the

three

and

six

months ended

June 30, 2017,

respectively.

The Company has

not

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

XML

Note 15 - Fair Value Measurement

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

15.

Fair value measurement:

For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into

three

broad levels. Level

1

inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level

2

inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level

3

inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

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

June 30, 2018 (

Dollar amounts in thousands of U.S. dollars):

	June 3 0 , 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	—	$	—	$	—	$	—
Derivative instrument liability	$	—	$	364	$	—	$	364

There were

no

derivative instrument assets or liabilities outstanding at

December 31, 2017.

XML

Note 16 - Contingencies

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

16.

Contingencies

On

August 30, 2017,

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

October 10, 2017.

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

2.65

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

November 15, 2017,

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

one

BTAPPA requirement which the Court provided in the

January 5, 2018

Order. The BTAPPA transfer was initiated on

January 8, 2018

and completed on

January 16, 2018.

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

not

 believe that this litigation is a material pending legal proceeding.

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

June 30, 2018

cannot be predicted with certainty, management does

not

believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at

June 30, 2018

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

June 30, 2018

and

2017.

The results of operations presented in this Quarterly Report on Form 

10

-Q are

not

necessarily indicative of the results of operations that

may

be expected for future periods.

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended

December 31, 2017

included in Tucows'

2017

Annual Report on Form 

10

-K filed with the SEC on

March 

6,

2018

(the

“2017

Annual Report”). There have been

no

material changes to our significant accounting policies and estimates during the

six

months ended

June 30, 2018

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

2017

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

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

(“ASU

2014

-

09”

).  See Note

3

for more information. Beginning with this Quarterly Report on Form 

10

-Q, all dollar values in the financial statements and accompanying tables have been rounded to the nearest thousand (

$000

), except when otherwise indicated.

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Note 3 - Recent Accounting Pronouncements (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	June 30, 2018
Consolidated Balance Sheet (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606
Assets
Contract costs (note 11)	$	1,354	$	(1,354	)	$	(0	)
Total assets	$	340,282	$	(1,354	)	$	338,928
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	$	19,577	$	(329	)	$	19,248
Retained earnings		51,027		(1,025	)		50,002
Total Liabilities and Shareholders' Equity	$	340,282	$	(1,354	)	$	338,928

	Three months ended, June 30, 2018							Six months ended, June 30, 2018
Consolidated Statements of Operations and Comprehensive Income (Dollar amounts in thousands of U.S. dollars)	As reported		Adjustments			Balances without adoption of Topic 606		As reported		Adjustments			Balances without adoption of Topic 606
Expenses
Sales and marketing	$	7,852	$	(25	)	$	7,827	$	16,217	$	(50	)	$	16,167
Income before provision for income taxes		4,836		25			4,861		9,763		50			9,813
Provision for income tax (note 8)		1,228		6			1,234		2,411		12			2,423
Net income for the period	$	3,608	$	19		$	3,627	$	7,352	$	38		$	7,390

	Three months ended, June 30, 2018									Six months ended, June 30, 2018
Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars)	As reported			Adjustments			Balances without adoption of Topic 606			As reported			Adjustments			Balances without adoption of Topic 606
Net income for the period	$	3,608		$	19		$	3,627		$	7,352		$	38		$	7,390
Items not involving cash
Amortization contract costs		25			(25	)		(0	)		50			(50	)		0
Deferred income taxes (recovery)		(445	)		6			(439	)		(492	)		12			(480	)
Net cash provided by operating activities	$	5,754		$	(0	)	$	5,754		$	15,327		$	-		$	15,327

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Note 5 - Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Derivative Instruments [Table Text Block]

Maturity date (Dollar amounts in thousands of U.S. dollars)	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair value
July - September 2018		6,130		1.2851		(134	)
October - December 2018		6,049		1.2802		(144	)
January - March 2019		1,640		1.2852		(30	)
April - June 2019		1,599		1.2831		(29	)
July - September 2019		1,444		1.2809		(27	)
	$	16,862		1.2828	$	(364	)

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

		As of June 30 , 2018			As of December 31, 2017
Derivatives (Dollar amounts in thousands of U.S. dollars)	Balance Sheet Location	Fair Value Asset (Liability)			Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	(321	)	$	-
Foreign currency forward contracts not designated as cash flow hedges (net)	Derivative instruments	$	(43	)	$	-
Total foreign currency forward contracts (net)	Derivative instruments	$	(364	)	$	-

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

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – March 31. 2018	$	23		$	(6	)	$	17
Other comprehensive income (loss) before reclassifications		(361	)		88			(273	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the three months ended June 30, 2018		(344	)		84			(260	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance – December 31, 2017	$	—		$	—		$	—
Other comprehensive income (loss) before reclassifications		(338	)		82			(256	)
Amount reclassified from accumulated other comprehensive income		17			(4	)		13
Other comprehensive income (loss) for the six months ended June 30, 2018		(321	)		78			(243	)
Ending AOCI balance – June 30, 2018	$	(321	)	$	78		$	(243	)

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

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2018	$	(260	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	24		Operating expenses	$	—
Foreign currency forward contracts for the three months ended June 30, 2017	$	126		Cost of revenues	$	4		Cost of revenues		—

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income, (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(1	)	Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2018	$	(243	)	Cost of revenues	$	(16	)	Cost of revenues		—
				Operating expenses	$	129		Operating expenses	$	—
Foreign currency forward contracts for the six months ended June 30, 2017	$	231		Cost of revenues	$	25		Cost of revenues		—

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Note 6 - Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances March 31, 2018	$	11,205		$	1,519		$	10,342		$	30,806		$	1,625		$	550		$	56,047
Additions to/(disposals from) domain portfolio, net		(4	)		(24	)		-			-			-			-			(28	)
Amortization expense		-			-			(450	)		(1,377	)		(487	)		(12	)		(2,326	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Technology			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			2 years			15 years
Balances December 31, 2017	$	11,210		$	1,551		$	10,793		$	32,186		$	2,113		$	561		$	58,414
Acquisition of customer relationships		-			-			-			1			-			-			1
Additions to/(disposals from) domain portfolio, net		(9	)		(56	)		-			-			-			-			(65	)
Amortization expense		-			-			(901	)		(2,758	)		(975	)		(23	)		(4,657	)
Balances June 30, 2018	$	11,201		$	1,495		$	9,892		$	29,429		$	1,138		$	538		$	53,693

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

	Year ending December 31,
Remainder of 2018	$	4,579
2019		7,338
2020		7,171
2021		7,171
2022		7,171
Thereafter		7,567
Total	$	40,997

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Note 7 - Loan Payable (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	If Total Funded Debt to EBITDA is:
Availment type or fee	Less than 1.00			Greater than or equal to 1.00 and less than 2.00			Greater than or equal to 2.00 and less than 2.25			Greater than or equal to 2.25
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)		2.00	%		2.25	%		2.75	%		3.25	%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)		0.75	%		1.00	%		1.50	%		2.00	%
Standby fees		0.40	%		0.45	%		0.55	%		0.65	%

