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|
|
|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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Delaware
|
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22-3509099
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification Number)
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7195 Oakport Street
Oakland, California
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94621
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(Address of principal executive offices)
|
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(Zip code)
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|
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Large accelerated filer
|
¨
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Accelerated filer
|
x
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Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
¨
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Page
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PART I. FINANCIAL INFORMATION
|
||
|
|
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Item 1.
|
||
|
||
|
||
|
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|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
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PART II. OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
NOT REVIEWED
1
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
34,375
|
|
|
$
|
10,015
|
|
Restricted cash
|
5,218
|
|
|
3,844
|
|
||
Short-term investments
|
—
|
|
|
—
|
|
||
Accounts receivable, net of allowances for sales returns and doubtful accounts of $5,492 as of September 30, 2016 and $868 as of December 31, 2015
|
39,306
|
|
|
32,728
|
|
||
Other receivables
|
12,892
|
|
|
13,010
|
|
||
Current deferred income tax assets
|
—
|
|
|
327
|
|
||
Inventories, net
|
31,957
|
|
|
13,900
|
|
||
Prepaid expenses and other current assets
|
3,878
|
|
|
951
|
|
||
Total current assets
|
127,626
|
|
|
74,775
|
|
||
Property and equipment, net
|
6,258
|
|
|
2,251
|
|
||
Intangible assets, net
|
22,573
|
|
|
696
|
|
||
Non-current deferred income tax assets
|
2,114
|
|
|
1,058
|
|
||
Other assets
|
1,778
|
|
|
4,811
|
|
||
Total assets
|
$
|
160,349
|
|
|
$
|
83,591
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
20,609
|
|
|
$
|
14,936
|
|
Short-term debt
|
21,941
|
|
|
21,848
|
|
||
Accrued and other liabilities
|
26,735
|
|
|
4,467
|
|
||
Total current liabilities
|
69,285
|
|
|
41,251
|
|
||
Long-term debt - Related Party
|
5,000
|
|
|
—
|
|
||
Other long-term liabilities
|
8,024
|
|
|
510
|
|
||
Total liabilities
|
82,309
|
|
|
41,761
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock, authorized 180,000 shares, 81,874 shares of the Company as of September 30, 2016 at $0.001 par value. 353,678 shares of DNS outstanding as of December 31, 2015 at $0.144 and $1 per share.
|
81,874
|
|
|
56,579
|
|
||
Additional paid-in capital
|
7,283
|
|
|
(8,890
|
)
|
||
Other comprehensive loss
|
908
|
|
|
(1,775
|
)
|
||
Accumulated deficit
|
(12,743
|
)
|
|
(4,222
|
)
|
||
Non-controlling interest
|
718
|
|
|
138
|
|
||
Total stockholders’ equity
|
78,040
|
|
|
41,830
|
|
||
Total liabilities and stockholders’ equity
|
$
|
160,349
|
|
|
$
|
83,591
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
NOT REVIEWED
1
|
||||||||||||||
Net revenue
|
$
|
32,166
|
|
|
$
|
22,591
|
|
|
$
|
93,256
|
|
|
$
|
93,339
|
|
Cost of revenue
|
22,693
|
|
|
16,774
|
|
|
68,997
|
|
|
69,287
|
|
||||
Gross profit
|
9,473
|
|
|
5,817
|
|
|
24,259
|
|
|
24,052
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and product development
|
5,885
|
|
|
4,859
|
|
|
15,582
|
|
|
16,546
|
|
||||
Selling, general and administrative
|
8,202
|
|
|
3,939
|
|
|
16,903
|
|
|
12,458
|
|
||||
Amortization of intangible assets
|
299
|
|
|
—
|
|
|
299
|
|
|
—
|
|
||||
Total operating expenses
|
14,386
|
|
|
8,798
|
|
|
32,784
|
|
|
29,004
|
|
||||
Operating loss
|
(4,913
|
)
|
|
(2,981
|
)
|
|
(8,525
|
)
|
|
(4,952
|
)
|
||||
Interest expense, net
|
(173
|
)
|
|
(87
|
)
|
|
(463
|
)
|
|
(286
|
)
|
||||
Other income, net
|
52
|
|
|
583
|
|
|
117
|
|
|
780
|
|
||||
Loss before income taxes
|
(5,034
|
)
|
|
(2,485
|
)
|
|
(8,871
|
)
|
|
(4,458
|
)
|
||||
Income tax expense (benefit)
|
(153
|
)
|
|
295
|
|
|
(584
|
)
|
|
480
|
|
||||
Net loss
|
(4,881
|
)
|
|
(2,780
|
)
|
|
(8,287
|
)
|
|
(4,938
|
)
|
||||
Less: Net income attributable to non-controlling interest
|
38
|
|
|
—
|
|
|
234
|
|
|
—
|
|
||||
Net loss attributable to DASAN Zhone Solutions, Inc.
