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Published: 2021-05-20




			SANGOMA TECHNOLOGIES CORPORATION

Condensed consolidated interim financial statements for
the three and nine month periods ended March 31, 2021 and
		2020
				(Unaudited in Canadian Dollars)

					100 Renfrew Drive, Suite 100,
	Markham, Ontario,
	Canada L3R 9R6


Sangoma Technologies Corporation March 31, 2021 Table of contents Condensed consolidated interim statements of financial position ......................................................................... 3
Condensed consolidated interim statements of income (loss) and comprehensive loss....................................... 4
Condensed consolidated interim statements of changes in		shareholders’ equity ................................................ 5
Condensed consolidated interim statements of cash flows ................................................................................... 6
Notes to the condensed consolidated interim financial statements ................................................................. 7-28










	2


	Sangoma Technologies Corporation
	Condensed consolidated interim statements of financial positionAs at March 31, 2021 and June 30, 2020
	(Unaudited in Canadian dollars)
		March 31,	June 30,
				2021	2020
				$	$
	Assets
	Current assets
	Cash and cash equivalents (Note 13)	28,935,293				27,249,863
	Trade receivables (Note 13)	19,135,503				11,234,541
	Inventories (Note 4)	13,920,397				12,643,738
	Contract assets	2,919,327				1,082,051
	Other current assets	4,542,115				2,383,857
		69,452,635				54,594,050
	Non-current assets
	Property and equipment (Note 5)	9,883,505				3,001,687
	Right-of-use assets (Note 15)	17,016,825				16,178,520
	Intangible assets (Note 6)	238,851,697				50,206,378
	Development costs (Note 7)	2,418,651				2,452,718
	Deferred income tax assets (Note 10)			-		5,287,207
	Goodwill (Note 8)	330,442,788				44,012,418
	Contract assets - long term	4,774,950				-
		672,841,051				175,732,978
	Liabilities
	Current liabilities
	Accounts payable and accrued liabilities (Note 13)	24,199,874				14,185,737
	Provisions (Note 16)	564,800				662,942
	Sales tax payable	454,203				808,074
	Income tax payable	7,293,954				2,636,159
	Operating facility and loans - current (Note 9)	18,298,828				16,898,720
	Contract liabilities - current	15,732,328				10,772,900
	Derivative liability (Note 9)	466,567				797,380
	Lease obligations - current (Note 15)	2,881,984				2,951,616
		69,892,538				49,713,528
	Long term liabilities
	Operating facility and loans - long term (Note 9)	80,540,672				33,593,020
	Contract liabilities - long term	5,250,653				3,972,730
	Non-current lease obligations (Note 15)	14,827,161				13,671,174
	Deferred income tax liabilities (Note 10)	45,815,066				-
	Other non-current liabilities	1,163,608				-
		217,489,698				100,950,452
	Shareholders’ equity
	Share capital	210,580,558				64,628,552
	Reserve for common shares related to acquisition	241,568,231				-
	Contributed surplus	3,530,908				2,437,227
	Accumulated other comprehensive loss	(11,070,305)				(691,896)
	Retained earnings	10,741,961				8,408,643
		455,351,353				74,782,526
		672,841,051				175,732,978
	Approved by the Board
	(Signed)						Al Guarino Director
	(Signed) Allan Brett Director

	The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3



Sangoma Technologies Corporation
Condensed consolidated interim statements of income (loss)and comprehensive income (loss)
For the three and nine month periods ended March 31, 2021 and 2020
(Unaudited in Canadian dollars)
					Three month periods ended				Nine month periods ended
		March 31,					March 31,
		2021				2020	2021	2020
		$				$	$	$
Revenue (Note 17)					35,437,620				36,310,054		105,794,450		96,601,677
Cost of sales					12,194,324				12,842,836		35,914,785		34,329,928
Gross profit					23,243,296				23,467,218		69,879,665		62,271,749
Expenses
Sales and marketing											5,689,388				5,670,595		16,128,878		16,012,750
Research and development											6,530,938				6,606,189		18,037,584		17,810,537
General and administration											7,950,608				8,026,785		25,352,091		21,252,521
Foreign currency exchange (gain) loss		(31,394)				(208,848)			(57,971)			66,120
					20,139,540				20,094,721		59,460,582		55,141,928
Income before interest, income taxes,
business acquisition costs											3,103,756				3,372,497		10,419,083		7,129,821
Interest income (Note 13)		(44,646)				(5,664)			(65,266)			(49,131)
Interest expense (Notes 9, 13, 15)		387,539				625,645			1,412,502		1,836,087
Business acquisition costs (Note 18)											4,744,591		-			4,744,591		2,599,067
											5,087,484		619,981			6,091,827		4,386,023
Income (loss) before income tax					(1,983,728)				2,752,516		4,327,256		2,743,798
Provision for income taxes
Current (Note 10)		564,634						1,771,590		2,466,793		1,983,193
Deferred (Note 10)											(180,829)		(717,561)			(472,855)			(513,384)
Net income (loss)					(2,367,533)				1,698,487		2,333,318		1,273,989
Other comprehensive lossItems to be reclassified to net income
Change in fair value of interest rate
			swaps, net of tax (Note 9)	161,457				(772,181)			330,813			(772,181)
Foreign currency translation loss					(1,688,922)				1,206,158		(10,709,222)		1,021,253
Comprehensive loss					(3,894,998)				2,132,464		(8,045,091)		1,523,061
Earnings per share
Basic (Note 11(iii))		(0.021)			$	0.023		$	0.022		$	0.018						$
Diluted (Note 11(iii))		(0.021)			$	0.022		$	0.021		$	0.017						$
Weighted average number
of shares outstanding (Note 11(iii))Basic
					111,380,706				73,560,226		107,391,290		70,435,148
Diluted					113,626,725				76,965,199		109,193,373		73,653,844


