Table of Contents

​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

​

OR

​

For the fiscal year ended December 31, 20212022

OR

​

OR

​

Date of event requiring this shell company report

​

Commission File Number 001-40717

VIQ SOLUTIONS INC.

(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

Province of Ontario, Canada

(Jurisdiction of incorporation or organization)

5915 Airport Road

Suite 700

Mississauga, Ontario L4V 1T1

Canada

(Address of principal executive offices)

Sebastien Paré

5915 Airport Road

Suite 700

Mississauga, Ontario L4V 1T1

Canada

Telephone: (905) 948-8266

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

​

​

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Table of Contents

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 29,881,71734,649,697

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

​

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

​

​

†    The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

​

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

​

​

​

​

Table of Contents

TABLE OF CONTENTS

​

​

​

Table of Contents

​

GENERAL INFORMATION

All references in this Annual Report on Form 20-F, or Annual Report, to “VIQ” the “Company,” “we,” “us” and “our” refer to VIQ Solutions Inc. and its consolidated subsidiaries, except where the context otherwise requires.

This Annual Report includes trademarks, tradenames and service marks, certain of which belong to us and others that are the property of other organizations. Solely for convenience, trademarks, tradenames and service marks referred to in this Annual Report appear without the ®, ™ and SM symbols, but the absence of those symbols is not intended to indicate, in any way, that we will not assert our rights or that the applicable owner will not assert its rights to these trademarks, tradenames and service marks to the fullest extent under applicable law. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Our fiscal year is the 12-month period ending December 31. Amounts stated herein are in United States dollars, unless otherwise indicated. All references to “CDN$” are to Canadian dollars.dollars, all references to “AUD” are to Australian dollars and all references to “GBP” are to Great British Pounds . Certain totals, subtotals and percentages throughout this report may not reconcile due to rounding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this Annual Report are based upon information available to us as of the date of this Annual Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include, but are not limited to, statements about:

Table of Contents

PART I

​

Item 1.Identity of Directors, Senior Management and Advisers.

​

Not applicable.

Item 2.Offer Statistics and Expected Timetable.

​

Not applicable.

Item 3.Key Information.

​

A.[Reserved]

​

Not applicable.

B.Capitalization and indebtedness.

​

Not applicable.

C.Reasons for the offer and use of proceeds.

​

Not applicable.

D.Risk factors.

​

Due to the nature of VIQ’s business, the legal and economic climate in which it operates and its present stage of development, VIQ is subject to significant risks. The risks presented below should not be considered to be exhaustive and may not be all of the risks that VIQ may face. Additional risks and uncertainties not presently known to VIQ or that VIQ currently considers immaterial may also impair its business and operations. If any of the following or other risks occur, the Company’s business, prospects, financial condition, results of operations and cash flows could be materially adversely impacted. In that event, the trading price of the Common SharesCompany’s common shares, no par value (the “Common Shares”), could decline and investors could lose all or part of their investment. There is no assurance that risk management steps taken will avoid future loss due to the occurrence of the risks described below or other unforeseen risks. Readers should carefully consider all such risks and other information elsewhere in this Annual Report before making an investment in VIQ and should not rely upon forward-looking statements as a prediction of future results. Risk factors relating to VIQ include, but are not limited to, the factors set out below.

Business Risks

COVID-19

Since December 2019, the outbreak of COVID-19 has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, mandatory quarantine periods and social distancing, have caused material disruption to business globally, resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Although vaccines have been effective to date in reducing the prevalence of COVID-19 in the largest markets for our products and services, additional mutations of the COVID-19 virus may evade the protection offered by vaccines and prolong the adverse effects of the pandemic on the economy, the Company and our customers.

Our transition to SaaS revenue model will cause our revenues to decline initially.

The Company is in the process of transitioning its software product offerings from license sales to a SaaS offering. License sales allow the Company to recognize the full amount of revenue upon the initial sale of the software to a client. But revenues from SaaS are recognized ratably over the period of time contracted with the client and their use of the software. Therefore, we expect that initial SaaS revenue will be lower compared to prior periods, but should recover over the course of the contract.

Table of Contents

Further, if the resellers and integrators that we work with fail to devote sufficient resources to provide effective sales and marketing support of our products, sales to our customers would be hurt.

COVID-19

Since December 2019, the outbreak of COVID-19 has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, mandatory quarantine periods and social distancing, have caused material disruption to business globally, resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Although vaccines have been effective to date in reducing the prevalence of COVID-19 in the largest markets for our products and services, additional mutations of the COVID-19 virus may evade the protection offered by vaccines and prolong the adverse effects of the pandemic on the economy, the Company and our customers.

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 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.

If we cannot continue to identify and acquire suitable acquisition targets, our Company will not grow as planned.

The Company’s strategy has historically involved pursuing accretive acquisitions. The Company may not be able to identify suitable new acquisition targets 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. Even if the Company is able to complete additional acquisitions in the future, there are risks inherent in any such acquisition. When conducting due diligence on a potential acquisition, we may not identify all the risks and costs inherent in the business being acquired. 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, and such funding may not be available to us on acceptable terms, or at all.