|
(4,919
|
)
|
|
(2,780
|
)
|
|
(8,521
|
)
|
|
(4,938
|
)
|
||||
Other comprehensive income, net of foreign currency translation adjustments
|
2,269
|
|
|
1,009
|
|
|
2,670
|
|
|
107
|
|
||||
Comprehensive loss
|
$
|
(2,612
|
)
|
|
$
|
(1,771
|
)
|
|
$
|
(5,617
|
)
|
|
$
|
(4,831
|
)
|
Less: Comprehensive income attributable to non-controlling interest
|
44
|
|
|
0
|
|
|
303
|
|
|
0
|
|
||||
Comprehensive loss attributable to DASAN Zhone Solutions, Inc.
|
$
|
(2,656
|
)
|
|
$
|
(1,771
|
)
|
|
$
|
(5,920
|
)
|
|
$
|
(4,831
|
)
|
Basic and diluted net loss per share
|
$
|
(0.06
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.01
|
)
|
Weighted average shares outstanding used to compute basic net loss per share
|
81,839
|
|
|
347,005
|
|
|
81,739
|
|
|
347,005
|
|
||||
Weighted average shares outstanding used to compute diluted net loss per share
|
81,839
|
|
|
347,005
|
|
|
81,739
|
|
|
347,005
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
NOT REVIEWED
1
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(8,287
|
)
|
|
$
|
(4,938
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
1,165
|
|
|
1,112
|
|
||
Stock-based compensation
|
128
|
|
|
—
|
|
||
Sales returns and doubtful accounts
|
(48
|
)
|
|
—
|
|
||
Loss on foreign currency translation
|
2,189
|
|
|
727
|
|
||
Deferred income taxes
|
(612
|
)
|
|
480
|
|
||
Gain on foreign currency translation
|
(534
|
)
|
|
(3,069
|
)
|
||
Other
|
174
|
|
|
23
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
11,931
|
|
|
11,160
|
|
||
Other receivables
|
2,670
|
|
|
(2,385
|
)
|
||
Inventories
|
(2,779
|
)
|
|
1,270
|
|
||
Prepaid expenses and other assets
|
(409
|
)
|
|
(119
|
)
|
||
Accounts payable
|
(6,064
|
)
|
|
(16,779
|
)
|
||
Accrued and other liabilities
|
13,657
|
|
|
5,019
|
|
||
Net cash provided by (used in) operating activities
|
13,181
|
|
|
(7,499
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Decrease in restricted cash
|
(1,374
|
)
|
|
2,526
|
|
||
Increase in short-term loans to others
|
1,561
|
|
|
285
|
|
||
Acquisition of other current financial assets
|
—
|
|
|
—
|
|
||
Proceeds from other current financial assets
|
319
|
|
|
86
|
|
||
Proceeds from disposal of property and equipment
|
98
|
|
|
6
|
|
||
Acquisition of property and equipment
|
(402
|
)
|
|
(541
|
)
|
||
Acquisition of intangible assets
|
(91
|
)
|
|
—
|
|
||
Proceeds of other non-current financial assets
|
—
|
|
|
106
|
|
||
Increase in short-term loans to others
|
(1,386
|
)
|
|
—
|
|
||
Decrease in long-term loans to others
|
330
|
|
|
—
|
|
||
Increase in long-term loans to others
|
—
|
|
|
(645
|
)
|
||
Net cash (used in) provided by investing activities
|
(945
|
)
|
|
1,823
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
(Repayments of) proceeds from short-term borrowings
|
(3,320
|
)
|
|
5,770
|
|
||
Proceeds from long-term borrowings
|
6,800
|
|
|
—
|
|
||
Government grants received
|
31
|
|
|
156
|
|
||
Proceeds from issuance of common stock
|
—
|
|
|
1,600
|
|
||
Decrease in capital surplus
|
—
|
|
|
(3,002
|
)
|
||
Net cash provided by financing activities
|
3,511
|
|
|
4,524
|
|
||
Effect of exchange rate changes on cash
|
1,600
|
|
|
(440
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
17,347
|
|
|
(1,592
|
)
|
||
Cash and cash equivalents at beginning of period
|
17,028
|
|
|
6,786
|
|
||
Cash and cash equivalents at end of period
|
$
|
34,375
|
|
|
$
|
5,194
|
|
(1)
|
Organization and Summary of Significant Accounting Policies
|
(a)
|
Description of Business
|
(b)
|
Basis of Presentation
|
(c)
|
Risks and Uncertainties
|
•
|
increasing its vulnerability to adverse economic conditions in its industry or the economy in general;
|
•
|
requiring substantial amounts of cash to be used for debt servicing, rather than other purposes, including operations;
|
•
|
limiting its ability to plan for, or react to, changes in its business and industry; and
|
•
|
influencing investor and customer perceptions about its financial stability and limiting its ability to obtain financing or acquire customers.
|
•
|
Potential deferment of purchases and orders by customers;
|
•
|
Customers’ inability to obtain financing to make purchases from the Company and/or maintain their business;
|
•
|
Negative impact from increased financial pressures on third-party dealers, distributors and retailers;
|
•
|
Intense competition in the communication equipment market;
|
•
|
Commercial acceptance of the Company’s products; and
|
•
|
Negative impact from increased financial pressures on key suppliers.
