SANGOMA TECHNOLOGIES CORPORATION
Consolidated financial statements for the
years ended June 30, 2023 and 2022
(in thousands of US dollars)
100 Renfrew Drive, Suite 100,
Markham, Ontario,
Canada L3R 9R6
1
Sangoma Technologies Corporation
June 30, 2023 and 2022
Table of contents
Independent auditor’s report
Consolidated statements of financial position
Consolidated statements of loss and comprehensive loss
Consolidated statements of changes in shareholders’ equity
Consolidated statements of cash flows
Notes to the consolidated financial statements
3
10
11
12
13
14-51
2
Report of Independent Registered Public Accounting Firm
KPMG LLP
Vaughan Metropolitan Centre
100 New Park Place, Suite 1400
Vaughan ON L4K 0J3
Canada
Tel 905-265-5900
Fax 905-265-6390
To the Shareholders and Board of Directors of Sangoma Technologies Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of financial position of Sangoma Technologies
Corporation (the "Company") as of June 30, 2023, the related consolidated statements of loss and comprehensive
loss, changes in shareholders' equity, and cash flows for the year ended June 30, 2023, and the related notes
(collectively, the "consolidated financial statements"). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of June 30, 2023 and the results of its
operations and its cash flows for the year ended June 30, 2023, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board ("PCAOB") and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audit provides a reasonable basis for our opinion.
3
Page 2
Chartered Professional Accountants, Licensed Public Accountants
We have served as the Company's auditor since 2022.
Vaughan, Canada
September 27, 2023
4
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, 2022, June 30, 2021, and July 1,
2020, and the consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity and
cash flows for the years ended June 30, 2022 and June 30, 2021, 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, 2022, June 30, 2021, and July 1, 2020, and its consolidated financial
performance and its consolidated cash flows for the years ended June 30, 2022 and June 30, 2021 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.
Emphasis of Matter – Change in Accounting Policy
As discussed in Note 2 to the consolidated financial statements, the Company has elected to change its presentation currency
from the Canadian dollar to the US dollar effective July 1, 2021. This change has been retrospectively applied. The statement of
financial position as of July 1, 2020 has been included pursuant to the requirements of International Financial Reporting
Standards.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5
Acquisition of NetFortris Corporation
Key Audit Matter Description
As described in Note 20(c) to the consolidated financial statements, on March 28, 2022, the Company completed its acquisition
of NetFortris Corporation for a total purchase price of $64,820 (in thousands). The identifiable assets acquired and the liabilities
assumed are measured at fair value as of the acquisition date. Where the net of the fair value of the assets acquired and liabilities
assumed is less than the fair value of consideration transferred, the difference is accounted for as goodwill. In assessing fair value
of the acquired assets, management used various valuation techniques involving significant judgement and subjectivity.
We considered this to be a key audit matter due to the complexity of the transaction, which included valuation of the acquired
intangible assets. This resulted in a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating the audit evidence related to management's estimates. As such, an increased extent of audit effort was required, which
included the involvement of internal valuation specialists.
Audit Response
We responded to this matter by performing procedures over management's valuation techniques in determining fair value of the
acquired assets and in determining goodwill. Our audit work in relation to this included, but was not limited to, the following:
•
•
•
•
•
Analyzed the signed purchase agreement to obtain an understanding of the key terms and conditions and to identify the
necessary accounting considerations.
Tested the mathematical accuracy of management's valuation models and supporting calculations.
Evaluated the fair value of the consideration transferred including the fair value of common shares and consideration
payable.
Evaluated the reasonableness of key assumptions in management's models, including testing of historical financial
results that were used as a basis for future projections.
Assessed the appropriateness of the disclosures relating to the assumptions used in the acquisition in the notes to the
consolidated financial statements.
• With the assistance of internal valuation specialists, evaluated the reasonableness of management's model, through
assessing the appropriateness of valuation models used and testing the significant assumptions and inputs by:
o
o
o
Comparing to externally available industry and economic trends;
Evaluating budgets and forecasts for future operations; and
Comparing against guideline companies within the same industry.
Impairment Analysis of Goodwill and Long-Lived Assets
Key Audit Matter Description
We draw attention to Notes 7, 8, 9 and 12 to the consolidated financial statements. The Company has recorded goodwill, property
and equipment, right-of-use assets and intangibles assets of USD $428,626 (in thousands) as of June 30, 2022. The Company
performs impairment testing for goodwill and long-lived assets on an annual basis or more frequently when there is an indication
of impairment. An impairment is recognized if the carrying amount of an asset, or its cash generating unit (CGU), exceeds its
estimated recoverable amount. The recoverable amount of an asset is the greater of its value-in-use and its fair value less costs to
sell. In determining the estimated recoverable amounts, the Company’s significant assumptions include future cash flows based
on expected operating results, long term growth rates, the revenue exit multiple, and the discount rate.
6
We considered this a key audit matter due to the significant judgment made by management in estimating the recoverable amount
for goodwill and long-lived assets and a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating audit evidence relating to management’s estimates. This resulted in an increased extent of audit effort, including the
involvement of internal valuation specialists.
Audit Response
We responded to this matter by performing procedures over the impairment of goodwill and long-lived assets. Our audit work in
relation to this included, but was not limited to, the following:
•
•
•
•
Tested management’s key assumptions, including performing a ‘retrospective review’ to compare management’s
assumptions in the prior year expected future cash flows to the actual results to assess the accuracy of the Company’s
budgeting process.
Evaluated the reasonableness of key assumptions in the impairment model, including future cash flows based on
expected operating results, long-term growth rates, the revenue exit multiple, and the discount rate.
Tested the mathematical accuracy of management’s impairment model and supporting calculations.
Assessed the appropriateness of the disclosures relating to the assumptions used in the impairment assessment in the
notes to the consolidated financial statements.
• With the assistance of internal valuation specialists, evaluated the reasonableness of the Company’s impairment model,
which included:
o
o
o
Evaluating the reasonableness of the discount rate and revenue exit multiple by comparing the Company’s
weighted average cost of capital and revenue exit multiple against publicly available market data;
Developing a range of independent estimates and comparing those to the discount rate selected by
management; and
Performing a sensitivity analysis of the recoverable amount of the CGU by varying the weighted average cost
of capital and the revenue exit multiple.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis; and
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
on Form 40-F.
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 and the Annual Report on Form 40-F 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.
7
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.
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 Company’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.
8
•
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 communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Ajmer Singh Sran.
Toronto, Ontario
September 26, 2022
/s/ MNP LLP
Chartered Professional Accountants
Licensed Public Accountants
9
Sangoma Technologies Corporation
Consolidated statements of financial position
As at June 30, 2023, and June 30, 2022
(in thousands of US dollars, except per share data)
Note
4
4
6
15
7
8
9
10
11
12
15
4
13
14
15
16
8
14
15
16
8
11
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Contract assets
Derivative assets
Other current assets
Non-current assets
Property and equipment
Right-of-use assets
Intangible assets
Development costs
Deferred income tax assets
Goodwill
Contract assets
Derivative assets
Other non-current assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Sales tax payable
Income tax payable
Consideration payable
Operating facility and loans
Contract liabilities
Lease obligations on right-of-use assets
Long term liabilities
Consideration payable
Operating facility and loans
Contract liabilities
Non-current lease obligations on right-of-use assets
Deferred income tax liabilities
Other non-current liabilities
Shareholders’ equity
Share capital
Shares to be issued
Contributed surplus
Accumulated other comprehensive income
Accumulated deficit
Approved by the Board
(Signed)
(Signed)
Al Guarino
Allan Brett
Director
Director
The accompanying notes are an integral part of these consolidated financial statements.
