Document:

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 46Exhibit 4.5

 

VIQ Solutions
Inc.

(the “Company”)

 

RESTATED 2019 MANAGEMENT’S
DISCUSSION AND

ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

  

Notice to Reader

 

The management’s
discussion and analysis of the Company for the year ended December 31, 2019 has been amended following a continuous disclosure review
by the Ontario Securities Commission (the “OSC”) of the Company’s disclosure record. This restated 2019 management’s
discussion and analysis of financial condition and results of operations (the “Amended MD&A”) was filed to address
comments received from the OSC and to improve the Company’s disclosure. In particular, the Company has made revisions in this Amended
MD&A as follows.

 

The Company has
clarified and provided additional disclosure in the Amended MD&A explaining the non-GAAP measures presented therein, specifically
Adjusted EBITDA, and has provided a reconciliation clarifying the calculation of Adjusted EBITDA from Net Loss, the most directly comparable
measure to Adjusted EBITDA under IFRS.

 

The Company has
revised the Amended MD&A to provide additional comparative financial information for the eight quarters ended December 31, 2019.

 

The Company has
revised the disclosure in the Amended MD&A to remove references to non-recurring, infrequent and unusual amounts.

 

The Company has
revised the Amended MD&A to more clearly disclose its results of operations for the years ended December 31, 2019 and 2018 and the
period over period change in the Company’s results of operations over such periods.

 

The Company has
revised the Amended MD&A to provide additional disclosure relating to the impact of seasonality on the Company’s business.

 

     

     

    

 

 

 

VIQ
Solutions Inc.

 

Restated 2019
Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

(Expressed in United
States dollars)

 

 

https://viqsolutions.com/

 

     

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Basis of Presentation

 

The following Management’s
Discussion and Analysis (“MD&A”) comments on the financial condition and results of operations of VIQ Solutions Inc.
(“VIQ” or the “Company”) for year ended December 31, 2019. The information contained herein should be read in
conjunction with the audited consolidated financial statements for December 31, 2019.

 

The consolidated
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) applicable to the preparation of consolidated financial statements.

 

The policies applied
in the consolidated financial statements are based on IFRS policies effective as of November 19, 2020 the date the Board of Directors
approved the consolidated financial statements for the year.

 

This document contains
forward-looking statements, which are qualified by reference to, and should be read together with, the Forward-looking Statements section
of this MD&A.

 

Unless the context
otherwise requires, all references to “VIQ”, “Company”, “VIQ Solutions”, “our”, “us”,
and “we” refers to VIQ Solutions Inc. and its subsidiaries. Additional information regarding the Company is available on
SEDAR at www.sedar.com. This MD&A is dated November 19, 2020. All amounts herein are presented in United States dollars, unless otherwise
stated.

 

Forward-looking
Statements

 

This MD&A contains
forward-looking statements about our achievements, the future success of our business and technology strategies, performance, goals and
other future events. Management’s assessment of future plans and operations, cash flows, methods of financing and the ability to
fund financial liabilities, and the timing of and impact of adoption of IFRS and other accounting policies may constitute forward-looking
statements under applicable securities laws and necessarily involve risks including, without limitation, the risks identified above including
COVID-19 pandemic globally. The subsequent event outlines in details COVID-19 impacts and risks.

 

As a consequence,
the Company’s actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking
statements or information are based on a number of factors and assumptions which have been used to develop such statements and information,
but which may prove to be incorrect. Although VIQ Solutions believes that the expectations reflected in such forward-looking statements
or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance
that such expectations will prove to be correct.

 

In addition to
other factors and assumptions which may be identified in this document and other documents filed by the Company, assumptions have been
made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment
in which VIQ Solutions operates, including significant changes in demand from our clients as a result of the impact of a global economic
crisis and capital markets weakness; the risk of potential non-performance by counterparties, including but not limited to, clients and
suppliers, during uncertain economic conditions; our dependence on a limited number of clients; our dependence on industries affected
by rapid technological change; our ability to successfully manage our operations internationally including in the United Kingdom, Australia
and the United States; the challenge of managing our financial exposures to foreign currency fluctuations; our ability to obtain qualified
staff and services in a timely and cost-efficient manner; our ability to obtain financing on acceptable terms including anticipated sources
of funding of working capital and financial losses which may include securing credit facilities, accessing new equity, corporate acquisitions
or business combinations or joint venture arrangements; the ability to secure new contracts on terms acceptable to the Company; the ability
to successfully develop new products; the Company's ability to effectively register, for protection, its new and existing products in
certain jurisdictions; the Company's ability to protect new and existing products from proprietary infringement by third parties and
its ability to effectively enforce such proprietary infringements; taxes in the jurisdictions in which the Company operates, including
Canada, the United Kingdom, Australia and the United States; and VIQ Solutions' ability to successfully market its products. Readers
are cautioned that the foregoing list of factors is not exhaustive.

 

The purpose of
the forward-looking statements is to provide the reader with a description of management’s expectations regarding the Company’s
2020 outlook and may not be appropriate for other purposes. Readers are encouraged to read the section entitled “Risk Factors”
in this MD&A for a broader discussion of the factors that could affect our future performance. Furthermore, the forward-looking statements
contained in this document are made as at the date of this document and the Company does not undertake any obligation to update publicly
or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except
as may be required by applicable securities laws.

 

    
	Management Discussion & Analysis	Page 1

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Trends in Our
Business

 

VIQ Solutions combines
artificial intelligence (AI)-driven voice and video capture technology and services to securely manage digital content in the most rigid
security environments including governments, courts, insurance, law enforcement, media content, news and conferencing.

 

We help our cybersecurity
focused clients securely speed the capture, creation, and management of large volumes of information, preserve the unique value of the
spoken word and video image, and deliver meaningful data our security focus customers can utilize.

 

Globally, the Company’s
1,300+ clients are engaged in a profound digital transformation driven by an expansion in the amount of evidence captured from audio,
video, sensors, body cameras, drones, and smartphones that need to be documented.

 

As volumes continue
to increase, the operational pressure to transform digital evidence to documents and transcripts, particularly for multi recordings and
multi speakers, in a faster, more secure and cost-effective manner, continues to drive the digital transformation for our clients. We
enable our clients’ digital transformation by implementing cybersecure capture solutions, driving the migration to Cloud solutions,
enabling hybrid technology services with human to machine workflow, and employing Artificial Intelligence tools such as speech recognition,
sentiment analysis, markets specific lexicon and algorithms. These trends will accelerate in the future.

 

VIQ is in full
execution mode, driving our strategy through the next level of integration and acquisitions and continuing to create long-term enterprise
value for shareholders.

 

Our acquisition
of three leading transcription providers in the United States in Q418 expanded our transcription services business with the provision
of secure, multi-speaker transcription services to law enforcement agencies, major insurance companies and criminal justice organizations.
These acquisitions extend our total addressable market to an estimated $8.5 billion in the US Transcription market alone, comprising
of $6.4 billion in Government related services and $2.1 billion in Insurance related services. The total addressable market is expected
to grow to $10.6 billion by the end of 2021 as the digitization of these markets accelerate.

 

 

 

    
	Management Discussion & Analysis	Page 2

     

    

 

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

 

Like the healthcare
sector a decade ago, these markets are highly fragmented and at the early stage of a substantial digital transformation as machine learning
and AI are better suited for multi speaker documentation and human to machine collaboration within a highly secured cloud environment.

