UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K


REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2017

Commission File Number: 001-35135

Sequans Communications S.A.
(Translation of Registrant’s name into English)

15-55 boulevard Charles de Gaulle
92700 Colombes, France
Telephone : +33 1 70 72 16 00
(Address of Principal Executive Office)


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 R Form 40-F £
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes £  No R
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes £  No R
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.  

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: Yes £  No R
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______________.







EXPLANATORY NOTE


On August 1, 2017, Sequans Communications S.A. issued a press release announcing its financial results for the second quarter ended June 30, 2017.  A copy of the press release is attached to this Form 6-K as Exhibit 99.1 and is incorporated herein by reference. 

Effective June 30, 2017, Sequans Communications S.A. amended the terms of the convertible notes issued April 15, 2015 and April 27, 2016 to increase the permitted level of secured indebtedness relating to a receivables facility or debt or letters of credit facilities from $10 million to $25 million. Copies of the amendments are attached to this Form 6-K as Exhibits 99.2, 99.3 and 99.4.









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.

 
 
 
 
 
 
SEQUANS COMMUNICATIONS S.A.  
(Registrant)
 
 
Date: August 1, 2017
By:
/s/ Deborah Choate
 
 
 
Deborah Choate
 
 
 
Chief Financial Officer
 
 





 
EXHIBIT INDEX
 
The following exhibit is filed as part of this Form 6-K:
 
Exhibit
Description
 
 
99.1
Press release dated August 1, 2017
99.2
Amendment to convertible promissory note dated April 15, 2015
99.3
Amendment to convertible promissory note dated April 27, 2016
99.4
Amendment to convertible promissory note dated April 27, 2016




LOGO.JPG

NEWS


Sequans Communications Announces Second Quarter 2017
Financial Results
PARIS - August 1, 2017 - 4G chipmaker Sequans Communications S.A. (NYSE: SQNS) today announced financial results for the second quarter ended June 30, 2017 .

Second Quarter 2017 Highlights:
Revenue: Revenue was $13.2 million , after a reduction of $740,000 related to a product return from an early 2016 tablet-related sale. Excluding the impact of the return, revenue would have been $14.0 million. Revenue for the second quarter of 2017 increased 6.3% compared to the first quarter of 2017 (12.3% without the impact of the return) and increased 33.7% compared to the second quarter of 2016 (41.2% without the impact of the return), reflecting increases in both product and other revenue.
   
Gross margin: Gross margin was 42.1% compared to 47.1% in the first quarter of 2017 and compared to 44.6% in the second quarter of 2016, reflecting an increase in the proportion of module sales in the product mix in the second quarter of 2017.

Operating loss: Operating loss was $4.1 million compared to an operating loss of $4.2 million in the first quarter of 2017 and an operating loss of $5.7 million in the second quarter of 2016.

Net loss: Net loss was $6.0 million , or ($0.08) per diluted share/ADS, compared to a net loss $5.6 million , or ($0.07) per diluted share/ADS, in the first quarter of 2017 and a net loss of $5.1 million , or ($0.09) per diluted share/ADS, in the second quarter of 2016.

Non-IFRS Net loss: Excluding the non-cash items of stock-based compensation and the fair-value (in 2016) and effective interest adjustments related to the convertible debt and other financings, non-IFRS net loss was $4.9 million , or ($0.06) per diluted share/ADS, compared to a non-IFRS net loss of $4.7 million , or ($0.06) per diluted share/ADS in the first quarter of 2017, and a non-IFRS net loss of $5.8 million , or ($0.10) per diluted share/ADS, in the second quarter of 2016.

Cash: Cash, cash equivalents and short-term deposit at June 30, 2017 totaled $19.5 million compared to $14.5 million at March 31, 2017, and does not reflect the net proceeds of approximately $3 million from government grants and research tax credit expected to be received in the third quarter of 2017.
In millions of US$ except percentages, shares and per share amounts
Key Metrics
Q2 2017

%*

Q1 2017

%*

Q2 2016

%*

Revenue

$13.2

 

$12.4

 

$9.9

 
Gross profit
5.6

42.1
 %
5.9

47.1
 %
4.4

44.6
 %
Operating loss
(4.1
)
(30.9
)%
(4.2
)
(34.2
)%
(5.7
)
(58.0
)%
Net loss
(6.0
)
(45.3
)%
(5.6
)
(45.1
)%
(5.1
)
(51.2
)%
Diluted EPS