June 30
2023
$
11,156
21,905
17,970
3,192
1,762
1,218
4,420
61,623
9,152
13,152
157,437
6,569
3,210
187,502
2,911
768
422
442,746
24,077
237
5,594
61
1,894
17,700
10,909
2,719
63,191
—
83,125
3,642
11,612
14,295
766
176,631
379,924
—
18,132
1,335
(133,276)
266,115
442,746
June 30
2022
$
12,702
23,943
17,426
—
1,225
648
4,364
60,308
10,274
16,974
191,369
2,861
2,762
210,009
2,567
700
709
498,533
28,568
200
5,895
1,885
8,986
17,700
11,580
3,592
78,406
3,782
86,925
3,487
14,397
16,657
1,071
204,725
203,032
179,132
15,055
839
(104,250)
293,808
498,533
10
Sangoma Technologies Corporation
Consolidated statements of loss and comprehensive loss
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Revenue
Cost of sales
Gross profit
Expenses
Sales and marketing
Research and development
General and administration
Foreign currency exchange (gain) loss
Interest expense (net)
Business acquisition costs
Restructuring and business integration costs
Exchange listing expense
Gain on change in fair value of consideration payable
Goodwill impairment
Loss before income tax
Provision for income taxes
Current
Deferred
Net loss
Other comprehensive income
Items to be reclassified to net income
Change in fair value of interest rate swaps, net of tax
Comprehensive loss
Loss per share
Basic
Diluted
Note
19
4,8,14,15
20
14
12
11
11
15
17(iii)
17(iii)
$
$
June 30
2023
$
252,530
79,739
172,791
61,922
37,470
76,363
(15)
6,767
—
2,710
—
(2,975)
22,507
(31,958)
(172)
(2,760)
(29,026)
496
(28,530)
(0.88) $
(0.88) $
June 30
2022
$
224,352
67,464
156,888
53,057
34,158
75,199
358
3,863
2,939
1,222
1,051
(2,254)
91,685
(104,390)
3,980
2,410
(110,780)
1,172
(109,608)
(3.52)
(3.52)
Weighted average number of shares outstanding
Basic
Diluted
17(iii)
17(iii)
33,118,980
33,118,980
31,475,254
31,475,254
The accompanying notes are an integral part of these consolidated financial statements.
11
Sangoma Technologies Corporation
Consolidated statements of changes in shareholders' equity
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Number of
common
shares
Note
Share capital
Shares to be
issued
Contributed
surplus
Accumulated
other
comprehensive
(loss) earnings
Retained
earnings
(accumulated
deficit)
Balance, July 1, 2021
Net loss
Change in fair value of interest rate swaps, net of tax
15
Common shares issued through business combination
17(i), 20
1,494,536
Deferred tax benefit on share issuance costs
Common shares issued for options exercised
Rounding of fractional shares after share consideration
Share-based compensation expense
Balance, June 30, 2022
Net loss
Change in fair value of interest rate swaps, net of tax
Common shares issued as installment for shares to be issued
Common shares issued for options exercised
Common shares purchased and cancelled
Common shares returned from escrow and cancelled
Share-based compensation expense
Balance, June 30, 2023
11
17(i)
17(ii)
15
17(i)
17(i)
17(i)
4
17(ii)
The accompanying notes are an integral part of these consolidated financial statements.
19,021,642
172,462
192,102
$
$
—
—
857,142
66,340
(28)
—
—
—
16,801
12,970
799
—
—
—
—
—
(12,970)
—
—
—
21,439,632
203,032
179,132
—
—
—
—
—
—
11,838,457
179,132
(179,132)
11,024
(108,622)
(142,124)
—
67
(605)
(1,702)
—
33,038,367
379,924
—
—
—
—
—
$
5,393
—
—
—
—
(267)
—
9,929
15,055
—
—
—
(23)
—
—
3,100
18,132
Total
shareholders'
equity
$
376,154
$
6,530
(110,780)
(110,780)
—
—
—
—
—
1,172
16,801
—
532
—
9,929
$
(333)
—
1,172
—
—
—
—
—
839
(104,250)
293,808
—
496
—
—
—
—
—
(29,026)
(29,026)
—
—
—
—
—
—
496
—
44
(605)
(1,702)
3,100
1,335
(133,276)
266,115
12
Sangoma Technologies Corporation
Consolidated statements of cash flows
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Operating activities
Net loss
Adjustments for:
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Amortization of development costs
Income tax expense (recovery)
Income tax paid
Income tax refunds
Share-based compensation expense
Interest on obligation on right-of-use assets
Unrealized foreign exchange loss
Goodwill Impairment
Accretion expense
Gain on lease modification
Loss on disposal of property and equipment
Gain on change in fair value of consideration payable
Changes in working capital
Trade and other receivables
Inventories
Contract assets
Other assets
Sales tax payable
Accounts payable and accrued liabilities
Provisions
Other non current liabilities
Contract liabilities
Net cash provided by operating activities
Investing activities
Purchase of property and equipment
Development costs
Business combinations, net of cash and cash equivalents acquired
Net cash flows used in investing activities
Financing activities
Proceeds from operating facility and loan
Repayments of operating facility and loan
Repayment of lease obligations on right-of-use assets
Payment of consideration payable
Common shares purchased and cancelled
Issuance of common shares for stock options exercised
Net cash flows provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Note
7
8
9
10
11
17(ii)
8
12
14
8
7
14
7
10
20
15
15
8
14
17(i)
17(i)
The accompanying notes are an integral part of these consolidated financial statements.
June 30
2023
$
(29,026)
4,729
3,778
33,932
2,705
(2,932)
(4,473)
450
3,100
476
193
22,507
435
(36)
409
(2,975)
(15)
(544)
(881)
231
(301)
(4,491)
37
(305)
(516)
26,487
(4,016)
(7,250)
—
(11,266)
13,900
(17,700)
(4,072)
(8,334)
(605)
44
(16,767)
(1,546)
12,702
11,156
June 30
2022
$
(110,780)
3,153
3,308
31,609
1,281
6,390
(2,752)
1,197
9,929
442
174
91,685
798
(105)
266
(2,254)
1,555
(5,190)
(2,198)
(611)
(930)
(3,234)
(242)
(81)
(2,353)
21,057
(1,868)
(3,237)
(50,712)
(55,817)
45,000
(15,338)
(3,407)
(1,421)
—
532
25,366
(9,394)
22,096
12,702
13
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
1. General information
Founded in 1984, Sangoma Technologies Corporation (“Sangoma” or the “Company”) is publicly traded on the
Toronto Stock Exchange (TSX: STC) and NASDAQ (NASDAQ: SANG). The Company’s shares were traded on
the TSX Venture Exchange under the symbol STC until November 1, 2021, at which point the Company’s shares
commenced trading on the TSX. In conjunction with listing on the TSX, the Company’s shares were delisted from
the TSX Venture Exchange. The Company’s shares commenced trading on NASDAQ on December 16, 2021. The
Company was incorporated in Canada, its legal name is Sangoma Technologies Corporation and its primary
operating subsidiaries for fiscal 2023 are Sangoma Technologies Inc., Sangoma US Inc., Digium Inc., NetFortris
Corporation, Star2Star Communications LLC, VoIP Supply LLC, and VoIP Innovations 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, 2022.
