|
|
|
|
|
|
|
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
|
Delaware
|
|
22-3509099
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
|
|
|
7195 Oakport Street
Oakland, California
|
|
94621
|
(Address of principal executive offices)
|
|
(Zip code)
|
|
|
|
Large accelerated filer
|
¨
|
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
x
|
|
|
|
Emerging growth company
|
¨
|
|
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
||
|
|
|
Item 1.
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
PART II. OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
10,145
|
|
|
$
|
17,893
|
|
Restricted cash
|
13,058
|
|
|
6,650
|
|
||
Short-term investments
|
—
|
|
|
993
|
|
||
Accounts receivable, net of allowances for sales returns and doubtful accounts of $2,095 as of September 30, 2017 and $1,143 as of December 31, 2016:
|
|
|
|
||||
Trade receivables
|
43,478
|
|
|
38,324
|
|
||
Related parties
|
12,941
|
|
|
13,311
|
|
||
Other receivables:
|
|
|
|
||||
Others
|
13,851
|
|
|
12,068
|
|
||
Related parties
|
22
|
|
|
171
|
|
||
Inventories
|
31,966
|
|
|
31,032
|
|
||
Prepaid expenses and other current assets
|
3,198
|
|
|
4,131
|
|
||
Total current assets
|
128,659
|
|
|
124,573
|
|
||
Property and equipment, net
|
5,812
|
|
|
6,288
|
|
||
Goodwill
|
3,977
|
|
|
3,977
|
|
||
Intangible assets, net
|
7,174
|
|
|
8,767
|
|
||
Other assets
|
1,536
|
|
|
1,842
|
|
||
Total assets
|
$
|
147,158
|
|
|
$
|
145,447
|
|
Liabilities, Stockholders’ Equity and Non-controlling Interest
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable:
|
|
|
|
||||
Others
|
$
|
35,224
|
|
|
$
|
30,681
|
|
Related parties
|
106
|
|
|
430
|
|
||
Short-term debt:
|
|
|
|
||||
Others
|
18,382
|
|
|
17,599
|
|
||
Related parties
|
3,544
|
|
|
—
|
|
||
Other payables:
|
|
|
|
||||
Others
|
1,691
|
|
|
2,040
|
|
||
Related parties
|
210
|
|
|
6,940
|
|
||
Deferred revenue
|
2,073
|
|
|
1,901
|
|
||
Accrued and other liabilities
|
10,108
|
|
|
8,163
|
|
||
Total current liabilities
|
71,338
|
|
|
67,754
|
|
||
Long-term debt - related parties
|
5,000
|
|
|
6,800
|
|
||
Deferred revenue
|
1,875
|
|
|
1,674
|
|
||
Other long-term liabilities
|
2,581
|
|
|
2,351
|
|
||
Total liabilities
|
80,794
|
|
|
78,579
|
|
||
Commitments and contingencies (Note 11)
|
|
|
|
||||
Stockholders’ equity and non-controlling interest:
|
|
|
|
||||
Common stock, authorized 36,000 shares, 16,387 shares and 16,375 shares outstanding as of September 30, 2017 and December 31, 2016 at $0.001 par value
|
16
|
|
|
16
|
|
||
Additional paid-in capital
|
89,873
|
|
|
89,174
|
|
||
Other comprehensive income (loss)
|
(1,052
|
)
|
|
(2,815
|
)
|
||
Accumulated deficit
|
(23,080
|
)
|
|
(19,923
|
)
|
||
Total stockholders’ equity
|
65,757
|
|
|
66,452