($0.08
)
 

($0.07
)
 

($0.09
)
 
Weighted average number of diluted shares/ADS
75,896,815

 
75,043,865

 
59,280,702

 
Cash flow from (used in) operations
(4.4
)
 
(9.9
)
 
(4.2
)
 
Cash, cash equivalents and short-term deposit at quarter-end
19.5

 
14.5

 
7.5

 
 
 
 
 
 
 
 
Additional information on non-cash items:
 
 
 
 
 
 
 - Stock-based compensation included in operating result
0.3

 
0.3

 
0.2

 
 - Change in the fair value of convertible debt embedded derivative

 

 
(1.5
)
 
 - Non-cash interest on convertible debt and other financing
0.8

 
0.6

 
0.6

 
Non-IFRS diluted EPS (excludes stock-based compensation, fair value and effective interest adjustments related to the convertible and other debt and embedded derivative)

($0.06
)
 

($0.06
)
 

($0.10
)
 
 
 
 
 
 
 
 
* Percentage of revenue



Sequans reports second quarter 2017 financial results
Page 2

"We continue to make excellent progress," said Georges Karam, Sequans' CEO. "Business during Q2 was in line with our expectations and it's unfortunate that the optics were affected by an adjustment related to a sale made over a year ago in the discontinued tablet business. Our Cat 1 business is ramping nicely and our visibility continues to improve. Our Cat M1 customers, including an extensive list of module partners, are moving aggressively to complete their certification on Verizon and AT&T, and we are performing Cat M1 and Cat NB1 trials with multiple operators world-wide, setting the stage for accelerating growth next year. In the broadband business, we are a little cautious about some temporary softness in the emerging markets, but we also see a number of very exciting opportunities to augment the growth we expect from popular devices such as Verizon's JetPack and SmartHub.

"Our strategy of working closely with partners to combine their leading technology with ours in an optimized solution is being well-received by customers. We also continue to be approached by a growing number of potential partners to discuss various forms of cooperation, which further validates our leadership and positions us the LTE connectivity partner of choice."


Q3 2017 Outlook
The following statements are based on management’s current assumptions and expectations. These statements are forward-looking and actual results may differ materially. Sequans undertakes no obligation to update these statements.

Sequans expects revenue for the third quarter of 2017 to be in the range of $15 to $17 million with non-IFRS gross margin above 40%. Based on this revenue range and expected gross margin, non-IFRS net loss per diluted share/ADS is expected to be between ($0.05) and ($0.07) for the third quarter of 2017, based on approximately 79.8 million weighted average number of diluted shares/ADSs. Non-IFRS EPS guidance excludes the impact of stock based compensation, the non-cash fair-value and effective interest adjustments related to the convertible debt and other financings, and any other relevant non-cash or non-recurring expenses.


Conference Call and Webcast
Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the second quarter of 2017 today, August 1, 2017 at 8:00 a.m. EDT /14:00 CEST. To participate in the live call, analysts and investors should dial 800-230-1059 (or +1 612-288-0337if outside the U.S.). A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/ . A replay of the conference call will be available until September 1, 2017 by dialing toll free 800-475-6701 in the U.S., or +1 320-365-3844 from outside the U.S., using the following access code: 426480.

Forward Looking Statements
This press release contains projections and other forward-looking statements regarding future events or our future financial performance. All statements other than present and historical facts and conditions contained in this release, including any statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations and potential strategic partnerships, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and execute on strategic alliances, (x) the impact of natural disasters on our sourcing operations and supply chain, and (xi) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.




Sequans reports second quarter 2017 financial results
Page 3


Use of Non-IFRS/non-GAAP Financial Measures
To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures. These measures exclude non-cash charges relating to stock-based compensation and the non-cash financial expense related to the convertible debt and its embedded derivative issued in April 2015 and April 2016. We believe that these measures can be useful to facilitate comparisons among different companies. These non-GAAP measures have limitations in that the non-GAAP measures we use may not be directly comparable to those reported by other companies. We seek to compensate for this limitation by providing a reconciliation of the non-GAAP financial measures to the most directly comparable IFRS measures in the table attached to this press release. We are not able to provide a non-GAAP reconciliation for forward-looking IFRS estimates for gross margin and net loss per diluted share without unreasonable efforts, because certain adjustments are not known until the end of the period. The impact of these adjustments could be significant to our actual IFRS results.