If we are not able to successfully integrate acquired businesses, our financial results would suffer.

Our ability to integrate recent and future acquisitions into our business is subject to a number of risks including the following:

Table of Contents

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 that 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. If we do not manage effectively the acquisition and integration of businesses, this could lead to disruptions in the overall activities of the Company, a loss of clients and revenue, and increased expenses. If we assume contingent liabilities in connection with the acquisitions of businesses, which are unknown at the time of acquisition or turn out to be more than expected, our financial condition could be impaired

If we are unable to effectively integrate our products into clients’ workplaces and adapt to clients’ changes, our revenues and reputation will suffer.

A portion of our sales are made into applications that require our products to be interfaced with other enterprise workflows, enterprise information technology environments or software functionalities. Any significant changes to those enterprise workflows, IT environments or software programs may limit the use or functionality of or demand for our products. As our customers advance technologically, we must continue to advance, modify and adapt our products to effectively interface our products with customer technologies to remain competitive.

If our products cannot continue to effectively operate with changing mobile operating systems and computer networks, our sales will suffer.

The functionality of certain of our products depends upon the continued interoperability of these products with popular mobile operating systems to deliver a high-quality user experience. Any changes in these systems that degrade our products’ functionality or give preferential treatment to competitive offerings could adversely affect the operability and usage of our software products on mobile devices and, thereby, result in lower sales of our products.

If our products fail for any of a large number of reasons, our reputation, market share and financial results would suffer.

Our business is dependent upon providing customers with fast, efficient and reliable services. Any reduction in the performance, reliability or availability of required network infrastructure may harm our ability to distribute content to our customers, which would damage our reputation and ability to attract and retain customers.

Our operations are susceptible to, and could be damaged or interrupted by, outages caused by fire, flood, power loss, telecommunications failure, Internet or mobile network breakdown, earthquake and similar events. Our solutions are also subject to human error, security breaches, power losses, computer viruses, break-ins, “denial of service” attacks, sabotage, intentional acts of vandalism and tampering designed to disrupt our computer systems and network communications. Our failure or our customers’ failure to protect the networks against damage from any of these events could have a material adverse effect on our business.

Our operations also depend on web browsers, internet service providers and mobile networks operated by others to provide our customers’ end-users with access to websites, streaming and mobile content. Many of these providers have experienced outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our solutions. Any such outage, delay or difficulty could adversely affect our ability to effectively provide our products and services, which would harm our business.

Table of Contents

reputation, impair our ability to retain existing customers and attract new customers and expose us to legal claims and government action, each of which could have a material adverse impact on our business, results of operations and financial condition.

If we cannot timely develop new and technologically improved products, we will not be able to enter new markets or further penetrate existing markets

The industry in which the Company operates is subject to rapid technological change. Our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve our solutions, to introduce new features and services in a timely manner, to sell into new markets and to further penetrate our existing markets. The success of any enhancement or new feature or service depends on several factors, including the timely completion, introduction and market acceptance of the enhancement or new feature or service If we are unable to successfully develop or acquire new features, products or services, enhance existing products or services to meet customer requirements, sell products and services into new markets or sell our product and services to additional customers in our existing markets, our revenue will not grow as expected. Moreover, we are frequently required to enhance and update our products and services as a result of changing standards and technological developments, which makes it difficult to recover the cost of development and forces us to continually qualify new features with our customers.

If we do not accurately anticipate industry changes and adapt rapidly to technological developments with cost-effective solutions, we will lose existing and potential customers.

The industry in which we operate is evolving at a rapid pace. Our ability to attract new customers and increase revenue from customers will depend in significant part on our ability to anticipate industry changes and to continue to enhance our solutions or introduce or acquire new solutions on a timely basis to keep pace with technological developments. The success of new solution depends on several factors, including the timely completion and market acceptance of the enhancement or new solution. Any new solution we develop or acquire might not be introduced in a timely or cost-effective manner and might not achieve the broad market acceptance necessary to generate significant revenue.

If we cannot compete effectively in the highly competitive business segments in which we operate, we could lose market share, or be forced to cut our prices and margins.

VIQ competes with a number of firms in various business segments that are very competitive. Competitors in courts, for example, are different from the ones we are competing against in public safety, medical, and legal sectors. Many of these companies have greater financial, technological, and personnel resources and experience than those of VIQ and therefore, we may be at competitive disadvantages.

Competitors may be able to respond to new or emerging technologies and changes in customer requirements more effectively than VIQ can, or may devote greater resources to the development, promotion and sale of products than VIQ can. Current and potential competitors may establish cooperative relationships among themselves or with third parties, including through mergers or acquisitions, to increase the ability of their products to address the needs of VIQ’s current or prospective customers. If these competitors were to acquire significantly increased market share, it could have a material adverse effect on VIQ’s business. VIQ’s competitors may also establish or strengthen co-operative relationships with systems integrators, third-party consulting firms or other parties with whom VIQ currently has relationships, thereby limiting VIQ’s ability to promote its products and services.

