SEALSQ Corp 6-K/A, filed Sep 29, 2023
SEALSQ Corp (LAES)
About this 6-K/A
SEALSQ Corp filed this 6-K/A on September 29, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934
Date of report: September 29, 2023
Commission File Number:
(Exact Name of Registrant as Specified in Charter)
N/A
(Translation of Registrant’s name into English)
|
|
Not Applicable | |
| (State or other jurisdiction of incorporation or organization) | (Address of principal executive office) | (I.R.S. Employer Identification No.) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F ☐ Form 40-F
EXPLANATORY NOTE
This Amendment to the Form 6-K of SEALSQ Corp (“SEAL”), filed on September 8, 2023 (the “Original 6-K”), is being filed solely to provide SEAL’s Condensed Consolidated Financial Statements as at June 30, 2023 using interactive data files in inline eXtensible Business Reporting Language (iXBRL), as attached to this Form 6-K/A as Exhibit 99.1.
Exhibit No. |
Description of Exhibit |
| 99.1 | Condensed Consolidated Financial Statements of SEALSQ Corp. as at June 30, 2023. |
| 101.INS | XBRL Instance Document. |
| 101.SCH | XBRL Taxonomy Extension Schema Document. |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 29, 2023 |
SEALSQ CORP | ||
| By: | /s/ Carlos Moreira | ||
| Name: | Carlos Moreira | ||
| Title: | Chief Executive Officer | ||
| By: | /s/ Peter Ward | ||
| Name: | Peter Ward | ||
| Title: | Chief Financial Officer | ||
Condensed Consolidated Financial Statements
of SEALSQ Corp.
(unaudited)
As at June 30, 2023
| 1. Condensed Consolidated Statements of Comprehensive Income/(Loss) | F-2 |
| 2. Condensed Consolidated Balance Sheets | F-3 |
| 3. Condensed Consolidated Statements of Changes in Shareholders’ Equity | F-4 |
| 4. Condensed Consolidated Statements of Cash Flows | F-5 |
| 5. Notes to the Condensed Consolidated Financial Statements | F-6 |
F-1
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
| 1. | Condensed Consolidated Statements of Comprehensive Income/(Loss) |
| Unaudited 6 months ended June 30, | ||||||||||
| USD'000 | 2023 | 2022 | Note ref. | |||||||
| Net sales | 24 | |||||||||
| Cost of sales | ( | ) | ( | ) | ||||||
| Depreciation of production assets | ( | ) | ||||||||
| Gross profit | ||||||||||
| Other operating income | 25 | |||||||||
| Research & development expenses | ( | ) | ( | ) | ||||||
| Selling & marketing expenses | ( | ) | ( | ) | ||||||
| General & administrative expenses | ( | ) | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ||||||
| Operating loss | ( | ) | ( | ) | ||||||
| Non-operating income | 26 | |||||||||
| Interest and amortization of debt discount | ( | ) | ( | ) | 19 | |||||
| Non-operating expenses | ( | ) | ( | ) | 27 | |||||
| Loss before income tax expense | ( | ) | ( | ) | ||||||
| Income tax income (expense) | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||||
| Earnings per ordinary share (USD) | ||||||||||
| Basic | ( | ) | ( | ) | 29 | |||||
| Diluted | ( | ) | ( | ) | 29 | |||||
| Earnings per F share (USD) | ||||||||||
| Basic | ( | ) | ( | ) | 29 | |||||
| Diluted | ( | ) | ( | ) | 29 | |||||
| Other comprehensive income / (loss), net of tax: | ||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||
| Defined benefit pension plans: | 20 | |||||||||
| Net gain (loss) arising during period | ||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
| 2. | Condensed Consolidated Balance Sheets |
| As at June 30, | As at December 31, | |||||||||
| USD'000, "except par value" | 2023 (unaudited) | 2022 | Note ref. | |||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 8 | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | 9 | |||||||||
| Inventories | 10 | |||||||||
| Prepaid expenses | ||||||||||
| Other current assets | 11 | |||||||||
| Total current assets | ||||||||||
| Noncurrent assets | ||||||||||
| Deferred income tax assets | ||||||||||
| Deferred tax credits | 12 | |||||||||
| Property, plant and equipment net of accumulated depreciation | 13 | |||||||||
| Intangible assets, net of accumulated amortization | 14 | |||||||||
| Operating lease right-of-use assets | 15 | |||||||||
| Other noncurrent assets | 16 | |||||||||
| Total noncurrent assets | ||||||||||
| TOTAL ASSETS | ||||||||||
| LIABILITIES | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable | 17 | |||||||||
| Indebtedness to related parties, current | 19 | |||||||||
| Current portion of obligations under operating lease liabilities | 15 | |||||||||
| Income tax payable | ||||||||||
| Other current liabilities | 18 | |||||||||
| Total current liabilities | ||||||||||
| Noncurrent liabilities | ||||||||||
| Bonds, mortgages and other long-term debt | 20 | |||||||||
| Operating lease liabilities, noncurrent | 15 | |||||||||
| Indebtedness to related parties, noncurrent | 19 | |||||||||
| Employee benefit plan obligation | 21 | |||||||||
| Total noncurrent liabilities | ||||||||||
| TOTAL LIABILITIES | ||||||||||
| Commitments and contingent liabilities | 22 | |||||||||
| SHAREHOLDERS' EQUITY | ||||||||||
| Ordinary stock | 23 | |||||||||
| Par value - USD | ||||||||||
| Authorized - and | ||||||||||
| Issued and outstanding - and shares | ||||||||||
| Common stock - F-Shares | 23 | |||||||||
| Par value - USD | ||||||||||
| Authorized - and | ||||||||||
| Issued and outstanding - and | ||||||||||
| Additional paid-in capital | ||||||||||
| Accumulated other comprehensive income / (loss) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total shareholders' equity | ( | ) | ||||||||
| TOTAL LIABILITIES AND EQUITY | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
| 3. | Condensed Consolidated Statements of Changes in Shareholders’ Equity |
| Unaudited 6 months ended June 30, | ||||||||||||||||||||||||||||
| USD'000 (except for share numbers) | Number of ordinary shares | Number of F shares | Share Capital | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive income / (loss) | Total equity (deficit) | |||||||||||||||||||||
| As at December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Indebtedness to related parties | — | — | ||||||||||||||||||||||||||
| Comprehensive income / (loss) | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| As at June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| As at December 31, 2022 | ( | ) | (a) | |||||||||||||||||||||||||
| Reverse recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||
| Indebtedness to related parties | — | — | ||||||||||||||||||||||||||
| Comprehensive income / (loss) | — | — | ( | ) | (a) | ( | ) | ( | ) | |||||||||||||||||||
| As at June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| (a) Adjusted for rounding | ||||||||||||||||||||||||||||
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income/(Loss)
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
| 4. | Condensed Consolidated Statements of Cash Flows |
| Unaudited 6 months ended June 30, | ||||||||
| USD'000 | 2023 | 2022 | ||||||
| Cash Flows from operating activities: | ||||||||
| Net Income (loss) | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation of property, plant & equipment | ||||||||
| Amortization of intangible assets | ||||||||
| Interest and amortization of debt discount | ||||||||
| Inventory obsolescence impairment | ( | ) | ||||||
| Income tax expense / (recovery) net of cash paid | ||||||||
| Changes in operating assets and liabilities, net of effects of businesses acquired | ||||||||
| Decrease (increase) in accounts receivables | ( | ) | ( | ) | ||||
| Decrease (increase) in inventories | ( | ) | ( | ) | ||||
| Decrease (increase) in other current assets and prepaids, net | ( | ) | ( | ) | ||||
| Decrease (increase) in deferred research & development tax credits, net | ( | ) | ( | ) | ||||
| Decrease (increase) in other noncurrent assets, net | ( | ) | ||||||
| Increase (decrease) in accounts payable | ||||||||
| Increase (decrease) in income taxes payable | ( | ) | ( | ) | ||||
| Increase (decrease) in other current liabilities | ( | ) | ||||||
| Increase (decrease) in defined benefit pension liability | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows from investing activities: | ||||||||
| Sale / (acquisition) of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash Flows from financing activities: | ||||||||
| Proceeds from debt | ||||||||
| Increase (decrease) in indebtedness to related parties, noncurrent, net of cash proceeds from debt | ||||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ||||||||
| Cash and cash equivalents | ||||||||
| Net increase (decrease) during the period | ( | ) | ( | ) | ||||
| Balance, beginning of period | ||||||||
Cash and cash equivalents balance, end of period | ||||||||
| Supplemental cash flow information | ||||||||
| Cash paid for incomes taxes | ||||||||
| ROU assets obtained from operating lease | ||||||||
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-5
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
| 5. | Notes to the Condensed Consolidated Financial Statements |
Note 1. The SEALSQ Group
SEALSQ Corp., together with its consolidated subsidiaries (“SEALSQ” or the “Group” or the “SEALSQ Group”), has its headquarters in Tortola, BVI. SEALSQ Corp., the parent of the SEALSQ Group, was incorporated in April 2022 and is listed on the NASDAQ Capital Market exchange with the valor symbol “LAES” since May 23, 2023.