 

We now have more
than 1,300 clients throughout the United States, Australia, Canada, and EMEA. Our clients capture several hundred million minutes of
audio and video evidence per year, either through VIQ capture products and/or a range of third-party products. From that content, VIQ
currently transcribes a significant portion of its revenue charged per word, per page, and per minute.

 

Our growth opportunity
for 2020-2021 comes from increasing our market share and improving operating margins through global adoption of VIQ industry leading,
AI-based integration of human and machine workflow. The Company plans to increase its technology reach to existing clients resulting
in a 50% increase in transcription volume and an increase in its baseline revenue run rate to over $36M by end of 2020, before factoring
in new sales or additional M&A. The technology and talent investments are made to scale.

 

We see significant
positive trends in our client requirements that align with our product strategy, including:

 

		I.	A
                                            dramatic expansion of evidence captured from audio, video, sensors, and through a broader
                                            range of next generation microphone arrays, mobile cameras, drones and smartphones. In parallel,
                                            there is an increasing need to find better methods to access and analyze content;

 

		II.	A
                                            greater focus on captured and distributed content security and privacy of evidentiary documentation
                                            as cyberattacks become more sophisticated and state-sponsored;

 

		III.	A
                                            growing interest in and implementation of secure Cloud-based storage;

 

		IV.	An
                                            increased rate of adoption of mobile and software-as-a-service capabilities and;

 

		V.	A
                                            greater demand for AI capabilities to assist people with workflow, data mining and data analytics.

 

Law Enforcement

 

The industry continues
to trend towards implementing technology for multi-channel evidence recording and leveraging various AI tools such as speech recognition
for document generation.

 

Demand is increasing
for our latest capture and processing products, such as MobileMicProTM and aiAssistTM. At their core, these are powerful new market-specific
AI and workflow technologies have advanced cybersecurity and content protection.

 

Our Law Enforcement
transcription services continue to see an ever-expanding need for securing content at all stages of the workflow. Early implementations
stress how significant secure transactions are in purchase decisions.

 

    
	Management Discussion & Analysis	Page 3

     

    

 

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Justice

 

Many of our long-term
clients and new prospects are looking outside the traditional on-premise, licensed solutions and are the importance of simple interfaces
with sophisticated back-end capabilities. The lengthy storage requirements create massive amounts of captured content and documentation
of audio/video files which can exceed what makes sense for on-premise storage. We are experiencing increasing interest in new secure
Cloud offerings from long-term clients in order to increase security and drive operating costs via machine draft transcription. The provision
of integrated services is also a significant opportunity as clients and prospects seek a single source provider that understands their
needs. 

 

Insurance

 

Similar to Law
Enforcement, many major insurance companies capture and manage recording content that must be maintained with veracity if required to
support legal proceedings. The ability to efficiently and securely share an audio recording that results in an accurate verbatim transcript
with exceptional turn-around time is critical. Current implementations of NetScribeTM offer simple, fast and yet powerful results that
will result in meaningful gains in workflow efficiencies. 

 

Mobility and
Technology

 

All our major markets
and lines of business share common ground. Our critical areas of focus are:

 

		I.	Protection
                                            and security of content

 

		II.	Movement
                                            towards larger longer-term Cloud-based storage capabilities

 

		III.	Adoption
                                            of simple, easily operated capture products on familiar mobile platforms

 

		IV.	Providing
                                            the most appropriate AI to our markets

 

We continue to
build proprietary, advanced AI technology to assist our clients optimize their content workflow, including market-specific speech recognition,
data analytics, and transcript generation.

 

 

International
Partner Programs and Joint Ventures

 

Identifying and
utilizing the best-in-class partners is a critical aspect of our transformation and expansion of international reach. Our approach to
selling our solutions and services through an expanded and highly qualified distribution network while fostering strong relationships
with key partners is beginning to produce encouraging results.

 

    
	Management Discussion & Analysis	Page 4

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

The dramatic explosion
in sources of evidence and the need to access, mine and analyze that content is driving the demand to generate outcomes more efficiently
and effectively. We believe our solutions deliver to our clients more flexible and simplified capture, resulting in faster and more accurate
documentation. Combined with sophisticated workflow tools, they deliver the power to generate new efficiencies and more effective analysis
of evidentiary content. These solutions will transform the way our clients exploit these technologies to affect real business change
and exploit new opportunities.

 

A few years back,
we identified the need for providing the ability to generate new value from clients stored digital assets through the application of
specialized artificial intelligence and analytics.

 

Applying our specialized
service framework (aiAssist), our capture products (CaptureProTM and MobileMic Pro) and our transcription workflow product (NetScribe)
enables our clients to leverage market proven artificial intelligence tools and methods that allow them to mine and process enormous
volumes of disparate data in minutes versus traditional techniques that take far longer. This produces significant time and cost benefits
and allows our industry professionals to review and assess the record in near real-time.

 

 

Digital Transformation

 

VIQ clients are
engaged in a profound digital transformation that has been recently accelerated due to the COVID-19 pandemic. Trusted highly secured
digital evidence is a significant component of such transformation both in terms of volume, security, and business outcomes needed to
use evidence effectively.

 

Three years ago,
we stated that the transformation of digital audio and video content would become the foundation for our future growth. Using that hypothesis,
we defined our strategy to make the necessary investments in technology to drive the industry through a true digital transformation in
our markets.

 

In fiscal years
2018/2019, we continued our innovation to develop significant new technologies to further the transformation, which included mobility,
secure workflow, Cloud-based, and Software-as-a-Service (SaaS) offerings that reflect trends we continue to see in the market.

 

We appointed new
and experienced operating and management executives and tapped into the wealth of knowledge gained through our acquisitions. These new
leaders enabled us to expand and scale the business with a clear focus on becoming the leader in digital transformation in our specialized
B2B markets. We amplified our focus on operating leverage, consolidated management, and resource allocation, combined with an accelerated
and aggressive stance on accretive mergers and acquisitions to increase the quantity and quality of revenues.

 

    
	Management Discussion & Analysis	Page 5

     

    

 

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

We intend to aggressively
pursue these growth opportunities by following through on critical elements of our strategy.

 

The Company’s
key strategies remain on track:

 

		·	Improve
                                            revenue quality by transitioning toward SaaS accounts;

 

		·	Grow
                                            VIQ’s client and talent base through organic growth and strategic acquisitions;

 

		·	Cross
                                            sell a range of purpose-built software products and services to increase wallet share with
                                            our existing client base;

 

		·	Implementing
                                            country specific technology stacks enabling the migration of clients in the United States,
                                            Australia, EMEA and Canada to complete a revolutionary end to end workflow switch into a
                                            highly secured cloud computing infrastructure.

 

The Company’s
key financial strategies consist of:

 

		·	Migrating
                                            VIQ toward higher quality and higher margin revenue;

 

		·	Supporting
                                            an operational and acquisition strategy with low cost liquidity; 

 

		·	Expanding
                                            gross margin through VIQ’s unique cybersecurity, AI and cloud workflow solutions that
                                            are applied to substantial volumes of voice and video data.

 

The Company has
been consolidating operations into its core production facility in Phoenix, Arizona. It will consolidate six of the eight offices in
the United States that were inherited with the acquisitions. Phoenix remains the Company’s global operating location.

