Exhibit 4.4


 





 


 


 


 


 


	VIQ Solutions Inc.	




 


Consolidated Financial Statements


December 31, 2019 and 2018


 


(Expressed in United States
dollars)


 






     


     


    




 


Independent
Auditor's Report


 


To the Shareholders of VIQ
Solutions Inc.:


 


Opinion


 


We have audited the consolidated
financial statements of VIQ Solutions Inc. and its subsidiaries (the "Company"), which comprise the consolidated balance sheets
as at December 31, 2019 and December 31, 2018, and the consolidated statements of loss and comprehensive loss, changes in equity and
cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies.


 


In our opinion, the accompanying
consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at
December 31, 2019 and December 31, 2018, and its consolidated financial performance and its consolidated cash flows for the years then
ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.


 


Basis for Opinion


 


We conducted our audits
in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.


 


Other Information


Management is responsible
for the other information. The other information comprises Management’s Discussion and Analysis.


 


Our opinion on the consolidated
financial statements does not cover the other information we do not express any form of assurance conclusion thereon.


 


In connection with our
audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or
otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s
report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.


 


Responsibilities of
Management and Those Charged with Governance for the Consolidated Financial Statements


 


Management is responsible
for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.


 


In preparing the consolidated
financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.


 


Those charged with governance
are responsible for overseeing the Company’s financial reporting process.


 


Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements


 


Our objectives are to obtain
reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.


 


 


 






     


     


    

 


As part of an audit in accordance
with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:


  


		·	Identify
                                            and assess the risks of material misstatement of the consolidated financial statements, whether
                                            due to fraud or error, design and perform audit procedures responsive to those risks, and
                                            obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
                                            The risk of not detecting a material misstatement resulting from fraud is higher than for
                                            one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
                                            misrepresentations, or the override of internal control.



		·	Obtain
                                            an understanding of internal control relevant to the audit in order to design audit procedures
                                            that are appropriate in the circumstances, but not for the purpose of expressing an opinion
                                            on the effectiveness of the Company’s internal control.



		·	Evaluate
                                            the appropriateness of accounting policies used and the reasonableness of accounting estimates
                                            and related disclosures made by management.



		·	Conclude
                                            on the appropriateness of management's use of the going concern basis of accounting and,
                                            based on the audit evidence obtained, whether a material uncertainty exists related to events
                                            or conditions that may cast significant doubt on the Company’s ability to continue
                                            as a going concern. If we conclude that a material uncertainty exists, we are required to
                                            draw attention in our auditor's report to the related disclosures in the consolidated financial
                                            statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
                                            are based on the audit evidence obtained up to the date of our auditor's report. However,
                                            future events or conditions may cause the Company to cease to continue as a going concern.



		·	Evaluate
                                            the overall presentation, structure and content of the consolidated financial statements,
                                            including the disclosures, and whether the consolidated financial statements represent the
                                            underlying transactions and events in a manner that achieves fair presentation.



		·	Obtain
                                            sufficient appropriate audit evidence regarding the financial information of the entities
                                            or business activities within the Company to express an opinion on the consolidated financial
                                            statements. We are responsible for the direction, supervision and performance of the group
                                            audit. We remain solely responsible for our audit opinion.



 


We communicate with those
charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including
any significant deficiencies in internal control that we identify during our audits.


 


We also provide those charged
with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.


 


The engagement partner
on the audit resulting in this independent auditor's report is Saad Shaikh.


 








  


	Toronto, Ontario	Chartered Professional Accountants
	April 16, 2020	Licensed Public Accountants







 


 


 



     


     


    




 


	 	VIQ
                                            SOLUTIONS INC.






 


VIQ
Solutions Inc. 

Consolidated Balance Sheets 

(Expressed in United States dollars)


 


	 	 	December 31, 2019	 	 	December 31, 2018	 
	Assets	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	Cash	 	$	1,707,654	 	 	$	1,922,768	 
	Trade and other receivables, net of
    expected credit loss (note 4)	 	 	3,169,545	 	 	 	3,023,127	 
	Inventories	 	 	64,706	 	 	 	58,195	 
	Prepaid expenses
    and deposits	 	 	184,207	 	 	 	161,170	 
		 	 	5,126,112	 	 	 	5,165,260	 
	Non-current assets	 	 	 	 	 	 	 	 
	Restricted cash	 	 	37,536	 	 	 	37,712	 
	Property and equipment (note 5)	 	 	111,587	 	 	 	111,437	 
	Right of use assets (note 10)	 	 	647,046	 	 	 	-	 
	Intangible assets (note 6)	 	 	10,216,461	 	 	 	11,358,813	 
	Goodwill (note 7)	 	 	4,295,515	 	 	 	4,291,935	 
	Deferred tax assets
    (note 19)	 	 	334,542	 	 	 	368,997	 
	Total assets	 	$	20,768,799	 	 	$	21,334,154	 
	 	 	 	 	 	 	 	 	 
	Liabilities	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Trade and other payables	 	$	3,073,361	 	 	$	4,458,982	 
	Income tax payable	 	 	94,606	 	 	 	-	 
	Share appreciation rights plan obligations
    (note 11)	 	 	149,078	 	 	 	257,164	 
	Current portion of long-term debt (note
    8)	 	 	1,103,438	 	 	 	1,155,518	 
	Conversion feature derivative liability
    (note 8)	 	 	2,336,804	 	 	 	3,290,832	 
	Current portion of lease obligations
    (note 10)	 	 	307,436	 	 	 	-	 
	Provisions (note 9)	 	 	441,667	 	 	 	458,959	 
	Contract liabilities	 	 	455,026	 	 	 	454,789	 
		 	 	7,961,416	 	 	 	10,076,244	 
	Non-current liabilities	 	 	 	 	 	 	 	 
	Deferred tax liability (note 19)	 	 	4,205	 	 	 	29,752	 
	Convertible debt (note 8)	 	 	3,601,182	 	 	 	1,563,554	 
	Long-term debt (note 8)	 	 	6,505,637	 	 	 	6,877,061	 
	Long-term lease obligations (note 10)	 	 	382,208	 	 	 	-	 
	Provisions (note
    9)	 	 	103,629	 	 	 	72,638	 
	Total liabilities	 	 	18,558,277	 	 	 	18,619,249	 
	 	 	 	 	 	 	 	 	 
	Shareholders’ equity	 	 	 	 	 	 	 	 
	Capital stock (note 11)	 	 	21,987,937	 	 	 	18,662,252	 
	Contributed surplus	 	 	4,552,528	 	 	 	3,595,587	 
	Accumulated other comprehensive income
    (loss)	 	 	(135,058	)	 	 	127,753	 
	Deficit	 	 	(24,194,885	)	 	 	(19,670,687	)
	 	 	 	2,210,522	 	 	 	2,714,905	 
	Total liabilities and shareholders’
    equity	 	$	20,768,799	 	 	$	21,334,154	 



 


Subsequent events (note 22)


Commitments and contingencies (note 13)


 


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



 


The accompanying notes form
an integral part of these consolidated financial statements.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 2 




     


    










 





	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Consolidated
Statements of Loss and Comprehensive Loss

(Expressed in United States dollars)


 


	
	 	 	Year Ended
    December 31,	 
	 	 	2019	 	 	2018	 
	
Revenue
                                            (note 16)
	 	$	25,096,308	 	 	$	11,462,804	 
	Cost of sales	 	 	14,276,321	 	 	 	7,874,219	 
	Gross profit	 	 	10,819,987	 	 	 	3,588,585	 
	 	 	 	 	 	 	 	 	 
	
Expenses
	 	 	 	 	 	 	 	 
	Selling and administrative expenses	 	 	8,954,512	 	 	 	5,533,724	 
	Research and development expenses	 	 	994,640	 	 	 	458,675	 
	Stock-based compensation (note 12)	 	 	195,113	 	 	 	(31,461	)
	(Gain)loss on revaluation of conversion
    feature liability (note 8)	 	 	(2,330,964	)	 	 	186,444	 
	Loss on settlement of payables (note
    11)	 	 	762,575	 	 	 	-	 
	Foreign exchange loss	 	 	217,040	 	 	 	198,180	 
	Depreciation and amortization (notes
    5, 6 and 10)	 	 	3,502,429	 	 	 	648,873	 
	 	 	 	12,295,345	 	 	 	6,994,435	 
	 	 	 	 	 	 	 	 	 
	
Loss
                                            before interest, accretion, business acquisition and financing costs, and income taxes
	 	 	(1,475,358	)	 	 	(3,405,850	)
	 	 	 	 	 	 	 	 	 
	Interest income	 	 	1,340	 	 	 	2,286	 
	Interest expense (notes 8 and 10)	 	 	(1,549,904	)	 	 	(96,484	)
	Accretion expense (note 8)	 	 	(916,734	)	 	 	(66,142	)
	Business acquisition and financing costs
    (notes 8 and 14)	 	 	(484,387	)	 	 	(2,488,873	)
	Net loss before income taxes	 	 	(4,425,043	)	 	 	(6,055,063	)
	 	 	 	 	 	 	 	 	 
	
Income
                                            tax expense (note 19)
	 	 	(99,155	)	 	 	(11,571	)
	Net loss for the year	 	$	(4,524,198	)	 	$	(6,066,634	)
	 	 	 	 	 	 	 	 	 
	Exchange differences on translating foreign
    operations	 	 	(262,811	)	 	 	(95,899	)
	Comprehensive loss for the year	 	$	(4,787,009	)	 	$	(6,162,533	)
	 	 	 	 	 	 	 	 	 
	
Net
                                            loss per share (note 13)
	 	 	 	 	 	 	 	 
	Basic	 	$	(0.49	)	 	$	(0.75	)
	Diluted	 	$	(0.49	)	 	$	(0.75	)
	 	 	 	 	 	 	 	 	 
	
Weighted
                                            average number of common shares outstanding – basic and diluted (note 13)
	 	 	9,251,546	 	 	 	8,090,803	 




 


The accompanying notes form
an integral part of these consolidated financial statements.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 3 




     


    

 








	 	VIQ
                                            SOLUTIONS INC.







  





VIQ Solutions Inc.


Consolidated
Statements of Changes in Equity 

(Expressed in United States dollars)


 


	 	 	Capital stock	 	 	Contributed	 	 	 	 	 	Accumulated other comprehensive	 	 	Total	 
	 	 	Number	 	 	Amount	 	 	surplus	 	 	Deficit	 	 	income
    (loss)	 	 	equity	 
	Balance at January 31, 2018	 	 	8,051,289	 	 	$	17,426,645	 	 	$	2,715,610	 	 	$	(13,604,053	)	 	$	223,652	 	 	$	6,761,854	 
	Comprehensive loss for the year	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(6,066,634	)	 	 	(95,899	)	 	 	(6,162,533	)
	Shares issued due to exercise of stock options (note 11)	 	 	20,525	 	 	 	40,104	 	 	 	(11,304	)	 	 	–	 	 	 	–	 	 	 	28,800	 
	Shares issued as debt financing costs (note 8)	 	 	106,383	 	 	 	225,530	 	 	 	623,152	 	 	 	–	 	 	 	–	 	 	 	848,682	 
	Shares issued for Transcription Express acquisition (note
    14)	 	 	551,121	 	 	 	969,973	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	969,973	 
	Stock-based compensation (note 12)	 	 	–	 	 	 	–	 	 	 	268,129	 	 	 	–	 	 	 	–	 	 	 	268,129	 
	Balance at December 31, 2018	 	 	8,729,318	 	 	$	18,662,252	 	 	$	3,595,587	 	 	$	(19,670,687	)	 	$	127,753	 	 	$	2,714,905	 
	Comprehensive loss for the year	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(4,524,198	)	 	 	(262,811	)	 	 	(4,787,009	)
	Shares issued due to exercise of stock options (note 11)	 	 	67,860	 	 	 	85,979	 	 	 	(26,348	)	 	 	–	 	 	 	–	 	 	 	59,631	 
	Shares issued due to exercise of DSUs (note 11)	 	 	33,333	 	 	 	39,777	 	 	 	(39,221	)	 	 	–	 	 	 	–	 	 	 	556	 
	Shares issued due to exercise of warrants (note 11)	 	 	1,362,506	 	 	 	2,196,277	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	2,196,277	 
	Shares issued upon settlement of payables (note 11)	 	 	659,600	 	 	 	1,003,652	 	 	 	762,575	 	 	 	–	 	 	 	–	 	 	 	1,766,227	 
	Options forfeited (note 12)	 	 	–	 	 	 	–	 	 	 	(39,652	)	 	 	–	 	 	 	–	 	 	 	(39,652	)
	Stock-based compensation (note 12)	 	 	–	 	 	 	–	 	 	 	299,587	 	 	 	–	 	 	 	–	 	 	 	299,587	 
	Balance at December 31, 2019	 	 	10,852,617	 	 	$	21,987,937	 	 	$	4,552,528	 	 	$	(24,194,885	)	 	$	(135,058	)	 	$	2,210,522	 



 


The accompanying notes form
an integral part of these consolidated financial statements.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 4 




     


    




 





	 	VIQ
                                            SOLUTIONS INC.







 





VIQ Solutions Inc.