|
|
||
Non-controlling interest
|
607
|
|
|
416
|
|
||
Total stockholders’ equity and non-controlling interest
|
66,364
|
|
|
66,868
|
|
||
Total liabilities, stockholders’ equity and non-controlling interest
|
$
|
147,158
|
|
|
$
|
145,447
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net revenue:
|
|
|
|
|
|
||||||||||
Net revenue
|
$
|
60,513
|
|
|
$
|
24,772
|
|
|
$
|
150,834
|
|
|
$
|
68,424
|
|
Net revenue - related parties
|
5,925
|
|
|
6,468
|
|
|
27,657
|
|
|
22,408
|
|
||||
Total net revenue
|
66,438
|
|
|
31,240
|
|
|
178,491
|
|
|
90,832
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Products and services
|
38,643
|
|
|
16,483
|
|
|
96,127
|
|
|
48,750
|
|
||||
Products and services - related parties
|
5,569
|
|
|
5,406
|
|
|
22,851
|
|
|
19,118
|
|
||||
Amortization of intangible assets
|
153
|
|
|
51
|
|
|
459
|
|
|
51
|
|
||||
Total cost of revenue
|
44,365
|
|
|
21,940
|
|
|
119,437
|
|
|
67,919
|
|
||||
Gross profit
|
22,073
|
|
|
9,300
|
|
|
59,054
|
|
|
22,913
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and product development
|
8,804
|
|
|
5,885
|
|
|
27,028
|
|
|
15,583
|
|
||||
Selling, marketing, general and administrative
|
11,454
|
|
|
8,278
|
|
|
32,506
|
|
|
16,691
|
|
||||
Amortization of intangible assets
|
154
|
|
|
251
|
|
|
1,191
|
|
|
259
|
|
||||
Total operating expenses
|
20,412
|
|
|
14,414
|
|
|
60,725
|
|
|
32,533
|
|
||||
Operating income (loss)
|
1,661
|
|
|
(5,114
|
)
|
|
(1,671
|
)
|
|
(9,620
|
)
|
||||
Interest income
|
36
|
|
|
31
|
|
|
82
|
|
|
137
|
|
||||
Interest expense
|
(263
|
)
|
|
(204
|
)
|
|
(793
|
)
|
|
(600
|
)
|
||||
Other income (loss), net
|
60
|
|
|
(112
|
)
|
|
43
|
|
|
(41
|
)
|
||||
Income (loss) before income taxes
|
1,494
|
|
|
(5,399
|
)
|
|
(2,339
|
)
|
|
(10,124
|
)
|
||||
Income tax expense (benefit)
|
107
|
|
|
(610
|
)
|
|
646
|
|
|
(1,041
|
)
|
||||
Net income (loss)
|
1,387
|
|
|
(4,789
|
)
|
|
(2,985
|
)
|
|
(9,083
|
)
|
||||
Net income (loss) attributable to non-controlling interest
|
(12
|
)
|
|
(56
|
)
|
|
172
|
|
|
(17
|
)
|
||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
1,399
|
|
|
$
|
(4,733
|
)
|
|
$
|
(3,157
|
)
|
|
$
|
(9,066
|
)
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(284
|
)
|
|
2,291
|
|
|
1,782
|
|
|
2,690
|
|
||||
Comprehensive income (loss)
|
1,103
|
|
|
(2,498
|
)
|
|
(1,203
|
)
|
|
(6,393
|
)
|
||||
Comprehensive income (loss) attributable to non-controlling interest
|
(14
|
)
|
|
(54
|
)
|
|
191
|
|
|
48
|
|
||||
Comprehensive income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
1,117
|
|
|
$
|
(2,444
|
)
|
|
$
|
(1,394
|
)
|
|
$
|
(6,441
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net income (loss) per share attributable to DASAN Zhone Solutions, Inc.
