TUCOWS INC /PA/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) of 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 that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to the material weakness in our internal control over financial reporting that is described below in Management's Annual Report on Internal Control over Financial Reporting, our disclosure controls and procedures were not effective as of December 31, 2023. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: ● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; ● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ● Provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and ● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, such as resource constraints, human error, lack of knowledge or awareness and the possibility of intentional circumvention of these controls, internal control over financial reporting may not prevent or detect misstatements. Furthermore, the design of any control system is based, in part, upon assumptions about the likelihood of future events, for which assumptions may ultimately prove to be incorrect. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 50 Table of Contents Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 . In making this assessment, our management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of our evaluation, management has determined that due to the material weakness described below, our internal control over financial reporting was not effective as of December 31, 2023. Material Weakness in Internal Control Over Financial Reporting A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. In connection with our audit of consolidated financial statements for the year ended December 31, 2023, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted a material weakness in two components of internal control as defined by COSO 2013 (Control Activities, and Information and Communication). As a result of the identified material weaknesses, management, including the CEO and CFO, concluded that internal control over financial reporting was not effective as of December 31, 2023. Deloitte LLP, the independent registered public accounting firm that audited our financial statements included in this annual report, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2023. Their attestation report is included in this annual report. We did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain (i) program change management controls for certain financial systems to ensure that IT program and data changes affecting certain IT systems and underlying accounting records are identified, tested, authorized and implemented appropriately and (ii) user access controls that adequately restrict user access to certain financial systems, programs and data to appropriate company personnel. These IT deficiencies did not result in a material misstatement to the Annual Financial Statements for the period ended December 31, 2023, however, the deficiencies, when aggregated, could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, and underlying data that support the effectiveness of system-generated reports used in related process-level manual controls that rely on information generated from the affected information technology systems) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness. Deloitte LLP, our independent registered public accounting firm, has audited our consolidated financial statements and expressed an unqualified opinion thereon. Deloitte has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2023. These reports set forth at the beginning of Part II, Item 8 if this Annual Report on Form 10-K. Remediation Plan for Material Weakness in Internal Control Over Financial Reporting To remediate the material weakness described above, the Company's remediation efforts included evaluating access controls to key financial systems and implementing enhanced procedures for regular access reviews. Under the oversight of the Audit Committee, management will continue to remediate and maintain effective IT controls over impacted financial systems. These steps will include training for IT control owners, enhanced change management procedures, and improved documentation that will clearly identify management’s expectations of the control activities. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period. The Company has made progress in the remediation efforts but cannot estimate when these efforts will be completed. The material weaknesses that were previously disclosed as of December 31, 2022 were remediated as of December 31, 2023. See “Item 9A. Controls and Procedures — Management’s Annual Report on Internal Control over Financial Reporting” and “Item 9A. Controls and Procedures — Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting” contained in the Company’s report on Form 10-K for the fiscal year ended December 31, 2022 and “Item 4. Controls and Procedures” contained in the Company’s subsequent quarterly reports on Form 10-Q during 2023, for disclosure of information about the material weaknesses that were reported as a result of the Company’s annual assessment as of December 31, 2022 and the remediation plan for that material weaknesses. As disclosed in the quarterly reports on Form 10-Q for the first three quarters of 2023, the Company has monitored the controls necessary to remediate the material weaknesses, and as of December 31, 2023, such controls were successfully tested and the material weaknesses were remediated. Changes in Internal Control over Financial Reporting Other than the material weaknesses noted above, there were no changes made in our internal controls over financial reporting occurred during Fiscal 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Rule 10b5 - 1 Trading Plans During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5 - 1 trading arrangement" or "non-Rule 10b5 - 1 trading arrangement," as each term is defined in Item 408 (a) of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 51 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Robin Chase Chair of the Board since September 2021 and Director since October 2014 Robin Chase, 65, is a transportation entrepreneur. She is co-founder and former CEO of Zipcar, founded in 2000, the world’s leading car sharing network; as well as co-founder of Veniam, founded in 2012, a network company that moves terabytes of data between vehicles and the cloud. In 2019, she co-founded her first nonprofit, NUMO, a global alliance to channel the opportunities presented by new urban mobility technologies to build cities that are sustainable and just. Her book is Peers Inc: How People and Platforms are Inventing the Collaborative Economy and Reinventing Capitalism . In addition to Ms. Chase’s position as Chair of the Tucows Board, she sat on the board of World Resources Institute from 2009 to 2022, and served on the Dutch multinational DSM’s Sustainability Advisory Board from 2016 to 2023. In the past, she serve d on the boards of Veniam and the Massachusetts Department of Transportation, the French National Digital Agency, the National Advisory Council for Innovation & Entrepreneurship for the US Department of Commerce, the Intelligent Transportations Systems Program Advisory Committee for the US Department of Transportation, the OECD’s International Transport Forum Advisory Board, the Massachusetts Governor’s Transportation Transition Working Group, and Boston Mayor’s Wireless Task Force. Ms. Chase lectures widely, has been frequently featured in the major media, and has received many awards in the areas of innovation, design, and environment, including the prestigious Urban Land Institute’s Nicols Prize as Urban Visionary, Time 100 Most Influential People, Fast Company Fast 50 Innovators, and BusinessWeek Top 10 Designers. Robin graduated from Wellesley College and MIT’s Sloan School of Management, was a Harvard University Loeb Fellow, and received an honorary Doctorate of Design from the Illinois Institute of Technology. Ms. Chase’s experience operating companies at the chief executive officer level along with her numerous experiences on these boards and councils qualify her to be a director of Tucows. Allen Karp Director since October 2005 and Chair Emeritus since September 2021 Mr. Karp, 83, was with Cineplex Odeon Corporation in various positions from 1986 to 2005, retiring as Chairman and Chief Executive Officer in 2002 and as Chairman Emeritus in 2005. From 1966 to 1986, he practiced law at the law firm of Goodman and Carr LLP, where he was named partner in 1970. Mr. Karp was until 2011 a Director of Brookfield Real Estate Services Inc., where he also served on the Audit Committee and as the Chair of the Corporate Governance Committee. From 2004 to 2014, Mr. Karp was Chairman of the Board of Directors of IBI Group Inc., as well as Chairman of the Nominating, Governance and Compensation Committee. Mr. Karp is a past director of the Toronto International Film Festival Group, where he served as Chairman of the Board from 1999 to 2007 and served as Chairman of its Corporate Governance Committee from 2007 to 2012. Additionally, Mr. Karp has previously served as director of several other public corporations. Mr. Karp has extensive executive leadership skills, long-standing senior management experience, a strong ethics and compliance focus and audit committee experience. These skills and qualifications, in addition to his recent service on the boards of directors of other public companies, enable him to bring valuable perspectives to our Board, particularly with respect to corporate governance matters, and qualify him to be a director of Tucows. Erez Gissin Director since August 2001 Mr. Gissin, 65, has served since 2010 as a managing partner in Helios Energy Investment, a renewable energy investment fund. From 2005 to 2010, Mr. Gissin served as the Chief Executive Officer of BCID Ltd., an investment company focusing on infrastructure development projects in China. From 2000 to 2005, Mr. Gissin served as the Chief Executive Officer of IP Planet Networks Ltd., an Israeli satellite communication operator providing Internet backbone connectivity and solutions to Internet Service Providers. From 1995 to 2000, Mr. Gissin was Vice President, Business Development of Eurocom Communications Ltd., a holding company that controls several telecommunications services, equipment and Internet companies in Israel. Mr. Gissin has a strong background in the internet communications industry and has gained significant institutional knowledge in his long tenure as one of our directors. Mr. Gissin also has significant leadership experience as the Chief Executive Officer of BCID Ltd. and IP Planet Networks Ltd. and has extensive financial acumen derived from his years of executive experience and PE fund management. All of these qualities qualify Mr. Gissin to be a director of Tucows. Elliot Noss Director since August 2001 Mr. Noss, 61, is our President and Chief Executive Officer and has served in such capacity since the completion of our merger with Tucows Delaware in August 2001. From May 1999 until completion of the merger in August 2001, Mr. Noss served as President and Chief Executive Officer of Tucows Delaware. Before that, from April 1997 to May 1999, Mr. Noss served as Vice President of Corporate Services of Tucows Interactive Ltd., which was acquired by Tucows Delaware in May 1999. Mr. Noss’s lengthy service as our Chief Executive Officer has provided him with extensive knowledge of, and experience with, Tucows’ operations, strategy and financial position. In addition, Mr. Noss has widespread knowledge of the internet and software industry generally that, coupled with his operational expertise, qualifies him to be a director of Tucows. Jeffrey Schwartz Director since June 2005 Mr. Schwartz, 61, has served as a director of Dorel Industries since 1987 and as Executive Vice President and Chief Financial Officer since 2003. Mr. Schwartz is a graduate of McGill University in Montreal and has a degree in the field of business administration. Mr. Schwartz has a significant amount of public-company financial expertise, particularly in his executive experience as the chief financial officer of Dorel Industries, Inc. This executive experience, along with Mr. Schwartz’s service as one of our Audit Committee members (and as Chairperson of our Audit Committee since 2005), qualifies him to be a director of Tucows. 52 Table of Contents Marlene Carl Director since September 2021 Marlene Carl, 34, became Chief Financial Officer ("CFO") at CHAPTERS Group AG (formerly MEDIQON group AG) in 2021, a German publicly traded company focused on entrepreneurial and long-term investments in companies with scalable business models from a variety of sectors including a number of software companies. Prior to joining CHAPTERS Group AG in 2020, Ms. Carl worked in financing for eight years focusing on digital infrastructure in Europe from FTTH roll-outs in rural areas to data center construction for banks, including Berenberg and NIBC Bank N.V. based in Hamburg, London and Frankfurt. Ms. Carl holds a Master of Science from Frankfurt School of Finance & Management with focus on Capital Markets. Ms. Carl’s experience in investment management and infrastructure financing, including FTTH projects, qualify her to be a director of Tucows. Lee Matheson Director since September 2023 Lee Matheson, 42, has been a Partner at EdgePoint Investment Group Inc. since June of 2020. Previously, Mr. Matheson was a partner at Ewing Morris & Co., co-founder of Broadview Capital Management Inc., and portfolio manager of the Broadview Dark Horse LP, a long/short fund focused on Canadian small cap securities. Mr. Matheson has extensive public company experience having served on the boards of Echelon Financial Holdings Inc. from 2018 to 2020, RDM Corporation from 2011 to 2017, AlarmForce Industries Inc. from 2016 to 2018, WesternOne Inc. from 2016 to 2018, Medworxx Solutions Inc. from 2013 to 2015, and Strad Inc. from 2019 to 2020. Mr. Matheson has been a director of AutoCanada Inc. and Optiva Inc. since 2020 and is a Chartered Financial Analyst Charterholder. Mr. Matheson’s experience in investment management, financing, and SaaS businesses qualify him to be a director of Tucows. Gigi Sohn Director since September 2023 Gigi Sohn, 61, is the Executive Director of the American Association of Public Broadband (AAPB), a Benton Institute Senior Fellow and Public Advocate and a Distinguished Fellow at the Georgetown Law Institute for Technology Law & Policy. She is one of the nation’s leading public advocates for open, affordable and democratic communications networks. In October 2021, President Biden nominated her to serve on the Federal Communications Commission. From 2013 to 2016, Ms. Sohn was Counselor to the former Chairman of the Federal Communications Commission, Tom Wheeler. She spent the previous 12 years as Co-Founder and CEO of Public Knowledge, a leading communications and intellectual property policy advocacy organization serving the interests of consumers in Washington. Ms. Sohn was previously a Project Specialist in the Ford Foundation’s Media, Arts and Culture unit and Executive Director of the Media Access Project, the first public interest communications law firm. In 1997, President Clinton appointed Ms. Sohn to serve as a member of his Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters. Ms. Sohn is a long-time advocate for LGBTQ+ equality and has served as President of the Gay and Lesbian Lawyers (now the LGBT Bar Association) of Washington, DC from 1994-1997 and was elected as the first openly LGBTQ+ member of the District of Columbia Bar Board of Governors. Ms. Sohn’s experience in telecommunications policy and regulation, and consumer interests qualify her to be a director of Tucows. Our directors are elected annually and serve until the election or appointment and qualification of their successors or their earlier death, resignation or removal. Executive Officers The required information regarding our executive officers is set forth in Part I, Item 1 hereof under the caption “Information about our Executive Officers and Key Employees ” and is incorporated herein by reference. Governance Principles The governance principles of our Board include the charters of our Audit Committee and our Corporate Governance, Nominating and Compensation Committee. Our governing principles also include our Code of Business Conduct and Ethics which includes specifics for our senior officers, including our Chief Executive Officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Each of these documents can be obtained without charge from our Internet web site at tucows.com. Amendments and waivers of our ethics policy for our senior officers will either be posted on our website or filed with the SEC on a Current Report on Form 8-K. Ms. Chase serves as Chair of the Board. The Board currently consists of eight directors, all of whom, except for Elliot Noss, are “independent” within the meaning of the independence requirements prescribed by the listing standards of the NASDAQ Capital Market. The Board believes that this structure, which provides an overwhelming majority of independent directors, coupled with the Board meeting in executive session without any management directors or non-independent directors present, is an appropriate structure for Tucows’ Board. We believe that this structure provides appropriate and independent oversight by the Board. The Board regularly consults with our Chief Executive Officer, who is also a director, and our Corporate Governance, Nominating and Compensation Committee to review the various types of risk that affect Tucows and the strategies to mitigate such risks. The Board believes that this structure has been effective. 53 Table of Contents Executive Sessions of Independent Directors A majority of the independent directors meet quarterly in executive sessions without members of our management present. Ms. Chase is responsible for chairing the executive sessions. Policy Regarding Attendance Directors are expected, but are not required, to attend board meetings, meetings of committees on which they serve, and shareholder meetings, and to spend the time needed and meet as frequently as necessary to discharge their responsibilities properly. Elliot Noss attended our 2023 annual meeting of shareholders held virtually. The remainder of the Board were available on request. Committees Our Board has two committees, an audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, and a corporate governance, nominating and compensation committee. Our committees generally meet in connection with regularly scheduled quarterly and annual meetings of the Board, with additional meetings held as often as its members deem necessary to perform its responsibilities. From time to time, depending on the circumstances, the Board may form a new committee or disband a current committee. The Audit Committee currently consists of Mr. Schwartz (Chair), Ms. Carl, Mr. Karp and Mr. Gissin, all of whom are independent directors as prescribed by the listing standards of the NASDAQ Capital Market. The Audit Committee held five meetings during Fiscal 2023 . Each member of the Audit Committee attended at least 75% of the total number of meetings of the committee during Fiscal 2023 . The Audit Committee’s purposes are to: ● Provide oversight of the Company’s accounting and financial reporting processes and the audit of the Company’s financial statements; ● Assist the Board in oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of the Company’s independent registered public accounting firm, and (iv) the Company’s internal accounting and financial controls; ● Provide to the Board such information and materials as it may deem necessary to make the Board aware of significant financial matters that require the attention of the Board; and ● Oversee the management of risks associated with the Company’s financial reporting, accounting and auditing matters. Each of the members of our Audit Committee is an independent director and satisfies the independence standards as prescribed by the listing standards of the NASDAQ Capital Market and Rule 10A-3 under the Exchange Act and is able to read and understand fundamental financial statements including balance sheets, income statements and cash flow statements. Additionally, the Board has determined that Mr. Schwartz qualifies as an “audit committee financial expert” as defined under Item 407(d)(5) of Regulation S-K. The Board has adopted a written charter for the Audit Committee, which the Audit Committee has reviewed and determined to be in compliance with the rules prescribed by the listing standards of the NASDAQ Capital Market and which is available at tucows.com. The Corporate Governance, Nominating and Compensation Committee currently consists of Ms. Chase (Chair), Mr. Karp, Ms. Sohn, and Mr. Matheson. Mr. Schwartz served on the committee until September, 2023. Each member of our Corporate Governance, Nominating and Compensation Committee is an independent director as defined in the listing standards of the NASDAQ Capital Market and also satisfies the applicable compensation committee member independence standards as prescribed by the listing standards of the NASDAQ Capital Market and Rule 10C-1 under the Exchange Act. The Corporate Governance, Nominating and Compensation Committee held five meetings during Fiscal 2023 . Each member of the Corporate Governance, Nominating and Compensation Committee attended at least 75% of the total number of meetings of the committee during Fiscal 2023 . The Corporate Governance, Nominating and Compensation Committee’s purposes are to: ● Identify individuals qualified to become board members, consistent with criteria approved by the Board. ● Select, or recommend that the Board select, the director nominees for election at each annual meeting of stockholders. ● Oversee the evaluation of the Board and management. ● Review and approve corporate goals and objectives relevant to the CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the Board), determine and approve the CEO's compensation level based on this evaluation. ● Review and approve non-CEO Executive compensation including incentive compensation and equity-based compensation. ● Provide oversight of the Company’s compensation policies and plans and benefits programs, and overall compensation philosophy. ● Administer the Company’s equity compensation plans for its executive officers and employees and the granting of equity awards pursuant to such plans or outside of such plans; and ● Cause to be prepared the report of the Corporate Governance, Nominating and Compensation required by the rules and regulations of the SEC. 54 Table of Contents The Corporate Governance, Nominating and Compensation Committee may delegate authority to one or more members of this committee or one or more members of management when appropriate, but no such delegation is allowed if the authority is required by law, regulation or listing standard to be exercised by the Corporate Governance, Nominating and Compensation Committee as a whole. The Board has adopted a written charter for the Corporate Governance, Nominating and Compensation Committee, which the Corporate Governance, Nominating and Compensation Committee has reviewed and determined to be in compliance with the rules prescribed by the listing standards of the NASDAQ Capital Market and which is available at tucows.com . Our executive officers do not play a formal role in determining their compensation. However, our People Team reviews (i) information the Company purchased from Payscales (formerly known as Payfactor) and (ii) published trends for the year from a variety of public sources, and, after consulting with Mr. Noss, our Chief Executive Officer, provides consolidated information outlining management’s recommendation regarding executive officer compensation based on title to the Corporate Governance, Nominating and Compensation Committee. The Corporate Governance, Nominating and Compensation Committee then reviews and discusses the information provided with our CEO and Chief People Officer and then determines the total compensation for each named executive office, as it deems appropriate. Board Leadership Structure and Responsibilities Our Board of Directors oversees management’s performance on behalf of our shareholders. Our Board's primary responsibilities are to (1) monitor management’s performance to assess whether we are operating in an effective, efficient and ethical manner to create value for our shareholders, (2) periodically review our long-range plans, business initiatives, cyber security matters, capital projects and budget matters and (3) approve compensation for our President and Chief Executive Officer who, with senior management, manages our day-to-day operations. Our Board and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. The independent directors meet without management present at regularly scheduled executive sessions at each quarterly Board meeting and some special Board meetings. Our Board has delegated certain responsibilities and authority to its Audit Committee and Corporate Governance, Nominating and Compensation Committee. The Audit Committee periodically discusses with management the Company's policies and guidelines regarding risk assessment and risk management, as well as the Company's major financial risk exposures and the steps that management has taken to monitor and control such exposures. The Audit Committee also reviews, evaluates and recommends changes to the Company’s financial reporting policies and procedures. The Corporate Governance, Nominating and Compensation Committee reviews and evaluates the risks underlying the Company’s compensation policies and plans and recommends changes to these policies and plans accordingly. Our Board believes that risk oversight actions taken by our Board and its committees are appropriate and effective at this time. We believe it is beneficial to separate the roles of Chief Executive Officer and Chairperson to facilitate their differing roles in the leadership of our company. The role of the Chairperson includes setting the agenda for, and presiding over, all meetings of our Board of Directors, including executive sessions of independent directors, providing input regarding information sent to our Board of Directors, serving as liaison between the Chief Executive Officer and the independent directors and providing advice and assistance to the Chief Executive Officer. The Chairperson is also a key participant in establishing performance objectives and overseeing the process for the annual evaluation of our Chief Executive Officer’s performance. In addition, under our Bylaws, our Chairperson has the authority to call special meetings of our Board and shareholders. In contrast, our Chief Executive Officer is responsible for handling our day-to-day management and direction, serving as a leader to the management team and formulating corporate strategy. Currently our Chairperson is Ms. Chase, while Mr. Noss serves as our Chief Executive Officer. Ms. Chase is an independent director. Ms. Chase has extensive executive leadership skills, long-standing senior management and board experience, and a strong ethics and compliance focus. We believe that this leadership structure for our Board provides us with the most effective level of oversight over the Company’s business operations while at the same time enhancing our Board’s ability to oversee our enterprise-wide approach to risk management and corporate governance and best serves the interests of our shareholders. It allows for a balanced corporate vision and strategy, which is necessary to address the challenges and opportunities we face at this time and demonstrates our commitment to good corporate governance. In addition, it allows for appropriate oversight of the Company by our Board, fosters appropriate accountability of management and provides a clear delineation of responsibilities for each position. 