Table of Contents

Competition may result in price reductions by VIQ, lower gross profit margins, increased discounts to customers and loss of market share, and could require increased spending by VIQ on research and development, sales and marketing and customer support, which would hurt our results of operations.

Our international operations expose us to additional risks that could harm our business.

We currently operate in the United States, Australia, the United Kingdom and Canada and our products and services are sold internationally. There are certain risks inherent in international operations including, but not limited to:

If we are affected by any of these risks, our operating results and financial condition will suffer.

If we are unable to protect our intellectual property rights, we may not be able to compete effectively in our markets.

Our success is heavily dependent on our ability to protect our intellectual property. Although we seek to protect proprietary intellectual property in part through confidentiality agreements with corporate resellers, strategic partners, employees, consultants and certain contractors, these agreements could be breached and we may not have adequate remedies. Even if these agreements are not breached, our trade secrets could otherwise become known or independently discovered by our competitors. Any such disclosures could hurt our competitive position.

Table of Contents

If our insurance is inadequate to cover product liability and other claims, our financial position could deteriorate.

Our business faces an inherent risk of exposure to product liability and other claims in the event that the development or use of our technology or products is alleged to have resulted in adverse effects on our customers or others. Although we currently carry product liability insurance, coverage may be insufficient and we may not be able to obtain product liability insurance in the future at acceptable cost or adequate to protect against potential product liability claims. An uninsured claim could prevent or inhibit the commercialization of products developed by us and have a material adverse effect on our financial condition.

Inability to managing our growth would hurt our operating results.results.

To manage growth and changes in strategy effectively, we must:

We expect to invest any earnings and capital to support our growth, but may incur additional unexpected costs, which could impair our ability to expand quickly enough to capitalize on potential market opportunities. Our inability to achieve any of these objectives could harm our business, financial condition and results of operations.

Table of Contents

Financial and Accounting Risks

We expect to need additional financing, which may not be available on acceptable terms, or at all.

We may need to raise additional funds to bring additional products to market, enhance marketing capabilities, and pursue potential future acquisitions. Our future capital requirements will depend on many factors, including continued progress in research and development programs, competing technological and market developments, the cost of production scale-up, effective commercialization activities and arrangements and other factors, some of which are not within our control. If additional funding is not available when needed through public or private financings on acceptable terms, we may be precluded from developing or bringing to market new products, or from making acquisitions that could be of benefit to us.

Inaccurate estimates or judgments relating to critical accounting policies could result in operating results that fall below the expectations of investors, resulting in a decline in the share price of VIQ.

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

The continuing uncertainty around the outbreak of COVID-19 pandemic required the use of judgments and estimates in the preparation of the consolidated financial statements for the year ended December 31, 2021.2022. The future impact of COVID-19 uncertainties could generate, in future reporting periods, a significant impact to the reported amounts of assets, liabilities, revenue and expenses in these and any future consolidated financial statements. Examples of accounting estimates and judgments that may be impacted by the pandemic include, but are not limited to, impairment of goodwill and intangible assets and allowance for doubtful accounts.

Table of Contents

rates may affect the relative costs of operations and prices at which VIQ and its foreign competitors sell products in the same market. VIQ currently does not engage in currency hedging through financial instruments.

Internal Controls Risk

Effective internal controls are necessary for VIQ to provide reliable financial reports and effectively prevent fraud. Under Canadian and United States securities law requirements, VIQ’s Chief Executive Officer and Chief Financial Officer are required to certify that they are responsible for establishing and maintaining disclosure controls and internal controls over financial reporting for the Company, that those disclosure controls and internal controls have been designed and are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. VIQ maintains compliance with Canadian and United States securities law requirements by strengthening, assessing and testing the system of internal controls to provide the basis for the certification. However, the continuous process of strengthening VIQ’s internal controls and complying with Canadian and United States securities law requirements is expensive and time consuming. Furthermore, as VIQ grows its business, the controls will become more complex and the Company could require more resources to ensure its internal controls remain effective. If the measures VIQ is taking are not adequate to ensure that it maintains adequate control over financial processes and reporting or if VIQ fails to implement required new or improved controls, or encounters difficulties in their implementation, VIQ could fail to meet its reporting obligations. If VIQ or its independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in VIQ’s audited consolidated financial statements and harm its share price. In addition, future non-compliance with the Canadian and United States reporting obligations or other securities law requirements could subject VIQ to a variety of administrative sanctions, including the suspension of trading or delisting of the Common Shares, which could materially adversely affect its share price.

Table of Contents

Operating results below current levels or other adverse factors, including increases in interest rates, could result in us being unable to comply with certain covenants contained in the credit agreement with Beedie. If we violate these covenants and are unable to obtain waivers, our debt under the credit agreement with Beedie would be in default, could be accelerated and could permit our lenders to foreclose on our assets securing the debt thereunder. If the indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. If our debt is in default for any reason, our cash flows, operating results, or financial condition could be materially and adversely affected. In addition, complying with these covenants may also cause us to take actions that may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions.

