Exhibit 4.5


 





 


VIQ Solutions Inc.





 



 


Interim Condensed Consolidated Financial
Statements


 


Three months ended March 31, 2021
and 2020 (Unaudited)


 


(Expressed in United States dollars)


 









     


     


    

 


 


VIQ Solutions Inc.


Interim Condensed Consolidated Statements
of Financial Position


(Expressed in United States dollars, unaudited)


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	Assets	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	Cash	 	$	16,020,297	 	 	$	16,835,671	 
	Trade and other receivables, net of allowance for doubtful accounts (note 5,6)	 	 	5,717,315	 	 	 	4,475,751	 
	Inventories	 	 	58,732	 	 	 	49,381	 
	Prepaid expenses and deposits	 	 	442,761	 	 	 	254,230	 
	 	 	 	22,239,105	 	 	 	21,615,033	 
	Non-current assets	 	 	 	 	 	 	 	 
	Restricted cash	 	 	93,672	 	 	 	42,835	 
	Property and equipment	 	 	208,283	 	 	 	215,835	 
	Right of use assets	 	 	268,611	 	 	 	309,566	 
	Intangible assets (note 7)	 	 	11,508,816	 	 	 	12,118,352	 
	Goodwill (note 7)	 	 	6,969,329	 	 	 	6,976,096	 
	Deferred tax assets	 	 	1,657,957	 	 	 	1,441,942	 
	Total assets	 	$	42,945,773	 	 	$	42,719,659	 
	 	 	 	 	 	 	 	 	 
	Liabilities	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Trade and other payables and accrued liabilities	 	$	5,236,134	 	 	$	5,305,600	 
	Income tax payable	 	 	157,486	 	 	 	201,592	 
	Share appreciation rights plan obligations (note 9)	 	 	36,836	 	 	 	126,503	 
	Current portion of long-term debt (note 8)	 	 	1,320,313	 	 	 	1,486,136	 
	Current portion of lease obligations (note 17)	 	 	81,483	 	 	 	113,218	 
	Current portion of contract liabilities	 	 	1,367,006	 	 	 	1,252,957	 
	 	 	 	8,199,258	 	 	 	8,486,006	 
	Non-current liabilities	 	 	 	 	 	 	 	 
	Deferred tax liability	 	 	60,183	 	 	 	60,587	 
	Long-term debt (note 8)	 	 	12,199,414	 	 	 	12,138,799	 
	Long-term contingent consideration (note 4)	 	 	1,247,351	 	 	 	1,575,528	 
	Long-term lease obligations (note 17)	 	 	228,009	 	 	 	240,981	 
	Long-term contract liabilities	 	 	10,012	 	 	 	70,834	 
	Other long-term liabilities	 	 	334,743	 	 	 	360,525	 
	Total liabilities	 	 	22,278,970	 	 	 	22,933,260	 
	 	 	 	 	 	 	 	 	 
	Shareholders’ equity	 	 	 	 	 	 	 	 
	Capital stock (note 9)	 	 	53,305,477	 	 	 	50,234,551	 
	Contributed surplus	 	 	4,282,820	 	 	 	4,970,945	 
	Accumulated other comprehensive income (loss)	 	 	85,486	 	 	 	(78,906	)
	Deficit	 	 	(37,006,980	)	 	 	(35,340,191	)
	Total liabilities and shareholders’ equity	 	$	42,945,773	 	 	$	42,719,659	 



 


See accompanying notes to interim condensed consolidated financial
statements.


 


	Approved by the Board	Signed “Larry Taylor”	 	Signed “Sebastien Paré”
	 	Larry Taylor, Director	 	Sebastien Paré, CEO and Director



 



    PAGE 2


     


    

 


 


VIQ Solutions Inc.


Interim Condensed Consolidated Statements of Loss and Comprehensive
Loss


(Expressed in United States dollars, unaudited)


 


	 	 	Three months ended
 March 31,
	 
	 	 	2021	 	 	2020
 (note 2(b))
	 
	Revenue (note 14)	 	$	8,254,222	 	 	$	7,548,204	 
	Cost of sales	 	 	4,236,387	 	 	 	4,318,312	 
	Gross profit	 	 	4,017,835	 	 	 	3,229,892	 
	 	 	 	 	 	 	 	 	 
	Expenses (note 15)	 	 	 	 	 	 	 	 
	Selling and administrative expenses	 	 	3,661,326	 	 	 	2,377,154	 
	Research and development expenses	 	 	239,663	 	 	 	252,321	 
	Stock-based compensation (note 10)	 	 	85,995	 	 	 	47,725	 
	Foreign exchange (gain) loss (note 18)	 	 	215,325	 	 	 	(252,249	)
	Depreciation	 	 	73,555	 	 	 	107,854	 
	Amortization	 	 	1,174,808	 	 	 	990,697	 
	 	 	 	5,450,672	 	 	 	3,523,502	 
	 	 	 	 	 	 	 	 	 
	Loss before undernoted items	 	 	(1,432,837	)	 	 	(293,610	)
	 	 	 	 	 	 	 	 	 
	Interest expense (note 8)	 	 	(331,419	)	 	 	(3,695,952	)
	Accretion and other financing expense (note 8)	 	 	(264,949	)	 	 	(230,548	)
	Loss on revaluation of conversion feature liability (note 8)	 	 	–	 	 	 	(1,118,761	)
	Loss on repayment of long-term debt (note 8)	 	 	–	 	 	 	(1,290,147	)
	Gain on contingent consideration (note 4)	 	 	95,994	 	 	 	–	 
	Other income	 	 	3,453	 	 	 	204	 
	 	 	 	(1,929,758	)	 	 	(6,628,814	)
	 	 	 	 	 	 	 	 	 
	Current income tax recovery (expense)	 	 	41,990	 	 	 	(53,444	)
	Deferred income tax recovery	 	 	220,979	 	 	 	–	 
	Income tax recovery (expense)	 	 	262,969	 	 	 	(53,444	)
	Net loss for the period	 	$	(1,666,789	)	 	$	(6,682,258	)
	Exchange gain on translating foreign operations	 	 	164,392	 	 	 	15,939	 
	Comprehensive loss for the period	 	$	(1,502,397	)	 	$	(6,666,319	)
	 	 	 	 	 	 	 	 	 
	Net loss per share (note 11)	 	 	 	 	 	 	 	 
	Basic	 	$	(0.07	)	 	$	(0.44	)
	Diluted	 	$	(0.07	)	 	$	(0.44	)
	Weighted average number of common shares outstanding – basic (note 11)	 	 	24,467,151	 	 	 	15,092,939	 
	Weighted average number of common shares outstanding – diluted (note 11)	 	 	24,467,151	 	 	 	15,092,939	 



 


See accompanying notes to interim condensed consolidated financial
statements.


 






    PAGE 3


     


    

 


 


VIQ Solutions Inc.


Interim Consolidated Statements of Changes in Shareholders’
Equity


(Expressed in United States dollars, unaudited)


 


	 	 	Capital stock	 	 	Contributed	 	 	 	 	 	Accumulated

 other

 comprehensive	 	 	Total	 
	 	 	Number	 	 	Amount	 	 	surplus	 	 	Deficit	 	 	income (loss)	 	 	equity	 
	Balance as at December 31, 2019	 	 	10,852,617	 	 	$	21,987,937	 	 	$	4,552,528	 	 	$	(24,194,885	)	 	$	(135,058	)	 	$	2,210,522	 
	Comprehensive loss for the period	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(6,682,258	)	 	 	15,939	 	 	 	(6,666,319	)
	Shares issued due to exercise of warrants (note 9)	 	 	1,014,874	 	 	 	1,561,039	 	 	 	81,467	 	 	 	–	 	 	 	–	 	 	 	1,642,506	 
	Shares issued due to debenture conversion (note 8)	 	 	6,395,648	 	 	 	11,231,198	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	11,231,198	 
	Stock-based compensation (note 10)	 	 	–	 	 	 	–	 	 	 	47,725	 	 	 	–	 	 	 	–	 	 	 	47,725	 
	Balance as at March 31, 2020 (note 2 (b))	 	 	18,263,139	 	 	$	34,780,174	 	 	$	4,681,720	 	 	$	(30,877,143	)	 	$	(119,119	)	 	$	8,465,632	 