			The accompanying notes are an integral part of these condensed consolidated interim financial statements.
	4


			Sangoma Technologies Corporation
			Condensed consolidated statements of changes in shareholders' equity For the nine month periods ended March 31, 2021 and 2020
			(Unaudited in Canadian dollars)
				Number of	Share	Accumulated other	Total
				common	Share			capital			Contributed	comprehensive		Retained	shareholders'
				shares	capital			reserve			surplus	(loss) income		earnings	equity
$					$	$		$	$	$
			Balance, June 30, 2019	52,962,090						34,889,816		-					2,514,154				(54,169)				4,479,665		41,829,466
			Net loss									-	-								-							-			-				1,273,989			1,273,989
			Foreign currency translational gain (loss)									-	-								-							-						1,021,253				-			1,021,253
			Change in fair value of interest rate swaps,
			net of tax (Note 9)									-	-								-							-						(772,181)				-			(772,181)
			Common shares issued
			through business combination (Note 11(i))	5,500,417						6,553,938		-				-			-		-			6,553,938
			Common shares issued
			through short form prospectus (Note 11(i))	14,846,500						21,319,720		-				-			-		-			21,319,720
			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))	399,071						250,394		-					(86,525)			-		-			163,869
			Common shares issued
			for broker warrants exercised (Note 11(i))	61,957						61,957									-						-				-		-			61,957
			Share-based compensation expense (Note 11(ii))									-	-								-									326,181		-				-			326,181
			Balance, March 31, 2020	73,748,362						63,051,463		-					2,753,810				194,903				5,778,016		71,778,192
			Balance, June 30, 2020	76,087,735						64,628,552		-					2,437,227				(691,896)				8,408,643		74,782,526
			Net income									-	-								-							-			-				2,333,318			2,333,318
			Foreign currency translational gain (loss)									-	-								-							-						(10,709,222)				-			(10,709,222)
			Change in fair value of interest rate swaps,
			net of tax (Note 9)									-	-								-							-						330,813				-			330,813
			Common shares reserved for issuance
			related to business combination (Note 18)									-	-										241,568,231							-			-				-			241,568,231
			Common shares issued
			for transaction cost payment (Note 11(i))	129,198						415,568		-				-			-		-			415,568
			Common shares issued
			through business combination (Note 11(i))	21,130,798						70,039,203		-				-			-		-			70,039,203
			Common shares issued through short-form
			bought deal prospectus offering, net of costs (Note 11(i))	35,006,000						75,283,264		-				-			-		-			75,283,264
			Common shares issued
			for options exercised (Note 11(i))	427,253						213,971		-					(73,268)			-		-			140,703
			Share-based compensation expense (Note 11(ii))									-	-								-									1,166,949		-				-			1,166,949
			Balance, March 31, 2021	132,780,984						210,580,558			241,568,231					3,530,908					(11,070,305)			10,741,961			455,351,353

		The accompanying notes are an integral part of these condensed consolidated interim financial statements.
	5


