Document:

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.

 

    47Exhibit 4.3

 

SANGOMA TECHNOLOGIES CORPORATION

 

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL 

CONDITION AND RESULTS OF OPERATIONS

FISCAL YEAR ENDED JUNE 30, 2021

 

INDEX

 

	Introduction	ii
	· Basis of presentation	ii
	· Non-IFRS measures	ii
	· Forward-looking statements	iii
	 	 
	Description of Business	iv
	 	 
	Overall Performance	viii
	· Financial	viii
	· Operational	ix
	· Innovation	ix
	· Sales and marketing	x
	 	 
	Results of Operations	xii
	· Summary of results for the fourth quarter of fiscal 2021	xii
	· Quarterly results trends	xvi
	· Sales and net income by quarter	xvi
	 	 
	Selected Annual Information	xvii
	· Key financial metrics	xvii
	· Summary of results for year to date fiscal 2021	xviii
	 	 
	Liquidity	xxi
	 	 
	Capital Resources	xxi
	 	 
	Contract Liabilities	xxii
	 	 
	Use of Proceeds from Equity Offerings	xxii
	 	 
	Off-Balance Sheet Arrangements	xxiii
	 	 
	Related Party Transactions	xxiii
	 	 
	Proposed Transactions	xxiii
	 	 
	Financial Instruments and Other Instruments	xxiv
	 	 
	Outstanding Share Data	xxiv
	 	 
	Significant Events	xxiv
	 	 
	Post Reporting Events	xxv
	 	 
	Guidance	xxvi
	 	 
	Additional Information	xxvi
	 	 
	Glossary of Terms	xxvii

 

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SANGOMA TECHNOLOGIES CORPORATION

 

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL 

CONDITION AND RESULTS OF OPERATIONS FOR
FISCAL 2021 

ENDED JUNE 30, 2021

 

September 29, 2021

 

INTRODUCTION

 

The Management Discussion and Analysis (“MD&A”) provides
a detailed analysis of the financial condition and results of operations of Sangoma Technologies Corporation (hereinafter referred to
as “Sangoma” or the “Company”). The MD&A compares the financial results for the fiscal fourth quarter and
full year 2021 with those of the same periods in the previous year. This MD&A should be read in conjunction with Sangoma’s audited
annual consolidated financial statements and related notes for twelve months ended June 30, 2021 (“Financial Statements”)
which are available at www.sedar.com. All amounts are in Canadian Dollars unless otherwise noted.

 

BASIS OF PRESENTATION

 

The Company reports in accordance with International Financial Reporting
Standards (“IFRS”).

 

NON-IFRS MEASURES

 

This MD&A contains references to certain non-IFRS financial measures
such as Adjusted Operating Income, Adjusted EBITDA and Adjusted Cash Flow. Non-IFRS financial measures are used by management to evaluate
the performance of the Company and do not have any meaning prescribed by IFRS and therefore may not be comparable to similar measures
presented by other reporting issuers. Non-IFRS financial measures used herein have been applied on a consistent basis but in past MD&As
the Company used the term “EBITDA” instead of “Adjusted EBITDA” as it is doing in this MD&A. This change is
solely a change in nomenclature and the calculation of this non-GAAP measure remains the same. “Adjusted Operating Income (Loss)”
is the same as the IFRS income before interest, income taxes, gain on change in fair value of consideration payable, business acquisition
and business integration costs. “Adjusted EBITDA” means earnings before interest, income taxes, depreciation (including for
right-of-use assets), amortization, share-based compensation, change in fair value of consideration payable, business acquisition costs
and business integration costs. Adjusted EBITDA is a measure used by many investors to compare issuers. “Adjusted Cash Flow”
means cash flow from operations as defined by IFRS less interest income and the capitalized development costs that Sangoma amortized during
the period, plus interest expense, business acquisition costs and business integration costs. We believe that Adjusted Operating Income,
Adjusted EBITDA and Adjusted Cash Flow are useful supplemental information as they provide an indication of the results generated by the
Company’s main business activities before taking into consideration how they are financed, taxed, depreciated or amortized. Investors
are cautioned that non-IFRS financial measures, such as those presented herein, should not be construed as an alternative to net income
or cash flow determined in accordance with IFRS.

  

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FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements, including statements
regarding the future success of our business, development strategies and future opportunities.

 

Forward-looking statements include, but are not limited to, statements
concerning estimates of expected expenditures (including in respect of IT and security enhancements being implemented in response to the
cyber attack), statements relating to expected future production and cash flows, statements relating to the ongoing investigation into
and actions being undertaken in response to the cyber attack and the anticipated impact on our business, and other statements which are
not historical facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”,
 “intend”, “may”, “potential”, “should” and similar expressions indicate forward-looking
statements.

 

Although Sangoma believes that its expectations reflected in these
forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results
will be consistent with these forward-looking statements. Forward-looking statements are based on the opinions and estimates of management
at the date that the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual
events or results to differ materially from those projected in forward-looking statements.

 

Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature,
forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute
to the possibility that the predictions, forecasts, projections and other events contemplated by the forward-looking statements will not
occur. Although Sangoma believes that the expectations represented by such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct as these expectations are inherently subject to business, economic and competitive
uncertainties and contingencies. Some of the risks and other factors which could cause results to differ materially from those expressed
in the forward-looking statements contained herein include, but are not limited to risks and uncertainties associated with the cost and
integration of Star2Star, the impact of the continuing COVID-19 pandemic, changes in exchange rate between the Canadian dollar and other
currencies, changes in technology, changes in the business climate, changes in the regulatory environment, the decline in the importance
of the PSTN, new competitive pressures, the outcome of our ongoing investigation into the cyber attack, costs related to our investigation
and any resulting liabilities, our ability to recover any proceeds under our insurance policies, costs related to and the effectiveness
of our mitigation and remediation efforts, the impact of global supply chain delays, the retention of key staff, the increase in cost
of our components and materials and the impact of changes to interest rates. See also “Guidance” below for more information
on certain of these risks and uncertainties.

 

The forward-looking statements contained in this management’s
discussion and analysis are expressly qualified by this cautionary statement. Sangoma undertakes no obligation to update forward-looking
statements if circumstances or management’s estimates or opinions should change except as required by law.

  

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DESCRIPTION OF THE BUSINESS

 

General (also refer to the Glossary of Terms at the end of this
document)

 

Sangoma’s products and services are used by leading companies
throughout the world and in leading UC, PBX, IVR, contact center, carrier networks, and data communication applications worldwide.
Sangoma’s portfolio of products also enable service providers, carriers, enterprises, SMBs, and OEMs alike to leverage their existing
infrastructure for maximum financial return, while still delivering the most advanced applications and services from the latest technologies
available.

 

Sangoma’s Communications as a Service (CaaS) Portfolio

 

Sangoma Technologies is a trusted leader in delivering
value-based Communications as a Service solutions for businesses of all sizes. The value-based communications segment includes small
businesses to large enterprises who are looking for all the advantages of cloud-based communications at a fair price. Sangoma’s
current Communications as a Service offerings are typically offered with monthly, yearly, or multi-year contracts and include: 

 

		·	Unified Communications as a Service (“UCaaS”)

		·	Trunking as a Service (“TaaS”)

		·	Communications Platform as a Service (“CPaaS”)

		·	Fax as a Service (“FaaS”)

		·	Video Meetings as a Service (“MaaS”)

		·	Desktop as a Service (“DaaS”)

 

Unified Communications as a Service (UCaaS)

 

Sangoma’s UC solutions are business communication systems (PBX’s
with advanced UC features, such as presence/chat, conferencing, mobility, fax, and more) that can be deployed on-premise or hosted in
the Cloud, allowing businesses to select the best option for their needs. Unified Communication systems, because of their mobility features
such as having the business phone number ring on an app on your smartphone and/or desktop and instant messaging capability, enable remote
work and work from home much more efficiently. Sangoma’s UC solutions are deployed globally, with over 2 million licensed seats
of its commercial Unified Communication solutions. Sangoma’s Unified Communication solutions fully integrate with our phones, soft
clients, and network interoperability products to provide a fully interoperable solution from a single vendor.

