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Note 3 - Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination Disclosure [Text Block]

3. Acquisitions:

(a)

Ascio

On March 18, 2019, the Company entered into an Asset Purchase Agreement with its indirect wholly owned subsidiary, Ting Fiber, Inc., and NetNames European Holdings ApS, CSC Administrative Services Limited UK, and Corporation Service Company (“CSC”), pursuant to which Ting Fiber, Inc. purchased from CSC all of the equity of Ascio Technologies, Inc. (“Ascio”), a domain registrar business, and all of CSC’s assets related to that business. The final purchase price was $29.9 million, which represented the agreed upon purchase of $29.44 million plus an amount of $0.45 million related to the estimated working capital deficiency acquired.

All definite life intangible assets acquired, including brand, developed technology and customer relationships will be amortized over 7 years.

The goodwill related to this acquisition is primarily attributable to synergies expected to arise from the acquisition and is deductible for US tax purposes but non-deductible for Danish tax purposes.

In connection with this acquisition, the Company incurred total acquisition related costs of $0.5 million of which $0.3 million and $0.2 million were included in General & Administrative expenses in the consolidated statements of operations and comprehensive income during Fiscal 2019 and Fiscal 2018, respectively.

(b)

Cedar

In the fourth quarter of 2019, the Company entered into a Stock Purchase Agreement to purchase all of the issued and outstanding shares of Cedar Holdings Group, Incorporated (“Cedar”), a fiber Internet provider business based in Durango, Colorado. The transaction closed on January 1, 2020, following receipt of all regulatory approvals. The purchase price was $14.1 million, less a purchase price adjustment of approximately $0.2 million relating to a working capital deficit and the estimated fair value of contingent consideration, for net purchase consideration of $13.9 million. In addition to $9.0 million cash consideration due at closing, the Company also issued 32,374 ($2.0 million) of Tucows Inc. shares with a two-year restriction period at closing. Included in the agreement is contingent consideration totaling up to $4.0 million, due on the 24th and 36th month anniversaries of the closing of the transaction dependent upon the achievement of certain milestones as defined in the Share Purchase Agreement. The fair value of the contingent consideration was determined to be $3.1 million using a discount rate of 11.2%. On January 2, 2022, the Company paid $2 million with respect to the 24^th month anniversary contingent payments.

The following table shows the final allocation of the purchase price for Cedar to the acquired identifiable assets and liabilities assumed (thousands of U.S. dollars):

Cash Consideration, including working capital adjustment	$	8,836
Share-based payment		2,000
Fair value of contingent payments		3,072
Total estimated purchase price		13,908

Cash and Cash Equivalents		66
Accounts Receivables, net		13
Other current assets		22
Property and equipment		4,661
Right of use operating lease		18
Customer relationships		4,640
Network rights		750
Total identifiable assets		10,170
Accounts payable and accrued labilities		(362	)
Deferred tax liability		(2,373	)
Operating lease liability		(13	)
Total liabilities assumed		(2,748	)
Total net assets (liabilities) assumed		7,422
Total goodwill	$	6,486

The amortization period for the customer relationships and network rights are 7 and 15 years, respectively.

(c)

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 estimated 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.

The amount of revenue recognized since the acquisition date included in the consolidated statements of operations and comprehensive income statement for Fiscal 2021 is $0.2 million.

The net income recognized since the acquisition date included in the consolidated statements of operations and comprehensive income for Fiscal 2021 is gain of less than $0.1 million.

In connection with this acquisition, the Company incurred nil acquisition related costs.

(d)

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 million, 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 is contingent consideration totaling up to $1.0 million, due 60 days from December 31, 2021, which is subject to the acquired entity meeting certain revenue targets in fiscal 2021. The purchase price allocation is preliminary and may differ from the final purchase price allocation, and these differences may be material. Revisions to the allocations will occur as additional information about the fair value of assets and liabilities becomes available. The final purchase price allocations will be completed within one year from the acquisition date.

Cash Consideration, including working capital adjustment	$	24,829
Fair value of contingent payments		953
Total estimated 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

The amortization period for the customer relationships is 7 years.

The goodwill related to this acquisition is primarily attributable to synergies expected to arise from the acquisition.

The amount of revenue recognized since the acquisition date included in the consolidated statements of operations and comprehensive income statement for Fiscal 2021 is $1.4 million.

The net income recognized since the acquisition date included in the consolidated statements of operations and comprehensive income for Fiscal 2021 is loss of less than $0.1 million.

On a proforma basis, the revenues and net income for Simply Bits for Fiscal 2021 would be $9.1 million and $1.7 million respectively had the acquisition occurred on January 1, 2021. This pro forma information is unaudited and does not purport to represent what the Company's actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

In connection with this acquisition, the Company incurred total acquisition related costs of $0.2 million were included in General & Administrative expenses in the consolidated statements of operations and comprehensive income during Fiscal 2021.