	Sangoma Technologies Corporation
	Condensed consolidated interim statements of cash flowsFor the nine month periods ended March 31, 2021 and 2020
	(Unaudited in Canadian dollars)
			Nine month periods ended
				March 31,
		2021	2020
		$	$
	Operating activities
	Net income		2,333,318		1,273,989
	Adjustments for:
	Depreciation of property and equipment (Note 5)	591,618			490,898
	Depreciation of right-of-use assets (Note 15)		2,295,490		2,378,746
	Amortization of intangible assets (Note 6)		5,720,414		5,045,327
	Amortization of development costs (Note 7)		1,360,309		1,083,910
	Income tax expense (Note 10)		1,993,938		(513,384)
	Income tax paid		(1,506,401)		(149,953)
	Share-based compensation expense (Note 11(ii))		1,166,949		326,181
	Interest on obligation on right-of-use assets (Note 15)	328,827			317,919
	Unrealized foreign exchange gain	(57,970)			(2,340,374)
	Gain on terminated leases	(10,033)			-
	Changes in working capital
	Trade receivables		(1,660,923)		793,894
	Inventories	(456,280)			(2,183,571)
	Contract assets	(342,571)			(38,875)
	Other current assets	(471,341)			(336,715)
	Sales tax payable	(301,399)			(1,149,782)
	Accounts payable and accrued liabilities		2,076,571		(1,819,375)
	Provisions	(48,523)			(5,842)
	Income tax payable		1,290,508		1,686,134
	Contract liabilities	(840,998)			(930,771)
	Net cash flows from operating activities		13,461,503		3,928,356
	Investing activities
	Purchase of property and equipment (Note 5)	(440,542)			(458,301)
	Development costs (Note 7)		(1,524,695)		(1,489,759)
	Business combinations, net of cash and cash
	equivalents acquired (Note 18)		(129,107,146)		(39,480,425)
	Net cash flows used in investing activities		(131,072,383)		(41,428,485)
	Financing activities
	Proceeds from operating facility and loan (Note 9)		66,018,750		45,699,360
	Repayments of operating facility and loan (Note 9)		(14,339,760)		(26,838,943)
	Repayment of right-of-use lease obligation (Note 15)		(1,737,414)		(2,239,033)
	Issuance of common shares through
	short-form bought deal prospectus offering, 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))	140,703			163,869
	Net cash flows from financing activities		125,365,543		38,166,930

	Effect of foreign exchange rate changes on cash and cash equivalents		(6,069,233)		156,098
	Increase in cash and cash equivalents		1,685,430		822,899
	Cash and cash equivalents, beginning of the period		27,249,863		11,724,844
	Cash and cash equivalents, end of the period		28,935,293		12,547,743

	The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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
		Statement of compliance and basis of presentation

		The accompanying condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting. The condensed consolidated interim financial statements do not include all the information required for annual consolidated financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2020.
		These condensed consolidated interim financial statements were, at the recommendation of the audit committee, approved and authorized for issuance by the Company’s Board of Directors on May 20, 2021.
		These condensed consolidated interim 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:
		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.
3.		Significant accounting judgments, estimates and uncertainties
		These unaudited condensed consolidated interim 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 and which are available at www.sedar.com. They were prepared using the same critical estimates and judgments in applying the accounting policies as those of the audited consolidated financial statements for the year ended June 30, 2020.



	7

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


4.		Inventories
		Inventories recognized in the condensed consolidated interim statements of financial position are comprised of:

			March 31,	June 30,
					2021	2020
					$	$
		Finished goods	9,064,463				8,381,484
		Parts	5,145,255				4,604,963
			14,209,718				12,986,447
		Provision for obsolescence	(289,321)				(342,709)
		Net inventory carrying value	13,920,397				12,643,738

		The acquisition of Star2Star added $1,812,415 to March 31, 2021 inventories.

	8

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


5.				Property and equipment

	Office furniture						Stockroom
	and computer					Software	and production	Tradeshow	Leasehold
					equipment	and 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 18)		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 18)		600,530						506,451		6,127,559			-				-		7,234,540
Additions		289,476											5,017								146,049		-					-		440,542
Effects of movements in exchange rates		(209,498)						(43,464)									(136,319)					(4,971)							(33,884)		(428,136)
Balance at March 31, 2021					3,391,848						1,030,521		7,901,543						59,367					404,647									12,787,926
Accumulated depreciationBalance 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		283,371															89,939								181,334							1,521						35,453	591,618
Effects of movements in exchange rates		(119,942)						(28,047)									(61,149)					(4,126)							(13,226)		(226,490)
Balance at March 31, 2021					1,525,853						366,047									791,238					50,630							170,653		2,904,421
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 March 31, 2021					1,865,995						664,474		7,110,305						8,737					233,994		9,883,505

Depreciation expense is included in general and administration expense in the condensed consolidated interim statements of income (loss) and comprehensive loss. For the three and nine month periods ended March 31, 2021, depreciation expenses were $191,240 and $591,618 (three and nine month periods ended March 31, 2020 - $199,032 and $490,898).
			9