 

Cloud-Based Business Phone Solution

 

Sangoma offers its customers full-scale cloud-based Unified Communications
solutions. With Sangoma, businesses can get contact center, mobility, softphone, call control, and productivity features included for
every user at a reasonable price. Sangoma’s hosted phone service delivers the customer experience businesses demand at an affordable
price point. Customers can also choose pre-provisioned phones that customers simply plug into their network.

 

On-Premise Business Phone Solution

 

Sangoma also offers the more traditional on-premise UC phone system,
for businesses still wanting to deploy their business phone system on premise. Whether deployed on a dedicated appliance or in the customer’s
virtual environment, Sangoma provides the power and connectivity necessary for any organization.

 

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		o	IP Deskphones, Headsets and UC Clients: Sangoma provides desktop and softphone collaboration clients that integrate seamlessly
with our UC solution offerings and deliver UC features (presence, contacts, chat, calling, audio and video conferencing, etc.) from
a single application, on any device, at any location.

 

		o	IP Deskphones: Sangoma offers a full line of phones that work with both our cloud and on-premise systems, that are perfect
for every user type, from casual to call center to managers and executives. Sangoma’s product line includes entry-level, mid-range,
and executive-level phones. All models include HD Voice and plug-and-play deployment. Sangoma’s range of IP phones are customized
to seamlessly integrate with all of our UC Systems and provide zero touch installation, simplified system management, and instant access
to a wide range of features.

 

		o	Headsets: Sangoma also offers headsets that either work in conjunction with the desktop phones (by plugging into the phone)
or work in conjunction to our desktop soft client (by plugging directly into the computer). These headsets enable roaming of up to 325
feet from the phone or desk computer.

 

		o	UC Clients and Softphones: Unified Communication Clients (or softphones) are used to make or receive phone calls with your
business phone number and can be used as your main phone or as an extension of your desk phone. They are available as an app on your smartphone
or computer. These UC clients have enabled employees to work remote seamlessly by enabling phone calls to customers and other employees
as if they were in a physical office. Sangoma offers UC clients with all of our Unified Communication / Business phone system product
lines.

 

Trunking as a Service (TaaS)

 

SIP trunks deliver Internet-based telephony services to businesses
using their existing internet connection, eliminating the need for separate traditional PSTN or digital telecom connections. SIP trunking
is fast becoming the technology of choice to interconnect an IP PBX system to a telephone company. The main drivers are cost efficiencies
(over fixed lines such as ISDN or analog lines from incumbent telcos) and end-to-end UC features/transparency. Cost efficiencies are realized
because SIP trunking uses already-available broadband connections at customer premises. Sangoma offers both retail and wholesale SIP Trunking
which allows our customers to choose the service that best meets their needs. Either service offers DIDs and number porting.

 

o     Retail
SIP Trunking

 

Retail SIP trunking offers predictable monthly expenses with pricing
based per trunk. SIPStation, Sangoma’s retail SIP trunking service, is seamlessly integrated into our various UC platforms, making
it easy to get up and running. It also includes an integrated fax service option, enabling a business to send and receive faxes from a
web interface or from a local fax machine. Typically, small to mid-sized businesses and enterprises would utilize this type of service.

 

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o     Wholesale
SIP Trunking

 

Sangoma’s wholesale SIP trunking offer is now available following
the acquisition of VoIP Innovations. Pricing for wholesale SIP trunking is usage-based but with a larger monthly minimum commitment. This
includes origination, termination, SMS/MMS, e911, and fraud mitigation. Typically, very large businesses or service providers who resell
SIP trunks would utilize this type of service.

 

Communications Platform as a Service (CPaaS)

 

Communications Platform as a Service (CPaaS) allows developers to easily
build services and applications using real-time communication features, such as voice, video, chat, and SMS, via the cloud. Our platform
enables Sangoma, our integrator/developer partners, and advanced customers to build new communications services based on voice, rest APIs,
WebRTC, and SMS. When running an application on a CPaaS platform, performance is critical. To ensure peak performance, Sangoma offers
its own SIP trunking service, providing optimized connectivity in addition to easy access to phone numbers.

 

Video Meetings as a Service (MaaS)

 

Sangoma Meet is a video conferencing and collaboration service accessible
from any device that enables file sharing on screen so collaboration with co-workers is enhanced, integrates seamlessly with your calendar
and enables PSTN phone calls.

 

FAX as a Service (FaaS)

 

Faxing remains an important communications tool, yet VoIP networks
are sometimes unable to send faxes reliably because fax standards are based on very specific timing that can be interrupted in VoIP systems,
especially where there is substantial latency. Sangoma’s FoIP service, FaxStation, is a hosted service to remedy this problem. It
features a telecom appliance with up to four analog connections for fax machines and operates in concert with Sangoma’s fax server
data center to encrypt and package the fax communication to make it fail-safe. This is particularly useful for small businesses that rely
on fax communications but also for industries with challenging network conditions, such as mining, oil rigs, and ship-to-shore over satellite.

 

Desktop as a Service (DaaS)

 

Sangoma’s Desktop as a Service helps companies adapt to today’s
modern, flexible, and remote workforce. It is the most secure method for staff to access their tools and applications from any location
to do their work, delivers simplified IT administration and cuts down on the CAPex of deploying PCs.

 

Network Interconnection Products

 

In addition to the Communications as a Service (CaaS) offerings describe
above, Sangoma also offers network interconnection products. These products connect different types of networks together, such as VoIP
networks to PSTN networks, or VoIP networks to mobile networks or different types of VoIP networks.

  

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Session Border Controllers (SBCs)

 

Anytime two VoIP networks interconnect, issues of security and interoperability
arise. SBCs can manage these issues, including provider-to-provider connections, provider-to-enterprise connections, and enterprise-to-enterprise
connections. Sangoma’s SBCs are available as hardware appliances, as software-only solutions running on a virtual machine in hosted
environments, or as a hybrid of both. The hybrid solution is unique to Sangoma and provides all the flexibility expected from virtual
machine capability coupled with the scalability that is found in hardware-based solutions. Sangoma’s SBCs have broad interoperability
certifications.

 

VoIP Gateways

 

VoIP gateways are needed any time voice traffic moves from a VoIP network
to a traditional PSTN telephone network. As the traffic traverses these networks there are issues that need to be resolved regarding both
the media (the sound of the caller’s voice) and the signaling (the method used to control the media traveling over that connection).

 

In a service provider or carrier network, much larger gateways perform
these same tasks. In addition, there are signaling protocols that are only used when carrier networks communicate with other carrier networks
that are not included in the enterprise product line.

 

All Sangoma’s gateways have broad interoperability certifications.

 

PSTN Interface and Media Processing Boards

 

Sangoma’s complete line of boards connect and interface to the
PSTN. Even though IP networks are growing and quickly becoming the standard, the PSTN still exists and new communication solutions often
need to connect to the PSTN. These boards are primarily used by communications solution developers in PC/Server based telecommunications
systems that connect to the PSTN. They perform a very similar task to VoIP gateways, but are installed inside the server rather than being
stand-alone devices. By providing customers with the option of using a PSTN interface board or a VoIP gateway, Sangoma maximizes flexibility
based on installation requirements, particularly when space and power are at a premium. They may also be used in harsh conditions that
require ruggedized servers.

 

Open-Source Software Products

 

Asterisk and FreePBX

 

Sangoma is the primary developer and sponsor of the Asterisk project,
the world’s most widely used open-source communications software, and the FreePBX project, the world’s most widely used open-source
PBX software. Together, Sangoma has 5 Million users of our open-source software, with an average of 50,000 new installs per month.