(ii) Basis of consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
Sangoma Technologies Inc. (Canada), Sangoma HK Ltd. (Hong Kong), Sangoma Technologies Ltd. (Ireland),
Sangoma Technologies Private Ltd. (India), Sangoma US Inc. (United States), Sangoma Technologies US Inc.
(United States), Digium Inc. (United States), Digium Cloud Services LLC (United States), .E4 LLC (United States),
NetFortris Corporation (United States), NetFortris Acquisition Co. Inc. (United States), NetFortris Operating Co.
Inc. (United States), Fonality Inc. (United States), Fonality Pty Ltd. (Australia), NetFortris (Philippines) Inc.
(Philippines), StarBlue Inc. (United States), Star2Star Communications LLC (United States),VoIP Supply LLC
(United States), VoIP Innovations LLC (United States), Vocaly LLC (United States), Trybe Labs LLC (United
States). and Sangoma Columbia SAS (Columbia).
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.
(iiii) Financial instruments
Non-Derivative Financial Assets
14
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
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.
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
15
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
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.
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 assets
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.
16
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
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.
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 loss 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 loss. The amount recognized in other comprehensive 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 loss as the hedged item. Any ineffective portion of changes in the fair value of the derivative is
recognized immediately in earnings.
(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. 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) 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
17
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the
consolidated statements of loss and comprehensive loss during the period in which they are incurred.
Depreciation
their useful life as outlined below:
is calculated on a straight-line basis for all classes of property and equipment over
Leasehold improvements, tradeshow equipment, software and books
Office furniture and computer equipment
Stockroom and production equipment
5 years
3 - 5 years
3 - 7 years
Residual values, method of depreciation and useful
adjusted, if required.
lives of
the assets are reviewed annually and
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 loss
and comprehensive loss.
(vi) 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.
(vii) 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
18
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
initial recognition, such intangible assets are carried at cost less any accumulated amortization on a straight-line
basis over the following periods:
Purchased technology
Customer relationships
Brand
Other purchased intangibles
6 - 10 years
3 - 10 years
6 - 10 years
3 - 10 years
Amortization expense is included in the consolidated statements of loss and comprehensive 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(xviii).
(viii) Revenue recognision
The Company derives its revenues primarily from services and subscriptions, sale of products, and professional
services. Revenues are recognized when control of these services is transferred to the customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for products and services.
The Company determines revenue recognition through the following steps:
•
•
•
•
•
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the Company satisfies a performance obligation.
The Company recognizes revenues as follows:
Product revenue
Product revenue primarily includes revenue generated from sale of pre-configured phones, connectivity hardware
and professional implementation services.
Revenue is recognized upon transfer of control to the customer which is generally upon shipment from the
Company’s warehouse.
Services revenue
Services revenue is generated from fees that provide customers access to one or more of the Company’s software
applications and related services and the rental for the hardware required to deliver these services. These
arrangements have contractual terms typically ranging from one month to seven years and include recurring fixed
fee subscription fees, variable usage-based fees for usage in excess of plan limits, one-time fees, recurring license
and other fees, derived from sales through our direct and indirect sales channels, including resellers and distributors.
Arrangements with customers do not provide the customer with the right to take possession of the Company’s
software at any time. Instead, customers are granted continuous access to the services over the contractual period.
The Company transfers control evenly over the contractual period by providing stand-ready service. Accordingly,
the fixed consideration related to subscription is recognized over time on a straight-line basis over the contract term
beginning on the date the Company’s service is made available to the customer. The Company may offer from time
to time its customers, services for no consideration during the initial months. Such discounts are recognized ratably
over the term of the contract.
Fees for additional minutes of usage in excess of plan limits are deemed to be variable consideration that meet the
allocation exception for variable consideration as they are specific to the month that the usage occurs.
19
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
The Company’s subscription contracts typically allow the customers to terminate their services within the first 30
days and receive a refund for any amounts paid for the remaining contract period. After the end of the termination
period, the contract is non-cancellable and the customer is obligated to pay for the remaining term of the contract.
Accordingly, the Company considers the non-cancellable term of the contract to begin after the expiration of the 30
day termination period.
The Company records reductions to revenue for estimated sales returns and customer credits at the time the related
revenue is recognized. Sales returns and customer credits are estimated based on the Company’s historical
experience, current trends and the Company’s expectations regarding future experience. The Company monitors the
accuracy of its sales reserve estimates by reviewing actual returns and credits and adjusts them for its future
expectations to determine the adequacy of its current and future reserve needs. If actual future returns and credits
differ from past experience, additional reserves may be required.
Principal vs. Agent
A portion of the Company’s revenues are generated through sales by resellers who offer add-ons which may not be
controlled to the Company prior to transfer to the customer. The Company does not recognize any revenue for these
add-ons.
However, when the Company controls the performance of these contractual obligations prior to the delivery to the
customer, it records these revenues at the gross amount paid by the customer with amounts retained by the resellers
recognized as sales and marketing expenses. The Company assesses control of goods or services when it is primarily
responsible for fulfilling the promise to provide the good or service, has inventory risk and has discretion in
establishing the price.
(ix) Cost of sales
Cost of product sales includes the cost of finished goods inventory and costs related to shipping and handling. Cost
of service sales include cost of delivery of service, third party carrier charges, data center and software licenses.
(x) Foreign currency
The Company and all of its significant wholly-owned operating subsidiaries are measured in US dollar as the
functional currency. Transactions in currencies other than USD are initially recorded in the US dollar by applying
the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in other than
US dollar are revaluated at the foreign exchange rate at the reporting date. Foreign exchange differences arising on
translation are recognized in the consolidated statement of loss and comprehensive loss.
(xi) 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.
(xii) Share-based payments
Under the Legacy Plan (as defined in note 17(ii)), the Company grants stock options to its employees. Stock options
vest over and expire after various periods of time. The general 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 fourth
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. 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.
On December 13, 2022, the Company adopted the Omnibus Equity Incentive Plan (the “Plan”), which replaces the
Legacy Plan. No further grants will be made under the Legacy Plan.
20
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Under the Omnibus Plan, the Company may grant participants Options, Performance Share Units (PSUs), Restricted
Share Units (RSUs) and Deferred Share Units (DSUs). The PSUs, RSUs and DSUs are redeemable either for one
common share or for an amount in cash equal to the fair market value of one common share (at the option of the
Company and as set out in the participant’s equity award agreement). All PSUs, RSUs and DSUs are accounted for
as equity-settled awards.
DSUs generally vest immediately and become redeemable once a director no longer serves on the board of the
Company. RSUs vest over a three-year period after the date of grant. The expense is measured based on the fair
value of the awards at the grant date.
PSUs vest in full at the end of a three-year period and the final amount is based 50% on market-based performance
targets being met and 50% on non-market-based performance targets, with the conversion ratio for vested PSUs
being from 0% to 150%. The expense related to the PSUs is measured (i) based on the fair value of the awards at the
grant date using the Monte Carlo simulation, with respect to the 50% based on the market-based performance
targets, and (ii) based on the fair value of the awards at the grant date using the volume weighted average trading
price per share on the TSX during the immediately preceding five trading days.
(xiii) Income taxes and deferred taxes
The income tax provision comprises current and deferred tax. Income tax is recognized in the consolidated
statements of loss and comprehensive 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 loss 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.
(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:
21
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
•
•
•
•
•
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(xviii).
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 periodically 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 loss and comprehensive loss.
The Company does not hold any forward foreign currency exchange contracts as at June 30, 2023, and June 30,
2022.