Schedule of Debt [Table Text Block]

	June 3 0 , 2018			December 31, 2017
Facility B		2,500			-
Facility C		3,554			5,930
Facility D		63,373			71,823
Less: unamortized debt discount and issuance costs		(694	)		(829	)
Total loan payable		68,733			76,924
Less: loan payable, current portion		17,721			18,290
Loan payable, long-term portion		51,012			58,634

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

Remainder of 2018		8,771
2019		17,900
2020		17,900
2021		17,900
2022		5,225
Thereafter		1,731
	$	69,427

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

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	Three months ended June 30,				Six months ended June 30,
	2018			2017		2018		2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$	3,608	$	5,242	$	7,352	$	7,686
Denominator for basic and diluted earnings per common share:
Basic weighted average number of common shares outstanding		10,597,228		10,528,219		10,592,994		10,501,407
Effect of outstanding stock options		205,779		264,812		204,023		284,278
Diluted weighted average number of shares outstanding		10,803,007		10,793,031		10,797,017		10,785,685
Basic earnings per common share	$	0.34	$	0.50	$	0.69	$	0.73
Diluted earnings per common share	$	0.33	$	0.49	$	0.68	$	0.71

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Note 10 - Revenue (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	22,411	$	20,379	$	44,283	$	38,341
Other Services		1,895		1,248		3,631		2,535
Total Network Access Services		24,306		21,627		47,914		40,876
Domain Services:
Wholesale
Domain Services		42,540		48,550		100,968		87,644
Value Added Services		4,601		5,415		9,035		9,322
Total Wholesale		47,141		53,965		110,003		96,966
Retail		8,477		7,663		16,913		14,064
Portfolio		1,163		968		2,052		1,885
Total Domain Services		56,781		62,596		128,968		112,915
	$	81,087	$	84,223	$	176,882	$	153,791

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

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Network Access Services:
Mobile Services	$	11,978	$	10,702	$	23,243	$	20,269
Other Services		1,290		946		2,230		1,771
Total Network Access Services		13,268		11,648		25,473		22,040
Domain Services:
Wholesale
Domain Services		35,844		42,449		87,161		76,913
Value Added Services		748		615		1,605		1,191
Total Wholesale		36,592		43,064		88,766		78,104
Retail		4,446		4,548		8,855		8,165
Portfolio		195		185		379		447
Total Domain Services		41,233		47,797		98,000		86,716
Network Expenses:
Network, other costs		2,701		2,261		5,275		4,604
Network, depreciation and amortization costs		1,727		1,169		3,357		2,141
		4,428		3,430		8,632		6,745
	$	58,929	$	62,875	$	132,105	$	115,501

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

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	150,983		$	160,582
Deferral of revenue		56,352			116,722
Recognition of deferred revenue 1		(55,284	)		(125,253	)
Balance, end of period	$	152,051		$	152,051

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

	June 30, 2018
Remainder of 2018	$	85,722
2019		45,546
2020		8,640
2021		4,616
2022		2,987
Thereafter		4,321
Total	$	151,832

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Note 11 - Contract Costs (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Capitalized Contract Cost [Table Text Block]

	Three months ended June 30, 2018			Six months ended June 30, 2018 (1 )
Balance, beginning of period	$	1,378		$	1,404
Capitalization of costs		244			439
Amortization of costs		(268	)		(489	)
Balance, end of period	$	1,354		$	1,354

	Three months ended June 30, 2018			Six months ended June 30, 2018
Balance, beginning of period	$	115,660		$	127,003
Deferral of costs		41,177			87,160
Recognition of costs 1		(41,380	)		(98,708	)
Balance, end of period	$	115,456		$	115,456

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Note 12 - Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Condensed Income Statement [Table Text Block]

	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2018
Net Revenues	$	24,306	$	56,781	$	81,087
Cost of revenues
Cost of revenues		13,268		41,233		54,501
Network expenses		640		2,061		2,701
Depreciation of property and equipment		903		325		1,228
Amortization of intangible assets		11		488		499
Total cost of revenues		14,822		44,107		58,929
Gross Profit		9,484		12,674		22,158
Expenses:
Sales and marketing						7,852
Technical operations and development						2,355
General and administrative						4,256
Depreciation of property and equipment						102
Amortization of intangible assets						1,827
Loss (gain) on currency forward contracts						52
Income from operations						5,714
Other income (expenses), net						(878	)
Income before provision for income taxes					$	4,836

	Network Access Services		Domain Services		Consolidated Totals
Three months ended June 30, 2017
Net Revenues	$	21,627	$	62,596	$	84,223
Cost of revenues
Cost of revenues		11,648		47,797		59,445
Network expenses		410		1,851		2,261
Depreciation of property and equipment		489		225		714
Amortization of intangible assets		11		444		455
Total cost of revenues		12,558		50,317		62,875
Gross Profit		9,069		12,279		21,348
Expenses:
Sales and marketing						7,447
Technical operations and development						1,798
General and administrative						3,285
Depreciation of property and equipment						165
Loss on disposal of property and equipment						2
Amortization of intangible assets						1,608
Loss (gain) on currency forward contracts						(27	)
Income from operations						7,070
Other income (expenses), net						(745	)
Income before provision for income taxes					$	6,325

	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2018
Net Revenues	$	47,914	$	128,968	$	176,882
Cost of revenues
Cost of revenues		25,473		98,000		123,473
Network expenses		1,130		4,145		5,275
Depreciation of property and equipment		1,737		622		2,359
Amortization of intangible assets		23		975		998
Total cost of revenues		28,363		103,742		132,105
Gross Profit		19,551		25,226		44,777
Expenses:
Sales and marketing						16,217
Technical operations and development						4,450
General and administrative						8,786
Depreciation of property and equipment						203
Amortization of intangible assets						3,659
Loss (gain) on currency forward contracts						49
Income from operations						11,413
Other income (expenses), net						(1,650	)
Income before provision for income taxes					$	9,763

	Network Access Services		Domain Services		Consolidated Totals
Six months ended June 30, 2017
Net Revenues	$	40,876	$	112,915	$	153,791
Cost of revenues
Cost of revenues		22,040		86,716		108,756
Network expenses		951		3,653		4,604
Depreciation of property and equipment		916		389		1,305
Amortization of intangible assets		23		813		836
Total cost of revenues		23,930		91,571		115,501
Gross Profit		16,946		21,344		38,290
Expenses:
Sales and marketing						14,667
Technical operations and development						3,492
General and administrative						6,742
Depreciation of property and equipment						331
Loss on disposal of property and equipment						2
Amortization of intangible assets						2,989
Loss (gain) on currency forward contracts						(61	)
Income from operations						10,128
Other income (expenses), net						(1,484	)
Income before provision for income taxes					$	8,644

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

	June 30, 2018		December 31, 2017
Canada	$	1,518	$	1,176
United States		32,979		23,417
Germany		41		27
	$	34,538	$	24,620