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


		6.	Intangible assets
				Other
					Copyright	Purchased				Customer	purchased
					to software	technology						Website	relationships			Brand intangibles*	Total
								$	$	$	$	$	$	$
		CostBalance 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 18)						-		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 18)						-							-								-			-				-		198,056,250		198,056,250
		Effects of movements on exchange rates			(227,820)		(897,489)							(18,290)		(3,143,786)			(714,705)			(289,371)						(5,291,461)
		Balance at March 31, 2021			2,720,641		10,717,879							218,415		37,543,314			8,535,051			201,511,944					261,247,244
		Accumulated amortizationBalance 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						-		1,128,886											-	3,241,542		667,956		682,030							5,720,414
		Effects of movements on exchange rates			(227,820)		(357,229)							(18,290)		(681,196)			(172,424)			(143,985)						(1,600,944)
		Balance at March 31, 2021			2,720,641		4,907,299							218,415		9,969,488			2,470,301			2,109,403						22,395,547
		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 March 31, 2021						-		5,810,580											-	27,573,826		6,064,750		199,402,541					238,851,697
		* Other purchase intangibles include no n-co mpete agreements and backlo g.
		Amortization expense is included in general and administration expense in the condensed consolidated interim statements of income (loss) and comprehensive loss. For the three and nine month periods ended March 31, 2021, amortization expenses were $1,861,497 and $5,720,414 (three and nine month periods ended March 31, 2020 - $2,039,020 and $5,045,327).
	10

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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	1,524,695
		Effects of movements in exchange rates	(1,862,918)
		Balance at March 31, 2021	23,217,191
		Accumulated amortization
		Balance at June 30, 2019	(19,602,943)
		Amortization	(1,499,753)
		Balance at June 30, 2020	(21,102,696)
		Amortization	(1,360,309)
		Effects of movements in exchange rates	1,664,465
		Balance at March 31, 2021	(20,798,540)
				March 31, 2021	June 30, 2020
					$	$
		Net capitalized development costs				2,418,651	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 $6,070,207 and $16,678,044 of engineering expenditures as an expense during the three and nine month periods ended March 31, 2021 (three month and nine month periods ended March 31, 2020 - $6,242,454 and $16,726,627).
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 18)	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 18)	289,831,095
		Effect of movements in exchange rates	(3,400,725)
		Balance at March 31, 2021	330,442,788

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

	11

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


9.			Operating facility and loan and derivative liability
			(a) Operating facility and loans

			(i)	The Company entered into a 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 March 31, 2021 is $32,820,750 ($26,100,000 USD) (June 30, 2020
		–
				$41,497,260 ($30,450,000 USD)). As at March 31, 2021, term loan facility balance of $7,293,500 (June 30, 2020 - $7,904,240) is classified as current and $25,527,250 (June 30, 2020 - $33,593,020) as long-term in the condensed consolidated interim statements of financial position.
			(ii)	The Company also has revolving credit facilities which includes 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.
			(iii)	On March 31, 2021, the Company amended its term loan facility with its lender 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 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 $1,5000,000.
	• The revolver facility was converted from CAD $8,000,000 to USD $6,000,000. • The debt to equity ratio calculation now allows Sangoma 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 $2,187,938 USD and is renewable as at September 30, 2024. As at March 31, 2021, the incremental facility is classified as $11,005,328 ($8,751,752 USD) current and $55,013,422 ($43,748,248 USD) long-term in the condensed consolidated interim statements of financial position.
		12

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


9.		Operating facility and loan and derivative liability (continued)
		For the three and nine month periods ended March 31, 2021, the Company incurred interest costs to service the borrowing facilities in the amount of $287,714 and $1,083,675 (three and nine month periods ended March 31, 2020 - $517,017 and $1,518,168). During the nine month period ended March 31, 2021, the Company borrowed $66,018,750 (nine month period ended March 31, 2020 - $45,699,360) in operating facility and loans and repaid $14,339,760 (nine month period ended March 31, 2020 - $26,838,943). 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 March 31, 2021 and June 30, 2020, the Company was in compliance with all covenants related to its credit agreements. (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 condensed consolidated interim 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 loss, net of tax in the condensed consolidated interim 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 March 31, 2021, the notional amount of the interest rate swap was $13,617,392 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 March 31, 2021, the fair value of the interest rate swap liability was valued at $466,567 (June 30, 2020 - $797,380) and was recorded as derivative liability in the condensed consolidated interim statements of financial position. For the three and nine month periods ended March 31, 2021, the changes in fair value of the interest rate swaps, net of tax, in the amounts of $161,457 and $330,813 (three and nine month periods ended March 31, 2020 was $772,181 and $772,181) are recorded in other comprehensive loss in the condensed consolidated interim statements of income (loss) and comprehensive 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.