55 Table of Contents Board Diversity We believe it is important that our Board is composed of individuals reflecting the diversity represented by our employees, our customers, and our communities. With the addition of Marlene Carl in 2021 and Gigi Sohn in 2023, we have expanded the diversity of our Board. Below, we provide an enhanced disclosure regarding the diversity of our Board as required by the listing standards of the NASDAQ Capital Market. Board Diversity Matrix (As of April 1, 2024) Total Number of Directors 8 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identify Directors 3 5 0 0 Part II: Demographic Background African American or Black 0 0 0 0 Alaskan Native or Native American 0 0 0 0 Asian 0 0 0 0 Hispanic or Latinx 0 0 0 0 Native Hawaiian or Pacific Islander 0 0 0 0 White 3 5 0 0 Two or More Races or Ethnicities 0 0 0 0 LGBTQ+ 1 Did Not Disclose Demographic Background 0 Board Diversity Matrix (As of March 15, 2023) Total Number of Directors 7 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identify Directors 2 5 0 0 Part II: Demographic Background African American or Black 0 0 0 0 Alaskan Native or Native American 0 0 0 0 Asian 0 0 0 0 Hispanic or Latinx 0 0 0 0 Native Hawaiian or Pacific Islander 0 0 0 0 White 2 5 0 0 Two or More Races or Ethnicities 0 0 0 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 56 Table of Contents Role of the Board in Risk Oversight One of our Board’s key functions is providing oversight of our risk management process. Our Board does not have a standing risk management committee, but rather administers this oversight function directly through our Board as a whole, as well as through Board of Directors standing committees that address risks inherent in their respective areas of oversight. In particular, our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, our Corporate Governance, Nominating and Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking, monitors our major legal compliance risk exposures and our program for promoting and monitoring compliance with applicable legal and regulatory requirements, and our Board is responsible for monitoring and assessing strategic risk exposure and other risks not covered by our committees. The full Board (or the appropriate committee in the case of risks that are under the purview of a particular committee) receives reports on the risks we face from our Chief Executive Officer or other members of management to enable us to understand our risk identification, risk management and risk mitigation strategies. When a committee receives the report, the chairperson of the relevant committee reports on the discussion to the full Board during that committee’s reports portion of the next Board meeting. However, it is the responsibility of the committee chairs to report findings regarding material risk exposures to our Board as quickly as possible. Director Nomination Our Corporate Governance, Nominating and Compensation Committee is responsible for identifying potential nominees to our Board. In considering candidates for nomination, our Corporate Governance, Nominating and Compensation Committee seeks individuals who evidence strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge. As set forth in the charter of our Corporate Governance, Nominating and Compensation Committee, our Board endeavors to have directors who collectively possess a broad range of skills, expertise, industry and other knowledge and business and other experience useful to the effective oversight of our business. In addition, our Board also seeks members from diverse backgrounds so that our Board consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. In determining whether to nominate a current director for re-election, our Corporate Governance, Nominating and Compensation Committee will take into account these same criteria as well as the director’s past performance, including his or her participation in and contributions to the activities of the Board. Our Corporate Governance, Nominating and Compensation Committee will evaluate and consider recommendations for director candidates from shareholders using the same criteria described above. As set forth in the charter of the Corporate Governance, Nominating and Compensation Committee, recommendations submitted by the Company’s shareholders shall be submitted, along with the following to the attention of the Chairperson of the Corporate Governance, Nominating and Compensation Committee at 96 Mowat Avenue, Toronto, Ontario M6K 3M1 Canada at least 120 days before the first anniversary of the date on which we first mailed our proxy materials for our prior year’s annual meeting of shareholders: • the name and address of the recommending shareholder; • the candidate’s name and the information about the individual that would be required to be included in a proxy statement under the rules of the SEC; • information about the relationship between the candidate and the recommending shareholder; • the consent of the candidate to serve as a director; and • proof of the number of shares of our common stock that the recommending shareholder owns and the length of time the shares have been owned. Communications with our Board of Directors A Tucows’ shareholder who wishes to communicate with our Board may send correspondence to the attention of our Secretary at 96 Mowat Avenue, Toronto, Ontario M6K 3M1 Canada. The Secretary will submit the shareholder’s correspondence to the Chairperson of the Board, the Chairperson of the appropriate committee, or the appropriate individual director, as applicable. Director Compensation Under the terms of our 2006 Amended and Restated Equity Compensation Plan (the “2006 Plan”), we make automatic formula grants of nonqualified stock options to our non-employee directors and members of committees of our Board as described below. All stock-based compensation for our non-employee directors is governed by our 2006 Plan or its predecessor, our 1996 Equity Compensation Plan (the “1996 Plan”). All options granted under the automatic formula grants vest after one year, have an exercise price equal to the fair market value per common share as determined by the per share price as of the close of business on the date of grant and have a five-year term. Options are granted to directors under the 2006 Plan as follows: • on the date a non-employee director becomes a director, he or she is granted options to purchase 4,375 shares of our common stock; • on the date a director becomes a member of the Audit Committee, he or she is granted options to purchase 3,750 shares of our common stock; • on the date a director becomes a member of the Corporate Governance, Nominating and Compensation Committee, he or she is granted options to purchase 2,500 shares of our common stock; and • on each date on which we hold our annual meeting of shareholders, each non-employee director in office immediately before and after the annual election of directors receives an automatic grant of options to purchase 3,750 shares of our common stock. 57 Table of Contents Directors who are employees receive no additional or special compensation for serving as directors. All annual fees are paid to our directors in quarterly installments. On each date on which we hold our annual meeting of shareholders, each non-employee director in office immediately before and after the annual election of directors receives an automatic grant of options to purchase shares of our common stock. The initial grant is set at 3,750 options. Each non-employee member of the Board will receive $30,000 annually, the Chairperson of the Board will additionally receive $15,000; each Chair of the Audit Committee and Corporate Governance, Nomination and Compensation Committee will additionally receive $7,500; and each member of the Audit Committee and Corporate Governance, Nomination and Compensation Committee will additionally receive $12,000. We also purchase directors and officer's liability insurance for the benefit of our directors and officers as a group in the amount of $30 million. We also reimburse our directors for their reasonable out-of-pocket expenses incurred in attending meetings of our Board or its committees. The table below shows all compensation paid to each of our non-employee directors during 2023. Each of the directors listed below served for the entire year except for Lee Matheson and Gigi Sohn, who joined in September 2023. Name Fees earned or paid in cash ($) Option awards ($) (1)(2) Total ($) (a) (b) (d) (h) Allen Karp $ 54,000 $ 27,211 $ 81,211 Brad Burnham (3) 22,500 - 22,500 Erez Gissin 42,000 27,211 69,211 Gigi Sohn 11,455 51,065 62,520 Jeffrey Schwartz 60,091 27,211 87,302 Lee Matheson 10,000 51,065 61,065 Marlene Carl 32,000 49,947 81,947 Robin Chase 64,500 27,211 91,711 $ 296,546 $ 260,921 $ 557,467 (1) The amounts reported in this column represent the aggregate grant date fair value of the option grants calculated in accordance with the FASB Accounting Standards Codification (“ASC”) 718 and based on the Black-Scholes option-pricing model using the same assumptions that are set forth in “ Note 16 – Stock Option Plans” of the Notes to the Consolidated Financial Statements including Part II, Item 8 of this Annual Report. Under the 2006 Plan, these options vest one year after the grant date and have a five-year term. (2) On September 7, 2023, each of our re-elected non-employee directors at the time were awarded automatic formula option grants with an exercise price of $19.78 and a grant date fair value of $7.26; directors newly elected to the Board at the Company's annual meeting, Ms. Sohn and Mr. Matheson, were awarded automatic formula option grants of 4,375 shares with an exercise price of $19.78 and a grant date fair value of $7.26 in connection with becoming a director. On November 2, 2023, Ms. Carl was awarded an automatic formula option grant of 3,750 with an exercise price of $16.47 and a grant date fair value of $6.06 in connection to Ms. Carl's appointment to the Audit Committee. On November 17, 2023, Ms. Sohn was awarded an automatic formula option grant of 2,500 options with an exercise price of $21.07 and a grant date fair value of $7.73 in connection with Ms. Sohn's appointment to the Corporate Governance, Nomination and Compensation Committee. On November 17, 2023, Ms. Matheson was awarded an automatic formula option grant of 2,500 options with an exercise price of $21.07 and a grant date fair value of $7.73 in connection with Mr. Matheson's appointment to the Corporate Governance, Nomination and Compensation Committee. The aggregate number of option awards outstanding at December 31, 2023 is as follows for each of the following non-employee directors: 22,500 for Mr. Karp; 22,500 for Mr. Gissin; 6,875 for Ms. Sohn; 22,500 for Mr. Schwartz; 6,875 for Mr. Matheson; 15,625 for Ms. Carl; and 22,500 for Ms. Chase. (3) Mr. Burnhan did not stand for re-election during the Company's 2023 meeting of the shareholders. DELINQUENT SECTION 16(a) REPORTS Section 16(a) of the Exchange Act, requires our directors and executive officers and persons who own more than ten percent of a registered class of our equity securities to file with the SEC reports of ownership and reports of changes in ownership of our common stock and our other equity securities. These persons are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. We believe that, under the SEC’s rules and based solely upon our review of the copies of the Forms 3, 4 and 5 furnished to us, or written representations from certain reporting persons, any such reports have been filed in a timely manner with the following exceptions: The Form 4's filed September 18, 2023 for the grants of options to each of Mr. Matheson and Ms. Sohn with a transaction date of September 7, 2023; and the Form 4's filed on July 5, 2023 for the grants of options for executives (Messrs. Nos, Singh, Woroch, Fausett, and Koenig) with a transaction date of June 29, 2023; and the Form 4 filed on February 28, 2024 for the grant of options to Mr. Matheson with a transaction date of November 16, 2023. Stock ownership of management We encourage stock ownership by our directors, officers and employees to align their interests with the interests of shareholders. Under Section 16(a) of the Exchange Act, directors, officers and certain beneficial owners of the Company’s equity securities are required to file reports of their transactions in the Company’s equity securities with the SEC on specified due dates. 58 Table of Contents ITEM 11. EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS Philosophy We recognize that our success depends to a great degree on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees. To this end, attracting and retaining the level of executive talent we need to be successful in accomplishing our mission of providing simple useful services that help people unlock the power of the Internet is a key objective of our executive compensation program. Our executive compensation program is designed to ensure we have the talent we need to maintain our current high-performance standards and grow our business for the future. As such, we aim to provide competitive compensation packages for all our key positions, including our Named Executive Officers (“NEOs”) that are guided by market rates and tailored to account for the specific needs and responsibilities of the particular position as well as the performance and unique qualifications of the individual employee. For Fiscal 2023, our NEO's included Messrs. Noss, Singh, Reilly, Woroch and Fausett. This Compensation Discussion and Analysis (“CD&A”) provides comprehensive information about our executive compensation program for our Fiscal 2023 NEOs, who are listed below, and provides context for the decisions underlying the compensation reported in the executive compensation tables in this Annual Report. Our NEOs are: Elliot Noss President and CEO, Tucows Inc. and Ting Davinder Singh Chief Financial Officer (“CFO”) Justin Reilly Chief Executive Officer, Wavelo David Woroch Chief Executive Officer, Tucows Domains Bret Fausett Chief Legal Officer & Vice-President, Regulatory Affairs Our philosophy is to provide a mix of compensation that motivates our executives to achieve our short and long- term performance goals in a market-competitive and fiscally responsible way, which in turn will create value for our shareholders. We achieve our objectives by designing our executive compensation program so that a substantial amount of our NEOs’ compensation is performance-based to ensure the actual compensation paid to our executives is appropriately aligned with our Company’s performance, and shareholder long-term interests. Beginning in Fiscal 2023 to better link individual compensation to Company performance, the Company will determine variable compensation based on a scorecard of organizational targets that are specific to each executive's business segment performance. In addition, we also link individual compensation to Company performance by virtue of the parent company or subsidiary stock options granted by the Company. More specifically, our executive compensation programs are designed to: • provide an appropriate mix of fixed and variable compensation to attract, retain and motivate key executives; • provide a substantial portion of our executive compensation that is performance-based, on a company or service basis, to support creation of long-term shareholder value, financial growth and operational efficiency without encouraging excessive risk taking; • target compensation at the 50th percentile of market levels, as measured by Payscales; and • promote internal equity by offering comparable pay to executives whom we expect to make roughly equivalent contributions, while differentiating executives’ compensation arrangements when appropriate. 59 Table of Contents Overview of Pay Elements and Linkage to Compensation Philosophy and Objectives We believe the following elements of our compensation program help us to realize our compensation philosophy and objectives: Pay Element Characteristics Compensation Philosophy and Objectives Factors Considered to Determine Awards Salary Annual fixed cash compensation Provides a competitive and stable component of income to our executives • Job responsibilities • Experience • Individual contributions • Future potential • Internal pay equity • Effect on other elements of compensation and benefits including target bonus amounts Short-Term Incentive Bonus Annual variable cash compensation based on the achievement of pre- established annual performance measures, for Fiscal 2022, these were based on parent company Adjusted EBITDA for Compensation and starting Fiscal 2023, these were based on balanced scorecards for each business which include a mix of performance measures tailored to each business segment Provides competitive short- term incentive opportunities for our executives to earn annual cash bonuses based on performance objectives that, if attained, can reasonably be expected to (i) promote our business and strategic objectives and (ii) correspond to those paid to similarly-situated and comparably skilled executives at peer companies • Company performance measures • Service performance measures Stock Options Grants Annual long-term equity awards, which can be in our Company ("Company Options") that vest over 4 years or non-recurring options in one or more of our subsidiaries of Wavelo or Ting ("Subsidiary Options") that vest over 3 years Provides variable compensation that helps to retain executives and ensures our executives’ interests are aligned with those of shareholders to grow long-term value • Job responsibilities • Individual contributions • Future potential • Value of vested and unvested outstanding equity awards • Internal pay equity The weight of each of these components has to date not been determined by any particular formula, although our overall mix of total compensation has historically emphasized retention value. The specific mix of components has been and will continue to be within the discretion and business judgment of our Board and the Corporate Governance, Nominating and Compensation Committee, which has placed greater emphasis on considerations specific to the individual holding a particular executive position rather than on general market data. 60 Table of Contents At the 2023 Annual Meeting, a majority of our stockholders approved, as recommended by our Board, a proposal for our stockholders to be provided with the opportunity to cast a non-binding advisory vote on compensation of our NEOs every three years. Our Board believed that this frequency would be appropriate as a triennial vote would provide the Company with sufficient time to engage with stockholders to understand and respond to the “say-on-pay” vote results and to put in place any changes to the Company’s compensation program as a result of such discussions, if necessary. The next stockholder advisory (non-binding) vote on executive compensation will be held at our 2026 Annual Meeting. Determining Total Compensation Base Salary With respect to each NEO, in determining total compensation, the Corporate Governance, Nominating and Compensation Committee considers the Company’s compensation philosophy as outlined above, comparative market data and specific factors relative to each NEO’s responsibilities and performance. We do not specifically benchmark compensation for our NEOs in terms of picking a particular percentile relative to other people with similar titles at peer group companies. We believe that many subjective factors unique to each NEO’s responsibilities and performance are not adequately reflected or otherwise accounted for in a percentile-based compensation determination. In addition, in determining the appropriate level of total compensation for our NEOs, the Corporate Governance, Nominating and Compensation Committee (i) reviews and considers the performance of each NEO, and (ii) considers, for each NEO, the estimated amount of total compensation: ● we would be willing to pay to retain that person; ● we would have to pay to replace the person; and ● the individual could otherwise command in the employment marketplace. Our People Team leadership reviews comparative data derived from market research and publicly available information for each of the NEOs and then recommends compensation levels for all employees to our CEO. The CEO then, after consultation with our People Team, makes recommendations to the Corporate Governance, Nominating and Compensation Committee regarding total compensation for each NEO. The Corporate Governance, Nominating and Compensation Committee reviews and discusses the information and then determines the total compensation for each NEO, as it deems appropriate. The CEO’s total compensation is determined by the Corporate Governance, Nominating and Compensation Committee outside the presence of the CEO. The Committee’s decision regarding total compensation for the CEO is based on the philosophy outlined above and includes a review of comparative data and consideration of the accomplishments of the CEO in developing the business strategy for the Company, the performance of the Company relative to this strategy and his ability to attract and retain senior management. In establishing the CEO’s total compensation, the Corporate Governance, Nominating and Compensation Committee is also mindful of the prior results of the shareholder’s Advisory Vote on Executive Compensation. 61 Table of Contents We provide a base salary to our NEOs to compensate them for services rendered on a day-to-day basis during the year and to provide sufficient fixed cash compensation to allow them to focus on their ongoing responsibilities. The base salaries of all executive officers are reviewed annually and adjusted when necessary to reflect individual roles and performance as well as market conditions. Annual Cash Incentive Bonuses We use annual cash incentive bonuses to communicate specific goals that are of primary importance during the coming year and motivate our senior officers and NEOs to achieve these goals. Each year, we assess if our corporate financial and strategic objectives are optimally aligned with our management incentive compensation plan to motivate and reward our senior executives, including our NEOs, to attain specific short-term performance objectives that, in turn, further our long- term business objectives. These objectives are based upon corporate or service-related targets, rather than individual objectives. In setting target payout levels under our management incentive compensation plan, our Corporate Governance, Nominating and Compensation Committee considers historical payouts, the total cost to the company should performance objectives be achieved and our retention needs. In Fiscal 2023, due to the Corporate Governance, Nominating and Compensation Committee's reassessment and the realignment of Tucows' operating segments in 2022, annual cash incentive bonuses were structured based on balanced scorecards for each business segment, including specific performance measures. Notably, bonuses were distributed semi-annually; of the first installment, 50% was paid in Company common stock, effectively meaning a quarter of the annual bonus was issued in stock. This procedure was unique to Fiscal 2023 and does not indicate a permanent policy shift. The Corporate Governance, Nominating and Compensation Committee determines the initial level of funding for the annual incentive bonus pools during the annual budgeting process and approves provisional quarterly payments, computed on a pro-rata basis, based on quarterly minimum year-to-date targets for our senior officers, including NEOs, taking into account the Company’s actual performance on a year-to-date basis. The future holdback percentage could be adjusted for each semi-annual period should circumstances warrant it. The Corporate Governance, Nominating and Compensation Committee retains the right to interpret, rescind, prescribe, amend or suspend payment under our management incentive compensation plan at any time. Changes made by the Corporate Governance, Nominating and Compensation Committee will however only be on a prospective basis so will not impact any semi-annual rights our NEO’s and senior officers may have up to the date of the change. The performance goals under our management incentive compensation plan consists of two components; namely, an incentive bonus and an overachievement bonus, each with established thresholds and maximum achievement levels. For the incentive bonus component, achievement of established targets for each NEO will equate to 100% of the bonus being paid. Where 75% of an established target is achieved (“floor level”) this will result in 50% of the bonus being paid. Below the floor level no bonus is payable. In those cases, where achievement is between the floor level and the established target, straight-line interpolation is applied from the established target levels. 62 Table of Contents The table below summarizes the 2023 and 2024 incentive bonus opportunities for our NEOs. Unaudited 2024 2023 Named Officer Target incentive Bonus Opportunity(1) Basis for Target incentive Bonus for 2024 Target incentive Bonus Opportunity(1) Basis for Target incentive Bonus for 2023 Elliot Noss $ 490,686 50% Ting targets, 20% Wavelo targets and 30% Tucows Domains targets $ 362,859 50% Ting targets, 30% Wavelo targets and 20% Tucows Domains targets Davinder Singh $ 181,176 50% Ting targets, 25% Wavelo targets and 25% Tucows Domains targets $ 153,277 50% Ting targets, 15% Wavelo targets and 35% Tucows Domains targets Justin Reilly $ 355,104 100% Wavelo targets $ 347,343 100% Wavelo targets David Woroch $ 181,176 100% Domain Services targets $ 157,064 100% Domain Services targets Bret Fausett $ 210,000 50% Ting targets, 25% Wavelo targets and 25% Tucows Domains targets $ 158,828 50% Ting targets, 15% Wavelo targets and 35% Tucows Domains targets (1) All dollar amounts below are shown U.S. dollars. Amounts payable in Canadian dollars for 2023 have been converted into U.S. dollars based upon the exchange rate of 1.3500 Canadian dollars for each U.S. dollar , the average OANDA exchange rate for 2023 as at December 31, 2023 . Amounts payable in Canadian dollars during the 2023 fiscal year have been converted into U.S. dollars based upon the exchange rate of 1.338 Canadian dollars for each U.S. dollar, which represents the year-end exchange rate as at December 31, 2023 Our Corporate Governance, Nominating and Compensation Committee met in March 2024 and determined the achievement of the financial objectives applicable under the management incentive compensation plan for 2023 had been partially achieved. In connection with the Corporate Governance, Nominating and Compensation Committee’s annual review process, the Committee also approved a new set of performance goals under our management incentive compensation plan for Fiscal 2024 and decided not to increase the incentive bonus target opportunity for our NEOs. 63 Table of Contents Equity-Based Awards We believe that equity-based awards encourage our NEOs to focus on the long-term performance of our business. Our Board grants equity awards to executives and other employees in order to enable them to participate in the long-term appreciation of our stock price. Additionally, we believe our equity awards provide an important retention tool for our NEOs, as they are subject to multi-year vesting. The equity awards can be Company Options and Subsidiary Options. To date, we have not adopted stock ownership guidelines for our NEOs. Historically, we have granted equity-based awards in the form of Company Options, including options granted at the commencement of employment and additional awards each year. The size of the initial option grant made to each NEO upon joining our company is primarily based on competitive conditions applicable to the NEO's specific position. For subsequent equity grants to our NEOs, our Corporate Governance, Nominating and Compensation Committee receives input from our CEO and the People Team leadership. The Company granted Ting Subsidiary Options to certain NEOs on January 16, 2023. The Ting Equity Compensation Plan (ECP) includes private subsidiary stock which have been established for the benefit of the employees, officers, directors and certain consultants of Ting. The Ting stock options were introduced in order to provide variable compensation that helps retain executives and ensures that our executives' interests are aligned with those stakeholders of the business to grow the long-term value. The maximum number of Ting common units that have been set aside for issuance under the plan is 10 million units, currently there are 100 million common units outstanding. Generally, options issued under the ECP vest over a four-year period and have a term not exceeding seven years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share-based instrument. No Company Option grants have yet been awarded for Fiscal 2024. In connection with its annual review process, the Corporate Governance, Nominating and Compensation Committee approved, effective June 29, 2023, the following Company Option awards to our NEOs. These options vest in equal installments on each of the first four anniversaries of the grant date, generally subject to the NEO’s continued employment with us. The following table sets forth the number of Company Options granted in Fiscal 2023 and their corresponding aggregate grant date fair value as of December 31, 2023 . Name Number of Company Options Aggregate Grant Date Fair Value (US Dollars) Elliot Noss 5,000 $ 55,815 Davinder Singh 5,000 $ 55,815 Justin Reilly - - David Woroch 5,000 $ 55,815 Bret Fausett 3,500 $ 39,070 The following table sets forth the number of Subsidiary Options granted in Fiscal 2023 and their corresponding aggregate grant date fair value as of December 31, 2023 Name Number of Subsidiary Options Aggregate Grant Date Fair Value (US Dollars) Elliot Noss 2,000,000 $ 201,700 Davinder Singh 50,000 $ 5,043 Bret Fausett 50,000 $ 5,043 During Fiscal 2023 options exercised and vested for our named executive officers were as follows: Name Company options exercised during Fiscal 2023 Company options vested during Fiscal 2023 Subsidiary options exercised during Fiscal 2023 Subsidiary options vested during Fiscal 2023 Wavelo Subsidiary options vested during Fiscal 2023 Ting Elliot Noss - 4,750 - 500,000 945,945 Davinder Singh - 3,625 - 75,000 23,648 Justin Reilly - 5,063 - 2,250,000 - David Woroch - 4,625 - - - Bret Fausett - 3,625 - 75,000 23,648 64 Table of Contents Severance and Change of Control Benefits Our Board believes that it is necessary to offer senior members of our executive team severance benefits to ensure that they remain focused on executing our strategic plans, including in the event of a proposed or actual acquisition. We have entered into employment agreements with our NEOs to provide them with additional severance benefits upon an involuntary termination of employment under specified circumstances prior to and following a change of control. The terms of these agreements are described below in "Potential Payments on Termination or Change in Control." Perquisites We do not provide any significant perquisites or other personal benefits to our NEOs. Benefits We provide the following benefits to our NEOs. We believe these benefits are typical of the companies with which we compete for employees: • healthcare insurance; • life insurance and accidental death and dismemberment insurance; • long term disability insurance; • a registered retirement savings matching program; • a healthcare spending account; • a car allowance; • an annual medical; and • an employee assistance program. Certain Corporate Governance Considerations We currently do not require our executive officers to own a particular number of shares of our common stock. The Corporate Governance, Nominating and Compensation Committee is satisfied that stock and option holdings among our executive officers are sufficient at this time to provide motivation and to align their interests with those of our stockholders. However, we prohibit all directors and employees from hedging their economic interest in the Company securities that they hold. Tax Considerations We do not provide any tax gross-ups to our executive officers or directors. In designing our compensation programs, the Corporate Governance, Nominating and Compensation Committee considers the financial accounting and tax consequences to Tucows as well as the tax consequences to our employees. In determining the aggregate number and mix of equity grants in any fiscal year, the Corporate Governance, Nominating and Compensation Committee and management consider the size and share-based compensation expense of the outstanding and new equity awards. Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction to public companies for annual compensation over $1 million (per individual) paid to their chief executive officer, chief financial officer and the next three most highly compensated executive officers (as well as certain other officers who were covered employees in years after 2016). As a result, most of the compensation payable to our NEOs in excess of $1 million per person in a year will not be fully deductible. Tax deductibility is not the primary factor used by the Committee in setting compensation, however, and corporate objectives may not necessarily align with the requirements for full deductibility under Section 162(m). Our Corporate Governance, Nominating and Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our NEOs. We believe it is important and in the best interests of our shareholders to preserve flexibility in administering compensation programs as corporate objectives may not always be consistent with the requirements for full deductibility under Section 162(m). Compensation Risk Assessment The Corporate Governance, Nominating and Compensation Committee oversaw the performance of a risk assessment of our Executive Compensation Program to ascertain any potential material risks that may be created by this program. Because performance-based incentives are used in our executive compensation program, it is important to ensure that these incentives do not result in our NEOs taking unnecessary or excessive risks or any other actions that may conflict with our long-term interests. The Corporate Governance, Nominating and Compensation Committee considered the following attributes of our Executive Compensation Program: • the balance between short- and long-term incentives; • use of qualitative as well as quantitative performance factors in determining compensation payouts, including minimum and maximum performance thresholds, funding that is based on actual results measured against pre-approved financial and operational goals and metrics that are clearly defined; • incentive compensation that includes a stock component where value is best realized through long-term appreciation of stockholder value; and • incentive compensation components that are paid or vest over an extended period. The Corporate Governance, Nominating and Compensation Committee focuses primarily on the compensation of our NEOs because risk-related decisions depend predominantly on their judgment. The Corporate Governance, Nominating and Compensation Committee believes that risks arising from our policies and practices for compensation of other employees are not reasonably likely to have a material adverse effect on us. 65 Table of Contents Compensation Committee Report The Corporate Governance, Nominating and Compensation Committee has reviewed and discussed the foregoing CD&A with management and, based on such review and discussions, the Corporate Governance, Nominating and Compensation Committee has recommended to the Board that the CD&A be included in this Annual Report. Submitted by the following members of the Corporate Governance, Nominating and Compensation Committee: Robin Chase (Chair) Allen Karp Gigi Sohn Summary Compensation Table The following Summary Compensation table provides a summary of the compensation earned by our NEOs, comprising our Chief Executive Officer, our Chief Financial Officer, and our next three most highly compensated executive officers for services rendered in all capacities during 2023. Specific aspects of this compensation are dealt with in further detail in the tables that follow. All dollar amounts below are shown in U.S. dollars. If necessary, amounts that were paid in Canadian dollars during Fiscal 2023 were converted into U.S. dollars based upon the exchange rate of 1.300 Canadian dollars for each U.S. dollar, which represents the average exchange rate for 2023 . Name and Principal Position Year Salary ($) Bonus (1)(2) ($) Option Awards (3) ($) All Other Compensation (4) ($) Total ($) (a) (b) (c) (d) (e) (f) (g) Elliot Noss 2023 $ 444,275 $ 383,666 $ 55,815 $ 210,372 $ 1,094,128 President and Chief Executive Officer of Tucows and Ting 2022 409,156 281,452 73,781 495,571 1,259,960 2021 397,112 242,240 125,719 8,379 773,450 Davinder Singh 2023 281,859 157,828 55,815 16,920 512,421 Chief Financial Officer 2022 269,447 137,816 73,781 176,012 657,056 2021 260,840 112,162 125,719 7,182 505,903 Justin Reilly 2023 581,085 348,652 - 1,482 931,219 Chief Executive Officer, Wavelo 2022 603,031 361,818 73,781 2,196,080 3,234,710 2021 317,128 114,166 100,575 1,197 533,066 David Woroch 2023 287,894 161,002 55,815 7,041 511,752 Chief Executive Officer, Tucows Domains 2022 282,553 144,308 147,561 6,701 581,123 2021 269,165 134,584 100,575 7,182 511,506 Bret Fausett 2023 321,760 167,290 39,070 17,913 546,034 Chief Legal Officer and Vice-President, Regulatory Affairs 2022 286,436 120,578 73,781 73,164 553,959 2021 274,461 98,806 125,719 - 498,986 (1) Represents bonus earned under our incentive programs during the fiscal years ended December 31, 2023, 2022 and 2021 . Of the 2023 amount, the following amounts will be paid in March 2024 (unaudited): Elliot Noss $ 174,887 Davinder Singh $ 74,942 Justin Reilly $ 106,531 David Woroch $ 84,585 Bret Fausett $ 79,883 Of the 2022 amount, the following amounts were paid in February 2023 (unaudited): Elliot Noss $ 107,611 Davinder Singh $ 50,389 Justin Reilly $ 233,839 David Woroch $ 57,441 Bret Fausett $ 45,773 66 Table of Contents Of the 2021 amount, the following amounts were paid in February 2022 (unaudited): Elliot Noss $ 104,902 Davinder Singh $ 48,646 Justin Reilly $ 49,233 David Woroch $ 59,539 Bret Fausett $ 43,403 (2) On August 14, 2023 the NEOs received grants of common stock of the Company in lieu of a portion of their cash bonuses. (3) Represents the aggregate grant date fair value of such Company Options, calculated in accordance with FASB ASC 718. Please see “Note 16– Stock Option Plans” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for a discussion of the assumptions underlying these calculations. (4) Amounts reported in this column are comprised of the following items: Unaudited Additional Health Car One-Time Subsidiary Retirement All Other Spending Allowance Payment Stock Options (1) Allowance Compensation Year Credits ($) ($) ($) ($) ($) ($) Elliot Noss 2023 $ 2,001 $ 6,671 $ - $ 201,700 $ - $ 210,372 2022 1,154 6,656 - 487,761 - 495,571 2021 1,197 7,182 - - - 8,379 Davinder Singh 2023 - 5,559 - 5,043 6,318 16,920 2022 1,154 5,547 96,147 73,164 - 176,012 2021 1,197 5,985 - - - 7,182 Justin Reilly 2023 1,482 - - - - 1,482 2022 1,154 - - 2,194,926 - 2,196,080 2021 1,197 - - - - 1,197 David Woroch 2023 1,482 5,559 - - - 7,041 2022 1,154 5,547 - - - 6,701 2021 1,197 5,985 - - - 7,182 Bret Fausett 2023 - - - 5,043 12,870 17,913 2022 - - - 73,164 - 73,164 2021 - - - - - - (1) Represents the aggregate grant date fair value of such Subsidiary Options, calculated in accordance with FASB ASC 718. Please see “Note 16– Stock Option Plans” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for a discussion of the assumptions underlying these calculations. Executive Pay Ratio In August 2015 pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (‟PEO”). The Company’s PEO is Mr. Noss. The annual total compensation for fiscal year 2023 for our PEO was $1,093,640, and for the median employee was $60,937. The resulting ratio of our PEO’s pay to the pay of our median employee for fiscal year 2023 is 18 to 1. The measurement was prepared as of December 31, 2023 based on active employees as at that date and total compensation for the annual period then ended. The Company utilized tax records to determine the total annual compensation based on gross employment income for each individual Form W-2 or equivalent for our international subsidiaries. Gross employment income includes salaries, bonus, company medical benefits, car allowance and benefits from exercise of stock-options. We determined the compensation of our median employee (i) by calculating the annual total compensation described above for each of our employees, (ii) ranking the annual total compensation of all employees except for the PEO from lowest to highest and (iii) determining the Median Employee. The Median Employee’s Fiscal 2023 compensation was then determined in a manner consistent with the Summary Compensation Table above and compared to the PEO to derive the ratio. 67 Table of Contents Grants of Plan-Based Awards The following table sets forth information concerning Company plan-based awards granted to our NEOs in 2023: Estimated future payouts under non-equity incentive plan awards(1) All other stock awards: Number of shares of stock or units (#) Exercise or base price of option awards ($/Sh) Grant date fair value of stock and option awards(2) Name Grant Date Threshold ($) Target ($) Maximum ($) (a) (b) (c) (d) (e) (f) (g) (h) Elliot Noss 6/29/2023 $ 181,429 $ 362,859 $ 362,859 5,000 $ 26.78 $ 55,815 Davinder Singh 6/29/2023 76,638 153,277 153,277 5,000 26.78 55,815 Justin Reilly - 173,672 347,343 347,343 - - - David Woroch 6/29/2023 78,532 157,064 157,064 5,000 26.78 55,815 Bret Fausett 6/29/2023 79,414 158,828 158,828 3,500 26.78 39,070 (1) The amounts represent the range of payouts under the 2023 Annual Cash Incentive Bonus plan assuming the achievement of corporate and individual performance targets as further described in "Annual Cash Incentive Bonuses." Amounts above reflect adjustment for any changes in base pay and resulting target bonus percentage during 2023. (2) Represents the grant date fair value of such awards, calculated in accordance with FASB ASC 718. Please see “Note 16 – Stock Option Plans” of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for a discussion of the assumptions underlying these calculations. The following table sets forth information concerning Subsidiary plan-based awards granted to our NEOs in 2023: Name Grant date All other option awards: Number of shares underlying Subsidiary Options Exercise or base price of Subsidiary Option awards Grant date fair value of Subsidiary Option awards (1) Elliot Noss 1/16/2023 2,000,000 $ 6.00 $ 201,700 Davinder Singh 1/16/2023 50,000 $ 6.00 $ 5,043 Justin Reilly - - - David Woroch - - - Bret Fausett 1/16/2023 50,000 $ 6.00 $ 5,043 (1) Represents the grant date fair value of such awards, calculated in accordance with FASB ASC 718. Please see “Note 16 – Stock Option Plans” of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, for a discussion of the assumptions underlying these calculations. 68 Table of Contents Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning Company Stock Options held by the named executive officers as of December 31, 2023: Name Number of Securities Underlying Unexercised Company Options (#) Exercisable Number of Securities Underlying Unexercised Company Options (#) Unexercisable Option Exercise Price ($) Option Expiration Date Elliot Noss 4,500 - $64.10 6/4/2025 4,500 - 62.12 5/27/2026 3,375 1,125 60.01 5/27/2027 2,500 2,500 79.44 5/11/2028 1,250 3,750 41.97 6/16/2029 - 5,000 26.78 6/29/2030 16,125 12,375 Davinder Singh 2,000 - $55.65 7/23/2024 2,250 - 64.10 6/4/2025 2,250 - 62.12 5/27/2026 1,687 563 60.01 5/27/2027 2,500 2,500 79.44 5/11/2028 1,250 3,750 41.97 6/16/2029 - 5,000 26.78 6/29/2030 11,937 11,813 Justin Reilly 9,000 - $55.19 9/16/2026 1,687 563 60.01 5/28/2027 2,000 2,000 79.44 5/12/2028 1,250 3,750 41.97 6/17/2029 13,937 6,313 David Woroch 2,250 - $64.10 6/4/2025 2,250 - 62.12 5/27/2026 1,687 563 60.01 5/27/2027 2,000 2,000 79.44 5/11/2028 2,500 7,500 41.97 6/16/2029 - 5,000 26.78 6/29/2030 10,687 15,063 Bret Fausett 5,000 - $53.20 9/3/2024 561 - 64.10 6/5/2025 1,124 - 62.12 5/28/2026 843 281 60.01 5/28/2027 1,249 1,249 79.44 5/11/2028 625 1,875 41.97 6/16/2029 - 1,742 26.78 6/29/2030 9,402 5,147 The stock options grants listed in the above table were issued under our 2006 Plan. 69 Table of Contents Under the 2006 Plan, these options primarily vest over a period of four years and have a 7-year term. These options are not exercisable for one year after the grant. Thereafter they become exercisable at the rate of 25% per annum, becoming fully exercisable after the fourth year. The following table sets forth information concerning subsidiary stock options held by the named executive officers as of December 31, 2023: Name Number of Securities Underlying Unexercised Subsidiary Options (#) Exercisable Number of Securities Underlying Unexercised Subsidiary Options (#) Unexercisable Option Exercise Price ($) Option Expiration Date Wavelo Ting Wavelo Ting Elliot Noss 500,000 - 500,000 - 1.27 11/8/2029 - 945,945 - 1,054,055 6.00 1/15/2030 500,000 945,945 500,000 1,054,055 Davinder Singh 75,000 - 75,000 - 1.27 11/8/2029 - 23,648 - 26,352 6.00 1/15/2030 75,000 23,648 75,000 26,352 Justin Reilly 2,250,000 - 2,250,000 - 1.27 11/8/2029 2,250,000 - 2,250,000 - Bret Fausett 75,000 - - - 1.27 11/8/2029 - 23,648 - 1,352 6.00 1/15/2030 75,000 23,648 - 1,352 The stock option grants listed in the above table were issued under the Wavelo, Inc. 2022 Equity Compensation Plan ("Wavelo ECP") and the 2022 Ting Equity Compensation Plan ("Ting ECP") adopted in 2022 and 2023 respectively. Under the Wavelo ECP, these options primarily vest over a period of three years and have a 7-year term. For the initial grants under the plan, the first 25% became exercisable within three months and vesting ratably monthly thereafter, after the third year. Under the Ting ECP, these options primarily vest over a period of four years and have a 10-year term. Director Compensation The required information regarding our director compensation is set forth in Part III, Item 10 “Directors, Executive Officers and Corporate Governance” of this Annual Report and is incorporated herein by reference. 70 Table of Contents Potential Payments on Termination or Change in Control We have certain agreements that require us to provide compensation to our NEO in the event of a termination of employment or a change in control of Tucows. These agreements are summarized following the table below and do not include any payment for termination for cause. The tables below show estimated compensation payable to each NEO upon various triggering events. Actual amounts can only be determined upon the triggering event. Unaudited Elliot Noss (1) Termination Change in 2023 without Cause (Dollar amounts in U.S. dollars) Control (Dollar amounts in U.S. dollars) Compensation Base Salary/Severance (2) $ 963,534 $ 2,963,534 Bonus Plan (3) 832,083 832,083 Acceleration of Unvested Equity Awards (4) - - Benefits (5) Car Allowance 13,341 13,341 Healthcare Flexible Spending Account 4,002 4,002 $ 1,812,960 $ 3,812,960 Unaudited Davinder Singh (1) Termination Change in 2023 without Cause (Dollar amounts in U.S. dollars) Control (Dollar amounts in U.S. dollars) Compensation Base Salary/Severance (2) 321,178 - Bonus Plan (3) 179,845 - Acceleration of Unvested Equity Awards (4) - - Benefits (5) Car Allowance 6,022 - Healthcare Flexible Spending Account - - $ 507,045 $ — Unaudited Bret Fausett (1) Termination Change in 2023 without Cause (Dollar amounts in U.S. dollars) Control (Dollar amounts in U.S. dollars) Compensation Base Salary/Severance (2) $ 350,000 $ - Bonus Plan (3) 181,973 - Acceleration of Unvested Equity Awards (4) - - Benefits (5) Car Allowance - - Healthcare Flexible Spending Account - - $ 531,973 $ — Unaudited Justin Reilly (1) Termination Change in without Cause (Dollar amounts in U.S. dollars) Control (Dollar amounts in U.S. dollars) Compensation Base Salary/Severance (2) $ 484,238 $ - Bonus Plan (3) 290,543 - Acceleration of Unvested Equity Awards (4) - - Benefits (5) Car Allowance - - Healthcare Flexible Spending Account 1,235 - $ 776,016 - 71 Table of Contents Unaudited David Woroch (1) Termination Change in without Cause (Dollar amounts in U.S. dollars) Control (Dollar amounts in U.S. dollars) Compensation Base Salary/Severance (2) $ 592,944 $ - Bonus Plan (3) 331,597 - Acceleration of Unvested Equity Awards (4) - - Benefits (5) Car Allowance 11,118 - Healthcare Flexible Spending Account 2,965 - $ 938,624 $ - (1) For the purpose of the table we assumed an annual base salary at the executive’s level as of December 31, 2023 . (2) Severance for Mr. Noss is compensation for one year plus one-month additional compensation for each completed year of service. Total compensation is capped at 24 months. For Messrs. Singh, Fausett, Reilly and Woroch, severance compensation is for six months plus one-month additional compensation for each completed year of service. Total compensation is capped at 24 months. (3) For the purpose of the table we assumed that the annual incentive bonus target as of December 31, 2023 had been achieved and that no overachievement bonus or special bonuses would be payable. (4) For purposes of the above table, we have assumed that if we terminate Mr. Noss without cause all his unvested options vest automatically and that for Messrs. Singh, Fausett, Reilly and Woroch, their options continue to vest through any severance period. On a change in control we have assumed that all unvested options for Mr. Noss vest automatically and that for Messrs. Singh, Fausett, Reilly and Woroch, their options continue to vest through and until the end of any severance period. Amounts disclosed in this table equal the closing market value of our common stock as of December 31, 2023 , minus the exercise price, multiplied by the number of unvested shares of our common stock that would vest. The closing market value of our common stock on December 31, 2023 was 27.00. (5) Pay for unused vacation, extended health, matching registered retirement savings plan benefit, life insurance and accidental death and dismemberment insurance are standard programs offered to all employees and are therefore not reported. Employment Agreements—Termination Employment contracts are currently in place for each of the NEOs. These employment contracts detail the severance payments that will be provided on termination of employment and the consequent obligations of non-competition and non-solicitation. The following details the cash severance payment that will be paid to each of the named executive officers in the event of termination without cause or termination for good reason. Upon termination without cause, Messrs. Woroch, Singh, Reilly and Fausett are each entitled to a severance payment in the amount of six months’ compensation plus one months’ compensation for each additional completed year of service. Severance payments can be made in equal monthly installments. Messrs. Woroch, Singh, Reilly and Fausett are each bound by a standard non-competition covenant for a period of twelve months following their termination. Mr. Noss’s employment agreements is subject to early termination by us due to: ● the death or disability of the executive; ● for “cause;” or ● without “cause.” If we terminate Mr. Noss without “cause,” he is entitled to receive 12 months of compensation plus one month of compensation for each year of service, to a maximum of 24 months of compensation. For purposes of the employment agreements, “cause” is defined to mean the executive’s conviction (or plea of guilty or nolo contendere) for committing an act of fraud, embezzlement, theft or other act constituting a felony or willful failure or an executive’s refusal to perform the duties and responsibilities of his position, which failure or refusal is not cured within 30 days of receiving a written notice thereof from our Board. 72 Table of Contents Employment Agreements—Change in Control Under his employment agreements, Mr. Noss is also entitled to the change in control benefits described in the following paragraph if: ● the executive resigns with or without “good reason” within the 30-day period immediately following the date that is six months after the effective date of the “change in control;” or ● within 18 months after a “change in control” and executive’s employment is terminated either: ● without “cause;” or ● by resignation for “good reason.” If an executive’s employment is terminated following a change in control under the circumstances described in the preceding paragraph, the executive is entitled to receive a lump sum payment based upon the fair market value of the Company on the effective date of the “change in control” as determined by our Board in the exercise of good faith and reasonable judgment taking into account, among other things, the nature of the “change in control” and the amount and type of consideration, if any, paid in connection with the “change in control.” Depending on the fair market value of the company, the lump sum payments range from $375,000 to $2 million for Mr. Noss. In addition to the lump sum payments, all stock options held by Mr. Noss will be immediately and fully vested and exercisable as of the date of termination. A “change in control” is generally defined as: ● the acquisition of 50% or more of our common stock; ● a change in the majority of our Board unless approved by the incumbent directors (other than as a result of a contested election); and ● certain reorganizations, mergers, consolidations, liquidations or dissolutions, unless certain requirements are met regarding continuing ownership of our outstanding common stock. “Good reason” is defined to include the occurrence of one or more of the following: ● the executive’s position, management responsibilities or working conditions are diminished from those in effect immediately prior to the change in control, or he is assigned duties inconsistent with his position; ● the executive is required to be based at a location in excess of 30 miles from his principal job location or office immediately prior to the change in control; ● the executive’s base compensation is reduced, or the executive’s compensation and benefits taken as a whole are materially reduced, from those in effect immediately prior to the change in control; or ● we fail to obtain a satisfactory agreement from any successor to assume and agree to perform our obligations to the executive under his employment agreement. Compensation Committee Interlocks and Insider Participation The members of the Corporate Governance, Nominating and Compensation Committee of our Board during 2023 we re Ms. Chase (Chair), Mr. Karp, Mr. Schwartz (until November 2023), Ms. Sohn (beginning November 2023) and Mr. Matheson (beginning November 2023). T o ensure that our compensation policies are administered in an objective manner, our Corporate Governance, Nominating and Compensation Committee is comprised entirely of independent directors. None of the members of our Corporate Governance, Nominating and Compensation Committee has ever been an officer or employee of the Company or its subsidiaries. None of our executive officers serves as a member of the Board or compensation committee of any entity that has one or more executive officers on our Board or Corporate Governance, Nominating and Compensation Committee. 73 Table of Contents ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth the beneficial ownership of our common stock, as of April 1, 2024 , by each of our directors and NEOs, as well as by all of our directors and executive officers as a group. The information on beneficial ownership in the table and related footnotes is based upon data furnished to us by, or on behalf of, the persons referred to in the table. Unless otherwise indicated in the footnotes to the table, each person named has sole voting power and sole investment power with respect to the shares included in the table. Unaudited Beneficial Ownership of Company Stock Name Company Stock Beneficially Owned Excluding Options Company Stock Options Exercisable within 60 Days of April 1, 2024 Total Common Stock Beneficially Owned Percent of Class(1) Elliot Noss 96 Mowat Avenue Toronto, Ontario, Canada 685,680 (2) 17,375 703,055 6.4 % Davinder Singh 8,082 (5) 13,187 21,269 * Justin Reilly 1,944 14,937 16,881 * David Woroch 125,348 (3) 11,687 137,035 1.3 % Bret Fausett 31,695 (6) 10,652 42,347 * Robin Chase 29,172 18,750 47,922 * Erez Gissin 17,887 18,750 36,637 * Jeffrey Schwartz 12,375 18,750 31,125 * Allen Karp 18,014 (4) 18,750 36,764 * Marlene Carl 18 8,125 8,143 * Gigi Sohn - - - * Lee Matheson - - - * All directors and executive officers as a group (12 persons) 930,215 150,963 1,081,178 11.6 % * Less than 1%. (1) Based on 10,928,623 shares outstanding as of March 27, 2024, and stock options exercisable within 60 days of April 1, 2024. (2) Includes an aggregate of 122,309 shares of common stock that are held in Mr. Noss’s RRSP accounts. Includes 1,639 shares of common stock that are held in Mr. Noss’s TFSA account. Includes 2,470 shares held by Mr. Noss's spouse, for which Mr. Noss disclaims ownership, and 38,968 shares of common stock that are held in Mr. Noss’s former spouses name, over which he has voting power only, pursuant to a separation agreement of 2013. Includes 514,951 shares of Common Stock that are subject to a loan and pledge arrangement entered into by Mr. Noss in order to satisfy the required Canadian taxes and exercise price due in connection with the exercise of expiring options. (3) Includes 54,984 shares of common stock that are held in Mr. Woroch’s RRSP account and 10,750 shares of common stock held in his wife’s RRSP account. (4) Includes 3,000 shares of common stock that are held directly by Mr. Karp’s wife. (5) Includes 319 shares held in Mr. Singh's Deferred Profit Sharing Plan (DPSP) account. (6) Includes 590 shares held in Mr. Fausett's 401(K) retirement savings plan. 74 Table of Contents Share Ownership of Certain Beneficial Owners The following table sets forth information with respect to each shareholder known to us to be the beneficial owner of more than 5% of our outstanding common stock a s of April 1, 2024 e xcept for Mr. Noss, whose beneficial ownership of shares is descri bed in the table above. Beneficial Ownership of Common Stock Name and Address of Beneficial Owner Number of Shares Beneficially Owned Percent of Class (1) Edgepoint Investment Group, Inc. 2,106,165 (3) 19.3% 150 Bloor Street West, Suite 500 Toronto, Ontario, Canada, M5S 2X9 Investmentaktiengesellschaft fuer langfristige Invetoren TGV 2,013,932 (2) 18.5% Ruengsdorfer Str. 2e 53173 Bonn, Germany Blacksheep Fund Management Limited 915,154 (4) 8.4% Rock House, Main Street, Blackrock, Co Dublin, Ireland A94 YY39 BlackRock, Inc. 706,631 (5) 6.5% 55 East 52nd Street New York, NY 10055 The Vanguard Group 694,231 (6) 6.4% 100 Vanguard Blvd. (1) Based on 10,928,623 shares outstanding as of March 27, 2024. (2) Investmentaktiengesellschaft fuer langfristige Invetoren TGV has sole dispositive power and sole voting power over 2,013,932 shares of common stock. This information is based solely on a review of a Schedule 13G filed with the SEC on February 13, 2024 by Investmentaktiengesellschaft fuer langfristige Invetoren TGV. (3) Edgepoint Investment Group, Inc. has sole dispositive power and sole voting power over 1,947,291 shares of common stock, and shared dispositive and shared voting power over 158,874 shares of common stock. This information is based solely on a review of a Schedule 13G filed with the SEC on February 14, 2024 by Edgepoint Investment Group, Inc. (4) Blacksheep Fund Management Ltd. has shared voting power and shared dispositive power over 915,154 shares of common stock. This information is based solely on a review of a Schedule 13D/A filed with the SEC on January 17, 2024 by Blacksheep Fund Management Limited. (5) Blackrock Inc. has sole voting power over 696,183 shares of common stock and sole dispositive power over 706,631 shares of common stock. This information is based solely on a review of a Schedule 13G filed with the SEC on January 29, 2024 by Blackrock Inc. (6) The Vanguard Group has sole dispositive power over 681,730 shares of common stock, shared dispositive power over 12,501 shares of common stock, and shared voting power over 9,079 shares of common stock. This information is based solely on a review of a Schedule 13G filed with the SEC on February 13, 2024 by The Vanguard Group. 