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

	June 30, 2018		December 31, 2017
Canada	$	7,085	$	7,749
United States		33,895		37,783
Germany		17		120
	$	40,997	$	45,652

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

Allowance for doubtful accounts excluding provision for credit notes	Balance at beginning of period		Charged to costs and expenses			Write-offs during period		Balance at end of period
Six months ended June 30, 2018	$	168	$	(36	)	$	-	$	132
Year ended December 31, 2017	$	164	$	4		$	-	$	168

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Note 13 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

											Accumulated
						Additional			Retained		other			Total
	Common stock					paid in			earnings		comprehensive			stockholders'
	Number			Amount		capital			(deficit)		income (loss)			equity
Balances, March 31, 2018		10,592,115		$	15,426	$	2,547		$	47,419	$	17		$	65,409
Exercise of stock options		16,153			122		(90	)		-		-			32
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(4,902	)				(141	)		-		-			(141	)
Stock-based compensation (note 14)		-			-		615			-		-			615
Net income		-			-		-			3,608		-			3,608
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			-		-			-
Other comprehensive loss		-			-		-			-		(260	)		(260	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027	$	(243	)	$	69,263

												Accumulated
						Additional			Retained			other			Total
	Common stock					paid in			earnings			comprehensive			stockholders'
	Number			Amount		capital			(deficit)			income (loss)			equity
Balances, December 31, 2017		10,583,879		$	15,368	$	2,167		$	42,676		$	-		$	60,211
Impact of Adoption of ASU 2014-09		-			-		-			1,063			-			1,063
Balance on January 1, 2018		10,583,879			15,368		2,167			43,739			-			61,274
Exercise of stock options		28,716			180		(141	)		-			-			39
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration		(9,229	)		-		(288	)		-			-			(288	)
Stock-based compensation (note 14)		-			-		1,193			-			-			1,193
Net income		-			-		-			7,352			-			7,352
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.		-			-		-			(64	)		-			(64	)
Other comprehensive loss		-			-		-			-			(243	)		(243	)
Balances, June 30, 2018		10,603,366		$	15,548	$	2,931		$	51,027		$	(243	)	$	69,263

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Note 14 - Share-based Payments (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	Three months ended June 30,					Three months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		634,883		$	37.48		430,611		$	15.46
Granted		128,566			64.10		-			-
Exercised		(16,153	)		12.26		(66,746	)		8.26
Forfeited		(13,100	)		55.04		(257	)		11.43
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

	Six months ended June 30,					Six months ended June 30,
	2018					2017
	Number of shares			Weighted average exercise price per share		Number of shares			Weighted average exercise price per share
Outstanding, beginning of period		653,571		$	36.69		474,501		$	12.67
Granted		139,566			63.66		32,875			40.56
Exercised		(28,716	)		10.30		(135,622	)		8.04
Forfeited		(30,225	)		47.96		(8,146	)		18.24
Expired		-			-		-			-
Outstanding, end of period		734,196			42.39		363,608			16.79
Options exercisable, end of period		229,780		$	16.92		213,769		$	11.46

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

			Options outstanding								Options exercisable
Exercise price			Number outstanding		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value		Number exercisable		Weighted average exercise price per share		Weighted average remaining contractual life (years)		Aggregate intrinsic value
$ 2.92	-	$ 8.92		75,367	$	6.94		1.2	$	4,048		75,367	$	6.94		1.2	$	4,048
$10.16	-	$19.95		109,488		16.38		3.0		4,847		83,288		15.99		2.8		3,720
$21.10	-	$27.53		72,500		23.76		3.6		2,674		52,500		24.78		3.2		1,883
$35.25	-	$37.35		14,375		35.89		4.9		356		10,625		36.11		4.7		261
$43.15	-	$47.00		18,500		44.19		5.6		305		8,000		43.75		5.6		135
$53.20	-	$58.65		315,400		55.51		5.9		1,622		-		-		-		-
$64.10	-	$64.10		128,566		64.10		6.9		-		-		-		-		-
				734,196	$	42.39		4.9	$	13,852		229,780	$	16.92		2.6	$	10,047

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Note 15 - Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	June 3 0 , 2018
	Fair Value Measurement Using						Assets (Liabilities)
	Level 1		Level 2		Level 3		at Fair value
Derivative instrument asset	$	—	$	—	$	—	$	—
Derivative instrument liability	$	—	$	364	$	—	$	364

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Note 3 - Recent Accounting Pronouncements (Details Textual) - USD ($)	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017	[1]
Capitalized Contract Cost, Net, Total	$ 1,354,000	$ 1,400,000
Retained Earnings (Accumulated Deficit), Ending Balance	51,027,000		$ 42,676,000
Deferred Tax Liabilities, Net, Noncurrent	19,577,000		$ 19,834,000
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Capitalized Contract Cost, Net, Total	(1,354,000)
Retained Earnings (Accumulated Deficit), Ending Balance	(1,025,000)	(1,100,000)
Deferred Tax Liabilities, Net, Noncurrent	$ (329,000)	$ (300,000)

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

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Note 3 - Recent Accounting Pronouncements - Impact of Changes to Financial Statements (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017		Jan. 01, 2018	Dec. 31, 2017	[1]
Assets
Contract costs (note 11)	$ 1,354,000			$ 1,354,000			$ 1,400,000
Total assets	340,282,000			340,282,000				$ 350,650,000
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	19,577,000			19,577,000				19,834,000
Retained earnings	51,027,000			51,027,000				42,676,000
Total Liabilities and Shareholders' Equity	340,282,000			340,282,000				$ 350,650,000
Sales and marketing	7,852,000	$ 7,447,000	[2]	16,217,000	$ 14,667,000	[2]
Income before provision for income taxes	4,836,000	6,325,000	[2]	9,763,000	8,644,000	[2]
Provision for income tax (note 8)	1,228,000	1,083,000		2,411,000	958,000
Net income for the period	3,608,000	5,242,000	[2],[3]	7,352,000	7,686,000	[2],[3]
Change in Capitalized Contract Costs	25,000		[3]	50,000		[3]
Deferred income taxes (recovery)	(445,000)	(2,885,000)	[3]	(492,000)	(1,565,000)	[3]
Net cash provided by operating activities	5,754,000	$ 8,131,000	[3]	15,327,000	$ 10,534,000	[3]
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Assets
Contract costs (note 11)	(1,354,000)			(1,354,000)
Total assets	(1,354,000)			(1,354,000)
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	(329,000)			(329,000)			(300,000)
Retained earnings	(1,025,000)			(1,025,000)			$ (1,100,000)
Total Liabilities and Shareholders' Equity	(1,354,000)			(1,354,000)
Sales and marketing	(25,000)			(50,000)
Income before provision for income taxes	25,000			50,000
Provision for income tax (note 8)	6,000			12,000
Net income for the period	19,000			38,000
Change in Capitalized Contract Costs	(25,000)			(50,000)
Deferred income taxes (recovery)	6,000			12,000
Net cash provided by operating activities	0
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Assets
Contract costs (note 11)	0			0
Total assets	338,928,000			338,928,000
Liabilities and Shareholders' Equity
Deferred tax liability (note 8)	19,248,000			19,248,000
Retained earnings	50,002,000			50,002,000
Total Liabilities and Shareholders' Equity	338,928,000			338,928,000
Sales and marketing	7,827,000			16,167,000
Income before provision for income taxes	4,861,000			9,813,000
Provision for income tax (note 8)	1,234,000			2,423,000
Net income for the period	3,627,000			7,390,000
Change in Capitalized Contract Costs	0			0
Deferred income taxes (recovery)	(439,000)			(480,000)
Net cash provided by operating activities	$ 5,754,000			$ 15,327,000