Consolidated Statements
of Cash Flows


(Expressed
in United States dollars)


 


	 	 	Year Ended
    December 31,	 
	 	 	2019	 	 	2018	 
	Cash provided by (used in):	 	 	 	 	 	 	 	 
	Operating activities	 	 	 	 	 	 	 	 
	Net loss for the year	 	$	(4,524,198	)	 	$	(6,066,634	)
	 	 	 	 	 	 	 	 	 
	Items not affecting cash:	 	 	 	 	 	 	 	 
	Depreciation and amortization (notes
    5 and 6)	 	 	3,067,037	 	 	 	648,873	 
	Depreciation – ROU (note 10)	 	 	435,392	 	 	 	–	 
	Stock-based compensation (note 12)	 	 	195,113	 	 	 	(31,461	)
	(Gain)loss on revaluation of conversion
    feature liability (note 8)	 	 	(2,330,964	)	 	 	186,444	 
	Loss on settlement of payables (note
    11)	 	 	762,575	 	 	 	–	 
	Accretion expense (note 8)	 	 	916,734	 	 	 	–	 
	Interest expense (notes 8 and 10)	 	 	1,549,904	 	 	 	–	 
	Provisions	 	 	(13,699	)	 	 	(6,129	)
	Deferred income tax expense (recovery)	 	 	5,575	 	 	 	11,571	 
	Unrealized foreign exchange loss	 	 	207,479	 	 	 	196,455	 
	Changes in non-cash operating working
    capital (note 15)	 	 	(822,132	)	 	 	3,543,308	 
	Cash used in operating activities	 	 	(551,184	)	 	 	(1,517,573	)
	 	 	 	 	 	 	 	 	 
	
Investing
                                            activities
	 	 	 	 	 	 	 	 
	Purchase of property and equipment (note
    5)	 	 	(92,671	)	 	 	(49,092	)
	Business acquisitions, net of cash acquired
    (note 14)	 	 	–	 	 	 	(9,605,683	)
	Development costs related to internally
    generated intangible assets (note 6)	 	 	(1,689,711	)	 	 	(1,881,792	)
	Change in restricted cash	 	 	176	 	 	 	4,406	 
	Cash used in investing activities	 	 	(1,782,206	)	 	 	(11,532,161	)
	 	 	 	 	 	 	 	 	 
	
Financing
                                            activities
	 	 	 	 	 	 	 	 
	Proceeds from the exercise of stock
    options (note 11)	 	 	59,631	 	 	 	28,800	 
	Proceeds from the exercise of warrants
    (note 11)	 	 	2,196,277	 	 	 	–	 
	Proceeds from convertible debt, net
    of cash issuance costs (note 8)	 	 	1,925,000	 	 	 	4,692,327	 
	Proceeds from debt, net of cash issuance
    costs (note 8)	 	 	–	 	 	 	6,345,166	 
	Repayment of debt (note 8)	 	 	(983,479	)	 	 	–	 
	Repayment of lease obligations (note
    10)	 	 	(479,439	)	 	 	–	 
	Payment of interest on debt (note 8)	 	 	(657,300	)	 	 	–	 
	Lease advances	 	 	(6,217	)	 	 	(20,491	)
	Cash provided by financing activities	 	 	2,054,473	 	 	 	11,045,802	 
	 	 	 	 	 	 	 	 	 
	
Net
                                            decrease in cash for the year
	 	 	(278,917	)	 	 	(2,003,932	)
	Cash, beginning of year	 	 	1,922,768	 	 	 	4,112,123	 
	Effect of exchange rate changes on cash	 	 	63,803	 	 	 	(185,423	)
	Cash, end of year	 	$	1,707,654	 	 	$	1,922,768	 




 


Supplemental
disclosure (note 15)


 


The accompanying notes form
an integral part of these consolidated financial statements.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 5 




     


    




 





	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to 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.


 


On November 28, 2018, the
Company completed the acquisition of Net Transcripts, Inc. (“Net Transcripts”) of Phoenix, Arizona. Net Transcripts is a
leading provider of secure, multi-speaker documentation services to law enforcement and criminal justice organizations.


 


On December 21, 2018, the
Company completed the acquisitions of Transcription Express, Inc. (“Transcription Express”) of Gilbert, Arizona and HomeTech,
Inc. (“HomeTech”) of Seattle, Washington. Transcription Express and HomeTech are two leading providers of transcription services
to the insurance, government and legal markets in the United States.


 


In December 2019, the Company
completed a 1:20 reverse stock split. The exercise price or conversion price of, and the number of common shares issuable under, any
convertible securities of the Company were proportionately adjusted upon completion of the reverse stock split. References in these consolidated
financial statements to share amounts, per share data, share prices, exercise prices and conversion prices have been adjusted to reflect
the 1:20 reverse stock split.


 


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 listed on the TSX Venture Exchange trading under the symbol “VQS”.


 


	2.	Basis of
                                            preparation



 


	(a)	Statement of compliance



 


The Company prepares its
consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) using the accounting
policies described herein as issued by International Accounting Standards Board (“IASB”). The preparation of 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 of complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.


 


This is the first fiscal
year of the Company’s consolidated financial statements where IFRS 16 – “Leases” has been applied. The changes
in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2018
are described in note 3.


 


The consolidated financial
statements were authorized for issuance by the Board of Directors on April 16, 2020.


 


	(b)	Basis of presentation



 


The 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. All financial information is presented in USD.


 









    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 6 




     


    

 


  





	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 






	2.	Basis of
                                            preparation (continued)



 


	(c)	Functional and presentation currency



 


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, Spark & Cannon
Australasia Pty. Ltd – AUD, Spark & Cannon Pty – AUD, VIQ Services Inc. – USD, Net Transcripts – USD, Transcription
Express – USD and HomeTech - USD. These consolidated financial statements are presented in USD.


 


The exchange rates used were
as follows:


 


	CAD /USD exchange rate	 	December 31, 2019	 	December 31, 2018
	Closing at the reporting date	 	0.7682	 	0.7329
	Average rate for the year	 	0.7537	 	0.7721



 


	AUD /USD exchange rate	 	December 31, 2019	 	 	December 31, 2018	 
	Closing at the reporting date	 	 	0.7013	 	 	 	0.7046	 
	Average rate for the year	 	 	0.6954	 	 	 	0.7478	 



 


	3.	Significant
                                            accounting policies, estimates and judgments



 


	(i)	Significant accounting policies



 


Basis of consolidation


The consolidated financial
statements of the Company include the accounts of VIQ and the consolidated accounts of all of its wholly-owned subsidiaries including
(i) the operations of VIQ Solutions, Inc. (formerly VIQ Solutions (U.S.) Inc.); (ii) the operations of Dataworxs Systems Limited and
Dataworxs Systems Limited’s wholly-owned subsidiary Dataworxs Australia Pty Ltd. (collectively, “Dataworxs”); (iii)
the operations of VIQ Australia Pty. Limited and VIQ Australia Pty. Limited’s wholly-owned subsidiaries Spark & Cannon Australasia
Pty. Ltd. and Spark & Cannon Pty. Ltd. (collectively, “Spark & Cannon”), and; (iv) the operations of VIQ Services
Inc. and VIQ Services Inc’s wholly owned subsidiaries, Net Transcripts, Inc., Transcription Express, Inc. and HomeTech, Inc.


 


Subsidiaries are entities
controlled by the Company where control is defined as the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. Subsidiaries are included in the consolidated financial statements from the date control is obtained
until the date control ceases. All intercompany balances, transactions, income and expenses have been eliminated on consolidation.


 


Inventories


Inventories of finished
goods and raw materials and supplies are valued at the lower of cost and net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less any applicable selling expenses. Cost is determined on a weighted average basis.
Reversals of previous write-downs to net realizable value are recognized when there is a subsequent increase in the value of inventories.


 


Restricted cash


Restricted cash is recorded
at fair value. Changes to fair value are recorded in the consolidated statements of loss and comprehensive loss in the period incurred.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 7 




     


    

  





	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


  


	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies
                                            (continued)



 


Property and equipment


Property and equipment
are recorded at cost less accumulated depreciation and accumulated impairment losses. Rates and basis of depreciation applied to write
off the cost of property and equipment to their residual values over their estimated useful lives are as follows:


 


	Furniture and
    fixtures	8% –
    20% declining balance
	Computer and transcription
    equipment	20% – 50% declining
    balance, 33% – 50% straight line
	Leasehold improvements	Over the term of the lease



 


An asset’s residual
value, useful life and depreciation method are reviewed, and adjusted prospectively if appropriate, on an annual basis. Repairs and maintenance
costs are charged to the consolidated statements of loss and comprehensive loss during the period which they are incurred. Gains and
losses on disposals of property and equipment are determined by comparing the proceeds with the carrying amount of the asset and are
included as part of selling and administrative expenses in the consolidated statements of loss and comprehensive loss.


 


Intangible assets


Intangible assets with
infinite lives that are acquired separately are measured on initial recognition at cost. Intangible assets with finite lives that are
acquired separately are measured on initial recognition at cost, which comprises its purchase price plus any directly attributable costs
of preparing the asset for its intended use. Following initial recognition, such intangible assets are carried at cost less any accumulated
amortization on a straight-line basis over 5 years for customer lists and technology. Amortization expense is included as part of depreciation
and amortization in the consolidated statements of loss and comprehensive loss.


 


The estimated useful life
and amortization method are reviewed annually, with the effect of any change in estimate being accounted for on a prospective basis.
These assets are subject to an impairment test as described below.


 


Research and development
costs


The Company incurs costs
associated with the design and development of new products. Expenditures during the research phase are expensed as incurred. Expenditures
during the development phase are capitalized if the Company can demonstrate each of the following criteria: (i) the technical feasibility
of completing the intangible asset so that it will be available for use or sale, (ii) 
its intention to complete the intangible asset and use or sell it, (iii) its ability to use or sell the intangible asset, (iv)
how the intangible asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset, and (vi) its ability to measure reliably the expenditure
attributable to the intangible asset during its development; otherwise, they are expensed as incurred. Costs associated with maintaining
computer software programs are recognized as an expense as incurred. Internally generated software development costs recognized as intangible
assets are carried at cost less any accumulated amortization on a straight- line basis over 3 years after they are completed. These assets
are subject to an impairment test as described below.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 8 




     


    

  








	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


  





	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



 


Business combinations


IFRS 3, Business Combinations,
requires business combinations to be accounted using the acquisition method. Under this method, the cost of an acquisition is measured
as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest
in the acquiree.


 


When the Company acquires
a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation based on the facts
and circumstances at the acquisition date. Business acquisition costs incurred are expensed and included in transaction costs. Measurement
period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which
cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The excess of (i)
the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the (ii) fair value of the net identifiable assets acquired is recorded as goodwill.


 


Goodwill arising on an
acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses,
if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the synergies of the combination.


 


A cash-generating unit
to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may
be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on
the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in the consolidated statements
of loss and comprehensive loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.


 


On disposal of the relevant
cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Determining
whether goodwill is impaired requires an estimation of the higher of fair value less costs of disposal and value in use of the cash-generating
units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected
to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.


 


Compound financial
instruments


Convertible notes issued
with warrants are evaluated whether any embedded derivatives need to be separated from the host instrument. In accordance with IAS 32.31
for compound financial instruments, because equity instruments are defined as contracts evidencing a residual interest in the assets
of an entity after deducting all of its liabilities, the warrants are assigned the residual amount of the consideration after deducting
the fair value of the liability components and are subsequently carried at historical cost. The liability components represent the host
debt and the embedded conversion feature.


 


The embedded derivative
conversion option is separated from its host contract on the basis of its stated terms and initially measured at fair value using the
Black-Scholes model, with the host debt contract being the residual amount after separation. Subsequently, the loan payable component
is measured at amortized cost using the effective interest method over the term of the loan. The loan component is accreted to the face
value by recording accretion expense. The values of the conversion feature is re-measured at each reporting date until settlement, with
changes in the fair value recorded in the consolidated statements of loss and comprehensive loss.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 9 




     


    

 











	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



 


Provisions


Provisions are recognized
when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow
of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured based on management’s
best estimate of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value
where the effect is material. Additionally, the Company performs evaluations to identify onerous contracts and, where applicable, records
provisions for such contracts.


 


The liability for employee
long service leave benefits which is not expected to be settled within 12 months of the reporting date is recognized as a provision based
on the probability that the employee will stay until they are legally entitled to the benefit. The liability payable later than one year
has been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cash flows are discounted
using market yields on national government bonds with terms to maturity that match the expected timing of the cash flows. The liability
is carried as a current liability if the staff is entitled to the long service leave in the next financial year.


 


Capital stock


Common shares are classified
as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. The proceeds
from the issuance of units (shares and warrants) is bifurcated between capital stock and warrants, with the value of the warrants determined
using the Black-Scholes option pricing model.


 


Foreign currency
translation


Items included in these
consolidated financial statements of each consolidated entity in the Company’s consolidated financial statements are measured using
the currency of the primary economic environment in which the entity operates (the “functional currency”).


 


The financial statements
of entities that have a functional currency different from the presentational 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.


 


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 consolidated
statements of loss and comprehensive loss.


 


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.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 10 




     


    

 














	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


  











	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



 





Financial instruments


 


Financial assets


 


Recognition and initial measurement


 


The Company recognizes
financial assets when it becomes party to the contractual provisions of the instrument. Financial assets are measured initially at their
fair value plus, in the case of financial assets not subsequently measured at fair value through profit or loss, transaction costs that
are directly attributable to their acquisition. Transaction costs attributable to the acquisition of financial assets subsequently measured
at fair value through profit or loss are expensed in the consolidated statements of loss and comprehensive loss when incurred.


 


Classification and subsequent
measurement


 


On initial recognition,
financial assets are classified as subsequently measured at amortized cost, fair value through other comprehensive income (“FVOCI”)
or fair value through profit or loss (“FVTPL”). The Company determines the classification of its financial assets, together
with any embedded derivatives, based on the business model for managing the financial assets and their contractual cash flow characteristics.


 


Financial assets are classified
as follows:


 


		·	Amortized
                                            cost - Assets that are held for collection of contractual cash flows where those cash flows
                                            are solely payments of principal and interest are measured at amortized cost. Interest revenue
                                            is calculated using the effective interest method and gains or losses arising from impairment,
                                            foreign exchange and derecognition are recognized in the consolidated statements of loss
                                            and comprehensive loss. Financial assets measured at amortized cost are comprised of trade
                                            receivables.



		·	Fair
                                            value through other comprehensive income - Assets that are held for collection of contractual
                                            cash flows and for selling the financial assets, and for which the contractual cash flows
                                            are solely payments of principal and interest, are measured at fair value through other comprehensive
                                            income. Interest income calculated using the effective interest method and gains or losses
                                            arising from impairment and foreign exchange are recognized in the consolidated statements
                                            of loss and comprehensive loss. All other changes in the carrying amount of the financial
                                            assets are recognized in other comprehensive income. Upon derecognition, the cumulative gain
                                            or loss previously recognized in other comprehensive income is reclassified to net loss.
                                            The Company does not hold any financial assets measured at fair value through other comprehensive
                                            income.



		·	Mandatorily
                                            at fair value through profit or loss - Assets that do not meet the criteria to be measured
                                            at amortized cost, or fair value through other comprehensive income, are measured at fair
                                            value through profit or loss. All interest income and changes in the financial assets’
                                            carrying amount are recognized in profit or loss. Financial assets mandatorily measured at
                                            fair value through profit or loss are comprised of cash and cash equivalents.



		·	Designated
                                            at fair value through profit or loss – On initial recognition, the Company may irrevocably
                                            designate a financial asset to be measured at fair value through profit or loss in order
                                            to eliminate or significantly reduce an accounting mismatch that would otherwise arise from
                                            measuring assets or liabilities, or recognizing the gains and losses on them, on different
                                            bases. All interest income and changes in the financial assets’ carrying amount are
                                            recognized in the consolidated statements of loss and comprehensive loss. The Company does
                                            not hold any financial assets designated to be measured at fair value through profit or loss.



 


The Company measures all
equity investments at fair value. Changes in fair value are recorded in the consolidated statements of loss and comprehensive loss. The
entity does not hold any equity investments.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 11 




     


    




 














	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



  


Financial assets (continued)


 


Business model assessment


 


The Company assesses the
objective of its business model for holding a financial asset at a level of aggregation which best reflects the way the business is managed,
and information is provided to management. Information considered in this assessment includes stated policies and objectives.