 

Sangoma also offers revenue-generating products and services, beyond
the open-source Asterisk or FreePBX software, to users of these open source software products. The types of products and services Sangoma
offers includes software add-ons beyond what is offered in Asterisk or FreePBX, IP phones, SIP trunking, cloud-based fax, training,
technical support, maintenance, PSTN cards, VoIP gateways, session border controllers, and commercial/hardened versions of the PBX/UC
software they have downloaded.

  

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OVERALL PERFORMANCE

 

Financial

 

 

 

1
Adjusted operating income (loss) and Adjusted EBITDA are metrics used by the Company to monitor its performance and the definitions may
be found in the section non-IFRS measures above.

 

Sales for the fiscal year 2021, were a record $167.34 million and were
in line with the most recent business update of approximately $167 million provided on July 29, 2021. Sales for the fourth quarter
were $61.55 million, up 77% over the same quarter last year, led by the Star2Star addition.

 

Gross profit for the year was $113.96 million, delivering gross margin
at 68% of sales, up by 3 points over the 65% in fiscal 2020. Gross profit in the fourth quarter was $44.08 million, producing over 70%
gross margin, an indication of our going forward run rate as a combined Company.

 

Operating expenses were $105.88 million for the fiscal year 2021 and
$46.42 million for the fourth quarter, both up materially year-over-year, and with the fourth quarter also up sequentially over our third
quarter. These increases in spending reflect investments in growth, the acquisition of Star2Star, and the additional amortization of the
acquired intangible assets (which does not have a cash impact).

 

Adjusted EBITDA was $12.09 million in the fourth quarter, or just over
19% of revenue, bringing the total for the year to $32.29 million. This annual figure is about 50% more than in fiscal 2020, above guidance
of $30 million, and consistent with our July 29, 2021 Business Update in which we indicated that we expected Sangoma to exceed such
guidance.

 

Net income for the year ended June 30, 2021 was $0.77 million
reflecting the additional non-cash items, together with $4.89 million of business acquisition expenses associated with the Star2Star acquisition.

 

Sangoma continues to maintain a strong balance sheet, finished the
quarter with a cash balance of $27.39 million on June 30, and remains comfortably within its debt covenants.

 

Sangoma generated $24.66 million of Adjusted Cash Flow from operations
during the fiscal year ended June 30, 2021 compared to $15.01 million in the fiscal year ended June 30, 2020, with $9.55 million
coming from the fourth quarter inclusive of Star2Star.

  

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Operational

 

Sangoma Technologies is a trusted leader in delivering cloud-based
 “Communications as a Service” (or CaaS) solutions for businesses of all sizes. This segment includes companies from small/medium
businesses (SMB’s) right up to large enterprises who are looking for all the advantages of cloud-based communications at a fair
price. In addition to those cloud-based Services, Sangoma also has a broad suite of Products to compliment its services.

 

Enterprises, SMBs and carriers in more than 100 countries rely on Sangoma’s
technology as part of their mission-critical infrastructures. Through a worldwide network of distribution partners, Sangoma delivers high-quality
services and products, some of which carry the industry’s first lifetime warranty.

 

Innovation

 

As a technology company, Sangoma is continuously working on a large
number of projects across its broad portfolio of existing products. While the Company has introduced several new additions to its product
portfolio over the last few years, the majority of the Company’s investment in Research and Development (“R&D”)
is dedicated to sustaining, improving on and enhancing its broad portfolio of existing products. Sangoma believes that product innovation
is essential to a technology company’s future. The Company also believes that R&D investment is necessary in order to address
the needs of the Company’s wide-ranging group of customers (which include business of all sizes including service providers, carriers,
enterprises, small and medium-sized businesses, and original equipment manufacturers) in more than 100 countries, to keep pace with technology
developments in the cloud communications industry, to meaningfully compete in that industry, and to achieve and maintain market acceptance.

 

The Company focuses on creating and introducing products to the market
as soon as commercially practical and, thereafter, focuses on enhancements to further improve its products. Such product introductions
enable the Company to validate product acceptance to some degree, and to get products to market efficiently to start generating revenue.
Furthermore, the Company focuses on keeping its new product development costs for new projects under control in a number of ways, including
by reusing its existing code base where applicable and by leveraging open-source software.

 

Sangoma continues to invest in Research and Development (“R&D”)
to develop new products and to improve existing offerings with spending on R&D increasing each year. Sangoma believes that product
innovation is essential to a technology company’s future.

 

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Sales and marketing

 

R&D is important, but without Sales and Marketing, customers can
be too unaware of the advancements that Sangoma has made in innovation. So Sangoma continues to increase its investment in both Sales
and in Marketing, to promote awareness of the Company, to communicate the critical shift from single products to full solutions to cloud,
and to drive customer acquisition.

 

Sales

 

Sangoma uses a dual sales path ‘go to market’ approach:
direct sales to large customers and indirect distribution to other small and medium businesses (SMBs).

 

		o	Large Customers typically include ‘service providers’, OEM’s and larger enterprise type businesses. This
is the customer segment that we can sell to directly.

 

Service Providers is a broad category of customers that included
telcos, ISPs, ITSPs, wireless/mobile operators, MSPs, UCaaS operators, etc. These types of organizations are potential
customers for Sangoma.

 

OEM partners are companies that “design in” Sangoma
products as a component of their solutions. OEM customers tend to be committed participants in their given markets and have longer-term
focus. It is important to reach these potential customers in the early days of any project to secure ‘design wins’ and to
have sales and marketing programs that will ensure close collaboration during product and sales development cycles.

 

Enterprise customers are the classic ‘larger’
companies who buy products or services for their own use. This type of customer has similar ‘use cases’ to a SMB type customer
but is large enough that they prefer to do business directly with Sangoma, and the Company wants a direct relationship with them as well,
and they are buying enough for Sangoma to cost effectively service them directly.

 

		o	SMB Customers: In other cases, the customer is commonly referred to as a Small-Medium Business. Here, it is not usually cost-effective
to travel to meet with such customers in a typical sales cycle. Sangoma then utilizes an indirect distribution model to reach the full
breadth of customers, often based upon a two-tier Channel model:

 

The ‘upper tier’ of the indirect model is typically
made up of Distributors or Master Agents. The ‘second tier’ of the indirect model is normally made up of Resellers and Agents.
Distributors typically sell to resellers, and Master Agents typically sell to Agents. The Resellers and Agents then sell, install, and
support end users. The upper tier of the channel tend to be larger organizations and cover broader geographic regions, whereas the second
tier tend to be smaller organizations (though not always) and are usually more ‘local’ in nature.

 

Sangoma has parts of its sales team that focus on Direct customers
and parts which focus on the Channel. In the channel, partners require frequent attention to keep Sangoma ‘on their mind’
in a crowded product marketplace. Therefore, a portion of the Company’s sales team services the distributors and master agents as
the upper tier of the channel while a different part of the team focuses on the resellers/agents. Finally, Sangoma has professional sales
teams across all key geographic regions as well.

 

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Marketing

 

Sangoma also continues to increase its efforts in marketing. The Company
has assembled corporate marketing programs with two key objectives in mind: 

 

		o	to promote the Sangoma brand and positioning, which included conveying the message about the Company’s full solutions and its
Cloud-First approach.

		o	lead generation as one of the front-end steps in customer acquisition

 

Sangoma is now using various marketing techniques typical of technology
firms to accomplish those two objectives. This includes participation in tradeshows, speaking at selected industry events, attending specialized
seminars run by Sangoma’s distribution channel and other partners, investing in electronic marketing strategies (e.g. web presence,
social media and blogging, online advertising, search engine campaigns, etc.), conducting lead generation campaigns via email/social
media/etc., webinars, creating thought leadership pieces, PR, etc.