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

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

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

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

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Note 5 - Derivative Instruments and Hedging Activities (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Derivative, Notional Amount	$ 16,862,000		$ 16,862,000
Foreign Exchange Forward [Member]
Derivative, Notional Amount	16,900,000		16,900,000
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member]
Derivative, Notional Amount	14,900,000		14,900,000
Forward Contracts [Member]
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments	(0.10)		(0.10)	$ 0.10
Forward Contracts [Member] | Not Designated as Hedging Instrument [Member]
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments	$ (0.10)	$ 0.10	$ (0.10)	$ 0.10

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Note 5 - Derivative Instruments and Hedging Activities - Foreign Currency Forward Contracts (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Notional amount of U.S. dollars	$ 16,862
Weighted average exchange rate of U.S. dollars	1.2828
Fair value	$ (364)
Foreign Exchange Forward 1 [Member]
Notional amount of U.S. dollars	$ 6,130
Weighted average exchange rate of U.S. dollars	1.2851
Fair value	$ (134)
Foreign Exchange Forward 2 [Member]
Notional amount of U.S. dollars	$ 6,049
Weighted average exchange rate of U.S. dollars	1.2802
Fair value	$ (144)
Foreign Exchange Forward 3 [Member]
Notional amount of U.S. dollars	$ 1,640
Weighted average exchange rate of U.S. dollars	1.2852
Fair value	$ (30)
Foreign Exchange Forward 4 [Member]
Notional amount of U.S. dollars	$ 1,599
Weighted average exchange rate of U.S. dollars	1.2831
Fair value	$ (29)
Foreign Exchange Forward 5 [Member]
Notional amount of U.S. dollars	$ 1,444
Weighted average exchange rate of U.S. dollars	1.2809
Fair value	$ (27)

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Note 5 - Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments in the Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Foreign currency forward contracts	$ (364)
Derivative Instruments [Member]
Foreign currency forward contracts	(364)
Derivative Instruments [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Foreign currency forward contracts	(321)
Derivative Instruments [Member] | Not Designated as Hedging Instrument [Member]
Foreign currency forward contracts	$ (43)

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Note 5 - Derivative Instruments and Hedging Activities - Movement in AOCI Balance (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	[2]	Jun. 30, 2018		Jun. 30, 2017	[2]
AOCI balance, Gains and losses on cash flow hedges	$ 23
Other comprehensive income (loss) before reclassifications, Gains and losses on cash flow hedges	(361)			(338)
Amount reclassified from accumulated other comprehensive income, Gains and losses on cash flow hedges	17			17
Other comprehensive income (loss), Gains and losses on cash flow hedges	(344)			(321)
AOCI balance, Gains and losses on cash flow hedges	(321)			(321)
AOCI balance, Tax impact	(6)
Other comprehensive income (loss) before reclassifications, Tax impact	88			82
Amount reclassified from accumulated other comprehensive income, Tax impact	(4)			(4)
Other comprehensive income (loss), Tax impact	84			78
AOCI balance, Tax impact	78			78
AOCI balance	17				[1]
Other comprehensive income (loss) before reclassifications	(273)	$ 143		(256)		$ 329
Amount reclassified from accumulated other comprehensive income	13	$ (17)		13		$ (98)
Other comprehensive income (loss)	(260)			(243)
AOCI balance	$ (243)			$ (243)

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

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

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Note 5 - Derivative Instruments and Hedging Activities - Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI) (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Other comprehensive income (loss) before reclassifications	$ (273)	$ 143	[1]	$ (256)	$ 329	[1]
Operating Expense [Member]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(1)	24		(1)	129
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cost of Sales [Member]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	(16)	4		(16)	25
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Other comprehensive income (loss) before reclassifications	$ (260)	$ 126		$ (243)	$ 231

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

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Note 6 - Goodwill and Other Intangible Assets (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Goodwill, Ending Balance	$ 90,054	$ 90,054
Finite-Lived Intangible Assets, Accumulated Amortization	$ 20,000
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	4 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	15 years
Domain Services Operating Segment [Member]
Goodwill, Ending Balance	$ 87,900
Goodwill Percentage Related to Operating Segments	98.00%
Network Access Services [Member]
Goodwill, Ending Balance	$ 2,200
Goodwill Percentage Related to Operating Segments	2.00%

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Note 6 - Goodwill and Other Intangible Assets - Acquired Intangible Assets by Major Class (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	[2]	Jun. 30, 2018		Jun. 30, 2017	[2]
Balances	$ 56,047			$ 58,414	[1]
Additions to/(disposals from) domain portfolio, net	(28)	$ (7)		(65)		$ (18)
Amortization expense	(2,326)	$ (2,064)		(4,657)		$ (3,825)
Finite-lived intangible assets acquired				1
Balances	53,693			53,693
Brand [Member]
Balances	10,342			10,793
Additions to/(disposals from) domain portfolio, net
Amortization expense	(450)			(901)
Finite-lived intangible assets acquired
Balances	9,892			9,892
Customer Relationships [Member]
Balances	30,806			32,186
Additions to/(disposals from) domain portfolio, net
Amortization expense	(1,377)			(2,758)
Finite-lived intangible assets acquired				1
Balances	29,429			29,429
Technology-Based Intangible Assets [Member]
Balances	1,625			2,113
Additions to/(disposals from) domain portfolio, net
Amortization expense	(487)			(975)
Finite-lived intangible assets acquired
Balances	1,138			1,138
Network Rights [Member]
Balances	550			561
Additions to/(disposals from) domain portfolio, net
Amortization expense	(12)			(23)
Finite-lived intangible assets acquired
Balances	538			538
Surname Domain Names [Member]
Balances	11,205			11,210
Additions to/(disposals from) domain portfolio, net	(4)			(9)
Amortization expense
Finite-lived intangible assets acquired
Balances	11,201			11,201
Direct Navigation Domain Names [Member]
Balances	1,519			1,551
Additions to/(disposals from) domain portfolio, net	(24)			(56)
Amortization expense
Finite-lived intangible assets acquired
Balances	$ 1,495			$ 1,495

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

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

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Note 6 - Goodwill and Other Intangible Assets - Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Remainder of 2018	$ 4,579
2019	7,338
2020	7,171
2021	7,171
2022	7,171
Thereafter	7,567
Total	$ 40,997	$ 45,652