 


Contractual cash flow
assessment


 


The cash flows of financial
assets are assessed as to whether they are solely payments of principal and interest on the basis of their contractual terms. For this
purpose, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is
defined as consideration for the time value of money, the credit risk associated with the principal amount outstanding, and other basic
lending risks and costs. In performing this assessment, the Company considers factors that would alter the timing and amount of cash
flows such as prepayment and extension features, terms that might limit the Company’s claim to cash flows, and any features that
modify consideration for the time value of money.


 


Impairment


The Company recognizes
a loss allowance for the expected credit losses associated with its financial assets, other than financial assets measured at fair value
through profit or loss. Expected credit losses are measured to reflect a probability-weighted amount, the time value of money, and reasonable
and supportable information regarding past events, current conditions and forecasts of future economic conditions.


 


The Company applies the
simplified approach for trade receivables. Using the simplified approach, the Company records a loss allowance equal to the expected
credit losses resulting from all possible default events over the assets’ contractual lifetime.


 


The Company assesses whether
a financial asset is credit-impaired at the reporting date. Regular indicators that a financial instrument is credit-impaired include
significant financial difficulties as evidenced through borrowing patterns or observed balances in other accounts and breaches of borrowing
contracts such as default events or breaches of borrowing covenants. For financial assets assessed as credit-impaired at the reporting
date, the Company continues to recognize a loss allowance equal to lifetime expected credit losses.


 


For financial assets measured
at amortized cost, loss allowances for expected credit losses are presented in the consolidated balance sheet as a deduction from the
gross carrying amount of the financial asset.


 


Financial assets are written
off when the Company has no reasonable expectations of recovering all or any portion thereof.


 


Derecognition of
financial assets


The Company derecognizes
a financial asset when its contractual rights to the cash flows from the financial asset expire.


 


Financial
liabilities


 


Recognition and initial
measurement


 


The Company recognizes
a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures
financial liabilities at their fair value plus transaction costs that are directly attributable to their issuance, with the exception
of financial liabilities subsequently measured at fair value through profit or loss for which transaction costs are immediately recorded
in the consolidated statements of loss and comprehensive loss.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 12 




     


    




 














	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



  


Financial liabilities


 


Recognition and initial measurement


 


Where an instrument contains
both a liability and equity component, these components are recognized separately based on the substance of the instrument, with the
liability component measured initially at fair value and the equity component assigned the residual amount.


 


Classification and subsequent
measurement


 


Subsequent to initial recognition,
all financial liabilities are measured at amortized cost using the effective interest rate method. Interest, gains and losses relating
to a financial liability are recognized in profit or loss.


 


The standard contains three
classifications categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and
fair value through profit or loss (FVTPL).


 


The classification for
each class of the Company’s financial assets and financial liabilities is as follows:


  


	Financial
    assets and liabilities	 	 IFRS
    9 Classification
	Cash and restricted cash	 	FVTPL
	Trade and other receivables	 	Amortized cost
	Trade and other payables	 	Amortized cost
	Long-term debt	 	Amortized cost
	Convertible debt	 	Amortized cost
	Share appreciation rights (SARs)	 	FVTPL
	Conversion feature derivative liability	 	FVTPL




 


Financial instruments
with separate components


Unit issuances comprising
of one common share and one-half warrant share are segregated between the capital stock and warrant value components at the date of issue.
The fair value of the capital stock component is calculated using the share price at the date of the issuance. The fair value of the
warrants is calculated using the Black Scholes pricing model. Amounts allocated to each component are allocated using the relative fair
value basis.


 


Leases


Effective January 1, 2019
(hereafter referred to as the “date of initial application”), the Company adopted IFRS 16 Leases as issued by the IASB in
January 2016. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the
lessee and lessor. The standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease,
SIC 15 Operating Leases – Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.


 


The Company adopted IFRS
16 using the modified retrospective approach and accordingly the information presented for 2018 has not been restated. It remains as
previously reported under IAS 17 and related interpretations. On initial application, the Company has elected to record right-of-use
assets based on the corresponding lease liability, adjusted by the amount of any prepaid or accrued lease payments. Right-of-use assets
and lease obligations of $1,072,426 were recorded as of January 1, 2019, with no net impact on deficit. When measuring lease liabilities,
the Company discounted lease payments using its incremental borrowing rate of 10% at January 1, 2019. The Company has elected to apply
the practical expedient to account for leases for which the lease term ends within 12 months of the date of initial application as short-term
leases. The Company has elected to apply the practical expedient to grandfather the assessment of which transactions are leases on the
date of initial application, as previously assessed under IAS 17 and IFRIC 4. The Company applied the definition of a lease under IFRS
16 to contracts entered into or changed on or after January 1, 2019.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 13 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



  


Impairment of property
and equipment, definite life intangibles, indefinite life intangibles and goodwill


For purposes of assessing
impairment under IFRS, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating
unit). The Company cash generating units consist of Spark & Cannon, Dataworxs, Net Transcripts, Transcription Express and HomeTech
cash generating units and goodwill is tested for impairment at least annually. All other long-lived assets and finite life intangible
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.


 


An impairment loss is recognized
for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the
higher of fair value less costs to sell or value-in-use. To determine the value-in-use, management estimates expected future cash flows
from the cash-generating unit and determines a suitable pre-tax discount rate in order to calculate the present value of those cash flows.
The data used for impairment testing procedures are directly linked to the Company’s latest approved budget, adjusted as necessary
to exclude the effects of future reorganizations and asset enhancements.


 


Discount factors have been determined for the
cash-generating units and reflect its risk profile as assessed by management. Impairment losses for the cash-generating units reduce
first the carrying amount of any goodwill allocated to that cash- generating unit, with any remaining impairment loss charged pro rata
to the other assets in the cash-generating unit.


 


With the exception of goodwill,
all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment
charge is reversed if the assets’ recoverable amount exceeds its carrying amount only to the extent of the new carrying amount
does not exceed the carrying value of the asset had it not originally been impaired.


 


Property and equipment
and definite life intangibles are tested for impairment when events or changes in circumstances indicate that the carrying value may
not be recoverable. For the purpose of measuring recoverable values, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units or “CGUs”). The recoverable value is the higher of an asset’s fair value
less costs of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risk specific to the asset. An impairment loss is recognized for the value
by which the asset’s carrying value exceeds its recoverable value.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 14 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



  


Revenue recognition


IFRS 15 outlines a single
comprehensive model to account for revenue arising from contracts with customers and replaced the majority of existing IFRS requirements
on revenue recognition including IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. The core principle of the
standard is to recognize revenue to depict the transfer of control of goods and services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods and services. The standard has prescribed a five-step
model to apply the principles. The standard also specifies how to account for the incremental costs of obtaining a contract and the costs
directly related to fulfilling a contract as well as requiring more informative and relevant disclosures.


 


Contracts with multiple
products or services


Typically, the Company
enters into contracts that contain multiple products and services such as right to use and right to access software licenses, hosted
software-as-a-service, maintenance and support, and professional services. The Company evaluates these arrangements to determine the
appropriate unit of accounting (performance obligation) for revenue recognition purposes based on whether the product or service is distinct
from some or all of the other products or services in the arrangement. A product or service is distinct if the customer can benefit from
it on its own or together with other readily available resources and the Company’s promise to transfer the good or service is separately
identifiable from other promises in the contractual arrangement with the customer. Non-distinct products and services are combined with
other goods or services until they are distinct as a bundle and therefore form a single performance obligation.


 


Where a contract consists
of more than one performance obligation, revenue is allocated to each performance obligation based on their estimated standalone selling
price (“SSP”).


 


The Company recognizes
revenue when the transfer of control of the promised products or services has occurred to customers in exchange for consideration the
Company expects to receive, net of discounts and taxes. Revenue from the sale of software products is recognized when the product is
shipped and received by the customer, and depending on the delivery conditions, title and risk have passed to the customer. Revenues
from installation and training relating to the sale of software products are recognized as the services are performed. Software support
and maintenance revenue is recognized over the term of the maintenance agreement. Revenues from the Company’s hosted software-as-a-service
(“SaaS”) application are recognized as services are provided. The Company defers revenues that have been billed but which
do not meet the revenue recognition criteria. Cash received in advance of revenue being recognized is classified as contract liabilities
(unearned revenues).


 


The Company recognizes
an asset for the incremental costs of obtaining a contract with a customer if it expects the costs to be recoverable and has determined
that such costs meet the requirements to be capitalized. Capitalized contract acquisition costs are amortized consistent with the pattern
of transfer to the customer for the goods and services to which the asset relates. The amortization period includes specifically identifiable
contract renewals where there is no substantive commission paid on renewals. The expected customer renewal period is estimated based
over the life of the intellectual property including expected software upgrades by the customer. The Company does not capitalize incremental
costs of obtaining contracts if the amortization period is one year or less.


 


Cost of sales


Cost of sales for the computer
products and services business segment includes the cost of finished goods inventory, costs related to shipping and handling and expenses
relating to software support services. Cost of sales for the transcription business segments includes production wages and other associated
costs.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 15 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)






 


Income taxes


The income tax provision
comprises current and deferred tax. Income tax is recognized in the consolidated statements of loss and comprehensive loss except to
the extent that it relates to items recognized directly in equity, in which case the income tax is also recognized directly in equity.


 


Current tax is the expected
tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period,
and any adjustment to tax payable in respect of previous years.


 


Deferred tax is determined
using the liability method. Deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined on a non-discounted basis
using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period and are expected to apply
when the asset is realized or liability is settled. Deferred tax assets are recognized for deductible temporary differences, unused tax
losses and other income tax deductions to the extent that it is probable the Company will have taxable income against which those deductible
temporary differences, unused tax losses and other income tax deductions can be utilized. The extent to which deductible temporary differences,
unused tax losses and other income tax deductions are expected to be realized is reassessed at the end of each reporting period.


 


In a business combination,
temporary differences arise as a result of differences in the fair values of identifiable assets and liabilities acquired and their respective
tax bases. Deferred tax assets and liabilities are recognized for the tax effects of these differences. Deferred tax assets and liabilities
are not recognized for temporary differences arising from goodwill or from the initial recognition of assets and liabilities acquired
in a transaction other than a business combination which do not affect either accounting or taxable income or loss.


 


Net loss per common
share


Basic net loss per common
share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net
loss per common share is calculated by dividing the applicable net loss by the sum of the weighted average number of common shares outstanding
and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period.
The dilutive effect of outstanding stock options and warrants on earnings per share is calculated by determining the proceeds for the
exercise of such securities which are then assumed to be used to purchase common shares of the Company.


 


Research and development
credits


Investment tax credits
are accrued when qualifying expenditures are incurred and there is reasonable assurance that the credits will be realized. Investment
tax credits earned with respect to current expenditures for qualified research and development activities are included in the consolidated
statements of loss and comprehensive loss as a reduction of expenses. Investment tax credits associated with capital expenditures are
reflected as reductions in the carrying amounts of capital assets.


 


Stock-based compensation


The Company has a stock
option plan (note 12) for directors, officers and employees, a deferred share unit (“DSU”) plan (note 12) for directors and
a share appreciation rights (“SAR”) plan (note 12) for directors, officers, employees, and consultants. Each tranche in an
award is considered a separate award with its own vesting period and grant date fair value. Other than the DSU grants, the fair value
of each tranche is measured at the date of grant using the Black-Scholes option pricing model (note 11). Compensation expense is recognized
over the tranche’s vesting period, based on the number of awards expected to vest, with the offset credited to contributed surplus,
and share appreciation rights plan obligations. Forfeitures are estimated at the grant date and are revised to reflect changes in actual
forfeitures. The number of awards expected to vest is reviewed quarterly, with any impact being recognized immediately. When options
are exercised the amount received is credited to capital stock and the fair value attributed to these options is transferred from contributed
surplus to capital stock. As the SAR is a cash-settled plan, the fair value is recognized as a liability in the consolidated balance
sheet and is re-measured each period using the Black- Scholes options pricing model and charged to the consolidated statements of loss
and comprehensive loss at each reporting date until the award is settled.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 16 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 


	(i)	Significant accounting policies (continued)



 





Stock-based compensation
(continued)


 


The holder of the DSU will
only be able to redeem the DSUs in shares upon cessation of their service with the Company, therefore, the Company records DSUs as equity.
Grants of DSUs are recorded at fair value in selling and administration expense at the time of grant. The quoted market price of the
underlying shares on the grant date is considered to be equivalent to fair value for the DSUs. The charge to equity for DSUs is not updated
to fair value at each subsequent reporting period. Upon settlement, the amount recognized in contributed surplus for the award is reclassified
to share capital, with any premium or discount applied to deficit.


 


Comprehensive loss


Comprehensive loss consists
of net loss and other comprehensive income (loss). Other comprehensive income (loss) represents changes in shareholders’ equity
and includes foreign exchange gains and losses on the translation of the financial statements of the Company’s foreign operations
into its presentation currency and is presented as accumulated other comprehensive income (loss) on the consolidated balance sheet. The
Company’s net loss per share presented on the consolidated statements of loss and comprehensive loss is based upon its net loss
and not its comprehensive loss.


 


	(ii)	Critical accounting estimates
                                            and judgments



 


Overview


The preparation of consolidated
financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and notes to the consolidated financial statements. These estimates are based on management’s
best knowledge of current events and actions 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 determination of cash-generating units and the recoverable amount
of goodwill, amounts recorded as provisions, capitalization of internally generated development costs, revenue recognition, the fair
value of stock-based compensation and warrants, fair value of the purchase price allocation related to acquisitions, and the determination
of functional currency.


 


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 consolidated financial statements. The estimates are impacted
by many factors, some of which are highly uncertain.


 


Stock-based compensation


Management uses judgment
to determine the inputs to the Black-Scholes option pricing model including the expected plan lives, underlying share price volatility
and forfeiture rates. Volatility is estimated by considering the Company’s historic share price volatility over similar periods
to the expected life of the awards under consideration. Changes in these assumptions will impact the calculation of fair value and the
amount of compensation expense recognized in the consolidated statements of loss and comprehensive loss.


 


Warrants


Similar to other stock-based
compensation, management uses judgment to determine the inputs to the Black-Scholes option pricing model including the expected life,
and underlying share price volatility. Volatility is estimated by considering the Company’s historic share price volatility over
similar periods to the expected life of the warrants. Changes in these assumptions will impact the calculation of fair value and the
value attributed to the warrants.