|
(e)
|
Use of Estimates
|
(f)
|
Revenue Recognition
|
(g)
|
Fair Value of Financial Instruments
|
(h)
|
Concentration of Risk
|
(i)
|
Comprehensive Loss
|
(j)
|
Recent Accounting Pronouncements
|
(2)
|
Merger
|
Fair Value of Total Assets
|
|
NOT REVIEWED
|
||
Current tangible assets
|
|
40,747
|
|
|
Non-current tangible assets
|
|
4,464
|
|
|
Total tangible assets
|
|
$
|
45,211
|
|
|
|
|
||
Identifiable Intangible Assets
|
|
|
||
Developed technology
|
|
3,040
|
|
|
Customer relationships
|
|
6,740
|
|
|
Backlog
|
|
2,017
|
|
|
Total Intangible Assets
|
|
$
|
11,797
|
|
|
|
|
||
Goodwill
|
|
$
|
10,326
|
|
|
|
|
||
Total Indicated Fair Value of Assets
|
|
$
|
67,334
|
|
|
|
Useful life (in Years)
|
|
Fair Value
|
|
Accumulated Amortization
|
|
Net
|
|||
NOT REVIEWED
|
|
|
|
|
|
|
|
|
|||
Developed technology
|
|
5
|
|
3,040
|
|
|
(51
|
)
|
|
2,989
|
|
Customer relationships
|
|
7
|
|
6,740
|
|
|
(80
|
)
|
|
6,660
|
|
Backlog
|
|
1
|
|
2,017
|
|
|
(168
|
)
|
|
1,849
|
|
|
|
|
|
11,797
|
|
|
(299
|
)
|
|
11,498
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
NOT REVIEWED
|
|
NOT REVIEWED
|
||||||||||||
Pro forma total net revenue
|
|
$
|
40,666
|
|
|
$
|
44,719
|
|
|
$
|
144,954
|
|
|
$
|
170,082
|
|
Pro forma net income (loss)
|
|
(17,786
|
)
|
|
(8,665
|
)
|
|
(28,058
|
)
|
|
(13,585
|
)
|
(3)
|
Cash and Cash Equivalents and Restricted Cash
|
(4)
|
Inventories
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
NOT REVIEWED
|
|
|
||||
Raw materials
|
$
|
12,935
|
|
|
$
|
5,519
|
|
Work in process
|
3,369
|
|
|
2,074
|
|
||
Finished goods
|
12,529
|
|
|
5,022
|
|
||
Other
|
$
|
3,124
|
|
|
$
|
1,285
|
|
|
$
|
31,957
|
|
|
$
|
13,900
|
|
(5)
|
Property and Equipment, net
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
NOT REVIEWED
|
|
|
||||
Machinery and equipment
|
$
|
14,468
|
|
|
$
|
3,173
|
|
Computers and software
|
3,868
|
|
|
—
|
|
||
Facilities
|
22,237
|
|
|
20,472
|
|
||
Furniture and fixtures
|
1,333
|
|
|
1,052
|
|
||
Leasehold improvements
|
4,640
|
|
|
—
|
|
||
Other
|
77
|
|
|
74
|
|
||
|
46,623
|
|
|
24,771
|
|
||
Less accumulated depreciation and amortization
|
(40,022
|
)
|
|
(22,121
|
)
|
||
Less government grants
|
$
|
(343
|
)
|
|
$
|
(399
|
)
|
|
$
|
6,258
|
|
|
$
|
2,251
|
|
(6)
|
Intangible Assets, net
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
NOT REVIEWED
|
|
|
||||
Goodwill
|
$
|
11,019
|
|
|
$
|
693
|
|
|
|
|
|
||||
Developed Technology
|
3,040
|
|
|
—
|
|
||
Customer Relationships
|
6,740
|
|
|
—
|
|
||
Backlog
|
2,017
|
|
|
—
|
|
||
Other
|
137
|
|
|
40
|
|
||
Less accumulated amortization
|
(380
|
)
|
|
(37
|
)
|
||
Other intangible assets, net
|
11,554
|
|
|
3
|
|
||
Intangible assets, net
|
$
|
22,573
|
|
|
$
|
696
|
|
(7)
|
Debt
|
(8)
|
Related Party Borrowings
|
(9)
|
Net Loss Per Share
|
(10)
|
Commitments and Contingencies
|
|
Nine Months Ended
September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
NOT REVIEWED
|
||||||
Beginning balance
|
$
|
1,093
|
|
|
$
|
389
|
|
Charged to cost of revenue
|
703
|
|
|
289
|
|
||
Claims and settlements
|
(805
|
)
|
|
(297
|
)
|
||
Ending balance
|
$
|
991
|
|
|
$
|
381
|
|
Guarantor
|
|
Amount Guaranteed
|
|
Description of Obligations Guaranteed
|
||
NOT REVIEWED
|
|
|
|
|
||
DASAN
|
|
$
|
4,378
|
|
|
Borrowings from Shinhan Bank
|
DASAN
|
|
4,800
|
|
|
Borrowings from KEB Hana Bank
|
|
DASAN
|
|
11,684
|
|
|
Borrowings from Industrial Bank of Korea
|
|
DASAN
|
|
6,000
|
|
|
Letter of credit from Nonghyup Bank
|
|
Industrial Bank of Korea
|
|
