UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2023

Commission File Number: 001-41175

Sangoma Technologies Corporation

(Exact name of Registrant as specified in its charter)

N/A

(Translation of registrant's name into English)

100 Renfrew Drive

Suite 100
Markham, Ontario, Canada L3R 9R6
(905) 474-1990
(Address and telephone number of registrant’s principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [ ] Form 40-F [ X ]


INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 of this Form 6-K is incorporated by reference as an additional exhibit to the registrant's Registration Statements on Form F-10 (File No. 333-261071) and Form F-3 (File No. 333-270918).



DOCUMENTS INCLUDED AS PART OF THIS REPORT




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sangoma Technologies Corporation
Date: November 8, 2023
By:/s/ Larry Stock
Name: Larry Stock
Title: Chief Financial Officer




sangomaa.jpg



SANGOMA TECHNOLOGIES CORPORATION


Condensed consolidated interim financial statements for the

three month periods ended September 30, 2023 and 2022

(Unaudited in thousands of US dollars)









100 Renfrew Drive, Suite 100,
Markham, Ontario,
Canada L3R 9R6
1

Sangoma Technologies Corporation

Three month periods ended September 30, 2023 and 2022

Table of contents

Condensed consolidated interim statements of financial position
Condensed consolidated interim statements of loss and comprehensive loss
Condensed consolidated interim statements of changes in shareholders’ equity
Condensed consolidated interim statements of cash flows
Notes to the condensed consolidated interim financial statements








2
Sangoma Technologies Corporation
Condensed consolidated interim statements of financial position
As at September 30, 2023, and June 30, 2023
(Unaudited in thousands of US dollars, except per share data)
September 30June 30
Note20232023
$ $
Assets  
Current assets  
Cash and cash equivalents411,139 11,156 
Trade and other receivables
4
20,434 21,905 
Inventories 617,890 17,970 
Income tax receivable3,030 3,192 
Contract assets1,610 1,762 
Derivative assets151,145 1,218 
Other current assets3,597 4,420 
58,845 61,623 
Non-current assets  
Property and equipment 78,682 9,152 
Right-of-use assets 812,764 13,152 
Intangible assets9149,076 157,437 
Development costs 107,296 6,569 
Deferred income tax assets 2,882 3,210 
Goodwill 12187,502 187,502 
Contract assets2,910 2,911 
Derivative assets15717 768 
Other non-current assets 428 422 
431,102 442,746 
Liabilities  
Current liabilities 
Accounts payable and accrued liabilities420,144 24,077 
Provisions13324 237 
Sales tax payable5,802 5,594 
Income tax payable113 61 
Consideration payable141,894 1,894 
Operating facility and loans1517,700 17,700 
Contract liabilities1610,053 10,909 
Lease obligations on right-of-use assets82,910 2,719 
58,940 63,191 
Long term liabilities  
Operating facility and loans1578,700 83,125 
Contract liabilities163,526 3,642 
Non-current lease obligations on right-of-use assets811,049 11,612 
Deferred income tax liabilities 13,101 14,295 
Other non-current liabilities1,546 766 
166,862 176,631 
Shareholders’ equity  
Share capital380,495 379,924 
Contributed surplus18,223 18,132 
Accumulated other comprehensive income1,242 1,335 
Accumulated deficit(135,720)(133,276)
264,240 266,115 
431,102 442,746 

Approved by the Board
(Signed)Al GuarinoDirector
(Signed)Allan BrettDirector

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
Sangoma Technologies Corporation
Condensed consolidated interim statements of loss and comprehensive loss
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
Three month periods ended
NoteSeptember 30, 2023September 30, 2022
$$
Revenue1963,028 64,051 
Cost of sales19,000 20,714 
Gross profit44,028 43,337 
Expenses  
Sales and marketing16,517 15,648 
Research and development9,315 9,429 
General and administration19,114 19,293 
Foreign currency exchange loss55 36 
  Interest expense (net)
4,8,14,15
1,662 1,578 
  Restructuring and business integration costs156 52 
Gain on change in fair value of consideration payable14— (1,581)
Loss before income tax(2,791)(1,118)
Provision for income taxes  
Current 11385 41 
Deferred11(732)817 
Net loss(2,444)(1,976)
Other comprehensive income
  
Items to be reclassified to net income
  
Change in fair value of interest rate swaps, net of tax15(93)437 
Comprehensive loss(2,537)(1,539)
Loss per share
  
Basic
17(iii)
$(0.07)$(0.06)
Diluted
17(iii)
$(0.07)$(0.06)
  
Weighted average number of shares outstanding   
Basic
17(iii)
33,126,67332,952,999
Diluted17(iii)33,126,67332,952,999

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
Sangoma Technologies Corporation
Condensed consolidated interim statements of changes in shareholders' equity
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
NoteNumber of common sharesShare capitalShares to be issuedContributed surplusAccumulated other comprehensive earningsAccumulated deficitTotal shareholders' equity
$ $ $ $ $ $
Balance, July 1, 2022
21,439,632 203,032 179,132 15,055 839 (104,250)293,808 
Net loss— — — — — (1,976)(1,976)
Change in fair value of interest rate swaps, net of tax15— — — — 437 — 437 
Deferred tax benefit on share issuance costs857,144 12,970 (12,970)— — — — 
Common shares issued for options exercised
17(i)
8,797 55 — (19)— — 36 
Common shares purchased and cancelled
17(i)
(16,200)(128)— — — — (128)
Share-based compensation expense
17(ii)
— — — 915 — — 915 
Balance, September 30, 2022
22,289,373215,929 166,162 15,951 1,276 (106,226)293,092 
Balance, July 1, 2023
33,038,367 379,924 — 18,132 1,335 (133,276)266,115 
Net loss— — — — — (2,444)(2,444)
Change in fair value of interest rate swaps, net of tax15— — — — (93)— (93)
Common shares issued for RSU exercised
17(i)
145,833 571 — (571)— — — 
Share-based compensation expense
17(ii)
— — — 662 — — 662 
Balance, September 30, 2023
33,184,200380,495 — 18,223 1,242 (135,720)264,240 
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
Sangoma Technologies Corporation
Condensed consolidated interim statements of cash flows
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
Three month periods ended
NoteSeptember 30, 2023September 30, 2022
Operating activities$ $
Net loss(2,444)(1,976)
Adjustments for:  
Depreciation of property and equipment71,073 1,306 
Depreciation of right-of-use assets 8759 996 
Amortization of intangible assets 98,361 8,577 
Amortization of development costs10972 422 
Income tax expense (recovery)11(347)858 
Income tax paid(39)(2,532)
Share-based compensation expense
17(ii)
662 915 
Unrealized foreign exchange gain(29)(46)
Accretion expense
8,14
108 303 
Gain on lease modification8— (34)
Loss on disposal of property and equipment782 81 
Gain on change in fair value of consideration payable14— (1,581)
Changes in working capital  
Trade and other receivables1,471 (1,174)
Inventories80 (1,641)
Contract assets153 (433)
Other assets817 1,229 
Sales tax payable208 (259)
Accounts payable and accrued liabilities(3,933)(943)
Provisions87 37 
Other non current liabilities780 (47)
Contract liabilities(972)(416)
Net cash provided by operating activities7,849 3,642 
Investing activities  
Purchase of property and equipment7(685)(707)
Development costs10(1,915)(1,768)
Net cash flows used in investing activities(2,600)(2,475)
Financing activities  
Repayments of operating facility and loan15(4,425)(4,425)
Repayment of lease obligations on right-of-use assets8(841)(1,066)
Common shares purchased and cancelled
17(i)
— (128)
Issuance of common shares for stock options exercised
17(i)
— 36 
Net cash flows used in financing activities(5,266)(5,583)
Decrease in cash and cash equivalents(17)(4,416)
Cash and cash equivalents, beginning of the period
11,156 12,702 
Cash and cash equivalents, end of the period
11,139 8,286 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited 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 was incorporated in Canada, its legal name is Sangoma Technologies Corporation and its primary operating subsidiaries for fiscal 2024 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

Statement of compliance and basis of presentation

These interim financial statements for the three month periods ended September 30, 2023 and 2022 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”).

