##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2013

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number 001-35135



|                           
|---------------------------
|SEQUANS COMMUNICATIONS S.A.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrants name into English)

French Republic

(Jurisdiction of incorporation or organization)

19 Le Parvis

92073 Paris-La Défense, France

(Address of principal executive
offices)

Georges Karam

Chairman and Chief Executive Officer

Sequans Communications S.A.

19 Le Parvis

92073 Paris-La Défense, France

Telephone: +33 1 70 72 16 00

Facsimile: +33 1 70 72 16 09

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

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



|                                                                                             |  |  |  |                                          
|-------------------------------------------------------------------------------------------- |  |  |  | -----------------------------------------
|Title of each class                                                                          |  |  |  | Name of each exchange on which registered
|American Depositary Shares, each representing one                                            |  |  |  | New York Stock Exchange                  
|ordinary share, nominal value 0.02 per
share Ordinary shares, nominal value 0.02 per
share |  |  |  | New York Stock Exchange*                 



|* | Not for trading, but only in connection with the registration of American Depositary Shares.
|- | --------------------------------------------------------------------------------------------

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

Not Applicable

(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.

Not Applicable

(Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary
shares, nominal value 0.02 per share: 59,129,639 as of December 31, 2013

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, or a non-accelerated filer. See the
definitions of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈                Accelerated
filer   ̈                Non-accelerated filer  þ

Indicate by check mark which basis for accounting the registrant has used to prepare the financing statements included in
this filing:



|              |  |                                                                                                          |  |         
|------------- |  | -------------------------------------------------------------------------------------------------------- |  | --------
|U.S. GAAP    ̈ |  | International Financial Reporting Standards as issued by the International Accounting Standards Board  þ |  | Other   ̈

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

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









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##### Table of Contents

SEQUANS COMMUNICATIONS S.A.





FORM 20-F

ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013





TABLE OF CONTENTS



|                                                                    |  |                                                                              |     |  |    | 
|------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- | --- |  | -- | 
|Introduction                                                        |  |                                                                              | 1   | 
|Special Note Regarding Forward-Looking Statements and Industry Data |  |                                                                              | 1   | 
|                                                                    |  |                                                                             
|                                                                    |  | PART I                                                                       |     |  |    | 
|                                                                    |  |                                                                             
|Item 1.                                                             |  | Identity of Directors, Senior Management and Advisers                        |     |  | 2  | 
|Item 2.                                                             |  | Offer Statistics and Expected Timetable                                      |     |  | 2  | 
|Item 3.                                                             |  | Key Information                                                              |     |  | 2  | 
|Item 4.                                                             |  | Information on the Company                                                   |     |  | 19 | 
|Item 4A.                                                            |  | Unresolved Staff Comments                                                    |     |  | 32 | 
|Item 5.                                                             |  | Operating and Financial Review and Prospects                                 |     |  | 32 | 
|Item 6.                                                             |  | Directors, Senior Management and Employees                                   |     |  | 49 | 
|Item 7.                                                             |  | Major Shareholders and Related Party Transactions                            |     |  | 56 | 
|Item 8.                                                             |  | Financial Information                                                        |     |  | 58 | 
|Item 9.                                                             |  | The Offer and Listing                                                        |     |  | 59 | 
|Item 10.                                                            |  | Additional Information                                                       |     |  | 60 | 
|Item 11.                                                            |  | Quantitative and Qualitative Disclosures About Market Risk                   |     |  | 66 | 
|Item 12.                                                            |  | Description of Securities Other than Equity Securities                       |     |  | 66 | 
|                                                                    |  |                                                                             
|                                                                    |  | PART II                                                                      |     |  |    | 
|                                                                    |  |                                                                             
|Item 13.                                                            |  | Defaults, Dividend Arrearages and Delinquencies                              |     |  | 68 | 
|Item 14.                                                            |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |     |  | 68 | 
|Item 15.                                                            |  | Controls and Procedures                                                      |     |  | 68 | 
|Item 16A.                                                           |  | Audit Committee Financial Expert                                             |     |  | 69 | 
|Item 16B.                                                           |  | Code of Ethics                                                               |     |  | 69 | 
|Item 16C.                                                           |  | Principal Accountant Fees and Services                                       |     |  | 69 | 
|Item 16D.                                                           |  | Exemptions from the Listing Standards for Audit Committees                   |     |  | 69 | 
|Item 16E.                                                           |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |     |  | 70 | 
|Item 16F.                                                           |  | Change in Registrants Certifying Accountant                                 |     |  | 70 | 
|Item 16G.                                                           |  | Corporate Governance                                                         |     |  | 70 | 
|Item 16H.                                                           |  | Mine Safety Disclosure                                                       |     |  | 70 | 
|                                                                    |  |                                                                             
|                                                                    |  | PART III                                                                     |     |  |    | 
|                                                                    |  |                                                                             
|Item 17.                                                            |  | Financial Statements                                                         |     |  | 71 | 
|Item 18.                                                            |  | Financial Statements                                                         |     |  | 71 | 
|Item 19.                                                            |  | Exhibits                                                                     |     |  | 71 | 
|                                                                    | 
|Signatures                                                          |  |                                                                              | 73  | 
|Index to Consolidated Financial Statements                          |  |                                                                              | F-1 | 



i



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INTRODUCTION

Unless otherwise indicated, Sequans Communications S.A., Sequans Communications, the Company,
we, us and our refer to Sequans Communications S.A. and its consolidated subsidiaries.

In
this annual report, references to the euro or  are to the euro currency of the European Union and references to U.S. dollars or $ are to Unites States dollars.

Reference to the the Shares are references to Sequans Communications Ordinary Shares, nominal value 0.02 per
share, and references to the ADSs are to Sequans Communications American Depositary Shares (each representing one Ordinary Share), which are evidenced by American Depositary Receipts (ADRs).

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our managements beliefs and assumptions and on information currently available to our management. All
statements other than present and historical facts and conditions contained in this annual report on Form 20-F, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for
future operations, are forward looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the forward-looking statements. These forward-looking statements include, but are not limited to, those concerning the following:



| |  |  | forecasts and trends in the markets in which we compete and in which our products are sold, including statements regarding the LTE and WiMAX markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our intent to expand our product platform to address the single-mode LTE market;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our expectations regarding our expenses, sales and operations;
| | - |  | --------------------------------------------------------------



| |  |  | our expectations regarding our operating results;
| | - |  | -------------------------------------------------



| |  |  | our expectations regarding our customer concentration;
| | - |  | ------------------------------------------------------



| |  |  | trends and challenges in the markets in which we operate, including average selling price reductions, cyclicality in the wireless communications
industry and transitions to new process technologies;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to anticipate the future market demands and future needs of our customers;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our ability 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our plans for future products and enhancements of existing products;
| | - |  | --------------------------------------------------------------------



| |  |  | anticipated features and benefits of our current and future products;
| | - |  | ---------------------------------------------------------------------



| |  |  | our growth strategy elements and our growth rate;
| | - |  | -------------------------------------------------



| |  |  | our ability to protect and defend our intellectual property against potential third party intellectual property infringement claims;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic conditions in our domestic and international markets; and
| | - |  | --------------------------------------------------------------------------



| |  |  | our future cash needs and our estimates regarding our capital requirements and our need for additional financing.
| | - |  | -----------------------------------------------------------------------------------------------------------------

In some cases, you can identify forward-looking statements by terms such as anticipates, believes,
could, estimates, expects, intends, may, plans, potential, predicts, projects, should, will, would as
well as similar expressions. Forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks, uncertainties and other important factors. We operate in a very competitive and
rapidly changing environment. New risks emerge from time to time. We cannot assure you that our plans, intentions or expectations will be achieved. Our actual results, performance or achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements contained in this annual report, including, but not limited to, those factors described in Item 3.DRisk Factors, Item 4Information on the Company and
Item 5Operating and Financial Review and Prospects. Given these risks, uncertainties and other important factors, you should not place undue reliance on these forward-looking statements. All forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this annual report. Also, these forward-looking statements represent our estimates and assumptions only as of the date such
forward-looking statements are made. Except as required by law, we assume no obligation to update any forward-looking statements publicly, whether as a result of new information, future events or otherwise.



1



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##### Table of Contents

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The following tables set forth our selected
consolidated financial and other data. You should read the following selected consolidated financial data in conjunction with Item 5  Operating and Financial Review and Prospects and our consolidated financial statements and the
related notes appearing elsewhere in this annual report. Our historical results are not necessarily indicative of results to be expected for future periods. The consolidated statements of operations data for the years ended December 31, 2011,
2012 and 2013, the consolidated statements of financial position data at December 31, 2011, 2012 and 2013, and the consolidated statements of cash flow data for the years ended December 31, 2011, 2012 and 2013 have been derived from our
audited Consolidated Financial Statements included elsewhere in this annual report. The consolidated statements of operations data for the years ended December 31, 2009 and 2010, consolidated statements of financial position data at
December 31, 2009 and 2010, and the consolidated statements of cash flow data for the years ended December 31, 2009 and 2010, have been derived from our audited Consolidated Financial Statements not included in this annual report.

Our financial statements included in this annual report were prepared in U.S. dollars in accordance with International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.



|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------ | ------------------ |  | - | ---------------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                            |  | Years ended December 31,              |        
|                                            |  | 2009                                  |         |   | 2010 |   |        | 2011 restated 
(3) |  |   | 2012restated (3) |   |  | 2013 |        
|                                            |  | (in thousands, except per share data) |        
|Consolidated Statements of Operations Data: |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Revenue:                                    |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Product revenue                             |  | $                                     | 15,564  |   |      | $ | 64,933 |                    |  | $ | 91,742           |   |  | $    | 19,600  |   |  | $ | 10,708  |  
|Other revenue                               |  |                                       | 3,992   |   |      |   | 3,611  |                    |  |   | 1,972            |   |  |      | 2,654   |   |  |   | 3,004   |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Total revenue                               |  |                                       | 19,556  |   |      |   | 68,544 |                    |  |   | 93,714           |   |  |      | 22,254  |   |  |   | 13,712  |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Cost of revenue(1):                         |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Cost of product revenue                     |  |                                       | 7,863   |   |      |   | 33,272 |                    |  |   | 46,167           |   |  |      | 11,781  |   |  |   | 8,616   |  
|Cost of other revenue                       |  |                                       | 330     |   |      |   | 340    |                    |  |   | 247              |   |  |      | 176     |   |  |   | 205     |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Total cost of revenue                       |  |                                       | 8,193   |   |      |   | 33,612 |                    |  |   | 46,414           |   |  |      | 11,957  |   |  |   | 8,821   |  
|Gross profit                                |  |                                       | 11,363  |   |      |   | 34,932 |                    |  |   | 47,300           |   |  |      | 10,297  |   |  |   | 4,891   |  
|% of revenue                                |  |                                       | 58      | % |      |   | 51     | %                  |  |   | 50               | % |  |      | 46      | % |  |   | 36      | %
|Operating expenses(1):                      |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Research and development                    |  |                                       | 13,857  |   |      |   | 17,917 |                    |  |   | 24,926           |   |  |      | 28,365  |   |  |   | 28,357  |  
|Sales and marketing                         |  |                                       | 9,242   |   |      |   | 13,541 |                    |  |   | 12,960           |   |  |      | 6,562   |   |  |   | 4,449   |  
|General and administrative                  |  |                                       | 3,410   |   |      |   | 3,953  |                    |  |   | 8,323            |   |  |      | 8,093   |   |  |   | 7,528   |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Total operating expenses                    |  |                                       | 26,509  |   |      |   | 35,411 |                    |  |   | 46,209           |   |  |      | 43,020  |   |  |   | 40,334  |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Operating income (loss)                     |  |                                       | (15,146 | ) |      |   | (479   | )                  |  |   | 1,091            |   |  |      | (32,723 | ) |  |   | (35,443 | )
|Financial income (expense)                  |  |                                       | (1,665  | ) |      |   | (2,063 | )                  |  |   | (1,133           | ) |  |      | (21     | ) |  |   | (1      | )
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Profit (Loss) before income taxes           |  |                                       | (16,811 | ) |      |   | (2,542 | )                  |  |   | (42              | ) |  |      | (32,744 | ) |  |   | (35,444 | )
|Income tax expense (benefit)                |  |                                       | 61      |   |      |   | 150    |                    |  |   | 371              |   |  |      | 234     |   |  |   | 142     |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Profit (Loss)                               |  | $                                     | (16,872 | ) |      | $ | (2,692 | )                  |  | $ | (413             | ) |  | $    | (32,978 | ) |  | $ | (35,586 | )
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Basic earnings (loss) per share(2)          |  | $                                     | (0.73   | ) |      | $ | (0.11  | )                  |  | $ | (0.01            | ) |  | $    | (0.95   | ) |  | $ | (0.78   | )
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Diluted earnings (loss) per share(2)        |  | $                                     | (0.73   | ) |      | $ | (0.11  | )                  |  | $ | (0.01            | ) |  | $    | (0.95   | ) |  | $ | (0.78   | )
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Number of shares used for computing(2):     |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Basic                                       |  |                                       | 23,257  |   |      |   | 24,980 |                    |  |   | 32,611           |   |  |      | 34,680  |   |  |   | 45,456  |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  
|Diluted                                     |  |                                       | 23,257  |   |      |   | 24,980 |                    |  |   | 32,611           |   |  |      | 34,680  |   |  |   | 45,456  |  
|                                            |  |                                       |         |   |      |   |        |                    |  |   |                  |   |  |      |         |   |  |   |         |  



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|                                                     |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                     |  | At December 31,         |        
|                                                     |  | 2009                    |         |   | 2010 |   |        | 2011 |  |   | 2012    |   |  | 2013 |        
|                                                     |  | (in thousands)          |        
|Consolidated Statements of Financial Position Data:  |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |  
|Cash and cash equivalents                            |  | $                       | 7,792   |   |      | $ | 9,739  |      |  | $ | 57,220  |   |  | $    | 28,751  |   |  | $ | 37,244  |  
|Total current assets                                 |  |                         | 21,919  |   |      |   | 39,365 |      |  |   | 86,255  |   |  |      | 49,539  |   |  |   | 60,658  |  
|Total assets                                         |  |                         | 28,813  |   |      |   | 49,717 |      |  |   | 101,030 |   |  |      | 68,402  |   |  |   | 73,528  |  
|Current loans and borrowings                         |  |                         | 3,754   |   |      |   | 3,564  |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total current liabilities                            |  |                         | 14,182  |   |      |   | 27,556 |      |  |   | 16,087  |   |  |      | 11,954  |   |  |   | 13,258  |  
|Total equity                                         |  |                         | 893     |   |      |   | 20,699 |      |  |   | 84,244  |   |  |      | 55,471  |   |  |   | 58,929  |  
|                                                     | 
|                                                     |  | Year ended December 31, |        
|                                                     |  | 2009                    |         |   | 2010 |   |        | 2011 |  |   | 2012    |   |  | 2013 |        
|                                                     |  | (in thousands)          |        
|Consolidated Statements of Cash Flow Data:           |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |  
|Net cash flow from (used in) operating activities    |  | $                       | (11,852 | ) |      | $ | 1,481  |      |  | $ | 2,763   |   |  | $    | (22,848 | ) |  | $ | (24,345 | )
|Net cash flow used in investments activities         |  |                         | (3,555  | ) |      |   | (7,377 | )    |  |   | (10,252 | ) |  |      | (5,511  | ) |  |   | (3,956  | )
|Net cash flow from financing activities              |  |                         | 7,338   |   |      |   | 7,844  |      |  |   | 54,976  |   |  |      | (119    | ) |  |   | 36,791  |  
|Net foreign exchange difference                      |  |                         | 12      |   |      |   | (1     | )    |  |   | (6      | ) |  |      | 9       |   |  |   | 3       |  
|Cash and cash equivalents at January 1               |  |                         | 15,849  |   |      |   | 7,792  |      |  |   | 9,739   |   |  |      | 57,220  |   |  |   | 28,751  |  
|Cash and cash equivalents at December 31             |  |                         | 7,792   |   |      |   | 9,739  |      |  |   | 57,220  |   |  |      | 28,751  |   |  |   | 37,244  |  
|(1)    Includes share-based compensation as follows: |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |   | 
|                                                     | 
|                                                     |  | Year ended December 31, |        
|                                                     |  | 2009                    |         |   | 2010 |   |        | 2011 |  |   | 2012    |   |  | 2013 |        
|                                                     |  | (in thousands)          |        
|Cost of revenue                                      |  | $                       | 24      |   |      | $ | 23     |      |  | $ | 208     |   |  | $    | 156     |   |  | $ | 112     |  
|Operating expenses                                   |  |                         | 1,151   |   |      |   | 1,108  |      |  |   | 3,966   |   |  |      | 3,033   |   |  |   | 2,052   |  
|                                                     |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   |         |  
|Share-based compensation                             |  | $                       | 1,175   |   |      | $ | 1,131  |      |  | $ | 4,174   |   |  | $    | 3,189   |   |  | $ | 2,164   |  
|                                                     |  |                         |         |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   |         |  



|(2) | All per share data reflect a 1-for-2 reverse split of our share capital that was effective on April 12, 2011.
|--- | -------------------------------------------------------------------------------------------------------------

|(3) | Figures for the year ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exchange Rate Information

In this annual report, for convenience only, we have translated the euro amounts reflected in our financial statements as of and for the year ended December 31, 2013 into U.S. dollars at the rate of
1.00 = $1.3779, the noon buying rate for euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on December 31, 2013. You should not assume that, on that or on any other date, one could have
converted these amounts of euros into U.S. dollars at that or any other exchange rate.

The following table sets forth, for
each period indicated, the low and high exchange rates for euros expressed in U.S. dollars, the exchange rate at the end of such period and the average of such exchange rates on the last day of each month during such period, based on the noon buying
rate in the City of New York for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank of New York. The source of the exchange rate is the H.10 statistical release of the Federal Reserve Board. The exchange rates set
forth below demonstrate trends in exchange rates, but the actual exchange rates used throughout this annual report may vary.



|             |  |                         |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|------------ |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|             |  | Year Ended December 31, |       
|             |  | 2009                    |        |  | 2010 |  |        | 2011 |  |  | 2012   |  |  | 2013 |       
|High         |  |                         | 1.5100 |  |      |  | 1.4536 |      |  |  | 1.4875 |  |  |      | 1.3463 |  |  |  | 1.3816 | 
|Low          |  |                         | 1.2547 |  |      |  | 1.1959 |      |  |  | 1.2926 |  |  |      | 1.2062 |  |  |  | 1.2774 | 
|Period End   |  |                         | 1.4432 |  |      |  | 1.3269 |      |  |  | 1.2973 |  |  |      | 1.3186 |  |  |  | 1.3779 | 
|Average Rate |  |                         | 1.3935 |  |      |  | 1.3261 |      |  |  | 1.3931 |  |  |      | 1.2859 |  |  |  | 1.3281 | 



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##### Table of Contents

The following table sets forth, for each of the last six months, the low and high exchange
rates for euros expressed in U.S. Dollars and the exchange rate at the end of the month based on the noon buying rate as described above. The source of the exchange rate is the H.10 statistical release of the Federal Reserve Board.



|             |  |                 |        |  |         |  |        |          |  |  |          |  |  |         |        |  |          |  |        |  |  |  |        | 
|------------ |  | --------------- | ------ |  | ------- |  | ------ | -------- |  |  | -------- |  |  | ------- | ------ |  | -------- |  | ------ |  |  |  | ------ | 
|             |  | Last Six Months |       
|             |  | September       |        |  | October |  |        | November |  |  | December |  |  | January |        |  | February | 
|High         |  |                 | 1.3537 |  |         |  | 1.3810 |          |  |  | 1.3606   |  |  |         | 1.3816 |  |          |  | 1.3682 |  |  |  | 1.3806 | 
|Low          |  |                 | 1.3120 |  |         |  | 1.3490 |          |  |  | 1.3357   |  |  |         | 1.3552 |  |          |  | 1.3500 |  |  |  | 1.3507 | 
|End of Month |  |                 | 1.3535 |  |         |  | 1.3594 |          |  |  | 1.3606   |  |  |         | 1.3779 |  |          |  | 1.3500 |  |  |  | 1.3806 | 

On March 21, 2014, the noon buying rate for euros in New York City, as certified for customs
purposes by the Federal Reserve Bank of New York, was 1.00 = $1.3783.

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the United States Securities and Exchange
Commission (SEC), including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This
report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below
and elsewhere in this report and our other SEC filings. See Special Note Regarding Forward-Looking Statements on page 1.

Risks Related to Our Business and Industry

We have a history of losses and have experienced a significant decline in revenue since 2011, and we may not achieve or sustain profitability in the future, on a quarterly or annual basis.

We were established in 2003 and began operations in 2004, and have incurred losses on an annual basis since
inception. We experienced net losses of $0.4 million, $33.0 million and $35.6 million in 2011, 2012 and 2013, respectively. At December 31, 2013, our accumulated deficit was $123.3 million. We expect to incur significant expense related to the
development of our LTE products and expansion of our business, including research and development and sales and administrative expenses. Additionally, we may encounter unforeseen difficulties, complications, product delays and other unknown factors
that require additional expense. As a result of these increased expenditures, we will have to generate and sustain substantially increased revenue to achieve profitability. We experienced a significant decline in revenue in the year ended
December 31, 2013 to $13.7 million from $22.3 million in the year ended December 31, 2012 and $93.7 million in 2011 due to lower sales of WiMAX products, following changes in the WiMAX market in the United States beginning in the second
half of 2011 and followed by many other markets in subsequent periods, and delays in the building out of LTE networks. Our revenue growth trends in periods prior to 2012 may not be repeated. Accordingly, we may not be able to achieve or maintain
profitability, and we may continue to incur significant losses in the future.

We currently derive a significant portion of our revenue
from sales of our semiconductor solutions for the WiMAX segment of the 4G market, although we expect the WiMAX market and WiMAX sales to decline over time. If the WiMAX market declines more quickly than expected prior to us generating significant
revenue from LTE products, our results of operations will be further harmed.

We currently derive a significant
portion of our revenue from the sale of our semiconductor solutions for the WiMAX market and expect we could do so through the first half of 2014. In the second half of 2011, the WiMAX market experienced a decline due to the global economic factors
and a shift in strategy by large WiMAX carriers, including Sprint, the largest driver of demand for WiMAX semiconductor solutions, to LTE, which significantly harmed our results of operations for the fourth quarter of 2011 and the years ended
December 31, 2012 and 2013. We believe this reduction in the size of the WiMAX market to be permanent, although we expect the market will continue to exist on a reduced basis for a number of years as it will take time for all WiMAX operators to
make the transition to LTE. If the WiMAX market declines more quickly than expected prior to us generating significant revenue from LTE products, our results of operations will be further harmed. We have invested substantial time and resources in
developing products that support LTE, and have begun to generate substantial LTE revenue starting in the third quarter of 2013. If we fail to accurately predict market requirements or market demand for LTE, or if our solutions are not successfully
developed or adopted by our customers, we will be unable to generate significant revenue from the LTE market and our business will suffer. If LTE networks are deployed to a lesser extent or more slowly than we currently anticipate, especially in
light of the decline of the WiMAX market, or if other competing 4G protocols achieve greater market acceptance or operators do not migrate to LTE, we may not realize any benefits from this investment. As a result, our business, operating results and
financial condition will be significantly harmed.



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Our LTE semiconductor solutions do not incorporate support for 2G or 3G protocols, and we currently
focus on selling these solutions into the market for LTE-only devices. If the market for LTE-only devices materializes more slowly or at a lower volume level than we anticipate, our results of operations may be harmed.

Our semiconductor solutions currently support only 4G protocols. As a result, our LTE strategy focuses primarily on selling into the
LTE-only device market. The growth rate and size of the market for LTE-only devices is dependent on a number of factors, including the degree of geographic and population coverage by LTE networks. If this coverage does not materialize as quickly as
we expect, if fewer LTE carriers than we expect offer comprehensive LTE coverage in their geographic operating areas, or if these LTE carriers require support for 2G or 3G protocols in a larger proportion of their overall device portfolio than we
expect, then demand for LTE-only semiconductor solutions like ours would be lower and our results of operations would be harmed.

If we are unsuccessful in developing and selling new products on a timely and cost-effective basis or in penetrating new markets, in particular the single-mode LTE market, our business and operating
results would suffer.

The markets in which we and our customers compete or plan to compete are characterized by rapidly
changing technologies and industry standards and technological obsolescence. Our ability to compete successfully depends on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and
cost-effective basis. A fundamental shift in technologies in any of our target markets could harm our competitive position within these markets. In addition, such shifts can cause a significant decrease in our revenues and adversely affect our
operating results, as we saw in 2012 and 2013 with technology shifting from WiMAX to LTE. Our failure to anticipate these shifts, to develop new technologies or to react to changes in existing technologies could materially delay our development of
new products, which could result in product obsolescence, decreased revenue and a loss of design wins. The development of new technologies and products generally requires substantial investment before they are commercially viable. We intend to
continue to make substantial investments in developing new technologies and products, including our LTE products, and it is possible that our development efforts will not be successful and that our new technologies and products will not be accepted
by customers or result in meaningful revenue. If the semiconductor solutions we develop fail to meet market or customer requirements or do not achieve market acceptance, our operating results and competitive position would suffer.

Our success and the success of our new products will depend on accurate forecasts of future technological developments, customer and
consumer requirements and long-term market demand, as well as on a variety of specific implementation factors, including:



| |  |  | accurate prediction of the size and growth of the LTE markets, and in particular the market for LTE-only, also referred to as single-mode LTE, products
where no fall back to 2G or 3G technology is required;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | accurate prediction of changes in device manufacturer requirements, technology, industry standards or consumer expectations, demands and preferences;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | timely and efficient completion of process design and transfer to manufacturing, assembly and test, and securing sufficient manufacturing capacity to
allow us to continue to timely and cost-effectively deliver products to our customers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | market acceptance, adequate consumer demand and commercial production of the products in which our semiconductor solutions are incorporated;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the quality, performance and reliability of our products as compared to competing products and technologies; and
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | effective marketing, sales and customer service.
| | - |  | ------------------------------------------------

The markets for our semiconductor solutions are characterized by frequent introduction of next generation and new products, short product life cycles and significant price competition. If we or our
customers are unable to manage product transitions in a timely and cost-effective manner, our business and results of operations would suffer. In addition, frequent technology changes and introduction of next generation products may result in
inventory obsolescence, which could reduce our gross margins and harm our operating performance. If we fail to timely introduce new products that meet the demands of our customers or our target markets, or if we fail to penetrate new markets, our
revenue will decrease and our financial condition would suffer.

Certain of our customers use third party suppliers for LTE radio
transceivers. If such third party suppliers are unable to assure supply to our customers, our sales of LTE basebands to these customers could be adversely affected.

While we have our own radio transceiver (RF) solution for certain frequencies, are developing additional RF solutions in other frequency bands and frequently evaluate alternative external solutions, a
number of our current LTE design wins are for products in frequency bands not supported by our existing internal RF solutions and therefore use RF solutions provided by third party suppliers. If such third party suppliers are unable to supply their
RF solutions, have technical or quality problems with their RF solutions, or declare their RF solutions end-of-life, the success of our customers products which incorporate such third party RF solutions may be adversely impacted. For
example, one such supplier, Fujitsu, has announced that it will no longer manufacture certain RF solutions. As a result, if we are unable to secure sufficient inventory for our customers of RF solutions that have been declared end-of-life until we
can transition our customers to our own or other alternative RF solutions, our sales of LTE baseband products integrated in these customers products could be adversely impacted.



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If we fail to successfully develop, commercialize, produce and sell our new module product line, our
business, revenue and operating results may be harmed.

We have recently introduced a new product module line. Our
modules incorporate many components in addition to our chipsets. We may lack the purchasing power to acquire at competitive prices certain components required to produce modules, and we do not expect to be able to command selling prices for those
modules that allow us to maintain traditional semiconductor-only margins for the full module. In the near future, modules could represent a large portion of our revenue mix, which could negatively impact our overall gross margin. Certain large
customers may decide to buy the modules directly from the manufacturers who purchase our chipsets, rather than us, in order to reduce their costs. This may result in a reduction of our gross profit, but an improvement of overall gross margin
percentage, compared to the case where we sell the modules ourselves.

Module components may be sourced from numerous
different suppliers. Some of these components may periodically be in short supply or be subject to long lead times, which could affect our ability to meet customer demand for our modules, therefore delaying our revenue. In addition, we rely on
various contract manufacturers to produce our modules. If these manufacturers encounter any issues with production capacity, quality or reliability of their products, it could adversely affect our revenue and our reputation in the market. If
our ability to expand our product platform is significantly delayed or if we are unable to leverage our module as expected, our business and financial condition could be materially and adversely affected.

If customers request from us, and we agree to provide, a wide variety of module variants or stock-keeping units, or SKUs, to support
different operators or different end-applications, our expenses associated with developing, sourcing and certifying our module products would increase. In addition, managing supply and demand across multiple SKUs may increase the possibility
that we will under or over-forecast a given SKU, resulting in either delayed revenue or excess inventory.

Participating in
the module business could create a perception among our customers that we are competing with them if they are also in the module business, which could impair our chipset business prospects with such customers. The module can be considered an end
product with full LTE functionality; therefore, there is market pressure from manufacturers of products not normally incorporating a communication function for us to sell the module with essential IP indemnification. We intend to negotiate license
agreements for the module in order to offer standard indemnification to our manufacturing partners, but there can be no assurance that we will be successful in obtaining licenses on acceptable terms.

We or our customers may be required to obtain licenses for certain so-called essential patents in order to comply with applicable
standards, which could require us to pay additional royalties on certain of our products. If we are unable to obtain such licenses, our business, results of operations, financial condition and prospects would be harmed.

We or our customers may be required to obtain licenses for third-party intellectual property. In particular, we may be required to obtain
licenses to certain third-party patents, so-called essential patents, that claim features or functions that are incorporated into applicable industry standards and that we are required to provide in order to comply with the standard. If
we need to license any third-party intellectual property, essential patents or other technology, we could be required to pay royalties on certain of our products. In addition, while the industry standards bodies and the antitrust laws in certain
countries may require participating companies to license their essential patents on fair, reasonable, and nondiscriminatory terms, there can be no assurances that we will be able to obtain such licenses on commercially reasonable terms or at all.
Although we have implemented a dedicated standard essential patents licensing-in reference policy, our inability to obtain required third-party intellectual property licenses on commercially reasonable terms or at all could harm our business,
results of operations, financial condition or prospects. If our customers are required to obtain such licenses, there can be no assurances that their businesses will not be adversely affected. In addition, if our competitors have significant numbers
of essential patents and/or patent license rights, they could be at an advantage in negotiating with our customers or potential customers, which could influence our ability to win new business or could result in downward pressure on our average
selling prices.

We depend on the commercial deployment of 4G wireless communications equipment, products and services to grow our
business, and our business may be harmed if wireless carriers delay or are unsuccessful in the commercial deployment of 4G technology or if they deploy technologies that are not supported by our solutions.

We depend upon the commercial deployment of 4G wireless communications equipment, products and services based on our technology. While
many wireless carriers have commercially deployed 3G networks, we cannot predict the timing or success of commercial deployments of 4G networks whether by existing 2G/3G network operators or by new wireless carriers. Deployment of new networks by
wireless carriers requires significant capital expenditures, well in advance of any revenue from such networks. In the past, wireless carriers have cancelled or delayed planned deployments of new networks. If existing deployments are not
commercially successful or do not continue to grow their subscriber base, or if new commercial deployments of 4G networks are delayed or unsuccessful, our business and financial results would be harmed.

During network deployment, wireless carriers often anticipate a certain rate of subscriber additions and, in response, operators
typically procure devices to satisfy this forecasted demand. If the rate of deployment of new networks by wireless carriers is slower than we expect or if 4G technology is not as widely adopted by consumers as we expect, the rate of subscriber
additions may be



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slower than expected, which will reduce the sales of our products and cause OEMs and ODMs to hold excess inventory. This would harm our sales and our financial results. A limited number of
wireless carriers have started testing 4G networks and a smaller number of wireless carriers have launched limited 4G networks, but the timing and extent of 4G network deployments remains uncertain, and we might not be successful in developing and
marketing our semiconductor solutions targeting 4G markets.

In addition, wireless carriers may choose to deploy technologies
not supported by our solutions. If a 4G technology that is not supported by our semiconductor solutions gains significant market share or is favored by a significant wireless carrier, we could be required to expend a significant amount of time and
capital to develop a solution that is compatible with that alternative technology. If we are not successful, we could lose design wins with respect to that technology and our business and financial results would be harmed. Moreover, once a
competitors solution is chosen by a wireless carrier, OEM or ODM we will have difficulty supplanting those solutions with ours.

A
portion of our software development and testing activity is outsourced to a third-party provider based in Kiev, Ukraine. If recent political developments in Ukraine and Russia escalate to open hostilities, our [product development activities and
some customer software support activities] could be adversely affected.

While we have our key engineering
competencies in-house, primarily in France, the United Kingdom and the United States, we outsource some software development and testing activities to an independent third-party provider of engineering services. We work with a dedicated team of 18
software engineers based in Kiev, Ukraine. As a result of the decision of the Russian government to annex the Crimea region of Ukraine, the United States and the European Community have imposed economic sanctions on Russia. If the political tensions
escalate into open hostilities or further political instability in Ukraine, these engineers may be unable to work for a sustained period of time, which could adversely impact our research and development operations. We also have our own electronic
equipment physically in place in Kiev which could be at risk in the event of violence in the region. We are developing a contingency plan to trigger if the engineers in Kiev are unable to continue working on their projects for us, but if we are not
ready with our contingency plan or if it is not effective, we could suffer delays in product introduction or delays in resolution of customer software bugs, which could have a negative impact on our revenues.

We depend on a small number of customers for a significant portion of our revenue. If we fail to retain or expand customer relationships, our
business could be harmed.

A significant amount of our total revenue is attributable to a small number of customers,
and we anticipate that this will continue to be the case for the foreseeable future. These customers may decide not to purchase our semiconductor solutions at all, to purchase fewer semiconductor solutions than they did in the past or to alter the
terms on which they purchase our products. In addition, to the extent that any customer represents a disproportionately high percentage of our accounts receivable, our exposure to that customer is further increased should they be unable or choose
not to pay such accounts receivable on a timely basis or at all.

Our top ten customers accounted for 95%, 80% and 94% of our
total revenue in 2011, 2012 and 2013, respectively. The following table summarizes customers representing a significant portion of total revenue:



|                                 |  |                                                     |             |   |                                             |  |              |      |  |  |              |   |  |  |    |  
|-------------------------------- |  | --------------------------------------------------- | ----------- | - | ------------------------------------------- |  | ------------ | ---- |  |  | ------------ | - |  |  | -- | -
|Customer                         |  | % of total revenues for the year ended December 31, |             |   | % of our accounts receivableat December 31, | 
|                                 |  | 2013                                                |             |   | 2012                                        |  |              | 2011 |  |  | 2013         |  
|Huawei                           |  |                                                     | 33          | % |                                             |  | 16           | %    |  |  | Less than 10 | % |  |  | 24 | %
|Customer A (United States-based) |  |                                                     | 22          | % |                                             |  | Less than 10 | %    |  |  | 0            | % |  |  | 27 | %
|Gemtek                           |  |                                                     | 14          | % |                                             |  | Less than 10 | %    |  |  | Less than 10 | % |  |  | 9  | %
|Customer B (United States-based) |  |                                                     | 10          | % |                                             |  | 0            | %    |  |  | 0            | % |  |  | 6  | %
|HTC                              |  |                                                     | Less than 1 | % |                                             |  | 32           | %    |  |  | 78           | % |  |  | 1  | %

We expect that some of these customers could each continue to represent at least 10% of our revenue in
2014, because we expect that the number of WiMAX customers is likely to be limited as the WiMAX industry consolidates and our LTE activity remains in its early stages. The loss of any significant customer, a significant reduction in sales we make to
them in general or during any period, or any issues with collection of receivables from customers would harm our financial condition and results of operations. For example, in the fourth quarter of 2011 and for the years ended December 31, 2012
and 2013, our revenue decreased significantly compared to the prior periods as a result of the decline in sales to HTC. Furthermore, we must obtain orders from new customers on an ongoing basis to increase our revenue and grow our business. If we
fail to expand our customer relationships, our business could be harmed.



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##### Table of Contents

We have significant ongoing capital requirements that could have a material effect on our business and
financial condition if we are unable to generate sufficient cash from operations.

Our business requires significant
capital investment to carry out extensive research and development in order to remain competitive. If the net proceeds from our February 2013 and November 2013 public offerings, our cash on hand and cash generated from operations are not sufficient
to fund our operations and capital requirements, we may be required to limit our growth, utilize our existing capital, or enter into financing arrangements at unfavorable terms, any of which could harm our business and financial condition.

We depend on one independent foundry to manufacture our products and do not have a long-term agreement with such foundry, and loss of
this foundry or our failure to obtain sufficient foundry capacity would significantly delay our ability to ship our products, cause us to lose revenue and market share and damage our customer relationships.

Access to foundry capacity is critical to our business because we are a fabless semiconductor company. We depend on a sole independent
foundry, Taiwan Semiconductor Manufacturing Company Limited, or TSMC, in Taiwan to manufacture our semiconductor wafers. Because we outsource our manufacturing to a single foundry, we face several significant risks, including:



| |  |  | constraints in or unavailability of manufacturing capacity;
| | - |  | -----------------------------------------------------------



| |  |  | limited control over delivery schedules, quality assurance and control, manufacturing yields and production costs; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | the unavailability of, or potential delays in obtaining access to, key process technologies.
| | - |  | --------------------------------------------------------------------------------------------

If we do not accurately forecast our capacity needs, TSMC may not have available capacity to meet our immediate needs or we may be
required to pay higher costs to fulfill those needs, either of which could harm our business, results of operations or financial condition. For example, in the third quarter of 2010, an unexpected sharp increase in demand for one of our products
caused us to incur capacity utilization surcharges from TSMC in order to secure the necessary capacity and production of our semiconductor solutions in quantities and on a timeline sufficient to meet our customers expectations.

The ability of TSMC to provide us with semiconductor wafers is limited at any given time by their available capacity and we do not have a
guaranteed level of manufacturing capacity. We do not have any agreement with TSMC and place our orders on a purchase order basis. As a result, if TSMC raises its prices or is not able to satisfy our required capacity for any reason, including
natural or other disasters, allocates capacity to larger customers or to different sectors of the semiconductor industry, experiences labor issues or shortages or delays in shipment of semiconductor equipment or materials used in the manufacture of
our semiconductors, or if our business relationship with TSMC deteriorates, we may not be able to obtain the required capacity and would have to seek alternative foundries, which may not be available on commercially reasonable terms, in a timely
manner, or at all.

Locating and qualifying a new foundry would require a significant amount of time, which would result in a
delay in production of our products. In addition, using foundries with which we have no established relationship could expose us to unfavorable pricing and terms, delays in developing and qualifying new products, unsatisfactory quality or
insufficient capacity allocation. We place our orders on the basis of our customers purchase orders and sales forecasts; however, foundries can allocate capacity to the production of other companies products and reduce deliveries to us
on short notice. Many of the customers of TSMC, or foundries that we may use in the future, are larger than we are, or have long-term agreements with such foundries, and as a result those customers may receive preferential treatment from the
foundries in terms of price, capacity allocation and payment terms. Any delay in qualifying a new foundry or production issues with any new foundry would result in lost sales and could damage our relationship with existing and future customers as
well as our reputation in the market.

If our foundry vendor does not achieve satisfactory yields or quality, our reputation and
customer relationships could be harmed.

The fabrication of semiconductor solutions such as ours is a complex and
technically demanding process. Minor deviations in the manufacturing process can cause substantial decreases in yields, and in some cases, cause production to be suspended. TSMC, or foundries that we may use in the future, could, from time to time,
experience manufacturing defects and reduced manufacturing yields. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by our foundry vendor could result in lower than anticipated manufacturing yields or
unacceptable performance. Many of these problems are difficult to detect at an early stage of the manufacturing process and may be time consuming and expensive to correct. Poor yields from our foundry vendor, or defects, integration issues or other
performance problems in our semiconductor solutions could cause us significant customer relations and business reputation problems, harm our financial results and result in financial or other damages to our customers. In addition, because we have a
sole source of wafer supply, these risks are magnified because we do not have an alternative source to purchase from should these risks materialize. If TSMC fails to provide satisfactory product to us, we would be required to identify and qualify
other sources, which could take a significant amount of time and would result in lost sales. In addition, we indemnify our customers for losses resulting from defects in our products, which costs could be substantial. A product liability or other
indemnification claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend.

Our customers may
cancel their orders, change production quantities or delay production, and if we fail to forecast demand for our products accurately, we may incur product shortages, delays in product shipments or excess or insufficient product inventory, which
could harm our business.

We do not have firm, long-term purchase commitments from our customers. Substantially all of
our sales are made on a purchase order basis which permits our customers to cancel, change or delay product purchase commitments with little or no notice to us and



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##### Table of Contents

without penalty. Because production lead times often exceed the amount of time required to fulfill orders, we often must manufacture in advance of orders, relying on an imperfect demand forecast
to project volumes and product mix. Our ability to accurately forecast demand can be harmed by a number of factors, including inaccurate forecasting by our customers, changes in market conditions, changes in our product order mix and demand for our
customers products. Even after an order is received, our customers may cancel these orders or request a decrease in production quantities. Any such cancellation or decrease subjects us to a number of risks, most notably that our projected
sales will not materialize on schedule or at all, leading to unanticipated revenue shortfalls and excess or obsolete inventory, which we may be unable to sell to other customers. For example, in the fourth quarter of 2011, HTC, our largest customer,
requested to take delivery of only 40% of the chips previously scheduled for delivery in December and to cancel the remainder of the scheduled shipment, as a result of global economic conditions and reduced WiMAX demand. As a result, our revenue for
the fourth quarter of 2011 decreased significantly. Alternatively, if we are unable to project customer requirements accurately, we may not manufacture enough semiconductor solutions, which could lead to delays in product shipments and lost sales
opportunities in the near term, as well as force our customers to identify alternative sources, which could affect our ongoing relationships with these customers. We have in the past had customers significantly increase their requested production
quantities with little or no advance notice. If we do not fulfill customer demands in a timely manner, our customers may cancel their orders and we may be subject to customer claims for cost of replacement. Underestimating or overestimating demand
would lead to insufficient, excess or obsolete inventory and could harm our operating results, cash flow and financial condition, as well as our relationships with our customers and our reputation in the marketplace.

If customers do not design our semiconductor solutions into their product offerings or if our customers product offerings are not
commercially successful, our revenue and our business would be harmed.

We sell our semiconductor solutions directly
to OEMs who include them in their products, and to ODMs who include them in their products they supply to OEMs. As a result, we rely on OEMs to design our semiconductor solutions into the products they sell. Because our semiconductor solutions are
generally a critical component of our customers products, they are typically incorporated into our customers products at the design stage and the sales cycle typically takes 12 months or more to complete. Without these design wins, our
revenue and our business would be significantly harmed. We often incur significant expenditures on the development of a new semiconductor solution without any assurance that an OEM will select our semiconductor solution for design into its own
product. Because the types of semiconductor solutions we sell are a critical aspect of an OEMs product, once an OEM designs a competitors semiconductor into its product offering, it becomes significantly more difficult for us to sell our
semiconductor solutions to that customer for a particular product offering because changing suppliers involves significant cost, time, effort and risk for the customer. Further, if we are unable to develop new products in a timely manner for
inclusion in such products, or if major defects or errors that might significantly impair performance or standards compliance are found in our products after inclusion by an OEM, OEMs will be unlikely to include our semiconductor solutions into
their products and our reputation in the market and future prospects would be harmed.

Furthermore, even if an OEM designs one
of our semiconductor solutions into its product offering, we cannot be assured that its product will be commercially successful and that we will receive any revenue from that OEM. This risk is heightened because 4G technology is rapidly emerging and
most of our customers do not have significant experience designing products utilizing 4G technology. If our customers products incorporating our semiconductor solutions fail to meet the demands of their customers or otherwise fail to achieve
market acceptance, our revenue and business would be harmed.

If we are unable to compete effectively, we may not increase or maintain
our revenue or market share, which would harm our business.

We may not be able to compete successfully against
current or potential competitors. If we do not compete successfully, our revenue and market share may decline. In the LTE market, we face or expect to face competition from established semiconductor companies such as Broadcom Corporation, HiSilicon
Technologies, Intel Corporation, Marvell Technology Group, Qualcomm Incorporated, Samsung Electronics Co. Ltd., and Spreadtrum, as well as smaller entrants in the market such as GCT Semiconductor or Altair Semiconductor. In the WiMAX market, we
compete with suppliers such as GCT Semiconductor, Inc.

Many of our competitors have longer operating histories, significantly
greater resources and name recognition, and a larger base of existing customers than us. In addition, recently there has been consolidation within the industry, notably the acquisition of smaller competitors by larger competitors. The significant
resources of these larger competitors may allow them to respond more quickly than us to new or emerging technologies or changes in customer requirements or to bring new products to market in a more timely manner than us. In addition, these
competitors may have greater credibility with our existing and potential customers. Further, many of these competitors are located in Asia or have a significant presence and operating history in Asia and, as a result, may be in a better position
than we are to work with manufacturers and customers located in Asia. Moreover, many of our competitors have been doing business with customers for a longer period of time and have well-established relationships, which may provide them with
advantages, including access to information regarding future trends and requirements that may not be available to us. In addition, some of our competitors may provide incentives to customers or offer bundled solutions with complementary products,
which could be attractive to some customers, or adopt more aggressive pricing policies, which may make it difficult for us to gain or maintain market share.

Our ability to compete effectively will depend on a number of factors, including:



| |  |  | our ability to anticipate market and technology trends and successfully develop products that meet market needs;
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| |  |  | our ability to deliver products in large volume on a timely basis at competitive prices;
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| |  |  | our success in identifying and penetrating new markets, applications and customers;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | our ability to accurately understand the price points and performance metrics of competing products in the market;
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| |  |  | our products performance and cost-effectiveness relative to those of our competitors;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our ability to develop and maintain relationships with key customers, wireless carriers, OEMs and ODMs;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our ability to secure sufficient high quality supply for our products;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to conform to industry standards while developing new and proprietary technologies to offer products and features previously not available
in the 4G market; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to recruit design and application engineers with expertise in wireless broadband communications technologies and sales and marketing
personnel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

If we experience material changes to the competitive structure of our industry due to cooperation or
consolidation among our competitors, we may not increase or sustain our revenue or market share, which would harm our business.

Our current or future competitors may establish cooperative relationships among themselves or with third parties. In addition, there has recently been consolidation within our industry, notably the
acquisition of smaller competitors by larger competitors with significantly greater resources than ours. These events may result in the emergence of new competitors with greater resources and scale than ours that could acquire significant market
share, which could result in a decline of our revenue and market share. Our ability to maintain our revenue and market share will depend on our ability to compete effectively despite material changes in industry structure. If we are unable to do so,
we may not increase or sustain our revenue or market share, which would harm our business.

If we are unable to effectively manage our
business through periods of economic or market slow-down and any subsequent future growth, we may not be able to execute our business plan and our operating results could suffer.

Our future operating results depend to a large extent on our ability to successfully manage our business through periods of economic or
market slow-down and periods of subsequent expansion and growth. To manage our growth successfully and handle the responsibilities of being a public company, we believe we must, among other things, effectively:



| |  |  | recruit, hire, train and manage additional qualified engineers for our research and development activities, especially in the positions of design
engineering, product and test engineering, and applications engineering;
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| |  |  | add additional sales personnel and expand sales offices;
| | - |  | --------------------------------------------------------



| |  |  | add additional finance and accounting personnel;
| | - |  | ------------------------------------------------



| |  |  | implement and improve our administrative, financial and operational systems, procedures and controls; and
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | enhance our information technology support for enterprise resource planning and design engineering by adapting and expanding our systems and tool
capabilities, and properly training new hires as to their use.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, to remain competitive and
manage further expansion and growth, we must carry out extensive research and development, which requires significant capital investment. During periods of economic or market slow-down we must also effectively manage our expenses to preserve our
ability to carry out such research and development. While we decreased our operating expenses in 2012 compared to our increased operating expenses in 2011, and further decreased expenses in 2013, we expect that our operating expenses in the first
half of 2014 will remain fairly flat. If we are successful in introducing and selling more new LTE products, we expect we will need to increase our investment in research and development, as well as sales and marketing, general and administrative
and other functions to support the growth of our business. We are likely to incur the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments, if any, may be lower, may
develop more slowly than we expect, or may not materialize at all, which could harm our operating results.

If we are unable
to manage our business during both periods of economic or market slow-down and growth effectively, we may not be able to take advantage of market opportunities or develop new products and we may fail to satisfy customer requirements, maintain
product quality, execute our business plan or respond to competitive pressures, any of which could harm our operating results.

The
average selling prices of our semiconductor solutions have historically decreased over time and will likely do so in the future, which could harm our gross profits and financial results.

Average selling prices of our semiconductor solutions have historically decreased over time, and we expect such declines to continue to
occur. Our gross profits and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced semiconductor solutions on a timely basis with higher selling prices or
gross profits, or increasing our sales volumes. Even if we are successful in reducing our costs or improving sales volumes, such improvements may not be sufficient to offset declines in average selling prices in the future. Additionally, because we
do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs and our costs may even increase, either of which would reduce our margins. We have reduced the prices of our semiconductor solutions in line
with and at times in advance of competitive pricing pressures, new product introductions by us or our competitors and other factors. We expect that we will have to do so again in the future.



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Any increase in the manufacturing cost of our products would reduce our gross margins and operating
profit.

The semiconductor business is characterized by ongoing competitive pricing pressure from customers and
competitors. Accordingly, any increase in the cost of our products, whether by adverse purchase price or manufacturing cost variances or due to other factors, will reduce our gross margins and operating profit. We do not have long-term supply
agreements with our manufacturing, test or assembly suppliers and we typically negotiate pricing on a purchase order by purchase order basis. Consequently, we may not be able to obtain price reductions or anticipate or prevent future price increases
from our suppliers. Because we have a sole source of wafer supply and limited sources of test and assembly, we may not be able to negotiate favorable pricing terms from our suppliers. These and other related factors could impair our ability to
control our costs and could harm our operating results.

The semiconductor and communications industries have historically experienced
significant fluctuations with prolonged downturns, which could impact our operating results, financial condition and cash flows.

The semiconductor industry has historically been cyclical, experiencing significant downturns in customer demand. Because a significant portion of our expenses is fixed in the near term or is incurred in
advance of anticipated sales, we may not be able to decrease our expenses rapidly enough to offset any unanticipated shortfall in revenue. If this situation occurs, it could harm our operating results, cash flow and financial condition. Furthermore,
the semiconductor industry has periodically experienced periods of increased demand and production constraints. For example, in the third quarter of 2010, an unexpected sharp increase in demand for one of our products caused us to incur capacity
utilization surcharges from our foundry, TSMC, in order to secure the necessary capacity and production of our semiconductor solutions in quantities and on a timeline sufficient to meet our customers expectations, resulting in increased costs
and lower margins. If this occurs again, we may not be able to obtain sufficient quantities of our semiconductor solutions to meet the increased demand, resulting in lost sales, loss of market share and harm to our customer relationships. We may
also have difficulty in obtaining sufficient assembly and test resources from our subcontract manufacturers. Any factor adversely affecting the semiconductor industry in general, or the particular segments of the industry that we target, may harm
our ability to generate revenue and could negatively impact our operating results.