75 Table of Contents Equity Compensation Plan Information The following table provides information for our Company equity compensation plans as of December 31, 2023: Plan category Number of securities to be issued upon exercise of outstanding Company Options, warrants and rights (#) Weighted average exercise price of outstanding Company Options, warrants and rights ($) Number of securities remaining available for future issuance under the plan (excluding securities reflected in the first column) (#) Equity compensation plans approved by security holders: 2006 Equity Compensation Plan 1,126,382 $ 54.82 1,028,584 Equity compensation plans not approved by security holders - - - Total 1,126,382 $ 54.82 1,028,584 The following table provides information for our Wavelo equity compensation plans as of December 31, 2023: Plan category Number of securities to be issued upon exercise of outstanding Subsidiary Options, warrants and rights (#) Weighted average exercise price of outstanding Subsidiary Options, warrants and rights ($) Number of securities remaining available for future issuance under the plan (excluding securities reflected in the first column) (#) Equity compensation plans approved by security holders: 2022 Wavelo Equity Compensation Plan 16,333,233 $ 1.28 3,676,767 Equity compensation plans not approved by security holders - - - Total 16,333,233 $ 1.28 3,676,767 The following table provides information for our Ting equity compensation plans as of December 31, 2023: Plan category Number of securities to be issued upon exercise of outstanding Subsidiary Options, warrants and rights (#) Weighted average exercise price of outstanding Subsidiary Options, warrants and rights ($) Number of securities remaining available for future issuance under the plan (excluding securities reflected in the first column) (#) Equity compensation plans approved by security holders: 2023 Ting Equity Compensation Plan 7,504,269 $ 6.00 2,495,731 Equity compensation plans not approved by security holders - - - Total 7,504,269 $ 6.00 2,495,731 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Review, Approval or Ratification of Transactions with Related Persons The Audit Committee of the Board is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer or director that would potentially require disclosure pursuant to the Audit Committee charter. As of the date of this Annual Report on Form 10-K, we expect that any transactions in which related persons have a direct or indirect interest will be presented to the Audit Committee for review and approval. While neither the Audit Committee nor the board have adopted a written policy regarding related party transactions, the Audit Committee makes inquiries to our management and our auditors when reviewing such transactions. Neither we nor the audit committee are aware of any transaction that was required to be reported with the SEC where such policies and procedures either did not require review or were not followed. Director Independence Our Board has determined that each of Messrs. Karp, Gissin, Matheson, and Schwartz, Ms. Chase, Ms. Carl, and Ms. Sohn are independent directors, as prescribed by the listing standards of the NASDAQ Capital Market. In this Annual Report, each of these seven directors are referred to individually as an “independent director” and collectively as the “independent directors”. In addition, our Board has determined that each member of our Audit Committee satisfies the applicable audit committee independence standards as prescribed by the listing standards of the NASDAQ Capital Market and Rule 10A-3 under the Exchange Act, and that each member of our Corporate Governance, Nomination and Compensation Committee satisfies the applicable compensation committee member independence standards as prescribed by the listing standards of the NASDAQ Capital Market and Rule 10C-1 under the Exchange Act. 76 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES A summary of the fees of Deloitte LLP for the year ended December 31, 2023 and KPMG LLP for the year ended December 31, 2022 are set forth below: 2023 Fees 2022 Fees Audit Fees (1) $ 566,000 $ 789,000 Tax Fees (2) 51,000 74,000 All Other Fees (3) - 32,000 Total Fees $ 617,000 $ 895,000 (1) Consists of fees and expenses for (a) the annual audits of our consolidated financial statements and the accompanying attestation report regarding our ICFR contained in our Annual Report on Form 10-K, (b) the review of quarterly financial information included in our Quarterly Reports on Form 10-Q, and (c) audit services related to mergers and acquisitions. (2) Consists of fees and expenses for tax compliance and advisory services. (3) All other services not included in the above. Audit Committee pre-approval of audit and permissible non-audit services of independent auditors. The Audit Committee has adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other non-audit services that may be provided to us by our independent auditors. Under this policy, the Audit Committee pre-approves all audit and certain permissible accounting and non-audit services performed by the independent auditors. These permissible services are set forth on an attachment to the policy that is updated at least annually and may include audit services, audit-related services, tax services and other services. For audit services, the independent auditor provides the audit committee with an audit plan including proposed fees in advance of the annual audit. The Audit Committee approves the plan and fees for the audit. With respect to non-audit and accounting services of our independent auditors that are not pre-approved under the policy, the employee making the request must submit the request to our Chief Financial Officer. The request must include a description of the services, the estimated fee, a statement that the services are not prohibited services under the policy and the reason why the employee is requesting our independent auditors to perform the services. If the aggregate fees for such services are estimated to be less than or equal to $50,000, our Chief Financial Officer will submit the request to the chairperson of the audit committee for consideration and approval, and the engagement may commence upon the approval of the chairperson. The chairperson is required to inform the full Audit Committee of the services at its next meeting. If the aggregate fees for such services are estimated to be greater than $50,000, our Chief Financial Officer will submit the request to the full Audit Committee for consideration and approval, generally at its next meeting or special meeting called for the purpose of approving such services. The engagement may only commence upon the approval of full Audit Committee. 77 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report on Form 10-K: 1. Financial Statements. The financial statements listed in the accompanying index to consolidated financial statements and condensed financial statements of Tucows Inc. are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedules. Schedules are not submitted because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits. The Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in the footnotes below. Exhibit No. Description 2.1 Stock Purchase Agreement, dated as of January 20, 2017, by and among Tucows Inc., Tucows (Emerald), LLC, Rightside Group, Ltd., Rightside Operating Co. and eNom, Incorporated (Incorporated by reference to Exhibit 2.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on January 23, 2017). 2.2 First Amendment, dated as of June 13, 2017, to Stock Purchase Agreement, dated as of January 20, 2017, by and among Tucows Inc., Tucows (Emerald), LLC, Rightside Group, Ltd., Rightside Operating Co. and eNom, Incorporated (Incorporated by reference to Exhibit 2.3 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on June 15, 2017, 2017). 2.3 Asset Purchase Agreement, dated as of March 18, 2019, by and among Tucows Inc., Ting Fiber, Inc., NetNames European Holdings ApS, NetNames GmbH, CSC Administrative Services Limited UK, Corporation Service Company and Ascio Technologies, Inc. (Incorporated by reference to Exhibit 2.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on March 20, 2019). 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). 97.1# Compensation Recoupment Policy of Tucows Inc., dated November 17, 2023. 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). 4.1 Description of Securities of the Registrant. 10.1* 2006 Equity Compensation Plan, as amended and restated, and approved by Shareholders as of September 8, 2020 (Incorporated by reference to Exhibit 4.1 filed with Tucows form S-8 as filed with the SEC on November 25, 2020). 10.2* Employment Agreement, dated as of January 22, 2003, by and between Tucows.com Co. and Elliot Noss (Incorporated by reference to Exhibit 10.3 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the SEC on March 28, 2003). 10.3 Lease between 707932 Ontario Limited and Tucows International Corporation, dated as of December 10, 1999 (Incorporated by reference to exhibit number 10.9 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the SEC on April 1, 2002). 10.4 Lease extension between 707932 Ontario Limited and Tucows Inc. and Tucows.com Co., dated as of September 18, 2004 (Incorporated by reference to Exhibit 10.8 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 24, 2005). 10.5 Third Lease Extension and Amending Agreement, dated as of January 1, 2019, by and between 707921 Ontario Limited and Tucows (Delaware) Inc. and Tucows.com Co., (Incorporated by reference to Exhibit 10.5 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 4, 2020). 10.6* Description of Tucows Fiscal 2004 At Risk Compensation Plan (Incorporated by reference to Exhibit 10.9 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 24, 2005). 10.7 Amended and Restated Senior Secured Credit Agreement, dated as of June 14, 2019, by and among Tucows.com Co., Ting Fiber, Inc., Ting, Inc., Tucows (Delaware) Inc., Tucows (Emerald), LLC, as Borrowers, Tucows, Inc., as parent, Royal Bank of Canada, as Administrative Agent, and Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia, HSBC Bank Canada and Canadian Imperial Bank of Commerce, as Lenders (Incorporated by reference to Exhibit 10.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on June 18, 2019). 78 Table of Contents Exhibit No. Description 10.8 Amending Agreement No. 1, dated as of November 27, 2019, to the Amended and Restated Senior Secured Credit Agreement, dated as of June 14, 2019 (Incorporated by reference to Exhibit 10.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on December 4, 2019). 10.9 Second Amended and Restated Senior Secured Credit Agreement, dated as of October 26, 2021, by and among Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc., Tucows (Emerald), LLC, as Borrowers, Tucows Inc. and certain other subsidiaries thereof, as Guarantors, Royal Bank of Canada, as Administrative Agent, and Bank of Montreal, Royal Bank of Canada, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, HSBC Bank Canada and Toronto Dominion-Bank as Lenders (Incorporated by reference to Exhibit 10.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on November 18, 2021). 10.10 Asset Purchase Agreement, dated as of August 1, 2020, by and between Tucows Inc., and DISH WIRELESS L.L.C. (Incorporated by reference to Exhibit 10.1 filed with Tucows’ Quarterly Report on Form 10-Q on November 5, 2020). 10.11 Mobile Virtual Network Enabler (“MVNE”) Master Services Agreement, dated as of August 1, 2020, by and between Ting Inc., and DISH WIRELESS L.L.C (Incorporated by reference to Exhibit 10.1 filed with Tucows’ Quarterly Report on Form 10-Q on November 5, 2020). 10.12 Third Amended and Restated Senior Secured Credit Agreement, dated as of August 8, 2022, by and among Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Tucows (Emerald), LLC, Wavelo Inc., as Borrowers, Tucows Inc. and certain other subsidiaries thereof, as Guarantors, Royal Bank of Canada, as Administrative Agent, and Bank of Montreal, Royal Bank of Canada, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, HSBC Bank Canada and Toronto Dominion-Bank as Lenders (Incorporated by reference to Exhibit 10.3 filed with Tucows Quarterly Report on Form 10-Q on November 3, 2022). 10.13 Amending Agreement No. 1 to the Third Amended and Restated Senior Secured Credit Agreement, dated as of November 2, 2022, by and among Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Tucows (Emerald), LLC, Wavelo, Inc. as Borrowers, Tucows Inc. and certain other subsidiaries thereof, as Guarantors, Royal Bank of Canada, as Administrative Agent, and Bank of Montreal, Royal Bank of Canada, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, HSBC Bank Canada and Toronto Dominion-Bank as Lenders. (Incorporated by Reference to Exhibit 10.13 filed with Tucows' Quarterly Report on Form 10-K on March 15, 2023) 10.14 Amending Agreement No. 2 to the Third Amended and Restated Senior Secured Credit Agreement, dated as of March 14, 2023, by and among Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Tucows (Emerald), LLC, Wavelo, Inc. as Borrowers, Tucows Inc. and certain other subsidiaries thereof, as Guarantors, Royal Bank of Canada, as Administrative Agent, and Bank of Montreal, Royal Bank of Canada, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, HSBC Bank Canada and Toronto Dominion-Bank as Lenders. (Incorporated by Reference to Exhibit 10.14 filed with Tucows' Quarterly Report on Form 10-K on March 15, 2023) 10.15 Series A Preferred Unit Purchase Agreement, dated as of August 8, 2022, by and among Ting Fiber, LLC, a Delaware limited liability company and Generate TF Holdings, LLC (Incorporated by Reference to Exhibit 10.4 filed with Tucows' Quarterly Report on Form 10-Q on November 3, 2022). 10.16 Wavelo, Inc. 2022 Equity Compensation Plan (September 22, 2022) (Incorporated by Reference to Exhibit 10.16 filed with Tucows' Quarterly Report on Form 10-K on March 13, 2023) 10.17 Ting Fiber, LLC 2022 Equity Compensation Plan (December 15, 2022) ( Incorporated by Reference to Exhibit 10.17 filed with Tucows' Quarterly Report on Form 10-K on March 13,2023) 10.18 Credit Agreement, dated as of September 22, 2023, by and among, Tucows Inc. and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo Inc., and Tucows (Emerald), LLC, Bank of Montreal as Agent and other parties thereto (Incorporated by References to Exhibit 10.1 filed with Tucows' Current Report on Form 8-K, as filed with the SEC on September 25, 2023). 79 Table of Contents Exhibit No. Description 21.1# Subsidiaries of Tucows Inc. 23.1# Consent of Deloitte LLP, Independent Registered Public Accounting Firm. 23.2# Consent of KPMG LLP, Independent Registered Public Accounting Firm. 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# Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH# Inline XBRL Taxonomy Extension Schema 101.CAL# Inline XBRL Taxonomy Extension Calculation 101.DEF# Inline XBRL Taxonomy Extension Definition 101.LAB# Inline XBRL Taxonomy Extension Labels 101.PRE# Inline XBRL Taxonomy Extension Presentation 104 The cover page from this Annual Report on Form 10-K, formatted as Inline XBRL. * Management or compensatory contract. # Filed herewith. † Furnished herewith. ITEM 16. FORM 10-K SUMMARY Not applicable. 80 Table of Contents INDEX TO FINANCIAL STATEMENTS Consolidated Financial Statements of Tucows Inc. Pages Consolidated Financial Statements of Tucows Inc. 1 Report of Independent Registered Public Accounting Firm ( Deloitte LLP , Toronto, Canada PCAOB ID: 1208 ) 2 Report of Independent Registered Public Accounting Firm (Deloitte LLP, Toronto, Canada PCAOB ID: 1208 ) 3 Report of Independent Registered Public Accounting Firm (KPMG LLP, Toronto, Ontario, PCAOB 1D: 85) 5 Consolidated Balance Sheets as of December 31, 2023 and 2022 6 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 7 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 8 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 9 Notes to Consolidated Financial Statements 10 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Tucows Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Tucows Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as at and for the year ended December 31, 2023 of the Company and our report dated April l, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Material Weakness A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment: Ineffective information technology general controls specifically associated with user access and program change management controls. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2023, of the Company, and this report does not affect our report on such financial statements. /s/ Deloitte LLP Chartered Professional Accountants Licensed Public Accountants Toronto, Canada April 1, 2024 F-2 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Tucows Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Tucows Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows, for the year ended December 31, 2023, and the related notes and the schedule of the Condensed Financial Statements of Tucows Inc. (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2024, expressed an adverse opinion on the Company’s internal control over financial reporting because of a material weakness. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. F-3 Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue — Refer to notes 11 and 21 to the financial statements Critical Audit Matter Description The Company’s revenues are derived from (a) the provisioning of retail fiber internet services, through Ting, (b) software solutions and professional services through Wavelo; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue through Tucows Domains Services (“Tucows Domains”). Given the Company’s process to record revenue for Ting and Tucows Domains is highly dependent on information technology systems (“IT systems”), and is impacted by the material weakness identified by management as described in Management’s Annual Report on Internal Control over Financial Reporting, we identified the evaluation of the nature and sufficiency of audit evidence over revenue as a critical audit matter, as it required an especially high level of auditor judgment. Auditing revenue resulted in an increased extent of audit effort and the nature of audit procedures were designed to obtain and evaluate audit evidence outside of the IT systems. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to revenue for Ting and Tucows Domains, taking into account ineffectiveness of certain key IT general controls, included the following, among others: ● Reconciled the extract of revenue transactions from the billing systems to the general ledger; ● For a sample of revenue transactions from the general ledger, obtained and inspected source documents, including contracts, invoices, proof of service, subsequent cash receipts, and history of customer payments where applicable; and ● For a sample of Tucows Domains revenue transactions, agreed them to third party registry information and Internet Corporation for Assigned Names and Numbers (ICANN) database. Property and equipment — Refer to notes 2 and 4 to the financial statements Critical Audit Matter Description The Company has been investing in its Ting fiber network. The buildout of the fiber network includes costs relating to the design, procurement of materials, construction of primary infrastructure and customer installation. The Company’s accounting for additions to the fiber network assets include costs relating to material, labor, capitalized interest, vehicle, installation, and construction costs associated with the construction of cable transmission and distribution facilities. The process to determine which labor costs are eligible for capitalization is manual in nature, requires management judgment and the use of complex calculations based on various inputs and assumptions. We identified the auditing of capitalized labor additions as a critical audit matter, as it required a high level of auditor judgment and an increased extent of audit effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to capitalized labor additions included the following, among others: ● Evaluated management’s policy for determining activities eligible for capitalization by analyzing specific facts and circumstances against relevant accounting guidance; and ● For a sample of additions (i) evaluated whether the activities were eligible for capitalization, (ii) obtained evidence to support the accuracy of inputs in the calculation, such as labor rate and time incurred by relevant personnel, and (iii) conducted inquiries with management and project personnel outside of finance to further assess the reasonableness of time allocated to the capitalized activities. /s/ Deloitte LLP Chartered Professional Accountants Licensed Public Accountants Toronto, Canada April 1, 2024 We have served as the Company's auditor since 2023. F-4 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Tucows Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Tucows Inc. (the Company) as of December 31, 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the two‑year period ended December 31, 2022, and the related notes, and the schedule of the Condensed Financial Statements of Tucows Inc. as of December 31, 2022 and for each of the years in the two‑year period ended December 31, 2022 (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP Chartered Professional Accountants, Licensed Public Accountants We had served as the Company’s auditor from 2001 - 2023. Vaughan, Canada March 15, 2023, except for the schedule of the Condensed Financial Statements of Tucows Inc., which is as of April 1, 2024. F-5 Table of Contents Tucows Inc. Consolidated Balance Sheets (Dollar amounts in thousands of U.S. dollars) December 31, December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 92,687 $ 23,496 Restricted cash (note 9) 3,639 - Accounts receivable, net of allowance for doubtful accounts of $ 511 as of December 31, 2023 and $ 693 as of December 31, 2022 22,206 18,404 Contract asset, net current portion 1,417 5,159 Inventory 6,786 7,284 Prepaid expenses and deposits 17,387 17,005 Derivative instrument asset, current portion (note 7) 2,277 1,903 Deferred costs of fulfillment, current portion (note 12 (b)) 95,649 94,198 Income taxes recoverable 709 2,471 Total current assets 242,757 169,920 Contract asset, net long-term portion (note 11) - 2,328 Deferred costs of fulfillment, long-term portion (note 12(b)) 15,419 16,476 Investments 2,012 2,012 Secured notes reserve funds (note 9) 8,652 - Property and equipment (note 4) 339,644 281,495 Right of use operating lease asset 27,467 20,489 Contract costs (Note 12(a)) 2,581 1,827 Intangible assets (note 5) 29,484 39,790 Goodwill (note 5) 130,410 130,410 Total assets $ 798,426 $ 664,747 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 12,676 $ 17,171 Accrued liabilities 35,356 22,653 Customer deposits 19,335 15,783 Derivative instrument liability, current portion (note 7) - 389 Operating lease liability, current portion (note 13) 5,397 4,642 Deferred revenue, current portion (note 11) 126,733 122,894 Accreditation fees payable, current portion 609 809 Income taxes payable 1,235 2,248 Other current liabilities - 1,600 Total current liabilities 201,341 188,189 Deferred revenue, long-term portion (note 11) 21,350 22,237 Accreditation fees payable, long-term portion - 142 Operating lease liability, long-term portion (note 13) 18,255 12,438 Syndicated revolver (note 8) 210,354 238,930 Notes payable (note 9) 222,895 - Redeemable preferred units - no par value, 33,333,333 shares authorized; 15,243,600 shares issued and outstanding as of December 31, 2023 and 14,583,333 shares issued and outstanding as of December 31, 2022 (note 14) 111,390 90,434 Deferred tax liability (note 10) 2,966 15,720 Stockholders' equity (note 15) Common stock - no par value, 250,000,000 shares authorized; 10,903,405 shares issued and outstanding as of December 31, 2023 and 10,817,110 shares issued and outstanding as of December 31, 2022 34,373 31,868 Additional paid-in capital 14,072 8,106 Retained earnings (Accumulated deficit) ( 40,298 ) 55,899 Accumulated other comprehensive income (loss) (note 7) 1,728 784 Total stockholders' equity 9,875 96,657 Total liabilities and stockholders' equity $ 798,426 $ 664,747 Commitments and contingencies (note 20) See accompanying notes to consolidated financial statements F-6 Table of Contents Tucows Inc. Consolidated Statements of Comprehensive Income (Dollar amounts in thousands of U.S. dollars, except per share amounts) Year ended December 31, 2023 2022 2021 Net revenues (note 11) $ 339,337 $ 321,142 $ 304,337 Cost of revenues (note 11) Cost of revenues 202,256 196,268 193,039 Network expenses 28,222 17,433 14,769 Network, depreciation of property and equipment (note 4) 35,864 27,589 17,452 Network, amortization of intangible assets (note 5) 1,506 1,512 583 Impairment of property and equipment (note 4) 4,822 92 201 Total cost of revenues 272,670 242,894 226,044 Gross profit 66,667 78,248 78,293 Expenses: Sales and marketing 67,806 53,937 39,471 Technical operations and development 19,217 14,187 14,310 General and administrative 33,406 30,845 22,370 Depreciation of property and equipment (note 4) 567 598 534 Loss (gain) on disposition of property and equipment - 461 234 Amortization of intangible assets (note 5) 9,323 9,882 9,424 Gain on currency forward contracts (note 7) - - ( 277 ) Total expenses 130,319 109,910 86,066 Income from operations ( 63,652 ) ( 31,662 ) ( 7,773 ) Other income (expenses): Interest expense, net (note 18) ( 41,771 ) ( 14,456 ) ( 4,617 ) Loss on debt extinguishment (note 14) ( 14,680 ) - - Income earned on sale of transferred assets, net (note 18) 17,033 18,507 20,030 Other expense, net - ( 177 ) ( 370 ) Total other income (expenses) ( 39,418 ) 3,874 15,043 Income before provision for income taxes ( 103,070 ) ( 27,788 ) 7,270 Provision for (recovery of) income taxes (note 10) ( 6,873 ) ( 217 ) 3,906 Net income (loss) for the period ( 96,197 ) ( 27,571 ) 3,364 Other comprehensive income, net of tax Unrealized income (loss) on hedging activities (note 7) 1,830 418 572 Net amount reclassified to earnings (note 7) ( 886 ) 23 ( 2,565 ) Other comprehensive income (loss) net of tax expense (recovery) of $ 299 , $ 141 and ($ 595 ) for the years ended December 31, 2023, 2022 and 2021 (note 7) 944 441 ( 1,993 ) Comprehensive income (loss), net of tax for the period $ ( 95,253 ) $ ( 27,130 ) $ 1,371 Basic earnings (loss) per common share (note 19) $ ( 8.85 ) $ ( 2.56 ) $ 0.32 Shares used in computing basic earnings per common share (note 19) 10,864,086 10,769,280 10,662,337 Diluted earnings per common share (note 19) $ ( 8.85 ) $ ( 2.56 ) $ 0.31 Shares used in computing diluted earnings per common share (note 19) 10,864,086 10,769,280 10,817,468 See accompanying notes to consolidated financial statements F-7 Table of Contents Tucows Inc. Consolidated Statements of Stockholders’ Equity (Dollar amounts in thousands of U.S. dollars) Accumulated Additional other Total Common stock paid in Retained comprehensive stockholders' Number Amount capital earnings income (loss) equity Balances, December 31, 2020 10,612,414 20,798 1,458 80,106 2,336 104,698 Exercise of stock options 180,827 7,588 ( 2,770 ) - - 4,818 Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration ( 45,824 ) - ( 387 ) - - ( 387 ) Stock-based compensation (note 16) - 129 4,463 - - 4,592 Net income - - - 3,364 - 3,364 Other comprehensive income (loss) (note 7) - - - - ( 1,993 ) ( 1,993 ) Balances, December 31, 2021 10,747,417 $ 28,515 $ 2,764 $ 83,470 $ 343 $ 115,092 Exercise of stock options 40,459 1,593 ( 497 ) - - 1,096 Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration ( 3,053 ) - - - - - Stock-based compensation (note 16) 32,287 1,760 5,839 - - 7,599 Net income (loss) - - - ( 27,571 ) - ( 27,571 ) Other comprehensive income (loss) (note 7) - - - - 441 441 Balances, December 31, 2022 10,817,110 $ 31,868 $ 8,106 $ 55,899 $ 784 $ 96,657 Stock-based compensation (note 16) (1) 86,295 2,505 5,966 8,471 Net income (loss) ( 96,197 ) ( 96,197 ) Other comprehensive income (loss) (note 7) 944 944 Balances, December 31, 2023 10,903,405 $ 34,373 $ 14,072 $ ( 40,298 ) $ 1,728 $ 9,875 See accompanying notes to consolidated financial statements (1) The Company capitalizes stock-based compensation costs directly attributable to the development of qualifying assets. Qualifying assets include internally use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC 350. During the twelve months ended December 31, 2023 the Company capitalized $ 0.3 million of stock-based compensation directly attributable to the development of certain IUS assets. F-8 Table of Contents Tucows Inc. Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2023 2022 2021 Cash provided by: Operating activities: Net income (loss) for the period $ ( 96,197 ) $ ( 27,571 ) $ 3,364 Items not involving cash: Depreciation of property and equipment 36,431 28,187 17,986 Impairment of property and equipment 4,822 92 201 Amortization of debt discount and issuance costs 3,331 685 300 Amortization of intangible assets 10,829 11,394 10,007 Net amortization contract costs ( 754 ) ( 748 ) ( 717 ) Accretion of contingent consideration - 248 383 Deferred income taxes (recovery) ( 13,040 ) ( 6,981 ) ( 1,328 ) Excess tax benefits on share-based compensation expense - ( 193 ) ( 1,554 ) Net Right of use operating assets/Operating lease liability ( 406 ) ( 897 ) ( 2,204 ) Loss on disposal of domain names 5 7 1 Accretion of redeemable preferred units 14,163 3,896 - Loss on debt extinguishment 14,680 - - Write-off of debt discount and issuance cost 277 - - Loss (gain) on change in the fair value of forward contracts 1,624 281 606 Amortization of discontinued cash flow hedge ( 1,144 ) ( 761 ) - Stock-based compensation 8,134 7,599 4,592 Remeasurement of contingent consideration - ( 400 ) - Change in non-cash operating working capital: Accounts receivable ( 3,802 ) ( 3,825 ) 1,586 Contract assets 6,070 ( 6,709 ) ( 778 ) Inventory 361 ( 4,007 ) ( 787 ) Prepaid expenses and deposits ( 382 ) 3,981 ( 3,974 ) Deferred costs of fulfillment ( 394 ) 2,037 ( 1,645 ) Income taxes recoverable 734 3,355 ( 1,394 ) Accounts payable ( 5,319 ) 6,754 4,068 Accrued liabilities 9,044 7,411 4,857 Customer deposits 3,552 ( 1,191 ) 645 Deferred revenue 2,952 ( 2,667 ) ( 4,495 ) Accreditation fees payable ( 342 ) ( 101 ) ( 83 ) Net cash provided by (used in) operating activities ( 4,771 ) 19,876 29,637 Financing activities: Proceeds received on exercise of stock options - 1,096 4,818 Proceeds from issuance of notes payable 227,258 - - Redeemable preferred units redemption ( 45,718 ) 87,500 - Proceeds from redeemable preferred units 35,000 - - Deferred notes payable financing costs ( 6,738 ) - - Deferred preferred financing costs 145 ( 1,016 ) - Payment of tax obligations resulting from net exercise of stock options - - ( 387 ) Proceeds received on syndicated revolver 52,382 48,300 69,000 Repayment of syndicated revolver ( 80,182 ) ( 748 ) ( 296 ) Deferred syndicate revolver issued ( 1,711 ) - - Contingent consideration for acquisitions ( 1,600 ) ( 3,125 ) - Net cash (used in) provided by financing activities 178,836 132,007 73,135 Investing activities: Additions to property and equipment ( 92,055 ) ( 136,710 ) ( 73,175 ) Proceeds on disposal of property and equipment - - 510 Acquisition of Uniregistry, (note 3(a)) - - ( 2,499 ) Acquisition of Simply Bits, net of cash of $801 (note 3(b)) - - ( 24,028 ) Acquisition of other intangible assets ( 528 ) ( 782 ) ( 774 ) Investment in securities - - ( 2,012 ) Net cash used in investing activities ( 92,583 ) ( 137,492 ) ( 101,978 ) Increase (decrease) in cash and cash equivalents, restricted cash, and restricted cash equivalents 81,482 14,391 794 Cash and cash equivalents, restricted cash, and restricted cash equivalents beginning of year 23,496 9,105 8,311 Cash and cash equivalents, restricted cash, and restricted cash equivalents end of year $ 104,978 $ 23,496 $ 9,105 Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above: Cash and cash equivalents 92,687 23,496 9,105 Restricted cash included in funds held by trustee 3,639 - Restricted cash included in secured notes reserve funds 8,652 - Total Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period $ 104,978 $ 23,496 $ 9,105 Supplemental cash flow information: Interest paid $ 24,736 $ 10,289 $ 4,485 Income taxes paid, net $ 4,929 $ 3,883 $ 8,828 Supplementary disclosure of non-cash investing and financing activities: Property and equipment acquired during the period not yet paid for $ 6,948 $ 501 $ 99 See accompanying notes to consolidated financial statements F-9 Table of Contents Tucows Inc. Notes to Consolidated Financial Statements (Dollar amounts in thousands of U.S. dollars, except per share amounts) 1. Organization of the Company: Tucows Inc. (referred to as the “Company”, “Tucows”, “we”, “us” or through similar expressions) is a corporate parent, allocating capital and providing efficient shared services to its three businesses Ting, Wavelo and Tucows Domains Services. Ting provides retail consumers and small businesses with high-speed fixed Internet access in a number of towns and cities across the United States. Wavelo offers platform services which provide solutions to support Communication Service Providers ("CSPs") including subscription and billing management, network orchestration and provisioning, individual developer tools, and other professional services. Tucows Domains Services is a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users. 