These interim financial statements do not include all of the disclosures required by International Financial Reporting Standards (“IFRS Accounting Standards”) for annual consolidated financial statements and accordingly should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2023 (“annual financial statements”) prepared in accordance with IFRS Accounting Standards.

The condensed consolidated interim financial statements were authorized for issue by the Board of Directors on November 8, 2023.

3.    Significant accounting judgements, estimates and uncertainties

These unaudited condensed consolidated interim financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as those of the audited consolidated financial statements for the year ended June 30, 2023. They were prepared using the same critical estimates and judgments in applying the accounting policies as those of the audited consolidated financial statements for the year ended June 30, 2023.

The preparation of the interim financial statements requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and reported assets, liabilities, revenue and expenses, consistent with those described in the Company’s annual financial statements and as described in these interim financial statements. Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical experience and other assumptions that are considered reasonable in the circumstances. The actual amount or values may vary in certain instances from the assumptions and estimates made. Changes will be recorded, with the corresponding effect on profit or loss, when, and if, better information is obtained.




7
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
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:

September 30June 30
20232023
$ $
Cash at bank and on hand11,139 11,156 

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 September 30, 2023 and June 30, 2023 the Company had no demand deposits and 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:

Three month periods ended
September 30September 30
Note20232022
$$
Interest income (6)— 
Interest expense151,560 1,275 
Accretion expense
8, 14
108 303 
Interest expense (net)1,662 1,578 

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.

September 30June 30
Note20232023
$ $
Trade receivables15,753 16,060 
Receivable related to working capital adjustment4,681 5,845 
Trade and other receivables20,434 21,905 

8
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
During the period ended September 30, 2023, the Company received $1,164 (September 30, 2022 - $nil) cash from the escrow account for the working capital provision related to certain indemnification assets recorded in respect of liabilities assumed on the acquisition of NetFortris. The remaining balance is $4,681 as at September 30, 2023 (June 30, 2023 - $5,845).

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:
September 30June 30
20232023
$ $
Trade receivables aging:  
0-30 days11,876 11,759 
31-90 days3,131 3,313 
Greater than 90 days1,989 2,554 
16,996 17,626 
Expected credit loss provision(1,243)(1,566)
15,753 16,060 

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

September 30June 30
20232023
$ $
Expected credit loss provision:  
Expected credit loss provision, beginning balance(1,566)(2,281)
Net change in expected credit loss provision during the period
323715
Expected credit loss provision, ending balance(1,243)(1,566)

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.

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 and align this planning and budgeting process with its financing activities through its capital management process.

The Company holds sufficient cash and cash equivalents and working capital, maintained through stringent cash flow management, to ensure sufficient liquidity is maintained. The following are the undiscounted contractual maturities of significant financial liabilities of the Company as at September 30, 2023:

9
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)


within 12 months12-24 months24-36 months>36 monthsTotal
$ $ $ $ $
Accounts payable and accrued liabilities20,144 — — — 20,144 
Sales tax payable5,802 — — — 5,802 
Consideration payable1,894 — — — 1,894 
Operating facility and loans17,700 22,050 20,600 36,050 96,400 
Lease obligations on right of use assets3,281 3,097 2,144 6,863 15,385 
Other non-current liabilities— — — 1,546 1,546 
48,821 25,147 22,744 44,459 141,171 

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), 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. As at September 30, 2023, a 10% depreciation or appreciation of the CAD, EUR, GBP, INR, PHP, AUD and COP currencies against the U.S. dollar would have resulted in an approximate $78 (June 30, 2023 - $76) 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 September 30, 2023, a change in the interest rate of 1% per annum would have an impact of approximately $753 (September 30, 2022 - $493) 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. As described in detail in Note 15, the fair value of the interest rate swaps was a current asset of $1,145 and non-current asset of $717 on September 30, 2023 (June 30, 2023 - current asset of $1,218 and non-current asset of $768).

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 period 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 condensed consolidated interim statements of financial position are comprised of:
    
10
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
September 30June 30
20232023
$ $
Finished goods13,526 13,860 
Components and parts5,543 5,234 
19,069 19,094 
Provision for obsolescence(1,179)(1,124)
Net inventory carrying value17,890 17,970 

11
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
7.    Property and equipment
Office furnitureStockroom
and computerSoftware and productionTradeshowLeasehold
equipmentequipmentequipmentimprovementsTotal
Cost$ $ $ $ $ $
Balance at July 1, 2022
4,737 458 10,451 47 475 16,168 
Additions846 — 3,170 — — 4,016 
Disposals(217)— (754)— (25)(996)
Balance at June 30, 2023
5,366 458 12,867 47 450 19,188 
Additions221 — 440 — 24 685 
Disposals— — (139)— — (139)
Balance at September 30, 2023
5,587 458 13,168 47 474 19,734 
Accumulated depreciation      
Balance at July 1, 2022
2,452 413 2,759 47 223 5,894 
Depreciation expense976 21 3,670 — 62 4,729 
Disposals(64)— (523)— — (587)
Balance at June 30, 2023
3,364 434 5,906 47 285 10,036 
Depreciation expense199 5 857 — 12 1,073 
Disposals— — (57)— — (57)
Balance at September 30, 2023
3,563 439 6,706 47 297 11,052 
Net book value as at:      
Balance at June 30, 2023
2,002 24 6,961 — 165 9,152 
Balance at September 30, 2023
2,024 19 6,462 — 177 8,682 

For the three month period ended September 30, 2023, depreciation expense of $245 (September 30, 2022 - $263) was recorded in general and administration expense in the condensed consolidated interim statements of loss and comprehensive loss. Depreciation expense in the amount of $828 was included in cost of sales for the three month period ended September 30, 2023 (September 30, 2022 - $1,043).

12
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited 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:
NoteRight-of-use assets
$
Present value of leases 
Balance as at July 1, 2022
23,230 
Additions41 
Terminations(1,089)
Balance at June 30, 2023
22,182 
Additions371 
Terminations(1,423)
Balance at September 30, 2023
21,130 
Accumulated depreciation and repayments 
Balance as at July 1, 2022
6,256 
Depreciation expense3,778 
Terminations(1,004)
Balance at June 30, 2023
9,030 
Depreciation expense759 
Terminations(1,423)
Balance at September 30, 2023
8,366 
Net book value as at: 
June 30, 202313,152 
September 30, 202312,764 

NoteLease Obligations
$
Present value of leases 
Balance as at July 1, 2022
17,989 
Additions41 
Adjustments due to lease modification(36)
Repayments(4,072)
Accretion expense476 
Terminations(54)
Effects of movements on exchange rates(13)
Balance at June 30, 2023
14,331 
Additions371 
Repayments(841)
Accretion expense108 
Effects of movements on exchange rates(10)
Balance at September 30, 2023
13,959 
Lease Obligations - Current2,910 
Lease Obligations - Non-current11,049 
13,959 
13
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
9.    Intangible assets
Other
PurchasedCustomerpurchased
NotetechnologyrelationshipsBrandintangiblesTotal
$ $ $ $ $
Cost
Balance at July 1, 2022
110,123 126,456 6,787 2,748 246,114 
Balance at June 30, 2023
110,123 126,456 6,787 2,748 246,114 
Balance at September 30, 2023
110,123 126,456 6,787 2,748 246,114 
Accumulated amortization     
Balance at July 1, 2022
23,906 25,464 2,820 2,555 54,745 
Amortization expense17,670 15,357 766 139 33,932 
Balance at June 30, 2023
41,576 40,821 3,586 2,694 88,677 
Amortization expense4,418 3,775 158 10 8,361 
Balance at September 30, 2023
45,994 44,596 3,744 2,704 97,038 
Net book value as at:     
Balance at June 30, 2023
68,547 85,635 3,201 54 157,437 
Balance at September 30, 2023
64,129 81,860 3,043 44 149,076 

Amortization expense is included in general and administration expense in the condensed consolidated interim statements of loss and comprehensive loss. For the three month period ended September 30, 2023, amortization expense was $8,361 (September 30, 2022 - $8,577).