Risks Related to the Common Shares

Continued volatility in the market price for our Common Shares could cause investors to lose money.

We have experienced in the past and expect to continue to experience volatility and wide fluctuations in the market price of our Common Shares. Fluctuations in the market price of the Common Shares could cause an investor to lose all or part of its investment in Common Shares. Factors that could cause fluctuations in the trading price of the Common Shares include:

Table of Contents

Table of Contents

Since January 1, 2021, the following important events in the development of the Company’s business have occurred:

As part of the distribution agreement, ORdigiNAL will offer VIQ’s NetScribe and FirstDraft, powered by aiAssist, to its dealer network operating in judicial, law enforcement and legal markets throughout Europe and Asia Pacific.

AccessPoint delivers self-guided search, request and export features to quickly access audio recordings captured during court proceedings. Advanced security settings provide granular control of authorized users and auto-logging of access and events to simplify the chain of custody tracking. AccessPoint is an integral part of VIQ’s end-to-end solution suite for Courts designed to deliver secure, real-time access to high-quality recordings.

Table of Contents

Capital Expenditures

We incur capital expenditures mainly in relation to leases of our head office in Toronto, Ontario, Canada, and our office spaces in Melbourne, Brisbane and Perth Australia.Australia and recording equipment used by our Australian operations. See “Item 5.B, Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows.” We do not own or lease any other office space, manufacturing facilities or equipment and do not have any current plans to construct or acquire any facilities.

Internet Availability of Company Information

The SEC maintains an Internet site that contains reports, proxy information statements and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. Our website address is www.viqsolutions.com. Information contained in, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this document. We have included our website address in this document solely as an inactive textual reference.

B.Business overview.

​

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. VIQ’s products and services help cybersecurity focused entities 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 that they can utilize.

VIQ offers its clients a technology services stackplatform comprised of six core software solutions: MobileMic Pro, CaptureProTM,CapturePro™, NetScribe, First Draft, Editing Services and aiAssist that are integrated to create a seamless, end to end digital platform, as outlined further below.

VIQ spent the last three years integrating its entire product portfolio into a modern, secured, cloud-based, scalable ecosystem. Through this established commercial platform, VIQ ingests multi-mediamulti-speaker content across its markets and delivers immediate value to customers in the form of high-quality evidentiary documentation.  The effective aggregation of customer information in the platform, which may appear as a by-product, is in fact a valuable asset that is to be monetized.driving accuracy and usability of the Company products and services. The Company’s first AI-driven use of this information was aimedAI aims at improving the efficiency of the verbatim transcription process by delivering a progressively better first draft. In turn, this capability enabled the delivery of First Draft, a service where a machine-generated version of a multi speakers recording is presented to the user, all the while, feeding back into the system the quality-controlled version of the documents we delivered, refining our linguistic and industry specific corpus models, and progressively enhancing the outcome of our services, in a virtuous circle.

VIQ operates worldwide with a network of partners including security integrators, audio-video specialists, and hardware and data storage suppliers. The Company’s revenue is strategically segmented both by geography and industry markets: Approximately 70%38% of its recent revenue has been from located in the United States, 27%57% from Australia and a growing 3%5% from Canada, Europe Middle East and Africa.

VIQ’s solutions serve a growing customer base across a variety of vertical and horizontal markets, the primary of which are as follows:

Table of Contents

VIQ delivers its products and services to clients primarily through a network of resellers and integrators, as well as through direct sales, offering a variety of deployment methodologies and business models to meet customer demand including software, SaaS and managed services.

Looking ahead, VIQ intends on utilizing this content to extend the scope of solutions that it offers and to expand the value of the content it collects. To that end, VIQ’s ML-driven AI engine selection process drives the platform to serve emerging needs and unlocks the additional value in the data stream. VIQ takes advantage of all available technologies to accelerate its strategy, as the system is designed intentionally to integrate both VIQ’s internal intellectual property and external applications.

Table of Contents

sales efforts. Our sales team works collaboratively with prospective clients to understand their needs, develop service proposals, and negotiate contracts to enable the execution of our solutions and services.

In addition to our direct sales team, we maintain business relationships/channel partnerships with third parties that promote and/or support our technology solutions within specific industries or geographic regions. These relationships are under agreements and compensate our channel partners for selling, implementing, and/or supporting products within our solutions portfolio. We operate worldwide with a network of partners including security integrators, audio/video specialists, and hardware and data storage suppliers.

Diversification

VIQ is segmented by both geography and industry markets. VIQ’s revenues are well diversified between a number of long term and short term contracts and arrangements.

Table of Contents

identifiable information and personal health information, including (i) the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, and the regulations promulgated under HIPPA governing, among other things, the privacy, security and electronic transmission of individually identifiable health information, and (ii) the European Union General Data Protection Regulation (effective May 25, 2018), or GDPR, which imposes stringent data protection requirements and significant penalties for non-compliance and has had a significant impact on how we process and handle certain data.