3,593
|
|
|
Letter of credit
|
|
NongHyup Bank
|
|
2,156
|
|
|
Letter of credit
|
|
Other
|
|
1,438
|
|
|
Purchasing card and performance payment guarantee
1
|
|
|
|
$
|
34,049
|
|
|
|
(11)
|
Enterprise-Wide Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
NOT REVIEWED
|
|
NOT REVIEWED
|
||||||||||||
Revenue by Geography:
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
3,382
|
|
|
$
|
550
|
|
|
$
|
7,240
|
|
|
$
|
3,988
|
|
Canada
|
255
|
|
|
—
|
|
|
255
|
|
|
—
|
|
||||
Total North America
|
3,637
|
|
|
550
|
|
|
7,495
|
|
|
3,988
|
|
||||
Latin America
|
1,406
|
|
|
—
|
|
|
1,406
|
|
|
—
|
|
||||
Europe, Middle East, Africa
|
1,301
|
|
|
—
|
|
|
1,301
|
|
|
—
|
|
||||
Korea
|
18,721
|
|
|
18,453
|
|
|
52,882
|
|
|
67,116
|
|
||||
Other Asia Pacific
|
7,101
|
|
|
3,588
|
|
|
30,172
|
|
|
22,235
|
|
||||
Total International
|
28,529
|
|
|
22,041
|
|
|
85,761
|
|
|
89,351
|
|
||||
|
$
|
32,166
|
|
|
$
|
22,591
|
|
|
$
|
93,256
|
|
|
$
|
93,339
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
NOT REVIEWED
|
|
NOT REVIEWED
|
||||||||||||
Revenue by Products and Services:
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
28,988
|
|
|
$
|
21,633
|
|
|
$
|
86,584
|
|
|
$
|
88,922
|
|
Services
|
3,178
|
|
|
958
|
|
|
6,672
|
|
|
4,417
|
|
||||
Total
|
$
|
32,166
|
|
|
$
|
22,591
|
|
|
$
|
93,256
|
|
|
$
|
93,339
|
|
(12)
|
Income Taxes
|
• Federal
|
|
2012 – 2015
|
|
|
|
• California and Canada
|
|
2011 – 2015
|
|
|
|
• Brazil
|
|
2010 – 2015
|
|
|
|
• Germany
|
|
2008 – 2015
|
|
|
|
• Japan
|
|
2011 – 2015
|
|
|
|
• Korea
|
|
2014 – 2015
|
|
|
|
• United Kingdom
|
|
2011 – 2015
|
•
|
Increasing revenue while continuing to carefully control costs;
|
•
|
Continued investments in strategic research and product development activities that will provide the maximum potential return on investment; and
|
•
|
Minimizing consumption of our cash and cash equivalents.
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
|
NOT REVIEWED
|
|
NOT REVIEWED
|
||||||||
Net revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
71
|
%
|
|
74
|
%
|
|
74
|
%
|
|
74
|
%
|
Gross profit
|
29
|
%
|
|
26
|
%
|
|
26
|
%
|
|
26
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Research and product development
|
18
|
%
|
|
22
|
%
|
|
17
|
%
|
|
18
|
%
|
Selling, general and administrative
|
25
|
%
|
|
17
|
%
|
|
18
|
%
|
|
13
|
%
|
Amortization of intangible assets
|
1
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Total operating expenses
|
45
|
%
|
|
39
|
%
|
|
35
|
%
|
|
31
|
%
|
Operating loss
|
(15
|
)%
|
|
(13
|
)%
|
|
(9
|
)%
|
|
(5
|
)%
|
Interest expense, net
|
(1
|
)%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Other income, net
|
0
|
%
|
|
3
|
%
|
|
0
|
%
|
|
1
|
%
|
Loss before income taxes
|
(16
|
)%
|
|
(11
|
)%
|
|
(10
|
)%
|
|
(5
|
)%
|
Income tax provision (benefit)
|
0
|
%
|
|
1
|
%
|
|
(1
|
)%
|
|
1
|
%
|
Net loss
|
(15
|
)%
|
|
(12
|
)%
|
|
(9
|
)%
|
|
(5
|
)%
|
Less: Net loss attributable to non-controlling interest
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Net loss attributable to DASAN Zhone Solutions, Inc.
|
(15
|
)%
|
|
(12
|
)%
|
|
(9
|
)%
|
|
(5
|
)%
|
Other comprehensive income, net of foreign currency translation adjustments
|
0
|
%
|
|
4
|
%
|
|
3
|
%
|
|
0
|
%
|
Comprehensive loss
|
(8
|
)%
|
|
(8
|
)%
|
|
(6
|
)%
|
|
(5
|
)%
|
Less: Comprehensive income attributable to non-controlling interest
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Comprehensive loss attributable to DASAN Zhone Solutions, Inc.