	13

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


10.		Income tax
		The Company income tax expense is determined as follows:
							Three month periods		Nine month periods
			ended March 31,		ended March 31,
			2021	2020	2021	2020
		Statutory income tax rate	26.30%	26.50%	26.30%	26.50%
			$	$	$	$
		Net income (loss) before income taxes					(1,983,728)		2,752,516		4,327,256		2,473,756
		Expected income tax expense (recovery)	(523,023)					789,764					1,140,920	727,095
		Tax rate changes and other adjustments	33,478					59,140					30,770		76,300
		Share based compensation and non-deductible expenses	302,910					66,860					302,910		199,670
		Business acquisition costs	571,198					74,821					571,198		403,300
		Difference in foreign tax rates	(758)					-					(51,860)		-
		Currency translation adjustment and other adjustments	-					63,444					-		63,444
		Income tax expense	383,805					1,054,029		1,993,938		1,469,809
		The Company's income tax expense	$	$	$	$
		is allocated as follows:
		Current tax expense	564,634					1,771,590		2,466,793		1,983,193
		Deferred income tax recovery	(180,829)					(717,561)					(472,855)		(513,384)
		Income tax expense	383,805					1,054,029		1,993,938		1,469,809

		The following table summarizes the components of deferred tax assets:
				March 31,		June 30,
									2021	2020
					$	$
		Deferred income tax assets (liabilities)
		Non-deductible reserves - Canadian		110,810			106,857
		Non-deductible reserves - USA		3,015,310			2,568,308
		SR&ED investment tax credits, net of 12(1)(x)		1,988,790			1,988,657
		Property and equipment - Canadian		(238,630)			(310,810)
		Property and equipment - USA		(2,376,170)			(679,817)
		Deferred development costs		(1,001,980)		(1,001,984)
		Intangible assets including goodwill - Canadian		(98,230)			(89,607)
		Intangible assets including goodwill - USA		(52,330,570)		(3,812,802)
		Non-capital losses carried forward - USA		4,255,300			5,551,484
		Capital losses carried forward and other - Canadian							4,370			370,626
		Non-capital losses carried forward - Canadian			-			127,473
		Right of use assets net of obligations - Canadian		37,070			7,833
		Right of use assets net of obligations - USA		138,880			103,662
		Share issuance costs - Canadian		342,154			357,327
		Other - USA		337,830		-
		Net deferred income tax assets (liabilities)		(45,815,066)			5,287,207

	14

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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:
				March 31,	June 30,
						2021	2020
						$	$
		Balance at the beginning of the period		5,287,207		4,176,043
		Recognized in profit/loss		472,855		479,929
		Recognized in goodwill		(51,319,548)		-
		Recognized in equity		60,980		432,590
		Other foreign exchange movement		(316,560)		198,645
		Balance at the end of the period		(45,815,066)		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:
							March 31, 2021
	$
		Share issuance cost - Canada			4,915,203
		Non-capital losses carried forward- Canadian			546,134

		The Company has deducted available
			scientific research and experimental development (“SR&ED”) for
		federal and provincial purposes and unutilized SR&ED tax credits. These condensed consolidated interim 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						Federal tax credits	Ontario tax credits
		expiration							carry forward	carry forward
				$	$
		2033							317,501		-
		2034							347,033		-
		2035							288,821		-
		2036							334,585		12,036
		2037							300,386		68,347
		2038							227,599		50,686
		2039							325,909		54,213
		2040							334,069		50,401
									2,475,903		235,683

		The income tax benefit of eligible SR&ED costs incurred in prior years but not utilized have been taken into account in these condensed consolidated interim financial statements.
	15