 

In addition to the overall corporate messaging, in support of the above
two objectives, Sangoma has developed a comprehensive set of channel promotion programs, aimed at the Company’s indirect partners
described above, both distributors/master agents as well as resellers/agents. The Company seeks to attract new channel partners and to
grow the business with existing partners. Sangoma has implemented several incentive programs to reward its channel partners for performance
and behaviours that Sangoma believes will grow revenues.

 

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RESULTS OF OPERATIONS

 

SUMMARY OF RESULTS FOR THE FOURTH QUARTER OF FISCAL 2021

 

Sangoma acquired StarBlue Inc. (dba “Star2Star Communications”)
(“Star2Star”) on March 31, 2021. The acquisition represented a unique opportunity for the Company to scale, to continue
transforming its business into a leading SaaS Company, and to enhance its offerings to customers with Star2Star’s cloud-native collaboration
platform and suite of communications and collaboration solutions. Under the terms of the share purchase agreement (a copy of which is
available on SEDAR), Sangoma acquired all of the shares of Star2Star for consideration of (i) an aggregate of 110,000,000 common
shares of Sangoma, 88,000,000 of which are to be issued and distributed in quarterly instalments commencing April 2022 and 869,202
common shares that are subject to an indemnification holdback for 16 months, and (ii) cash consideration of $137.56 million including
cash consideration of $127.15 million on closing. The full details of the transaction are covered in Note 20 (c) of the June 30,
2021 financial statements.

 

For the quarter ended June 30, 2021, the Company incurred transaction
expenses (excluding the purchase price paid) of $0.14 million relating to the acquisition of Star2Star, which is in addition to the $4.74
million recorded in the quarter ending March 31, 2021. Consistent with the Company’s approach in prior acquisitions, upon closing,
the Company immediately began integrating Star2Star’s business with the Company’s existing business and as such, the Company
does not segregate revenue, cost of sales or operational expenses of an acquired business post-integration. The Company expects to complete
the integration of Star2Star at the end of the first quarter of fiscal 2022 and will record any associated costs in this period.

 

Sales

 

The comparison of this quarter’s sales to that of the fourth
quarter in the prior year was materially affected by the inclusion of a full quarter of the acquisition of Star2Star, as well as the significant
swing in exchange rates between years. Sales for the quarter ended June 30, 2021 were $61.55 million, up 77% from the fourth quarter
of fiscal 2020.

 

This increase is driven by the Star2Star acquisition contributing significantly
to sales, our existing Services business continuing to grow and compound, all partially offset by some softening in the US currency exchange
rate. As a result, our Services revenue expanded to 71% of total sales this quarter, up from 55% in the same quarter of the prior year,
consistent with our strategic objective.

 

The solid growth in services was partially offset by some softness
in our traditional product sales which has continued, due to the decline of the PSTN, the trend towards cloud, the impact of the COVID-19
pandemic (tighter constraints on capital purchases and more difficult to get on site for installs), and the ongoing tightening of the
global supply chain for electronic components.

 

Cost of sales and gross profit

 

The cost of sales for the quarter ended June 30, 2021 was $17.47
million compared to $12.18 million last year, reflecting the global supply chain pressures and the additional costs associated with the
Star2Star business. Sangoma’s product manufacturing and delivery has been impacted by the COVID-19 related supply chain pressures
on availability and cost, for both electronic components and for shipping. Sangoma has needed to order further ahead in some cases, to
pay more for electronic components, in order to stay abreast of demand. Sangoma was able to fill most customer orders in the fourth quarter,
despite these supply chain pressures.

  

    xii 

     

    

 

Gross profit for the quarter ended June 30, 2021 was $44.08 million,
95% higher than the $22.64 million realized in the quarter ended June 30, 2020. Gross margin for the fourth quarter of June 30,
2021 was 72% of revenue, up 7% from the 65% last quarter, primarily reflecting higher margins at Star2Star and a larger fraction of revenue
coming from higher margin services year over year.

 

Operational expense

 

As permitted under IFRS, costs are allocated by function except for
the impact of foreign exchange, which can result in material swings between time periods.

 

Sales and marketing 

 

Sales and marketing expense was $14.89 million for the fourth quarter
of fiscal 2021, significantly higher than the $4.54 million incurred in the same quarter of fiscal 2020. This was primarily the result
of the addition of the Star2Star sales team, channel partner trailing commissions, and marketing expenditures. The integration of Star2Star’s
sales and marketing team into the Company’s existing sales and marketing department is in progress.

 

Research and development 

 

A portion of the Company’s R&D costs are capitalized each
period and amortized on a straight-line basis over three years (see the notes to the audited consolidated financial statements and related
notes for the fiscal year ended June 30, 2021 available at www.sedar.com). The engineering expenses incurred, and the development
costs amortized during the fourth quarter were $9.16 million or approximately 15% of sales, higher than the $6.10 million in the same
quarter last year mostly as a result of the addition of Star2Star. For the quarter ended June 30, 2021, the Company did not have
any significant projects that have not yet generated revenue, nor did it have any products or services that are not fully developed, and
which are material to the Company. The R&D programs are in the process of being integrated following the acquisition of Star2Star.

 

General and administration 

 

General and administration expenses were $22.47 million for the quarter
ended June 30, 2021, considerably above the $9.00 million over the same period of fiscal 2020. The $22.47 million includes the costs
of the Star2Star team and the additional amortization of the intangible assets acquired (a non-cash expense).

 

Foreign exchange 

 

For the quarter ended June 30, 2021, there was a foreign exchange
gain of $0.10 million compared to a $0.01 million gain in the fourth quarter of fiscal 2020.

 

Total expenses 

 

Total operating expense for the fourth quarter of fiscal 2021 was $46.42
million versus $19.63 million during the same period last year. The primary driver of the increase was the incremental expense associated
with the addition of Star2Star.

 

Adjusted
Operating Income, defined as income before interest, income taxes, gain on change in fair value of consideration payable, business
acquisition and business integration costs

 

As a result of the above, Adjusted Operating loss for the quarter ended
June 30, 2021 was $2.34 million, compared to the $3.01 million profit in the same period last year, again affected by the addition
of the Star2Star teams in the quarter and the incremental amortization of intangible assets.

 

    xiii 

     

    

 

Interest

 

Net interest expense for the quarter ended June 30, 2021 was $1.07
million, higher than the $0.69 million in the same period last year, with the additional interest on the new debt from the acquisition
of Star2Star more than offsetting the lower LIBOR rate and the paydown of principal on the existing loan between periods.

 

Business acquisition and integration costs

 

During the quarter ended June 30, 2021, the Company incurred additional
transaction expenses (excluding the purchase price paid) of $0.14 for the acquisition of Star2Star and expects to incur some integration
expense in the first quarter of fiscal 2022. For further information on the Star2Star transaction please refer to Note 20 (c) of
the June 30, 2021 financial statements filed on SEDAR.

 

Consideration payable

 

As part of the agreement for the purchase of Star2Star, Sangoma is
required to process certain payroll tax benefits to Star2Star Holdings (“Holdings”) option holders each time an installment
of the remaining share consideration is distributed. This gives rise to a tax deduction for Sangoma, the benefit of which is to be paid
to Holdings when it is realized by Sangoma. To account for this, the estimated amount is calculated each quarter and recorded as a deferred
tax asset with the associated liability to Holdings recorded as consideration payable. The amount of the potential payment is tied to
Sangoma’s share price, the US dollar to Canadian dollar exchange rate and the current US tax rate and as these change; the Company
will update the potential payout. In the fourth quarter of fiscal 2021, the change in these factors gave rise to a gain versus the amount
established on March 31, 2021 with the offset included in deferred tax expense. There is no cash exposure to Sangoma since the payment
is only due when the tax benefit is actually realized, and the two balances will largely offset each other each quarter until the final
share distribution is completed.

