Exhibit 4.2





 





 



 


 





 


 


 


SANGOMA TECHNOLOGIES CORPORATION


 


 





 



 



 


Consolidated financial statements for


 


 


years ended June 30, 2021 and 2020


 


100 Renfrew Drive, Suite 100,


Markham, Ontario,


Canada L3R 9R6


 




     


     


    

 


Sangoma Technologies Corporation


June 30, 2021 and 2020


 


Table of contents


 


	Independent Auditor’s Report	3
	 	 
	Consolidated statements of financial position	5
	 	 
	Consolidated statements of income and comprehensive income (loss)	6
	 	 
	Consolidated statements of changes in shareholders’ equity	7
	 	 
	Consolidated statements of cash flows	8
	 	 
	Notes to the consolidated financial statements	9-47


 




    2 


     


    

 


        


Independent
Auditor’s Report





 


To the Shareholders of Sangoma Technologies Corporation:


 


Opinion


 


We have audited the consolidated financial statements of Sangoma Technologies
Corporation and its subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at June 30,
2021 and June 30, 2020, and the consolidated statements of income and comprehensive income (loss), changes in shareholders’
equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.


 


In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the consolidated financial position of the Company as at June 30, 2021 and June 30,
2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards.


 


Basis for Opinion


 


We conducted our audits in accordance with Canadian generally accepted
auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements
that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.


 


Other Information


 


Management is responsible for the other information. The other information
comprises Management’s Discussion and Analysis.


 


Our opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance conclusion thereon.


 


In connection with our audits of the consolidated financial statements,
our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We
obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed
on this other information, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.


 


Responsibilities of Management and Those Charged with Governance
for the Consolidated Financial Statements


 


Management is responsible for the preparation and fair presentation
of the consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.


 


In preparing the consolidated financial statements, management is responsible
for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has
no realistic alternative but to do so.


 


Those charged with governance are responsible for overseeing the Company’s
financial reporting process.


 




    3 


     


    

 


Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements


 


Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.


 


As part of an audit in accordance with Canadian generally accepted
auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:


 


		·	Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.






		·	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.






		·	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by management.






		·	Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.






		·	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.






		·	Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.



 


We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal
control that we identify during our audits.


 


We also provide those charged with governance with a statement that
we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.


 


The engagement partner on the audit resulting in this independent auditor’s
report is Ajmer Singh Sran.


 


	 	/s/ MNP LLP
	Toronto, Ontario	Chartered Professional Accountants
	September 29, 2021	Licensed Public Accountants


 


 


 




    4 


     


    

 


Sangoma Technologies Corporation


Consolidated statements of financial position


As at June 30, 2021 and 2020


(in Canadian dollars)








 



 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Assets	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	Cash and cash equivalents (Note 13)	 	 	27,385,282	 	 	 	27,249,863	 
	Trade receivables (Note 13)	 	 	18,261,836	 	 	 	11,234,541	 
	Inventories (Note 4)	 	 	14,649,861	 	 	 	12,643,738	 
	Income tax receivable	 	 	821,201	 	 	 	-	 
	Contract assets (Note 2(v))	 	 	917,114	 	 	 	645,296	 
	Other current assets	 	 	4,085,501	 	 	 	2,383,857	 
	 	 	 	66,120,795	 	 	 	54,157,295	 
	Non-current assets	 	 	 	 	 	 	 	 
	Property and equipment (Note 5)	 	 	9,485,146	 	 	 	3,001,687	 
	Right-of-use assets (Note 17)	 	 	16,768,978	 	 	 	16,178,520	 
	Intangible assets (Note 6)	 	 	240,416,895	 	 	 	50,206,378	 
	Development costs (Note 7)	 	 	1,899,735	 	 	 	2,452,718	 
	Deferred income tax assets (Note 10)	 	 	2,543,353	 	 	 	5,287,207	 
	Goodwill (Note 8)	 	 	331,412,760	 	 	 	44,012,418	 
	Contract assets (Note 2(v))	 	 	1,058,573	 	 	 	436,755	 
	 	 	 	669,706,235	 	 	 	175,732,978	 
	Liabilities	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities (Note 13)	 	 	27,713,597	 	 	 	14,185,737	 
	Provisions (Note 18)	 	 	548,390	 	 	 	662,942	 
	Sales tax payable	 	 	1,634,156	 	 	 	808,074	 
	Income tax payable	 	 	-	 	 	 	2,636,159	 
	Consideration payable (Note 16)	 	 	2,894,921	 	 	 	-	 
	Operating facility and loans (Note 9)	 	 	18,033,270	 	 	 	16,898,720	 
	Contract liabilities (Note 15)	 	 	14,143,563	 	 	 	10,772,900	 
	Derivative liability (Note 9)	 	 	413,111	 	 	 	797,380	 
	Lease obligations on right-of-use assets (Note 17)	 	 	3,001,069	 	 	 	2,951,616	 
	 	 	 	68,382,077	 	 	 	49,713,528	 
	Long term liabilities	 	 	 	 	 	 	 	 
	Consideration payable (Note 16)	 	 	8,385,867	 	 	 	-	 
	Operating facility and loans (Note 9)	 	 	74,875,253	 	 	 	33,593,020	 
	Contract liabilities (Note 15)	 	 	5,381,611	 	 	 	3,972,730	 
	Non-current lease obligations on right-of-use assets (Note 17)	 	 	14,651,306	 	 	 	13,671,174	 
	Deferred income tax liabilities (Note 10)	 	 	30,688,333	 	 	 	-	 
	Other non-current liabilities	 	 	1,137,020	 	 	 	-	 
	 	 	 	203,501,467	 	 	 	100,950,452	 
	Shareholders’ equity	 	 	 	 	 	 	 	 
	Share capital	 	 	226,333,036	 	 	 	64,628,552	 
	Shares to be issued	 	 	241,568,231	 	 	 	-	 
	Contributed surplus	 	 	6,925,843	 	 	 	2,437,227	 
	Accumulated other comprehensive loss	 	 	(17,797,975	)	 	 	(691,896	)
	Retained earnings	 	 	9,175,633	 	 	 	8,408,643	 
	 	 	 	466,204,768	 	 	 	74,782,526	 
	 	 	 	669,706,235	 	 	 	175,732,978	 






	Approved by the Board	 	 
	(Signed)	Al Guarino	Director	 
	(Signed)	Allan Brett	Director	 


 


The accompanying notes are an integral part of these consolidated
financial statements.


 




    5 


     


    

 


Sangoma Technologies Corporation


Consolidated statements of income and comprehensive income (loss)


For the years ended June 30, 2021 and 2020


(in Canadian dollars)








 



 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Revenue (Note 19)	 	 	167,344,815	 	 	 	131,417,706	 
	Cost of sales (Note 4)	 	 	53,389,496	 	 	 	46,509,149	 
	Gross profit	 	 	113,955,319	 	 	 	84,908,557	 
	 	 	 	 	 	 	 	 	 
	Expenses	 	 	 	 	 	 	 	 
	Sales and marketing	 	 	31,019,555	 	 	 	20,556,128	 
	Research and development	 	 	27,194,305	 	 	 	23,913,068	 
	General and administration	 	 	47,819,825	 	 	 	30,249,635	 
	Foreign currency exchange (gain) loss	 	 	(157,539	)	 	 	54,142	 
	 	 	 	105,876,146	 	 	 	74,772,973	 
	Income before interest, income taxes, gain on change in fair value of consideration payable, business integration and acquisition costs	 	 	8,079,173	 	 	 	10,135,584	 
	 	 	 	 	 	 	 	 	 
	Interest income (Note 13)	 	 	(49,211	)	 	 	(53,170	)
	Interest expense (Notes 9, 13, 17)	 	 	2,465,643	 	 	 	2,530,537	 
	Gain on change in fair value of consideration payable (Note 16)	 	 	(5,164,811	)	 	 	-	 
	Business acquisition costs (Note 20)	 	 	4,889,557	 	 	 	2,581,854	 
	 	 	 	2,141,178	 	 	 	5,059,221	 
	 	 	 	 	 	 	 	 	 
	Income before income tax	 	 	5,937,995	 	 	 	5,076,363	 
	Provision for income taxes	 	 	 	 	 	 	 	 
	Current (Note 10)	 	 	2,485,051	 	 	 	1,651,676	 
	Deferred (Note 10)	 	 	2,685,954	 	 	 	(479,929	)
	Net income	 	 	766,990	 	 	 	3,904,616	 
	 	 	 	 	 	 	 	 	 
	Other comprehensive income (loss)	 	 	 	 	 	 	 	 
	Items to be reclassified to net income Change in fair value of interest rate swaps, net of tax (Note 9)	 	 	384,269	 	 	 	(797,380	)
	Foreign currency translation gain (loss)	 	 	(17,490,348	)	 	 	159,653	 
	Comprehensive income (loss)	 	 	(16,339,089	)	 	 	3,266,889	 
	 	 	 	 	 	 	 	 	 
	Earnings per share	 	 	 	 	 	 	 	 
	Basic (Note 11(iii))	 	$	0.004	 	 	$	0.055	 
	Diluted (Note 11(iii))	 	$	0.004	 	 	$	0.054	 
	 	 	 	 	 	 	 	 	 
	Weighted average number of shares outstanding (Note 11(iii))	 	 	 	 	 	 	 	 
	Basic	 	 	202,609,514	 	 	 	71,382,799	 
	Diluted	 	 	204,277,032	 	 	 	72,595,302	 



 


The accompanying notes are an integral part of these consolidated
financial statements.


 




    6 


     


    





 


Sangoma Technologies Corporation


Consolidated statements of changes in shareholders’ equity


For the years ended June 30, 2021 and 2020


(in Canadian dollars)


 


	 	 	Number
    of	 	 	 	 	 	Shares	 	 	 	 	 	 	 	 	Accumulated
    other	 	 	 	 	 	Total	 
	 	 	common	 	 	Share	 	 	to
    be	 	 	Contributed	 	 	Warrant	 	 	comprehensive	 	 	Retained	 	 	shareholders’	 
	 	 	shares	 	 	capital	 	 	issued	 	 	surplus	 	 	reserve	 	 	(loss)
    income	 	 	earnings	 	 	equity	 
	 	 		 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Balance, June 30, 2019	 	 	52,962,090	 	 	 	34,860,468	 	 	 	-	 	 	 	2,514,154	 	 	 	29,348	 	 	 	(54,169	)	 	 	4,479,665	 	 	 	41,829,466	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,904,616	 	 	 	3,904,616	 
	Other comprehensive income	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	159,653	 	 	 	-	 	 	 	159,653	 
	Change in
    fair value of interest rate swaps, net of tax (Note 9)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(797,380	)	 	 	-	 	 	 	(797,380	)
	Common shares
    issued through business combination (Note11(i), 20)	 	 	5,500,417	 	 	 	6,553,938	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	6,553,938	 
	Common shares
    issued through short form prospectus, net of costs (Note 11(i))	 	 	14,846,500	 	 	 	21,319,720	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	21,319,720	 
	Deferred tax benefit on share
    issuance costs (Note 10)	 	 	-	 	 	 	432,590	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	432,590	 
	Common shares
    released from escrow and cancelled (Note 11(i))	 	 	(21,673	)	 	 	(24,362	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	24,362	 	 	 	-	 
	Common shares
    issued for options exercised (Note 11(i))	 	 	2,738,444	 	 	 	1,394,893	 	 	 	-	 	 	 	(478,904	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	915,989	 
	Common shares
    issued for broker warrants exercised (Note 11(i))	 	 	61,957	 	 	 	91,305	 	 	 	-	 	 	 	-	 	 	 	(29,348	)	 	 	-	 	 	 	-	 	 	 	61,957	 
	Share-based compensation expense
    (Note 11(ii))	 	 	-	 	 	 	-	 	 	 	-	 	 	 	401,977	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	401,977	 
	Balance, June 30, 2020	 	 	76,087,735	 	 	 	64,628,552	 	 	 	-	 	 	 	2,437,227	 	 	 	-	 	 	 	(691,896	)	 	 	8,408,643	 	 	 	74,782,526	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	766,990	 	 	 	766,990	 
	Other comprehensive loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(17,490,348	)	 	 	-	 	 	 	(17,490,348	)
	Change in
    fair value of interest rate swaps, net of tax (Note 9)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	384,269	 	 	 	-	 	 	 	384,269	 
	Common shares
    reserved for issuance related to business combination (Note 20)	 	 	-	 	 	 	-	 	 	 	241,568,231	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	241,568,231	 
	Common
    shares issued for transaction cost payment (Note 11(i), 20)	 	 	129,198	 	 	 	415,568	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	415,568	 
	Common shares
    issued through business combination (Note 11(i), 20)	 	 	21,130,798	 	 	 	84,093,299	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	84,093,299	 
	Common shares
    issued through short form prospectus, net of costs (Note 11(i))	 	 	35,006,000	 	 	 	75,283,264	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	75,283,264	 
	Deferred tax benefit on share
    issuance costs (Note 10)	 	 	-	 	 	 	1,440,455	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,440,455	 
	Common shares
    issued for options exercised (Note 11(i))	 	 	797,777	 	 	 	471,898	 	 	 	-	 	 	 	(192,710	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	279,188	 
	Share-based compensation expense
    (Note 11(ii))	 	 	-	 	 	 	-	 	 	 	-	 	 	 	4,681,326	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	4,681,326	 
	Balance, June 30, 2021	 	 	133,151,508	 	 	 	226,333,036	 	 	 	241,568,231	 	 	 	6,925,843	 	 	 	-	 	 	 	(17,797,975	)	 	 	9,175,633	 	 	 	466,204,768	 



 


The accompanying notes are an integral part of
these consolidated financial statements.