 

Continue to
Innovate Technology

 

VIQ has long been
a global leader in the capture of sensitive digital evidence information. New technological trends, including the shift to secure transfer
of media, the emergence of low-cost hardware that has enabled the interconnection of devices and the collection of vast amounts of audio
and video data are driving new opportunities for VIQ. Our broad set of refreshed and new technologies, applications, intellectual property,
and expanded service offerings provides our clients with the opportunity to generate measurable business improvements. We continue to
aggressively strengthen our AI framework with a specific short-term focus on multi-speaker capabilities. This represents a critical need
within our markets and clients will quickly reap the benefits with its rollout.

 

VIQ is focused
on driving digital transformation of the full range of captured evidence by our clients. The strategy is to deliver an AI and human workflow
platform where machines perform the bulk of high-volume work, including speech to text, while humans perform QA and improve machine results
via machine training roles. Our patent-pending aiAssist framework focuses on delivering better results to our clients via market and
client specific vocabulary and custom language models.

 

VIQ’s products
are delivered in both local and cloud formats using modern container-based technologies to scale and adapt to client processing patterns
while maintaining privacy and confidentiality using advanced cybersecurity methods.

 

    
	Management Discussion & Analysis	Page 6

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Cybersecurity is
designed into all our products, from mobile to desktop, web, and cloud-based systems including all content movement between devices.

 

VIQ creates the
most flexible and functional capture software for fixed rooms (courts, interview rooms), workplace and vehicle computers, telephony (SIP)
and remote or mobile capture scenarios. Our AI-powered transcription platforms are designed to support audio and video that is captured
on any system, from any vendor, to bring the value of Artificial Intelligence to our clients.

 

Cloud and SaaS
offerings provide better security than private corporate or government data centers. VIQ products embrace Cloud and SaaS offerings using
advanced microservice based architecture to securely bring the value and flexibility of Amazon and Azure cloud offerings to our clients.

 

VIQ’s patented
digital workflow in aiAssist combines AI tools in the optimum sequence to generate the best results for each audio and video processing
problem.

 

Our workflow engine
in NetScribe routes work to the transcriber with the best experience for the job and maximizes utilization of our large work pool located
across the US, Australia and Canada.

 

Speech Recognition

 

This is one of
the foundations for the VIQ transcription platform and is mandatory to drive our patent pending innovation.

 

We plan to further
develop our speaker recognition, which is designed to identify individual speakers in a recording to improve diarization. Our approach
is to find the best methods from the many emerging methods and integrate those into our aiAssist framework.

 

The aiAssist framework
processes audio and automatically routes to NetScribe for human review and formatting. Any edits are used to improve the AI tools, which
are the foundation of VIQ Human and Machine Collaboration. It changes how work is defined and results in significant productivity gains
and faster turnaround times for our clients. This demonstrates how VIQ is disrupting traditional transcription workflow and gaining productivity
improvements.

 

VIQ is at the forefront
of Human and Machine collaboration using the aiAssist framework and NetScribe workflow to disrupt the traditional transcription workflow.
aiAssist speech to text tools perform the initial transcription in a fraction of human time but humans perform QA and train the AI to
improve future results.

 

Markets Specific
Vocabulary

 

Each of our markets,
i.e. Law Enforcement, Insurance, Courts and Government, have a set of specialized vocabulary and use of that vocabulary. VIQ generates
value by building AI tools optimized for each client and their specific requirements, which is a major competitive differentiation separating
VIQ’s speech to text over other companies.

 

VIQ plans to continue
building its market specific lexicon and find methods to expand on the limited lexicon capabilities in existing generic speech recognition
engines provided by the market. VIQ is currently rolling out an API approach that abstracts the lexicon function and injects standardized
results into any speech to text engine selected by clients. Our approach will reduce the lexicon integration to build a service that
maps our standard lexicon to the method used by each speech engine, thus capitalizing on the big lexicon investment.

 

    
	Management Discussion & Analysis	Page 7

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

 

Grow Subscription
and SaaS Revenue

 

Through 2019, VIQ
continued to invest in infrastructure, technology, products and people to transition toward a software as a service (“SaaS”)
revenue model providing the platform to clients for a monthly fee. While faster with new clients, the transition from traditional licensing
to subscription and SaaS is a multi-year incremental process that is driven by the renewal cycle with most of our clients. Given the
size, nature and visibility of our sales pipeline, VIQ anticipates this SaaS option will continue to gain significant traction in multiple
markets with security conscious clients as they seek secure, intelligent Cloud-based platforms.

 

Improve Margins
to Drive Business Value

 

The cornerstone
of our strategy is exploiting the market-specific AI technologies that enhance our clients human resource capabilities and documentation
workflow. We expect that a major revolution in how audio/video evidence is translated to documented evidence is about to occur. As we
implement advances such as our NetScribeTM and aiAssistTM products and realize efficiency gains, margins will improve.

 

We will offer our
clients significant advantages over competitive workflow solutions. As outlined below, we expect that the price and cost of transcription
will drop over time as human labor is assisted by machine capabilities. In a subscription-based SaaS revenue model, the human component
of transcription decreases from 100% to 20% over time, powered by the AI component increasing from 0% to 80%.

 

VIQ is poised to
benefit from this margin improvement through continued reinvestment in the business and integrated value-add services and solutions for
clients. Our future enterprise value creation lies in this digital market transformation now in its infancy.

 

World-class
Leadership Team

 

The three acquisitions
we completed towards the end of 2018 delivered a wealth of leaders experienced in our core markets. This experience and knowledge added
further depth to our organization and a new organizational structure which reflects our expanded business strategy. With these leaders
in place, the integration of products, services and processes becomes a seamless and disciplined effort. The integrated organization
has a clear opportunity to drive operational synergies and feedback between products, services and growth.

 

    
	Management Discussion & Analysis	Page 8

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

During Q2, Mr.
Alexie Edwards joined the Company as CFO to lead the company expansive growth reporting directly to the CEO Mr. Pare. Mr.
Edwards is a highly experienced financial technology executive. For the past six years he had a significant role in the growth of
Jonas Software where he was Vice President Finance. Jonas Software is one of the largest software divisions of Constellation
Software. Through multiple acquisition integrations in various international jurisdictions, Mr. Edwards enabled substantial
shareholder value.

 

During Q3 FY19,
Tony Incardona joined the Company as SVP of Global Sales and Business Development. Mr. Incardona’s appointment is the final piece
completing VIQ’s seasoned leadership team. He has an executive responsibility for building a global sales organization, strengthening
the corporate sales strategy and creating global partnerships. His appointment was a critical step in VIQ's ability to anticipate evolving
client needs, drive new business around the world and to achieve revenue growth objectives.

 

Please refer to the
Company web site https://viqsolutions.com/about for a consolidated view of the Company leadership team and profiles. 

 

Continue
Strategic Acquisitions

 

In Q1 FY20, we
announced the completion of the fourth and fifth strategic acquisitions that significantly grew our presence in key US-based markets,
including Content Media, News and Conferencing. These value-added acquisitions were immediately accretive to our business and added a
significant amount of long-term contracted clients which increased the opportunity to leverage our technologies and cross sell our products.

 

These acquisitions
also enable us to directly offer business workflow improvements, scalability and a wide range of new benefits to our clients by leveraging
our innovative technologies and the ability to develop our AI algorithms through an increased volume of audio and video data. The Company
has built a disciplined approach to identifying and closing key acquisitions and we continue to look for additional value-add opportunities.

 

 

Drive Client
Value-add Through Enhancing the End-to-End Value Chain

 

With the introduction
of our Cloud and subscription-based AI-driven offerings, we have vertical integration in our markets from the capture through mining
of content. The end-to-end solutions provide clients a single source for their capture, manage and mine needs as they relate to digital
evidence.