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Note 7 - Loan Payable (Details Textual) $ in Thousands		3 Months Ended			6 Months Ended
	Jan. 20, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	[1]	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	[1]	Oct. 01, 2018	Sep. 30, 2018	Jan. 24, 2018	Dec. 31, 2017 USD ($)	Jan. 19, 2017 USD ($)
Payments of Financing Costs, Total	$ 600		$ 13		$ 4	$ 604
Foreign Exchange Risk [Member]
Line of Credit Facility, Maximum Borrowing Capacity		3,500			$ 3,500
Line of Credit Facility Covenant Period					1 year 180 days
Derivative Asset, Fair Value, Gross Asset, Total		21,600			$ 21,600
Second Interim Amendment [Member]
Credit Agreement, Maximum Aggregate Amount Held in Account With Certain Bank		$ 3,000			$ 3,000
Bank of Montreal and Royal Bank of Canada [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 140,000
Debt Instrument, Term	4 years
Maximum Total Funded Debt to EBITDA Ratio	2.25							2.25	2.5
Repayment Obligation, Percentage of Excess Cash Flow	50.00%
Minimum Fixed Charge Coverage Ratio		1.2			1.2
Maximum Annual Capital Expenditures Requirement					$ 50,000
Line of Credit Facility, Maximum Funded Share Repurchases Ceiling					20,000
Maximum Ratio of Funded Share Repurchases to 12 Months Trailing EDITDA										1.5
Bank of Montreal and Royal Bank of Canada [Member] | Total Loans Do Not Exceed 1.5 Times of Trailing 12 Months EBITDA [Member]
Line of Credit Facility, Maximum Funded Share Repurchases Ceiling					$ 40,000
Bank of Montreal and Royal Bank of Canada [Member] | Non-revolving Facility C [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 35,500											$ 40,000
Bank of Montreal and Royal Bank of Canada [Member] | Non-revolving Facility D [Member]
Line of Credit Facility, Maximum Borrowing Capacity	84,500
Long-term Line of Credit, Total	84,500
Bank of Montreal and Royal Bank of Canada [Member] | Revolving Credit Facility A [Member]
Line of Credit Facility, Maximum Borrowing Capacity	5,000
Bank of Montreal and Royal Bank of Canada [Member] | Revolving Reducing Term Facility B [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 15,000
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for Share Repurchases [Member]
Debt Instrument, Term	4 years
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for Acquisitions [Member]
Debt Instrument, Term	5 years
Bank of Montreal and Royal Bank of Canada [Member] | Credit Facility B and C [Member] | Draws for FFTH Capital Expenditures [Member]
Debt Instrument, Term	7 years
Bank of Nova [member] | Corporate Credit Card Program [Member]
Line of Credit Facility, Maximum Borrowing Capacity											$ 5,000

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

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Note 7 - Loan Payable - Schedule of Standby Fees Based on Total Funded Debt to EBITDA Ratio (Details)	6 Months Ended
	Jun. 30, 2018
Debt to EBITDA is Less Than 1 [Member]
Standby fees	0.40%
Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Standby fees	0.45%
Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Standby fees	0.55%
Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Standby fees	0.65%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Less Than 1 [Member]
Basis Spread on Variable Rate	2.00%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Basis Spread on Variable Rate	2.25%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Basis Spread on Variable Rate	2.75%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Basis Spread on Variable Rate	3.25%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Less Than 1 [Member]
Basis Spread on Variable Rate	0.75%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]
Basis Spread on Variable Rate	1.00%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.25 [Member]
Basis Spread on Variable Rate	1.50%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2.25 [Member]
Basis Spread on Variable Rate	2.00%

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Note 7 - Loan Payable - Schedule of Loans Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loans payable	$ 68,733	$ 76,924
Less: unamortized debt discount and issuance costs	(694)	(829)
Less: loan payable, current portion	17,721	18,290
Loan payable, long-term portion	51,012	58,634	[1]
Revolving Reducing Term Facility B [Member]
Loans payable	2,500
Non-revolving Facility C [Member]
Loans payable	3,554	5,930
Non-revolving Facility D [Member]
Loans payable	$ 63,373	$ 71,823

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

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Note 7 - Loan Payable - Principal Repayments (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Remainder of 2018	$ 8,771
2019	17,900
2020	17,900
2021	17,900
2022	5,225
Thereafter	1,731
	$ 69,427

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Note 8 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Income Tax Expense (Benefit), Total	$ 1,228,000	$ 1,083,000	$ 2,411,000	$ 958,000
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest, Total	4,800,000	6,300,000	9,800,000	8,600,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	0		0		$ 0
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit), Total	$ 200,000	$ 1,200,000	$ 300,000	$ 2,200,000

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Note 9 - Basic and Diluted Earnings Per Common Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Stock Repurchased and Retired During Period, Shares	0	0	0	0
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	419,000	18,500	449,000	23,500

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Note 9 - Basic and Diluted Earnings Per Common Share - Summary of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Numerator for basic and diluted earnings per common share:
Net income for the period	$ 3,608	$ 5,242	[1],[2]	$ 7,352	$ 7,686	[1],[2]
Basic weighted average number of common shares outstanding (in shares)	10,597,228	10,528,219	[1]	10,592,994	10,501,407	[1]
Effect of outstanding stock options (in shares)	205,779	264,812		204,023	284,278
Diluted weighted average number of shares outstanding (in shares)	10,803,007	10,793,031	[1]	10,797,017	10,785,685	[1]
Basic earnings per common share (in dollars per share)	$ 0.34	$ 0.50	[1]	$ 0.69	$ 0.73	[1]
Diluted earnings per common share (in dollars per share)	$ 0.33	$ 0.49	[1]	$ 0.68	$ 0.71	[1]

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

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

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Note 10 - Revenue (Details Textual) $ in Thousands		3 Months Ended		6 Months Ended		12 Months Ended
		Jun. 30, 2018 USD ($)	Jun. 30, 2017	Jun. 30, 2018 USD ($)	Jun. 30, 2017	Dec. 31, 2017 USD ($)	Mar. 31, 2018 USD ($)	Jan. 05, 2018	Jan. 01, 2018 USD ($)
Contract with Customer, Liability, Total		$ 152,051		$ 152,051		$ 160,582	$ 150,983		$ 160,600
Contract with Customer, Liability, Revenue Recognized	[1]	$ 55,284		125,253
Namecheap, Inc. [Member]
Domain Name Transfer to Counter Party								2,650,000
Contract with Customer, Liability, Revenue Recognized				$ 14,600
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Number of Customers		0	0	1	0
Concentration Risk, Percentage				11.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Customers				0		0

[1] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5, 2018, recognized revenue for the six months ended June 30, 2018 includes $14.6 million related to previously deferred revenue for these names.