 


Internally generated
development costs


Management monitors the
progress of internal research and development projects and uses judgment to distinguish research from the development phase. Expenditures
during the research phase are expensed as incurred. Development costs are recognized as an intangible asset when the Company can demonstrate
certain criteria.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 17 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 





	(ii)	Critical accounting estimates
                                            and judgments (continued)


  


Expected credit
losses


The Company performs impairment
testing annually for accounts receivable in accordance with IFRS 9. The ECL model requires considerable judgment, including consideration
of how changes in economic factors affect ECLs, which are determined on a probability-weighted basis. The Company applies the simplified
approach to determine ECLs on trade receivables by using a provision matrix based on historical credit loss experiences. The historical
results were used to calculate the run rates of default which were then applied over the expected life of the trade receivables, adjusted
for forward looking estimates.


 


Functional currency


The functional currency
of the Company and its subsidiaries has been assessed by management based on consideration of the currency and economic factors that
mainly influence operating costs, financing and related transactions. Changes to these factors may have an impact on the judgment applied
in the future determination of the Company’s and its subsidiaries’ functional currency.


 


Income taxes


At the end of each reporting
period, the Company assesses whether the realization of deferred tax benefits is sufficiently probable to recognize deferred tax assets.
This assessment requires the exercise of judgment on the part of management with respect to, among other things, benefits that could
be realized from available income tax strategies and future taxable income, as well as other positive and negative factors. The recorded
amount of total deferred tax assets could be reduced if estimates of projected future taxable income and benefits from available income
tax strategies are lowered, or if changes in current income tax regulations are enacted that impose restrictions on the timing or extent
of the Company’s ability to utilize deferred tax benefits.


 


The Company’s effective
income tax rate can vary significantly quarter-to-quarter for various reasons, including the mix and volume of business in lower income
tax jurisdictions and in jurisdictions for which no deferred income tax assets have been recognized because management believed it was
not probable that future taxable profit would be available against which income tax losses and deductible temporary differences could
be utilized. The Company’s effective income tax rate can also vary due to the impact of foreign exchange fluctuations.


 


Goodwill impairment
testing and recoverability of assets


Goodwill and intangible
assets are reviewed annually for impairment, or more frequently when there are indicators that impairment may have occurred, by comparing
the carrying value to its recoverable amount. Management uses judgment in estimating the recoverable values of the Company's CGUs and
uses internally developed valuation models that consider various factors and assumptions including forecasted cash earnings, growth rates
and discount rates. The use of different assumptions and estimates could influence the determination of the existence of impairment and
the valuation of goodwill.


 


Purchase price
allocation


In a business combination,
all identifiable assets, liabilities and contingent liabilities acquired are recorded at their fair values. One of the most significant
estimates relates to the determination of the fair value of these assets and liabilities. For any intangible asset identified, depending
on the type of intangible asset and the complexity of determining its fair value, an independent valuation expert or management may develop
the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash
flows. The valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned
and any changes in the discount rate applied. All acquisitions have been accounted for using the acquisition method.


 


Certain fair values may
be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in
accounting for a business combination, they may be adjusted retrospectively in subsequent periods. However, the measurement period will
last for one year from the acquisition date.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 18 




     


    

 




















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)


 








	3.	Significant accounting policies, estimates
                                            and judgments (continued)



 





	(ii)	Critical accounting estimates
                                            and judgments (continued)


 


Provisions


The Company has made certain
assumptions in order to estimate the provision for statutory long-term service leave for employees of the Company. Provisions are measured
based on management’s best estimate of the expenditure required to settle the obligation and the expected timing of the expenditure
at the end of the reporting period and are discounted to present value where the effect is material.


 


Revenue recognition


As the Company enters into
transactions that represent multiple-element arrangements, estimates are made to determine how consideration is allocated to the separate
units of accounting or elements on a relative fair value basis. Changes in the estimates will impact the revenue recognized in the period.


 


Incremental borrowing
rate used to discount leases


The Company’s incremental
borrowing rate is used to estimate the initial value of the lease liability and associated right of use asset. The Company’s incremental
borrowing rate is determined with reference to the Company’s long-term debt which represents the amount that the company could
borrow at within a similar timeframe.


 


	(iii)	Accounting standards and amendments
                                            issued but not yet applied



 


The International Accounting
Standards Board (“IASB”) has issued the following accounting standards which have not yet been adopted by the Company:


 


Amendment to IFRS
3 – Business Combinations


On October 22, 2018, the
IASB issued Definition of a Business (Amendments to IFRS 3: Business Combinations). The amendments to IFRS 3 are applicable for acquisitions
occurring on or after January 1, 2020 and are adopted prospectively. These amendments to the implementation guidance of IFRS 3 clarify
the definition of a business to assist entities to determine whether a transaction should be accounted for as a business combination
or an asset acquisition. The amendments to IFRS 3 – Business Combinations may affect whether future acquisitions are accounted
for as business combinations or asset acquisitions, along with the resulting allocation of the purchase price between the net identifiable
assets acquired and goodwill. The Company does not expect any impact to the consolidated financial statements as a result of its adoption
of the amendments to IFRS 3 on its acquisitions completed subsequent to year-end.


 


	4.	Trade and other receivables



 


	 	 	December
    31, 2019	 	 	December 31,
    2018	 
	Trade accounts receivable	 	$	4,071,760	 	 	$	3,793,057	 
	Less: expected credit losses (note 20)	 	 	(902,215	)	 	 	(769,930	)
	 	 	$	3,169,545	 	 	$	3,023,127	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 19 




     


    

  























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









 





	5.	Property
                                            and equipment



 


Details of the Company’s property and
equipment as of December 31, 2019 and December 31, 2018 are listed as follows:


 


	 	 	Balance

                                             January 1,
 2019
	 	 	Foreign
    
 exchange	 	 	Additions/
    
 (Disposals)	 	 	Balance
                                            
 December 31,
 2019
	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Furniture and fixtures	 	$	253,670	 	 	$	(1,002	)	 	$	1,309	 	 	$	253,977	 
	Computer and transcription equipment	 	 	1,190,489	 	 	 	16,863	 	 	 	91,362	 	 	 	1,298,714	 
	Buildings – Leasehold Improvements	 	 	4,595	 	 	 	222	 	 	 	-	 	 	 	4,817	 
	 	 	$	1,448,754	 	 	$	16,083	 	 	$	92,671	 	 	$	1,557,508	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Furniture and fixtures	 	$	189,063	 	 	$	(1,758	)	 	$	17,408	 	 	$	204,713	 
	Computer and transcription equipment	 	 	1,147,545	 	 	 	17,007	 	 	 	75,267	 	 	 	1,239,819	 
	Buildings – Leasehold Improvements	 	 	709	 	 	 	15	 	 	 	665	 	 	 	1,389	 
	 	 	$	1,337,317	 	 	$	15,264	 	 	$	93,340	 	 	$	1,445,921	 
	Net book value	 	$	111,437	 	 	 	 	 	 	 	 	 	 	$	111,587	 




 


	 	 	Balance
                                            

January 1,
 2018
	 	 	Foreign
    exchange	 	 	Additions/
    (Disposals)	 	 	Balance
                                            December 31,
 2018
	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Furniture and fixtures	 	$	264,977	 	 	$	(27,742	)	 	$	16,435	 	 	$	253,670	 
	Computer and transcription equipment	 	 	1,472,355	 	 	 	(37,763	)	 	 	(244,103	)	 	 	1,190,489	 
	Buildings – Leasehold Improvements	 	 	4,996	 	 	 	(401	)	 	 	-	 	 	 	4,595	 
	 	 	$	1,742,328	 	 	$	(65,906	)	 	$	(227,668	)	 	$	1,448,754	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Furniture and fixtures	 	$	191,924	 	 	$	(21,304	)	 	$	18,443	 	 	$	189,063	 
	Computer and transcription equipment	 	 	1,377,001	 	 	 	(23,715	)	 	 	(205,741	)	 	 	1,147,545	 
	Buildings – Leasehold Improvements	 	 	104	 	 	 	-	 	 	 	605	 	 	 	709	 
	 	 	$	1,569,029	 	 	$	(45,019	)	 	$	(186,693	)	 	$	1,337,317	 
	Net book value	 	$	173,299	 	 	 	 	 	 	 	 	 	 	$	111,437	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 20 




     


    

 























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









  





	6.	Intangible
                                            assets



 


Details of the Company’s intangible assets
as of December 31, 2019 and December 31, 2018 are listed as follows:


 


	 	 	Balance

                                             January 1,
 2019
	 	 	Acquisitions

    (note 14)	 	 	Additions	 	 	Foreign
    exchange	 	 	Balance
                                            December 31,
 2019
	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquired customer list	 	$	7,375,700	 	 	$	       -	 	 	$	-	 	 	$	18,008	 	 	$	7,393,708	 
	Technology	 	 	470,000	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	470,000	 
	Brand	 	 	840,000	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	840,000	 
	Internally generated intangible assets	 	 	3,382,117	 	 	 	-	 	 	 	1,689,711	 	 	 	187,459	 	 	 	5,259,287	 
	 	 	$	12,067,817	 	 	$	-	 	 	$	1,689,711	 	 	$	205,467	 	 	$	13,962,995	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquired customer list	 	$	252,383	 	 	$	-	 	 	$	1,477,254	 	 	$	83,196	 	 	$	1,812,833	 
	Technology	 	 	8,499	 	 	 	-	 	 	 	94,000	 	 	 	-	 	 	 	102,499	 
	Internally generated intangible assets	 	 	448,122	 	 	 	-	 	 	 	1,402,443	 	 	 	(19,363	)	 	 	1,831,202	 
	 	 	$	709,004	 	 	$	-	 	 	$	2,973,697	 	 	$	63,833	 	 	$	3,746,534	 
	Net book value	 	$	11,358,813	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	10,216,461	 



 


 


	 	 	Balance
                                            

                                            January 1,
 2018
	 	 	Acquisitions
    (note 14)	 	 	Additions	 	 	Foreign
    exchange	 	 	Balance
                                            December 31,
 2018
	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquired customer list	 	$	400,114	 	 	$	7,000,000	 	 	$	-	 	 	$	(24,414	)	 	$	7,375,700	 
	Technology	 	 	-	 	 	 	470,000	 	 	 	-	 	 	 	-	 	 	 	470,000	 
	Brand	 	 	-	 	 	 	840,000	 	 	 	-	 	 	 	-	 	 	 	840,000	 
	Internally generated intangible assets	 	 	1,653,622	 	 	 	-	 	 	 	1,881,792	 	 	 	(153,297	)	 	 	3,382,117	 
	 	 	$	2,053,736	 	 	$	8,310,000	 	 	$	1,881,792	 	 	$	(177,711	)	 	$	12,067,817	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquired customer list	 	$	180,051	 	 	$	-	 	 	$	79,141	 	 	$	(6,809	)	 	$	252,383	 
	Technology	 	 	-	 	 	 	-	 	 	 	8,499	 	 	 	-	 	 	 	8,499	 
	Internally generated intangible assets	 	 	23,716	 	 	 	-	 	 	 	453,113	 	 	 	(28,707	)	 	 	448,122	 
	 	 	$	203,767	 	 	$	-	 	 	$	540,753	 	 	$	(35,516	)	 	$	709,004	 
	Net book value	 	$	1,849,969	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	11,358,813	 



 


As of December 31, 2019, the Company has $157,280
of internally generally intangible assets under development which have not commenced amortization (December 31, 2018 - $211,031).


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 21 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









  


	7.	Goodwill



 


	 	 	December
    31, 2019	 	 	December 31,
    2018	 
	Spark & Cannon, net of foreign exchange	 	$	587,187	 	 	$	589,950	 
	Dataworxs, net of foreign exchange	 	 	138,053	 	 	 	131,710	 
	Net Transcripts (note 14)	 	 	1,575,511	 	 	 	1,575,511	 
	Transcription Express (note 14)	 	 	1,516,904	 	 	 	1,516,904	 
	HomeTech (note 14)	 	 	477,860	 	 	 	477,860	 
	 	 	$	4,295,515	 	 	$	4,291,935	 



 


The Company performed its
annual impairment tests in 2019 and 2018 and determined that there were no impairment charges necessary for the respective years. The
Company chose the discounted cash flow approach as the primary valuation approach to determine the value of the Spark & Cannon, Dataworxs,
Net Transcripts, Transcription Express and HomeTech CGUs. The recoverable amount of the Company’s CGUs was estimated based on an
assessment of their value in use using a discounted cash flow approach. Cash flows for the years thereafter are extrapolated using the
estimated terminal growth rate. The risk premiums expected by market participants related to uncertainties about the industry and assumptions
relating to future cash flows may differ or change quickly, depending on economic conditions and other events.


 


The Company has made certain
assumptions in determining the cash flow projections based on budgets approved by management and include management’s best estimate
of expected market conditions. The cash flow projections include certain key assumptions regarding revenue growth rates, terminal revenue
growth rates and current income tax rates. Accordingly, it is reasonably possible that future changes in assumptions may negatively impact
future valuations of goodwill and the Company would be required to recognize an impairment loss.


 


The following are key assumptions
on which management based its determinations of the recoverable amount for goodwill based on each CGU’s value in use:


 


 


	Assumptions 2019	 	Spark &

    Cannon	 	 	Dataworxs	 	 	Net 

    Transcripts	 	 	Transcription
    Express	 	 	HomeTech	 
	Revenue growth rate	 	 	3.0	%	 	 	5.0	%	 	 	2.0	%	 	 	2.0	%	 	 	2.0	%
	Terminal revenue growth rate	 	 	2.0	%	 	 	2.0	%	 	 	2.0	%	 	 	2.0	%	 	 	2.0	%
	Pre-tax discount rate	 	 	26.2	%	 	 	23.6	%	 	 	25.8	%	 	 	35.0	%	 	 	27.0	%



 


The Company determined
the revenue growth rate, the terminal revenue growth rate based on past performance and its expectations for market development. The
pre-tax discount rates used reflect specific risks in relation to the CGU.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 22 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









 


	8.	Debt



 


Convertible debt


 





	 

     
	 	Convertible
    debt	 	 	Conversion

    feature derivative

    liability
	 	 	Total	 
	Balance as at January 1, 2018	 	-	 	 	-	 	 	-	 
	New issuance during the year	 	$	1,687,730	 	 	$	3,180,204	 	 	$	4,867,934	 
	Issuance costs	 	 	(175,607	)	 	 	-	 	 	 	(175,607	)
	Interest expense	 	 	37,080	 	 	 	-	 	 	 	37,080	 
	Accretion expense	 	 	50,451	 	 	 	-	 	 	 	50,451	 
	Loss on revaluation of conversion feature liability	 	 	-	 	 	 	186,444	 	 	 	186,444	 
	Foreign exchange translation	 	 	(36,100	)	 	 	(75,816	)	 	 	(111,916	)
	Balance as at December 31, 2018	 	$	1,563,554	 	 	$	3,290,832	 	 	$	4,854,386	 
	New issuance during the year	 	 	462,565	 	 	 	1,462,435	 	 	 	1,925,000	 
	Interest expense	 	 	704,188	 	 	 	-	 	 	 	704,188	 
	Accretion expense	 	 	618,039	 	 	 	-	 	 	 	618,039	 
	Gain on revaluation of conversion feature liability	 	 	-	 	 	 	(2,330,964	)	 	 	(2,330,964	)
	Foreign exchange translation	 	 	252,836	 	 	 	(85,499	)	 	 	167,337	 
	Balance as at December
    31, 2019	 	$	3,601,182	 	 	$	2,336,804	 	 	$	5,937,986	 


  


2018 convertible debt issuances


 


On November 28, 2018, the
Company issued unsecured convertible debt for gross proceeds of $3,717,934 (CAD $4,954,988) bearing interest at a rate of 10% per annum
maturing in five years after issuance. The principal amount of the convertible debt is convertible, at the option of the holder, into
common shares at a conversion price of CAD $2.82 per share.