 

These full-spectrum
offerings drive further efficiencies in our clients’ business and provide solutions and upgrades that create measurable outcomes.
Our emphasis on cybersecurity enables us to target high profile, highly data-sensitive growth markets in regulated government institutions.
The integration of products across our solutions and services provides an essential feedback loop where product improvements lead to
enhanced services that generate innovations in products.

 

    
	Management Discussion & Analysis	Page 9

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

 

Pursue Strategic
Partnerships and International Joint Ventures

 

Continuing into
2020, we will engage selected opportunities for collaboration, innovation, and marketing relationships to accelerate our growth and expand
our presence globally. We are actively pursuing opportunities to leverage new technologies, execute on new business opportunities, and
grow our client base while providing new business value to our clients.

 

A full set of R&D
initiatives anticipated to generate revenue is in development and aimed at driving new services and products for our clients and partners.

 

Over the last three
years, we gained valuable experience in acquiring and integrating businesses and technologies. This knowledge will continue to deliver
exponential value to all our clients and stakeholders.

 

Operating
Performance: Insights on 2019 Results

 

In 2019, we began
the commercialization of the investments made in 2018 and before to enhance our technology platform capabilities and readiness for scalability
ahead of our first three acquisitions. While these investments did reduce Adjusted EBITDA significantly in the short-term, they are now
driving efficiencies, improving gross and operating margins, broadening offerings, and enabling the technology to support a multiple
of the current volume. The investments we made in 2016 on cybersecurity, plus the continued investments in workflow, cloud, AI and mobility,
have become the foundation for 2020-2021 growth.

 

We anticipate that
technology improvement synergies will increase acquisition targets’ gross margin by 15-20% in the first 18 months of consolidated
operations, while cost savings will reduce acquisition targets’ G&A costs (as a proportion to revenue) by up to 20% in the
first 18 months of consolidated operations.

 

During 2019, VIQ
generated revenue from approximately 1,300 clients across 47 states in the United States and 15 countries.

 

Client revenue
segmentation by Dec 31, 2019, was approximately 40% Law Enforcement, 25% Insurance, and 35% Justice & Legal with clients including
major law enforcement, courts, and government agencies as well the top four Fortune 500 Insurance companies in the United States.

 

Subsequently, in
Q1 FY2020, acquisitions of WordZ and ASC added new verticals, Media, News, and Conferencing, along with some strategic Fortune 500 clients.

 

    
	Management Discussion & Analysis	Page 10

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

We have implemented
four operational cloud instances to support the localization of NetScribe, MobileMic Pro, and aiAssist platforms in the United States,
Australia, Europe and Canada using AWS and Azure clouds designed specifically for government solutions. The Company plans to deploy new
cloud-based infrastructure in two more regions globally by end of 2020 in order to support sales and new clients.

 

The revenues consist
of a combination of new long term (3-5+ years) technology and services contracts being delivered annually, quarterly and monthly via
various forms of subscriptions in addition to existing long-term technology and service contracts already in place with our clients and
partners.

 

The Company announced
the migration of the first client groups onto the NetScribe and aiAssist platform in Q1 2019, as other clients continued to migrate onto
the platform throughout 2019. As operational leverage improves with scale and VIQ realizes its anticipated margin improvements, the Company
will continue to report operational milestones.

 

During 2019, we
initiated plans for a substantial percent of our clients to be migrated to NetScribe using one of the Company’s four cloud-based
infrastructures that are now operational around the world.

 

Overall, the Company
is on a path to a revenue run rate of over $36M by end of 2020, before factoring in new sales or additional M&A.

 

Financial guidance
including revenues and Adjusted EBITDA projections for 2020 taking into consideration these new sales, targeted new acquisitions and
new partnerships are not disclosed by the Company at this time.

 

Enterprise
Value Creation

 

Due to the size
and magnitude of the transformation throughout 2019, management believes it will take some time for markets and shareholders to appreciate
the short-term and medium-term impacts of the transformation on the Company’s enterprise value. The Company continues to increase
its investor and public relations efforts in order to disseminate and communicate broadly its strengths, strategy and the opportunities
ahead for existing shareholders and new investors.

 

Despite COVID-19
and associated equity market’s correction in the past month, the Company’s total enterprise value of USD $56 million is approximately
50% higher than one year ago. VIQ’s enterprise value is comprised of the Company’s market capitalization at March 31st 2020
of $43.8million, and net debt of $14.7 million. This compares favorably to VIQ’s enterprise value of a year ago at March 31st 2019
of approximately $37 million comprised of a market capitalization of $25 million plus net debt of $12 million.

 

 

    
	Management Discussion & Analysis	Page 11

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Enterprise
Assets

 

The Company views
its enterprise value as being built upon three classes of revenue: VIQ Technology Services, VIQ SaaS Software and VIQ aiAssist artificial
intelligence.

 

According to external
EV assessments, we believe that each class of revenue comes with different estimated EV multipliers. Once blended, long-term EV creation
can be estimated, and is a tool that VIQ management looks at in order to pursue long term value creation for the Company.

 

To this end, the
Company continues to execute its growth plan focusing on quantity and quality of revenues and an increasing volume of audio and video
evidence being captured and transformed from analog and manual to digital and machine learning throughout 2020. In parallel, the Company
plans to increase its public reporting and make available client success stories in leading the digital transformation in a large and
highly fragmented US market.

 

During 2020, the
Company expects to enter full implementation mode driving our strategy through the next level of execution to create long-term enterprise
value for shareholders. We plan value-add accretive acquisitions, rolling out our new technologies and providing broader, enhanced offerings
to our clients. We are proud of our global presence and look to a short-term goal of further enhancing our US-based business.

 

Looking forward,
we plan to integrate all our services and solutions to provide our clients with a single source for the most advanced seamless workflow
from capture through management to mining their digital assets. This will continue to improve the measurable value-add that our business
can offer our clients.

 

SaaS
and Hybrid SaaS Revenue 

 

One of the Company’s
key growth strategies is to improve the revenue quality by transitioning to SaaS and AI accounts. This is a multi-year incremental transition.
This will be driven by the improvement in the size and quality of our three revenue streams: VIQ technology services, VIQ SaaS software
and VIQ aiAssist, focused on the design, development and deployment of AI services to our operating brands, clients and partners globally.

 

Intellectual
Properties and Patents

 

In 2019, the Company
continued to expand its IP portfolio. A new issued patent pending status protects ten unique aspects of VIQ’s innovative aiAssist
technology including, but not limited to processing designs and the proprietary Parallel Processing Framework for Voice-to-Text Digital
Media. Combined with AI-driven digital voice and video capture technology, VIQ’s NetScribe powered by aiAssist, it provides organizations
an end-to-end platform to transform large volumes of audio and video recordings, securely in the cloud at very high speeds. The platform
enables verbatim transcription leveraging AI technology, to quickly and accurately create documentation for our target markets. VIQ is
committed to protect the veracity of collected evidence through extensive metadata for auditing. This is another milestone in VIQ's innovation,
research and development of our products and services.

 

    
	Management Discussion & Analysis	Page 12

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

This patent
combined with our previously granted Patent for Digital Evidence-Based Training is an essential part of VIQ's intellectual property
(IP) portfolio and builds on our investment to develop and implement technology-based solutions to solve complex business
challenges. The commercialization of our transformative IP is shaping the transcription industry and reflected in the
Company’s 2019 Operating Highlights with a charge of more than $3.5M as past investments have started to be amortized in
2019.