(xvi) 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 are 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.
(xvii) 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.
22
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(xviii) 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 one cash generating unit 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 the
new carrying amount does not exceed the carrying value of the asset had it not originally been impaired.
(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 loss 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. 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.
Share consolidation (reverse stock split)
On November 2, 2021, the Company implemented a consolidation of its outstanding Common Shares (the “reverse
stock split”) on the basis of one new Common Share for every seven currently outstanding Common Shares (the
“Consolidation Ratio”). At the special meeting of the Company’s shareholders held on September 23, 2021, the
Company’s shareholders granted the Company’s Board of Directors discretionary authority to implement a
consolidation of the issued and outstanding common shares of the Company on the basis of a consolidation ratio of
up to 20 pre-consolidation common shares for one post-consolidation common share. The Board of Directors
selected a share consolidation ratio of seven pre-consolidation common shares for one post-consolidation common
share. The Company’s common shares began trading on the TSX on a post-consolidation basis under the Company’s
23
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
existing trade symbol "STC" on November 8, 2021. In accordance with IFRS, the change has been applied
retrospectively.
The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock.
As a result of the reverse stock split, the Company further adjusted the share amounts and exercise prices under its
option plans and outstanding options.
IAS 33 Earnings per Share (paragraph 64) requires retrospective adjustment of earnings per share for a reverse stock
split that occurs subsequent to the balance sheet date but before the date of authorization of the consolidated
financial statements. As a result, all disclosures of common shares, per common share data and data related to
options in the accompanying consolidated financial statements and related notes reflect this reverse stock split for all
years presented.
(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 as 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 Financial Instruments, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognized in profit or loss.
3. Significant accounting judgements, 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 worldwide, and 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. 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 flows and
liquidity, operations and financial reporting.
24
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
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 unit was 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-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 exit 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.
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 period-to-period 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.
25
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(iv) Estimated useful lives of long-lived assets
Management reviews useful lives of depreciable assets at each reporting date. Management assessed 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, research and development costs 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 and
Monte Carlo simulation 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.
(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 movement. 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 and service 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.
26
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(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 loss and comprehensive 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.
(xiv) Contract costs
Contract costs include customer acquisition costs, which consist primarily of sales commissions paid to sales
personnel. These costs are deferred as a contract cost asset as they are considered to be incremental costs incurred to
obtain a customer contract and amortized on a straight-line basis over a period consistent with the pattern of transfer
of the products and services to which the asset relate, including specifically identifiable expected renewals. The
Company has determined this to be an average of 4.2 years. The Company uses judgement to determine the period
of benefit by taking into consideration its customer contracts and customer life, life of its revenue generating
platform technology and other factors.
4. Financial instruments
The fair values of the cash and cash equivalents, trade and other receivables, contract assets, other current assets,
accounts payable and accrued liabilities approximate their carrying values due to the relatively short-term nature of
these financial instruments. 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. Derivative assets and liabilities and
consideration payable are recorded at fair value.
Cash and cash equivalents are comprised of:
Cash at bank and on hand
June 30
2023
$
11,156
June 30
2022
$
12,702
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, 2023 and June 30, 2022 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:
27
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Interest income
Interest expense
Accretion expense
Interest expense (net)
Note
15
8, 14
June 30
2023
$
(41)
5,897
911
6,767
June 30
2022
$
(12)
2,635
1,240
3,863
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.
Trade receivables
Receivable related to working capital adjustment
Trade and other receivables
Note
20
June 30
2023
$
16,060
5,845
21,905
June 30
2022
$
16,045
7,898
23,943
During the year ended June 30, 2023, the parties finalized the working capital provision in respect of the acquisition
of NetFortris and the company received $2,053 from the escrow account, consisting of $351 in cash and $1,702 in
the form of 142,124 common shares. The remaining balance of $5,845 as at June 30, 2023 relates to certain
indemnification assets recorded in respect of liabilities assumed on the acquisition of Netfortris (June 30, 2022 -
$7,898).
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:
Trade receivables aging:
0-30 days
31-90 days
Greater than 90 days
Expected credit loss provision
June 30
2023
$
11,759
3,313
2,554
17,626
(1,566)
16,060
June 30
2022
$
12,809
2,541
2,976
18,326
(2,281)
16,045
28
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
The movement in the provision for expected credit losses can be reconciled as follows:
Expected credit loss provision:
Expected credit loss provision, beginning balance
Net change in expected credit loss provision during the year
Expected credit loss provision, ending balance
June 30
2023
$
(2,281)
715
(1,566)
June 30
2022
$
(1,096)
(1,185)
(2,281)
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.
Default rates
Trade receivables
Expected credit loss provision
Default rates
Trade receivables
Expected credit loss provision
Total
Up to 30 days
past due
0.64 %
17,626 $
1,566 $
11,759
75
$
$
Total
Up to 30 days
past due
2.02 %
18,326 $
2,281 $
12,809
259
$
$
$
$
$
$
June 30, 2023
Over 30
days past
due
8.33 %
3,313
276
Over 90 days
past due
47.57 %
2,554
1,215
$
$
June 30, 2022
Over 30
days past
due
7.79 %
2,541
198
$
$
Over 90 days
past due
61.29 %
2,976
1,824
Substantially all of the Company’s cash and cash equivalents are held with major Canadian and 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.
29
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
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, 2023:
within 12 months
$
12-24 months
$
24-36 months
$
>36 months
$
24,077
5,594
1,894
17,700
3,097
—
52,362
—
—
—
19,875
3,084
—
22,959
—
—
—
22,050
2,308
—
24,358
—
—
—
41,200
7,353
766
49,319
Total
$
24,077
5,594
1,894
100,825
15,841
766
148,997
Accounts payable and accrued liabilities
Sales tax payable
Consideration payable
Operating facility and loans
Lease obligations on right of use assets
Other non-current liabilities
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), Hong Kong Dollars (HKD), Indian Rupees (INR), Philippine Peso (PHP), Australian
Dollar (AUD), and Columbia Peso (COP) , 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, 2023, a 10% depreciation or appreciation of the
CAD, EUR, GBP, HKD, INR, PHP, AUD and COP currencies against the U.S. dollar would have resulted in an
approximate $76 (June 30, 2022 - $59) increase or decrease, respectively, in total comprehensive loss.
Interest rate risk
The Company’s exposure to interest rate fluctuations is with its credit facility (Note 15) which bears interest at a
floating rate. As at June 30, 2023, a change in the interest rate of 1% per annum would have an impact of
approximately $779 (June 30, 2022 - $522) per annum in finance costs. The Company also entered an interest rate
swap arrangement for its loan facility (Note 15) to manage the exposure to changes in SOFR-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 SOFR 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 15, the fair value of the interest rate swaps
was a current asset of $1,218 and non-current asset of $768 on June 30, 2023 (June 30, 2022 - current asset of $648
and non-current asset of $700).
5. 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 15, the Company is not subject to any
other capital requirements imposed by external parties.
6.
Inventories
Inventories recognized in the consolidated statements of financial position are comprised of:
30
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Finished goods
Parts
Provision for obsolescence
Net inventory carrying value
June 30
2023
$
13,860
5,234
19,094
(1,124)
17,970
June 30
2022
$
13,190
5,155
18,345
(919)
17,426
During the year ended June 30, 2023, inventories in the amount of $40,473 (June 30, 2022 - $42,585) were included
in cost of sales.