|
$
|
0.09
|
|
|
$
|
(0.42
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.90
|
)
|
Weighted average shares outstanding used to compute basic and diluted net income (loss) per share
|
16,382
|
|
|
11,139
|
|
|
16,380
|
|
|
10,046
|
|
||||
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(2,985
|
)
|
|
$
|
(9,083
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,105
|
|
|
1,164
|
|
||
Stock-based compensation
|
670
|
|
|
128
|
|
||
Unrealized gain (loss) on foreign currency transactions
|
(185
|
)
|
|
1,655
|
|
||
Deferred taxes
|
—
|
|
|
(1,069
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
—
|
|
|||
Accounts receivable
|
(2,948
|
)
|
|
14,450
|
|
||
Inventories
|
(578
|
)
|
|
(4,107
|
)
|
||
Prepaid expenses and other assets
|
(101
|
)
|
|
2,320
|
|
||
Accounts payable
|
6,713
|
|
|
(5,814
|
)
|
||
Accrued expenses
|
(4,314
|
)
|
|
13,598
|
|
||
Net cash provided by (used in) operating activities
|
(623
|
)
|
|
13,242
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Cash increase through Merger
|
—
|
|
|
7,013
|
|
||
Increase in restricted cash
|
(6,061
|
)
|
|
(947
|
)
|
||
Decrease in short-term and long-term loans to others
|
—
|
|
|
1,891
|
|
||
Increase in short-term and long-term loans to others
|
—
|
|
|
(1,386
|
)
|
||
Proceeds from sale of short-term investments
|
1,463
|
|
|
—
|
|
||
Purchase of short-term investments
|
(430
|
)
|
|
—
|
|
||
Proceeds from disposal of property and equipment and other assets
|
6
|
|
|
98
|
|
||
Purchase of property and equipment
|
(840
|
)
|
|
(370
|
)
|
||
Purchase of intangible asset
|
(72
|
)
|
|
(92
|
)
|
||
Net cash provided by (used in) investing activities
|
(5,934
|
)
|
|
6,207
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayments of borrowings
|
(15,627
|
)
|
|
(23,088
|
)
|
||
Proceeds from short-term borrowings
|
13,778
|
|
|
19,769
|
|
||
Proceeds from long-term borrowings
|
—
|
|
|
6,800
|
|
||
Proceeds from issuance of common stock
|
28
|
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
(1,821
|
)
|
|
3,481
|
|
||
Effect of exchange rate changes on cash
|
630
|
|
|
1,538
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(7,748
|
)
|
|
24,468
|
|
||
Cash and cash equivalents at beginning of period
|
17,893
|
|
|
9,095
|
|
||
Cash and cash equivalents at end of period
|
$
|
10,145
|
|
|
$
|
33,563
|
|
(1)
|
Organization and Summary of Significant Accounting Policies
|
(a)
|
Description of Business
|
(b)
|
Going Concern
|
(c)
|
Risks and Uncertainties
|
(d)
|
Correction of errors
|
(e)
|
Basis of Presentation
|
(f)
|
Reverse Stock Split
|
(g)
|
Concentration of Risk
|
(2)
|
Merger
|
|
|
Shares
|
|
Estimated Fair Value
|
|||
Shares of Legacy Zhone stock as of September 8, 2016
|
|
6,874
|
|
|
$
|
40,902
|
|
Legacy Zhone stock options
|
|
198
|
|
|
540
|
|
|
Total Purchase Consideration
|
|
|
|
$
|
41,442
|
|
Cash and cash equivalents
|
|
$
|
7,013
|
|
Accounts receivable
|
|
18,510
|
|
|
Inventory
|
|
16,456
|
|
|
Prepaid expenses and other current assets
|
|
2,191
|
|
|
Property and equipment
|
|
4,339
|
|
|
Other assets
|
|
125
|
|
|
Identifiable intangible assets
|
|
10,479
|
|
|
Goodwill
|
|
3,284
|
|
|
Accounts payable
|
|
(11,021
|
)
|
|
Accrued and other liabilities
|
|
(7,089
|
)
|
|
Other long-term liabilities
|
|
(2,845
|
)
|
|
Total Indicated Fair Value of Assets
|
|
$
|
41,442
|
|
|
|
Useful life
(in Years)
|
|
Fair Value
|
||
Developed technology
|
|
5
|
|
$
|
3,060
|
|
Customer relationships
|
|
10
|
|
5,240
|
|
|
Backlog
|
|
1
|
|
2,179
|
|
|
|
|
|
|
$
|
10,479
|
|
|
September 30, 2016
|
||||||
(in thousands)
|
Three
Months Ended |
|
Nine
Months Ended |
||||
Pro forma total net revenue
|
$
|
39,740
|
|
|
$
|
142,530
|
|
Pro forma net loss
|
(15,569
|
)
|
|
(25,504
|
)
|
Level 1 –
|
Inputs are quoted prices in active markets for identical assets or liabilities.