 

Key
Operating Highlights during 2019

 

 

		·	Record
                                            $25.1M revenue increased 119% year-over-year. 

 

		·	Serving
                                            1,300 clients across insurance, law enforcement, courts and government agencies; 

 

		·	58%
                                            of revenue was generated in the United States, 36% in Australia and 6% in EMEA and Canada;
                                            

 

		·	Record
                                            gross profit of $10.8M, representing 43.0% of revenue versus 31.3% in the prior year, increased
                                            1,170 basis points year-over-year. The increase in gross margin reflects the impact of growth
                                            in higher quality revenues for clients converted to VIQ’s NetScribe and aiAssist solutions.
                                            Gross margins are expected to continue increasing as AI integration accelerates;

 

		·	Adjusted
                                            EBITDA of $871K;

 

		·	2019
                                            financial results reflect expenses related to M&A and large-scale customers' migrations
                                            and investment made in operations to prepare for 2020 and onward. These expenses are noted
                                            in the financial statements.

 

		·	$3.5M
                                            in depreciation and amortization expenses due to the successful commercial adoption of the
                                            Company’s new cloud workflow and AI platform. 

 

		·	M&A
                                            expenses of $484K that occurred in Q4 2019, related to VIQ’s fourth and fifth acquisitions
                                            completed in the last fifteen months early in 2020;

 

		·	VIQ’s
                                            AI platform, NetScribe, began operating in the United States and Australia with an increasing
                                            number of clients in production. One-time expenses over $650k related to NetScribe aiAssist
                                            migrations and Cloud infrastructures setup in four regions globally.

 

		·	DTC
                                            eligible foreign depository for Common Shares in the United States were upgraded from the
                                            OTCQB to the QTCQX, the Best Market on OTC Markets;

 

		·	Stock
                                            market liquidity volume of 52M shares for the period January 1 to December 31, 2019 was up
                                            27% over the same period in 2018. Q1 2020 volume run rate is on course for annual record
                                            volume tradable on more than seven North American exchanges.

 

    
	Management Discussion & Analysis	Page 13

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Operating
Results

 

Key performance indicators
that we use to manage our business and evaluate our financial results and operating performance include: revenue, expenses, Adjusted
EBITDA, and net income (loss). We evaluate our performance on these metrics by comparing our actual results to management budgets, forecasts,
and prior period performance.

 

The following table
sets forth a summary of our results of operations for the years ended December 31, 2019 and 2018:

 

Financial Highlights
- Year Ended 2019,

 

	 	 	Year ended December 31	 	 	Period over Period Change	 
	 	 	2019	 	 	2018	 	 	$

Inc/(dec)	 	 	%

Inc/(dec)	 
	Revenue	 	 	25,096,308	 	 	 	11,462,804	 	 	 	13,633,504	 	 	 	119	 
	Cost of sales	 	 	14,276,321	 	 	 	7,874,219	 	 	 	6,402,102	 	 	 	81	 
	Gross profit	 	 	10,819,987	 	 	 	3,588,585	 	 	 	7,231,402	 	 	 	202	 
	Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Selling and administrative expenses	 	 	8,954,512	 	 	 	5,533,724	 	 	 	3,420,788	 	 	 	62	 
	Research and development expenses	 	 	994,640	 	 	 	458,675	 	 	 	535,965	 	 	 	117	 
	Total Operating expenses	 	 	9,949,152	 	 	 	5,992,399	 	 	 	3,956,753	 	 	 	66	 
	Adjusted EBITDA	 	 	870,835	 	 	 	(2,403,814	)	 	 	3,274,649	 	 	 	136	 
	Stock based compensation expense	 	 	195,113	 	 	 	(31,461	)	 	 	226,574	 	 	 	720	 
	Depreciation and amortization	 	 	3,502,429	 	 	 	648,873	 	 	 	2,853,556	 	 	 	440	 
	Interest, net	 	 	1,548,564	 	 	 	94,198	 	 	 	1,454,366	 	 	 	1,544	 
	Accretion expense	 	 	916,734	 	 	 	66,142	 	 	 	850,592	 	 	 	1,286	 
	(Gain) loss on revaluation of conversion liability	 	 	(2,330,964	)	 	 	186,444	 	 	 	(2,517,408	)	 	 	(1,350	)
	Loss on settlement of payables	 	 	762,575	 	 	 	-	 	 	 	762,575	 	 	 	-	 
	Business acquisition and financing costs	 	 	484,387	 	 	 	2,488,873	 	 	 	(2,004,486	)	 	 	(81	)
	FX (gain) loss	 	 	217,040	 	 	 	198,180	 	 	 	18,860	 	 	 	10	 
	Loss before income taxes	 	 	(4,425,043	)	 	 	(6,055,063	)	 	 	(1,630,020	)	 	 	(27	)
	Income taxes	 	 	99,155	 	 	 	11,571	 	 	 	87,584	 	 	 	757	 
	Net loss	 	 	(4,524,198	)	 	 	(6,066,634	)	 	 	(1,542,436	)	 	 	(25	)
	Weighted average number of common shares outstanding	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted	 	 	9,251,546	 	 	 	8,090,803	 	 	 	 	 	 	 	 	 
	Net loss per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted	 	 	(0.49	)	 	 	(0.75	)	 	 	 	 	 	 	 	 

 

		(1)	Adjusted EBITDA (Earnings before
Stock-based compensation, depreciation and amortization, interest, net, accretion expense, (gain) loss on revaluation of conversion feature
liability, loss on settlement of payables, business acquisition and financing costs, FX (gain) loss, and income taxes) is a non-IFRS
measures. Please refer to the section entitled “Reconciliation and Definition of Non-IFRS Measures.”

 

		(2)	Net loss includes $4.7M in expenses:
$3.5M in depreciation and amortization from the successful commercial deployments of NetScribe, aiAssist and MobileMic Pro, $484k in
business acquisition and financing costs, approximatively $600k in NetScribe, aiAssist and Cloud infrastructures setup in four regions
globally and $195k in stock-based compensation as the stock value evolved significantly through the year before and after the consolidation.

 

    
	Management Discussion & Analysis	Page 14

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Our gross margins
for the year were $10.8M, a 201% increase compared to the previous year.

 

Selling and administrative
expenses for the year ended December 31, 2019 were $8,954,512, an increase of $3,420,788 (62%) from $5,533,724 during the same period
in 2018. The acquisitions of Net Transcripts, Transcription Express and HomeTech added $5,643,497 to the increase in selling and administrative
costs for 2019.

 

Stock based compensation
for the year ended December 31, 2019 was $195,113 compared to recovery of $31,461 in the same period in 2018.

 

Research and development
expenses for the year ended December 31, 2019 were $994,640, an increase of $535,965 (117%) from $458,675 in 2018. Our research and development
efforts are focused on developing new products for our markets and clients. We capitalize our development efforts, (i) when there is
a technical feasibility of completing the product, (ii) our intention is to complete the product and use or sell it, (iii) we have the
ability to use or sell the product, (iv) we know or understand how we will generate probable future economic benefits, (v) we have adequate
technical, financial and other resources to complete the development, and (vi) our ability to measure reliably the expenditures attributable
to developing the product. Costs associated with maintaining our existing products are expensed as they are incurred. During the year
we added resources to our research and development team to accelerate the development of our new products particularly NetScribe, aiAssist,
MobileMic Pro and AcessPoint Portal to continue to support our existing products resulting in a significant increase in our research
and development expenditures, a significant portion of which is capitalized.