Additional laws of the United States and foreign jurisdictions apply to our processing of individually identifiable information. These laws have been subject to frequent changes, and new legislation in this area may be enacted at any time. For example, the GDPR and the invalidation of the U.S.-EU Safe Harbor regime have required us to implement alternative mechanisms for some of our data flows from Europe to the United States to comply with applicable law.

Table of Contents

Table of Contents

Item 5.Operating and Financial Review and Prospects.

​

A.Operating Results

​

The following Management’s Discussion and Analysis (“MD&A”) comments on the financial condition and results of operations of VIQ Solutions Inc. for the years ended December 31, 2022, 2021 2020 and 2019.2020. This MD&A should also be read in conjunction with our audited financial statements for the years ended December 31, 2022, 2021 2020 and 2019,2020, prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

Basis of Presentation

Our audited consolidated financial statements have been prepared in accordance with IFRS. Our fiscal year is the 12-month period ending December 31. Amounts stated in this MD&A are in United States dollars, unless otherwise indicated.

Cautionary Note Regarding Non-IFRS Measures and Industry Metrics

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 measures are an important part of the financial reporting process and are useful in communicating information that complements and supplements the consolidated financial statements.

We use the following non-IFRS financial performance measures in our MD&A:

For a detailed description of each of the non-IFRS measures used in this MD&A and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the Key Operating Metrics – Non-IFRS Measures section of this MD&A. The non-IFRS measures set out in this MD&A are intended to provide additional information to investors and do not have any standardized meaning under IFRS, and therefore may not be comparable to other issuers, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Table of Contents

We define such non-IFRS measures and industry metrics as follows:

“Adjusted EBITDA,” as defined by management, refers to net income (loss) before adjusting earnings for stock-based compensation, depreciation, amortization, interest expense, accretion and other financing costs, (gain) loss on revaluation of conversion feature liability, loss on repayment of long-term debt, gain on revaluation of options, gain on revaluation of restricted share units (“RSUs”), gain on revaluation of derivative warrant liability, restructuring costs, impairment of PPE, impairment of goodwill and intangibles, business acquisition costs, other expense (income), foreign exchange (gain) loss, current and deferred income tax expense (recovery). We believe that the items excluded from Adjusted EBITDA are not connected to and do not represent the operating performance of the Company. “EBITDA” is a non-IFRS financial measure and is not a standardized financial measure under the financial reporting framework used to prepare the financial statements of the Company and accordingly might not be comparable to similar financial measures disclosed by other issuers. We believe that Adjusted EBITDA is 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, amortization, restructuring costs, acquisition, other expense (income), and foreign exchange (gain) loss. Accordingly, we believe that this measure may also be useful to investors in enhancing their understanding of the Company’s operating performance.

“ARR,” as defined by management, is the annualized equivalent value of the 1- Software Support Maintenance (SSM), 2- Software Subscriptions 3 – SaaS and 3-4- Technology Services revenue of all existing contracts as of the date being measured. This excludes non-recurring revenue from implementation, support, and maintenance fees. The majority of our Editing Services contracts are volumes based. Accordingly, our calculation of ARR assumes that the clients will renew the contractual commitments on a periodic basis as those commitments come up for renewal. A portion of the contract renewals are through a competitive tender process. Contracts agreements may be subject to contract value increases upon renewal reflecting both inflationary increases and the additional value and added products and services provided by our solutions. ARR is not adjusted for the impact of any known or projected future client cancellations, loss of renewals, service upgrades or downgrades or price increases or decreases. We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring client contracts, assuming minor cancellations.contracts. We believe that this measure provides a fair real-time measure of performance in a volume and subscription-based environment. ARR provides us with the visibility for consistent and predictable growth to our cash flows. Our total revenue growth coupled with increasing ARR indicates the continued strength in the expansion of our business and will continue to be our focus on a go-forward basis.

“EBITDA,” as defined by management, refers to earnings before depreciation, amortization, interest expense, current and deferred income tax expense (recovery).

“Bookings” as defined by management, is the calculated  “Bookings” for a given period as the estimated contract value (for services tied to volume) of our recurring client contracts entered into during the period from (i) new clients and (ii) net upgrades by existing clients within the same workload, plus the actual (not annualized) estimated value of professional services consulting, advisory or project-based orders received, software licenses, subscriptions, SaaS, and hardware during the period.

Recurring client contracts are any contracts entered into on a multi-year or month-to-month basis, but excluding any professional services contracts for consulting, advisory or project-based work, software license and hardware.

We use Bookings to measure the amount of new business generated in a period, which we believe is an important indicator of new client acquisition and our ability to cross-sell new services to existing clients. Bookings are also used by management as a factor in determining performance-based compensation for our sales force. While we believe Bookings, in combination with other metrics, are an indicator of our near-term future revenue opportunity, it is not intended to be used as a projection of future revenue. Booking information is a non-IFRS measure, which involves judgments, estimates and assumptions, which does not have a standard industry definition. Our calculation of Bookings may differ from similarly titled metrics presented by other companies.