The communications industry has
experienced pronounced downturns, and these cycles may continue in the future. A future decline in global economic conditions could have adverse, wide-ranging effects on demand for our semiconductor solutions and for the products of our customers,
particularly wireless communications equipment manufacturers or other participants in the wireless industry, such as wireless carriers. Inflation, deflation and economic recessions that harm the global economy and capital markets also harm our
customers and our end consumers. Specifically, the deployment of new 4G networks requires significant capital expenditures and wireless carriers may choose not to undertake network expansion efforts during an economic downturn or time of other
economic uncertainty. Our customers ability to purchase or pay for our semiconductor solutions and services, obtain financing and upgrade wireless networks could be harmed, and networking equipment providers may slow their research and
development activities, cancel or delay new product development, reduce their inventories and take a cautious approach to acquiring our products, which would have a significant negative impact on our business. If such economic situations were to
occur, our operating results, cash flow and financial condition could be harmed. In the future, any of these trends may also cause our operating results to fluctuate significantly from year to year, which may increase the volatility of the price of
the ADSs.

Though we rely to a significant extent on proprietary intellectual property, we may not be able to obtain, or may chose not
to obtain, sufficient intellectual property rights to provide us with meaningful protection or commercial advantage.

We depend significantly on intellectual property rights to protect our products and proprietary technologies against misappropriation by
others. We generally rely on the patent, trademark, copyright and trade secret laws in Europe, the United States and certain other countries in which we operate or in which our products are produced or sold, as well as licenses and nondisclosure and
confidentiality agreements, to protect our intellectual property rights.

We may have difficulty obtaining patents and other
intellectual property rights, and the patents and other intellectual property rights we have and obtain may be insufficient to provide us with meaningful protection or commercial advantage. We currently do not apply for patent protection in all
countries in which we operate. Instead we select and focus on key countries for each patent family. In addition, the protection offered by patents and other intellectual property rights may be inadequate or weakened for reasons or circumstances that
are out of our control. For instance, we may not be able to obtain patent protection or secure other intellectual property rights in all the countries in which we have filed patent applications or in which we operate, and under the laws of such
countries, patents and other intellectual property rights may be or become unavailable or limited in scope.

We may not be
able to adequately protect or enforce our intellectual property against improper use by our competitors or others and our efforts to do so may be costly to us, which may harm our business, financial condition and results of operations.

Our patents and patent applications, or those of our licensors, could face challenges, such as interference proceedings, opposition
proceedings, nullification proceedings and re-examination proceedings. Any such challenge, if successful, could result in the invalidation or narrowing of the scope of any such patents and patent applications. Any such challenges, regardless of
their success, would also likely be time-consuming and expensive to defend and resolve, and would divert management time and attention. Further, our unpatented proprietary processes, software, designs and trade secrets may be vulnerable to
disclosure or misappropriation by



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employees, contractors and other persons. While we generally enter into confidentiality agreements with such persons to protect our intellectual property, we cannot assure you that our
confidentiality agreements will not be breached, that they will provide meaningful protection for our proprietary technology and trade secrets or that adequate remedies will be available in the event they are used or disclosed without our
authorization. Also, intellectual property rights are difficult to enforce in the Peoples Republic of China, or PRC, and certain other countries, particularly in Asia, where the application and enforcement of the laws governing such rights may
not have reached the same level as compared to other jurisdictions where we operate, such as Europe and the United States. Consequently, because we operate in these countries and all of our manufacturing, test and assembly takes place in Taiwan and
Singapore, we may be subject to an increased risk that unauthorized parties may attempt to copy or otherwise use our intellectual property or the intellectual property of our suppliers or other parties with whom we engage or have licenses.

There can be no assurance that we will be able to protect our intellectual property rights, that our intellectual property
rights will not be challenged, invalidated, circumvented or rendered unenforceable, or that we will have adequate legal recourse in the event that we seek legal or judicial enforcement of our intellectual property rights. Any inability on our part
to adequately protect or enforce our intellectual property may harm our business, financial condition and results of operations. We may in the future initiate claims or litigation against third parties for infringement of our intellectual property
rights to protect these rights or to determine the scope and validity of our proprietary rights or the proprietary rights of competitors. These claims could result in costly litigation and the diversion of our technical and management personnel, and
we may not prevail in making these claims.

Assertions by third parties of infringement by us or our customers of their intellectual
property rights could result in significant costs and cause our operating results to suffer.

The markets in which we
compete are characterized by rapidly changing products and technologies and there is intense competition to establish intellectual property protection and proprietary rights to these new products and the related technologies. The semiconductor and
wireless communications industries, in particular, are characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive litigation for many companies.

We may be unaware of the intellectual property rights of others that may cover some of our technology, products and services. In
addition, third parties may claim that we or our customers are infringing or contributing to the infringement of their intellectual property rights.

We have in the past received and, particularly as a public company operating in a highly competitive marketplace, we expect that in the future we will receive communications and offers from various
industry participants and others alleging that we infringe or have misappropriated their patents, trade secrets or other intellectual property rights and/or inviting us to license their technology and intellectual property. Any lawsuits resulting
from such allegations of infringement or invitations to license, including suits challenging the WiMAX or the LTE standards, could subject us to significant liability for damages and/or challenge our activities. Any potential intellectual property
litigation also could force us to do one or more of the following:



| |  |  | stop selling products or using technology that contain the allegedly infringing intellectual property;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our
intellectual property against others;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | incur significant legal expenses;
| | - |  | ---------------------------------



| |  |  | pay substantial damages to the party whose intellectual property rights we may be found to be infringing;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | redesign those products that contain the allegedly infringing intellectual property; or
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

Our customers could also become the target of litigation relating to the patents and other intellectual
property rights of others. This could, in turn, trigger an obligation for us to provide technical support and/or indemnify such customers. These obligations could result in substantial expenses, including the payment by us of costs and damages
relating to claims of intellectual property infringement. In addition to the time and expense required for us to provide support or indemnification to our customers, any such litigation could disrupt the businesses of our customers, which in turn
could hurt our relationships with our customers and cause the sale of our products to decrease. We cannot assure you that claims for indemnification will not be made or that if made, such claims would not materially harm our business, operating
results or financial conditions.

Any potential dispute involving our patents or other intellectual property could also include our
industry partners and customers, which could trigger our indemnification obligations to them and result in substantial expense to us.

In any potential dispute involving our patents or other intellectual property, our licensees could also become the target of litigation, and certain customers have received notices of written offers from
our competitors and others claiming to have patent rights in certain technology and inviting our customers to license this technology. Because we indemnify our licensees and customers for intellectual property claims made against them for products
incorporating our technology, any litigation could trigger technical support and indemnification obligations in some of our license agreements, which could result in substantial payments and expenses by us. In addition to the time and expense
required for us to supply support or indemnification to our licensees and customers, any such litigation could severely disrupt or shut down the business of our customers, which in turn could hurt our relations with our customers and cause the sale
of our proprietary technologies and products to decrease.



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Our failure to comply with obligations under open source licenses could require us to release our
source code to the public or cease distribution of our products, which could harm our business, financial condition and results of operations.

Some of the software used with our products, as well as that of some of our customers, may be derived from so-called open source software that is generally made available to the public by its
authors and/or other third parties. Such open source software is often made available to us under licenses, such as the GNU General Public License, which impose certain obligations on us in the event we were to make available derivative works of the
open source software. These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the licenses we customarily use to
protect our intellectual property. In addition, there is little or no legal precedent for interpreting the terms of certain of these open source licenses, including the determination of which works are subject to the terms of such licenses. While we
believe we have complied with our obligations under the various applicable licenses for open source software, in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the
terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work.

The complexity of our semiconductor solutions could result in unforeseen delays or expenses from undetected defects or design errors in hardware or software, which could reduce the market acceptance
for our semiconductor solutions, damage our reputation with current or prospective customers and increase our costs.

Highly complex semiconductor solutions such as ours can contain defects and design errors, which, if significant, could impair
performance or prevent compliance with industry standards. We have not in the past, but may in the future, experience such significant defects or design errors. In addition, our semiconductor solutions must be certified by individual wireless
carriers that such solutions function properly on the carriers network before our solutions can be designed into a particular product. If any of our semiconductor solutions have reliability, quality or compatibility problems from defects or
design errors we may not be able to successfully correct these problems in a timely manner, or at all. Furthermore, we may experience production delays and increased costs correcting such problems. Issues in the carrier certification process, which
varies among carriers, may also create delays. Consequently, and because our semiconductor solutions are a critical component of our customers products, our reputation may be irreparably damaged and customers may be reluctant to buy our
semiconductor solutions, which could harm our ability to retain existing customers and attract new customers and harm our financial results. In addition, these defects or design errors or delays in the carrier certification process could interrupt
or delay sales to our customers. If any of these problems are not found until after we have commenced commercial production of a new semiconductor solution, we may be required to incur additional development costs and product recalls, repairs or
replacement costs. Furthermore, we provide warranties on our products ranging from one to two years, and thus may be obligated to refund sales with respect to products containing defects, errors or bugs. These problems may also result in claims
against us by our customers or others, all of which could damage our reputation and increase our costs.

The loss of any of our key
personnel could seriously harm our business, and our failure to attract or retain specialized technical, management or sales and marketing employees could impair our ability to grow our business.

We believe our future success will depend in large part upon our ability to attract, retain and motivate highly skilled management,
engineering and sales and marketing personnel. The loss of any key employees or the inability to attract, retain or motivate qualified personnel, including engineers and sales and marketing personnel could delay the development and introduction of
and harm our ability to sell our semiconductor solutions. We believe that our future success is dependent on the contributions of Georges Karam, our co-founder and chief executive officer, and Bertrand Debray, our co-founder and vice president,
engineering. The loss of the services of Dr. Karam, Mr. Debray, other executive officers or certain other key personnel could materially harm our business, financial condition and results of operations. For example, if any of these
individuals were to leave unexpectedly, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity during the search for any such successor and while any successor is integrated into our business
and operations.

Our key technical and engineering personnel represent a significant asset and serve as the source of our
technological and product innovations. We plan to recruit additional design and application engineers with expertise in wireless broadband communications technologies. We may not be successful in attracting, retaining and motivating sufficient
technical and engineering personnel to support our anticipated growth. In addition, to expand our customer base and increase sales to existing customers, we will need to hire additional qualified sales personnel. The competition for qualified
marketing, sales, technical and engineering personnel in our industry is very intense. If we are unable to hire, train and retain qualified marketing, sales, technical and engineering personnel in a timely manner, our ability to grow our business
will be impaired. In addition, if we are unable to retain our existing sales personnel, our ability to maintain or grow our current level of revenue will be harmed.

Rapidly changing standards could make our semiconductor solutions obsolete, which would cause our operating results to suffer.

We design our semiconductor solutions to conform to standards set by industry standards bodies such as the Institute of Electrical and
Electronics Engineers, Inc. (IEEE), the 3rd Generation Partnership Project (3GPP) and Open Mobile Alliance (OMA). We also depend on industry groups such as the WiMAX Forum, an industry-led, non-profit corporation formed to help promote
and certify the compatibility and interoperability of broadband wireless products, to certify and maintain certification of our semiconductor



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solutions as well as the Global Certification Forum (GCF) and the PTS Type Certification Review Board (PTCRB). If our customers adopt new or competing industry standards that are not compatible
with our semiconductor solutions, if industry groups fail to adopt standards compatible with our semiconductor solutions or if our customers are requiring chip certifications that we did not design our products for, our existing semiconductor
solutions would become less desirable to our customers and our sales would suffer. The emergence of markets for our products is affected by a variety of factors beyond our control. In particular, our semiconductor solutions are designed to conform
to current specific industry standards. Competing standards may emerge that are preferred by our customers, which could also reduce our sales and require us to make significant expenditures to develop new semiconductor solutions. Governments and
foreign regulators may adopt standards that are incompatible with our semiconductor solutions, favor alternative technologies or adopt stringent regulations that would impair or make commercially unviable the deployment of our semiconductor
solutions. In addition, existing standards may be challenged as infringing upon the intellectual property rights of other companies or may become obsolete.

We outsource our assembly, testing, warehousing and shipping operations to third parties, and if these parties fail to produce and deliver our products in a timely manner and in accordance with our
specifications, our reputation, customer relationships and operating results could suffer.

We rely on third parties
for the assembly, testing, warehousing and shipping of our products. We rely on United Test and Assembly Center Ltd., or UTAC, Siliconware Precision Industries Limited, or SPIL, StatschipPac Limited, or SPC, and other third-party assembly and test
subcontractors for assembly and testing. We further rely on a single company for logistics and storage. We depend on these parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost and
manufacturing quality. We are unable to maintain the same level of oversight and control of these outsourced operations as we would if we were to conduct them internally.

The services provided by these vendors could be subject to disruption for a variety of reasons, including natural disasters, such as earthquakes, labor disputes, power outages, or if our relationship with
a vendor is damaged. If we experience problems at a particular location, we would be required to transfer the impacted services to a backup vendor, which could be costly and require a significant amount of time. During such a transition, we would be
required to meet customer demand from our then-existing inventory, as well as any partially finished goods that can be modified to the required product specifications, which may not be possible or cost effective. Further, we do not have any
long-term agreements with any of these vendors. If one or more of these vendors terminates its relationship with us, allocates capacity to other customers or if we encounter any problems with our supply chain, it could harm our ability to ship our
products to our customers on time and in the quantity required, which in turn could cause an unanticipated decline in our sales and possibly damage our customer relationships.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields,
delays in product deliveries and increased costs.

To remain competitive, we expect to continue to transition our
semiconductor products to increasingly smaller geometries and to achieve higher levels of design integration. These ongoing efforts require us from time to time to modify the manufacturing processes for our semiconductor solutions and to redesign
some solutions, which in turn may result in delays in product deliveries. We periodically evaluate the benefits of migrating to new process technologies to reduce cost and improve performance. We may face difficulties, delays and increased expenses
as we transition our products to new processes. We depend on our relationship with TSMC and our test and assembly subcontractors to transition to new processes successfully. We cannot assure you that TSMC or our test and assembly subcontractors will
be able to effectively manage the transition or that we will be able to maintain our relationship with TSMC or our test and assembly vendors or develop relationships with new foundries and vendors if necessary. If TSMC, any of our subcontractors or
we experience significant delays in transitioning to smaller geometries or fail to efficiently implement transitions, we could experience reduced manufacturing yields, or delays in product deliveries and increased costs, all of which could harm our
relationships with our customers, our margins and our operating results. As new processes become more prevalent, we expect to continue to integrate greater levels of functionality, as well as end-customer and third-party intellectual property, into
our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely or cost-effective basis.

Changes in current laws or regulations or the imposition of new laws or regulations could impede the sale of our products or otherwise harm our business.

Wireless networks can only operate in the spectrum allowed by regulators and in accordance with rules governing how that spectrum can be
used. Regulators in various countries have broad jurisdiction over the allocation of spectrum for wireless networks, and we therefore rely on these regulators to provide sufficient spectrum and usage rules. For example, countries such as China,
India, Japan or Korea heavily regulate all aspects of their wireless communication industries, and may restrict spectrum allocation or usage. If further restrictions were to be imposed over the frequency bands where our semiconductor solutions are
designed to operate, we may have difficulty selling our products in those regions. In addition, our semiconductor solutions operate in the 2.5 and 3.5 gigahertz, or GHz, bands, which in some countries is also used by government and commercial
services such as military and commercial aviation. European and United States regulators have traditionally protected government uses of the 2.5 and 3.5 GHz bands by setting power limits and indoor and outdoor designation and requiring that
wireless local area networking devices not interfere with other users of the band such as government and civilian satellite services. Changes in current laws or regulations or the imposition of new laws and regulations in the markets in which we
operate regarding the allocation and usage of the 2.5 and 3.5 GHz band may harm the sale of our products and our business, financial condition and results of operations.



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Adverse outcomes in tax disputes could subject us to tax assessments and potential penalties.

From time to time, we are subject to tax audits that could result in tax assessments and potential penalties,
particularly with respect to claimed research tax credits due to the judgment involved in determining which projects meet the tax codes criteria for innovation and fundamental research. For example, in December 2012, we were notified of
proposed tax adjustments, penalties and interest related to a French tax audit totaling 827 thousand ($1.1 million). We disagree with essentially all of the proposed adjustments, filed our formal objections in February 2013 and intend to
vigorously defend our reporting position. As of the date of this filing, we have had no response to our formal objections. Based on our assessment of the potential exposure in this dispute, we have recorded a provision for potential tax adjustments
or penalties while we contest the proposed tax adjustments. However, our actual costs for this dispute or other disputes in the future may be materially different from the provisions recorded if we are not successful in our appeal of any assessment,
which could have a material adverse effect on our business.

New regulations related to conflict minerals may force us to
incur additional expenses, may result in damage to our business reputation and may adversely impact our ability to conduct our business.

In August 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted new requirements for companies that use certain minerals and derivative metals (referred to as
conflict minerals, regardless of their actual country of origin) in their products. Some of these metals are commonly used in electronic equipment and devices, including our products. Depending on various circumstances, these new
requirements will require companies to investigate, disclose and report whether or not such metals originated from the Democratic Republic of Congo or adjoining countries. We have an extremely complex supply chain, with numerous suppliers (many of
whom are not obligated by the new law to investigate their own supply chains) for the components and parts used in each of our products. As a result, we may incur significant costs to comply with the diligence and disclosure requirements, including
costs related to determining the source of any of the relevant metals used in our products. In addition, because our supply chain is so complex, we may not be able to sufficiently verify the origin of all the relevant metals used in our products
through the due diligence procedures that we implement, which may harm our business reputation. We may also face difficulties in satisfying customers if they require that we prove or certify that our products are conflict free. Key
components and parts that can be shown to be conflict free may not be available to us in sufficient quantity, or at all, or may only be available at significantly higher cost to us. If we are not able to meet customer requirements,
customers may choose to disqualify us as a supplier. Any of these outcomes could adversely impact our business, financial condition or results of operations.

Fluctuations in foreign exchange rates may harm our financial results.

Our functional currency is the U.S. dollar. Substantially all of our sales are denominated in U.S. dollars and the payment terms of all of our significant supply chain vendors are also denominated in U.S.
dollars. We incur operating expenses and hold assets and liabilities denominated in currencies other than the U.S. dollar, principally the euro, and to a lesser extent the British pound sterling, the Chinese yuan and the New Israeli shekel. As a
result, our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, primarily the U.S. dollar to euro exchange rate. As we grow our operations, our exposure to foreign currency risk could
become more significant. If there had been a 10% increase or decrease in the exchange rate of the U.S. dollar to the euro, we estimate the impact, in absolute terms, on operating expenses for the year ended December 31, 2013 would have been
$2.0 million.

Commencing in 2009, we entered into foreign currency hedging contracts primarily to reduce the impact of
variations in the U.S. dollar to euro exchange rate on our operating expenses denominated in euros. However, hedging at best reduces volatility and helps to lock in a target rate for the following six to twelve months but cannot eliminate the
fundamental exposure and may not be effective.

Certain natural disasters, such as coastal flooding, large earthquakes or volcanic
eruptions, may negatively impact our business. Any disruption to the operations of our foundry and assembly and test subcontractors could cause significant delays in the production or shipment of our products.

If coastal flooding, a large earthquake, volcanic eruption or other natural disaster were to directly damage, destroy or disrupt
TSMCs manufacturing facilities or the facilities of our test and assembly contractors, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of
which would negatively impact our business. For example, substantially all of our semiconductor solutions are manufactured and assembled by third-party contractors located in Taiwan and Singapore. The risk of an earthquake or tsunami in Taiwan or
Singapore, such as the major earthquakes that occurred in Taiwan in December 2006 and June 2003, and elsewhere in the Pacific Rim region is significant due to the proximity of major earthquake fault lines to the facilities of our foundry vendor and
assembly and test subcontractors. Even if these facilities are not directly damaged, a large natural disaster may result in disruptions in distribution channels or supply chains. Although our third-party contractors did not suffer any significant
damage as a result of the most recent earthquakes, the occurrence of additional earthquakes or other natural disasters could result in the disruption of our foundry vendor or assembly and test capacity. For instance, the recent earthquake and
tsunami in Japan, though it did not directly cause damage to any of our third-party contractors, may impair the ability of such contractors to procure components from vendors in Japan, and alternative suppliers may not be available in a timely
manner or at all, and may impair the ability of our customers to procure components other than ours that are necessary to their production process, which in turn could result in a slowing of their production and consequently of purchases of our



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products. Additionally, the dislocation of air transport services following volcanic eruptions in Iceland in April 2010 caused us delays in distribution of our semiconductor solutions. Any
disruption resulting from such events could cause significant delays in the production or shipment of our semiconductor solutions as well as significant increases in our transportation costs until we are able to shift our manufacturing, assembling
or testing from an affected contractor to an alternative vendor.

Our global operations are subject to risks for which we may not be
adequately insured.

Our global operations are subject to many risks including errors and omissions, infrastructure
disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. No assurance can be given that we will not incur
losses beyond the limits or outside the scope of coverage of our insurance policies. From time-to-time, various types of insurance may not be available on commercially acceptable terms or, in some cases, at all. We cannot assure you that in the
future we will be able to maintain existing insurance coverage or that premiums will not increase substantially. We maintain limited insurance coverage and in some cases no coverage for natural disasters and sudden and accidental environmental
damages as these types of insurance are sometimes not available or available only at a prohibitive cost. Accordingly, we may be subject to an uninsured or under-insured loss in such situations.

Risks Related to Ownership of Our Shares and ADSs

Fluctuations in our operating results on a quarterly or annual basis and difficulty predicting our quarterly operating results could cause the market price of the ADSs to decline.

Our revenue and operating results have fluctuated significantly from period to period in the past and will do so in
the future. As a result, you should not rely on period-to-period comparisons of our operating results as an indication of our future performance. In future periods, our revenue and results of operations may be below the expectations of analysts and
investors, which could cause the market price of the ADSs to decline.

Factors that may cause our operating results to
fluctuate include:



| |  |  | reductions in orders or cancellations by our customers;
| | - |  | -------------------------------------------------------



| |  |  | changes in the size, growth or growth prospects of the LTE and WiMAX markets;
| | - |  | -----------------------------------------------------------------------------



| |  |  | changes in the competitive dynamics of our market, including new entrants or pricing pressures, and our ability to compete in the LTE market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | timing and success of commercial deployments of and upgrades to 4G wireless networks;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | timely availability, at a reasonable cost, of adequate manufacturing capacity with the sole foundry that manufactures our products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully define, design and release new products in a timely manner that meet our customers needs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | timing and growth rate of revenues from the LTE market;
| | - |  | -------------------------------------------------------



| |  |  | changes in manufacturing costs, including wafer, test and assembly costs, mask costs and manufacturing yields;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the timing of product announcements by competitors or us; and
| | - |  | -------------------------------------------------------------



| |  |  | costs associated with litigation, especially related to intellectual property.
| | - |  | ------------------------------------------------------------------------------

Moreover, sales of our semiconductor solutions fluctuate from period to period due to cyclicality in the semiconductor industry and the
short product life cycles and wide fluctuations in product supply and demand characteristic of this industry. We expect these cyclical conditions to continue. Due to our limited operating history, we have yet to experience an established pattern of
seasonality. However, business activities in Asia generally slow down in the first quarter of each year during the lunar new year period, which could harm our sales and results of operations during the period. Our expense levels are relatively fixed
in the short-term and are based, in part, on our future revenue projections. If revenue levels are below our expectations, we may experience declines in margins and profitability or incur a loss from our operations. As a result, our quarterly
operating results are difficult to predict, even in the near term, which may result in our revenue and results of operations being below the expectations of analysts and investors and which could cause the market price of the ADSs to decline.

If securities or industry analysts cease to publish research reports about us or our industry, or if they adversely change their
recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

The trading
market for the ADSs is influenced by research reports that industry or securities analysts publish about us or our industry. If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more
of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.

We have no present intention to pay dividends on our ordinary shares in the foreseeable future and, consequently, your only opportunity to achieve
a return on your investment during that time is if the price of the ADSs appreciates.



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We have no present intention to pay dividends on our ordinary shares in the foreseeable
future. Any recommendation by our board of directors to pay dividends will depend on many factors, including our financial condition, results of operations, legal requirements and other factors. Accordingly, if the price of the ADSs falls in the
foreseeable future, you will incur a loss on your investment, without the likelihood that this loss will be offset in part or at all by potential future cash dividends. In addition, even if we were to pay a dividend on our ordinary shares, French
law may prohibit paying such dividends to holders of the ADSs or the tax implications of such payments may significantly diminish what you receive.

French law may limit the amount of dividends we are able to distribute and exchange rate fluctuations may reduce the amount of U.S. dollars you receive in respect of any dividends or other
distributions we may pay in the future in connection with your ADSs.

Although our consolidated financial statements
are denominated in U.S. dollars, under French law, the determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our unconsolidated annual financial statements under the French commercial code in
accordance with generally accepted accounting principles in France, which we refer to as French GAAP. Therefore, we may be more restricted in our ability to declare dividends than companies not based in France. In addition, exchange rate
fluctuations may affect the amount of euros that we are able to distribute, and the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euros, if any. These
factors could harm the value of the ADSs, and, in turn, the U.S. dollar proceeds that holders receive from the sale of the ADSs.

You may not be able to exercise your right to vote the ordinary shares underlying your ADSs.

Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by the ADSs only in accordance with the
provisions of the deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our ordinary shares, the depositary will, as soon as practicable thereafter, fix a record date for the determination of ADS
holders who shall be entitled to give instructions for the exercise of voting rights. Upon timely receipt of notice from us, if we so request, the depositary shall distribute to the holders as of the record date (i) the notice of the meeting or
solicitation of consent or proxy sent by us and (ii) a statement as to the manner in which instructions may be given by the holders.

You may instruct the depositary of your ADSs to vote the ordinary shares underlying your ADSs. Otherwise, you will not be able to exercise your right to vote, unless you withdraw the ordinary shares
underlying the ADSs you hold. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares. If we ask for your instructions, the depositary, upon timely notice from us, will notify you of the upcoming vote and
arrange to deliver our voting materials to you. We cannot guarantee you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw your ordinary share so that you can
vote them yourself. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to
vote, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.

You may be
subject to limitations on the transfer of your ADSs.

Your ADSs, which may be evidenced by ADRs, are transferable on
the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers
of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the
deposit agreement, or for any other reason.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities
laws and are permitted to file less information with the SEC than a U.S. company; our ordinary shares are not listed, and we do not intend to list our shares, on any market in France, our home country. This may limit the information available to
holders of the ADSs.

We are a foreign private issuer, as defined in the SECs rules and regulations
and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations
and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our
officers and directors are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we have
and expect to continue to submit quarterly interim consolidated financial data to the SEC under cover of the SECs Form 6-K, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. Furthermore, our ordinary shares are not listed and we do not currently intend to list our ordinary shares
on any market in France, our home country. As a result, we are not subject to the reporting and other requirements of listed companies in France. For instance, we are not required to publish quarterly or semi-annual financial statements.
Accordingly, there is less publicly available information concerning our company than there would be if we were a U.S. public company.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ
significantly from NYSE corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with NYSE corporate governance listing standards.



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As a foreign private issuer listed on the NYSE, we are subject to NYSE corporate governance
listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in France, which is our home country, may differ significantly
from NYSE corporate governance listing standards. For example, neither the corporate laws of France nor our by-laws require a majority of our directors to be independent and we could include non-independent directors as members of our compensation
committee and nominating committee, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. Currently, we intend to comply with the NYSE corporate governance listing
standards to the extent possible under French law. However, if we choose to change such practice to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under NYSE corporate
governance listing standards applicable to U.S. domestic issuers.

U.S. holders of the ADSs may suffer adverse tax consequences if
we are characterized as a Passive Foreign Investment Company.

Generally, if for any taxable year 75% or more of our
gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. To determine
if at least 50% of our assets are held for the production of, or produce, passive income, we may use the market capitalization method for certain periods. Under the market capitalization method, the total asset value of a company would be considered
to equal the fair market value of its outstanding shares plus outstanding indebtedness on a relevant testing date. Because the market price of the ADSs has fluctuated substantially and is likely to fluctuate in the future, and the market price may
affect the determination of whether we will be considered a PFIC, there can be no assurance that we will not be considered a PFIC for any taxable year. While we do not believe we were a PFIC for 2013 there is no assurance that we will not be a PFIC
in 2014 or later years. If we are characterized as a PFIC, U.S. holders of the ADSs may suffer adverse tax consequences, including having gains realized on the sale of the ADSs treated as ordinary income, rather than capital gain, the loss of the
preferential rate applicable to dividends received on the ADSs by individuals who are U.S. holders, having interest charges apply to distributions by us and the proceeds of ADS sales and additional reporting requirements. We do not expect to provide
to U.S. holders the information needed to report income and gain pursuant to a qualified electing fund election, which election would alleviate some of the adverse tax consequences of PFIC status, and we make no undertaking to provide
such information in the event that we are a PFIC. See Item 10.ETaxationMaterial United States Federal Income Tax Consequences.

You may be unable to recover in civil proceedings for U.S. securities laws violations.

We are a corporation organized under the laws of France. The majority of our directors are citizens and residents of countries other than the United States, and the majority of our assets are located
outside of the United States. Accordingly, it may be difficult for investors to obtain jurisdiction over us or our directors in courts in the United States and enforce against us or them judgments obtained against us or them. In addition, we
cannot assure you that civil liabilities predicated upon the federal securities laws of the United States will be enforceable in France.

The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations
incorporated in the United States.

We are a French company with limited liability. Our corporate affairs are governed
by our by-laws and by the laws governing companies incorporated in France. The rights of shareholders and the responsibilities of members of our board of directors are in many ways different from the rights and obligations of shareholders in
companies governed by the laws of U.S. jurisdictions. For example, in the performance of its duties, our board of directors is required by French law to consider the interests of our company, its shareholders, its employees and other stakeholders,
rather than solely our shareholders and/or creditors. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a stockholder.

Our by-laws and French corporate law contain provisions that may delay or discourage a takeover attempt.

Provisions contained in our by-laws and the corporate laws of France, the country in which we are incorporated, could make it more
difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. In addition, provisions of our by-laws impose various procedural and other requirements, which could make it more difficult for shareholders to
effect certain corporate actions. These provisions include the following:



| |  |  | our shares are in registered form only and we must be notified of any transfer of our shares in order for such transfer to be validly registered;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our by-laws provide for directors to be elected for three year terms, and we intend to elect one third of the directors every year;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our shareholders may grant our board of directors broad authorizations to increase our share capital;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | our board of directors has the right to appoint directors to fill a vacancy created by the resignation, death or removal of a director, subject to the
approval by the shareholders of such appointment at the next shareholders meeting, which prevents shareholders from having the sole right to fill vacancies on our board of directors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our board of directors can only be convened by its chairman except when no board meeting has been held for more than two consecutive months;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | our board of directors meetings can only be regularly held if at least half of the directors attend either physically or by way of secured
telecommunications;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | approval of at least a majority of the shares entitled to vote at an ordinary shareholders general meeting is required to remove directors with
or without cause;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | advance notice is required for nominations for election to the board of directors or for proposing matters that can be acted upon at a
shareholders meeting; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the sections of the by-laws relating to the number of directors and election and removal of a director from office may only be modified by a resolution
adopted by 66 2/3% of our shareholders present or represented at the meeting.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The exercise or conversion of
outstanding stock options, founders warrants and warrants into ordinary shares will dilute the percentage ownership of our other shareholders and the sale of such shares may adversely affect the market price of the ADSs.

As of December 31, 2013, there are outstanding stock options, founders warrants and warrants to purchase an aggregate of
approximately 5.3 million of our ordinary shares and more options and warrants will likely be granted in the future to our officers, directors, employees and consultants. We may issue additional warrants in connection with acquisitions,
borrowing arrangement or other strategic or financial transactions. The exercise of outstanding stock options will dilute the percentage ownership of our other shareholders. The exercise of these options and warrants and the subsequent sale of the
underlying ordinary shares could cause a decline in the market price of the ADSs.

If we raise additional capital in the future, your
ownership in us could be diluted.

Any issuance of equity we may undertake in the future to raise additional capital
could cause the price of the ADSs to decline, or require us to issue shares or ADSs at a price that is lower than that paid by holders of our shares or ADSs in the past, which would result in those newly issued shares or ADSs being dilutive. If we
obtain funds through a credit facility or through the issuance of debt or preferred securities, these securities would likely have rights senior to your rights as an ADS holder, which could impair the value of the ADSs.

Item 4. Information on the Company



|A. | History and Development of the Company
|-- | --------------------------------------

Our History

Sequans Communications S.A. was incorporated as a
société anonyme under the laws of the French Republic on October 7, 2003, for a period of 99 years. We are registered at the Nanterre Commerce and Companies Register under the number 450 249 677. Our principal
executive offices are located at 19 Le Parvis, 92073 Paris-La Défense, France, and our telephone number is +33 1 70 72 16 00. Our agent for service of process in the U.S. is GKL Corporate/Search, Inc., 915 L Street, Suite 1250,
Sacramento, California 95814.

Our website is www.sequans.com. The information on, or that can be accessed through, our
website is not part of this annual report.

As of the date of this annual report, there has been no indication of any public
takeover offers by third parties in respect of our ADSs or ordinary shares or by the Company in respect of other companies shares.

Principal Capital Expenditures

Our capital expenditures for the years ended December 31, 2011, 2012 and 2013 amounted to $11.0 million, $5.6 million and $3.9 million, respectively. These investments in property and equipment and
intangible assets primarily consisted of purchases related to LTE product development and, to a lesser extent in 2011, ongoing WiMAX product development. We anticipate our capital expenditures in the year ended December 31, 2014 to be for
ongoing LTE product development. We anticipate our capital expenditure in 2014 to be financed from our recent public offerings in February and November 2013. Should we decide to broaden our product range by acquiring or developing complementary
technologies, we would need additional capital expenditures in order to support development of multi-mode products.



|B. | Business Overview
|-- | -----------------

Overview

We are a
leading fabless designer, developer and supplier of 4G LTE and WiMAX semiconductor solutions for wireless mobile broadband applications, with a specific focus on the single-mode device market. Our solutions incorporate baseband processor and radio
frequency, or RF, transceiver integrated circuits, or ICs, along with our proprietary signal processing techniques, algorithms and software stacks. Our high performance ICs deliver high throughput, low power consumption and high reliability in a
small form factor and at a competitive price. In the LTE market, we believe the single-mode, or LTE-only, device market is a potentially large and



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underserved segment of the overall LTE device market, and that these devices are characterized by attractive attributes not typically found in the traditional multi-mode device market.
Specifically, we believe there are significant advantages in size, power consumption, product cost, development costs and certification costs for our customers producing LTE-only devices compared to their more expensive, larger, more power hungry
and more complex multi-mode counterparts. As a result, we believe that the LTE-only market will continue to increase, especially as operators fully deploy their LTE networks and as the volume of data traffic continues to grow. We believe our LTE
solutions are among the most highly optimized, efficient and mature solutions in the industry, and that they are differentiated from both the multi-mode solutions providers and from rivals providing single-mode 4G solutions.

We have successfully brought to market five generations of 4G wireless chipsets, including two generations of LTE chipsets, and in
February 2013, we announced our third generation LTE-Advanced chipset. The cost, size and power efficiency of our LTE chip designs, coupled with our deep understanding of system-level architecture, our advanced wireless signal processing
intellectual property and our RF expertise, enable us to provide high-performance, low-power and cost-efficient 4G semiconductor solutions, allowing us to target a wide range of wireless broadband devices. Our solutions serve as the core wireless
broadband communications platform in these devices, including smartphones; USB dongles; portable routers; embedded wireless modems for laptops, tablets, and other consumer multimedia and industrial devices; and customer-premises equipment, such as
fixed wireless access modems, routers and residential gateways.

From 2005 through December 31, 2013, we shipped
approximately 17.0 million 4G baseband-based semiconductor solutions, which have been deployed by leading wireless carriers around the world. Until the end of 2012, our shipments were primarily WiMAX products. In the year ended
December 31, 2013, shipments of our LTE products increased and in the future LTE shipments are expected to outpace WiMAX shipments as the WiMAX market declines.

Given that LTE and WiMAX share a common technology platform, we have leveraged our leadership in WiMAX to successfully develop highly competitive LTE semiconductor solutions that are being deployed
globally. Our LTE solutions are currently in commercial deployments in Australia and Brazil, have successfully completed the Verizon Wireless chipset certification process and approved for deployment by their module certification program in the
United States. Further, we have received Chinas Ministry of Industry and Information Technology approval to participate in China Mobiles large-scale LTE trials, have been certified for commercial deployment by LG U+ in South Korea, and
are presently under evaluation or in trials with other leading wireless carriers in India, Japan, Europe, the United States and elsewhere. More than twenty OEM or ODM customers have chosen to design products using our LTE solutions. Our LTE product
line comprises two families: our StreamrichLTE family addresses the high-performance, feature-rich device segment, while the StreamliteLTE family is designed specifically to address the unique price/performance requirements of the
Internet of Things market, including connected consumer electronics and machine-to-machine devices. In 2013, we introduced the EZLinkLTE family of LTE modules, which provide all-in-one connectivity solutions designed to simplify
the task, and reduce the cost, of embedding LTE into mobile computers, tablets, home networking and machine-to-machine devices. The first two EZLinkLTE modules have been certified by Verizon Wireless for use on their LTE network.

The research firm Strategy Analytics projects that the number of LTE devices shipped annually will increase from 355 million in 2013
to 1.04 billion in 2017, representing a CAGR of approximately 31%. Nearly 3.5 billion LTE devices are expected to ship over this timeframe, and according to Strategy Analytics, more than 600 million of them will be single-mode LTE devices.

Our LTE solutions are incorporated into devices sold by many leading OEMs and ODMs, including Huawei, Modacom, NationZ,
Netcomm, Gemtek, KD Interactive and Pinyon Technologies.

Our WiMAX solutions were incorporated into the highly successful HTC
EVO 4G, the first mass-market 4G smartphone, as well as into data devices sold by leading OEMs and ODMs, including Huawei, Gemtek, Zyxel, Mitsumi, Alvarion, Sagemcom, Accton and others. Our WiMAX products have been deployed by many wireless carriers
worldwide, including seven of the ten largest WiMAX carriers globally by number of subscribers according to BWA Research UK.

Our total revenue decreased from $93.7 million in 2011 to $22.3 million in 2012 and to $13.7 million in 2013; and our annual net loss
increased from $0.4 million to $33.0 million from 2011 to 2012 and then increased to $35.6 million in 2013.

As explained more fully in
Item 5. Operating and Financial Review and Prospects, the decrease in revenue in 2012 was primarily due to lower sales of WiMAX products, in particular to our largest customer HTC, following changes in the WiMAX market in the United
States beginning in the second half of 2011. HTC integrated our WiMAX products into a line of smartphones sold primarily in the United States. There were virtually no sales to HTC in 2013, while sales of LTE products only began to contribute to
revenue in a significant manner beginning in the second half of 2013, resulting in a further decline in revenue in 2013 compared to 2012.

Industry Background

Evolution of
Wireless Networks

The use of wireless communications devices has increased dramatically in the
past decade, and mobile phones and wireless data services have become an integral part of day-to-day communication. According to the February 2014 Cisco® Visual Networking Index, global mobile data traffic is projected to grow from 1.5 exabytes per month at the end of 2013 to 15.9 exabytes per month by 2018, and over
half of this data will run on 4G networks.



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This increase in wireless data traffic is driven by two primary trends. First, the
pervasiveness of the Internet with its vast array of rich media content and applications along with users desire to be connected anywhere and anytime using a variety of different wireless devices is driving a fundamental change in wireless
data usage models and increasing demand for high speed wireless data connectivity. Second, rapid advances in performance and functionality have resulted in mobile phones evolving from solely voice-centric communications devices into data-intensive
devices, such as smartphones, that support high-definition video, bandwidth-intensive Internet applications and streaming multimedia content, all of which require additional wireless network throughput. As a result, current wireless carrier
networks, originally designed primarily for voice traffic, are straining to reliably handle the dramatic increase in wireless broadband data demand.

Wireless technologies have evolved through successive generations of protocols driven by the need for more efficient networks with greater bandwidth and capacity to handle a rising number of subscribers
and increasing usage of data services. Launched in 1991, 2G wireless networks, based on the Global System for Mobile Communications, or GSM, standard, were the first mobile telephone networks to use digital technology to digitize and compress voice
traffic for more efficient use of spectrum bandwidth. These networks were designed primarily to support voice traffic, although they were capable of supporting data rates up to 9.6 kilobits per second, or Kbps, using a circuit-switched data
connection. By 2003, multiple enhancements to these networks improved theoretical peak downlink data rates to as high as 473.6 Kbps. An alternative to GSM-based 2G networks was the IS-95 standard based on Code Division Multiple Access, or CDMA,
technology, which was adopted by several carriers in the U.S. and Asia in the 1990s. By the late 1990s, these networks could support data rates of up to 64 Kbps.

In the late 1990s, 3rd Generation Partnership Project, or 3GPP, began defining 3G networks based on the Universal Mobile Telecommunications System, or UMTS, standard, which was intended to minimize
capital expenditure for wireless carriers evolving from GSM-based systems as they added data capability. The first UMTS networks were established in the early 2000s and supported peak downlink data rates of 384 Kbps. After many enhancements to the
technology, peak downlink data rates of 28 Mbps and higher were achieved. In parallel to these 3GPP efforts, 3rd Generation Partnership Project 2, or 3GPP2, defined a path from 2G to 3G technology for CDMA-based carriers. An outcome of the 3GPP2
effort was the creation of specifications for CDMA2000, which supported 1xEV-DO (EVolution Data Only) implementations capable of up to 3.1 Mbps downlink speeds.

Despite the advances in data rates provided by these improvements on both the 3GPP and 3GPP2 paths, these networks remain constrained by legacy technologies that were designed primarily for voice traffic,
which are characterized by limited throughput and inefficient utilization of spectrum. Unable to effectively address the fast growing demand for wireless broadband data services in a cost effective manner using legacy 2G and 3G networks, many
wireless carriers are moving to what are commonly referred to as 4G networks using LTE, which provides peak downlink speeds of 150 Mbps, and to a much more limited extent WiMAX, which provides peak downlink capacity of 46 Mbps, to enable
higher data throughput. 4G networks also provide significantly higher uplink performance than legacy networks, which is increasingly important for consumers who upload large multimedia payloads such as videos and images. LTE provides up to 50 Mbps
of uplink throughput. In addition, the next version of LTE, called LTE-Advanced, provides additional improvements in features and performance, and is already in the early stages of deployment by some operators. The initial versions of LTE-Advanced
can provide as much as 300 Mbps of downlink speed, with future versions providing even higher downlink speeds and increasing the peak uplink speeds to 100 Mbps.



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The figure below provides a simplified perspective on the evolution of wireless
technologies:



LOGO

Wireless carriers are seeking to quickly deploy and transition existing wireless
data services to more efficient 4G networks, which require less capital expenditure for a given amount of data throughput. At the same time, potential average revenue per account, or ARPA, can be increased by providing value-added mobile broadband
services and solutions that are better enabled by the speed and performance of 4G networks. According to the February 2014
Cisco® Visual Networking Index, by 2018 over two-thirds of the worlds mobile data traffic will be video,
which is particularly problematic for legacy networks to support economically. These factors are key drivers of the move by mobile network operators to LTE technology.

Additionally, carriers in developing regions are increasingly embracing 4G wireless technology as a cost-effective and easier-to-deploy alternative to wireline networks for delivering broadband capability
to subscribers. According to an October 2010 report by the International Telecommunications Union, developing regions of the world are forecasted to have only 4.4% wired broadband penetration by the end of 2010, compared to 24.6% for developed
regions. 4G wireless technology is being deployed in many of these developing regions to increase access to broadband services.

An additional factor fueling some applications to move to 4G connectivity is the expected longevity of the technology. Many
machine-to-machine connections are of the set it and forget it variety, and are expected to remain operational for ten or more years. A number of operators, including AT&T in the United States and others in South Korea and Japan,
have announced plans to shut down their aging 2G networks so they can re-farm the spectrum for use with 4G technology. As a result, many new machine-to-machine device deployments are incorporating LTE technology, despite the fact that some may not
need the performance provided by LTE.

4G Wireless Networks

4G architecture represents a fundamental technological change in the design of wireless communication networks. 2G and 3G networks were
originally designed to support voice communications and utilize older circuit switching technology based on wireline telephone system design concepts. Circuit switching technology is inflexible as it requires a continuous dedicated connection
between the source and destination of the communication, and is inefficient as network capacity is wasted on connections that are established but not in continuous use. 4G, which employs concepts such as packet switching and internet protocol, or
IP, improves the scalability and performance of data networks. Packet switching technology makes more efficient use of network capacity for data communication by transmitting data in packets over multiple shared connections as compared to a
dedicated connection. OFDMA and MIMO have emerged as key technologies that increase efficient use of spectrum, signal reliability, throughput and range in 4G networks compared to 2G and 3G networks.



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| |  |  | OFDMA is a digital modulation and access technique that achieves significantly higher throughput within a given frequency spectrum than the TDMA
and CDMA techniques used in 2G and 3G wireless networks. OFDMA splits the wireless signal into multiple lower frequency sub-signals spread throughout available spectrum during transmission, effectively reducing the demands on the network for each
sub-signal and enabling increased overall speed and performance.
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| |  |  | MIMO is a smart antenna technology that enables higher data throughput and signal range without requiring additional bandwidth or transmit
power. MIMO employs multiple antennae to more efficiently transmit and receive wireless data.
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The
throughput and range extension capabilities of OFDMA and MIMO technologies also enable infrastructure installations to cover a larger service area and provide increased network capacity, thereby reducing capital expenditures for wireless carriers.

The commonly accepted 4G protocols, LTE and WiMAX, are IP-based, share the same OFDMA and MIMO technologies and have very
similar radio designs, coding schemes and signal processing algorithms. WiMAX was defined as a standard and deployed ahead of LTE as carriers sought to monetize available frequency spectrum using a Time Division Duplexing, or TDD, RF technology. TDD
transmits and receives signals on the same frequency using a time-sharing scheme, whereas Frequency Division Duplexing, or FDD, uses different frequencies to transmit and receive signals simultaneously. While WiMAX is deployed almost exclusively in
one of a limited number of TDD frequency bands, LTE is compatible with both TDD and FDD spectrum and can be deployed in many different frequency bands.

Wireless carriers that deployed WiMAX were primarily new market entrants seeking competitive differentiation from incumbents in addition to carriers in emerging markets who utilized WiMAX networks as an
economical alternative to wired broadband networks. The availability of WiMAX technology prior to the development of LTE led to adoption and deployment of WiMAX networks first. We expect that most WiMAX carriers will transition from WiMAX networks
to LTE networks over time.

LTE has become the dominant technology for 4G wireless broadband access, particularly among large
mobile operators who have historically deployed 3GPP or 3GPP2 technology. The Global Mobile Suppliers Association counted 268 commercial networks in 100 countries at the end of 2013, and was forecasting this to grow to over 350 networks by the end
of 2014, making it the fastest developing mobile communications system technology ever. Leading this trend, Verizon Wireless in the U.S. had 42.7 million active LTE connections at the end of 2013, Japans NTT DoCoMo had crossed
15 million users by August 2013, and South Koreas SK Telecom counted 12.4 million subscribers as of October 2013. According to ABI Research, LTE subscribers will grow from 221 million at the end of 2013 to 1.5 billion by 2018.
This growth in subscribers drives an LTE device market that is expected to grow from 355 million units in 2013 to over 1 billion units in 2017, according to Strategy Analytics.

The rapid pace of deployment of LTE networks worldwide implies that in some regions, operators are preparing to achieve LTE coverage at
parity or better compared to their 2G or 3G coverage footprint. Verizon Wireless for instance has said that it has substantially completed its LTE network build as of mid-2013, achieving population coverage parity with their 3G network of over 97%.
Meanwhile, South Korean and Japanese LTE operators achieved 100% population coverage in 2012. In this environment, many devices will not require 2G or 3G support. Initially, this is especially true outside the handset market, in devices such as
tablets, laptops, mobile hotspots, USB modems, consumer electronics devices, and M2M applications. In these data devices the usage models are data-centric rather than voice-centric, and there are significant advantages in size, power consumption,
product cost, development costs and certification costs for LTE-only implementations compared to their more expensive, larger, more power hungry and more complex multi-mode equivalents. In some regions, LTE-only handsets will emerge as well,
particularly for domestic use. These LTE-only device-level advantages, coupled with the network-level economic benefits to carriers, imply that a significant market exists for LTE-only devices. Various industry analysts expect approximately 3
billion total LTE devices to be shipped worldwide between 2013 and 2017. Strategy Analytics forecasts that the LTE-only portion of the total LTE device market is expected to increase from approximately 8% of LTE units shipped in
2013 to well above 20% in 2017.