 

During the year,
we started to amortize previously capitalized development costs as some of our development projects attained market viability. $3,067,037
has been recorded in amortization in 2019.

 

Financial
Condition, Liquidity and Capital Resources

 

As at December
31, 2019, we had $1,707,654 of cash as compared to $1,922,768 as at December 2018 for a net decrease in cash of $215,114. As of December
31, outstanding account receivables were approximatively $3.2M.

 

Cash used in investing
activities was $1,782,206 for the year ended December 31, 2019 as compared to a cash usage of $11,532,161 during 2018. A significant
portion of the cash usage relate to Research & Development. We will continue to invest in R&D activities to ensure our product
offerings remain leading edge in our industry.

 

Net Cash from financing
activities was $2,054,473 for the year ended December 31, 2019 primarily due to convertible note issuance, payment received from investors
exercising their warrants and options and offset by loan repayment, interest payment, and payment of lease obligation.

 

At December 31,
2019, we had negative change in working capital of $822,132 compared to positive change in working capital of $3,543,308 at December
31, 2018. M&A activities in Q4 that led to the subsequent acquisitions of ASC and WordZ in Q1FY20 are included which added a strategic
new market of media content, news, political and conferencing.

 

We intend to use
our operating income and funds on hand to meet funding requirements for the development and commercialization of our technology products
and services based on anticipated market demand and working capital purposes. Our actual funding requirements will vary depending on
a variety of factors, including our success in executing our business plan, the progress of our research and development efforts, our
commercial sales and our ability to manage our working capital requirements.

 

    
	Management Discussion & Analysis	Page 15

     

    

 

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Quarterly Results of Operations

 

The following tables sets out selected financial
information for each of the eight most recent quarters, the latest of which ended December 31, 2019. Our quarterly operating results have
historically fluctuated significantly and may continue to fluctuate significantly in the future. Therefore, we believe that past operating
results and period to period comparisons should be not be relied upon as an indication of the company’s future performance.

 

	 	 	unaudited	 
	 	 	 	Dec-19	 	 	 	Sep-19	 	 	 	Jun-19	 	 	 	Mar-19	 	 	 	Dec-18	 	 	 	Sep-18	 	 	 	Jun-18	 	 	 	Mar-18	 
	Revenue	 	 	6,096,550	 	 	 	6,451,077	 	 	 	6,189,458	 	 	 	6,359,223	 	 	 	2,110,358	 	 	 	3,055,297	 	 	 	3,290,981	 	 	 	3,006,145	 
	Net income (loss)	 	 	(2,525,682	)	 	 	291,994	 	 	 	(1,519,355	)	 	 	(771,155	)	 	 	(4,939,420	)	 	 	(688,855	)	 	 	(499,938	)	 	 	61,583	 
	Weighted average number of shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	 	10,848,296	 	 	 	9,549,609	 	 	 	9,416,779	 	 	 	9,177,708	 	 	 	8,177,024	 	 	 	8,071,685	 	 	 	8,066,250	 	 	 	8,060,424	 
	Diluted	 	 	10,848,296	 	 	 	9,549,609	 	 	 	9,416,779	 	 	 	9,177,708	 	 	 	8,177,024	 	 	 	8,071,685	 	 	 	8,066,250	 	 	 	8,060,424	 
	Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	 	(0.23	)	 	 	0.03	 	 	 	(0.16	)	 	 	(0.08	)	 	 	(0.60	)	 	 	(0.09	)	 	 	(0.06	)	 	 	0.01	 
	Diluted	 	 	(0.23	)	 	 	0.03	 	 	 	(0.16	)	 	 	(0.08	)	 	 	(0.60	)	 	 	(0.09	)	 	 	(0.06	)	 	 	0.01	 

 

Key factors that account for the fluctuation in
quarterly results include the variability in the Company’s revenue due to timing of acquisitions and seasonality of revenue. Seasonality
impacts the transcription services industry in that it is impacted in some cases by summer holiday seasons, such as court closings in
January in Australia, and the Thanksgiving and December holidays in the US.  It also has a slight impact in US summer period. Our
quarterly results may also fluctuate as a result of the various acquisitions which may be completed by the Company in any given quarter.
We may experience variations in our net income/(loss) on a quarterly basis depending upon the timing of certain expenses or gains, which
may include changes in provisions and acquired contract liabilities. 

 

Contingent Off-Balance Sheet Arrangements

 

We have entered into indemnification agreements
with our current directors and officers to indemnify them, to the extent permitted by law, against any and all charges, costs, expenses,
and amounts paid in settlement and damages incurred as a result of any lawsuit or any other judicial, administrative or investigative
proceeding in which they are sued as a result of their services. The nature of the indemnification agreements prevents us from making
a reasonable estimate of the maximum potential amount we could be required to pay to counterparties. We have purchased directors’
and officers’ liability insurance. No amount has been recorded in the consolidated financial statements with respect to these indemnification
agreements nor are we aware of any pending matter against the Company.

 

Critical Accounting Policies
and Estimates

 

For a complete description of the Company’s
Critical Accounting Policies and Estimates, including Use of Estimates, and Accounting Standards Issued but Not Yet Applied, please
see the accompanying Notes to the Audited Consolidated Financial Statements for December 31, 2018 and 2017.

 

    
	Management Discussion & Analysis	Page 16

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Reconciliation and Definition
of Non-IFRS Measures

 

The Company prepares its financial statements
in accordance with IFRS. Non-IFRS measures are used by management to provide additional insight into our performance and financial condition.
We believe non-IFRS measure are an important part of the financial reporting process and are useful in communicating information that
complements and supplements the consolidated financial statements. This MD&A also includes certain measures which have not been prepared
in accordance with IFRS such as Adjusted EBITDA. To evaluate the Company’s operating performance as a complement to results provided
in accordance with IFRS, the term “Adjusted EBITDA” refers to net income (loss) before adjusting for stock-based compensation,
depreciation and amortization, interest, net, accretion expense, (gain) loss on revaluation of conversion feature liability, loss on
settlement of payables, business acquisition and financing costs, FX (gain) loss, and income taxes. We believe that the items excluded
from Adjusted EBITDA are not connected to and does not represent the operating performance of the Company.

 

We believe that Adjusted EBITDA is a useful supplemental
information as it provides an indication of the results generated by the Company’s main business activities prior to taking into
consideration how those activities are financed and taxed as well as expenses related to stock-based compensation, depreciation and amortization,
interest, net, accretion expense, (gain) loss on revaluation of conversion feature liability, loss on settlement of payables, business
acquisition and financing costs, FX (gain) loss, and income taxes. Accordingly, we believe that these measures may also be useful to investors
in enhancing their understanding of the Company’s operating performance.

 

Adjusted EBITDA is not a measure recognized by
IFRS and do not have standardized meanings prescribed by IFRS. Therefore, Adjusted EBITDA may not be comparable to similar measures presented
by other issuers. Investors are cautioned that Adjusted EBITDA should not be construed as an alternative to net income (loss) as determined
in accordance with IFRS.

 

The following is a reconciliation of Net Loss
to adjusted EBITDA, the most directly comparable IFRS measure for the year ended December 31, 2019 and 2018.