 






    7 


     


    

 


Sangoma Technologies Corporation


Consolidated statements of cash flows


For the years ended June 30, 2021 and 2020


(in Canadian dollars)


 


	 	 	2021	 	 	2020	 
	Operating activities	 	$	 	 	$	 
	Net income	 	 	766,990	 	 	 	3,904,616	 
	Adjustments for:	 	 	 	 	 	 	 	 
	Depreciation of property and equipment (Note 5)	 	 	1,126,967	 	 	 	700,950	 
	Depreciation of right-of-use assets (Note 17)	 	 	3,217,711	 	 	 	3,366,767	 
	Amortization of intangible assets (Note 6)	 	 	15,183,270	 	 	 	6,948,436	 
	Amortization of development costs (Note 7)	 	 	1,837,958	 	 	 	1,499,753	 
	Deferred income tax expense (recovery) (Note 10)	 	 	2,685,954	 	 	 	(479,929	)
	Income tax paid	 	 	(3,965,880	)	 	 	(136,951	)
	Income tax refunds	 	 	651,500	 	 	 	18,067	 
	Share-based compensation expense (Note 11(ii))	 	 	4,681,326	 	 	 	401,977	 
	Interest on obligation on right-of-use assets (Note 17)	 	 	478,656	 	 	 	481,697	 
	Unrealized foreign exchange loss (gain)	 	 	149,421	 	 	 	(1,731,625	)
	Gain on terminated leases	 	 	(10,291	)	 	 	-	 
	Gain on contingent consideration	 	 	(5,164,811	)	 	 	-	 
	Changes in working capital	 	 	 	 	 	 	 	 
	Trade receivables	 	 	(1,137,629	)	 	 	1,155,710	 
	Inventories	 	 	(1,366,523	)	 	 	(931,226	)
	Income tax receivable	 	 	(1,367,652	)	 	 	-	 
	Contract assets	 	 	(1,005,027	)	 	 	(255,934	)
	Other current assets	 	 	(118,896	)	 	 	32,000	 
	Sales tax payable	 	 	944,999	 	 	 	522,295	 
	Accounts payable and accrued liabilities	 	 	4,640,720	 	 	 	(3,111,187	)
	Provisions	 	 	(56,411	)	 	 	84,717	 
	Income tax payable	 	 	(1,938,262	)	 	 	1,136,217	 
	Contract liabilities	 	 	(767,834	)	 	 	(1,693,851	)
	Net cash flows from operating activities	 	 	19,466,256	 	 	 	11,912,499	 
	Investing activities	 	 	 	 	 	 	 	 
	Purchase of property and equipment (Note 5)	 	 	(1,404,233	)	 	 	(631,338	)
	Development costs (Note 7)	 	 	(2,108,207	)	 	 	(1,964,684	)
	Business combinations, net of cash and cash equivalents
    acquired (Note 20)	 	 	(132,744,170	)	 	 	(39,288,136	)
	Net cash flows used in investing activities	 	 	(136,256,610	)	 	 	(41,884,158	)
	Financing activities	 	 	 	 	 	 	 	 
	Proceeds from operating facility and loan (Note 9)	 	 	66,018,750	 	 	 	54,977,430	 
	Repayments of operating facility and loan (Note 9)	 	 	(18,811,703	)	 	 	(28,810,943	)
	Repayment of right-of-use lease obligation (Note 17)	 	 	(3,228,906	)	 	 	(3,285,223	)
	Issuance of common shares through
    short form prospectus, net (Note 11(i))	 	 	75,283,264	 	 	 	21,319,720	 
	Issuance of common shares for broker warrants exercised (Note 11(i))	 	 	-	 	 	 	61,957	 
	Issuance of common shares for stock options exercised (Note 11(i))	 	 	279,188	 	 	 	915,989	 
	Net cash flows from financing activities	 	 	119,540,593	 	 	 	45,178,930	 
	Effect of foreign exchange rate changes on cash and cash equivalents	 	 	(2,614,820	)	 	 	317,748	 
	Increase in cash and cash equivalents	 	 	135,419	 	 	 	15,525,019	 
	Cash and cash equivalents, beginning of the year	 	 	27,249,863	 	 	 	11,724,844	 
	Cash and cash equivalents, end of the year	 	 	27,385,282	 	 	 	27,249,863	 



 


The accompanying notes are an integral part of
these consolidated financial statements.


 






    8 


     


    





 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		1.	General information



 


Founded in 1984, Sangoma Technologies Corporation (“Sangoma”
or the “Company”) is publicly traded on the TSX Venture Exchange (TSX VENTURE: STC). The Company was incorporated in Canada,
its legal name is Sangoma Technologies Corporation and its primary operating subsidiaries for fiscal 2021 are Sangoma Technologies Inc.,
Sangoma US Inc., VoIP Supply LLC, Digium Inc., VoIP Innovations LLC and Star2Star Communications LLC.


 


Sangoma is a leading provider of hardware and software components
that enable or enhance Internet Protocol Communications Systems for both telecom and datacom applications. Enterprises, small to medium
sized businesses (“SMBs”) and telecom operators in over 150 countries rely on Sangoma’s technology as part of their
mission critical infrastructures. The product line includes data and telecom boards for media and signal processing, as well as gateway
appliances and software.


 


The Company is domiciled in Ontario, Canada. The address
of the Company’s registered office is 100 Renfrew Dr., Suite 100, Markham, Ontario, L3R 9R6 and the Company operates in multiple
jurisdictions.


 


		2.	Significant accounting policies



 


		(i)	Statement of compliance and basis of presentation



 


The accompanying consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).


 


These audited consolidated financial statements were prepared
using the same basis of presentation, accounting policies and methods of computation as those of the audited consolidated financial statements
for the year ended June 30, 2020, except for the change in functional currency of Sangoma Technologies Corporation and Sangoma Technologies
Inc. from Canadian dollars to US dollars described below.


 


		(ii)	Change in functional currency for the Company and Sangoma
Technologies Inc.



 


Management assessed the functional currency of the Company
and its wholly owned subsidiary Sangoma Technologies Inc. and concluded that the Company and its wholly-owned operating subsidiary should
be measured using the US dollar as the functional currency. Effective July 1, 2020, the change in functional currency was applied
on a prospective basis. The US dollar translated amounts of nonmonetary assets and liabilities as at July 1, 2020 became the historical
accounting basis for those assets and liabilities at July 1, 2020.


 


		(iii)	Basis of consolidation



 


The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries Sangoma Technologies Inc. (Canada), Sangoma US Inc. (United States), Sangoma Technologies
US Inc. (United States), VoIP Supply LLC (United States), Digium Inc. (United States), Digium Cloud Services LLC (United States), Sangoma
Technologies Ltd. (Ireland), Sangoma HK Ltd. (Hong Kong), Sangoma Technologies Private Limited (India), VoIP Innovations LLC (United States),
Vocally LLC (United States), Trybe Labs LLC (United States), .e4 LLC (United States), StarBlue Inc. (United States) and Star2Star Communications
LLC (United States).


 


Subsidiaries are entities controlled by the Company where control
is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries
are included in the consolidated financial statements from the date control is obtained until the date control ceases. All intercompany
balances, transactions, income and expenses have been eliminated on consolidation.


 









    9 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(iv)	Inventories



 


Parts and finished goods are stated at the lower of cost and
net realizable value. Inventory cost includes all expenses directly attributable to the manufacturing process, which include the cost
of materials and labor, as well as suitable portions of related production overheads, based on normal operating capacity. Costs of ordinary
interchangeable items are assigned using weighted average cost method. Net realizable value is the estimated selling price in the ordinary
course of business less any applicable selling expenses.


 


		(v)	Revenue



 


The Company determines revenue recognition through the following
steps: a) identification of the contract with a customer; b) identification of the performance obligations in the contract; c) determination
of the transaction price; d) allocation of the transaction price for the performance obligations in the contract; and e) recognition of
revenue when the Company satisfies a performance obligation.


 


Revenue is recognized when control of the promised goods or
services is transferred to the customers, in an amount that reflects the consideration receivable in exchange for those goods or services,
net of discounts and sales taxes.


 


Contracts with multiple products or services


 


Typically, the Company enters into contracts that contain multiple
products and services such as right to use and right to access software licenses, hosted software-as-a-service, maintenance and support,
and professional services. The Company evaluates these arrangements to determine the appropriate unit of accounting (performance obligation)
for revenue recognition purposes based on whether the product or service is distinct from some or all of the other products or services
in the arrangement. A product or service is distinct if the customer can benefit from it on its own or together with other readily available
resources and the Company’s promise to transfer the good or service is separately identifiable from other promises in the contractual
arrangement with the customer.


 


Non-distinct products and services are combined with other
goods or services until they are distinct as a bundle and therefore form a single performance obligation.


 


Where a contract consists of more than one performance obligation,
revenue is allocated to each performance obligation based on their estimated standalone selling price (“SSP”).


 


The Company recognizes revenue when the transfer of control
of the promised products or services has occurred to customers in exchange for consideration the Company expects to receive, net of discounts
and taxes. Revenue from the sale of software products is recognized when the product is shipped and received by the customer, and depending
on the delivery conditions, title and risk have passed to the customer. Revenues from installation and training relating to the sale of
software products are recognized as the services are performed. Software support and maintenance revenue is recognized over the term of
the maintenance agreement. Revenue from the Company’s hosted software-as-a-service (“SaaS”) application are recognized
as services are provided. The Company defers revenues that have been billed but which do not meet the revenue recognition criteria. Cash
received in advance of revenue being recognized is classified as contract liabilities (unearned revenues).


 


The Company recognizes an asset (contract assets) for the incremental
costs of obtaining a contract with a customer if it expects the costs to be recoverable and has determined that such costs meet the requirements
to be capitalized. Capitalized contract acquisition costs are amortized consistent with the pattern of transfer to the customer for the
goods and services to which the asset relates. The amortization period includes specifically identifiable contract renewals where there
is no substantive commission paid on renewals. The expected customer
renewal period is estimated based over the life of the intellectual property, including expected software upgrades by the customer. The
Company does not capitalize incremental costs of obtaining contracts if the amortization period is one year or less. As at June 30,
2021, the Company has $917,114 (June 30, 2020 - $645,296) as current contract assets and $1,058,573 (June 30, 2020 - $436,755)
as long term contract assets in the consolidated statements of financial position.


 






    10 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)







  


		(vi)	Cost of sales



 


Cost of product sales includes the cost of finished goods inventory
and costs related to shipping and handling.


 


		(vii)	Foreign currency



 


The consolidated financial statements are presented in Canadian
dollars. The functional currency of Sangoma Technologies Corporation, Sangoma Technologies Inc., Sangoma US Inc., Sangoma Technologies
US Inc., VoIP Supply LLC, Digium Inc., Digium Cloud Services LLC, VoIP Innovations LLC, Vocally LLC, Trybe Labs LLC, .e4 LLC, StarBlue
Inc., Star2Star Communications LLC and Sangoma HK Ltd. is US dollars, the functional currency of Sangoma Technologies Limited is Euros
and the functional currency of Sangoma Technologies Private Limited is Indian Rupees (INR).


 


Assets and liabilities of subsidiaries having a functional
currency other than the Canadian dollar are translated at the rate of exchange at the reporting period end date. Revenues and expenses
are translated at average rates for the period, unless exchange rates fluctuated significantly during the period, in which case the exchange
rates at the dates of the transaction are used. The resulting foreign currency translation adjustments are recognized in the accumulated
other comprehensive income (loss) included in shareholders’ equity. Foreign currency transactions are translated into the functional
currency using exchange rates prevailing at the date of the transactions. At the end of each reporting period, foreign currency denominated
monetary assets and liabilities are translated to the functional currency using the prevailing rate of exchange at the reporting period
date. Gains and losses on translation of monetary items are recognized in the consolidated statements of income and comprehensive income
(loss).


 


		(viii)	Interest income



 


Interest income from financial assets is recognized when it
is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is
accrued on the basis of time that has passed, by reference to the principal outstanding and at the effective interest rate applicable.


 


		(ix)	Share-based payments



 


The Company grants stock options to its employees. Stock options
vest over and expire after various periods of time. The vesting policy is 25% of the options vest on the first anniversary of the grant
and the remainder vest in equal amounts every 3 months thereafter until the fifth anniversary of the commencement date. The fair value
of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Details regarding the determination of
the fair value of equity-settled share-based payment transactions are set out in Note 11(ii).


 


Share-based compensation expense is recognized over the tranche’s
vesting period based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually, with
any impact being recognized immediately.


 






    11 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(x)	Income taxes and deferred taxes



 


The income tax provision comprises current and deferred tax.
Income tax is recognized in the consolidated statements of income and comprehensive income (loss) except to the extent that it relates
to items recognized directly in equity, in which case the income tax is also recognized directly in equity.


 


Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and any adjustment to tax payable
in respect of previous years.


 


Deferred tax is recognized in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the end of the
reporting period and are expected to apply when the asset is realized or liability is settled. Deferred tax assets are recognized for
deductible temporary differences, unused tax losses and other income tax deductions to the extent that it is probable the Company will
have taxable income against which those deductible temporary differences, unused tax losses and other income tax deductions can be utilized.
The extent to which deductible temporary differences, unused tax losses and other income tax deductions are expected to be realized is
reassessed at the end of each reporting period.


 


In a business combination, temporary differences arise as a
result of differences in the fair values of identifiable assets and liabilities acquired and their respective tax bases. Deferred tax
assets and liabilities are recognized for the tax effects of these differences. Deferred tax assets and liabilities are not recognized
for temporary differences arising from goodwill or from the initial recognition of assets and liabilities acquired in a transaction other
than a business combination which do not affect either accounting or taxable income or loss.


 


		(xi)	Property and equipment



 


Property and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent
costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount
of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the consolidated statements of income
and comprehensive income (loss) during the period in which they are incurred.


 


Depreciation is calculated on a straight-line basis for all
classes of property and equipment over their useful life as outlined below:


 


	Leasehold improvements, tradeshow equipment, software and books	5 years
	Office furniture and computer equipment	3 - 5 years
	Stockroom and production equipment	5 - 7 years


 


Residual values, method of depreciation and useful lives of
the assets are reviewed annually and adjusted, if required.


 


Gains and losses on disposals of property and equipment are
determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains and losses in the consolidated
statements of income and comprehensive income (loss).


 






    12 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xii)	Leases



 


At commencement of the contract, the Company evaluates if the
contract is a lease based on whether the contract conveys the right to control the use of a specific asset for a period of time in exchange
for a consideration. To determine whether the contract results in right of control, the Company assesses whether it has both the right
to direct the identified asset’s use and to obtain substantially all the economic benefits from that use.


 


Once the Company has determined that the contract conveys the
right to control the use of the asset, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date.


 


The asset is initially measured at cost which comprises of
the lease liability, lease payments made at or before the commencement date less any lease incentives. Subsequently the asset is measured
at net carrying value, which is cost less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease
liability. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the
straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term
includes periods covered by an option to extend if the Company is reasonably certain to exercise that option.


 


The lease liability is initially measured at the present value
of the future lease payments discounted using the Company’s incremental borrowing rate as the discount rate. Subsequently, the lease
liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, or if the Company changes its assessment of whether it will exercise a purchase, extension
or termination option.


 


The Company applies recognition exemptions for short-term leases
(leases with term less than 12 months) and low-dollar value leases.


 


The Company leases properties which make up the entire right-of-use
asset and lease liability balances.