Challenges Faced By 4G Wireless Semiconductor Providers

Suppliers of 4G semiconductor solutions face significant challenges:



| |  |  | Execution Challenges. The rapid evolution of wireless protocols, such as LTE to LTE Advanced, requires sustained product development
excellence and ongoing collaboration with carriers to meet market technology needs. Subscriber demand and carriers push to increase revenues by providing new and higher performance devices have driven OEM and ODM product lifecycles to become
shorter and require semiconductor solution providers to adhere to quick time-to-market schedules while providing fast and efficient transition from design-in to volume production. In addition, wireless carriers require semiconductor solutions to
undergo extensive certification qualification and interoperability testing prior to mass production.
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| |  |  | Technology Challenges. In order to increase throughput with minimal cost, wireless carriers require more efficient use of spectrum through
the implementation of complex signal processing algorithms, such as OFDMA and MIMO, that require a significant amount of system-level and software expertise in addition to IC design knowledge. In addition, OEM and ODM customers desire for
continuous improvements in power efficiency, reduced form factor and lower cost require rapid design cycles employing increasingly advanced silicon processes, improved RF transceiver performance and integration of additional features. Furthermore,
until LTE networks are fully deployed by the carrier, the need to provide an optimal user experience in areas of poor network coverage or areas where coverage changes from 2G or 3G to 4G requires multi-mode system designs that are capable of
seamlessly transitioning between the technologies.
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Our Competitive Strengths

We believe the following competitive strengths enable us to address the challenges faced by 4G wireless semiconductor providers:



| |  |  | A strong track record of execution in 4G.We were an early provider of WiMAX products and have been shipping our wireless
broadband semiconductor solutions since 2005. We believe we have a strong position in the WiMAX market and are well positioned for the LTE market, with approximately 30 customers working on one or multiple products. Since we commenced operations in
2004, we have accomplished the following milestones:
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| |  |  | released six generations of 4G semiconductor solutions that have been deployed in a variety of devices including smartphones, USB dongles, embedded
wireless modems and CPE systems;
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| |  |  | delivered advanced broadband semiconductor solutions such as a single chip solution for WiMAX that incorporates baseband and RF transceiver
functionality, utilizes cost-effective and power-efficient 65nm complementary metal-oxide-semiconductor, or CMOS, technology and delivers high network throughput, low latency, strong signal reach, low power consumption and high reliability in a
small form factor and at a low cost;
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| |  |  | designed our WiMAX solution into multiple devices, including the highly successful HTC EVO 4G, the first mass-market 4G smartphone, followed by eight
more HTC devices;
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| |  |  | introduced our first LTE product in May 2010, a full 20MHz bandwidth TDD LTE solution, which was used by China Mobile in the first TDD LTE network
demonstration and was launched in several commercial networks, including in Australia and Brazil;
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| |  |  | at the end of 2011, introduced our StreamrichLTE family of second-generation LTE chipset solutions, designed in advanced low-power 40nm CMOS
technology, supporting both FDD and TDD networks, 3GPP Release 9 features, and providing one of the industrys first solutions to support Category 4 throughput of up to 150Mbps in the downlink;
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| |  |  | in the fourth quarter of 2012, successfully completed a comprehensive qualification process of our second-generation LTE chipsets conducted by China
Mobile and Chinas Ministry of Industry and Information Technology (MIIT) and announced that our chips were selected to power a significant portion of the LTE devices to be used in the next phase of China Mobiles large-scale LTE trial;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certified our second generation LTE chipset solution on Verizon Wireless network in the fourth quarter of 2012;
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| |  |  | introduced our StreamliteLTE family of products in the fourth quarter of 2012, optimized for the price/performance requirements of the
Internet of Things market, including connected consumer electronics and machine-to-machine devices;
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| |  |  | successfully demonstrated performance gains enabled by our proprietary LTE interference cancellation technology, Sequans AIR, in a trial with
Japanese LTE operator Softbank in December 2012;
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| |  |  | introduced our third-generation LTE chipset solution in the first quarter of 2013, supporting LTE Advanced and 3GPP Release 10 features, including
support for carrier aggregation up to a total of 40MHz bandwidth, an industry-first capability;
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| |  |  | introduced our EZLinkLTE family of LTE modules in the second quarter of 2013, designed to reduce time to market for LTE-only device
manufacturers, and achieved Verizon Wireless certification of the first two members of the EZLinkLTE module family, the VZ20Q and VZ20M, in the third quarter of 2013;
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| |  |  | achieved certification by LG U+ in South Korea of our Firefly LTE platform for machine-to-machine applications in the third quarter of 2013;
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| |  |  | announced our first consumer LTE tablet design win, the Kurio 7X 4G LTE, from KD Interactive, in the first quarter of 2014; and
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| |  |  | successfully demonstrated our implementation of eMBMS, or LTE broadcast, technology as part of Verizon Wireless LTE Multicast public
demonstration in New York during Super Bowl Week in the first quarter of 2014.
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| |  |  | Understanding of wireless system-level architecture and expertise in signal processing.We have an end-to-end understanding of
wireless system-level architectures and networks based on our teams experience in a broad range of wireless technologies including 2G, 3G, Wi-Fi, WiMAX and LTE. This enables us to serve as a trusted advisor to wireless carriers, OEMs and
infrastructure vendors to optimize the performance of their 4G devices and networks. For example, our solutions offer improved standby-mode battery life in 4G devices as a result of our in-depth understanding of the interactions between the device
and the network and implementation of advanced power-saving techniques in our solutions. We also utilize our system-level knowledge to optimize handover performance between 3G and 4G networks in the same smartphone allowing for seamless transitions
between networks and providing an enhanced user experience for mobile users. In addition, we provide our customers with Wi-Fi-4G coexistence systems designs that ensure that Wi-Fi transmissions in adjacent frequencies are properly filtered to
maintain 4G performance.
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| |  |  | High performance solutions for 4G applications.Our solutions offer high performance for use in a wide array of 4G-enabled
devices. The key performance characteristics of our solutions include:
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| |  |  | high throughput with peak downlink data transfer rates of 150 Mbps in our LTE solutions and up to 225 Mbps in our LTE-Advanced solution;
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| |  |  | high power efficiency in both active and idle modes using our patented idle mode optimization algorithms that improve standby time and help maximize
device battery life;
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| |  |  | patented dual-transmit technology that improves coverage and provides higher data throughput from the device to the network compared to traditional
single transmitter approaches;
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| |  |  | support for an advanced technology called hybrid automatic repeat request, or hybrid ARQ, which significantly enhances RF link robustness and
throughput improving mobility and range;
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| |  |  | inclusion of LTE broadcast support in our LTE solutions using a feature called evolved multimedia broadcast multicast service, or eMBMS, which enables
carriers to deliver new multimedia services in an economical and spectrally efficient manner;
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| |  |  | optimized support for IP communications services in our LTE solutions, including voice over LTE, or VoLTE, and Rich Communications Suite, or RCS, both
of which provide carriers with opportunities to deliver new services in an economical and spectrally efficient manner;
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| |  |  | development and integration of a unique LTE interference mitigation technology, Sequans Active Interference Rejection (Sequans AIR) into our LTE
solutions for improved cell edge performance, enhanced network capacity and enhanced user experience; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | support for LTE-Advanced features, including carrier aggregation, a capability of creating a single virtual wide channel from two different narrower
channels, resulting in higher throughput.
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| |  |  | Highly optimized 4G solutions.We have successfully produced and ramped into commercial production five generations of 4G
system-on-chip, or SoC, semiconductor solutions, and in 2013, we introduced our sixth generation 4G solution. This experience has resulted in what we believe to be one of the industrys most efficient implementation, providing high performance
at low cost and low power consumption. Some of our solutions have integrated the baseband processor and the RF transceiver into a single die, for the ultimate in integration, small footprint and low cost. In addition, we successfully migrated our
baseband processors from 130nm to 65nm CMOS technology in 2009, and again to 40nm CMOS technology with our second-generation LTE SoC which became available in 2012. Furthermore, our comprehensive software solutions help our customers get to market
quickly with an optimized, mature and field proven solution. Our highly optimized solutions offer key advantages for both ourselves and our end customers:
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| |  |  | Lower overall system cost for our end customers, coupled with higher functionality and smaller form factor. Our ability to integrate digital and RF
functions into a single device also allows us to maintain higher product margins as we believe device manufacturers are willing to pay a premium for our integrated 4G solutions, while also enabling us to reduce our manufacturing costs for wafer
fabrication, assembly and testing.
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| |  |  | Simplified product design for device manufacturers, as our solutions incorporate all key components required for a 4G device in a single die or
package. We believe these advantages enable our products to be incorporated into leading edge devices that offer a high quality user experience, as well as accelerate our end customers time-to-market.
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| |  |  | Proprietary embedded protocol software that has been exhaustively tested with major basestation vendors equipment to ensure reliable performance
in the field. We also offer host software that facilitates rapid development of high performance device drivers, connection managers and other key application-layer software functionality.
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Our Strategy

Our goal is to be a leading provider of next-generation wireless semiconductors by providing best-in-class solutions that enable mass-market adoption of 4G technologies worldwide. Key elements of our
strategy include:



| |  |  | Identifying, segmenting and optimally serving LTE-only market segments. As the LTE market grows and matures, and as operators
aggressively build out their LTE networks and refarm their 2G and 3G spectrum to support demand for data capacity on LTE, we expect to see significant growth in the demand for single-mode LTE, or LTE-only, devices, initially primarily outside the
handset market. LTE-only devices are typically smaller, thinner, more power-efficient, can take less time to develop and certify, and cost less to produce and sell than their multi-mode counterparts. Data-centric devices including tablets, laptop
and ultrabook PCs, portable routers, USB dongles, consumer electronics devices such as digital cameras and portable gaming devices, machine-to-machine devices and fixed broadband access gateways or CPE are expected to embrace the advantages of
LTE-only implementations. We anticipate this trend to manifest itself first with wireless carriers having the most aggressive LTE network coverage plans in the U.S., Korea, Japan and elsewhere. Some of these device markets, including the connected
consumer electronics and machine-to-machine devices, are especially cost-sensitive, and as a result, in 2012 we launched our StreamliteLTE family of products to provide the appropriate features and price/performance points to competitively
serve these needs. Meanwhile, our full-featured, high-performance StreamrichLTE family of products serves the computing, tablet, mobile hotspot and CPE device segments.
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| |  |  | Accelerating our, and our customers, time to market and reducing our customers development costs.In 2013, we introduced the
EZLinkLTE family of LTE-only modules. By packaging our LTE semiconductor solutions in a complete, turnkey module form factor and certifying them with key wireless carriers, we expect to catalyze the market for LTE-only devices, speed time to
market for customer wishing to incorporate LTE connectivity in their devices, and reduce the cost and complexity for our customers.
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| |  |  | Leveraging our multiple generations of 4G chip design experience to become a leader in advanced LTE technology and cost
efficiency. We have ten years and six generations of 4G chip design experience, resulting in highly optimized and cost-efficient chip implementations and deep technical expertise, allowing us to be among the first in the industry
to deliver new capabilities to market, as well as to enable extremely cost-competitive solutions. For example, we developed a full 20MHz bandwidth TDD LTE solution which was used in the first TDD LTE network demonstration by China Mobile in 2010. In
2011, we announced our second-generation LTE solutions, the SQN3110, SQN3120 and SQN3140, which we believe provide differentiated performance, power efficiency and system cost advantages to manufacturers serving all potential LTE markets, including
TDD LTE solutions for large wireless carriers such as China Mobile, Softbank, Reliance Jio Infocomm Ltd. and Sprint; and FDD LTE products to enable 3G wireless carriers such as Verizon Wireless, AT&T, KDDI and others to migrate to LTE. With this
second-generation chipset, we were among the first LTE chip vendors to demonstrate the full 150Mbps downlink throughput capability defined in the 3GPP specification for LTE Category 4 devices. In December 2012, we disclosed the performance gains
achieved in a trial with Softbank using our proprietary interference cancellation technology, Sequans AIR. In February 2013, we announced our third generation LTE chip, with support for LTE Advanced features, including carrier aggregation
support for up to 40MHz aggregated bandwidth, the only such capability in the industry. In addition, our SQN5120 dual-4G baseband along with our 4sight 4G network migration initiative provides an LTE chipset with built-in WiMAX support and other
solutions to enable WiMAX operators to deploy devices for an efficient transition to LTE. In May 2013, we introduced our EZLinkLTE family of LTE-only modules, aimed at speeding time to market for our customers. In February 2014, we
demonstrated a commercial-ready implementation of LTE Broadcast in Verizon Wireless LTE Multicast demonstration in New York during Super Bowl week. Finally, the cost and power efficiency achieved from our multiple generations of 4G modem
design has enabled us to deliver our StreamliteLTE family of products at attractive price points, enabling LTE connectivity to be embedded in a wide range of cost-sensitive consumer and machine-to-machine applications, potentially growing the
addressable market for LTE.
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| |  |  | Maximizing return-on-investment in WiMAX. We developed a leadership position in WiMAX, particularly in the smartphone market,
by investing early in the silicon integration and system design techniques required to be competitive in this market. With WiMAX deployments now slowing and new device development projects declining, we remain in a competitive position to address
those opportunities that remain, maintaining or even growing market share. We intend to maintain our market position in WiMAX by focusing on continued penetration into 4G WiMAX devices that are deployed by large wireless carriers and the expansion
of our sales in broadband wireless access devices for emerging markets and greenfield operators. In addition, as the first in the industry to provide a dual-4G WiMAX+LTE chip, we are uniquely positioned to generate new business by providing a
solution that helps WiMAX carriers transition smoothly and economically to LTE. Our technology and market share leadership position enables us to pursue additional business without further investment in new product development.
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Our Solutions

We have developed a portfolio of 4G semiconductor solutions to address a variety of applications and market segments. We offer baseband solutions used to encode and decode data based on 4G protocols that
serve as the core wireless processing platform for



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a 4G device; RF transceivers used to transmit and receive wireless transmissions; and highly integrated SoC solutions that combine these and other functions into a single die or package. Some of
our SoC solutions integrate the baseband and RF transceiver functions, in some cases with an applications processor and memory. This advanced integration reduces the size, cost, design complexity and power consumption of the 4G solution. In 2013, we
introduced a family of LTE modules that vastly simplify the task of embedding LTE connectivity in many computing, consumer and machine-to-machine devices.

All of our baseband, SoC products and modules are provided with comprehensive software, including relevant source code and tools, to enable manufacturers to easily integrate our solutions into their
devices in a wide variety of environments, including Apple MAC OSX, Microsoft Windows, Chrome OS and embedded operating systems such as Android. In addition, we provide our customers with design support, in the form of reference designs that specify
recommended methods for interconnecting our chips to surrounding devices, such as host processors, memory and RF front-end components as well as tools to integrate with products from major automatic test equipment vendors. Further, we provide our
customers with a warranty, for a period of one to two years, that our solutions are free from defects in materials and workmanship and will operate in material conformance with the provided specifications, entitling the customer to have the
defective product repaired or replaced at our expense.

Many of todays LTE-enabled devices, including smartphones,
tablets, laptops and mobile hotspots, tend to require the highest performance and richest set of features in their LTE solution, driven by consumer demand for these attributes and by a highly competitive device market. For these performance
segments, we typically propose our StreamrichLTE family of products, as these solutions deliver the required higher performance and comprehensive feature set. However, in the nascent market for connected devices in segments like consumer
electronics and machine-to-machine modules, attributes like size, power consumption and cost are often much more important than raw performance. For these products, we typically propose our StreamliteLTE family of products, which provide
performance levels suitable for these kinds of devices in a smaller, more power-efficient and more cost-effective implementation.

Our primary products during the last three financial years are summarized in the table below.



|                       |  |                            |  |                         |  |              |  |                 |  |     |  |              |  |  |  |              |  |                                                                                              
|---------------------- |  | -------------------------- |  | ----------------------- |  | ------------ |  | --------------- |  | --- |  | ------------ |  |  |  | ------------ |  | ---------------------------------------------------------------------------------------------
|Product Nameand Family |  | Description                |  | Target Applications     |  | Availability |  | Key Features   
|                       |  | Handsets                   |  | Tablets/EmbeddedLaptops |  | USBDongles   |  | EmbeddedCE, M2M |  | CPE |  | Basestations |  | 
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN1210                |  | WiMAX
BB + RF              |  |                        |  |             |  |                |  |    |  |              |  |  |  | Now          |  | 65nm technology, integrated multi-band RF transceiver, embedded SDRAM                        
|SQN1220                |  | WiMAX
BB + RF              |  |                         |  |              |  |                |  |     |  |             |  |  |  | Now          |  | As in SQN1210, plus integrated processor with VoIP support                                   
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN3220 LOGO           |  | LTE-Advanced Release 10 BB |  |                         |  |             |  |                 |  |     |  |             |  |  |  | Sampling Now |  | Carrier aggregation up to 20 + 20 MHz                                                        
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN3110 LOGO           |  | LTE Release 9 BB           |  |                        |  |             |  |                |  |    |  |              |  |  |  | Now          |  | 40nm technology, 150Mbps Category 4 peak throughput, USB and SDIO interfaces, embedded SDRAM.
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN3120 LOGO           |  | LTE Release 9 BB           |  |                         |  |              |  |                |  |    |  |             |  |  |  | Now          |  | As in SQN3110 plus integrated processor and gigabit Ethernet MAC + interface.                
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN5120 LOGO           |  | LTE Release 9
+ WiMAX BB   |  |                         |  |              |  |                |  |     |  |             |  |  |  | Now          |  | As in SQN3120, plus integrated WiMAX baseband, seamless WiMAX-LTE handover support           
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN3140 LOGO           |  | LTE RF                     |  |                        |  |             |  |                |  |    |  |             |  |  |  | Now          |  | Supports 2.32.7 GHz and 3.33.8 GHz TDD LTE bands, up to 20 MHz bandwidth                   
|                       |  |                            |  |                         |  |              |  |                 | 
|SQN3240 LOGO           |  | LTE RF                     |  |                        |  |             |  |                |  |    |  |             |  |  |  | Now          |  | Supports FDD and TDD 700 MHz  2.7 GHz, up to 20 MHz bandwidth                               



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|                       |  |                                                         |  |                         |  |              |  |                 |  |     |  |              |  |  |  |     |  |                                                                                                                                                               
|---------------------- |  | ------------------------------------------------------- |  | ----------------------- |  | ------------ |  | --------------- |  | --- |  | ------------ |  |  |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Nameand Family |  | Description                                             |  | Target Applications     |  | Availability |  | Key Features   
|                       |  | Handsets                                                |  | Tablets/EmbeddedLaptops |  | USBDongles   |  | EmbeddedCE, M2M |  | CPE |  | Basestations |  | 
|                       |  |                                                         |  |                         |  |              |  |                 | 
|SQN3101 LOGO           |  | LTE Release 9 BB                                        |  |                         |  |              |  |                 |  |    |  |              |  |  |  | Now |  | 40nm technology, 50Mbs peak throughput, SDIO and USB interfaces, integrated processor + SDRAM, optimized price/performance and features
for CE and M2M markets
|                       |  |                                                         |  |                         |  |              |  |                 | 
|VZ20Q LOGO             |  | Surface-mount LTE module for Verizon Wireless network   |  |                         |  |             |  |                 |  |    |  |              |  |  |  | Now |  | 17mm x 24mm surface mountable module with integrated RF front end; Verizon Wireless certified                                                                 
|                       |  |                                                         |  |                         |  |              |  |                 | 
|VZ20M LOGO             |  | M.2 form-factor LTE module for Verizon Wireless network |  |                         |  |             |  |                 |  |    |  |             |  |  |  | Now |  | M.2 module with integrated RF front end and power management; Verizon Wireless certified                                                                      

Abbreviations used in this table: BB = baseband processor, CPE = customer premise equipment, EOL = product declared
end-of-life (as of December 31, 2013), FDD = frequency division duplexing, nm = nanometer, RF = radio frequency transceiver, SDRAM = Synchronous Dynamic Random Access Memory, SoC = system-on-chip, TDD = time division duplexing, VoIP = Voice
over Internet Protocol.

In February 2013, we announced our first LTE-Advanced chip in our StreamrichLTE family of
products, the SQN3220, which supports 3GPP Release 10 specifications. The key feature is extremely flexible carrier aggregation, allowing combination of any two carriers of any size up to 20 MHz each, contiguous or non-contiguous, inter-band or
intra-band, for an overall total of 40 MHz of bandwidth. The SQN3220 also will support other Release 10 enhancements such as new MIMO schemes, enhanced inter-cell interference coordination (eICIC) schemes for heterogeneous networks (HetNet), and
improvements to eMBMS (evolved multimedia broadcast multicast service) or LTE Broadcast. The SQN3220 supports both FDD and TDD duplexing methods and integrates a customer-programmable processor. The SQN3220 baseband chip is built in 40 nm CMOS.

Competition

The wireless semiconductor business is very competitive. We believe that our competitive strengths will enable us to compete favorably in
the LTE and WiMAX markets. The following are the primary elements on which companies in our industry compete:



| |  |  | functionality, form factor and cost;
| | - |  | ------------------------------------



| |  |  | product performance, as measured by network throughput, signal reach, latency and power consumption;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | track record of providing high-volume deployments in the industry; and
| | - |  | ----------------------------------------------------------------------



| |  |  | systems knowledge.
| | - |  | ------------------

In the LTE market, we expect to face competition from established semiconductor companies such as Broadcom Corporation, Intel Corporation, Marvell Technology Group Ltd., NVIDIA Corporation, Qualcomm
Incorporated, Samsung Electronics Co. Ltd., and Spreadtrum, as well as smaller entrants in the market such as Altair Semiconductor or GCT Semiconductor. In the WiMAX market, we compete with suppliers such as GCT Semiconductor, Inc.

Many of our competitors have longer operating histories, significantly greater resources and name recognition, and a larger base of
existing customers than us. In addition, some of them may provide incentives to customers or offer bundled solutions with complementary products, which could be attractive to some customers, or adopt more aggressive pricing policies to offset what
we believe are the performance and cost advantages of our solutions.

Business Development, Sales and Marketing

Our business development efforts are focused on developing relationships with wireless carriers to identify the potential product
opportunities at each carrier. Our sales efforts are then focused on determining which OEMs and ODMs are most likely to win in the various carrier product opportunities, and securing design wins for mobile broadband devices to be manufactured by the
OEMs and ODMs. We work closely with key players across the 4G wireless broadband industry to understand their requirements and enable them to certify and deploy 4G solutions in high volume.



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Our business development team is organized regionally and by wireless carrier. In addition
to identifying new business opportunities based on the wireless carriers product launch plan, the business development team also works to understand the wireless carriers future technological requirements, so that we can incorporate
appropriate features in our product roadmap. As of December 31, 2013, we had a business development team of both dedicated employees and outside contractors.

Our sales force is organized regionally to provide account management and customer support functions as close to customer physical locations as practical. As of December 31, 2013, we had a direct
sales force serving our OEM and ODM customers in the Asia-Pacific region, including Taiwan, China, Korea and Japan; India; Europe; the Middle East and North and South America. In China, Japan, India, Korea and Brazil we supplement our direct sales
team with local distributors and/or sales representatives who handle certain customer communications, logistics and customer support functions.

Our sales force works closely with a team of technical support personnel which, since April 2012, is part of the engineering and product development department. This team assists customers in solving
technical challenges during the design, manufacturing implementation and certification phases of a customers product life cycle. The information obtained from customer support is then communicated back to the direct product development teams
to be considered in future software releases or hardware development. This high-touch approach allows us to facilitate the successful certification and acceptance by the wireless carriers of our customers products, which speeds time-to-market
for our customers and reinforces our role as a trusted advisor to our customers.

Our sales cycles typically take 12 months or
more to complete and our solutions are generally incorporated into our customers products at the design stage. Prior to an end customers selection and purchase of our solutions, our sales force and technical support engineers provide our
end customers with technical assistance in the use of our solutions in their products. Once our solution is designed into a customers product offering, it becomes more difficult for a competitor to sell its semiconductor solutions to that end
customer for that particular product offering given the significant cost, time, effort and risk involved in changing suppliers. In addition, once we win a particular design with an end customer, we believe our ability to penetrate other product
families at that end customer increases significantly.

Our marketing strategy is focused on enabling broad adoption of 4G
solutions and communicating our technology advantages to the marketplace. This includes building awareness of and preference for our technology at wireless carriers who generate demand for 4G-enabled devices. By working to understand carrier
services strategies, device roadmaps and technical requirements, we believe we are better positioned to drive our roadmap to meet these needs, to influence their choice of technology suppliers, and to identify manufacturers in the wireless industry
who are best prepared to serve the needs of the wireless carrier. For example, by engaging early with China Mobile, we were able to understand their requirements and achieve aggressive timelines for delivering our LTE solution for their
demonstration network. In addition, our collaboration with Sprint allowed us to understand their user experience goals, which led to the implementation of an optimized 3G-4G handover capability and reduced idle-mode power consumption for handsets
incorporating our solutions. More recently, our technical and business relationships with Verizon Wireless have allowed us to anticipate requirements and develop solutions tailored for their network, which helped us secure several design wins in
2013.

Our marketing team is also responsible for product management, strategic planning, product roadmap creation, OEM, ODM
and wireless carrier business development and corporate communications. All of these functions are aimed at strengthening the competitiveness of our solutions in response to evolving industry needs and competitive activities, and at articulating the
value proposition of our technology throughout the 4G broadband wireless industry. Our business development, sales and marketing organizations work closely together to ensure that evolving industry requirements are reflected in our product plans,
and that customers have early access to our roadmaps and can communicate the value of our technology to the wireless carriers. This end-to-end value chain management approach is designed to grow and preserve our market share in the segments we
serve.

As of December 31, 2013 we had 13 employees and 2 outside contractors in our business development, sales and
marketing team.

Customers

We maintain relationships with 4G wireless carriers and with OEMs and ODMs who supply devices to those carriers and their end users. We do not typically sell directly to wireless carriers, except from
time to time in the context of selling services to enable new technologies or markets being developed by the carrier. Our sales are conducted on a purchase order basis with OEMs, ODMs, contract manufacturers or system integrators, or to a lesser
extent with distributors who provide certain customer communications, logistics and customer support functions.



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Our top ten customers accounted for 95%, 80% and 94% of our total revenue in 2011, 2012 and
2013, respectively. HTC accounted for 78%, 32% and less than 10% of our total revenue in 2011, 2012 and 2013, respectively. Huawei, through sales via dedicated distributors, accounted for less than 10% of our total revenue in 2011 and 16% and 33% of
our revenue in 2012 and 2013, respectively. Customer A (a U.S. based corporation) accounted for 22% of our total revenue in 2013. Customer B (a U.S. based corporation) accounted for 10% of our total revenue in 2013. Customers A and B each accounted
for less than 10% of our total revenue in 2011 and 2012. The terms and the existence of our commercial relationships with Customers A and B currently are subject to non-disclosure agreements. The following is a list of our top ten customers, in
alphabetical order, based on total revenue during 2013:



|                                                                                                                                                      |  |                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    Airspan Network
     Arrow Asia Pac
Ltd.* 
    Gemtek Electronics Co
     KZ Broadband
Technologies 
    Customer A (U.S.-based corporation) |  |     Nationz Technologies
     Netcomm
Wireless, Ltd 
    Pinyon Technologies, Inc
     Smith &
Associates Far East Ltd. 
    Customer B (U.S.-based corporation)

*Distributor used exclusively for sales to Huawei

Manufacturing

We operate a fabless business model and use third-party
foundries and assembly and test contractors to manufacture, assemble and test our semiconductor solutions. Our sole foundry vendor is TSMC. In our latest products, we use 65nm and 40nm standard RF, mixed-signal and digital CMOS production processes.
The use of these commercially available standard processes is designed to enable us to produce our products more cost-effectively and, by migrating to lower process geometries, we expect to achieve advantages in cost, size and power consumption.

We use UTAC and SCI for most of our assembly and testing. We rely on extensive simulation, practical application and
standardized test bed studies to validate and verify our products.

We closely monitor the production cycle from wafer to
finished goods by reviewing electrical parameters and manufacturing process and test yield data. We also run routine reliability monitoring programs to ensure long term product reliability. This enables us to operate certain test processes on demand
to reduce the time-to-market for our products and to help ensure their quality and reliability. We are ISO 9001 certified, and all of our major suppliers and subcontractors are required to have quality management systems certified to ISO 9000 and
ISO 14000 levels, as well as appropriate environmental control programs.

We do not have any agreements with our foundry or
with our testing and packaging vendors, other than a framework agreement with UTAC, and we place our orders with our foundry and other vendors on a purchase order basis. See Risk FactorsRisks Related to Our Business and Industry.

Intellectual Property

We rely on a combination of intellectual property rights, or IPR, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology and intellectual
property. At December 31, 2013, we had 15 issued and allowed United States patents, 13 European patents, and 46 pending United States and European patents. The first of our issued and allowed patents is not expected to expire until 2025.

In addition to our own intellectual property, we have also entered into a number of licensing arrangements pursuant to which
we license third-party technologies and intellectual property. In particular, we have entered into such arrangements for certain technologies embedded in our semiconductor, hardware and software designs. These are typically non-exclusive contracts
provided under royalty-accruing or paid-up licenses. These licenses are generally perpetual or automatically renewed for so long as we continue to pay any royalty that may be due and in the absence of any uncured material breach of the agreement.
Certain licenses for technology used for development of a particular product are for a set term, generally at least two years, with a renewal option, and can be easily replaced with other currently available technology in subsequent product
developments. In the event that such licenses are not renewed, they nevertheless continue with regard to products distributed in the field. Except for our licenses to the so called essential patents described below, we do not believe our
business is dependent to any significant degree on any individual third-party license.

In the past, we have entered into
licensing arrangements with respect to so called essential patents that claim features or functions that are incorporated into applicable industry standards and that we are required to provide in order to comply with the standard. We may
be required to enter into such licensing arrangements in the future in order to comply with applicable industry standards, in particular with respect to the sales of our module products, which have full LTE functionality. We believe that general
practice in the industry is that essential patent holders licensing policy is to license only to licensees selling a full LTE product, not to component vendors.



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Facilities

Our principal executive offices are located in Paris, France, consisting of approximately 22,390 square feet under a lease that expires in May 2014. We have entered into a new lease for 21,625 square feet
of office space just outside of Paris, effective January 1, 2014, with a term of six years. This facility accommodates our principal research and development, product marketing, and finance and administrative activities.

We have a 4,236 square-foot facility in Winnersh Triangle, England, which accommodates a research and development center under a lease
expiring in October 2015. We have a 1,973 square-foot facility in Petach Tikva, Israel, which houses a small research and development team, and sales and technical support personnel, under a lease that expires in January 2015. We have a 1,957
square-foot facility in Xindian City, Taipei, Taiwan for sales and technical support personnel under a lease that expires in May 2014. We have a 1,447 square-foot facility in Shenzhen, China, which accommodates sales and technical support personnel,
under a lease that expires in June 2014. We have a 1,600 square foot office in Singapore under a lease expiring in February 2016. We rent additional office space in Shanghai, China; Seoul, South Korea and Burnsville, Minnesota, U.S. under short-term
lease agreements.

We do not own any real property. We believe that our leased facilities are adequate to meet our current
needs and that additional facilities will be available on suitable, commercially reasonable terms to accommodate any future needs.



|C. | Organizational Structure
|-- | ------------------------

The Company is the ultimate parent of the group comprised of the Sequans Communications S.A. and its subsidiaries at December 31, 2013:



|                                     |  |                         |  |                      |      |  |                  |  |     | 
|------------------------------------ |  | ----------------------- |  | -------------------- | ---- |  | ---------------- |  | --- | 
|Name                                 |  | Country ofincorporation |  | Year ofincorporation |      |  | % equityinterest | 
|Sequans Communications Ltd.          |  | United Kingdom          |  |                      | 2005 |  |                  |  | 100 | 
|Sequans Communications Inc.          |  | United States           |  |                      | 2008 |  |                  |  | 100 | 
|Sequans Communications Ltd. Pte.     |  | Singapore               |  |                      | 2008 |  |                  |  | 100 | 
|Sequans Communications (Israel) Ltd. |  | Israel                  |  |                      | 2010 |  |                  |  | 100 | 



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|D. | Property, Plants and Equipment
|-- | ------------------------------

For a discussion of property, plants and equipment, see Item 4.BBusiness OverviewFacilities.

Item 4A. Unresolved Staff Comments

Not
applicable.

Item 5. Operating and Financial Review and Prospects

Summary

We are a leading
fabless designer, developer and supplier of 4G LTE and WiMAX semiconductor solutions for wireless broadband applications. Our solutions incorporate baseband processor and RF transceiver ICs along with our proprietary signal processing techniques,
algorithms and software stacks. Our high performance ICs deliver high throughput, low power consumption and high reliability in a small form factor and at a low cost.

We shipped nearly 900,000 units during 2013, compared to nearly 1.6 million units during 2012 and more than 8.1 million units during 2011. Our total revenue was 13.7 million in 2013,
compared to $22.3 million in 2012 and $93.7 million in 2011.

We currently have more than 50 end customers worldwide,
consisting primarily of OEMs and ODMs for USB dongles, embedded devices, CPE, mobile routers and other data devices. We derive a significant portion of our revenue from a small number of end customers, and we anticipate that we will continue to do
so for the foreseeable future. We do not have long-term purchase agreements with any of our end customers and substantially all of our sales are made on a purchase order basis. We expect that the percentage of revenue derived from each end customer
may vary significantly due to the order patterns of our end customers, the timing of new product releases by our end customers, and consumer demand for the products of our end customers. Customers representing more than 10% of total revenue in any
of the years 2011, 2012 or 2013 are as follows:



|                  |  |                                                   |  |              |  |     
|----------------- |  | ------------------------------------------------- |  | ------------ |  | ----
|Customer Location |  | % of total revenue for the year endedDecember 31,
|                  |  | 2013                                              |  | 2012         |  | 2011
|China             |  | 33%                                               |  | 16%          |  | 9%  
|United States     |  | 22%                                               |  | Less than 1% |  | 0%  
|China             |  | 14%                                               |  | 2%           |  | 1%  
|United States     |  | 10%                                               |  | 0%           |  | 0%  
|Taiwan            |  | Less than 1%                                      |  | 32%          |  | 78% 

The high levels of revenue from HTC in 2011 was driven by the success of the HTC EVO 4G smartphone, which
was launched in June 2010, and subsequent phones and tablets in the EVO family launched in 2011.

Our Consolidated Financial
Statements for 2011, 2012 and 2013, have been prepared in accordance with IFRS as issued by the IASB.



|A. | Operating Results
|-- | -----------------

Revenue

Our total revenue consists of product revenue and other revenue.

Product Revenue

We derive substantially all of our revenue from the
sale of semiconductor solutions for 4G wireless broadband applications and we currently expect to continue to do so for the foreseeable future. Our solutions are sold both directly to our end customers and, to a lesser extent, indirectly through
distributors.

Our sales cycles typically take 12 months or more to complete and our solutions are generally incorporated into
our end customers products at the design stage. Prior to an end customers selection and purchase of our solutions, our sales force and applications engineers provide our end customers with technical assistance in the use of our solutions
in their products. Once our solution is designed into an end customers product offering, it becomes more difficult for a competitor to sell its semiconductor solutions to that end customer for that particular product offering given the
significant cost, time, effort and risk involved in changing suppliers. In addition, once we win a particular design with an end customer, we believe our ability to penetrate other product families at that end customer increases significantly.

Our product revenue began declining in the second half of 2011 compared to the first half of 2011 due to an overall decline
in the WiMAX market driven by a change in strategy by Sprint to commit funding to a new 3G product and ultimately to transition from



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WiMAX to LTE. Sprint was the largest driver of demand for WiMAX semiconductor solutions. We believe this reduction in the size of the WiMAX market to be permanent. Sales of our LTE products began
to contribute materially to revenues in the second half of 2013 due to the timing of our products and the deployment timing of the operators where we are focused.

Our product revenue is also affected by changes in the unit volume and average selling prices, or ASPs, of our semiconductor solutions. Our products are typically characterized by a life cycle that begins
with higher ASPs and lower volumes as our new products use more advanced designs or technology and are usually incorporated into new devices that consumers adopt over a period of time. This is followed by broader market adoption with higher volumes
and ASPs that are lower than initial levels, due to the maturity of the technology, greater availability of competing products or less demand as our end customers products reach the end of their life cycle.

In the second half of 2013, we had initial sales of our module products. We introduced our modules in order to accelerate market adoption
of LTE functionality in data devices such as tablets, notebook computers, consumer devices and machine-to-machine devices. The ASP of the module is much higher than the ASP of our semiconductor solutions as many other components are added in order
to provide a complete LTE solution.

A small portion of our product revenue is derived from sales of reference designs or
electronic boards on which our end customers develop and test their own designs.

The proportion of our product revenue that
is generated from the sale of various products, also referred to as product mix, affects our overall ASP, product revenue and profitability. Given the varying ASPs of our solutions, any material change in our product mix may affect our gross margins
and operating results from period to period. We expect to continue to broaden our product portfolio by introducing new solutions.

Other
Revenue

Other revenue consists of the sale of licenses to use our technology solutions and revenue from associated
annual software maintenance and support services, as well as technical support services. We license the right to use our solutions, including embedded software that enables our end customers to customize our solutions for use in their products. The
license is perpetual and covers unlimited product designs by the end customer. We expect that we will continue to sign new license agreements as we begin working with new customers, but we do not expect that such licenses will generate significant
revenues. Technical services may be provided from time to time for unusually complex projects. These agreements typically call for a number of milestones to be delivered over several quarters, with revenue recognized as the milestone deliverables
are achieved. Such service agreements are occasional in nature, although we earned revenue from two customers under such agreements in 2013, resulting in an increase in other revenue this year. We therefore expect other revenue to remain flat or
decline in absolute terms in future periods, however in the short term it is likely to remain a significant percentage of our total revenue.

The following table sets forth our total revenue by region for the periods indicated. We categorize our total revenue geographically based on the location to which we invoice.



|                            |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                            |  | Year ended December 31, |       
|                            |  | 2011                    |        |  | 2012 |   |        | 2013 | 
|                            |  | (in thousands)          |       
|Asia                        |  | $                       | 85,902 |  |      | $ | 17,841 |      |  | $ | 8,169  | 
|Europe, Middle East, Africa |  |                         | 6,823  |  |      |   | 3,479  |      |  |   | 541    | 
|Americas                    |  |                         | 989    |  |      |   | 934    |      |  |   | 5,002  | 
|                            |  |                         |        |  |      |   |        |      |  |   |        | 
|Total revenue               |  | $                       | 93,714 |  |      | $ | 22,254 |      |  | $ | 13,712 | 
|                            |  |                         |        |  |      |   |        |      |  |   |        | 

Cost of Revenue

Our cost of revenue includes cost of product revenue and cost of other revenue.

Cost of
Product Revenue

A significant portion of our cost of semiconductor solution product revenue consists of the cost of
wafers manufactured by third-party foundries and costs associated with assembly and test services. Cost of product revenue is impacted by manufacturing variances such as cost and yield for wafer, assembly and test operations and package cost. To a
lesser extent, cost of product revenue includes expenses relating to depreciation of productions mask sets, the cost of shipping and logistics, royalties, personnel costs, including share-based compensation expense, valuation provisions for excess
inventory and warranty costs.

For our module products, the cost of product revenue includes not only the cost of the
semiconductor solution but also other components such as power amplifiers and filters, as well as greater packaging costs.



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Early in the life cycle of our products, we typically experience lower yields and higher
associated costs, which are offset by higher ASPs. Over the life cycle of a particular product, our experience has been that the cost of product revenue has typically declined as volumes increase and test operations mature, while ASPs generally
decline.

We use third-party foundry, assembly and test subcontractors, which are primarily located in Asia, to manufacture,
package and test our semiconductor solutions. We purchase processed wafers from our fabrication supplier, currently TSMC. We also rely on third-party assembly and test subcontractors to assemble, package and test our products, and on third-party
logistics specialists for logistics and storage. We do not have long-term agreements with our suppliers. Our obligations with our vendors for manufacturing, assembly and testing are generally negotiated on a purchase order basis.

Cost of Other Revenue

As most of the costs related to other revenue, particularly our licenses, are incurred as part of our normal research and development efforts, we allocate to cost of other revenue only the specific
incremental costs related to generating maintenance and technical support services revenue.

Gross Profit

Our gross profit is affected by a variety of factors, including our product mix, the ASPs of our products, the volumes sold, the purchase
price of fabricated wafers, assembly and test service costs and royalties, provision for inventory valuation charges, and changes in wafer, assembly and test yields. We expect our gross profit will fluctuate over time depending upon competitive
pricing pressures, the timing of the introduction of new products, product mix, volume pricing, variances in manufacturing costs and the level of royalty payments to third parties possessing intellectual property necessary for our products.

Operating Expenses

Research and Development

We engage in substantial research and development efforts to develop new products and integrate additional capabilities into our core products. Research and development expense consists primarily of
personnel costs, including share-based compensation, for our engineers engaged in design and development of our products and technologies. These expenses also include the depreciation cost of intellectual property licensed from others for use in our
products, product development costs, which include external engineering services, development software and hardware tools, cost of fabrication of mask sets for prototype products, external laboratory costs for certification procedures, equipment
depreciation and facilities expenses.

We expect research and development expense to remain fairly stable in the short term as
we continue to control costs, and then to increase in absolute terms as we enhance and expand our features and offerings for our product portfolio and we continue to develop new products for LTE, which will require additional resources and
investments.

Under IFRS, research and development expense is required to be capitalized if certain criteria are met and then
amortized over the life of the product. As we operate in a highly innovative, dynamic and competitive sector, the costs incurred from the point that the criteria for capitalization are met to the point when the product is made generally available on
the market are not material. Through 2013, all research and development expense has been expensed as incurred.

Research
and Development Incentives

In France and the United Kingdom, we receive certain tax incentives based on the qualifying
research and development expense incurred in those jurisdictions. When the incentive is available only as a reduction of taxes owed, such incentive is accounted for as a reduction of tax expense; otherwise, it is accounted for as a government grant
with the benefit recorded as a reduction of research and development expense. We expect to be able to continue to qualify for such tax incentives in these jurisdictions in future periods. We expect the tax incentives, which are based on a percentage
of qualifying research and development expense, to remain fairly stable or decline slightly in the short term. For 2013, we recorded a net amount of approximately $3.7 million in tax incentives.

In France, we also receive incentives in the form of grants from agencies of the French government and the European Union, based on
qualifying research and development expense incurred pursuant to collaborative programs carried out with other companies and universities. These incentives are recorded as a reduction of research and development expense and are recognized when there
is a reasonable assurance that the grant will be received and all relevant conditions will be complied with. We expect that the amounts we receive from such incentives will be flat or decline over time in absolute terms. For 2013, we recorded
approximately $0.8 million in grants.

Sales and Marketing

Sales and marketing expense consists primarily of personnel costs, including sales commissions, and share-based compensation for our
business development, sales and marketing personnel, commissions paid to independent sales agents, the costs of advertising and participation in trade shows, depreciation and facilities expenses. We expect the size of our business development, sales
and marketing organization to remain flat or grow slightly in 2014 and therefore expect sales and marketing expense to remain fairly stable or grow slightly.



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General and Administrative

General and administrative expense consists primarily of personnel costs and share-based compensation for our finance, human resources,
information technology, purchasing, quality and administrative personnel; professional services costs related to recruiting, accounting, tax and legal services; investor relations costs; insurance; depreciation and facilities expenses. We expect the
size of our general and administrative staff to remain flat in 2014 and therefore expect general and administrative expense to remain fairly flat in absolute terms.

Interest Income (Expense), Net

Interest income consists of interest earned
on cash and cash equivalent balances. We have historically invested our cash primarily in commercial bank accounts, short term deposits and money market funds.

Foreign Exchange Gain (Loss), Net

Foreign exchange gain (loss) represents
exchange gains and losses on our exposures to non-U.S. dollar denominated transactions, primarily associated with the changes in exchange rates between the U.S. dollar and the euro, and re-measurement of foreign currency balances at reporting date.
As a result of our international operations, we are subject to risks associated with foreign currency fluctuations. Almost all of our revenues are in U.S. dollars and a portion of our expenses are also in U.S. dollars. However, a significant portion
of our personnel costs is in euros. We use hedging instruments in order to reduce volatility in operating expenses related to exchange rate fluctuations. We classify foreign exchange gains and losses related to hedges of euro-based operating
expenses as operating expenses.

Income Tax Expense (Benefit)

We are subject to income taxes in France, the United States and numerous other jurisdictions. During the ordinary course of business, there are many transactions and calculations for which the ultimate
tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. These tax liabilities are recognized when we believe that certain positions may not be fully sustained upon review
by tax authorities, notwithstanding our belief that our tax return positions are supportable. Our effective tax rates differ from the statutory rate primarily due to any valuation allowance, the tax impact of local taxes, international operations,
research and development tax credits, tax audit settlements, non-deductible compensation, and transfer pricing adjustments. In respect of our subsidiaries outside of France, we operate on a cost plus basis.

In France, we have significant net deferred tax assets resulting from net operating loss carry forwards, tax credit carry forwards and
deductible temporary differences that reduce our taxable income. Our ability to realize our deferred tax assets depends on our ability to generate sufficient taxable income within the carry back or carry forward periods provided for in the tax law
for each applicable tax jurisdiction. Over time, as we generate taxable income, we expect our tax rate to increase significantly.

Critical
Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is
based on our Consolidated Financial Statements contained elsewhere in this annual report, which are prepared in accordance with IFRS as described in Note 2 to our Consolidated Financial Statements.

Some of the accounting methods and policies used in preparing our Consolidated Financial Statements under IFRS are based on complex and
subjective assessments by our management or on estimates based on past experience and assumptions deemed realistic and reasonable based on the circumstances concerned. The actual value of our assets, liabilities and shareholders equity and of
our earnings could differ from the value derived from these estimates if conditions changed and these changes had an impact on the assumptions adopted. We believe that the most significant management judgments and assumptions in the preparation of
our financial statements are described below.

Revenue Recognition

Our policy for revenue recognition, in instances where multiple deliverables are sold contemporaneously to the same counterparty, is in
accordance with IAS 18.13. When we enter into contracts for the sale of products, licenses and maintenance and support services, we evaluate all deliverables in the arrangement to determine whether they represent separate units of accounting, each
with its own separate earnings process, and their relative fair value. Such determination requires judgment and is based on an analysis of the facts and circumstances surrounding the transactions.

Our policy for revenue recognition is further explained in Note 2.3 to our Consolidated Financial Statements contained elsewhere in this
annual report.



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Inventories

Inventories consist primarily of the cost of semiconductors and modules purchased from subcontractors, including wafer fabrication, additional components for modules, packaging and testing. We write down
the carrying value of our inventories to the lower of cost (determined using the moving average method) or net realizable value (estimated market value less estimated costs of completion and the estimated costs necessary to make the sale). We write
down the carrying value of our inventory for estimated amounts related to lower of cost or market value, obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value. The estimated
market value of the inventory is based on historical usage and assumptions about future demand, future product purchase commitments, estimated manufacturing yield levels and market conditions on a product-by-product basis. Once established,
inventory reserves are not reversed until the related inventory has been sold or scrapped. Actual demand may differ from forecasted demand and these differences may have a material effect on recorded inventory values and cost of revenue.

When we consider future demand for a product, there are a number of factors that we take into consideration, including purchase orders
and forecasts from customers, which in normal market conditions give us visibility for the next three months and some view on the following three months, our own internal projections based on customer inputs and new business opportunities, and
estimates of market potential based on reports from industry analysts. The time horizon considered for future demand varies depending on the nature of the product, meaning we consider if the product is newly-introduced or approaching end-of-life, if
the product is in finished good form or in component form, and if the product is incorporated in a large or small number of different end-user products from few or many customers.

We evaluate the realizability of our inventory at each balance sheet date. In doing so, we consider, among other things, demand indicated
by our customers, overall market potential based on input from operators and analysts, and the remaining estimated commercial life of our products. In late March 2012, we began receiving confirmation from the operators who purchase product from HTC
that there would be new WiMAX product launches in 2012 in the United States and Taiwan. In addition, a Japanese operator confirmed its launch of a new HTC WiMAX phone in April 2012. We also continued to receive orders and ship WiMAX products to
other customers. Accordingly, we concluded that our inventory at December 31, 2011 would be realized at the book value or more prior to the inventory becoming obsolete or unsalable.

During the second quarter of 2012, we began to receive new orders and forecast information from HTC indicating demand for goods to be
delivered in the second, third and fourth quarters of 2012. As of September 30, 2012, we had shipped 99% of the WiMAX product that had been in the form of finished goods at December 31, 2011 and we had launched production of additional
finished goods in Q3 and Q4 2012 to meet additional demand in Q4 and expected in 2013. During the fourth quarter of 2012, HTC indicated that they did not expect to place further WiMAX orders and the decision on a major new WiMAX design win was
delayed until April 2013. Consequently, we decided that it was now unlikely that we would order more silicon wafers for WiMAX products and the number of wafers on hand would determine the maximum number of finished goods we could sell; therefore, we
recorded a provision at the end of 2012 to write down the value of certain components in excess of that needed to produce this maximum number of finished goods.

In 2012, we also decided to enter the end-of-life process for SQN2130, a WiMAX base station product, and for SQN3010, our first TDD-only LTE product. Provisions were recorded to reduce the value of the
inventory related to these two products to zero. We also reviewed the value of inventory of finished goods and components related to products which have not been declared end-of-life. Taking into consideration the latest estimations of expected
demand, particularly for the WiMAX products, we determined that it was not probable that all of the stock of memory components on hand would be used to produce finished goods and a provision was recorded for the portion of inventory considered to be
in excess of future needs. In total, the inventory recorded in 2012 was $0.8 million. In 2011, we decided to bring the SQN1130, SQN1010 and SQN2010 to end of life. As expected future shipments of these products as expected to be in excess of
quantities in inventory, no adjustment of the inventory value was deemed necessary as of December 31, 2012.

In 2013, we
reviewed the value of inventory of products which have not been declared end-of-life and for slow-moving WiMAX products and memory components. Based on the latest estimations of demand, the provision for WiMAX related inventory was adjusted and
resulted in a net inventory provision reversal of $0.2 million.

Share-Based Compensation

We have various share-based compensation plans for employees and non-employees. The expense recorded in our statement of operations for
equity awards under these plans is affected by changes in valuation assumptions. For example, the fair value of stock options is estimated by using the binomial model on the date of grant based on certain assumptions, including, among others,
expected volatility, the expected option term and the expected dividend payout rate. As a private and now public company, the assumption as to volatility has been determined by reference to the historical volatility of similar publicly traded
semiconductor companies. Prior to our initial public offering, the fair value of our shares underlying our share option grants was determined by our board of directors with input from management at each grant date upon review of a variety of
factors, including the valuation used in our latest financing rounds. Beginning in September 2010, we regularly conducted contemporaneous third-party valuations to assist us in the determination of the fair value of our shares. Our board of
directors ensured that the relevant objective and subjective factors deemed



36



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important by our board of directors were accounted for in each valuation. Our board of directors also ensured that the assumptions and inputs used in connection with such valuations reflected our
board of directors best estimate of our business condition, prospects and operating performance at each valuation date. Since our initial public offering in April 2011, we have used the closing market price of our ADSs on the grant date as the
fair value of our shares.

We recognize compensation expense only for the portion of share options that are expected to vest.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from our estimates.

For 2011, 2012 and 2013, we recorded employee share-based compensation expense of $4.2 million, $3.2 million and $2.2 million, respectively. Share-based compensation expense related to non-employees was
not material for 2011, 2012 and 2013.

Functional Currency

We use the U.S. dollar as the functional currency of Sequans Communications S.A. due to the high percentage of our revenues, cost of
revenue, capital expenditures and operating costs, other than those related to headcount and overhead, which are denominated in U.S. dollars. Our IPO proceeds were also denominated in U.S. dollars. However, all financing proceeds we have received
since our inception prior to our initial public offering were denominated in euros.

Each subsidiary determines its own
functional currency and items included in the financial statements of each entity are measured using that functional currency. As of each reporting date, the assets and liabilities of each subsidiary are translated into the U.S. dollar, our
functional and reporting currency, at the rate of exchange at the balance sheet date and each subsidiarys statement of operations is translated at the average exchange rate for the year. Exchange differences arising on the translation are
taken directly to a separate component of equity, cumulative translation adjustments.

Fair Value of Financial Instruments

Fair value corresponds to the quoted price for listed financial assets and liabilities. Where no active market exists,
we establish fair value by using a valuation technique determined to be the most appropriate in the circumstances, for example:



| |  |  | available-for-sale assets: comparable transactions, multiples for comparable transactions, discounted present value of future cash flows;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loans and receivables, financial assets at fair value through profit and loss: net book value is deemed to be approximately equivalent to fair value
because of their relatively short holding period; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | trade payables: book value is deemed to be approximately equivalent to fair value because of their relatively short holding period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

Results of Operations

The following tables set forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our Consolidated Financial Statements and
related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.