|
(8
|
)%
|
|
(8
|
)%
|
|
(6
|
)%
|
|
(5
|
)%
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
Increase
(Decrease)
|
|
% change
|
|
2016
|
|
2015
|
|
Increase
(Decrease)
|
|
% change
|
||||||||||||||
|
NOT REVIEWED
|
||||||||||||||||||||||||||||
Revenue by geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
United States
|
$
|
3.4
|
|
|
$
|
0.6
|
|
|
$
|
2.8
|
|
|
467
|
%
|
|
$
|
7.2
|
|
|
$
|
4.0
|
|
|
$
|
3.2
|
|
|
80
|
%
|
Canada
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
100
|
%
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
100
|
%
|
||||||
Total North America
|
3.7
|
|
|
0.6
|
|
|
3.1
|
|
|
517
|
%
|
|
7.5
|
|
|
4.0
|
|
|
3.5
|
|
|
88
|
%
|
||||||
Latin America
|
1.4
|
|
|
—
|
|
|
1.4
|
|
|
100
|
%
|
|
1.4
|
|
|
—
|
|
|
1.4
|
|
|
100
|
%
|
||||||
Europe, Middle East, Africa
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|
100
|
%
|
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|
100
|
%
|
||||||
Korea
|
18.7
|
|
|
18.5
|
|
|
0.2
|
|
|
1
|
%
|
|
52.9
|
|
|
67.1
|
|
|
(14.2
|
)
|
|
(21
|
)%
|
||||||
Asia Pacific
|
7.1
|
|
|
3.6
|
|
|
3.5
|
|
|
97
|
%
|
|
30.2
|
|
|
22.2
|
|
|
8.0
|
|
|
36
|
%
|
||||||
Total International
|
28.5
|
|
|
22.1
|
|
|
6.4
|
|
|
29
|
%
|
|
85.8
|
|
|
89.4
|
|
|
(3.6
|
)
|
|
(4
|
)%
|
||||||
Total
|
$
|
32.2
|
|
|
$
|
22.6
|
|
|
$
|
9.6
|
|
|
42
|
%
|
|
$
|
93.3
|
|
|
$
|
93.3
|
|
|
$
|
—
|
|
|
0
|
%
|
•
|
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual requirements;
|
•
|
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
|
•
|
non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; and
|
•
|
other companies in our industry may calculate Adjusted EBITDA and similar measures differently than we do, limiting its usefulness as a comparative measure.
|
|
|
|
Payments due by period
|
|
|
|
|
||||||||||||||||
|
Total
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020 and thereafter
|
||||||||||||
NOT REVIEWED
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating leases
|
$
|
7,642
|
|
|
$
|
272
|
|
|
$
|
1,470
|
|
|
$
|
1,066
|
|
|
$
|
597
|
|
|
$
|
4,237
|
|
Purchase commitments
|
10,215
|
|
|
6,329
|
|
|
1,398
|
|
|
1,383
|
|
|
1,106
|
|
|
—
|
|
||||||
Lines of credit
|
5,749
|
|
|
5,749
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Related party debt
|
6,800
|
|
|
—
|
|
|
1,800
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
||||||
Total future contractual commitments
|
$
|
30,406
|
|
|
$
|
12,350
|
|
|
$
|
4,668
|
|
|
$
|
2,449
|
|
|
$
|
1,703
|
|
|
$
|
9,237
|
|
•
|
commercial acceptance of our products and services;
|
•
|
fluctuations in demand for network access products;
|
•
|
the timing and size of orders from customers;
|
•
|
the ability of our customers to finance their purchase of our products as well as their own operations;
|
•
|
new product introductions, enhancements or announcements by our competitors;
|
•
|
our ability to develop, introduce and ship new products and product enhancements that meet customer requirements in a timely manner;
|
•
|
changes in our pricing policies or the pricing policies of our competitors;
|
•
|
the ability of our company and our contract manufacturers to attain and maintain production volumes and quality levels for our products;
|
•
|
our ability to obtain sufficient supplies of sole or limited source components;
|
•
|
increases in the prices of the components we purchase, or quality problems associated with these components;
|
•
|
unanticipated changes in regulatory requirements which may require us to redesign portions of our products;
|
•
|
changes in accounting rules, such as recording expenses for employee stock option grants;
|
•
|
integrating and operating any acquired businesses;
|
•
|
our ability to achieve targeted cost reductions;
|
•
|
how well we execute on our strategy and operating plans; and
|
•
|
general economic conditions as well as those specific to the communications, internet and related industries.
|
|
DASAN ZHONE SOLUTIONS, INC.