While we continue to acquire new clients, we also aim to deepen relationships with these clients through high-margin technology services and software bookings. In addition, we are investing in initiatives to drive sales productivity improvements.

“Average Technology Services Revenue per Day”, as defined by management, is calculated by region based on the total technology services revenue divided by the total billing days during the period. This number is highly impacted by seasonality and should be looked at for monthly trends. As an example, average revenue per day will likely drop in November and December in the US and December and January in Australia and the UK.

Table of Contents

“Technology Services Cost of Sales per Minute of Audio without COVID-19 Subsidies”, as defined by management, the direct labor cost of edited content divided by the volume of audio content delivered.

“Gross Margin for Technology Services without COVID-19 Subsidies”, as defined by management, is as reported on the Company’s MD&A less COVID-19 related subsidies received related to technology services employees.

“Gross Margin for Technology and Related revenue”, as defined by management, is as reported on the Company’s MD&A.

Overview

VIQ Solutions is a leading provider of capture software and cloud-based transcription workflow automation solutions to assist government agencies and commercial enterprises securely digitize information-intensive voice and video content.

Our technology, which delivers a seamless, proprietary workflow and documentation platform securely captures, transforms, distributes, and manages complex digital voice and video content for over 2,5604,293 active clients in the criminal justice, legal, insurance, media, government, and financial services verticals. We have operations in the U.S., Canada, Australia, and Europe, the Middle East and Africa.Europe.

Our scalable technology utilizes artificial intelligence (AI) designed to ingest significant amounts of evidentiary content to produce accurate, verbatim, diarized transcripts for mission critical events that have lasting financial and social impacts. In 2021,2022, our platform processed over 13.317.4  million minutes of recorded, multi-speaker, multi-channel audio and video and created 7.39.4  million pages of secure, industry specific evidence documentation creating actionable information for use by our clients.

Our technology solutions are proven to deliver productivity enhancements, which drive down our overall production costs and speed of delivery, leading to meaningful gross margin improvements. Our automated workflow has enabled profitable growth while improving the overall service levels, strengthening our AI learning, and bolstering our competitive advantage.

Key Operating Highlights

Table of Contents

The following table sets forth a summary of our results of operations for the year ended December 31, 2022, 2021 2020 and 2019:2020:

​

​

Table of Contents

The following table sets forth a reconciliation of technology services, support and maintenance, SaaS and Subscription revenues to non-IFRS measure ARR, as described above:

​

​

The following is a reconciliation of Net Loss to Adjusted EBITDA, the most directly comparable IFRS measure for the year ended December 31, 2022, 2021 2020 and 2019:2020:

​

​

Table of Contents

Components of Results of Operations

Revenue

The recurring nature of our revenue base is a key indication of performance. Most of our revenue is tied to major contracts and is expected to remain the same or increase in terms of the overall contribution to the Company. Also, these clients are tied to government entities and multinational Fortune 500 companies that provide little credit risk and accordingly provide a reliable revenue stream. Our revenue consists of transcription services, software license fees, support and maintenance and other recurring fees, professional service fees, and hardware sales. Transcription, service revenue consists of fees charged for recurring editing documentation services provided to our clients. Technology service revenue consists of fees charged for recurring automated transcription services. Software license revenue is comprised of license fees charged for the use of our software products generally licensed under perpetual arrangements and to a lesser extent sale of third-party software licenses. These license sales are larger contracts with longer sales cycles and are more variable in nature. Support and maintenance and other recurring revenue primarily consist of fees charged for client support on our software products post-delivery. Professional service revenue consists of fees charged for customization, implementation, integration, training and ongoing services associated with our software products and technology services. Hardware revenue includes the resale of third-party hardware that forms part of our client solutions. Occasionally, our clients may purchase a combination of software, maintenance, professional services and hardware, although the type, mix and quantity vary by client to create a solution for the client’s unique requirements.

Cost of Sales

Cost of sales consists primarily of staff costs, professional services and the cost of hardware and third-party licenses to fulfill client arrangements.

Selling and Administrative Expenses

Selling and administrative expenses consist primarily of personnel and related costs for our sales and marketing functions, including salaries and benefits, contract acquisition costs including commissions earned by sales personnel, direct marketing campaigns, public relations and other promotional activities. Selling and administrative expenses also consist primarily of personnel and related costs associated with the administrative functions of our business including corporate, finance, and internal information system support as well as legal, accounting, other professional fees, investor relations, occupancy costs and insurance.

We continue to invest globally in sales, marketing and business development to continue to diversify across segments, industries and geographies building awareness in our global brand to increase the future revenue growth of the Company.

Research and Development Expenses

Research and development expenses include personnel and related costs for ongoing research, development and product management initiatives.