On January 1, 2023, SEALSQ Corp. acquired WISeKey Semiconductors SAS, a private joint stock company (French Simplified Joint Stock Company), and its subsidiaries. Prior to that acquisition, SEALSQ did not have any operations. As further described in the notes below, the acquisition qualified as a reverse recapitalization.
SEALSQ designs, develops and markets secure semiconductors worldwide as a fabless manufacturer. It provides added security and authentication layers on its semiconductors which can be tailored to customers’ needs. As an advanced chip designer, the Group holds the intellectual property (IP) for the semiconductors it sells.
SEALSQ is also accredited as a Product Attestation Authority (PAA) and, as such, can issue MATTER Device Attestation Certificates (DAC).
The Group anticipates being able to generate profits in the near future thanks to the increased focus on the security and authentication of IT components and networks.
Note 2. Future operations and going concern
The Group recorded a loss from operations in this reporting period and the accompanying condensed consolidated financial statements have been prepared assuming that the Group will continue as a going concern.
The Group incurred a net operating loss of USD
million in the six months ended June 30, 2023 and had positive working capital of USD
We note that, historically, the Group has been dependent on financing from its parent, WISeKey International Holding Ltd, to augment the operating cash flow to cover its cash requirements.
Based on the foregoing, Management believe it is correct to present these figures on a going concern basis.
Note 3. Basis of presentation
The condensed consolidated financial statements are prepared in accordance with the Generally Accepted Accounting Principles in the United States of America (“US GAAP”) as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). All amounts are in United States dollars (“USD”) unless otherwise stated.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Group’s annual financial statements for the year ended December 31, 2022, as filed in the 20-F on June 27, 2023.
The Group’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The significant accounting policies applied in the annual consolidated financial statements of the Group as of December 31, 2022, contained in the Group’s Annual Report have been applied consistently in these unaudited condensed consolidated financial statements.
Reverse Acquisition
On January 1, 2023, SEALSQ Corp., then a so-called empty shell private company with no operating activities that was not considered a business under US GAAP standards, acquired WISeKey Semiconductors SAS, a private operating company. Before this acquisition, both companies were wholly owned by WISeKey International Holding AG (“WISeKey”). This transaction being a capital transaction in substance, it qualifies as a reverse acquisition that is considered a recapitalization whereby SEALSQ Corp. is the legal acquirer and accounting acquiree, whereas WISeKey Semiconductors SAS is the legal acquiree and accounting acquirer. In accordance with ASC 805-40 (Reverse acquisition), the condensed consolidated financial statements are therefore issued by the legal parent, SEALSQ Corp., but are considered to be the continuation of the financial statements of the legal subsidiary, WISeKey Semiconductors SAS.
Comparative information in SEALSQ’s condensed consolidated financial statements relates to WISeKey Semiconductors SAS and not to the non-operating SEALSQ Corp. until the date of the transaction. The assets and liabilities of the accounting acquiree, SEALSQ Corp., have been consolidated from January 1, 2023. No goodwill arose as a result of the transaction. The consolidated statement of comprehensive losses includes the results of SEALSQ Corp. from January 1, 2023.
The newly formed company was then listed on the Nasdaq Global Market on May 23, 2023 through a spin-off by WISeKey of 20% of the ordinary share capital.
F-6
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 4. Summary of significant accounting policies
Fiscal Year
The Group’s fiscal year ends on December 31.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of SEALSQ Corp. and its wholly owned subsidiaries over which the Group has control.
Intercompany income and expenses, including unrealized gross profits from internal group transactions and intercompany receivables, payables and loans have been eliminated.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make certain estimates, judgments and assumptions. We believe these estimates, judgements and assumptions are reasonable, based upon information available at the time they were made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and the actual results, our condensed consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by US GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting from available alternatives would not produce a materially different result.
Foreign Currency
The functional currency of SEALSQ Corp. is USD.
In general, the functional currency of a foreign operation is the local currency. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income/loss. The Group's reporting currency is USD.
Cash and Cash Equivalents
Cash consists of deposits held at major banks that are readily available. Cash equivalents consist of highly liquid investments that are readily convertible to cash and with original maturity dates of three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments.
Accounts Receivable
Receivables represent rights to consideration that are unconditional and consist of amounts billed and currently due from customers, and revenues that have been recognized for accounting purposes but not yet billed to customers. The Group extends credit to customers in the normal course of business and in line with industry practices.
Allowance for Doubtful Accounts
We recognize an allowance for credit losses to present the net amount of receivables expected to be collected as of the balance sheet date. The allowance is based on the credit losses expected to arise over the asset’s contractual term taking into account historical loss experience, customer-specific data as well as forward-looking estimates. Expected credit losses are estimated individually.
Accounts receivables are written off when deemed uncollectible and are recognized as a deduction from the allowance for credit losses. Expected recoveries, which are not to exceed the amount previously written off, are considered in determining the allowance balance at the balance sheet date.
Inventories
Inventories are stated at the lower of cost or net realizable value. Costs are calculated using standard costs, approximating average costs. Finished goods and work-in-progress inventories include material, labor and manufacturing overhead costs. The Group records write-downs on inventory based on an analysis of obsolescence or a comparison to the anticipated demand or market value based on a consideration of marketability and product maturity, demand forecasts, historical trends and assumptions about future demand and market conditions.