|
||
|
|
|
|
Date: November 14, 2016
|
By:
|
|
/s/ JAMES NORROD
|
|
Name:
|
|
James Norrod
|
|
Title:
|
|
Co-Chief Executive Officer
|
|
|
|
|
|
By:
|
|
/s/ IL YUNG KIM
|
|
Name:
|
|
Il Yung Kim
|
|
Title:
|
|
Co-Chief Executive Officer
|
|
|
|
|
|
By:
|
|
/s/ KIRK MISAKA
|
|
Name:
|
|
Kirk Misaka
|
|
Title:
|
|
Chief Financial Officer
|
Exhibit
Number
|
Description
|
|
|
|
|
3.1
|
Restated Certificate of Incorporation of DASAN Zhone Solutions, Inc., as amended through September 9, 2016
|
|
|
3.2
|
Amended and Restated Bylaws of DASAN Zhone Solutions, Inc. (incorporated by reference to Exhibit 3.2 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.1#
|
DASAN Zhone Solutions, Inc. Amended and Restated 2001 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.6 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.2#
|
Form of Stock Option Agreement for the DASAN Zhone Solutions, Inc. Amended and Restated 2001 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.7 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.3#
|
Form of Restricted Stock Unit Award Agreement for the DASAN Zhone Solutions, Inc. Amended and Restated 2001 Stock Incentive Plan, as amended
|
|
|
10.4#
|
Employment Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and Il Yung Kim (incorporated by reference to Exhibit 10.1 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.5#
|
Amended and Restated Employment Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and James Norrod (incorporated by reference to Exhibit 10.2 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.6#
|
Employment Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and Kirk Misaka (incorporated by reference to Exhibit 10.3 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.7#
|
Transaction Bonus Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and James Norrod (incorporated by reference to Exhibit 10.4 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.8#
|
Transaction Bonus Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and Kirk (incorporated by reference to Exhibit 10.5 of registrant’s Current Report on Form 8-K dated September 8, 2016 and filed on September 13, 2016)
|
|
|
10.9#
|
Letter Agreement, dated November 10, 2016, between DASAN Zhone Solutions, Inc. and Eric Presworsky (incorporated by reference to Exhibit 10.1 of registrant’s Current Report on Form 8-K dated November 8, 2016 and filed on November 14, 2016)
|
|
|
10.10
|
Stockholder Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and DASAN Networks, Inc. (incorporated by reference to Exhibit 10.1 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.11
|
Lock-Up Agreement, dated as of September 9, 2016, by and among DASAN Zhone Solutions, Inc., DASAN Networks, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.2 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.12
|
Registration Rights Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and DASAN Networks, Inc. (incorporated by reference to Exhibit 10.3 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.13
|
Loan Agreement, dated as of September 9, 2016, by and between DASAN Zhone Solutions, Inc. and DASAN Networks, Inc. (incorporated by reference to Exhibit 10.4 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.14
|
Sixth Amendment to Credit and Security Agreements and Consent, dated as of September 9, 2016, by and among Zhone Technologies, Inc., ZTI Merger Subsidiary III, Inc., Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.5 of registrant’s Current Report on Form 8-K dated September 6, 2016 and filed on September 12, 2016)
|
|
|
10.15
|
Joinder and Seventh Amendment to Credit and Security Agreements, dated as of October 7, 2016, by and among DASAN Zhone Solutions, Inc., ZTI Merger Subsidiary III, Inc., Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation, Dasan Network Solutions, Inc. and Wells Fargo Bank, National Association
|
|
|
31.1
|
Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
|
|
|
31.2
|
Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
|
|
|
31.3
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
|
|
|
32.1
|
Section 1350 Certification of Co-Chief Executive Officers and Chief Financial Officer
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase
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DASAN ZHONE SOLUTIONS, INC.
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GRANTEE
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By:
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By:
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Print Name:
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Print Name:
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Title:
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Title:
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Address:
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7195 Oakport Street
Oakland, CA 94621 |
Address:
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1.
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Attached as
Schedule 5.1(b)
is a complete and accurate description of (i) the authorized capital Stock of DNS, by class and, as of the Seventh Amendment Effective Date, a description of the number of shares of each such class that are issued and outstanding, (ii) all subscriptions, options, warrants or calls relating to any shares of DNS’ capital Stock, including any right of conversion or exchange under any outstanding security or other instrument; (iii) each stockholders’ agreement, restrictive agreement, voting agreement or similar agreement relating to any such capital Stock; and (iv) an organization chart of DNS and its Subsidiaries.
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2.
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Attached as
Schedule 5.1(c)
is a complete and accurate list of (i) DNS’ direct and indirect Subsidiaries, showing the number of shares of each class of common or preferred Stock authorized for each such Subsidiary and the number and percentage of outstanding shares, by class, that are owned, directly or indirectly, by DNS, as of the Seventh Amendment Effective Date, and (ii) all subscriptions, options, warrants or calls relating to any shares of any such Subsidiary’s capital Stock, including any right of conversion or exchange under any outstanding security or other instrument.
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3.
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DNS uses the following trade name(s) in the operation of its business (e.g. billing, advertising, etc.):
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4.
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DNS is a registered organization of the following type:
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5.
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The exact legal name (within the meaning of Section 9-503 of the Code) of DNS as set forth in its certificate of incorporation, organization or formation, or other public organic document, as amended to date, is set forth in
Schedule 5.6(a)
.
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6.