 

	 	 	Year ended December 31	 
	 	 	2019	 	 	2018	 
	Net loss	 	 	(4,524,198	)	 	 	(6,066,634	)
	 	 	 	 	 	 	 	 	 
	Add:	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	3,502,429	 	 	 	648,873	 
	Interest, net	 	 	1,548,564	 	 	 	94,198	 
	Income tax expense	 	 	99,155	 	 	 	11,571	 
	 	 	 	 	 	 	 	 	 
	EBITDA	 	 	625,950	 	 	 	(5,311,992	)
	 	 	 	 	 	 	 	 	 
	Stock based compensation expense	 	 	195,113	 	 	 	(31,461	)
	Accretion expense	 	 	916,734	 	 	 	66,142	 
	(Gain) loss on revaluation of conversion liability	 	 	(2,330,964	)	 	 	186,444	 
	Loss on settlement of payables	 	 	762,575	 	 	 	-	 
	Business acquisition and financing costs	 	 	484,387	 	 	 	2,488,873	 
	FX (gain) loss	 	 	217,040	 	 	 	198,180	 
	 	 	 	 	 	 	 	 	 
	Adjusted EBITDA	 	 	870,835	 	 	 	(2,403,814	)

 

    
	Management Discussion & Analysis	Page 17

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Outlook FY 2020

 

Full Year 2020 goals are currently being assessed
in light of COVID-19;

 

		·	2020 revenue goals are comprised of an estimated
85-90% in core technology and services revenue from existing clients and 10% to 15% in organic growth. During the first quarter of 2020,
the Company anticipates revenue between $7.0-$7.5 million. This includes some revenue contribution related to the acquisition of WordZ
(closed Feb. 27th) and ASC (closed Feb. 4th). The full impact of these acquisitions, along with the recently announced organic wins, are
expected to be reflected beginning in Q2;

 

		·	Approximately 30% of transcription volume is
on our new NetScribe aiAssist platform. We expect all 1,300 customers, excluding two recent acquisitions, will migrate to NetScribe by
the end of June 2020 resulting in gross margins increasing to an expected range of 50% and 55% of revenue for the year;

 

		·	Adjusted EBITDA is expected to range between
10% and 15% of revenue;

 

		·	Current backlog of booked orders but not delivered
yet is approximately $3 million, primarily consisting of long-term SaaS technology and services contracts awarded to VIQ, is expected
to generate incremental revenue and will be fully realized throughout 2021;

 

		·	VIQ maintains an active M&A pipeline, which
may result in additional acquisitions completed in 2020 and 2021.

 

Internal Controls over Financial
Reporting and Disclosure Controls and Procedures

 

In accordance with National Instrument (“NI”)
52-109 (Certification of Disclosure in Issuer’s Annual and Interim Filings), the Company's Chief Executive Officer (“CEO”)
and Chief Financial Officer (“CFO”) file a Venture Issuer Basic Certificate with respect to the financial information contained
in the financial statements and accompanying Management’s Discussion and Analysis. The Venture Issuer Basic Certification includes
a ‘Note to Reader’ stating that the CEO and CFO do not make any representations relating to the establishment and maintenance
of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109.

 

As part of our corporate governance practices,
internal controls over financial reporting (“ICFR”) and disclosure controls and procedures (“DC&P”) have been
designed. There has been no formal evaluation of the operation of these controls. The Company has designed its ICFR to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS. Management works to mitigate the risk of a material misstatement in financial reporting; however, a control system, no matter
how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

The Company’s DC&P have been designed
to ensure that information required to be disclosed by VIQ Solutions is accumulated and communicated to the Company’s management
as appropriate to allow timely decisions regarding required disclosure. It should be noted that while the Company's CEO and CFO believe
that the Company's DC&P provide a reasonable level of assurance that they are effective, they do not expect that the DC&P or ICFR
will prevent all errors or fraud. There have been no material changes to the internal controls of the Company for the year ended December
31, 2019.

 

    
	Management Discussion & Analysis	Page 18

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Risk Factors

 

COVID-19: Details about COVID-19
risks and impacts on the company available in the subsequent events section.

 

Cash-flow: VIQ Solutions' business
operations are subject to all of the risks inherent in the establishment and maintenance of a developing business enterprise, such as
competition and viable operations management. The future earnings and cash flow from operations of the Company are dependent, in part,
on its ability to further develop and market its products. There can be no assurances that the Company will grow and achieve profitability.
The operations of VIQ Solutions have been funded to date by external financing and if sufficient cash flow from operations or earnings
is not generated in the future, additional financing might be required.

 

Transition to SaaS Revenue: The
Company is in the process of transitioning its software product offerings from license sales to a SaaS offering. This may cause revenue
levels to decline compared to prior periods. License sales allow the Company to recognize revenue upon the initial sale of the software
to a client. Revenues from SaaS are earned over a period of time contracted with the client and their use of the software. Initial SaaS
revenue will be lower but over the course of the contract will generally be cumulatively higher compared to license sales.

 

Fluctuations in Periodic Results:
The Company's operating results can vary substantially from period to period. Planned operating expenses are normally targeted to planned
revenue levels for the period and are incurred equally throughout the period. If expenses remain relatively fixed, but the Company's revenues
are less than planned in any quarter, the Company's operating results would be adversely affected for that quarter. In addition, incurring
unplanned expenses could adversely affect operating results for the period in which such expenses are incurred. Failure to achieve periodic
revenue, earnings and other operating and financial results could result in an immediate and adverse effect on the market price of the
Company's common shares. The Company may not discover, or be able to confirm, revenue or earnings shortfalls until the end of a quarter,
which could result in a greater immediate and adverse effect on the price of the common shares.

 

Additional Financing and Access to Capital:
The Company may need to raise additional funds to bring its potential products to market, enhance our marketing capabilities and pursue
potential future acquisitions. The Company's future capital requirements will depend on many factors, including continued progress in
its research and development programs, competing technological and market developments, the cost of production scale-up, effective commercialization
activities and arrangements and other factors not within the Company's control. The Company may seek additional funding through public
or private financings.

 

Identify and Acquire Suitable Acquisitions:
The Company may not be able to identify suitable new acquisitions that are available to purchase at a reasonable value. Even if a suitable
acquisition can be identified the acquisition may not proceed if suitable terms cannot be negotiated. When conducting due diligence on
a potential acquisition it cannot be assured that all the risks and costs inherent in the business being acquired will be identified.
If an acquisition of an identified business were to proceed in which a portion or all of the consideration consisted of cash additional
funding maybe required through public or private financings if internally generated cash resources are not sufficient.

 

    
	Management Discussion & Analysis	Page 19

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Successfully Integrate Acquired Businesses:
Integration of completed business acquisitions and any future acquisitions involves a number of special risks, including the following:

 

·        
Failure to integrate successfully the personnel, information systems, technology and operations of the acquired business;

·        
Failure to maximize the potential financial and strategic benefits of the acquisition;

·        
Failure to realize the expected synergies of the acquired business;

·        
Possible impairment of relationships with employees and clients as a result of any integration of new businesses and management personnel;

·        
Impairment of goodwill; and

·        
Reductions in future operating results from amortization of intangible assets.

 

Future acquisitions are accompanied by the risk
that obligations and liabilities of an acquired business may not be adequately reflected in the historical financial statements of the
business and the risk that historical financial statements may be based on assumptions, which are incorrect or inconsistent with the Company’s
assumptions or approach to accounting policies. The acquisition and integration of businesses may not be managed effectively and any failure
to do so could lead to disruptions in the overall activities of the Company, a loss of clients and revenue, and increased expenses. The
Company may acquire contingent liabilities in connection with the acquisitions of business, which maybe material. Best efforts are used
to identify and estimate these contingent liabilities and the likelihood that they will materialize but these estimates could differ materially
from the liabilities actually incurred.