Property, Plant and Equipment
Property, Plant and Equipment
Minimum
Maximum
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives which range from to years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the improvements or the lease terms, as appropriate. Property, plant and equipment are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Intangible Assets
Intangible Assets
Those intangible assets that are considered to have a finite useful life are amortized over their useful lives, which generally range from to years. Each period we evaluate the estimated remaining useful lives of intangible assets and whether events or changes in circumstances require a revision to the remaining periods of amortization or that an impairment review be carried out.
F-7
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Leases
In line with ASC 842, the Group, as a lessee, recognizes right-of-use assets and related lease liabilities on its balance sheet for all arrangements with terms longer than twelve months, and reviews its leases for classification between operating and finance leases. Obligations recorded under operating and finance leases are identified separately on the balance sheet. Assets under finance leases and their accumulated amortization are disclosed separately in the notes. Operating and finance lease assets and operating and finance lease liabilities are measured initially at an amount equal to the present value of minimum lease payments during the lease term, as at the beginning of the lease term.
The Group has elected the short-term lease practical expedient whereby we do not present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise.
We have also elected the practical expedients related to lease classification of leases that commenced before the effective date of ASC 842.
Revenue Recognition
The Group’s policy is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the group applies the following steps:
| - | Step 1: Identify the contract(s) with a customer. |
| - | Step 2: Identify the performance obligations in the contract. |
| - | Step 3: Determine the transaction price. |
| - | Step 4: Allocate the transaction price to the performance obligations in the contract. |
| - | Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. |
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. We typically allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. If a standalone price is not observable, we use estimates.
The Group recognizes revenue when it satisfies a performance obligation by transferring control over goods or services to a customer. The transfer may be done at a point in time (typically for goods) or over time (typically for services). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. For performance obligations satisfied over time, the revenue is recognized over time, most frequently on a prorata temporis basis as most of the services provided by the Group relate to a set performance period.
If the Group determines that the performance obligation is not satisfied, it will defer recognition of revenue until it is satisfied.
We present revenue net of sales taxes and any similar assessments.
The Group delivers products and records revenue pursuant to commercial agreements with its customers, generally in the form of an approved purchase order or sales contract.
Where products are sold under warranty, the customer is granted a right of return which, when exercised, may result in either a full or partial refund of any consideration received, or a credit that can be applied against amounts owed, or that will be owed, to the Group. For any amount received or receivable for which we do not expect to be entitled to because the customer has exercised its right of return, we recognize those amounts as a refund liability.
Contract Assets
Contract assets consist of accrued revenue where the Group has fulfilled its performance obligation towards the customer but the corresponding invoice has not yet been issued. Upon invoicing, the asset is reclassified to trade accounts receivable until payment.
Deferred Revenue
Deferred revenue consists of amounts that have been invoiced and paid but have not been recognized as revenue. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current and the remaining deferred revenue recorded as non-current. This would relate to multi-year certificates or licenses.
Contract Liability
Contract liability consists of either:
| - | amounts that have been invoiced and not yet paid, nor recognized as revenue. Upon payment, the liability is reclassified to deferred revenue if the amounts still have not been recognized as revenue. Contract liability that will be realized during the succeeding 12-month period is recorded as current and the remaining contract liability recorded as non-current. This would relate to multi-year certificates or licenses. |
| - | advances from customers not supported by invoices. |
Sales Commissions
Sales commission expenses where revenue is recognized are recorded in the period of revenue recognition.
Cost of Sales and Depreciation of Production Assets
Our cost of sales consists primarily of expenses associated with the delivery and distribution of products. These include expenses related to the license to the Global Cryptographic ROOT Key, the global Certification authorities as well as the digital certificates for people, servers and objects, expenses related to the preparation of our secure elements and the technical support provided on the Group's ongoing production and on the ramp-up phase, including materials, labor, test and assembly suppliers, and subcontractors, freights costs, as well as the amortization of probes, wafers and other items that are used in the production process. This amortization is disclosed separately under depreciation of production assets on the face of the income statement.
F-8
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Research and Development and Software Development Costs
All research and development costs and software development costs are expensed as incurred.
Advertising Costs
All advertising costs are expensed as incurred.
Pension Plan
In the six months ended June 30, 2023, the Group maintained one defined benefit post retirement plans covering the French employees of WISeKey Semiconductors SAS.
In accordance with ASC 715-30, Defined Benefit Plans – Pension, the Group recognizes the funded status of the plan in the balance sheet. Actuarial gains and losses are recorded in accumulated other comprehensive income / (loss).
Income Taxes
Taxes on income are accrued in the same period as the revenues and expenses to which they relate.
Deferred taxes are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet of our companies prepared for consolidation purposes, with the exception of temporary differences arising on investments in foreign subsidiaries where the Group has plans to permanently reinvest profits into the foreign subsidiaries.
Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is “more likely than not” that future profits will be available and the tax loss carry-forward can be utilized.
Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the determination of the applicable tax rate provided that they are likely to be applicable in the period when the deferred tax assets or tax liabilities are realized.
The Group is required to pay income taxes in a number of countries. The Group recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Group adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions.
Research Tax Credits
Research tax credits are provided by the French government to give incentives for companies to perform technical and scientific research. WISeKey Semiconductors SAS is eligible to receive such tax credits.
These research tax credits are presented as a reduction of research & development expenses in the income statement when companies that have qualifying expenses can receive such grants in the form of a tax credit irrespective of taxes ever paid or ever to be paid, the corresponding research and development efforts have been completed and the supporting documentation is available. The credit is deductible from the entity’s income tax charge for the year or payable in cash the following year, whichever event occurs first. The tax credits are included in noncurrent deferred tax credits in the balance sheet in line with ASU 2015-17.
Basic earnings per share are calculated using the two-class method required for companies with multiple classes of common stock. The two-class method determines net earnings per common share for each class of common stock according to dividends declared or accumulated and participation rights in distributed and undistributed earnings or losses. The two-class method requires income available to common stockholders for the period to be allocated between each class of common stock based upon their respective rights to receive dividends as if all income for the period had been distributed.
For SEALSQ, the dividend rights of the holders of ordinary and Class F common stock (collectively, the “common stock”) differ. The dividend rights of a Class F Share are five times greater than the dividend rights of an ordinary share. Undistributed earnings are allocated to the classes of common stock proportionately to their dividend rights and the resulting net results per share will, therefore, vary for each class of common stock. In line with ASC 260-10-45, the Group has presented the net earnings attributed to its common stock for each class of common stock. The earnings per share calculation is based on the weighted average number of shares in issue of each class.
When the effects are not antidilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares and the dilutive effect of stock options as determined under the treasury stock method.
Segment Reporting
Our chief operating decision maker, who is also our Chief Executive Officer, regularly reviews information related to one operating segment, secure microcontrollers, for purposes of allocating resources and assessing budgets and performance. We report our financial performance based on this segment structure described in Note 28.