37



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Comparison of Years Ended December 31, 2012 and 2013



|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|--------------------------------- |  | ----------------------- | ------- | - | ------ | - | ------- | - |  |  | --- | --
|                                  |  | Year ended December 31, |         |   | Change |  
|                                  |  | 2012restated (1)        |         |   | 2013   |   |         | % | 
|                                  |  | (in thousands)          |         |   |        |  
|Revenue:                          |  |                         |         |   |        |   |         |   |  |  |     |   
|Product revenue                   |  | $                       | 19,600  |   |        | $ | 10,708  |   |  |  | (45 | )%
|Other revenue                     |  |                         | 2,654   |   |        |   | 3,004   |   |  |  | 13  |   
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Total revenue                     |  |                         | 22,254  |   |        |   | 13,712  |   |  |  | (38 | ) 
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Cost of revenue:                  |  |                         |         |   |        |   |         |   |  |  |     |   
|Cost of product revenue           |  |                         | 11,781  |   |        |   | 8,616   |   |  |  | (27 | ) 
|Cost of other revenue             |  |                         | 176     |   |        |   | 205     |   |  |  | 17  |   
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Total cost of revenue             |  |                         | 11,957  |   |        |   | 8,821   |   |  |  | (26 | ) 
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Gross profit                      |  |                         | 10,297  |   |        |   | 4,891   |   |  |  | (53 | ) 
|Operating expenses:               |  |                         |         |   |        |   |         |   |  |  |     |   
|Research and development          |  |                         | 28,365  |   |        |   | 28,357  |   |  |  | 0   |   
|Sales and marketing               |  |                         | 6,562   |   |        |   | 4,449   |   |  |  | (32 | ) 
|General and administrative        |  |                         | 8,093   |   |        |   | 7,528   |   |  |  | (7  | ) 
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Total operating expenses          |  |                         | 43,020  |   |        |   | 40,334  |   |  |  | (6  | ) 
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Operating income (loss)           |  |                         | (32,723 | ) |        |   | (35,443 | ) |  |  | 8   |   
|Financial income (expense):       |  |                         |         |   |        |   |         |   |  |  |     |   
|Interest income (expense), net    |  |                         | 137     |   |        |   | 34      |   |  |  |     |   
|Foreign exchange gain (loss)      |  |                         | (158    | ) |        |   | (35     | ) |  |  |     |   
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Profit (Loss) before income taxes |  |                         | (32,744 | ) |        |   | (35,444 | ) |  |  |     |   
|Income tax expense (benefit)      |  |                         | 234     |   |        |   | 142     |   |  |  |     |   
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   
|                                  |  |                         |        
|Profit (Loss)                     |  | $                       | (32,978 | ) |        | $ | (35,586 | ) |  |  |     |   
|                                  |  |                         |         |   |        |   |         |   |  |  |     |   



|(1) | Figures for the year ended December 31, 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth a summary of our statement of operations as a percentage of total revenue:



|                                  |  |                        |      |   |      |  |      |  
|--------------------------------- |  | ---------------------- | ---- | - | ---- |  | ---- | -
|                                  |  | Year endedDecember 31, |     
|                                  |  | 2012                   |      |   | 2013 | 
|                                  |  | (% of total revenue)   |     
|Revenue:                          |  |                        |      |   |      |  |      |  
|Product revenue                   |  |                        | 88   |   |      |  | 78   |  
|Other revenue                     |  |                        | 12   |   |      |  | 22   |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Total revenue                     |  |                        | 100  |   |      |  | 100  |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Cost of revenue:                  |  |                        |      |   |      |  |      |  
|Cost of product revenue           |  |                        | 53   |   |      |  | 63   |  
|Cost of other revenue             |  |                        | 1    |   |      |  | 1    |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Total cost of revenue             |  |                        | 54   |   |      |  | 64   |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Gross profit                      |  |                        | 46   |   |      |  | 36   |  
|Operating expenses:               |  |                        |      |   |      |  |      |  
|Research and development          |  |                        | 128  |   |      |  | 207  |  
|Sales and marketing               |  |                        | 29   |   |      |  | 32   |  
|General and administrative        |  |                        | 36   |   |      |  | 55   |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Total operating expenses          |  |                        | 194  |   |      |  | 294  |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Operating income (loss)           |  |                        | (147 | ) |      |  | (258 | )
|Financial income (expense):       |  |                        |      |   |      |  |      |  
|Interest income (expense), net    |  |                        | 1    |   |      |  | 0    |  
|Foreign exchange gain (loss)      |  |                        | (1   | ) |      |  | 0    |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Profit (Loss) before income taxes |  |                        | (147 | ) |      |  | (258 | )
|Income tax expense (benefit)      |  |                        | 1    |   |      |  | 1    |  
|                                  |  |                        |      |   |      |  |      |  
|                                  |  |                       
|Profit (Loss)                     |  |                        | (148 | ) |      |  | (259 | )
|                                  |  |                        |      |   |      |  |      |  



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##### Table of Contents

Revenue

Product Revenue

Product revenue decreased 45% from $19.6 million in 2012
to $10.7 million in 2013. This decrease was primarily due to lower sales of WiMAX products, which was partially offset by an increase in sales of LTE products. In the third quarter of 2013, we started selling LTE modules which have been
developed for integration in tablets, notebooks, consumer electronics and machine-to-machine applications. Our largest customer in 2013, Huawei, integrated our WiMAX products into a range of products for emerging markets as well as for Japan. Huawei
represented 33% of our revenue in 2013 compared to 16% of our revenue in 2012. HTC was our largest customer in 2012, representing 32% of our revenue, while $156,000 in revenue was recognized for this customer in 2013.

In 2013, we shipped approximately 700,000 units of WiMAX products compared to 1.4 million units in 2012, and 200,000 units of
LTE products, which was flat compared to 2012. We expect our WiMAX product revenue to continue to decline as a result of a general decline in the WiMAX market in the United States and in most countries around the world. We expect our LTE product
revenue to increase in 2014 as our LTE solutions are currently in commercial deployments in multiple countries outside of the U.S., and our chipset and modules were certified by Verizon Wireless and are beginning to ship in the United States. In
addition, our solutions are under evaluation or trials with other leading wireless carriers.

Other Revenue

Other revenue increased 13% from $2.7 million in 2012 to $3.0 million in 2013, reflecting an increase of development services in 2013.

Cost of Revenue

Cost of product revenue decreased 27% from $11.8 million in 2012 to $8.6 million in 2013 due to lower variable product cost associated with the decreased number of units sold. Cost of other revenue
remained relatively flat at $0.2 million in 2013, as compared to 2012.

Gross Profit

Gross profit decreased 53% from $10.3 million in 2012 to $4.9 million in 2013, and gross margin decreased from 46.3% in 2012 to
35.7% in 2013. The reduction in gross profit and gross margin primarily reflects the significant decline in revenue. Product gross margin decreased from 39.9% in 2012 to 19.5% in 2013 due to low absorption of fixed production costs by a low product
revenue base, lower average selling prices on WiMAX products, and the sale of modules with lower gross margin in the second half of 2013. Provisions related to WiMAX inventory totaling $854,000 were recorded during 2012, while a net WiMAX inventory
provision totaling $217,000 was reversed in 2013.

Research and Development

Research and development expense remained flat at $28.4 million in both 2013 and 2012. Overall, there were 176 employees and independent
contractors in research and development at December 31, 2013 compared to 171 employees and independent contractors at December 31, 2012.

These expenses are net of any research and development incentives earned during the periods, which are accounted for as a reduction of research and development expense. Research and development incentives
decreased by 9% from $5.0 million in 2012 to $4.5 million in 2013. In December 2012, we were notified of proposed tax adjustments, penalties and interest related to the French tax audit which related almost entirely to the research tax credits
claimed for 2008 and 2009. Although we disagree with the adjustments, we recorded a provision, reducing the research and development incentives by $0.3 million. Without this provision, research and development incentives would have decreased by 14%.



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Sales and Marketing

Sales and marketing expense decreased 32% from $6.6 million in 2012 to $4.4 million in 2013. The decrease primarily reflects the impact of a reorganization that occurred in mid-2012 as product
development and technical support engineers were reassigned to research and development teams; the full impact of this reorganization was reflected in the 2013 full year sales and marketing expense. Overall, there were 15 employees in sales and
marketing at December 31, 2013 compared to 17 employees at December 31, 2012.

General and Administrative

General and administrative expense decreased 7% from $8.1 million in 2012 to $7.5 million in 2013 due to a decrease of $0.7
million in stock based compensation expenses and a decrease of $0.4 million related to bad debts provision, partially offset by the $0.5 million impact of the decision in November 2013 to move our headquarters in 2014. The charge in 2013 related to
the move resulted from the reduction in the duration of the expected economic benefits of leasehold improvements, and a revision on a prospective basis of the depreciation of assets. We also recorded an impairment to reduce the carrying value to
fair value. There were 18 employees in general and administrative at December 31, 2013 compared to 19 employees at December 31, 2012.

Interest Income (Expense), Net

Net interest income decreased 75% from a net interest income of $0.1 million in 2012 to a net interest income of $34,000 in 2013. The decrease of interest income is due to lower amounts of cash and cash
equivalents invested in interest-bearing accounts.

Foreign Exchange Gain (Loss), Net

We had a net foreign exchange loss of $35,000 in 2013 compared to a net foreign exchange loss of $0.2 million in 2012 primarily due
to movements in the U.S. dollar versus the euro.

Income Tax Expense (Benefit)

In 2013, we recorded current tax expense of $190,000 arising from taxable income incurred at certain subsidiaries, and a deferred tax
income amounting to $48,000. In 2012, we recorded current tax expense of $207,000 arising from taxable income incurred at certain subsidiaries and a deferred tax expense amounting to $27,000. Deferred tax assets have not been recognized in 2013 or
2012 with respect to our losses as we have not generated taxable profits since beginning operations in 2004.

Comparison of Years Ended
December 31, 2011 and 2012



|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|--------------------------------- |  | ----------------------- | ------ | - | ---------------- | - | ------- | - |  |  | ------ | --
|                                  |  | Year ended December 31, |        |   | Change           |  
|                                  |  | 2011restated 
(1)       |        |   | 2012restated (1) |   |         | % | 
|                                  |  | (in thousands)          |        |   |                  |  
|Revenue:                          |  |                         |        |   |                  |   |         |   |  |  |        |   
|Product revenue                   |  | $                       | 91,742 |   |                  | $ | 19,600  |   |  |  | (79    | )%
|Other revenue                     |  |                         | 1,972  |   |                  |   | 2,654   |   |  |  | 35     |   
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Total revenue                     |  |                         | 93,714 |   |                  |   | 22,254  |   |  |  | (76    | ) 
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Cost of revenue:                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|Cost of product revenue           |  |                         | 46,167 |   |                  |   | 11,781  |   |  |  | (74    | ) 
|Cost of other revenue             |  |                         | 247    |   |                  |   | 176     |   |  |  | (29    | ) 
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Total cost of revenue             |  |                         | 46,414 |   |                  |   | 11,957  |   |  |  | (74    | ) 
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Gross profit                      |  |                         | 47,300 |   |                  |   | 10,297  |   |  |  | (78    | ) 
|Operating expenses:               |  |                         |        |   |                  |   |         |   |  |  |        |   
|Research and development          |  |                         | 24,926 |   |                  |   | 28,365  |   |  |  | 14     |   
|Sales and marketing               |  |                         | 12,960 |   |                  |   | 6,562   |   |  |  | (49    | ) 
|General and administrative        |  |                         | 8,323  |   |                  |   | 8,093   |   |  |  | (3     | ) 
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Total operating expenses          |  |                         | 46,209 |   |                  |   | 43,020  |   |  |  | (7     | ) 
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Operating income (loss)           |  |                         | 1,091  |   |                  |   | (32,723 | ) |  |  | (3,151 | ) 
|Financial income (expense):       |  |                         |        |   |                  |   |         |   |  |  |        |   
|Interest income (expense), net    |  |                         | (389   | ) |                  |   | 137     |   |  |  |        |   
|Foreign exchange gain (loss)      |  |                         | (744   | ) |                  |   | (158    | ) |  |  |        |   
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Profit (Loss) before income taxes |  |                         | (42    | ) |                  |   | (32,744 | ) |  |  |        |   
|Income tax expense (benefit)      |  |                         | 371    |   |                  |   | 234     |   |  |  |        |   
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   
|                                  |  |                         |       
|Profit (Loss)                     |  | $                       | (413   | ) |                  | $ | (32,978 | ) |  |  |        |   
|                                  |  |                         |        |   |                  |   |         |   |  |  |        |   



|(1) | Figures for the year ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table sets forth a summary of our statement of operations as a percentage of total revenue:



|                                  |  |                        |     |   |      |  |      |  
|--------------------------------- |  | ---------------------- | --- | - | ---- |  | ---- | -
|                                  |  | Year endedDecember 31, |    
|                                  |  | 2011                   |     |   | 2012 | 
|                                  |  | (% of total revenue)   |    
|Revenue:                          |  |                        |     |   |      |  |      |  
|Product revenue                   |  |                        | 98  |   |      |  | 88   |  
|Other revenue                     |  |                        | 2   |   |      |  | 12   |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Total revenue                     |  |                        | 100 |   |      |  | 100  |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Cost of revenue:                  |  |                        |     |   |      |  |      |  
|Cost of product revenue           |  |                        | 49  |   |      |  | 53   |  
|Cost of other revenue             |  |                        | 1   |   |      |  | 1    |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Total cost of revenue             |  |                        | 50  |   |      |  | 54   |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Gross profit                      |  |                        | 50  |   |      |  | 46   |  
|Operating expenses:               |  |                        |     |   |      |  |      |  
|Research and development          |  |                        | 27  |   |      |  | 128  |  
|Sales and marketing               |  |                        | 14  |   |      |  | 29   |  
|General and administrative        |  |                        | 8   |   |      |  | 36   |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Total operating expenses          |  |                        | 49  |   |      |  | 194  |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Operating income (loss)           |  |                        | 1   |   |      |  | (147 | )
|Financial income (expense):       |  |                        |     |   |      |  |      |  
|Interest income (expense), net    |  |                        |    |   |      |  | 1    |  
|Foreign exchange gain (loss)      |  |                        | (1  | ) |      |  | (1   | )
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Profit (Loss) before income taxes |  |                        |    |   |      |  | (147 | )
|Income tax expense (benefit)      |  |                        |    |   |      |  | 1    |  
|                                  |  |                        |     |   |      |  |      |  
|                                  |  |                       
|Profit (Loss)                     |  |                        |    |   |      |  | (148 | )
|                                  |  |                        |     |   |      |  |      |  

Revenue

Product Revenue

Product revenue decreased 79% from $91.7 million in 2011
to $19.6 million in 2012. This decrease was primarily due to lower sales of WiMAX products following changes in the WiMAX market in the United States beginning in the second half of 2011. Our largest customer, HTC, integrated our WiMAX products
into a line of smartphones sold primarily in the United States. HTC represented 32% of our revenue in 2012 compared to 78% of our revenue in 2011. In 2012, we shipped 1.6 million units of products compared to 8.1 million units in 2011.

Other Revenue

Other revenue increased 35% from $2.0 million in 2011 to $2.7 million in 2012, reflecting primarily the execution of a greater number of license agreements for the use of our technology solutions in 2012.

Cost of Revenue

Cost of product revenue decreased 74% from $46.2 million in 2011 to $11.8 million in 2012 due to lower product and manufacturing costs associated with the decreased number of units sold. Cost of
other revenue remained relatively flat at $0.2 million in 2012, as compared to 2011.

Gross Profit

Gross profit decreased 78% from $47.3 million in 2011 to $10.3 million in 2012, and gross margin decreased from 50.5% in 2011 to
46.3% in 2012. The reduction in gross profit and gross margin primarily reflects the significant decline in revenue. Product gross margin decreased from 49.7% in 2011 to 39.9% in 2012 due to continued low absorption of fixed production costs by a
low product revenue base. In addition, provisions related to WiMAX inventory totaling $854,000 were recorded during 2012, primarily in the fourth quarter. These provisions related to the two products that had been declared end-of-life during 2012
and excess or obsolete components related to active products.



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Research and Development

Research and development expense increased 14% from $24.9 million 2011 to $28.4 million in 2012. This reflects increases in costs from
internal reorganizations that moved certain teams from sales and marketing to research and development in the first quarter of 2012, offset by headcount reductions that took place in May 2012 as part of an overall headcount reduction in the Company.
From January 1, 2012, the product project management team, which previously was combined with product marketing and which works closely with engineering, was deemed to be more logically a part of research and development, while the product
marketing team was combined with strategic marketing. Therefore, the costs related to eight employees in the project management team were recorded in research and development expense beginning in January 2012. In addition, the technical support
engineers who previously reported to the sales department were moved to the engineering department in April 2012, as their work is closely tied to ongoing product development (particularly in software). Overall, there were 167 employees and
independent contractors in research and development at December 31, 2012 compared to 171 employees and independent contractors at December 31, 2011.

These expenses are net of any research and development incentives earned during the periods, which are accounted for as a reduction of research and development expense. Research and development incentives
decreased by 16% from $5.9 million in 2011 to $5.0 million in 2012. In December 2012, we were notified of proposed tax adjustments, penalties and interest related to the French tax audit which related almost entirely to the research tax credits
claimed for 2008 and 2009. Although we disagree with the adjustments, we recorded a provision, reducing the research and development incentives by $0.3 million. Without this provision, research and development incentives would have decreased by 12%.

Sales and Marketing

Sales and marketing expense decreased 49% from $13.0 million in 2011 to $6.6 million in 2012. The decrease reflects primarily the impact of a reduction in headcount as product development and
technical support engineers were reassigned to research and development. Overall, there were 17 employees in sales and marketing at December 31, 2012 compared to 45 employees at December 31, 2011.

General and Administrative

General and administrative expense decreased 3% from $8.3 million in 2011 to $8.1 million in 2012 due to a decrease of $0.4 million in stock based compensation expenses, offset by a provision of
$0.4 million for bad debt for amounts due from one customer, net of related credit insurance. Overall, there were 19 employees in general and administrative at December 31, 2012 compared to 24 employees at December 31, 2011.

Interest Income (Expense), Net

Net interest income increased 135% from a net interest expense of $0.4 million in 2011 to a net interest income of $0.1 million in 2012. Higher net interest income in 2012 reflects lower interest expense
in 2012 due to the termination of our accounts receivable financing arrangement in the third quarter of 2011, the reimbursement of bank convertible notes in October 2011, offset slightly by interest expense related to a new lease financing
arrangement put in place in the third quarter of 2012. See Item 5.BLiquidity and Capital Resources for a more detailed description of our debt facilities.

Foreign Exchange Gain (Loss), Net

We had a net foreign exchange
loss of $0.2 million in 2012 compared to a net foreign exchange loss of $0.7 million in 2011 primarily due to movements in the U.S. dollar versus the euro.

Income Tax Expense (Benefit)

In 2012, we recorded tax expense of $207,000
arising from taxable income incurred as certain subsidiaries and a deferred tax expense amounting to $27,000. In 2011, we recorded tax expense of $314,000 arising from taxable income incurred as certain subsidiaries and a deferred tax expense
amounting to $57,000. Deferred tax assets have not been recognized in 2012 or 2011 with respect to our losses as we have not generated taxable profits since beginning operations in 2004.

Selected Quarterly Results of Operations

The following table presents our
unaudited quarterly results of operations for 2012 and 2013. This unaudited quarterly information has been prepared on the same basis as our audited Consolidated Financial Statements and includes all adjustments necessary for the fair presentation
of the information for the quarters presented. You should read this table together with our Consolidated Financial Statements and the related notes thereto included in this annual report. Our quarterly results of operations will vary in the future.
The results of operations for any quarter are not necessarily indicative of results for the entire year and are not necessarily indicative of any future results.



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##### Table of Contents

|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|--------------------------------- |  | -------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | ------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------ | - |  | - | ------ | -
|                                  |  | Three months ended         |       
|                                  |  | March 31,2012              |        |   | June 30,2012 |   |        | Sept. 30,2012 |  |   | Dec. 31,2012 |   |  | March 31,2013 |        |   | June 30,2013 |   |        | Sept. 30,2013 |  |   | Dec. 31,2013 |  
|                                  |  | restated(2)                |        |   | restated(2)  |   |        | restated(2)   |  |   | restated(2)  |   |  |               |        |   |              |   |        |               |  |   |              |  
|                                  |  | (in thousands) (unaudited) |       
|Revenue:                          |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Product revenue                   |  | $                          | 3,314  |   |              | $ | 5,990  |               |  | $ | 7,452        |   |  | $             | 2,844  |   |              | $ | 1,096  |               |  | $ | 1,799        |   |  | $ | 3,842  |   |  | $ | 3,971  |  
|Other revenue                     |  |                            | 793    |   |              |   | 1,045  |               |  |   | 530          |   |  |               | 286    |   |              |   | 1,206  |               |  |   | 548          |   |  |   | 227    |   |  |   | 1,023  |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Total revenue                     |  |                            | 4,107  |   |              |   | 7,035  |               |  |   | 7,982        |   |  |               | 3,130  |   |              |   | 2,302  |               |  |   | 2,347        |   |  |   | 4,069  |   |  |   | 4,994  |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Cost of revenue(1):               |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Cost of product revenue           |  |                            | 1,707  |   |              |   | 3,177  |               |  |   | 4,104        |   |  |               | 2,793  |   |              |   | 1,262  |               |  |   | 1,332        |   |  |   | 3,026  |   |  |   | 2,996  |  
|Cost of other revenue             |  |                            | 44     |   |              |   | 44     |               |  |   | 44           |   |  |               | 44     |   |              |   | 320    |               |  |   | 51           |   |  |   | 21     |   |  |   | (187   | )
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Total cost of revenue             |  |                            | 1,751  |   |              |   | 3,221  |               |  |   | 4,148        |   |  |               | 2,837  |   |              |   | 1,582  |               |  |   | 1,383        |   |  |   | 3,047  |   |  |   | 2,809  |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Gross profit                      |  |                            | 2,356  |   |              |   | 3,814  |               |  |   | 3,834        |   |  |               | 293    |   |              |   | 720    |               |  |   | 964          |   |  |   | 1,022  |   |  |   | 2,185  |  
|Operating expenses(1):            |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Research and development          |  |                            | 7,018  |   |              |   | 7,650  |               |  |   | 6,448        |   |  |               | 7,251  |   |              |   | 6,514  |               |  |   | 7,248        |   |  |   | 7,339  |   |  |   | 7,256  |  
|Sales and marketing               |  |                            | 2,230  |   |              |   | 2,009  |               |  |   | 1,470        |   |  |               | 853    |   |              |   | 1,139  |               |  |   | 1,135        |   |  |   | 1,101  |   |  |   | 1,074  |  
|General and administrative        |  |                            | 2,111  |   |              |   | 2,107  |               |  |   | 1,870        |   |  |               | 2,003  |   |              |   | 2,321  |               |  |   | 1,798        |   |  |   | 1,350  |   |  |   | 2,059  |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Total operating expenses          |  |                            | 11,359 |   |              |   | 11,766 |               |  |   | 9,788        |   |  |               | 10,107 |   |              |   | 9,974  |               |  |   | 10,181       |   |  |   | 9,790  |   |  |   | 10,389 |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Operating income (loss)           |  |                            | (9,003 | ) |              |   | (7,952 | )             |  |   | (5,954       | ) |  |               | (9,814 | ) |              |   | (9,254 | )             |  |   | (9,217       | ) |  |   | (8,768 | ) |  |   | (8,204 | )
|Financial income (expense):       |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|Interest income (expense), net    |  |                            | 31     |   |              |   | 46     |               |  |   | 22           |   |  |               | 38     |   |              |   | 19     |               |  |   | 10           |   |  |   | 3      |   |  |   | 2      |  
|Foreign exchange gain (loss)      |  |                            | (8     | ) |              |   | (354   | )             |  |   | 249          |   |  |               | (45    | ) |              |   | (132   | )             |  |   | 167          |   |  |   | 52     |   |  |   | (122   | )
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Profit (Loss) before income taxes |  |                            | (8,980 | ) |              |   | (8,260 | )             |  |   | (5,683       | ) |  |               | (9,821 | ) |              |   | (9,367 | )             |  |   | (9,040       | ) |  |   | (8,713 | ) |  |   | (8,324 | )
|Income tax expense (benefit)      |  |                            | 55     |   |              |   | 36     |               |  |   | 73           |   |  |               | 70     |   |              |   | 37     |               |  |   | 51           |   |  |   | 53     |   |  |   | 1      |  
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  
|                                  |  |                            |        |   |              |   |        |              
|Profit (Loss)                     |  | $                          | (9,035 | ) |              | $ | (8,296 | )             |  | $ | (5,756       | ) |  | $             | (9,891 | ) |              | $ | (9,404 | )             |  | $ | (9,091       | ) |  | $ | (8,766 | ) |  | $ | (8,325 | )
|                                  |  |                            |        |   |              |   |        |               |  |   |              |   |  |               |        |   |              |   |        |               |  |   |              |   |  |   |        |   |  |   |        |  



|(1) | Includes share-based compensation as follows:
|--- | ---------------------------------------------



|                         |  |                            |       |  |              |   |     |               |  |   |              |  |  |               |     |  |              |   |     |               |  |   |              |  |  |   |     |  |  |   |     | 
|------------------------ |  | -------------------------- | ----- |  | ------------ | - | --- | ------------- |  | - | ------------ |  |  | ------------- | --- |  | ------------ | - | --- | ------------- |  | - | ------------ |  |  | - | --- |  |  | - | --- | 
|                         |  | Three months ended         |      
|                         |  | March 31,2012              |       |  | June 30,2012 |   |     | Sept. 30,2012 |  |   | Dec. 31,2012 |  |  | March 31,2013 |     |  | June 30,2013 |   |     | Sept. 30,2013 |  |   | Dec. 31,2013 | 
|                         |  | (in thousands) (unaudited) |      
|Cost of revenue          |  | $                          | 65    |  |              | $ | 42  |               |  | $ | 33           |  |  | $             | 15  |  |              | $ | 26  |               |  | $ | 23           |  |  | $ | 20  |  |  | $ | 43  | 
|Operating expenses       |  |                            | 1,241 |  |              |   | 875 |               |  |   | 710          |  |  |               | 207 |  |              |   | 536 |               |  |   | 465          |  |  |   | 407 |  |  |   | 644 | 
|                         |  |                            |       |  |              |   |     |               |  |   |              |  |  |               |     |  |              |   |     |               |  |   |              |  |  |   |     |  |  |   |     | 
|                         |  |                            |       |  |              |   |     |              
|Share-based compensation |  | $                          | 1,306 |  |              | $ | 917 |               |  | $ | 743          |  |  | $             | 222 |  |              | $ | 562 |               |  | $ | 488          |  |  | $ | 427 |  |  | $ | 687 | 
|                         |  |                            |       |  |              |   |     |               |  |   |              |  |  |               |     |  |              |   |     |               |  |   |              |  |  |   |     |  |  |   |     | 



|(2) | Figures for each quarter of 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee Benefits).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following table sets forth a summary of our quarterly statement of operations as a percentage of total
revenue:



|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|--------------------------------- |  | -------------------------- | ---- | - | ------------ |  | ---- | ------------- |  |  | ------------ | - |  | ------------- | ---- | - | ------------ |  | ---- | ------------- |  |  | ------------ | - |  |  | ---- | - |  |  | ---- | -
|                                  |  | Three months ended         |     
|                                  |  | March 31,2012              |      |   | June 30,2012 |  |      | Sept. 30,2012 |  |  | Dec. 31,2012 |   |  | March 31,2013 |      |   | June 30,2013 |  |      | Sept. 30,2013 |  |  | Dec. 31,2013 |  
|                                  |  | (% of revenue) (unaudited) |     
|Revenue:                          |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|Product revenue                   |  |                            | 81   |   |              |  | 85   |               |  |  | 93           |   |  |               | 91   |   |              |  | 48   |               |  |  | 77           |   |  |  | 94   |   |  |  | 80   |  
|Other revenue                     |  |                            | 19   |   |              |  | 15   |               |  |  | 7            |   |  |               | 9    |   |              |  | 52   |               |  |  | 23           |   |  |  | 6    |   |  |  | 20   |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Total revenue                     |  |                            | 100  |   |              |  | 100  |               |  |  | 100          |   |  |               | 100  |   |              |  | 100  |               |  |  | 100          |   |  |  | 100  |   |  |  | 100  |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Cost of revenue:                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|Cost of product revenue           |  |                            | 42   |   |              |  | 45   |               |  |  | 51           |   |  |               | 90   |   |              |  | 55   |               |  |  | 57           |   |  |  | 74   |   |  |  | 60   |  
|Cost of other revenue             |  |                            | 1    |   |              |  | 1    |               |  |  | 1            |   |  |               | 1    |   |              |  | 14   |               |  |  | 2            |   |  |  | 1    |   |  |  | (4   | )
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Total cost of revenue             |  |                            | 43   |   |              |  | 46   |               |  |  | 52           |   |  |               | 91   |   |              |  | 69   |               |  |  | 59           |   |  |  | 75   |   |  |  | 56   |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Gross profit                      |  |                            | 57   |   |              |  | 54   |               |  |  | 48           |   |  |               | 9    |   |              |  | 31   |               |  |  | 41           |   |  |  | 25   |   |  |  | 44   |  
|Operating expenses:               |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|Research and development          |  |                            | 171  |   |              |  | 109  |               |  |  | 81           |   |  |               | 232  |   |              |  | 283  |               |  |  | 309          |   |  |  | 180  |   |  |  | 145  |  
|Sales and marketing               |  |                            | 54   |   |              |  | 29   |               |  |  | 18           |   |  |               | 27   |   |              |  | 49   |               |  |  | 48           |   |  |  | 27   |   |  |  | 22   |  
|General and administrative        |  |                            | 51   |   |              |  | 29   |               |  |  | 23           |   |  |               | 64   |   |              |  | 101  |               |  |  | 77           |   |  |  | 33   |   |  |  | 41   |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Total operating expenses          |  |                            | 276  |   |              |  | 167  |               |  |  | 122          |   |  |               | 323  |   |              |  | 433  |               |  |  | 434          |   |  |  | 241  |   |  |  | 208  |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Operating income (loss)           |  |                            | (219 | ) |              |  | (113 | )             |  |  | (74          | ) |  |               | (314 | ) |              |  | (402 | )             |  |  | (393         | ) |  |  | (215 | ) |  |  | (164 | )
|Financial income (expense):       |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|Interest income (expense), net    |  |                            |     |   |              |  | 1    |               |  |  |             |   |  |               | 1    |   |              |  | 1    |               |  |  |             |   |  |  |     |   |  |  |     |  
|Foreign exchange gain (loss)      |  |                            |     |   |              |  | (5   | )             |  |  | 3            |   |  |               | (1   | ) |              |  | (6   | )             |  |  | 7            |   |  |  | 1    |   |  |  | (2   | )
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Profit (Loss) before income taxes |  |                            | (219 | ) |              |  | (117 | )             |  |  | (71          | ) |  |               | (314 | ) |              |  | (407 | )             |  |  | (385         | ) |  |  | (214 | ) |  |  | (167 | )
|Income tax expense (benefit)      |  |                            | 1    |   |              |  | 1    |               |  |  | 1            |   |  |               | 3    |   |              |  | 2    |               |  |  | 2            |   |  |  | 1    |   |  |  |     |  
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  
|                                  |  |                            |      |   |              |  |      |              
|Profit (Loss)                     |  |                            | (220 | ) |              |  | (118 | )             |  |  | (72          | ) |  |               | (317 | ) |              |  | (409 | )             |  |  | (387         | ) |  |  | (215 | ) |  |  | (167 | )
|                                  |  |                            |      |   |              |  |      |               |  |  |              |   |  |               |      |   |              |  |      |               |  |  |              |   |  |  |      |   |  |  |      |  

In 2012 and the first two quarters of 2013, product sales fluctuated over the quarters due to the
combined effect of our LTE products shipping in small quantities for trials or early phases of deployment by various carriers and our WiMAX products being sold primarily for mature products and only as the supply chain became empty. In the third and
fourth quarters of 2013, product revenue began increasing as shipments for new design wins began. Other revenue fluctuated over the quarters, primarily due to the timing of the execution of software licenses and, in 2013, the timing of performance
milestones in technology service agreements.

Cost of product revenue declined throughout 2012 and the first two quarters of
2013 as product revenue decreased, and then increased with the revenue ramp in the third and fourth quarters of 2013. Cost of other revenue increased in the first quarter of 2013 impacted by an expected external cost of services related to a service
agreement, an amount which was reversed in the fourth quarter as the service ultimately was provided internally at lower cost. Otherwise, cost of other revenue remained flat as the cost of providing maintenance services was provided generally by the
same number of personnel during each of these periods and does not vary significantly with the level of maintenance revenues.

Gross margin was significantly above 50% in the first two quarters of 2012 due to the high contribution of license revenue in the mix.
Gross margin declined to 48% in the third quarter of 2012 as the revenue mix shifted more toward product revenue, and license revenues declined. In the fourth quarter of 2012, gross margin declined to 9% reflecting a combination of low other
revenue, lower product revenues unable to fully absorb fixed costs and a provision for excess WiMAX inventory of $854,000. In 2013, the gross margin remained below 50% as low product revenue was not able to absorb fixed costs, our LTE modules with
lower margins than our chip solutions began shipping in the third quarter and the proportion of license and other revenue fluctuated from quarter to quarter.

Research and development expense increased significantly in the first half of 2012, reflecting an internal reorganization resulting in certain project managers and technical support engineers being
reassigned to research and development teams. The decrease in the



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third quarter reflects the impact of a headcount reduction implemented in the second quarter, as well as some seasonality. The increase in the fourth quarter results from some significant
operator certification costs as well as the impact of a provision related to the tax audit findings with respect to prior years research tax credits. Research and development expense in the first quarter of 2013 decreased both in comparison to
the unusually high level in the fourth quarter of 2012 and due to discretionary spending being delayed until after a financing round was completed. Beginning in the second quarter of 2013, research and development expenses increased, reflecting
amortization of large product development-related fixed assets as well as normal product certification and other development-related spending.

In 2012, sales and marketing expense declined significantly beginning in the first quarter due to the internal reorganization resulting in the transfer of the technical support engineers and certain
project managers into the research and development department. Sales and marketing expense remained flat in 2013 from quarter to quarter.

Following headcount reductions in the second quarter of 2012, general and administrative expense declined in the third quarter. The increase in the fourth quarter of 2012 reflects the provision for bad
debts recorded related to one customer for $448,000. The increase in general and administrative expense in the first quarter of 2013 reflects the provision for bad debts recorded related to one customer for $770,000. The increase in the fourth
quarter of 2013 reflects the impact of the move of our headquarters, which will take place in May 2014 but was decided in November 2013, totaling $508,000.

Financial income (expense) has varied each quarter presented primarily due to foreign exchange gains and losses. Foreign exchange gains and losses resulted primarily from the change in the U.S. dollar to
euro exchange rate and remeasurement of euro-based assets and liabilities at settlement or balance sheet date.

Due to our
limited operating history, we have yet to experience an established pattern of seasonality. However, business activities in Asia generally slow down in the first quarter of each year during the Chinese New Year period, which could harm our sales and
results of operations during the period.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

Sources of Liquidity

Our cash and cash equivalents were $37.2 million at
December 31, 2013. We believe that our available cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months.

Since inception, we have financed our operations primarily through proceeds from the issues of our shares and convertible notes, which totaled 54.7 million ($73.1 million) from 2004 to the end
of 2010; from the $59.1 million in net proceeds from our initial public offering on the New York Stock Exchange in April 2011 and from $37.1 million in net proceeds from our two follow-on public offerings in February and November 2013.

In June 2012, we entered into a finance lease agreement with a French financial institution whereby we have the possibility to finance
acquisitions of qualifying equipment with a total purchase price of up to 1.5 million ($2.0 million) through finance leases that are reimbursed over a 36-month period at an effective rate of interest of 4.6%. The finance lease obligation
is secured by restricted cash balances on deposit with the financial institution equal to one-third of the original principal financed. The facility expired February 28, 2013 and has not been renewed. At December 31, 2013, our capital
lease obligations, including the current portion, amounted to $0.5 million.

Apart from amounts outstanding under the finance
lease agreement, we had no outstanding debt at December 31, 2013.

Cash Flows

The following table summarizes our cash flows for the periods indicated:



|                                                     |  |                         |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                     |  | Year ended December 31, |        
|                                                     |  | 2011                    |         |   | 2012 |   |         | 2013 | 
|                                                     |  | (in thousands)          |        
|Net cash from (used in) operating activities         |  | $                       | 2,763   |   |      | $ | (22,848 | )    |  | $ | (24,345 | )
|Net cash used in investing activities                |  |                         | (10,252 | ) |      |   | (5,511  | )    |  |   | (3,956  | )
|Net cash from financing activities                   |  |                         | 54,976  |   |      |   | (119    | )    |  |   | 36,791  |  
|                                                     |  |                         |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents |  | $                       | 47,487  |   |      | $ | (28,478 | )    |  | $ | 8,490   |  
|                                                     |  |                         |         |   |      |   |         |      |  |   |         |  

Cash Flows from Operating Activities

Net cash used in operating activities during 2013 was $24.3 million, reflecting a net loss (before income tax) of $35.4 million, a
decrease in trade receivables and other receivables of $0.5 million, a decrease in inventories of $0.9 million, an decrease in research



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tax credit receivable of $0.4 million and a increase of trade payables and other liabilities of $1.3 million. These uses of cash were partially offset by non-cash charges, including depreciation
and amortization of $6.3 million, and share-based compensation expense of $2.2 million during the period.

Net cash used in
operating activities during 2012 was $22.8 million, reflecting a net loss (before income tax) of $32.7 million, a decrease in trade receivables and other receivables of $3.9 million, a decrease in inventories of $4.2 million, an increase in research
tax credit receivable of $4.0 million and a decrease of trade payables and other liabilities of $3.3 million. These uses of cash were partially offset by non-cash charges, including depreciation and amortization of $4.4 million, and share-based
compensation expenses of $3.2 million during the period.

Net cash from operating activities during 2011 was $2.8 million,
reflecting a net loss (before income tax) of $58,000, increases in inventories of $2.9 million and in research tax credit receivable of $2.4 million and a decrease of trade payables and other liabilities of $6.3 million. These uses of cash were
offset by non-cash charges, including depreciation and amortization of $5.9 million and share-based compensation expenses of $4.2 million, and a decrease in trade receivables and other receivables of $5.1 million during the period.

Cash Used in Investing Activities

Cash used in investing activities during 2013, 2012 and 2011, consisted primarily of purchases of property and equipment and intangible assets of $3.9 million, $5.6 million, and $11.0 million,
respectively. The higher level of capital expenditures in 2011 reflects purchases related to LTE product development in addition to ongoing WiMAX product development. In 2010, the factoring agreement we entered into with Natixis Factor also required
establishing a financial deposit of $0.6 million which was reimbursed in 2011 pursuant the termination of the agreement.

Cash Flows
from Financing Activities

Net cash provided by financing activities was $36.8 million in 2013, reflecting $37.1
million in net proceeds from our two follow-on public offerings in February and November 2013.

Net cash provided by financing
activities was $0.1 million in 2012, reflecting interest received from our cash equivalents invested in money market funds.

Net cash provided by financing activities was $55.1 million in 2011, reflecting $59.9 million in net proceeds from our initial public
offering on the New York Stock Exchange in April 2011 and $0.6 million in proceeds from exercise of stock options, founders warrants and other warrants. These sources of cash were partially offset by the repayment of the bank convertible notes
of $3.5 million and by the repayment of interest-free loans in the amount of $1.3 million.

Operating and Investing Requirements

We expect our operating expenses to remain flat or increase slightly in 2014. We expect that investments in tangible
and intangible assets are likely to return to about the level of 2012 investments.

Based on our current plans, and including
pending and/or recent transactions, we believe that our available capital resources will be adequate to satisfy our cash requirements at least for 12 months from the date of this annual report. If our plans change, or if we do not achieve profits or
if our profitability is significantly lower than anticipated, we may need additional financing.

If our available cash
balances are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities or enter into a credit facility, which may contain restrictive covenants. The sale of equity and convertible debt securities
may result in dilution to our shareholders and those securities may have rights senior to those of the ADSs. If we raise additional funds through the issue of convertible debt securities, these securities could contain covenants that would restrict
our operations.

Our estimates of the period of time through which our financial resources will be adequate to support our
operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties, and actual results could vary materially and negatively as a result of a number
of factors, including the factors discussed in Item 3.DRisk Factors. We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Our short and long-term capital requirements will depend on many factors, including the following:



| |  |  | our ability to generate cash from operations or to minimize the cash used in operations;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | our ability to control our costs;
| | - |  | ---------------------------------



| |  |  | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, or participating in
litigation-related activities; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the acquisition of businesses, products and technologies.
| | - |  | ---------------------------------------------------------



|C. | Research and Development, Patents and Licenses, etc.
|-- | ----------------------------------------------------

We engage in substantial research and development efforts to develop new products and integrate additional capabilities into our core products. Our research and development team of 176 employees and
consultants, at December 31, 2013, includes experienced semiconductor designers, software developers and test engineers. Key areas of expertise include wireless systems architecture, SoC architecture, digital and RF IC design, digital signal
processing, embedded real-time and application software design, protocol stack development, hardware and software integration, quality assurance test development and scripting and field testing. Our team has significant experience in the principal
wireless domains, including LTE, WiMAX, 2G, 3G and Wi-Fi. More than 73% of our employee engineers have more than 10 years of experience in their specific domain and 99% of our engineers hold masters degrees.

The ability to successfully integrate and mass-produce digital and/or RF functionality in advanced process technology with acceptable
yields is a significant industry challenge. Due to the robustness of our silicon design and verification methodologies, we have demonstrated competency in repeatedly achieving production-capable products with the first version of our chip designs,
reducing time to market and avoiding costs associated with additional design revisions. Each of our 65nm WiMAX SoC products, which consisted of integrated baseband and RF transceiver functions, and our first two generations of 40nm LTE baseband
products, were production-ready from the initial version of the design. We believe this experience positioned us well for our migration to dense process geometry such as 28nm for our new products. Looking ahead to future generations, we expect
this competency will serve us well as we develop ever more complex designs in more advanced process technologies.

We design
our products with careful attention to quality, flexibility, cost- and power-efficiency requirements. Our 4G modem architecture, which has been refined through multiple generations of integrated circuit designs, is designed to optimize hardware and
software partitioning to provide more flexibility and better cost without compromising performance. As a result, we achieve equivalent or higher throughput and lower power consumption in a smaller die size than other single-mode LTE chip
competitors.

Since February 2009, we have been certified as ISO 9001 compliant, an international standard set by the
International Organization for Standardization, or ISO, that sets forth requirements for an organizations quality management system. We believe this certification gives our customers confidence in our quality control procedures. We also
participate in a number of organizations and standards bodies, including the IEEE 802.16 Working Group on Broadband Wireless Access Standards, an organization that develops standards and recommended practices to support the development and
deployment of broadband wireless metropolitan area networks, the 3rd Generation Partnership Project (3GPP), Open Mobile Alliance (OMA), the WiMAX Forum, the PTS Type Certification Review Board (PTCRB) the Global Certification Forum, European
Telecommunications Standards Institute (ETSI) and CTIAThe Wireless Association. In addition, we participate in multiple European Union and French collaborative projects for advanced studies focusing on future evolutions of the 4G technology or
addressing the longer term 5G technology challenges.

Our research and development expense was $24.9 million for 2011 and
$28.4 million for each of 2012 and 2013, respectively.



|D. | Trend Information
|-- | -----------------

For the year ended December 31, 2011, the most significant change in trends that effected our business, results of operations and financial condition was the unexpected decline experienced in the
WiMAX market driven by a change in strategy by Sprint, the largest driver of demand for WiMAX semiconductor solutions, who in the third quarter of 2011 introduced the 3G iPhone and announced their intention to begin deploying LTE in 2012. This
change in the WiMAX market harmed our results of operations for the second half of 2011 and for the year ended December 31, 2012, particularly as we did not generate significant revenue from LTE products until the second half of 2013 due to the
time necessary to get our LTE products ready for mass production, certify them at various LTE carriers and the timing of the LTE carriers LTE-only products. Other than these items, or as disclosed elsewhere in this annual report, including in
Item 5. A. Operating Results, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonable likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital
resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.



|E. | Off-Balance Sheet Arrangements
|-- | ------------------------------

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.



|F. | Contractual Obligations
|-- | -----------------------

The following table summarizes our outstanding contractual obligations at December 31, 2013 and the effect those obligations are expected to have on our liquidity and cash flows in future periods:



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|                                                       |  |                        |       |  |                 |   |       |           |  |   |           |  |  |                  |       |  |  |   |     | 
|------------------------------------------------------ |  | ---------------------- | ----- |  | --------------- | - | ----- | --------- |  | - | --------- |  |  | ---------------- | ----- |  |  | - | --- | 
|                                                       |  | Payments due by period |      
|                                                       |  | Total                  |       |  | Less than1 year |   |       | 1-3 years |  |   | 3-5 years |  |  | More than5 years |      
|                                                       |  | (in thousands)         |      
|Finance lease obligation                               |  | $                      | 501   |  |                 | $ | 261   |           |  | $ | 240       |  |  | $                |      |  |  | $ |    | 
|Operating leases                                       |  |                        | 5,365 |  |                 |   | 1,382 |           |  |   | 1,581     |  |  | $                | 1,441 |  |  | $ | 961 | 
|Inventory component and equipment purchase commitments |  |                        | 1,024 |  |                 |   | 1,024 |           |  |   |          |  |  |                  |      |  |  |   |    | 
|                                                       |  |                        |       |  |                 |   |       |           |  |   |           |  |  |                  |       |  |  |   |     | 
|Total                                                  |  | $                      | 6,890 |  |                 | $ | 2,667 |           |  | $ | 1,821     |  |  | $                | 1,441 |  |  | $ | 961 | 
|                                                       |  |                        |       |  |                 |   |       |           |  |   |           |  |  |                  |       |  |  |   |     | 



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Item 6. Directors, Senior Management and Employees



|A. | Directors and Senior Management
|-- | -------------------------------

Executive Officers and Directors

The following table sets forth information about our executive officers and directors as the date of this annual report.



|                     |  |     |    |  |             |                                                  
|-------------------- |  | --- | -- |  | ----------- | -------------------------------------------------
|Name                 |  | Age |    |  | Position(s)
|Executive Officers   |  |     |    |  |             |                                                  
|Dr. Georges Karam    |  |     | 52 |  |             | Chairman of the Board and Chief Executive Officer
|Deborah Choate       |  |     | 50 |  |             | Chief Financial Officer                          
|Bertrand Debray      |  |     | 49 |  |             | Chief Operating Officer                          
|Rudy Leser           |  |     | 48 |  |             | Vice President, Business Development             
|T. Craig Miller      |  |     | 48 |  |             | Vice President, Worldwide Marketing              
|                     |  |    
|Directors            |  |     |    |  |             |                                                  
|Gilles Delfassy      |  |     | 58 |  |             | Director                                         
|James Patterson      |  |     | 46 |  |             | Director                                         
|Hubert de Pesquidoux |  |     | 48 |  |             | Director                                         
|Dominique Pitteloud  |  |     | 52 |  |             | Director                                         
|Alok Sharma          |  |     | 49 |  |             | Director                                         
|Zvi Slonimsky        |  |     | 64 |  |             | Director                                         

Executive Officers

Dr. Georges Karam has served as our chairman of the board and chief executive officer since the company was founded in 2003. Before founding Sequans, Dr. Karam was vice president
of cable access at Juniper Networks, running the cable engineering and marketing departments and managing the cable sales launch in the Europe, Middle East and Africa region. He joined Juniper Networks when the company acquired Pacific Broadband
Communications (PBC), where he was vice president of engineering and general manager for Europe. Dr. Karam has served in a variety of senior management positions at Alcatel, SAGEM and Philips. He is a senior member of IEEE, has authored
numerous technical and scientific papers and holds several patents in digital communications. Dr. Karam holds a[n Eng and] PhD [in signal processing and communication theory] from Ecole Nationale Supérieure des
Télécommunications, Paris.

Deborah Choate has served as our chief financial officer since July
2007. Prior to joining Sequans she was chief financial officer at Esmertec AG from September 2005 to June 2007 and at Wavecom SA, from August 1998 to August 2004, and vice president of finance at Platinum Equity from October 2004 to September 2005.
Earlier in her career, she was an audit partner with Ernst & Young. Ms. Choate has 30 years of experience in management, finance and accounting, including over 15 years working with technology companies, in particular communications
hardware, software and services. Ms. Choate holds a BS from the University of California at Berkeley.

Bertrand
Debray has served as our chief operating officer since July 2013 and prior to that as vice president, engineering since the company was founded in 2003.Before joining Sequans, Mr. Debray was director of hardware and ASIC
development in the cable product division at Juniper Networks. He joined Juniper Networks after the company acquired Pacific Broadband Communications, where he played the same role and was significantly involved in developing the cable product and
team. Mr. Debray has held technical and management positions at Alcatel. He has 17 years experience in large project development covering all access technologies, including wireless, satellite and cable. Mr. Debray holds a MSE from
Ecole Nationale Supérieure des Télécommunications, Paris.

Rudy Leser has served as our
vice president, business development since September 2011. Mr. Leser is responsible for establishing and managing our relationships with mobile operators, technology partners and other key players in the global wireless ecosystem. He has more
than 20 years experience managing marketing, sales and business development in the telecom industry with carriers and telecom equipment manufacturers. Prior to joining Sequans, Mr. Leser was an independent telecommunications
consultant from January 2011 to August 2011. From 2000 through December 2010, Mr. Leser served in the executive management group of Alvarion as the corporate vice president of marketing and strategy, a global leader in 4G networking solutions.
Prior to joining Alvarion, he was a member of the management team at Floware, where he led the merger of BreezeCom and Floware, which became Alvarion in 2001. From 1994 to 2000, Mr. Leser was a founder of Metalink Ltd, a worldwide xDSL chipset
vendor, where he served as vice president of marketing and vice president of sales. Mr. Leser started his career at Tadiran Telecommunication where he served in different positions in R&D and later in global European sales
responsibilities. Mr. Leser holds a BS in aerospace engineering and an MS in aerospace and applied maths engineering from Technion Israel.



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T. Craig Miller has served as our vice president, worldwide marketing since
September 2011, and previously served as our vice president, marketing and business development beginning in June 2009. Mr. Miller is responsible for coordinating our global product and corporate marketing strategies. He is a technology
industry veteran with experience in product management, marketing, strategic planning and business development over the course of his twenty-plus year career. Prior to joining Sequans, Mr. Miller was vice president of product management and
marketing at NextWave Wireless from September 2006 to March 2009, where he was responsible for strategic marketing, product planning, product management, applications engineering and marketing communications for a portfolio of WiMAX and LTE
chipsets. Prior to NextWave, from July 1988 to May 2006 he held numerous positions in product marketing, strategy, business development and product engineering at Intel Corporation and was director of marketing for the Wireless Networking Group.
Mr. Miller holds a BS in electrical engineering from the University of Cincinnati and an MBA from Arizona State University.

Directors

Gilles Delfassy has served as a director since June 2012. He is also non-executive director at Imagination
Technologies and Chairman of the Board of Movea. Mr. Delfassy started his career with Texas Instruments, and created and led that companys wireless business. He was Senior Vice-President and Executive Officer of Texas Instruments when he
retired in 2007. Between 2007 and 2009, Mr. Delfassy served as an advisor for several venture capital firms in the US and Europe, and joined the boards of directors of several public and private companies. In particular he was a director at
ANADIGICS and interim CEO in 2008 and 2009. From September 2009 to December 2011 he was President and CEO of ST-Ericsson. Mr. Delfassy received an Engineer Diploma (Master of Science in Electrical Engineering) from Ecole Nationale Superieure
dElectronique et dAutomatique de Toulouse in 1977, and then graduated in Business Administration from Institut dAdministration des Entreprises de Paris in 1978. He also completed specialized courses for Board members at Stanford
University and University of Chicago in 2007.

James Patterson has served as a director since January 2011.
Mr. Patterson is currently CEO of the Patterson Advisory Group (PAG), a consultancy that specializes in start-ups for the telecom and technology industries. Mr. Patterson also serves on technology and advisory boards for Cbeyond, Inc.
and RCR Wireless. Prior to the formation of PAG, Mr. Patterson was the Executive Vice PresidentBusiness Development for Infotel Broadband Services, Ltd., a subsidiary of Reliance Industries, Ltd. Prior to Infotel, Mr. Patterson
served as the chief executive officer and co-founder of Mobile Symmetry, a mobile and database applications company, from September 2009 to September 2011. Prior to that Mr. Patterson held various leadership roles during his 15 year tenure with
Sprint, including President of Wholesale Services from 2008 to 2009, Vice President of Cable Solutions from 2005 to 2008, Vice President of Carrier Markets and of Network Access Management from 2001 to 2005, and Vice President of Sprint E|Solutions
Finance from 2000 to 2001. Prior to Sprint, Mr. Patterson was a consultant to the financial services industry at Andersen Consulting (now Accenture). Mr. Patterson holds a bachelors in economics from Davidson College and an MBA from
the University of Virginia. He has also studied British literature and economic history at Cambridge University and completed additional post-graduate work at Georgetown University.