 

Competition: The Company competes
with a number of firms in various business segments. Competitors in Courts for example are different from the ones we are competing against
in public safety, medical and legal. Some of these companies have greater financial, technological and personnel resources than those
of the Company.

 

International Operations: The Company's
operations are currently located in Canada, the United States and Australia and its products and services are sold internationally. There
are certain risks inherent in international operations including, but not limited to, remote management, unexpected changes in regulatory
requirements, export restrictions, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, fluctuations in currency exchange rates, and potential adverse tax consequences,
which could have a materially adverse effect on the Company's business, operating results, and financial condition.

 

Proprietary Intellectual Property:
The Company relies on protecting its proprietary intellectual property in part through confidentiality agreements with its corporate resellers,
strategic partners, employees, consultants and certain contractors. There can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or independently
discovered by its competitors. It is possible that the Company's products or processes will infringe, or will be found to infringe, on
patents not owned or controlled by the Company. If any relevant claims of third-party patents are upheld as valid and enforceable, the
Company could be prevented from practising the subject matter claimed in such patents or would be required to obtain licenses or redesign
its products and processes to avoid infringement. There can be no assurance that such licenses would be available at all or on terms commercially
reasonable to the Company or that the Company could redesign its products or processes to avoid infringement. Litigation may be necessary
to defend against claims of infringement or to protect trade secrets. Such litigation could result in substantial costs and diversion
of management efforts regardless of the results of such litigation and an adverse result could subject the Company to significant liabilities
to third parties, require disputed rights to be licensed or require the Company to cease using such technology.

 

    
	Management Discussion & Analysis	Page 20

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Product Liability Exposure: The
Company faces an inherent business risk of exposure to product liability and other claims in the event that the development or use of
its technology or prospective products is alleged to have resulted in adverse effects. While the Company has taken, and will continue
to take, what it believes are appropriate precautions, there can be no assurance that it will avoid significant liability exposure. Although
the Company currently carries product liability insurance, there can be no assurance that the Company has sufficient coverage or can
obtain sufficient coverage at a reasonable cost. An inability to obtain product liability insurance at acceptable cost or to otherwise
protect against potential product liability claims could prevent or inhibit the commercialization of products developed by the Company.
A product liability claim could have a material adverse effect on the Company's business financial condition and results of operations.

 

Volatility of Stock Price and Absence of
Dividends: The market price of the Company's common shares, like that of the common shares of many other software companies, has
been and is likely to be somewhat volatile. Factors such as the Company’s strategic alliances or its competitors', announcements
of technological innovations or new products by the Company or its competitors, governmental regulatory actions, developments with the
Company's collaborators, developments concerning patent or other proprietary rights of the Company or its competitors (including litigation),
period-to-period fluctuation of the Company's operating results, changes in estimates of the Company's performance by securities analysts,
market conditions for shares of software companies in general and other factors not within the control of the Company could have a significant
adverse impact on the market price of the Company’s common shares. The Company has never paid cash dividends on its common shares
and does not anticipate paying any cash dividends in the foreseeable future.

 

Foreign Currency Fluctuations: Our
monetary assets and liabilities denominated in currencies other than the Canadian dollar will give rise to a foreign currency gain or
loss reflected in our comprehensive earnings. To the extent the United States dollar or Australian dollar weakens against the Canadian
dollar, we may incur foreign exchange losses. Such losses would be included in our financial results and, consequently, may have an adverse
effect on our share price. As we currently have a global client base, a significant portion of our income is in US dollars and Great Britain
pounds. However, a significant part of our expenses are currently generated in Canadian dollars, and we expect this will continue for
the foreseeable future. The exchange rates between the Canadian dollar, the US dollar and the Great Britain pound are subject to daily
fluctuations in the currency markets and these fluctuations in market exchange rates are expected to continue in the future. Such fluctuations
affect both our consolidated revenues as well as our consolidated costs. Also, changes in foreign exchange rates may affect the relative
costs of operations and prices at which we and our foreign competitors sell products in the same market. We do not currently have any
currency hedging through financial instruments.

 

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.

 

    
	Management Discussion & Analysis	Page 21

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

VIQ Solutions has taken what it believes to be
the appropriate measures to ensure continuity of its business during the COVID-19 health crisis:

 

		·	VIQ remains on highly solid footing with diversified
revenue sources across multiple markets and regions. Load balancing enables the Company to mitigate any market declines from some markets
with significant surges in others;

		·	While some markets and regions are more directly
impacted, others such as Conferencing, Media and Law Enforcement are experiencing significant demand surge;

		·	More than 95% of VIQ global workforce is working
remotely with high productivity levels, up from our VIQ steady state level of approximatively 80%;

		·	Migration from office to online work and ever-increasing
demand for high-quality turnaround time on documentation is now more essential than ever to enable crucial business continuity during
COVID-19 for our clients; 

		·	VIQ is seeing an uptick in three of its five
major markets, though it is too early to speak to longer term impacts.

		·	The Company cannot accurately predict the impact
COVID-19 will have on its operations and the ability of others to meet their obligations with the Company;

 

Convertible Note

 

During the first quarter
2020, the Company issued 6.4 million shares as the result of the exercise of the Conversion Option in respect of Notes having an aggregate
principal amount of approximately US $6.4 million. The Company will recognize an aggregate Total Interest Payable of approximately US
$4.1 million related to the conversion during the first quarter 2020. Additionally, the replacement of warrants issued to Crown Capital
Partner Funding, LP, as announced February 4, 2020, was approved by the TSXV.

 

Warrants

 

As a result of the stock
price maintaining a price above $2.68 Canadian for two consecutive weeks, the acceleration of the vesting of 1.1 million warrants originally
issued pursuant to private placements that closed on November 28, 2018, December 20, 2018 and May 7, 2019. The transaction closed on April
3rd and resulted in 1.1 million new shares and $1.8 million in cash infusion, which will be used to fund new business contracts.

 

Acquisitions

 

During
the first quarter 2020, the Company announced the completion of two accretive and non-dilutive acquisitions. Announced on February 4th,
the first acquisition was of one of the most respected and leading Digital Media Content and Transcription providers in the United States,
ASC Services LLC of Washington, D.C. (“ASC”). On February 27th, the second acquisition was announced of a leading US transcription
provider, wordZXpressed, Inc. (“WordZ”) of Atlanta, Georgia. WordZ was VIQ’s fifth accretive acquisition in 15 months.

 

    
	Management Discussion & Analysis	Page 22

     

    

 

VIQ
Solutions Inc.

 

VIQ Solutions Inc.

Management’s
Discussion and Analysis of Financial Condition and

Results of Operations
for 2019

 

Disclosure of Outstanding
Share Data

 

VIQ Solutions Inc. common shares trade on the
TSX Venture Exchange under the symbol “VQS” and VQSLF on the OTCQX in the United States. The Company is authorized to issue
an unlimited number of common shares without par value. On December 31, 2019 there were 10,852,617 common shares issued and outstanding,
868,100 stock options outstanding with a weighted average exercise price of $2.00 CAD expiring between 2020 and 2024, 2,519,600 warrants
outstanding with a weighted average exercise price of $2.60 CAD expiring between 2020 and 2023 and 66,667 deferred share units outstanding
with an average exercise price of $1.20 CAD with an expiry between 2020 and 2021.

 

    
	Management Discussion & Analysis	Page 23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00329-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00329-of-00352.parquet"}]]