31
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
7. Property and equipment
Office furniture
and computer
equipment
Note
Stockroom
Software and
and production
books
equipment
Tradeshow
equipment
Leasehold
improvements
Cost
Balance at July 1, 2021
Additions through business combinations
20
Additions
Disposals
Balance at June 30, 2022
Additions
Disposals
Balance at June 30, 2023
Accumulated depreciation
Balance at July 1, 2021
Depreciation expense
Disposals
Balance at June 30, 2022
Depreciation expense
Disposals
Balance at June 30, 2023
Net book value as at:
Balance at June 30, 2022
Balance at June 30, 2023
$
3,329
540
893
(25)
4,737
846
(217)
5,366
1,371
1,081
—
2,452
976
(64)
3,364
2,285
2,002
$
417
2
41
(2)
458
—
—
458
314
99
—
413
21
—
434
45
24
$
6,255
3,619
808
(231)
10,451
3,170
(754)
12,867
872
1,889
(2)
2,759
3,670
(523)
5,906
7,692
6,961
$
47
—
—
—
47
—
—
47
41
6
—
47
—
—
47
—
—
$
348
11
126
(10)
475
—
(25)
450
146
78
(1)
223
62
—
285
252
165
Total
$
10,396
4,172
1,868
(268)
16,168
4,016
(996)
19,188
2,744
3,153
(3)
5,894
4,729
(587)
10,036
10,274
9,152
For the year ended June 30, 2023, depreciation expense of $994 (June 30, 2022 - $1,289) was recorded in general and administration expense in the consolidated
statements of loss and comprehensive loss. Depreciation expense in the amount of $3,735 was included in cost of sales for the year ended June 30, 2023 (June 30,
2022 - $1,864).
32
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
8. Leases: Right-of-use assets and lease obligations
The Company’s lease obligations and right-of-use assets are presented below:
Note
20
Present value of leases
Balance as at July 1, 2021
Additions
Addition through business combination
Terminations
Adjustments due to lease modification
Balance at June 30, 2022
Additions
Terminations
Balance at June 30, 2023
Accumulated depreciation and repayments
Balance as at July 1, 2021
Depreciation expense
Terminations
Balance at June 30, 2022
Depreciation expense
Terminations
Balance at June 30, 2023
Net book value as at:
June 30, 2022
June 30, 2023
Right-of-use assets
$
17,955
5,536
3,277
(1,536)
(2,002)
23,230
41
(1,089)
22,182
4,425
3,308
(1,477)
6,256
3,778
(1,004)
9,030
16,974
13,152
33
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Note
20
Present value of leases
Balance as at July 1, 2021
Additions
Addition through business combination
Adjustments due to lease modification
Repayments
Accretion expense
Terminations
Balance at June 30, 2022
Additions
Adjustments due to lease modification
Repayments
Accretion expense
Terminations
Effects of movements on exchange rates
Balance at June 30, 2023
Lease Obligations - Current
Lease Obligations - Non-current
Lease Obligations
$
14,243
5,535
3,277
(2,107)
(3,407)
442
6
17,989
41
(36)
(4,072)
476
(54)
(13)
14,331
2,719
11,612
14,331
(1)
(2)
(3)
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.
Right-of-use assets opening balance includes the impact of estimated restoration costs.
Addition through business combination represents the right-of-use asset and leased obligation of the leased office buildings of NetFortris
Corporation which was acquired on March 28, 2022.
Amounts recognized in consolidated statements of loss and comprehensive loss
Depreciation charge on right-of-use assets
Interest expense on lease obligations
Income from sub-leasing right-of-use assets
Expenses relating to leases of low-value assets
June 30
2023
$
3,778
476
(90)
99
June 30
2022
$
3,308
442
(80)
181
34
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
9.
Intangible assets
Cost
Balance at July 1, 2021
Business combinations
Balance at June 30, 2022
Balance at June 30, 2023
Accumulated amortization
Balance at July 1, 2021
Amortization expense
Balance at June 30, 2022
Amortization expense
Balance at June 30, 2023
Net book value as at:
Balance at June 30, 2022
Balance at June 30, 2023
Note
20
Purchased
technology
$
Customer
relationships
$
95,323
14,800
110,123
110,123
7,809
16,097
23,906
17,670
41,576
86,217
68,547
112,256
14,200
126,456
126,456
11,336
14,128
25,464
15,357
40,821
100,992
85,635
Other
purchased
intangibles
$
2,748
—
2,748
2,748
1,856
699
2,555
139
2,694
193
54
Brand
$
6,787
—
6,787
6,787
2,135
685
2,820
766
3,586
3,967
3,201
Total
$
217,114
29,000
246,114
246,114
23,136
31,609
54,745
33,932
88,677
191,369
157,437
Amortization expense is included in general and administration expense in the consolidated statements of loss and comprehensive loss). For the year ended June
30, 2023, amortization expense was $33,932 (June 30, 2022 - $31,609).
35
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
10. Development costs
Cost
Balance at July 1, 2021
Additions
Investment tax credits
Balance at June 30, 2022
Additions
Cost fully amortized
Investment tax credits
Balance at June 30, 2023
Accumulated amortization
Balance at July 1, 2021
Amortization
Balance at June 30, 2022
Amortization
Cost fully amortized
Balance at June 30, 2023
$
3,360
3,237
(628)
5,969
7,250
(380)
(788)
12,051
(1,827)
(1,281)
(3,108)
(2,705)
331
(5,482)
Net capitalized development costs
June 30, 2023
$
6,569
June 30, 2022
$
2,861
Each period, additions to development costs are recognized net of investment tax credits accrued. In addition to the
above amortization, the Company has recognized $34,765 of engineering expenditures as an expense during the year
ended June 30, 2023 (June 30, 2022 - $32,877).