About Sequans Communications
Sequans Communications S.A. (NYSE: SQNS) is a leading provider of single-mode 4G LTE wireless semiconductor solutions for Internet of Things (IoT) and a wide range of broadband data devices. Founded in 2003, Sequans has developed and delivered seven generations of 4G technology and its chips are certified and shipping in 4G networks around the world. Today, Sequans offers two LTE product lines: StreamliteLTE™, optimized for IoT and M2M devices and StreamrichLTE™, optimized for feature-rich mobile computing and home and portable router devices. The company is based in Paris, France with additional offices in the United States, United Kingdom, Sweden, Israel, Hong Kong, Singapore, Taiwan, South Korea, and China.
Visit Sequans online at   www.sequans.com www.facebook.com/sequans www.twitter.com/sequans

SOURCE: Sequans Communications S.A.

Media Relations: Kimberly Tassin, +1.425.736.0569, Kimberly@sequans.com
Investor Relations: Claudia Gatlin, +1 212.830.9080, Claudia@sequans.com

Condensed financial tables follow





Sequans reports second quarter 2017 financial results
Page 4


SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 



Three months ended
 
(in thousands of US$, except share and per share amounts)
June 30,
2017

 
March 31,
2017

 
June 30,
2016

 



 




 

 

 
Revenue :

 

 

 

Product revenue
$
10,159

 
$
9,640

 
$
7,699

 

Other revenue
3,058

 
2,790

 
2,185

 
Total revenue
13,217

 
12,430

 
9,884

 
Cost of revenue

 

 

 

Cost of product revenue
7,064

 
5,989

 
4,667

 

Cost of other revenue
591

 
589

 
804

 
Total cost of revenue
7,655

 
6,578

 
5,471

 
Gross profit
5,562

 
5,852

 
4,413

 
Operating expenses :

 

 

 

Research and development
6,254

 
6,194

 
6,889

 

Sales and marketing
2,072

 
2,496

 
1,495

 

General and administrative
1,323

 
1,411

 
1,761

 




 

 

 
Total operating expenses
9,649

 
10,101

 
10,145

 
Operating loss
(4,087
)
 
(4,249
)
 
(5,732
)
 
Financial income (expense):

 

 

 

Interest income (expense), net
(1,194
)
 
(1,038
)
 
(916
)
 

Other financial expense

 

 
(83
)
 

Change in the fair value of convertible debt embedded derivative

 

 
1,544

 

Foreign exchange gain (loss)
(626
)
 
(246
)
 
196

 
Loss before income taxes
(5,907
)
 
(5,533
)
 
(4,991
)
 
Income tax expense (benefit)
83

 
71

 
70

 
Loss
$
(5,990
)
 
$
(5,604
)
 
$
(5,061
)
 
Attributable to :

 

 

 

Shareholders of the parent
(5,990
)
 
(5,604
)
 
(5,061
)
 

Minority interests

 

 

 
Basic loss per share

($0.08
)
 

($0.07
)
 

($0.09
)
 
Diluted loss per share

($0.08
)
 

($0.07
)
 

($0.09
)
 
Weighted average number of shares used for computing:

 

 

 
— Basic
75,896,815

 
75,043,865

 
59,280,702

 
— Diluted
75,896,815

 
75,043,865

 
59,280,702

 
 
 
 
 
 
 
 
 






Sequans reports second quarter 2017 financial results
Page 5

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Six months ended June 30
(in thousands of US$, except share and per share amounts)
2017
 
2016




 

Revenue :

 


Product revenue
$
19,799

 
$
13,111


Other revenue
5,848

 
6,058

Total revenue
25,647

 
19,169

Cost of revenue
 
 
 

Cost of product revenue
13,053

 
8,795


Cost of other revenue
1,180

 
1,551

Total cost of revenue
14,233

 
10,346

Gross profit
11,414

 
8,823

Operating expenses :
 
 
 

Research and development
12,448

 
13,616


Sales and marketing
4,568

 
2,996


General and administrative
2,734

 
3,139




 
 
 
Total operating expenses
19,750

 
19,751

Operating loss
(8,336
)
 
(10,928
)
Financial income (expense):
 
 
 

Interest income (expense), net
(2,232
)
 