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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 March 31, 2021
				, the Company’s issued and outstanding common shares consist of the
		following:
								Three month periods	Nine month periods
								ended March 31,	ended March 31,
					2021	2020	2021	2020
					#	#	#	#
		Shares issued and outstanding:Outstanding, beginning of the period
								111,359,288		73,499,920				76,087,735		52,962,090
		Shares issued for business combinations (Note 18)						21,130,798		-				21,130,798		5,500,417
		Shares issued for acquisition costs (Note 18)						129,198		-		129,198			-
		Shares issued through short-form bought deal prospectus offering			-				-				35,006,000		14,846,500
		Shares returned from escrow			-				(21,673)		-			(21,673)
		Shares issued upon exercise of options						161,700		270,115		427,253			399,071
		Shares issued upon exercise of broker warrants			-				-		-			61,957
		Shares issued and outstanding, end of the period						132,780,984	73,748,362			132,780,984		73,748,362
		On March 31, 2021, the Company acquired StarBlue Inc. and issued 21,130,798 shares as part of the consideration, and 129,198 shares as part of the acquisition costs (Note 18). Under the terms of the agreement a further 88,869,202 shares will be issued in instalments over the fourteen quarters commencing on April 1, 2022 which would bring the total shares to 221,650,186. The $241,568,231 discounted value of the 88,869,202 shares not yet issued is shown in the Reserve for common shares related to acquisition. On July 30, 2020, the Company closed its short-form bought deal 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 sold pursuant to 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. The Company intends to use the net proceeds of the offering to fund any future acquisitions, for debt repayment, and for general corporate purposes. On October 18, 2019, the Company acquired VoIP Innovations LLC and issued 5,500,417 shares as part of the consideration (Note 18).

		On July 16, 2019, the Company closed a short-form bought deal 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 three month and nine month periods ended March 31, 2021, a total of 161,700 and 427,253 (three month and nine month periods ended March 31, 2020
					– 270,115 and 399,071) options were
		exercised for cash consideration of $56,739 and $140,703 (three month and nine month periods ended March 31, 2020 - $101,494 and $163,869), and the Company recorded a charge of $26,654 and $73,268 (three month and nine month periods ended March 31, 2020
					– $68,391 and $86,525) from contributed
		surplus to share capital. During the three month and nine month periods ended March 31, 2020, a total of nil and 61,957 broker warrants were exercised for cash consideration of $nil and $61,957 and the Company recorded a charge of $nil and $29,348 from warrant reserve to share capital. As at March 31, 2021, no broker warrants were outstanding (June 30, 2020 - $nil).


	16

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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
			Exercised		(399,071)				(0.41)
			Expired		(192,760)				(0.82)
		Balance, March 31,2020			4,647,511				0.59
		Balance, June 30, 2020			4,498,203				1.55
			Granted		5,700,000				4.90
			Exercised		(427,253)				(0.33)
			Expired		(24,002)				(1.50)
			Forfeited		(258,886)				(2.00)
		Balance, March 31, 2021			9,488,062				3.61

		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.
	17

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


11.			Shareh	olders’ 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.
					March 31,	June 30,
							2021	2020
			Share price		$4.90	$2.20
			Exercise price		$4.90	$2.20
			Expected volatility		65.58%	61.96%
			Expected option life		4 years	5 years
			Risk-free interest rate		0.33%	0.39%
			The following table summarizes information about the stock options outstanding and exercisable at the end of each period:
									March 31, 2021	March 31,2020
								Number of stock		Weighted	Number of stock
											Weighted average
									options	average	options
				Exercise price		remaining
								outstanding and		remaining	outstanding and
											contractual life
								exercisable	contractual life					exercisable

				$0.26 - $0.50					308,028					0.23	2,382,409							0.73
				$0.51 - $0.75					159,789					1.75						206,897							2.75
				$1.01 - $1.25					393,496					2.74						303,567							3.74
				$1.51 - $1.75					48,830					3.17							-						-
									910,143					1.74	2,892,873							1.19

			For the three month and nine month periods ended March 31, 2021, the Company recognized share-based compensation expense in the amount of $786,849 and $1,166,949 (three month and nine month periods ended March 31, 2020 - $45,898 and $326,181).

			(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.
							Nine month periods	Three month periods
	ended March 31,						ended March 31,
										2021			2020	2021	2020
			Number of shares:Weighted average number of shares
	111,380,706											73,560,226		107,391,290	70,435,148
			used in basic earnings per share
			Shares deemed to be issued	2,246,019												3,404,973		1,802,083	3,218,696
			in respect of options and warrants
			Weighted average number of shares	113,626,725												76,965,199	109,193,373	73,653,844
			used in diluted earnings per share
			Net income (loss) for the year	($2,367,533)												$1,698,487	$2,333,318	$1,273,989
			Earnings per share:Basic earnings per share
										(0.021)	$											0.023	$	0.022	$	0.018		$
			Diluted earings per share							(0.021)	$											0.022	$	0.021	$	0.017		$

		18

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited 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:
					March 31,	June 30,
							2021	2020
							$	$
			Accounts payable and accrued liabilities		10,000		5,000

13.			Financial instruments
			The fair values of the cash and cash equivalents, trade receivables, contract assets, accounts payable and accrued liabilities, and derivative liability approximate their carrying values due to the relatively short-term nature of these financial instruments and 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:
					March 31,	June 30,
							2021	2020
							$	$
			Cash at bank and on hand		28,935,293		27,249,863
					28,935,293		27,249,863