 


	 	 	Capital stock	 	 	Contributed	 	 	 	 	 	Accumulated 

other 

comprehensive	 	 	Total	 
	 	 	Number	 	 	Amount	 	 	surplus	 	 	Deficit	 	 	income (loss)	 	 	equity	 
	Balance as at December 31, 2020	 	 	23,591,427	 	 	$	50,234,551	 	 	$	4,970,945	 	 	$	(35,340,191	)	 	$	(78,906	)	 	$	19,786,399	 
	Comprehensive loss for the period	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(1,666,789	)	 	 	164,392	 	 	 	(1,502,397	)
	Issuance cost reimbursement	 	 	–	 	 	 	1,673	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	1,673	 
	Shares issued due to exercise of stock options (note 9)	 	 	178,333	 	 	 	322,547	 	 	 	(119,690	)	 	 	–	 	 	 	–	 	 	 	202,857	 
	Shares issued due to exercise of warrants and warrant repricing (note 9)	 	 	1,123,878	 	 	 	2,746,706	 	 	 	(654,430	)	 	 	–	 	 	 	–	 	 	 	2,092,276	 
	Stock-based compensation (note 10)	 	 	–	 	 	 	–	 	 	 	85,995	 	 	 	–	 	 	 	–	 	 	 	85,995	 
	Balance as at March 31, 2021	 	 	24,893,638	 	 	$	53,305,477	 	 	$	4,282,820	 	 	$	(37,006,980	)	 	$	85,486	 	 	$	20,666,803	 



 


See accompanying notes to interim condensed consolidated financial
statements.


 








    PAGE 4


     


    

 



 





 


VIQ Solutions Inc.


Interim Condensed Consolidated Statements
of Cash Flows


(Expressed
in United States dollars, unaudited)


 


	 	 	Three months ended March 31,	 
	 	 	2021	 	 	2020
 (note
                                            2 (b))
	 
	Cash provided by (used in):	 	 	 	 	 	 	 	 
	Operating activities	 	 	 	 	 	 	 	 
	Net loss for the period	 	$	(1,666,789	)	 	$	(6,682,258	)
	 	 	 	 	 	 	 	 	 
	Items not affecting cash:	 	 	 	 	 	 	 	 
	Depreciation	 	 	73,555	 	 	 	107,854	 
	Amortization	 	 	1,174,808	 	 	 	990,697	 
	Stock-based compensation (note 10)	 	 	85,995	 	 	 	47,725	 
	Loss on revaluation of conversion feature liability (note 8)	 	 	–	 	 	 	1,118,761	 
	Loss on repayment of long-term debt (note 8)	 	 	–	 	 	 	1,290,147	 
	Accretion and other financing expense (note 8)	 	 	264,949	 	 	 	230,548	 
	Interest expense (note 8)	 	 	331,419	 	 	 	3,695,952	 
	Income tax (recovery) expense	 	 	(262,969	)	 	 	53,444	 
	Gain on contingent consideration (note 4)	 	 	(95,994	)	 	 	–	 
	Other income	 	 	(3,453	)	 	 	(204	)
	Foreign exchange (gain) loss (note 18)	 	 	215,325	 	 	 	(252,249	)
	Unrealized foreign exchange loss (gain)	 	 	3,094	 	 	 	200,098	 
	Changes in non-cash operating working capital (note 12)	 	 	(1,027,370	)	 	 	(732,387	)
	Cash provided by (used in)  operating
    activities	 	 	(907,430	)	 	 	68,128	 
	 	 	 	 	 	 	 	 	 
	Investing activities	 	 	 	 	 	 	 	 
	Purchase of property and equipment	 	 	(7,540	)	 	 	(26,988	)
	Business acquisitions	 	 	–	 	 	 	(4,411,500	)
	Earn out payment	 	 	(386,827	)	 	 	–	 
	Development costs related to internally generated intangible assets (note 7)	 	 	(532,298	)	 	 	(338,362	)
	Employee loan advancement (note 5)	 	 	(518,431	)	 	 	–	 
	Change in restricted cash	 	 	(50,837	)	 	 	4,877	 
	Cash used in investing activities	 	 	(1,495,933	)	 	 	(4,771,973	)
	 	 	 	 	 	 	 	 	 
	Financing activities	 	 	 	 	 	 	 	 
	Issuance costs reimbursement	 	 	1,673	 	 	 	–	 
	Proceeds from debt, net of issuance costs	 	 	–	 	 	 	4,566,945	 
	Proceeds from exercise of stock options (note 9)	 	 	202,857	 	 	 	–	 
	Proceeds from exercise of warrants (note 9)	 	 	2,092,276	 	 	 	1,561,039	 
	Repayment of debt (note 8)	 	 	(381,157	)	 	 	(254,382	)
	Repayment of lease obligations (note 17)	 	 	(45,268	)	 	 	(79,842	)
	Payment of interest on debt (note 8)	 	 	(311,909	)	 	 	(188,330	)
	Payment of interest on lease obligations (note 17)	 	 	(7,777	)	 	 	(15,680	)
	Cash provided by financing activities	 	 	1,550,695	 	 	 	5,589,750	 
	 	 	 	 	 	 	 	 	 
	Net increase (decrease) in cash for the period	 	 	(852,668	)	 	 	885,905	 
	Cash, beginning of period	 	 	16,835,671	 	 	 	1,707,654	 
	Effect of exchange rate changes on cash	 	 	37,294	 	 	 	(108,218	)
	Cash, end of period	 	$	16,020,297	 	 	$	2,485,341	 



 


See accompanying notes to interim condensed consolidated financial
statements.


 






    PAGE 5


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed
Consolidated Financial Statements


(Expressed
in United States dollars,)


 


1.            Nature
of operations


 


VIQ Solutions Inc. (“VIQ” or the “Company”)
is a technology and service platform provider for digital evidence capture, retrieval, and content management. VIQ’s modular software
allows customers to easily integrate the platform at any stage of their organization's digitization, from the capture of digital content
from video and audio devices through to online collaboration, mobility, data analytics, and integration with sensors, facial recognition,
speech recognition, and case management or patient record systems. VIQ operates worldwide with a network of partners including security
integrators, audio-video specialists, and hardware and data storage suppliers.


 


The Company also provides recording and transcription
services directly to a variety of clients including medical, courtrooms, legislative assemblies, hearing rooms, inquiries and quasi-judicial
clients in numerous countries including Canada, the United Kingdom, the United States and Australia.


 


VIQ was incorporated by articles of incorporation
in the province of Alberta in November 2004. On June 21, 2017, the Company continued under articles of continuance in the province
of Ontario. The Company’s offices are located at 700 – 5915 Airport Road, Mississauga, Ontario, L4V 1H1. VIQ is a public Company.
Subsequent to yearend, the Company graduated from the Toronto Venture Exchange to the Toronto Stock Exchange. The Company's common shares
began trading on TSX under trading symbol VQS at the market open on January 21, 2021.


 


2.            Basis
of preparation


 


(a)            Statement
of compliance


 


The Company prepares its interim condensed consolidated
financial statements in accordance with International Financial Reporting Standards (“IFRS”), International Accounting
Standard (“IAS”) 34, Interim Financial Reporting and International Financial Reporting Interpretations Committee (“IFRIC”)
interpretations, as issued by the International Accounting Standards Board (“IASB”) and using the same accounting policies
as described in the Company’s December 31, 2020 consolidated financial statements. The preparation of the interim condensed
consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires
management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment and
complexity, or areas where assumptions and estimates are significant to the interim condensed consolidated financial statements, are disclosed
in note 3. The accounting policies applied in these interim condensed consolidated financial statements are based on IFRS issued as at
May 13, 2021, the date the Board of Directors approved the interim condensed consolidated financial statements.