F-9
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Recent Accounting Pronouncements
Adoption of new FASB Accounting Standard in the current year – Prior-Year Financial Statements not restated:
As of January 1, 2023, the Group adopted Accounting Standards Update (ASU) 2021-08, Business Combinations (topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.
ASU 2021-08 amends ASC 805 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606 (meaning the acquirer should assume it has entered the original contract at the same date and using the same terms as the acquiree). This new ASU applies to contract assets and contract liabilities acquired in a business combination and to other contracts that directly/indirectly apply the requirements of ASC 606.
There was no impact on the Group's results upon adoption of the standard.
New FASB Accounting Standard to be adopted in the future:
In March 2023, The FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements, which requires all companies to amortize leasehold improvements associated with common control leases over the asset’s useful life to the common control group regardless of the lease term.
Summary: The amendments allow a private company to elect to account for a common control leasing arrangement using the written terms and conditions without having to determine if those terms and conditions are legally enforceable. If the terms of the arrangement are not in writing, then the entity would apply existing guidance to determine the legally enforceable terms and conditions of the arrangement. The amendments also require leasehold improvements associated with leases between entities under common control to be amortized over the useful life of the improvements until the lessee ceases to control the use of the underlying asset through a lease, at which time the remaining value of the leasehold improvement would be accounted for as a transfer between entities under common control.
Effective Date: ASU 2023-01 is effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. An entity should apply the amendments prospectively to business combinations occurring on or after the effective dates. Early adoption is permitted.
The Group expects to adopt all the aforementioned guidance when effective. Management is assessing the impact of the aforementioned guidance on its consolidated financial statements but does not expect it to have a material impact.
In June 2023, The FASB issued ASU No. 2023-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies how the fair value of equity securities subject to contractual sale restrictions is determined.
Summary: The ASU clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities.
Effective Date: ASU 2023-03 is effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. An entity should apply the amendments prospectively to business combinations occurring on or after the effective dates. Early adoption is permitted.
The Group expects to adopt all the aforementioned guidance when effective. Management is assessing the impact of the aforementioned guidance on its consolidated financial statements but does not expect it to have a material impact.
Note 5. Concentration of credit risks
Financial instruments that are potentially subject to credit risk consist primarily of cash and cash equivalents and trade accounts receivable. Our cash is held with large financial institutions. Management believes that the financial institutions that hold our investments are financially sound and accordingly, are subject to minimal credit risk. Deposits held with banks may exceed the amount of insurance provided on such deposits.
The Group sells to large, international customers and, as a result, may maintain individually significant trade accounts receivable balances with such customers during the year. We generally do not require collateral on trade accounts receivable. Summarized below are the clients whose revenue were 10% or higher than the respective total consolidated net sales for the 6 months to June 30, 2023 or 2022, and the clients whose trade accounts receivable balances were 10% or higher than the respective total consolidated trade accounts receivable balance as at June 30, 2023 and December 31, 2022. In addition, we note that some of our clients are contract manufacturers for the same companies; should these companies reduce their operations or change contract manufacturers, this would cause a decrease in our customer orders which would adversely affect our operating results.
Revenue
Receivables
| Revenue concentration (% of total net sales) |
Receivables concentration (% of total accounts receivable) | ||||
| 6 months ended June 30, | As at June 30, | As at December 31, | |||
2023 (unaudited) |
2022 (unaudited) |
2023 (unaudited) |
2022 | ||
| Multinational electronics contract manufacturing company | |||||
| International digital security company | |||||
| Multinational technology company | |||||
| International equipment and software manufacturer | |||||
| International equipment and product manufacturer | |||||
F-10
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 6. Fair value measurements
ASC 820 establishes a three-tier fair value hierarchy for measuring financial instruments, which prioritizes the inputs used in measuring fair value. These tiers include:
· Level 1, defined as observable inputs such as quoted prices in active markets;
· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Level 3
Accounts Receivable
Accounts Payable
Indebtedness to Related Parties, Current
| As at June 30, 2023 (unaudited) | As at December 31, 2022 | |||||||||||||||||||||||
| USD'000 | Carrying amount | Fair value | Carrying amount | Fair value | Fair value level | Note ref. | ||||||||||||||||||
| Nonrecurring fair value measurements | ||||||||||||||||||||||||
| Accounts receivable | 3 | 9 | ||||||||||||||||||||||
| Accounts payable | 3 | 17 | ||||||||||||||||||||||
| Indebtedness to related parties, current | 3 | 19 | ||||||||||||||||||||||
| Bonds, mortgages and other long-term debt | 3 | 20 | ||||||||||||||||||||||
| Indebtedness to related parties, noncurrent | 3 | 19 | ||||||||||||||||||||||
In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments:
| - | Accounts receivable – carrying amount approximated fair value due to their short-term nature. |
| - | Accounts payable – carrying amount approximated fair value due to their short-term nature. |
| - | Indebtedness to related parties, current – carrying amount approximated fair value. |
| - | Bonds, mortgages and other long-term debt - carrying amount approximated fair value. |
| - | Indebtedness to related parties, noncurrent - carrying amount approximated fair value. |
Note 7. Business combination
Reverse Acquisition
On January 1, 2023, SEALSQ Corp., then a so-called empty shell private company with no operating activities that was not considered a business under US GAAP standards, acquired WISeKey Semiconductors SAS, a private operating company. Before this acquisition, both companies were wholly owned by WISeKey. This transaction being a capital transaction in substance, it qualifies as a reverse acquisition that is considered a recapitalization whereby SEALSQ Corp. is the legal acquirer and accounting acquiree, whereas WISeKey Semiconductors SAS is the legal acquiree and accounting acquirer. In accordance with ASC 805-40 (Reverse acquisition), the condensed consolidated financial statements are therefore issued by the legal parent, SEALSQ Corp., but are considered to be the continuation of the financial statements of the legal subsidiary, WISeKey Semiconductors SAS.
In line with ASC 805-40, comparative information in SEALSQ’s condensed consolidated financial statements relate to WISeKey Semiconductors SAS and not to the non-operating SEALSQ Corp. until the date of the transaction. The assets and liabilities of the accounting acquiree, SEALSQ Corp., have been consolidated from January 1, 2023. No goodwill arose as a result of the transaction. The consolidated statement of comprehensive losses includes the results of SEALSQ Corp. from January 1, 2023.
F-11
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
The major classes of assets and liabilities acquired by the accounting acquirer, WISeKey Semiconductors SAS, are as follows:
Business Combination - Schedule of Assets and Liabilities Acquired
| USD'000 | As at December 31, 2022 | |||
| ASSETS | ||||
| TOTAL ASSETS | ||||
| LIABILITIES | ||||
| Indebtedness to related parties, current | ||||
| Total current liabilities | ||||
| TOTAL LIABILITIES | ||||
| Commitments and contingent liabilities | ||||
| SHAREHOLDERS' EQUITY | ||||
| Common stock | ||||
| USD par value | ||||
| Authorized, issued and outstanding - shares | ||||
| Additional paid-in capital | ||||
| Accumulated deficit | ( | ) | ||
| Total shareholders'equity | ( | ) | ||
| TOTAL LIABILITIES AND EQUITY | ||||
The reverse acquisition resulted in a net debit adjustment to total stock equity of USD corresponding to the net assets acquired.