36
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
11. Income tax
(a.) Amounts recognized in profit or loss:
Current tax expense
Current year
Changes in prior years position
Deferred tax expense
Origination and reversal of temporary differences
Reduction/increase in tax rate
Changes in prior years position
Recognition of previously unrecognized tax losses
(b.) Amounts recognized in OCI:
June 30
2023
$
1,510
(1,682)
(172)
(2,236)
(588)
174
(110)
(2,760)
June 30
2022
$
2,786
1,194
3,980
763
1,652
—
(5)
2,410
June 30, 2023
Tax (expense)
benefit
$
Before tax
$
Net of tax
$
Before tax
$
June 30, 2022
Tax (expense)
benefit
$
Net of tax
$
638
638
(142)
(142)
496
496
1,589
1,589
(417)
(417)
1,172
1,172
Change in fair
value of interest
rate swaps, net of
tax
37
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(c.) Reconciliation of effective tax rate:
June 30, 2023
June 30, 2022
Loss before tax from continuing operations
Tax using the Company's domestic tax rate
Effect of tax rates in foreign jurisdictions
Tax rate changes and other adjustments
Tax effect of:
Share based compensation
Other non-deductible expenses
Scientific Research and Experimental Development
Business acquisition cost
Section 481(a) adjustment
Gain on contingent consideration
Stock options deduction revaluation adjustment
Goodwill impairment
Earn-out amortization
Current year losses for which no deferred tax asset is
recognized
Recognition of previously unrecognized tax losses
Change in prior years position
$
(31,958)
(8,186)
90
(588)
642
(92)
90
—
—
(753)
1,749
5,623
110
—
(110)
(1,507)
(2,932)
$
(104,390)
(27,297)
(75)
1,652
2,596
(42)
87
470
136
(591)
4,239
23,756
209
62
(5)
1,193
6,390
38
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(d.) Movements in deferred tax balances:
Balance at
July 1,
2022
DTA/
(DTL)
$
Recognized
in profit or
loss
$
5,444
(403)
Recognized
in OCI
$
—
2,001
(2,432)
(41,927)
(886)
—
472
8,727
206
—
—
—
—
Balance at June 30, 2023
Other
$
—
Net
$
DTA
$
5,041
5,041
DTL
$
—
192
—
2,193
(1,960)
2,193
42
—
(2,002)
—
—
(33,200)
(680)
—
—
(33,200)
(680)
15,620
(2,020)
—
—
13,600
13,600
—
269
834
—
4,096
3,593
(507)
32
(313)
152
(4,096)
3
—
—
—
—
—
—
(142)
—
—
—
—
—
—
301
521
152
—
3,596
(649)
301
521
152
—
3,596
—
—
—
—
—
—
(649)
(13,895)
2,760
(142)
192
(11,085)
25,446
22,236
3,210
(36,531)
(22,236)
(14,295)
Non-deductible reserves
SR&ED investment tax credits, net
of 12(1)(x)
Property, plant and equipment
Intangible assets including
goodwill
Deferred development costs
Non-capital/Net operating losses
carried forward
Right of use assets net of
obligations & other
Share issuance cost
Equity Incentive Plan
Stock options
163J interest
Interest Swap
Tax assets (liabilities) before set-
off
Set-off of tax
Net tax assets (liabilities)
39
Sangoma Technologies Corporation
Notes to the consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Non-deductible reserves
SR&ED investment tax
credits, net of 12(1)(x)
Property, plant and
equipment
Intangible assets including
goodwill
Deferred development
costs
Non-capital/Net losses
carried forward
Right of use assets net of
obligations & other
Share issuance cost
Stock options
163J interest
Interest Swap
Tax assets (liabilities)
before set-off
Set-off of tax
Net tax assets (liabilities)
Balance at
July 1,
2021
DTA/
(DTL)
$
5,028
Balance at June 30, 2022
Recognized
in profit or
loss
Recognized
in OCI
Other -
Business
combination
$
(380)
$
—
—
Other
$
—
Net
$
$
5,444
5,444
DTA
DTL
$
796
$
—
—
1,457
(157)
—
701
2,001
2,001
(1,704)
324
—
(1,041)
(11)
(2,432)
—
(2,432)
(41,628)
4,622
—
(4,921)
—
(41,927)
— (41,927)
(608)
(227)
—
—
(51)
(886)
—
(886)
5,159
(1,853)
—
12,314
—
15,620 15,620
—
182
1,146
8,260
—
—
87
(312)
(4,164)
(350)
—
—
—
—
—
(417)
—
—
—
3,943
—
—
—
—
(90)
269
834
4,096
3,593
(507)
269
834
4,096
3,593
—
—
—
—
—
(507)
(22,708)
(2,410)
(417)
11,091
549
(13,895) 31,857 (45,752)
29,095 (29,095)
2,762 (16,657)
40
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(e.) Unrecognized deferred tax asset:
Capital losses carried forward Canada
Capital losses carried forward USA
Non-capital losses - STC Canada
Net operating loss - Ireland
Net operating loss - Australia
June 30, 2023
June 30, 2022
Gross amount
$
48
12,885
48
—
—
Tax effect
$
12
3,251
12
—
—
Gross amount
$
41
12,884
—
396
206
Tax effect
$
11
3,378
—
50
62
Capital losses carried forward do not expire while the non-capital loss will expire in 2042.
12. Goodwill
The carrying amount and movements of goodwill was as follows:
Note
20
Balance at July 1, 2021
Addition through business combinations
Goodwill Impairment
Balance at June 30, 2022
Goodwill Impairment
Balance at June 30, 2023
$
267,398
34,296
(91,685)
210,009
(22,507)
187,502
There is no addition to goodwill for the year ended June 30, 2023.
The Company performed an annual impairment test for its single CGU as at June 30, 2023. The recoverable amount
of the Company’s only CGU (“Sangoma”) was determined based on a fair value less costs to sell valuation model
which used cash flow projections based on financial forecasts from management covering a four-year period and an
after-tax discount rate of 20.0% (pre-tax – 24.4%) per annum. The terminal value beyond the four-year period was
determined using an enterprise value to revenue exit multiple based on peer group valuations. The cash flow
projections used in estimating the recoverable amount were generally consistent with results achieved historically
adjusted for anticipated growth. The Company concluded that the carrying value of its Sangoma CGU was higher
than the recoverable amount and a non-cash goodwill impairment charge totaling $22,507 was recognized in the
year ended June 30, 2023 (year ended June 30, 2022 - $91,685). As at June 30, 2023, the carrying value of the
Sangoma CGU was $288,551 and the recoverable amount was $266,044 giving rise to an impairment of $22,507.
The Company performed sensitivities of key assumptions used in the impairment test at June 30, 2023 and
determined that if all other assumptions were held constant:
• A 0.5% increase or decrease in the after-tax discount rate would change the estimated fair value by $5,000.
• A 10% increase or decrease in the enterprise value to the revenue exit multiple used in determining the terminal
value would change the estimated fair value by $20,000.
41
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
13. Provisions
Sales returns
Warranty & allowances
provision
provision
$
$
Stock
rotation
provision
$
Balance at July 1, 2021
Additional provision recognized
Balance at June 30, 2022
Additional provision recognized (reversed)
Balance at June 30, 2023
241
(168)
73
11
84
175
(48)
127
(68)
59
26
(26)
—
94
94
Total
$
442
(242)
200
37
237
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.
14. Consideration payable
(i) Star Blue Inc
During the year ended June 30, 2023, the Company made payments of $2,834 (June 30, 2022 - $1,421), recognized
accretion expense of $177 (June 30, 2022 - $684), and recognized a gain on change in fair value of $1,466 (June 30,
2022 - gain of $2,349).
The fair value of consideration payable as of June 30, 2023 in the amount of $1,894 (June 30, 2022 - $6,017) was
determined using an effective tax rate of 26.22% (June 30, 2022 – 26.22%) and a discount rate of 4.9% (June 30,
2022 – 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.
(ii) Netfortris Corporation
As described in Note 20, additional consideration of up to $11,500 could be payable as part of the acquisition of
NetFortris Corporation. During the year ended June 30, 2023, the Company made full and final payments of $5,500
(June 30, 2022 - $nil), recognized accretion expense of $258 (June 30, 2022 - $114), and recognized a gain on
change in fair value of $1,509 (June 30, 2022 - loss of $95). The fair value of consideration payable as of June 30,
2023 in the amount of $nil (June 30, 2022 - $6,751).
42
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
The fair value of consideration payable as at June 30, 2023 is summarized below:
Note
20
4
Opening balance, July 1, 2021
Additions through business combination
Payments
Accretion value of earn out
Gain on change in fair value
Ending balance, June 30, 2022
Payments
Accretion value of earn out
Gain on change in fair value
Ending balance, June 30, 2023
Consideration payable - Current
Consideration payable - Non-current
15. Operating facility and loan and derivative assets and liabilities
(a) Operating facility and loan
$
9,102
6,543
(1,421)
798
(2,254)
12,768
(8,334)
435
(2,975)
1,894
1,894
—
1,894
(i) On October 18, 2019, the Company entered into a new loan facility with two banks and drew down $34,800
which is repayable in quarterly installment of $1,450 over 5 years on a straight line basis. 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 each. On March 28, 2022 the credit agreement was
amended and the LIBOR rate was replaced with the Secured Overnight Financing Rate (SOFR) and as at March
31, 2023 all loans were converted to SOFR based loans. The repayment schedule for the loan has not been
impacted by these changes. The balance outstanding against this term loan facility as of June 30, 2023 is
$13,050 (June 30, 2022 - $18,850). As at June 30, 2023, term loan facility balance of $5,800 (June 30, 2022 -
$5,800) is classified as current and $7,250 (June 30, 2022 - $13,050) as long-term in the consolidated statements
of financial position.