 


(b)            Comparative
figures


 


Certain comparative figures have been updated to reflect adjustments
that were recorded in the Company’s amended filings for the three and six-months ended June 30, 2020, which were refiled in
November 2020. The adjustments related to the accounting for acquisitions, the revaluation of the conversion feature as well as the
repayment of long-term debt which were transactions that occurred in the three-months ended March 31, 2020.


 






    PAGE 6


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed
Consolidated Financial Statements


(Expressed
in United States dollars,)


 


2.            Basis
of preparation (continued)


 


(c)  Basis of preparation


 


The notes presented in these interim condensed
consolidated financial statements include only significant changes and transactions occurring since the Company’s last year end
and are not fully inclusive of all disclosures required by International Financial Reporting Standards (“IFRS”). These interim
condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements, including
the notes thereto, for the years ended December 31, 2020 and 2019. The interim condensed consolidated financial statements have been
prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair
value as noted below.


 


(e)            Functional
currency, presentation currency and foreign currency translation


 


The functional currency of VIQ Solutions Inc.
is the Canadian dollar (“CAD”). The functional currency of the Company’s subsidiaries are as follows; Dataworxs Systems
Limited – CAD, VIQ Solutions, Inc. – United States dollar (“USD”), VIQ Australia Pty. Ltd – Australian
dollar (“AUD”), Dataworxs Systems Australia Pty. Ltd – AUD, VIQ Solutions PTY Ltd – AUD, Spark & Cannon
Pty – AUD, VIQ Services Inc. – USD, Net Transcripts – USD, Transcription Express – USD, HomeTech – USD,
VIQ Media Transcriptions – USD, and WordZXpressed – Inc. – USD. All financial information is presented in USD unless
otherwise stated.


 


The exchange rates used were as follows:


 


	USD / CAD exchange rate	 	March 31, 2021	 	 	December 31, 2020	 	 	March 31, 2020	 
	Closing at the reporting date	 	 	0.7941	 	 	 	0.7672	 	 	 	0.7056	 
	Average rate for the period	 	 	0.7895	 	 	 	0.7480	 	 	 	0.7455	 



 


	USD / AUD exchange rate	 	March 31, 2021	 	 	December 31, 2020	 	 	March 31, 2020	 
	Closing at the reporting date	 	 	0.7607	 	 	 	0.7311	 	 	 	0.6140	 
	Average rate for the period	 	 	0.7724	 	 	 	0.6901	 	 	 	0.6581	 



 


The financial results of each subsidiary consolidated
in the Company’s interim condensed consolidated financial statements are measured using the subsidiary’s functional currency,
which is the currency of the primary economic environment in which the entity operates for each of the Company’s wholly-owned subsidiaries.


 


Foreign currency transactions are translated into
the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of foreign currency transactions and from the translation at period-end exchange rates of monetary assets and liabilities
denominated in currencies other than an operation’s functional currency are recognized in the interim condensed consolidated statements
of loss and comprehensive loss.


 


The financial statements of entities that have
a functional currency different from the presentation currency of USD are translated into USD as follows: assets and liabilities at the
closing rate at the date of the balance sheet, and income and expenses at the average rate of the period as this is considered a reasonable
approximation to actual rates. All resulting changes are recognized in other comprehensive income (loss) as translation adjustments.


 






    PAGE 7


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated
Financial Statements


(Expressed
in United States dollars,)


 


2.            Basis
of preparation (continued)


 


The Company has monetary items that are receivable
from foreign operations. A monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is, in
substance, a part of the parent company’s net investment in that foreign operation. Such exchange differences are recognized initially
in other comprehensive income and reclassified from equity to net loss on disposal of the net investment in foreign operations.


 


(f)            Use
of estimates and judgements


 


The preparation of the interim condensed consolidated
financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the application of the
Company’s accounting policies and the amounts reported in the interim condensed consolidated financial statements and the related
notes. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in
the future. These estimates have been applied in a manner consistent with that in prior periods and there are no known trends, commitments,
events or uncertainties that the Company believes will materially affect the assumptions utilized in these interim condensed consolidated
financial statements. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to estimates are recognized
prospectively. The estimates are impacted by many factors, some of which are highly uncertain and actual results may differ from those
estimates


 


The continuing uncertainty around the outbreak
of the novel coronavirus (“COVID-19”) pandemic required the use of judgments and estimates in the preparation of the interim
condensed consolidated financial statements for the period ended March 31, 2021. The future impact of COVID-19 uncertainties could
generate, in future reporting periods, a significant impact to the reported amounts of assets, liabilities, revenue and expenses in these
and any future interim condensed consolidated financial statements. Examples of accounting estimates and judgments that may be impacted
by the pandemic include, but are not limited to, impairment of goodwill and intangible assets and allowance for doubtful accounts.


 


3.            Significant
accounting policies, estimates and judgements


 


The preparation of the financial statements in
accordance with IAS 34 requires management to make estimates and assumptions that affect the amounts reported in the interim condensed
consolidated financial statements and notes to the interim condensed consolidated financial statements. These estimates are based on management’s
best knowledge of current events and actions that the Company may undertake in the future. Actual results may differ from those estimates.
Significant estimates and judgments made by the Company include the valuation of acquired intangible assets, the determination of the
recoverable amount of goodwill, amounts recorded as provisions, recognition of deferred tax assets, the provision for long-term service
leave and other employee benefits, contingent consideration, stock based compensation, and the determination of functional currency.


 


4.            Acquisitions


 


On January 31, 2020, the Company through
its US subsidiary, VIQ Media Transcription Inc., acquired 100% of the assets of ASC. ASC was a provider of transcription services focused
on the multi-speaker transcription market, serving both government and public ‘content creation space’ and complements the
Company’s transcription services business. The purchase price paid for the ASC acquisition was $5,175,096, with $3,136,500 paid
in cash on closing and an estimated $2,038,596 to be paid as contingent consideration via a performance-based earn-out payable quarterly
over 30 months. With respect to the contingent consideration, the Company has agreed to make quarterly payments to the sellers between
July 15, 2020 and April 15, 2023 based on the achievement of quarterly revenue targets as defined in the purchase agreement.
At the date of acquisition, contingent consideration was measured on a discounted cash flow basis, reflecting the present value of undiscounted
expected future payments of $2,948,083 which is the expected payout based on forecast revenues at that date, discounted using a risk-adjusted
discount rate of 20.6 percent. The expected cash flows, which can range between $nil and $3,095,487, and the risk-adjusted discount rate
are each significant unobservable inputs in the determination of contingent consideration.


 






    PAGE 8


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated
Financial Statements


(Expressed
in United States dollars,)


 


4.            Acquisitions
(continued)


 


On February 26, 2020, the Company through
its US subsidiary VIQ Services Inc., acquired 100% of the shares of WordZ. WordZ was a provider of English transcription services to medical
service providers and to insurance companies in the USA and complements the Company’s transcription services business. The purchase
price paid for the WordZ acquisition was $3,861,347, with $1,275,000 paid in cash on closing, $1,200,000 paid via a promissory note payable
quarterly over 36 months, recorded at the discounted value of $914,677, and an estimated $1,671,670 to be paid as contingent consideration
via a performance-based earnout payable quarterly over 36 months. The Company has agreed to make quarterly payments to the sellers between
October 1, 2020 and July 1, 2023 based on the achievement of quarterly revenue targets as defined in the purchase agreement.
At the date of acquisition, contingent consideration is measured on a discounted cash flow basis, reflecting the present value of undiscounted
expected future payments of $2,175,231, which is the expected payout based on forecast revenues, discounted using a risk-adjusted discount
rate of 16.1 percent. The expected cash flows, which can range between $nil and $2,338,373, and the risk-adjusted discount rate are each
significant unobservable inputs in the determination of contingent consideration.