Note 8. Cash and cash equivalents
Cash consists of deposits held at major banks.
Note 9. Accounts receivable
The breakdown of the accounts receivable balance is detailed below:
Accounts Receivable - Schedule of Accounts Receivable
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Trade accounts receivable | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable from underwriters, promoters, and employees | ||||||||
| Total accounts receivable net of allowance for doubtful accounts | ||||||||
Note 10. Inventories
Inventories consisted of the following:
Inventories - Schedule of Inventories, Current
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Raw materials | ||||||||
| Work in progress | ||||||||
| Total inventories | ||||||||
F-12
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 11. Other current assets
Other current assets consisted of the following:
Other Current Assets - Schedule of Other Current Assets
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Value-Added Tax Receivable | ||||||||
| Advanced payment to suppliers | ||||||||
| Deposits, current | ||||||||
| Total other current assets | ||||||||
Note 12. Deferred tax credits
WISeKey Semiconductors SAS is eligible for research
tax credits provided by the French government (see Note 4 Summary of significant accounting policies). As at June 30, 2023 and December
31, 2022, the receivable balances in respect of these research tax credits owed to the Group were respectively USD
Note 13. Property, plant and equipment
Property, plant and equipment, net consisted of the following.
Property, Plant and Equipment - Schedule of Property, Plant and Equipment
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Machinery & equipment Machinery & Equipment | ||||||||
| Office equipment and furniture Office Equipment and Furniture | ||||||||
| Computer equipment and licences Computer Equipment and Licenses | ||||||||
| Total property, plant and equipment gross | ||||||||
| Accumulated depreciation for: | ||||||||
| Machinery & equipment | ( | ) | ( | ) | ||||
| Office equipment and furniture | ( | ) | ( | ) | ||||
| Computer equipment and licences | ( | ) | ( | ) | ||||
| Total accumulated depreciation | ( | ) | ( | ) | ||||
| Total property, plant and equipment, net | ||||||||
| Depreciation charge for the 6 months to June 30, | ||||||||
In the six months ended June 30, 2023 and in 2022, SEALSQ Corp. did not identify any events or changes in circumstances indicating that the carrying amount of any asset may not be recoverable. As a result, the Group did not record any impairment charge on Property, plant and equipment in the six months ended June 30, 2023 and in the year ended December 31, 2022.
Software
Production Tools
The useful economic life of property plant and equipment is as follow:
| · | Office equipment and furniture: | to years |
| · | Production masks | years |
| · | Production tools | years |
| · | Licenses | years |
| · | Software | year |
F-13
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 14. Intangible assets
Intangible assets and future amortization expenses consisted of the following:
Intangible Assets - Schedule of Finite-Lived Intangible Assets
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Intangible assets subject to amortization: | ||||||||
| Patents | ||||||||
| License agreements | ||||||||
| Other intangibles | ||||||||
| Total intangible assets gross | ||||||||
| Accumulated amortization for: | ||||||||
| Patents Patents | ( | ) | ( | ) | ||||
| License agreements License Agreements | ( | ) | ( | ) | ||||
| Other intangibles Other Intangibles | ( | ) | ( | ) | ||||
| Total accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets subject to amortization, net Total Intangible Assets Subject to Amortization, Net | ||||||||
| Total intangible assets, net | ||||||||
| Amortization charge for the 6 months to June 30, | ||||||||
The useful economic life of intangible assets is as follow:
| · | Patents: | to years |
| · | License agreements: | to years |
| · | Other intangibles: | years |
Note 15. Leases
The Group has historically entered into a number of lease arrangements under which it is the lessee. As at June 30, 2023, the SEALSQ Group holds four operating leases. The operating leases relate to premises. We do not sublease. All of our operating leases include multiple optional renewal periods which are not reasonably certain to be exercised.
During the six months ended June 30, 2023 and 2022 we recognized rent expenses associated with our leases as follows:
Leases - Schedule of Lease Costs
| 6 months ended June 30, | ||||||||
| USD'000 | 2023 (unaudited) | 2022 (unaudited) | ||||||
| Operating lease cost: | ||||||||
| Fixed rent expense | ||||||||
| Short-term lease cost | ||||||||
| Net lease cost | ||||||||
| Lease cost - Cost of sales Cost of Sales | ||||||||
| Lease cost - General & administrative expenses General & Administrative Expenses | ||||||||
| Net lease cost | ||||||||
In the six months ended June 30, 2023 and the year ended December 31, 2022, we had the following cash and non-cash activities associated with our leases:
Leases - Schedule of Cash and Non-Cash Activities Associated with Leases
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | ||||||||
| Non-cash investing and financing activities : | ||||||||
| Net lease cost | ||||||||
| Additions to ROU assets obtained from: | ||||||||
| New operating lease liabilities | ||||||||
F-14
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
The following table provides the details of right-of-use assets and lease liabilities as of June 30, 2023:
Leases - Schedule of Right-Of-Use Assets and Lease Liabilities
| As at June 30, 2023 | ||||
| USD'000 | ||||
| Right-of-use assets: | ||||
| Operating leases | ||||
| Total right-of-use assets | ||||
| Lease liabilities: | ||||
| Operating leases | ||||
| Total lease liabilities | ||||
As at June 30, 2023, future minimum annual lease payments were as follows, which corresponds to the future minimum lease payments under legacy ASC 840 in line with ASU 2018-11.
Leases - Schedule of Future Minimum Lease Payments
Other Liabilities
| USD'000 | USD'000 | USD'000 | USD'000 | |||||||||||||
| Year | Operating | Short-term | Finance | Total | ||||||||||||
| 2023 | ||||||||||||||||
| 2024 | ||||||||||||||||
| 2025 | ||||||||||||||||
| 2026 | ||||||||||||||||
| 2027 and beyond | ||||||||||||||||
| Total future minimum operating and short-term lease payments | ||||||||||||||||
| Less effects of discounting | ( | ) | ( | ) | ||||||||||||
| Lease liabilities recognized | ||||||||||||||||
As of June 30, 2023 the weighted-average remaining
lease term was
For our operating leases, we calculated an estimate
rate based upon the estimated incremental borrowing rate of the entity holding the lease. The weighted average discount rate associated
with operating leases as of June 30, 2023 was
Note 16. Other noncurrent assets
Other noncurrent assets consisted of noncurrent deposits. Deposits are primarily made up of rental deposits on the premises rented by the Group.
Note 17. Accounts payable
The accounts payable balance consisted of the following:
Accounts Payable - Schedule of Accounts Payable
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Trade creditors | ||||||||
| Accounts payable to shareholders | ||||||||
| Accounts payable to underwriters, promoters, and employees | ||||||||
| Other accounts payable | ||||||||
| Total accounts payable | ||||||||
Accounts payable to shareholders consist of short-term payables due to WISeKey International Holding AG in relation to interest on outstanding loans and the recharge of management services (se Notes 19 and 31).
Accounts payable to underwriters, promoters and employees consist primarily of payable balances to employees in relation to holidays, bonus and 13th month accruals across the Group.
Other accounts payable are mostly accruals of social charges in relation to the accrued liability to employees.