14
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
10.    Development costs
Cost $
Balance at July 1, 2022
5,969 
Additions7,250 
Cost fully amortized(380)
Investment tax credits(788)
Balance at June 30, 2023
12,051 
Additions1,915 
Investment tax credits(216)
Balance at September 30, 2023
13,750 
Accumulated amortization 
Balance at July 1, 2022
(3,108)
Amortization(2,705)
Cost fully amortized331 
Balance at June 30, 2023
(5,482)
Amortization(972)
Balance at September 30, 2023
(6,454)


September 30, 2023June 30, 2023
$ $
Net capitalized development costs7,2966,569

Amortization expense is included in general and administration expense in the consolidated interim statements of loss and comprehensive loss. For the three month period ended September 30, 2023, amortization was $972 (September 30, 2022 - $422). In addition to the above amortization, the Company has recognized $8,343 of engineering expenditures as an expense during the three month period ended September 30, 2023 (September 30, 2022 - $9,007).

15
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
11.    Income tax

The Company income tax expense is determined as follows:

Three month periods ended
September 30, 2023September 30, 2022
Statutory income tax rate26.15%26.37%
$ $
Loss before income tax(2,791)(1,118)
Expected income tax expense(715)(292)
Difference in foreign tax rates8 (8)
Share based compensation 170 239 
Other non deductible expenses(30)19 
Changes in estimates194 — 
Scientific Research and Experimental Development (SR&ED)26 — 
Sec 481(a) adjustment— 34 
Gain on consideration payable— (415)
Stock options deduction revaluation adjustment— 1,167 
Earn-out amortization— 46 
Changes in tax benefits not recognized— 68 
Income tax expense(347)858 
The Company’s income tax expense is allocated as follows:$ $
Current tax expense385 41 
Deferred income tax expense(732)817 
Income tax expense(347)858 

12.    Goodwill

The carrying amount and movements of goodwill was as follows:
$
Balance at July 1, 2022
210,009 
Goodwill Impairment(22,507)
Balance at June 30, 2023
187,502 
Balance at September 30, 2023
187,502 

There is no addition to goodwill for the three month period ended September 30, 2023. The Company has evaluated for triggers of impairment at September 30, 2023 and has not identified any indicators of impairment.

16
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
13.    Provisions

Sales returnsStock
Warranty& allowancesrotation
provisionprovisionprovisionTotal
$ $ $ $
Balance at July 1, 2022
73 127 — 200 
Additional provision recognized11 (68)94 37 
Balance at June 30, 2023
84 59 94 237 
Additional provision recognized (used)48 (5)44 87 
Balance at September 30, 2023
132 54 138 324 

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

During the three month period ended September 30, 2023, the Company made payments of $nil (September 30, 2022 - $nil), recognized accretion expense of $nil (September 30, 2022 - $59), and recognized a loss on change in fair value of $nil (September 30, 2022 - gain of $1,581).

The fair value of consideration payable as of September 30, 2023 in the amount of $1,894 (June 30, 2023 - $1,894) was determined using an effective tax rate of 26.22% (June 30, 2023 – 26.22%) and a discount rate of 4.9% (June 30, 2023 – 4.9%). The fair value of the consideration payable is dependent upon the Company’s ability to utilize the underlying tax losses as they become available in each reporting period.



The fair value of consideration payable as at September 30, 2023 is summarized below:

$
Opening balance, July 1, 2022
12,768
Payments(8,334)
Accretion value of earn out435
Gain on change in fair value(2,975)
Ending balance, June 30, 2023
1,894
Ending balance, September 30, 2023
1,894
Consideration payable - Current1,894

15.    Operating facility and loan and derivative assets and liabilities

(a)    Operating facility and loan
17
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)

(i)On October 18, 2019, the Company entered into a 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. The balance outstanding against this term loan facility as of September 30, 2023 is $11,600 (June 30, 2023 - $13,050). As at September 30, 2023, term loan facility balance of $5,800 (June 30, 2023 - $5,800) is classified as current and $5,800 (June 30, 2023 - $7,250) as long-term in the condensed consolidated interim 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.

The second loan is repayable, on a straight-line basis, through quarterly payments of $2,188 and matures on December 31, 2024. As at September 30, 2023, $8,750 (June 30, 2023 - $8,750) is classified as current and $21,875 (June 30, 2023 - $24,063) is classified as long-term in the condensed consolidated interim statements of financial position.

(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. The loan 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 September 30, 2023, $3,150 (June 30, 2023 - $3,150) is classified as current and $37,125 (June 30, 2023 - $37,912) is classified as long-term in the condensed condensed consolidated interim statements of financial position.

(iv)On April 6, 2023 the Company increased 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 September 30, 2023, the amount of $13,900 (June 30, 2023 - $13,900) remains outstanding and is classified as long term in the condensed consolidated interim statements of financial position.

For the three month period ended September 30, 2023, the Company incurred interest costs to service its borrowing facilities, comprising of the loans and operating facilities, in the amount of $1,560 (September 30, 2022 - $1,275). During the three month period ended September 30, 2023, the Company borrowed $nil (September 30, 2022 - $nil) in term loans and repaid $4,425 ( September 30, 2022 - $4,425).

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 September 30, 2023, and June 30, 2023 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 condensed consolidated interim statements of financial position. Upon entering into a hedging arrangement with an intent to apply hedge accounting, the Company formally documents the hedge relationship and designates the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. When the Company determines that a derivative financial instrument qualifies as a cash flow hedge and is effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive loss, net of tax in the condensed consolidated interim statements of financial position and will be reclassified to earnings when the hedged item affects earnings.

18
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
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 September 30, 2023, the notional amount of the interest rate swap was $38,149 (June 30, 2023 – $39,621). The interest rate swap has a weighted average fixed rate of 1.80% (June 30, 2023 – 1.80%) and have been designated as an effective cash flow hedge and therefore qualifies for hedge accounting.

As at September 30, 2023, the fair value of the interest rate swap assets were valued at current of $1,145 (June 30, 2023 - $1,218) and non-current $717 (June 30, 2022 – $768). The current and non-current derivative assets were recording in the condensed consolidated interim statements of financial position.

For the three month period ended September 30, 2023, the change in fair value of the interest rate swaps, net of tax, was a loss of $93 (September 30, 2022 – gain of $437) recorded in other comprehensive loss in the condensed consolidated interim 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 September 30, 2023, and June 30, 2023 are below:
$
Opening balance, July 1, 2022
15,067
Revenue deferred during the period
23,839
Deferred revenue recognized as revenue during the period
(24,355)
Ending balance, June 30, 2023
14,551
Revenue deferred during the period
9,185
Deferred revenue recognized as revenue during the period
(10,157)
Ending balance, September 30, 2023
13,579
Contract liabilities - Current10,053
Contract liabilities - Non-current3,526
13,579
19
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited 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 September 30, 2023 and 2022, the Company’s issued and outstanding common shares consist of the following:

Three month periods ended
September 30, 2023September 30, 2022
##
Shares issued and outstanding:
Outstanding, beginning of the period
33,038,36721,439,632
Shares issued as installment for shares to be issued—857,144
Shares purchased and cancelled—(16,200)
Shares issued upon exercise of options—8,797
Shares issued upon exercise of RSUs145,833—
Outstanding, end of the period
33,184,20022,289,373

During the three month period ended September 30, 2023, a total of 145,833 (September 30, 2022 – nil) shares were issued upon the exercise of Restricted Share Units, and the Company recorded a charge of $571 (September 30, 2022 – $nil) from contributed surplus to share capital.

(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.

Under the 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 one 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.

For the three month period ended September 30, 2023, the Company recognized share-based compensation expense in the amount of $662 (September 30, 2022 - $915).




20
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
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 three month period ended September 30, 2023 and September 30, 2022, the Corporation did not grant any options.