 


As at the acquisition date, the presence of goodwill
in the WordZ acquisition was supported by the following factors: a long history of operations; a positive reputation in the marketplace,
including being a leading provider of transcription services in insurance and law enforcement, providing services across the USA. The
customer base acquired included a large national Insurance company, which was a useful credentialing tool for sales to new customers;
there was potential for continued growth at the valuation date, including the potential to acquire new customers or by participating in
new market segments. The acquisition included the acquisition of medical customers. While there were competitive pressures in the medical
transcription industry at the acquisition date, management considered certain geographic segments and sub-markets (such as midwifery and
child protective services) to present opportunities for growth, and considered that the company’s experience with medical customers
could provide access to profitable growth in certain markets; the potential for achieving operating margin efficiencies resulting in operating
margins that might also be achieved by other larger entities operating in this or similar process/document management industries; and,
the acquisition provided access to an assembled skilled workforce. As at December 31, 2020, as a result of an unexpected downturn
in the acquired business, the Company recognized an impairment charge on goodwill for WordZ of $1,453,832.


 


The acquisitions completed during the year ended
December 31, 2020 were each determined to be a business combination and were accounted for using the acquisition method in accordance
with IFRS 3 with the results of operations consolidated with those of the Company effective January 31, 2020 for ASC and February 26,
2020 for WordZ.


 


During the year ended December 31, 2020,
the contingent consideration of WordZ and ASC was adjusted based on revision of the estimated quarterly revenue target achievement. During
the period ended March 31, 2021, there was a gain of $95,944 of contingent consideration expense recorded (2020 – $nil). During
the three months ended March 31, earnout payment totalling $386,827 (March 31, 2020 - $nil) was made to the previous owners
of ASC and WordZ.


 


As at March 31, 2021, total contingent consideration
is $2,666,902 (December 31, 2020 - $3,015,434), of which $1,419,551 (December 31, 2020 - $1,439,906) is recorded as trade and
other payables and accrued liabilities, and $1,247,351 has been recorded as long-term contingent consideration (December 31, 2020
- $1,575,528).


 


The accounting for the acquisitions is complete
as of December 31, 2020. The finalization of the above purchase price


 


allocations of the valuation of fair value for
the assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential unrecorded
liabilities was completed as of December 31, 2020.


 






    PAGE 9


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed
Consolidated Financial Statements


(Expressed
in United States dollars,)


 


5.            Trade
and other receivables


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	Trade accounts receivable	 	$	4,435,464	 	 	$	4,233,012	 
	Other receivable (note 6)	 	 	1,385,850	 	 	 	366,077	 
	Less: allowance for doubtful accounts (note 21)	 	 	(103,999	)	 	 	(123,338	)
	 	 	$	5,717,315	 	 	$	4,475,751	 



 


During the three months ended March 31, 2021,
the Company granted a non-revolving executive loan (the “Executive Loan”)


 


to Sebastien Paré, President, Chief Executive
Officer and a director of the Company in the aggregate amount of $518,431 (CAD$657,838) to: (i) facilitate Mr. Paré exercise
of certain vested outstanding stock options; and (ii) facilitate Mr. Paré’s repayment of certain indebtedness incurred
in connection the previous exercising of convertible securities of the Company. The Executive Loan matures on February 10, 2028 and
bears interest at a rate of 1.0% per annum. The Executive Loan is secured by a pledge of 175,000 common shares in the capital of the Company
held by Sebastien Paré in favor of the Company (the “Share Pledge”). Pursuant to the terms of the Share Pledge, Mr. Paré
has agreed to comply with certain covenants in favor of the Company.


 


As at March 31, 2021, other receivable relates
to employee loan advance of $518,431 (December 31, 2020 - $nil) as described above, accrual for employee retention credit of $284,155
(December 31, 2020 - $nil), work in progress and unbilled receivables of $575,348 (December 31, 2020 - $297,581), and government
assistance receivable $7,916 (December 31, 2020 - $68,496).


 


6.            Government
Assistance


 


Australian Business Wage Subsidies


 


The Australian government provided the Company
with $19,310 (December 31, 2020, - $nil). This amount was recognized as a reduction in selling and administrative expenses in the
interim condensed consolidated statements of loss and comprehensive loss.


 


U.S. Employee Retention Credit Program


 


For the period ended March 31, 2021, the
Company determined that it qualified for the employee retention credit program and the Company received a credit of $284,155 (2020 - $nil)
of which $169,084 was recognized as a reduction to operating expenses against related salary costs in the interim condensed consolidated
statement of loss and comprehensive loss and $115,071 as a reduction to cost of sales.


 


As at March 31, 2021, the interim condensed
consolidated statement of financial position included assistance receivable of $292,071 (December 31, 2020 - $68,496) in trade and
other receivables.


 






    PAGE 10


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated
Financial Statements


(Expressed
in United States dollars,)


 


7.            Intangible
assets and goodwill


 


Details of the Company’s intangible assets
as of March 31, 2021 are listed as follows:


 


	 	 	Balance January
    1, 2021	 	 	Additions	 	 	Foreign
    exchange	 	 	Balance March
    31, 2021	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 
	Customer relationships	 	$	11,775,697	 	 	 	–	 	 	 	4,818	 	 	$	11,780,515	 
	Technology	 	 	470,000	 	 	 	–	 	 	 	–	 	 	 	470,000	 
	Non-compete	 	 	51,031	 	 	 	–	 	 	 	–	 	 	 	51,031	 
	Brand	 	 	1,520,899	 	 	 	–	 	 	 	–	 	 	 	1,520,899	 
	Internally generated intangible assets	 	 	7,015,035	 	 	 	532,298	 	 	 	87,134	 	 	 	7,634,467	 
	 	 	$	20,832,662	 	 	 	532,298	 	 	 	91,952	 	 	$	21,456,912	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Customer relationships	 	$	4,099,565	 	 	 	580,500	 	 	 	4,818	 	 	 	4,684,883	 
	Technology	 	 	196,499	 	 	 	23,500	 	 	 	–	 	 	 	219,999	 
	Non-compete	 	 	19,638	 	 	 	5,833	 	 	 	–	 	 	 	25,471	 
	Brand	 	 	133,921	 	 	 	37,328	 	 	 	–	 	 	 	171,249	 
	Internally generated intangible assets	 	 	4,264,687	 	 	 	527,647	 	 	 	54,160	 	 	 	4,846,494	 
	 	 	$	8,714,310	 	 	 	1,174,808	 	 	 	58,978	 	 	$	9,948,096	 
	Net book value	 	$	12,118,352	 	 	 	 	 	 	 	 	 	 	$	11,508,816	 



 


Details of the Company’s goodwill as of
March 31, 2021 are listed as follows:


 


	 	 	January 1, 2021	 	 	Foreign exchange	 	 	March 31, 2021	 
	VIQ Solutions PTY Ltd.	 	 	650,001	 	 	 	(8,456	)	 	 	641,545	 
	Dataworxs	 	 	141,018	 	 	 	1,689	 	 	 	142,707	 
	Net Transcripts	 	 	1,575,511	 	 	 	–	 	 	 	1,575,511	 
	Transcription Express	 	 	1,516,904	 	 	 	–	 	 	 	1,516,904	 
	HomeTech	 	 	477,860	 	 	 	–	 	 	 	477,860	 
	ASC	 	 	2,614,802	 	 	 	–	 	 	 	2,614,802	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	$	6,976,096	 	 	$	(6,767	)	 	$	6,969,329	 



 






    PAGE 11


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed
Consolidated Financial Statements


(Expressed
in United States dollars,)


 


8.            Long-term
debt


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	Crown Capital Funding Partner LP Note Payable (a)	 	$	11,614,244	 	 	$	11,398,146	 
	 	 	 	 	 	 	 	 	 
	Unsecured Transcription Express 10% promissory note (b)	 	 	71,012	 	 	 	280,531	 
	 	 	 	 	 	 	 	 	 
	Unsecured HomeTech interest-free promissory note (b)	 	 	578,999	 	 	 	621,725	 
	 	 	 	 	 	 	 	 	 
	Unsecured WordZ 5% promissory note (b)	 	 	995,242	 	 	 	1,064,303	 
	 	 	 	 	 	 	 	 	 
	U.S. Paycheck Protection Program loan (c)	 	 	260,230	 	 	 	260,230	 
	 	 	 	 	 	 	 	 	 
	Less current portion of long term debt	 	 	(1,320,313	)	 	 	(1,486,136	)
	 	 	$	12,199,414	 	 	$	12,138,799	 



