You want errors and refilings? – you came to the right place!

Here’s a news release to conjure with:

  • November 19, 2020–VIQ Solutions Inc… a global provider of secure, AI-driven, digital voice and video capture technology and transcription services, announced today that it has refiled its interim financial statements for the six months ended June 30, 2020 and 2019, its interim management’s discussion and analysis (“MD&A”) for the six months ended June 30, 2020 and 2019, its MD&A for the three months ended March 31, 2020 and 2019 and its MD&A for the years ended December 31, 2019 and 2018 (collectively the “Amended Filings”). The Company’s revenue and Adjusted EBITDA for the respective periods covered by the Amended Filings have remained unchanged.
  • The Amended Filings were prepared following a continuous disclosure review by the staff of the Ontario Securities Commission (the “OSC”) of the Company’s disclosure record in connection with the Company’s previously announced $20M bought deal prospectus offering. The Amended Filings address comments received from OSC staff in order to clarify disclosure in the Company’s previous filings. In particular, the Amended Filings have been revised to:
    • more clearly disclose its results of operations and the period over period change in the Company’s results of operations in the Amended Filings;
    • provide additional comparative financial information and remove references to nonrecurring, infrequent and unusual amounts;
    • clarify and provide additional disclosure explaining non-IFRS measures presented in the Amended Filings, specifically Adjusted EBITDA and has provided a reconciliation clarifying the calculation of Adjusted EBITDA in each of the Amended Filings;
    • reflect mandatory disclosures associated with the acquisitions executed during the first quarter of 2020, as well as adjustments to correct material differences associated with the accounting for business combinations, the recognition of financial instruments, government assistance and the presentation of certain financing related costs;
    • provide additional disclosure relating to the Company’s liquidity and available capital resources, the Company’s critical accounting policies and estimates and the impact of seasonality on the Company’s business, as well as to restate disclosure respecting outstanding Company securities; and
    • restate: (i) the Company’s enterprise value as at June 30, 2020 and the increase in the Company’s enterprise value from its enterprise value as at June 30, 2019; (ii) the year-over-year growth in the Company’s Adjusted EBITDA; (iii) the Company’s weighted average number of common shares outstanding for the six months ended June 30, 2020; and (iv) the amortization of intangible assets acquired during 2020 recognized by the Company during the three months ended June 30, 2020.

This was recorded on the OSC’s “refilings and errors list,” a record of companies that refiled or restated some aspect of their continuous disclosure record as a result of an OSC review – the list has the dual purpose, I believe, of providing an extra degree of visibility regarding such companies, and also of setting out identified pitfalls that other preparers can thereby learn from and avoid. Not too surprisingly, most of the cases involve issues of broader regulatory compliance (MD&A, mining technical reports and suchlike) rather than errors in applying IFRS; and most of them just set out one or two identified errors, rather than the imposing list set out above. Of course, it’s necessary to dig into the pre- and post-amendment documents to get a fuller sense of what’s being conveyed, and this often raises questions. For example, as indicated, the above company’s annual 2019 MD&A originally distinguished between “recurring revenues” consisting 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,” and “non-recurring revenues,” described as “mainly one-time software and hardware sales.” The amended MD&A doesn’t mention the latter category at all, but it’s a bit unclear whether the earlier distinction was factually erroneous, or whether the issue was with the implications underlying the term “recurring.” And to confuse things further, the revised MD&A still includes a “revenue mix” table that retains the distinction between the two categories. Another example where the benefit of the change may be a bit hard to discern – the original income statement label “profit (loss) before interest, accretion, business acquisition and financing costs, and income taxes” may be clunky, but is it somehow objectively “worse” than the revised “Gain (loss) before undernoted items and income taxes”…?

Apart from summarizing the various amendments, the company’s news release reported on something else that might perhaps have contributed to a sub-optimal disclosure environment:

  • The Company wishes to clarify that from May 2018 to November 12, 2020, the Company’s audit committee was comprised of only two members and not three as required under National Instrument 52-110. As of the date of this news release, the Company’s audit committee is comprised of…three directors…

Anyway, I’m mentioning the list here because it is an overlooked resource of sorts – not just for Canadian companies, but for others reporting under IFRS or subject to comparable regulatory expectations.

The opinions expressed are solely those of the author

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