 

Tax

 

Taxable income is impacted by the intangible asset amortization arising
from the Star2Star acquisition which is not tax deductible. The deferred tax balance includes the amount of the expected tax benefit from
the remaining share distributions to Star2Star Holdings option holders which will change over time as the share price alters and is largely
offset by the corresponding change in consideration payable noted above.

 

Net income (loss)

 

Net loss for the fourth quarter was $1.57 million ($0.007 loss per
share fully diluted), compared to a net income of $2.63 million ($0.035 income per share fully diluted) for the equivalent quarter ended
June 30, 2020.

 

    xiv 

     

    

 

Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, share-based compensation, gain on change in fair value of consideration payable, business acquisition costs and business
integration costs)

 

For the fourth quarter of fiscal 2021, Adjusted EBITDA at $12.09 million
was almost double that of the same quarter last year, resulting from the inclusion of Star2Star, the timing of the VoIP Innovations acquisition,
and the ongoing gradual increase of services as a percentage of revenue.

 

	 	 	Three months ended	 
	$C Thousands	 	June 30, 2021	 	 	June 30, 2020	 
	Net income (loss)	 	 	(1,566	)	 	 	2,631	 
	Tax	 	 	3,177	 	 	 	(298	)
	Interest income	 	 	16	 	 	 	(4	)
	Interest expense	 	 	1,053	 	 	 	695	 
	Share-based compensation	 	 	3,515	 	 	 	76	 
	Depreciation of property and equipment	 	 	535	 	 	 	210	 
	Depreciation of right-of-use assets	 	 	922	 	 	 	988	 
	Amortization of intangibles	 	 	9,463	 	 	 	1,903	 
	Business acquisition expense	 	 	145	 	 	 	(17	)
	Gain on change in fair value of consideration payable	 	 	(5,165	)	 	 	-	 
	Adjusted EBITDA	 	 	12,095	 	 	 	6,184	 
	Percentage of revenue	 	 	19.7	%	 	 	17.8	%

 

The above table shows the reconciliation of net income to Adjusted
EBITDA which is a metric used by the Company to monitor its performance and the definition may be found in the section non-IFRS measures
above.

 

    xv 

     

    

 

QUARTERLY RESULTS TRENDS

 

 

 

When measured in source currency (predominantly US$), sales in the
quarter ended June 30, 2021 were 100% higher than in the fourth quarter of fiscal 2020 and were 79% higher than in the immediately
preceding third quarter. The sales were higher in the quarter ended June 30, 2021 compared to the preceding quarter primarily due
to the addition of the Star2Star customers together with the ongoing growth in the services business which continues to grow as a percentage
of revenue. In US dollars, Sangoma’s quarterly revenue has now exceeded the same period in the prior year for each of the last twenty-three
quarters.

 

SALES AND NET INCOME BY QUARTER

 

	 	 	First	 	 	Second	 	 	Third	 	 	Fourth	 	 	First	 	 	Second	 	 	Third	 	 	Fourth	 
	 	 	quarter	 	 	quarter	 	 	quarter	 	 	quarter	 	 	quarter	 	 	quarter	 	 	quarter	 	 	quarter	 
	C$ thousands	 	2019-2020	 	 	2019-2020	 	 	2019-2020	 	 	2019-2020	 	 	2020-2021	 	 	2020-2021	 	 	2020-2021	 	 	2020-2021	 
	Sales	 	$	28,005	 	 	$	32,286	 	 	$	36,310	 	 	$	34,817	 	 	$	35,033	 	 	$	35,324	 	 	$	35,438	 	 	$	61,550	 
	Gross Profit	 	$	17,483	 	 	$	21,322	 	 	$	23,467	 	 	$	22,637	 	 	$	23,175	 	 	$	23,461	 	 	$	23,243	 	 	$	44,076	 
	Expenses	 	$	15,877	 	 	$	19,170	 	 	$	20,095	 	 	$	19,631	 	 	$	19,643	 	 	$	19,678	 	 	$	20,140	 	 	$	46,415	 
	Adjusted operating income (loss)1	 	$	1,606	 	 	$	2,152	 	 	$	3,372	 	 	$	3,006	 	 	$	3,532	 	 	$	3,783	 	 	$	3,104	 	 	$	(2,340	)
	Net income (loss)	 	$	906	 	 	$	(1,331	)	 	$	1,699	 	 	$	2,631	 	 	$	2,238	 	 	$	2,463	 	 	$	(2,368	)	 	$	(1,566	)
	Net earnings (loss) per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-diluted basis	 	$	0.014	 	 	$	(0.018	)	 	$	0.023	 	 	$	0.035	 	 	$	0.022	 	 	$	0.022	 	 	$	(0.021	)	 	$	(0.007	)
	Fully diluted basis	 	$	0.013	 	 	$	(0.018	)	 	$	0.022	 	 	$	0.035	 	 	$	0.022	 	 	$	0.021	 	 	$	(0.021	)	 	$	(0.007	)
	Adjusted EBITDA1	 	$	3,666	 	 	$	5,192	 	 	$	6,513	 	 	$	6,184	 	 	$	6,728	 	 	$	6,836	 	 	$	6,630	 	 	$	12,095	 

 

1
Adjusted Operating income (loss) and Adjusted EBITDA are metrics used by the Company to monitor its performance and the definition may
be found in the section non-IFRS measures above.

 

    xvi 

     

    

 

 

SELECTED ANNUAL INFORMATION

 

The table and chart below show selected historical information from
the Company’s financial statements.

 

	 	 	Fiscal Years Ended June 30,	 
	 	 	2021	 	 	2020	 	 	2019	 
	 	 	 	 	 	 	 	 	 	 
	 	 	($ millions, except per share amounts)	 
	Operating Results	 	 	 	 	 	 	 	 	 	 	 	 
	Sales	 	 	167.34	 	 	 	131.42	 	 	 	109.65	 
	Gross profit	 	 	113.96	 	 	 	84.91	 	 	 	66.83	 
	Operating expense	 	 	105.88	 	 	 	74.77	 	 	 	59.78	 
	Adjusted operating income1	 	 	8.08	 	 	 	10.14	 	 	 	7.04	 
	Income before provision for income tax	 	 	5.94	 	 	 	5.08	 	 	 	2.88	 
	Net income	 	 	0.77	 	 	 	3.90	 	 	 	1.54	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 
	- non diluted basis	 	$	0.004	 	 	$	0.055	 	 	$	0.030	 
	- fully diluted basis	 	$	0.004	 	 	$	0.054	 	 	$	0.028	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted EBITDA1	 	 	32.29	 	 	 	21.56	 	 	 	12.30	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Position	 	 	 	 	 	 	 	 	 	 	 	 
	Cash and equivalents	 	 	27.39	 	 	 	27.25	 	 	 	11.72	 
	Total assets	 	 	669.71	 	 	 	175.73	 	 	 	96.41	 
	Operating facility and loan	 	 	92.91	 	 	 	50.49	 	 	 	22.73	 
	Shareholders’ equity	 	 	466.20	 	 	 	74.78	 	 	 	41.83	 
	Cash dividends declared per share	 	$	0.00	 	 	$	0.00	 	 	$	0.00	 

 

1
Adjusted Operating Income (Loss) and Adjusted EBITDA are metrics used by the Company to monitor its performance and the definition may
be found in the section non-IFRS measures above.

 

 

 

    xvii

     

    

 

SUMMARY OF RESULTS FOR YEAR TO DATE FISCAL 2021

 

Sales

 

Sales for the year ended June 30, 2021 were $167.34 million, up
27% from the $131.42 million recorded in fiscal 2020.

 

The increase in sales was due to the additional revenue from the acquisition
of Star2Star, the continued growth and compounding of the existing services business where the recurring revenue is generated, the timing
of the VoIP Innovations acquisition early in fiscal 2020, all partly offset by the impact of the decline in the US dollar against the
Canadian dollar from $1.34 in fiscal 2020 to $1.28 in fiscal 2021. Products sales, some of which need onsite installation, were impacted
by the COVID restrictions and at $64.11 million for the year were down 4% from fiscal 2020. Services revenue for the year at $103.23 million
grew 59% and contributed 62% of the total revenue for the year, up from about 50% in fiscal 2020.

