Derivative instruments and hedging activities:

Foreign currency forward contracts

October 2012,

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

not

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

one

and

eighteen

months.

The Company has designated certain of these transactions as cash flow hedges of forecasted transactions and foreign currency denominated liabilities under ASC Topic

815,

Derivatives and Hedging

(“ASC

815”

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

815,

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

June 30, 2019,

is recorded as derivative instrument assets or liabilities. As a result of adopting the targeted improvements on

January 1, 2019,

for any existing contracts on the effective date of adoption and thereafter, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness will be recorded in OCI.

As of

June 30, 2019,

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

$20.2

million, of which

$18.6

million were designated as hedges. As of

December 31, 2018,

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

$40.5

million, of which

$36.5

million were designated as hedges.

Maturity date (Dollar amounts in thousands of U.S. dollars)	Notional amount of U.S. dollars		Weighted average exchange rate of U.S. dollars		Fair Value
July - September 2019	$	9,881	$	1.3136	$	48
October - December 2019		10,327		1.3174		92
	$	20,208	$	1.3156	$	140

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

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

not

include any income tax effects).

Fair value of derivative instruments in the consolidated balance sheets

Derivatives (Dollar amounts in thousands of U.S. dollars)	Balance Sheet Location	As of June 30, 2019 Fair Value Asset			As of December 31, 2018 Fair Value Liability
Foreign Currency forward contracts designated as cash flow hedges (net)	Derivative instruments	$	158		$	(1,069	)
Foreign Currency forward contracts not designated as cash flow hedges (net)	Derivative instruments		(18	)		(207	)
Total foreign currency forward contracts (net)	Derivative instruments	$	140		$	(1,276	)

Movement in accumulated other comprehensive income (“AOCI”) balance for the

three

months ended

June 30, 2019 (

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

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance - March 31, 2019	$	(264	)	$	64		$	(200	)
Other comprehensive income (loss) before reclassifications		317			(77	)		240
Amount reclassified from AOCI		106			(26	)		80
Other comprehensive income (loss) for the three months ended June 30, 2019		423			(103	)		320

Ending AOCI Balance - June 30, 2019	$	159		$	(39	)	$	120

Movement in AOCI balance for the

six

months ended

June 30, 2019

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

	Gains and losses on cash flow hedges			Tax impact			Total AOCI
Opening AOCI balance - December 31, 2018	$	(1,069	)	$	259		$	(810	)
Other comprehensive income (loss) before reclassifications		1,042			(253	)		789
Amount reclassified from AOCI		186			(45	)		141
Other comprehensive income (loss) for the six months ended June 30, 2019		1,228			(298	)		930

Ending AOCI Balance - June 30, 2019	$	159		$	(39	)	$	120

Effects of derivative instruments on income and OCI for the

three

months ended

June

201

are as follows

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

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative			Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)		Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(91	)	$	-	$	-
Foreign currency forward contracts for the three months ended June 30, 2019	$	320		Cost of revenues	$	(15	)	$	-	$	-

				Operating expenses	$	(1	)	$	-	$	-
Foreign currency forward contracts for the three months ended June 30, 2018	$	(260	)	Cost of revenues	$	(16	)	$	-	$	-

Effects of derivative instruments on income and OCI for the

six

months ended

June

2019

are as follows

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

Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative			Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)		Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective Portion and Amount Excluded from Effectiveness Testing)
				Operating expenses	$	(154	)	$	-	$	-
Foreign currency forward contracts for the six months ended June 30, 2019	$	930		Cost of revenues	$	(32	)	$	-	$	-

				Operating expenses	$	(1	)	$	-	$	-
Foreign currency forward contracts for the six months ended June 30, 2018	$	(243	)	Cost of revenues	$	(16	)	$	-	$	-

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

not

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

$0.1

million and a gain of

$0.1

million for the change in fair value of outstanding contracts in the consolidated statement of operations and comprehensive income for the

three

months ended

June 30, 2019.

The Company recorded a loss on settlement of

$0.1

million and a gain of

$0.2

million for the change in fair value of outstanding contracts in the consolidated statement of operations and comprehensive income for the

six

months ended

June 30, 2019

in the consolidated statement of operations and comprehensive income.

The Company recorded a loss on settlement of less than

$0.1

million and a loss of less than

$0.1

million for the change in fair value of outstanding contracts the

three

months ended

June 30, 2018

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

$0.1

million and a loss of than then

$0.1

million for change in fair value of outstanding contracts for the

six

months ended

June 30, 2018

in the consolidated statement of operations and comprehensive income.