The following table shows the movement in the stock option plan:
NumberWeighted
of optionsaverage price
# $
Balance, July 1, 2022
1,207,90814.02
Exercised(8,797)(4.04)
Expired(21,332)(11.60)
Forfeited(14,226)(12.86)
Balance, September 30, 2022
1,163,55314.16
Balance, July 1, 2023
723,05113.58
Forfeited(22,939)(12.57)
Balance, September 30, 2023
700,11213.61


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

Three month periods ended
September 30, 2023September 30, 2022
Number ofWeightedNumber ofWeighted
Number ofstock optionsaverageNumber ofstock optionsaverage
stock optionsoutstanding andremainingstock optionsoutstandingremaining
Exercise priceoutstandingexercisablecontractual lifeoutstandingand exercisablecontractual life
$3.01 - $5.00
— — 018,455 17,112 0.24
$5.01 - $7.00
61,766 59,606 0.2469,393 52,139 1.24
$7.01 - $9.00
209,500 65,507 3.75245,000 — 4.75
$9.01 - $12.00
104,698 71,389 1.68196,926 95,145 2.68
$12.01 - $15.00
48,125 20,005 3.5055,000 — 4.50
$15.01 - $18.00
150,045 88,023 2.75180,572 56,617 3.75
$18.01 - $20.00
22,856 11,444 2.75285,711 71,431 3.98
$20.01 - $27.00
103,122 64,598 2.36112,496 42,755 3.36
700,112 380,572 2.661,163,553 335,199 3.63







21
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
Share Units

The following table summarizes information about the DSUs, RSUs and PSUs granted, exercised and forfeited during the three month period ended September 30, 2023.

DSUPSURSUTotal
Awards outstanding July 1, 2023
66,391 130,000 130,000 326,391 
Awards granted during the period
— — 102,500 102,500 
Awards exercised during the period
— — (145,833)(145,833)
Awards forfeited during the period
— (17,500)(11,667)(29,167)
Awards outstanding September 30, 2023
66,391 112,500 75,000 253,891 

During the three month period ended September 30, 2023, 102,500 RSU were granted (September 30, 2022 – nil). The fair value of each RSU issued during three month period ended September 30, 2023 is $3.98 per share (September 30, 2022 – nil).

During the three month periods11,139 ended September 30, 2023 and September 30, 2022, no PSU or DSU were issued.


(iii)Loss per share

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.

Three month periods ended
September 30, 2023September 30, 2022
Number of shares:
Weighted average number of shares outstanding33,126,67321,971,685
Shares to be issued—10,981,314
Weighted average number of shares used in basic earnings per share33,126,67332,952,999
Weighted average number of shares used in diluted earnings per share33,126,67332,952,999
Net loss for the period$(2,444)$(1,976)
Loss per share
Basic loss per share$(0.07)$(0.06)
Diluted loss per share$(0.07)$(0.06)

18.    Related parties

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

The Company had incurred no related party transactions and had no outstanding balance with related parties for the three month periods ended September 30, 2023 and 2022.

19.    Segment disclosures

22
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
The Company operates as 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 three month periods ended September 30, 2023 and 2022 as follows:





Three month periods ended
September 30
20232022
$ $
Products11,872 15,727 
Services51,156 48,324 
Total revenues63,028 64,051 

The sales in each of these geographic locations for the three month periods ended September 30, 2023 and 2022 as follows:

Three month periods ended
September 30
20232022
$$
USA58,693 59,682 
Canada990 1,008 
All other countries3,345 3,361 
Total revenues63,028 64,051 






The non-current assets, in US dollars, in each of the geographic locations as at September 30, 2023, and June 30, 2023 are below:
September 30June 30
20232023
$ $
Canada5,884 6,309 
USA366,373 374,814 
Total non-current assets372,257 381,123 

23
Sangoma Technologies Corporation
Notes to the condensed consolidated interim financial statements
For the three month periods ended September 30, 2023 and 2022
(Unaudited in thousands of US dollars, except per share data)
20.    Authorization of the consolidated financial statements

The condensed consolidated interim financial statements were authorized for issuance by the Board of Directors on November 8, 2023.

24











sangomab.jpg


Management discussion and analysis of financial
condition and results of operations for the
three month period ended September 30, 2023





TABLE OF CONTENTS





INTRODUCTION

As used in this Management Discussion and Analysis (“MD&A”), unless the context indicates or requires otherwise, all references to the “Company”, “Sangoma”, “we”, “us”, or “our” refer to Sangoma Technologies Corporation, together with our subsidiaries, on a consolidated basis as constituted on September 30, 2023. The MD&A is for the first quarter of fiscal 2024 ended September 30, 2023 and is comparing it with the same period in the previous year. This MD&A should be read in conjunction with Sangoma’s unaudited interim consolidated financial statements for the three month period ended September 30, 2023 and Sangoma’s audited annual consolidated financial statements and related notes for the year ended June 30, 2023 (“Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts are in thousands of United States dollars except where otherwise indicated.

Additional information about us, including copies of our continuous disclosure materials, is available on our website at www.sangoma.com, through the EDGAR website at www.sec.gov or through the SEDAR+ website at www.sedarplus.ca.

This MD&A is dated as of November 8, 2023.



NON-IFRS MEASURES

This MD&A contains references to certain non-IFRS financial measures such as Adjusted EBITDA and Adjusted Cash Flow. Non-IFRS financial measures are used by management to evaluate the performance of the Company and do not have any meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other reporting issuers. Non-IFRS financial measures used herein have been applied on a consistent basis. “Adjusted EBITDA” means earnings before income taxes, interest expense (net), share-based compensation, depreciation (including for right-of-use assets), amortization, restructuring and business integration costs, exchange listing expense, business acquisition costs, goodwill impairment and change in fair value of consideration payable. Adjusted EBITDA is a measure used by many investors to compare issuers. “Adjusted Cash Flow” means net cash flows from operating activities as defined by IFRS less the capitalized development costs that Sangoma amortized during the period, plus interest expense (net), business acquisition costs paid, restructuring and business integration costs, and exchange listing expense. We believe that Adjusted EBITDA and Adjusted Cash Flow are useful supplemental information as they provide an indication of the results generated by the Company's main business activities before taking into consideration how they are financed, taxed, depreciated or amortized. Investors are cautioned that non-IFRS financial measures, such as those presented herein, should not be construed as an alternative to net income or cash flow determined in accordance with IFRS. The reconciliation of the closest IFRS measure to each non-IFRS measure is set out on pages 16, and 19 herein.

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements, including statements regarding the future success of our business, development strategies and future opportunities. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to
3



the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking statements include, but are not limited to, statements relating to management’s guidance on revenue and Adjusted EBITDA, statements relating to expected inventory levels, statements relating to future lease and interest payments, statements relating to the impact of the continuing COVID-19 pandemic, statements concerning estimates of expected expenditures, statements relating to expected future production and cash flows, and other statements which are not historical facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions indicate forward-looking statements.

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

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other events contemplated by the forward-looking statements will not occur. Although Sangoma believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct as these expectations are inherently subject to business, economic and competitive uncertainties and contingencies. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, risks and uncertainties associated with changes in exchange rate between the Canadian dollar and other currencies (in particular the United States’ (“US”) dollar), changes in technology, changes in the business climate, changes to macroeconomic conditions, including (i) inflationary pressures and potential recessionary conditions, as well as actions taken by central banks and regulators across the world in an attempt to reduce, curtail and address such pressures and conditions, including any increases in interest rates, and (ii) the effects of adverse developments at financial institutions, including bank failures, that impact general sentiment regarding the stability and liquidity of banks, and the resulting impact on the stability of the global financial markets at large, risks related to the COVID-19 (coronavirus) pandemic and any resurgence thereof, our ability to identify and remediate material weaknesses and significant deficiencies in our internal controls, changes in the regulatory environment, the imposition of tariffs, the decline in the importance of the PSTN (as hereinafter defined), impairment of goodwill and new competitive pressures, and acts of terrorism and war, hostilities and conflicts, including, but not limited to, Russia’s invasion of Ukraine in February 2022 (and associated changes in global trade policies and economic sanctions), and the other risk factors described in our most recently filed Annual Information Form for the fiscal year ended June 30, 2023.

The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement. Sangoma undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by law.
4



OVERVIEW

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

Communications as a Service (CaaS) Portfolio

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

Unified Communications as a Service (“UCcaS”)
Trunking as a Service (“TaaS”)
Contact Center as a Service (“CCaaS”)
Communications Platform as a Service (“CPaaS”)
Video Meetings as a Service (“MaaS”)
Collaboration as a Service (“Collab aaS”)
Desktop as a Service (“DaaS”)

Unified Communications as a Service (UCaaS)

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

Cloud-Based Business Phone Solution

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

On-Premise Business Phone Solution

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

5



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

IP Deskphones: Sangoma offers a full line of phones that work with both our cloud and on-premise systems that are perfect for every user type, from casual to call center to managers and executives.

