Sequans Communications 6-K, filed Nov 16, 2020

Sequans Communications (SQNS)

6-K 2020-11-16 For: 2020-09-30

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Added on April 10, 2026

About this 6-K

Sequans Communications filed this 6-K on November 16, 2020.

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FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements at September 30, 2020 and for the nine months ended September 30, 2019 and 2020

a) Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2019 and 2020						4

b) Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2019 and 2020						5

c) Unaudited Condensed Consolidated Statements of Financial Position at December 31, 2019 and at September 30, 2020						6

d) Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) for the nine months ended September 30, 2019 and 2020						7

e) Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2020						9

f) Notes to the Unaudited Condensed Consolidated Financial Statements						10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						27


		Nine months ended September 30,
	Note	2019		2020
		(in thousands, except ADS and per ADS amounts)
Revenue:
Product revenue		$	16,093	$	25,855
Other revenue		4,805		9,270
Total revenue	3	20,898		35,125
Cost of revenue:
Cost of product revenue		12,169		17,449
Cost of other revenue		1,450		1,340
Total cost of revenue		13,619		18,789
Gross profit		7,279		16,336
Operating expenses:
Research and development	4	18,135		22,917
Sales and marketing		6,104		5,909
General and administrative		6,446		6,763
Total operating expenses		30,685		35,589
Operating loss		(23,406)		(19,253)
Financial income (expense):
Interest expense	5	(6,488)		(11,037)
Interest income		5		206
Change in fair value of convertible debt derivative	15	—		(13,240)
Convertible debt amendment	15	—		1,399
Foreign exchange gain (loss), net		893		(715)
Loss before income taxes		(28,996)		(42,640)
Income tax expense (benefit)	6	(409)		575
Loss		$	(28,587)	$	(43,215)
Attributable to:
Shareholders of the parent		$	(28,587)	$	(43,215)
Non-controlling interests		—		—
Basic earnings (loss) per ADS		$	(1.20)	$	(1.59)
Diluted earnings (loss) per ADS		$	(1.20)	$	(1.59)
Weighted average number of ADS used for computing:
Basic per ADS		23,736,950		27,120,905
Diluted per ADS		23,736,950		27,120,905


	Nine months ended September 30,
	2019		2020
	(in thousands)
Loss for the period	$	(28,587)	$	(43,215)
Other comprehensive income (loss)
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods :
Net gain (loss) on cash flow hedge	(18)		(58)
Exchange differences on translation of foreign operations	(42)		(50)
Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods	(60)		(108)
Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods :
Re-measurement gains (losses) on defined benefit plans	(21)		(35)
Net other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods	(21)		(35)
Total other comprehensive income (loss)	(81)		(143)
Total comprehensive loss	$	(28,668)	$	(43,358)
Attributable to:
Shareholders of the parent	$	(28,668)	$	(43,358)
Non-controlling interests	—		—