F-15
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 18. Other current liabilities
Other current liabilities consisted of the following:
Other Current Liabilities - Schedule of Other Current Liabilities
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Other tax payable | ||||||||
| Customer contract liability, current | ||||||||
| Other current liabilities | ||||||||
| Total other current liabilities | ||||||||
Note 19. Indebtedness to related parties
WISeKey International Holding AG
On October 1, 2016, the SEALSQ Group entered into a Revolving Credit Agreement (the “Revolving Credit”) with its parent WISeKey International Holding AG to borrow funds within a credit period starting on October 1, 2016 and ending on December 31, 2017 when all outstanding funds would become immediately due and payable. Outstanding loan amounts under the Revolving Credit bore an interest rate of 3% per annum. Repayments before the end of the credit period were permitted. On November 1, 2017, the Group and WISeKey entered into the First Amendment to the Revolving Credit Agreement extending the credit period by 2 years to December 31, 2019. On March 16, 2021, the Group and WISeKey entered into the Second Amendment to the Revolving Credit Agreement extending the credit period by another 2 years to December 31, 2022. On November 1, 2022, the Group and WISeKey entered into the Third Amendment to the Revolving Credit Agreement pursuant to which the interest rate was amended to 2.5% per annum.
On April 1, 2019, the SEALSQ Group entered into
a loan agreement with WISeCoin AG, an affiliate of WISeKey, pursuant to which WISeCoin AG commits to loan EUR
On October 1, 2019, the SEALSQ Group entered into
a loan agreement with WISeCoin AG pursuant to which WISeCoin AG commits to loan USD
On November 12, 2020, WISeKey provided a Funding
Commitment to extend shareholder loans (each the “Shareholder Loan”) to the Group for a maximum aggregate amount of
USD million
On April 1, 2021, the Group entered into a Debt
Remission Agreement (the “Debt Remission”) with WISeKey pursuant to which an outstanding amount of EUR
On June 28, 2021, the Group entered into a Debt
Transfer Agreement with its parent, WISeKey, and an affiliate of WISeKey, WISeKey SA, pursuant to which WISeKey extended a loan of USD
On December 31, 2021, the Group entered into a
Debt Transfer Agreement with WISeKey pursuant to which WISeKey extended a loan of USD
On June 30, 2022, the Group entered into a Debt
Transfer Agreement with WISeKey pursuant to which WISeKey extended a loan of USD
On August 31, 2022, the Group entered into a Debt
Transfer Agreement with WISeKey and WISeKey SA pursuant to which WISeKey extended a loan of USD
On December 15, 2022, and in view of the negative
equity position of the Group, WISeKey as then sole shareholder of the SEALSQ Group resolved to recapitalize the Group by forfeiting EUR
F-16
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Because of the requirement under French law, we
analyzed the amendment of the maturity of the loans and Revolving Credit as being part of the substance of the recapitalization transaction.
We assessed the recapitalization as a capital transaction between related parties in line with ASC 470-50 and, therefore, in the
year ended December 31, 2022, recorded a credit entry of USD
On December 31, 2022, the Group entered into a
Debt Transfer Agreement with WISeKey pursuant to which WISeKey extended a loan of USD
As at December 31, 2022, the Group owed WISeKey
USD
On January 1, 2023, the SEALSQ Group entered into
a loan agreement with WISeKey (the “New Loan”) which replaced all outstanding loan agreements. Per the terms of the
New Loan, WISeKey extended a loan to the SEALSQ Group of up to USD
All entities in the SEALSQ Group are subject to management fees from WISeKey and WISeKey’s affiliates. Where the payment terms have been defined, the classification between current and noncurrent follows the payment terms, however, where there is no set payment date for these fees, they have been classified as noncurrent.
As at June 30, 2023, the Group owed WISeKey and
WISeKey’s affiliates noncurrent debts in an aggregate amount of USD
As at June 30, 2023, the Group also held an accounts
payable balance of USD
Note 20. Bonds, mortgages and other long-term debt
Production Capacity Investment Loan Agreement
In November 2022, SEALSQ entered into a loan agreement
with a third-party client to borrow funds for the purpose of increasing their production capacity. Under the terms of the Agreement,
the client has lent to SEALSQ a total of USD
At inception in November 2022, a debt discount
totaling USD
As of June 30, 2023, SEALSQ has not repaid any
amount. The Group recorded a debt discount amortization expense of USD
As at June 30, 2023, the loan balance remains
USD
Note 21. Employee benefit plans
Defined benefit post-retirement plan
As of June 30, 2023, the Group maintained one defined benefit post retirement plan for the employees of WISeKey Semiconductors SAS.
The plan is and was considered a defined benefit plan and accounted for in accordance with ASC 715 Compensation – Retirement Benefits. This model allocates pension costs over the service period of employees in the plan. The underlying principle is that employees render services ratably over this period, and therefore, the income statement effects of pensions should follow a similar pattern. ASC 715 requires recognition of the funded status or difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the balance sheet, with a corresponding adjustment recorded in the net loss. If the projected benefit obligation exceeds the fair value of the plan assets, then that difference or unfunded status represents the pension liability.
The Group records net service cost as an operating expense and other components of defined benefit plans as a non-operating expense in the statement of comprehensive loss.
The liabilities and annual income or expense of the pension plan are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the long-term rate of asset return (based on the market-related value of assets). The fair value of plan assets is determined based on prevailing market prices.
F-17
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
The defined benefit pension plan maintained by WISeKey Semiconductors SAS, and their obligations to employees in terms of retirement benefits, is limited to a lump sum payment based on remuneration and length of service, determined for each employee. The plan is not funded.
The pension liability calculated as at June 30, 2023 is based on annual personnel costs and assumptions as of December 31, 2022.
The expected future cash flows to be paid by the Group for employer contribution for the year ended December 31, 2023, are USD 26,000.
| Movement in Funded Status | 6 months ended June 30, | |||||||
| USD'000 | 2023 | 2022 | ||||||
| Net Service cost | ||||||||
| Interest cost/(credit) | ||||||||
| Settlement / curtailment cost / (credit) | ||||||||
| Total Net Periodic Benefit Cost/(credit) | ||||||||
| Employer contributions paid in the period | ( | ) | ( | ) | ||||
| Total Cashflow | ( | ) | ( | ) | ||||
Note 22. Commitments and contingencies
Lease commitments
The future payments due under leases are shown in Note 15.
Guarantees
Our software and hardware product sales agreements generally include certain provisions for indemnifying customers against liabilities if our products infringe a third party’s intellectual property rights. Certain of our product sales agreements also include provisions indemnifying customers against liabilities in the event we breach confidentiality or service level requirements. It is not possible to determine the maximum potential amount under these indemnification agreements due to our lack of history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our condensed consolidated financial statements.
Note 23. Stockholders’ equity
Stockholders’ equity consisted of the following:
Stockholders' Equity - Schedule of Stock by Class
| SEALSQ Corp. | WISeKey Semiconductors SAS | |||||||||||||||
| As at June 30, 2023 | As at December 31, 2022 | |||||||||||||||
| Share Capital | Ordinary shares | F shares | In equivalent ordinary shares | In equivalent F shares | ||||||||||||
| Par value per share | USD | USD | USD | USD | ||||||||||||
| Share capital (in USD) | ||||||||||||||||
| Total number of authorized shares | ||||||||||||||||
| Total number of fully paid-in issued shares | ||||||||||||||||
| Total number of fully paid-in outstanding shares | ||||||||||||||||
| Total share capital (in USD) | ||||||||||||||||
On May 23, 2023, the ordinary shares of the SEALSQ Group were listed on the Nasdaq Global Market.