Hubert de Pesquidoux has served as a director since March 2011. Mr. de Pesquidoux is an Executive Partner at Siris
Capital and from November 2009 to the present Mr. de Pesquidoux has served as Chief Executive Officer of HDP Consulting, a consulting company. From 1991 until December 2009, Mr. de Pesquidoux held various positions at the
telecommunications company Alcatel-Lucent SA (and its predecessor, Alcatel S.A. and its affiliates), where he most recently served as Chief Financial Officer from November 2007 until December 2008 and as President of the Enterprise
business from November 2006 until December 2008. Mr. de Pesquidouxs recent positions also include President of Alcatel North America from June 2003 until November 2006. Mr. de Pesquidoux also served as the
Chairman of the Board of Tekelec and currently serves, or has served, as a director of Radisys Corporation, Mavenir Systems, Inc. and Criteo S.A. Mr. de Pesquidoux holds a Master in Law from University of Nancy II, a Master in Economics and
Finance from Institut dEtudes Politiques de Paris, a DESS in International Affairs from University of Paris Dauphine and was a laureate in the Concours Général de Droit.

Dominique Pitteloud has served as a director since January 2005. Mr. Pitteloud has been a partner with Endeavour
Vision since 2007 and was a principal at Vision Capital from 2001 to 2007. Mr. Pitteloud is also an advisor to ASSIA, a provider of DSL management solutions. Mr. Pitteloud also serves as a director of number of private companies. Prior to
becoming a venture capitalist, Mr. Pitteloud was vice president of marketing at 8×8, a Silicon Valley semiconductor and telecommunication company, which he joined in 1999 as part of the acquisition of Odisei, a VoIP start-up from Sophia
Antipolis, France. At Odisei, Mr. Pitteloud led the development of the companys business and financing activities. Prior to Odisei, Mr. Pitteloud held various engineering and management positions at Logitech, including Vice President
of the scanner and video camera business units. Mr. Pitteloud received a BS in telecommunications from the Swiss engineering school of Yverdon and an MBA from Santa Clara University.

Alok Sharma has served as a director since January 2011. Dr. Sharma currently serves as management consultant for
Silver Lake Partners, a global leader in technology investing with over $23 billion in combined assets under management. From September 2010 to December 2012, Dr. Sharma was the chief executive officer of Accelera Inc., a company focused on
building network optimization software for mobile broadband networks. From February 2009 to August 2010, Dr. Sharma was the Senior Vice President, Corporate Development and Alliances, at Aviat Networks (earlier known as Harris-Stratex,
Microwave Division of Harris Corporation), where he was responsible for leading corporate strategy, mergers and acquisitions, as well as the development of key strategic relationships for the company. Beginning in June 2004, Dr. Sharma was the
founder and chief executive officer of Telsima Corporation, a provider of WiMAX broadband wireless solutions, until it was acquired by Aviat Networks in February 2009. Prior to Telsima, Dr. Sharma was the vice president and general manager of
the Worldwide Cable Business at Juniper Networks from



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December 2001 to May 2003. Before Juniper Networks, Dr. Sharma was the founder and chief executive officer of Pacific Broadband Communications, which was acquired by Juniper Networks in
December 2001. Prior to that, Dr. Sharma held senior management and technical positions at Hewlett Packard, Fujitsu/Amdahl, Integrated Device Technology and Siara Systems, a metro routing company acquired by Redback/Ericsson. Dr. Sharma
holds a bachelor of engineering from the Indian Institute of Technology, Roorkee, India and a PhD in electrical engineering from the University of Wisconsin-Madison.

Zvi Slonimsky has served as a director since November 2006. Since 2005, Mr. Slonimsky has been chairman of the board of several Israeli high tech companies, including Awear, Extricom,
Maradin, Pentalum, Alvarion, Teledata and Surf. He served as CEO of Alvarion Ltd. from 2001 to October 2005, following Alvarions establishment via merger of BreezeCOM and Floware in August 2001. Prior to the merger, Mr. Slonimsky was CEO
of BreezeCom. Before that, he served as president and CEO of MTS Ltd. and was general manager of DSP Group, Israel. Earlier in his career, he held senior positions at several Israeli telecom companies, including C.Mer and Tadiran. Mr. Slonimsky
holds a BSEE and a MSEE from the Technion Israel Institute for Technology and an MBA degree from Tel-Aviv University.



|B. | Compensation
|-- | ------------

Compensation of Executive Officers and Directors

The aggregate compensation paid and benefits in kind granted by us to our executive officers and directors, including share-based compensation, for the year ended December 31, 2013, was approximately
$4.4 million. For the year ended December 31, 2013, we estimate that approximately $10,000 of the amounts set aside or accrued to provide pension, retirement or similar benefits to our employees was attributable to our executive officers.

Our non-employee directors are entitled to the following annual compensation:



|                                                |  |   |        | 
|----------------------------------------------- |  | - | ------ | 
|Attendance fees                                 |  | $ | 20,000 | 
|Attendance fees for board committee chairperson |  |   |        | 
|Audit committee                                 |  | $ | 12,000 | 
|Compensation committee                          |  | $ | 9,000  | 
|Nominating and corporate governance committee   |  | $ | 5,000  | 
|Attendance fees for board committee members     |  |   |        | 
|Audit committee                                 |  | $ | 6,000  | 
|Compensation committee                          |  | $ | 4,500  | 
|Nominating and corporate governance committee   |  | $ | 2,500  | 

In addition, our non-employee directors are also entitled to the following equity awards:



|                                                |  |                                   
|----------------------------------------------- |  | ----------------------------------
|Initial equity award for new directors(1)(3)    |  | Warrants to purchase 25,000 shares
|Annual award for continuing board members(2)(3) |  | Warrants to purchase 6,000 shares 



|(1) | The initial equity award for new directors will have an exercise price equal to the fair market value of the ADSs on the date of grant and will be subject to vesting
over a period of three years in equal installments commencing on the date of grant, subject to the non-employee directors continued service to us through the vesting date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The annual equity award for continuing board members will have an exercise price equal to the fair market value of the ADSs on the date of grant and will fully vest
on the earlier of (a) the one year anniversary of the date of grant of the award and (b) the date immediately preceding the date of the annual meeting of our shareholders for the year following the year of grant for the award, subject to
the non-employee directors continued service to us through the vesting date. A non-employee director will receive an annual warrant award only if he or she has served on the board of directors for at least the preceding twelve months.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | All such awards will become fully vested upon a change of control.
|--- | ------------------------------------------------------------------

Employment Agreements with Executive Officers

We have entered into a
managing director agreement with Georges Karam, our chairman and chief executive officer. See Item 7.BRelated Party TransactionsAgreements with Executive Officers and DirectorsEmployment Agreement. We have entered into
standard employment agreements with each of our other executive officers. There are no arrangements or understanding between us and any of our other executive officers providing for benefits upon termination of their employment, other than as
required by applicable law.



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Equity Plans

Beginning in 2004, we have issued to our employees and consultants stock options, founders warrants and warrants to purchase our ordinary shares, and in 2011 and 2012, we issued restricted share awards.
Due to French corporate law and tax considerations, we have issued such equity awards under four types of equity plans, collectively referred to in this discussion as our equity plans. Our equity plans provide for the issue of stock options to
employees pursuant to our Stock Option Plans, warrants to our business partners, including consultants and advisors, who have long-term relationships with us and advise us on a regular basis, pursuant to our BSA Subscription Plans, and restricted
share awards pursuant to our Restricted Share Award Plans, and prior to our initial public offering in the United States in April 2011, founders warrants to employees in France until the time of our initial public offering, pursuant to our BCE
Subscription Plans. Founders warrants are a specific type of option available to qualifying young companies in France and have a more favorable tax treatment for both the employee and the employer compared to stock options, but otherwise function in
the same manner as stock options, in particular in terms of vesting. Following completion of our initial public offering in the Unites States in April 2011, we no longer issue founders warrants.

Under French law, each of these equity plans must be approved at the shareholders general meeting. The shareholders may delegate to
our board of directors the authority to grant the securities within a period that cannot exceed 18 months for founders warrants and warrants, and 38 months for stock options. The shareholders have nevertheless historically delegated the authority to
our board to grant these securities within a period that cannot exceed 12 months. Once approved by the shareholders general meeting, these equity plans cannot be extended either in duration or in size. We have therefore implemented new equity
plans when necessary each year.

From 2004 through March 21, 2014, our shareholders have approved and authorized the
issuance of an aggregate of 9,526,500 shares under our equity plans. At March 21, 2014, there were outstanding stock options, founders warrants and warrants to purchase a total of 5,326,558 of our shares issued under our equity plans at a
weighted average exercise price of $4.57, of which 1,961,500 were held by our directors and executive officers at a weighted average exercise price of $5.83 per share. Of these outstanding stock options, founders warrants and warrants, at
March 21, 2014, options to purchase 3,304,449 ordinary shares were vested and exercisable. At March 21, 2014, there were 72,800 restricted share awards outstanding, all vested but restricted from sale until October 2015, and none of which
was held by our directors and executive officers.

The stock options, founders warrants and warrants granted under each of our
equity plans were granted on substantially the same terms. In general, vesting of the stock options and founders warrants may occur over four years, with 25% vesting after an initial 12 months and the remaining 75% vesting monthly over the remaining
36 months, or may be immediate when linked to employee performance. In general, vesting of other warrants may be either on a monthly basis over a two-year or four-year period, or may be immediate, depending on the nature of the service contract with
the consultant or adviser. The stock options, founders warrants and warrants generally expire ten years after the date of grant if not exercised earlier. In general, when a stock option or founders warrant holders employment service with us,
or a warrant holders service with us, terminates for any reason, his or her stock options or founders warrants or warrants, as the case may be, will no longer continue to vest following termination. The holder may exercise any vested stock
options or founders warrants or warrants for a period of 30 days; however, for founders warrants and stock options, in the event of incapacity, such period is extended to 90 days. In the event of death, the holders heirs or beneficiaries shall
have a period of six months to exercise such founders warrants, stock options or warrants. For stock options and founders warrants, in the event that a third party acquires a 100% interest in us, an employee holder who is subsequently dismissed for
cause has the right to exercise all of his or her options or warrants within 30 days, notwithstanding the current vesting schedule. In the event of a change of control, as defined in the warrant equity plans subject to vesting, warrants that are not
yet exercisable will become exercisable for 30 days following the effective date of the change of control.

The exercise price
of the founders warrants, stock options or warrants is determined by the board of directors and is specified in each founders warrant, stock option or warrant award agreement. Historically, the exercise price of the stock options, founders warrants
and warrants was equal to the estimated fair value of the shares on the date of grant, based on our valuation, as negotiated with new investors, at the time of the last round of financing prior to the grant. Beginning in January 2011, for new
issuances of stock options, founders warrants and warrants, the exercise price is the fair market value of the shares on the date of grant as determined by our board of directors, based upon objective criteria including if the board so decides,
independent valuation analyses and the trading price of ADSs.

The restricted share awards vest 100% after two years, if the
employee is still with the company. The beneficiary is then required to hold the shares a further two years before being allowed to sell the shares, regardless of whether or not employment with the company continues.

In the event of certain changes in our share capital structure, such as a consolidation or share split or dividend, appropriate
adjustments will be made to the numbers of shares and exercise prices under outstanding stock options founders warrants and warrants.

The following table provides information regarding the options to purchase our ordinary shares held by each of our directors and officers who beneficially own greater than one percent of our ordinary
shares or have options to purchase more than one percent of our ordinary shares as of March 21, 2014:



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|                                                        |  |                    |  |               |  |                
|------------------------------------------------------- |  | ------------------ |  | ------------- |  | ---------------
|Name (Title)                                            |  | Number ofOption(s) |  | ExercisePrice |  | Expiration Date
|Dr. Georges Karam, Chairman and Chief Executive Officer |  | 500,000            |  | 6.26 ($8.63) |  | Mar. 8, 2021   
|                                                        |  | 50,000             |  | $2.04         |  | Dec. 13, 2022  
|                                                        |  | 150,000            |  | $1.90         |  | Dec. 12, 2023  
|                                                        |  |                    | 
|Bertrand Debray, Chief Operating Officer                |  | 150,000            |  | 6.26 ($8.63) |  | Mar. 8, 2021   
|                                                        |  | 24,000             |  | $2.04         |  | Dec. 13, 2022  
|                                                        |  | 24,000             |  | $1.90         |  | Dec. 12, 2023  



|C. | Board Practices
|-- | ---------------

In accordance with French law governing a société anonyme, our business is overseen by our board of directors and by our chairman. The board of directors has appointed Dr. Karam
as our chairman, who also serves as our chief executive officer. Subject to the prior authorization of the board of directors for certain decisions as required under French law, the chief executive officer has full authority to manage our affairs.

Our board of directors is responsible for, among other things, presenting our accounts to our shareholders for their approval
and convening shareholder meetings. The board of directors also reviews and monitors our economic, financial and technical strategies. The directors are elected by the shareholders at an ordinary general meeting. Under French law, a director may be
an individual or a corporation and the board of directors must be composed at all times of a minimum of three members.

Within
the limits set out by the corporate purposes (objet social) of our company and the powers expressly granted by law to the shareholders general meeting, the board of directors may deliberate upon our operations and make any decisions in
accordance with our business. However, a director must abstain from voting on matters in which the director has an interest. The board of directors can only deliberate if at least half of the directors attend the meeting in the manners provided for
in our by-laws. Decisions of the board of directors are taken by the majority of the directors present or represented. Under French law, our directors and chief executive officer may not, under any circumstances, borrow money from us or obtain an
extension of credit or obtain a surety from us.

Our board of directors currently consists of seven directors. Under our
by-laws, our board of directors may be comprised of up to nine members. Our board of directors is not currently seeking to fill the two vacant positions; however, a major shareholder, Bpifrance Participations, reporting ownership of 6,362,761 ADSs
(10.76% of our outstanding shares), seeks to nominate a board member. As part of the November 2013 public offering, during which Bpifrance Participations purchased approximately 4.8 million ADSs, Dr. Karam agreed with Bpifrance
Participations to propose their candidate to the board of directors for consideration to be nominated at our next annual shareholders meeting to take place in June 2014. In addition, assuming that the board approves the nomination and the election
of the candidate is put to a vote of the shareholders, Dr. Karam has committed to vote his own shares in favor of the election of the candidate. As of March 21, 2014, Bpifrance Participations has proposed a candidate, but the candidate has
yet been presented to the board of directors.

Our board of directors has determined that each of Messrs. Delfassy, Patterson,
de Pesquidoux, Pitteloud, Sharma and Slonimsky qualify as independent under the applicable rules and regulations of the SEC and the NYSE.

Under our by-laws, the sections of the by-laws relating to the number of directors, election and removal of a director from office may be modified only by a resolution adopted by 662/3% of our shareholders present or represented. A
directors term expires at the end of the ordinary shareholders general meeting convened to vote upon the accounts of the then-preceding fiscal year and is held in the year during which the term of such director comes to an end unless
such directors term expires earlier in the event of a resignation or removal. The following table sets forth the names of the directors of our company, the dates of their initial appointment as directors and the expiration dates of their
current term.



|                     |  |                 |  |                    |  |                   
|-------------------- |  | --------------- |  | ------------------ |  | ------------------
|Name                 |  | Currentposition |  | Year ofappointment |  | Termexpirationyear
|Georges Karam        |  | Chairman        |  | 2003               |  | 2015              
|Gilles Delfassy      |  | Director        |  | 2012               |  | 2015              
|James Patterson      |  | Director        |  | 2011               |  | 2016              
|Hubert de Pesquidoux |  | Director        |  | 2011               |  | 2016              
|Dominique Pitteloud  |  | Director        |  | 2005               |  | 2016              
|Alok Sharma          |  | Director        |  | 2011               |  | 2016              
|Zvi Slonimsky        |  | Director        |  | 2006               |  | 2015              



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At our shareholders general meeting held in June 2012, our by-laws were amended to
provide that each director is elected for a three-year term by a vote of the majority of the shareholders present or represented. Under French law, a director who is an individual cannot serve on more than five boards of directors or supervisory
boards in corporations (société anonyme) registered in France; directorships in companies controlled by us, as defined in article L.233-16 of the French Commercial Code, are not taken into account.

Directors may resign at any time and their position as members of the board of directors may be revoked at any time by a majority vote of
the shareholders present or represented at a shareholders general meeting, excluding abstentions. The number of directors who are over 70 years old may not exceed one third of the total number of directors and the chairman of our board must
not be over 65 years old. A director does not need to be a French national and there is no limitation on the number of terms that a director may serve. In case of removal without cause, directors may be entitled to damages.

Vacancies on our board of directors, including vacancies resulting from there being fewer than the maximum number of directors permitted
by our by-laws, provided there are at least three directors remaining, may be filled by a vote of a simple majority of the directors then in office. The appointment must then be ratified by the next shareholders general meeting. Directors
chosen or appointed to fill a vacancy shall be elected by the board for the remaining duration of the current term of the replaced director. In the event the board would be composed of less than three directors as a result of a vacancy, meetings of
the board of directors shall no longer be permitted to be held except to immediately convene a shareholders general meeting to elect one or several new directors so there are at least three directors serving on the board of directors, in
accordance with French law.

Under French law, employees may be elected to serve as a director. However, such
employee-director must perform actual functions separate from his/her role as director in order to retain the benefit of his/her employment agreement. The number of directors who are our employees cannot exceed one third of the directors then in
office. No director can enter into an employment agreement with us after his/her election to the board of directors.

French
law requires that companies having at least 50 employees for a period of 12 consecutive months have a Comité dEntreprise, or Workers Council, composed of representatives elected from among the personnel. Our Workers
Council was formed in 2007. Two of these representatives are entitled to attend all meetings of the board of directors and the shareholders, but they do not have any voting rights.

Directors are required to comply with applicable law and with our by-laws. Our directors may be jointly and severally liable for actions
that they take that are contrary to our interests. Directors are jointly and severally liable for collective decisions. However, each director may avoid liability by proving that he or she acted diligently and with caution, in particular by not
approving the decision at issue or even by resigning in the event of certain critical situations. In certain critical situations, in order to avoid liability for decisions made by the board, a director must resign from his or her office. Directors
may be individually liable for actions fully attributable to them in connection with a specific mission assigned to them by the board of directors. As a director, the chairman of the board is liable under the same conditions. The chief executive
officer may be liable with respect to third parties if he commits a fault that is severable from his duties and which is only attributable to him.

Directors Service Contracts

We entered into letter agreements with
each of James Patterson and Alok Sharma before they became directors. We also entered into a consulting agreement with Gilles Delfassy before he became one of our directors. See Item 7.BRelated Party TransactionsAgreements with
Executive Officers and DirectorsDirector and Compensation Agreements. There are no arrangements or understandings between us and any of our non-employee directors providing for benefits upon termination of their employment or service as
directors of our company, other than as required by applicable law.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee.

Audit Committee

Our audit committee consists of Hubert de Pesquidoux, James Patterson and Dominique Pitteloud, with Mr. de Pesquidoux serving as chairperson. Our audit committee oversees our corporate accounting and
financial reporting process and internal controls over financial reporting. Our audit committee evaluates the independent registered public accounting firms qualifications, independence and performance; recommends to the shareholders with
respect to the identity and compensation of the independent registered public accounting firm; approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; reviews our
Consolidated Financial Statements; reviews our critical accounting policies and estimates and internal controls over financial reporting; discusses with management and the independent registered public accounting firm the results of the annual audit
and the reviews of our quarterly Consolidated Financial Statements; and reviews the scope and results of internal audits and evaluates the performance of the internal auditor. Our board of directors has determined that each of our audit committee
members meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and the NYSE. Our board of directors has determined that Mr. de Pesquidoux is an audit committee financial expert as
defined under the applicable rules of the SEC and has the requisite financial sophistication under the applicable rules and regulations of the NYSE. The audit committee operates under a written charter that satisfies the applicable rules of the SEC
and the NYSE.



54



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##### Table of Contents

Compensation Committee

Our compensation committee consists of Zvi Slonimsky, Hubert de Pesquidoux and Dominique Pitteloud, with Mr. Slonimsky serving as
chairperson. Our compensation committee reviews and recommends policies relating to the compensation and benefits of our officers and employees, which includes reviewing and approving corporate goals and objectives relevant to compensation of our
chief executive officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives and setting compensation of these officers based on such evaluations. The compensation committee also recommends
to the board of directors the issue of stock options and other awards. Our board of directors has determined that each member our compensation committee meets the requirements for independence under the applicable rules and regulations of the SEC
and the NYSE. The compensation committee operates under a written charter.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of James Patterson, Alok Sharma, Zvi Slonimsky and,
beginning in July 2013, Gilles Delfassy, with Mr. Patterson serving as chairperson. The nominating and corporate governance committee is responsible for making recommendations regarding candidates for directorships and the size and composition
of our board. In making such recommendations, the nominating and corporate governance committee considers the skills and experience of the directors or nominees in the context of the needs of our board of directors as well as the directors or
nominees diversity of skills and experience in areas that are relevant to our business and activities. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance guidelines and
reporting and making recommendations concerning governance matters. Our board of directors has determined that each member of our nominating and corporate governance committee meets the requirements for independence under the applicable rules and
regulations of the NYSE. The nominating and corporate governance committee operates under a written charter.



|D. | Employees
|-- | ---------

At December 31, 2013, we had 188 full-time employees, of whom 120 were located in France, 19 were in the United Kingdom, 13 were in
China, 12 were in the United States, 8 were in Singapore, 5 were in Israel, 5 were in Taiwan, 2 were in India, 2 were in South Korea, 1 was in Ukraine and 1 was in Hong Kong. These employees include 153 in research and development, 13 in sales
and marketing, 18 in general and administration and 4 in operations. Management considers labor relations to be good. We also have independent contractors and consultants. At December 31, 2013, we had 18 dedicated engineers from Global
Logic in Ukraine for software development and testing, and also had 7 independent contractors in both research and development and sales and marketing in France.

At each date shown, we had the following employees, broken out by department and geography:



|                            |  |                 |     |  |      |  |     |      |  |  |     | 
|--------------------------- |  | --------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                            |  | At December 31, |    
|                            |  | 2011            |     |  | 2012 |  |     | 2013 | 
|Department:                 |  |                 |     |  |      |  |     |      |  |  |     | 
|Research and development    |  |                 | 139 |  |      |  | 144 |      |  |  | 153 | 
|Sales and marketing         |  |                 | 46  |  |      |  | 15  |      |  |  | 13  | 
|General and administration  |  |                 | 21  |  |      |  | 19  |      |  |  | 18  | 
|Operations                  |  |                 | 6   |  |      |  | 4   |      |  |  | 4   | 
|                            |  |                 |     |  |      |  |     |      |  |  |     | 
|Total                       |  |                 | 212 |  |      |  | 182 |      |  |  | 188 | 
|                            |  |                 |     |  |      |  |     |      |  |  |     | 
|                            |  |                 |    
|Geography:                  |  |                 |     |  |      |  |     |      |  |  |     | 
|Europe, Middle East, Africa |  |                 | 163 |  |      |  | 141 |      |  |  | 145 | 
|Asia                        |  |                 | 38  |  |      |  | 32  |      |  |  | 31  | 
|Americas                    |  |                 | 11  |  |      |  | 9   |      |  |  | 12  | 
|Total                       |  |                 | 212 |  |      |  | 182 |      |  |  | 188 | 
|                            |  |                 |     |  |      |  |     |      |  |  |     | 



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##### Table of Contents

|E. | Share Ownership
|-- | ---------------

For information regarding the share ownership of our directors and executive officers, please refer to Item 6.B.CompensationEquity Plans and Item 7.AMajor
Shareholders.

Item 7. Major Shareholders and Related Party Transactions



|A. | Major Shareholders
|-- | ------------------

The following table sets forth information with respect to the beneficial ownership of our shares as of March 21, 2014:



| |  |  | each person, or group of affiliated persons, known by us to own beneficially more than 5% of our outstanding ADSs or ordinary shares;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each of our executive officers;
| | - |  | -------------------------------



| |  |  | each of our directors; and
| | - |  | --------------------------



| |  |  | all of our executive officers and directors as a group.
| | - |  | -------------------------------------------------------

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or
shared voting or investment power with respect to those securities, and include shares subject to options that are exercisable within 60 days after the date of this annual report. Such shares are also deemed outstanding for purposes of computing the
percentage ownership of the person holding the option, but not the percentage ownership of any other person.

For the purpose
of calculating the percentage of shares beneficially owned by any shareholder, this table lists applicable percentage ownership based on 59,143,722 ordinary shares outstanding as of March 21, 2014.

Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to
their shares. To our knowledge, none of our selling shareholders is a broker-dealer or is affiliated with a broker-dealer.

Unless otherwise indicated in the footnotes to the table, the address of each individual listed in the table is c/o Sequans
Communications S.A., 19 Le Parvis, 92073 Paris-La Défense, France.



|                                                                 |  |                                   |           |  |         |  |      |  
|---------------------------------------------------------------- |  | --------------------------------- | --------- |  | ------- |  | ---- | -
|                                                                 |  | Ordinary SharesBeneficially Owned |          
|                                                                 |  | Number                            |           |  | Percent | 
|5% Shareholders                                                  |  |                                   |           |  |         |  |      |  
|Add Partners and affiliates(1)                                   |  |                                   | 4,371,996 |  |         |  | 7.4  | %
|I-Source Gestion and affiliates(2)                               |  |                                   | 3,314,226 |  |         |  | 5.6  |  
|Kennet Partners and affiliates(3)                                |  |                                   | 3,219,766 |  |         |  | 5.4  |  
|Dr. Georges Karam(4)                                             |  |                                   | 3,510,553 |  |         |  | 5.9  |  
|Nokomis Capital, L.L.C.(5)                                       |  |                                   | 3,012,876 |  |         |  | 5.1  |  
|Bpifrance Participations(6)                                      |  |                                   | 6,362,761 |  |         |  | 10.8 |  
|Executive Officers and Directors                                 |  |                                   |           |  |         |  |      |  
|Dr. Georges Karam(4)                                             |  |                                   | 3,510,553 |  |         |  | 5.9  | %
|Deborah Choate(7)                                                |  |                                   | 246,656   |  |         |  | *    |  
|Bertrand Debray(8)                                               |  |                                   | 991,314   |  |         |  | 1.7  |  
|Rudy Leser(9)                                                    |  |                                   | 78,500    |  |         |  | *    |  
|T. Craig Miller(10)                                              |  |                                   | 127,667   |  |         |  | *    |  
|Gilles Delfassy(11)                                              |  |                                   | 8,333     |  |         |  | *    |  
|James Patterson(12)                                              |  |                                   | 27,000    |  |         |  | *    |  
|Hubert de Pesquidoux(13)                                         |  |                                   | 27,000    |  |         |  | *    |  
|Dominique Pitteloud(14)                                          |  |                                   | 27,000    |  |         |  | *    |  
|Alok Sharma(15)                                                  |  |                                   | 27,000    |  |         |  | *    |  
|Zvi Slonimsky(16)                                                |  |                                   | 243,798   |  |         |  | *    |  
|All executive officers and directors as a group (11 persons)(17) |  |                                   | 5,314,821 |  |         |  | 9.0  | %



|* | Represents beneficial ownership of less than 1%.
|- | ------------------------------------------------

|(1) | Based on information provided to the Company. Includes 4,304,838 shares held by ADD One LP, or ADD; and 67,158 shares held by ADD One GmbH K.G. & Co, or KG.
Pursuant to the constitutional documents of ADD and KG, ADD Management Limited, or AML, has sole voting and investment power over the shares held by ADD and KG. AML is the managing general partner of ADD One General Partner LP which in turn is the
managing general partner of ADD and Liquidator of KG. The board of directors of AML consists of Kevin Brennan and Barry McClay, who share such voting and investment power. Each of Kevin Brennan and Barry McClay disclaim beneficial ownership except
to the extent of his pecuniary interest therein. The address of AML is 1 Royal Plaza, Royal Avenue, St. Peter Port, Guernsey, GY1 2HL.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on a Schedule 13G filed with the SEC on February 14, 2012 and information provided to the Company. Includes 2,798,172 shares owned by
FCPR T-Source; 357,578 shares owned by FCPI CA Innovation 6; 92,015 shares owned by FCPI CA Innovation 9; and 66,461 shares owned by FCPI CA Investissement 1. I-Source Gestion, as the management company of FCPR T-Source, and the delegate of Amundi
PEF, the management company of the FPCI CA Innovation 6, CA Innovation 9 and CA Investissement 1, is the Reporting Person. Under French Law, the funds (FCPR, FCPI) do not have legal capacity or their own personnel; they are represented in all
respects by the
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | management company, which acts in the interest of the unit holders of each fund. I-Source Gestion SA is a French société de gestion (management company) regulated as such by the
French Autorité des Marchés Financiers. Organized as a Société Anonyme, it is governed by a Directoire, comprised of Didier Moret, the Président du Directoire, Nicolas Landrin, Directeur Général, and
Jean-Philippe Zoghbi, Directeur Général. They make voting and investment decisions for I-Source Gestion SA. Therefore, I-Source Gestion, Didier Moret, Nicolas Landrin and Jean-Philippe Zoghbi have shared voting and shared dispositive
power over all shares owned of record by the Funds. However, Didier Moret, Nicolas Landrin and Jean-Philippe Zoghbi disclaim beneficial ownership of those shares except to the extent of their pecuniary interest therein, if any. The address of
I-Source Gestion is 23, avenue dIéna 75116 Paris, France.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on a Schedule 13G filed with the SEC on February 9, 2012 and information provided to the Company. Includes 3,205,401 shares held by Kennet Partners II LP,
or KII; and 14,365 shares held by King Street Partners LP, or KSP. Pursuant to a management agreement, Kennet Capital Management (Jersey) Limited, or KCMJL, has sole voting and investment power over the shares held by KII and KSP. The board of
directors of KCMJL consists of Michael Harrop, James Brasher and Davinia Smith, who share such voting and investment power. Each of Michael Harrop, James Brasher and Davinia Smith disclaim beneficial ownership except to the extent of his or her
pecuniary interest therein. The address of KCMJL is 47 Esplanade, St. Helier, Jersey JE1 0BD Channel Islands.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes 403,125 shares subject to options that are exercisable within 60 days of March 21, 2014.
|--- | -------------------------------------------------------------------------------------------------

|(5) | Based on a Schedule 13G filed with the SEC on February 14, 2014. Includes 3,012,876 shares held by Nokomis Capital, L.L.C., or Nokomis Capital, purchased by
Nokomis Capital through the accounts of certain private funds and managed accounts (collectively, the Nokomis Accounts). Nokomis Capital serves as the investment adviser to the Nokomis Accounts and may direct the voting and disposition of the
3,012,876 shares held by the Nokomis Accounts. As the principal of Nokomis Capital, Brett Hendrickson holds voting and investment power with respect to all securities beneficially owned by the Nokomis Accounts. The address of Nokomis Capital is 2305
Cedar Springs Rd., Suite 420, Dallas, TX 75201.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Based on a Schedule 13D filed with the SEC on December 2, 2013 and information provided to the Company. Includes 4,791,187 shares held by Bpifrance
Participations S.A., or Bpifrance, and 1,571,574 shares held by Fonds de Co-Investissement Direct, or FCID. Bpifrance is the wholly owned subsidiary of BPI-Groupe (bpifrance), or BPI. The Caisse des Dépôts et Consignations, or CDC, and
EPIC BPI-Groupe, or EPIC, each hold 50% of the share capital of BPI and jointly control BPI. FCID is managed by Bpifrance Investissement, which is managed by a board of directors. Nicolas Dufourcq is the Chairman of the Board of Directors and
President of Bpifrance Investissement and the Chief Executive Officer of Bpifrance and he may be deemed to have shared voting and investment power over the shares held by FCID and Bpifrance. Paul-François Fournier is the director of the
Innovation Business Unit of Bpifrance and Maïlys Ferrère is the director of the Large Venture Fund of Bpifrance, and they may be deemed to have shared voting and investment power over the shares held by Bpifrance. None of BPI, CDC, EPIC,
Bpifrance Investissement, Nicolas Dufourcq, Paul-François Fournier or Maïlys Ferrère hold any shares directly. BPI may be deemed to be the beneficial owner of 6,362,761 shares, indirectly through its sole ownership of Bpifrance,
who in addition to its direct holding of 4,791,187 shares, has an indirect holding of 1,571,574 shares held by FCID. CDC and EPIC may be deemed to be the beneficial owner of 6,362,761 shares, indirectly through their joint ownership and control of
BPI. Bpifrance Investissement and Nicolas Dufourcq may be deemed to be the beneficial owner of 1,571,574 shares through their control of FCID. Nicolas Dufourcq disclaims beneficial ownership of the 1,571,574 shares held by FCID and Bpifrance.
Paul-François Fournier and Maïlys Ferrère disclaim beneficial ownership of the shares held by Bpifrance. The principal address for Bpifrance, BPI, EPIC, FCID, Bpifrance Investissement and Nicolas Dufourcq is 27-31, avenue du
Général Leclerc, 94710 Maisons-Alfort Cedex, France.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 241,656 shares subject to options that are exercisable within 60 days of March 21, 2014.
|--- | -------------------------------------------------------------------------------------------------

|(8) | Includes 120,000 shares held by Mr. Debray as custodian for his sons. Includes 124,125 shares subject to options that are exercisable within 60 days of
March 21, 2014.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes 78,500 shares subject to options and warrants that are exercisable within 60 days of March 21, 2014.
|--- | -------------------------------------------------------------------------------------------------------------

|(10) | Includes 127,667 shares subject to options that are exercisable within 60 days of March 21, 2014.
|---- | -------------------------------------------------------------------------------------------------

|(11) | Includes 8,333 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | ------------------------------------------------------------------------------------------------

|(12) | Includes 27,000 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | -------------------------------------------------------------------------------------------------

|(13) | Includes 27,000 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | -------------------------------------------------------------------------------------------------

|(14) | Includes 27,000 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | -------------------------------------------------------------------------------------------------

|(15) | Includes 27,000 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | -------------------------------------------------------------------------------------------------

|(16) | Includes 243,798 shares subject to warrants that are exercisable within 60 days of March 21, 2014.
|---- | --------------------------------------------------------------------------------------------------

|(17) | Includes 1,335,204 shares subject to options and warrants that are exercisable within 60 days of March 21, 2014.
|---- | ----------------------------------------------------------------------------------------------------------------

None of our principal shareholders have voting rights different than our other shareholders.

At March 21, 2014, there were 58,895,681 of our ADSs outstanding, representing 58,895,681 of our ordinary shares or 99.6% of our
outstanding ordinary shares. At such date, there were 103 holders of record registered with the Bank of New York Mellon, depositary of our ADSs.



|B. | Related Party Transactions
|-- | --------------------------

Since January 1, 2013, we have engaged in the following transactions with our directors and executive officers, holders of more than 5% of our voting securities and affiliates of our directors,
executive officers and 5% shareholders. We believe that all of the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated third parties.

Under French law, agreements entered into directly or indirectly between us and either one of our officers or one of our shareholders
owning more than 10% of our shares, or any company controlling one of our shareholders owning more than 10% of our shares, are subject to the prior approval of the board of directors and must be ratified by our ordinary shareholders general
meetings on the basis of a specific report issued by our statutory auditors on such agreements. Our managing director agreement with Georges Karam, our letter agreements with each James Patterson and Alok Sharma, and our consultancy services
agreements with each of Zvi Slonimsky and Gilles Delfassy described below have been submitted to the prior approval of the board of directors and have been or will be submitted to our shareholders at each annual shareholders general meeting.



57



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##### Table of Contents

Agreements with Executive Officers and Directors

Employment Agreement

We have entered into a managing director agreement with Georges Karam, our chairman and chief executive officer, which contains provisions regarding salary, severance payment and benefits. If
Dr. Karam is terminated for any reason, he is entitled to a lump sum severance payment equal to one year of base salary. In accordance with French law, our chief executive officer (directeur général or managing
director) cannot be an employee in connection with the performance of his duties in such capacity. The managing director agreement entered into with Dr. Karam does not constitute, and does not contain the compulsory provisions under
French law to be construed as, an employment agreement. Therefore, Dr. Karam does not benefit from the status of employee nor from any benefit that French laws and regulations grant to employees. The managing director agreement only sets forth
the terms and conditions, including compensation, under which Dr. Karam performs his duties as chief executive officer.

Director
Compensation and Agreements

The non-employee members of our board of directors receive compensation based on our
director compensation policy. A description of the cash compensation and equity awards that non-employee members of our board of directors will be entitled to receive is described under Item 6. BCompensationCompensation of
Executive Officers and Directors.

Effective June 1, 2012, prior to Gilles Delfassy joining the board of directors,
we entered into an agreement whereby Mr. Delfassy provides to the Company consultancy services in the area of business development and strategy in the broadband wireless access industry. This agreement expired on June 1, 2013. During the
year ended December 31, 2013, Mr. Delfassy earned fees totaling $71,000 under this contract.

Stock Options, Founders Warrants
and Warrants

Since our inception, we have granted stock options, founders warrants and warrants to purchase our shares to
certain of our executive officers and board members. For more information about our option and warrant plans see Item 6. BCompensationEquity Plans.



|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not applicable.

Item 8. Financial Information



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

Consolidated Financial Statements

We have appended our consolidated
financial statements at the end of this annual report, starting at page F-1, as part of this annual report.

Legal Proceedings

On September 9, 2011, a class action lawsuit was filed in the United States District Court for the Southern District
of New York against the Company, certain of its officers and directors, and UBS Limited and Jefferies & Company Inc, the lead underwriters in the Companys initial public offering. This action, Donald Dean Johnson v. Sequans
Communications S.A., et al, alleges violations of the U.S. federal securities laws in connection with the Companys initial public offering. A substantially similar complaint was filed on October 25, 2011, also in the United States
District Court for the Southern District of New York. On December 13, 2011 the Court consolidated the two actions, and appointed lead plaintiffs and co-lead plaintiffs counsel. On January 31, 2012, lead plaintiffs filed a
Consolidated Amended Complaint for Violations of Federal Securities Laws, which seeks unspecified damages. On May 14, 2012, the Company filed a Motion to Dismiss the consolidated complaint. Following oral argument, on January 17, 2013, the
Court granted the Companys motion and gave lead plaintiffs 20 days leave to move to amend their complaint. On February 7, 2013, plaintiffs brought a motion for leave to file an amended complaint, on March 15, 2013, the Company filed
an opposition, and on April 16, 2013, plaintiffs filed a reply. The parties subsequently engaged in settlement discussions and stayed the litigation pending mediation. Following mediation, on June 21, 2013, the parties informed the Court
that they had reached an agreement in principle to settle the action, subject to the negotiation of a mutually agreeable settlement agreement. A settlement agreement was executed on October 31, 2013, and the Court preliminarily approved the
settlement on November 20, 2013. On January 8, 2014, plaintiffs filed a motion with the Court for final approval of the settlement, a plan of allocation of the settlement proceeds, and an award of attorneys fees and expenses. That
motion is still pending. Any payment under the settlement agreement, including payment of the Companys attorneys fees and expenses, will be directly supported by the insurance company.



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Dividend Policy

We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future and intend to retain all available
funds and any future earnings for use in the operation and expansion of our business.

Subject to the requirements of French
law and our by-laws, dividends may only be distributed from our statutory retained earnings. See Item 10. BMemorandum and Articles of Association for further details on the limitations on our ability to declare and pay dividends.
Dividend distributions, if any, will be made in euros and converted into U.S. dollars with respect to the ADSs, as provided in the deposit agreement.



|B. | Significant Changes
|-- | -------------------

No significant changes have occurred since December 31, 2013, except as otherwise disclosed in this annual report.

Item 9. The Offer and Listing



|A. | Listing Details
|-- | ---------------

Our ADSs have been listed on the New York Stock Exchange under the symbol SQNS since April 15, 2011. Prior to that date, there was no public trading market for ADSs or our ordinary
shares. The following table sets forth for the periods indicated the high and low sales prices per ordinary share as reported on the New York Stock Exchange:



|                               |  |      |      |  |     |   |      | 
|------------------------------ |  | ---- | ---- |  | --- | - | ---- | 
|                               |  | High |      |  | Low |  
|Year ending December 31, 2012: |  |      |      | 
|First Quarter                  |  | $    | 3.82 |  |     | $ | 2.50 | 
|Second Quarter                 |  | $    | 2.76 |  |     | $ | 2.00 | 
|Third Quarter                  |  | $    | 2.30 |  |     | $ | 1.54 | 
|Fourth Quarter                 |  | $    | 2.75 |  |     | $ | 1.30 | 
|Year ending December 31, 2013: |  |      |      | 
|First Quarter                  |  | $    | 2.85 |  |     | $ | 1.46 | 
|Second Quarter                 |  | $    | 1.74 |  |     | $ | 1.44 | 
|Third Quarter                  |  | $    | 2.59 |  |     | $ | 1.48 | 
|Fourth Quarter                 |  | $    | 2.95 |  |     | $ | 1.80 | 
|Last Six Months                |  |      |      |  |     |   |      | 
|September                      |  | $    | 2.59 |  |     | $ | 1.90 | 
|October                        |  | $    | 2.95 |  |     | $ | 1.82 | 
|November                       |  | $    | 2.38 |  |     | $ | 1.80 | 
|December                       |  | $    | 2.14 |  |     | $ | 1.81 | 
|January                        |  | $    | 2.80 |  |     | $ | 1.90 | 
|February                       |  | $    | 3.08 |  |     | $ | 2.53 | 

On March 21, 2014, the last reported sale price of our ADSs on the New York Stock Exchange was $2.98
per share.



|B. | Plan of Distribution
|-- | --------------------

Not applicable.



|C. | Markets
|-- | -------

Our ADS have been listed on the New York Stock Exchange under the symbol SQNS since April 15, 2011.



|D. | Selling Shareholders
|-- | --------------------

Not applicable.



|E. | Dilution
|-- | --------

Not applicable.



|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



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Item 10. Additional Information



|A. | Share Capital
|-- | -------------

Not applicable.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------

The information set forth in our Registration Statement on Form F-3 (File No. 333-182854), filed with the SEC on July 26, 2012, under the heading Description of Share Capital is
incorporated herein by reference.



|C. | Material Contracts
|-- | ------------------

We entered into an underwriting agreement with Needham & Company, LLC on February 15, 2013, with respect to the ADSs sold in our February 2013 public offering. We have agreed to indemnify
the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of such liabilities.

We entered into an underwriting agreement with Needham & Company, LLC on November 21, 2013, with respect to the ADSs sold
in our November 2013 public offering. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of such
liabilities.



|D. | Exchange Controls
|-- | -----------------

Under current French foreign exchange control regulations there are no limitations on the amount of cash payments that we may remit to residents of foreign countries. Laws and regulations concerning
foreign exchange controls do, however, require that all payments or transfers of funds made by a French resident to a non-resident be handled by an accredited intermediary. All registered banks and substantially all credit institutions in France are
accredited intermediaries.



|E. | Taxation
|-- | --------

Material
United States Federal Income Tax Consequences

The following is a description of the material United States federal income
tax consequences of the acquisition, ownership and disposition of the ADSs. This description addresses only the United States federal income tax consequences to holders that are

purchasers of the ADSs and hold such ADSs as capital assets (generally property held for investment). This description does not address tax considerations applicable to holders that may be subject to
special tax rules, including:



| |  |  | financial institutions or insurance companies;
| | - |  | ----------------------------------------------



| |  |  | real estate investment trusts, regulated investment companies or grantor trusts;
| | - |  | --------------------------------------------------------------------------------



| |  |  | dealers or traders in securities or currencies;
| | - |  | -----------------------------------------------



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | certain former citizens or former long-term residents of the United States;
| | - |  | ---------------------------------------------------------------------------



| |  |  | persons that received the ADSs as compensation for the performance of services;
| | - |  | -------------------------------------------------------------------------------



| |  |  | persons that will hold the ADSs as part of a hedging or conversion transaction or as a position in a straddle for
United States federal income tax purposes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | holders that will hold the ADSs through a partnership or other pass-through entity;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | U.S. Holders, as defined below, whose functional currency is not the United States dollar; or
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | holders that own directly, indirectly or through attribution 10.0% or more, of the voting power or value, of our shares.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

Moreover, this description does not address the United States federal estate and gift or alternative minimum tax, or foreign, state or
local tax, consequences of the acquisition, ownership and disposition of the ADSs.

This description is based on the United
States Internal Revenue Code of 1986, as amended, or the Code, existing, proposed and temporary United States Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the
date hereof. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below.

For purposes of this description, a U.S. Holder is a beneficial owner of the ADSs that, for United States federal income tax purposes, is:



| |  |  | a citizen or resident of the United States;
| | - |  | -------------------------------------------



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| |  |  | a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the
United States or any state thereof, including the District of Columbia;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate the income of which is subject to United States federal income taxation regardless of its source; or
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court
within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A Non-U.S. Holder is a beneficial owner of the ADSs that is neither a U.S. Holder nor a partnership, or other entity or
arrangement treated as a partnership, for United States federal income tax purposes.

If a partnership or any other entity or
arrangement treated as a partnership for United States federal income tax purposes holds the ADSs, the tax treatment of a partner in such partnership will depend on the status of the partner and the activities of the partnership. Such a partner or
partnership is encouraged to consult its tax advisor as to its tax consequences.

You are encouraged to consult your tax
advisor with respect to United States federal, state, local and foreign tax consequences of acquiring, owning and disposing of the ADSs.

For United States federal income tax purposes, you will be treated as the owner of our ordinary shares represented by your ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, will
not be subject to United States federal income tax.

Distributions with Respect to ADSs

Subject to the discussion below under Passive Foreign Investment Company Considerations, if you are a U.S. Holder, for United
States federal income tax purposes, the gross amount of any distribution made to you with respect to your ADSs (other than certain distributions, if any, of the ADSs distributed pro rata to all our shareholders), before reduction for any French
taxes withheld therefrom, will be includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated earnings and profits as determined under United States federal income tax principles. Subject to
the discussion below under Passive Foreign Investment Company Considerations, non-corporate U.S. Holders may qualify for the lower rates of taxation with respect to dividends on ADSs applicable to long-term capital gains (i.e., gains
from the sale of capital assets held for more than one year), provided that certain conditions are met, including certain holding period requirements and the absence of certain risk reduction transactions. However, such dividends will not be
eligible for the dividends received deduction generally allowed to corporate U.S. Holders. Subject to the discussion below under Passive Foreign Investment Company Considerations, to the extent, if any, that the amount of any
distribution by us exceeds our current and accumulated earnings and profits as determined under United States federal income tax principles, it will be treated first as a tax-free return of your adjusted tax basis in your ADSs and thereafter as
capital gain. We do not expect to maintain calculations of our earnings and profits under United States federal income tax principles and, therefore, if you are a U.S. Holder you should expect that the entire amount of any distribution generally
will be reported as dividend income to you.

Dividends, if any, paid to U.S. Holders in euros or currency other than the U.S.
dollar (Other Foreign Currency) will be includible in income in a U.S. dollar amount based on the prevailing spot market exchange rate in effect on the date of actual or constructive receipt whether or not converted into U.S. dollars at
that time. Assuming dividends received in euros (or Other Foreign Currency) are converted into U.S. dollars on the day they are received, the U.S. Holder will not be required to recognize foreign currency gain or loss in respect of the dividend
income. If, however, the payment is not converted at that time, a U.S. Holder will have a tax basis in euros (or Other Foreign Currency) equal to the U.S. dollar amount of the dividend included in income, which will be used to measure gain or loss
from subsequent changes in exchange rates. Any gain or loss that a U.S. Holder recognizes on a subsequent conversion of euros (or Other Foreign Currency) into U.S. dollars (or on other disposition) will be U.S. source ordinary income or loss. U.S.
Holders should consult their own tax advisors regarding the tax consequences to them if the dividends are paid in euros (or Other Foreign Currency).

Subject to certain conditions and limitations, French tax withheld on dividends may be deducted from your taxable income or credited against your United States federal income tax liability. The limitation
on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends, if any, that we distribute will constitute passive category income, or, in the case of certain U.S.
Holders, general category income. A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period requirements or if you engage in certain risk reduction transactions. If
you are a U.S. Holder, dividends, if any, paid to you with respect to your ADSs will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. The rules relating to the determination of the foreign
tax credit are complex, and you are encouraged to consult your tax advisor to determine whether and to what extent you will be entitled to this credit.

Subject to the discussion below under Backup Withholding Tax and Information Reporting Requirements, if you are a Non-U.S. Holder, you will not be subject to United States federal income, or
withholding, tax on dividends received by you on your ADSs, unless such income is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a
permanent establishment or fixed base).



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Sale, Exchange or Other Disposition of ADSs

Subject to the discussion below under Passive Foreign Investment Company Considerations, if you are a U.S. Holder, you will
recognize capital gain or loss on the sale, exchange or other disposition of your ADSs equal to the difference between the amount realized on such sale, exchange or other disposition and your adjusted tax basis in your ADSs. If you are a
non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of ADSs is eligible for the preferential rate of taxation applicable to long-term capital gains if your holding period for such ADSs exceeds one year (i.e., such
gain is long-term capital gain). Gain or loss, if any, recognized by a U.S. Holder will be treated as U.S. source gain or loss, as the case may be, for foreign tax credit limitation purposes. The deductibility of capital losses for United States
federal income tax purposes is subject to limitations.

Subject to the discussion below under Backup Withholding Tax and
Information Reporting Requirements, if you are a Non-U.S. Holder, you will not be subject to United States federal income, or withholding, tax on any gain realized on the sale or exchange of such ADSs unless:



| |  |  | such gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty,
is attributable to a permanent establishment or fixed base); or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | you are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange and certain other
conditions are met.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Passive Foreign Investment Company Considerations

A non-U.S. corporation will be classified as a passive foreign investment company, or a PFIC, for United States federal income
tax purposes in any taxable year in which, after applying certain look-through rules, either



| |  |  | at least 75% of its gross income is passive income; or
| | - |  | --------------------------------------------------------



| |  |  | at least 50% of the average value of its gross assets is attributable to assets that produce passive income or are held for the production
of passive income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Passive income for this purpose includes dividends, interest, royalties, rents, gains
from commodities and securities transactions and the excess of gains over losses from the disposition of assets which produce passive income, including amounts derived by reason of the temporary investment of funds raised in offerings of the ADSs.
If a non-U.S. corporation owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving
directly its proportionate share of the other corporations income.

Based on the character of our gross income and the
average value of our passive assets relative to the gross value of our assets for the taxable year ended December 31, 2013, we do not believe we were a PFIC for 2013. Because PFIC status is determined annually based on our income, assets and
activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for 2014 or any other future year until after the close of that year. While we intend to manage our business so as to avoid PFIC
status to the extent consistent with our other business goals, we cannot predict whether our business plans will allow us to avoid PFIC status. In addition, because the market price of the ADSs has fluctuated and is likely to fluctuate in the future
and because that market price may affect the determination of whether we are a PFIC, there can be no assurance that we will not be a PFIC for any taxable year.

If we are a PFIC for a given year, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime will apply to both (a) any excess
distribution by us to you for the year (defined as your ratable portion of distributions in the year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding years or, your holding
period for the ADSs) and (b) any gain realized on the sale or other disposition (including a pledge) of the ADSs. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if
(a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year
(other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holders regular ordinary income rate for the current year and would not be subject to the interest
charge discussed below), and (c) the interest charge applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, the tax liability for amounts allocated to years prior to the year of
disposition or excess distribution cannot be offset by any net operating losses for such years, and dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above
under Distributions with Respect to ADSs.



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Certain elections are available to U.S. Holders of shares that may serve to alleviate some
of the adverse tax consequences of PFIC status described above. One such election is a qualified electing fund, or a QEF, election, under which you would be required to include in income on a current basis your pro rata share of our ordinary
earnings as ordinary income and your pro rata share of our net capital gains as capital gain. However, we do not expect to provide to U.S. Holders the information needed to report income and gain pursuant to a QEF election, and we make no
undertaking to provide such information in the event that we are a PFIC.