 


		(a)	Crown Capital Funding Partner LP Note Payable



 


During the year ended December 31, 2018,
the Company entered into a secured debt facility with Crown Capital Funding Partner LP (“Crown”) of $11,770,500 (CAD$15,000,000)
bearing an interest rate of 10 percent payable quarterly. The loan is secured by a general security agreement covering all assets of the
Company. The outstanding principal balance of the loan is repayable on November 28, 2023. Additionally, during the three months ended
March 31, 2020, the Company cancelled previously issued 450,000 common share purchase warrants and reissued new warrants to reflect
a price per Share equal to CAD$2.06 (the “Exercise Price”) until expiry on November 28, 2023. As a result of this modification,
the Company recorded $84,287 (CAD$111,387) reflecting the incremental fair value of the warrant associated with the amendment as a reduction
in the carrying value of the note payable. The Company incurred fees of $353,115 (CAD$450,000) associated with establishing the amended
debt facility which was recorded as a reduction in the carrying value of the note payable. These fees remain unpaid and the long-term
payable is added to the Company’s outstanding principal. These fees accrue interest at 10 percent and repayment is due on November 28,
2023. At inception, the loan was recorded at the fair value of $11,031,120. During the three months ended March 31, 2021, the Company
recorded interest expense of $300,785 (2020 - $235,890)


 


The difference between the face value and ascribed
value of the Crown Capital note payable is being accreted over the remaining life of the debt facility. Corresponding transaction costs
were netted against the face value of the debt facility and are recognized as accretion and other financing expense over the term of the
loan. During the period ended March 31, 2021, there was $84,941 (2020 - $59,272) recorded as accretion and other financing expense
related to the note payable in the interim condensed consolidated statements of loss and comprehensive loss.


 


The Company received a waiver in March 2021 to remove the Fixed
Charge Coverage Ratio covenant for all four quarters of 2021. The Company is in compliance of other covenants as at March 31, 2021.


 


		(b)	Unsecured Promissory Notes



 


Unsecured promissory notes have been issued to
the former owners of acquired companies. As part of the acquisition of Transcription Express, the Company issued an unsecured promissory
note to the former owners of Transcription Express with a face value of $1,666,227, bearing interest at 10% per annum. During the year
ended December 31, 2019, the terms of the Transcription Express unsecured promissory note were amended with the principal and accrued
interest to be paid monthly beginning on July 31, 2019 to the period ending April 30, 2021.


 


As part of the acquisition of HomeTech, the Company
issued an unsecured interest-free promissory note to the former owners of HomeTech with a face value of $1,200,000, to be paid monthly
for 60 months in equal installments of $20,000 beginning February 25, 2019 to the period ending January 25, 2024. The Company
recorded the unsecured promissory note by discounting the principal amounts due using a market annual interest rate of 12%. The difference
between the present value and the face value is being accreted over the term of the unsecured promissory notes.


 






    PAGE 12


     


    

 








 


VIQ Solutions Inc.


Notes to Interim Condensed
Consolidated Financial Statements


(Expressed
in United States dollars,)


 


8.            Long-term
debt (continued)


 


An additional note was issued to the former owners
of WordZ with a face value of $1,200,000 bearing interest at 5% to be paid


 


quarterly for 36 months beginning January 5,
2021 to the period ending October 5, 2023. The fair value of the unsecured promissory notes was determined on a market annual interest
rate of 12%. The difference between the face value and the ascribed value of the notes is being accreted over life of the notes.


 


		(c)	U.S. Paycheck Protection Program Loan



 


On April 24, 2020, the Company received a
loan for $2,159,000 under the U.S. Small Business Administration Paycheck Protection Program through BMO Harris Ban at an interest rate
of 1% maturing in two years. Principal and interest are due beginning seven months from the date of the note. Generally, the loan will
be forgiven if utilized for payment of qualifying


 


expenses during the 24-week period that begins
at the origination date of the loan. As at March 31, 2021 the balance of $260,230 (December 31, 2020 - $260,230) was unutilized
and reported as a note payable.


 


		(d)	Convertible Notes



 


During the year ended December 31, 2020,
the Company entered into agreements (the “Amending Agreements”) with the holders of unsecured convertible notes (each, a “Note”)
in the aggregate principal amount of approximately $6,792,934, granting the holders of such Notes (each a “Noteholder”) the
option to convert the principal and the aggregate interest payable on their Notes from the date of issuance to the maturity date (the
 “Total Interest Payable”) into Shares at a conversion price of CAD$2.18 per Share (the “Conversion Option”). During
the year ended, December 31, 2020, the Company issued 6,785,651 common shares to settle its outstanding Notes.


 


Noteholders holding all of the outstanding Notes
exercised the conversion option during the year ended December 31, 2020. As a result, for the period ended March 31, 2021, the
Company recognized $nil of interest expense (2020 - $3,419,124) reflecting interest charges from the convertible notes and accretion expense
of $nil (2020 - $63,178). For the three months ended March 31, 2021, the Company recognized a loss of $nil on the revaluation of
the conversion feature liability (2020 - $1,118,761).


 


As a result of the exercise of the Conversion
Option during the year ended December 31, 2020, during the period ended March 31, 2021, the Company issued $nil common shares
(2020 – 6,395,648) to settle its outstanding Notes having $nil amount of aggregate principal (2020 - $7,189,627) and total interest
payable of $nil (2020 - $4,041,571) for a total amount of $nil (2020 - $11,231,198).


 






    PAGE 13


     


    

 



 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States
dollars)





 



 


9.            Capital
stock


 


Common Shares


 


The Company’s authorized capital consists
of an unlimited number of common shares with no par value. As at March 31, 2021, common shares of the Company were reserved as follows:


 


	 	 	Exercise Price

 (CAD)	 	 	Expiry dates	 	Number outstanding	 
	Options	 	 	$2.10 – $4.20	 	 	January 2021 – December 2021	 	 	58,333	 
	 	 	 	$4.40 – $6.40	 	 	January 2022 – December 2022	 	 	97,000	 
	 	 	 	$2.84 - $6.00	 	 	January 2023 – December 2023	 	 	141,250	 
	 	 	 	$2.10 - $3.10	 	 	January 2024 – December 2024	 	 	247,017	 
	 	 	$	3.13	 	 	January 2025 – December 2025	 	 	396,000	 
	 	 	 	 	 	 	 	 	 	939,600	 
	Deferred share units	 	$	1.20	 	 	N/A	 	 	66,667	 



 


Warrants


 


During the three months ended March 31, 2021,
there were 1,123,878 of warrants exercised (2020 – 1,014,874) for proceeds of $2,092,276 (2020 - $1,561,039). During the period
ended March 31, 2021, there were no warrants issued (2020 – nil).


 


As at March 31, 2021, there were no warrants
outstanding (December 31, 2020 – 1,123,878).


 


Stock Option Plan


 


The Company has an incentive stock option plan
for its directors, officers, employees, and contractors. The Company's stock option plan allows for the granting of options (and Deferred
Share Units as described below) up to an aggregate amount equal to 10% of the aggregate number of common shares of the Company outstanding.
The options, which have a term not exceeding five years when issued, generally vest as follows:


 


•                 1/3
at time of issue


•                 1/3
after one year


•                 1/3 after two years


 


As at March 31, 2021, the Company had vested
610,483 options (December 31, 2020 – 770,283) with a weighted average exercise price of CAD $3.25 per share (December 31,
2020 – CAD$2.84).


 


During the three months ended March 31, 2021,
there were no stock options granted to directors, officers, employees, and contractors (2020 – nil). During the three months ended
March 31, 2021, 178,333 options were exercised (2020 – nil) for proceeds of $202,857 (2020 – $nil). There were no stock
options forfeited (2020 – nil) during the three months ended March 31, 2021 (2020 – nil). There were no stock options
that were expired during the period ended March 31, 2021 (2020 – nil).