 


		(xiii)	Intangible assets



 


Intangible assets with finite lives that are acquired separately
are measured on initial recognition at cost, which comprises its purchase price plus any directly attributable costs of preparing the
asset for its intended use. Following initial recognition, such intangible assets are carried at cost less any accumulated amortization
on a straight-line basis over the following periods:


 


	Copyright to software	10 years
	Purchased technology	6 - 10 years
	Website	1 year
	Customer relationship	3 - 10 years
	Brand	6 - 10 years
	Other purchased intangibles	3 - 10 years


 


Amortization expense is included in the consolidated statements
of income and comprehensive income (loss) in general and administration expense.


 


The estimated useful life and amortization method are reviewed
annually, with the effect of any change in estimate being accounted for on a prospective basis. These assets are subject to impairment
testing as described below in Note 2(xvii).


 






    13 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xiv)	Research and development expenditures



 


The Company qualifies for certain investment tax credits related
to its research and development activities in Canada. Research costs are expensed as incurred and are reduced by related investment tax
credits, which are recognized when it is probable that they will be realized.


 


Costs that are directly attributable to the development phase
of identified new products are recognized as intangible assets and amortized over a useful life of three years provided they meet the
following recognition requirements:


 


		·	Completion of the intangible asset is technically feasible so that it will be available for use or sale.



 


		·	The Company intends to complete the intangible asset and use or sell it and also has the ability to use or sell it.



 


		·	The intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for
the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in
generating such benefits.



 


		·	There are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.



 


		·	The expenditure attributable to the intangible asset during its development can be measured reliably.



 


Development costs not meeting these criteria for capitalization
are expensed as incurred.


 


Directly attributable costs include employee costs incurred
on software development along with an appropriate portion of relevant overheads and borrowing costs (if any). Internally generated software
development costs recognized as intangible assets are subject to the same subsequent measurement method as externally acquired software
licenses. These assets are subject to impairment testing as described below in Note 2(xvii).


 


Any gain or loss arising on the disposal of an intangible asset
is determined as the difference between the proceeds and the carrying amount of the asset and is recognized in profit or loss within “other
income” or “other expenses”.


 


		(xv)	Foreign currency hedging



 


The Company enters into forward foreign currency exchange contracts
to hedge the cash flow risk associated with forecasted transactions in foreign currencies and foreign-currency denominated balances. The
Company does not enter into derivative contracts for speculative purposes. The contracts, which have not been designated as hedges for
accounting purposes, are marked to market each period. The resulting gain or loss is recorded as foreign currency exchange (gain) loss
on the consolidated statements of income and comprehensive income (loss). The Company does not hold any forward foreign currency exchange
contracts as at June 30, 2021.


 


		(xvi)	Goodwill



 


Goodwill represents the excess of the acquisition cost in a
business combination over the fair value of the Company’s share of the identifiable net assets acquired. Goodwill is carried at
cost less accumulated impairment losses.


 






    14 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xvii)	Impairment testing of goodwill and long-lived assets



 


For purposes of assessing impairment under IFRS, assets are
grouped at the lowest levels for which there are largely independent cash inflows (cash-generating unit). The Company has two cash generating
units and intangible assets not yet available for use are tested for impairment at least annually. All other long-lived assets and finite
life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable.


 


An impairment loss is recognized for the amount by which the
asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs
to sell or value-in-use. To determine the value-in-use, management estimates expected future cash flows from the cash-generating unit
and determines a suitable pre-tax discount rate in order to calculate the present value of those cash flows. The data used for impairment
testing procedures are directly linked to the Company’s latest approved budget, adjusted as necessary to exclude the effects of
future reorganizations and asset enhancements. Discount factors have been determined for the cash-generating unit and reflect its risk
profile as assessed by management.


 


Impairment losses for the cash-generating unit reduce first
the carrying amount of any goodwill allocated to that cash-generating unit, with any remaining impairment loss charged pro rata to the
other assets in the cash-generating unit. In allocating an impairment loss, the Company does not reduce the carrying amount of an asset
below the highest of its fair value less costs of disposal or its value in use and zero. With the exception of goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment charge is reversed
if the assets’ recoverable amount exceeds its carrying amount only to the extent of the new carrying amount does not exceed the
carrying value of the asset had it not originally been impaired.


 


		(xviii)	Financial instruments 



 


Non-Derivative Financial Assets


 


Recognition and initial measurement


 


The Company recognizes financial assets when it becomes party
to the contractual provisions of the instrument. Financial assets are measured initially at their fair value plus, in the case of financial
assets not subsequently measured at fair value through profit or loss, transaction costs that are directly attributable to their acquisition.
Transaction costs attributable to the acquisition of financial assets subsequently measured at fair value through profit or loss are expensed
in profit or loss when incurred.


 


Classification and subsequent measurement


 


On initial recognition, financial assets are classified as
subsequently measured at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit
or loss (“FVTPL”). The Company determines the classification of its financial assets, together with any embedded derivatives,
based on the business model for managing the financial assets and their contractual cash flow characteristics.


 


Financial assets are classified as follows:


 


		·	Amortized cost - Assets that are held for collection of contractual cash flows where those cash flows are solely payments of principal
and interest are measured at amortized cost. Interest revenue is calculated using the effective interest method and gains or losses arising
from impairment, foreign exchange and derecognition are recognized in profit or loss. Financial assets measured at amortized cost are
comprised of cash and cash equivalents, trade receivables, contract assets and other current assets.



 






    15 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xviii)	Financial instruments (continued)



 


Non-Derivative Financial Assets (continued)


 


		·	Fair value through other comprehensive income - Assets that are held for collection of contractual cash flows and for selling the
financial assets, and for which the contractual cash flows are solely payments of principal and interest, are measured at fair value through
other comprehensive income. Interest income calculated using the effective interest method and gains or losses arising from impairment
and foreign exchange are recognized in profit or loss. All other changes in the carrying amount of the financial assets are recognized
in other comprehensive income. Upon derecognition, the cumulative gain or loss previously recognized in other comprehensive income is
reclassified to profit or loss. The Company does not hold any financial assets measured at fair value through other comprehensive income.



 


		·	Mandatorily at fair value through profit or loss - Assets that do not meet the criteria to be measured at amortized cost, or fair
value through other comprehensive income, are measured at fair value through profit or loss. All interest income and changes in the financial
assets’ carrying amount are recognized in profit or loss. The Company does not hold any financial assets mandatorily measured at
fair value through profit or loss.



 


		·	Designated at fair value through profit or loss – On initial recognition, the Company may irrevocably designate a financial
asset to be measured at fair value through profit or loss in order to eliminate or significantly reduce an accounting mismatch that would
otherwise arise from measuring assets or liabilities, or recognizing the gains and losses on them, on different bases. All interest income
and changes in the financial assets’ carrying amount are recognized in profit or loss. The Company does not hold any financial assets
designated to be measured at fair value through profit or loss.



 


Classification and subsequent measurement


 


The Company measures all equity investments at fair value.
Changes in fair value are recorded in profit or loss.


 


Business model assessment


 


The Company assesses the objective of its business model for
holding a financial asset at a level of aggregation which best reflects the way the business is managed, and information is provided to
management. Information considered in this assessment includes stated policies and objectives.


 


Contractual cash flow assessment


 


The cash flows of financial assets are assessed as to whether
they are solely payments of principal and interest on the basis of their contractual terms. For this purpose, ‘principal’
is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the
time value of money, the credit risk associated with the principal amount outstanding, and other basic lending risks and costs. In performing
this assessment, the Company considers factors that would alter the timing and amount of cash flows such as prepayment and extension features,
terms that might limit the Company’s claim to cash flows, and any features that modify consideration for the time value of money.


 






    16 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xviii)	Financial instruments (continued)



 


Impairment


 


The Company recognizes a loss allowance for the expected credit
losses associated with its financial assets, other than financial assets measured at fair value through profit or loss. Expected credit
losses are measured to reflect a probability-weighted amount, the time value of money, and reasonable and supportable information regarding
past events, current conditions and forecasts of future economic conditions. The Company applies the simplified approach for trade receivables.
Using the simplified approach, the Company records a loss allowance equal to the expected credit losses resulting from all possible default
events over the assets’ contractual lifetime.


 


The Company assesses whether a financial asset is credit-impaired
at the reporting date. Regular indicators that a financial instrument is credit-impaired include significant financial difficulties as
evidenced through borrowing patterns or observed balances in other accounts and breaches of borrowing contracts such as default events
or breaches of borrowing covenants. For financial assets assessed as credit-impaired at the reporting date, the Company continues to recognize
a loss allowance equal to lifetime expected credit losses.


 


For financial assets measured at amortized cost, loss allowances
for expected credit losses are presented in the consolidated statements of financial position as a deduction from the gross carrying amount
of the financial asset. Financial assets are written off when the Company has no reasonable expectations of recovering all or any portion
thereof.


 


Derecognition of financial asset


 


The Company derecognizes a financial asset when its contractual
rights to the cash flows from the financial asset expire.


 


Non-Derivative Financial Liabilities


 


Recognition and initial measurement


 


The Company recognizes a financial liability when it becomes
party to the contractual provisions of the instrument. At initial recognition, the Company measures financial liabilities at their fair
value plus transaction costs that are directly attributable to their issuance, with the exception of financial liabilities subsequently
measured at fair value through profit or loss for which transaction costs are immediately recorded in profit or loss.


 


Where an instrument contains both a liability and equity component,
these components are recognized separately based on the substance of the instrument, with the liability component measured initially at
fair value and the equity component assigned the residual amount.


 


Classification and subsequent measurement


 


Subsequent to initial recognition, all financial liabilities
are measured at amortized cost using the effective interest rate method. Interest, gains and losses relating to a financial liability
are recognized in profit or loss.


 


Derecognition of financial liabilities


 


The Company derecognizes a financial liability only when its
contractual obligations are discharged, cancelled or expire.


 






    17 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xviii)	Financial instruments (continued)



 


Derivative Financial Liabilities


 


The Company holds interest rate swaps to hedge its interest
rate risk exposures on the variable-interest credit arrangement. At the inception of the hedging relationship, there is formal designation
and documentation prepared by the Company of the hedging relationship between the hedging instruments and hedged items and the risk management
objective and strategy for undertaking the hedge including how the Company will assess whether the hedging relationship meets the hedge
effectiveness requirements. The Company assesses at the inception of the hedging relationship, and on ongoing basis, whether the hedging
relationship meets the hedge effectiveness requirements.


 


Recognition and initial measurement


 


The Company recognizes interest rate swaps at fair value initially;
attributable transaction costs are recognized in comprehensive income as incurred.


 


Classification and subsequent measurement


 


Subsequent to initial recognition, interest rate swaps are
measured at fair value and the effective portion of changes in fair value of the derivative that is designated and meets the definition
of the hedge is recognized in accumulated other comprehensive income (loss). The amount recognized in other comprehensive income (loss)
is removed and included in earnings in the same period as the hedged cash flows affect earnings under the same line item in the consolidated
statements of comprehensive income (loss) as the hedged item. Any ineffective portion of changes in the fair value of the derivative is
recognized immediately in earnings.


 


		(xix)	Provisions



 


Provisions represent liabilities of the Company for which the
amount or timing is uncertain. Provisions are recognized when the Company has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Provisions are not recognized for future operating losses. Where material, provisions are measured at the present value of the expected
expenditures to settle the obligation using a discount rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.


 


		(xx)	Earnings per share



 


Basic earnings per share is computed by dividing the net income
available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted earnings per
share is computed similarly to basic earnings per share except that the weighted average number of shares outstanding is increased to
include additional shares for the assumed exercise of stock options and warrants, if dilutive, as well as shares to be issued as part
of acquisition as described in Note 20. The average number of shares is calculated by assuming that outstanding conversions were exercised
and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting period.


 






    18 


     


    

 



 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)





 


		2.	Significant accounting policies (continued)



 


		(xxi)	Business combinations



 


On the acquisition of a business, the acquisition method of
accounting is used, whereby the purchase consideration is allocated to the identifiable assets and liabilities on the basis of fair value
of the date of acquisition. Provisional fair values allocated at a reporting date are finalized as soon as the relevant information is
available, within a period not to exceed twelve months from the acquisition date with retroactive restatement of the impact of adjustment
to those provisional fair values effective as at the acquisition date. Incremental costs related to acquisitions are expensed as incurred.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration
transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts
and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration
that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with
IFRS 9, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being
recognized in profit or loss.


 


		(xxii)	Investment tax credits



 


Investment tax credits (“ITCs”) are recognized
where there is reasonable assurance that the ITCs will be received, and all attached conditions will be complied with. When the ITCs relates
to an expense item, it is netted against the related expense. Where the ITCs relates to an asset, it reduces the carrying amount of the
asset. The ITCs is then recognized as income over the useful life of a depreciable asset by way of a reduced depreciation charge. The
Company is actively engaged in scientific research and development (“R&D”) and, accordingly, has previously filed for
ITC refunds under both the Canadian federal and Ontario provincial Scientific Research and Experimental Development (“SR&ED”)
tax incentive programs. The ITCs recorded in the accounts are based on management’s interpretation of the Income Tax Act of Canada,
provisions which govern the eligibility of R&D costs. The claims are subject to review by the Canada Revenue Agency and the Minister
of Revenue for Ontario before the refunds can be released.


 









    19 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)





 


		3.	Significant accounting judgments, estimates and uncertainties



 


The preparation of consolidated financial statements in accordance
with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements
and notes to the consolidated financial statements. These estimates are based on management’s best knowledge of current events and
actions the Company may undertake in the future. Actual results could differ from those estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to the accounting estimates are recognized in the period in which the estimates are revised.


 


In December 2019, there was a global outbreak of coronavirus,
identified as “COVID-19”, which has had a significant impact on businesses through the restrictions put in place by the national,
provincial and municipal governments around the world regarding travel, business operations and isolation and quarantine orders. At the
commencement of the COVID-19 outbreak, the Company was designated as an essential business in many of the jurisdictions in which it operates
and continued to receive factory shipments and make deliveries to customers around the world throughout fiscal year 2020 and 2021. There
continues to be uncertainty regarding the full impact, duration and pace of recovery from the COVID- 19 pandemic on the Company’s
operations and markets, due to the evolving nature of the virus and the global economic slowdown (including varied governmental responses
which may affect the Company’s business and prospects). Despite these uncertainties, the Company believes it is well equipped to
handle the uncertainty and has taken several proactive steps in an attempt to better manage the challenges of the COVID-19 pandemic including
potential future impact on the Company’s assets, cash flow and liquidity, operations and financial reporting.


