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Note 3 - Acquisitions
 3 Months Ended
Mar. 31, 2012
Business Combination Disclosure [Text Block]
3. ACQUISITIONS:

a.     Acquisition of EPAG Domainservices GMBH: 

On August 1, 2011, Tucows (Germany) Inc. (“Tucows Germany”), one of the Company’s wholly owned subsidiaries, acquired 100% of the outstanding capital stock of EPAG Domainservices GMBH (“EPAG”), from QSC AG. EPAG, based in Bonn, Germany, is an ICANN-accredited registrar with over 400,000 domains under management and is notable for offering over 200 Top Level Domains (TLDs). Consideration for the acquisition of EPAG was approximately US$2.4 million (€1.7 million to purchase the shares and the settlement of a working capital adjustment of €0.25 million) through an all-cash transaction which was financed by utilizing the Company’s non-revolving, reducing demand loan facility in the amount of US$2.5 million. In August 2011, the Company repaid $1.0 million of this loan. The acquisition consideration is net of cash acquired of US$0.1 million and a loan receivable from EPAG assumed in the amount of US$0.1 million. In connection with the acquisition, the Company incurred approximately US$0.1 million of acquisition costs during the three months ended September 30, 2011 and recorded the expenses in the general and administrative expenses line in the consolidated statement of operations. These costs include legal and other professional services.

The Company has accounted for the acquisition of EPAG using the acquisition method as required in ASC 805, Business Combinations. As such, fair values have been assigned to the assets and liabilities acquired and the excess of the total purchase price over the fair value of the net assets acquired is recorded as goodwill. The Company has completed the final valuation of the fair value assessment of certain intangible assets. The goodwill represents business benefits the Company anticipates realizing from optimizing resources and access to additional domain name TLD’s. The goodwill is not expected to be deductible for tax purposes.

Purchase price allocation

The following table summarizes the Company’s purchase price allocation based on the fair value of the assets acquired and liabilities assumed on August 1, 2011:

Accounts receivable
 
$
587,595
       
Cash acquired
   
118,477
       
Prepaid expenses and deposits
   
468,523
       
Prepaid domain name registry fees
   
1,116,798
       
Property and equipment
   
29,198
       
Intangible assets
   
1,723,800
       
Goodwill
   
882,320
       
Total assets acquired
           
4,926,711
 
                 
Accounts payable
   
92,950
         
Accrued liabilities
   
140,658
         
Customer deposits
   
32,603
         
Deferred revenue
   
1,425,182
         
Income taxes payable
   
172,380
         
Deferred tax liability
   
552,000
         
Total liabilities acquired
           
2,415,773
 
                 
Purchase price
         
$
2,510,938
 

The intangible assets acquired include technology in the amount of $0.3 million, brand in the amount of $0.2 million and customer relationships in the amount of $1.2 million. The residual value from the purchase price has been allocated to goodwill. The technology is being amortized over two years, while the customer relationships and brand are being amortized over seven years.

The amount of EPAG’s revenues and net loss included in Tucows’ Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2012, and the unaudited pro forma revenues and net income of the combined entity had the acquisition been consummated as of January 1, 2011, are set forth below:

   
Revenues for the three
   
Net income (loss) for the three
 
   
months ended March 31,
   
months ended March 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Actual
 
$
870,639
   
$
—
   
$
66,326
   
$
—
 

   
Three months ended
 
   
March 31,
 
   
2012
   
2011
 
Supplemental Unaudited Pro Forma Information
           
Total revenue
 
$
27,537,306
   
$
23,552,384
 
Net income *
 
$
1,663,619
   
$
665,164
 

*           Included within net income for the three months ended March 31, 2012 above are $87,240 of estimated amortization charges relating to the allocated values of intangible assets.

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.