 


On December 20, 2018, the
Company issued unsecured convertible debt for gross proceeds of $1,150,000 (CAD $1,551,925) bearing interest at a rate of 10% per annum
maturing in five years after issuance. The principal amount of the convertible debt is convertible, at the option of the holder, into
common shares at a conversion price of CAD $2.72 per share.


 


In conjunction with the
convertible debt, 1,424,297 common share purchase warrants were issued to the holders of the convertible debt. Each common share purchase
warrant is convertible into one common share in the capital of the Company at a price equal to CAD $3.24 until two years after the issuance
of the debt.


 


Convertible debt issued
with warrants are evaluated whether any embedded derivatives need to be separated from the host instrument. In accordance with IAS 32.31
for compound financial instruments, because equity instruments are defined as contracts evidencing a residual interest in the assets
of an entity after deducting all of its liabilities, the warrants are assigned the residual amount of the consideration after deducting
the fair value of the liability components and are subsequently carried at historical cost. The liability components represent the host
debt and the embedded conversion feature.


 


The Company calculated
the fair value of the liability components to be $4,867,934 and therefore, a $nil value was assigned to the warrants. The embedded derivative
conversion feature liability was separated from its host contract on the basis of its stated terms and initially measured at fair value
using the Black-Scholes model, with the host debt contract being the residual amount after separation.


 


The Company calculated
the fair value of $2,510,860 for the November 28, 2018 embedded derivative conversion option liability using the Black-Scholes pricing
model with the following assumptions: a share price of CAD $2.80, an exercise price of CAD $2.82, a volatility of 85.75%, an expected
life of 5.0 years, a dividend yield of 0.0%, and a risk -free interest rate of 2.27%. The residual amount of $1,207,074 was allocated
to the host debt instrument and is being accreted to the face value of $3,717,934 over the term of 5 years.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 23 




     


    




 





























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









  


	8.	Debt (continued)



 


2018
convertible debt issuances (continued)


The Company calculated
the fair value of $669,344 for the December 20, 2018 embedded derivative conversion option liability using the Black-Scholes pricing
model with the following assumptions: a share price of CAD $2.40, an exercise price of CAD $2.72, a volatility of 86.13%, an expected
life of 5.0 years, a dividend yield of 0.0%, and a risk -free interest rate of 1.92%. The residual amount of $480,656 was allocated to
the host debt instrument and is being accreted to the face value of $1,150,000 over the term of 5 years.


 


The Company incurred total
issuance costs of $506,196 related to the convertible debt issuances. The total issuance costs of $506,196 were allocated proportionally
to the debt instrument and conversion feature liability in the amount of $175,607 and $330,589, respectively. All costs allocated to
the conversion feature derivative liability were expensed as financing costs in the consolidated statements of loss and comprehensive
loss.


 


2019 convertible debt issuances


 


On May 7, 2019, the Company
issued unsecured convertible debt for gross proceeds of $1,925,000 (CAD $2,594,016) bearing interest at a rate of 10% per annum maturing
in five years after issuance. The principal amount of the convertible debt is convertible, at the option of the holder, into common shares
at a conversion price of CAD $2.70 per share.


 


In conjunction with the
convertible debt, 1,056,178 common share purchase warrants were issued to the holders of the convertible debt. 235,998 of the common
share purchase warrants are convertible into one common share in the capital of the Company at a price equal to CAD $3.24 until two years
after the issuance of the debt. The remaining 820,181 of the common share purchase warrants are convertible into one common share in
the capital of the Company at a price equal to CAD $3.10 until two years after the issuance of the debt.


 


Convertible debt issued
with warrants are evaluated whether any embedded derivatives need to be separated from the host instrument. In accordance with IAS 32.31
for compound financial instruments, because equity instruments are defined as contracts evidencing a residual interest in the assets
of an entity after deducting all of its liabilities, the warrants are assigned the residual amount of the consideration after deducting
the fair value of the liability components and are subsequently carried at historical cost. The liability components represent the host
debt and the embedded conversion feature.


 


The Company calculated
the fair value of the liability components to be $1,925,000 and therefore, a $nil value was assigned to the warrants. The embedded derivative
conversion feature liability was separated from its host contract on the basis of its stated terms and initially measured at fair value
using the Black-Scholes model, with the host debt contract being the residual amount after separation.


 


The Company calculated
the fair value of $1,462,435 for the May 7, 2019 embedded derivative conversion option liability using the Black-Scholes pricing model
with the following assumptions: a share price of CAD $2.60, an exercise price of CAD $2.70, a volatility of 85.35%, an expected life
of 5.0 years, a dividend yield of 0.0%, and a risk -free interest rate of 1.55%. The residual amount of $462,565 was allocated to the
host debt instrument and is being accreted to the face value of $1,925,000 over the term of 5 years.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 24 




     


    

 





























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)









 





	8.	Debt (continued)



 


Revaluation
of conversion feature derivative liabilities


 


The Company revalued the
conversion feature derivative liability of the November 28, 2018 and December 20, 2018 convertible debt issuances using the Black-Scholes
pricing model at December 31, 2018 with the following assumptions: a share price of CAD $2.80, an exercise price of CAD $2.82/$2.72,
a volatility of 86.97%, an expected life of 4.9 years, a dividend yield of 0.0%, and a risk -free interest rate of 1.88%. The Company
recognized a loss on the revaluation of the conversion feature derivative liability of $186,444 for the year ended December 31, 2018.


 


The Company revalued the
conversion feature derivative liability of the November 28, 2018, December 20, 2018 and May 7, 2019 convertible debt issuances using
the Black-Scholes pricing model at December 31, 2019 with the following assumptions: a share price of CAD $2.20, an exercise price of
CAD $2.82/$2.72/$2.70, a volatility of 60.55%/69.33%, an expected life of 3.9/4.35 years, a dividend yield of 0.0%, and a risk-free interest
rate of 1.68%. The Company recognized a gain on the revaluation of the conversion feature derivative liability of $2,330,964 for the
year ended December 31, 2019.


 


Crown Capital debt
and vendor take back (“VTB”) loans


  


		 	 
 
Crown
                                            Capital
	 	 	Transcription
                                            Express VTB
 Loan
	 	 	 
HomeTech
                                            VTB
 Loan
	 	 	 
 
Total
	 
	Balance as at January 1, 2019	 	$	5,489,305	 	 	$	1,639,882	 	 	$	903,392	 	 	$	8,032,579	 
	Interest expense	 	 	620,624	 	 	 	138,975	 	 	 	-	 	 	 	759,599	 
	Accretion expense	 	 	201,052	 	 	 	-	 	 	 	97,643	 	 	 	298,695	 
	Interest payment	 	 	(505,360	)	 	 	(151,940	)	 	 	-	 	 	 	(657,300	)
	Debt repayment	 	 	-	 	 	 	(763,479	)	 	 	(220,000	)	 	 	(983,479	)
	Foreign exchange translation	 	 	158,981	 	 	 	-	 	 	 	-	 	 	 	158,981	 
	Balance as at December 31, 2019	 	$	5,964,602	 	 	$	863,438	 	 	$	781,035	 	 	$	7,609,075	 
	Less: current portion	 	 	-	 	 	 	(863,438	)	 	 	(240,000	)	 	 	(1,103,438	)
	 	 	$	5,964,602	 	 	$	-	 	 	$	541,035	 	 	$	6,505,637	 




 


		 	 
 
 
Crown
                                            Capital
	 	 	 
 
Transcription
                                            Express VTB
 Loan
	 	 	 
 
 
HomeTech
                                            VTB
 Loan
	 	 	 
 
 
Total
	 
	Balance as at January 1, 2018	 	$	-	 	 	$	-	 	 	$	-	 	 	$	-	 
	New issuances during the year	 	 	6,548,461	 	 	 	1,635,248	 	 	 	902,049	 	 	 	9,085,758	 
	Issuance costs	 	 	(1,096,956	)	 	 	-	 	 	 	-	 	 	 	(1,096,956	)
	Interest expense	 	 	44,629	 	 	 	-	 	 	 	-	 	 	 	44,629	 
	Accretion expense	 	 	9,714	 	 	 	4,634	 	 	 	1,343	 	 	 	15,691	 
	Foreign exchange translation	 	 	(16,543	)	 	 	-	 	 	 	-	 	 	 	(16,543	)
	Balance as at December 31, 2018	 	$	5,489,305	 	 	$	1,639,882	 	 	$	903,392	 	 	$	8,032,579	 
	Less: current portion	 	 	-	 	 	 	(935,518	)	 	 	(220,000	)	 	 	(1,155,518	)
	 	 	$	5,489,305	 	 	$	704,364	 	 	$	683,392	 	 	$	6,877,061	 



 


During the year ended December
31, 2018, the Company completed a secured debt placement with Crown Capital Funding Partner LP (“Crown”) for drawings up
to approximately $11,500,000 (CAD $15,000,000) bearing an interest rate of 10% payable quarterly. Drawing on the facility is open until
June 30, 2019 and as at December 31, 2018, the Company had drawn $6,548,461 (CAD $8,935,000). 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. In conjunction
with the debt facility, 450,000 common share purchase warrants were issued to Crown. Each warrant is convertible into one common share
in the capital of the Company at a price per share equal to CAD $3.24 with an expiry of November 28, 2023. In addition, in lieu of payment
of the debt facility origination fee, the Company issued 106,383 common shares to Crown at a price of CAD $2.80.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 25 




     


    

 



































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












 





	8.	Debt (continued)



 


Crown Capital debt and
vendor take back (“VTB”) loans (continued)


 


The Company incurred
total debt issuance costs of $1,096,956 related to the Crown debt issuance which included a value of $623,152 (CAD $828,917)
attributable to the 450,000 warrants and a value of $225,530 (CAD $300,000) attributable to the 2,127,659 common shares. The Company
calculated the fair value of the 450,000 common share purchase warrants using the Black-Scholes pricing model with the following
assumptions: a share price of CAD $2.80, an exercise price of CAD $3.24, a volatility of 85.75%, an expected life of 5.0 years, a
dividend yield of 0.0%, and a risk -free interest rate of 2.27%. The Company calculated the value of the 2,127,659 common shares
issued based on the trading price on the date of issuance. The remaining costs of $248,274 include legal costs of which $203,295
have been paid at year end. The total debt issuance costs were offset against the proceeds of the debt and are being accreted to the
face value of $6,548,461 over the term of 5 years.


 


As part of the acquisition
of Transcription Express, the Company issued and unsecured promissory note with the former owners of Transcription Express with a face
value of $1,666,227, bearing interest at 10% to be paid quarterly for 24 months. During the year ended December 31, 2019, the terms of
the Transcription Express unsecured promissory note was amended with the principal and accrued interest to be paid monthly beginning
on July 31, 2019.


 


As part of the acquisition
of HomeTech, the Company issued an unsecured interest-free promissory note with 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.


 


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.


 


The minimum remaining principal
repayments of debt under all agreements are as follows:


 


		 	Crown 

    Capital	 	 	 
Convertible
 debt
	 	 	Transcription
                                            Express VTB
 loan
	 	 	HomeTech
    VTB loan	 	 	Total	 
	2020	 	$	-	 	 	$	-	 	 	$	863,438	 	 	$	240,000	 	 	$	1,103,438	 
	2021	 	 	-	 	 	 	-	 	 	 	-	 	 	 	240,000	 	 	 	240,000	 
	2022	 	 	-	 	 	 	-	 	 	 	-	 	 	 	240,000	 	 	 	240,000	 
	2023	 	 	6,548,461	 	 	 	4,867,934	 	 	 	-	 	 	 	240,000	 	 	 	11,656,395	 
	2024	 	 	-	 	 	 	1,925,000	 	 	 	-	 	 	 	20,000	 	 	 	1,945,000	 
	 	 	$	6,548,461	 	 	$	6,792,934	 	 	$	863,438	 	 	$	980,000	 	 	$	15,184,833	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 26 




     


    

  






































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	9.	Provisions



 


The Company’s provisions
relate to statutory benefits including annual and long-term service leaves for employees of Spark and Cannon. A summary of the provisions
is as follows:


 


		 	 
Long-term
                                            service leave
	 	 	 
Other

                                            provisions
	 	 	 
Total

                                            provisions
	 
	Balance at December
    31, 2018	 	$	220,661	 	 	$	310,936	 	 	$	531,597	 
	Additional provisions	 	 	72,289	 	 	 	335,557	 	 	 	407,846	 
	Utilized during the year	 	 	(39,777	)	 	 	(341,709	)	 	 	(381,486	)
	Unused amounts reversed	 	 	(10,172	)	 	 	–	 	 	 	(10,172	)
	Foreign currency
    adjustments	 	 	(1,031	)	 	 	(1,458	)	 	 	(2,489	)
	Balance at December 31, 2019	 	 	241,970	 	 	 	303,326	 	 	 	545,296	 
	Less: current portion	 	 	(138,341	)	 	 	(303,326	)	 	 	(441,667	)
	 	 	$	103,629	 	 	$	–	 	 	$	103,629	 



 


		 	 
Long-term
                                            service leave
	 	 	 
Other
                                            provisions
	 	 	 
Total
                                            provisions
	 
	Balance at December
    31, 2017	 	$	266,973	 	 	$	309,890	 	 	$	576,863	 
	Additional provisions	 	 	76,105	 	 	 	405,348	 	 	 	481,453	 
	Utilized during the year	 	 	(78,067	)	 	 	(374,102	)	 	 	(452,169	)
	Unused amounts reversed	 	 	(18,282	)	 	 	–	 	 	 	(18,282	)
	Foreign currency
    adjustments	 	 	(26,068	)	 	 	(30,200	)	 	 	(56,268	)
	Balance at December 31, 2018	 	 	220,661	 	 	 	310,936	 	 	 	531,597	 
	Less: current portion	 	 	(148,023	)	 	 	(310,936	)	 	 	(458,959	)
	 	 	$	72,638	 	 	$	–	 	 	$	72,638	 



 


Long-term service leave
represents Australian statutory leave payable to those employees reaching the nominated service date as required by state law. Long-term
service leave accrues from the date the employee commences employment. The accrual is based on the expected weeks of leave payable for
each employee and the entitlement calculation as provided within the various state Acts. A probability factor is applied to the accrual
for each employee based on the probability the employee will reach the entitlement. The long-term service leave provision also includes
a provision for superannuation (pension) and payroll tax, both payable when the leave is taken. Other provisions include annual leave
and time off in lieu.