Under an alternative tax regime, you may also avoid
certain adverse tax consequences relating to PFIC status discussed above by making a mark-to-market election with respect to your ADSs, provided that the ADSs are marketable. The ADSs will be marketable if they are regularly traded on
certain U.S. stock exchanges, including the NYSE, or on certain non-U.S. stock exchanges. For these purposes, the shares will be considered regularly traded during any calendar year during which they are traded, other than in negligible quantities,
on at least 15 days during each calendar quarter. U.S. Holders should be aware, however, that if we are determined to be a PFIC, the interest charge regime described above could be applied to indirect distributions or gains deemed to be attributable
to U.S. Holders in respect of any of our subsidiaries that also may be determined to be a PFIC, and the mark-to-market election would not be effective for such subsidiaries.

If you choose to make a mark-to-market election, you would recognize as ordinary income or loss each year in which we are a PFIC an amount equal to the difference as of the close of the taxable year
between the fair market value of your ADSs and your adjusted tax basis in your ADSs. Losses would be allowed only to the extent of net mark-to-market gain previously included by you under the election for prior taxable years. If the mark-to-market
election were made, then the PFIC rules described above relating to excess distributions and realized gains would not apply for periods covered by the election. If you do not make a mark-to-market election for the first taxable year in which we are
a PFIC during your holding period of the ADSs, you would be subject to interest charges with respect to the inclusion of ordinary income attributable to each taxable year in which we were a PFIC during your holding period before the effective date
of such election.

A U.S. Holder who is a direct or indirect holder of stock of a PFIC must file United States
Internal Revenue Service Form 8621 in respect of such PFIC for a taxable year in the circumstances described in the United States Treasury Regulations. If we are a PFIC for a given taxable year, then you are encouraged to consult your tax advisor
concerning the availability and consequences of making any of the elections mentioned above, as well as concerning your annual filing requirements.

Medicare Tax

A United States person that is an individual or
estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on net investment income in excess of certain amounts. In the case of an individual, the tax is imposed on the lesser of
(1) the United States persons net investment income for the relevant taxable year and (2) the excess of the United States persons modified adjusted gross income for the taxable year over $250,000 (in the case of a
taxpayer filing a joint return or a surviving spouse), $125,000 (in the case of a married taxpayer filing a separate return) or $200,000 (in any other case). In the case of an estate or trust, the tax is imposed on the lesser of (1) the
entitys undistributed net investment income for the taxable year and (2) the excess (if any) of the entitys adjusted gross income over the dollar amount at which the highest tax bracket begins for such
entity. A holders net investment income will include its gross dividend income and its net gains from the disposition of ADSs, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other
than a trade or business that consists of certain passive or trading activities). If you are a United States person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the Medicare
tax to your income and gains in respect of your investment in the ADSs.

Information with Respect to Foreign Financial Assets

Individuals who own specified foreign financial assets with an aggregate value in excess of $50,000
are required to file an information report with respect to such assets with their tax returns. Specified foreign financial assets include any financial accounts maintained by foreign financial institutions, as well as any of the
following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities, including ADSs issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have
non-U.S. issuers or counterparties and (iii) interests in foreign entities. U.S. holders that are individuals are encouraged to consult their tax advisors regarding the application of this reporting requirement as it relates to their ownership
of ADSs.



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Backup Withholding Tax and Information Reporting Requirements

United States backup withholding tax and information reporting requirements apply to certain payments to certain non-corporate holders of
stock. Information reporting will apply to payments of dividends on, and to proceeds from the sale or redemption of, the ADSs made within the United States, or by a United States payor or United States middleman, to a holder of the ADSs, other than
an exempt recipient, including a corporation, a payee that is not a United States person that provides an appropriate certification and certain other persons. A payor will be required to withhold backup withholding tax from any payments of dividends
on, or the proceeds from the sale or redemption of, ADSs within the United States, or by a United States payor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against the beneficial
owners United States federal income tax liability, if any, provided that the required information is timely furnished to the IRS.

French Material Tax Consequences

The following is a description of the material French tax consequences of the acquisition, ownership and disposition of the ADSs by a U.S. Holder. This description is based on applicable tax laws,
regulations and judicial decisions as of the date of this annual report, and, where applicable, the Convention between the United States of America and France for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income and Capital, dated of August 31, 1994, as amended from time to time (the U.S. Treaty).

This
description is based in part upon the representation of the custodian and the assumption that each obligation in the Depositary Agreement with the depositary relating to your ADRs and any related agreement will be performed in accordance with their
terms.

The following is a description of the principal tax effect on U.S. Holders for the purposes of French tax if, all of
the following points apply:



| |  |  | the U.S. Holder owns, directly, indirectly or constructively, less than 10% of the Company capital and dividend rights;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the U.S. Holder is entitled to the benefits of the U.S. Treaty (including under the limitations on benefits article of the U.S. Treaty);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the U.S. Holder does not hold the ADSs through a permanent or a fixed base in France;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the U.S. Holder is not multi-resident;
| | - |  | --------------------------------------



| |  |  | the U.S. Holder does not hold the ADSs through a non-U.S. based pass-through entity; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the U.S. Holder does not receive dividend, capital gains or other payments on the ADSs on an account located in a Non-cooperative State as defined in
Article 238-0 A of the French General Tax Code and as mentioned in a list published by the French tax authorities as amended from time to time (on January 1stof each year).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A U.S. Holder to whom all the above requirements apply will be hereafter defined as a Qualifying U.S. Holder.

This description is relevant only to holders of ADSs who are Qualifying U.S. Holders.

For purposes of the U.S. Treaty Qualifying U.S. Holders of ADSs will be treated as the owners of Companys ordinary shares represented by such ADSs.

Special rules apply to U.S. expatriates, insurance companies, pass-through entities and investors in such entities, tax-exempt
organizations, financial institutions, persons subject to the alternative minimum tax and securities broker-dealers, among others. Those special rules are not discussed in this annual report.

Holders of Company ADSs are encouraged to consult their own tax advisors as to the particular tax consequences to them of owning the ADS,
including their eligibility for benefits under the U.S. Treaty, the application and effect of state, local, foreign and other tax laws and possible changes in tax laws or in their interpretation.

Taxation of Dividends

Dividends paid by a French company to non-French holders are generally subject to a 30% withholding tax (or 21% if the holder is an individual resident of the EU, Norway, Iceland or Liechtenstein). Such
30% withholding tax rate can be increased to 75% if the dividend is paid towards non-cooperative States or territories (as mentioned above) irrespective of the tax residence of the beneficiary of the dividends. Such withholding tax rates may,
however, be reduced by application of a tax treaty with France.



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Dividends paid to a Qualifying U.S. Holder by French companies are immediately subject to a
reduced rate of 15%, provided that such Qualifying U.S. Holder establishes before the date of payment of the dividend that he or she is a U.S. resident under the U.S. Treaty by completing and delivering the depositary with a simplified certificate
(Form 5000) (the Certificate) in accordance with French tax guidelines (BOI-INT-DG-20-20-20-20). Dividends paid to a Qualifying U.S. Holder that has not filed and delivered to the paying agent the Certificate before the dividend payment
date, will be subject to French withholding tax at the rate of 30%. The tax withheld in excess of 15% can be refunded by the French tax authorities provided that such Qualifying U.S. Holder duly completes and provides the French tax authorities with
the Certificate and Form 5001 (the Forms) before December 31 of the second calendar year following the year during which the dividend is paid. U.S. pension funds and other tax exempt entities are subject to the same general filing
requirement as the U.S. Holders, except that they may be required to supply additional documentation evidencing their entitlement to these benefits.

Taxation of Capital Gains

A Qualifying U.S. Holder will not be
subject to any French income or withholding tax on any capital gain realized upon the sale or exchange of ADSs of the Company.

Estate
and Gift Taxes

Under the Convention Between the United States of America and the French Republic for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritance and Gifts dated November 24, 1978 (as amended from time to time), if a U.S. Holder transfers his or her shares by gift or by reason of the U.S.
Holders death, that transfer will not be subject to French gift or inheritance tax unless the U.S. Holder is domiciled in France at the time of making the gift or at the time of his or her death or if the shares are held for use in the conduct
of a business or profession through a permanent establishment or a fixed base in France.

Wealth Tax

Qualifying U.S. Holders will not be subject to French wealth tax.



|F. | Dividends and Paying Agents
|-- | ---------------------------

Not applicable.



|G. | Statement by Experts
|-- | --------------------

Not applicable.



|H. | Documents on Display
|-- | --------------------

We are currently subject to the informational requirements of the Exchange Act applicable to foreign private issuers and fulfill the obligations of these requirements by filing reports with the Securities
and Exchange Commission. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the
reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the Securities and Exchange
Commission as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. However, we intend to file with the Securities and Exchange Commission, within 120 days after the end of each subsequent
fiscal year, an annual report on Form 20-F containing financial statements which will be examined and reported on, with an opinion expressed, by an independent public accounting firm. We also intend to file with the Securities and Exchange
Commission reports on Form 6-K containing unaudited financial information for the first three quarters of each fiscal year, within 60 days after the end of each quarter.

You may read and copy any document we file with the Securities and Exchange Commission without charge at the Securities and Exchange Commissions public reference room at 100 F Street, N.E., Room
1580, Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for



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##### Table of Contents

further information on the public reference room. The Securities and Exchange Commission also maintains an
Internet site that contains reports and other information regarding issuers that file electronically with the Securities and Exchange Commission. Our filings with the Securities and Exchange Commission are also available to the public through this
web site at http://www.sec.gov.



|I. | Subsidiary Information
|-- | ----------------------

Not applicable.

Item 11. Quantitative and Qualitative
Disclosures About Market Risk

Interest Rate Risk

We had cash and cash equivalents totaling $57.2 million, $28.8 million and $37.3 million, at December 31, 2011, 2012 and 2013, respectively. Our cash and cash equivalents consist of cash in
commercial bank accounts and investments in money market funds. The primary objectives of our investment activities are to preserve principal, and provide liquidity without significantly increasing risk. Our cash and cash equivalents are held for
working capital purposes. We do not enter into investments for trading or speculative purposes.

Our exposure to interest rate
risk primarily relates to the interest income generated by excess cash invested in money market funds. Due to the short-term and highly liquid nature of our portfolio, a movement in interest rates of 100 basis points during 2013 would not have a
material effect on interest income.

Foreign Currency Risk

We use the U.S. dollar as the functional currency of Sequans Communications S.A. Substantially all of our sales are denominated in U.S. dollars. Therefore, we have very limited foreign currency risk
associated with our revenue. The payment terms of our significant supply chain vendors are also denominated in U.S. dollars. We incur operating expenses and hold assets and liabilities denominated in currencies other than the U.S. dollar,
principally the euro. In addition, we have limited exposure to the British pound sterling, the New Israeli shekel, the Taiwan dollar, the Chinese yuan and the Japanese yen. As a result, our results of operations and cash flows are subject to
fluctuations due to changes in foreign currency exchange rates, primarily the U.S. dollar to euro exchange rate. As we grow our operations, our exposure to foreign currency risk could become more significant. If there had been a 10% increase or
decrease in the exchange rate of the U.S. dollar to the euro, we estimate the impact, in absolute terms, on operating expenses for 2013, would have been $2.0 million.

From time to time, we have entered into foreign currency hedging contracts primarily to reduce the impact of variations in the U.S. dollar to euro exchange rate on our operating expenses denominated in
euros. Currently, we do not expect to enter into foreign currency exchange contracts for trading or speculative purposes.

Item 12. Description of Securities Other than Equity Securities



|A. | Debt Securities
|-- | ---------------

Not applicable.



|B. | Warrants and Rights
|-- | -------------------

Not applicable.



|C. | Other Securities
|-- | ----------------

Not applicable.



|D. | American Depositary Shares
|-- | --------------------------

The Bank of New York Mellon, as depositary, registers and delivers our ADSs. Each ADS represents one ordinary share (or a right to receive one ordinary share) deposited with the principal Paris office of
Société Générale or any successor, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property which may be held by the depositary in respect of the depositary facility. A
copy of our Deposit Agreement among us, the depositary, owners and holders of ADSs was filed with the SEC as an exhibit to our Form F-6 filed on March 22, 2011.



66



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Fees and Expenses

Pursuant to the terms of the deposit agreement, we will be paying all fees and expenses relating to the ADSs on behalf of the holders. However, in the future that arrangement may be changed, at our
option, such that the holders will be required to pay the following fees:



|                                                                                                                                                                                           |  |                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Persons depositing or withdrawing ordinary shares or ADS holders must pay:                                                                                                                 |  | For:                                                                                                                                                                                                                           
|                                                                                                                                                                                           | 
|$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)                                                                                                                                      |  |        Issue of ADSs, including issues resulting from
a distribution of ordinary shares or rights or other property         Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
|                                                                                                                                                                                           | 
|$0.05 (or less) per ADS                                                                                                                                                                    |  |        Any cash distribution to ADS holders                                                                                                                                                                                   
|                                                                                                                                                                                           | 
|A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the shares had been deposited for issue of ADSs                            |  |        Distribution of securities distributed to holders of deposited securities which
are distributed by the depositary to ADS holders                                                                                       
|                                                                                                                                                                                           | 
|$0.05 (or less) per ADSs per calendar year                                                                                                                                                 |  |        Depositary services                                                                                                                                                                                                    
|                                                                                                                                                                                           | 
|Registration or transfer fees                                                                                                                                                              |  |        Transfer and registration of ordinary shares on our share register to or from the
name of the depositary or its agent when you deposit or withdraw shares                                                              
|                                                                                                                                                                                           | 
|Expenses of the depositary                                                                                                                                                                 |  |        Cable, telex and facsimile transmissions (when
expressly provided in the deposit agreement)         converting foreign currency to U.S. dollars                                                                       
|                                                                                                                                                                                           | 
|Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding
taxes |  |        As necessary                                                                                                                                                                                                           
|                                                                                                                                                                                           | 
|Any charges incurred by the depositary or its agents for servicing the deposited securities                                                                                                |  |        As necessary                                                                                                                                                                                                           

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing
ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a
portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants
acting for them. The depositary may generally refuse to provide for-fee services until its fees for those services are paid.

Holders of ADS are responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities
represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you
or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay
to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.



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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Initial Public Offering

The effective date of the registration statement on Form F-1, File No. 333-173001, for our initial public offering of ADSs, each
representing one ordinary share, nominal value 0.02, was April 14, 2011. UBS Limited and Jefferies & Company, Inc. acted as joint book-running managers of the offering and representatives of the underwriters. We sold 6,666,666
ADSs in our initial public offering for an aggregate offering price of the shares sold was $66.7 million. The selling shareholders sold 1,033,334 ADSs at an aggregate offering price of $10.3 million. The total expenses of the offering to us,
including underwriting discounts and commissions, were approximately $8.3 million. The net proceeds that we received from the offering were approximately $58.4 million.

The net proceeds from our initial public offering were used for general corporate purposes. None of the net proceeds of our initial public offering was paid directly or indirectly to any director,
officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities, or to any of our affiliates, other than as a result of sales of ordinary shares by selling shareholders in the
offering.

Item 15. Controls and Procedures

Disclosure Controls and Procedures

Our chief executive officer and chief
financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2013, have concluded that, as of such date, our disclosure controls and
procedures were effective and ensured that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief
financial officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms.

Management Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Exchange Act as a process designed by, or under the supervision of, the companys principal executive and principal financial officers and effected by the companys board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and includes those policies and procedures that:



| |  |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the companys assets that
could have a material effect on the financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our
internal control over financial reporting, as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
ControlIntegrated Framework (1992 Framework).

Based on our assessment, management believes that as of December 31,
2013 our internal control over financial reporting is effective based on these criteria.



68



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No Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of the Companys independent registered public accounting firm regarding
the Companys internal control over financial reporting. Managements report was not subject to attestation by the Companys independent registered public accounting firm pursuant to an exemption for non-accelerated filers under
Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank provides an exemption from the independent auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act
for issuers that are neither large accelerated filers nor accelerated filers. The Company qualifies for this exemption.

Changes in
Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that
occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Our Board has determined that Mr. de Pesquidoux is an audit committee financial expert as defined by the Securities and Exchange
Commission rules and has the requisite financial sophistication under the applicable rules and regulations of the New York Stock Exchange. Mr. de Pesquidoux is independent as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and
under the listing standards of the New York Stock Exchange.

Item 16B. Code of Ethics

We have adopted a Code of Ethics that applies to the Companys chief executive officer, chief financial officer and other senior
financial officers, including the Companys principal accounting officer. We have posted this code on our corporate website at http://www.sequans.com/investors/corporate-governance/.

Item 16C. Principal Accountant Fees and Services

Ernst & Young Audit has served as our independent registered public accounting firm for 2012 and 2013. Our accountants billed the following fees to us for professional services in each of those
fiscal years:



|                   |  |                      |     |  |      |   |     |      |  |   |     | 
|------------------ |  | -------------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                   |  | 2011                 |     |  | 2012 |   |     | 2013 | 
|                   |  | (euros in thousands) |    
|Audit Fees         |  |                     | 283 |  |      |  | 303 |      |  |  | 285 | 
|Audit-Related Fees |  |                      | 142 |  |      |   |    |      |  |   | 140 | 
|Tax Fees           |  |                      |    |  |      |   |    |      |  |   |    | 
|All Other Fees     |  |                      |    |  |      |   |    |      |  |   |    | 
|                   |  |                      |     |  |      |   |     |      |  |   |     | 
|Total              |  |                     | 425 |  |      |  | 303 |      |  |  | 425 | 
|                   |  |                      |     |  |      |   |     |      |  |   |     | 

Audit Fees are the aggregate fees billed for the audit of our annual financial statements.
This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC. Audit-Related Fees are the aggregate fees billed for assurance and
related services that are reasonably related to the performance of the audit and are not reported under Audit Fees. These fees include mainly accounting consultations regarding the accounting treatment of matters that occur in the regular course of
business, implications of new accounting pronouncements and other accounting issues that occur from time to time. There were no Tax Fees or Other Fees billed or paid during 2012 or 2013.

Our audit committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and
non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the
categories of audit service, audit-related service and tax services that may be performed by our independent accountants.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.



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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

Not applicable.

Item 16F. Change in Registrants Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

As a foreign private issuer listed on the NYSE, we are subject to NYSE corporate governance listing standards. However, NYSE rules permit
a foreign private issuer like us to follow the corporate governance practices of its home country. Currently, we rely on the NYSE Listed Company Manual with respect to our corporate governance to the extent possible under French law. The following
are the significant ways in which our corporate governance practices differ from those required for U.S. companies listed on the NYSE.



| |  |  | Audit CommitteeOur audit committee is responsible for organizing for selecting our statutory auditors and making a recommendation
to our board of directors regarding their chose and terms of compensation. As required by French law, the actual appointment of the statutory auditors is made by our shareholders at a general meeting of the shareholders. According to the Audit
Committee Charter, our audit committee has the authority to engage advisors and determine appropriate funding for payment of compensation to an independent auditor or other advisors necessary or appropriate to aid the committee in carrying out its
responsibilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Executive Sessions/Communications with Independent DirectorsFrench law does not require (and we do not currently provide) for our
independent directors to meet regularly without management, nor does it require the independent directors to meet alone in executive session at least once a year. However, if our independent directors decide to do so, they may do so. In addition,
French law does not require (and we do not currently provide) a method for interested parties to communication with our independent directors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity Compensation PlansUnder French law, we must obtain shareholder approval at a general meeting of the shareholders in order to
adopt an equity compensation plan. Generally, the shareholders then delegate to our board of directors the authority to decide on the specific terms of the granting of equity compensation, within the limits of the shareholders authorization.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate Governance GuidelinesWe have adopted a Board Internal Charter as required by French law that sets forth certain corporate
governance practices of our board under French law. This Board Internal Charter does not cover all items required by the NYSE Listed Company Manual for U.S. companies listed on the NYSE.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 16H. Mine Safety Disclosure

Not applicable.



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PART III

Item 17. Financial Statements

See pages F-1 through F-41 of this annual report.

Item 18.
Financial Statements

Not applicable.

Item 19. Exhibits



|               |  |                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                                         
|               | 
|1.1*           |  | By-laws (statuts) of Sequans Communications S.A. (English translation)                                                                                                                                                                                                                                                         
|               | 
|2.1            |  | Shareholders Agreement, by and between Sequans Communications S.A. and certain shareholders signatory thereto, dated January 31, 2008 (incorporated by reference to Exhibit 4.1
to Sequans Communications S.A.s Registration Statement on Form F-1, as amended (Registration No. 333-173001) (Registration No. 333-173001))
|               | 
|2.2            |  | Form of Deposit Agreement among Sequans Communications S.A., The Bank of New York Mellon and owners and holders of American Depositary Shares (incorporated by reference to Exhibit
4.2 to Registration No. 333-173001)                                                                                                        
|               | 
|2.3            |  | Form of American Depositary Receipt (included in Exhibit 2.2)                                                                                                                                                                                                                                                                  
|               | 
|4.1(a)         |  | Stock Option Subscription Plans2006-1, 2006-2, 2006-3, 2006-4, 2008-1, 2009-1, 2009-2, 2010-1, 2010-2, 2010-1-2, 2011-1, 2011-2 (incorporated by reference to Exhibit 10.1 to
Registration No. 333-173001)                                                                                                                    
|               | 
|4.1(b)         |  | Stock Option Subscription Plan2012-1 (incorporated by reference to Exhibit 4.1(b) to Sequans Communications S.A.s Annual Report on
Form 20-F for the fiscal year ended December 31, 2012, filed with the SEC on March 29, 2013)                                                                                              
|               | 
|4.1(c)*        |  | Stock Option Subscription Plan2013-1                                                                                                                                                                                                                                                                                          
|               | 
|4.2(a)         |  | BSA Subscription Plans2006-1, 2006-2, 2006-3, 2007-1, 2007-2, 2008-1, 2008-2, 2009-1, 2009-2, 2010-1, 2010-2, 2010-1-2, 2010-2-2, 2011-1, 2011-2 (incorporated by reference to
Exhibit 10.2 to Registration No. 333-173001)                                                                                                   
|               | 
|4.2(b)         |  | BSA Subscription Plan2012-2 (incorporated by reference to Exhibit 4.2(b) to Sequans Communications S.A.s Annual Report on
Form 20-F for the fiscal year ended December 31, 2012, filed with the SEC on March 29, 2013)                                                                                                       
|               | 
|4.2(c)*        |  | BSA 2013-1 (Warrants) Issuance Agreement                                                                                                                                                                                                                                                                                       
|               | 
|4.3            |  | BSA (Warrants) Issuance Agreement, dated January
11th, 2011 (incorporated by reference to Exhibit 4.4 to
Sequans Communications S.A.s Annual Report on Form 20-F for the fiscal year ended December 31, 2011, filed with the SEC on March 30, 2012)                                                                           
|               | 
|4.4            |  | BSA (Warrants) Issuance Agreement, dated January
11th, 2011 (incorporated by reference to Exhibit 4.5 to
Sequans Communications S.A.s Annual Report on Form 20-F for the fiscal year ended December 31, 2011, filed with the SEC on March 30, 2012)                                                                           
|               | 
|4.5            |  | BSA (Warrants) Issuance Agreement, dated March
8th, 2011 (incorporated by reference to Exhibit 4.5 to
Sequans Communications S.A.s Annual Report on Form 20-F for the fiscal year ended December 31, 2011, filed with the SEC on March 30, 2012)                                                                              
|               | 
|4.6            |  | BSA (Warrants) Issuance Agreement, dated June 26, 2012 (6,000 BSA) (incorporated by reference to Exhibit 4.6 to Sequans Communications S.A.s Annual Report on Form 20-F for the fiscal year ended December 31, 2012, filed with the SEC on March 29, 2013)                                                                    
|               | 
|4.7            |  | BSA (Warrants) Issuance Agreement, dated June 26, 2012 (25,000 BSA) (incorporated by reference to Exhibit 4.7 to Sequans Communications S.A.s Annual Report on Form 20-F for the fiscal year ended December 31, 2012, filed with the SEC on March 29, 2013)                                                                   
|               | 
|4.8*           |  | BSA (Warrants) Issuance Agreement, dated June 25, 2013                                                                                                                                                                                                                                                                         
|               | 
|4.9            |  | Investment Agreement, by and between Sequans Communications S.A. and certain investors signatory thereto, dated July 1, 2010 (incorporated by reference to Exhibit 10.5 to
Registration No. 333-173001)                                                                                                                        
|               | 
|4.10           |  | Form of Letter Agreement by and between Sequans Communications S.A. and Board Nominee (incorporated by reference to Exhibit 10.7 to Registration No. 333-173001)                                                                                                                                                               
|               | 
|4.11           |  | Assembly & Testing Service Agreement by and between Sequans Communications S.A. and United Test and Assembly Center Ltd, dated as of November 8, 2010 (incorporated by
reference to Exhibit 10.11 to Registration No. 333-173001)                                                                                              



71



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|      |  |                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|8.1*  |  | List of Subsidiaries                                                                                                                                                  
|      | 
|12.1* |  | Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of
2002
|      | 
|12.2* |  | Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of
2002
|      | 
|13.1* |  | Certificate of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002                                     
|      | 
|13.2* |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002                                     
|      | 
|15.1* |  | Consent of Ernst & Young Audit, independent registered public accounting firm                                                                                         



|* | Filed herewith.
|- | ---------------



72



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.



Sequans Communications S.A.By:

/s/ Dr. Georges KaramName: Dr. Georges KaramTitle: Chief Executive Officer and Chairman


Date: March 31, 2014



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##### Table of Contents

Sequans Communications S.A.

Index to the Consolidated Financial Statements



|                                                                                                                                   |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                   |  | Page |    
|Report of Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of Sequans
 Communications S.A. |  |      | F-2 | 
|                                                                                                                                   | 
|Consolidated Statements of Operations for the years ended December 31, 2011, 2012 and
2013                                         |  |      | F-3 | 
|                                                                                                                                   | 
|Consolidated Statements of Comprehensive Income (Loss) for the years ended December 
31, 2011, 2012 and 2013                       |  |      | F-4 | 
|                                                                                                                                   | 
|Consolidated Statements of Financial Position at December 31, 2011, 2012 and 2013                                                  |  |      | F-5 | 
|                                                                                                                                   | 
|Consolidated Statements of Changes in Equity at December 31, 2011, 2012 and 2013                                                   |  |      | F-6 | 
|                                                                                                                                   | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2012 and
2013                                         |  |      | F-7 | 
|                                                                                                                                   | 
|Notes to the Consolidated Financial Statements                                                                                     |  |      | F-8 | 



F-1



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Sequans Communications S.A.:

We have audited the accompanying consolidated statements of
financial position of Sequans Communications S.A. (the Company) as of December 31, 2011, 2012 and 2013, and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each
of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2011, 2012 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.

Ernst & Young Audit

/s/ Frédéric Martineau

Represented by Frédéric Martineau

Paris-La Défense, France

March 31,
2014



F-2



---

##### Table of Contents

Sequans Communications S.A.

Consolidated Statements of Operations



|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|----------------------------------------------------- |  | ---- | --- |  | -------------------------------------------------- | - | ---------- | -------- |  | - | ---------- | - |  | - | ---------- | -
|                                                      |  |      |     |  | Year ended December 31,                            |  
|                                                      |  | Note |     |  | 2011 (1)                                           |   |            | 2012 (1) |  |   | 2013       |  
|                                                      |  |      |     |  | (in thousands, except share and per share amounts) |  
|Revenue:                                              |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Product revenue                                       |  |      |     |  |                                                    | $ | 91,742     |          |  | $ | 19,600     |   |  | $ | 10,708     |  
|Other revenue                                         |  |      |     |  |                                                    |   | 1,972      |          |  |   | 2,654      |   |  |   | 3,004      |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Total revenue                                         |  |      | 3   |  |                                                    |   | 93,714     |          |  |   | 22,254     |   |  |   | 13,712     |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Cost of revenue:                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Cost of product revenue                               |  |      |     |  |                                                    |   | 46,167     |          |  |   | 11,781     |   |  |   | 8,616      |  
|Cost of other revenue                                 |  |      |     |  |                                                    |   | 247        |          |  |   | 176        |   |  |   | 205        |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Total cost of revenue                                 |  |      | 4.2 |  |                                                    |   | 46,414     |          |  |   | 11,957     |   |  |   | 8,821      |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Gross profit                                          |  |      |     |  |                                                    |   | 47,300     |          |  |   | 10,297     |   |  |   | 4,891      |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Operating expenses:                                   |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Research and development                              |  |      | 4.4 |  |                                                    |   | 24,926     |          |  |   | 28,365     |   |  |   | 28,357     |  
|Sales and marketing                                   |  |      |     |  |                                                    |   | 12,960     |          |  |   | 6,562      |   |  |   | 4,449      |  
|General and administrative                            |  |      |     |  |                                                    |   | 8,323      |          |  |   | 8,093      |   |  |   | 7,528      |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Total operating expenses                              |  |      | 4.2 |  |                                                    |   | 46,209     |          |  |   | 43,020     |   |  |   | 40,334     |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Operating income (loss)                               |  |      |     |  |                                                    |   | 1,091      |          |  |   | (32,723    | ) |  |   | (35,443    | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Financial income (expense):                           |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Interest expense                                      |  |      | 4.1 |  |                                                    |   | (470       | )        |  |   | (104       | ) |  |   | (109       | )
|Interest income                                       |  |      | 4.1 |  |                                                    |   | 81         |          |  |   | 241        |   |  |   | 143        |  
|Foreign exchange gain (loss)                          |  |      | 4.1 |  |                                                    |   | (744       | )        |  |   | (158       | ) |  |   | (35        | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Profit (Loss) before income taxes                     |  |      |     |  |                                                    |   | (42        | )        |  |   | (32,744    | ) |  |   | (35,444    | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Income tax expense (benefit)                          |  |      | 5   |  |                                                    |   | 371        |          |  |   | 234        |   |  |   | 142        |  
|Profit (Loss)                                         |  |      |     |  |                                                    | $ | (413       | )        |  | $ | (32,978    | ) |  | $ | (35,586    | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Attributable to:                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Shareholders of the parent                            |  |      |     |  |                                                    |   | (413       | )        |  |   | (32,978    | ) |  |   | (35,586    | )
|Non-controlling interests                             |  |      |     |  |                                                    |   |           |          |  |   |           |   |  |   |           |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Basic earnings (loss) per share                       |  |      | 6   |  |                                                    | $ | (0.01      | )        |  | $ | (0.95      | ) |  | $ | (0.78      | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Diluted earnings (loss) per share                     |  |      | 6   |  |                                                    | $ | (0.01      | )        |  | $ | (0.95      | ) |  | $ | (0.78      | )
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Weighted average number of shares used for computing: |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Basic                                                 |  |      |     |  |                                                    |   | 32,610,680 |          |  |   | 34,680,227 |   |  |   | 45,456,367 |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  
|Diluted                                               |  |      |     |  |                                                    |   | 32,610,680 |          |  |   | 34,680,227 |   |  |   | 45,456,367 |  
|                                                      |  |      |     |  |                                                    |   |            |          |  |   |            |   |  |   |            |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-3



---

##### Table of Contents

Sequans Communications S.A.

Consolidated Statements of Comprehensive Income (Loss)



|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ------- | - | ------- | ---- |  | - | ------- | -
|                                                                                            |  | Year ended December 31, |       
|                                                                                            |  | 2011 (1)                |        |   | 2012(1) |   |         | 2013 | 
|                                                                                            |  | (in thousands)          |       
|Profit (Loss) for the year                                                                  |  | $                       | (413   | ) |         | $ | (32,978 | )    |  | $ | (35,586 | )
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Other comprehensive income (loss)                                                           |  |                         |        |   |         |   |         |      |  |   |         |  
|Other comprehensive income to be reclassified to profit or loss in subsequent years :       |  |                         |        |   |         |   |         |      |  |   |         |  
|Net gain (loss) on cash flow hedge                                                          |  |                         | (706   | ) |         |   | 985     |      |  |   | (275    | )
|Exchange differences on translation of foreign operations                                   |  |                         | (7     | ) |         |   | 52      |      |  |   | 14      |  
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Net other comprehensive income to be reclassified to profit or loss in subsequent years     |  |                         | (713   | ) |         |   | 1,037   |      |  |   | (261    | )
|Other comprehensive income not to be reclassified to profit or loss in subsequent years :   |  |                         |        |   |         |   |         |      |  |   |         |  
|Re-measurement gains (losses) on defined benefit plans                                      |  |                         | (16    | ) |         |   | (46     | )    |  |   | 9       |  
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Net other comprehensive income not to be reclassified to profit or loss in subsequent years |  |                         | (16    | ) |         |   | (46     | )    |  |   | 9       |  
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Total other comprehensive income (loss)                                                     |  |                         | (729   | ) |         |   | 991     |      |  |   | (252    | )
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Total comprehensive income (loss)                                                           |  | $                       | (1,142 | ) |         | $ | (31,987 | )    |  | $ | (35,838 | )
|                                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Attributable to:                                                                            |  |                         |        |   |         |   |         |      |  |   |         |  
|Shareholders of the parent                                                                  |  |                         | (1,142 | ) |         |   | (31,987 | )    |  |   | (35,838 | )
|Non-controlling interests                                                                   |  |                         |       |   |         |   |        |      |  |   |        |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-4



---

##### Table of Contents

Sequans Communications S.A.

Consolidated Statements of Financial Position



|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --- |  | --------------- | - | ------- | ------- |  | - | ------- | - |  | - | -------- | -
|                                                                                                                                                                              |  |                |     |  | At December 31, |  
|                                                                                                                                                                              |  | Note           |     |  | 2011(1)         |   |         | 2012(1) |  |   | 2013    |  
|                                                                                                                                                                              |  | (in thousands) |    
|ASSETS                                                                                                                                                                        |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Non-current assets:                                                                                                                                                           |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Property, plant and equipment                                                                                                                                                 |  |                | 7   |  |                 | $ | 9,334   |         |  | $ | 9,187   |   |  | $ | 6,622    |  
|Intangible assets                                                                                                                                                             |  |                | 8   |  |                 |   | 4,233   |         |  |   | 4,184   |   |  |   | 4,679    |  
|Loan and other receivables                                                                                                                                                    |  |                |     |  |                 |   | 531     |         |  |   | 458     |   |  |   | 471      |  
|Available for sale financial assets                                                                                                                                           |  |                | 18  |  |                 |   | 677     |         |  |   | 931     |   |  |   | 1,098    |  
|Research tax credit receivable                                                                                                                                                |  |                | 4.4 |  |                 |   |        |         |  |   | 4,103   |   |  |   |         |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total non-current assets                                                                                                                                                      |  |                |     |  |                 |   | 14,775  |         |  |   | 18,863  |   |  |   | 12,870   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Current assets:                                                                                                                                                               |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Inventories                                                                                                                                                                   |  |                | 9   |  |                 |   | 11,660  |         |  |   | 7,443   |   |  |   | 6,582    |  
|Trade receivables                                                                                                                                                             |  |                | 10  |  |                 |   | 8,373   |         |  |   | 5,529   |   |  |   | 5,486    |  
|Prepaid expenses and other receivables                                                                                                                                        |  |                |     |  |                 |   | 2,571   |         |  |   | 3,074   |   |  |   | 2,832    |  
|Recoverable value added tax                                                                                                                                                   |  |                |     |  |                 |   | 2,008   |         |  |   | 415     |   |  |   | 508      |  
|Research tax credit receivable                                                                                                                                                |  |                | 4.4 |  |                 |   | 4,423   |         |  |   | 4,327   |   |  |   | 8,006    |  
|Cash and cash equivalents                                                                                                                                                     |  |                | 11  |  |                 |   | 57,220  |         |  |   | 28,751  |   |  |   | 37,244   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total current assets                                                                                                                                                          |  |                |     |  |                 |   | 86,255  |         |  |   | 49,539  |   |  |   | 60,658   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total assets                                                                                                                                                                  |  |                |     |  |                 | $ | 101,030 |         |  | $ | 68,402  |   |  | $ | 73,528   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|EQUITY AND LIABILITIES                                                                                                                                                        |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Equity:                                                                                                                                                                       |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Issued capital euro 0.02 nominal value, 59,129,639 shares issued and outstanding at December 31, 2013 (34,683,839 and
34,667,339 at December 31, 2012 and 2011, respectively) |  |                | 12  |  |                 | $ | 912     |         |  | $ | 912     |   |  | $ | 1,567    |  
|Share premium                                                                                                                                                                 |  |                | 12  |  |                 |   | 129,283 |         |  |   | 129,309 |   |  |   | 165,785  |  
|Other capital reserves                                                                                                                                                        |  |                | 13  |  |                 |   | 9,368   |         |  |   | 12,556  |   |  |   | 14,721   |  
|Accumulated deficit                                                                                                                                                           |  |                |     |  |                 |   | (54,675 | )       |  |   | (87,653 | ) |  |   | (123,239 | )
|Other components of equity                                                                                                                                                    |  |                |     |  |                 |   | (644    | )       |  |   | 347     |   |  |   | 95       |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total equity                                                                                                                                                                  |  |                |     |  |                 |   | 84,244  |         |  |   | 55,471  |   |  |   | 58,929   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Non-current liabilities:                                                                                                                                                      |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Government grant advances                                                                                                                                                     |  |                | 15  |  |                 |   | 385     |         |  |   | 287     |   |  |   | 604      |  
|Finance lease obligations                                                                                                                                                     |  |                | 14  |  |                 |   |        |         |  |   | 236     |   |  |   | 240      |  
|Provisions                                                                                                                                                                    |  |                | 16  |  |                 |   | 259     |         |  |   | 369     |   |  |   | 460      |  
|Deferred tax liabilities                                                                                                                                                      |  |                |     |  |                 |   | 55      |         |  |   | 85      |   |  |   | 37       |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total non-current liabilities                                                                                                                                                 |  |                |     |  |                 |   | 699     |         |  |   | 977     |   |  |   | 1,341    |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Current liabilities:                                                                                                                                                          |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Trade payables                                                                                                                                                                |  |                | 17  |  |                 |   | 8,580   |         |  |   | 6,038   |   |  |   | 7,252    |  
|Government grant advances                                                                                                                                                     |  |                | 15  |  |                 |   | 717     |         |  |   | 515     |   |  |   | 435      |  
|Finance lease obligations                                                                                                                                                     |  |                | 14  |  |                 |   |        |         |  |   | 129     |   |  |   | 261      |  
|Other current liabilities                                                                                                                                                     |  |                | 18  |  |                 |   | 5,846   |         |  |   | 4,133   |   |  |   | 4,384    |  
|Deferred revenue                                                                                                                                                              |  |                | 18  |  |                 |   | 869     |         |  |   | 609     |   |  |   | 343      |  
|Provisions                                                                                                                                                                    |  |                | 16  |  |                 |   | 75      |         |  |   | 530     |   |  |   | 583      |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total current liabilities                                                                                                                                                     |  |                |     |  |                 |   | 16,087  |         |  |   | 11,954  |   |  |   | 13,258   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  
|Total equity and liabilities                                                                                                                                                  |  |                |     |  |                 | $ | 101,030 |         |  | $ | 68,402  |   |  | $ | 73,528   |  
|                                                                                                                                                                              |  |                |     |  |                 |   |         |         |  |   |         |   |  |   |          |  



|(1) | Figures as of December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee Benefits).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



F-5



---

##### Table of Contents

Sequans Communications S.A.

Consolidated Statements of Changes in Equity



|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|------------------------------------------------------------------------------------------ |  | -------------------------------------------------- | ---------- |  | ------------ | - | ----- | -------------------- |  | - | ------------------ | - |  | -------------------------------- | ------ |  | ------------------------------------------ | - | -------- | ----------- |  | - | --- | - |  | - | ---- | - |  | - | ------- | -
|                                                                                           |  | Attributable to the shareholders of the parent     |           
|                                                                                           |  | Ordinary shares                                    |            |  | Sharepremium |   |       | Othercapitalreserves |  |   | Accumulateddeficit |   |  | Cumulativetranslationadjustments |        |  | Accumulatedothercomprehensiveincome (loss) |   |          | Totalequity | 
|                                                                                           |  | Shares                                             |            |  | Amount       |   |       |                      |  |   |                    |  
|                                                                                           |  | (Note 12)                                          |            |  | (Note 12)    |   |       | (Note 12)            |  |   | (Note 13)          |   |  |                                  |        |  |                                            |   |          |             |  |   |     |  
|                                                                                           |  | (in thousands, except share and per share amounts) |           
|At January 1, 2011                                                                         |  |                                                    | 27,720,013 |  |              | $ | 710   |                      |  | $ | 68,972             |   |  | $                                | 5,194  |  |                                            | $ | (54,262  | )           |  | $ | 89  |   |  | $ | (4   | ) |  | $ | 20,699  |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Loss for the year                                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (413     | )           |  |   |     |   |  |   |      |   |  |   | (413    | )
|Re-measurement gains (losses) on defined benefit plans                                     |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | (16  | ) |  |   | (16     | )
|Foreign currency translation                                                               |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   | (7  | ) |  |   |      |   |  |   | (7      | )
|Income and expense directly recognized in equity                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | (706 | ) |  |   | (706    | )
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Total comprehensive income (loss)                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (413     | )           |  |   | (7  | ) |  |   | (722 | ) |  |   | (1,142  | )
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Issue of shares in connection with the exercise of options and warrants                    |  |                                                    | 280,660    |  |              |   | 8     |                      |  |   | 571                |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 579     |  
|Issue of shares in initial public offering                                                 |  |                                                    | 6,666,666  |  |              |   | 194   |                      |  |   | 66,473             |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 66,667  |  
|Transaction costs                                                                          |  |                                                    |            |  |              |   |       |                      |  |   | (6,733             | ) |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | (6,733  | )
|Share-based payment                                                                        |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  | 4,174  |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 4,174   |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|At December 31, 2011 (1)                                                                   |  |                                                    | 34,667,339 |  |              | $ | 912   |                      |  | $ | 129,283            |   |  | $                                | 9,368  |  |                                            | $ | (54,675  | )           |  | $ | 82  |   |  | $ | (726 | ) |  | $ | 84,244  |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Loss for the year                                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (32,978  | )           |  |   |     |   |  |   |      |   |  |   | (32,978 | )
|Re-measurement gains (losses) on defined benefit plans                                     |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | (46  | ) |  |   | (46     | )
|Foreign currency translation                                                               |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   | 52  |   |  |   |      |   |  |   | 52      |  
|Income and expense directly recognized in equity                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | 985  |   |  |   | 985     |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Total comprehensive income (loss)                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (32,978  | )           |  |   | 52  |   |  |   | 939  |   |  |   | (31,987 | )
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Issue of shares in connection with the exercise of options and warrants                    |  |                                                    | 16,500     |  |              |   |       |                      |  |   | 26                 |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 26      |  
|Share-based payment                                                                        |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  | 3,188  |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 3,188   |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|At December 31, 2012 (1)                                                                   |  |                                                    | 34,683,839 |  |              | $ | 912   |                      |  | $ | 129,309            |   |  | $                                | 12,556 |  |                                            | $ | (87,653  | )           |  | $ | 134 |   |  | $ | 213  |   |  | $ | 55,471  |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Loss for the year                                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (35,586  | )           |  |   |     |   |  |   |      |   |  |   | (35,586 | )
|Re-measurement gains (losses) on defined benefit plans                                     |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | 9    |   |  |   | 9       |  
|Foreign currency translation                                                               |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   | 14  |   |  |   |      |   |  |   | 14      |  
|Income and expense directly recognized in equity                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   | (275 | ) |  |   | (275    | )
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Total comprehensive income (loss)                                                          |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   | (35,586  | )           |  |   | 14  |   |  |   | (266 | ) |  |   | (35,838 | )
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|Issue of shares in connection with the exercise of options and warrants                    |  |                                                    | 70,800     |  |              |   | 2     |                      |  |   | (2                 | ) |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |        |  
|Issue of shares in connection with public offering of February and November 2013 (Note 12) |  |                                                    | 24,375,000 |  |              |   | 653   |                      |  |   | 40,222             |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 40,875  |  
|Transaction costs                                                                          |  |                                                    |            |  |              |   |       |                      |  |   | (3,744             | ) |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | (3,744  | )
|Share-based payment                                                                        |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  | 2,165  |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   | 2,165   |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  
|At December 31, 2013                                                                       |  |                                                    | 59,129,639 |  |              | $ | 1,567 |                      |  | $ | 165,785            |   |  | $                                | 14,721 |  |                                            | $ | (123,239 | )           |  | $ | 148 |   |  | $ | (53  | ) |  | $ | 58,929  |  
|                                                                                           |  |                                                    |            |  |              |   |       |                      |  |   |                    |   |  |                                  |        |  |                                            |   |          |             |  |   |     |   |  |   |      |   |  |   |         |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-6



---

##### Table of Contents

Sequans Communications S.A.

Consolidated Statements of Cash Flow



|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ---- |  | ----------------------- | - | ------- | -------- |  | - | ------- | - |  | - | ------- | -
|                                                                                                           |  |      |      |  | Year ended December 31, |  
|                                                                                                           |  | Note |      |  | 2011 (1)                |   |         | 2012 (1) |  |   | 2013    |  
|                                                                                                           |  |      |      |  | (in thousands)          |  
|Operating activities:                                                                                      |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Profit (Loss) before income taxes                                                                          |  |      |      |  |                         | $ | (42     | )        |  | $ | (32,744 | ) |  | $ | (35,444 | )
|Non-cash adjustment to reconcile income (loss) before tax to net cash from (used in) operating activities: |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Amortization and impairment of property, plant and equipment                                               |  |      | 7    |  |                         |   | 4,066   |          |  |   | 4,442   |   |  |   | 4,510   |  
|Amortization and impairment of intangible assets                                                           |  |      | 8    |  |                         |   | 1,836   |          |  |   | 1,758   |   |  |   | 1,826   |  
|Share-based payment expense                                                                                |  |      | 4.3  |  |                         |   | 4,174   |          |  |   | 3,189   |   |  |   | 2,165   |  
|Increase (decrease) in provisions                                                                          |  |      |      |  |                         |   | (31     | )        |  |   | 565     |   |  |   | 144     |  
|Financial expense (income)                                                                                 |  |      |      |  |                         |   | 471     |          |  |   | (137    | ) |  |   | (34     | )
|Foreign exchange loss (gain)                                                                               |  |      |      |  |                         |   | 205     |          |  |   | (37     | ) |  |   | 17      |  
|Interest-free financing benefit                                                                            |  |      |      |  |                         |   | 178     |          |  |   |        |   |  |   |        |  
|Working capital adjustments:                                                                               |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Decrease in trade receivables and other receivables                                                        |  |      |      |  |                         |   | 5,144   |          |  |   | 3,925   |   |  |   | 462     |  
|Decrease (Increase) in inventories                                                                         |  |      |      |  |                         |   | (2,870  | )        |  |   | 4,217   |   |  |   | 861     |  
|Decrease (Increase) in research tax credit receivable                                                      |  |      |      |  |                         |   | (2,422  | )        |  |   | (4,007  | ) |  |   | 424     |  
|Increase (Decrease) in trade payables and other liabilities                                                |  |      |      |  |                         |   | (7,003  | )        |  |   | (3,363  | ) |  |   | 1,272   |  
|Decrease in deferred revenue                                                                               |  |      |      |  |                         |   | (24     | )        |  |   | (260    | ) |  |   | (266    | )
|Decrease in government grant advances                                                                      |  |      |      |  |                         |   | (521    | )        |  |   | (292    | ) |  |   | (33     | )
|Income tax paid                                                                                            |  |      |      |  |                         |   | (398    | )        |  |   | (104    | ) |  |   | (249    | )
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Net cash flow from (used in) operating activities                                                          |  |      |      |  |                         | $ | 2,763   |          |  | $ | (22,848 | ) |  | $ | (24,345 | )
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Investing activities:                                                                                      |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Purchase of intangible assets and property, plant and equipment                                            |  |      | 7, 8 |  |                         | $ | (11,042 | )        |  | $ | (5,571  | ) |  | $ | (3,919  | )
|Purchase of financial assets                                                                               |  |      |      |  |                         |   |        |          |  |   | (181    | ) |  |   | (180    | )
|Interest received                                                                                          |  |      |      |  |                         |   | 81      |          |  |   | 241     |   |  |   | 143     |  
|Refund of factoring deposit and other                                                                      |  |      |      |  |                         |   | 709     |          |  |   |        |   |  |   |        |  
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Net cash flow used in investments activities                                                               |  |      |      |  |                         | $ | (10,252 | )        |  | $ | (5,511  | ) |  | $ | (3,956  | )
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Financing activities:                                                                                      |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Public equity offering proceeds, net of transaction costs paid                                             |  |      |      |  |                         | $ | 59,934  |          |  | $ |        |   |  | $ | 37,131  |  
|Proceeds from issue of warrants and exercise of stock options/warrants, net of transaction costs           |  |      |      |  |                         |   | 579     |          |  |   | 26      |   |  |   |        |  
|Repayment of borrowings and finance lease liabilities                                                      |  |      |      |  |                         |   | (3,479  | )        |  |   | (40     | ) |  |   | (231    | )
|Interest paid                                                                                              |  |      |      |  |                         |   | (737    | )        |  |   | (105    | ) |  |   | (109    | )
|Repayment of interest-free loans                                                                           |  |      |      |  |                         |   | (1,321  | )        |  |   |        |   |  |   |        |  
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Net cash flows from financing activities                                                                   |  |      |      |  |                         | $ | 54,976  |          |  | $ | (119    | ) |  | $ | 36,791  |  
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                       |  |      |      |  |                         |   | 47,487  |          |  |   | (28,478 | ) |  |   | 8,490   |  
|Net foreign exchange difference                                                                            |  |      |      |  |                         |   | (6      | )        |  |   | 9       |   |  |   | 3       |  
|Cash and cash equivalent at January 1                                                                      |  |      |      |  |                         |   | 9,739   |          |  |   | 57,220  |   |  |   | 28,751  |  
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  
|Cash and cash equivalents at period end                                                                    |  |      | 11   |  |                         | $ | 57,220  |          |  | $ | 28,751  |   |  | $ | 37,244  |  
|                                                                                                           |  |      |      |  |                         |   |         |          |  |   |         |   |  |   |         |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-7



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements

1. Corporate information

Sequans Communications S.A. (Sequans) is organized as
a limited liability company (société anonyme) incorporated and domiciled in the Republic of France, with its principal place of business at 19 Le Parvis, 92073 Paris-La Défense, France. Sequans, together with its
subsidiaries (the Company), is a leading fabless designer, developer and supplier of 4G semiconductor solutions for wireless broadband applications. The Companys semiconductor solutions incorporate baseband processor and radio
frequency transceiver integrated circuits along with our proprietary signal processing techniques, algorithms and software stacks.

2.Summary of significant accounting and reporting policies

2.1. Basis of preparation

The Consolidated Financial Statements are prepared on a
historical cost basis, except for fair value through profit and loss financial assets, derivative financial instruments and available for sale financial assets that are measured at fair value. The Consolidated Financial Statements are presented in
U.S. dollars and all values are rounded to the nearest thousand ($000) except where otherwise indicated.

These Consolidated Financial
Statements for the year ended December 31, 2013 have been prepared on a going concern assumption. The Companys internal cash forecast is built from sales forecasts by products and by customer and a stable operating cost structure. Taking
into account forecasted operating cash flow and government funding of research programs, including reimbursement of prior years tax credits, management believes that Companys existing cash and cash equivalents plus cash generated from
these activities will be sufficient at least for the 12 months following December 31, 2013.

Statement of compliance

The Consolidated Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standard Board (IASB) and whose application is mandatory for the year ending December 31, 2013. Comparative figures are presented for December 31, 2011 and 2012.

The accounting policies are consistent with those of the same period of the previous financial year, except for the changes disclosed in Note
2.2 to the Consolidated Financial Statements.

The Consolidated Financial Statements of the Company for the years ended December 31,
2011, 2012 and 2013 have been authorized for issue in accordance with a resolution of the board of directors on March 25, 2014.