 

Cost of sales and gross profit

 

The cost of sales for the year ended June 30, 2021 was $53.39
million compared to $46.51 million last year, reflecting the global supply chain pressures and the additional costs associated with the
Star2Star business. Sangoma’s product manufacturing and delivery has been impacted by the COVID-19 related supply chain pressures
on availability and cost, for both electronic components and for shipping. Sangoma has needed to order further ahead in some cases, to
pay more for electronic components, in order to stay abreast of demand. To date, Sangoma has been able to fill most customer orders in
fiscal 2021 in spite of these supply chain pressures.

 

Gross profit for the fiscal year ended June 30, 2021 was $113.96
million, 34% higher than the $84.91 million realized in fiscal year ended June 30, 2020. Gross margin for the year ended June 30,
2021 was 68% of revenue, up 3% from the 65% last year, reflecting slightly higher margins in the newly acquired businesses and a larger
fraction of revenue coming from higher margin services year over year.

 

Operational expense

 

As permitted under IFRS, costs are allocated by function except for
the impact of foreign exchange which can result in material swings between time periods. In general, key drivers of increased cost year-over-year,
were the addition of Star2Star on March 31, 2021, the timing of the VoIP Innovations acquisition in the second quarter of fiscal
2020 (and thus its contribution in only part of fiscal 2020), and the incremental spending to drive growth, all partly offset by spending
controls in the face of the COVID-19 pandemic.

 

Selling and marketing

 

Selling and marketing expenses were $31.02 million for the year ended
June 30, 2021 compared to $20.56 million for the year ended June 30, 2020. The increase arises mostly from the addition of Star2Star
for the whole of the fourth quarter, including the sales team, channel commissions, and marketing expenditures in that acquired business.

 

    xviii

     

    

 

Research and development

 

A portion of the development costs are capitalized each period and
amortized on a straight-line basis over three years (see the notes to the consolidated financial statements and related notes for the
year ended June 30, 2021 at www.sedar.com). The engineering expenses incurred, and the development costs amortized during the fiscal
year ended June 30, 2021 were $27.19 million, compared to $23.91 million during the fiscal year ended June 30, 2020. The majority
of the increase was from the addition of Star2Star for the fourth quarter of fiscal 2021.

 

General and administration

 

General and administration expenses were $47.82 million for the fiscal
year ended June 30, 2021 versus $30.25 million over the same period ended June 30, 2020. The increased spend is a result of
the addition of the Star2Star headcount-related costs, the additional intangible amortization, higher share-based compensation expense
and the ransomware cost. The $1.4 million of costs incurred in fiscal 2021 related to ransomware attack has been fully expensed pending
the claim outstanding with its insurers being settled.

 

Foreign exchange

 

For the year ended June 30, 2021, there was a foreign exchange
gain of $0.16 million compared to a $0.05 million loss last year.

 

Total operational expense

 

Operating expense for the fiscal year ended June 30, 2021 was
$105.88 million compared to $74.77 million for the prior fiscal year. The most significant driver of this increase was the additional
costs from Star2Star.

 

Adjusted
Operating Income before income before interest, income taxes, gain on change in fair value of consideration payable, business
acquisition and business integration costs

 

Adjusted operating income for the year ended June 30, 2021 was
$8.08 million somewhat lower than the Adjusted Operating Income of $10.14 million in the fiscal year ended June 30, 2020, for the
reasons described earlier in this section.

 

Interest

 

Net interest for the fiscal year ended June 30, 2021 was $2.42
million, versus $2.48 million in the prior year, with the savings from lower LIBOR rates and the paydown of existing loans being offset
by the additional debt taken on to finance the Star2Star acquisition.

 

Business acquisition and integration costs

 

During the fiscal year ended 2021, Sangoma recorded $4.89 million of
costs directly associated with the closing of the acquisition of StarBlue on March 31, 2021 and expects to incur some integration
expense in the first quarter of fiscal 2022. During fiscal year ended 2020, the Company incurred $2.58 million for the acquisition of
VoIP Innovations. There were no business integration costs recorded in either of fiscal 2021 or fiscal 2020.

 

Gain on change in fair value of consideration payable

 

Please refer to the results of operations for the fourth quarter of
fiscal 2021.

 

    xix

     

    

 

Tax

 

Taxable income is impacted by the intangible asset amortization arising
from the Star2Star acquisition which is not tax deductible. The deferred tax balance includes the amount of the expected tax benefit from
the remaining share distributions to Star2Star Holdings option holders which will change over time as the share price alters and is largely
offset by the corresponding change in contingent consideration noted above.

 

Net income (loss)

 

Net income for the year ended June 30, 2021 was $0.77 million
($0.004 income per share fully diluted) compared to net income of $3.90 million ($0.054 income per share fully diluted) for the equivalent
period ended June 30, 2020.

 

Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, gain on change in fair value of consideration payable, business integration and acquisition related expenses)

 

For the fiscal year ended June 30, 2021, Adjusted EBITDA at $32.29
million was 50% higher than the $21.56 million in the prior fiscal year, resulting from the inclusion of Star2Star for one quarter, the
underlying growth in the business, and the timing of the VI acquisition in fiscal 2020. Adjusted EBITDA as a percentage of revenue increased
by 3%, from 16% in fiscal 2020 to 19% in fiscal 2021.

 

	 	 	Twelve months ended	 
	$C Thousands	 	June 30, 2021	 	 	June 30, 2020	 
	Net income (loss)	 	 	767	 	 	 	3,905	 
	Tax	 	 	5,171	 	 	 	1,172	 
	Interest income	 	 	(49	)	 	 	(53	)
	Interest expense	 	 	2,466	 	 	 	2,531	 
	Share-based compensation	 	 	4,681	 	 	 	402	 
	Depreciation of property and equipment	 	 	1,127	 	 	 	701	 
	Depreciation of right-of-use assets	 	 	3,218	 	 	 	3,367	 
	Amortization of intangibles	 	 	15,183	 	 	 	6,948	 
	Business acquisition expense	 	 	4,890	 	 	 	2,582	 
	Gain on change in fair value of consideration payable	 	 	(5,165	)	 	 	-	 
	Adjusted EBITDA	 	 	32,289	 	 	 	21,555	 
	Percentage of revenue	 	 	19.3	%	 	 	16.4	%

 

The above table shows the reconciliation of net income to Adjusted
EBITDA which is a metric used by the Company to monitor its performance and the definition may be found in the section non-IFRS measures
above.

 

    xx

     

    

 

LIQUIDITY

 

As of June 30, 2021, Sangoma had current assets of $66.12 million,
current liabilities of $68.38 million, and closed the 2021 fiscal year with $27.39 million of cash.

 

Sangoma generated $24.66 million of Adjusted Cash Flow from operations
during the fiscal year ended June 30, 2021 compared to $15.01 million in the fiscal year ended June 30, 2020 with $9.55 million
coming from the fourth quarter inclusive of Star2Star.

 

	 	 	Three month periods ended	 	 	Twelve month periods ended	 
	 	 	June 30,	 	 	June 30,	 
	$ Thousands	 	2021	 	 	2020	 	 	2021	 	 	2020	 
	Net cash flows from operating activities	 	 	6,004	 	 	 	7,984	 	 	 	19,466	 	 	 	11,912	 
	Less capitalization of development costs	 	 	(583	)	 	 	(475	)	 	 	(2,108	)	 	 	(1,965	)
	Interest earned	 	 	16	 	 	 	(4	)	 	 	(49	)	 	 	(53	)
	Interest expense	 	 	1,053	 	 	 	695	 	 	 	2,466	 	 	 	2,531	 
	Business acquisition costs	 	 	3,063	 	 	 	(17	)	 	 	4,889	 	 	 	2,582	 
	Adjusted cash flow from operations	 	 	9,553	 	 	 	8,183	 	 	 	24,664	 	 	 	15,007	 

 

Accounts receivable of $18.26 million on June 30, 2021 were higher
than the 11.23 million in fiscal 2020 almost entirely as a result of the addition of the Star2Star business.