Sangoma’s product line includes entry-level, mid-range, and executive-level phones. All models include HD Voice and plug-and-play deployment. Sangoma’s range of IP phones are customized to seamlessly integrate with all of our UC Systems and provide zero touch installation, simplified system management, and instant access to a wide range of features.

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

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

Trunking as a Service (TaaS)

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

Retail SIP Trunking

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

Wholesale SIP Trunking

Sangoma’s wholesale SIP trunking offer is now available following the acquisition of VoIP Innovations. Pricing for wholesale SIP trunking is usage-based but with a larger monthly minimum commitment. This
6



includes origination, termination, SMS/MMS, e911, and fraud mitigation. Typically, very large businesses or service providers who resell SIP trunks would utilize this type of service.

Fax as a Service

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

Contact Center as a Service (CCaaS)

Contact Center as a Service (CCaaS) is our cloud-based contact center, or customer experience, offering. It provides robust contact center capabilities running in various ways: either standalone, in conjunction with our other cloud services (such as UCaaS), or integrated “inside” our UCaaS product in a simplified version. This latter solution is intended for ‘departmental’ type usage, by companies that are not pure-play contact centers, but that might have a department such as customer service or technical support that operate inside that company almost like a mini contact center.

Communications Platform as a Service (CPaaS)

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

Video Meetings as a Service (MaaS)

Sangoma Meet is our video meetings, cloud-based service accessible from any device, be it desktop or mobile. It enables file sharing on screen so collaboration with co-workers is enhanced, integrates seamlessly with your calendar, and enables PSTN phone calls. Sangoma Meet is available in free and chargeable tiers.

Collaboration as a Service (Collab aaS)

Collaboration as a Service (Collab aaS) is Sangoma’s cloud-based offering for enabling people to work together more productively. This service is called TeamHub. It allows users to interact using any of the various forms of communications, including chatting, calling, and video. TeamHub integrates Sangoma’s softphone client software applications (desktop and mobile) and is designed to allow communications to start in one mode (such as chat), and move through different modes very elegantly, in effect ‘upgrading’
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that mode of communications to a voice call in real time, and/or upgrading that voice call to a video meeting.

Desktop as a Service (DaaS)

Sangoma’s Desktop as a Service helps companies adapt to today’s modern, flexible, and remote workforce. It is the most secure method for staff to access their tools and applications from any location to do their work, delivers simplified IT administration and cuts down on the CapEx of deploying PCs. Sangoma is one of the only companies that can offer communications capability inside a DaaS product.

MSP Portfolio

Sangoma’s cloud-based Managed Service Provider (“MSP”) offerings deliver mission critical communication services that businesses need and complement our full line of Communications as a Service solutions. The MSP product line is built upon a tightly integrated, enterprise grade, and end-to-end managed network, which is all supported by an expert 24/7 network engineering team. The current MSP offering includes three primary services:

Managed Security: Sangoma provides a cloud-based service, sometimes called Unified Threat Management (“UTM”), whereby the customers network, including voice and data traffic, are secured by intrusion prevention and detection capabilities. The network security service helps protect customers against attacks and data losses from spam, viruses, ransomware, botnets, etc.

Managed SD-WAN: Sangoma offers a cloud-based software-defined approach to managing a customers wide area network. The SD-WAN service enables network redundancy through the ability to manage multiple internet connections from multiple providers, which is seen as one seamless connection for the customer. If one connection fails, the customer does not lose connectivity and has uninterrupted uptime. The service also provides traffic shaping whereby certain types of traffic can be given priority or forced in priority.

Managed Access: Sangoma also provides a robust broadband connectivity solution, including network monitoring, analytics, backup, and a fully PCI-compliant offering for payment card and credit card transactions. Additionally, our Managed Access solution integrates with Managed Security and Managed SD-WAN services, delivering unique capabilities such as secure, end-to-end peering connections to critical destinations (such as Public Cloud sites like AWS and Azure) and Quality of Service commitments.

Network Interconnection Products

In addition to the CaaS and MSP offerings described above, Sangoma also offers network interconnection products. These products connect different types of networks together, such as VoIP networks to PSTN networks, or VoIP networks to mobile networks or different types of VoIP networks.

Session Border Controllers (SBCs)

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

VoIP Gateways

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

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

All Sangoma’s gateways have broad interoperability certifications.

PSTN Interface and Media Processing Boards

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

Open-Source Software Products

Asterisk and FreePBX

Sangoma is the primary developer and sponsor of the Asterisk project, the world’s most widely used open-source communications software, and the FreePBX project, the world’s most widely used open-source PBX software.

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


9



OVERALL PERFORMANCE

Operational

Sangoma is a trusted leader in delivering cloud-based CaaS and MSP solutions for businesses of all sizes. Customers include companies from small/medium businesses (SMB’s) right up to large enterprises who are looking for all the advantages of cloud-based communications and managed network services at a fair price. In addition to those cloud-based Services, Sangoma also has a broad suite of Products to complement its Services.

Enterprises, SMBs and carriers in over 150 countries rely on Sangoma’s technology as part of their mission-critical infrastructures. Through a worldwide network of distribution partners, Sangoma delivers high-quality services and products, some of which carry the industry’s first lifetime warranty.

Sangoma has always been operated and managed as a single economic entity. There is one management team that directs the activities of all aspects of the Company and it is managed globally by our executive team. As a result, we believe that we have one reporting segment, being the consolidated Company. Over time, this may change as the Company grows and when this occurs, we will reflect the change in our reporting practice.

Revenue

Sangoma generates revenue from both Services and Products. Our Services revenue is generated primarily from customers entering recurring revenue agreements. Product revenues are comprised of the sale of products and services that generate non-recurring revenue.

Innovation

As a technology company, Sangoma is continuously working on a large number of projects across its broad portfolio of existing products and services. While the Company has introduced several new additions to its portfolio over the last few years, the majority of the Company’s investment in Research and Development (“R&D”) is dedicated to sustaining, improving on and enhancing its broad portfolio of existing products and services. Sangoma believes that innovation is essential to a technology company’s future. The Company also believes that R&D investment is necessary in order to address the needs of the Company’s wide-ranging group of customers (which include business of all sizes including service providers, enterprises, small-medium sized businesses, and original equipment manufacturers) in over 150 countries, to keep pace with technology developments in the cloud communications industry, to meaningfully compete in that industry, and to achieve and maintain market acceptance.

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

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Sangoma continues to invest in R&D to develop new products and to improve existing offerings with spending on R&D increasing each year.

Sales and marketing

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

Sales

Sangoma uses a dual sales path ‘go to market’ approach: direct sales to some of our largest customers and indirect distribution to most of our other clients.

•Direct Sales is typically used for selling to ‘service providers’, OEMs and large enterprise type businesses.

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

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

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

•Indirect Sales: In most cases, Sangoma uses the indirect or channel model. We value the ‘multiplier effect’ of a channel model (i.e., one of our salespeople sells to dozens of partners who sell to hundreds/thousands of customers), the more ‘local nature’ of a channel partner who is often based quite near to their end customers, and the more cost-effective structure of indirect distribution in a typical sales cycle. In such cases, Sangoma utilizes this indirect distribution model to reach the full breadth of customers, often based upon a two-tier Channel model:

The ‘upper tier’ of the indirect model is typically made up of Distributors or Master Agents, who normally sell not to the end customer, but to the ‘second tier’ of the channel. Master Agents are now sometimes called Technology Service Brokers or Telecom Solution Distributors. This upper tier of the channel tends to be larger organizations and cover broader geographic regions.

The ‘second tier’ of the indirect model is normally made up of Resellers and Agents. Distributors typically sell to resellers, and Master Agents typically sell to Agents. The Resellers and Agents then sell to end users (with some performing other ancillary services such as installation and/or support).
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The second tier tend to be smaller organizations (though not always) and are usually more ‘local’ in nature.
Sangoma has parts of its sales team that focus on Direct customers, whereas the majority focuses on the Channel. In the Channel, partners require frequent attention to keep Sangoma ‘on their mind’ in a crowded product marketplace. Therefore, a portion of the Channel sales team services the distributors and master agents as the upper tier of the channel, while a different part of the team focuses on the resellers/agents. Finally, Sangoma has professional sales teams across all our key geographic regions as well.