 


The provisions have been
classified as short and long-term based on the Company’s best estimate of when the benefits will be paid. Annual leave is classified
as current in the consolidated financial statements. The provision for long-term service leave is classified as current if the employee
has reached the required service in accordance with the applicable state Act and is eligible for the leave. If the employee has not reached
the entitlement date, the leave provision is classified as non-current.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 27 




     


    

 






































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












 






	10.	Leases



 


The Company adopted IFRS
16 effective January 1, 2019 at the start of its new fiscal year and on initial application, the Company has elected to record right-of-use
assets based on the corresponding lease liability. When measuring lease liabilities, the Company discounted lease payments using its
incremental borrowing rate of 10% at January 1, 2019 for all leases. The Company applied the definition of a lease under IFRS 16 to contracts
entered into or changed on or after January 1, 2019.


 


The following table reconciles
the Company’s operating lease obligations to the lease obligations recognized on initial application of IFRS 16 at January 1, 2019:





 


		 	December 31, 2019	 
		 	Right-of-use
    assets	 	 	Right-of-use
    liabilities	 
	
Present
                                            value of leases
	 	$		 	 	$		 
	Balance at January 1, 2019	 	 	-	 	 	 	-	 
	Aggregate lease commitments	 	 	1,276,795	 	 	 	1,276,795	 
	Less: impact of present value	 	 	(204,369	)	 	 	(204,369	)
	Opening IFRS 16 lease value as at January
    1, 2019	 	 	1,072,426	 	 	 	1,072,426	 
	 	 	 	 	 	 	 	 	 
	Additions	 	 	-	 	 	 	-	 
	Less: impact of present value	 	 	-	 	 	 	-	 
	

 
 Effects
                                            of movements on exchange rates
	 	 	12,438	 	 	 	12,438	 
	Balance at December 31, 2019	 	 	1,084,864	 	 	 	1,084,864	 
	 	 	 	 	 	 	 	 	 
	Accumulated depreciation and repayments	 	 	 	 	 	 	 	 
	

 Depreciation
                                            expense
	 	 	435,392	 	 	 	-	 
	Interest expense	 	 	86,117	 	 	 	 	 
	Repayments	 	 	-	 	 	 	(479,439	)
	Effects of movements on exchange rates	 	 	2,426	 	 	 	(1,898	)
	Balance at December 31, 2019	 	 	437,818	 	 	 	689,644	 
	 	 	 	 	 	 	 	 	 
	Net
                                            book value as at:
 
	 	 		 	 	 		 
	January 1, 2019	 	 	-	 	 	 	-	 
	December 31, 2019	 	 	647,046	 	 	 	689,644	 
	 	 	 	 	 	 	 	 	 
	Balance Sheet	 	 	 	 	 	 	 	 
	

 Current
	 	 	307,436	 	 	 	 	 
	Long term	 	 	382,208	 	 	 	 	 
	 	 	 	689,644	 	 	 		 



 


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:


 


	2020	 	$	361,220	 
	2021	 	 	174,446	 
	2022	 	 	66,974	 
	2023	 	 	66,974	 
	2024 and thereafter	 	 	128,367	 
	 	 	$	797,981	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 28 




     


    

 





 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	11.	Capital
                                            stock



 


The Company’s authorized
capital consists of an unlimited number of common shares with no par value. As at December 31, 2019, common shares of the Company were
reserved as follows:


 


		 	Exercise Price

    (CAD)	 	Expiry dates	 	Number outstanding	 
	Options	 	$1.20 – $1.30	 	January 2020 – December 2020	 	 	232,500	 
	 	 	$2.10 – $4.20	 	January 2021 – December 2021	 	 	100,000	 
	 	 	$4.40 – $6.40	 	January 2022 – December 2022	 	 	114,000	 
	 	 	$2.90 - $6.00	 	January 2023 – December 2023	 	 	163,750	 
	 	 	$2.20 - $3.10	 	January 2024 – December 2024	 	 	257,850	 
	 	 	 	 	 	 	 	868,100	 
	Deferred share units	 	$1.20	 	N/A	 	 	66,667	 
	Warrants	 	$3.24	 	May 2020	 	 	292,196	 
	 	 	$2.14	 	April 2020	 	 	619,230	 
	 	 	$3.24	 	November 2020	 	 	14,278	 
	 	 	$2.14	 	April 2020	 	 	372,108	 
	 	 	$2.60	 	January 2021	 	 	659,600	 
	 	 	$2.14	 	April 2020	 	 	112,188	 
	 	 	$3.24	 	November 2023	 	 	450,000	 
	 	 	 	 	 	 	 	2,519,600	 



 


Settlement of payables


 


On January 31, 2019, the
Company entered into an agreement to settle certain outstanding fees owed to an arm’s length service provider. Pursuant to such
agreement, the Company issued 659,600 units (each a “Unit”) in satisfaction of $1,000,000 (CAD $1,319,200) based on the Bank
of Canada Exchange Rate on January 30, 2019) of fees owed to such service provider. Each Unit is comprised of one common share and one
common share purchase warrant. The common share purchase warrants are exercisable for a period of two years from the date of issuance
at an exercise price of CAD $2.60 per share. The Company calculated the fair value of the units to be $1,790,664 and recorded a loss
on the settlement of payables of $762,575.


 


Warrants


 


On November 15, 2017 and
November 22, 2017, the Company completed a private placement to fund the development of the Company’s artificial intelligence platform,
aiAssistTM. The raise totalled $3,644,091 (net of fees of $218,603) for 818,672 common shares plus one-half warrant per common
share. The exercise price of the warrants is CAD $7.80. The warrants expire on May 15, 2019 and May 22, 2019 respectively. The warrants
attached to the common shares were valued at $294,486. The Company also granted 17,096 warrants to the broker at an exercise price of
CAD $6.00 that expired on May 22, 2019. The broker warrants were valued at $23,463.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 29 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












 






11.       Capital
stock (continued)


 


Warrants (continued)


 


On November 28, 2018, the
Company entered into a secured debt facility with Crown Capital Funding Partner LP (Note 8) which included the issuance of 450,000 common
share purchase warrants as debt issuance costs. The exercise price of the warrants is CAD $3.24. The warrants expire on November 28,
2023.


 


On November 28, 2018 and
December 20, 2018, the Company issued convertible debt (Note 8) which included the issuance of 1,424,297 common share purchase warrants.
The exercise price for the 878,544 warrants issued on November 28, 2018 was CAD $3.24. The exercise price for the 545,754 warrants issued
on December 20, 2018 was CAD $3.12. The warrants expire on November 28, 2020 and December 20, 2020 respectively. The exercise price of
these warrants was repriced to CAD $2.14 on September 18, 2019.


 


On May 7, 2019, the Company
issued convertible debt (Note 8) which included issuance of 1,056,178 common share purchase warrants. The exercise price for 235,998
of the warrants were at CAD $3.24 and the exercise price of 820,181 was CAD $3.10. The warrants expire on May 7, 2021. The exercise price
of these warrants was repriced to CAD $2.14 on September 18, 2019.


 


As at December 31, 2019,
the Company had 2,519,600 warrants outstanding (December 31, 2018 – 2,300,729) with a weighted average exercise price of CAD $2.66
per share (December 31, 2018 – $5.04).


 


During the year ended December
31, 2019, the Company issued 1,715,778 warrants (2018 – 1,874,125). During the year ended December 31, 2019, 1,362,499 of warrants
(December 31, 2018 – nil) were exercised for proceeds of $2,196,277 (December 31, 2018 - nil).


 


The following information
applies to warrants outstanding and exercisable at December 31, 2019:


 


	Range of exercise
    prices 
(CAD)	 	 	Warrants 

    outstanding	 	 	Weighted

    average 

    remaining 
contractual life	 	Weighted

    average 

    exercise price 
(CAD)	 	 	Warrants

    exercisable	 	 	Weighted

    average 

    exercise price 
(CAD)	 
	$	2.14	 	 	 	1,103,526	 	 	0.3 years	 	$	2.14	 	 	 	1,103,526	 	 	$	2.14	 
	$	3.24	 	 	 	292,196	 	 	0.4 years	 	$	3.24	 	 	 	292,196	 	 	$	3.24	 
	$	3.24	 	 	 	14,278	 	 	0.9 years	 	$	3.24	 	 	 	14,278	 	 	$	3.24	 
	$	2.60	 	 	 	659,600	 	 	1.0 years	 	$	2.60	 	 	 	659,600	 	 	$	2.60	 
	$	3.24	 	 	 	450,000	 	 	3.8 years	 	$	3.24	 	 	 	450,000	 	 	$	3.24	 
	 	 	 	 	 	2,519,600	 	 	1.3 years	 	$	2.60	 	 	 	2,519,600	 	 	$	2.60	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 30 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	11.	Capital
                                            stock (continued)



 


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 December 31, 2019,
the Company had 613,283 options (December 31, 2018 – 564,526) that had vested with a weighted average exercise price of CAD $2.62
per share (December 31, 2018 – $2.40).


 


During the year ended December
31, 2019, the Company granted 257,850 stock options to directors, officers, employees, and contractors (2018 – 163,750). During
the year ended December 31, 2019, 67,860 stock options (December 31, 2018 – 20,525 stock options) were exercised for proceeds of
$59,631 (December 31, 2018 - $28,800). During the year ended December 31, 2019, 50,000 stock options (December 31, 2018 – nil)
were forfeited resulting in a reversal of $39,652 in stock-based compensation.


 


The following information
applies to stock options outstanding and exercisable at December 31, 2019:


 


	Range of exercise

    prices (CAD)	 	Options 

    outstanding	 	 	Weighted 

    average 
remaining 

    contractual life	 	Weighted 

    average exercise 

    price 
(CAD)	 	 	Options

    exercisable	 	 	Weighted 

    average exercise 

    price 
(CAD)	 
	$1.20 – $1.30	 	 	232,500	 	 	0.7 years	 	$	1.20	 	 	 	232,500	 	 	$	1.20	 
	$2.10 – $4.20	 	 	100,000	 	 	1.5 years	 	$	2.60	 	 	 	100,000	 	 	$	2.60	 
	$4.40 – $6.40	 	 	114,000	 	 	2.4 years	 	$	5.00	 	 	 	114,000	 	 	$	5.00	 
	$2.90 - $6.00	 	 	163,750	 	 	3.8 years	 	$	3.20	 	 	 	80,833	 	 	$	3.40	 
	$2.20 - $3.10	 	 	257,850	 	 	4.5 years	 	$	2.40	 	 	 	85,950	 	 	$	2.40	 
	 	 	 	868,100	 	 	2.7 years	 	$	2.00	 	 	 	613,283	 	 	$	2.62	 



 


Deferred Share Units
Plan


 


In 2015, the Company established
a Deferred Share Units (“DSU”) Plan to provide non-employee directors with the opportunity to acquire DSUs of the Company
to allow them 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 December 31, 2019 were 1,085,261 (December 31, 2018 – 872,932) of which
868,100 were outstanding stock options and 66,667 were outstanding DSUs for a total of 934,767 (December 31, 2018 – 829,860).


 


The Company did not grant any DSU’s to
Directors of the Company during the year ended December 31, 2019 (2018 – nil). During the year ended December 31, 2019, the Company
issued 33,333 common shares upon exercise of DSUs (2018 – nil)


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 31 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	11.	Capital
                                            stock (continued)



 


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.
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.


 


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 SAR’s plan by placing a limit on the appreciated value of the Company’s shares within the SAR’s plan to limit the
overall liability. The total number of SAR units which have vested as at December 31, 2019 is 163,990 (December 31, 2018 – 206,458).
The total number of SAR units which are unvested as at December 31, 2019 is nil (December 31, 2018 – nil). During the year ended
December 31, 2018, the Company amended the outstanding SAR’s to extend the expiry of the SAR’s from December 31, 2018 to
July 15, 2020, the date the SAR’s plan will expire.


 


	12.	Stock-based
                                            compensation



 


The total compensation
expense relating to the value assigned to the stock options, DSUs and SARs granted to directors, officers, employees, and contractors
for the year ended December 31, 2019 was $195,113 (2018 – recovery $31,461) which was included in stock-based compensation expense,
with a corresponding charge to contributed surplus ($259,935 stock options, net of forfeits) and a reduction in accrued liabilities ($64,822
SARs). The Company granted 257,850 options during the year ended December 31, 2019 (2018 – 163,750) and nil SARs (2018 –
nil). The weighted average fair value of the options granted during the year ended December 31, 2019 was CAD $2.40 per option (2018 –
CAD $3.20) and $nil (2018 – $nil) per SAR unit at the grant date, CAD $2.80 per SAR unit at the December 31, 2019 revaluation date
(December 31, 2018 – CAD $2.80).


 


During the year ended December
31, 2019, 28,663 SARs were exercised (December 31, 2018 – 19,917) resulting in $80,256 of payments. (December 31, 2018 - $60,759)


 


The fair value of the stock
options and SAR units was determined using the Black-Scholes option pricing model which requires subjective assumptions, including future
stock price volatility and expected time until exercise, which greatly affect the calculated values. The expected volatility is based
on the Company’s historical trading prices. The expected life is based on historical exercise patterns. The quoted market price
of the underlying shares on the grant date is considered to be equivalent to fair value for the DSUs.