(ii) On March 31, 2021, the Company amended its term loan facility with its lenders and drew down a second loan
of $52,500 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 to USD $1,500
The revolver facility was converted from CAD $8,000 to USD $6,000
The debt to equity ratio calculation now allows the Company to offset up to $10,000 of unrestrained funds
against the outstanding amount of the debt.
The incremental draw is repayable, on a straight-line basis, through quarterly payments of $2,188 and is due to
mature on December 31, 2024. As at June 30, 2023, $8,750 (June 30, 2022 - $8,750) of the incremental facility
is classified as current and $24,063 (June 30, 2022 - $32,812) is classified as long-term in the consolidated
statements of financial position.
43
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
(iii) On March 28, 2022, the Company amended its term loan facility with its lenders and drew down a third loan of
$45,000 to fund part of the acquisition of NetFortris Corporation. At the time of the draw down of the additional
amounts, the following amendments were made to the agreement: As at March 31, 2023 all loans were
converted to SOFR based loans. The incremental draw is repayable, on a straight-line basis, through quarterly
payments of $1,875 and is due to mature on March 28, 2027. On June 28, 2022, the Company amended its term
loan facility with its lenders, the amended repayment for the first twelve quarterly payments of $788 and $2,963
thereafter. As at June 30, 2023, $3,150 (June 30, 2022 - $3,150) of the incremental facility is classified as
current and $37,912 (June 30, 2022 - $41,063) is classified as long-term in the condensed consolidated
statements of financial position.
(iv) On April 6, 2023 the Company further amended the term loan facility to reflect certain administrative
amendments and to increase the amount of the revolving credit facility from $6,000 to $20,000 and the amount
of the swingline credit facility from $1,500 to $5,000. As of June 30, 2023, the amount of $13,900 (June 30,
2022 - $nil) remains outstanding and is classified as long term in the consolidated statements of financial
position.
For the year ended June 30, 2023, the Company incurred interest costs to service its borrowing facilities,
comprising of the loans and operating facilities, in the amount of $5,897 (June 30, 2022 - $2,635). During the
year ended June 30, 2023, the Company borrowed $nil (June 30, 2022 - $45,000) in term loans and repaid
$17,700 ( June 30, 2022 - $15,338). During the year ended June 30, 2023, the Company borrowed $13,900
(June 30, 2022 - $nil) on its revolving credit facility as a part of the overall capital management.
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, 2023, and June 30, 2022 the Company was in compliance with all covenants
related to its credit agreements.
(b) Derivative assets and liabilities
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 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 each to manage its exposure to changes in LIBOR-based interest
rates. As of March 31, 2023 this was converted to a SOFR. 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 and decreases in
line with the term of the loan facility. Effective March 31, 2022, Sangoma US Inc. entered into a fixed rate
swap transaction worth $43,750 over a five year period and terminating on February 28, 2027. As of June 30,
2023, the notional amount of the interest rate swap was $39,621 (June 30, 2022 – $51,397). The interest rate
44
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
swap has a weighted average fixed rate of 1.80% (June 30, 2022 – 1.80%) and have been designated as an
effective cash flow hedge and therefore qualifies for hedge accounting.
As at June 30, 2023, the fair value of the interest rate swap assets were valued at current of $1,218 (June 31,
2022 - $648) and non-current $768 (June 30, 2022 – $700). The current and non-current derivative assets were
recording in the consolidated statements of financial position.
For the year ended June 30, 2023, the change in fair value of the interest rate swaps, net of tax, was a gain of
$496 (June 30, 2022 – gain of $1,172) was recorded in other comprehensive loss in the consolidated statements
of 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 SOFR 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 SOFR rate.
16. 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, 2023, and June 30, 2022 are below:
Note
20
Opening balance, July 1, 2021
Revenue deferred during the year
Deferred revenue recognized as revenue during the year
Additions through business combination
Ending balance, June 30, 2022
Revenue deferred during the year
Deferred revenue recognized as revenue during the year
Ending balance, June 30, 2023
Contract liabilities - Current
Contract liabilities - Non-current
$
15,754
40,272
(42,625)
1,666
15,067
23,839
(24,355)
14,551
10,909
3,642
14,551
45
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
17. 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, 2023 and 2022, the Company’s issued and outstanding common shares consist of the following:
Note
20
4
Shares issued and outstanding:
Outstanding, beginning of the year
Shares issued for business combinations
Shares issued as installment for shares to be
issued
Shares purchased and cancelled
Shares returned from escrow and cancelled
Shares issued upon exercise of options
Rounding of fractional shares in 2021 after share
consolidation
Outstanding, end of the year
June 30
2023
#
21,439,632
—
11,838,457
(108,622)
(142,124)
11,024
—
33,038,367
June 30
2022
#
19,021,642
1,494,536
857,142
—
—
66,340
(28)
21,439,632
On March 31, 2021, the Company acquired StarBlue Inc. and issued 3,018,685 common shares valued in the amount
of $66,873 as part of the consideration, and 18,456 common shares valued in the amount of $330 as part of the
acquisition costs. Under the terms of the agreement, a further 12,695,599 common shares valued in the amount of
$192,102 were to be issued in installments commencing on April 1, 2022. As of June 30, 2023, 12,695,599 common
shares have been issued to StarBlue sellers in accordance with the installment schedule defined in the amended share
purchase agreement and the related amendment to accelerate the issuance of these shares. Following this issuance,
the Company has no further obligation to issue any additional shares in connection with the StarBlue acquisition.
During the year ended June 30, 2023, a total of 11,024 (June 30, 2022 – 66,340) options were exercised for cash
consideration of $44 (June 30, 2022 - $532), and the Company recorded a charge of $23 (June 30, 2022 – $267)
from contributed surplus to share capital.
In the fourth quarter of fiscal 2022, the Company announced its intention to make an Normal Course Issuer Bid
(“NCIB”) with respect to its Shares. Pursuant to the NCIB, Sangoma may, during the 12-month period commencing
June 23, 2022 and ending no later than June 22, 2023, purchase up to 1,071,981 shares, representing 5% of the total
number of 21,439,632 Shares outstanding, through the facilities of the TSX, the Nasdaq Global Select Market or
alternative Canadian trading systems. Under the term of the NCIB, during the year ended June 30, 2023, the
Company purchased a total of 103,122 common shares (June 30, 2022 - nil ) at an average price of $5.42 per share,
for total consideration of $559. During the year ended June 30, 2023, the total of 103,122 of those common shares
were settled and cancelled along with 5,500 common shares that were purchased in the fourth fiscal quarter of 2022
and cancelled in 2023, and the company recorded a total reduction of $605 (June 30, 2022 - nil) in share capital for
the value of share repurchased.
(ii) Share based payments
On December 13, 2022, the Corporation’s shareholders approved the Omnibus Equity Incentive Plan (the “Plan”),
which replaces the previous share option plan (the “Legacy Plan”). No further grants will be made under the Legacy
Plan.