|
Level 2 –
|
Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
|
Level 3 –
|
Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
|
(4)
|
Inventories
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Raw materials
|
$
|
12,812
|
|
|
$
|
13,547
|
|
Work in process
|
3,004
|
|
|
3,705
|
|
||
Finished goods
|
16,150
|
|
|
13,780
|
|
||
Total inventories
|
$
|
31,966
|
|
|
$
|
31,032
|
|
(5)
|
Property and Equipment
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Furniture and fixtures
|
$
|
21,251
|
|
|
$
|
20,040
|
|
Machinery and equipment
|
4,945
|
|
|
4,530
|
|
||
Leasehold improvements
|
3,386
|
|
|
3,573
|
|
||
Computers and software
|
567
|
|
|
411
|
|
||
Other
|
983
|
|
|
922
|
|
||
|
31,132
|
|
|
29,476
|
|
||
Less accumulated depreciation and amortization
|
(25,109
|
)
|
|
(22,922
|
)
|
||
Less government grants
|
(211
|
)
|
|
(266
|
)
|
||
Total property and equipment, net
|
$
|
5,812
|
|
|
$
|
6,288
|
|
(6)
|
Goodwill and Intangible Assets
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Beginning balance
|
$
|
3,977
|
|
|
$
|
693
|
|
Addition from Merger
|
—
|
|
|
3,284
|
|
||
Less: accumulated impairment
|
—
|
|
|
—
|
|
||
Ending balance
|
$
|
3,977
|
|
|
$
|
3,977
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Developed technology
|
$
|
3,060
|
|
|
$
|
3,060
|
|
Customer relationships
|
5,240
|
|
|
5,240
|
|
||
Backlog
|
2,179
|
|
|
2,179
|
|
||
Other
|
194
|
|
|
105
|
|
||
Less accumulated amortization
|
(3,499
|
)
|
|
(1,817
|
)
|
||
Intangible assets, net
|
$
|
7,174
|
|
|
$
|
8,767
|
|
(7)
|
Debt
|
|
|
|
|
As of September 30, 2017
|
||||
|
|
|
|
Interest rate (%)
|
|
Amount
|
||
Industrial Bank of Korea
|
|
Credit facility
|
|
2.8 - 3.0
|
|
$
|
3,235
|
|
Industrial Bank of Korea
|
|
Trade finance
|
|
3.9-5.4
|
|
2,287
|
|
|
Shinhan Bank
|
|
General loan
|
|
5.89
|
|
2,791
|
|
|
Shinhan Bank
|
|
Trade finance
|
|
3.70
|
|
1,950
|
|
|
NongHyup Bank
|
|
Credit facility
|
|
1.7 - 3.0
|
|
1,841
|
|
|
The Export-Import Bank of Korea
|
|
Export development loan
|
|
3.1
|
|
6,278
|
|
|
|
|
|
|
|
|
$
|
18,382
|
|
|
|
|
|
As of December 31, 2016
|
||||
|
|
|
|
Interest rate (%)
|
|
Amount
|
||
Industrial Bank of Korea
|
|
Credit facility
|
|
2.16 - 2.76
|
|
$
|
1,106
|
|
Shinhan Bank
|
|
General loan
|
|
4.08
|
|
3,310
|
|
|
Shinhan Bank
|
|
Trade finance
|
|
3.28 - 3.44
|
|
1,752
|
|
|
NongHyup Bank
|
|
Credit facility
|
|
1.92 - 2.66
|
|
482
|
|
|
KEB Hana Bank
|
|
Comprehensive credit loan
|
|
2.79
|
|
3,501
|
|
|
The Export-Import Bank of Korea
|
|
Export development loan
|
|
3.10
|
|
7,448
|
|
|
|
|
|
|
|
|
$
|
17,599
|
|
(8)
|
Non-Controlling Interests
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Beginning non-controlling interests
|
|
$
|
416
|
|
|
$
|
138
|
|
Acquisition of additional interest in a subsidiary
|
|
—
|
|
|
277
|
|
||
Net income (loss) attributable to non-controlling interests
|
|
172
|
|
|
(17
|
)
|
||
Foreign currency translation adjustments (OCI)
|
|
19
|
|
|
66
|
|
||
Ending non-controlling interests
|
|
$
|
607
|
|
|
$
|
464
|
|
(9)
|
Related-Party Transactions
|
|
|
|
|
Three Months Ended September 30, 2017
|
||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing,
general and administrative
|
|
Other Expenses
|
||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
3,976
|
|
|
$
|
3,604
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,291
|
|
|
$
|
51
|
|
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
257
|
|
|
20
|
|
|
—
|
|
|
—
|
|
||||||
DASAN FRANCE
|
|