 


Significant areas requiring the Company to make estimates
include goodwill impairment testing and recoverability of long-lived assets, business combinations, income taxes, estimated useful life
of long-lived assets, internally generated development costs, the fair value of share-based payments, provision for expected credit losses,
inventory obsolescence, investment tax credits receivable, warranty provision, sales returns and allowances provision, and stock rotation
provision. These estimates and judgments are further discussed below:


 


		(i)	Goodwill impairment testing and recoverability of long-lived assets



 


Goodwill and long-lived assets are reviewed annually for impairment,
or more frequently when there are indicators that impairment may have occurred, by comparing the carrying value to its recoverable amount.
The recoverable amounts of the cash-generating units were estimated based on an assessment of value in use using a discounted cash flow
approach and fair value less costs to sell. The approach uses cash flow projections based upon a financial forecast approved by management,
covering a four to five-year period. Cash flows for the years thereafter are extrapolated using the estimated terminal growth rate for
value in use impairment analysis. Cash flows for the terminal period for fair value less costs to sell impairment analysis is determined
using an exist multiple. The risk premiums expected by market participants related to uncertainties about the industry and assumptions
relating to future cash flows may differ or change quickly, depending on economic conditions and other events.


 


		(ii)	Business combinations



 


In a business combination, all identifiable assets, liabilities
and contingent liabilities acquired are recorded at their fair values. One of the most significant estimates relates to the determination
of the fair value of these assets and liabilities. For any intangible asset identified, depending on the type of intangible asset and
the complexity of determining its fair value, an independent valuation expert or management may develop the fair value, using appropriate
valuation techniques, which are generally based on a forecast of the total expected future net cash flows. The evaluations are linked
closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount
rate applied. All acquisitions have been accounted for using the acquisition method.


 






    20 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)





 


		3.	Significant accounting judgments, estimates and uncertainties
(continued)



 


		(ii)	Business combinations (continued)



 


Certain fair values may be estimated at the acquisition date
pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination,
they may be adjusted retrospectively in subsequent periods. The measurement period ends as soon as the Company receives the information
it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable.
However, the measurement period shall not exceed one year from the acquisition date.


 


		(iii)	Income taxes



 


At the end of each reporting period, the Company assesses whether
the realization of deferred tax benefits is sufficiently probable to recognize deferred tax assets. This assessment requires the exercise
of judgment on the part of management with respect to, among other things, benefits that could be realized from available income tax strategies
and future taxable income, as well as other positive and negative factors. The recorded amount of total deferred tax assets could be reduced
if estimates of projected future taxable income and benefits from available income tax strategies are lowered, or if changes in current
income tax regulations are enacted that impose restrictions on the timing or extent of the Company’s ability to utilize deferred
tax benefits.


 


The Company’s effective income tax rate can vary significantly
quarter-to-quarter for various reasons, including the mix and volume of business in lower income tax jurisdictions and in jurisdictions
for which no deferred income tax assets have been recognized because management believed it was not probable that future taxable profit
would be available against which income tax losses and deductible temporary differences could be utilized.


 


		(iv)	Estimated useful lives of long-lived assets



 


Management reviews useful lives of depreciable assets at each
reporting date. Management assesses that the useful lives represent the expected utilization in terms of duration of the assets to the
Company. Actual utilization, however, may vary due to technical obsolescence, particularly relating to software and information technology
equipment.


 


		(v)	Internally generated development costs



 


Management monitors the progress of internal research and development
projects and uses judgment to distinguish research from the development phase. Expenditures during the research phase are expensed as
incurred. Development costs are recognized as an intangible asset when the Company can demonstrate certain criteria listed in Note 2(xiv).
Otherwise, they are expensed as incurred.


 


		(vi)	Fair value of share-based payments



 


The fair value of all share-based payments granted are determined
using the Black-Scholes option pricing model which incorporates assumptions regarding risk-free interest rates, dividend yield, expected
volatility, estimated forfeitures, and the expected life of the options. The Company has a significant number of options outstanding and
expects to continue to make grants.


 


		(vii)	Provision for expected credit losses (“ECLs”)



 


The Company is exposed to credit risk associated with its trade
receivables. This risk is reduced by having customers’ trade receivables insured by Export Development Canada (“EDC”)
wherever possible. Management reviews the trade receivables at each reporting date in accordance with IFRS 9. The ECL model requires considerable
judgment, including consideration of how changes in economic factors affect ECLs, which are determined on a probability-weighted basis.
IFRS 9 outlines a three-stage approach to recognizing ECLs which is intended to reflect the increase in credit risks of a financial instrument
based on 1) 12-month expected credit losses or 2) lifetime expected credit losses. The Company measures provision for ECLs at an amount
equal to lifetime ECLs.


 






    21 


     


    

 





Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)





 


		3.	Significant accounting judgments, estimates and uncertainties
(continued)



 


		(vii)	Provision for expected credit losses (“ECLs”)
(continued)



 


The Company applies the simplified approach to determine ECLs
on trade receivables by using a provision matrix based on historical credit loss experiences adjusted for forward-looking estimates. The
historical results and the forward-looking estimates are used to calculate the run rates of default which are then applied over the expected
life of the trade receivables.


 


		(viii)	Inventory obsolescence



 


Inventory consists of parts and finished goods recorded at
the lower of cost and net realizable value. Inventory represents a significant portion of the asset base of the Company and its value
is reviewed at each reporting period. Inventories are written down to net realizable value when the cost of inventories is estimated to
be unrecoverable due to obsolescence, damage or slow moving. Actual net realizable value can vary from the estimated provision.


 


		(ix)	Investment tax credits receivable



 


Investment tax credits are recorded based on management’s
estimate that all conditions attached to its receipt have been met. The Company has significant investment tax credits receivable and
expects to continue to apply for future tax credits as their research and development activities remain applicable. Therefore, the estimates
related to the recoverability of these investment tax credits are important to the Company’s financial position.


 


		(x)	Warranty provision



 


The warranty provision represents management’s best estimate
of costs of product warranties at the time the product is installed or delivered. Therefore, the estimates and assumptions related to
costs of repairs and/or replacement costs to correct product failures impact the Company’s financial position.


 


		(xi)	Sales returns and allowances provision



 


The sales returns and allowances provision represent management’s
best estimate of the value of the products sold in the current financial year that may be returned in a future year.


 


		(xii)	Stock rotation provision



 


The stock rotation provision represents management’s
best estimate of the value of the products sold in the current financial year that may be rotated in a future year.


 


		(xiii)	Fair value of interest rate swaps



 


The estimated fair values of derivative instruments resulting
in financial assets and liabilities, by their very nature, are subject to measurement uncertainty. The Company determines the fair value
of interest rate swaps based on the present value of projected future cash flows using the implied zero-coupon forward swap yield curve.
The change in the difference between the discounted cash flow streams for the hedged item and the hedging item is deemed to be hedge ineffectiveness
and is recorded in the consolidated statements of income and comprehensive income (loss). The fair value of the interest rate swap is
based on forward yield curves, which are observable inputs provided by banks and available in other public data sources and are classified
within Level 2.


 









    22 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)






 


		4.	Inventories



 


Inventories recognized in the consolidated statements of financial position are comprised of:




 


	 	 	June 30,	 	 	June 30,	 
	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Finished goods	 	 	10,438,963	 	 	 	8,381,484	 
	Parts	 	 	4,836,684	 	 	 	4,604,963	 
	 	 	 	15,275,647	 	 	 	12,986,447	 
	Provision for obsolescence	 	 	(625,786	)	 	 	(342,709	)
	Net inventory carrying value	 	 	14,649,861	 	 	 	12,643,738	 



 


During the year ended June 30, 2021, inventories in
the amount of $40,586,535 (2020 - $39,711,850) were included in cost of sales.


 









    23 


     


    





 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)








 



 


	5.	 Property and equipment



 


	 	 	Office
    furniture	 	 	 	 	 	Stockroom
    and	 	 	 	 	 	 	 	 	 	 
	 	 	and
    computer	 	 	Software
    and	 	 	production	 	 	Tradeshow	 	 	Leasehold	 	 	 	 
	 	 	equipment	 	 	books	 	 	equipment	 	 	equipment	 	 	improvements	 	 	Total	 
		 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	1,875,588	 	 	285,249	 	 	1,642,909	 	 	64,338	 	 	353,152	 	 	4,221,236	 
	Additions through business combinations
    (Note 20)	 	307,553	 	 	249,585	 	 	-	 	 	-	 	 	-	 	 	557,138	 
	Additions	 	493,749	 	 	3,383	 	 	59,469	 	 	-	 	 	74,737	 	 	631,338	 
	Effects
    of movements in exchange rates	 	34,450	 	 	24,300	 	 	61,876	 	 	-	 	 	10,642	 	 	131,268	 
	Balance at June 30, 2020	 	2,711,340	 	 	562,517	 	 	1,764,254	 	 	64,338	 	 	438,531	 	 	5,540,980	 
	Additions through business combination
    (Note 20)	 	595,574	 	 	-	 	 	6,113,104	 	 	-	 	 	-	 	 	6,708,678	 
	Additions	 	1,074,842	 	 	4,945	 	 	291,384	 	 	-	 	 	33,062	 	 	1,404,233	 
	Disposals	 	(5,578	)	 	-	 	 	(164,616	)	 	-	 	 	-	 	 	(170,194	)
	Effects
    of movements in exchange rates	 	(267,648	)	 	(48,156	)	 	(237,461	)	 	(5,490	)	 	(38,460	)	 	(597,215	)
	Balance at June 30,
    2021	 	4,108,530	 	 	519,306	 	 	7,766,665	 	 	58,848	 	 	433,133	 	 	12,886,482	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	1,056,938	 	 	203,367	 	 	362,883	 	 	50,754	 	 	123,765	 	 	1,797,707	 
	Depreciation expense	 	284,223	 	 	92,569	 	 	286,993	 	 	2,455	 	 	34,710	 	 	700,950	 
	Effect of
    movements in exchange rates	 	21,263	 	 	8,219	 	 	21,177	 	 	26	 	 	(10,049	)	 	40,636	 
	Balance at June 30, 2020	 	1,362,424	 	 	304,155	 	 	671,053	 	 	53,235	 	 	148,426	 	 	2,539,293	 
	Depreciation expense	 	477,576	 	 	114,856	 	 	486,398	 	 	2,078	 	 	46,059	 	 	1,126,967	 
	Effects
    of movements in exchange rates	 	(139,346	)	 	(31,378	)	 	(74,331	)	 	(4,890	)	 	(14,979	)	 	(264,924	)
	Balance at June 30,
    2021	 	1,700,654	 	 	387,633	 	 	1,083,120	 	 	50,423	 	 	179,506	 	 	3,401,336	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net book value as at:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2020	 	1,348,916	 	 	258,362	 	 	1,093,201	 	 	11,103	 	 	290,105	 	 	3,001,687	 
	Balance at June 30,
    2021	 	2,407,876	 	 	131,673	 	 	6,683,545	 	 	8,425	 	 	253,627	 	 	9,485,146	 



 


For the year ended June 30, 2021, depreciation expense of $885,566
(June 30, 2020 - $700,950) was recorded in general and administration expense in the consolidated statements of income and comprehensive
income (loss). Depreciation expense in the amount of $241,401 was included in cost of sales for the year ended June 30, 2021 (June 30,
2020 - $nil).


 






    24 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)








 



 


	6.	 Intangible assets



 


	 	 	Copyright	 	 	Purchased	 	 	 	 	 	Customer	 	 	 	 	 	Other

                                                                                purchased
	 	 	 	 
	 	 	to
    software	 	 	technology	 	 	Website	 	 	relationships	 	 	Brand	 	 	intangibles*	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	2,948,461	 	 	7,821,004	 	 	227,702	 	 	19,179,146	 	 	7,996,687	 	 	2,274,667	 	 	40,447,667	 
	Business combinations (Note 20)	 	-	 	 	3,466,848	 	 	-	 	 	19,965,689	 	 	919,240	 	 	1,326,332	 	 	25,678,109	 
	Effects
    of movements on exchange rates	 	-	 	 	327,516	 	 	9,003	 	 	1,542,265	 	 	333,829	 	 	144,066	 	 	2,356,679	 
	Balance at June 30, 2020	 	2,948,461	 	 	11,615,368	 	 	236,705	 	 	40,687,100	 	 	9,249,756	 	 	3,745,065	 	 	68,482,455	 
	Business combinations (Note 20)	 	-	 	 	109,151,000	 	 	-	 	 	103,618,000	 	 	-	 	 	-	 	 	212,769,000	 
	Effects
    of movements on exchange rates	 	(266,980	)	 	(2,614,513	)	 	(21,354	)	 	(5,156,651	)	 	(865,872	)	 	(338,159	)	 	(9,263,529	)
	Balance at June 30,
    2021	 	2,681,481	 	 	118,151,855	 	 	215,351	 	 	139,148,449	 	 	8,383,884	 	 	3,406,906	 	 	271,987,926	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accumulated amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	2,916,587	 	 	2,743,350	 	 	212,957	 	 	3,408,372	 	 	1,040,991	 	 	671,864	 	 	10,994,121	 
	Amortization expense	 	31,874	 	 	1,358,513	 	 	14,927	 	 	3,794,315	 	 	890,253	 	 	858,554	 	 	6,948,436	 
	Effects
    of movements on exchange rates	 	-	 	 	33,779	 	 	8,821	 	 	206,455	 	 	43,525	 	 	40,940	 	 	333,520	 
	Balance at June 30, 2020	 	2,948,461	 	 	4,135,642	 	 	236,705	 	 	7,409,142	 	 	1,974,769	 	 	1,571,358	 	 	18,276,077	 
	Amortization expense	 	-	 	 	5,967,203	 	 	-	 	 	7,444,180	 	 	877,307	 	 	894,580	 	 	15,183,270	 
	Effects
    of movements on exchange rates	 	(266,980	)	 	(826,918	)	 	(21,354	)	 	(520,102	)	 	(141,147	)	 	(111,815	)	 	(1
    ,888,316	)
	Balance at June 30,
    2021	 	2,681,481	 	 	9,275,927	 	 	215,351	 	 	14,333,220	 	 	2,710,929	 	 	2,354,123	 	 	31,571,031	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net book value as at:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at June 30, 2020	 	-	 	 	7,479,726	 	 	-	 	 	33,277,958	 	 	7,274,987	 	 	2,173,707	 	 	50,206,378	 
	Balance at June 30,
    2021	 	-	 	 	108,875,928	 	 	-	 	 	124,815,229	 	 	5,672,955	 	 	1,052,783	 	 	240,416,895	 



 


* Other purchase intangibles include non-compete agreements and
backlog


 


Amortization expense is included in general and administration expense
in the consolidated statements of income and comprehensive income (loss). For the years ended June 30, 2021, amortization expenses
were $15,183,270 (June 30, 2020 - $6,948,436).