 






    PAGE 14


     


    

 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)







 



 


9.            Capital
stock (continued)


 


The following information applies to stock options outstanding and
exercisable as at March 31, 2021, along with their respective exercise prices and related weighted averaged remaining contractual
life:


 


	Range of exercise

 prices 
(CAD)	 	 	Options

 outstanding	 	 	Weighted 

average

 remaining 

contractual life	 	Weighted 

average exercise

 price 
(CAD)	 	 	Options 

exercisable	 	 	Weighted 

average exercise

 price 
(CAD)	 
	 	$2.10 – $4.20	 	 	 	58,333	 	 	0.4 years	 	$	3.06	 	 	 	58,333	 	 	$	3.06	 
	 	$4.40 – $6.40	 	 	 	97,000	 	 	1.1 years	 	$	4.92	 	 	 	97,000	 	 	$	4.92	 
	 	$2.84 - $6.00	 	 	 	141,250	 	 	2.6 years	 	$	3.28	 	 	 	141,250	 	 	$	3.28	 
	 	$2.20 - $3.10	 	 	 	247,017	 	 	3.3 years	 	$	2.44	 	 	 	181,900	 	 	$	2.50	 
	$	3.13	 	 	 	396,000	 	 	4.1 years	 	$	3.13	 	 	 	132,000	 	 	$	3.13	 
	 	 	 	 	 	939,600	 	 	3.1 years	 	$	3.15	 	 	 	610,483	 	 	$	3.25	 



 


Deferred Share Units Plan


 


In 2015, the Company established a Deferred Share
Units (“DSU”) Plan to provide non-employee directors to participate in the long-term success of the Company. DSUs are fully
vested upon being granted.


 


The Board of Directors may grant DSUs (and the
number of options to purchase shares described above) up to a maximum of 10% of common shares outstanding and up to a maximum of 100,000
units.


 


Maximum allowable grants under the Stock Option
and DSU plans in aggregate as at March 31, 2021 were 2,489,364 (December 31, 2020 – 2,359,143) of which 939,600 were outstanding
stock options and 66,667 were outstanding DSUs for a total of 1,006,267 (December 31, 2020 – 1,184,600).


 


The Company did not grant any DSU’s to Directors of the Company
during the period ended March 31, 2021 (2020 – nil).


 


Share Appreciation Rights Plan


 


In 2015, the Company established a Share Appreciation
Rights (“SAR”) plan for its Service Providers (as defined in VIQ’s SAR plan). The Company's SAR plan provides incentive
compensation, based on the appreciation in the value of the Company’s shares, to the service providers, thereby providing additional
incentive for their efforts in promoting the continued growth and success of the business of the Company. During the year ended December 31,
2018, the Company amended the outstanding SARs to extend the expiry of the SARs from December 31, 2018 to July 15, 2020, the
date the SARs plan will expire. The aggregate number of units in respect of which SARs have been granted and not yet exercised, shall
not at any time exceed 10% of the aggregate number of shares that are then issued and outstanding. The SAR units, which have a term not
exceeding five years when granted, generally vest as follows:


 


•                 1/3 at time of issue


•                 1/3 after one year


•                 1/3 after two years


 


At any time on or after the date when the trading
price of one share is equal to or exceeds four times the fair value of one SAR unit at the grant date, the Company shall be entitled to
require the disposition of the vested SAR units by the grantee to the Company, by the Company paying the bonus in cash to the grantee.


 






    PAGE 15


     


    

 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States
dollars)






 



 


9.            Capital
stock (continued)


 


The value of each SAR unit when issued is based
on the market price of the Company's stock on the date of grant. At the end of December 31, 2017, the Company amended the SARs plan
by placing a limit on the appreciated value of the Company’s shares within the SARs plan to limit the overall liability. At December 31,
2019, 188,990 outstanding SARs units were fully vested.


 


As at March 31, 2021, previously exercised
SARS had a remaining share appreciation rights plan obligation balance of $36,836 (December 31, 2020 - $126,503) has been recognized
in the consolidated statement of financial position to reflect the outstanding cash settlement.


 


10.          Stock-based
compensation


 


The total compensation expense relating to the value assigned to the
stock options granted to directors, officers, employees and contractors for the period ended March 31, 2021 was $85,995 (2020 - $47,725)
which was included in the stock base compensation expense with a corresponding charge to contributed surplus.


 


11.          Net
loss per share


 


	 	 	Three months ended March 31,	 
	 	 	2021	 	 	2020
 (note 2 (b))
	 
	Numerator for basic and diluted net loss per share:	 	 	 	 	 	 	 	 
	Net loss for the period	 	$	(1,666,789	)	 	$	(6,682,258	)
	 	 	 	 	 	 	 	 	 
	Denominator for basic net loss per share:	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	24,467,151	 	 	 	15,092,939	 
	Effect of potential dilutive securities	 	 	–	 	 	 	–	 
	Adjusted denominator for diluted net loss per share	 	 	24,467,151	 	 	 	15,092,939	 
	 	 	 	 	 	 	 	 	 
	Basic net loss per share	 	$	(0.07	)	 	$	(0.44	)
	Diluted net loss per share	 	$	(0.07	)	 	$	(0.44	)



 


For the period ended March 31, 2021, 2,489,364
of potentially dilutive common shares (2020 - 1,826,314) issuable upon the exercise of the conversion option related to convertible debt,
warrants, deferred share units, and options were not included in the computation of loss per share because their effect was anti-dilutive.


 






    PAGE 16


     


    

 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States
dollars)






 



 


12.          Supplemental
cash flow information


 


Components of the net change in non-cash working
capital are as follows:


 


	 	 	Three months ended March 31,	 
	 	 	2021	 	 	2020
 (note 2(b))
	 
	Trade and other receivables	 	$	(719,175	)	 	$	(196,721	)
	Inventories	 	 	(9,609	)	 	 	7,070	 
	Prepaid expenses	 	 	(187,672	)	 	 	(33,103	)
	Trade and other payables	 	 	(161,884	)	 	 	(330,798	)
	Contract liabilities and taxes	 	 	50,970	 	 	 	(178,835	)
	Total	 	$	(1,027,370	)	 	$	(732,387	)



 


Other supplemental cash flow information as follows:


 


	 	 	Three months ended March 31,	 
	 	 	2020	 	 	2020
 (note 2 (b))
	 
	Cash received for interest	 	$	3,453	 	 	$	204	 
	Cash paid for interest	 	 	319,686	 	 	 	204,010	 



 






    PAGE 17


     


    

 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States
dollars)






 



 


 


13.          Segmented
financial information


 


The Company has determined it has two reportable
business segments namely technology and related revenue and technology services. The technology segment, develops, distributes and licenses
computer-based digital solutions based on its proprietary technology; and the technology service segment, provides recording and transcription
services.


 


The Company’s reportable segments are strategic
business segments that offer different products and/or services. These business segments work on different business models and operate
autonomously. The Company does not segregate sales and associated costs by individual technology products. Accordingly, segmented information
on revenue and associated costs is only provided for the full line of software solutions currently offered by the Company.


 


The Chief Executive Officer, Chief Operating Officer,
and Chief Financial Officer are the operating decision maker and regularly reviews our operations and performance by segment. They review
segment gain (loss) as the key measure of profit for the purpose of assessing performance of each segment and to make decisions about
the allocation of resources.