 

Inventories were $14.65 million on June 30, 2021, $2.01 million
higher than as at June 30 of the prior year, again due to inventory from the acquisition of Star2Star and because of the supply chain
pressures described earlier. Sangoma expects this slightly elevated inventory level for the next few quarters until the supply chain stabilizes.

 

Net cash flows used in investing activities were $136.26 million during
the fiscal year ended June 30, 2021 compared to $41.88 million during fiscal year ended June 30, 2020. The change is primarily
due to $132.74 million cash used in the purchase of Star2Star on March 31, 2021 whereas $39.29 million was used in acquisitions during
fiscal year ended June 30, 2020.

 

There are no existing or anticipated defaults or arrears on lease payments
or interest payments and Sangoma is in full compliance with all debt covenants. Management of the Company believes that the current working
capital and expected funds generated from operations will be sufficient to meet the operating and planned capital expenditures of the
Company for the foreseeable future.

 

CAPITAL RESOURCES

 

There are no material commitments for capital expenditures at this
time.

 

    xxi

     

    

 

CONTRACT LIABILITIES

 

The following table shows the movement in Contract Liabilities over
the last two years and the impact of the change in currency rates during the period.

 

	 	 	$	 
	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	 

 

USE OF PROCEEDS FROM EQUITY FINANCINGS

 

On July 16, 2019, the Company raised aggregate gross proceeds
of $23,012,075 in connection with a short-form bought deal prospectus offering of 14,846,500 common shares at a price of $1.55 per common
share, including 1,936,500 common shares issued upon the exercise in full of the overallotment option granted to the underwriters (the
 “2019 Offering”). On July 30, 2020, the Company raised aggregate gross proceeds of $80,513,800 in connection with
a bought deal equity offering of 35,006,000 common shares at a price of $2.30 per common share, including 4,566,000 common shares issued
upon the exercise in full of the overallotment option granted to the underwriters (the “2020 Offering” and together
with the 2019 Offering, the “Offerings”).

 

As described in the short form prospectus dated July 8, 2019 in
respect of the 2019 Offering, the Company intended to use the aggregate gross proceeds of the 2019 Offering for future acquisitions, debt
reduction and general corporate purposes, with substantially all net proceeds initially being allocated for future acquisitions (the “Acquisition
Funds”), provided that the Company may reallocate a portion of the Acquisition Funds primarily for the purpose of debt reduction
with the remainder for general corporate purposes. As described in the prospectus supplement dated July 24, 2020 in respect of the
2020 Offering, the Company intended to use the aggregate gross proceeds of the 2020 Offering for future acquisitions, with any unused
net proceeds to be used for working capital and other general corporate purposes, including to reduce debt.

 

    xxii

     

    

 

As of the date of this MD&A, there has not been, and the Company
does not anticipate, any changes to its previously made disclosure about the Company’s intended use of proceeds from the Offerings.

 

	 	 	Previously Disclosed	 	Actual Use of Proceeds and
	Offering	 	Proposed Use of Proceeds	 	Explanation of Variances
	Short form prospectus dated 

July 8, 2019	 	The Company intends to allocate the net proceeds from the Offering for future acquisitions, debt reduction and for general corporate purposes, with substantially all of the net proceeds initially being allocated for future acquisitions (the “Acquisition Funds”).	 	Substantially all of the proceeds were used in the Company’s acquisition of VoIP Innovations, LLC completed on October 18, 2019.
	 	 	 	 	 
	Prospectus Supplement dated July 24, 2020 to the Short Form Base Shelf Prospectus Dated June 29, 2020	 	The Company intends to use net proceeds of the Offering for future acquisitions, with any unused net proceeds to be used for working capital and other general corporate purposes, including to reduce debt. The Company will have discretion in the actual application of Net Proceeds.	 	Substantially all of the proceeds were used in the Company’s acquisition of StarBlue Inc. and its wholly-owned operating subsidiary Star2Star Communications, LLC completed on March 31, 2021.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

There are no off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future effect on the results of operations or financial condition of Sangoma.

 

RELATED PARTY TRANSACTIONS

 

Except as disclosed in the notes to the consolidated financial statements,
the Company is not party to any material transactions with related parties.

 

PROPOSED TRANSACTIONS

 

None.

 

    xxiii

     

    

 

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

 

The fair values of the cash and cash equivalents, trade receivables,
contract assets, other current assets, accounts payable, 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 loans at market rates.

 

OUTSTANDING SHARE DATA

 

As of September 29, 2021, there were 133,151,508 issued and outstanding
common shares of Sangoma, with a further 88,869,202 shares to be issued, and as of the same date there were outstanding options to acquire
10,523,708 common shares.

 

SIGNIFICANT EVENTS

 

COVID-19:

 

In December 2019, there was a global outbreak of COVID-19 (coronavirus),
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 pandemic
Sangoma 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 years 2020 and 2021.

 

As indicated in previous business updates, there continues to be uncertainty
regarding the full impact, duration and pace of recovery from the COVID-19 pandemic on Sangoma’s operations and markets. In addition
to the varying government responses in each of the countries that Sangoma operates in, there have been global electronic component supply
shortages with associated higher prices, longer lead times for the supply of both components and finished goods, delays in and increased
cost of shipping the company’s products to its warehouses and customers. Sangoma has responded though seeking to lock in component
supply for as far out as is possible but remains dependent on these components being delivered in the agreed quantities and timelines.
As a result Sangoma has needed to use more air freight than it normally would to get products into its warehouses in order to meet customer
demand.

 

Going forward, the COVID-19 pandemic’s impact on the continuing
recovery of the global economy; the Company’s manufacturing, labour and shipping costs; global exchange rates; Company’s customers’
business operations; the availability and costs of components required by the Corporation for the production of its products; the Company’s
manufacturers and supply chain delivering the required quantities of finished products on schedule; the continued ability for the Company’s
operations employees to work at the Company’s internal and outsourced facilities; and other employees being able to work from home
as required without any material impact on productivity remains uncertain.

 

    xxiv

     

    

 

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. 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).

 

POST REPORTING EVENTS

 

On July 16, 2021, Sangoma purchased certain assets, M2 Telecom
LLC for $2.52 million ($2.00 million US dollars). M2 was a channel partner for our wholesale TaaS business and Sangoma 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.

 

    xxv

     

    

 

GUIDANCE

 

2021 ACHIEVEMENTS AGAINST GUIDANCE

 

In its press release dated October 20, 2020, Sangoma published
initial guidance with respect to revenue and Adjusted EBITDA for fiscal year 2021, stating that revenue and Adjusted EBITDA were expected
to be between $143 and $147 million and $24 and $26 million, respectively. The material factors and assumptions used by management to
develop such guidance for fiscal year 2021 were:

 

		·	anticipated sales of products and services from its sales employees and channels including the projected softer demand in some of
its products from the impact of COVID-19;

		·	no material fluctuation to the then prevailing foreign currency exchange rate of approximately US$1:CDN$1.32;

		·	uninterrupted availability of components and manufacturing capability for building the Company’s products;

		·	the ability of the Company’s employees to work from home without any material impact on productivity; and

		·	the ability of the Company’s customers to continue their business operations without any material impact on their requirements
for the Company’s products and services.