Marketing

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

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

•leads generation as one of the front-end steps in customer acquisition.

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

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

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RESULTS OF OPERATIONS

All amounts are in thousands of United States dollars except where otherwise indicated.

SUMMARY

The following table outlines our unaudited condensed consolidated interim statements of loss and comprehensive loss for the periods indicated:

Three month periods ended
September 30
20232022ChangeChange
$$$%
Revenue63,028 64,051 (1,023)(2)%
Cost of sales19,000 20,714 (1,714)(8)%
Gross profit44,028 43,337 691 2%
Expenses
Sales and marketing16,517 15,648 869 6%
Research and development9,315 9,429 (114)(1)%
General and administration19,114 19,293 (179)(1)%
Foreign currency exchange loss55 36 19 53%
Interest expense (net)1,662 1,578 84 5%
Restructuring and business integration costs156 52 104 200%
Gain on change in fair value of consideration payable— (1,581)1,581 (100)%
Loss before income tax(2,791)(1,118)(1,673)150%
Provision for income taxes
Current385 41 344 839%
Deferred(732)817 (1,549)(190)%
Net loss(2,444)(1,976)(468)24%
Other comprehensive income
Items to be reclassified to net income
Change in fair value of interest rate swaps, net of tax
(93)437 (530)(121)%
Comprehensive loss(2,537)(1,539)(998)65%
Loss per share
Basic$(0.07)$(0.06)$(0.01)23%
Diluted$(0.07)$(0.06)$(0.01)23%
Weighted average shares outstanding (thousands)
Basic33,127 32,953 174 1%
Diluted33,127 32,953 174 1%
    
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REVIEW OF OPERATIONS

Revenue

Three month periods ended
September 30, 2023September 30, 2022ChangeChangeJune 30, 2023ChangeChange
$$$%$$%
Service revenues51,15648,3242,8326%50,2149422%
Percent of total revenues81%75%6%8%79%2%2%
Product revenues11,87215,727(3,855)(25)%13,466(1,594)(12)%
Percent of total revenues19%25%(6)%(24)%21%(2)%(2)%
Total revenues63,02864,051(1,023)(2)%63,680(652)(1)%

Sales for the first quarter of fiscal 2024 ended September 30, 2023 were $63,028, down 2% from the $64,051 in the comparable first quarter of fiscal 2023. The year-over-year decrease in quarterly revenue primarily resulted from the the decline in product revenue. The decreased Product revenue is now more in line with the Product revenue we experienced prior to the COVID-19 outbreak and the corresponding hold on Capex spending by customers given the resulting global economic conditions. Services revenue was up 6% from the same quarter of the prior year and up 2% from the immediately preceding quarter. Service revenue represented 81% of total revenue this quarter, up from 75% in the same quarter of the prior year, and consistent with our organic growth objective.

When compared sequentially, sales was down 1% from $63,680 in the fourth quarter of fiscal 2023. This decrease is a reflection of the increase in Services revenue and a larger decrease in Product revenue.

Cost of revenue and gross profit

Three month periods ended
September 30
20232022ChangeChange
$$$%
Cost of sales19,00020,714(1,714)(8)%
Gross profit44,02843,3376912%

The cost of sales for the first quarter ended September 30, 2023 was $19,000 compared to $20,714 last year, drive primarily by the decrease in Product revenues.

Gross profit for the first quarter ended September 30, 2023 was $44,028, up 2% from the $43,337 realized in the same quarter ended September 30, 2022. Gross margin for the first quarter of fiscal 2024 was approximately 70% of revenue. This is up 2% from the same quarter last year helped by the increase in the service revenues and the revenue mix.

Expenses

Consistent with IFRS, costs are allocated by function except for the impact of foreign exchange, which can result in swings between time periods.

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Three month periods ended
September 30
20232022ChangeChange
$$$%
Sales and marketing16,517 15,648 869 6%
Research and development9,315 9,429 (114)(1)%
General and administration19,114 19,293 (179)(1)%
Foreign currency exchange loss55 36 19 53%

Sales and marketing

Sales and marketing expense was $16,517 for the first quarter of fiscal 2024, an increase from the $15,648 incurred in the same quarter of fiscal 2023, as the Company builds out a stronger and more effective sales and marketing team, which results in higher operating expenses.

Research and development

A portion of the Company’s R&D costs are capitalized each period and amortized on a straight-line basis over three years (see the audited consolidated financial statements and related notes for the fiscal year ended June 30, 2023, available at www.sedarplus.ca and www.sec.gov).

The engineering expenses incurred, and the development costs amortized during the first quarter of fiscal 2024 were $9,315. This was lower than the $9,429 incurred in the same quarter last year, mostly as a result of higher capitalization of labor costs on development projects, but no change as a percentage of revenue at approximately 15% due to the nature of the development projects being worked on. For the quarter ended September 30, 2023, the Company did not have any significant projects that have not yet generated revenue, nor did it have any products or services that are not fully developed, and which are material to the Company.

General and administration

General and administration expenses were $19,114 for the quarter ended September 30, 2023, compared to $19,293 in the same period of fiscal 2023. The decrease in spending is driven primarily by the non-cash expenses including share-based compensation, amortizations, projects depreciation, and early stages of cost savings initiatives.

Foreign exchange

Foreign exchange loss for the quarter ended September 30, 2023 was $55, compared to a loss of $36 in the same period of fiscal 2023.


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Three month periods ended
September 30
20232022ChangeChange
$$$%
Interest expense (net)1,662 1,578 84 5%
Restructuring and business integration costs156 52 104 200%
Gain on change in fair value of consideration payable— (1,581)1,581 (100)%

Interest expense (net)

Net interest expense for the quarter ended September 30, 2023 was $1,662, higher than the $1,578 in the same period last year, reflecting the higher interest rate environment.

Restructuring and business integration costs

For the first quarter of fiscal year 2024, Sangoma recorded immaterial costs of $156 directly associated with a reduction of staff. In the same period last year, Sangoma recorded restructuring and integration costs of $52.

Consideration payable

As part of the agreement for the purchase of StarBlue, Sangoma processes certain payroll transactions for Star2Star Holdings (“Holdings”) option holders each time an installment of the remaining share consideration is distributed. All of the remaining common shares were issued to the StarBlue sellers in the prior fiscal year ended June 30, 2023, and following this issuance, the Company has no further obligation to issue any additional shares in connection with the StarBlue acquisition. As of September 30, 2023, the Company in accordance of the agreement, has crystallized $1,894 which will be distributed to the seller in cash before June 30, 2024.

Net loss

Net loss for the first quarter was $2,444 ($0.07 loss per share fully diluted), compared to a net loss of $1,976 ($0.06 loss per share fully diluted) for the equivalent quarter of the prior year.

Adjusted EBITDA

The derivation of Adjusted EBITDA and the reconciliation of net income to Adjusted EBITDA for the comparable quarter and each fiscal year is shown in the table below.

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Three month periods ended
September 30
20232022ChangeChange
$$$%
Net loss(2,444)(1,976)(468)24%
Tax(347)858 (1,205)(140)%
Interest expense (net)1,662 1,578 84 5%
Share-based compensation662 915 (253)(28)%
Depreciation of property and equipment1,073 1,306 (233)(18)%
Depreciation of right-of-use assets759 996 (237)(24)%
Amortization of intangibles8,361 8,577 (216)(3)%
Restructuring and business integration costs156 52 104 200%
Gain on change in fair value of consideration payable— (1,581)1,581 (100)%
Adjusted EBITDA9,882 10,725 (843)(8)%
Percentage of revenue16%17%—(1)%

Adjusted EBITDA for the first quarter ended September 30, 2023 was $9,882, down from $10,725 in the equivalent quarter of the prior year, primarily due to gain in the fair value of consideration payable.

17



QUARTERLY RESULTS OF OPERATIONS

Selected financial information over the prior eight quarters is shown in the table below.
    