 


Financial information by reportable business segment
is as follows:


 


	 	 	Three months ended March 31, 2021	 
	 	 	Technology 

and related

 revenue	 	 	Technology

 services	 	 	Corporate	 	 	Total	 
	Consolidated income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue	 	$	1,423,355	 	 	$	6,830,867	 	 	$	–	 	 	$	8,254,222	 
	Gross profit	 	 	1,301,039	 	 	 	2,716,796	 	 	 	–	 	 	 	4,017,835	 
	Selling and administrative expenses	 	 	1,342,962	 	 	 	1,805,844	 	 	 	512,520	 	 	 	3,661,326	 
	Stock-based compensation	 	 	–	 	 	 	–	 	 	 	85,995	 	 	 	85,995	 
	Research and development expenses	 	 	239,663	 	 	 	–	 	 	 	–	 	 	 	239,663	 
	Depreciation and amortization	 	 	560,127	 	 	 	688,236	 	 	 	–	 	 	 	1,248,363	 
	Foreign exchange loss	 	 	215,249	 	 	 	76	 	 	 	 	 	 	 	215,325	 
	Interest, accretion and other financing expense	 	 	6,485	 	 	 	1,292	 	 	 	588,591	 	 	 	596,368	 
	Gain on contingent consideration	 	 	–	 	 	 	(95,994	)	 	 	–	 	 	 	(95,994	)
	Other income	 	 	(3,453	)	 	 	–	 	 	 	–	 	 	 	(3,453	)
	Current income tax expense	 	 	–	 	 	 	(41,990	)	 	 	–	 	 	 	(41,990	)
	Deferred income tax expense (recovery)	 	 	–	 	 	 	(220,979	)	 	 	–	 	 	 	(220,979	)
	Segment income (loss)	 	 	(1,059,994	)	 	 	580,311	 	 	 	(1,187,106	)	 	 	(1,666,789	)
	Consolidated balance sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total segment assets	 	$	19,554,776	 	 	$	23,390,997	 	 	 	–	 	 	$	42,945,773	 
	Total segment current liabilities	 	 	2,093,241	 	 	 	6,069,181	 	 	 	36,836	 	 	 	8,199,258	 
	Total segment non-current liabilities	 	 	–	 	 	 	2,433,243	 	 	 	11,311,726	 	 	 	13,744,969	 



 






    PAGE 18


     


    

 





 



 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States
dollars)






 



 


13.          Segmented
financial information (continued)


 


	 	 	Three months ended March 31, 2020
 (note 2 (b))
	 
	 	 	Technology and

 related revenue	 	 	Technology

 services	 	 	Corporate	 	 	Total	 
	Consolidated income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue	 	$	683,778	 	 	$	6,864,425	 	 	$	–	 	 	$	7,548,204	 
	Gross profit	 	 	498,516	 	 	 	2,731,376	 	 	 	–	 	 	 	3,229,892	 
	Selling and administrative expenses	 	 	758,936	 	 	 	1,098,664	 	 	 	519,554	 	 	 	2,377,154	 
	Stock-based compensation	 	 	–	 	 	 	–	 	 	 	47,725	 	 	 	47,725	 
	Research and development expenses	 	 	252,321	 	 	 	–	 	 	 	–	 	 	 	252,321	 
	Depreciation and amortization	 	 	485,965	 	 	 	612,586	 	 	 	–	 	 	 	1,098,551	 
	Foreign exchange (gain) loss	 	 	(297,013	)	 	 	44,764	 	 	 	–	 	 	 	(252,249	)
	Interest, accretion and other financing expense	 	 	7,103	 	 	 	8,577	 	 	 	3,910,820	 	 	 	3,926,500	 
	Gain on revaluation of conversion feature liability	 	 	–	 	 	 	–	 	 	 	1,118,761	 	 	 	1,118,761	 
	Loss on repayment of debt	 	 	–	 	 	 	–	 	 	 	1,290,147	 	 	 	1,290,147	 
	Other (income) expense	 	 	–	 	 	 	(204	)	 	 	–	 	 	 	(204	)
	Tax expense (recovery)	 	 	–	 	 	 	53,444	 	 	 	–	 	 	 	53,444	 
	Segment income (loss)	 	 	(708,796	)	 	 	913,545	 	 	 	(6,887,007	)	 	 	(6,682,258	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated balance sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total segment assets	 	$	6,051,627	 	 	$	25,408,172	 	 	$	–	 	 	$	31,459,799	 
	Total segment current liabilities	 	 	2,360,626	 	 	 	3,303,486	 	 	 	2,520,686	 	 	 	8,184,798	 
	Total segment non-current liabilities	 	 	–	 	 	 	11,208,187	 	 	 	3,601,182	 	 	 	14,809,369	 



 


Property and equipment are located in the following
countries:


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	Canada	 	$	119,266	 	 	$	120,511	 
	Australia	 	 	89,017	 	 	 	95,324	 
	 	 	$	208,283	 	 	$	215,835	 



 






    PAGE 19


     


    

 


 



 


 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)




 


14.            Revenue


 


The Company generates revenue primarily from the
delivery of technology transcription services to its customers. Revenue from contracts with customers is disaggregated by primary geographical
market, major products and services and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue
with the Company’s reportable segments (note 13).


 


	Primary geographical markets	 	Three months ended March 31,	 
	 	 	2021	 	 	2020	 
	United States	 	$	4,878,512	 	 	$	5,460,671	 
	Australia	 	 	2,413,454	 	 	 	1,985,794	 
	United Kingdom	 	 	668,388	 	 	 	36,518	 
	Canada	 	 	10,401	 	 	 	48,387	 
	Other	 	 	283,467	 	 	 	16,834	 
	Total	 	$	8,254,222	 	 	$	7,548,204	 




 


	Major products / service lines	 	Three months ended March 31,	 
	 	 	2021	 	 	2020	 
	Technology services	 	$	6,567,932	 	 	$	6,837,994	 
	Software licenses	 	 	712,294	 	 	 	202,038	 
	Support and maintenance	 	 	588,707	 	 	 	356,116	 
	SaaS	 	 	32,099	 	 	 	10,205	 
	Professional services	 	 	243,264	 	 	 	32,449	 
	Hardware	 	 	91,202	 	 	 	97,067	 
	Other	 	 	18,724	 	 	 	12,335	 
	Total	 	$	8,254,222	 	 	$	7,548,204	 




 


The Company had one customer who contributed greater
than 10 percent of consolidated total revenues during the period ended March 31, 2021 (2020 – one customer). During the period
ended March 31, 2021, this customer comprised 11.7 percent of consolidated revenue (2020 – 11.9 percent).


 








    PAGE 20


     


    

 


 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)




 


15.            Expenses
by nature


 


Expenses incurred by nature are as follows:


 


	 	 	Three months ended March 31	 
	 	 	2021	 	 	2020
 (note 2(b))
	 
	Employee and contractor expenses (note 16)	 	$	6,259,894	 	 	$	5,763,400	 
	Inventory, materials and other cost of sales	 	 	575,697	 	 	 	185,956	 
	Depreciation and amortization	 	 	1,248,361	 	 	 	1,098,551	 
	Facilities	 	 	110,179	 	 	 	120,649	 
	Professional and consulting fees	 	 	462,583	 	 	 	273,623	 
	Investor relations and other shareholder expenses	 	 	205,942	 	 	 	65,284	 
	Bad debt	 	 	(19,236	)	 	 	-	 
	Marketing and advertising/promotion expenses	 	 	47,543	 	 	 	28,855	 
	Software license and IT expenses	 	 	347,199	 	 	 	220,853	 
	Telephone and internet	 	 	74,811	 	 	 	120,394	 
	Travel	 	 	9,239	 	 	 	75,855	 
	Insurance	 	 	36,993	 	 	 	17,756	 
	Office, administrative, and other operating expenses	 	 	112,529	 	 	 	122,887	 
	Foreign exchange (gain) loss	 	 	215,325	 	 	 	(252,249	)
	Total	 	$	9,687,059	 	 	$	7,841,814	 




 


16.            Employee
benefit expense


 


Expenditures for employee benefits are as follows:


 


	 	 	Three months ended March 31	 
	 	 	2021	 	 	2020	 
	Salaries and wages and employee benefits	 	$	2,873,965	 	 	$	2,720,536	 
	Contract labour	 	 	3,190,536	 	 	 	2,927,996	 
	Stock-based compensation	 	 	85,995	 	 	 	47,725	 
	Other staff expense	 	 	109,398	 	 	 	67,243	 
	Total	 	$	6,259,894	 	 	$	5,763,400	 




 








    PAGE 21


     


    

 


 




VIQ
Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)


 


17.            Lease
obligations


 