			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. On December 1, 2020, the Company invested $56,000,000 USD in a term deposit for a period of 91 days at the rate of 0.29% which matured on March 3, 2021(June 30, 2020 - $nil).
			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:
	Three month periods						Nine month periods
	ended March 31,						ended March 31,
									2021	2020			2021	2020
									$	$	$	$
			Interest income	(44,646)						(5,664)					(65,266)		(49,131)
			Interest expense (Notes 9, 15)	387,539										625,645		1,412,502		1,836,087
			Net interest expense	342,893										619,981		1,347,235		1,786,956


		19

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


13.		Financial instruments (continued)
		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:
				March 31,	June 30,
						2021	2020
						$	$
		Trade receivables aging:
		0-30 days		15,299,212		9,312,820
		31-90 days		3,908,771		1,838,303
		Greater than 90 days		1,203,234		671,596
				20,411,217		11,822,719
		Expected credit loss provision		(1,275,715)		(588,178)
				19,135,503		11,234,541

		* The inclusion of Star2Star added $7,163,020 of receivables in the quarter.

		The movement in the provision for expected credit losses can be reconciled as follows:
				March 31,	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 period		(687,537)		(300,806)
		Expected credit loss provision, ending balance		(1,275,715)		(588,178)

		*Net change includes credit loss provision of $563,274 of Star2Star
		.
		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.








	20

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


13.		Financial instruments (continued)
										March 31, 2021
				Up to 30	Over 30	Over 90
			Total	days past	days past	days past
				due	due	due
		Default rates		2.25%	11.36%	40.49%
		Trade receivables					$	20,411,217				$ 15,299,212		3,908,771	1,203,234
		Expected credit loss provision					$	1,275,715				$	344,485			$	443,987		$	487,243
										June 30, 2020
				Up to 30	Over 30	Over 90
			Total	days past	days past	days past
				due	due	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. Maturity analysis of liabilities which are due in next twelve months can be summarized as follows:
									March 31,	June 30,
					2021	2020
					$	$
		Accounts payable and accrued liabilities							24,199,874		14,185,737
		Operating facility and loans							18,298,828		16,898,720
		Lease obligations on right-of-use assets							2,881,984		2,951,616
									45,380,686		34,036,073

		Foreign currency risk
		A p	ortion of the Company’s transactions occur in a foreign currency (Canadian dollars (CAD), Euro (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 March 31, 2021, a 10% depreciation or appreciation of the CAD, EUR, and GBP against the U.S. dollar would have resulted in an approximate $78,456 (March 31, 2020 - $63,722) increase or decrease, respectively, in total comprehensive loss.

	21

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


13.		Financial instruments (continued)
		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 March 31, 2021, a change in the interest rate of 1% per annum would have an impact of approximately $824,291 (March 31, 2020 - $205,712) 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 $466,567 on March 31, 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 the Company is not subject to any capital requirements imposed by external parties.
	22

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


15.		Leases: Right-of-use assets and lease obligations
		The Company’s lease liabilities and right-of-use assets are presented below:

			Right-of-use assets
	$
		Present value of leasesBalance at June 30, 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		1,196,170
		Addition through business combination		3,507,844
		Terminations		(1,038,970)
		Effects of movements on exchange rates		(1,579,053)
		Balance at March 31, 2021		21,646,394
		Accumulated depreciation and repaymentsBalance at June 30, 2019
	-
		Depreciation expense		3,366,767
		Effects of movements on exchange rates		15,116
		Balance at June 30, 2020		3,381,883
		Depreciation expense		2,295,490
		Terminations		(705,823)
		Effects of movements on exchange rates		(341,981)
		Balance at March 31, 2021		4,629,569
		Net book value as at:June 30, 2020
				16,178,520
		March 31, 2021		17,016,825


	23

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


15.			Leases: Right-of-use assets and lease obligations (continued)
					Lease Obligations
		$
			Present value of leases
			Balance at June 30, 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			1,196,170
			Addition through business combination			3,507,844
			Repayments			(1,737,414)
			Interest expense			328,827
			Terminations			(343,180)
			Effects of movements on exchange rates			(1,865,892)
			Balance at March 31, 2021			17,709,145
			Lease Obligations - Current			2,881,984
			Lease Obligations - Non-current			14,827,161
						17,709,145
			(1) Includes the impact o f reco gnitio n exemptio ns including tho se fo r sho rt-term and lo w-do llar value leases; includes the impact o f judgment applied with regard to renewal o ptio ns in the lease terms in which the Co mpany is a lessee.
			(2) Right-o f-use assets o pening balance includes the impact o f estimated resto ratio n co sts.
			(3) A dditio n thro ugh business co mbinatio n represents the Right-o f-use asset and leased o bligatio n o f the leased o ffice building o f Star2Star that was acquired o n M arch 31, 2021.