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DNS is organized solely under the laws of the State set forth on
Schedule 5.6(a)
. DNS is in good standing in the State of its organization.
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7.
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The chief executive office and mailing address of DNS is located at the address set forth on
Schedule 5.6(b)
hereto.
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8.
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The books and records of DNS (if any) pertaining to Accounts, contract rights, Inventory, and other assets are located at the addresses specified on
Schedule 5.6(b)
.
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9.
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The identity and Federal Employer Identification Number of DNS and organizational identification number, if any, is set forth on
Schedule 5.6(c)
.
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10.
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DNS does not have any Commercial Tort Claims, except as set forth on
Schedule 5.6(d)
.
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11.
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There are no judgments, actions, suits, proceedings or other litigation pending by or against or threatened by or against DNS, any of its Subsidiaries or any of their respective officers or principals, in each case as of the Seventh Amendment Effective Date, except as set forth on
Schedule 5.7(b)
.
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12.
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During the past five (5) years, the name as set forth in DNS’ organizational documentation filed of record with the applicable state authority has been changed as follows:
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13.
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Since the date of its organization, DNS has made or entered into the following Acquisitions:
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14.
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DNS’ assets are owned and held free and clear of Liens (other than Permitted Liens and other than those certain Security Interests granted under the Credit Agreement), except as set forth below:
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15.
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DNS and its Subsidiaries have been and remain in compliance with all Environmental Laws applicable to their business or operations except as set forth on
Schedule 5.12
.
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16.
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DNS does not have any Deposit Accounts, investment accounts, Securities Accounts or similar accounts with any bank, securities intermediary or other financial institution, except as set forth on
Schedule 5.15
for the purposes and of the types indicated therein.
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17.
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DNS is not a party to or bound by a collective bargaining or similar agreement with any union, labor organization or other bargaining agent except as set forth below: (indicate date of agreement, parties to agreement, description of employees covered, and date of termination)
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18.
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Set forth on
Schedule 5.17
is a reasonably detailed description of each Material Contract of DNS as of the Seventh Amendment Effective Date.
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19.
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Set forth on
Schedule 5.19
is a true and complete list of all Indebtedness of DNS and its Subsidiaries outstanding as of September 30, 2016. DNS has no Indebtedness outstanding as of the Seventh Amendment Effective Date.
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20.
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DNS has not made any loans or advances or guaranteed or otherwise become liable for the obligations of any others (other than pursuant to a Guaranty), except as set forth below:
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21.
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DNS does not have any Chattel Paper (whether tangible or electronic) or instruments as of the Seventh Amendment Effective Date, except as follows:
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23.
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Schedule 5.26(a)
sets forth all Real Property owned by DNS as of the Seventh Amendment Effective Date.
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22.
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DNS does not own or licenses any Trademarks, Patents, Copyrights or other Intellectual Property, and is not a party to any Intellectual Property License, in each case as of the Seventh Amendment Effective Date, except as set forth on
Schedule 5.26(b)
(indicate type of Intellectual Property and whether owned or licensed, registration number, date of registration, and, if licensed, the name and address of the licensor).
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24.
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The Inventory, Equipment and other goods of DNS are located only at the locations set forth on
Schedule 5.29
.
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25.
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DNS maintains Cash Management Services of a type and on terms reasonably satisfactory to Lender at one or more of the banks set forth on
Schedule 6.12(j)
.
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26.
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As of the Seventh Amendment Effective Date, DNS has no delinquent taxes due (including, but not limited to, all payroll taxes, personal property taxes, real estate taxes or income taxes) except as follows:
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27.
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Except as set forth on
Schedule 7.15
, DNS has no consignment, bill and hold, sale or return, sale on approval or conditional sale arrangements.
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Loan Party
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Authorized Shares/Issued Shares
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Holder
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Type of Rights/Stock
(common/preferred/option/ class)
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Percent Interest (on a fully diluted basis)
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DASAN NETWORK SOLUTIONS, INC.
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100/10
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DASAN Zhone Solutions, Inc.
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Common
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100%
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Subsidiary
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State or Other Jurisdiction of Incorporation or Organization
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Authorized Shares/ Issued Shares Owned (Directly or Indirectly) By DNS
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Percentage Ownership
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Dasan Network Solutions, Inc.
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Republic of Korea
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1,000,000,000/10,000,000
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100%
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Dasan Network Solutions Japan, Inc.
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Japan
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24,640/6,400
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69.06%
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Dasan Vietnam Co., Ltd.
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Vietnam
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1/1
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100%
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Name
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Jurisdiction of Organization
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DASAN NETWORK SOLUTIONS, INC.
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California
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Name
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Organizational Identification Number
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DASAN NETWORK SOLUTIONS, INC.
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FEIN: 27-3063221
California ID: C3303680
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Name and Address of Bank
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Loan
Party |
Account No.
(1)
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Purpose
∗
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Bank of America - Dasan Network Solutions
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Dasan Network Solutions, Inc.
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3340 4679 4814
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Not in use
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Bank of America - Dasan Solutions
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Dasan Network Solutions, Inc.