 


The fair value of stock
options granted was calculated using the following weighted average assumptions:


 


	 	 	2019	 	2018
	Risk free interest rate (%)	 	1.16 – 1. 50%	 	1.88 – 0.13%
	Expected volatility (%)	 	37.81– 44.20%	 	72.9 –93.75%
	Expected life (in years)	 	4.0	 	4.0
	Expected dividends	 	Nil	 	Nil
	Weighted average share price (CAD)	 	$2.20	 	$3.20
	Forfeiture rate (%)	 	Nil	 	Nil




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 32 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	12.	Stock-based
                                            compensation (continued)



 


The fair value of SAR units
was calculated using the following weighted average assumptions:


 


 


		 	December
                                            31,
 2019
 revaluation
                                            date
	 	December 31, 
2018 
revaluation
    date
	Risk free interest rate
    (%)	 	1.86%	 	1.86%
	Expected volatility (%)	 	37.81%-44.20%	 	52.3%-57.8%
	Expected life (in years)	 	0.05-1.75	 	1.5-2.2
	Expected dividends	 	Nil	 	Nil
	Weighted average share price (CAD)	 	$2.20	 	$2.80
	Forfeiture rate
    (%)	 	Nil	 	Nil




 


	13.	Net loss
                                            per share






 


	 	 	Year ended December
    31,	 
		 	2019	 	 	2018	 
	Numerator for basic and diluted net loss per share:	 	 	 	 	 	 
	Net
    loss for the year	 	$	(4,524,198	)	 	$	(6,066,634	)
	 Denominator for basic net income per share:	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	9,251,546	 	 	 	8,090,803	 
	Effect of potential
    dilutive securities	 	 	–	 	 	 	–	 
	Adjusted denominator
    for diluted net loss per share	 	 	9,251,546	 	 	 	8,090,803	 
	Basic net loss per share	 	$	(0.49	)	 	$	(0.75	)
	Diluted net loss per share	 	$	(0.49	)	 	$	(0.75	)




 


For the years ended December
31, 2019 and 2018, potentially dilutive common shares issuable upon the exercise of the conversion option related to convertible debt,
warrants and options were not included in the computation of loss per share because their effect was anti-dilutive.


 


	14.	Acquisitions



 


On November 28, 2018, the
Company completed the acquisition of Net Transcripts. On December 21, 2018, the Company completed the acquisitions of Transcription Express
and HomeTech. Net Transcripts is a leading provider of secure, multi- speaker documentation services to law enforcement and criminal
justice organizations. Transcription Express and HomeTech are two leading providers of transcription services to the insurance, government
and legal markets in the United States.


 


The acquisition of Net
Transcripts required the payment of total consideration of $6,800,000 of which $730,000 was held in escrow pending finalization of working
capital and completion of certain transition plans. The amounts held in escrow was discounted to $691,791 using a 5.2% discount rate.


 


The acquisition of Transcription
Express required a payment comprising of cash consideration to the former shareholders of $2,777,045, the issuance of 11,022,418 common
shares of the Company and the issuance of a debenture note for $1,666,227 at an interest rate of 10% paid quarterly over 2 years. The
promissory note and future interest payments were recorded at a value of $1,632,943 by discounting the principal and interest using a
market annual interest rate of 12%. The 11,022,418 shares were valued at $969,973 based on the trading price of the Company’s common
share on the date of issuance.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 33 




     


    

 























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	14.	Acquisitions
                                            (continued)



 


The acquisition of HomeTech
required the payment of total consideration of $1,450,000 comprising of cash consideration to the former shareholders of $152,484, cash
consideration of $97,516 to a financial institution for payment of a pre-existing line of credit, and the issuance of an interest-free
promissory note for $1,200,000 payable monthly over five years. The promissory note and future interest payments were recorded at a value
of $902,049 by discounting the principal using a market annual interest rate of 12%.


 


The acquisitions completed
during the year ended December 31, 2018 were determined to be a business combination and were accounted for using the acquisition method
in accordance with IFRS 3 – Business Combinations, with the results of operations consolidated with those of the Company effective
November 28, 2018 for Net Transcripts and December 21, 2018 for Transcription Express and HomeTech.


 


During the year ended December
31, 2018, the Company incurred $2,158,284 in business acquisition costs related to the above acquisitions which have been expensed and
included in the consolidated statement of loss and comprehensive loss. During the year ended December 31, 2019, the Company incurred
$484,387 in business acquisition costs which have been expensed and included in the consolidated statement of loss and comprehensive
loss.


 


The total consideration
for the acquisitions and the purchase price allocation is as follows:


 


 


	 	 	Measurement	 
	 	 	 	 	 	Transcription	 	 	 	 
	 	 	Net Transcripts	 	 	Express	 	 	HomeTech	 
	Consideration	 	 	 	 	 	 	 	 	 
	Cash	 	$	6,070,000	 	 	$	2,777,045	 	 	$	152,484	 
	Fair value of amounts held in escrow	 	 	691,791	 	 	 	-	 	 	 	-	 
	Shares issued (11,022,418 shares)	 	 	-	 	 	 	969,973	 	 	 	-	 
	Line of credit	 	 	-	 	 	 	-	 	 	 	97,516	 
	VTB loans	 	 	-	 	 	 	1,632,943	 	 	 	902,049	 
	Total Consideration	 	$	6,761,791	 	 	$	5,379,961	 	 	$	1,152,049	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Identifiable assets acquired and liabilities assumed	 	 	 	 	 	 	 	 	 	 	 	 
	Cash	 	$	21,121	 	 	$	90,701	 	 	$	12,024	 
	Working capital excess	 	 	1,025,159	 	 	 	182,356	 	 	 	82,165	 
	Customer relationships	 	 	3,160,000	 	 	 	3,310,000	 	 	 	530,000	 
	Brand (note 6)	 	 	510,000	 	 	 	280,000	 	 	 	50,000	 
	Technology (note 6)	 	 	470,000	 	 	 	-	 	 	 	-	 
	Goodwill (note 7)	 	 	1,575,511	 	 	 	1,516,904	 	 	 	477,860	 
	Total	 	$	6,761,791	 	 	$	5,379,961	 	 	$	1,152,049	 



  


The accounting for the
acquisitions was incomplete as at December 31, 2018 as disclosed in the prior year consolidated financial statements. During the year
ended December 31, 2019, the Company completed the accounting for the acquisition within the measurement period. The Company has retrospectively
adjusted the provisional goodwill amount and recognized a liability of $14,048. Comparative information from prior periods has been recasted
in accordance with IFRS 3 – Business Combinations.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 34 




     


    

 























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	15.	Supplemental
                                            cash flow information



 


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


 











	 	 	Year ended December
    31	 
	 	 	2019	 	 	2018	 
	Trade and other receivables	 	$	(234,649	)	 	$	893,292	 
	Inventories	 	 	(5,932	)	 	 	6,656	 
	Prepaid expenses	 	 	(38,505	)	 	 	(53,789	)
	Trade and other payables	 	 	(646,796	)	 	 	2,606,528	 
	Provisions	 	 	16,053	 	 	 	87,079	 
	Contract liabilities and taxes	 	 	87,697	 	 	 	3,542	 
	Total	 	$	(822,132	)	 	$	3,543,308	 



 


Other supplemental cash flow information as
follows:     


 


	 	 	Year ended December
    31	 
	 	 	2019	 	 	2018	 
	Cash received for interest	 	$	1,340	 	 	$	1,606	 
	Cash paid for interest	 	 	780,892	 	 	 	9,819	 



 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 35 




     


    

 


 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















 


	16.	Segmented
                                            financial information



 


The Company operates within
two business segments: the technology segment, which develops, distributes and licenses computer-based digital solutions based on its
proprietary technology; and the transcription segment, which 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.


 


Financial information by
reportable business segment is as follows:


 


	 	 	Year ended
    December 31, 2019	 
	 	 	Technology	 	 	Transcription
    services	 	 	Corporate	 	 	Total	 
	Consolidated income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Recurring revenue	 	$	1,515,468	 	 	$	21,117,300	 	 	$	–	 	 	$	22,632,768	 
	Non-recurring revenue	 	 	1,945,592	 	 	 	517,948	 	 	 	–	 	 	 	2,463,540	 
	Gross profit	 	 	1,799,404	 	 	 	9,020,583	 	 	 	–	 	 	 	10,819,987	 
	Selling and administrative expenses	 	 	1,397,310	 	 	 	4,576,823	 	 	 	2,980,379	 	 	 	8,954,512	 
	Stock-based compensation	 	 	–	 	 	 	–	 	 	 	195,113	 	 	 	195,113	 
	Research and development expenses	 	 	994,640	 	 	 	–	 	 	 	–	 	 	 	994,640	 
	Depreciation and amortization	 	 	1,555,543	 	 	 	1,946,886	 	 	 	–	 	 	 	3,502,429	 
	Foreign exchange loss (gain)	 	 	660,482	 	 	 	(443,442	)	 	 	–	 	 	 	217,040	 
	Interest income	 	 	–	 	 	 	(1,340	)	 	 	–	 	 	 	(1,340	)
	Interest and accretion expense	 	 	29,918	 	 	 	2,436,720	 	 	 	–	 	 	 	2,466,638	 
	Gain on revaluation of conversion feature	 	 	–	 	 	 	–	 	 	 	(2,330,964	)	 	 	(2,330,964	)
	Loss on settlement of payables	 	 	–	 	 	 	–	 	 	 	762,575	 	 	 	762,575	 
	Business acquisition costs	 	 	–	 	 	 	–	 	 	 	484,387	 	 	 	484,387	 
	Tax expense (recovery)	 	 	(18,978	)	 	 	118,133	 	 	 	–	 	 	 	99,155	 
	Segment income (loss)	 	 	(2,819,511	)	 	 	386,803	 	 	 	(2,091,490	)	 	 	(4,524,198	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated balance sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total segment assets	 	$	6,051,627	 	 	$	14,717,172	 	 	$	–	 	 	$	20,768,799	 
	Total segment current liabilities	 	 	2,360,626	 	 	 	3,114,908	 	 	 	2,485,882	 	 	 	7,961,416	 
	Total segment non-current liabilities	 	 	–	 	 	 	6,995,679	 	 	 	3,601,182	 	 	 	10,596,861	 



 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 36 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	16.	Segmented financial information (continued)



 


	 	 	Year ended
    December 31, 2018	 
	 	 	 
Technology
	 	 	Transcription
    services	 	 	 
Corporate
	 	 	 
Total
	 
	Consolidated income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Recurring revenue	 	$	1,563,345	 	 	$	8,537,528	 	 	$	–	 	 	$	10,100,873	 
	Non-recurring revenue	 	 	1,327,395	 	 	 	34,536	 	 	 	–	 	 	 	1,361,931	 
	Gross profit	 	 	1,632,345	 	 	 	1,956,240	 	 	 	–	 	 	 	3,588,585	 
	Selling and administrative expenses	 	 	2,034,019	 	 	 	1,906,128	 	 	 	1,593,577	 	 	 	5,533,724	 
	Stock-based compensation	 	 	–	 	 	 	–	 	 	 	(31,461	)	 	 	(31,461	)
	Research and development expenses	 	 	458,675	 	 	 	–	 	 	 	–	 	 	 	458,675	 
	Depreciation and amortization	 	 	488,153	 	 	 	160,720	 	 	 	–	 	 	 	648,873	 
	Foreign exchange loss	 	 	(265,919	)	 	 	464,099	 	 	 	–	 	 	 	198,180	 
	Interest income	 	 	(171	)	 	 	(2,115	)	 	 	–	 	 	 	(2,286	)
	Interest and accretion expense	 	 	–	 	 	 	162,626	 	 	 	–	 	 	 	162,626	 
	Loss on revaluation of conversion	 	 	–	 	 	 	–	 	 	 	186,444	 	 	 	186,444	 
	Business acquisition costs	 	 	–	 	 	 	–	 	 	 	2,488,873	 	 	 	2,488,873	 
	Taxes	 	 	916	 	 	 	10,655	 	 	 	–	 	 	 	11,571	 
	Segment income (loss)	 	 	(1,083,328	)	 	 	(745,873	)	 	 	(4,237,433	)	 	 	(6,066,634	)
	Consolidated balance sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total segment assets	 	$	5,134,908	 	 	$	16,199,246	 	 	$	–	 	 	$	21,334,154	 
	Total segment current liabilities	 	 	4,067,475	 	 	 	5,715,685	 	 	 	293,084	 	 	 	10,076,244	 
	Total segment non-current liabilities	 	 	83,576	 	 	 	8,459,429	 	 	 	–	 	 	 	8,543,005	 



 


Revenues are segmented by geographic region
as follows:


 


	 	 	 
2019
	 	 	 
2018
	 
	United States	 	$	14,484,717	 	 	$	1,162,869	 
	Australia	 	 	9,042,475	 	 	 	8,889,300	 
	United Kingdom	 	 	1,240,068	 	 	 	977,531	 
	Canada	 	 	275,066	 	 	 	312,820	 
	Other	 	 	53,982	 	 	 	120,284	 
	 	 	$	25,096,308	 	 	$	11,462,804	 



 


Outstanding AR are segmented by geographic region
as follows:


 


	 	 	 
2019
	 	 	 
2018
	 
	United States	 	$	1,708,484	 	 	$	1,933,267	 
	Australia	 	 	1,057,981	 	 	 	688,573	 
	United Kingdom	 	 	358,917	 	 	 	169,397	 
	Canada	 	 	12,795	 	 	 	177,635	 
	Other	 	 	31,368	 	 	 	54,255	 
	 	 	$	3,169,545	 	 	$	3,023,127	 



 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 37 




     


    

 


























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	16.	Segmented
                                            financial information (continued)



 


The Company’s largest customers comprise
the following percentages of consolidated revenue:


 


	 	 	2019	 	 	2018	 
	First	 	 	15	%	 	 	23	%
	Second	 	 	11	%	 	 	15	%
	Third	 	 	9	%	 	 	13	%
	Fourth	 	 	6	%	 	 	7	%
	Fifth	 	 	6	%	 	 	7	%
	Others	 	 	53	%	 	 	35	%
	 	 	 	100	%	 	 	100	%



 


Property and equipment are located in the following
countries:


 


	 	 	 
2019
	 	 	 
2018
	 
	Canada	 	$	94,023	 	 	$	74,367	 
	Australia	 	 	17,564	 	 	 	37,070	 
	 	 	$	111,587	 	 	$	111,437	 



 


	17.	Expenses
                                            by nature



 


Expenses incurred by nature are as follows:


 


	 	 	2019	 	 	2018	 
	Employee salaries and benefits (note 18)	 	$	14,060,877	 	 	$	10,556,356	 
	Inventory, materials and other cost of sales	 	 	6,284,141	 	 	 	923,021	 
	Depreciation and amortization	 	 	3,502,429	 	 	 	648,873	 
	Facilities	 	 	301,859	 	 	 	526,075	 
	Professional and consulting fees	 	 	1,011,964	 	 	 	489,345	 
	Bad debt	 	 	114,237	 	 	 	339,204	 
	Marketing and advertising/promotion expenses	 	 	162,848	 	 	 	-	 
	Software license and IT expenses	 	 	278,966	 	 	 	54,568	 
	Telephone and internet	 	 	514,006	 	 	 	318,176	 
	Travel	 	 	376,477	 	 	 	251,496	 
	Investor relations and other shareholder expenses	 	 	305,527	 	 	 	84,976	 
	Insurance	 	 	126,709	 	 	 	53,212	 
	Other	 	 	908,737	 	 	 	238,728	 
	Total	 	$	27,948,777	 	 	$	14,484,030	 