(1,544
)

Other financial expense

 
(83
)

Change in the fair value of convertible debt embedded derivative

 
(1,583
)

Foreign exchange gain (loss)
(872
)
 
(16
)
Loss before income taxes
(11,440
)
 
(14,154
)
Income tax expense (benefit)
154

 
136

Loss
$
(11,594
)
 
$
(14,290
)
Attributable to :
 
 
 

Shareholders of the parent
(11,594
)
 
(14,290
)

Minority interests

 

Basic loss per share

($0.15
)
 

($0.24
)
Diluted loss per share

($0.15
)
 

($0.24
)
Weighted average number of shares used for computing:
 
 
 
— Basic
75,472,863

 
59,239,524

— Diluted
75,472,863

 
59,239,524






Sequans reports second quarter 2017 financial results
Page 6

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
 
At June 30,

 
At December 31,
(in thousands of US$)
2017

 
2016

 
 
 
 
 
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Property, plant and equipment
$
6,337

 
$
6,659

 
Intangible assets
8,527

 
7,707

 
Deposits and other receivables
370

 
332

 
Available for sale assets
336

 
310

 
     Total non-current assets
15,570

 
15,008

 
Current assets
 
 
 
 
Inventories
8,528

 
8,693

 
Trade receivables
17,223

 
15,285

 
Prepaid expenses and other receivables
3,895

 
3,172

 
Recoverable value added tax
807

 
470

 
Research tax credit receivable
3,709

 
1,902

 
Short term deposit
345

 
345

 
Cash and cash equivalents
19,126

 
20,202

 
     Total current assets
53,633

 
50,069

Total assets
$
69,203

 
$
65,077

 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
Equity
 
 
 
 
Issued capital, euro 0.02 nominal value, 79,762,386 shares authorized, issued and outstanding at June 30, 2017 (75,030,078 at December 31, 2016)
$
2,028

 
$
1,923

 
Share premium
204,750

 
189,029

 
Other capital reserves
28,905

 
28,257

 
Accumulated deficit
(221,147
)
 
(209,553
)
 
Other components of equity
(521
)
 
(796
)
 
     Total equity
14,015

 
8,860

 
Non-current liabilities
 
 
 
 
Government grant advances, loans and other liabilities
5,242

 
5,144

 
Convertible debt and accrued interest
5,620

 
16,338

 
Provisions
1,574

 
1,306

 
Other Liabilities
22

 
22

 
Deferred revenue
1,455

 
1,940

 
     Total non-current liabilities
13,914

 
24,750

 
Current liabilities
 
 
 
 
Trade payables
14,385

 
18,358

 
Interest-bearing receivables financing
7,370

 
7,712

 
Government grant advances
698

 
601

 
Convertible debt and accrued interest
12,437

 

 
Other current liabilities
5,468

 
4,415

 
Deferred revenue
900

 
335

 
Provisions
16

 
46

 
     Total current liabilities
41,274

 
31,467

Total equity and liabilities
$
69,203

 
$
65,077

 
 
 
 
 





Sequans reports second quarter 2017 financial results
Page 7

SEQUANS COMMUNICATIONS S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Six months ended June 30
(in thousands of US$)
2017

 
2016

 
 
 
 
 
 
 
Operating activities
 
 
 
 
Loss before income taxes
$
(11,440
)
 
$
(14,154
)
 
Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
 
 
 
 
 
Depreciation and impairment of property, plant and equipment
1,367

 
1,582

 
 
Amortization and impairment of intangible assets
1,181

 
1,001

 
 
Share-based payment expense
648

 
480

 
 
Increase in provisions
323

 
3

 
 
Financial expense (income)
2,269

 
1,552

 
 
Change in the fair value of convertible debt embedded derivative

 
1,583

 
 
Other financial expense

 
83

 
 
Foreign exchange loss (gain)
414

 
135

 
Working capital adjustments
 
 
 
 
 
Decrease (Increase) in trade receivables and other receivables
(2,614
)
 
4,624

 
 
Decrease in inventories
165

 
236

 
 
Increase in research tax credit receivable
(1,807
)
 
(1,078
)
 
 
Increase (Decrease) in trade payables and other liabilities
(4,125
)
 
3,587

 
 
Increase in deferred revenue
80

 
1

 
 
Increase (Decrease) in government grant advances
(693
)
 