Below is a summary of the activity related to
our lease liabilities for the year ended March 31, 2021 and 2020:


 


	 	 	Three months ended March 31	 
	 	 	2021	 	 	2020
 (note 2 (b))
	 
	Lease obligations, beginning of period	 	$	354,199	 	 	$	689,644	 
	Additions	 	 	-	 	 	 	12,199	 
	Disposals	 	 	-	 	 	 	-	 
	Interest on lease liabilities	 	 	7,777	 	 	 	15,680	 
	Interest payments on lease liabilities	 	 	(7,777	)	 	 	(15,680	)
	Principal payments of lease liabilities	 	 	(45,268	)	 	 	(79,842	)
	Adjustments	 	 	(1,736	)	 	 	275	 
	Foreign exchange difference	 	 	2,297	 	 	 	(46,879	)
	Lease obligations, end of period	 	$	309,492	 	 	$	575,397	 
	Less: current portion of lease obligations	 	 	(81,483	)	 	 	(270,173	)
	Long-term lease obligations	 	 	228,009	 	 	 	305,224	 




 


The Company and its subsidiaries have entered
into agreements to lease office premises until 2025. The annual rent expenses for premises consist of minimum rent and does not include
variable costs. The minimum payments under all agreements are as follows:


 


	2021	 	$	86,732	 
	2022	 	 	114,962	 
	2023	 	 	98,698	 
	2024	 	 	73,075	 
	2025	 	 	62,711	 
	 	 	$	436,178	 



 


18.            Risk
management for financial instruments


 


Fair values


 


The estimated fair values of cash, trade and other
receivables, restricted cash, trade and other payables, and share appreciation rights plan obligations approximate their carrying values
due to the relatively short-term nature of the instruments. The estimated fair values of current and long-term debt and obligations under
finance lease also approximate carrying values due to the fact that effective interest rates are not significantly different from market
rates.


 


Fair value measurements recognized in the consolidated
balance sheets must be categorized in accordance with the following levels:


 


		•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;






		•	Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and






		•	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).



 


The Company’s financial instruments carried
at fair value on the consolidated balance sheets consist of cash and restricted cash. Cash and restricted cash are valued using quoted
market prices (Level 1). Share appreciation rights and the conversion feature derivative liability are categorized using observable market
inputs (Level 2). The Company did not value any financial instruments using valuation techniques based on non-observable market inputs
(Level 3) as at March 31, 2021.


 








    PAGE 22


     


    

 


 




VIQ
Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)


 





18.            Risk
management for financial instruments (continued)


 


Liquidity risk


 


Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as they become due. The Company’s


 


approach in managing liquidity is to ensure, to
the extent possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
by continuously monitoring actual and budgeted cash flows.


 


The Company has sustained losses over the last
number of periods and has financed these losses mainly through a combination of equity and debt offerings. Management believes that it
has raised sufficient cash to meet all of its contractual debt that is coming due in 2021 and has the ability to fund any operating losses
that may occur in the upcoming periods.


 


Credit risk


 


Credit risk arises from the potential that a customer
or counterparty will fail to perform its obligations. The Company is exposed to credit risk from its customers; however, the Company has
a significant number of customers, minimizing the concentration of credit risk. Further, a large majority of the Company’s customers
are economically stable organizations such as government agencies or departments with whom the Company transacts with on a regular basis,
further reducing the overall credit risk.


 


Historically, the Company has suffered losses
under trade receivables. In order to minimize the risk of loss from trade


 


receivables, the Company’s extension of
credit to customers involves review and approval by senior management and conservative credit limits for new or higher risk accounts.


 


The Company reviews its trade receivable accounts
regularly and writes down these accounts to their expected realizable values, by making an allowance for expected credit losses, as soon
as the account is determined not to be fully collectible. The allowance is recorded as an expense in the consolidated statements of loss
and comprehensive loss. Shortfalls in collections are applied against this provision. Estimates for allowance for expected credit losses
are determined by a customer-by-customer evaluation of collectability at each balance sheet reporting date, taking into account the amounts
that are past due and any available relevant information on the customers’ liquidity and going concern issues. Normal credit terms
for amounts due from customers call for payment within 30 to 60 days.


 


The Company’s exposure to credit risk for
trade receivables by geographic area was as follows:


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	United States	 	 	60	%	 	 	65	%
	Australia	 	 	16	%	 	 	17	%
	United Kingdom	 	 	15	%	 	 	16	%
	Canada	 	 	2	%	 	 	0	%
	Rest of world	 	 	7	%	 	 	2	%
	 	 	 	100	%	 	 	100	%




 


The activity of the allowance for doubtful accounts
provision is as follows:


 


	 	 	March 31, 2021	 	 	December 31, 2020	 
	Beginning of period	 	$	123,338	 	 	$	902,215	 
	Add: provision for allowance for doubtful accounts	 	 	(19,236	)	 	 	18,116	 
	Less: write-offs	 	 	-	 	 	 	(815,817	)
	Foreign exchange adjustments	 	 	(103	)	 	 	18,824	 
	Expected credit loss – end of period	 	$	103,999	 	 	$	123,338	 




 








    PAGE 23


     


    

 


 


VIQ Solutions Inc.


Notes to Interim Condensed Consolidated Financial Statements


(Expressed in United States dollars)



 


18.            Risk
management for financial instruments (continued)


 


Interest rate risk


 


Interest rate risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company’s interest rate
risk is primarily related to the Company’s interest-bearing debts on its consolidated balance sheet. The Company does not have a
material amount of long-term debt with variable interest rates, thereby


 


minimizing the Company’s exposure to cash
flow interest rate risk.


 


Foreign currency risk


 


Foreign currency risk arises because of fluctuations
in exchange rates. The Company conducts a significant portion of its business activities in foreign currencies, primarily the U.S. and
Australian dollars and Great Britain pounds with a large portion of the Company’s sales and operating costs being realized in these
foreign currencies. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency
cash flows by transacting, to the greatest extent possible, with third parties in Canadian, U.S. and Australian dollars.


 


The financial assets and liabilities that are
denominated in foreign currencies will be affected by changes in the exchange rate between the United States dollar and these foreign
currencies. This primarily includes cash, restricted cash, trade and other receivables, trade and other payables, provisions and obligations
under finance lease which were denominated in foreign currencies.


 


The Company’s Australian subsidiaries have
a majority of revenue and expenses being transacted in Australian dollars. As of March 31, 2021, fluctuations of the Australian
dollar relative to the United States dollar of 5% would result in an exchange gain or loss on the net financial assets, impacting the
Company’s comprehensive income by approximately $50,000 (2020 –$13,000).


 


The Company’s computer products and services
operations are exposed to exchange rate changes in the U.S. dollar relative to the Canadian dollar since a substantial portion of this
business unit’s sales are denominated in U.S. dollars with most of the related expenses in Canadian dollars. A 5% fluctuation of
the U.S. dollar would result in an exchange gain or loss on the net financial assets of approximately $17,000 (2020 – $32,000) as
at March 31, 2021.


 


The Company’s computer products and
services operations are exposed to exchange rate changes in the Great Britain pound relative to the United States dollar since a
portion of this business unit’s sales are denominated in Great Britain pounds with most of the related expenses in United
States dollars. A fluctuation of the Great Britain pound of 5% would result in an exchange gain or loss on the net financial assets
of approximately $21,000 (2020 – $nil) as at March 31, 2021.


 


The Company does not currently use foreign exchange
contracts to hedge its exposure of its foreign currencies cash flows as management has determined that this risk is not significant at
this point in time. The Company recognized a foreign exchange loss from operations of $215,325 for the period ended March 31, 2021
(2020 – foreign exchange gain of $252,249).


 


Capital management


 


The Company considers its capital structure
to consist of shareholders’ equity, long-term debt and convertible debt. The Company’s objective in managing capital is
to ensure sufficient liquidity to pursue its organic growth strategy, fund research and development and undertake selective
acquisitions, while at the same time taking a conservative approach toward financial leverage and management of financial risk.


 


19.            Subsequent
events


 


None.


 






    PAGE 24