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Note 10 - Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Net Revenues	$ 81,087	$ 84,223	[1]	$ 176,882	$ 153,791	[1]
Network Access Services [Member]
Net Revenues	24,306	21,627		47,914	40,876
Domain Name Services [Member]
Net Revenues	56,781	62,596		128,968	112,915
Domain Name Services [Member] | Wholesale [Member]
Net Revenues	47,141	53,965		110,003	96,966
Domain Name Services [Member] | Retail Services [Member]
Net Revenues	8,477	7,663		16,913	14,064
Domain Name Services [Member] | Portfolio [Member]
Net Revenues	1,163	968		2,052	1,885
Mobile Services [Member] | Network Access Services [Member]
Net Revenues	22,411	20,379		44,283	38,341
Other Services [Member] | Network Access Services [Member]
Net Revenues	1,895	1,248		3,631	2,535
Domain Services [Member] | Domain Name Services [Member] | Wholesale [Member]
Net Revenues	42,540	48,550		100,968	87,644
Value Added Services [Member] | Domain Name Services [Member] | Wholesale [Member]
Net Revenues	$ 4,601	$ 5,415		$ 9,035	$ 9,322

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

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Note 10 - Revenue - Cost of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Cost of revenues	$ 54,501	$ 59,445	[1]	$ 123,473	$ 108,756	[1]
Network, other costs	2,701	2,261	[1]	5,275	4,604	[1]
Cost of revenues	58,929	62,875	[1]	132,105	115,501	[1]
Network Expenses [Member]
Network, other costs	2,701	2,261		5,275	4,604
Network, depreciation and amortization costs	1,727	1,169		3,357	2,141
Cost of revenues	4,428	3,430		8,632	6,745
Network Access Services [Member]
Cost of revenues	13,268	11,648		25,473	22,040
Network, other costs	640	410		1,130	951
Cost of revenues	14,822	12,558		28,363	23,930
Network Access Services [Member] | Mobile Services [Member]
Cost of revenues	11,978	10,702		23,243	20,269
Network Access Services [Member] | Other Services [Member]
Cost of revenues	1,290	946		2,230	1,771
Domain Name Services [Member]
Cost of revenues	41,233	47,797		98,000	86,716
Network, other costs	2,061	1,851		4,145	3,653
Cost of revenues	44,107	50,317		103,742	91,571
Domain Name Services [Member] | Wholesale [Member]
Cost of revenues	36,592	43,064		88,766	78,104
Domain Name Services [Member] | Retail Services [Member]
Cost of revenues	4,446	4,548		8,855	8,165
Domain Name Services [Member] | Portfolio [Member]
Cost of revenues	195	185		379	447
Domain Name Services [Member] | Domain Services [Member] | Wholesale [Member]
Cost of revenues	35,844	42,449		87,161	76,913
Domain Name Services [Member] | Value Added Services [Member] | Wholesale [Member]
Cost of revenues	$ 748	$ 615		$ 1,605	$ 1,191

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

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Note 10 - Revenue - Contract Balances (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended
		Jun. 30, 2018	Jun. 30, 2018
Balance, beginning of period		$ 150,983	$ 160,582
Deferral of revenue		56,352	116,722
Recognition of deferred revenue	[1]	(55,284)	(125,253)
Balance, end of period		$ 152,051	$ 152,051

[1] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5, 2018, recognized revenue for the six months ended June 30, 2018 includes $14.6 million related to previously deferred revenue for these names.

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Note 10 - Revenue - Remaining Performance Obligations (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Remaining performance obligations	$ 85,722
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Remaining performance obligations	45,546
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Remaining performance obligations	8,640
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Remaining performance obligations	4,616
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Remaining performance obligations	2,987
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Remaining performance obligations	4,321
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil)
Remaining performance obligations	$ 151,832

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Note 11 - Contract Costs (Details Textual) xbrli-pure in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2018 USD ($)		Jun. 30, 2017 USD ($)	[1]	Jun. 30, 2018 USD ($)		Jun. 30, 2017 USD ($)	[1]	Mar. 31, 2018 USD ($)	Jan. 05, 2018	Jan. 01, 2018 USD ($)	Dec. 31, 2017 USD ($)
Capitalized Contract Cost, Net, Total		$ 1,354,000				$ 1,354,000						$ 1,400,000
Change in Capitalized Contract Costs		25,000				50,000
Capitalized Contract Cost, Impairment Loss		0
Contract with Customer, Liability, Revenue Recognized	[2]	55,284,000				125,253,000
Deferred Costs of Acquisition [Member]
Capitalized Contract Cost, Net, Total		1,354,000	[3],[4]			1,354,000	[3],[4]			$ 1,378,000			$ 1,404,000	[3],[4]
Increase (Decrease) in Capitalized Costs		244,000				439,000
Capitalized Contract Cost, Amortization		$ 268,000				489,000
Capitalized Contract Cost, Impairment Loss						$ 0
Deferred Costs of Acquisition [Member] | Minimum [Member]
Capitalized Contract Cost, Amortization Period		2 years				2 years
Deferred Costs of Acquisition [Member] | Maximum [Member]
Capitalized Contract Cost, Amortization Period		10 years				10 years
Change in Capitalized Contract Costs		$ 100,000				$ 100,000
Domain Registration Costs [Member]
Capitalized Contract Cost, Net, Total		115,456,000				115,456,000				$ 115,660,000			$ 127,003,000
Increase (Decrease) in Capitalized Costs		41,177,000				87,160,000
Capitalized Contract Cost, Amortization		41,380,000				98,708,000
Change in Capitalized Contract Costs		200,000				11,500,000
Capitalized Contract Cost, Impairment Loss		$ 0				0
Domain Name Transfer to Counter Party											2,650
Domain Registration Costs [Member] | Domain Services [Member]
Contract with Customer, Liability, Revenue Recognized						$ 14,500,000
Domain Registration Costs [Member] | Minimum [Member]
Capitalized Contract Cost, Amortization Period		1 year				1 year
Domain Registration Costs [Member] | Maximum [Member]
Capitalized Contract Cost, Amortization Period		10 years				10 years

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

[2] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5, 2018, recognized revenue for the six months ended June 30, 2018 includes $14.6 million related to previously deferred revenue for these names.

[3] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, recognized costs for the six months ended June 30, 2018 includes $14.5 million related to previously deferred revenue for these names.

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

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Note 11 - Contract Costs - Capitalized Contract Costs Activity (Details) - USD ($)		3 Months Ended	6 Months Ended
		Jun. 30, 2018	Jun. 30, 2018
Balance		$ 1,354,000	$ 1,354,000
Deferred Costs of Acquisition [Member]
Balance		1,378,000	1,404,000	[1],[2]
Capitalization of costs		244,000	439,000
Amortization of costs		(268,000)	(489,000)
Balance	[1],[2]	1,354,000	1,354,000
Domain Registration Costs [Member]
Balance		115,660,000	127,003,000
Capitalization of costs		41,177,000	87,160,000
Amortization of costs		(41,380,000)	(98,708,000)
Balance		$ 115,456,000	$ 115,456,000

[1] As a result of the bulk transfer of 2.65 million domain names to Namecheap on January 5th, 2018, recognized costs for the six months ended June 30, 2018 includes $14.5 million related to previously deferred revenue for these names.