79

 
Income tax paid
(81
)
 
(130
)
Net cash flow from (used in) operating activities
(14,313
)
 
(416
)
 
 
 
 
 
 
 
Investing activities
 
 
 
 
Purchase of intangible assets and property, plant and equipment
(2,289
)
 
(2,738
)
 
Sale (purchase) of financial assets
(64
)
 
(13
)
 
Sale of short-term deposit

 
50

 
Interest received
37

 
8

Net cash flow used in investments activities
(2,316
)
 
(2,693
)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
Proceeds from issue of warrants, exercise of stock options/warrants
760

 
246

 
Public equity offering proceeds, net of transaction costs paid
15,313

 

 
Proceeds from Interest-bearing receivables financing
(342
)
 
(5,138
)
 
Proceeds from convertible debt, net of transaction cost

 
6,932

 
Repayment of borrowings and finance lease liabilities

 
(12
)
 
Interest paid
(187
)
 
(84
)
Net cash flows from (used in) financing activities
15,544

 
1,944

 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(1,085
)
 
(1,165
)
 
Net foreign exchange difference
9

 
(1
)
 
Cash and cash equivalent at January 1
20,202

 
8,288

Cash and cash equivalents at end of the period
$
19,126

 
$
7,122






Sequans reports second quarter 2017 financial results
Page 8

SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share amounts)
Three months ended
June 30,
2017

 
March 31,
2017

 
June 30,
2016

Net IFRS loss as reported
$
(5,990
)
 
$
(5,604
)
 
$
(5,061
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
307

 
341

 
226

 
Change in the fair value of convertible debt embedded derivative

 

 
(1,544
)
 
Non-cash interest on Convertible debt and other financing (2)
759

 
610

 
556

Non-IFRS loss adjusted
$
(4,924
)
 
$
(4,653
)
 
$
(5,823
)
IFRS basic loss per share as reported

($0.08
)
 

($0.07
)
 

($0.09
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.00

 

$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.00

 

($0.03
)
 
Non-cash interest on Convertible debt and other financing (2)

$0.01

 

$0.01

 

$0.01

Non-IFRS basic loss per share

($0.06
)
 

($0.06
)
 

($0.10
)
IFRS diluted loss per share

($0.08
)
 

($0.07
)
 

($0.09
)
Add back
 
 
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.00

 

$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.00

 

($0.03
)
 
Non-cash interest on Convertible debt and other financing (2)

$0.01

 

$0.01

 

$0.01

Non-IFRS diluted loss per share

($0.06
)
 

($0.06
)
 

($0.10
)
 
 
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
 
 
Cost of product revenue
$
2

 
$
3

 
$
4

 
 
Research and development
97

 
109

 
96

 
 
Sales and marketing
65

 
79

 
35

 
 
General and administrative
143

 
150

 
91

 
 
 
 
 
 
 
 
 
(2) Related to the difference between contractual and effective interests
 
 
 
 
 
 
 
 
 
 
 
 
 






Sequans reports second quarter 2017 financial results
Page 9

SEQUANS COMMUNICATIONS S.A.

UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS
(in thousands of US$, except share and per share amounts)
Six months ended June 30
2017
 
2016
Net IFRS loss as reported
$
(11,594
)
 
$
(14,290
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)
648

 
480

 
Change in the fair value of convertible debt embedded derivative

 
1,583

 
Non-cash interest on Convertible debt and other financing (2)
1,370

 
921

Non-IFRS loss adjusted
$
(9,576
)
 
$
(11,306
)
IFRS basic loss per share as reported

($0.15
)
 

($0.24
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.03

 
Non-cash interest on Convertible debt and other financing (2)

$0.01

 

$0.01

Non-IFRS basic loss per share

($0.13
)
 

($0.19
)
IFRS diluted loss per share

($0.24
)
 

($0.24
)
Add back
 
 
 
 
Stock-based compensation expense according to IFRS 2 (1)

$0.01

 

$0.01

 
Change in the fair value of convertible debt embedded derivative

$0.00

 

$0.03

 
Non-cash interest on Convertible debt and other financing (2)

$0.01

 

$0.01

Non-IFRS diluted loss per share

($0.13
)
 

($0.19
)
 
 
 
 
 
 
 
(1) Included in the IFRS loss as follows:
 
 
 
 
 