46
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
For the year ended June 30, 2023, the Company recognized share-based compensation expense in the amount of
$3,100 (June 30, 2022 - $9,929).
Stock Options
Under the Plan (and previously under the Legacy Plan), employees are periodically granted share options to
purchase common shares at prices not less than the market price of the common shares on the day prior to the date of
grant or the volume weighted average trading price per share on the TSX during the five trading days immediately
preceding the grant date. The fair value of each option grant is estimated at the date of grant using the Black-Scholes
option pricing model. Expected volatility is determined by the amount the Corporation’s daily share price fluctuated
over a period commensurate with the expected life of the options. During the year ended June 30, 2023, the
Corporation did not grant any options (June 30, 2022 – 590,211).
The following table shows the movement in the stock option plan:
Balance, July 1, 2021
Granted
Exercised
Forfeited
Cancelled
Rounding of fractional shares
Balance, June 30, 2022
Exercised
Expired
Forfeited
Balance, June 30, 2023
Number
of options
#
1,587,310
590,211
(66,340)
(290,644)
(612,497)
(132)
1,207,908
(11,024)
(171,133)
(302,700)
723,051
Weighted
average price
$
19.55
13.92
(8.07)
(17.80)
(27.10)
—
14.02
(3.87)
(13.80)
(15.56)
13.58
The key assumptions used to fair value the grants were as follows:
Share price
Exercise price
Expected volatility
Expected option life
Risk-free interest rate
June 30
2023
—
—
—
0 years
—
June 30
2022
$8.47 - $18.62
$8.47 -$18.62
57.63% -60.16%
4.5 - 5 years
0.78% - 2.58%
The following table summarizes information about the stock options outstanding and exercisable at the end of each
year:
47
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Number of
outstanding
June 30, 2023
Number of
stock options
stock options outstanding and
exercisable
—
60,539
53,001
66,270
17,190
79,105
10,012
58,131
344,248
—
67,012
210,125
107,039
55,000
157,897
22,856
103,122
723,051
Exercise price
$3.01 - $5.00
$5.01 - $7.00
$7.01 - $9.00
$9.01 - $12.00
$12.01 - $15.00
$15.01 - $18.00
$18.01 - $20.00
$20.01 - $27.00
Weighted
average
remaining
contractual life
Number of
stock options
outstanding
0
0.49
4.00
1.93
3.75
3.00
3.00
2.61
2.90
26,080
74,224
249,500
219,382
55,000
183,106
285,711
114,905
1,207,908
June 30, 2022
Number of
stock options
outstanding
and exercisable
23,299
51,881
—
104,313
—
45,808
—
35,951
261,252
Weighted
average
remaining
contractual life
0.50
1.49
5.00
2.93
4.75
4.00
4.23
3.61
3.84
The following table summarizes information about the DSUs, RSUs and PSUs granted and forfeited during the year
ended June 30, 2023.
Awards outstanding July 1, 2022
Awards granted during the year
Awards forfeited during the year
Awards outstanding June 30, 2023
DSU
—
66,391
—
66,391
PSU
—
302,500
(172,500)
130,000
RSU
—
352,500
(222,500)
130,000
Total
—
721,391
(395,000)
326,391
The average fair value of each DSU issued during the year ended June 30, 2023 is $3.52 per share (June 30, 2022 -
nil).
The fair value of each RSU is $4.20 per share.
The fair value of each of the PSUs tied to non-market based performance targets is $4.20 per share. The fair value of
each of the PSUs tied to market-based performance targets is $3.69 per share using the Monte Carlo simulation. The
key assumptions used in the Monte Carlo simulation are:
Share price
Expected volatility
Time to expiry
Risk-free interest rate
(iii) Loss per share
June 30, 2023
3.69
60.00 %
2.52 years
4.08 %
June 30, 2022
—
—
0 years
—
Both the basic and diluted loss per share have been calculated using the net loss attributable to the shareholders of
the Company as the numerator.
48
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Number of shares:
Weighted average number of shares outstanding
Shares to be issued
Weighted average number of shares used in basic earnings per share
Weighted average number of shares used in diluted earnings per share
Net loss for the period
Loss per share
Basic loss per share
Diluted loss per share
18. Related parties
June 30
2023
33,118,980
—
33,118,980
33,118,980
June 30
2022
19,636,797
11,838,457
31,475,254
31,475,254
$
$
$
(29,026) $
(110,780)
(0.88) $
(0.88) $
(3.52)
(3.52)
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 incurred no related party transactions and had no outstanding balance with related parties for the
years ended June 30, 2023 and 2022.
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 five officers.
The remuneration of directors and other members of key management personnel during the fiscal years ended June
30, 2023 and 2022 were as follows:
Short-term benefits
Long-term benefits
Shared-based payment transactions
Total compensation
19. Segment disclosures
June 30
2023
$
2,162
90
1,208
3,460
June 30
2022
$
3,271
54
8,335
11,660
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 for the years ended June 30, 2023 and 2022
as follows:
49
Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Products
Services
Total revenues
June 30
2023
$
54,018
198,512
252,530
The sales in each of these geographic locations for the years ended June 30, 2023 and 2022 as follows:
USA
Canada
All other countries
Total revenues
June 30
2023
$
234,858
3,785
13,887
252,530
June 30
2022
$
65,742
158,610
224,352
June 30
2022
$
202,886
5,334
16,132
224,352
The non-current assets, in US dollars, in each of the geographic locations as at June 30, 2023, and June 30, 2022 are
below:
Canada
USA
Total non-current assets
20. Business combinations
June 30
2023
$
6,309
374,814
381,123
June 30
2022
$
7,000
431,225
438,225
On March 28, 2022, the Company acquired NetFortris Corporation. The Company paid an aggregate purchase price
of $64,820, net of a net working capital adjustment of $(8,942), and comprised of $50,418 cash consideration,
1,494,536 common shares at a fair value of $16,801. The Company issued 1,494,536 common shares including
327,241 shares representing a holdback for indemnification purposes on closing of the acquisition. The Company
estimates that a further payment of $6,543 will be paid as part of an earn out that is up to $11,500 if certain
operating targets are met. The Company incurred estimated transaction costs in the amount of $2,939 which were
expensed in the fiscal year ended June 30, 2022. The acquisition has been accounted for using the acquisition
method under IFRS 3, Business Combinations.
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.
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Sangoma Technologies Corporation
Notes to the Consolidated financial statements
For the years ended June 30, 2023 and 2022
(in thousands of US dollars, except per share data)
Consideration
Cash consideration on closing
Net working capital adjustment
Cash held in escrow for working capital
Cash held in escrow for telecom taxes
Cash held in escrow for indemnification
Additional consideration for earn out
Common shares issued on closing
Common shares reserved in escrow for indemnification
Purchase price allocation
Cash
Trade receivables
Inventories
Property and equipment
Right-of-use assets
Other current assets
Other non-current assets
Deferred income tax asset
Accounts payable and accrued liabilities
Sales tax payable
Contract liabilities
Lease obligations on right-of-use assets
Other non-current liabilities
Intangible assets
Goodwill
$
43,868
(8,942)
350
3,400
2,800
6,543
13,122
3,679
64,820
$
1,706
1,822
416
4,172
3,277
796
370
11,091
(9,442)
(5,506)
(1,666)
(3,277)
(235)
29,000
32,296
64,820
21. Authorization of the consolidated financial statements
The consolidated financial statements were authorized for issuance by the Board of Directors on September 27,
2023.
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