		Note	At December 31, 2019		At September 30, 2020
			(in thousands)
ASSETS
Non-current assets:
	Property, plant and equipment		$	8,858	$	8,748
	Intangible assets	7	16,696		24,618
	Deposits and other receivables		401		449
	Other non-current financial assets		335		349
	Total non-current assets		26,290		34,164
Current assets:
	Inventories	8	6,664		5,801
	Trade receivables	9	8,390		14,084
	Contract assets	9	1,587		1,028
	Prepaid expenses	20	901		1,226
	Other receivables		2,253		4,367
	Research tax credit receivable	4	3,132		3,287
	Short-term deposits	10	—		14,900
	Cash and cash equivalents	10	14,098		10,385
	Total current assets		37,025		55,078
	Total assets		$	63,315	$	89,242
EQUITY AND LIABILITIES
Equity:
	Issued capital euro 0.02 nominal value, 121,248,638 ordinary shares, issued and outstanding at September 30, 2020 (95,587,146 at December 31, 2019)	11	$	2,403	$	2,962
	Share premium	11	233,720		262,641
	Other capital reserves	12 . 14	43,656		41,012
	Accumulated deficit		(308,733)		(351,948)
	Other components of equity		(607)		(750)
	Total equity		(29,561)		(46,083)
Non-current liabilities:
	Government grant advances and loans	13	6,150		11,148
	Venture debt	14	7,071		3,469
	Convertible debt	15	23,342		34,984
	Convertible debt embedded derivative	15	—		18,506
	Lease liabilities	17	3,204		3,978
	Trade payables	19	1,139		1,050
	Provisions	18	1,905		1,885
	Deferred tax liabilities	6 . 19	429		18
	Contract liabilities	19	11,572		4,341
	Total non-current liabilities		54,812		79,379
Current liabilities:
	Trade payables		8,834		17,204
	Interest-bearing receivables financing	16	4,068		14,449
	Venture debt	14	5,109		5,694
	Convertible debt	15	7,329		—
	Lease liabilities	17	900		806
	Government grant advances and loans		1,472		3,026
	Contract liabilities	19	5,812		8,018
	Other current liabilities and provisions	18	4,540		6,749
	Total current liabilities		38,064		55,946
	Total equity and liabilities		$	63,315	$	89,242


		Attributable to the shareholders of the parent
		Ordinary shares			Share premium		Other capital reserves		Accumulated deficit		Cumulative translation adjustments		Accumulated other comprehensive income (loss)		Total equity
		Shares	Amount
		(Note 11)	(Note 11)		(Note 11)		(Note 11)
		(in thousands, except share and per share amounts)
At January 1, 2019		94,732,539	$	2,384	$	225,470	$	39,768	$	(272,036)	$	(368)	$	(237)	$	(5,019)
	Loss for the period								(28,587)						(28,587)
	Re-measurement gains (losses) on defined benefit plans												(21)		(21)
	Foreign currency translation										(42)				(42)
	Net gain on cash flow hedge												(18)		(18)
	Total comprehensive income (loss)								(28,587)		(42)		(39)		(28,668)
	Issue of shares in connection with the exercise of options and warrants, and vesting of restricted shares awards	430,663	10		(10)										—
	Warrants issued to a strategic partner in February 2019 (Note 11)				8,360										8,360
	Transaction costs				(91)										(91)
	Issuance of convertible debt (Note 15)						2,864								2,864
	Deferred tax effect of debt instruments with equity components (Note 6)						(776)								(776)
	Share-based payments						1,279								1,279
At September 30, 2019		95,163,202	$	2,394	$	233,729	$	43,135	$	(300,623)	$	(410)	$	(276)	$	(22,051)


The information in this Report on Form 6-K is being filed to furnish the registrant’s Unaudited Condensed Consolidated Financial Statements at September 30, 2020 and for the nine months ended September 30, 2020 and 2019 and the related Management’s Discussion and Analysis. The information in this report shall be incorporated by reference into each of the following Registration Statements under the Securities Act of 1933, as amended, of the registrant: Form S-8 (File Nos. 333-177919, 333-180487, 333-187611, 333-194903, 333-203539, 333-211011, 333-214444, 333-215911, 333-219430, 333-226458, 333-233473 and 333-239968) and Form F-3 (File No 333-221919).


	Nine months September 30,
	2019		2020
	(In thousands)
Product	$	16,093	$	25,855
License	350		—
Development and other services	4,455		9,270
Total revenue	$	20,898	$	35,125


Customer Customer Location	% of total revenues for the nine months ended September 30,			Trade receivables at
	2019		2020	September 30, 2020
A South Korea	18	%	45%	$7,205,850
B Taiwan	36	%	21%	$4,992,728
C United States of America	Less than 10%		20%	$—
D Taiwan	13	%	Less than 10%	$879,606