100%
|
|
662
|
|
|
576
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
—
|
|
||||||
DASAN INDIA Private Limited
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
||||||
D-Mobile
|
|
100%
|
|
1,233
|
|
|
1,077
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
—
|
|
||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
54
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
4
|
|
||||||
Tomato Soft Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
43
|
|
|
108
|
|
|
—
|
|
|
—
|
|
||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
$
|
5,925
|
|
|
$
|
5,269
|
|
|
$
|
300
|
|
|
$
|
272
|
|
|
$
|
1,532
|
|
|
$
|
55
|
|
|
|
|
|
Three Months Ended September 30, 2016 (As Revised)
|
||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing,
general and administrative |
|
Other Expenses
|
||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
5,112
|
|
|
$
|
4,390
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
946
|
|
|
$
|
89
|
|
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
130
|
|
|
38
|
|
|
—
|
|
|
—
|
|
||||||
DASAN FRANCE
|
|
100%
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
D-Mobile
|
|
100%
|
|
1,267
|
|
|
789
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
—
|
|
||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
68
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
J-Mobile Corporation
|
|
90.47%
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Tomato Soft Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
$
|
6,468
|
|
|
$
|
5,240
|
|
|
$
|
166
|
|
|
$
|
219
|
|
|
$
|
1,071
|
|
|
$
|
89
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing,
general and administrative |
|
Other Expenses
|
||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
16,608
|
|
|
$
|
14,020
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,491
|
|
|
$
|
171
|
|
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
578
|
|
|
79
|
|
|
—
|
|
|
—
|
|
||||||
DASAN FRANCE
|
|
100%
|
|
1,612
|
|
|
1,512
|
|
|
—
|
|
|
—
|
|
|
383
|
|
|
—
|
|
||||||
DASAN INDIA Private Limited
|
|
100%
|
|
6,287
|
|
|
4,783
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
||||||
D-Mobile
|
|
100%
|
|
3,054
|
|
|
1,831
|
|
|
—
|
|
|
—
|
|
|
318
|
|
|
—
|
|
||||||
Fine Solution
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
88
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
4
|
|
||||||
J-Mobile Corporation
|
|
90.47%
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
132
|
|
|
—
|
|
||||||
Tomato Soft Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
104
|
|
|
108
|
|
|
—
|
|
|
—
|
|
||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
448
|
|
|
37
|
|
|
—
|
|
||||||
Solueta
|
|
27.21%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
|
|
|
|
$
|
27,657
|
|
|
$
|
22,169
|
|
|
$
|
682
|
|
|
$
|
635
|
|
|
$
|
4,401
|
|
|
$
|
178
|
|
|
|
|
|
Nine Months Ended September 30, 2016 (As Revised)
|
||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing,
general and administrative |
|
Other Expenses
|
||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
19,080
|
|
|
$
|
16,219
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,255
|
|
|
$
|
309
|
|
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
436
|
|
|
106
|
|
|
—
|
|
|
—
|
|
||||||
DASAN FRANCE
|
|
100%
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
DASAN INDIA Private Limited
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
D-Mobile
|
|
100%
|
|
3,135
|
|
|
2,231
|
|
|
—
|
|
|
—
|
|
|
318
|
|
|
—
|
|
||||||
DMC, Inc.