F-18
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 24. Revenue
Nature of goods and services
The following is a description of the principal activities from which the Group generates its revenue.
The Group recognizes revenue when a customer takes possession of the chips, which usually occurs when the goods are delivered. Customers typically pay once goods are delivered.
Disaggregation of revenue
The following table shows the Group’s revenues disaggregated by product or service type:
Revenue - Schedule of Disaggregation of Revenue
At One Point in Time
| At one point in time | Total | |||||||||||||||||
| Disaggregation of revenue (unaudited) | Revenue recognized | 6 months ended June 30, | 6 months ended June 30, | |||||||||||||||
| USD'000 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Secure Microcontrollers Segment | ||||||||||||||||||
| Secure chips | Upon delivery | |||||||||||||||||
| Total Secure Microcontrollers segment revenue | ||||||||||||||||||
| All Other Segment | ||||||||||||||||||
| Secure chips | Upon delivery | |||||||||||||||||
| Total All Other segment revenue | ||||||||||||||||||
| Total Revenue | ||||||||||||||||||
For the six months ended June 30, 2023 and 2022, the Group recorded no revenues related to performance obligations satisfied in prior periods.
The following table shows the Group’s revenues disaggregated by geography, based on our customers’ billing addresses:
Revenue - Schedule of Disaggregation of Revenue by Geographic Areas
Rest of EMEA
North America
Asia Pacific
Latin America
France
| Net sales by region (unaudited) | 6 months ended June 30, | |||||||
| USD'000 | 2023 | 2022 | ||||||
| Secure Microcontrollers Segment | ||||||||
| France | ||||||||
| Rest of EMEA | ||||||||
| North America | ||||||||
| Asia Pacific | ||||||||
| Latin America | ||||||||
| Total Secure Microcontrollers segment revenue | ||||||||
| All Other Segment | ||||||||
| France | ||||||||
| Rest of EMEA | ||||||||
| North America | ||||||||
| Asia Pacific | ||||||||
| Total All Other segment revenue | ||||||||
| Total net sales | ||||||||
| *EMEA means Europe, Middle East and Africa | ||||||||
F-19
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Contract assets, deferred revenue and contract liability
Our contract assets, deferred revenue and contract liability consist of:
Revenue - Schedule of Contract Assets, Deferred Revenue and Contract Liability
| As at June 30, | As at December 31, | |||||||
| USD'000 | 2023 (unaudited) | 2022 | ||||||
| Trade accounts receivables | ||||||||
| Trade accounts receivable - Secure Microcontrollers Segment | ||||||||
| Trade accounts receivable - All Other Segment | ||||||||
| Total trade accounts receivables | ||||||||
| Contract liabilities - current | ||||||||
| Total contract liabilities | ||||||||
| Revenue recognized in the period from amounts included in the deferred revenue at the beginning of the year | ||||||||
Increases or decreases in trade accounts receivable, contract assets, deferred revenue and contract liability were primarily due to normal timing differences between our performance and customer payments.
Remaining performance obligations
As of June 30, 2023, approximately USD
Note 25. Other operating income
The other operating income relates to a liability written off after expiry of the statute of limitation.
Note 26. Non-operating income
Non-operating income consisted of the following:
Non-Operating Income - Schedule of Non-Operating Income
| Unaudited 6 months ended June 30, | ||||||||
| USD'000 | 2023 | 2022 | ||||||
| Foreign exchange gain | ||||||||
| Interest income | ||||||||
| Total non-operating income | ||||||||
Note 27. Non-operating expenses
Non-operating expenses consisted of the following:
Non-Operating Expenses - Schedule of Non-Operating Expenses
| Unaudited 6 months ended June 30, | ||||||||
| USD'000 | 2023 | 2022 | ||||||
| Foreign exchange losses | ||||||||
| Financial charges | ||||||||
| Interest expense | ||||||||
| Other | ||||||||
| Total non-operating expenses | ||||||||
F-20
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 28. Segment reporting
The Group has one operating segment that meets the criteria set in ASC 280-10-50: Secure Microcontrollers. The Group’s chief operating decision maker, who is its Chief Executive Officer, reviews financial performance of this operating segment for purposes of allocating resources and assessing budgets and performance.
The remaining non-reportable operating segments and other business activities that are not identified as operating segments are combined and disclosed in an “all other” standalone category.
The Secure Microcontrollers segment encompasses the design, manufacturing, sales and distribution of high-end, Common Criteria EAL5+ & FIPS 140-3-certified secure microprocessors.
| 6 months ended June 30, | 2023 (unaudited) | 2022 (unaudited) | ||||||||||||||||||||||
| USD'000 | Secure Microcontrollers | All Other | Total | Secure Microcontrollers | All Other | Total | ||||||||||||||||||
| Revenues from external customers | ||||||||||||||||||||||||
| Intersegment revenues | ||||||||||||||||||||||||
| Interest revenue | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Segment income /(loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Profit / (loss) from intersegment sales | ||||||||||||||||||||||||
| Income tax recovery /(expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Segment assets | ||||||||||||||||||||||||
| 6 months ended June 30, | 2023 | 2022 | ||||||
| USD'000 | USD'000 | |||||||
| Revenue reconciliation | ||||||||
| Total revenue for reportable segment | ||||||||
| Elimination of intersegment revenue Intersegment | ( | ) | ( | ) | ||||
| Total consolidated revenue | ||||||||
| Loss reconciliation | ||||||||
| Total profit / (loss) from reportable segments | ( | ) | ( | ) | ||||
| Elimination of intersegment profits | ( | ) | ( | ) | ||||
| Income /(Loss) before income taxes | ( | ) | ( | ) | ||||
| As at June 30, | 2023 | 2022 | ||||||
| USD'000 | USD'000 | |||||||
| Asset reconciliation | ||||||||
| Total assets from reportable segments Reportable Segments | ||||||||
| Elimination of intersegment receivables Intersegment | ( | ) | ( | ) | ||||
| Consolidated total assets | ||||||||
F-21
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Revenue and property, plant and equipment by geography
The following tables summarize geographic information for net sales based on the billing address of the customer, and for property, plant and equipment.