 






    25 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)








 



 




	7.	Development costs



 


	 	 	 	 	 	$	 
	Cost	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	 	 	 	 	 	21,727,446	 
	Additions	 	 	 	 	 	 	1,964,684	 
	Investment tax credits	 	 	 	 	 	 	(136,716	)
	Balance at June 30, 2020	 	 	 	 	 	 	23,555,414	 
	Additions	 	 	 	 	 	 	2,108,207	 
	Cost fully amortized	 	 	 	 	 	 	(20,597,682	)
	Investment tax credits	 	 	 	 	 	 	(601,566	)
	Effects of movements in exchange rates	 	 	 	 	 	 	(300,330	)
	Balance at June 30, 2021	 	 	 	 	 	 	4,164,043	 
	 	 	 	 	 	 	 	 	 
	Accumulated amortization	 	 	 	 	 	 	 	 
	Balance at June 30, 2019	 	 	 	 	 	 	(19,602,943	)
	Amortization	 	 	 	 	 	 	(1,499,753	)
	Balance at June 30, 2020	 	 	 	 	 	 	(21,102,696	)
	Amortization	 	 	 	 	 	 	(1,837,958	)
	Cost fully amortized	 	 	 	 	 	 	20,597,682	 
	Effects of movements in exchange rates	 	 	 	 	 	 	78,664	 
	Balance at June 30, 2021	 	 	 	 	 	 	(2,264,308	)
	 	 	 	 	 	 	 	 	 
	 	 	 	June 30, 2021	 	 	 	June 30, 2020	 
	 	 	 	$	 	 	 	$	 
	Net capitalized development costs	 	 	1,899,735	 	 	 	2,452,718	 



 


Each period, additions to development costs are recognized net of
investment tax credits accrued. In addition to the above amortization, the Company has recognized $25,356,347 of engineering expenditures
as an expense during the year ended June 30, 2021 (2020 - $22,413,315).


 






    26 


     


    

 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)








 



 


	8.	Goodwill



 



	The carrying amount and movements of goodwill was as follows:	 	 	 
	 	 	$	 
	Balance at June 30, 2019	 	21,405,420	 
	Addition through business combinations (Note 20)	 	21,025,465	 
	Effect of movements in exchange rates	 	1,581,533	 
	Balance at June 30, 2020	 	44,012,418	 
	Addition through business combinations (Note 20)	 	295,640,965	 
	Effect of movements in exchange rates	 	(8,240,623	)
	Balance at June 30, 2021	 	331,412,760	 



 


The addition to goodwill for the year ended June 30,
2021 was from the acquisition of StarBlue Inc. on March 31, 2021. For the year ended June 30, 2020, the addition to goodwill
was from the acquisitions of VoIP Innovations LLC on October 18, 2019 and .e4 LLC on February 29, 2020 (Note 20).


 


The recoverable amount of the Company’s Sangoma CGU
was determined based on a value in use model which uses cash flow projections based on financial budgets covering a five-year period
and an after-tax discount rate of 15.5% (pre-tax – 20.0%) per annum. The cash flows beyond the five-year period have been extrapolated
using a steady 3.0% per annum growth rate. The recoverable amount of the Company’s StarBlue Inc. CGU was determined using a fair
value less costs to sell model, which uses cash flow projections based on financial budgets covering a four-year period and a discount
rate of 12.1% per annum. The terminal period cash flows were determined using an enterprise value to revenue exit multiple of four. The
cash flow projections used in estimating the recoverable amounts for both CGUs are generally consistent with results achieved historically
adjusted for anticipated growth and are in the range of approximately 9.0% - 6.5%. The Company believes that any reasonably possible
change in key assumptions on which the recoverable amounts were based would not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the CGUs.


 






    27 


     


    





 


Sangoma Technologies Corporation


Notes to the consolidated financial statements


For the years ended June 30, 2021 and 2020


(in Canadian dollars)


 


	9.	Operating facility and loan and derivative liability



 


		(a)	Operating facility and loan



 


		(i)	A term loan facility of up to $1,297,700 ($1,000,000 USD) which was used to finance the acquisition of VoIP Supply LLC. This facility
was governed by the general security agreement and standard operating covenants. The term loan facility had a maturity date of June 2022
and carried an interest rate of 6.75%, consisting of base rate of 5.50% and a loan spread of 1.25%. This term loan was fully paid off
and cancelled as part of the new debt agreement effective October 18, 2019.



 


		(ii)	A second term loan facility of up to $4,128,640 ($3,200,000 USD) which was used to finance the acquisition of the Converged Communications
Division (“CCD”) from Dialogic Corporation. This facility was governed by a general security agreement and standard operating
covenants. This term loan facility had a maturity date of January 2023 and carried a fixed interest rate of 5.38%. This term loan
was fully paid off and cancelled as part of the new debt agreement effective October 18, 2019.



 


		(iii)	A third term loan facility of up to $5,274,000 ($4,000,000 USD) which was used to finance the acquisition of Digium Inc. This facility
was governed by a general security agreement and standard operating covenants. This term loan facility had a maturity date of August 2023
and carried an interest rate of 6.75%, consisting of base rate of 5.50% and a loan spread of 1.25%). This term loan was fully paid off
and cancelled as part of the new debt agreement effective October 18, 2019.



 


		(iv)	A fourth term loan facility of up to $15,822,000 ($12,000,000 USD) which was used to finance the acquisition of the Digium Inc. This
facility was governed by a general security agreement and standard operating covenants. This term loan facility had a maturity date of
August 2023 and carried a fixed interest rate of 6.18%. This term loan was fully paid off and cancelled as part of the new debt agreement
effective October 18, 2019.



 


		(v)	The Company entered into a new loan facility with two banks and drew down the first tranche of $45,699,360 ($34,800,000 USD) on October 18,
2019. This new loan facility was used to pay down and close all existing loans and to fund part of the purchase of VoIP Innovations LLC.
This term facility is repayable over six years on a straight-line basis.



 


The interest rates charged are based on Prime rate, US Base
rate, London Inter-Bank Offered Rate (LIBOR) or Canadian Dollar Offered Rate (CDOR) plus the applicable margin. Under the terms of these
term facilities, the Company may convert the loans from variable to a fixed loan. The Company is required to lock in the interest rate
on one half of the term loan within three months of each draw down. On January 21, 2020, the Company converted its US Base Rate loan
to a one-month LIBOR loan plus the credit spread based on the syndicated loan agreement entered on October 18, 2019. Separately,
as required under the agreement, the Company locked in half of the original loan amount by entering a 5-year interest rate credit swap
with the two banks for $8,700,000 USD each. The swaps together with protection against the 0% LIBOR floor have effectively converted one
half of the variable LIBOR rate to a fixed loan of approximately 4.2% for five years of the six-year remaining balance on the loan. The
repayment schedule for the loan has not been impacted by either of these changes. The balance outstanding against this term loan facility
as of June 30, 2021 is $30,551,210 ($24,650,000 USD) (June 30, 2020 – $41,497,260 ($30,450,000 USD)). As at June 30,
2021, term loan facility balance of $7,188,520 (June 30, 2020 - $7,904,240) is classified as current and $23,362,690 (June 30,
2020 - $33,593,020) as long-term in the consolidated statements of financial position.


 






    28 


     


    

 


Sangoma Technologies Corporation





Notes to the consolidated financial statements





For the years ended June 30, 2021 and 2020





(in Canadian dollars)



 





	9.	Operating facility and loan and derivative liability (continued)


 


		(vi)	The Company also had revolving credit facilities which included a committed revolving credit facility for up to $8,000,000 and a committed
swingline credit facility for up to $2,000,000 both of which may be used for general business purposes. On April 3, 2020, the Company
drew down $1,838,460 ($1,300,000 USD) on the swingline credit facility available under the Credit Agreement. On April 17, 2020, the
Company drew down $7,439,610 ($5,300,000 USD) from the revolving credit facility. The Company drew down the credit facility to maximize
its cash balance in order to take advantage of opportunities that may arise, as well as to fully prepare itself for any further uncertainties
during the COVID-19 pandemic. The balances outstanding as at June 30, 2020 for the swingline credit facility and revolving credit
facility were $1,771,640 and $7,222,840 respectively and were classified as current. During August 2020, the Company repaid the outstanding
amounts of $1,723,020 ($1,300,000 USD) on the swingline credit facility and $6,993,350 ($5,300,000 USD) on the revolving credit facility
and closed both facilities.



 


		(vii)	On March 31, 2021, the Company amended its term loan facility with its lenders and drew down an additional $66,018,750 ($52,500,000
USD) to fund part of the acquisition of StarBlue Inc. At the time of the draw down of the additional amounts, the following amendments
were made to the agreement:



 


		·	The provision for additional funding related to VoIP Innovations under the original agreement was no longer necessary and has been
cancelled.
		·	The swingline facility was converted from CAD $2,000,000 to
USD $1,500,000.
		·	The revolver facility was converted from CAD $8,000,000 to USD
$6,000,000.
		·	The debt to equity ratio calculation now allows the Company to offset up to US $10,000,000 of unrestrained funds against the outstanding
amount of the debt.



 


The interest rates charged continue to be based on Prime rate,
US Base rate, London Inter-Bank Offered Rate (LIBOR) or Canadian Dollar Offered Rate (CDOR) plus the applicable margin. The incremental
draw is repayable, on a straight-line basis, through quarterly payments of $2,187,500 USD and is due to mature on October 18, 2024.
As at June 30, 2021, $10,844,750 ($8,750,000 USD) of the incremental facility is classified as current and $51,512,563 ($41,562,500
USD) is classified as long-term in the consolidated statements of financial position.


 


For the year ended June 30, 2021, the Company incurred
interest costs to service the borrowing facilities in the amount of $1,986,987 (June 30, 2020 - $2,048,840). During the year ended
June 30, 2021, the Company borrowed $66,018,750 (June 30, 2020 - $54,977,430) in operating facility and loans and repaid $18,811,703
(June 30, 2020 - $28,810,943).


 


Under its credit agreements with its lenders, the Company
must satisfy certain financial covenants, principally in respect of total funded debt to earnings before interest, taxes and amortization
(“EBITDA”), and debt service coverage ratio. As at June 30, 2021 and June 30, 2020, the Company was in compliance
with all covenants related to its credit agreements.


 






    29 


     


    

 


Sangoma Technologies Corporation





Notes to the consolidated financial statements





For the years ended June 30, 2021 and 2020





(in Canadian dollars)



 


	9.	Operating facility and loan and derivative liability (continued)



 


(b) Derivative liability


 


The Company uses derivative financial instruments to hedge
its exposure to interest rate risks. All derivative financial instruments are recognized as either assets or liabilities at fair value
on the consolidated statements of financial position. Upon entering into a hedging arrangement with an intent to apply hedge accounting,
the Company formally documents the hedge relationship and designates the instrument for financial reporting purposes as a fair value hedge,
a cash flow hedge, or a net investment hedge. When the Company determines that a derivative financial instrument qualifies as a cash flow
hedge and is effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive income (loss), net
of tax in the consolidated statements of financial position and will be reclassified to earnings when the hedged item affects earnings.


 


On January 21, 2020, the Company converted its US Base
Rate loan to a one-month LIBOR loan plus the credit spread based on the syndicated loan agreement entered into on October 18, 2019.
Separately, as required under the agreement, the Company locked in half of the original loan amount by entering into a 5-year interest
rate credit swap with the two banks for $8,700,000 USD each to manage its exposure to changes in LIBOR-based interest rates. The interest
rate swap hedges the variable cash flows associated with the borrowings under the loan facility, effectively providing a fixed rate of
interest for five years of the six-year loan term.


 


The interest rate swap arrangement with two banks became
effective on January 31, 2020, with a maturity date of December 31, 2024. The notional amount of the swap agreement at inception
was $17,400,000 USD and decreases in line with the term of the loan facility. As of June 30, 2021, the notional amount of the interest
rate swap was $12,860,870 USD (June 30, 2020 – 15,886,958 USD). The interest rate swap has a weighted average fixed rate of
1.65% (June 30, 2020 – 1.65%) and has been designated as an effective cash flow hedge and therefore qualifies for hedge accounting.
As at June 30, 2021, the fair value of the interest rate swap liability was valued at $413,111 (June 30, 2020 - $797,380) and
was recorded as derivative liability in the consolidated statements of financial position. For the year ended June 30, 2021, the
change in fair value of the interest rate swaps, net of tax, was a gain of $384,269 (June 30, 2020 – loss of $797,380) was
recorded in other comprehensive income (loss) in the consolidated statements of income and comprehensive income (loss). The fair value
of interest rate swap is determined based on the market conditions and the terms of the interest rate swap agreement using the discounted
cash flow methodology. Any differences between the hedged LIBOR rate and the fixed rate are recorded as interest expense on the same period
that the related interest is recorded for the loan facility based on the LIBOR rate.