2. Significant Accounting Policies: The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars, except where otherwise noted. (a) Basis of presentation These consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated on consolidation. (b) Use of estimates The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its judgements and estimates, the recoverability of goodwill and intangible assets which requires judgment over qualitative indicators of impairment and loss contingencies. For acquired customer relationships, the Company estimates the fair value based on the income approach. The income approach is a valuation technique that calculates the fair value of an intangible asset based on the present value of future cash flows expected to be generated over the remaining useful life of the asset. This valuation involves significant subjectivity and estimation uncertainty, including assumptions related to future revenues attributable to acquired customer relationships, attrition rates and discount rates. Management bases its estimates on historical experience, available market information as applicable, and on various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company’s control. (c) Cash and cash equivalents All highly liquid investments, with an original term to maturity of three months or less are classified as cash and cash equivalents. This classification also extends to amounts in transit from payment providers and other clearing accounts. These in-transit balances have been initiated and collected from customers prior to the reporting date and are expected to settle shortly after the reporting date. Cash and cash equivalents are stated at cost which approximates market value. (d) Restricted cash Restricted cash is solely in connection with the 2023 Term Notes as defined in "Note 9 - Notes Payable" and consists of (i) securitized assets cash receipts held by trustee related to securitized assets and (ii) liquidity reserve funds. The non-current portion of the restricted cash is presented in "Secured notes reserve funds" on the Consolidated Balance Sheet. (e) Inventory Inventory primarily consists of Internet optical network terminals and customer installation equipment. All inventory is stated at the lower of cost or net realizable value. Cost is determined based on actual cost of the mobile device, accessory shipped or optical network terminals. The net realizable value of inventory is analyzed for signs of obsolescence or damage on a regular basis. If assessments regarding the above factors adversely change, we may be required to write down the value of inventory. (f) Property and equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-line basis so as to depreciate the cost of depreciable assets over their estimated useful lives at the following rates: Rate Asset Computer equipment 30 % Computer software 33 1/3 - 100 % Furniture and equipment 20 % Vehicles and tools 20 % Fiber network (years) 15 Customer equipment and installations (years) 3 Leasehold improvements Over term of lease Capitalized internal use software (years) 3 - 7 F- 10 Table of Contents The Company reviews the carrying values of its property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated undiscounted future cash flows expected to result from the use of the group of assets and their eventual disposition is less than their carrying amount, they are considered to be impaired. The amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset, with fair value being determined based upon discounted cash flows or appraised values, depending on the nature of the assets. In instances where inventory is found to be damaged, it is written off. Additions to the fiber network are recorded at cost, including all material, labor, capitalized interest, vehicle and installation and construction costs associated with the construction of cable transmission and distribution facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the fiber network level and not on a specific asset basis. For assets that are retired, the estimated historical cost and related accumulated depreciation is removed. Additions to land are recorded at cost, and include any direct costs associated with the purchase, as well as any direct costs incurred to bring it to the condition necessary for its intended use, such as legal fees associated with the acquisition and the cost of permanent improvements. Land is not depreciated. We capitalize costs for software to be used internally when we enter the application development stage. This occurs when we complete the preliminary project stage, management authorizes and commits to funding the project, and it is feasible that the project will be completed and the software will perform the intended function. We cease to capitalize costs related to a software project when it enters the post implementation and operation stage. Costs capitalized during the application development stage consist of payroll and related costs for employees who are directly associated with, and who devote time directly to, a project to develop software for internal use. External contractor costs who are directly associated with, and who devote time directly to, a project to develop software for internal use are also capitalized. Generally, we do not capitalize any general and administrative or overhead costs or costs incurred during the application development stage related to research and development, training or data conversion costs. Research and development costs and data conversion costs may be capitalized as Costs to fulfill a contract, if they relate to a specific professional services customer contract (see Note 12 - Costs to obtain and fulfill a contract). Costs related to upgrades and enhancements to internal-use software, if those upgrades and enhancements result in additional functionality, are capitalized. If upgrades and enhancements do not result in additional functionality, those costs are expensed as incurred. In determining and reassessing the estimated useful life over which the cost incurred for the software should be amortized, we consider the effects of obsolescence, technology, competition and other economic factors. (g) Derivative Financial Instruments The Company uses derivative financial instruments to manage foreign currency exchange risk. The Company accounts for these instruments in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 815, “Derivatives and Hedging” ("Topic 815" ), which requires that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. Topic 815 also requires that changes in our derivative financial instruments’ fair values be recognized in earnings, unless specific hedge accounting and documentation criteria are met (i.e., the instruments are accounted for as hedges). The Company recorded the effective portions of the gain or loss on derivative financial instruments that were designated as cash flow hedges in accumulated other comprehensive income in our accompanying Consolidated Balance Sheets. For certain foreign currency contracts, when the Company has not complied with the documentation standards required for its forward foreign exchange contracts to be accounted for as hedges the Company accounts for such forward foreign exchange contracts at their fair values with the changes in fair value recorded in net income. F- 11 Table of Contents The fair value of the forward exchange contracts is determined using an estimated credit adjusted mark-to-market valuation which takes into consideration the Company's and the counterparty's credit risk. The valuation technique used to measure the fair values of the derivative instruments is a discounted cash flow technique, with all significant inputs derived from or corroborated by observable market data, as no quoted market prices exist for the derivative instruments. The discounted cash flow techniques use observable market inputs, such as foreign currency spot, SOFR rates, forward currency and interest rates. (h) Goodwill and Other Intangible assets Goodwill Goodwill represents the excess of purchase price over the fair values assigned to the net assets acquired in business combinations. The Company does not amortize goodwill. Impairment testing for goodwill is performed annually in the fourth quarter of each year or more frequently if impairment indicators are present. Impairment testing is performed at the operating segment level. The Company has determined that it has three operating segments, Ting, Wavelo and Tucows Domains. The Company performs a qualitative assessment to determine whether there are events or circumstances which would lead to a determination that it is more likely than not that goodwill has been impaired. If, after this qualitative assessment, the Company determines that it is not more likely than not that goodwill has been impaired, then no further quantitative testing is necessary. In performance of the qualitative test, an evaluation is made of the impact of various factors to the expected future cash flows attributable to its operating segments and to the assumed discount rate which would be used to present value those cash flows. Consideration is given to factors such as macro-economic, industry and market conditions including the capital markets, the competitive environment, in addition to other internal factors including changes to our market capitalization, cash inflows, obligations and access to capital of our segments. In the event that the qualitative tests indicate that there may be impairment, quantitative impairment testing is required. If required to perform the quantitative test, the Company uses a discounted cash flow or income approach in which future expected cash flows at the operating segment level are converted to present value using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis. The discount rate reflects a market-derived weighted average cost of capital. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the Company’s expected long-term operating and cash flow performance for its operating segment. The projections are based upon the Company’s best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures and changes in future working capital. If assumptions and estimates used to allocate the purchase price or used to assess impairment prove to be inaccurate, future asset impairment charges could be required. Intangibles Assets Not Subject to Amortization Intangible assets not subject to amortization consist of surname domain names and direct navigation domain names. While the domain names are renewed annually, through payment of a renewal fee to the applicable registry, the Company has the exclusive right to renew these names at its option. Renewals occur routinely and at a nominal cost. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, economic or other factors that limit the useful life of these domain names on an aggregate basis and accordingly treat the portfolio of domain names as indefinite life intangible assets. The Company re-evaluates the useful life determination for domain names in the portfolio each year to determine whether events and circumstances continue to support an indefinite useful life. F- 12 Table of Contents The Company reviews individual domain names in the portfolio for potential impairment throughout the fiscal year in determining whether a particular name should be renewed. Impairment is recognized for names that are not renewed. Intangible Assets Subject to Amortization Intangible assets subject to amortization, consist of brand, customer relationships, technology and network rights and are amortized on a straight-line basis over their estimated useful lives as follows: (in years) Technology 2 - 7 Brand 7 Customer relationships 3 - 7 Network rights 15 The Company continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful lives of its intangible assets subject to amortization may warrant revision or that the remaining balance of such assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. (i) Revenue recognition See “Note 11 – Revenue” for a description of the Company’s revenue recognition policy and a further description of the principal activities – separated by reportable segments – from which the Company generates its revenue. (j) Contract balances The Company accounts for contract assets and liabilities (deferred revenue) on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly. Contract assets are recorded for services delivered under contracts, to the extent that the services delivered exceed the services which have been billed to the customer at the reporting date. Contract assets are transferred to receivables when the rights to consideration become unconditional. Contract assets primarily relate to long-term mobile platform services contracts. Deferred revenue primarily relates to the unearned portion of revenues received in advance related to the unexpired term of registration fees from domain name registrations and other domain related Internet services, on both a wholesale and retail basis, net of external commissions. To a lesser extent, deferred revenue also includes a portion of the transaction price received from other professional services. (k) Contract Costs See “Note 12 – Costs to obtain and fulfill a contract” for a description of the Company’s contract cost recognition policy. (l) Contract Modifications Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is considered to be a separate contract. If a contract modification is not accounted for as a separate contract, the Company accounts for the promised services not yet transferred at the date of the contract modification (the remaining promised services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining services are distinct from the services transferred on or before the date of the contract modification. The Company accounts for a contract modification as if it were a part of the existing contract if the remaining services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis). (m) Leases Under ASC 842, we determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by payments contingent on the number of Ting internet subscribers connected to a leased fiber network, and payments for maintenance and utilities. We have elected to consider leases with a term of 12 months or less as short-term, and as such these have not been recognized on the balance sheet. We recognize lease expense for short-term leases on a straight-line basis over the lease term. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. F- 13 Table of Contents (n) Accreditation fees payable In accordance with ICANN rules, the Company has elected to pay ICANN fees incurred on the registration of Generic Top-Level Domains on an annual basis. Accordingly, accreditation fees that relate to registrations completed prior to ICANN rendering a bill are accrued and reflected as accreditation fees payable. (o) Translation of foreign currency transactions The Company's functional currency is the United States dollar. Monetary assets and liabilities of the Company and of its wholly owned subsidiaries that are denominated in foreign currencies are translated into United States dollars at the exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities are translated at the historical exchange rates. Transactions included in operations are translated at the rate at the date of the transactions. (p) Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income in the year that includes the enactment date. A valuation allowance is recorded if it is not likely that a deferred tax asset will be realized. The Company recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than- not to be sustained upon audit by the relevant taxing authority and includes consideration of interest and penalties. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within 12 months of the reporting date. (q) Redeemable preferred units See "Note 14 - Redeemable preferred units" for the description and treatment of the Company's Series A Preferred Unit Purchase Agreement. (r) Stock-based compensation Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest, reduced for estimated forfeitures. The Company recognizes stock based compensation for both public company stock and private subsidiary stock - see "Note 16. Stock Option Plans." (s) Earnings per common share Basic earnings per common share has been calculated on the basis of net income for the year divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share gives effect to all dilutive potential common shares outstanding at the end of the year assuming that they had been issued, converted or exercised at the later of the beginning of the year or their date of issuance. In computing diluted earnings per share, the treasury stock method is used to determine the number of shares assumed to be purchased from the conversion of common share equivalents or the proceeds of the exercise of options. When there is a net loss from operations, the Company considers all options anti-dilutive for the purposes of calculating a diluted earnings per share. (t) Concentration of credit risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, restricted cash, accounts receivable, forward foreign exchange contracts and pay-fixed, receive-variable interest rate swap contracts. Cash equivalents consist of deposits with major commercial banks, the maturities of which are three months or less from the date of purchase. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does not require collateral from them. The counterparty to any forward foreign exchange contracts is a major commercial bank which management believes does not represent a significant credit risk. Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information. (u) Fair value measurement Fair value of financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three -tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows: Level 1—Quoted prices in active markets for identical assets or liabilities Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3—No observable pricing inputs in the market Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The fair value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accreditation fees payable, customer deposits, accrued liabilities, syndicated revolver, notes payable and redeemable preferred units (level 2 measurements) approximate their carrying values due to the relatively short periods to maturity of the instruments. The fair value of the derivative financial instruments is determined using an estimated credit-adjusted mark-to-market valuation (a level 2 measurement) which takes into consideration the Company and the counterparty credit risk. F- 14 Table of Contents (v) Investments The Company accounts for investment in entities over which it has the ability to exert significant influence, but does not control and is not the primary beneficiary of, using the equity method of accounting. The Company includes the proportionate share of earnings (loss) of the equity method investees in Other Income in the Consolidated Statements of Comprehensive Income. The proportional shares of affiliate earnings or losses accounted for under the equity method of accounting were not material for all periods presented. Equity investments without readily determinable fair value include ownership rights that do not provide the Company with control or significant influence. Such equity investments are recorded at cost, less any impairment, and adjusted for subsequent observable price changes as of the date that an observable transaction takes place. Subsequent adjustments are recorded in Other income (expense), net. (w) Segment reporting The Company operates in three operating segments, Ting, Wavelo and Tucows Domains. No operating segments have been aggregated to determine our reportable segments. Our reportable operating segments and their principal activities consist of the following: Ting This segment derives revenue from the retail high speed Internet access to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States Wavelo This segment derives revenue from platform and other professional services related to communication service providers, including Mobile Network Operators and Internet Service Providers, and are primarily generated in the United States. Tucows Domains This segment includes wholesale and retail domain name registration services and value added services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States. Our segmented results include shared services allocations, including a profit margin, from Tucows Corporate for Finance, Human Resources and other technical services, to the operating units. In addition, Wavelo charges Ting a subscriber based monthly charge for services rendered. Financial impacts from these allocations and cross segment charges are eliminated as part of the Tucows Corporate results. The Company’s assets are primarily located in Canada, the United States and Europe. ( x ) Recent Accounting Pronouncements Recent Accounting Pronouncements Adopted None. Recent Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures." The amendments in ASU 2023 - 07 improve financial reporting by requiring disclosure of incremental segment information, including significant segment expenses, on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the Chief Operating Decision Maker (“CODM”) uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment information, such as depreciation, amortization and depletion expense amounts, to be disclosed under certain circumstances. The amendments in ASU 2023 - 07 do not change or remove those disclosure requirements. The amendments in ASU 2023 - 07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023 - 07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023 - 07 retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023 - 09 "Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures." ASU 2023 - 09 is intended to improve the disclosures for income taxes to allow investors to better assess, in their capital allocation decisions, how an entity's worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cashflows. The amendments in ASU 2023 - 09 require consistent categories and greater disaggregation of information in the rate reconciliation disclosure as well as disclosure of income taxes paid disaggregated by jurisdiction. The amendments of ASU 2023 - 09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures. In March 2024, the SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition risks, data, and opportunities. The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related to a registrant’s climate-related targets, goals, and/or transition plans, and (iii) disclosure on whether and how climate-related events and transition activities impact line items above a threshold amount on a registrant’s consolidate financial statements, including the impact of the financial estimates and the assumptions used. This new rule will first be effective in our annual disclosures for the year ending December 31, 2027. We are in the process of assessing the impact on our consolidated financial statements and disclosures. F- 15 Table of Contents 3. Acquisitions: (a) Uniregistry On October 1, 2021, the Company acquired the domain registry related assets of UNR Corp., UNR Inc. and Uni Naming and Registry Ltd. (each a seller and collectively "UNR"). The purchase price was $ 3.0 million, less a purchase price adjustment of approximately $ 0.5 million relating to a working capital deficit, for net purchase consideration of $ 2.5 million. Cash Consideration, including working capital adjustment $ 2,499 Total purchase price 2,499 Accounts Receivables, net 538 Other current assets 23 Technology 3,039 Total identifiable assets 3,600 Accounts payable and accrued labilities 1,101 Total liabilities assumed 1,101 Total net assets (liabilities) assumed 2,499 Total goodwill $ - The technology assets acquired are amortized over periods of 5 - 7 years. F- 16 Table of Contents (b) Simply Bits On November 8, 2021, the Company acquired 100 % of Simply Bits, LLC via an Agreement and Plan of Merger with one of our wholly owned subsidiaries. The purchase price was $ 25.0 m illion, plus a purchase price adjustment of approximately $ 0.8 million relating to a working capital surplus and the estimated fair value of contingent consideration, for net purchase consideration of $ 25.8 million. Included in the agreement was contingent consideration totaled up to $ 1.0 million, which was due 60 days from December 31, 2021 and was paid in 2022. Cash Consideration, including working capital adjustment $ 24,829 Fair value of contingent payments 953 Total purchase price 25,782 Cash and Cash Equivalents 801 Accounts Receivables, net 87 Other current assets 759 Property and equipment 1,684 Right of use operating lease 1,804 Customer relationships 9,160 Total identifiable assets 14,295 Accounts payable and accrued labilities 307 Deferred tax liability 20 Operating lease liability 1,794 Other liabilities 498 Total liabilities assumed 2,619 Total net assets (liabilities) assumed 11,676 Total goodwill $ 14,106 4. Property and Equipment: Property and equipment consist of the following (Dollar amounts in thousands of U.S. dollars): December 31, December 31, 2023 2022 Computer equipment $ 53,818 $ 43,440 Computer software 1,926 1,935 Capitalized internal use software 38,379 25,172 Furniture and equipment 1,880 1,708 Vehicles and tools 10,594 9,144 Fiber network 215,205 168,587 Customer equipment and installations 48,041 36,382 Land 1,109 1,109 Buildings 9,118 8,864 Assets under construction 75,519 62,588 Leasehold improvements 727 624 456,316 359,553 Less: Accumulated depreciation 116,672 78,058 $ 339,644 $ 281,495 F- 17 Table of Contents Depreciation of property and equipment (Dollar amounts in thousands of U.S. dollars): Year Ended December 31, Year Ended December 31, Year Ended December 31, 2023 2022 2021 Depreciation of property and equipment $ 36,431 $ 28,187 $ 17,986 During the years ended December 31, 2023 , 2022, and 2021 property, plant, and equipment with net book values of $ 4.8 million, $ 0.1 million, and $ 0.2 million, respectively, were written off and included in impairment of property and equipment in the consolidated statement of comprehensive income. The impairment losses incurred in 2023 related to specific network assets that were identified as being damaged and no longer in use. The full cost of the identified assets was recorded as an impairment loss. 5. Goodwill and Other Intangible Assets: Goodwill Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions. Goodwill consists of the following (Dollar amounts in thousands of U.S. dollars): Ting Wavelo Tucows Domains Total Balances, December 31, 2022 $ 22,724 $ - $ 107,686 $ 130,410 Balances, December 31, 2023 $ 22,724 $ - $ 107,686 $ 130,410 The Company's Goodwill balance is $ 130.4 million as of December 31, 2023 and $ 130.4 million as of December 31, 2022 . The Company's goodwill relates 83 % ($ 107.7 million) to its Tucows Domains operating segment and 17 % ($ 22.7 million) to its Ting operating segment. Goodwill is not amortized, but is subject to an annual impairment test. The Company performed an impairment analysis as outlined in “Note 2 (h) – Significant Accounting Policies” and there were no indications of impairment for Fiscal 2023 and Fiscal 2022 . 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 ap plica ble 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. During Fiscal 2023 , we assessed whether the specific domain names acquired through the acquisition of Mailbank.com Inc. in June 2006, which were due for renewal should not be renewed. Upon review, the Company decided to renew these domain names. During the years ended December 31, 2023 , December 31, 2022 , and December 31, 2021 , no impairment of indefinite life intangible assets was recorded. Finite-life intangible assets, comprising brand, technology, customer relationships and network rights are being amortized on a straight-line basis over periods of two to fifteen years. Throughout 2023, the Company purchased $ 0.5 million in customer relationship assets through hosting agreements whereby customer assets and domain names were obtained. These customer assets are being amortized over seven years. Acquired intangible assets consist of the following (Dollar amounts in thousands of U.S. dollars): December 31, 2023 December 31, 2022 Gross Carrying Value Accumulated Amortization Total Net Book Value Gross Carrying Value Accumulated Amortization Total Net Book Value Brand $ 15,764 $ 14,894 $ 870 $ 15,764 $ 12,824 $ 2,940 Customer relationships 65,892 52,589 13,303 65,463 44,650 20,813 Technology 10,157 8,009 2,148 10,157 7,387 2,770 Network Rights 1,515 631 884 1,515 532 983 Surname domain names 11,151 - 11,151 11,155 - 11,155 Direct navigation domain names 1,128 - 1,128 1,129 - 1,129 $ 105,607 $ 76,123 $ 29,484 $ 105,183 $ 65,393 $ 39,790 F- 18 Table of Contents Surname domain names Direct navigation domain names Brand Customer relationships Technology Network rights Total Amortization period indefinite life indefinite life 7 years 3 - 7 years 2 -7 years 15 years Balances, December 31, 2021 $ 11,156 $ 1,135 $ 5,010 $ 28,634 $ 3,392 $ 1,082 $ 50,409 Acquisition of customer relationship - - - 782 - - 782 Additions to/(disposals from) domain portfolio, net ( 1 ) ( 6 ) - - - - ( 7 ) Amortization expense - - ( 2,070 ) ( 8,603 ) ( 622 ) ( 99 ) ( 11,394 ) Balances December 31, 2022 $ 11,155 $ 1,129 $ 2,940 $ 20,813 $ 2,770 $ 983 $ 39,790 Acquisition of customer relationship - - - 528 - - 528 Additions to/(disposals from) domain portfolio, net ( 4 ) ( 1 ) - - - - ( 5 ) Amortization expense - - ( 2,070 ) ( 8,038 ) ( 622 ) ( 99 ) ( 10,829 ) Balances December 31, 2023 $ 11,151 $ 1,128 $ 870 $ 13,303 $ 2,148 $ 884 $ 29,484 The following table shows the estimated amortization expense for each of the next 5 years and thereafter, assuming no further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars): Year ending December 31, 2024 $ 5,582 2025 4,550 2026 2,703 2027 2,159 2028 2,159 Thereafter 52 Total $ 17,205 6. Fair Value Measurement: For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs 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. Equity investments without readily determinable fair value include ownership rights that do not provide the Company with control or significant influence. Such equity investments are recorded at cost, less any impairment, and adjusted for subsequent observable price changes as of the date that an observable transaction takes place. Subsequent adjustments are recorded in other income (expense), net. The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at December 31, 2023 (Dollar amounts in thousands of U.S. dollars): December 31, 2023 Fair Value Measurement Using Assets Level 1 Level 2 Level 3 at Fair value Derivative instrument asset, net $ - $ 2,277 $ - $ 2,277 Total assets, net $ - $ 2,277 $ - $ 2,277 The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at December 31, 2022 (Dollar amounts in thousands of U.S. dollars): December 31, 2022 Fair Value Measurement Using Assets Level 1 Level 2 Level 3 at Fair value Derivative instrument asset, net $ - $ 1,514 $ - $ 1,514 Total assets, net $ - $ 1,514 $ - $ 1,514 F- 19 Table of Contents 7. Derivative Instruments and Hedging Activities: The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk. Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Second Amended 2019 Credit Facility. The notional value of the interest rate swap was $ 70 million. During the third quarter of fiscal year 2022, the Company elected to discontinue its application of hedge accounting to its interest rate swaps prospectively. Until the interest rate swaps matured in June 2023, the derivatives continued to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair value from the date of discontinuance recognized in current period earnings in Interest expense, net in the Consolidated Statements of Operations and Comprehensive Loss. Unrealized gains and losses in Accumulated other comprehensive income (AOCI) as of the date of discontinuance were realized in net income over the remaining term of the underlying forecasted interest payments into interest expense over the original term of the hedged debt. Prior to the discontinuance, for the interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts had been included in other comprehensive income (OCI) and reclassified to earnings when the hedged transaction settled. As of December 31, 2023, there are no interest swaps held by the Company. The Company does not use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between one and twelve months, and the interest rate swap fully matured as of June 30, 2023. The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU 2017 - 12, Derivatives and Hedging (Topic 815 ): Targeted Improvements to Accounting for Hedging Activities (“ASC Topic 815” ). For certain contracts, as the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with ASC Topic 815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. The Company designated the interest rate swap as a cash flow hedge of expected future interest payments at the inception of the contract. Accordingly, for the foreign exchange, unrealized gains or losses on the effective portion of these contracts were included within other comprehensive income and reclassified to earnings when the hedged transaction is settled. Cash flows from hedging activities were classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the contracts, as of December 31, 2023 and December 31, 2022 , is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings. As of December 31, 2023 , the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $ 61.4 million, of which $ 61.4 million met the requirements of ASC Topic 815 and were designated as hedges. As of December 31, 2022 the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars wa s $ 49.7 million, of which $ 49.7 m illion met the requirements of ASC Topic 815 and were designated as hedges. As of December 31, 2021 the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars wa s $ 38.1 million, of which $ 26.8 m illion met the requirements of ASC Topic 815 and were designated as hedges. As of December 31, 2023 , we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars: 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 January - March 2024 16,840 1.3664 592 April - June 2024 13,840 1.3678 507 July - September 2024 16,974 1.3697 652 October - December 2024 13,795 1.3686 526 $ 61,449 1.3681 $ 2,277 Fair value of derivative instruments and effect of derivative instruments on financial performance The effect of these derivative instruments on our consolidated financial statements as of, and for the years ended December 31, 2023 and 2022 , were as follows (amounts presented do not include any income tax effects). Fair value of derivative instruments in the consolidated balance sheets (see “Note 6 – Fair Value Measurement” ) Derivatives (Dollar amounts in thousands of U.S. dollars) Balance Sheet Location As of December 31, 2023 Fair Value Asset As of December 31, 2022 Fair Value Asset Foreign Currency forward contracts designated as cash flow hedges (net) Derivative instruments $ 2,277 $ ( 84 ) Interest rate swap contract designated as a cash flow hedge (net) Derivative instruments - 1,598 Total foreign currency forward contracts and interest rate swaps (net) Derivative instruments $ 2,277 $ 1,514 F- 20 Table of Contents Movement in AOCI balance for the year ended December 31, 2023 (Dollar amounts in thousands of U.S. dollars) Gains and losses on cash flow hedges Tax impact Total AOCI Opening AOCI balance - December 31, 2022 $ 1,032 $ ( 248 ) $ 784 Other comprehensive income (loss) before reclassifications 2,413 ( 583 ) 1,830 Amount reclassified from AOCI ( 52 ) 14 ( 38 ) Amortization of discontinued cash flow hedge ( 1,118 ) 270 ( 848 ) Other comprehensive income (loss) for the year ended December 31, 2023 1,243 ( 299 ) 944 Ending AOCI Balance - December 31, 2023 $ 2,275 $ ( 547 ) $ 1,728 Movement in AOCI balance for the year ended December 31, 2022 (Dollar amounts in thousands of U.S. dollars) Gains and losses on cash flow hedges Tax impact Total AOCI Opening AOCI balance - December 31, 2021 $ 450 $ ( 107 ) $ 343 Other comprehensive income (loss) before reclassifications 550 ( 132 ) 418 Amount reclassified from AOCI 793 ( 193 ) 600 Amortization of discontinued cash flow hedge ( 761 ) 184 ( 577 ) Other comprehensive income (loss) for the year ended December 31, 2022 582 ( 141 ) 441 Ending AOCI Balance - December 31, 2022 $ 1,032 $ ( 248 ) $ 784 Movement in AOCI balance for the year ended December 31, 2021 (Dollar amounts in thousands of U.S. dollars) Gains and losses on cash flow hedges Tax impact Total AOCI Opening AOCI balance - December 31, 2020 $ 3,038 $ ( 702 ) $ 2,336 Other comprehensive income (loss) before reclassifications 794 ( 222 ) 572 Amount reclassified from AOCI ( 3,382 ) 817 ( 2,565 ) Other comprehensive income (loss) for the year ended December 31, 2021 ( 2,588 ) 595 ( 1,993 ) Ending AOCI Balance - December 31, 2021 $ 450 $ ( 107 ) $ 343 Effects of derivative instruments on income and other comprehensive income (OCI) (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 Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income Operating expenses $ 46 Foreign currency forward contracts for the year ended December 31, 2023 $ 1,830 Cost of revenues $ 6 Operating expenses $ ( 691 ) Foreign currency forward contracts for the year ended December 31, 2022 $ ( 1,014 ) Cost of revenues $ ( 171 ) Interest rate swap contract for the year ended December 31, 2022 $ 1,430 Interest expense, net $ 69 Operating expenses $ 2,652 Foreign currency forward contracts for the year ended December 31, 2021 $ ( 2,203 ) Cost of revenues $ 615 Interest rate swap contract for the year ended December 31, 2021 $ ( 210 ) Interest expense, net $ 115 For those foreign currency forward contracts not designated as hedges, the Company recorded the following fair value adjustments, on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars): Year Ended December 31, Forward currency contracts not designated as hedges: 2023 2022 2021 Gain (loss) on settlement $ - $ - $ 883 Gain (loss) on change in fair value - - ( 606 ) $ - $ - $ 277 F- 21 Table of Contents 8. Syndicated Revolver: Third Amended 2019 Credit Facility In connection with entering into the 2023 Credit Agreement, on September 22, 2023, the Company paid off the principal balance, including accrued interest thereon, of the revolving loans outstanding under the Third Amended and Restated Credit Agreement (the “RBC Credit Agreement”), dated as of August 8, 2022, as amended, by and among the Company, certain subsidiaries of the Company as borrowers, certain other subsidiaries of the Company as guarantors, Royal Bank of Canada, as administrative agent (“RBC”), and the lenders party thereto, pursuant to which Tucows’ prior credit facility that provided the Borrowers with a $ 240 million revolving credit facility (the "2019 Credit Facility"). The RBC Credit Agreement automatically terminated upon the receipt by RBC of certain backstop letters of credit delivered by BMO. Prior to entering into the 2023 Credit Facility, during the year ended December 31, 2023 the Company made repayments of $ 16.3 million on the 2019 Credit Facility. 2023 Credit Facility On September 22, 2023, the Company and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo, Inc. and Tucows (Emerald), LLC (each, a “Borrower” and together, the “Borrowers,” collectively with the Company, “Tucows”) and certain other subsidiaries of the Company, as guarantors, entered into the 2023 Credit Agreement with Bank of Montreal, as administrative agent (“BMO” or the “Agent”), and the lenders party thereto, to, among other things, provide the Borrowers with a revolving credit facility in an aggregate amount not to exceed $ 240 million (the “2023 Credit Facility”). The Borrowers may request an increase to the 2023 Credit Facility through new commitments of up to $ 60 million if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the 2023 Credit Agreement) is less than 3.75:1.00. The 2023 Credit Facility expires on September 22, 2026, which is the third anniversary of the effective date of the 2023 Credit Agreement. In connection with the 2023 Credit Facility, the Company incurred $ 0.9 million of fees paid to the lenders and $ 0.3 million of legal fees related to the debt issuance. These fees have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the 2023 Credit Facility agreement. The Company evaluated the issuance of the 2023 Credit Facility and the termination of the 2019 Credit Facility (collectively referred to as the "Debt Transactions") under the loan modification and extinguishment guidance within ASC 470. The Debt Transactions were accounted for as a partial modification, partial extinguishment and new debt issuance at the syndicated lender level. Based on the application of the loan modification and extinguishment guidance within ASC 470 to the Debt Transactions, the Company has treated $ 50.9 million of the loan principal under the 2019 Credit Facility as an extinguishment of debt and $ 50.9 million of the loan principal under the 2023 Credit Facility as issuance of new debt. The remaining loan principal on the 2023 Credit Facility was treated as a loan modification within the guidance of ASC 470. In accordance with the debt extinguishment, the Company expensed $ 0.1 million of the unamortized debt issuance costs to Interest expense, net in the Consolidated Statements of Comprehensive Income. 2023 Credit Facility Terms The 2023 Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The 2023 Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In addition, the Company has agreed to comply with the following financial covenants: ( 1 ) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio of not more than (i) 4.50:1:00 at any time from and after the Closing Date to and including December 30, 2023; ( ii) 4.25:1:00 from December 31, 2023 to and including March 30, 2024; ( iii) 4.00:1.00 from March 31, 2024 to and including June 29, 2024; and (iv) 3.75:1.00 thereafter; and ( 2 ) an interest coverage ratio by maintaining as of the end of each rolling four financial quarter period, an Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of not less than 3.00:1.00. The required principal repayment of $ 211.9 million is due in 2026. During the years ended December 31, 2023 and December 31, 2022 the Company was in compliance with the covenants under its credit agreements in effect at the time. During the year ended December 31, 2023, the Company made net cash repayments o f $ 17.8 million and $ 10.0 m illion under the 2019 Credit Facility and the 2023 Credit Facility respectively. F- 22 Table of Contents Borrowings under the 2023 Credit Agreement will accrue interest and standby fees based on the Company's Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows: If Total Funded Debt to Adjusted EBITDA is: Availment type or fee Less than 2.00 Greater than or equal to 2.00 and less than 2.75 Greater than or equal to 2.75 and less than 3.50 Greater than or equal to 3.50 and less than 4.00 Greater than or equal to 4.00 Canadian dollar borrowings based on the Canadian Dollar Offered Rate or U.S. dollar borrowings based on SOFR and letter of credit fees (Margin) 1.50 % 2.00 % 2.50 % 3.00 % 3.50 % Canadian borrowings based on Prime Rate or Canadian or U.S. dollar borrowings based on Base Rate (Margin) 0.25 % 0.75 % 1.25 % 1.75 % 2.25 % Standby fees 0.30 % 0.40 % 0.50 % 0.60 % 0.70 % The following table summarizes the Company’s borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars): December 31, 2023 December 31, 2022 Revolver 211,900 239,700 Less: unamortized debt discount and issuance costs ( 1,546 ) ( 770 ) Total loan payable 210,354 238,930 Less: loan payable, current portion - - Loan payable, long-term portion 210,354 238,930 The following table summarizes our scheduled principal repayments as of December 31, 2023 (Dollar amounts in thousands of U.S. dollars): 2024 - 2025 - 2026 211,900 $ 211,900 9. Notes Payable: 2023 Term Notes On May 4, 2023 ( the “Closing Date”), Tucows Inc. through its indirect and wholly owned subsidiaries, including Ting Fiber, LLC entered into a definitive agreement relating to a securitized financing facility related the 2023 Term Notes. On the Closing Date, Ting Issuer LLC, a Delaware limited liability company (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company issued (i) $ 168,357,000 of its 5.95 % Secured Fiber Revenue Notes, Series 2023 - 1, Class A- 2, (ii) $ 23,289,000 of its 7.40 % Secured Fiber Revenue Notes, Series 2023 - 1, Class B and (iii) $ 46,859,000 initial principal amount of 9.95 % Secured Fiber Revenue Notes, Series 2023 - 1, Class C, together, the “2023 Term Notes”. The offering was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the issuance of the 2023 Term Notes were $ 220.5 million, after deducting a debt discount of $ 11.2 million and issuing costs of $ 6.7 million. The debt discount and issuance costs of the 2023 Term Notes are being amortized using the straight line method over a five -year period between the Closing date and the anticipated repayment date. During the year ended December 31, 2023, the Company recognized $ 2.4 million of interest expense related to the amortization of the debt discount and issuance costs of the 2023 Term Notes. The 2023 Term Notes are issued under an indenture, dated May 4, 2023 ( the “Base Indenture”) between the Issuer and Citibank, N.A., as trustee (the “Indenture Trustee”) as supplemented by the Series 2023 - 1 supplemental indenture dated May 4, 2023, ( the “Series 2023 - 1 Supplement” and, together with the Base Indenture, the “Indenture”), between the Issuer and the Trustee. Interest payments on the 2023 Term Notes are payable on a monthly basis. The legal final maturity date of the 2023 Term Notes is in April of 2053, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the 2023 Term Notes will be in April 2028. If the Issuer has not repaid or refinanced the 2023 Term Notes prior to the anticipated repayment date, additional interest will accrue on the 2023 Term Notes in an amount equal to the greater of (A) 5.00 % per annum and (B) a per annum interest rate equal to the excess, if any, by which the sum of the following exceeds the original interest rate of such 2023 Term Note (i) the yield to maturity (adjusted to a “mortgage equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) on such anticipated repayment date of the United States Treasury Security having a term closest to 10 years, plus (ii) 5.00 %, plus (iii) ( x ) for the 2023 Class A- 2 Notes, 3.50 %, (y) for the 2023 Class B Notes, 5.00 % and (z) for the 2023 Class C Notes, 7.82 %. The 2023 Term Notes are secured by certain of the Company’s revenue-generating assets, consisting principally of fiber-network related agreements, fiber-network assets and customer contracts (collectively, the “Securitized Assets”) that are owned by certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company that act as the Guarantors (collectively with the Issuer, the “Obligor”) under the Base Indenture. The 2023 Term Notes are subject to a series of covenants, restrictions and other investor protections including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the 2023 Term Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, (iii) certain indemnification payments (iv) the guarantors comply with standard bankruptcy-remoteness covenants, including not guaranteeing or being liable for other affiliates debts or liabilities and (v) covenants relating to recordkeeping, access to information, and similar matters. F- 23 Table of Contents As of December 31, 2023, the Company was in compliance with all required covenants. As of December 31, 2023, the Company's scheduled principal repayments for the 2023 Term Notes are set to occur after 2027. The following table summarizes Ting's borrowings under the 2023 Term Notes (Dollar amounts in thousands of U.S. dollars): December 31, 2023 December 31, 2022 Principal $ 238,505 $ - Less: unamortized issuance costs ( 5,847 ) - Less: unamortized discount ( 9,763 ) Total notes payable 222,895 - Less: notes payable, current portion - - Note payable, long-term portion (1) $ 222,895 $ - ( 1 ) The Company capitalizes interest expenses directly attributable to the development of qualifying assets. Qualifying assets include internally use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC 350. During the year ended December 31, 2023, the Company capitalized $ 1.0 mi llion of interest expenses pertaining to the 2023 Term Notes directly attributable to the development of certain AUC assets, respectively. Restricted Cash Under the terms of the Indenture, revenues generated from the Securitized Assets are deposited into accounts controlled by the Indenture Trustee within two business days of receipt. The Company has no access to or control of the funds held in trust until they are disbursed by the Indenture Trustee on the 20th day of each calendar month (the “Payment Date”). In accordance with the Indenture, on each Payment Date the Indenture Trustee disburses, on behalf of the Obligor, administration fees to service providers, interest payments to the noteholders, liquidity reserve top-ups (if required), and the remaining funds to accounts controlled by the Obligor. Funds held in trust with the Indenture Trustee at the reporting date are presented as “Restricted cash” on the Company’s Consolidated Balance Sheet. At December 31, 2023, Restricted cash totaled $ 3.6 million. Under the terms of the Indenture, the Company is also required to maintain a liquidity reserve fund equal to the sum of (A) six times the total amount of fund administration fees payable on each payment date after May 20, 2023 and (B) six times the total amount of monthly interest on the 2023 Notes due and payable on each payment date after May 20, 2023. The liquidity reserve is maintained with the Indenture Trustee until the maturity of the 2023 Term Notes and the balance is presented as “Secured notes reserve funds” on the Company’s Consolidated Balance Sheet. At December 31, 2023 Secured notes reserve funds totaled $ 8.7 million. 10. Income Taxes: The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 21 % for th e years ended December 31, 2023 , December 31, 2022 and December 31, 2021 , to income before provision for income taxes as a result of the following (Dollar amounts in thousands of U.S. dollars): Year ended December 31, 2023 2022 2021 Income (loss) for the year before provision for income taxes $ ( 103,070 ) $ ( 27,788 ) $ 7,270 Computed federal tax expense ( 21,644 ) ( 5,836 ) 1,527 Increase (decrease) in income tax expense resulting from: State income taxes ( 2,891 ) 845 314 Foreign earnings 5,976 386 382 Changes in valuation allowance 11,213 4,023 2,300 Foreign income tax deduction ( 1,571 ) - - Adjustments recognized in the current period for income tax of prior periods 1,569 250 377 Permanent differences ( 90 ) ( 112 ) 205 Shortfall (excess) tax benefits on share-based compensation - 138 ( 1,556 ) Others 565 89 357 Provision (recovery) for income taxes $ ( 6,873 ) $ ( 217 ) $ 3,906 Our effective tax rate is mainly driven by changes in valuation allowance on net operating losses, interest expense limitation that we are not expected to realize in future years, and the impact of foreign earnings. F- 24 Table of Contents The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2023 , and December 31, 2022 are presented below (Dollar amounts in thousands of U.S. dollars): December 31, 2023 December 31, 2022 Deferred tax assets: Net operating losses $ 55,574 $ 2,468 Foreign tax credits 13,040 17,554 Deferred revenue 5,132 5,349 Interest expense limitation 4,606 1,047 Limited life intangible assets 2,034 - Fixed assets - 379 Accruals, including foreign exchange and other 5,122 3,909 Total deferred tax assets 85,508 30,706 Valuation allowance ( 28,767 ) ( 17,554 ) Total deferred tax assets $ 56,741 $ 13,152 Deferred tax liabilities: Investment in partnership $ ( 32,550 ) $ ( 6,727 ) Prepaid registry fees and expenses ( 19,216 ) ( 17,941 ) Fixed assets ( 4,862 ) - Indefinite life intangible assets ( 2,966 ) ( 2,968 ) Limited life intangible assets - ( 629 ) Foreign branch deferred tax liabilities ( 113 ) ( 607 ) Total deferred tax liabilities $ ( 59,707 ) $ ( 28,872 ) Net deferred tax liabilities $ ( 2,966 ) $ ( 15,720 ) In assessing the need for valuation allowance, historical and future levels of income, expectations and risks associated with estimates of future taxable income and tax planning strategies are considered. In 2023, we have determined that it is not more likely than not that we will ultimately be able to fully utilize the net operating losses, foreign tax credits and interest expense limitation in future years. As of December 31, 2023, a valuation allowance of $ 28.8 million is recorded against net deferred tax assets. The increase in the valuation allowance was primarily attributable to an increase in deferred tax assets resulting from the loss from operations and interest expense limitation. Should our operating results continue to improve and projections to show utilization of the deferred tax assets, we would take the positive evidence into consideration and reassess our valuation allowance position. As of December 31, 2023, the Company had net federal and state operating loss carryforwards of approximately $ 230.1 million and interest expense carryforwards of $ 18.9 million respectively. The majority of the net operating loss and interest expense carryforwards can be carried forward indefinitely. As of December 31, 2023, the Company had foreign tax credit carryforwards of $ 13.0 million. The foreign tax credit will expire beginning in the year ending December 31, 2027 if not utilized. The Company had nil total gross unrecognized tax benefits as of both December 31, 2023 and December 31, 2022. The Company does not expect its total gross unrecognized tax benefits will change within the next 12 months. The Company recognizes interest and penalties related to income tax matters within the provision for income taxes. As of December 31, 2023, the Company recorded $ 0.8 million of interest in income taxes, primarily due to Sec. 453A interest on deferred tax liability for U.S. tax purposes. No material interest and penalties were recognized as of December 31, 2022. 11. Revenue: Significant accounting policy The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services through Ting, (b) the CSP solutions and professional services through Wavelo; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue through Tucows Domains Services. Certain revenues are disclosed under Tucows Corporate as they are considered non-core business activities including retail mobile services, Transition Services Agreement ("TSA") revenue and eliminations of intercompany revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf 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 21 – Segment Reporting. F- 25 Table of Contents (a) Ting The Company generates Ting revenues primarily through the provisioning of fixed high-speed Internet access, Ting Internet. Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company 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. Ting 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 Internet customers is computed based on the customer’s activation date. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. In those cases, where payment 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) Wavelo The Company generates Wavelo revenues by providing billing and provisioning platform services to Communication Service Providers ("CSPs") to whom we also provide other professional services. Platform service agreements contain both platform services and professional services. Platform services offer a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools through a single, cloud based service. Consideration under platform service arrangements includes both a variable component that changes each month depending on the number of subscribers hosted on the platform, as well as platform payments and credits. The Company estimates platform payment and credit consideration over the term of the contract and recognizes the portion related to platform services evenly over the term of the contract. The Company recognizes variable subscriber fees, as the fees are invoiced. Platform services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform. As each month of providing access to the platform is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the performance obligation consists of a series of distinct service periods. Professional services provided under platform service arrangements can include implementation, training, consulting or software development/modification services. Revenues related to professional services are distinct from the other promises in the contract(s) and are recognized as the related services are performed, on the basis of hours consumed. Platform payment and credit consideration is allocated between the platform services and professional services performance obligations by estimating the standalone selling price (“SSP”) of each performance obligation. The Company estimates the SSP of professional services based on observable standalone sales. The SSP of platform services is derived using the residual approach by estimating the total contract consideration and subtracting the SSP of professional services. Total contract consideration is estimated at contract inception, considering any constraints that may apply and updating the estimates as new information becomes available. Other professional services consist of professional service arrangements with platform services customers which are billed based on separate Statement of Work (“SOW”) arrangements for bespoke feature development. Revenues for professional services contracted through separate SOWs are recognized at a point-in-time when the final acceptance criteria have been met. F- 26 Table of Contents (c) Tucows Domains 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, website hosting and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations. The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company 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): 2023 2022 2021 Ting: Fiber Internet Services $ 50,937 $ 42,425 $ 25,327 Wavelo: Platform Services 37,082 22,594 13,031 Other professional services 1,588 1,750 3,750 Total Wavelo 38,670 24,344 16,781 Tucows Domains: Wholesale Domain Services 189,013 187,542 189,091 Value Added Services 17,712 20,712 20,942 Total Wholesale 206,725 208,254 210,033 Retail 35,372 34,904 35,543 Total Tucows Domains 242,097 243,158 245,576 Tucows Corporate: Mobile Services and eliminations 7,633 11,215 16,653 $ 339,337 $ 321,142 $ 304,337 As of December 31, 2023 , one customer represented 39 % of total accounts receivable. As of December 31, 2022 one customer represented 46 % of total accounts receivable. As of December 31, 2021 , one customer represented 46 % of total accounts receivable. During the year ended December 31, 2023 one customer accounted for 10.7 % of revenue amounting to $ 36.2 million, within the Wavelo segment. For the years ended December 31, 2022 and December 31, 2021 no customer accounted for more than 10% of total revenue. F- 27 Table of Contents 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): 2023 2022 2021 Ting: Fiber Internet Services $ 20,151 $ 17,004 $ 12,035 Wavelo: Platform Services 1,337 1,294 504 Other professional services 1,289 1,632 804 Total Wavelo 2,626 2,926 1,308 Tucows Domains: Wholesale Domain Services 150,664 147,894 147,213 Value Added Services 2,249 2,514 2,544 Total Wholesale 152,913 150,408 149,757 Retail 16,501 16,482 17,731 Total Tucows Domains 169,414 166,890 167,488 Tucows Corporate: Mobile Services and eliminations 10,065 9,448 12,208 Network Expenses: Network, other costs 28,222 17,433 14,769 Network, depreciation and amortization costs 37,370 29,101 18,035 Network, impairment 4,822 92 201 Total Network Expenses 70,414 46,626 33,005 $ 272,670 $ 242,894 $ 226,044 Contract Balances The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly. Some of the Company’s long-term contracts with customers are billed in advance of service, such as domain contracts and some professional service contracts. Consideration received from customers related to performance obligations which have not yet been satisfied are contract liabilities and recorded as deferred revenues. Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions. The opening balance of deferred revenue was $ 145.1 million as of January 1, 2023 . Significant changes in deferred revenue were as follows (Dollar amounts in thousands of U.S. dollars): Year ended December 31, 2023 Balance, beginning of period $ 145,131 Deferred revenue 250,130 Recognized revenue ( 247,178 ) Balance, end of period $ 148,083 F- 28 Table of Contents Remaining Performance Obligations: As the Company fulfills its performance obligations, the following table includes revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) as at December 31, 2023 (Dollar amounts in thousands of U.S. dollars) December 31, 2023 2024 $ 124,362 2025 9,940 2026 4,507 2027 2,703 2028 1,688 Thereafter 2,512 Total $ 145,712 For retail 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 to performance obligations that are unsatisfied (or partially unsatisfied). Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our deferred revenue balance related to domain contracts is expected to be recognized within the next twelve months. Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the next twelve months. Professional service revenue related to platform services may be deferred over the period not exceeding the term of the contract. 12. Costs to obtain and fulfill a contract (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 and other customer acquisition fees that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $ 2.6 million at December 31, 2023 . Capitalized contract acquisition costs are amortized into operating expense based on the transfer of goods or services to which the assets relate which typically range from two – ten years. For the year ended December 31, 2023 , the Company capitalized $ 2.0 million and also amortized $ 1.2 million of contract costs, respectively. The breakdown of the movement in the deferred costs of acquisition balance for the year ended December 31, 2023 is as follows (Dollar amounts in thousands of U.S. dollars): Year ended December 31, 2023 Balance, beginning of period $ 1,827 Capitalization of costs 1,987 Amortization of costs ( 1,233 ) Balance, end of period $ 2,581 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, certain partner sales incentive programs and other customer acquisition fees. (b) Deferred costs of fulfillment Deferred costs to fulfill contracts primarily consist of domain registration costs which have been paid to a domain registry, and are capitalized as deferred costs of fulfillment. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. The Company also defers certain technology design and data migration costs it incurs to fulfil its performance obligations contained in our platform services arrangements. For the year ended December 31, 2023 , the Company capitalized $ 179.5 million and also amortized $ 179.1 million of contract costs. There were no impairment losses recognized in relation to the costs capitalized during the year ended December 31, 2023 . Amortization expense is primarily included in cost of revenue. The breakdown of the movement in the deferred costs of fulfillment balance for the year ended December 31, 2023 is as follows (Dollar amounts in thousands of U.S. dollars). Year ended December 31, 2023 Balance, beginning of period $ 110,674 Deferral of costs 179,477 Recognized costs ( 179,083 ) Balance, end of period $ 111,068 F- 29 Table of Contents 13. Leases We lease datacenters, corporate offices, antenna tower and fiber-optic cables under operating leases. The Company does not have any leases classified as finance leases. Our leases have remaining lease terms of 1 year to 20 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. The components of lease expense were as follows (Dollar amounts in thousands of U.S. dollars): Year Ended Year Ended December 31, 2023 December 31, 2022 Operating lease cost (leases with a total term greater than 12 months) $ 5,710 $ 4,200 Short-term lease cost (leases with a total term of 12 months or less) 196 244 Variable lease cost 1,878 1,223 Total lease cost $ 7,784 $ 5,667 Lease Cost is presented in general and administrative expenses and direct cost of revenues within our consolidated statements of operations and comprehensive income. Information related to leases was as follows (Dollar amounts in thousands of U.S. dollars): Year Ended Year Ended Supplemental cashflow information: December 31, 2023 December 31, 2022 Operating lease - operating cash flows (fixed payments) $ 6,088 $ 4,896 Operating lease - operating cash flows (liability reduction) $ 5,170 $ 3,984 New Right of Use assets - operating leases $ 11,388 $ 6,726 Supplemental balance sheet information related to leases: December 31, 2023 December 31, 2022 Weighted average discount rate 6.92 % 4.14 % Weighted average remaining lease term 10.57 yrs 6.56 yrs Maturity of lease liability as of December 31, 2023 (Dollar amounts in thousands of U.S. dollars): December 31, 2023 2024 $ 6,717 2025 5,349 2026 3,478 2027 2,204 2028 1,769 Thereafter 15,307 Total future lease payments 34,824 Less interest 11,172 Total $ 23,652 Operating lease payments include payments under the non-cancellable term, without any additional amounts related to options to extend lease terms that are not reasonably certain of being exercised. As of December 31, 2023 , we have not entered into any lease agreements that have not yet commenced, and therefore are not included in the lease liability. The Company has elected to use the single exchange rate approach when accounting for lease modifications. Under the single exchange rate approach, the entire right of use asset is revalued at the date of modification in the Company’s functional currency provided the re-measurement is not considered a separate contract or if the re-measurement is related to change the lease term or assessment of a lessee option to purchase the underlying asset being exercised. F- 30 Table of Contents 14. Redeemable preferred units: The Company entered into a Series A Preferred Unit Purchase Agreement (the “Unit Purchase Agreement”) with Generate TF Holdings, LLC, a Delaware limited liability company (“Generate”) on August 8, 2022 ( the "Effective Date"), and closed the transaction contemplated thereby on August 11, 2022 ( the "Transaction Close") pursuant to which the Company issued and sold 10,000,000 units of its Series A Preferred Units to Generate at a cash purchase price of $ 6.00 per unit ("Initial Funding"). Under the Unit Purchase Agreement, after the Transaction Close until the third anniversary of the Effective Date (the "End Date") and upon the achievement of pre-determined operational and financial drawdown milestones, the Company will issue and sell in subsequent fundings an aggregate of 23,333,333.34 units of additional Series A Preferred Units on the same terms and conditions as in the Initial Funding ("Milestone Fundings"). The investment provided the Company with $ 60 million of capital upon the Initial Funding, with an additional $ 140 million of capital commitments available to the Company over the subsequent three -year period if the milestones are achieved. From the Transaction Close until the earlier of (i) the End Date and (ii) the date upon which Generate has paid $ 140 million pursuant to Milestone Fundings, the Company is required to pay Generate a standby fee at a rate of 0.50 % of any portion of the unpaid $ 140 million capital commitment which will be paid quarterly. The Series A Preferred Units accrue a preferred return to the holder at a rate of 15 % per annum, subject to adjustments based on the value of approved projects under the Equity Capital Contribution Agreement (the “ECC Agreement”). The preferred return on the Series A Preferred Units purchased under the Unit Purchase Agreement may be adjusted down to a floor of 13 % or up to a ceiling of 17 % per annum based on commitment and contribution amounts under the ECC Agreement. The preferred return accrues daily, and is compounded quarterly. The preferred return accrued during the first two years is not payable unless and until the Series A Preferred Units are redeemed. The preferred return accrued after the second anniversary of the Transaction Close is payable by the Company quarterly. If the Company should redeem the Series A Preferred Units prior to the fourth anniversary of the Transaction Close, the Company is required to pay a make-whole premium, which is calculated as the cumulative and compounded preferred return that would have accrued (at the preferred return rate in effect immediately prior to such redemption) on the outstanding unreturned capital balance with respect to the Series A Preferred Units through and including the six -year anniversary of the Transaction Close had such Series A Preferred Unit not been redeemed, discounted at an agreed upon treasury rate plus 50 basis points, compounded quarterly (the "Make-Whole-Premium"). The Company's Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"), states that in the event that (i) the Company fails to pay the preferred return for two consecutive quarters, (ii) the Company fails to pay the redemption price in connection with any redemption of the Series A Preferred Units, (iii) the Company materially breaches its obligations under the LLC Agreement, (iv) there occurs an event of default (or similar term) under Tucows Inc.’s or its affiliates’ credit agreement, (v) there occurs material breach if not cured or otherwise remedied in accordance with the terms of any credit facility (taking into account any cure periods), by the Company or any of its Subsidiaries under any debt facilities where the Company or any of its Subsidiaries incurs indebtedness for borrowed money, or (vi) the Company breaches any covenant under the Unit Purchase Agreement, Generate has the option to either (i) convert Series A Preferred Units based on the Redemption Price into common units of the Company based on the then applicable conversion price ; or (ii) compelling the sale of certain assets of the Company or its subsidiaries of equal value to the Redemption Price. Under the terms of the LLC Agreement, the Company is mandatorily required to redeem the redeemable preferred units prior to the earliest of (i) a sale of the Company, (ii) a public offering, (iii) an event of default (or similar term) by Tucows Inc. or any of its affiliates under, (iv) a material breach if not cured or otherwise remedied in accordance with the terms of any credit facility (taking into account any cure periods), by the Company or any of its Subsidiaries under any debt facilities where the Company or any of its Subsidiaries incurs indebtedness for borrowed money, (v) the Company failed to pay the preferred return for two consecutive quarters, and (vi) the six -year anniversary of the Transaction Close. Due to the fact that the redeemable preferred units are mandatorily redeemable, the redeemable preferred units are classified as a liability in the accompanying consolidated balance sheets. The liability was initially recorded at fair value and subsequently recorded at the present value of the settlement amount, which includes the preferred return payments required until the instrument's expected maturity on the sixth anniversary of the Transaction Close, August 10, 2028 using the implicit rate of return of the instrument, 15 %. The Company recorded a $ 16.6 million accretion expense on the redeemable preferred units for the year ended December 31, 2023, recorded as interest expense, net in the accompanying consolidated statements of comprehensive income. The Company incurred $ 0.8 million of legal fees related to the redeemable preferred unit issuance, which have been reflected as a reduction to the carrying amount of the redeemable preferred unit balance and will be amortized to interest expense, net in the accompanying consolidated statements of operations and comprehensive income (loss) over the expected six -year term instrument. On January 30, 2023, the Company issued and sold an additional 5,000,000 units of its Series A Preferred Units to Generate at a cash purchase price of $ 6.00 per unit. The Milestone Funding provided the Company with an additional $ 30.0 million of capital. On April 21, 2023, the Company issued and sold an additional 833,333 units of Series A Preferred Units to Generate at a cash purchase price of $ 6.00 per unit pursuant to the Unit Purchase Agreement. The Milestone Funding provided the Company with an additional $ 5.0 million of capital and reduced Generate's future capital commitment under the Unit Purchase Agreement to $ 77.5 million. On May 4, 2023, Ting Fiber, LLC executed the Ting Class C Notes - Redemption Agreement (the "Redemption Agreement") and the Ting Class C Notes – Side Letter (the "Side Letter Agreement") with Generate. Under the terms of the Redemption Agreement, Ting Fiber, LLC redeemed 5,173,067 Series A Preferred Units held by Generate at $ 6 per unit, totaling a redemption of $ 31 million. The terms of the redemption were modified by the Side Letter Agreement, which granted a 30 % discount on the make-whole premium which amounted to $ 14.7 million for a total redemption price of $ 45.7 million inclusive of the make-whole premium. The Company has accounted for the redemption of the preferred units as an extinguishment of debt in accordance with ASC 470 - Debt. The resulting loss on debt extinguishment has been recognized as 'Other Income/Expense' in the financial statements. Terms of the Side Letter Agreement also preclude Ting Fiber, LLC from issuing additional Series A Preferred Units for 365 days from the closing of the Redemption Agreement during which time standby fees will be suspended. F- 31 Table of Contents As of December 31, 2023, the redeemable preferred units have an aggregate liquidation preference of $ 91.5 million, plus a Make-Whole Premium should redemption occur before the fourth anniversary of the Transaction Date and are senior to the Ting Fiber, LLC common shares with respect to sale, dissolution, liquidation or winding up of the Company. The following table summarizes the Company’s borrowings under the preferred unit agreement (Dollar amounts in thousands of U.S. dollars): December 31, 2023 December 31, 2022 Opening Balance $ 91,396 $ - Add: Funding at Transaction Close - 60,000 Add: Milestone Funding 35,000 27,500 Add: Accretion of redeemable preferred units(1) 16,541 3,896 Add: Loss on debt extinguishment 14,680 - Less: Redemption of preferred units ( 45,718 ) - Redeemable preferred units balance 111,899 91,396 Less: Deferred preferred financing costs ( 509 ) ( 962 ) Total Redeemable preferred units $ 111,390 $ 90,434 ( 1 ) The Company capitalizes interest expenses directly attributable to the development of qualifying assets. Qualifying assets include internally use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC 350. During the year ended December 31, 2023, the Company capitalized $ 2.4 mi llion of interest expenses pertaining to the redeemable preferred units directly attributable to the development of certain AUC assets, respectively. The following table summarizes our scheduled repayments as of December 31, 2023 ( Dollar amounts in thousands of U.S. dollars): 2024 $ 7,353 2025 18,639 2026 18,536 2027 18,639 2028 133,942 $ 197,109 15. Common Shares The Company’s authorized common share capital is 250 million shares of common stock without nominal or par value. On December 31, 2023 , there were 10,903,405 shares of common stock outstanding ( December 31, 2022 : 10,817,110 ). Repurchase of common shares: (a) Normal Course Issuer Bids: 2024 Stock Buyback Program On February 22, 2024, the Company announced that its Board of Directors (“Board”) has approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $ 40 million buyback program commenced on February 23, 2024 and is expected to terminate on February 22, 2025. 2023 Stock Buyback Program On February 9, 2023, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $ 40 million buyback program commenced on February 10, 2023 and terminated on February 9, 2024. The Company did not repurchase shares under this program. 2022 Stock Buyback Program On February 10, 2022, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $ 40 million buyback program commenced on February 11, 2022 and terminated on February 9, 2023. The Company did not repurchase shares under this program. 2021 Stock Buyback Program On February 9, 2021, the Company announced that its Board of Directors (“Board”) had approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $ 40 million buyback program commenced on February 10, 2021 and terminated on February 9, 2022. The Company did not repurchase shares under this program. 2020 Stock Buyback Program On February 12, 2020, the Company announced that its Board had approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $ 40 million buyback program commenced on February 13, 2020 and terminated on February 9, 2021. The Company did not repurchase shares under this program during the year ended December 31, 2021. F- 32 Table of Contents (b) Net Exercise of Stock Options Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option holder can be paid for by having the option holder tender back to the Company a number of shares at fair value equal to the amounts due. These transactions are accounted for by the Company as a purchase and retirement of shares and are included in the table on the following page as common stock received in connection with share-based compensation. The following table summarizes our share repurchase activity for the periods covered below (Dollar amounts in thousands of US dollars, except for share data): Year Ended December 31, 2023 2022 2021 Common stock received in connection with share-based compensation Number of shares - 3,053 45,824 Aggregate market value of shares (in thousands) $ - $ 197 $ 3,669 Average price per share $ - $ 64.67 $ 80.07 16. Stock Option Plans: 2006 Tucows Equity Compensation Plan On November 22, 2006, the shareholders of the Company approved the Company’s 2006 Equity Compensation Plan (the “2006 Plan”), which was amended and restated effective July 29, 2010 and which serves as a successor to the 1996 Plan. The 2006 Plan has been established for the benefit of the employees, officers, directors and certain consultants of the Company. The maximum number of common shares which have initially set aside for issuance under the 2006 Plan is 1.25 million shares. On October 8, 2010, the 2006 Plan was amended to increase the number of shares set aside for issuance by an additional 0.475 million shares to 1.725 million shares. In September 2015, the 2006 Plan was amended to increase the number of shares set aside for issuance by an additional 0.75 million shares to 2.475 million shares. In November 2020, the 2006 Plan was amended to increase the number of shares set aside for issuance by an additional 1.53 million shares to 4.0 million shares. Generally, options issued under the 2006 Plan vest over a four -year period and have a term not exceeding seven years, except for automatic formula grants of non-qualified stock options, which vest after one year and have a five -year term. Prior to the September 2015 amendment to the 2006 Plan, automatic formula grants of non-qualified stock options vested immediately upon grant. Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option holder can be paid for by having the option holder tender back to the Company a number of shares at fair value equal to the amounts due. These transactions are accounted for by the Company as a purchase and retirement of shares. The fair value of each option grant ("Company Option") is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company’s common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant. The fair value of Company Options granted during the years ended December 31, 2023 , December 31, 2022 and December 31, 2021 was estimated using the following weighted average assumptions: Year Ended December 31, 2023 2022 2021 Volatility 42.6 % 34.9 % 35.7 % Risk-free interest rate 4.2 % 3.4 % 0.8 % Expected life (in years) 4.46 4.60 4.60 Dividend yield 0.0 % 0.0 % 0.0 % The weighted average grant date fair value for options issued, with the exercise price equal to market value on the date of grant $ 10.34 $ 14.93 $ 24.83 Details of Company Option transactions are as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Outstanding, beginning of period 1,036,748 $ 59.97 904,151 $ 64.36 845,020 $ 55.31 Granted 172,305 25.04 262,980 42.15 282,625 79.30 Exercised - - ( 40,459 ) 31.95 ( 179,321 ) 45.04 Forfeited ( 41,126 ) 58.89 ( 55,234 ) 68.11 ( 41,240 ) 65.72 Expired ( 35,295 ) 68.58 ( 34,690 ) 58.92 ( 2,933 ) 60.70 Outstanding, end of period 1,132,632 54.61 1,036,748 59.97 904,151 64.36 Options exercisable, end of period 731,945 $ 61.05 520,679 $ 62.74 415,925 $ 56.44 F- 33 Table of Contents As of December 31, 2023 , the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Company Options were as follows: 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 $16.47 - $19.78 31,250 $ 19.38 4.7 $ 238 - $ - - $ - $21.07 - $28.37 139,497 26.29 6.4 102 - - - - $30.70 - $30.74 20,000 30.71 5.9 - 5,000 30.71 5.9 - $40.04 - $48.00 216,247 42.40 5.3 - 77,231 43.21 5.0 - $51.82 - $59.98 193,633 55.72 1.0 - 225,837 55.70 0.9 - $60.01 - $68.41 292,332 62.10 2.7 - 289,494 62.41 2.5 - $70.13 - $79.51 223,173 78.50 4.1 - 124,258 78.28 4.0 - $80.61 - $82.07 16,500 81.27 4.8 - 10,125 81.42 4.8 - 1,132,632 $ 54.61 3.8 $ 340 731,945 $ 61.05 2.6 $ - Total unrecognized compensation cost relating to unvested Company Options at December 31, 2023 , prior to the consideration of expected forfeitures, is approxi mately $ 5.5 m illion and is expected to be recognized over a weighted average period of 2.8 y ears. There were no exercises of Company Options during the year ended December 31, 2023 . The total intrinsic value of Company Options exercised during the years ended December 31, 2022 and December 31, 2021 wa s $ 0.8 million and $ 6.4 million, r espectively. Cash received from the exercise of stock options during the years ended December 31, 2022 and December 31, 2021 was $ 1.1 million and $ 4.8 million respectively. The Company recorded stock-based compensation for Company options amounting to $ 6.0 million, $ 5.8 million and $ 4.6 million for the years ended December 31, 2023 , 2022 and 2021 respectively. Stock-based compensation for the Company stock has been included in operating expenses as follows (Dollar amounts in thousands of US dollars): Year Ended December 31, 2023 2022 2021 Network expenses $ 399 $ 399 $ 531 Sales and marketing 1,423 1,498 1,941 Technical operations and development 634 545 824 General and administrative 3,577 3,337 1,296 $ 6,033 $ 5,779 $ 4,592 2022 Wavelo Equity Compensation Plan On November 9, 2022 the Board of Wavelo approved Wavelo's Equity Compensation Plan (Wavelo ECP), which has been established for the benefit of the employees, officers, directors and certain consultants of Wavelo or Tucows. The Wavelo stock options were introduced in order to provide variable compensation that helps retain executives and ensures that our executives' interests are aligned with those stakeholders of the business to grow long-term value. Wavelo is a wholly owned subsidiary of Tucows. The maximum number of Wavelo common shares which have been set aside for issuance under the 2022 Plan is 20 million shares, currently there are 100 million shares outstanding. The options issued under the ECP primarily vest over a period of three years and have a 7 -year term. For the initial grants under the plan, the first 25 % became exercisable within three months and vesting ratably monthly thereafter, subsequently for three years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The Company calculates expected volatility based on the actual volatility of comparable publicly traded companies. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company assumes the expected dividend yield to be zero. The fair value of stock options granted during the year ended December 31, 2023 was estimated using the following weighted average assumptions: Year Ended December 31, 2023 2022 2021 Volatility 40.6 % 40.7 % N/A Risk-free interest rate 4.3 % 4.4 % N/A Expected life (in years) 4.17 4.16 N/A Dividend yield 0.0 % 0.0 % N/A The weighted average grant date fair value for options issued, with the exercise price equal to market value on the date of grant $ 0.49 $ 0.49 N/A F- 34 Table of Contents Details of Wavelo's stock option transactions are as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Outstanding, beginning of period 15,975,528 $ 1.27 - $ - N/A N/A Granted 865,000 1.37 15,975,528 1.27 N/A N/A Exercised - - - - N/A N/A Forfeited ( 451,708 ) 1.27 - - N/A N/A Expired ( 55,587 ) 1.27 - - N/A N/A Outstanding, end of period 16,333,233 1.28 15,975,528 1.27 N/A N/A Options exercisable, end of period 7,752,114 $ 1.27 15,975,528 $ 1.27 N/A N/A As of December 31, 2023 , the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Wavelo stock options were as follows: 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 $0.00 - $1.74 16,333,233 $ 1.28 5.9 $ 7,588 7,752,114 $ 1.27 5.9 $ 3,643 16,333,233 $ 1.28 5.9 $ 7,588 7,752,114 $ 1.27 5.9 $ 3,643 Total unrecognized compensation cost relating to unvested Wavelo stock options at December 31, 2023 , prior to the consideration of expected forfeitures, is approxi mately $ 4.5 m illion and is expected to be recognized over a weighted average period of 2.2 y ears. Stock-based compensation for the Wavelo stock options has been included in operating expenses as follows (Dollar amounts in thousands of US dollars): Year Ended December 31, 2023 2022 2021 Network expenses $ 131 $ 104 $ - Sales and marketing 931 508 - Technical operations and development 259 407 - General and administrative 434 801 - $ 1,755 $ 1,820 $ - 2022 Ting Equity Compensation Plan On January 16, 2023 the Board of Ting Fiber, LLC approved Ting's Equity Compensation Plan (Ting ECP), which has been established for the benefit of the employees, officers, directors and certain consultants of Ting or Tucows. The Ting stock options were introduced in order to provide variable compensation that helps retain executives and ensures that our executives' interests are aligned with those stakeholders of the business to grow the long-term value. The maximum number of Ting common units that have been set aside for issuance under the plan is 10 million units, currently there are 100 million common units outstanding. Generally, options issued under the ECP vest over a four -year period and have a term not exceeding seven years. Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of share-based instrument at the time of the grant and are recognized as expense over the vesting period of the share based instrument. The Company calculates expected volatility based on the actual volatility of comparable publicly traded companies. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company assumes the expected dividend yield to be zero. The fair value of stock options granted during the year ended December 31, 2023 was estimated using the following weighted average assumptions: Year Ended December 31, 2023 2022 2021 Volatility 35.8 % N/A N/A Risk-free interest rate 3.8 % N/A N/A Expected life (in years) 4.18 N/A N/A Dividend yield 0.0 % N/A N/A The weighted average grant date fair value for options issued, with the exercise price equal to market value on the date of grant $ 0.11 N/A N/A F- 35 Table of Contents Details of Ting's stock option transactions are as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Number of shares Weighted average exercise price per share Outstanding, beginning of period - $ - N/A N/A N/A N/A Granted 8,044,000 6.00 N/A N/A N/A N/A Exercised - - N/A N/A N/A N/A Forfeited ( 438,381 ) 6.00 N/A N/A N/A N/A Expired ( 101,350 ) 6.00 N/A N/A N/A N/A Outstanding, end of period 7,504,269 6.00 N/A N/A N/A N/A Options exercisable, end of period 3,156,281 $ 6.00 N/A N/A N/A N/A As of December 31, 2023 , the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were for Ting stock options were as follows: 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 $0.00 - $6.00 7,504,269 $ 6.00 6.1 $ - 3,156,281 $ 6.00 6.0 $ - 7,504,269 $ 6.00 6.1 $ - 3,156,281 $ 6.00 6.0 $ - Total unrecognized compensation cost relating to unvested stock options at December 31, 2023, prior to the consideration of expected forfeitures, is approximately $ 0.6 million and is expected to be recognized over a weighted average period of 2.5 years. Stock-based compensation for the Ting stock options has been included in operating expenses as follows (Dollar amounts in thousands of US dollars): Year Ended December 31, 2023 2022 2021 Network expenses $ 45 $ - $ - Sales and marketing 139 - - Technical operations and development 6 - - General and administrative 156 - - $ 346 $ - $ - The Company recorded stock-based compensation expense of $ 8.1 million for year ended December 31, 2023 and $ 7.6 million and $ 4.6 million for the years ended December 31, 2022 and December 31, 2021, respectively. The Company details of the stock-based compensation expense are as follows: Year Ended December 31, 2023 2022 2021 Company options $ 6,060 $ 5,779 $ 4,592 Wavelo options 2,065 1,820 - Ting options 346 - - Capitalized stock based compensation ( 337 ) - - Total Stock Based Compensation expense $ 8,134 $ 7,599 $ 4,592 The Company capitalizes stock-based compensation costs directly attributable to the development of qualifying assets. Qualifying assets include internal use software (IUS), assets under construction (AUC), equipment, or other long-lived assets that meet the capitalization criteria prescribed by ASC 350. During the year ended December 31, 2023, the Company capitalize d $ 0.3 million of stock based compensation directly attributable to the development of certain IUS assets. 17. Foreign Exchange: A foreign exchange loss amounting to $ 0.1 million has been recorded in general and administrative expenses during the year ended December 31, 2023 . A foreign exchange loss amounting to $ 0.2 million has been recorded in general and administrative expenses during the year ended December 31, 2022 . A foreign exchange gain amounting to $ 0.4 million has been recorded in general and administrative expenses during the year ended December 31, 2021 . F- 36 Table of Contents 18. Other Income (Expenses): On August 1, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), by and between the Company and DISH Wireless L.L.C.