|
|
27.21%
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
150
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
J-Mobile Corporation
|
|
90.47%
|
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
634
|
|
|
—
|
|
||||||
PANDA Media, Inc.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||||
Tomato Soft Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
560
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
$
|
22,408
|
|
|
$
|
18,584
|
|
|
$
|
534
|
|
|
$
|
666
|
|
|
$
|
5,209
|
|
|
$
|
309
|
|
(10)
|
Net Income (Loss) Per Share Attributable to DASAN Zhone Solutions, Inc.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
(As Revised)
|
|
|
|
(As Revised)
|
||||||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
|
$
|
1,399
|
|
|
$
|
(4,733
|
)
|
|
$
|
(3,157
|
)
|
|
$
|
(9,066
|
)
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
16,382
|
|
|
11,139
|
|
|
16,380
|
|
|
10,046
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Stock options, restricted stock units and share awards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted
|
|
16,382
|
|
|
11,139
|
|
|
16,380
|
|
|
10,046
|
|
||||
Net income (loss) per share attributable to DASAN Zhone Solutions, Inc.:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
0.09
|
|
|
$
|
(0.42
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.90
|
)
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
(0.42
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.90
|
)
|
|
|
Three and Nine Months Ended September 30,
|
||||
|
|
2017
|
|
2016
|
||
|
|
|
|
(As Revised)
|
||
Stock options
|
|
915
|
|
|
795
|
|
Restricted stock units
|
|
2
|
|
|
9
|
|
|
|
917
|
|
|
804
|
|
(11)
|
Commitments and Contingencies
|
|
Operating Leases
|
||
Year ending December 31:
|
|
||
2017 (remainder of the year)
|
$
|
967
|
|
2018
|
3,359
|
|
|
2019
|
2,496
|
|
|
2020
|
2,358
|
|
|
2021
|
2,264
|
|
|
Thereafter
|
8,722
|
|
|
Total minimum lease payments
|
$
|
20,166
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Beginning balance
|
$
|
878
|
|
|
$
|
441
|
|
Charged to cost of revenue
|
126
|
|
|
227
|
|
||
Claims and settlements
|
(195
|
)
|
|
(389
|
)
|
||
Foreign exchange impact
|
14
|
|
|
78
|
|
||
Ending balance
|
$
|
823
|
|
|
$
|
357
|
|
Guarantor
|
|
Amount Guaranteed
|
|
Description of Obligations Guaranteed
|
||
DNI (Parent Company)
|
|
$
|
3,349
|
|
|
Borrowings from Shinhan Bank
|
DNI (Parent Company)
|
|
1,884
|
|
|
Purchasing card from Shinhan Bank
|
|
DNI (Parent Company)
|
|
10,493
|
|
|
Credit facility & purchasing card from Industrial Bank of Korea
|
|
DNI (Parent Company)
|
|
6,000
|
|
|
Credit facility from NongHyup Bank
|
|
DNI (Parent Company)
|
|
523
|
|
|
Purchasing card from NongHyup Bank
|
|
Industrial Bank of Korea
|
|
6,512
|
|
|
Credit facility
|
|
Industrial Bank of Korea
|
|
864
|
|
|
Performance bonds
|
|
NongHyup Bank
|
|
4,567
|
|
|
Credit facility
|
|
Shinhan Bank
|
|
191
|
|
|
Purchasing card
|
|
KEB Hana Bank
|
|
33
|
|
|
Performance bonds
|
|
State Bank of India
|
|
38
|
|
|
Performance bonds
|
|
Seoul Guarantee Insurance Co.
|
|
54
|
|
|
Performance bonds
|
|
Seoul Guarantee Insurance Co.