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3340 4446 5896
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Not in use
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Bank of America - Sales (9987)
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Dasan Network Solutions, Inc.
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3340 4109 9987
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Payments to suppliers and vendors
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Bank of America - Dasan Main Account
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Dasan Network Solutions, Inc.
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0012 6287 3420
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Payment of operational expenses, payroll and benefits, & office expenses
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Bank of America - Busi. Interest Maximizer
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Dasan Network Solutions, Inc.
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0012 6287 3449
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Not in use
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Bank of America - Business Checking
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Dasan Network Solutions, Inc.
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4815 8810 0437 8832
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Not in use
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*
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For “Purpose” indicate either: “collection account” if proceeds of receivables or other assets are deposited in it, and note “lockbox” if it is subject to lockbox servicing arrangements with the applicable bank or “disbursement account” if it is a checking account or account used for transferring funds to third parties and note if it is used for a specific purpose, e.g., “payroll”, “medical”, “insurance”, “escrow” etc. Also, please note any “zero balance” or other automatic sweep or investment accounts.
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Obligor
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Bank or Financial Institution
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Type of Indebtedness
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Facility size
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Principal Amount Outstanding as of September 30, 2016
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DNS Korea
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Industrial Bank of Korea, Bundang Sunaeyeok Branch, 216, Hwangsaeul-ro, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea
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B2B payment
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KRW 3,000,000,000
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KRW 703,775,563
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Employee loans secured by DNS Korea deposit
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KRW 1,600,000,000
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KRW 711,065,375
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Letter of credit facility
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USD 7,000,000
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USD 3,728,783.55
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DNS Korea
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Shinhan Bank, Gwanggyo Corporate Finance Center, 54, Cheonggyecheon-ro, Jung-gu, Seoul, Korea
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B2B payment
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KRW 6,000,000,000
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KRW 1,092,547,359
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Short-term loans
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KRW 4,000,000,000
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KRW 4,000,000,000
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Discounting of bills
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Not applicable
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USD 3,100,000
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DNS Korea
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NH Bank, Eunhaeng-dong Branch,
469, Sanseong-daero, Sujeong-gu, Seongnam-si, Gyeonggi-do, Korea |
B2B payment
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KRW 1,000,000,000
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-
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Letter of credit facility
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USD 5,000,000
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USD 2,544,809.17
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DNS Korea
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The Export-Import Bank of Korea,
38, Eunhaeng-ro, Yeongdeungpo-gu, Seoul, Korea
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Revolving line of credit
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KRW 9,000,000,000
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KRW 9,000,000,000
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DNS Korea
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KEB Hanabank, Sunaedong Branch, 12, Sunae-ro 46beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea
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Revolving line of credit
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USD 4,000,000
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JPY 408,100,000
(1)
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Issuance of guaranty bonds
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Not applicable
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EUR 56,653.67
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DNS Korea
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State bank of India, Seoul Branch,
20th Floor, Kyobo Life Building, Jongno 1-ga , Jongno-gu , Seoul, Korea |
Issuance of guaranty bonds
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Not applicable
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INR 5,000,000
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DNS Korea
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Samsung Futures,
67, Sejong-daero, Jung-gu, Seoul, Korea
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Hedging arrangements
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Not applicable
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USD 10,400,000 and
JPY 132,000,000
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Address
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Owned/Leased/Third Party
∗
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Name/Address of Lessor or Third Party, as Applicable
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7195 Oakport Street
Oakland, California
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Leased
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LBA Realty, LLC
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4400 College Blvd. Suite# 325, Overland Park, KS 66211
(1)
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Third Party
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Dixon Lumber Company, P.O. Box 907, Galax, VA 24333
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800 Atlanta South Parkway # 100, College Park, GA 30349
(2)
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Third Party
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Top Trans Logistics, LLC.
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7340 Bryan Dairy Road, Largo, Florida 33777
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Leased
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BACM 2005-3 BRYAN DAIRY INDUSTRIAL, LLC 1601 Washington Avenue, Suite 700
Miami Beach, Florida 33139
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1317, Jungwon-daero, Janghowon-eup, Icheon-si, Gyeonggi-do, Korea
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Third Party
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Dasan Networks Inc.
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49, Daewangpangyo-ro 644beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea
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Third Party
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Dasan Networks Inc.
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Kirk Misaka
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Chief Financial Officer
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James Norrod
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Co-Chief Executive Officer
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Katheryn Root
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Assistant Controller
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1.
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I have reviewed this Quarterly Report on Form 10-Q of DASAN Zhone Solutions, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ JAMES NORROD
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James Norrod
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Co-Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of DASAN Zhone Solutions, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ IL YUNG KIM
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Il Yung Kim
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Co-Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of DASAN Zhone Solutions, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ KIRK MISAKA
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Kirk Misaka
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Chief Financial Officer
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1.
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The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ JAMES NORROD
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/s/ IL YUNG KIM
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/s/ KIRK MISAKA
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James Norrod
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Il Yung Kim
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Kirk Misaka
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Co-Chief Executive Officer
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Co-Chief Executive Officer
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Chief Financial Officer
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