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

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Note 12 - Segment Reporting (Details Textual)	6 Months Ended
	Jun. 30, 2018
Number of Operating Segments	2

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Note 12 - Segment Reporting - Information by Reportable Segments (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018	Jun. 30, 2017
Net Revenues	$ 81,087,000	$ 84,223,000	[1]	$ 176,882,000	$ 153,791,000	[1]
Cost of revenues	54,501,000	59,445,000	[1]	123,473,000	108,756,000	[1]
Network expenses	2,701,000	2,261,000	[1]	5,275,000	4,604,000	[1]
Depreciation of property and equipment	1,228,000	714,000	[1]	2,359,000	1,305,000	[1]
Amortization of intangible assets	499,000	455,000	[1]	998,000	836,000	[1]
Total cost of revenues	58,929,000	62,875,000	[1]	132,105,000	115,501,000	[1]
Gross Profit	22,158,000	21,348,000	[1]	44,777,000	38,290,000	[1]
Sales and marketing	7,852,000	7,447,000	[1]	16,217,000	14,667,000	[1]
Technical operations and development	2,355,000	1,798,000	[1]	4,450,000	3,492,000	[1]
General and administrative	4,256,000	3,285,000	[1]	8,786,000	6,742,000	[1]
Depreciation of property and equipment	102,000	165,000	[1]	203,000	331,000	[1]
Amortization of intangible assets	1,827,000	1,608,000	[1]	3,659,000	2,989,000	[1]
Loss (gain) on currency forward contracts	52,000	(27,000)	[1]	49,000	(61,000)	[1]
Income from operations	5,714,000	7,070,000	[1]	11,413,000	10,128,000	[1]
Other income (expenses), net	(878,000)	(745,000)	[1]	(1,650,000)	(1,484,000)	[1]
Income before provision for income taxes	4,836,000	6,325,000	[1]	9,763,000	8,644,000	[1]
Loss on disposal of property and equipment		2,000	[1]		2,000	[1]
Network Access Services [Member]
Net Revenues	24,306,000	21,627,000		47,914,000	40,876,000
Cost of revenues	13,268,000	11,648,000		25,473,000	22,040,000
Network expenses	640,000	410,000		1,130,000	951,000
Depreciation of property and equipment	903,000	489,000		1,737,000	916,000
Amortization of intangible assets	11,000	11,000		23,000	23,000
Total cost of revenues	14,822,000	12,558,000		28,363,000	23,930,000
Gross Profit	9,484,000	9,069,000		19,551,000	16,946,000
Loss on disposal of property and equipment
Domain Name Services [Member]
Net Revenues	56,781,000	62,596,000		128,968,000	112,915,000
Cost of revenues	41,233,000	47,797,000		98,000,000	86,716,000
Network expenses	2,061,000	1,851,000		4,145,000	3,653,000
Depreciation of property and equipment	325,000	225,000		622,000	389,000
Amortization of intangible assets	488,000	444,000		975,000	813,000
Total cost of revenues	44,107,000	50,317,000		103,742,000	91,571,000
Gross Profit	$ 12,674,000	12,279,000		$ 25,226,000	21,344,000
Loss on disposal of property and equipment

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

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Note 12 - Segment Reporting - Summary of Property and Equipment by Geographic Region (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property and equipment	$ 34,538	$ 24,620	[1]
CANADA
Property and equipment	1,518	1,176
UNITED STATES
Property and equipment	32,979	23,417
GERMANY
Property and equipment	$ 41	$ 27

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

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Note 12 - Segment Reporting - Summary of Amortizable Intangible Assets by Geographic Region (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Amortizable intangible assets	$ 40,997	$ 45,652
CANADA
Amortizable intangible assets	7,085	7,749
UNITED STATES
Amortizable intangible assets	33,895	37,783
GERMANY
Amortizable intangible assets	$ 17	$ 120

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Note 12 - Segment Reporting - Summary of Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Balance at beginning of period	$ 168	$ 164
Charged to (recovered) costs and expenses	(36)	4
Balance at end of period	$ 132	$ 168

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Note 13 - Stockholders' Equity (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Feb. 14, 2018	Mar. 01, 2017	Feb. 09, 2016
Stock Repurchased and Retired During Period, Shares	0	0	0	0
Stock Buyback Program 2018 [Member]
Stock Repurchase Program, Authorized Amount					$ 40
Stock Repurchased and Retired During Period, Shares	0		0
Stock Buyback Program 2017 [Member]
Stock Repurchase Program, Authorized Amount						$ 40
Stock Repurchased and Retired During Period, Shares			0
Stock Buyback Program 2016 [Member]
Stock Repurchase Program, Authorized Amount							$ 40
Stock Repurchased and Retired During Period, Shares				0

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Note 13 - Stockholders' Equity - Stockholders' Equity Transactions (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017		Jun. 30, 2018		Jun. 30, 2017
Balances	$ 65,409			$ 60,211	[1]
Exercise of stock options (in shares)	16,153	66,746		28,716		135,622
Exercise of stock options	$ 32			$ 39
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration	(141)			(288)
Stock-based compensation (note 14)	615			1,193
Net income	3,608	$ 5,242	[2],[3]	7,352		$ 7,686	[2],[3]
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.				(64)
Other comprehensive loss	(260)	$ 126	[2]	(243)		$ 231	[2]
Balances	$ 69,263			69,263
Impact of Adoption of ASU 2014-09				1,063
Balances				$ 61,274
Common Stock [Member]
Balances (in shares)	10,592,115			10,583,879
Balances	$ 15,426			$ 15,368
Exercise of stock options (in shares)	16,153			28,716
Exercise of stock options	$ 122			$ 180
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration (in shares)	(4,902)			(9,229)
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 14)
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive loss
Balances (in shares)	10,603,366			10,603,366
Balances	$ 15,548			$ 15,548
Impact of Adoption of ASU 2014-09
Balances				15,368
Additional Paid-in Capital [Member]
Balances	2,547			2,167
Exercise of stock options	(90)			(141)
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration	(141)			(288)
Stock-based compensation (note 14)	615			1,193
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive loss
Balances	2,931			2,931
Impact of Adoption of ASU 2014-09
Balances				2,167
Retained Earnings [Member]
Balances	47,419			42,676
Exercise of stock options
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 14)
Net income	3,608			7,352
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.				(64)
Other comprehensive loss
Balances	51,027			51,027
Impact of Adoption of ASU 2014-09				1,063
Balances				43,739
AOCI Attributable to Parent [Member]
Balances	17
Exercise of stock options
Shares deducted from exercise of stock options for payment of witholding taxes and exercise consideration
Stock-based compensation (note 14)
Accretion of redeemable non-controlling interest in Ting Virginia, LLC.
Other comprehensive loss	(260)			(243)
Balances	$ (243)			(243)
Impact of Adoption of ASU 2014-09
Balances