Cost of product revenue
$
5

 
$
8

 
 
Research and development
206

 
204

 
 
Sales and marketing
144

 
74

 
 
General and administrative
293

 
194

 
 
 
 
 
 
 
(2) Related to the difference between contractual and effective interests
 
 
 
 
 
 
 
 
 






EXHIBIT 99.2
SEQUANS COMMUNICATIONS S.A.
AMENDMENT NO. 1 TO CONVERTIBLE PROMISSORY NOTE

This Amendment No. 1 to Convertible Promissory Note (the “ Amendment ”) is made as of June 30, 2017 by and between Sequans Communications S.A., a société anonyme incorporated in the French Republic (the “ Company ”) and Nokomis Capital Master Fund, LP, a Cayman Islands exempted limited partnership (the “ Purchaser ” and together with the Company, the “ Parties ”) and is made with reference to the Convertible Promissory Note issued as of April 14, 2015 (the “ Note ”) under and pursuant to that certain Convertible Note Agreement, dated as of April 14, 2015 (the “ Purchase Agreement ”), between the Parties. Unless otherwise indicated herein, capitalized terms used herein have the same meanings set forth in the Purchase Agreement.
WHEREAS, the Parties wish to amend the Note to increase the amount of secured indebtedness that may be owed by the Company to $25 million to accommodate the increase in the amount of the Company’s accounts receivable.
NOW, THEREFORE, the Parties hereby agree to amend the Note as follows:
1.
Amendments to Note .
a.
Amendments to Note .
i.
Article VI of the Note is hereby amended and restated in its entirety as follows:
“For so long as the Note is outstanding, the Company will not grant a consensual security interest or pledge its personal property assets to another third-party lender in connection with debt for borrowed money (other than purchase money security interests or capital leases incurred in the ordinary course of business and up to $25 million of secured indebtedness relating to a receivables facility or debt or letters of credit facilities) without the consent of Purchaser (such consent not to be unreasonably withheld, conditioned or delayed, in particular in the case of a security interest or pledge granted or made to a strategic corporate partner or joint venture partner as a component of a financing transaction or other business relationship with a strategic corporate partner or joint venture partner (whether directly or involving an investment fund controlled by the relevant strategic corporate partner or joint venture partner)).”
ii.
Section 5.4 of the Note is hereby amended by deleting the last sentence of the Section and replacing it with the following language:
“In the event of an Organic Change prior to repayment in full of the Note, Purchaser shall elect, at its option, either (i) to require the Company to repurchase for cash all, but not less than all, of the Note at a price equal to the Accreted Principal Amount (including any accrued and unpaid interest), (ii) to convert all, but not less than all, of the Note, in each case effective immediately prior to such Organic Change or (iii) to convert the outstanding principal and any accrued but unpaid interest on the Note directly into the proceeds paid to the holders of Ordinary Shares (whether direct or in the form of ADSs) in connection with the Organic Change) in an amount equal to the proceeds that the Purchaser would have received if the Purchaser had elected option (ii).”


[ Signature page to Amendment No. 1 to Note ]




2.
Miscellaneous .
a.
Governing Law . The validity, interpretation and performance of this Amendment shall be governed by and construed in accordance with the internal laws of The French Republic (without regard to principles of conflicts of law). The parties agree that the competent courts within the jurisdiction of the Paris Court of Appeal ( Cour d’Appel de Paris ) shall have exclusive jurisdiction (and are deemed to be a convenient forum for each party) as to resolution of any dispute.
b.
Continuing Effect . Other than as set forth in this Amendment, all of the terms and conditions of the Note will continue in full force and effect.
c.
Amendment and Waiver . No modification of or amendment to this Amendment, nor any waiver of any rights under this Amendment, shall be effective unless in writing signed by the Company and the Purchaser. No delay or failure to require performance of any provision of this Amendment shall constitute a waiver of that provision as to that or any other instance.
d.
Successors and Assigns . The terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties.

    


[ Signature page to Amendment No. 1 to Note ]







IN WITNESS WHEREOF, the Company has executed and delivered this Amendment on July 17, 2017.
COMPANY:
SEQUANS COMMUNICATIONS S.A.