Basis of consolidation

The
Consolidated Financial Statements comprise the financial statements of Sequans Communications S.A., which is the ultimate parent of the group, and its subsidiaries at December 31, 2013:



|                                     |  |                         |  |                      |      |  |                 |  |     | 
|------------------------------------ |  | ----------------------- |  | -------------------- | ---- |  | --------------- |  | --- | 
|Name                                 |  | Country ofincorporation |  | Year ofincorporation |      |  | %equityinterest | 
|Sequans Communications Ltd.          |  | United Kingdom          |  |                      | 2005 |  |                 |  | 100 | 
|Sequans Communications Inc.          |  | United States           |  |                      | 2008 |  |                 |  | 100 | 
|Sequans Communications Ltd. Pte.     |  | Singapore               |  |                      | 2008 |  |                 |  | 100 | 
|Sequans Communications (Israel) Ltd. |  | Israel                  |  |                      | 2010 |  |                 |  | 100 | 

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full. The subsidiaries have been fully consolidated from their date of
incorporation.



F-8



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



2.2. Changes in accounting policy and disclosures

New and amended standards and interpretations

The accounting policies adopted in 2013 are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of January 1,
2013:



| |  |  | IAS 1  Presentation of Items of Other Comprehensive Income  Amendments to IAS 1
| | - |  | ---------------------------------------------------------------------------------



| |  |  | IAS19  Employee benefits
| | - |  | -------------------------



| |  |  | IFRS 7  Disclosures  Offsetting Financial Assets and Financial Liabilities  Amendments to IFRS 7
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | IAS 28  Investments in Associates and Joint Ventures (as revised in 2011)
| | - |  | --------------------------------------------------------------------------



| |  |  | IFRS 10  Consolidated Financial Statements, IAS 27 Separate Financial Statements
| | - |  | ---------------------------------------------------------------------------------



| |  |  | IFRS 11  Joint arrangements
| | - |  | ----------------------------



| |  |  | IFRS 12  Disclosures of Interests in other entities
| | - |  | ----------------------------------------------------



| |  |  | IFRS 13  Fair value measurement
| | - |  | --------------------------------



| |  |  | Annual Improvements May 2012
| | - |  | ----------------------------

The timing of the adoption of the above standards and interpretations is described below:

IAS 1 Presentation of Items of Other Comprehensive Income  Amendments to IAS 1

The
amendments to IAS 1 introduce a grouping of items presented in OCI. Items that will be reclassified (recycled) to profit or loss at a future point in time (e.g., net loss or gain on AFS financial assets) have to be presented separately
from items that will not be reclassified (e.g.,actuarial gains and losses).

The amendments affect presentation only and have no impact on the
Companys financial position or performance.

IAS19 - Employee benefits

The Group applied IAS 19 (Revised 2011) retrospectively in the current period in accordance with the transitional provisions set out in the revised standard.

Changes related to IAS 19 Revised (Employee Benefits) are the following:

Until December 31, 2010, actuarial gains and losses were accounted for through profit and loss. These items are now accounted for within other comprehensive income (loss) caption. Corresponding
change was applied retrospectively to all prior periods presented. Corresponding impact is $16,000 and $46,000 on Companys profit and loss respectively for the years ended December 31, 2011 and 2012, respectively.

IFRS 7 Disclosures  Offsetting Financial Assets and Financial Liabilities  Amendments to IFRS 7

These amendments require an entity to disclose information that would enable users to evaluate the effect of the offsetting arrangements on an
entitys financial position. The new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognized financial
instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32.

This amendment has no impact on Companys Consolidated Financial Statements.

IAS 28
Investments in Associates and Joint Ventures (as revised in 2011)

As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12
Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to
associates.



F-9



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



This new standard has no impact on Companys Consolidated Financial Statements.

IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12
Consolidation  Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 require management to exercise significant judgment to
determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27.

This new standard has no impact on Companys Consolidated Financial Statements.

IFRS 11
- Joint arrangements

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities  Non-monetary
Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.

This new standard has no impact on Companys Consolidated Financial Statements.

IFRS 12 - Disclosures of Interests in other entities

IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28.
These disclosures relate to an entitys interests in subsidiaries, joint arrangements, associates and structured entities.

This new
standard has no impact on Companys Consolidated Financial Statements.

IFRS 13 - Fair value measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements and required additional disclosures. IFRS 13 does not change
when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted.

This new standard has no impact on Companys Consolidated Financial Statements

Annual
Improvements May 2012

These improvements include:



| |  |  | IAS 1 Presentation of Financial Statements: This improvement clarifies the difference between voluntary additional comparative information and the
minimum required comparative information. Generally, the minimum required comparative information is the previous period.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IAS 16 Property Plant and Equipment: This improvement clarifies that major spare parts and servicing equipment that meet the definition of property,
plant and equipment are not inventory.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IAS 32 Financial Instruments, Presentation: This improvement clarifies that income taxes arising from distributions to equity holders are accounted for
in accordance with IAS 12 Income Taxes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These improvements have no impact on Companys Consolidated Financial
Statements

Standards issued but not yet effective

Standards and interpretations issued but not yet effective up to the date of issue of the Companys Consolidated Financial Statements are listed below. The Company intends to adopt these standards
when they become effective.

IAS 32 Offsetting Financial Assets and Financial Liabilities  Amendments to IAS 32

These amendments clarify the meaning of currently has a legally enforceable right to set-off and the criteria for non-simultaneous settlement
mechanisms of clearing houses to qualify for offsetting.



F-10



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



These are effective for annual periods beginning on or after 1 January 2014. These amendments are
not expected to be relevant to the Company.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9, as issued, reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of
financial assets and financial liabilities as defined in IAS 39.

In November 2013 the IASB issued IFRS 9-hedge accounting, removing the
previous mandatory effective date of 1 January 2015.The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Companys financial assets, but will not have an impact on classification and
measurements of financial liabilities. The Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

IAS 36 - Recoverable amount disclosures for non-financial assets

These amendments remove
the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognized or reversed during the
period.

These amendments are effective retrospectively for annual periods beginning on or after 1 January 2014 with earlier application
permitted, provided IFRS 13 is also applied. Based on the preliminary analysis performed, this amendment is not expected to have significant impact on the disclosures.

IAS 39 - Novation of derivatives and continuation of hedge accounting

These amendments
provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.

These amendments are effective for annual periods beginning on or after 1 January 2014. The Group has not novated its derivatives during the current
period. However, these amendments would be considered for future novations.

IFRIC 21  Levies

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation,
occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached.

IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. The Company does not expect that IFRIC 21 will have material financial impact in future financial statements.

2.3. Summary of significant accounting policies

Functional currencies and translation of financial statements denominated in currencies other than the U.S. dollar

The Consolidated Financial Statements are presented in U.S. dollars, which is also the functional currency of Sequans Communications S.A. The Company uses the U.S. dollar as its functional currency due to
the high percentage of revenues, cost of revenue, capital expenditures and operating costs, other than those related to headcount and overhead, which are denominated in U.S. dollars. Each subsidiary determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.

As at the reporting date, the assets and
liabilities of each subsidiary are translated into the presentation currency of the Company (the U.S. dollar) at the rate of exchange in effect at the Statement of Financial Position date and their Statement of Operations are translated at the
weighted average exchange rate for the reporting period. The exchange differences arising on the translation are taken directly to a separate component of equity (Cumulative translation adjustments).



F-11



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Foreign currency transactions

Foreign currency transactions are initially recognized by Sequans Communications S.A. and each of its subsidiaries at their respective functional currency rates prevailing at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange in effect at the reporting date. All differences are taken to the Consolidated Statement of Operations within
financial income or expense. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transactions.

The table below sets forth, for the periods and dates indicated, the average and closing exchange rate for the U.S. dollar (USD) to the euro (EUR), the
U.K. pound sterling (GBP), the Singapore dollar (SGD) and the New Israeli shekel (NIS):



|                  |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|----------------- |  | ------- | ------ |  | ------- |  | ------ | ------- |  |  | ------- |  |  |  | ------ | 
|                  |  | USD/EUR |        |  | USD/GBP |  |        | USD/SGD |  |  | USD/NIS | 
|December 31, 2011 |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|Average rate      |  |         | 1.3917 |  |         |  | 1.6035 |         |  |  | 0.7956  |  |  |  | 0.2797 | 
|Closing rate      |  |         | 1.2939 |  |         |  | 1.5490 |         |  |  | 0.7693  |  |  |  | 0.2616 | 
|                  |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|December 31, 2012 |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|Average rate      |  |         | 1.2856 |  |         |  | 1.5850 |         |  |  | 0.8005  |  |  |  | 0.2595 | 
|Closing rate      |  |         | 1.3194 |  |         |  | 1.6167 |         |  |  | 0.8189  |  |  |  | 0.2679 | 
|                  |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|December 31, 2013 |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 
|Average rate      |  |         | 1.3282 |  |         |  | 1.5643 |         |  |  | 0.7993  |  |  |  | 0.2770 | 
|Closing rate      |  |         | 1.3791 |  |         |  | 1.6542 |         |  |  | 0.7919  |  |  |  | 0.2880 | 
|                  |  |         |        |  |         |  |        |         |  |  |         |  |  |  |        | 

Earnings (loss) per share

Basic earnings (loss) per share amounts are computed using the weighted average number of shares outstanding during each period.

Diluted earnings per share include the effects of dilutive options, warrants, and convertible notes as if they had been exercised.

Revenue recognition

The Companys total revenue consists of product revenue
and other revenue.

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured and when the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue is measured at the fair value of the consideration received, excluding sales taxes or duty. The following specific
recognition criteria must also be met before revenue is recognized.

Product revenue

Substantially all of the Companys product revenue is derived from the sale of semiconductor solutions for 4G wireless broadband applications.

Revenue from the sale of products is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and
when no continuing managerial involvement to the degree usually associated with ownership nor effective control over the sale of products is retained, which usually occurs on shipment of the goods. Products are not sold with a right of return but
are covered by warranty. Although the products sold have embedded software, the Company believes that software is incidental to the products it sells.

Other revenue

Other revenue consists of the sale of licenses to use the Companys
technology solutions and fees for the associated annual software maintenance and support services, as well as the sale of technical support and development services.

Revenue from the sale of licenses is recognized when (i) there is a legally binding arrangement with the customer, (ii) the software has been delivered (assuming no other significant obligations
exist), (iii) collection of the resulting receivable is probable and (iv) the amount of fees is fixed and determinable. If any of these criteria are not met, revenue recognition is deferred until such time as all of the criteria are met.
If the contract for a licensing agreement includes a clause allowing for free updates if and when available and if vendor specific objective evidence of fair value for this post-contract customer support cannot be determined at the time the contract
is signed, the revenue is recognized over the life of the contract.

Revenue from the sale of software maintenance and support services is
recognized over the period of the maintenance (generally one year). When the first year of maintenance is included in the software license price, an amount equal to the negotiated rate for one year of maintenance is deducted from the value of the
license and recognized as revenue over the period of maintenance as described above. The difference between license and maintenance services invoiced and the amount recognized in revenue is recorded as deferred revenue.



F-12



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Revenue from technical support and development services is recognized using the percentage-of-completion
method when the outcome of the contract can be estimated reliably. This occurs when total contract revenue can be estimated reliably and it is probable that the economic benefits associated with the contract will flow to the Company and the stage of
contract completion can be measured. The costs associated with these arrangements are recognized as incurred.

Cost of revenue

Cost of product revenue includes all direct and indirect costs incurred with the sale of products, including shipping and handling.
Cost of other revenue includes all costs incurred with the sale.

Research and development costs

Research costs are expensed as incurred. Development costs are recognized as an intangible asset if the Company can demonstrate:



| |  |  | the technical feasibility of completing the intangible asset so that it will be available for use or sale;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | its intention to complete the asset and use or sell it;
| | - |  | -------------------------------------------------------



| |  |  | its ability to use or sell the asset;
| | - |  | -------------------------------------



| |  |  | how the asset will generate future economic benefits;
| | - |  | -----------------------------------------------------



| |  |  | the availability of adequate resources to complete the development and to use or sell the asset; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the ability to measure reliably the expenditure during development.
| | - |  | -------------------------------------------------------------------

The asset is tested for impairment annually.

Government grants and research tax credits

The Company operates in certain jurisdictions which offer government grants or other incentives based on the qualifying research
expense incurred or to be incurred in that jurisdiction. These incentives are recognized as the qualify research expense is incurred if there is reasonable assurance that all related conditions will be complied with and the grant will be received.
When the grant relates to an expense item, it is recognized as a reduction of the related expense over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Any cash received in advance of the
expenses being incurred is recorded as a liability.

The Company also benefits from research incentives in the form of tax credits which are
detailed in Note 4.4 to the Consolidated Financial Statements.

Financial income and expense

Financial income and expense include:



| |  |  | interest expense related to financial debt (financial debt consists of finance-lease liabilities);
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | other expenses paid to financial institutions for financing operations;
| | - |  | -----------------------------------------------------------------------



| |  |  | foreign exchange gains and losses
| | - |  | ---------------------------------

In accordance with revised IAS 23 Borrowing Costs, the Company capitalizes borrowing costs for all eligible assets where construction was commenced on or after January 1, 2009. To date, the
Company has not incurred such costs.

The Company reflects the classification of foreign exchange gains and losses related to hedges of
euro-based operating expenses in operating expenses.

Taxation

Current income tax

Current income tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

The Company operates in certain jurisdictions which offer tax incentives based on the qualifying research expense incurred in those jurisdictions. When
the incentive is available only as a reduction of taxes owed, such incentive is accounted for as a reduction of tax expense; otherwise, it is accounted for as a government grant with the benefit recorded as a reduction of research and development
expenses.



F-13



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except with respect to taxable temporary
differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry forwards of unused tax credits and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forwards of unused tax credits and unused tax losses can be utilized.

Deferred tax is computed based on the temporary difference that exists between tax and accounting basis for non-monetary items.

The carrying amount of deferred income tax assets is reviewed at the reporting date and adjusted to the extent that it is probable that sufficient future
taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and
liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial
position date.

Deferred income tax relating to items recognized directly in equity is recognized in equity.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right of offset exists.

Value added tax

Revenue, expenses and
assets are recognized net of the amount of value added tax except:



| |  |  | where the value added tax incurred on a purchase of assets or services is not recoverable from the tax authorities, in which case the value added tax
is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | receivables and payables that are stated with the amount of value added tax included.
| | - |  | -------------------------------------------------------------------------------------

Value added tax recoverable consists of value added tax paid by the Company to vendors and suppliers located in the European Union and recoverable from
the tax authorities. Value added tax recoverable is collected on a quarterly basis.

Inventories

Inventories consist primarily of the cost of semiconductors and modules purchased from subcontractors, including wafer fabrication, additional components
for modules, assembly, testing and packaging. Inventories are valued at the lower of cost (determined using the weighted average cost method) or net realizable value (estimated market value less estimated cost of completion and the estimated costs
necessary to make the sale).

The Company writes down the carrying value of its inventories for estimated amounts related to the lower of cost
or market value, obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value. The estimated market value of the inventory is based on historical usage and assumptions about future
demand, future product purchase commitments, estimated manufacturing yield levels and market conditions on a product-by-product basis. When the circumstances that previously caused inventories to be written down below cost no longer exist or when
there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of the original write-down) so that the new carrying
amount is the lower of the cost and the revised net realizable value.

Financial assets

Receivables

Receivables are initially
recognized at fair value, which in most cases approximates the nominal value as the Company does not grant payment terms beyond normal business conditions. If there is any subsequent indication that those assets may be impaired, they are reviewed
for impairment. Any difference between the carrying value and the impaired value (present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the receivables original effective
interest rate) is recorded in operating income (loss). If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtors credit rating), the previously recognized impairment loss is reversed. In that case, the reversal of the impairment loss is reported in operating income (loss).



F-14



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Deposits

Deposits are reported as non-current financial assets (loans and receivables) when their initial maturity is more than twelve months. Such deposits included that required by a factoring agreement
previously in place with a French financial institution.

Cash and cash equivalents

Cash and cash equivalents in the Consolidated Statements of Financial Position includes cash at banks, term deposits and money market funds, which
correspond to highly liquid investments readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment loss. Depreciation is computed using the
straight-line method over the estimated useful lives of each component. The useful lives most commonly used are the following:



|                                    |  |  |              | 
|----------------------------------- |  |  | ------------ | 
|Machinery and equipment             |  |  | 3 to 5 years | 
|Building and leasehold improvements |  |  | 5 to 9 years | 
|Computer equipment                  |  |  | 3 years      | 
|Furniture and office equipment      |  |  | 3 to 5 years | 

Impairment tests are performed whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If any indication exists, the Company estimates the assets recoverable amount, which is the higher of the fair value less cost to sell and the value in use. Where the carrying amount exceeds that recoverable amount, the
asset is considered impaired and it is written down to its recoverable amount.

Depreciation expense is recorded in cost of revenue or
operating expenses, based on the function of the underlying assets.

Intangible assets

Intangible assets, primarily purchased licenses for development or production technology and tools, are stated at cost less accumulated amortization and
any accumulated impairment loss. Amortization is computed using the straight-line method over the estimated useful life of each component, which generally is the shorter of the life of the license or five years.

Useful lives are reviewed on a regular basis and changes in estimates, when relevant, are accounted for on a prospective basis. The amortization expense
is recorded in cost of revenue or operating expenses, based on the function of the underlying assets.

Impairment tests are performed whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If any indication exists, the Company estimates the assets recoverable amount, which is the higher of the fair value less cost to sell and
the value in use. Where the carrying amount exceeds that recoverable amount, the asset is considered impaired and it is written down to its recoverable amount.

Leases

Finance leases, which transfer to the Company substantially all the risks
and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned
between the interest expense and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.

Leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the
lease term.

Operating lease payments are recognized as an expense in the Statement of Operations on a straight line basis over the lease
term.

Costs of Public Offerings

Incremental costs directly attributable to the equity transaction are recorded as a deduction from equity in accordance with paragraphs 35 and 37 of IAS 32 Financial Instruments: Presentation.



F-15



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event for which it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in operating income (loss) net of any reimbursement.

Provisions include the provision for pensions and post-employment benefits. Pension funds in favor of employees are maintained in France, the United Kingdom, Singapore, the United States and Israel, and
they comply with the respective legislation in each country and are financially independent of the Company. The pension funds are generally financed by employer and employee contributions and are accounted for as defined contribution plans with the
employer contributions recognized as expense as incurred. There are no actuarial liabilities in connection with these plans.

French law also
requires payment of a lump sum retirement indemnity to employees based on years of service and annual compensation at retirement. Benefits do not vest prior to retirement. This defined benefit plan is self-funded by the Company. It is calculated as
the present value of estimated future benefits to be paid, applying the projected unit credit method whereby each period of service is seen as giving rise to an additional unit of benefit entitlement, each unit being measured separately to build up
the final obligation. Following the application of IAS 19 revised, actuarial gains and losses are recognized in equity with retropective application in 2011 and 2012. The actualization rate is based on iBoxx Euro AA 10+.

Share-based payment transactions

Employees (including senior executives) and certain service providers of the Company receive remuneration in the form of share-based payment transactions,
whereby they render services as consideration for equity instruments (equity-settled transactions).

The cost of equity-settled
transactions is measured by reference to the fair value at the date on which they are granted. Prior to the Companys initial public offering, the fair value was determined by management, which relied in part upon a report from an external
valuator using the binomial pricing model, further details of which are given in Note 13 to the Consolidated Financial Statements. Following completion of the initial public offering of the Companys shares, the exercise price is based closing
market price on the date of grant.

The cost of equity-settled transactions is recognized, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the beneficiary become fully entitled to the award (the vesting date). The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companys best estimate of the number of equity instruments that will ultimately vest. The Statement of Operations
charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

Trade payables

Trade payables
are initially recognized at fair value, which in most cases approximates the nominal value. They are subsequently re-measured at amortized cost.

Derivative financial instruments and hedge accounting

The Company uses financial
instruments, including derivatives such as foreign currency forward and options contracts, to reduce the foreign exchange risk on cash flows from firm and highly probable commitments denominated in euros. The effective portion of the gain or loss on
the hedging instrument is recognized directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is immediately accounted for in financial results in the Consolidated Statement of Operations. Amounts
recognized as other comprehensive income are transferred to the Consolidated Statement of Operations when the hedged transaction affects profit or loss. If the forecasted transaction is no longer expected to occur, the cumulative gain or loss
previously recognized in equity is transferred to the Consolidated Statement of Operations.

All derivative financial instruments are recorded
at fair value. Changes in fair value are recorded in current earnings or other comprehensive income, depending on whether the derivative is designated as a hedge, its effectiveness as a hedge, and the type of hedge transaction. Any change in the
fair value of the derivatives deemed ineffective as a hedge is immediately recognized in earnings.



F-16



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Commitments

Commitments comprise primarily future operating lease payments and purchase commitments with its third-party manufacturers for future deliveries of equipment and components, which are described in Note 19
to the Consolidated Financial Statements.

2.4. Significant accounting judgments, estimates and assumptions

In the process of applying the Companys accounting policies, management must make judgments and estimates involving assumptions. These judgments and
estimates can have a significant effect on the amounts recognized in the financial statements and the Company reviews them on an ongoing basis taking into consideration past experience and other relevant factors. The evolution of the judgments and
assumptions underlying estimates could cause a material adjustment to the carrying amounts of assets and liabilities as recognized in the financial statements. The most significant management judgments and assumptions in the preparation of these
financial statements are:

Revenue recognition

The Companys policy for revenue recognition, in instances where multiple deliverables are sold contemporaneously to the same counterparty, is in accordance with paragraph 13 of IAS 18
Revenue. When the Company enters into contracts for the sale of products, licenses and maintenance and support services, the Company evaluates all deliverables in the arrangement to determine whether they represent separate units of
accounting, each with its own separate earnings process, and its relative fair value. When the Company enters into contracts for technical services for which revenues are recognized as the project advances, the Company evaluates the percentage of
completion of the project. Such determinations require judgment and are based on an analysis of the facts and circumstances surrounding the transactions.

Inventories

As disclosed in Note 2.3 to the Consolidated Financial Statements, the
Company writes down the carrying value of its inventory to the lower of cost or net realizable value which approximates estimated market value. The estimated market value of the inventory is based on historical usage and assumptions about future
demand, future product purchase commitments, estimated manufacturing yield levels and market conditions on a product-by-product basis. Actual demand may differ from the forecast established by the Company, which may materially impact recorded
inventory values and cost of revenue.

Share-based compensation

As disclosed in Note 13 to the Consolidated Financial Statements, the Company has various share-based compensation plans for employees and non-employees that may be affected, as to the expense recorded in
the Consolidated Statements of Operations, by changes in valuation assumptions. Fair value of stock options is estimated by using the binomial model on the date of grant based on certain assumptions, including, among others expected volatility, the
expected option term and the expected dividend payout rate. As a private or newly-public company, the assumption as to volatility has been determined by reference to the historical volatility of similar entities (using a selection of publicly-traded
semiconductor companies). Prior to the Companys initial public offering, the fair value of the Companys shares underlying the stock option grants was determined by the Companys Board of Directors with input from management at each
grant date upon review of a variety of factors, including the valuation used in the latest financing rounds. Since the initial public offering, fair value of the Companys shares underlying stock option grants equals to the closing price on the
New York Stock Exchange on the date of grant.

Provision

As disclosed in Note 16 to the Consolidated Financial Statements, the Company is subject to a tax audit that could result in tax assessments and potential penalties, particularly with respect to claimed
research tax credits due to the judgment involved in determining which projects meet the tax codes criteria for innovation and fundamental research. Based on the Companys assessment of the potential exposure in this dispute, the Company
has recorded a provision for potential tax adjustments or penalties while the Company contests the proposed tax adjustments.

Fair value
of financial instruments

Fair value corresponds to the quoted price for listed financial assets and liabilities. Where no active
market exists, the Company establishes fair value by using a valuation technique determined to be the most appropriate in the circumstances, for example:



| |  |  | available-for-sale assets: comparable transactions, multiples for comparable transactions, discounted present value of future cash flows;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loans and receivables, financial assets at fair value through profit and loss: net book value is deemed to be approximately equivalent to fair value
because of their relatively short holding period;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-17



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



| |  |  | derivatives : fair value based on mark to market value; and
| | - |  | -----------------------------------------------------------



| |  |  | trade payables: book value is deemed to be approximately equivalent to fair value because of their relatively short holding period;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

3. Segment information

The Company has one operating segment, which is the design and marketing of semiconductor components for 4G broadband wireless systems. All information required to be disclosed under IFRS 8 Operating
Segments is shown in the Consolidated Financial Statements and these associated Notes.

Sales to external customers disclosed below are
based on the geographical location of the customers. The following table sets forth the Companys total revenue by region for the periods indicated. The Company categorizes its total revenue geographically based on the location to which it
invoices.



|                             |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|---------------------------- |  | ------------------------- | ----- |  | -------- | - | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                             |  | Europe,Middle East,Africa |       |  | Americas |   |       | Asia |  |   | Total  | 
|                             |  | (in thousands)            |      
|Year ended December 31, 2011 |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Total revenue                |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Sales to external customers  |  | $                         | 6,823 |  |          | $ | 989   |      |  | $ | 85,902 |  |  | $ | 93,714 | 
|                             |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Year ended December 31, 2012 |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Total revenue                |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Sales to external customers  |  |                           | 3,479 |  |          | $ | 934   |      |  | $ | 17,841 |  |  | $ | 22,254 | 
|                             |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Year ended December 31, 2013 |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Total revenue                |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 
|Sales to external customers  |  | $                         | 541   |  |          | $ | 5,002 |      |  | $ | 8,169  |  |  | $ | 13,712 | 
|                             |  |                           |       |  |          |   |       |      |  |   |        |  |  |   |        | 

The substantial majority of the Companys non-current assets are held by the parent company, Sequans Communications
S.A. See Note 18.3 to these Consolidated Financial Statements for information about major customers.

4. Other revenues and expenses

4.1. Financial income and expenses

Financial income:



|                                                                               |  |                         |       |  |      |   |       |      |  |   |     | 
|------------------------------------------------------------------------------ |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | --- | 
|                                                                               |  | Year ended December 31, |      
|                                                                               |  | 2011                    |       |  | 2012 |   |       | 2013 | 
|                                                                               |  | (in thousands)          |      
|Income from short-term investments and term deposits and other finance revenue |  | $                       | 81    |  |      | $ | 241   |      |  | $ | 143 | 
|Foreign exchange gain                                                          |  |                         | 1,092 |  |      |   | 1,904 |      |  |   | 735 | 
|                                                                               |  |                         |       |  |      |   |       |      |  |   |     | 
|Total financial income                                                         |  | $                       | 1,173 |  |      | $ | 2,145 |      |  | $ | 878 | 
|                                                                               |  |                         |       |  |      |   |       |      |  |   |     | 

Financial expenses:



|                                      |  |                         |       |  |      |   |       |      |  |   |     | 
|------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | --- | 
|                                      |  | Year ended December 31, |      
|                                      |  | 2011                    |       |  | 2012 |   |       | 2013 | 
|                                      |  | (in thousands)          |      
|Interests on loans and finance leases |  | $                       | 134   |  |      | $ | 5     |      |  | $ | 25  | 
|Other bank fees and financial charges |  |                         | 336   |  |      |   | 99    |      |  |   | 84  | 
|Foreign exchange loss                 |  |                         | 1,836 |  |      |   | 2,062 |      |  |   | 770 | 
|                                      |  |                         |       |  |      |   |       |      |  |   |     | 
|Total financial expenses              |  | $                       | 2,306 |  |      | $ | 2,166 |      |  | $ | 879 | 
|                                      |  |                         |       |  |      |   |       |      |  |   |     | 



F-18



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



The net foreign exchange loss of $35,000 for the year ended December 31, 2013 (2012: net foreign
exchange loss $158,000; 2011: net foreign exchange loss $744,000) arises primarily from euro-based monetary assets. This includes a loss of $26,000 corresponding to the ineffectiveness of foreign exchange hedge (gain of $158,000 in 2012 and loss of
$125,000 in 2011).

4.2. Depreciation, amortization, and share-based payment expense included in the Consolidated Statement of Operations



|                                                                            |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|--------------------------------------------------------------------------- |  | ---- | -- |  | ----------------------- | - | ------ | -------- |  | - | ------ |  |  | - | ------ | -
|                                                                            |  |      |    |  | Year ended December 31, |  
|                                                                            |  | Note |    |  | 2011                    |   |        | 2012     |  |   | 2013   | 
|                                                                            |  |      |    |  | (in thousands)          |  
|Included in cost of revenue:                                                |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|Cost of components                                                          |  |      |    |  |                         | $ | 41,654 |          |  | $ | 8,501  |  |  | $ | 6,636  |  
|Depreciation and impairment                                                 |  |      | 7  |  |                         |   | 1,410  |          |  |   | 1,447  |  |  |   | 698    |  
|Amortization of intangible assets                                           |  |      | 8  |  |                         |   |       |          |  |   | 37     |  |  |   | 15     |  
|Wages and benefits                                                          |  |      |    |  |                         |   | 791    |          |  |   | 677    |  |  |   | 653    |  
|Share-based payment expense                                                 |  |      | 13 |  |                         |   | 209    |          |  |   | 156    |  |  |   | 113    |  
|Assembly services, royalties and other                                      |  |      |    |  |                         |   | 2,350  |          |  |   | 1,139  |  |  |   | 706    |  
|                                                                            |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|                                                                            |  |      |    |  |                         | $ | 46,414 |          |  | $ | 11,957 |  |  | $ | 8,821  |  
|                                                                            |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|                                                                            |  |     
|                                                                            |  |      |    |  | Year ended December 31, |  
|                                                                            |  | Note |    |  | 2011 (1)                |   |        | 2012 (1) |  |   | 2013   | 
|                                                                            |  |      |    |  | (in thousands)          |  
|Included in operating expenses (between gross profit and operating result): |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|Depreciation and impairment                                                 |  |      | 7  |  |                         | $ | 2,656  |          |  | $ | 2,995  |  |  | $ | 3,812  |  
|Amortization of intangible assets                                           |  |      | 8  |  |                         |   | 1,836  |          |  |   | 1,721  |  |  |   | 1,811  |  
|Wages and benefits                                                          |  |      |    |  |                         |   | 26,415 |          |  |   | 22,820 |  |  |   | 22,681 |  
|Share-based payment expense                                                 |  |      | 13 |  |                         |   | 3,965  |          |  |   | 3,033  |  |  |   | 2,052  |  
|Foreign exchange gains and losses related to hedges of euro                 |  |      |    |  |                         |   | (351   | )        |  |   | 838    |  |  |   | (133   | )
|Other                                                                       |  |      |    |  |                         |   | 11,688 |          |  |   | 11,613 |  |  |   | 10,111 |  
|                                                                            |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  
|                                                                            |  |      |    |  |                         | $ | 46,209 |          |  | $ | 43,020 |  |  | $ | 40,334 |  
|                                                                            |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.3. Employee benefits expense



|                                              |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        | 
|--------------------------------------------- |  | ---- | -- |  | ----------------------- | - | ------ | -------- |  | - | ------ |  |  | - | ------ | 
|                                              |  |      |    |  | Year ended December 31, |  
|                                              |  | Note |    |  | 2011 (1)                |   |        | 2012 (1) |  |   | 2013   | 
|                                              |  |      |    |  | (in thousands)          |  
|Wages and salaries                            |  |      |    |  |                         | $ | 20,332 |          |  | $ | 17,578 |  |  | $ | 17,464 | 
|Social security costs and other payroll taxes |  |      |    |  |                         |   | 6,666  |          |  |   | 5,702  |  |  |   | 5,694  | 
|Other benefits                                |  |      |    |  |                         |   | 149    |          |  |   | 29     |  |  |   | 97     | 
|Pension costs                                 |  |      |    |  |                         |   | 59     |          |  |   | 188    |  |  |   | 80     | 
|Share-based payment expenses                  |  |      | 13 |  |                         |   | 4,174  |          |  |   | 3,189  |  |  |   | 2,164  | 
|                                              |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        | 
|Total employee benefits expense               |  |      |    |  |                         | $ | 31,380 |          |  | $ | 26,686 |  |  | $ | 25,499 | 
|                                              |  |      |    |  |                         |   |        |          |  |   |        |  |  |   |        | 



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The amount recognized as an expense for defined contributions plans amounts to $1,082,000 for the year ended
December 31, 2013 $1,298,000 and $1,110,000 for the years ended December 31, 2011 and 2012, respectively).

4.4. Research and
development expense and tax credit receivable

All research and development expense was charged directly to expense in the Statement of
Operations.



F-19



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



The Company operates in a highly innovative, dynamic and competitive sector. Therefore, the costs
incurred from the point when the criteria for capitalization are met to the point when the product is made generally available on the market are not material. The amount of research tax credit is deducted from research and development costs. In the
year ended December 31, 2011, the French tax authorities confirmed that the Company could include certain subsidiary research expenses in the research tax credit calculation. The research tax credit in France is deducted from corporate income
taxes due; if taxes due are not sufficient to cover the full amount of the credit, the balance is received in cash three years later (one year later if the Company is below certain size criteria). Total research tax credit receivable as of
December 31, 2013 is $8,006,000, relating to tax credits receivables for 2011 and 2013, which is expected to be recovered in 2014 (in cash).

In December 2012, the Company was notified of proposed tax adjustments, penalties and interest which relates almost entirely to the research tax credits claimed for 2008 and 2009 (already received). (See
Note 16 to the Consolidated Financial Statements).

Government grants have been received in support of certain research programs. Where there
are unfulfilled conditions or contingencies relating to the grants, the corresponding amount has been deferred on the Statement of Financial Position until all conditions are fulfilled and contingencies settled at which time amounts earned are
recorded as an offset to the corresponding expenses.

The reduction of research and development expense from government grants and research
tax credit was as follows:



|                                       |  |                         |        |   |          |   |        |      |  |   |        |  
|-------------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------ | ---- |  | - | ------ | -
|                                       |  | Year ended December 31, |       
|                                       |  | 2011 (1)                |        |   | 2012 (1) |   |        | 2013 | 
|                                       |  | (in thousands)          |       
|Research and development costs         |  | $                       | 30,846 |   |          | $ | 33,318 |      |  | $ | 32,882 |  
|Research tax credit                    |  |                         | (4,562 | ) |          |   | (4,226 | )    |  |   | (3,749 | )
|Government grants                      |  |                         | (1,358 | ) |          |   | (727   | )    |  |   | (776   | )
|                                       |  |                         |        |   |          |   |        |      |  |   |        |  
|Total research and development expense |  | $                       | 24,926 |   |          | $ | 28,365 |      |  | $ | 28,357 |  
|                                       |  |                         |        |   |          |   |        |      |  |   |        |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. Income tax

The major components of income tax expense are:



|                                                                        |  |                         |     |  |      |   |     |      |  |   |     |  
|----------------------------------------------------------------------- |  | ----------------------- | --- |  | ---- | - | --- | ---- |  | - | --- | -
|                                                                        |  | Year ended December 31, |    
|                                                                        |  | 2011                    |     |  | 2012 |   |     | 2013 | 
|                                                                        |  | (in thousands)          |    
|Consolidated Statement of Operations                                    |  |                         |     |  |      |   |     |      |  |   |     |  
|Current income tax:                                                     |  |                         |     |  |      |   |     |      |  |   |     |  
|Current income tax charge                                               |  | $                       | 314 |  |      | $ | 207 |      |  | $ | 190 |  
|Deferred income tax:                                                    |  |                         | 57  |  |      |   | 27  |      |  |   | (48 | )
|                                                                        |  |                         |     |  |      |   |     |      |  |   |     |  
|Income tax expense reported in the Consolidated Statement of Operations |  | $                       | 371 |  |      | $ | 234 |      |  | $ | 142 |  
|                                                                        |  |                         |     |  |      |   |     |      |  |   |     |  

A reconciliation of income taxes computed at the French statutory rate (34.43% from the year ended December 31,
2011, 2012 and 2013) to the income tax expense (benefit) is as follows:



|                                                                                  |  |                         |        |   |          |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | Year ended December 31, |       
|                                                                                  |  | 2011 (1)                |        |   | 2012 (1) |   |         | 2013 | 
|                                                                                  |  | (in thousands)          |       
|Accounting profit (loss) before income tax                                        |  | $                       | (42    | ) |          | $ | (32,744 | )    |  | $ | (35,444 | )
|At Frances statutory income tax rate of 34.43%                                   |  |                         | (14    | ) |          |   | (11,274 | )    |  |   | (12,203 | )
|Non-deductible share-based payment expense                                        |  |                         | 1,437  |   |          |   | 1,098   |      |  |   | 745     |  
|Tax credits                                                                       |  |                         | (1,571 | ) |          |   | (1,455  | )    |  |   | (1,291  | )
|Unrecognized benefit of tax loss carryforwards and permanent differences          |  |                         | 519    |   |          |   | 11,865  |      |  |   | 12,891  |  
|                                                                                  |  |                         |        |   |          |   |         |      |  |   |         |  
|Income tax expense (benefit) reported in the Consolidated Statement of Operations |  | $                       | 371    |   |          | $ | 234     |      |  | $ | 142     |  
|                                                                                  |  |                         |        |   |          |   |         |      |  |   |         |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



As of December 31, 2013, the Company had accumulated tax losses which arose in France of
$148,315,000 that are available for offset against future taxable profits of Sequans Communications S.A within a limit of one million euro per year, plus 50% of the profit exceeding this limit. Remaining unapplied losses would continue to be carried
forward indefinitely. As of December 31, 2013, the Company also had accumulated tax losses which arose in its U.K. subsidiary of $350,000 that are available for offset against future taxable profits of its U.K. subsidiary for an unlimited
period.

Deferred tax assets were recognized in 2011, 2012 and 2013 only to the extent that deferred tax liabilities existed in the same
jurisdiction.

As non-monetary assets and liabilities are measured in their functional currency and the Company taxable profit is determined
in another currency, deferred tax has to be computed based on the temporary difference that exists between tax and accounting basis. Companys analysis led to a deferred tax asset of $129,000 which has not been recognized due to the
Companys above described tax situation.

6. Earnings (loss) per share

Basic earnings (loss) per share amounts are calculated by dividing net income (loss) for the year attributable to all shareholders of the Company by the weighted average number of all shares outstanding
during the year.

Diluted earnings per share amounts are calculated by dividing the net earnings attributable to equity holders of the Company
by the weighted average number of shares outstanding during the year plus the weighted average number of shares that would be issued on the exercise of all the dilutive stock options and warrants. Dilution is defined as a reduction of earnings per
share or an increase of loss per share. As the exercise of all outstanding stock options and warrants would decrease loss per share, they are considered to be anti-dilutive and excluded from the calculation of loss per share.

The following reflects the income and share data used in the basic and diluted earnings (loss) per share computations:



|                                                              |  |                                                 |            |   |          |   |            |      |  |   |            |  
|------------------------------------------------------------- |  | ----------------------------------------------- | ---------- | - | -------- | - | ---------- | ---- |  | - | ---------- | -
|                                                              |  | Year ended December 31,                         |           
|                                                              |  | 2011 (1)                                        |            |   | 2012 (1) |   |            | 2013 | 
|                                                              |  | (in thousands, except share and per share data) |           
|Profit (Loss)                                                 |  | $                                               | (413       | ) |          | $ | (32,978    | )    |  | $ | (35,586    | )
|Weighted average number of shares outstanding for basic EPS   |  |                                                 | 32,610,380 |   |          |   | 34,680,227 |      |  |   | 45,456,367 |  
|Net effect of dilutive stock options                          |  |                                                 |           |   |          |   |           |      |  |   |           |  
|Net effect of dilutive warrants                               |  |                                                 |           |   |          |   |           |      |  |   |           |  
|Weighted average number of shares outstanding for diluted EPS |  |                                                 | 32,610,380 |   |          |   | 34,680,227 |      |  |   | 45,456,367 |  
|                                                              |  |                                                 |            |   |          |   |            |      |  |   |            |  
|Basic earnings (loss) per share                               |  | $                                               | (0.01      | ) |          | $ | (0.95      | )    |  | $ | (0.78      | )
|                                                              |  |                                                 |            |   |          |   |            |      |  |   |            |  
|Diluted earnings (loss) per share                             |  | $                                               | (0.01      | ) |          | $ | (0.95      | )    |  | $ | (0.78      | )
|                                                              |  |                                                 |            |   |          |   |            |      |  |   |            |  



|(1) | Figures for the years ended December 31, 2011 and 2012 have been restated to reflect the impact of the retrospective application of IAS 19 Revised (Employee
Benefits).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-21



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



7. Property, plant and equipment

Property, plant and equipment include:



|                                 |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|-------------------------------- |  | --------------------- | ----- | - | ------------------ | - | ------ | ---------------------- |  | - | ----- | - |  | - | ------ | -
|                                 |  | Leaseholdimprovements |       |   | Plant andequipment |   |        | IT and officeequipment |  |   | Total |  
|                                 |  | (in thousands)        |      
|Cost:                            |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|At January 1, 2011               |  | $                     | 1,235 |   |                    | $ | 7,862  |                        |  | $ | 3,054 |   |  | $ | 12,151 |  
|Additions                        |  |                       | 127   |   |                    |   | 6,956  |                        |  |   | 1,036 |   |  |   | 8,119  |  
|Disposals                        |  |                       |      |   |                    |   | (755   | )                      |  |   | (6    | ) |  |   | (761   | )
|Exchange difference              |  |                       | 2     |   |                    |   | (27    | )                      |  |   | 1     |   |  |   | (24    | )
|At December 31, 2011             |  |                       | 1,364 |   |                    |   | 14,036 |                        |  |   | 4,085 |   |  |   | 19,485 |  
|Additions                        |  |                       |      |   |                    |   | 4,036  |                        |  |   | 196   |   |  |   | 4,232  |  
|Disposals                        |  |                       |      |   |                    |   | (484   | )                      |  |   |      |   |  |   | (484   | )
|Exchange difference              |  |                       | 12    |   |                    |   | 64     |                        |  |   | 16    |   |  |   | 92     |  
|At December 31, 2012             |  |                       | 1,376 |   |                    |   | 17,652 |                        |  |   | 4,297 |   |  |   | 23,325 |  
|Additions                        |  |                       |      |   |                    |   | 1,852  |                        |  |   | 94    |   |  |   | 1,946  |  
|Disposals                        |  |                       |      |   |                    |   |       |                        |  |   | (170  | ) |  |   | (170   | )
|Exchange difference              |  |                       | 4     |   |                    |   | 36     |                        |  |   |      |   |  |   | 40     |  
|                                 |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|At December 31, 2013             |  | $                     | 1,380 |   |                    | $ | 19,540 |                        |  | $ | 4,221 |   |  | $ | 25,141 |  
|                                 |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|Depreciation and impairment:     |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|At January 1, 2011               |  | $                     | 322   |   |                    | $ | 4,440  |                        |  | $ | 2,098 |   |  | $ | 6,860  |  
|Depreciation charge for the year |  |                       | 221   |   |                    |   | 3,166  |                        |  |   | 658   |   |  |   | 4,045  |  
|Impairment                       |  |                       |      |   |                    |   | 21     |                        |  |   |      |   |  |   | 21     |  
|Disposals                        |  |                       |      |   |                    |   | (755   | )                      |  |   | (6    | ) |  |   | (761   | )
|Exchange difference              |  |                       | 23    |   |                    |   | (12    | )                      |  |   | (25   | ) |  |   | (14    | )
|At December 31, 2011             |  |                       | 566   |   |                    |   | 6,860  |                        |  |   | 2,725 |   |  |   | 10,151 |  
|Depreciation charge for the year |  |                       | 209   |   |                    |   | 3,538  |                        |  |   | 695   |   |  |   | 4,442  |  
|Disposals                        |  |                       |      |   |                    |   | (484   | )                      |  |   |      |   |  |   | (484   | )
|Exchange difference              |  |                       | 4     |   |                    |   | 29     |                        |  |   | (3    | ) |  |   | 30     |  
|At December 31, 2012             |  |                       | 779   |   |                    |   | 9,943  |                        |  |   | 3,417 |   |  |   | 14,139 |  
|Depreciation charge for the year |  |                       | 286   |   |                    |   | 3,424  |                        |  |   | 558   |   |  |   | 4,268  |  
|Impairment                       |  |                       | 242   |   |                    |   |       |                        |  |   |      |   |  |   | 242    |  
|Disposals                        |  |                       |      |   |                    |   |        |                        |  |   | (170  | ) |  |   | (170   | )
|Exchange difference              |  |                       | (1    | ) |                    |   | 25     |                        |  |   | 16    |   |  |   | 40     |  
|                                 |  |                       |       |   |                    |   |        |                        |  |   |       |   |  |   |        |  
|At December 31, 2013             |  | $                     | 1,306 |   |                    | $ | 13,392 |                        |  | $ | 3,821 |   |  | $ | 18,519 |  
|At January 1, 2011               |  | $                     | 913   |   |                    | $ | 3,422  |                        |  | $ | 956   |   |  | $ | 5,291  |  
|At December 31, 2011             |  |                       | 798   |   |                    |   | 7,176  |                        |  |   | 1,360 |   |  |   | 9,334  |  
|At December 31, 2012             |  |                       | 597   |   |                    |   | 7,709  |                        |  |   | 880   |   |  |   | 9,186  |  
|At December 31, 2013             |  | $                     | 74    |   |                    | $ | 6,148  |                        |  | $ | 401   |   |  | $ | 6,622  |  

The cost of equipment purchased under capital leases included in tangible assets at December 31, 2013 totaled
$730,000 ($384,000 at December 31, 2012). Accumulated amortization of this equipment totaled $269,000 at December 31, 2013 ($36,000 at December 31, 2012).

Impairment of property, plant and equipment

In January 2012, the Company decided to
scrap the SQN2130 production mask set as the product had been replaced by the SQN2131 and no further production of the SQN2130 was deemed necessary. The net book value of this asset as at December 31, 2011 of



F-22



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



$21,000 consequently was determined to be completely impaired, its value reduced to zero, and the related expense recorded as cost of product revenue in the Consolidated Statements of Operations
for the year ended December 31, 2011. There were no equipment impairment losses in the year ended December 31, 2012.

In November
2013, the Company decided to move its headquarter to another site at the end of the current lease in May 2014. The Company reviewed the useful life of leasehold improvements The amount recorded in the year ended December 31, 2013 was $362,000,
recognized in General and administrative expense in the Consolidated Statements of Operations in the year ended December 31, 2013.

8. Intangible assets

Intangible assets include:



|                             |  |                |        | 
|---------------------------- |  | -------------- | ------ | 
|                             |  | Licenses       |       
|                             |  | (in thousands) |       
|Cost:                        |  |                |        | 
|At January 1, 2011           |  | $              | 5,758  | 
|Additions                    |  |                | 2,925  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                |       | 
|At December 31, 2011         |  |                | 8,683  | 
|Additions                    |  |                | 1,722  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                | 2      | 
|At December 31, 2012         |  |                | 10,407 | 
|Additions                    |  |                | 2,318  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                | 7      | 
|                             |  |                |        | 
|At December 31, 2013         |  | $              | 12,732 | 
|                             |  |                |        | 
|Depreciation and impairment: |  |                |        | 
|At January 1, 2011           |  | $              | 2,614  | 
|Amortization                 |  |                | 1,836  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                |       | 
|At December 31, 2011         |  |                | 4,450  | 
|Amortization                 |  |                | 1,758  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                | 15     | 
|At December 31, 2012         |  |                | 6,223  | 
|Amortization                 |  |                | 1,826  | 
|Disposals                    |  |                |       | 
|Exchange difference          |  |                | 4      | 
|                             |  |                |        | 
|At December 31, 2013         |  | $              | 8,053  | 
|                             |  |                |        | 
|Net book value:              |  |                |        | 
|At January 1, 2011           |  | $              | 3,144  | 
|At December 31, 2011         |  |                | 4,233  | 
|At December 31, 2012         |  |                | 4,184  | 
|At December 31, 2013         |  | $              | 4,679  | 

As no development costs have been capitalized during the three years ended December 31, 2013, the only intangible
assets recorded in the Consolidated Statements of Financial Position are acquired licenses for technology used primarily in the product development process.



F-23



---

##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



9. Inventories



|                                                          |  |                 |        |  |      |   |       |      |  |   |       | 
|--------------------------------------------------------- |  | --------------- | ------ |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                          |  | At December 31, |       
|                                                          |  | 2011            |        |  | 2012 |   |       | 2013 | 
|                                                          |  | (in thousands)  |       
|Components (at cost)                                      |  | $               | 5,850  |  |      | $ | 5,313 |      |  | $ | 2,257 | 
|Finished goods (at lower of cost or net realizable value) |  |                 | 5,810  |  |      |   | 2,130 |      |  |   | 4,325 | 
|                                                          |  |                 |        |  |      |   |       |      |  |   |       | 
|Total inventories                                         |  | $               | 11,660 |  |      | $ | 7,443 |      |  | $ | 6,582 | 
|                                                          |  |                 |        |  |      |   |       |      |  |   |       | 

In the year ended December 31, 2011, the Company reversed $22,000 related to SQN1140 products sold during the year,
which was previously written down. There was no write-down of any inventories in the year ended December 31, 2011.

In the year ended
December 31, 2012, the Company decided to enter the end-of-life process for SQN2130, a WiMAX base station product, and for SQN3010, its first TDD-only LTE product. Provisions were recorded to reduce the value of the inventory related to these
two products to zero. The Company also reviewed the value of inventory of finished goods and components related to products which have not been declared end-of-life. Taking into consideration the latest estimations of expected demand, particularly
for the WiMAX products, the Company determined that it was not probable that all of the stock of memory components on hand would be used to produce finished goods and a provision was recorded for the portion of inventory considered to be in excess
of future needs. In total, the inventory provision recorded in the year ended December 31, 2012 was $854,000. The related expense was recognized in the Consolidated Statements of Operations in Cost of product revenue.

In the year ended December 31, 2013, the Company reviewed the value of inventory of products which have not been declared end-of-life and for
slow-moving WiMAX and LTE products and memory components. Based on the latest estimations of demand, the provision for WiMAX related inventory was adjusted and resulted in a net inventory provision reversal of $165,000. The Company also recorded a
provision for defective products and other LTE products of $174,000 which is included in the Consolidated Statements of Operations in Cost of product revenue.