 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 38 




     


    

 

















	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  





	18.	Employee
                                            benefit expense



 


Expenditures for employee benefits are as follows:


 


	 	 	2019	 	 	2018	 
	Salaries and wages and employee benefits	 	$	11,537,852	 	 	$	8,462,280	 
	Contract labour	 	 	2,311,408	 	 	 	1,913,215	 
	Stock-based compensation	 	 	195,113	 	 	 	(31,461	)
	Other staff expense	 	 	16,504	 	 	 	212,322	 
	Total	 	$	14,060,877	 	 	$	10,556,356	 



 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 39 




     


    

 





























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  






	19.	Income
                                            taxes



 


The reconciliation of the
combined Canadian federal and provincial statutory income tax rate of 26.5% (2017 - 26.5%) to the effective tax rate is as follows:


 


	 	 	2019	 	 	2018	 
	Net loss before income taxes	 	$	(4,425,043	)	 	$	(6,055,063	)
	Expected income tax (recovery)	 	 	(1,172,636	)	 	 	(1,604,592	)
	Difference in foreign tax rates	 	 	-	 	 	 	21,275	 
	Share based compensation and non-deductible expenses	 	 	(202,553	)	 	 	528,876	 
	Non taxable accounting entry	 	 	-	 	 	 	118,293	 
	Prior year true-ups	 	 	119,972	 	 	 	(11,331	)
	Tax rate changes and other adjustments	 	 	(15,933	)	 	 	(25,529	)
	Foreign exchange translation adjustment	 	 	(172,081	)	 	 	285,443	 
	Change in tax benefits not recognized	 	 	1,542,386	 	 	 	699,136	 
	Income tax expense	 	$	99,155	 	 	$	11,571	 



 


The Company’s income
tax expense (recovery) is allocated as follows:


 


	 	 	2019	 	 	2018	 
	Current income tax expense	 	$	93,580	 	 	$	916	 
	Deferred income tax expense	 	 	5,575	 	 	 	10,655	 
	Income tax expense	 	$	99,155	 	 	$	11,571	 



 


The significant components
of deferred tax assets are as follows:


 


	 	 	2019	 	 	2018	 
	Non-capital losses carried forward	 	$	183,530	 	 	$	267,137	 
	Intangible assets	 	 	61,214	 	 	 	-	 
	Right of use assets	 	 	174,264	 	 	 	-	 
	Reserves	 	 	180,927	 	 	 	182,481	 
	Deferred tax assets	 	$	599,935	 	 	$	449,618	 
	Deferred tax liabilities	 	 	(269,598	)	 	 	(110,373	)
	Net deferred tax assets	 	$	330,337	 	 	$	339,245	 
	 Comprised of:	 	 	 	 	 	 	 	 
	Deferred tax assets	 	$	334,542	 	 	$	368,997	 
	Deferred tax liabilities	 	 	(4,205	)	 	 	(29,752	)



 


Deferred taxes are provided
as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets
and liabilities. Deferred tax assets have not been recognized in respect of the following deductible temporary differences:


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 40 




     


    

 





























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)












  






19.       Income
taxes (continued)


  


	 	 	2019	 
	Property and equipment	 	 	170,926	 
	Intangible assets	 	 	731,587	 
	Share issuance costs – 20(1)(e)	 	 	82,732	 
	Non-capital losses carried forward – Canada	 	 	2,448,176	 
	Non-capital losses carried forward – US	 	 	74,829	 
	Capital losses carried forward	 	 	112,286	 
	Investment tax credits from schedule 31	 	 	428,220	 
	SR&ED pool from T661	 	 	483,063	 
	Stock appreciation right liability	 	 	39,856	 
	Ontario SR&ED credit	 	 	90,251	 
	Lease liabilities	 	 	8,264	 



 


The Company has available
Canadian non-capital losses of approximately $9,256,792 and capital losses of approximately $338,008. The net capital loss carry forward
may be carried forward indefinitely, but can only be used to reduce capital gains. The Company’s Canadian non-capital income tax
losses expire as follows:


 


	2026	 	$	534,343	 
	2027	 	 	547,555	 
	2029	 	 	301,317	 
	2030	 	 	826,572	 
	2032	 	 	312,959	 
	2033	 	 	202,378	 
	2034	 	 	299,280	 
	2035	 	 	358,011	 
	2036	 	 	131,636	 
	2037	 	 	215,934	 
	2038	 	 	2,359,522	 
	2039	 	 	3,167,285	 
	 	 	$	9,256,792	 




 


During the year-ended December
31, 2019, the Company utilized Canadian loss carry-forwards of approximately $nil (2018 – $nil) to reduce taxable income in the
current year.


 


The Company also has investment
tax credits available to reduce future federal taxes payable of approximately $582,612 if not utilized will expire as follows:


 


	2025	 	$	97,429	 
	2026	 	 	36,762	 
	2027	 	 	38,664	 
	2028	 	 	45,124	 
	2029	 	 	51,992	 
	2030	 	 	57,478	 
	2031	 	 	72,663	 
	2033	 	 	87,119	 
	2034	 	 	95,381	 
	 	 	$	582,612	 




 


The effective and statutory
tax rate in the Company’s Australian subsidiaries is 27.5% (2018 – 27.5%). These subsidiaries have capital losses of approximately
$245,455 (2018 – $246,933) available to offset future taxable capital gains and non-capital


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 41 




     


    

 
































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















 





	19.	Income
                                            taxes (continued)



 


losses of approximately
$649,000 (2018 – $718,952) available to reduce future taxable income. These losses do not expire.


 


The Company’s US
subsidiaries have non-capital losses of approximately $332,00 available to reduce future taxable income. These losses do not expire.


 


The potential future tax
benefits that may result from the application of the capital loss carry forwards and Canadian non-capital federal and provincial losses
have not been recorded in these consolidated financial statements.


 


	20.	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 December 31, 2019.


 


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 2020 and has the ability to fund
any operating losses that may occur in the upcoming periods.


 


The table below summarizes
the Company’s contractual obligations into relevant maturity groups at the balance sheet date based on the expected contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows for operations:


  


	 	 	2020	 	 	2021	 	 	2022	 	 	2023	 	 	2024 and
    thereafter	 	 	Total	 
	Trade and other payables	 	$	3,073,361	 	 	$	–	 	 	$	–	 	 	$	–	 	 	$	–	 	 	$	3,073,361	 
	Provisions	 	 	441,667	 	 	 	103,629	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	545,296	 
	Share appreciation rights	 	 	149,078	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	149,078	 
	Lease obligations	 	 	624,353	 	 	 	109,356	 	 	 	66,974	 	 	 	66,974	 	 	 	128,367	 	 	 	996,024	 
	Crown Capital debt	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	6,548,461	 	 	 	6,548,461	 
	Convertible debt	 	 	–	 	 	 	–	 	 	 	–	 	 	 	4,867,934	 	 	 	1,925,000	 	 	 	6,792,934	 
	Transcription Express VTB loan	 	 	863,438	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	863,438	 
	HomeTech VTB loan	 	 	240,000	 	 	 	240,000	 	 	 	240,000	 	 	 	240,000	 	 	 	20,000	 	 	 	980,000	 
	Total	 	$	5,391,897	 	 	$	452,985	 	 	$	306,974	 	 	$	5,174,908	 	 	$	8,621,828	 	 	$	19,948,592	 




 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 42 




     


    

 



































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















 






	20.	Risk management for financial instruments
                                            (continued)



 


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:


 


	 	 	December
    31, 2019	 	 	December 31,
    2018	 
	United States	 	 	54	%	 	 	64	%
	Australia	 	 	33	%	 	 	23	%
	United Kingdom	 	 	11	%	 	 	6	%
	Canada	 	 	1	%	 	 	6	%
	Rest of world	 	 	1	%	 	 	1	%
	 	 	 	100	%	 	 	100	%



 


The Company is subject
to risk of non-payment of accounts receivable. The Company mitigates credit risk by assessing the credit worthiness of customers prior
to extending credit and monitoring the aging and size of credit extended to customers. All of the Company’s cash is held with major
financial institution 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.


 


The following is a breakdown
of trade receivables aging, net of expected credit losses (“ECLs”):


 


	 	 	December
    31, 2019	 	 	December 31,
    2018	 
	0 to 30 days	 	$	2,286,445	 	 	$	2,216,876	 
	31 to 60 days	 	 	636,975	 	 	 	330,761	 
	61 to 90 days	 	 	51,222	 	 	 	64,115	 
	91 days and older	 	 	194,903	 	 	 	411,375	 
	 	 	$	3,169,545	 	 	$	3,023,127	 



 


At December 31, 2019, the
Company recorded a provision for ECLs in the amount of $902,215 (2018 - $769,930).


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 43 




     


    

 





























	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















  





	20.	Risk management for financial instruments
                                            (continued)



 


Credit risk (continued)


 


The activity of the expected credit loss provision
is as follows:


 


	 	 	2019	 	 	2018	 
	 Expected credit loss – beginning of
    year	 	$	769,930	 	 	$	551,421	 
	Add: provision for expected credit loss	 	 	114,237	 	 	 	232,223	 
	Less: write-offs	 	 	–	 	 	 	(10,651	)
	Foreign exchange adjustments	 	 	18,048	 	 	 	(3,063	)
	Expected credit loss – end of year	 	$	902,215	 	 	$	769,930	 



 


The following default rates are used to calculate
the ECLs on billed receivables as at December 31, 2019:


 


 


	 	 	Total	 	 	Current	 	 	Over 30
    days	 	 	Over 60
    days	 	 	Over 90
    days	 
	Default rates (%)	 	 	 	 	 	 	2.0	%	 	 	3.2	%	 	 	14.0	%	 	 	74.0	%
	Trade receivables ($)	 	 	4,071,760	 	 	 	2,277,849	 	 	 	480,468	 	 	 	217,688	 	 	 	1,095,755	 
	Provision for ECLs ($)	 	 	902,215	 	 	 	45,361	 	 	 	15,519	 	 	 	30,476	 	 	 	810,859	 



 


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 December 31, 2019, 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 $1,000 (2018 –


$11,000).


 


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 $33,000 (2018
 – $44,000) as at December 31, 2019.


 


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 $nil (2018 – $8,000) as December 31, 2019.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 44 




     


    

 
































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















  





	20.	Risk
                                            Management for Financial Instruments (continued)



 


Foreign
currency risk (continued)


 


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 $217,040 for the year ended
December 31, 2019 (2018 – foreign exchange loss of $198,180).


 


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.


 


	21.	Related
                                            party transactions



 


Key management personnel
are comprised of the Company’s directors and executive officers. In addition to their salaries, key management personnel also participate
in the Company’s share option program (note 11), DSU plan, SAR plan. Key management personnel compensation for the years ended
December 31, 2019 and December 31, 2018 is as follows:


 


	 	 	2019	 	 	2018	 
	Salaries and short-term employee benefits
    (i)	 	$	1,018,166	 	 	$	876,241	 
	Stock-based compensation	 	 	106,959	 	 	 	(98,643	)
	 	 	$	1,125,125	 	 	$	777,598	 



		(i)	Short-term
                                            employee benefits include bonuses and car allowances.



 


	22.	Subsequent
                                            events



 


COVID-19


 


Since December 31, 2019,
the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in the World Health
Organization declaring this virus a global pandemic in March 2020. Governments around the world have enacted emergency measures to combat
the spread of the virus. These measures which include the implementation of travel bans, self-imposed quarantine periods and social distancing
and closure of businesses have caused material disruption to businesses resulting in an economic slowdown. Governments and central banks
have responded with significant monetary and fiscal interventions designed to stabilize the financial markets. The duration and impact
of the COVID-19 outbreak is unknown at this time and it is not possible to reliably estimate the duration and severity of these developments.


 


Acquisitions


On January 31, 2020, The
Company through it’s US subsidiary VIQ services Inc., acquired the assets of ASC Services LLC (“ASC”). The purchase
price paid for the ASC acquisition was $6.9 million, with $3.1 million paid in cash on closing and $3.8 million paid via an earn-out
payable quarterly over 30 months.


 


On January 31, 2020, in
connection with the acquisition of ASC, The Company and Crown entered into an amendment to the Debt Facility, pursuant to which Crown
agreed to forfeit the 450,000 common share purchase warrants (the “Original Crown Warrants”) that Crown was issued on November
28, 2018. In exchange for the Original Crown Warrants, the Amendment provides that the Company issue 450,000 new common share purchase
warrants (the “New Crown Warrants”). Each New Crown Warrant is exercisable to acquire one common share in the capital of
the Company at a price per Share equal to CAD$2.06 (the “Exercise Price”) until November 28, 2023.


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 45 




     


    

 



































	 	VIQ
                                            SOLUTIONS INC.







 


VIQ Solutions Inc.


Notes to Consolidated Financial
Statements 





(Expressed
in United States dollars)
















  





	22.	Subsequent events (continued) 



 


Acquisitions (continued)


 


In February 2020, the Company
also 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”).
Concurrent with their entry into the Amending Agreements, Noteholders holding all of the outstanding Notes exercised the Conversion Option,
except to the extent that the exercise of the Conversion Option would result in a Noteholder becoming a “control person”
under the policies of the TSX Venture Exchange (the “TSXV”). The Corporation issued 6,395,648 common shares as the result
of the exercise of the Conversion Option in respect of Notes having an aggregate principal amount of approximately $6,404,319 and an
aggregate Total Interest Payable of approximately $4,089,607.


 


On February 26, 2020, the
Company through its US subsidiary VIQ services Inc., acquired the shares of WordZXpressed Inc. The purchase price paid for the WordZ
acquisition was $4.7 million, with $1.3 million paid in cash on closing, $1.2 million paid via a promissory note payable quarterly over
36 months and $2.2 million paid via an earnout payable quarterly over 36 months.


 


On March 4, 2020, VIQ announced
that it is accelerating the vesting of 1,103,526 warrants (each a “Warrant”) exercisable to acquire common shares of the
Company (each a “Common Share”), originally issued pursuant to private placements closing on November 28, 2018, December
20, 2018 and May 7, 2019. Pursuant to the terms of the Warrants (the “Warrant Certificates”), the Company has the right to
accelerate the expiry date of the Warrants in the event that the closing price of the Common Shares on the TSX Venture Exchange is equal
to or greater than $2.68 for any ten (10) consecutive trading days (an “Acceleration Event”).


 






    	CONSOLIDATED FINANCIAL STATEMENTS 2019	PAGE 46