By:      /s/ Deborah Choate             
Name:          Deborah Choate
Title:          Chief Financial Officer



PURCHASER:
NOKOMIS CAPITAL MASTER FUND, LP

By:      /s/ Brett Hendrickson             
Name:          Brett Hendrickson
Title:          Portfolio Manager





[ Signature page to Amendment No. 1 to Note ]





EXHIBIT 99.3
SEQUANS COMMUNICATIONS S.A.
AMENDMENT NO. 1 TO CONVERTIBLE PROMISSORY NOTE

This Amendment No. 1 to Convertible Promissory Note (the “ Amendment ”) is made as of June 30, 2017 by and between Sequans Communications S.A., a société anonyme incorporated in the French Republic (the “ Company ”) and Nokomis Capital Master Fund, LP, a Cayman Islands exempted limited partnership (the “ Purchaser ” and together with the Company, the “ Parties ”) and is made with reference to the Convertible Promissory Note issued as of April 27, 2016 (the “ Note ”) under and pursuant to that certain Convertible Note Agreement, dated as of April 27, 2016 (the “ Purchase Agreement ”), between the Company and the several purchasers party thereto, including the Purchaser. Unless otherwise indicated herein, capitalized terms used herein have the same meanings set forth in the Purchase Agreement.
WHEREAS, the Parties wish to amend the Note to increase the amount of secured indebtedness that may be owed by the Company to $25 million to accommodate the increase in the amount of the Company’s accounts receivable.
NOW, THEREFORE, the Parties hereby agree to amend the Note as follows:
1.
Amendments to Note .
a.
Amendments to Note .
i.
Article VI of the Note is hereby amended and restated in its entirety as follows:
“For so long as the Note is outstanding, the Company will not grant a consensual security interest or pledge its personal property assets to another third-party lender in connection with debt for borrowed money (other than purchase money security interests or capital leases incurred in the ordinary course of business and up to $25 million of secured indebtedness relating to a receivables facility or debt or letters of credit facilites) without the consent of Purchaser (such consent not to be unreasonably withheld, conditioned or delayed, in particular in the case of a security interest or pledge granted or made to a strategic corporate partner or joint venture partner as a component of a financing transaction or other business relationship with a strategic corporate partner or joint venture partner (whether directly or involving an investment fund controlled by the relevant strategic corporate partner or joint venture partner)).”
ii.
Section 5.4 of the Note is hereby amended by deleting the last sentence of the Section and replacing it with the following language:
“In the event of an Organic Change prior to repayment in full of the Note, Purchaser shall elect, at its option, either (i) to require the Company to repurchase for cash all, but not less than all, of the Note at a price equal to the Accreted Principal Amount (including any accrued and unpaid interest), (ii) to convert all, but not less than all, of the Note, in each case effective immediately prior to such Organic Change or (iii) to convert the outstanding principal and any accrued but unpaid interest on the Note directly into the proceeds paid to the holders of Ordinary Shares (whether direct or in the form of ADSs) in connection with the Organic Change) in an amount equal to the proceeds that the Purchaser would have received if the Purchaser had elected option (ii).”

[ Signature page to Amendment No. 1 to Note ]




2.
Miscellaneous .
a.
Governing Law . The validity, interpretation and performance of this Amendment shall be governed by and construed in accordance with the internal laws of The French Republic (without regard to principles of conflicts of law). The parties agree that the competent courts within the jurisdiction of the Paris Court of Appeal ( Cour d’Appel de Paris ) shall have exclusive jurisdiction (and are deemed to be a convenient forum for each party) as to resolution of any dispute.
b.
Continuing Effect . Other than as set forth in this Amendment, all of the terms and conditions of the Note will continue in full force and effect.
c.
Amendment and Waiver . No modification of or amendment to this Amendment, nor any waiver of any rights under this Amendment, shall be effective unless in writing signed by the Company and the Purchaser. No delay or failure to require performance of any provision of this Amendment shall constitute a waiver of that provision as to that or any other instance.
d.
Successors and Assigns . The terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties.

    




[ Signature page to Amendment No. 1 to Note ]





IN WITNESS WHEREOF, the Company has executed and delivered this Amendment on July 17, 2017.
COMPANY:
SEQUANS COMMUNICATIONS S.A.