 






    30 


     


    

 


Sangoma Technologies Corporation





Notes to the consolidated financial statements





For the years ended June 30, 2021 and 2020





(in Canadian dollars)



 


	10.	Income tax
	 	 
	 	The Company income tax expense is determined as follows:



 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Statutory income tax rate	 	 	26.37	%	 	 	26.30	%
	Net income before income taxes	 	 	5,937,995	 	 	 	5,076,363	 
	Expected income tax expense	 	 	1,565,849	 	 	 	1,335,083	 
	Difference in foreign tax rates	 	 	(140,872	)	 	 	(83,649	)
	Tax rate changes and other adjustments	 	 	(19,351	)	 	 	248,248	 
	Share based compensation and non-deductible expenses	 	 	1,234,270	 	 	 	178,448	 
	Other non deductible expenses	 	 	40,116	 	 	 	-	 
	True-up of prior years	 	 	47,781	 	 	 	(482,730	)
	Scientific Research and Experimental Development (SR&ED)	 	 	(196,326	)	 	 	(259,873	)
	Business acquisition costs	 	 	1,144,113	 	 	 	-	 
	Sec 481(a) adjustment	 	 	163,582	 	 	 	184,271	 
	Gain on contingent consideration	 	 	(1,311,850	)	 	 	-	 
	Stock options deduction revaluation adjustment	 	 	2,893,844	 	 	 	-	 
	Currency translation adjustment and other adjustments	 	 	(208,640	)	 	 	-	 
	Changes in tax benefits not recognized	 	 	(41,511	)	 	 	51,949	 
	Income tax expense	 	 	5,171,005	 	 	 	1,171,747	 
	 	 	 	 	 	 	 	 	 
	 	 	$	 	 	$	 
	The Company’s income tax expense is allocated as follows:	 	 		 	 	 		 
	Current tax expense	 	 	2,485,051	 	 	 	1,651,676	 
	Deferred income tax expense (recovery)	 	 	2,685,954	 	 	 	(479,929	)
	Income tax expense	 	 	5,171,005	 	 	 	1,171,747	 



 


	The following table summarizes the components of deferred tax assets (liabilities):	 	 	 
	 	 	June 30,	 	 	June 30,	 
	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Deferred income tax assets (liabilities)	 	 	 	 	 	 	 	 
	Non-deductible reserves - Canadian	 	 	392,400	 	 	 	106,857	 
	Non-deductible reserves - USA	 	 	5,839,556	 	 	 	2,568,308	 
	SR&ED investment tax credits, net of 12(1)(x)	 	 	1,806,384	 	 	 	1,988,657	 
	Property and equipment - Canadian	 	 	(262,213	)	 	 	(310,810	)
	Property and equipment - USA	 	 	(1,849,893	)	 	 	(679,817	)
	Deferred development costs	 	 	(754,014	)	 	 	(1,001,984	)
	Intangible assets including goodwill - Canadian	 	 	(101,103	)	 	 	(89,607	)
	Intangible assets including goodwill - USA	 	 	(52,014,497	)	 	 	(3,812,802	)
	Non-capital losses carried forward - USA	 	 	6,394,127	 	 	 	5,551,484	 
	Non-capital losses carried forward - Canadian	 	 	-	 	 	 	127,473	 
	Capital losses carried forward and other - Canadian	 	 	4,373	 	 	 	370,626	 
	Right of use assets net of obligations - Canadian	 	 	37,167	 	 	 	7,833	 
	Right of use assets net of obligations - USA	 	 	183,983	 	 	 	103,662	 
	Share issuance costs - Canadian	 	 	1,420,359	 	 	 	357,327	 
	Acquisition costs & other - USA	 	 	521,302	 	 	 	-	 
	Stock options - USA	 	 	10,237,089	 	 	 	-	 
	Net deferred income tax assets (liabilities)	 	 	(28,144,980	)	 	 	5,287,207	 



 






    31 


     


    

 


Sangoma Technologies Corporation





Notes to the consolidated financial statements





For the years ended June 30, 2021 and 2020





(in Canadian dollars)



 


	10.	Income
                                            tax (continued)



 


Deferred tax assets and liabilities have been offset where
they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset. The following
table shows the movement in net deferred tax assets (liabilities):


 


	 	 	June 30,	 	 	June 30,	 
	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Balance at the beginning of the year	 	 	5,287,207	 	 	 	4,176,043	 
	Recognized in profit/loss	 	 	(2,685,954	)	 	 	479,929	 
	Recognized in goodwill	 	 	(32,036,406	)	 	 	-	 
	Recognized in equity	 	 	1,440,455	 	 	 	432,590	 
	Recognized in deferred development costs	 	 	(153,583	)	 	 	-	 
	Other foreign exchange movement	 	 	3,301	 	 	 	198,645	 
	Balance at the end of the year	 	 	(28,144,980	)	 	 	5,287,207	 



 


Unrecognized deferred tax assets


 


Deferred taxes are provided as a result of temporary differences
that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred tax assets
have not been recognized in respect of the following deductible temporary differences:


 


	 	 	June 30, 2021	 
	 	 	$	 
	Capital losses carried forward and other - Canadian	 	 	50,366	 
	Capital losses carried forward - USA	 	 	15,969,099	 




 


The net capital loss carry forward may be carried forward
indefinitely but can only be used to reduce capital gains. Deferred tax assets have not been recognized in respect of these items because
it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.


 


The Company has deducted available SR&ED for federal
and provincial purposes and unutilized SR&ED tax credits. These consolidated financial statements take into account an income tax
benefit resulting from tax credits available to the Company to reduce its net income for federal and provincial income tax purposes in
future years as follows:


 


	Year of expiration	 	Federal tax
    credits carry forward	 	 	Ontario tax
    credits carry forward	 
	 	 	$	 	 	$	 
	2034	 	 	262,641	 	 	 	-	 
	2035	 	 	288,821	 	 	 	-	 
	2036	 	 	334,585	 	 	 	-	 
	2037	 	 	300,386	 	 	 	-	 
	2038	 	 	227,599	 	 	 	-	 
	2039	 	 	325,909	 	 	 	-	 
	2040	 	 	301,819	 	 	 	42,939	 
	2041	 	 	412,423	 	 	 	60,882	 
	 	 	 	2,454,183	 	 	 	103,821	 




 


The income tax benefit of eligible SR&ED costs incurred
in prior years but not utilized have been taken into account in these consolidated financial statements.


 






    32 


     


    





 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		11.	Shareholders’ equity



 


(i)          Share
capital


 


The Company’s authorized share capital consists of
an unlimited number of common shares without par value. As at June 30, 2021 and 2020, the Company’s issued and outstanding
common shares consist of the following:


 


	 	 	June 30, 2021	 	 	June 30, 2020	 
	 	 	#	 	 	#	 
	Shares issued and outstanding:	 	 	 	 	 	 	 	 
	Outstanding, beginning of the year	 	 	76,087,735	 	 	 	52,962,090	 
	Shares issued for business combinations (Note 20)	 	 	21,130,798	 	 	 	5,500,417	 
	Shares issued for acquisition costs (Note 20)	 	 	129,198	 	 	 	-	 
	Shares issued through short form prospectus	 	 	35,006,000	 	 	 	14,846,500	 
	Shares returned from escrow	 	 	-	 	 	 	(21,673	)
	Shares issued upon exercise of options	 	 	797,777	 	 	 	2,738,444	 
	Shares issued upon exercise of broker warrants	 	 	-	 	 	 	61,957	 
	Shares issued and outstanding, end of the year	 	 	133,151,508	 	 	 	76,087,735	 



 


On March 31, 2021, the Company acquired StarBlue Inc.
and issued 21,130,798 common shares valued in the amount of $84,093,299 as part of the consideration, and 129,198 common shares valued
in the amount of $415,568 as part of the acquisition costs (Note 20). Under the terms of the agreement, a further 88,869,202 common shares
valued in the amount of $241,568,231 will be issued in instalments over fourteen quarters commencing on April 1, 2022 which would
bring the total common shares to 222,020,710. The $241,568,231 discounted value of the 88,869,202 common shares not yet issued is recorded
as shares to be issued in the consolidated statements of changes in shareholders’ equity.


 


On July 30, 2020, the Company closed its short-form
prospectus offering with 35,006,000 common shares being issued at a price of $2.30 per common share including 4,566,000 common shares
issued upon the exercise in full of the over-allotment option grant to the Underwriter for aggregate gross proceeds of $80,513,800 and
net proceeds of $75,283,264.


 


During the year ended June 30, 2020, 21,673 shares were
returned and cancelled, which were held in escrow for working capital adjustment purposes for Digium acquisition. As a result of cancellation
of common shares, an amount of $24,362 was reclassed from share capital to retained earnings.


 


On October 18, 2019, the Company acquired VoIP Innovations
LLC and issued 5,500,417 shares valued in the amount of $6,553,938 as part of the consideration (Note 20).


 


On July 16, 2019, the Company closed a short form prospectus
offering of 14,846,500 common shares, including 1,936,500 common shares issued upon the exercise in full of the over-allotment option
granted to the Underwriters, at a price of $1.55 per common share for aggregate gross proceeds of $23,012,075 and net proceeds of $21,319,720.


 


During the year ended June 30, 2021, a total of 797,777
(June 30, 2020 - 2,738,444) options were exercised for cash consideration of $279,188 (June 30, 2020 - $915,989), and the Company
recorded a charge of $192,710 (June 30, 2020 – $478,904) from contributed surplus to share capital.


 


During the year ended June 30, 2020, a total of 61,957
broker warrants were exercised for cash consideration of $61,957 and the Company recorded a charge of $29,348 from warrant reserve to
share capital. As at June 30, 2021, no broker warrants were outstanding (June 30, 2020 - $nil).


 






    33 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		11.	Shareholders’ equity (continued)



 


(ii)         Stock
options


 


During the year ended June 30, 2020, the shareholders
of the Company amended the stock option plan (the “plan”) for officers, employees and consultants of the Company. The number
of common shares that may be set aside for issuance under the plan (and under all other management stock option and employee stock option
plans) is limited to 10% of the outstanding common shares of the corporation provided that the Company complies with the provisions of
policies, rules and regulations of applicable securities legislation. The maximum number of common shares that may be reserved for
issuance to any one person under the plan is 5% of the common shares outstanding at the time of grant (calculated on a non-diluted basis)
less the number of common shares reserved for issuance to such person under any stock option to purchase common shares granted as a compensation
or incentive mechanism. Any common shares subject to a stock option, which for any reason are terminated, cancelled, exercised, expired,
or surrendered will be available for a subsequent grant under the plan, subject to regulatory requirements.


 


The stock option price of any common shares cannot be less
than the closing price or the minimum price as determined by applicable regulatory authorities of the relevant class or series of shares,
on the day immediately preceding the day on which the stock option is granted. Stock options granted under the plan may be exercised during
a period not exceeding five years from the date of grant, subject to earlier termination on the termination of the optionee’s employment,
on the optionee’s ceasing to be an employee, officer or director of the Company or any of its subsidiaries, as applicable, or on
the optionee’s retiring, becoming permanently disabled or dying, subject to certain grace periods to allow the optionee or his or
her personal representative time to exercise such stock options. The stock options are non-transferable. The plan contains provisions
for adjustment in the number of common shares issuable thereunder in the event of the subdivision, consolidation, reclassification or
change of the common shares, a merger, or other relevant changes in the Company’s capitalization. The board of directors may, from
time to time, amend or revise the terms of the plan or may terminate the plan at any time.


 


The following table shows the movement in the stock option plan: 




 


	 	 	Number	 	 	Weighted	 
	Measurement date	 	of options	 	 	average price	 
	 	 	#	 	 	$	 
	Balance, June 30, 2019	 	 	5,239,342	 	 	0.58	 
	Granted	 	 	2,381,000	 	 	2.20	 
	Exercised	 	 	(2,738,444	)	 	(0.33	)
	Expired	 	 	(16,190	)	 	(0.88	)
	Forfeited	 	 	(367,505	)	 	(1.09	)
	Balance, June 30,2020	 	 	4,498,203	 	 	1.55	 
	Granted	 	 	7,718,000	 	 	4.42	 
	Exercised	 	 	(797,777	)	 	(0.35	)
	Expired	 	 	(24,002	)	 	(1.50	)
	Forfeited	 	 	(283,254	)	 	(1.99	)
	Balance, June 30, 2021	 	 	11,111,170	 	 	3.62	 



 


The Company uses the fair value method to account for all
share-based awards granted to employees, officers, and directors. The estimated fair value of stock options granted is determined using
the Black- Scholes option pricing model and is recorded as a charge to income over the vesting period of the stock options, with a corresponding
increase to contributed surplus. Stock options are granted at a price equal to or above the fair value of the common shares on the day
immediately preceding the date of the grant. The consideration received on the exercise of stock options is added to stated capital at
the time of exercise.


 






    34 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		11.	Shareholders’ equity (continued)



 


(ii)         Stock
options (continued)


 


On February 9, 2021, the Company granted 5,700,000 stock
options to employees, officers, and directors at a strike price of $4.90 vesting over a period of four years.


 


On June 30, 2021, the Company granted 2,018,000 stock
options to employees, officers, and directors at a strike price of $3.07 vesting over a period of four years.


 


	 	 	2021	 	 	2020	 
	Share price	 	 	$3.07 - $4.90	 	 	$	2.20	 
	Exercise price	 	 	$3.07 - $4.90	 	 	$	2.20	 
	Expected volatility	 	 	62.27% - 65.55%	 	 	 	61.96	%
	Expected option life	 	 	5 years	 	 	 	5 years	 
	Risk-free interest rate	 	 	0.33% - 0.71%	 	 	 	0.39	%




 


The following table summarizes information about the stock options outstanding and exercisable at the end of each year:




 


	 	 	June 30, 2021	 	 	June 30, 2020	 
	 	 	Number of stock	 	 	Weighted	 	 	Number of stock	 	 	Weighted	 
	 	 	options	 	 	average	 	 	options	 	 	average	 
	 	 	outstanding and	 	 	remaining	 	 	outstanding and	 	 	remaining	 
	Exercise price	 	exercisable	 	 	contractual life	 	 	exercisable	 	 	contractual life	 
	$0.01 - $1.00	 	 	165,105	 	 	 	1.50	 	 	 	481,281	 	 	 	1.34	 
	$1.01 - $1.50	 	 	479,747	 	 	 	2.54	 	 	 	285,163	 	 	 	3.49	 
	$1.51 - $2.00	 	 	-	 	 	 	-	 	 	 	50,000	 	 	 	3.92	 
	$2.01 - $3.00	 	 	530,250	 	 	 	3.93	 	 	 	-	 	 	 	-	 
	 	 	 	1,175,102	 	 	 	3.02	 	 	 	816,444	 	 	 	2.25	 



 


For the year ended June 30, 2021, the Company recognized
share-based compensation expense in the amount of $4,681,326 (June 30, 2020 - $401,977).


 


(iii)       Earnings
per share


 


Both the basic and diluted earnings per share have been calculated
using the net income attributable to the shareholders of the Company as the numerator.


 


	 	 	2021	 	 	2020	 
	Number of shares:	 	 	 	 	 	 	 	 
	Weighted average number of shares outstanding	 	 	113,740,312	 	 	 	71,382,799	 
	Shares to be issued	 	 	88,869,202	 	 	 	-	 
	Weighted average number of shares used in basic earnings per share	 	 	202,609,514	 	 	 	71,382,799	 
	Shares deemed to be issued in respect of options and warrants	 	 	1,667,518	 	 	 	1,212,503	 
	Weighted average number of shares used in diluted earnings per share	 	 	204,277,032	 	 	 	72,595,302	 
	Net income for the year	 	$	766,990	 	 	$	3,904,616	 
	Earnings per share:	 	 	 	 	 	 	 	 
	Basic earnings per share	 	$	0.004	 	 	$	0.055	 
	Diluted earings per share	 	$	0.004	 	 	$	0.054	 



 






    35 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		11.	Shareholders’ equity (continued)



 


(iii)       Earnings
per share (continued)


 


Under the terms of the StarBlue Inc. share purchase agreement,
a further 88,869,202 shares will be issued in instalments over the fourteen quarters commencing on April 1, 2022.