 

In its press release dated May 20, 2021 and in its management
discussion and analysis for the three and nine months ended March 31, 2021, Sangoma increased its guidance for fiscal year 2021 to
approximately $166 million for revenue and approximately $30 million for Adjusted EBITDA. The material factors and assumptions used by
management to develop such updated guidance for fiscal year 2021 were:

 

		·	the inclusion of the Star2Star business from April 1, 2021 and such business continuing to operate and generate results in a
manner consistent with its business preceding the acquisition closing;

		·	no material fluctuation to the current foreign currency exchange rate of approximately US$1: CDN$1.21 for the remainder of fiscal
year 2021;

		·	no material escalation of the COVID-19 pandemic or resulting material and adverse impact on sales for the remainder of fiscal year
2021; and

		·	the re-stabilization, in all material respects, of the global supply chain on availability of, and pricing for, certain components
required by the Corporation for the remainder of fiscal year 2021 (including a temporary increase in investment into parts and finished
goods inventory to minimize the effect of component shortages where possible); and

		·	no material escalation in the cost to ship the Corporation’s products to its warehouses and to its customers during the remainder
of fiscal year 2021.

 

The Company provided a Business Update to investors on July 29,
2021 to indicate that revenue would be approximately $167 million (up from $166 million in the prior guidance of May 20), and Adjusted
EBITDA would exceed the $30 million we had previously indicated. Our actual results were consistent with this Business Update, with $167.3
million for revenue and $32.3 million for Adjusted EBITDA, respectively.

 

ADDITIONAL INFORMATION

 

Additional information relating to the Company is filed on SEDAR at
www.sedar.com.

 

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GLOSSARY OF TERMS

 

Analog

 

Analog telephony is the telephone system that dates back to the original
experiments by Alexander Graham Bell. The voice signal is picked up by a microphone and transmitted to the central office. Voice signals
from the central office consist of voltages that drive a headset to produce sound. Analog means that the voice pressure signals are represented
by voltages levels on the line.

 

API

 

Application Program Interface: An API is a purpose-built interface
that allows fourth party software to interact with a particular application. A typical API is the user interface for Windows that allow
programmers to write programs for Windows that use all its built-in utilities. APIs do not depend on revealing source code, in general.
They are usually well documented and include sample programs that make development easy.

 

Codec

 

In the telephony context a codec is a mechanism of digitally encoding
voice. On the PSTN a voice channel takes up 64kbps in a codec standard called G.711. Cell phones use a codec called GSM that compress
the voice further so that a GSM call consumes about 24kbps. Other compressed codecs are used in VoIP to conserve bandwidth. These include
standards such as G.729, G.723. Most audio codecs are lossy, in that some of the voice quality is degraded by the compression. On the
other hand, as bandwidth becomes cheaper, VoIP allows one to use other codecs that in fact use more bandwidth than the PSTN, the so-called
broadband codecs that have DVD-like voice quality.

 

Digital telephony

 

In the modern PSTN only the “last mile” line to the customer
is still analog, all other internal parts of the network are digital. Digital in this case means that at the central office the analog
signal from the subscriber’s telephone is sampled digitally, converting the line voltages to a series of numbers that can be easily
transmitted error free over long distances. See T1, E1 below.

 

Gateway

 

In the telephony context this is typically a separate unit with its
own case and power supply that provides VoIP-to-PSTN services for a VoIP network. Almost all gateway devices use SIP interfaces to the
VoIP system over Ethernet and have analog or digital telephony interfaces that connect to the PSTN. VoIP gateways are available from many
manufacturers including Audiocodes, Cisco, Grandstream, Patton Electronics and many others.

 

ISDN

 

Integrated Services Digital Network (“ISDN”) is a set of
communications standards for simultaneous digital transmission of voice, video, data, and other network services over the traditional
circuits of the public switched telephone network. Of the many variations of ISDN, Sangoma supports BRI (Basic Rate Interface) which is
essentially an all-digital replacement for ordinary analog lines and PRI (Primary Rate Interface) which is used over T1 and E1 lines.
BRI is very popular outside of North America. PRI is used worldwide.

 

IP

 

The Internet Protocol (“IP”) is the primary protocol in
the internet layer of the Internet protocol suite, and delivers data packets from the source host to the destination host solely based
on the IP address.

 

ISP

 

Internet Service Provider

 

ITSP

 

Internet Telephony Service Provider who offer telecommunications service
including voice over internet type connections.

 

IVR

 

Interactive Voice Response: IVR systems use the phone to navigate a
menu, for example those used by banks to allow access to customer’s account information. IVR systems have typically been driven
by dial tones as the buttons on your phone are pressed, but increasingly they are using voice recognition for navigation.

 

    xxvii

     

    

 

Open Source

 

Open Source software is distributed free subject to certain conditions.
Open Source licenses usually stipulate that source code must always be distributed or made available, and any improvements in the code
have to be donated back to the community. It is possible to have dual licensing: Open Source to the community and also a closed, commercial
license of the same or similar software.

 

NetBorder

 

This is the trade name of a Sangoma SIP to PSTN gateway product. It
includes several other functions in addition to the PSTN gateway function. The mass marketed version is known as NetBorder Express or
NBE.

 

PBX

 

Private branch exchange. A PBX is a premised basis device to deliver
calls from the PSTN or VOIP network to phones in a single or multiple locations.

 

PSTN

 

Public Switched Telephone Network: This is the standard telephone network
that has been in operation for many decades. A telephone or FAX or PBX or other telephony device is generally connected to an analog line
at a wall plug, which is connected by “last mile” cabling to the central office. The analog signal from the device is converted
to a digital signal at the Telco central office and is multiplexed, 24 simultaneous voice channels per line (in North America) onto a
T1 for onward transmission. At the other end of the line the digital channel is reconverted to analog for transmission over the “last
mile” to the receiving phone or other device.

 

SBC

 

A Session Border Controller (“SBC”) is a device deployed
in Voice over Internet Protocol (“VoIP”) networks to exert control over the signaling and usually also the media streams involved
in setting up, conducting, and tearing down telephone calls or other interactive media communications. SBCs are deployed as demarcation
points between enterprises and service providers and between service provider networks.

 

Signalling

 

Call setup and tear down is remarkably complicated, involving such
things as responding to the different tones as well as generating them, caller identification and handling the different features like
hook-flash and voicemail properly. There are different signalling mechanisms for different types of circuits. Analog circuits use tones
such as out-of-order, busy, ringing as well as the dialling tones. T1 lines often use a data protocol called ISDN PRI, where packets of
control data are exchanged on a separate data channel. ISDN PRI is a simplification of the general signalling protocol used internally
by the telecommunications networks known as SS7. In all cases signalling has to be exactly compatible with what the Telco expects, so
interoperability and standards are important.

 

SIP

 

Session Initiation Protocol: SIP is the emerging standard signalling
protocol for VoIP, though it has much broader applications. SIP is responsible for setting up and teardown of two party and multiparty
calls, as well as a host of management features. To a great and increasing extent, VoIP calls are SIP based. The term SIP Trunk is used
to describe the provision of a SIP line to an end customer.

 

T1, E1

 

A T1 line is a circuit that carries 24 digital telephone calls simultaneously.
At higher densities, 28 T1s are aggregated into a T3 line carrying 672 calls. Larger offices can also connect to the central office via
T1 directly, so as to have only one circuit for up to 24 calls. T1 is standard in North America and Japan while E1 is the standard in
the rest of the world. E1 carries 30 channels of digitized voice per line.

 

TDM

 

Time Division Multiplexing (“TDM”) is used in circuit switched
networks to increase the number of calls carried simultaneously on any one circuit and formed the basis for the digital telephony networks.

 

Unified Communications

 

Unified communications is a concept in which voice, email, messaging,
video and any other type of communication are all considered forms of data that can be combined, manipulated and used in intelligent applications
in a seamless way.

 

VoIP

 

Voice over IP: The transfer of voice traffic over the Internet Protocol.
IP is used universally for all networking including local area networks and private networks, not just the Internet. VoIP is not necessarily
voice over the Internet, but voice over general data networks.

 

    xxviii

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