16.			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	17,919							37,684	(153,744)	(98,142)
			Balance at March 31, 2021	232,076							132,141	200,584	564,800

			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.
		24

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


17.			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: United States of America (“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 for the three and nine month periods ended March 31, 2021 and 2020 as follows:
	Three month periods				Nine month periods
	ended March 31,				ended March 31,
	2021			2020	2021	2020
						$	$	$	$
			Products	15,404,091								17,472,575	46,111,185	50,778,389
			Services	20,033,529								18,837,479	59,683,265	45,823,288
			Total revenues	35,437,620								36,310,054	105,794,450	96,601,677
			The sales, in Canadian dollars, in each of these geographic locations for the three and nine month periods ended March 31, 2021 and 2020 as follows:
	Three month periods				Nine month periods
	ended March 31,				ended March 31,
	2021			2020	2021	2020
						$	$	$	$
			USA	28,594,831								28,489,278	85,154,522	74,735,769
			Canada	978,229								952,098			3,493,947	3,415,038
			All other countries	5,864,560								6,868,678	17,145,981	18,450,870
			Total revenues	35,437,620								36,310,054	105,794,450	96,601,677

			The non-current assets, in Canadian dollars, in each of the geographic locations as at March 31, 2021 and June 30, 2020 are below:
				March 31, 2021						June 30, 2020
					$	$
			Canada	6,535,597							7,516,113
			USA	596,852,819							113,622,815
			Total non-current assets	603,388,416							121,138,928

		25

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


18.		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. Post closing the working capital adjustment was finalized 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 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 was expensed and included in the consolidated statements of income and comprehensive income 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 for further payment by the Company to the Universal Service Fund (“USF”). This was the last payment outstanding and was made in full and final settlement of all amounts due as at December 31, 2019. The remaining USF escrow amount was released to the sellers and the escrow account closed.
			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




	26

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


18.		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 of 110,000,000 common shares at a discounted value of $311,607,434 ($247,799,152 USD), and paid cash consideration of CAD$133,923,456 (US$106,499,767, adjusted from US$105,000,000 as a result of initial closing adjustments). Share Consideration of 22,000,000 shares (less 869,202 shares representing a holdback for indemnification purposes) were issued on closing of the acquisition, with the remaining shares to be issued and distributed in quarterly installments commencing on April 1, 2022.

			The estimated purchase price allocation below remains subject to an independent valuation and audit of the initial balance sheet of Star2Star.
			Consideration	USD	CAD
			Cash consideration on closing		101,010,064		127,020,156
			Net working capital adjustment		248,386		312,345
			Cash held in escrow for working capital		987,877		1,242,255
			Cash held in escrow for PPP loan forgiveness		4,253,440		5,348,700
			Common shares issued on closing		55,697,179		70,039,203
			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
					354,298,919		445,530,890



	27

Sangoma Technologies Corporation Notes to the condensed consolidated interim financial statements For the three and nine month periods ended March 31, 2021 and 2020 (Unaudited in Canadian dollars)


18.		Business combinations (continued)

			Purchase price allocation	USD	CAD
			Cash		3,830,067		4,816,310
			Accounts receivable		5,696,238		7,163,020
			Inventory		1,441,284		1,812,414
			Contract assets		5,061,304		6,364,590
			Property and equipment		5,753,114		7,234,540
			Other current assets		1,500,355		1,886,695
			Accounts payable and accrued liabilities		(5,741,321)		(7,219,711)
			Income tax payable		(2,873,010)		(3,612,810)
			Contract Liabilities		(6,612,484)		(8,315,199)
			Other liabilities	(925,334)		(1,163,607)
			Intangible assets		157,500,000		198,056,250
			Deferred tax liability on intangible		(40,813,278)		(51,322,697)
			Goodwill		230,481,984		289,831,095
					354,298,919		445,530,890

			The Company incurred estimated transaction costs in the amount of $4,744,591 which was expensed and included in the consolidated statements of income and comprehensive income of the three and nine month periods ended March 31, 2021. These costs are including 129,198 shares issued at closing to an advisor. The acquisition has been accounted for using the acquisition method under IFRS 3, Business Combinations.

19.		Authorization of the condensed consolidated interim financial statements
		The condensed consolidated interim financial statements were authorized for issuance by the Board of Directors on May 20, 2021.

	28