(“DISH”). Under the Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to DISH its mobile customer accounts that are marketed and sold under the Ting brand (other than certain customer accounts associated with one network operator) (“Transferred Assets”). For a period of 10 years following the execution of the Purchase Agreement, DISH will pay a monthly fee to the Company generally equal to an amount of net revenue received by DISH in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the Purchase Agreement. During the year ended December 31, 2023 , the Co mpany earned $ 17.0 million under the Purchase Agreement. For the twelve months ended 2023 2022 2021 Income earned on sale of transferred assets 17,033 18,507 20,030 Income earned on sale of Ting customer assets $ 17,033 $ 18,507 $ 20,030 The Company recorded interest income amounting to $ 4.5 million, $ 0.1 million and nil for the years ended December 31, 2023 , 2022 and 2021 respectively. This significant increase in 2023 was primarily due to the strategic investment of excess 2023 Term Notes proceeds into Money Market Deposit Accounts ("MMDAs") and Certificates of Deposit ("CDs"), which generated $ 4.3 million in interest income. Interest expense, net has been included in "Other Income" as follows (Dollar amounts in thousands of US dollars): For the twelve months ended 2023 2022 2021 Interest expense $ ( 46,256 ) $ ( 14,588 ) $ ( 4,617 ) Interest income 4,485 132 - Interest expense, net $ ( 41,771 ) $ ( 14,456 ) $ ( 4,617 ) 19. Earnings Per Common Share: The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation (Dollar amounts in thousands of US dollars, except for share data): Year ended December 31, 2023 2022 2021 Numerator for basic and diluted earnings per common share: Net income (loss) for the period $ ( 96,197 ) $ ( 27,571 ) $ 3,364 Denominator for basic and diluted earnings per common share: Basic weighted average number of common shares outstanding 10,864,086 10,769,280 10,662,337 Effect of outstanding stock options - - 155,132 Diluted weighted average number of shares outstanding 10,864,086 10,769,280 10,817,468 Basic earnings per common share $ ( 8.85 ) $ ( 2.56 ) $ 0.32 Diluted earnings per common share $ ( 8.85 ) $ ( 2.56 ) $ 0.31 For the year ended December 31, 2023 , and December 31, 2022 the Company recorded a net loss, thus all outstanding options were considered anti-dilutive and excluded from the computation of diluted income per common share. For the year ended December 31, 2021, options to purchase 39,889 common shares were outstanding but were not included in the computation of diluted income per common share because the options' exercise price was greater than the average market price of the common shares for the year. F- 37 Table of Contents 20. Commitments and Contingencies: (a) The Company has several non-cancelable lease and purchase obligations primarily for general office facilities, service contracts for mobile telephone services and equipment that expire over the next ten years. Future minimum payments under these agreements are as follows (Dollar amounts in thousands of US dollars): Contractual Obligations for the year ending December 31, Contractual Lease Obligations Debt Obligations Capital Purchase Obligations Redeemable preferred units financing Obligations Notes Payable financing Obligations Purchase Obligations (1)(2) Total Obligations 2024 $ 6,717 $ - $ 12,342 $ 7,353 $ - $ 19,403 $ 45,815 2025 5,349 - - 18,639 - 20,994 44,982 2026 3,478 211,900 - 18,536 - 5,098 239,012 2027 2,204 - - 18,639 - 1,252 22,095 2028 1,769 - - 133,942 238,505 1,179 375,395 Thereafter 15,307 - - - - 4,724 20,044 $ 34,824 $ 211,900 $ 12,342 $ 197,109 $ 238,505 $ 52,650 $ 747,343 ( 1 ) Purchase obligations include all other legally binding service contracts for mobile telephone services and other operational agreements to be delivered during Fiscal 2024 and subsequent years. ( 2 ) Purchase obligations include minimum revenue commitments of $ 30.5 million with the Company's MNO partner between 2024 and 2026. (b) On February 9, 2015 Ting Fiber, Inc.(“Ting”) entered into a lease and network operation agreement with the City of Westminster, Maryland (the “City”) relating to the deployment of a new fiber network throughout the Westminster area (“WFN”). Under the agreement, the City will finance, construct, and maintain the WFN which will be leased to Ting for a period of ten years. The network will be constructed in phases, the scope and timing of which shall be determined by the City, in cooperation with Ting. Under the terms of the agreement, Ting may be required to advance funds to the City in the event of a quarterly shortfall between the City’s revenue from leasing the network to Ting and the City’s debt service requirements relating to financing of the network. Ting could be responsible for shortfalls between $ 50,000 and $ 150,000 per quarter. In Fiscal 2016, the City has entered into financing for the construction of the WFN which allows the City to draw up to $ 21.0 million, from their lenders, over the next five years with interest only payments during that period with a loan maturity of 30 years. As of December 31, 2023 , the City has drawn $ 16.2 million and the City’s revenues from Ting exceed the City’s debt service requirements. The Company does not believe it will be responsible for any shortfall in Fiscal 2024. (c) On September 17, 2018 Ting entered into a non-exclusive access and use agreement with SiFi Networks Fullerton, LLC (“SiFi”). The agreement memorializes a long-term ( 15 -year) relationship wherein Ting will be granted the non-exclusive right to act as an Internet service provider for a fiber-optic network to be constructed in the city of Fullerton, California. Under the terms of the agreement, SiFi is fully responsible for constructing, operating and maintaining a wholesale fiber-optic network, as well as the financing of those activities. Ting is responsible for paying a fee per subscriber to SiFi. Through a “take or pay” arrangement, Ting has agreed to certain minimum charges based on minimum subscriber rates. These minimum fees are variable based on the percentage completion of the fiber optic network, and thus have not been considered an unconditional purchase obligation for the purposes of the table in Note 20 (a). (d) On November 4, 2019 Ting entered into an access and use agreement with Netly, LLC (“Netly”). The agreement memorializes a long-term ( 12 -year) relationship wherein Ting will be granted the right to act as an Internet service provider for fiber-optic networks to be constructed in and around the cities of Solana Beach, California. Under the terms of the agreement, Ting will have a 3 -year “Headstart” period over each completed segment of the network, whereby Ting shall be the exclusive provider of services to subscribers during the “Headstart” period. Netly is fully responsible for constructing, operating and maintaining a wholesale fiber optic network, as well as the financing of those activities. Ting is responsible for paying a fee per subscriber to Netly, as well as an unlit door fee for each serviceable address not subscribed. Through a “take or pay” arrangement, Ting has agreed to certain minimum charges based on minimum subscriber rates. To the extent that construction of the fiber optic network is complete, our minimum commitments have been included in the contractual lease obligations of the table in Note 20 (a). With respect to future obligations based on the future construction of the fiber optic network, these minimum fees are variable and thus have not been considered an unconditional purchase obligation for the purposes of the table in Note 20 (a). (e) O n January 7, 2022, Ting Fiber, Inc., entered into a 25 -year lease agreement with Colorado Springs Utilities (“CSU”), a municipally owned utility. The lease agreement named Ting Fiber the anchor tenant on a city-wide fiber network that is intended to pass 200,000 homes in Colorado Springs, Colorado. CSU began construction in Q2 of 2023. The lease obligates Ting, and its ultimate parent Tucows, Inc., to pay a per month fee for addresses passed by the network (as they are passed and become serviceable for customers to connect to the network) and for certain fiber infrastructure, including co-location space. Total costs of the lease, over its twenty-five -year term, are approximately $ 593,000,000 based on a fully completed fiber-to-the-home network, however the minimum fees are variable based on the percentage completion of the fiber optic network. Future committed fees associated with completed portions of the network have been included in the contractual lease obligations of the table in Note 20 (a). Future fees associated with portions of the network that have yet to be constructed have not been considered an unconditional purchase obligation for the purposes of the table in Note 20 (a). F- 38 Table of Contents (f) On May 11, 2022, Ting Fiber, LLC, entered into a "Rights-of-Way" agreement with the City of Alexandria, Virginia whereby the City granted Ting Fiber the right to install, place, construct, maintain, operate, upgrade, repair, and replace a Communications System to provide Broadband Services within the Public Rights-of-Way (a space in, upon, above, along, across, over and below the public and City-owned property that is used as a public rights-of-way) for a fee. Per the agreement, Ting Fiber is to pay the City throughout the 20 -year term of the agreement, an amount equal to 3% of Ting Fiber's Broadband Revenues once the network is live, and subscribers are obtained, and this fee is to be paid on a quarterly basis. The agreement commenced once Ting Fiber launched its network in Alexandria in March 2023. Since these fees are currently variable in nature, they have not been considered an unconditional purchase obligation for the purposes of the table in Note 20 (a). (g) On November 1, 2023, the Company, entered into a Network Access and Use Agreement with Blue Suede Networks, LLC, which granted Ting Fiber the right to use the fiber communications network to be constructed by Blue Suede Networks, LLC to provide high-speed broadband Internet Access services to end-user residential and small and medium sized business customers in the city of Memphis, Tennessee. The agreement grants the Company an exclusivity period of 5 years. The agreement requires the Company to pay the greater of a minimum revenue commitment based on minimum subscriber rates and a revenue share. Future fees associated with portions of the network have not been considered an unconditional purchase obligation for the purposes of the table in Note 20 (a). (h) In the normal course of its operations, the Company becomes involved in various legal claims and lawsuits. The Company intends to vigorously defend these claims. While the final outcome with respect to any actions or claims outstanding or pending as of December 31, 2023 cannot be predicted with certainty, management 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. 21. Segment Reporting: Reportable operating segments: We are organized and managed based on three operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate. No operating segments have been aggregated to determine our reportable segments. Certain revenues and expenses disclosed under the Corporate category are excluded from segment Adjusted EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment, including retail mobile services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT. Our reportable operating segments and their principal activities consist of the following: 1. Ting - This segment derives revenue from the retail high speed Internet access to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States. 2. Wavelo – This segment derives revenue from platform and other professional services related to communication service providers, including Mobile Network Operators and Internet Service Providers, and are primarily generated in the United States. 3. Tucows Domains – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States. Our segmented results include shared services allocations, including a profit margin, from Tucows Corporate for Finance, Human Resources and other technical services, to the operating units. In addition, Wavelo charges Ting a subscriber based monthly charge services rendered. Financial impacts from these allocations and cross segment charges are eliminated as part of the Tucows Corporate results. Key measure of segment performance: The CEO, as the chief operating decision maker, regularly reviews the operations and performance by segment. The CEO reviews segment revenue, gross margin and Adjusted EBITDA (as defined below) as (i) key measures of performance for each segment and (ii) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses and general and administrative expenses and not reviewed or managed by the CEO separate from Adjusted EBITDA, and are thus not included as separate measurements of segment profitability. Depreciation of property and equipment, amortization of intangible assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and 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. Our key measures of segment performance and their definitions are: 1. Segment gross margin - Net revenues less Direct cost of revenues attributable to each segment. 2. Segment Adjusted EBITDA - segment gross margin as well as the recurring income earned on sale of transferred assets, less network expenses and certain operating expenses attributable to each segment, such as sales and marketing, technical operations and development, general and administration expenses but excludes gains and losses from unrealized foreign currency, stock-based compensation and transactions that are not indicative of on-going performance, including acquisition and transition costs. Certain revenues and expenses disclosed under the Tucows Corporate category are excluded from segment Adjusted EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment, including mobile retail services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT. The Company believes that both segment gross margin and Adjusted EBITDA measures are important indicators of the operational strength and performance of its segments, by identifying those items that are not directly a reflection of each segment’s performance or indicative of ongoing operational and profitability trends. Segment gross margin and segment Adjusted EBITDA both exclude depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets that are included in the measurement of income before provision for income taxes pursuant to generally accepted accounting principles ("GAAP"). Total assets and total liabilities are centrally managed and are not reviewed at the segment level by the CEO. F- 39 Table of Contents Information by reportable segments (with the exception of disaggregated revenue, which is discussed in “Note 11 – Revenue”), which is regularly reported to the chief operating decision maker, and the reconciliations thereof to our income before taxes, are set out in the following tables (Dollar amounts in thousands of US dollars): Ting Wavelo Tucows Domains Tucows Corporate and eliminations Consolidated Totals Year Ended December 31, 2023 Net revenues External revenues $ 50,937 $ 35,979 $ 242,097 $ 10,324 $ 339,337 Intersegment revenues - 2,691 - (2,691 ) - Total net revenues 50,937 38,670 242,097 7,633 339,337 Direct cost of revenues 20,151 2,626 169,414 10,065 202,256 Segment gross margin 30,786 36,044 72,683 ( 2,432 ) 137,081 Network, other costs 28,222 Network, depreciation of property and equipment 35,864 Network, amortization of intangible assets 1,506 Network, impairment of property and equipment 4,822 Gross profit 66,667 Expenses: Sales and marketing 67,806 Technical operations and development 19,217 General and administrative 33,406 Depreciation of property and equipment 567 Amortization of intangible assets 9,323 Loss (gain) on currency forward contracts - Total expenses 130,319 Loss from operations (63,652 ) Other income (expenses): Interest expense (46,256 ) Interest income 4,485 Loss on debt extinguishment ( 14,680 ) Income earned on sale of transferred assets, net 17,033 Total other income (expenses) ( 39,418 ) Loss before provision for income taxes $ (103,070 ) Adjusted EBITDA $ (44,151 ) $ 10,573 $ 42,623 $ 6,406 $ 15,451 F- 40 Table of Contents Ting Wavelo Tucows Domains Tucows Corporate and eliminations Consolidated Totals Year Ended December 31, 2022 Net revenues External revenues $ 42,425 $ 23,632 $ 243,158 $ 11,927 $ 321,142 Intersegment revenues - 712 - (712 ) - Total net revenues 42,425 24,344 243,158 11,215 321,142 Direct cost of revenues 17,004 2,926 166,890 9,448 196,268 Segment gross margin 25,421 21,418 76,268 1,767 124,874 Network, other costs 17,433 Network, depreciation of property and equipment 27,589 Network, amortization of intangible assets 1,512 Network, impairment of property and equipment 92 Gross profit 78,248 Expenses: Sales and marketing 53,937 Technical operations and development 14,187 General and administrative 30,845 Depreciation of property and equipment 598 Loss (gain) on disposition of property and equipment 461 Amortization of intangible assets 9,882 Total expenses 109,910 Loss from operations (31,662 ) Other income (expenses): Interest expense (14,588 ) Interest income 132 Gain on sale of Ting customer assets, net 18,507 Other expense, net (177 ) Total other income (expenses) 3,874 Loss before provision for income taxes $ (27,788 ) Adjusted EBITDA $ (21,557 ) $ 3,875 $ 44,834 $ 10,438 $ 37,590 F- 41 Table of Contents Ting Wavelo Tucows Domains Tucows Corporate and eliminations Consolidated Totals Year Ended December 31, 2021 Net revenues External revenues $ 25,327 $ 16,781 $ 245,576 $ 16,653 $ 304,337 Intersegment revenues - - - - - Total net revenues 25,327 16,781 245,576 16,653 304,337 Direct cost of revenues 12,035 1,308 167,488 12,208 193,039 Segment gross margin 13,292 15,473 78,088 4,445 111,298 Network, other costs 14,769 Network, depreciation of property and equipment 17,452 Network, amortization of intangible assets 583 Network, impairment of property and equipment 201 Gross profit 78,293 Expenses: Sales and marketing 39,471 Technical operations and development 14,310 General and administrative 22,370 Depreciation of property and equipment 534 Loss (gain) on disposition of property and equipment 234 Amortization of intangible assets 9,424 Impairment of definite life intangible assets - Gain on currency forward contracts ( 277 ) Total expenses 86,066 Loss from operations (7,773 ) Other income (expenses): Interest expense, net (4,617 ) Gain on sale of Ting customer assets, net 20,030 Other expense, net (370 ) Total other income (expenses) 15,043 Income before provision for income taxes $ 7,270 Adjusted EBITDA $ (18,778 ) $ 7,334 $ 47,765 $ 12,500 $ 48,821 Reconciliation of Income before Provision for Income Taxes to Adjusted EBITDA Twelve months ended December 31, (In Thousands of US Dollars) 2023 2022 2021 Net Income (Loss) for the period $ ( 96,197 ) $ ( 27,571 ) $ 3,364 Less: Provision for income taxes ( 6,873 ) ( 217 ) 3,906 Depreciation of property and equipment 36,431 28,187 17,986 Impairment and loss on disposition of property and equipment 4,822 553 435 Amortization of intangible assets 10,829 11,394 10,007 Interest expense, net 41,771 14,456 4,617 Loss on debt extinguishment 14,680 - - Accretion of contingent liability - 248 383 Stock-based compensation 8,134 7,599 4,592 Unrealized loss (gain) on change in fair value of foreign currency forward contracts - - 606 Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities ( 62 ) 281 219 Acquisition and other costs 1 1,916 2,660 2,706 Adjusted EBITDA $ 15,451 $ 37,590 $ 48,821 1 Acquisition and other costs represents transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisition of Cedar in January 2020 and Simply Bits in November 2021 and the disposition of certain Ting Mobile assets in August 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments. F- 42 Table of Contents (b) The following is a summary of the Company’s property and equipment by geographic region (Dollar amounts in thousands of US dollars): December 31, 2023 December 31, 2022 Canada $ 943 $ 1,240 United States 338,696 280,219 Europe 5 36 $ 339,644 $ 281,495 (c) The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars): December 31, 2023 December 31, 2022 Canada $ 1,864 $ 2,736 United States 15,341 24,770 $ 17,205 $ 27,506 F- 43 Table of Contents (d) Valuation and qualifying accounts (Dollar amounts in thousands of US dollars): Allowance for doubtful accounts Balance at beginning of period Charged to costs and expenses Write-offs during period Balance at end of period Year Ended December 31, 2023 $ 693 $ $ ( 182 ) $ 511 Year Ended December 31, 2022 $ 541 $ 152 $ - $ 693 22. Subsequent Events: 2024 Stock Buyback Program On February 22, 2024, the Company announced that its Board of Directors (“Board”) has approved a stock buyback program to repurchase up to $ 40 million of its common stock in the open market. The $40 million buyback program commenced on February 23, 2024 and is expected to terminate on February 22, 2025. The previously announced $ 40 million buyback program for the period February 10, 2023 to February 9, 2024 was terminated. F- 44 Table of Contents CONDENSED FINANCIAL STATEMENTS OF TUCOWS INC. (PARENT COMPANY) All operating activities of Tucows Inc. (the “Parent Company”) are primarily conducted by its operating subsidiaries, Tucows.com Co (“Tucows.com Co”), eNom LLC ("eNom"), EPAG Domainservices GmbH (“EPAG”), Ascio Technologies, Corp (“Ascio”), Ting Inc. (“Ting Inc”), Wavelo, Inc. (“Wavelo”) and Ting Fiber, LLC (“Ting Fiber”). The Parent Company holds a direct 100 % ownership interest in Tucows (Delaware) Inc. ("Tucows Delaware"), which holds the Parent Company’s interest in its operating subsidiaries. The Parent Company is a holding company that does not conduct any substantive business operations and does not have any assets or liabilities other than cash and cash equivalents, accounts receivables, prepaid expenses, intangible assets, derivative instruments, accounts payables, accrued liabilities, investments in its subsidiaries and due to related party. The operations of Ting Fiber, LLC are partially funded through Redeemable preferred units which have restrictions on the ability to pay dividends, loan funds and make other upstream distributions to the Parent Company without prior approval by the holder of the Redeemable preferred units. These Condensed Parent Company financial statements have been prepared using the same accounting principles and policies described in the notes to the Consolidated Financial Statements. Refer to the Consolidated Financial Statements and notes presented above for additional information and disclosures with respect to these condensed financial statements. F- 45 Table of Contents PARENT COMPANY INFORMATION TUCOWS INC SCHEDULE I - CONDENSED BALANCE SHEETS (Dollar amounts in thousands of U.S. dollars) December 31, 2023 December 31, 2022 Assets Cash and cash equivalents $ 7,051 $ 3,897 Accounts receivable - 482 Prepaid expenses and deposits 610 528 Income taxes recoverable 508 1,716 Derivative instrument - 1,599 Investment in subsidiaries 81,636 178,786 Intangible assets 59 59 Total Assets 89,864 187,067 Liabilities Accounts payable 147 665 Accrued liabilities 459 265 Due to related parties 68,392 66,415 Deferred tax liability 10,991 23,065 Total Liabilities 79,989 90,410 Equity Share capital 34,321 31,816 Additional paid-in capital 21,235 17,679 Accumulated surplus (deficit) ( 45,681 ) 46,314 Accumulated other comprehensive income - 848 Total Equity 9,875 96,657 Total Liabilities and Equity $ 89,864 $ 187,067 The accompanying notes to the condensed financial statements are an integral part of these financial statements F- 46 Table of Contents PARENT COMPANY INFORMATION TUCOWS INC SCHEDULE I - CONDENSED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Dollar amounts in thousands of U.S. dollars) For the year ended December 31, 2023 2022 2021 Income (loss) of equity method investments $ ( 97,150 ) $ ( 25,348 ) $ 8,486 Operating expenses ( 8,192 ) ( 7,095 ) ( 7,059 ) Interest income (expense) 1,016 1,378 ( 376 ) Income tax recovery 8,129 3,494 2,313 Net income (loss) ( 96,197 ) ( 27,571 ) 3,364 Other comprehensive income (loss) - Parent Company ( 848 ) 1,408 - Other comprehensive income (loss) - Subsidiaries 1,792 ( 967 ) ( 1,993 ) Comprehensive income (loss) $ ( 95,253 ) $ ( 27,130 ) $ 1,371 The accompanying notes to the condensed financial statements are an integral part of these financial statements F- 47 Table of Contents PARENT COMPANY INFORMATION TUCOWS INC SCHEDULE I - CONDENSED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands of U.S. dollars) For the year ended December 31, 2023 2022 2021 Operating activities Net income (loss) $ ( 96,197 ) $ ( 27,571 ) $ 3,364 Non-cash items affecting net income Excess tax benefits on stock-based compensation expense - ( 193 ) ( 1,554 ) Stock-based compensation 6,035 5,779 4,592 Deferred income taxes (recovery) ( 11,804 ) ( 6,689 ) ( 1,251 ) Amortization of discontinued cash flow hedge from Accumulated other income ( 1,144 ) ( 761 ) - Loss (gain) on change in the fair value of forward contracts 1,624 281 - Equity in undistributed earnings of subsidiaries 97,150 25,348 ( 8,486 ) Changes in non-cash balances related to operations Accounts receivable 381 ( 482 ) - Prepaid expenses and deposits ( 82 ) ( 49 ) ( 191 ) Income taxes recoverable 1,208 532 108 Accounts payable ( 492 ) 507 102 Accrued liabilities 195 196 254 Customer deposits - ( 1 ) - Cash from operating activities ( 3,126 ) ( 3,103 ) ( 3,062 ) Financing activities Net proceeds received from (paid to) subsidiaries 6,280 1,101 ( 1,650 ) Net Proceeds received on exercise of stock options - 1,096 4,431 Cash from financing activities 6,280 2,197 2,781 Investing activities Investment in unrelated company - ( 2,012 ) - Acquisition of intangible assets - - ( 59 ) Cash from investing activities - ( 2,012 ) ( 59 ) Increase (decrease) in cash and cash equivalents 3,154 ( 2,918 ) ( 340 ) Cash and cash equivalents, beginning of period 3,897 6,815 7,155 Cash and cash equivalents, end of year $ 7,051 $ 3,897 $ 6,815 The accompanying notes to the condensed financial statements are an integral part of these financial statements F- 48 Table of Contents SCHEDULE I - NOTES TO THE CONDENSED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION Tucows Inc. (the “Parent Company”) is a holding company that conducts substantially all of its business operations through its subsidiaries. The Parent Company holds a direct 100 % ownership interest in Tucows (Delware) Inc., which holds the Parent Company’s interest in Tucows.com Co (“Tucows.com Co”), eNom LLC ("eNom"), EPAG Domainservices GmbH (“EPAG”), Ascio Technologies, Corp (“Ascio”), Ting Inc. (“Ting Inc”), Wavelo, Inc. (“Wavelo”) and Ting Fiber, LLC (“Ting Fiber”). The Parent Company was incorporated under the laws of the Commonwealth of Pennsylvania in November 1992 under the name Infonautics, Inc. In August 2001, we completed our acquisition of Tucows Inc., a Delaware corporation, and we changed our name from Infonautics, Inc. to Tucows Inc. The Parent Company was established to allocate capital and manage internet and telecom infrastructure businesses. Through its operating subsidiaries, the Parent Company offers a broad range of services including fixed Internet access, billing and subscription management platform services for communication service providers and distribution of global internet services through the provision of domain name registrations, digital certificates and email services. As of December 31, 2023 the restricted net assets for Ting Fiber LLC totaled $ 89.3 million. The restrictions on these net assets primarily affect our ability to transfer funds from our subsidiaries without violating contractual agreements. The Company continuously evaluates the impact of these restrictions on our liquidity and capital resource planning. The Company operates within a consolidated tax group, comprising the Parent Company and its wholly-owned subsidiaries. Deferred taxes are not separately identified and recorded at the parent level. No dividends have been received from any of our subsidiaries in the past three years. NOTE 2. COMMITMENTS AND CONTINGENCIES The Parent Company and its subsidiaries, excluding Ting Fiber, LLC, have revolving credit facilities through third -party financial institutions. The total available amount on the credit facilities is $ 240 million, and as at December 31, 2023, $ 211.9 million was drawn on the credit facilities. The Parent Company had no other material commitments or contingencies during the reported periods. NOTE 3. SHARE CAPITAL The Company's authorized common share capital is 250 million shares of common stock without nominal or par value. As of December 31, 2023, and 2022, the number of outstanding shares of common stock was 10,903,405 and 10,817,110 , respectively. The Parent Company issued 86,295 , 40,459 , and nil common stock during the twelve months ended December 31, 2023 , December 31, 2022 and December 31, 2021 , respectively related to stock based compensation. The Parent Company retired nil, 3,053 and 45,824 common stock during the twelve months ended December 31, 2023 , December 31, 2022 and December 31, 2021 , respectively related to stock options exercised. F- 49 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Tucows Inc. DATE: April 1, 2024 By: /s/ E lliot Noss Name: Elliot Noss Title: Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ E lliot Noss President, Chief Executive Officer April 1, 2024 Elliot Noss (Principal Executive Officer) and Director /s/ D avinder Singh Chief Financial Officer April 1, 2024 Davinder Singh (Principal Financial and Accounting Officer) /s/ A llen Karp Director April 1, 2024 Allen Karp /s/ marlene carl Director April 1, 2024 Marlene Carl /s/ R obin Chase Director April 1, 2024 Robin Chase /s/ E rez Gissin Director April 1, 2024 Erez Gissin /s/ J effrey Schwartz Director April 1, 2024 Jeffrey Schwartz /s/ gigi sohn Director April 1, 2024 Gigi Sohn /s/ lee matheson Director April 1, 2024 Lee Matheson 81