Results of Operations

Comparison of the Years Ended December 31, 2022, and 2021

Revenue

Total revenue for the year ended December 31, 2022, was $45,843,929 an increase of $14,797,117, or 48%, from $31,046,812 recognized in the comparative period in 2021. The increase in revenue for the year ended December 31, 2022, was primarily due to revenue generated from Q4 2021 acquisitions which were partially offset by lower organic technology service revenue generated from Insurance, Criminal Justice, and lower technology sales versus the comparative period 2021. The foreign exchange impact for the year ended December 31, 2022 resulted in a reduction in revenue of $0.9M.

Cost of Sales

Cost of Sales for the year ended December 31, 2022, increased by $7,794,373, or 48%, to $23,918,226 from $16,123,853 for the comparative period in 2021.

Table of Contents

The increase in Cost of Sales for the year ended December 31, 2022, is primarily due to Cost of Sales related to Q421 acquisitions which were partially offset by productivity gains achieved through NetScribe, powered by aiAssist, and our global workforce. Our Cost of Sales for the year ended December 31, 2022 was impacted positively by approximately $0.6M respectively due to weakening Australia and UK currencies in comparison to the USD.

We continued to utilize our global labor force which provides scale and real-time capacity, lower costs and 24-hour production. This stimulated gross margin improvements that began in Q4 2021.

During the year ended December 31, 2022, the Company received and recorded in cost of sales $129,247 of COVID-19 wage subsidies vs. $673,281 in the comparative period in 2021.

Gross Profit

Gross Profit for the year ended December 31, 2022, increased by $7,002,744, or 47%, to $21,925,703, from $14,922,959, for the comparative period in 2021. The increase in Gross Profit for the year ended December 31, 2022, is primarily due to Q4 2021 acquisitions and productivity gains, partially offset by lower technology revenue vs. the comparative period in 2021. In addition, the comparative period in 2021 includes $673,281 in COVID-19 wage subsidies vs. $129,247 in the year ended December 31, 2022. Excluding COVID-19 wage subsidies, Gross Profit Margin for the year ended December 31, 2022, would be 47.5% vs. 45.9% in the comparative period in 2021 which has increased due to productivity gains achieved through NetScribe, powered by aiAssist, and lower labour costs due to continued expanded use of our global workforce. Our Gross Profit for the year ended December 31, 2022 was impacted negatively by approximately $0.3M due to the weakening Australia and UK currencies in comparison to the USD.

Selling and Administrative Expenses

Selling and Administrative Expenses for the year ended December 31, 2022, increased by $5,406,590, or 28%, to $24,526,303, from $19,119,713, for the comparative period in 2021. The increase for the year ended December 31, 2022, includes Selling and Administrative Expenses related to Q4 2021 acquisitions, and incremental costs associated with cloud services of approximately $800,000 to support expansion of our infrastructure. The increase in selling and administrative expenses was partially offset by approximately $3,000,000 in one-time professional service fees reported in comparative period 2021 relating to capital raise, Nasdaq listing fees and M&A activity. In addition, the year ended December 31, 2022, included $95,565 recorded in selling and administrative expenses for COVID-19 wage subsidies versus $988,531 in the comparative period in 2021.

Research and Development Expenses

Research and Development Expenses for the year ended December 31, 2022, decreased by $357,993, or 33%, to $734,115, from $1,092,108, for the comparative period in 2021. The decrease in Research and Development Expenses for the year ended December 31, 2022, is primarily due to lower project costs than the comparative period in 2021.

Loss (Gain) on Contingent Consideration

For the year ended December 31, 2022, Contingent Consideration changed by $412,640, from a gain of $332,569, recognized in the comparative period in 2021 to a loss of $80,071. The change for the year ended December 31, 2022, is mainly due to changes in anticipated acquisition earnout payments primarily as a result of revised forecasted revenue for the wordZXpressed, Inc. (“WordZ”) acquisition. In addition, the prior year gain on contingent consideration related to the earnout of the ASC acquisition which was settled in Q4 2021. Revenue forecasts are updated on a quarterly basis and the related anticipated acquisition earnout payment accruals are updated accordingly.

Stock-Based Compensation

For the year ended December 31, 2022, Stock Based Compensation decreased by $5,715,877 to $2,779,312 from $8,495,189, recognized in the same period of 2021. The decrease in Stock Based Compensation is due to the impact of 805,947 options, 803,463 RSUs and 195,000 PSUs granted during the year ended December 31, 2022 compared to 1,115,086 stock options and 1,023,378 RSUs granted for the year ended December 31, 2021. In addition, the 2022 RSUs, PSUs and stock options were recorded at lower fair value due to lower share price.

Table of Contents

Depreciation

For the year ended December 31, 2022, depreciation increased by $322,150, to $579,249, from $257,099 recognized in the comparative period in 2021. The increase in depreciation for the three months and year ended December 31, 2022, is due primarily to the addition of right of use assets acquired with Q4 2021 acquisitions and capital assets purchased during the period.