Segment Reporting - Schedule of Revenue and Property, Plant and Equipment by Geography
| Net sales by region | 6 months ended June 30, | |||||||
| USD'000 | 2023 (unaudited) | 2022 (unaudited) | ||||||
| France | ||||||||
| Rest of EMEA* | ||||||||
| North America | ||||||||
| Asia Pacific | ||||||||
| Latin America | ||||||||
| Total net sales | ||||||||
| * EMEA means Europe, Middle East and Africa | ||||||||
| Property, plant and equipment, net of depreciation, by region | As at June 30, | As at December 31, | ||||||
| USD'000 | 2023 | 2022 | ||||||
| France | ||||||||
| Total Property, plant and equipment, net of depreciation | ||||||||
Earnings/(Loss) Per Share - Schedule of Earnings Per Shares, Basic and Diluted
| 6 months ended June 30, | ||||||||
| Earnings / (loss) per share | 2023 (unaudited) | 2022 (unaudited) | ||||||
| Net income (USD'000) | ( | ) | ( | ) | ||||
| Effect of potentially dilutive instruments on net gain (USD'000) | n/a | n/a | ||||||
| Net income / (loss) after effect of potentially dilutive instruments (USD'000) | (875 | ) | (183 | ) | ||||
| Ordinary shares used in net earnings / (loss) per share computation: | ||||||||
| Weighted average shares outstanding - basic | ||||||||
| Effect of potentially dilutive equivalent shares | n/a | n/a | ||||||
| Weighted average shares outstanding - diluted | ||||||||
| Net earnings / (loss) per ordinary share | ||||||||
| Basic weighted average loss per share (USD) | ( | ) | ( | ) | ||||
| Diluted weighted average loss per share (USD) | ( | ) | ( | ) | ||||
| F shares used in net earnings / (loss) per share computation: | ||||||||
| Weighted average shares outstanding - basic | ||||||||
| Effect of potentially dilutive equivalent shares | n/a | n/a | ||||||
| Weighted average shares outstanding - diluted | ||||||||
| Net earnings / (loss) per F share | ||||||||
| Basic weighted average loss per share (USD) | ( | ) | ( | ) | ||||
| Diluted weighted average loss per share (USD) | ( | ) | ( | ) | ||||
F-22
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 30. Legal proceedings
We are currently not party to any legal proceedings and claims that are not provided for in our financial statements.
Note 31. Related parties disclosure
Subsidiaries
As at June 30, 2023, the condensed consolidated financial statements of the Group include the entities listed in the following table:
Related Parties Disclosure - Schedule of Subsidiary/Parent Ownership Interest
| Group Company Name | Country of incorporation | Year of incorporation | Share Capital | % ownership as at June 30, 2023 |
% ownership as at December 31, 2022 |
Nature of business | ||||||
| WISeKey Semiconductors SAS | EUR |
|||||||||||
| WISeKey IoT Japan KK | JPY |
|||||||||||
| WISeKey IoT Taiwan | TWD |
Related party transactions and balances
| Receivables as at | Payables as at | Net expenses to | Net income from | |||||||||||||||||||||||||||||||
| Related Parties | June 30, | December 31, | June 30, | December 31, | in the 6 months ended June 30, | in the 6 months ended June 30, | ||||||||||||||||||||||||||||
| (in USD'000) | 2023 (unaudited) | 2022 | 2023 (unaudited) | 2022 | 2023 (unaudited) | 2022 (unaudited) | 2023 (unaudited) | 2022 (unaudited) | ||||||||||||||||||||||||||
| 1 | WISeKey International Holding AG | |||||||||||||||||||||||||||||||||
| 2 | WISeKey USA Inc | |||||||||||||||||||||||||||||||||
| 3 | WISeKey Semiconductors GmbH | |||||||||||||||||||||||||||||||||
| 4 | WISeCoin AG | |||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||
1. The SEALSQ Group is 90%-owned by WISeKey International Holding AG, which provides financing and management services, including, but not limited to, sales and marketing, accounting, finance, legal, taxation, business and strategy consulting, public relations, marketing, risk management, information technology and general management. The expenses in relation to WISeKey International Holding AG for the six months ended June 30, 2023 and 2022 relate to interest on outstanding loans and the recharge of management services.
2. WISeKey USA Inc is part of the group headed by WISeKey International Holding AG (the “WISeKey Group”)and employs sales staff who work for the SEALSQ Group. The expenses in relation to WISeKey USA Inc. in the six months ended June 30, 2023 and 2022 relate to the recharge of employee costs.
3. WISeKey Semiconductors GmbH is part of the WISeKey Group and employs sales staff who work for the SEALSQ Group. The expenses in relation to WISeKey Semiconductors GmbH in the six months ended June 30, 2023 and 2022 relate to the recharge of employee costs.
4. WISeCoin AG is part of the WISeKey Group. The expenses recorded in the six months ended June 30, 2023 and 2022 relate to interest on an outstanding loan.
Note 32. Subsequent events
Capital Increase
On July 10, 2023, the Group issued new ordinary shares to a shareholder as a result of a share ledger correction.
Subsequent Event
Private Placement
Securities Purchase Agreement
On July 11, 2023, the Group entered into a Securities
Purchase Agreement with L1 Capital Global Opportunities Master Fund Ltd. and Anson Investments Master Fund LP (each the “Investor”,
together the “Investors”) pursuant to which the Investors may enter into a private placement of up to a maximum amount of
USD
The first tranche for a total of USD
The funding of the Second Tranche is, inter alia, subject to the mutual consent of the Group and each Investor.
F-23
| SEALSQ Corp. | Condensed Consolidated Financial Statements as at June 30, 2023 |
Note 33. Business Update Related to COVID-19
In March 2020, the World Health Organization declared the Coronavirus (COVID-19) a pandemic. The outbreak spread quickly around the world, including in every geography in which the Group operates. The pandemic has created uncertainty around the impact of the global economy and has resulted in impacts to the financial markets and asset values. Governments implemented various restrictions around the world, including closure of non-essential businesses, travel, shelter-in-place requirements for citizens and other restrictions.
The Group took a number of precautionary steps to safeguard its businesses and colleagues from COVID-19, including implementing travel restrictions, working from home arrangements and flexible work policies. The Group has now returned to offices around the world. We continue to prioritize the safety and well-being of our colleagues.
The Group’s major production centers, located in Taiwan and Vietnam, were quick to implement controls and safeguards around their processes that enabled us to continue delivering products with minimal interruption to our clients. In the six months to June 30, 2023, the impact upon the Group has been very limited and we remain confident that we are able to, and will be able to, fulfil all current and future client orders.
Currently the Group remains able to meet its commitments and does not foresee any significant challenges in the near future. The Group currently does not anticipate any material impact on its liquidity position in future periods nor on its outlook.
At this stage it remains impossible to predict the extent of the impact of the COVID-19 pandemic on future periods as this will depend on numerous evolving factors and future developments that the Group is not able to predict.
Note 34. Impacts of the war in Ukraine
Following the outbreak of the war in Ukraine in late February 2022, several countries imposed sanctions on Russia, Belarus and certain regions in Ukraine. There has been an abrupt change in the geopolitical situation, with significant uncertainty about the duration of the conflict, changing scope of sanctions and retaliation actions including new laws.
The SEALSQ group does not have any operation or customer in Russia, Belarus or Ukraine, and, as such, does not foresee any direct impact of the war on its operations. However, the war has also contributed to an increase in volatility in currency markets, energy prices, raw material and other input costs, which may impact the Group’s supply chain in the future.
As at June 30, 2023, SEALSQ has assessed the consequences of the war for its financial disclosures and considered the impacts on key judgments and significant estimates, and has concluded that no changes were required. SEALSQ will continue to monitor these areas of increased risk for material changes.
F-24