10. Trade receivables

Trade receivables are non-interest bearing and are generally on
30-90 day payment terms.



|                                |  |                 |        |   |      |   |        |      |  |   |        |  
|------------------------------- |  | --------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                |  | At December 31, |       
|                                |  | 2011            |        |   | 2012 |   |        | 2013 | 
|                                |  | (in thousands)  |       
|Trade receivables               |  | $               | 9,595  |   |      | $ | 7,199  |      |  | $ | 7,174  |  
|Unbilled revenue                |  |                 |        |   |      |   |        |      |  |   | 32     |  
|Provisions on trade receivables |  |                 | (1,222 | ) |      |   | (1,670 | )    |  |   | (1,720 | )
|                                |  |                 |        |   |      |   |        |      |  |   |        |  
|Net trade receivables           |  | $               | 8,373  |   |      | $ | 5,529  |      |  | $ | 5,486  |  
|                                |  |                 |        |   |      |   |        |      |  |   |        |  

The movements in the provision for impairment of receivables were as follows:



|                    |  |                |       |  |      |   |       |      |  |   |       | 
|------------------- |  | -------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                    |  | December 31,   |      
|                    |  | 2011           |       |  | 2012 |   |       | 2013 | 
|                    |  | (in thousands) |      
|At January 1,       |  | $              | 949   |  |      | $ | 1,222 |      |  | $ | 1,670 | 
|Charge for the year |  |                | 273   |  |      |   | 448   |      |  |   | 50    | 
|Utilized amounts    |  |                |      |  |      |   |      |      |  |   |      | 
|                    |  |                |       |  |      |   |       |      |  |   |       | 
|At year end         |  | $              | 1,222 |  |      | $ | 1,670 |      |  | $ | 1,720 | 
|                    |  |                |       |  |      |   |       |      |  |   |       | 



F-24



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



As at year end, the aging analysis of trade receivables that were not impaired is as follows:



|                     |  |                |       |  |                             |   |       |                           |  |   |            |  |  |             |     |  |           |   |     |  |  |   |       | 
|-------------------- |  | -------------- | ----- |  | --------------------------- | - | ----- | ------------------------- |  | - | ---------- |  |  | ----------- | --- |  | --------- | - | --- |  |  | - | ----- | 
|                     |  | Total          |       |  | Neither pastdue norImpaired |   |       | Past due but not impaired | 
|                     |  |                |       |  |                             |   |       | <30 days                  |  |   | 30-60 days |  |  | 60-120 days |     |  | >120 days |  
|                     |  | (in thousands) |      
|At December 31, 2011 |  | $              | 8,373 |  |                             | $ | 7,248 |                           |  | $ | 690        |  |  | $           | 105 |  |           | $ | 330 |  |  | $ |      | 
|At December 31, 2012 |  |                | 5,529 |  |                             |   | 2,652 |                           |  |   | 503        |  |  |             | 625 |  |           |   | 744 |  |  |   | 1,005 | 
|At December 31, 2013 |  | $              | 5,486 |  |                             | $ | 1,812 |                           |  | $ | 2,378      |  |  | $           | 106 |  |           | $ | 441 |  |  | $ | 749   | 

11. Cash and cash equivalents



|                          |  |                 |        |  |      |   |        |      |  |   |        | 
|------------------------- |  | --------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                          |  | At December 31, |       
|                          |  | 2011            |        |  | 2012 |   |        | 2013 | 
|                          |  | (in thousands)  |       
|Cash at banks             |  | $               | 3,737  |  |      | $ | 7,284  |      |  | $ | 1,652  | 
|Cash equivalents          |  |                 | 53,483 |  |      |   | 21,467 |      |  |   | 35,592 | 
|                          |  |                 |        |  |      |   |        |      |  |   |        | 
|Cash and cash equivalents |  | $               | 57,220 |  |      | $ | 28,751 |      |  | $ | 37,244 | 
|                          |  |                 |        |  |      |   |        |      |  |   |        | 

Cash at banks earns no interest. Cash equivalents in money market funds are invested for short-term periods depending on
the immediate cash requirements of the Company, and earn interest at market rates for short-term investments. The fair value of cash and cash equivalents is equal to book value. Most of the cash and cash equivalents is held in U.S. dollar and euros
as follows:



|                                      |  |                 |        |  |      |   |        |      |  |   |        | 
|------------------------------------- |  | --------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                      |  | At December 31, |       
|                                      |  | 2011            |        |  | 2012 |   |        | 2013 | 
|                                      |  | (in thousands)  |       
|U.S. dollar denominated accounts      |  | $               | 54,995 |  |      | $ | 27,794 |      |  | $ | 36,205 | 
|Euro denominated accounts             |  |                 | 1,912  |  |      |   | 843    |      |  |   | 834    | 
|GBP denominated accounts              |  |                 | 244    |  |      |   | 30     |      |  |   | 93     | 
|SGP denominated accounts              |  |                 | 41     |  |      |   | 32     |      |  |   | 32     | 
|NIS denominated accounts              |  |                 |       |  |      |   | 35     |      |  |   | 28     | 
|RMB denominated accounts              |  |                 | 28     |  |      |   | 5      |      |  |   | 30     | 
|Other currencies denominated accounts |  |                 |       |  |      |   | 12     |      |  |   | 22     | 
|                                      |  |                 |        |  |      |   |        |      |  |   |        | 
|Cash and cash equivalents             |  | $               | 57,220 |  |      | $ | 28,751 |      |  | $ | 37,244 | 
|                                      |  |                 |        |  |      |   |        |      |  |   |        | 

12. Issued capital and reserves

The share capital of Sequans Communications S.A. is denominated in euros, as required by law in France. Any distributions to shareholders are denominated in euros. Amounts of capital and reserves
presented in the Consolidated Statements of Financial Position in U.S. dollars have been translated using historical exchange rates.

Authorized capital, in number of shares

Authorized capital includes all shares issued as well as all potential shares which may be issued upon exercise of stock options, founders warrants, other warrants and restricted share awards, or which
the shareholders have otherwise authorized for specific capital increases. At December 31, 2013, authorized capital was 65,124,387 ordinary shares with a nominal of 0.02 each (38,777,437 and 49,561,737 ordinary shares at December 31, 2011
and 2012, respectively).

All categories of shares have equal voting rights of one vote per share. All categories of shares have equal
dividend rights.



F-25



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Shares issued and fully paid



|                                                       |  |                                       |            |  |        |   |     |        |  |  |            |  |  |        |     |  |        |  |            |  |  |   |       | 
|------------------------------------------------------ |  | ------------------------------------- | ---------- |  | ------ | - | --- | ------ |  |  | ---------- |  |  | ------ | --- |  | ------ |  | ---------- |  |  | - | ----- | 
|                                                       |  | At December 31,                       |           
|                                                       |  | 2011                                  |            |  | 2012   |   |     | 2013   | 
|                                                       |  | Shares                                |            |  | Amount |   |     | Shares |  |  | Amount     |  |  | Shares |     |  | Amount | 
|                                                       |  | (in thousands, except for share data) |           
|Ordinary shares                                        |  |                                       | 34,667,339 |  |        |  | 693 |        |  |  | 34,683,839 |  |  |       | 694 |  |        |  | 59,129,639 |  |  |  | 1,183 | 
|Converted to U.S. dollars at historical exchange rates |  |                                       |            |  |        | $ | 912 |        |  |  |            |  |  | $      | 912 |  |        |  |            |  |  | $ | 1,567 | 

Other capital reserves

Other capital reserves include the cumulated share-based payment expense as of period end, the counterpart of which is in retained earnings as the expense is reflected in profit and loss.

Dividend rights

Dividends may be
distributed from the statutory retained earnings and additional paid-in capital, subject to the requirements of French law and the by-laws of Sequans Communications S.A. There were no distributable retained earnings at December 31, 2011, 2012
or 2013. Dividend distributions by the Company, if any, will be made in euros.

Capital transactions

On April 20, 2011, the Company increased its capital in connection with the initial public offering by issuing 6,666,666 ordinary shares at $10.00
per share for a total offering amount of $66,666,660. $193,533 was recorded in share capital in the Consolidated Statement of Financial Position and $66,473,127 in share premium. IPO costs directly attributable to the equity transaction amounting to
approximately $7.5 million were deducted from the share premium.

On February 21, 2013, the Company increased its capital in connection
with a public offering by issuing 10,000,000 ordinary shares at $ 1.50 per share for a total offering amount of $ 15,000,000. $263,720 was recorded in share capital in the Consolidated Statement of Financial Position and $14,736,280 in share
premium. Costs directly attributable to the equity transaction amounting to approximately $1.5 million were deducted from the share premium.

On November 26, 2013, the Company increased its capital in connection with a public offering by issuing 12,500,000 ordinary shares at $
1.80 per share. On December 5, 2013, the underwriters purchased an additional 1,875,000 ordinary shares at the public offering price. The total offering amounted to $ 25,875,000. $389,553 was recorded in share capital in the Consolidated
Statement of Financial Position and $25,485,447 in share premium. Costs directly attributable to the equity transaction amounting to approximately $2.3 million were deducted from the share premium.

In the years ended December 31, 2011, 2012 and 2013, ordinary shares were issued upon exercise of options and warrants as described in Note 13 to
the Consolidated Financial Statements.

13. Share-based payment plans

The expense recognized for employee and other services received during the year ended December 31, 2013 and arising from equity-settled share-based payment transactions was $2,165,000 (2011:
$4,174,000; 2012: $3,189,000). Of this total, $4,000 in 2013 (2011: $86,000; 2012: $22,000), related to warrants plans for consultants considered equivalent to employees.

The share-based payment plans are described below. There have been no cancellations or modifications to any of the plans during the years ended December 31, 2011, 2012 or 2013.

General employee stock option, founders warrant plans and restricted shares awards

All employees of the French parent company and its subsidiaries are entitled to a grant of stock options or restricted shares awards. Founders warrants were granted to residents of France prior to the
Companys IPO. Founders warrants are a specific type of option available to qualifying young companies in France and had more favorable tax treatment for both the employee and the employer compared to stock options. Otherwise, founders warrants
function in the same manner as stock options.



F-26



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



In general, vesting of the founders warrants and stock options occurs over four years, with 25% vesting
after the first anniversary of grant and the remaining 75% vesting monthly over the remaining 36 months. From time to time, vesting may be linked to employee performance. Restricted shares awards vest two years after the grant date and may be sold
only after an additional two years.

All expenses related to these plans have been recorded in the Consolidated Statement of Operations in the
same line items as the related employees cash-based compensation.

Warrant plans for certain consultants considered equivalent to
employees

The Company awards warrants to a limited number of consultants who have long-term relationships with the Company and who are
considered equivalent to employees. Vesting may be either on a monthly basis over a two-year, three-year or four-year period, or may be immediate, depending on the nature of the service contract. All expenses related to these plans have been
recorded in the Consolidated Statements of Operations in the same line items as the related service providers cash-based compensation.

Founders warrants, stock options, warrants and restricted share awards give the right to acquire ordinary shares. Following completion of the initial
public offering of the Companys shares, the exercise price is based on the closing market price on the date of grant. There is no exercise price for restricted share awards; the beneficiary receives title to the underlying ordinary shares with
no cash payment at the end of the vesting period. In general, the contractual life of the founders warrants, stock options and warrants is ten years. There are no cash settlement alternatives and the Company has not developed a practice of cash
settlement.

Movements in the periods presented

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, founders warrants, stock options, warrants and restricted shares awards during the period:



|                                                           |  |              |           |   |      |   |      |        |  |  |           |   |  |        |      |  |      |  |           |      |  |   |      | 
|---------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | ---- | ------ |  |  | --------- | - |  | ------ | ---- |  | ---- |  | --------- | ---- |  | - | ---- | 
|                                                           |  | December 31, |          
|                                                           |  | 2011         |           |   | 2012 |   |      | 2013   | 
|                                                           |  | Number       |           |   | WAEP |   |      | Number |  |  | WAEP      |   |  | Number |      |  | WAEP | 
|Outstanding at January 1,                                  |  |              | 2,329,850 |   |      | $ | 3.84 |        |  |  | 4,110,098 |   |  | $      | 5.79 |  |      |  | 4,709,198 |      |  | $ | 5.07 | 
|Granted during the year                                    |  |              | 2,079,450 |   |      | $ | 7.59 |        |  |  | 952,300   |   |  | $      | 1.03 |  |      |  | 1,056,100 |      |  | $ | 1.88 | 
|Forfeited during the year                                  |  |              | (101,042  | ) |      | $ | 5.47 |        |  |  | (336,700  | ) |  | $      | 2.72 |  |      |  | (374,650  | )    |  | $ | 5.07 | 
|Exercised during the year(1)                               |  |              | (198,160  | ) |      | $ | 1.96 |        |  |  | (16,500   | ) |  | $      | 0.92 |  |      |  | (70,800   | )(2) |  | $ | 0    | 
|Expired during the year                                    |  |              |          |   |      |   |      |        |  |  |          |   |  |        |      |  |      |  |          |      |  |   |      | 
|                                                           |  |              |           |   |      |   |      |        |  |  |           |   |  |        |      |  |      |  |           |      |  |   |      | 
|Outstanding at period end                                  |  |              | 4,110,098 |   |      | $ | 5.79 |        |  |  | 4,709,198 |   |  | $      | 5.07 |  |      |  | 5,319,848 |      |  | $ | 4.50 | 
|Of which, warrants for consultants equivalent to employees |  |              | 336,298   |   |      | $ | 3.71 |        |  |  | 348,798   |   |  | $      | 3.47 |  |      |  | 351,798   |      |  | $ | 3.49 | 
|Exercisable at period end                                  |  |              | 1,847,690 |   |      | $ | 3.86 |        |  |  | 2,602,291 |   |  | $      | 5.09 |  |      |  | 3,116,221 |      |  | $ | 5.26 | 
|Of which, warrants for consultants equivalent to employees |  |              | 325,131   |   |      | $ | 3.52 |        |  |  | 332,881   |   |  | $      | 3.54 |  |      |  | 346,548   |      |  | $ | 3.52 | 



|(1) | The weighted average share estimated fair value at the dates of exercise of these options was $2.43 in 2013, $2.60 in 2012 and $9.37 in 2011
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Restricted share awards vested in October 2013, resulting in issuance of 70,800 shares.
|--- | ---------------------------------------------------------------------------------------

Prior to the initial public offering in April 2011, exercise prices were denominated in euros. Since the IPO, exercise prices are denominated in U.S. dollars. Euro-denominated exercise prices have been
converted to U.S. dollars at the historical exchange rate for purposes of presentation in this table.

The weighted average remaining
contractual life of founders warrants, stock options and warrants outstanding as at December 31, 2013 was 6.8 years (2012: 7.1 years; 2011: 7.6 years).

The range of exercise prices, with euro-denominated exercise prices converted to U.S. dollars at the year-end exchange rate, for founders warrants, stock options, and warrants outstanding at
December 31, 2013, 2012 and 2011 was $1.43$8.61.



F-27



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



The weighted average fair value of founders warrants, stock options, warrants and restricted shares
awards granted during the year ended December 2013 was 0.70 (2012: 0.81; 2011: 4.80). The fair value is measured at the grant date. The following table lists the inputs to the models used for determining the value of the grants
made for the years ended December 31, 2011, 2012 and 2013:



|                                                |  |              |             |  |      |  |             |      |  |  |             | 
|----------------------------------------------- |  | ------------ | ----------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|                                                |  | December 31, |            
|                                                |  | 2011         |             |  | 2012 |  |             | 2013 | 
|Dividend yield (%)                              |  |              |            |  |      |  |            |      |  |  |            | 
|Expected volatility (%)                         |  |              | 58 - 61     |  |      |  | 54 - 60     |      |  |  | 52 - 57     | 
|Riskfree interest rate (%)                     |  |              | 3.24 - 3.68 |  |      |  | 2.03 - 2.93 |      |  |  | 1.71 - 2.57 | 
|Assumed annual lapse rate of options (%)        |  |              | 5           |  |      |  | 10          |      |  |  | 10          | 
|Sell price multiple (applied to exercise price) |  |              | 2           |  |      |  | 2           |      |  |  | 2           | 
|Weighted average share price ()                |  |              | 5.79        |  |      |  | 1.62        |      |  |  | 1.38        | 
|Model used                                      |  |              | Binomial    |  |      |  | Binomial    |      |  |  | Binomial    | 

Since the Company has a short history of being publicly traded, it is not practicable to determine the volatility of the
underlying shares based on the Companys own experience. Therefore, as allowed by Appendix B (paragraphs 26 to 29) of IFRS2 Share-based Payment, the historical volatility of similar entities (a selection of publicly-traded semiconductor
companies) after a comparable period in such companies lives was used.

Founders warrants, stock options, and warrants can be exercised
during a period after the vesting date until the plan terminates. In the pricing model, the assumption was made that plan participants will exercise before the end of the exercise period if the share price reaches a certain multiple of the exercise
price.

If a sell-price multiple of 3 instead of 2 had been used and if the weighted average share price used in the pricing model had been
decreased by 10%, share-based payment total compensation for founders warrants, stock options, warrants and restricted shares awards granted through December 31, 2013 would have increased by approximately 2.05% (2012: -7.95%; 2011: -1.70%).

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

14. Interest-bearing loans and borrowings



|                          |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|------------------------- |  | ---- | ---- |  | --------------- | - | - | ---- |  | - | ---- |  |  | - | --- | 
|                          |  |      |      |  | At December 31, |  
|                          |  | Note |      |  | 2011            |   |   | 2012 |  |   | 2013 | 
|                          |  |      |      |  | (in thousands)  |  
|Current                   |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|Finance lease obligation  |  |      | 14.1 |  |                 | $ |  |      |  | $ | 129  |  |  | $ | 261 | 
|                          |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|Total current portion     |  |      |      |  |                 | $ |  |      |  | $ | 129  |  |  | $ | 261 | 
|                          |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|Non-current               |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|Finance lease obligation  |  |      | 14.1 |  |                 | $ |  |      |  | $ | 236  |  |  |   | 240 | 
|                          |  |      |      |  |                 |   |   |      |  |   |      |  |  |   |     | 
|Total non-current portion |  |      |      |  |                 | $ |  |      |  | $ | 236  |  |  | $ | 240 | 

As of December 31, 2013, the Company had no drawn or undrawn committed borrowing or overdraft facilities in place,
with the exception of the unused financing lease facility as described in Note 14.1.

14.1. Finance lease obligation

Future minimum lease payments under capitalized lease obligations for the years ending December 31 were as follows:



|                                            |  |   |     |  
|------------------------------------------- |  | - | --- | -
|2014                                        |  | $ | 277 |  
|2015                                        |  |   | 234 |  
|2016                                        |  |   | 11  |  
|                                            |  |   |     |  
|Total minimum lease payments                |  |   | 522 |  
|Less amount representing interest           |  |   | (21 | )
|                                            |  |   |     |  
|Present value of net minimum lease payments |  |   | 501 |  
|Less current portion                        |  |   | 261 |  
|                                            |  |   |     |  
|Long-term portion                           |  | $ | 240 |  
|                                            |  |   |     |  



F-28



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



This debt was secured by $271,000 at December 31, 2013 ($141,000 at December 31, 2012) in
pledged money market funds, which is included in available-for-sale financial assets.

In June 2012, the Company entered into a finance lease
agreement with a French financial institution whereby the Company has the possibility to finance acquisitions of qualifying equipment with a total purchase price of up to 1,500,000 ($1,918,000), through a finance leases which are reimbursed
over a 36-month period at an effective rate of interest of 4.6%. The finance lease obligation was secured by pledged money market with the financial institution equal to one-third of the original principal financed. This agreement expired
February 28, 2013.

15. Government grant advances



|                          |  |                |     |  |      |   |     |      |  |   |     | 
|------------------------- |  | -------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                          |  | December 31,   |    
|                          |  | 2011           |     |  | 2012 |   |     | 2013 | 
|                          |  | (in thousands) |    
|Current                   |  |                |     |  |      |   |     |      |  |   |     | 
|Government grant advances |  | $              | 717 |  |      | $ | 287 |      |  | $ | 435 | 
|                          |  |                |     |  |      |   |     |      |  |   |     | 
|Total current portion     |  | $              | 717 |  |      | $ | 287 |      |  | $ | 435 | 
|                          |  |                |     |  |      |   |     |      |  |   |     | 
|Non-current               |  |                |     |  |      |   |     |      |  |   |     | 
|Government grant advances |  | $              | 385 |  |      | $ | 515 |      |  | $ | 604 | 
|                          |  |                |     |  |      |   |     |      |  |   |     | 
|Total non-current portion |  | $              | 385 |  |      | $ | 515 |      |  | $ | 604 | 
|                          |  |                |     |  |      |   |     |      |  |   |     | 

In 2011, the Company was named as a participant in one collaborative project with funding of 355,000 ($481,000),
which is expected to be released to the Consolidated Statement of Operations over the life of the project, expected to be approximately three years.

In 2012, the Company was named as a participant in two new collaborative projects with funding of 459,000 ($583,000), which is expected to be released to the Consolidated Statement of Operations
over the life of the project, expected to be between one and two years.

In 2013, the Company was named as a participant in two new
collaborative projects with funding of 695,000 ($942,000), which is expected to be released to the Consolidated Statement of Operations over the life of the project, expected to be between one and two years.

16. Provisions



|                                   |  |                         |     |  |        |   |      |       |  |   |         |   |  |             |     |  |  |   |     | 
|---------------------------------- |  | ----------------------- | --- |  | ------ | - | ---- | ----- |  | - | ------- | - |  | ----------- | --- |  |  | - | --- | 
|                                   |  | Post-employmentbenefits |     |  | Others |   |      | Total |  |   | Current |   |  | Non-current |    
|                                   |  | (in thousands)          |    
|At January 1, 2011                 |  |                         | 184 |  |        |   | 432  |       |  |   | 616     |   |  |             | 432 |  |  |   | 184 | 
|Arising (released) during the year |  |                         | 75  |  |        |   | (357 | )     |  |   | (282    | ) |  |             |    |  |  |   |    | 
|                                   |  |                         |     |  |        |   |      |       |  |   |         |   |  |             |     |  |  |   |     | 
|At December 31, 2011               |  |                         | 259 |  |        |   | 75   |       |  |   | 334     |   |  |             | 75  |  |  |   | 259 | 
|Arising (released) during the year |  |                         | 110 |  |        |   | 455  |       |  |   | 565     |   |  |             |    |  |  |   |    | 
|                                   |  |                         |     |  |        |   |      |       |  |   |         |   |  |             |     |  |  |   |     | 
|At December 31, 2012               |  |                         | 369 |  |        |   | 530  |       |  |   | 899     |   |  |             | 530 |  |  |   | 369 | 
|Arising (released) during the year |  |                         | 91  |  |        |   | 53   |       |  |   | 144     |   |  |             |    |  |  |   |    | 
|                                   |  |                         |     |  |        |   |      |       |  |   |         |   |  |             |     |  |  |   |     | 
|At December 31, 2013               |  | $                       | 460 |  |        | $ | 583  |       |  | $ | 1,043   |   |  | $           | 583 |  |  | $ | 460 | 
|                                   |  |                         |     |  |        |   |      |       |  |   |         |   |  |             |     |  |  |   |     | 

The provision for post-employment benefits is for the lump sum retirement indemnity required to be paid to French
employees. No employee has retired during the past three years.



F-29



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



The main assumptions used in the calculation are the following:



|                                     |  |                                              |  |                             |  |                            
|------------------------------------ |  | -------------------------------------------- |  | --------------------------- |  | ---------------------------
|                                     |  | 2011                                         |  | 2012                        |  | 2013                       
|Discount rate                        |  | 4.60%                                        |  | 2.83%                       |  | 3.17%                      
|Salary increase                      |  | between 2% and 4%                            |  | between 2% and 3%           |  | 3%                         
|Retirement age                       |  | 67 years                                     |  | 67 years                    |  | 67 years                   
|Turnover: depending on the seniority |  | between 3.5% and14%, nil as from
50 year old |  | 10%, nil as from 50year old |  | 10%, nil as from 50year old

In December 2011, the Company was notified that the French tax authorities would review the tax declarations for the
years 2009 and 2010, and the nine months ended September 30, 2011. In December 2012, the Company received proposed tax adjustments, penalties and related to the French tax audit totaling 884,000 ($1,167,000), which relates almost entirely
to the research tax credits claimed for 2008 and 2009. The Company disagreed with nearly all the adjustments, which for the most part are differences of judgment, and intends to vigorously defend its position. Nevertheless, a provision for $327,000
has been recorded in the year ended December 31, 2012 given the current trend of such disputes in France. This is the primary component of other provisions as of December 31, 2012 and 2013. In February 2013, the Company
provided its rebuttal to the proposed tax adjustment and, as of the date of issuance of the Financial Statements, the Company had not received the conclusions of the tax audit yet.

During the year ended December 31, 2011, the Company released all the provision for estimated payments to patent-holders which may be deemed as essential under the requirements of the WiMAX standard
as defined by the IEEE, due to the low probability of payments.

17. Trade payables and other current liabilities



|                                |  |                 |       |  |      |   |       |      |  |   |       | 
|------------------------------- |  | --------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                |  | At December 31, |      
|                                |  | 2011            |       |  | 2012 |   |       | 2013 | 
|                                |  | (in thousands)  |      
|Trade payables                  |  | $               | 8,580 |  |      | $ | 6,038 |      |  | $ | 7,252 | 
|Other current liabilities:      |  |                 |       |  |      |   |       |      |  |   |       | 
|Employees and social debts      |  |                 | 4,095 |  |      |   | 3,475 |      |  |   | 3,668 | 
|Others                          |  |                 | 1,751 |  |      |   | 658   |      |  |   | 716   | 
|                                |  |                 |       |  |      |   |       |      |  |   |       | 
|Total other current liabilities |  | $               | 5,846 |  |      | $ | 4,133 |      |  | $ | 4,384 | 
|                                |  |                 |       |  |      |   |       |      |  |   |       | 
|Deferred revenue                |  | $               | 869   |  |      | $ | 609   |      |  | $ | 343   | 
|                                |  |                 |       |  |      |   |       |      |  |   |       | 

Terms and conditions of the above financial liabilities:



| |  |  | Trade payables are non-interest bearing and are normally settled on 30-day terms.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Other payables, primarily accrued compensation and related social charges, are non-interest bearing.
| | - |  | ----------------------------------------------------------------------------------------------------

Deferred revenue is related to maintenance revenue, recognized over the 12-month maintenance period.



F-30



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



18. Information about financial instruments

18.1. Financial assets and liabilities



|                                                                        |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|----------------------------------------------------------------------- |  | --------------- | ------ |  | ------------ | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ |  |  | - | ------ | 
|                                                                        |  | Carrying amount |        |  | Fair value   |  
|                                                                        |  | December 31,    |        |  | December 31, |  
|                                                                        |  | 2011            |        |  | 2012         |   |        | 2013 |  |   | 2011   |  |  | 2012 |        |  | 2013 |  
|                                                                        |  | (in thousands)  |       
|Financial assets:                                                       |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Trade and other receivables                                             |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Trade receivables                                                       |  | $               | 8,387  |  |              | $ | 5,529  |      |  | $ | 5,486  |  |  | $    | 8,387  |  |      | $ | 5,529  |  |  | $ | 5,486  | 
|Cash flow hedges                                                        |  |                 |       |  |              |   | 142    |      |  |   |       |  |  |      |       |  |      |   | 142    |  |  |   |       | 
|Loans and other receivables                                             |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Deposits                                                                |  |                 | 531    |  |              |   | 458    |      |  |   | 471    |  |  |      | 531    |  |      |   | 458    |  |  |   | 471    | 
|Available for sale instruments                                          |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Long-term investments                                                   |  |                 | 677    |  |              |   | 931    |      |  |   | 1,098  |  |  |      | 677    |  |      |   | 931    |  |  |   | 1,098  | 
|Cash and cash equivalents                                               |  |                 | 57,220 |  |              |   | 28,751 |      |  |   | 37,244 |  |  |      | 57,220 |  |      |   | 28,751 |  |  |   | 37,244 | 
|                                                                        |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Total financial assets                                                  |  | $               | 66,815 |  |              | $ | 35,811 |      |  | $ | 44,299 |  |  | $    | 66,815 |  |      | $ | 35,811 |  |  | $ | 44,299 | 
|Total current                                                           |  | $               | 65,607 |  |              | $ | 34,422 |      |  | $ | 42,730 |  |  | $    | 65,607 |  |      | $ | 34,422 |  |  | $ | 42,730 | 
|Total non-current                                                       |  | $               | 1,208  |  |              | $ | 1,389  |      |  | $ | 1,569  |  |  | $    | 1,208  |  |      | $ | 1,389  |  |  | $ | 1,569  | 
|Financial liabilities:                                                  |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Interest-bearing loans and borrowings:                                  |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Finance lease liability                                                 |  |                 |       |  |              |   | 365    |      |  |   | 501    |  |  |      |       |  |      |   | 365    |  |  |   | 501    | 
|Trade and other payables                                                |  |                 | 8,580  |  |              |   | 6,038  |      |  |   | 7,252  |  |  |      | 8,580  |  |      |   | 6,038  |  |  |   | 7,252  | 
|Financial instruments at fair value through other comprehensive income: |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Cash flow hedges                                                        |  |                 | 1,007  |  |              |   |       |      |  |   | 271    |  |  |      | 1,007  |  |      |   |       |  |  |   | 271    | 
|                                                                        |  |                 |        |  |              |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|Total financial liabilities                                             |  | $               | 9,587  |  |              | $ | 6,403  |      |  | $ | 8,024  |  |  | $    | 9,587  |  |      | $ | 6,403  |  |  | $ | 8,024  | 
|Total current                                                           |  | $               | 9,587  |  |              | $ | 6,167  |      |  | $ | 7,784  |  |  | $    | 9,587  |  |      | $ | 6,167  |  |  | $ | 7,784  | 
|Total non-current                                                       |  | $               |       |  |              | $ | 236    |      |  | $ | 240    |  |  | $    |       |  |      | $ | 236    |  |  | $ | 240    | 

The carrying values of current financial instruments (cash and cash equivalents, trade receivables and trade and other
payables) approximate their fair values, due to their short-term nature.

Available for sale long-term investments are primarily related to:



| |  |  | a bank guarantee secured by pledges of investments in money market funds issued in favor of the owners of leased office space to secure annual lease
payments by the Company for its office space in Paris. This guarantee is expected to be reimbursed after the end of the lease in May 2014;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | bank credit lines used in connection with the purchase of hedging instruments and finance lease, also secured by pledged money market funds.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

Fair Value Hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:



| |  |  | Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



F-31



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



As at December 31, 2011, the Company held the following financial instruments carried at fair value
on the statement of financial position:

Assets measured at fair value



|                                |  |                 |     |  |         |  |   |         |  |   |         |  |  |  |   | 
|------------------------------- |  | --------------- | --- |  | ------- |  | - | ------- |  | - | ------- |  |  |  | - | 
|                                |  | At December 31, |     |  |         |  |   |         |  |   |         | 
|                                |  | 2011            |     |  | Level 1 |  |   | Level 2 |  |   | Level 3 | 
|                                |  | (in thousands)  |    
|Available-for-sale instruments: |  |                 |     |  |         |  |   |         |  |   |         |  |  |  |   | 
|Long-term investments           |  | $               | 677 |  |         |  |  |         |  | $ | 677     |  |  |  |  | 

Liabilities measured at fair value



|                                                                        |  |                 |        |   |         |  |   |         |  |   |         |   |  |  |   | 
|----------------------------------------------------------------------- |  | --------------- | ------ | - | ------- |  | - | ------- |  | - | ------- | - |  |  | - | 
|                                                                        |  | At December 31, |        |   |         |  |   |         |  |   |         |  
|                                                                        |  | 2011            |        |   | Level 1 |  |   | Level 2 |  |   | Level 3 |  
|                                                                        |  | (in thousands)  |       
|Financial instruments at fair value through other comprehensive income: |  |                 |        |   |         |  |   |         |  |   |         |   |  |  |   | 
|Cash flow and fair value hedges                                         |  | $               | (1,007 | ) |         |  |  |         |  | $ | (1,007  | ) |  |  |  | 

As at December 31, 2012, the Company held the following financial instruments carried at fair value on the statement
of financial position:

Assets measured at fair value



|                                |  |                 |     |  |         |  |   |         |  |   |         |  |  |  |   | 
|------------------------------- |  | --------------- | --- |  | ------- |  | - | ------- |  | - | ------- |  |  |  | - | 
|                                |  | At December 31, |     |  |         |  |   |         |  |   |         | 
|                                |  | 2012            |     |  | Level 1 |  |   | Level 2 |  |   | Level 3 | 
|                                |  | (in thousands)  |    
|Available-for-sale instruments: |  |                 |     |  |         |  |   |         |  |   |         |  |  |  |   | 
|Long-term investments           |  | $               | 931 |  |         |  |  |         |  | $ | 931     |  |  |  |  | 
|Trade and other receivables:    |  |                 |     |  |         |  |   |         |  |   |         |  |  |  |   | 
|Cash flow and fair value hedges |  |                 | 142 |  |         |  |   |         |  |   | 142     |  |  |  |   | 

As at December 31, 2013, the Company held the following financial instruments carried at fair value on the statement
of financial position:

Assets measured at fair value



|                                |  |                 |       |  |         |  |   |         |  |   |         |  |  |  |   | 
|------------------------------- |  | --------------- | ----- |  | ------- |  | - | ------- |  | - | ------- |  |  |  | - | 
|                                |  | At December 31, |       |  |         |  |   |         |  |   |         | 
|                                |  | 2013            |       |  | Level 1 |  |   | Level 2 |  |   | Level 3 | 
|                                |  | (in thousands)  |      
|Available-for-sale instruments: |  |                 |       |  |         |  |   |         |  |   |         |  |  |  |   | 
|Long-term investments           |  | $               | 1,098 |  |         |  |  |         |  | $ | 1,098   |  |  |  |  | 

Liabilities measured at fair value



|                                                                        |  |                 |      |   |         |  |   |         |  |   |         |   |  |  |   | 
|----------------------------------------------------------------------- |  | --------------- | ---- | - | ------- |  | - | ------- |  | - | ------- | - |  |  | - | 
|                                                                        |  | At December 31, |      |   |         |  |   |         |  |   |         |  
|                                                                        |  | 2013            |      |   | Level 1 |  |   | Level 2 |  |   | Level 3 |  
|                                                                        |  | (in thousands)  |     
|Financial instruments at fair value through other comprehensive income: |  |                 |      |   |         |  |   |         |  |   |         |   |  |  |   | 
|Fair value hedge                                                        |  | $               | (271 | ) |         |  |  |         |  | $ | (271    | ) |  |  |  | 

18.2. Financial instruments at fair value

The Company uses financial instruments, including derivatives such as foreign currency forward and options contracts, to reduce the foreign exchange risk on cash flows from firm and highly probable
commitments denominated in euros.

The following tables present fair values of derivative financial instruments at December 31, 2011,
2012 and 2013.



F-32



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



|                                                 |  |                      |        |   |            |   |        |  
|------------------------------------------------ |  | -------------------- | ------ | - | ---------- | - | ------ | -
|                                                 |  | At December 31, 2011 |       
|                                                 |  | Notional Amount      |        |   | Fair value |  
|                                                 |  | (in thousands)       |       
|Forward contracts (buy euros, sell U.S. dollars) |  |                     | 7,500  |   |            | $ | (379   | )
|Options (buy euros, sell U.S. dollars)           |  |                      | 6,500  |   |            |   | (681   | )
|                                                 |  |                      |        |   |            |   |        |  
|Total                                            |  |                     | 14,000 |   |            | $ | (1,060 | )
|                                                 |  |                      |        |   |            |   |        |  
|                                                 | 
|                                                 |  | At December 31, 2012 |       
|                                                 |  | Notional Amount      |        |   | Fair value |  
|                                                 |  | (in thousands)       |       
|Forward contracts (buy euros, sell U.S. dollars) |  |                     | 7,000  |   |            | $ | 231    |  
|Forward contracts (buy U.S dollars, sell euros)  |  |                      | (6,000 | ) |            |   | (141   | )
|Options (buy euros, sell U.S. dollars)           |  |                      | 3,000  |   |            |   | 8      |  
|                                                 |  |                      |        |   |            |   |        |  
|Total                                            |  |                     | 4,000  |   |            | $ | 98     |  
|                                                 |  |                      |        |   |            |   |        |  
|                                                 | 
|                                                 |  | At December 31, 2013 |       
|                                                 |  | Notional Amount      |        |   | Fair value |  
|                                                 |  | (in thousands)       |       
|Forward contracts (buy U.S dollars, sell euros)  |  |                     | (4,250 | ) |            | $ | (271   | )
|                                                 |  |                      |        |   |            |   |        |  
|Total                                            |  |                     | (4,250 | ) |            | $ | (271   | )
|                                                 |  |                      |        |   |            |   |        |  

The fair value of foreign currency related derivatives are included in the Consolidated Statement of Financial Position
in Other current financial liabilities for the periods presented. The earnings impact of cash flow hedges relating to forecasted operating expense transactions is reported in operating expense. Realized and unrealized gains and losses on
these instruments deemed effective for hedge accounting are deferred in accumulated other comprehensive income until the underlying transaction is recognized in earnings or the instruments are designated as hedges.

During the year ended December 31, 2012, the Company recorded a gain of $147,000 (loss of $355,000 for the year ended December 31, 2011) in
other comprehensive income related to the effective portion of the change in fair value of its cash flow hedges. There was no fair value of cash flow hedges as of December 31, 2013. During the year ended December 31, 2013, the amount
transferred from other comprehensive income to Consolidated Statement of Operations was a gain of $275,000.

During the year ended
December 31, 2012, the Company recognized a net gain of $26,000 and a net loss of $132,000 for the year ended December 31, 2011. There was no ineffective portion of hedging instrument in the year ended December 31, 2013.

The derivatives have maturity dates of less than 12 months. Management believes counterparty risk on financial instruments is minimal since the Company
deals with major banks and financial institutions.

The use of different estimations, methodologies and assumptions could have a material
effect on the estimated fair value amounts. The methodologies are as follows:



| |  |  | Cash, cash equivalents, accounts receivable, accounts payable, other receivable and accrued liabilities: due to the short-term nature of these
balances, carrying amounts approximate fair value.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Available for sale long -term investments are composed of debt-based mutual funds with traded market prices. Their fair values amounted to $677,000,
$931,000 and $1,098,000 at December 31, 2011, 2012 and 2013, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Foreign exchange forward and option contracts: the fair values of foreign exchange forward and option contracts were calculated using the market price
that the Company would pay or receive to settle the related agreements, by reference to published exchange rates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18.3.
Financial risk management objectives and policies

The Companys principal financial liabilities comprise trade payables. The Company
has various financial assets such as trade receivables and cash and cash equivalents, which arise directly from its operations, as well as from capital increases.



F-33



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



The main risks arising from the Companys financial instruments are foreign currency risk, credit
risk, interest rate risk and cash flow liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below.

Foreign currency risk

The Company faces the following foreign currency exposures:



| |  |  | Transaction risk arising from:
| | - |  | ------------------------------



| |  |  | Operating activities, when revenues or expenses are denominated in different currencies from the functional currency of the entity carrying out these
transactions.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non derivative monetary financial instruments that are denominated and settled in a currency different from the functional currency of the entity which
holds them.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Nearly 100% of total revenues and approximately 99% of total cost of sales are denominated in U.S. dollars.
However, as a result of significant headcount and related costs from operations in France, which are denominated and settled in euros (the structural costs), the Company has transactional currency exposures which can be affected
significantly by movements in the US dollar/euro exchange rates. Approximately 49% of operating expense is denominated in euros. The Company seeks to mitigate the effect of its structural currency exposure by raising capital in euros sufficient to
cover euro-based operating expenses. The Company has not used the possibility offered by paragraph 72 of IAS 39 Financial Instruments: Recognition and Measurement to designate non-derivative financial assets (cash and cash equivalents plus
trade accounts receivables less trade accounts payable, denominated in euro) as a hedging instrument for a hedge of a foreign currency risk (US dollar versus euro fluctuations) corresponding to structural cost related future cash outflows.

If there were a 10% increase or decrease in exchange rate of the U.S. dollar to the euro, the Company estimates the impact, in absolute
terms, on operating expenses for the year ended December 31, 2013 would have been approximately $2.0 million.

Credit risk

The Company trades only with recognized, creditworthy third parties. It is the Companys policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. The Company has subscribed to a credit insurance policy which provides assistance in determining credit limits and collection, in addition to some coverage of uncollectible
amounts. In addition, receivable balances are monitored on an ongoing basis with the result that the Companys exposure to bad debts is not significant.

The following table summarizes customers representing a significant portion of the Compagnys total revenue:



|         |  |                   |  |                                                     |              |   |                                      |  |              |      |  |  |              |   |  |      |           |  |      |   |         |  |  |   |           | 
|-------- |  | ----------------- |  | --------------------------------------------------- | ------------ | - | ------------------------------------ |  | ------------ | ---- |  |  | ------------ | - |  | ---- | --------- |  | ---- | - | ------- |  |  | - | --------- | 
|Customer |  | Customer Location |  | % of total revenues for the year ended December 31, |              |   | Accounts receivables at December 31, | 
|         |  |                   |  | 2013                                                |              |   | 2012                                 |  |              | 2011 |  |  | 2013         |   |  | 2012 |           |  | 2011 |  
|A        |  | China             |  |                                                     | 33           | % |                                      |  | 16           | %    |  |  | Less than 10 | % |  | $    | 1,317,000 |  |      | $ | 787,000 |  |  | $ | 170,000   | 
|B        |  | United States     |  |                                                     | 22           | % |                                      |  | Less than 10 | %    |  |  | 0            | % |  | $    | 1,485,000 |  |      | $ | 100,000 |  |  | $ | 0         | 
|C        |  | China             |  |                                                     | 14           | % |                                      |  | Less than 10 | %    |  |  | Less than 10 | % |  | $    | 475,000   |  |      | $ | 177,000 |  |  | $ | 56,000    | 
|D        |  | United States     |  |                                                     | 10           | % |                                      |  | 0            | %    |  |  | 0            | % |  | $    | 350,000   |  |      | $ | 0       |  |  | $ | 0         | 
|E        |  | Taiwan            |  |                                                     | Less than 10 | % |                                      |  | 32           | %    |  |  | 78           | % |  | $    | 71,000    |  |      | $ | 538,000 |  |  | $ | 5,227,000 | 

With respect to credit risk arising from the other financial assets, which comprise cash and cash equivalents, the
Companys exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Nearly all cash and cash equivalents are held in France at two large and international banks.



F-34



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Vendor concentration risk

Access to foundry capacity is critical to the Companys operations as a fabless semiconductor company. The Company depends on a sole independent foundry in Taiwan to manufacture its semiconductor
wafers.

Liquidity risk

The Company monitors its risk of a shortage of funds using a cash flow planning tool. This tool considers the maturity of both its financial investments
and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operations.



|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|--------------------------- |  | -------------- | ------ |  | ----------- | - | --- | ----------- |  | - | ----------- |  |  | ----------- | - |  | --------------- |  | - | ----- |  |  | - |  |  | - | ------ | 
|                            |  | Within 1year   |        |  | 1 to 2years |   |     | 2 to 3years |  |   | 3 to 4years |  |  | 4 to 5years |   |  | Morethan 5years |  |   | Total | 
|                            |  | (in thousands) |       
|At December 31, 2011        |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|Trade payables              |  | $              | 8,580  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  | $ | 8,580  | 
|Other financial liabilities |  |                | 5,846  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  |   | 5,846  | 
|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|                            |  | $              | 14,426 |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  | $ | 14,426 | 
|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|At December 31, 2012        |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|Finance lease               |  | $              | 129    |  |             | $ | 135 |             |  | $ | 101         |  |  |             |  |  |                 |  |  |       |  |  |  |  |  | $ | 365    | 
|Trade payables              |  |                | 6,038  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  |   | 6,038  | 
|Other financial liabilities |  |                | 4,133  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  |   | 4,133  | 
|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|                            |  | $              | 10,300 |  |             |   | 135 |             |  |   | 101         |  |  |             |   |  |                 |  |   |       |  |  |   |  |  | $ | 10,536 | 
|At December 31, 2013        |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|Finance lease               |  | $              | 261    |  |             | $ | 232 |             |  | $ | 8           |  |  |             |  |  |                 |  |  |       |  |  |  |  |  | $ | 501    | 
|Trade payables              |  |                | 7,252  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  |   | 7,252  | 
|Other financial liabilities |  |                | 4,384  |  |             |   |    |             |  |   |            |  |  |             |  |  |                 |  |  |       |  |  |  |  |  |   | 4,384  | 
|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 
|                            |  | $              | 11,897 |  |             |   | 232 |             |  |   | 8           |  |  |             |   |  |                 |  |   |       |  |  |   |  |  | $ | 12,137 | 
|                            |  |                |        |  |             |   |     |             |  |   |             |  |  |             |   |  |                 |  |   |       |  |  |   |  |  |   |        | 

Capital management

The primary objective of the Companys capital management is to continue to execute according to its business plans and budgets in order to achieve profitability and positive cash flow, and to
maximize shareholder value.

19. Commitments and contingencies

Contingencies

From time to time, the Company has been and may become involved in
legal proceedings arising in the ordinary course of its business.

On December 14, 2012, the French tax authorities proposed revising
research tax credits («Credit Impôt Recherche») granted to the Company for the years 2008 and 2009, for a total amount in tax adjustments, penalties and interest of 884,000 ($1,167,000). The Company intends to vigorously
contest this tax adjustment (see Note 16 to the Consolidated Financial Statements).

On September 9, 2011, a class action
lawsuit was filed in the United States District Court for the Southern District of New York against the Company, certain of its officers and directors, and UBS Limited and Jefferies & Company Inc, the lead underwriters in the Companys
initial public offering. This action, Donald Dean Johnson v. Sequans Communications S.A., et al, alleges violations of the U.S. federal securities laws in connection with the Companys initial public offering. A substantially similar complaint
was filed on October 25, 2011, also in the United States District Court for the Southern District of New York. On December 13, 2011 the Court consolidated the two actions, and appointed lead plaintiffs and co-lead plaintiffs counsel.
On January 31, 2012, lead plaintiffs filed a Consolidated Amended Complaint for Violations of Federal Securities Laws, which seeks unspecified damages. On May 14, 2012, the Company filed a Motion to Dismiss the consolidated complaint.
Following oral argument, on January 17, 2013, the Court granted the Companys motion and gave lead plaintiffs 20 days leave to move to amend their complaint. On February 7, 2013, plaintiffs brought a motion for leave to file an
amended complaint, and on March 15, 2013, the Company filed an opposition, and on April 16, 2013, plaintiffs filed a reply. The parties subsequently engaged in settlement discussions and stayed the litigation pending mediation. Following
mediation, on June 21, 2013, the parties informed the Court that they had reached an agreement in principle to settle the action, subject to the negotiation of a mutually agreeable settlement agreement. A settlement agreement was executed on
October 31, 2013, and the Court preliminarily approved the settlement on November 20, 2013. On January 8, 2014, plaintiffs filed a motion with the Court for final approval of the settlement, a plan of allocation of the settlement
proceeds, and an award of attorneys fees and expenses. That motion is still pending. Any payment under the settlement agreement, including payment of attorneys fees and expenses, will be paid directly by the insurance company.



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Bank guarantee

A bank guarantee was issued in favor of the owners of leased office space in France, in order to secure six months of lease payments, for an amount of $815,000 as of December 31, 2013. This guarantee
was secured by the pledge of certificates of deposit and mutual funds for 100% of the amount of the guarantee. The total value of investments secured to cover this bank guarantee was $281,000, $791,000 and $828,000 at December 31, 2011, 2012
and 2013, respectively.

Operating leases

The Company has long-term operating leases for office rental. Future minimum undiscounted lease payments under operating leases are as follows:



|                                            |  |                |       |  |      |   |       |      |  |   |       | 
|------------------------------------------- |  | -------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                            |  | December 31,   |      
|                                            |  | 2011           |       |  | 2012 |   |       | 2013 | 
|                                            |  | (in thousands) |      
|Within one year                             |  | $              | 1,434 |  |      | $ | 1,604 |      |  | $ | 1,382 | 
|After one year but not more than five years |  |                | 1,901 |  |      |   | 793   |      |  |   | 3,022 | 
|More than five years                        |  |                |      |  |      |   |      |      |  |   | 961   | 
|                                            |  |                |       |  |      |   |       |      |  |   |       | 
|Total minimum lease payments                |  | $              | 3,335 |  |      | $ | 2,397 |      |  | $ | 5,365 | 
|                                            |  |                |       |  |      |   |       |      |  |   |       | 

Total operating lease expense for the year ended December 31, 2013 was $1,991,000 (2012: $1,794,000; $2011:
$1,754,000).

Purchase commitments

At December 31, 2013, the Company had $1.0 million of non-cancelable purchase commitments with its third-party manufacturer and suppliers for future deliveries of equipment and components,
principally during the first half of 2014.

20. Related party disclosures

There is no single investor who has the ability to control the Board of Directors or the vote on shareholder resolutions. There is one investor who owns in excess of 10% of the share capital of the
Company: Caisse des Dépôts et Consignations.

Mr. Zvi Slonimsky, a member of the Board of Directors, was granted by the
Company, on January 11, 2006, 225,000 warrants, subscribed by Mr. Slonimsky at the price of 0.02 per warrant. Each warrant gives the holder the right to purchase one ordinary share of the Company at the price of $3.16 per share.
The warrants were fully vested in January 2010 and may be exercised for a period of 10 years from the subscription date; all unexercised warrants become null and void at the end of the 10-year period. In the year ended December 31, 2011,
Mr. Slonimsky exercised warrants to acquire 8,202 ordinary shares.

Effective June 1, 2012, the Company and Gilles Delfassy, prior
to Mr. Delfassy joining the board of directors, entered into an agreement whereby Mr. Delfassy provided to the Company consultancy services in the area of business development and strategy in the broadband wireless access industry. This
agreement expired on June 1, 2013. During the year ended December 31, 2013, Mr. Delfassy earned fees totaling $71,000 under this contract.

No other transactions have been entered into with these or any other related parties in 2011, 2012 and 2013, other than normal compensation (including share based payment arrangements) for and
reimbursement of expenses incurred in their roles as Directors or employees of the Company.



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##### Table of Contents

Sequans Communications S.A.

Notes to the Consolidated Financial Statements (Continued)



Compensation of key management personnel



|                                                                           |  |                         |       |  |      |   |       |      |  |   |       | 
|-------------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                                           |  | Year ended December 31, |      
|                                                                           |  | 2011                    |       |  | 2012 |   |       | 2013 | 
|                                                                           |  | (in thousands)          |      
|Fixed and variable wages, social charges and benefits expensed in the year |  | $                       | 2,778 |  |      | $ | 2,490 |      |  | $ | 2,464 | 
|Share-based payment expense for the year                                   |  |                         | 2,473 |  |      |   | 2,170 |      |  |   | 1,541 | 
|                                                                           |  |                         |       |  |      |   |       |      |  |   |       | 
|Total compensation expense for key management personnel                    |  | $                       | 5,251 |  |      | $ | 4,660 |      |  | $ | 4,005 | 
|                                                                           |  |                         |       |  |      |   |       |      |  |   |       | 

Key management personnel comprises the chief executive officer and all executive vice presidents reporting directly to
him.

The employment agreement with the chief executive officer calls for the payment of a termination indemnity of an amount equal to one
year of his gross annual base remuneration in the event of his dismissal by the Board of Directors of the Company.

In the year ended
December 31, 2013, the Company expensed a total of $172,000 board fees to non-executive members (2012: $162,000; 2011: $135,000).

One
non-executive board member was paid fees under the consulting agreement described above in 2013.

Directors interests in an
employee share incentive plan

In addition to the warrants granted to Mr. Slonimsky as described above, the Company granted
warrants to certain members of the Board of Directors during the years ended December 31, 2011, 2012 and 2013:

- On January 11,
2011, the Company granted to Messrs. Patterson, Sharma and Slonimsky 25,000 warrants each with an exercise price of 6.28 ($8.29) per ordinary share.

- On March 8, 2011, the Company granted to Messrs. de Pesquidoux and Pitteloud 25,000 warrants each, and to Dr. Georges Karam (CEO) 500,000 founders warrants with an exercise price of 6.26
($8.26) per ordinary share.

- On June 26, 2012, the shareholders authorized the Board of Directors to grant to Messrs. de Pesquidoux,
Patterson, Pitteloud, Sharma and Slonimsky 6,000 warrants each and to Mr. Delfassy 25,000 warrants. On June 26, 2012, the Board used this authorization to make such grants with an exercise price of $2.19 per ordinary share.

- On June 25, 2013, the shareholders authorized the Board of Directors to grant to Messrs. de Pesquidoux, Delfassy, Patterson, Pitteloud, Sharma and
Slonimsky 6,000 warrants each. On June 25, 2013, the Board used this authorization to make such grants with an exercise price of $1.47 per ordinary share.

The board members were required to subscribe to the warrants at a price of 0.01 per warrant, as required by French law. There is no subscription required for founders warrants.

Share-based payment expense incurred in connection with these transactions amounted to $178,000 in the year ended December 31, 2013 (2012: $195,000;
2011: $308,000).

21. Events after the reporting date

In its meetings of February 4, 2014 and March 25, 2014, the Board of Directors granted 26,600 and 23,300 stock options, respectively, at exercise prices of $2.67 and $2.79 per ordinary share,
respectively.



F-37