 SecondThirdFourthFirstSecondThirdFourthFirst
 quarterquarterquarterquarterquarterquarterquarterquarter
 20222022202220232023202320232024
Sales$53,186 $53,366 $66,301 $64,051 $62,035 $62,764 $63,680 $63,028 
Gross Profit$38,353 $37,201 $44,461 $43,337 $42,789 $44,424 $42,241 $44,028 
Operating Expenses1
$39,194 $40,137 $45,714 $44,406 $44,258 $43,368 $43,708 $45,001 
Net loss$(2,477)$(6,755)$(99,247)$(1,976)$(2,735)$(685)$(23,630)$(2,444)
Net loss per share
Non-diluted basis$(0.08)$(0.21)$(2.99)$(0.06)$(0.08)$(0.02)$(0.72)$(0.07)
Fully diluted basis$(0.08)$(0.21)$(2.99)$(0.06)$(0.08)$(0.02)$(0.72)$(0.07)
Adjusted EBITDA$10,433 $10,469 $11,129 $10,725 $10,566 $12,243 $10,860 $9,882 

1 Operating Expenses consist of sales and marketing, research and development, general and administration and foreign exchange (gain) loss.

Sales and Net Loss by Quarter

Revenue over the comparative periods has been positively impacted by the acquisition of NetFortris in March 2022, the organic growth within the existing Services business. As anticipated, fiscal 2024 has seen a decline in the Product business to levels more in line with the Product revenue we experienced prior to the COVID-19 outbreak and the corresponding hold on Capex spending by customers given the resulting global economic conditions. While Product revenue continued to decline, this decline was partially offset by the increase in Services revenue during the quarter. The increasing Services revenue trend resulted in a favorable revenue mix and contributed to a higher gross profit and gross profit percent. Building out a stronger and more effective sales and marketing team is resulting in higher operating expenses, higher net loss, and lower EBITDA this quarter over the comparative periods.


18



LIQUIDITY AND CAPITAL RESOURCES


As of September 30, 2023, Sangoma had current assets of $58,845 and current liabilities of $58,940, compared with $61,623 and $63,191 at June 30, 2023, respectively. The decrease in current assets is mainly due to the collection of trade and other receivables and other current assets, while the decrease in current liabilities is primarily due to the payment of accounts payable and accrued liabilities.

The Company ended the first quarter with $11,139 of cash compared to $11,156 at June 30, 2023. The Company used a portion of its cash to continue paying down the debts, accounts payable and accrued liabilities.

Trade receivables of $15,753 on September 30, 2023, were slightly lower than the $16,060 on June 30, 2023, primarily as a result of the tightening of credit policies and increased focus on collection efforts.

Inventories were $17,890 on September 30, 2023, $80 lower than the $17,970 at June 30, 2023, primarily a reflection of management’s position to continue drawing down on existing inventories for product sales.

Sangoma generated $7,644 of Adjusted Cash Flow from operations during the first quarter of fiscal 2024, more than double compared to $3,201 in the same quarter last year. The reconciliation of net cash flows from operating activities to Adjusted Cash Flow for the three month periods ended September 30, 2023, and 2022 are shown in the table below.
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Three month periods ended
September 30
20232022ChangeChange
$$$%
Net cash flows from operating activities7,849 3,642 4,207 116%
Less capitalization of development costs(1,915)(1,768)(147)8%
Interest expense on term loans and operating facility1,554 1,275 279 22%
Restructuring and business integration costs156 52 104 200%
Adjusted cash flow from operations7,644 3,201 4,443 139%

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

Credit Facility

On October 18, 2019, the Company entered into a new credit agreement (the “Original Credit Agreement”) in favour of its subsidiaries, Sangoma Technologies Inc. and Sangoma US Inc. (the “Borrowers”) with inter alia The Toronto-Dominion Bank and The Bank of Montreal, as lenders (the “Lenders”). Under the terms of the Original Credit Agreement, the Lenders provided the Borrowers with a term loan facility to refinance the Company’s existing credit facilities and to fund part of the purchase of VI Acquisition.

On March 31, 2021, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) which amended and restated the Original Credit Agreement to allow the Company to fund part of the StarBlue Acquisition.

On March 28, 2022, the Company entered into the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”) which amended and restated the Amended and Restated Credit Agreement to allow the Company to fund part of the NetFortris Acquisition. The Second Amended and Restated Credit Agreement is comprised of: (i) a $6,000 revolving credit facility, (ii) a $21,750 term credit facility, which was used to partially fund the Voip Innovation Acquisition (iii) a $52,500 term credit facility, which was used to partially fund the StarBlue Acquisition, (iv) a $45,000 term credit facility, which was used to partially fund the NetFortris Acquisition (the “Term 3 Facility”), and (v) a $1,500 swingline credit facility.

On June 28, 2022, the Company entered into the first amendment to the Second Amended and Restated Credit Agreement to reflect certain administrative amendments and to amend the amount of the Term 3 Facility quarterly principal installments.

On October 19, 2022 and January 31, 2023 the Company drew down $3,000 and $2,300 from the revolving credit facility, respectively. As of September 30, 2023, these amounts remain outstanding.

On April 6, 2023 the Company entered into a second amendment to the Second Amended and Restated Credit Agreement to reflect certain administrative amendments and to amend 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.
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On April 23, 2023 the Company, as was originally intended on closing of the NetFortris acquisition, drew down $8,600 from the revolving credit facility primarily to fund the earn-out owing to the sellers pursuant to the stock purchase agreement dated March 28, 2022 (the “NetFortris Purchase Agreement”). As of September 30, 2023, this amount remains outstanding.

Under its Second Amended and Restated Credit Agreement with its lenders, the Company must satisfy certain financial covenants, principally in respect of total funded debt to earnings before interest, taxes and amortization, and debt service coverage ratio. As at September 30, 2023, the Company was in compliance with all covenants related to its Credit Agreement.

CONTRACTUAL OBLIGATIONS

The following table shows the movement in contractual liabilities from July 1, 2023 to September 30, 2023:

$
Opening balance, July 1, 2022
15,067 
Revenue deferred during the period
23,839 
Deferred revenue recognized as revenue during the period
(24,355)
Additions through business combination— 
Ending balance, June 30, 2023
14,551 
Revenue deferred during the period
9,185 
Deferred revenue recognized as revenue during the period
(10,157)
Ending balance, September 30, 2023
13,579 
Contract liabilities - Current10,053 
Contract liabilities - Non-current3,526 
13,579 

Commitments

The table below outlines our contractual commitments as of September 30, 2023:

within 12 months12-24 months24-36 months>36 monthsTotal
$ $ $ $ $
Accounts payable and accrued liabilities20,144 — — — 20,144 
Sales tax payable5,802 — — — 5,802 
Consideration payable1,894 — — — 1,894 
Operating facility and loans17,700 22,050 20,600 36,050 96,400 
Lease obligations on right of use assets3,281 3,097 2,144 6,863 15,385 
Other non-current liabilities— — — 1,546 1,546 
48,821 25,147 22,744 44,459 141,171 

OFF-BALANCE SHEET ARRANGEMENTS

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

RELATED PARTY TRANSACTIONS

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We review these estimates on an ongoing basis based on management’s best knowledge of current events and actions that we may undertake in the future. Actual results could differ from these estimates. All significant estimates and critical judgments, estimates, and assumptions are described in Note 3 of the Company’s Financial Statements.

FINANCIAL INSTRUMENTS AND OTHER 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 or as these financial instruments are fair valued at each reporting period. The fair values of operating facility and loans approximate their carrying values due to variable interest loans or fixed rate loan, which represent market rate. Derivative assets and liabilities and consideration payable are recorded at fair value. Further details relating to our financial instruments, the risks associated with the financial instruments and how we manage those risks, are described in Note 4 of the Company’s Financial Statements.

OUTSTANDING SHARE INFORMATION


We are currently authorized to issue an unlimited number of common shares. As of the date hereof, 33,184,200 common shares and 699,395 stock options and 253,891 share units are issued and outstanding.

CONTROLS AND PROCEDURES

Management of the Company, under the supervision of the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining (i) disclosure controls and procedures, and (ii) adequate internal control over financial reporting (“ICFR”) (as defined under applicable Canadian securities laws and by the United States Securities and Exchange Commission (“SEC”) in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for the company to ensure that (i) material information relating to the Company is made known to management by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual and interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation.
22




Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer and oversight of the Board of Directors evaluated the effectiveness of our ICFR as of September 30, 2023 against the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation, management has concluded that the Company’s disclosure controls and procedures were effective.