 


		12.	Related parties



 


The Company’s related parties include key management
personnel and directors. Unless otherwise stated, none of the transactions incorporated special terms and conditions and no guarantees
were given or received. Outstanding balances payable are usually settled in cash and relate to director fees.


 


The Company had the following balances with related parties
excluding key management compensation:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Total transactions during the year:	 	 	 	 	 	 	 	 
	General and administrative expenses	 	 	-	 	 	 	10,000	 
	 	 	 	 	 	 	 	 	 
	Outstanding balances as at June 30:	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	-	 	 	 	5,000	 



 


Compensation of key management personnel


 


Key management personnel are those individuals having authority
and responsibility for planning, directing and controlling the activities of the Company, including members of the Company’s Board
of Directors. The Company considers key management to be the members of the Board of Directors and three officers.


 


The remuneration of directors and other members of key management
personnel during the fiscal year ended June 30, 2021 and 2020 were as follows:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Short term benefits	 	 	2,448,847	 	 	 	1,762,752	 
	Long term benefits	 	 	20,000	 	 	 	20,000	 
	Share-based compensation	 	 	2,650,870	 	 	 	114,031	 
	 	 	 	5,119,717	 	 	 	1,896,783	 



 


		13.	Financial instruments



 


The fair values of the cash and cash equivalents, trade receivables,
contract assets, other current assets, accounts payable and accrued liabilities, consideration payable and derivative liability approximate
their carrying values due to the relatively short-term nature of these financial instruments or as these financial instruments are fair
valued at each reporting period. The fair values of operating facility and loans approximate their carrying values due to variable interest
loans or fixed rate loan, which represent market rate.


 


Cash and cash equivalents are comprised of:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Cash at bank and on hand	 	 	27,385,282	 	 	 	27,249,863	 



 






    36 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		13.	Financial instruments (continued)



 


Cash includes demand deposits with financial institutions
and cash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. As at
June 30, 2021 and 2020, the Company had no cash equivalents.


 


Total interest income and interest expense for financial
assets or financial liabilities that are not at fair value through profit or loss can be summarized as follows:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Interest income	 	 	(49,211	)	 	 	(53,170	)
	Interest expense (Notes 9, 17)	 	 	2,465,643	 	 	 	2,530,537	 
	Net interest expense	 	 	2,416,432	 	 	 	2,477,367	 



 


The Company examines the various financial instrument risks
to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, foreign
currency risk, interest rate risk and market risk.


 


Credit risk


 


Credit risk is the risk of financial loss to the Company
if a customer or counterparty to a financial instrument fails to meet its obligations. Where possible, the Company uses an insurance policy
with Export Development Canada (“EDC”) for its trade receivables to manage this risk and minimize any exposure.


 


The Company’s maximum exposure to credit risk for its
trade receivables is summarized as follows with some of the over 90-day receivable not being covered by EDC:


 


	 	 	June 30,	 	 	June 30,	 
	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Trade receivables aging:	 	 	 	 	 	 	 	 
	0-30 days	 	 	14,490,586	 	 	 	9,312,820	 
	31-90 days	 	 	3,453,846	 	 	 	1,838,303	 
	Greater than 90 days	 	 	1,674,175	 	 	 	671,596	 
	 	 	 	19,618,607	 	 	 	11,822,719	 
	Expected credit loss provision	 	 	(1,356,771	)	 	 	(588,178	)
	 	 	 	18,261,836	 	 	 	11,234,541	 



 


The movement in the provision for expected credit losses
can be reconciled as follows:


 


	 	 	June 30,	 	 	June 30,	 
	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Expected credit loss provision:	 	 	 	 	 	 	 	 
	Expected credit loss provision, beginning balance	 	 	(588,178	)	 	 	(287,372	)
	Net change in expected credit loss provision during the year	 	 	(768,593	)	 	 	(300,806	)
	Expected credit loss provision, ending balance	 	 	(1,356,771	)	 	 	(588,178	)



 






    37 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)








 



 


		13.	Financial instruments (continued)



 


The Company applies the simplified approach to provide for
expected credit losses as prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables
and contract assets. The expected credit loss provision is based on the Company’s historical collections and loss experience and
incorporates forward-looking factors, where appropriate. The provision matrix below shows the expected credit loss rate for each aging
category of trade receivables.


 


	 	 	June 30, 2021	 
	 	 	 	 	 	Up to 30	 	 	Over 30	 	 		 
	 	 		 	 	days past	 	 	days past	 	 	Over 90 days	 
	 	 	Total	 	 	due	 	 	due	 	 	past due	 
	Default rates	 	 	 	 	 	 	1.80	%	 	 	16.81	%	 	 	30.76	%
	Trade receivables	 	$	19,618,607	 	 	$	14,490,586	 	 	 	3,453,846	 	 	 	1,674,175	 
	Expected credit loss provision	 	$	1,356,771	 	 	$	261,077	 	 	$	580,639	 	 	$	515,055	 




 


	 	 	June 30, 2020	 
	 	 	 	 	 	Up to 30	 	 	Over 30	 	 	 	 
	 	 		 	 	days past	 	 	days past	 	 	Over 90 days	 
	 	 	Total	 	 	due	 	 	due	 	 	past due	 
	Default rates	 	 	 	 	 	 	1.68	%	 	 	5.39	%	 	 	49.58	%
	Trade receivables	 	$	11,822,719	 	 	$	9,312,820	 	 	$	1,838,303	 	 	$	671,596	 
	Expected credit loss provision	 	$	588,178	 	 	$	156,043	 	 	$	99,164	 	 	$	332,971	 



 


Substantially all of the Company’s cash and cash equivalents
are held with major Canadian or US financial institutions and thus the exposure to credit risk is considered insignificant. Management
actively monitors the Company’s exposure to credit risk under its financial instruments, including with respect to trade receivables.


 


Liquidity risk


 


Liquidity risk is the risk that the Company will not be able
to meet its obligations associated with financial liabilities. The Company has a planning and budgeting process in place by which it anticipates
and determines the funds required to support its normal operating requirements. The Company coordinates this planning and budgeting process
with its financing activities through its capital management process.


 


The Company holds sufficient cash and cash equivalents and
working capital, maintained through stringent cash flow management, to ensure sufficient liquidity is maintained. The following are the
undiscounted contractual maturities of significant financial liabilities of the Company as at June 30, 2021:


 


	 	 	2022	 	 	2023	 	 	2024	 	 	2025	 	 	Thereafter	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Accounts payable and accrued liabilities	 	 	27,713,597	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	27,713,597	 
	Sales tax payable	 	 	1,634,156	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,634,156	 
	Consideration payable	 	 	2,965,049	 	 	 	2,864,751	 	 	 	2,764,626	 	 	 	2,764,626	 	 	 	1,151,928	 	 	 	12,510,980	 
	Operating facility and loans	 	 	18,033,270	 	 	 	18,033,270	 	 	 	18,033,270	 	 	 	38,808,713	 	 	 	-	 	 	 	92,908,523	 
	Lease obligations on right of use assets	 	 	3,339,863	 	 	 	2,981,048	 	 	 	2,546,054	 	 	 	2,511,395	 	 	 	8,318,153	 	 	 	19,696,513	 
	Other non-current liabilities	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,137,020	 	 	 	1,137,020	 
	 	 	 	53,685,935	 	 	 	23,879,069	 	 	 	23,343,950	 	 	 	44,084,734	 	 	 	10,607,101	 	 	 	155,600,789	 



 






    38 


     


    





  


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		13.	Financial instruments (continued)



 


Foreign currency risk


 


A portion of the Company’s transactions occur in a
foreign currency (Canadian dollars (CAD), Euros (EUR), and Great British Pounds (GBP)) and, therefore, the Company is exposed to foreign
currency risk at the end of the reporting period through its foreign denominated cash, trade receivables, contract assets, accounts payable
and accrued liabilities, and operating facility and loans. As at June 30, 2021, a 10% depreciation or appreciation of the CAD, EUR,
and GBP against the U.S. dollar would have resulted in an approximate $109,902 (June 30, 2020 - $1,063,592) increase or decrease,
respectively, in total comprehensive income (loss).


 


Interest rate risk


 


The Company’s exposure to interest rate fluctuations
is with its credit facility (Note 9) which bears interest at a floating rate. As at June 30, 2021, a change in the interest rate
of 1% per annum would have an impact of approximately $776,329 (June 30, 2020 - $293,044) per annum in finance costs. The Company
also entered an interest rate swap arrangement for its loan facility (Note 9) to manage the exposure to changes in LIBOR-rate based interest
rate. The fair value of the interest rate swaps was estimated based on the present value of projected future cash flows using the LIBOR
forward rate curve. The model used to value the interest rate swaps included inputs of readily observable market data, a Level 2 input.
As described in detail in Note 9, the fair value of the interest rate swaps was a liability of $413,111 on June 30, 2021 (June 30,
2020 – $797,380).


 


		14.	Capital management



 


The Company’s objectives in managing capital are to
safeguard the Company’s assets, to ensure sufficient liquidity to sustain the future development of the business via advancement
of its significant research and development efforts, to conservatively manage financial risk and to maximize investor, creditor, and market
confidence. The Company considers its capital structure to include its shareholders’ equity and operating facilities and loans.
Working capital is optimized via stringent cash flow policies surrounding disbursement, foreign currency exchange and investment decision-making.
There have been no changes in the Company’s approach to capital management during the year and apart from the financial covenants
as discussed in Note 9, the Company is not subject to any other capital requirements imposed by external parties.


 






    39 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		15.	Contract liabilities



 


Contract liabilities, which includes deferred revenues, represent
the future performance obligations to customers in respect of services or customer activation fees for which consideration has been received
upfront and is recognized over the expected term of the customer relationship.


 


Contract liabilities as at June 30, 2021 and June 30,
2020 are below:


 


	 	 	$	 
	Opening balance, June 30, 2019	 	 	14,988,404	 
	Revenue deferred during the year	 	 	16,826,638	 
	Deferred revenue amortized into income during the year	 	 	(17,676,552	)
	Additions through business combination (Note 20)	 	 	825,646	 
	Effects of movements on exchange rates	 	 	(218,506	)
	Ending balance, June 30, 2020	 	 	14,745,630	 
	Revenue deferred during the year	 	 	25,358,368	 
	Deferred revenue amortized into income during the year	 	 	(26,172,111	)
	Additions through business combination (Note 20)	 	 	6,957,026	 
	Effects of movements on exchange rates	 	 	(1,363,739	)
	Ending balance, June 30, 2021	 	 	19,525,174	 
	 	 	 	 	 
	Contract liabilities - Current	 	 	14,143,563	 
	Contract liabilities - Non-current	 	 	5,381,611	 
	 	 	 	19,525,174	 



 


		16.	Consideration payable



 


As described in Note 20, consideration in the amount of $16,685,768
($13,269,000 USD) was payable as part of the acquisition of Star2Star. The fair value of consideration payable as of June 30, 2021
was determined using an effective tax rate of 24.56% and a discount rate of 4.9%. The fair value of the consideration payable is dependent
upon the Company’s share price, foreign exchange rates and Company’s ability to utilize the underlying tax losses as they
become available in each reporting period. The Company recognized a gain on change in fair value of consideration payable in the amount
of $5,164,811 for the year ended June 30, 2021. The balance of consideration payable as at June 30, 2021 is summarized below:


 


	 	 	$	 
	Opening balance, June 30, 2019 and 2020	 	 	-	 
	Additions through business combination (Note 20)	 	 	16,685,768	 
	Gain on change in fair value	 	 	(5,164,811	)
	Effects of movements on exchange rates	 	 	(240,169	)
	Ending balance, June 30, 2021	 	 	11,280,788	 
	 	 	 	 	 
	Consideration payable - Current	 	 	2,894,921	 
	Consideration payable - Non-current	 	 	8,385,867	 
	 	 	 	11,280,788	 



 






    40 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		17.	Leases: Right-of-use assets and lease obligations



 


The Company’s lease obligations and right-of-use assets
are presented below:


 


	 	 	Right-of-use assets	 
	 	 	$	 
	Present value of leases	 	 	 	 
	Opening IFRS 16 value as at July 1, 2019	 	 	17,241,779	 
	Additions	 	 	1,620,892	 
	Effects of movements on exchange rates	 	 	697,732	 
	Balance at June 30, 2020	 	 	19,560,403	 
	Additions	 	 	2,360,941	 
	Addition through business combination (Note 20)	 	 	3,249,517	 
	Terminations	 	 	(1,070,603	)
	Effects of movements on exchange rates	 	 	(1,846,425	)
	Balance at June 30, 2021	 	 	22,253,833	 
	 	 	 	 	 
	Accumulated depreciation and repayments	 	 	 	 
	Opening IFRS 16 value as at July 1, 2019	 	 	-	 
	Depreciation expense	 	 	3,366,767	 
	Effects of movements on exchange rates	 	 	15,116	 
	Balance at June 30, 2020	 	 	3,381,883	 
	Depreciation expense	 	 	3,217,711	 
	Terminations	 	 	(729,487	)
	Effects of movements on exchange rates	 	 	(385,252	)
	Balance at June 30, 2021	 	 	5,484,855	 
	 
	Net book value as at:	 	 	 	 
	June 30, 2020	 	 	16,178,520	 
	June 30, 2021	 	 	16,768,978	 



 






    41 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		17.	Leases: Right-of-use assets and lease obligations (continued)



 


	 	 	Lease Obligations	 
	 	 	$	 
	Present value of leases	 	 	 	 
	Opening IFRS 16 value as at July 1, 2019	 	 	17,123,225	 
	Additions	 	 	1,620,892	 
	Repayments	 	 	(3,285,223	)
	Interest expense	 	 	481,697	 
	Effects of movements on exchange rates	 	 	682,199	 
	Balance at June 30, 2020	 	 	16,622,790	 
	Additions	 	 	2,360,941	 
	Addition through business combination (Note 20)	 	 	3,348,681	 
	Repayments	 	 	(3,228,906	)
	Interest expense	 	 	478,656	 
	Terminations	 	 	(351,407	)
	Effects of movements on exchange rates	 	 	(1,578,380	)
	Balance at June 30, 2021	 	 	17,652,375	 
	 	 	 	 	 
	Lease Obligations - Current	 	 	3,001,069	 
	Lease Obligations - Non-current	 	 	14,651,306	 
	 	 	 	17,652,375	 



 


(1) Includes the impact of recognition exemptions
including those for short-term and low-dollar value leases; includes the impact of judgment applied with regard to renewal options
in the lease terms in which the Company is a lessee.