	Nine months ended September 30,
	2019		2020
	(in thousands)
Condensed Consolidated Statement of Operations
Current income tax expense	$	120	$	177
Deferred income tax expense (benefit)	(529)		398
Income tax expense (benefit) reported in the Condensed Consolidated Statement of Operations	$	(409)	$	575


	Capitalized development costs		Licenses		Total
	(in thousands)
Cost:
At December 31, 2019	$	10,737	$	20,818	$	31,555
Additions	3,997		8,239		12,236
Exchange difference	—		(6)		(6)
At September 30, 2020	$	14,734	$	29,051	$	43,785
Amortization and impairment:
At December 31, 2019	1,755		13,104		14,859
Amortization	1,125		3,189		4,314
Exchange difference	—		(6)		(6)
At September 30, 2020	$	2,880	$	16,287	$	19,167
Net book value:
At January 1, 2020	$	8,982	$	7,714	$	16,696
At September 30, 2020	$	11,854	$	12,764	$	24,618


	Year ended December 31, 2019		Nine months ended September 30, 2020
	(in thousands)
At January 1,	$	2,592	$	2,719
Charge for the period	515		64
Utilized amounts	(388)		—
Unutilized amounts	—		(43)
At period end	$	2,719	$	2,740


	Total		Neither past due nor Impaired		Past due but not impaired
					<30 days		30-60 days		60-120 days		>120 days
	(in thousands)
At December 31, 2019	$	9,977	$	6,265	$	2,125	$	130	$	371	$	1,086
At September 30, 2020	$	15,112	$	10,747	$	3,171	$	406	$	—	$	788


	Real-estate		IT and office equipment		Total
	(In thousands)
As at January 1, 2020	$	3,942	$	107	$	4,049
Additions	914		547		1,461
Disposals	(207)		(255)		(462)
Depreciation expenses	(958)		(196)		(1,154)
Amortization disposals	125		255		380
As at September 30, 2020	$	3,816	$	458	$	4,274


	Lease liabilities		Current		Non-current
	(In thousands)
As at January 1, 2020	$	4,104	$	900	$	3,204
Additions	1,409
Interest expense	487
Foreign exchange gain (loss)	111
Payments	(1,327)
As at September 30, 2020	$	4,784	$	806	$	3,978


	Post- employment benefits		Others		Total		Current		Non-current
	(in thousands)
At December 31, 2019	$	1,063	$	842	$	1,905	$	—	$	1,905
Arising during the period	121		381		502
Released (used) during the period	—		—		—
Released (unused) during the period	—		(292)		(292)

At September 30, 2020	$	1,184	$	931	$	2,115	$	230	$	1,885


			Nine months ended September 30,
			2019		2020
			(in thousands)
Operating activities:
	Loss before income taxes		$	(28,996)	$	(42,640)
	Non-cash adjustment to reconcile loss before tax to net cash used in operating activities:
		Amortization and impairment of property, plant and equipment	2,900		2,845
		Amortization and impairment of intangible assets	3,310		4,314
		Share-based payment expense	1,279		1,813
		Decrease in provisions	68		(55)
		Interest expense, net	6,483		10,831
		Change in fair value of convertible debt embedded derivative	—		13,240
		Convertible debt amendment	—		(1,399)
		Foreign exchange loss (gain)	(1,059)		1,200
		Loss on disposal of property, plant and equipment	(32)		—
		Bad debt expense	635		63
	Working capital adjustments:
		Decrease (Increase) in trade receivables and other receivables	2,031		(7,670)
		Decrease in inventories	839		863
		Decrease (Increase) in research tax credit receivable	1,376		716
		Increase (Decrease) in trade payables and other liabilities	466		5,762
		Decrease in contract liabilities	(631)		(7,564)
		Increase (Decrease) in government grant advances	245		12
	Income tax paid		(247)		(269)
Net cash flow used in operating activities			$	(11,333)	$	(17,938)
Investing activities:
	Purchase of intangible assets and property, plant and equipment		(2,888)		(5,073)
	Capitalized development expenditures		(3,537)		(4,776)
	Sale (Purchase) of financial assets		32		(62)
	Increase of short-term deposit		—		(14,900)
	Interest received		5		21
Net cash flow used in investing activities			$	(6,388)	$	(24,790)
Financing activities:
	Proceeds from issue of warrants, exercise of stock options/warrants		—		32
	Public equity offering proceeds, net of transaction costs paid		—		27,496
	Proceeds from issuing of warrants to a strategic partner, net of transaction costs paid		8,269		—
	Proceeds from (repayment of) interest-bearing receivables financing		(2,300)		10,381
	Proceeds from governments loans, net of transaction costs		—		5,392
	Proceeds from interest-bearing research project financing		1,126		405