The Company identified a significant deficiency in its annual management discussion & analysis dated September 27, 2023 (the “2023 Annual MD&A”), which continues to exist as of September 30, 2023 and which the Company is addressing through the implementation of mitigation processes set out in the 2023 Annual MD&A.

GLOSSARY OF TERMS


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

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

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

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

DID
Direct Inward Dialing (“DID”) is a virtual phone number that uses the existing phone lines to route incoming calls. Callers can connect to a phone extension directly without an operator. This offers convenience for both employees and callers alike. DID offers a cost saving on its own and is less expensive when purchased with a SIP trunk.

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

ISDN
Integrated Services Digital Network (“ISDN”) is a set of communications standards for simultaneous digital transmission of voice, video, data, and other network services over the traditional circuits of the public switched telephone network. Of the many variations of ISDN, Sangoma supports BRI (Basic Rate Interface) which is essentially an all-digital replacement for ordinary
23



analog lines and PRI (Primary Rate Interface) which is used over T1 and E1 lines. BRI is very popular outside of North America. PRI is used worldwide.

IoT
Internet of Things (“IoT”) refers to a system of interrelated, internet-connected objects that are able to collect and transfer data over a wireless network without human intervention.

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

ISP
Internet Service Provider

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


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

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

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

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

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

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

SD-WAN
A Software-defined Wide Area Network (“SD-WAN”) uses software to control and manage connectivity across a customers wide area network. While traditional wide area networks rely on physical routers to connect remote users, this centralized software solution can help customers monitor their performance of the network and manage traffic.

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

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

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

TDM
Time Division Multiplexing (“TDM”) is used in circuit switched networks to increase the number of calls carried simultaneously on any one circuit and formed the basis for the digital telephony networks.
Unified Communications
Unified communications is a concept in which voice, email, messaging, video and any other type of communication are all considered forms of data that can be combined, manipulated and used in intelligent applications in a seamless way.


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


25

sangomac.jpg

NEWS RELEASE
SANGOMA ANNOUNCES FIRST QUARTER FISCAL 2024 RESULTS
Services revenue at $51.16 million reaches a record 81.1% of total revenue in Q1

MARKHAM, ONTARIO, November 8, 2023 – Sangoma Technologies Corporation (TSX: STC; Nasdaq: SANG) (“Sangoma” or the “Company”), a trusted leader in delivering cloud-based Communications as a Service solutions for companies of all sizes, today announced its first quarter financial results and unaudited condensed consolidated interim financial statements for the fiscal first quarter ended September 30, 2023.

US $000
Q1 FY2024
Q1 FY2023
Change
Q4 FY2023
Change
Revenue
$63,028$64,051(2)%$63,680(1)%
Gross profit
$44,028$43,3372%$42,2414%
Operating expenses1
$45,001$44,4061%$43,7083%
Net loss
$(2,444)$(1,976)$(23,630)
Net loss per share (fully diluted)
$(0.07)$(0.06)$(0.72)
Adjusted EBITDA2
$9,882$10,725(8)%$10,860(9)%
Net cash provided by operating activities$7,849$3,642116%$10,855(28)%

Sangoma's Services revenue rose to $51.16 million, representing 81.1% of total revenue in the first quarter of fiscal 2024. Products revenue was down, resulting in total Revenue for the first quarter of $63.03 million, a decrease of 2% from the same period in the prior year, and a 1% decrease from the immediately preceding quarter.

The Company continues to maintain a healthy balance sheet, finishing the quarter with net cash provided by operating activities of $7.85 million and a cash balance of $11.14 million on September 30, 2023, reflecting a strong quarterly progression of cash flow. Sangoma continues to remain comfortably within its debt covenants.

“My first two months in the role have served to strengthen my convictions in the value of Sangoma’s uniquely positioned portfolio that addresses a large and underserved segment of the marketplace with a wide array of both standalone and bundled solutions” said Charles Salameh, Sangoma CEO. “Our transformational activities are well underway and our global team of dedicated employees, suppliers, and partners are capable and eager to execute to forge that path. During the coming months and quarters, I look forward to sharing with you the impact of those strategies as they drive value into the business and solidify Sangoma’s position in the global marketplace.”



Operating expenses1 were $45.00 million for the quarter, up from $44.41 million for the same period last year by about 1%. In line with recent history, first quarter operating expenses include certain one time annual costs.

Net loss for the first quarter was $2.44 million, while Adjusted EBITDA remained strong at $9.88 million.

Conference call
Sangoma will host a conference call on Wednesday, November 8, 2023, at 5:30 pm ET to discuss these results. The dial-in number for the call is 1-800-319-4610 (International 1-604-638-5340). Participants are requested to dial in 5 minutes before the scheduled start time and ask to join the Sangoma call.

1 Operating Expenses consist of sales and marketing, research and development, general and administration and foreign exchange (gain) loss.
2 Adjusted EBITDA is a non-IFRS financial measure used by the Company to monitor its performance and definitions of these terms along with reconciliation to the closest IFRS measure may be found in the accompanying MD&A on page 16 posted today at www.sedarplus.ca and www.sec.gov.


About Sangoma Technologies Corporation
Sangoma is a leading provider of managed cloud-based communications and technology solutions for businesses worldwide. With a deep commitment to simplifying and enhancing communications, Sangoma offers a comprehensive suite of cloud-native communication solutions, including software, endpoints and connectivity services. With a focus on value-based offerings, Sangoma empowers businesses of all sizes to streamline their processes, reduce operational complexity, and increase efficiency. Whether it's cloud software solutions, reliable endpoints, or seamless connectivity, Sangoma's expert team is dedicated to delivering trusted and innovative services.

Sangoma is your one-stop solution for managed cloud communications services, making vendor management more straightforward and saving you valuable time. To learn more about how Sangoma can transform your communication infrastructure, visit our website at www.sangoma.com.

Cautionary Statement Regarding Forward Looking Statements
This press release contains forward-looking statements, including statements regarding the future success of our business, development strategies and future opportunities.

Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking statements include, but are not limited to, statements which are not historical facts. When used in this document, the words such as "could", "plan", "estimate", "expect", "intend", "may", "potential", "should" and similar expressions indicate forward-looking statements.

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

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other events contemplated by the forward-looking statements will not occur. Although Sangoma believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct as these expectations are inherently subject to business, economic and competitive uncertainties and contingencies. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, risks and uncertainties associated with changes


in exchange rate between the Canadian dollar and other currencies (in particular the United States’ (“US”) dollar), changes in technology, changes in the business climate, changes to macroeconomic conditions, including (i) inflationary pressures and potential recessionary conditions, as well as actions taken by central banks and regulators across the world in an attempt to reduce, curtail and address such pressures and conditions, including any increases in interest rates, and (ii) the effects of adverse developments at financial institutions, including bank failures, that impact general sentiment regarding the stability and liquidity of banks, and the resulting impact on the stability of the global financial markets at large, risks related to the COVID-19 (coronavirus) pandemic and any resurgence thereof, our ability to identify and remediate material weaknesses and significant deficiencies in our internal controls, changes in the regulatory environment, the imposition of tariffs, the decline in the importance of the PSTN (as hereinafter defined), impairment of goodwill and new competitive pressures, and acts of terrorism and war, hostilities and conflicts, including, but not limited to, Russia’s invasion of Ukraine in February 2022 (and associated changes in global trade policies and economic sanctions), and the other risk factors described in our most recently filed Annual Information Form for the fiscal year ended June 30, 2023.


Sangoma Technologies Corporation
Larry Stock
Chief Financial Officer
investorrelations@sangoma.com






FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE


I, Charles Salameh, Chief Executive Officer of Sangoma Technologies Corporation, certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sangoma Technologies Corporation (the “issuer”) for the interim period ended September 30, 2023.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

1.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

a. material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
b. information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
2.    designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO 2013 Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.


Date: November 8, 2023

/s/ Charles Salameh

Chief Executive Officer




FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE


I, Larry Stock, Chief Financial Officer of Sangoma Technologies Corporation, certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sangoma Technologies Corporation (the “issuer”) for the interim period ended September 30, 2023.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

1.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

a. material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
b. information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
2.    designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO 2013 Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.


Date: November 8, 2023

/s/ Larry Stock
Chief Financial Officer

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