Amortization

For the year ended December 31, 2022, Amortization increased by $1,124,452, to $5,508,954, from $4,384,502 recognized in the comparative period in 2021. The increase in amortization for year ended December 31, 2022, is mainly attributable to the amortization of intangible assets related to Q4 2021 acquisitions and accelerated amortization recorded on VIQ legacy brands. The increase in amortization is partially offset by the reduction in amortization of capitalized internally generated intangible assets due to the timing of projects partially offset by amortization of intangible assets related to Q4 2021 acquisitions.

Interest Expense

For the year ended December 31, 2022, Interest Expense decreased by $278,482, to $1,052,618, from $1,331,100 recognized in the comparative period in 2021. The decrease in Interest Expense for the three months and year ended December 31, 2022, is primarily due to $4,005,768 principal repayment on long term debt, which occurred in Q1 2022.

Accretion and Other Financing Costs

For the year ended December 31, 2022, Accretion and Other Financing Costs increased by $264,088 to $1,231,194 from $967,106 recognized in the comparative period in 2021. The increase in Accretion and Other Financing Costs for the year ended December 31, 2022 is primarily due to incremental amendment fees incurred on debt financing partially offset by extinguishment of debt.

Loss on Extinguishment of Debt

On July 14, 2022, the Company amended the terms of the debt agreement with Crown Capital Partner Funding, LP (the “Crown Debt Facility”). The amendment resulted in the terms of the Crown Debt Facility being substantially modified, as such the transaction is accounted for as an extinguishment of the old debt. The Company recognized a loss on extinguishment of debt of $747,865 for the year ended December 31,2022 and the new debt was recognized at a fair value of $7,706,896.

Gain on Revaluation of Options

For the year ended December 31, 2022, Gain on Revaluation of Options increased by $483,344, to $1,511,399, from $1,028,055 recognized in the comparative period in 2021. This increase is due to the revaluation of cash-settled options recorded under share-based payment liability, due to the decrease in stock price from the date of initial measurement compared to the re-measurement and the forfeiture of these options.

Gain on Revaluation of RSUs

For the year ended December 31, 2022, Gain on Revaluation of RSUs increased by $307,665, to $550,260, from $242,595 recognized in the comparative period in 2021. This decrease is due to the revaluation of RSUs recorded under share-based payment liability and due to the larger decrease in share price compared to the comparative year.

Gain on Revaluation of Derivative Warrant Liability

For the year ended December 31, 2022, Gain on Revaluation of Derivative Warrant Liability increased by $2,886,837, to $4,255,017, from $1,368,180 recognized in the comparative period in 2021. The Gain on Revaluation of Derivative Warrant Liability for the year ended December 31, 2022 is due to a decrease in share price on an increased number of warrants which results in a gain recognized.

Table of Contents

Restructuring Costs

For the year ended December 31, 2022, Restructuring Costs decreased by $109,627, to $323,075, from $432,702 recognized in the comparative period in 2021. The decrease in Restructuring Costs for year ended December 31, 2022 is due to lower organizational restructuring costs.

Impairment of PPE

For the year ended December 31, 2022, impairment of PPE increased by $15,246, recognized due to write-off of capitalized software that is no longer in use.

Business Acquisition Costs

For the year ended December 31, 2022, Business Acquisition costs decreased by $106,362, to $433,372, from $539,734 recognized in the comparative period in 2021. The decrease in Business Acquisition Costs for the year ended December 31, 2022, is primarily due lower business acquisition costs incurred than comparative period 2021.

Other Income

For the year ended December 31, 2022, Other Income decreased by $10,712, to $1,291, from $12,003 recognized in the comparative period in 2021. The decrease in Other Income for the year ended December 31, 2022 is due to lower interest earned on term deposits.

Foreign Exchange (Gain) Loss

For the year ended December 31, 2022, Foreign Exchange Gain increased by $474,198, from a loss of $22,130 recognized in the comparative period in 2021 to a gain of $452,068. The gain/loss on foreign exchange is due to fluctuations in the foreign exchange rates. Our businesses are organized geographically so many of our expenses are incurred in the same currency as our revenues, which mitigates some of our exposure to currency fluctuations. Foreign exchange gain and losses are primarily related to the unrealized foreign translation gains and losses of certain USD, AUD and GBP denominated working capital balances to CAD and USD denominated working capital balances to AUD.

Income Tax Recovery (Expense)

We operate globally and we calculate our tax provision in each of the jurisdictions in which we conduct business. Our effective tax rate on a consolidated basis is, therefore, affected by the realization and anticipated relative profitability of our operations in those various jurisdictions, as well as different tax rates that apply and our ability to utilize tax losses and other credits. For the year ended December 31, 2022, Income tax recovery increased by $1,553,348 to a tax recovery of $609,621, from a tax expense of $943,727 in the comparative period in 2021. The increase for the year ended December 31, 2022, is primarily due to the recording of a valuation allowance on deferred tax asset recorded for our U.S. entities in 2021 based on forecasted profitability and taxable profit recognized for our Australian subsidiaries.

Net Loss and Earnings Per Share