By:      /s/ Deborah Choate             
Name:          Deborah Choate
Title:          Chief Financial Officer



PURCHASER:
NOKOMIS CAPITAL MASTER FUND, LP

By:      /s/ Brett Hendrickson             
Name:          Brett Hendrickson
Title:          Portfolio Manager





[ Signature page to Amendment No. 1 to Note ]





EXHIBIT 99.4
SEQUANS COMMUNICATIONS S.A.
AMENDMENT NO. 1 TO CONVERTIBLE PROMISSORY NOTE

This Amendment No. 1 to Convertible Promissory Note (the “ Amendment ”) is made as of June 30, 2017 by and between Sequans Communications S.A., a société anonyme incorporated in the French Republic (the “ Company ”) and Manatuck Hill Scout Fund, LP, a Delaware limited partnership (the “ Purchaser ” and together with the Company, the “ Parties ”) and is made with reference to the Convertible Promissory Note issued as of May 5, 2016 (the “ Note ”) under and pursuant to that certain Convertible Note Agreement, dated as of April 27, 2016 (the “ Purchase Agreement ”), between the Company and the several purchasers party thereto, including the Purchaser. Unless otherwise indicated herein, capitalized terms used herein have the same meanings set forth in the Purchase Agreement.
WHEREAS, the Parties wish to amend the Note to increase the amount of secured indebtedness that may be owed by the Company to $25 million to accommodate the increase in the amount of the Company’s accounts receivable.
NOW, THEREFORE, the Parties hereby agree to amend the Note as follows:
1.
Amendments to Note .
a.
Amendments to Note .
i.
Article VI of the Note is hereby amended and restated in its entirety as follows:
“For so long as the Note is outstanding, the Company will not grant a consensual security interest or pledge its personal property assets to another third-party lender in connection with debt for borrowed money (other than purchase money security interests or capital leases incurred in the ordinary course of business and up to $25 million of secured indebtedness relating to a receivables facility or debt or letters of credit facilities) without the consent of Purchaser (such consent not to be unreasonably withheld, conditioned or delayed, in particular in the case of a security interest or pledge granted or made to a strategic corporate partner or joint venture partner as a component of a financing transaction or other business relationship with a strategic corporate partner or joint venture partner (whether directly or involving an investment fund controlled by the relevant strategic corporate partner or joint venture partner)).”
i.
Section 5.4 of the Note is hereby amended by deleting the last sentence of the Section and replacing it with the following language:
“In the event of an Organic Change prior to repayment in full of the Note, Purchaser shall elect, at its option, either (i) to require the Company to repurchase for cash all, but not less than all, of the Note at a price equal to the Accreted Principal Amount (including any accrued and unpaid interest), (ii) to convert all, but not less than all, of the Note, in each case effective immediately prior to such Organic Change or (iii) to convert the outstanding principal and any accrued but unpaid interest on the Note directly into the proceeds paid to the holders of Ordinary Shares (whether direct or in the form of ADSs) in connection with the Organic Change) in an amount equal to the proceeds that the Purchaser would have received if the Purchaser had elected option (ii).s”

[ Signature page to Amendment No. 1 to Note ]




2.
Miscellaneous .
a.
Governing Law . The validity, interpretation and performance of this Amendment shall be governed by and construed in accordance with the internal laws of The French Republic (without regard to principles of conflicts of law). The parties agree that the competent courts within the jurisdiction of the Paris Court of Appeal ( Cour d’Appel de Paris ) shall have exclusive jurisdiction (and are deemed to be a convenient forum for each party) as to resolution of any dispute.
b.
Continuing Effect . Other than as set forth in this Amendment, all of the terms and conditions of the Note will continue in full force and effect.
c.
Amendment and Waiver . No modification of or amendment to this Amendment, nor any waiver of any rights under this Amendment, shall be effective unless in writing signed by the Company and the Purchaser. No delay or failure to require performance of any provision of this Amendment shall constitute a waiver of that provision as to that or any other instance.
d.
Successors and Assigns . The terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties.

    


[ Signature page to Amendment No. 1 to Note ]






IN WITNESS WHEREOF, the Company has executed and delivered this Amendment on July 18, 2017.
COMPANY:
SEQUANS COMMUNICATIONS S.A.

By:      /s/ Deborah Choate             
Name:          Deborah Choate
Title:          Chief Financial Officer



PURCHASER:
MANATUCK HILL SCOUT FUND, LP

By:      /s/ Thomas Scalia             
Name:          Thomas Scalia
Title:          General Partner





[ Signature page to Amendment No. 1 to Note ]