 


(2) Right-of-use assets opening balance includes the
impact of estimated restoration costs.


 


(3) Addition through business
combination represents the right-of-use asset and leased obligation of the leased office building of Star2Star Communications
LLC, which was acquired on March 31, 2021.


 


	Amounts recognized in consolidated statements of income and comprehensive income (loss)	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Depreciation charge on right-of-use assets	 	 	3,217,711	 	 	 	3,366,767	 
	Interest expense on lease obligations	 	 	478,656	 	 	 	481,697	 
	Income from sub-leasing right-of-use assets	 	 	(108,790	)	 	 	(56,393	)
	Expenses relating to leases of low-value assets	 	 	301,455	 	 	 	309,567	 



 






    42 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		18.	Provisions



 


	 	 	 	 	 	Sales returns &	 	 	Stock	 	 	 	 
	 	 	Warranty	 	 	allowances	 	 	rotation	 	 	 	 
	 	 	provision	 	 	provision	 	 	provision	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Balance at June 30, 2019	 	 	208,481	 	 	 	48,230	 	 	 	300,294	 	 	 	557,005	 
	Additional provision recognized	 	 	5,676	 	 	 	46,227	 	 	 	54,034	 	 	 	105,937	 
	Balance at June 30, 2020	 	 	214,157	 	 	 	94,457	 	 	 	354,328	 	 	 	662,942	 
	Additional provision recognized	 	 	85,110	 	 	 	122,641	 	 	 	(322,303	)	 	 	(114,552	)
	Balance at June 30, 2021	 	 	299,267	 	 	 	217,098	 	 	 	32,025	 	 	 	548,390	 



 


The provision for warranty obligations represents the Company’s
best estimate of repair and/or replacement costs to correct product failures. The sales returns and allowances provision represent the
Company’s best estimate of the value of the products sold in the current financial period that may be returned in a future period.
The stock rotation provision represents the Company’s best estimate of the value of the products sold in the current financial period
that may be exchanged for alternative products in a future period. The Company accrues for product warranties, stock rotation, and sales
returns and allowances at the time the product is delivered.


 


		19.	Segment disclosures



 


The Company operates in one operating segment; development,
manufacturing, distribution and support of voice and data connectivity components for software-based communication applications. The majority
of the Company’s assets are located in Canada and the United States of America (“USA”). The Company sells into three
major geographic centers: USA, Canada and other foreign countries. The Company has determined that it has a single reportable segment
as the Company’s decision makers review information on a consolidated basis.


 


Revenues for group of similar products and services can be
summarized years ended June 30, 2021 and 2020 as follows:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Products	 	 	64,119,358	 	 	 	66,496,760	 
	Services	 	 	103,225,457	 	 	 	64,920,946	 
	Total revenues	 	 	167,344,815	 	 	 	131,417,706	 



 


The sales, in Canadian dollars, in each of these geographic
locations for the years ended June 30, 2021 and 2020 as follows:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	USA	 	 	139,556,694	 	 	 	102,837,194	 
	Canada	 	 	4,929,241	 	 	 	4,369,137	 
	All other countries	 	 	22,858,880	 	 	 	24,211,375	 
	Total revenues	 	 	167,344,815	 	 	 	131,417,706	 



 






    43 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		19.	Segment disclosures (continued)



 


The non-current assets, in Canadian dollars, in each of the
geographic locations as at June 30, 2021 and June 30, 2020 are below:


 


	 	 	2021	 	 	2020	 
	 	 	$	 	 	$	 
	Canada	 	 	8,322,384	 	 	 	7,516,113	 
	USA	 	 	595,263,056	 	 	 	114,059,570	 
	Total non-current assets	 	 	603,585,440	 	 	 	121,575,683	 



 


		20.	Business combinations



 


		a)	On October 18, 2019, Sangoma Technologies US Inc., a wholly owned subsidiary of Sangoma Technologies Inc., acquired all the membership
interest of VoIP Innovations LLC, a US based company. The total discounted consideration for the acquisition was $46,028,032 ($35,050,283
USD). The discounted purchase price consisted of $39,171,420 ($29,828,982 USD) in cash paid on closing and the issuance of 5,500,417 common
shares valued at $6,553,938 ($4,990,815 USD) based on a share price of $1.40 ($1.066 USD) per common share on closing and a discount of
14.9% to reflect the 12-month lock up. In addition, the Company is required to pay additional consideration of up to $7,879,200 ($6,000,000
USD) if certain performance criteria are met for the twelve-month period from the date of acquisition. The Company estimated this potential
payment to be $nil and was subsequently finalized to be $nil. The working capital adjustment was finalized post-closing at $302,674 ($230,486
USD). Of the cash consideration paid to the vendors, $4,281,032 ($3,260,000 USD) was paid to an escrow agent to be held for periods ranging
from 4 months to 2 years to cover potential working capital, indemnification and Universal Service Fund (“USF”) special indemnity
adjustments. The cash held in escrow for working capital and indemnification purposes was discounted using a 5.0% discount for a period
of four to twelve months, respectively for an amount of $1,163,074 ($885,679 USD) and $450,240 ($342,857 USD). The cash held in escrow
for USF Special Indemnity purposes was discounted using a 1.72% and 1.64% discount for a period of one and two years, respectively for
an amount of $2,194,691 ($1,671,254 USD) and $381,349 ($290,397 USD). The Company acquired VoIP Innovations LLC to expand its suite of
service offerings and increase recurring revenue.
	 	 	 
	 	 	The Company incurred transaction costs in the amount of $2,581,854
which were expensed and included in the consolidated statements of income and comprehensive income (loss) of the fiscal year ended June 30,
2020. The acquisition has been accounted for using the acquisition method under IFRS 3, Business Combinations.
	 	 	 
	 	 	On October 7, 2020, $601,823 ($449,256 USD) was released
to the Company from the funds held in escrow in connection with the VoIP Innovations LLC acquisition. This amount represented the amount
owing by VoIP Innovations LLC under the USF as at the closing of the VoIP Innovations LLC acquisition and was released in accordance with
the terms of the VoIP Innovations LLC acquisition agreement and the escrow agreement entered into in connection with the transaction.
The following table summarizes the fair value of consideration paid on the acquisition date and the allocation of the purchase price to
the assets and liabilities acquired.



 


	Consideration	 	USD	 	 	CAD	 
	Cash consideration on closing	 	 	26,638,795	 	 	 	34,982,066	 
	Net working capital adjustment	 	 	230,486	 	 	 	302,674	 
	Cash held in escrow for working capital	 	 	885,679	 	 	 	1,163,074	 
	Cash held in escrow for indemnification	 	 	342,857	 	 	 	450,240	 
	Cash held in escrow for USF Special Indemnity (1 year)	 	 	1,671,254	 	 	 	2,194,691	 
	Cash held in escrow for USF Special Indemnity (2 year)	 	 	290,397	 	 	 	381,349	 
	Common shares	 	 	4,990,815	 	 	 	6,553,938	 
	 	 	 	35,050,283	 	 	 	46,028,032	 



 






    44 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		20.	Business combinations (continued)



 


	Purchase price allocation	 	USD	 	 	CAD	 
	Cash	 	 	1,513,854	 	 	 	1,987,993	 
	Accounts receivable	 	 	582,676	 	 	 	765,170	 
	Prepaids and other deposits	 	 	294,739	 	 	 	387,051	 
	Property and equipment	 	 	424,260	 	 	 	557,138	 
	Right-of-use assets	 	 	516,648	 	 	 	678,462	 
	Accounts payable and accrued liabilities	 	 	(561,890	)	 	 	(737,874	)
	Other liabilities	 	 	(978,715	)	 	 	(1,285,249	)
	Contract liabilities	 	 	(628,728	)	 	 	(825,646	)
	Lease obligations on right-of-use assets	 	 	(516,648	)	 	 	(678,462	)
	Customer relationships	 	 	15,030,000	 	 	 	19,737,396	 
	Technology	 	 	2,640,000	 	 	 	3,466,848	 
	Brand	 	 	700,000	 	 	 	919,240	 
	Non-compete	 	 	1,010,000	 	 	 	1,326,332	 
	Goodwill	 	 	15,024,087	 	 	 	19,729,633	 
	 	 	 	35,050,283	 	 	 	46,028,032	 



 


		b)	On February 29, 2020, the Company acquired .e4 LLC in order to strengthen its sales capabilities in its FreePBX® ecosystem.
Given the relative size of this transaction, no financial details were publicly disclosed.



 


Goodwill arises primarily from the ability to benefit from
the assembled workforce, future growth, and potential synergies in the form of cost savings.


 


		c)	On March 31, 2021, the Company acquired all of the shares
of StarBlue Inc. (dba Star2Star Communications, herein “Star2Star”). The Company paid an aggregate purchase price of $479,907,778
($381,636,405 USD), which comprised of $137,560,480 ($109,392,033 USD) cash consideration (adjusted from US$105,000,000 as a result of
initial closing adjustments), 110,000,000 common shares at a discounted value of $325,661,530 ($258,975,372 USD), and an additional consideration
payable for future tax benefit in the amount of $16,685,768 ($13,269,000 USD). The Company issued 21,130,798 common shares (22,000,000
common shares less 869,202 shares representing a holdback for indemnification purposes) on closing of the acquisition, with the remaining
88,000,000 common shares to be issued and distributed in fourteen quarterly installments commencing on April 1, 2022. The fair value
of the share consideration is determined using a put option pricing model with a share price of $4.13, volatility of 56.58%, risk free
rate of 0.221% - 0.855%, time to maturity of 0.003 – 4.25 years. The fair value of $16,685,768 ($13,269,000 USD) of consideration
payable is related to estimated tax losses to be utilized in future years, and is determined using an effective tax rate of 24.56% and
a discount rate of 4.9%. The Company acquired Star2Star to expand and broaden the suite of service offerings, add key customers and realize
synergies by removing redundancies.



 


The following table summarizes the fair value of consideration
paid on the acquisition date and the allocation of the purchase price to the assets and liabilities acquired.


 






    45 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		20.	Business combinations (continued)



 


	Consideration	 	USD	 	 	CAD	 
	Cash consideration on closing	 	 	101,110,566	 	 	 	127,146,537	 
	Net working capital adjustment	 	 	446,834	 	 	 	561,893	 
	Cash paid relating to debt	 	 	2,581,193	 	 	 	3,245,850	 
	Cash held in escrow for working capital	 	 	1,000,000	 	 	 	1,257,500	 
	Cash held in escrow for PPP loan forgiveness	 	 	4,253,440	 	 	 	5,348,700	 
	Additional consideration for tax	 	 	13,269,000	 	 	 	16,685,768	 
	Common shares issued on closing	 	 	66,873,399	 	 	 	84,093,299	 
	Common shares reserved in escrow for indemnification	 	 	2,129,067	 	 	 	2,677,302	 
	Common shares reserved for future issuance	 	 	189,972,906	 	 	 	238,890,929	 
	 	 	 	381,636,405	 	 	 	479,907,778	 




 


	Purchase price allocation	 	USD	 	 	CAD	 
	Cash	 	 	3,830,067	 	 	 	4,816,310	 
	Accounts receivable	 	 	5,562,064	 	 	 	6,994,295	 
	Inventory	 	 	1,448,237	 	 	 	1,821,158	 
	Property and equipment	 	 	5,334,933	 	 	 	6,708,678	 
	Right-of-use assets	 	 	2,584,109	 	 	 	3,249,517	 
	Other current assets	 	 	1,496,235	 	 	 	1,881,514	 
	Accounts payable and accrued liabilities	 	 	(8,324,491	)	 	 	(10,468,047	)
	Contract liabilities	 	 	(5,532,426	)	 	 	(6,957,026	)
	Other liabilities	 	 	(925,334	)	 	 	(1,163,607	)
	Lease obligations on right-of-use assets	 	 	(2,662,967	)	 	 	(3,348,681	)
	Intangible assets	 	 	169,200,000	 	 	 	212,769,000	 
	Deferred tax liability on intangible	 	 	(25,476,181	)	 	 	(32,036,298	)
	Goodwill	 	 	235,102,159	 	 	 	295,640,965	 
	 	 	 	381,636,405	 	 	 	479,907,778	 



 


The Company incurred estimated transaction costs in the amount
of $4,889,557 which were expensed and included in the consolidated statements of income and comprehensive income (loss) for the year ended
June 30, 2021. These costs are including 129,198 common shares valued at $415,568, which were issued at closing to an advisor. The
acquisition has been accounted for using the acquisition method under IFRS 3, Business Combinations.


 


		21.	Government assistance



 


The outbreak of the novel strain of coronavirus, specifically
identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus.
Government Canada and the Bank of Canada have responded with significant monetary and fiscal interventions designed to stabilize economic
conditions as temporary measures and one of them is the Canada Emergency Wage Subsidy (CEWS). The CEWS program offers assistance in the
form of wage subsidy for qualifying businesses faced with specified levels of revenue decline, and the subsidy is targeted to either retain
workforce on payroll or to re-hire furloughed employees. The CEWS program is applicable from March 15 to December 19, 2020 for
eligible entities that experienced a reduction in gross revenue for the period as determined by the program.


 






    46 


     


    

 


Sangoma Technologies Corporation 


Notes to the consolidated financial statements 


For the years ended June 30, 2021 and 2020 


(in Canadian dollars)


 


		21.	Government assistance (continued)



 


The Company received under the CEWS a total of $142,592 for
the fiscal year ended June 30, 2021 ($407,447 – June 30, 2020) which was recorded as an offset against salaries and wages
in operating expenses in the consolidated statements of income and comprehensive income (loss).


 


		22.	Subsequent events



 


On July 16, 2021, Sangoma purchased certain assets of
M2 Telecom LLC for $2.52 million ($2.00 million US dollars). M2 was a channel partner for the Company’s wholesale Trunking as a
Service “TaaS” business and the Company has taken over the sales team.


 


At a special meeting of shareholders on September 23,
2021, a special resolution to authorize Sangoma’s board of directors to effect a consolidation of its common shares based on a consolidation
ratio within the range of one (1) post-consolidation share for every two (2) to twenty (20) pre-consolidation shares was approved.


 


		23.	Authorization of the consolidated financial statements



 


The consolidated financial statements were authorized for
issuance by the Board of Directors on September 29, 2021.


 






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