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

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

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

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Note 14 - Share-based Payments (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 8,000		$ 8,000
Allocated Share-based Compensation Expense, Total	$ 600	$ 300	1,200	$ 600
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount			$ 0	$ 0
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			2 years 328 days

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Note 14 - Share-based Payments - Stock Option Transactions (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Outstanding, Number of shares (in shares)	634,883	430,611	653,571	474,501
Outstanding, Weighted average exercise price per share (in dollars per share)	$ 37.48	$ 15.46	$ 36.69	$ 12.67
Granted, Number of shares (in shares)	128,566		139,566	32,875
Granted, Weighted average exercise price per share (in dollars per share)	$ 64.10		$ 63.66	$ 40.56
Exercised, Number of shares (in shares)	(16,153)	(66,746)	(28,716)	(135,622)
Exercised, Weighted average exercise price per share (in dollars per share)	$ 12.26	$ 8.26	$ 10.30	$ 8.04
Forfeited, Number of shares (in shares)	(13,100)	(257)	(30,225)	(8,146)
Forfeited, Weighted average exercise price per share (in dollars per share)	$ 55.04	$ 11.43	$ 47.96	$ 18.24
Expired, Number of shares (in shares)
Expired, Weighted average exercise price per share (in dollars per share)
Outstanding, Number of shares (in shares)	734,196	363,608	734,196	363,608
Outstanding, Weighted average exercise price per share (in dollars per share)	$ 42.39	$ 16.79	$ 42.39	$ 16.79
Options exercisable, Number of shares (in shares)	229,780	213,769	229,780	213,769
Options exercisable, Weighted average exercise price per share (in dollars per share)	$ 16.92	$ 11.46	$ 16.92	$ 11.46

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Note 14 - Share-based Payments - Summary of Exercise Prices, Weighted Average Remaining Contractual Life and Intrinsic Values of Outstanding Options (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) $ / shares shares
Number outstanding (in shares) | shares	734,196
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 42.39
Weighted average remaining contractual life, options outstanding (Year)	4 years 328 days
Aggregate intrinsic value, options outstanding | $	$ 13,852
Number exercisable (in shares) | shares	229,780
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 16.92
Weighted average remaining contractual life, options exercisable (Year)	2 years 219 days
Aggregate intrinsic value, options exercisable | $	$ 10,047
Exercise Price Range 01 [Member]
Exercise price - lower (in dollars per share)	$ 2.92
Exercise price - higher (in dollars per share)	$ 8.92
Number outstanding (in shares) | shares	75,367
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 6.94
Weighted average remaining contractual life, options outstanding (Year)	1 year 73 days
Aggregate intrinsic value, options outstanding | $	$ 4,048
Number exercisable (in shares) | shares	75,367
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 6.94
Weighted average remaining contractual life, options exercisable (Year)	1 year 73 days
Aggregate intrinsic value, options exercisable | $	$ 4,048
Exercise Price Range 02 [Member]
Exercise price - lower (in dollars per share)	$ 10.16
Exercise price - higher (in dollars per share)	$ 19.95
Number outstanding (in shares) | shares	109,488
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 16.38
Weighted average remaining contractual life, options outstanding (Year)	3 years
Aggregate intrinsic value, options outstanding | $	$ 4,847
Number exercisable (in shares) | shares	83,288
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 15.99
Weighted average remaining contractual life, options exercisable (Year)	2 years 292 days
Aggregate intrinsic value, options exercisable | $	$ 3,720
Exercise Price Range 03 [Member]
Exercise price - lower (in dollars per share)	$ 21.10
Exercise price - higher (in dollars per share)	$ 27.53
Number outstanding (in shares) | shares	72,500
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 23.76
Weighted average remaining contractual life, options outstanding (Year)	3 years 219 days
Aggregate intrinsic value, options outstanding | $	$ 2,674
Number exercisable (in shares) | shares	52,500
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 24.78
Weighted average remaining contractual life, options exercisable (Year)	3 years 73 days
Aggregate intrinsic value, options exercisable | $	$ 1,883
Exercise Price Range 04 [Member]
Exercise price - lower (in dollars per share)	$ 35.25
Exercise price - higher (in dollars per share)	$ 37.35
Number outstanding (in shares) | shares	14,375
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 35.89
Weighted average remaining contractual life, options outstanding (Year)	4 years 328 days
Aggregate intrinsic value, options outstanding | $	$ 356
Number exercisable (in shares) | shares	10,625
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 36.11
Weighted average remaining contractual life, options exercisable (Year)	4 years 255 days
Aggregate intrinsic value, options exercisable | $	$ 261
Exercise Price Range 05 [Member]
Exercise price - lower (in dollars per share)	$ 43.15
Exercise price - higher (in dollars per share)	$ 47
Number outstanding (in shares) | shares	18,500
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 44.19
Weighted average remaining contractual life, options outstanding (Year)	5 years 219 days
Aggregate intrinsic value, options outstanding | $	$ 305
Number exercisable (in shares) | shares	8,000
Weighted average exercise price per share, options exercisable (in dollars per share)	$ 43.75
Weighted average remaining contractual life, options exercisable (Year)	5 years 219 days
Aggregate intrinsic value, options exercisable | $	$ 135
Exercise Price Range 06 [Member]
Exercise price - lower (in dollars per share)	$ 53.20
Exercise price - higher (in dollars per share)	$ 58.65
Number outstanding (in shares) | shares	315,400
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 55.51
Weighted average remaining contractual life, options outstanding (Year)	5 years 328 days
Aggregate intrinsic value, options outstanding | $	$ 1,622
Number exercisable (in shares) | shares
Weighted average exercise price per share, options exercisable (in dollars per share)
Weighted average remaining contractual life, options exercisable (Year)
Aggregate intrinsic value, options exercisable | $
Exercise Price Range 07 [Member]
Exercise price - lower (in dollars per share)	$ 64.10
Exercise price - higher (in dollars per share)	$ 64.10
Number outstanding (in shares) | shares	128,566
Weighted average exercise price per share, options outstanding (in dollars per share)	$ 64.10
Weighted average remaining contractual life, options outstanding (Year)	6 years 328 days
Aggregate intrinsic value, options outstanding | $
Number exercisable (in shares) | shares
Weighted average exercise price per share, options exercisable (in dollars per share)
Weighted average remaining contractual life, options exercisable (Year)
Aggregate intrinsic value, options exercisable | $

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Note 15 - Fair Value Measurement (Details Textual) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Derivative Asset, Total		$ 0
Derivative Liability, Total	$ 364	$ 0

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Note 15 - Fair Value Measurement - Summary of the Fair Values of the Company's Derivative Instrument Liabilities (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Derivative Asset, Total		$ 0
Derivative Liability, Total	364	$ 0
Fair Value, Inputs, Level 1 [Member]
Derivative Asset, Total
Derivative Liability, Total
Fair Value, Inputs, Level 2 [Member]
Derivative Asset, Total
Derivative Liability, Total	364
Fair Value, Inputs, Level 3 [Member]
Derivative Asset, Total
Derivative Liability, Total

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