	Nine months ended September 30,
	2019		2020
	(In thousands)
Asia:
Taiwan	$	10,276	$	7,557
Korea	3,700		15,840
China (including Hong Kong)	1,521		387
Rest of Asia	95		48
Total Asia	15,592		23,832
United States of America	4,951		9,427
Rest of world	355		1,866
Total revenue	$	20,898	$	35,125


	At December 31, 2019		At September 30, 2020
	(in thousands)
Components	$	2,645	$	1,724
Finished goods	4,702		4,765
Total inventories at cost	$	7,347	$	6,489
Depreciation of components	$	2	$	2
Depreciation of finished goods	681		686
Total depreciation	$	683	$	688
Components, net	$	2,643	$	1,722
Finished goods, at the lower of cost and net realizable value	4,021		4,079
Total net inventories	$	6,664	$	5,801



	At December 31, 2019		At September 30, 2020
	(in thousands)
U.S. dollar denominated accounts	$	13,702	$	21,006
Euro denominated accounts	301		4,033
GBP denominated accounts	37		58
SGP denominated accounts	12		59
NIS denominated accounts	19		97
RMB denominated accounts	11		13
Other currencies denominated accounts	16		19
Cash, cash equivalents and deposits	$	14,098	$	25,285


	At December 31, 2019		At September 30, 2020
	(in thousands)
Trade payables	$	1,139	$	1,050
Deferred tax liabilities	429		18
Contract liabilities:
License and development services agreement	11,249		4,341
Deferred revenue	323		—
Total contract liabilities	$	11,572	$	4,341


	At December 31, 2019
	Notional Amount		Fair value
	(in thousands)
Forward contracts (buy euros, sell U.S. dollars)	€	3,000	$	46
Total	€	3,000	$	46


	Nine months ended September 30,				Change
	2019		2020	%
	(Unaudited)
	(in thousands)
Revenue:
Product revenue	$	16,093	25,855	61		%
Other revenue	4,805		9,270	93
Total revenue	20,898		35,125	68
Cost of revenue:
Cost of product revenue	12,169		17,449	43
Cost of other revenue	1,450		1,340	(8)
Total cost of revenue	13,619		18,789	38
Gross profit	7,279		16,336	124
Operating expenses:
Research and development	18,135		22,917	26
Sales and marketing	6,104		5,909	(3)
General and administrative	6,446		6,763	5
Total operating expenses	30,685		35,589	16
Operating loss	(23,406)		(19,253)	(18)
Financial income (expense):
Interest income	5		206	4,020
Interest expense	(6,488)		(11,037)	70
Change in fair value of convertible debt derivative	—		(13,240)		100
Convertible debt amendment	—		1,399		100
Foreign exchange gain (loss)	893		(715)	(180)
Loss before income taxes	(28,996)		(42,640)	47
Income tax expense (benefit)	(409)		575	(241)
Loss	$	(28,587)	(43,215)


Exhibit number			Description
3.1			By-laws (statuts) of Sequans Communications S.A.(English translation), as amended on June 29, 2020
4.1			Deposit Agreement, dated May 14, 2018, among Sequans Communications S.A., The Bank of New York Mellon and owners and holders of American Depositary Shares