|
|
373
|
|
|
Warranty bonds
|
|
|
|
$
|
34,881
|
|
|
|
(12)
|
Enterprise-Wide Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
(As Revised)
|
|
|
|
(As Revised)
|
||||||||
Revenue by geography:
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
13,068
|
|
|
$
|
3,408
|
|
|
$
|
37,176
|
|
|
$
|
7,432
|
|
Canada
|
1,498
|
|
|
254
|
|
|
4,112
|
|
|
254
|
|
||||
Total North America
|
14,566
|
|
|
3,662
|
|
|
41,288
|
|
|
7,686
|
|
||||
Latin America
|
7,480
|
|
|
1,877
|
|
|
19,425
|
|
|
2,912
|
|
||||
Europe, Middle East, Africa
|
7,378
|
|
|
2,232
|
|
|
19,134
|
|
|
5,209
|
|
||||
Korea
|
20,520
|
|
|
18,372
|
|
|
69,032
|
|
|
60,144
|
|
||||
Other Asia Pacific
|
16,494
|
|
|
5,097
|
|
|
29,612
|
|
|
14,881
|
|
||||
Total International
|
51,872
|
|
|
27,578
|
|
|
137,203
|
|
|
83,146
|
|
||||
Total
|
$
|
66,438
|
|
|
$
|
31,240
|
|
|
$
|
178,491
|
|
|
$
|
90,832
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
(As Revised)
|
|
|
|
(As Revised)
|
||||||||
Revenue by products and services:
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
63,257
|
|
|
$
|
28,891
|
|
|
$
|
169,831
|
|
|
$
|
84,666
|
|
Services
|
3,181
|
|
|
2,349
|
|
|
8,660
|
|
|
6,166
|
|
||||
Total
|
$
|
66,438
|
|
|
$
|
31,240
|
|
|
$
|
178,491
|
|
|
$
|
90,832
|
|
|
September 30,
2017
|
|
December 31,
2016
|
||||
United States
|
$
|
3,611
|
|
|
$
|
4,094
|
|
Korea
|
1,449
|
|
|
1,455
|
|
||
Japan and Vietnam
|
752
|
|
|
739
|
|
||
|
$
|
5,812
|
|
|
$
|
6,288
|
|
(13)
|
Income Taxes
|
•
|
$18.4 million
in short-term debt obligations to other non-related parties;
|
•
|
$3.5 million
in short-term debt obligations to related parties; and
|
•
|
$5.0 million
in long-term debt obligations to related parties.
|
•
|
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,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
|
|
|
(As Revised)
|
|
|
|
(As Revised)
|
||||
Net revenue:
|
|
|
|
|
|
|
|
||||
Net revenue
|
91
|
%
|
|
79
|
%
|
|
85
|
%
|
|
75
|
%
|
Net revenue - related parties
|
9
|
%
|
|
21
|
%
|
|
15
|
%
|
|
25
|
%
|
Total net revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue:
|
|
|
|
|
|
|
|
||||
Products and services
|
58
|
%
|
|
53
|
%
|
|
54
|
%
|
|
54
|
%
|
Products and services - related parties
|
8
|
%
|
|
17
|
%
|
|
13
|
%
|
|
21
|
%
|
Amortization of intangible assets
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Total cost of revenue
|
67
|
%
|
|
70
|
%
|
|
67
|
%
|
|
75
|
%
|
Gross profit
|
33
|
%
|
|
30
|
%
|
|
33
|
%
|
|
25
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Research and product development
|
14
|
%
|
|
19
|
%
|
|
15
|
%
|
|
17
|
%
|
Selling, marketing, general and administrative
|
17
|
%
|
|
26
|
%
|
|
18
|
%
|
|
18
|
%
|
Amortization of intangible assets
|
0
|
%
|
|
1
|
%
|
|
1
|
%
|
|
0
|
%
|
Total operating expenses
|
31
|
%
|
|
46
|
%
|
|
34
|
%
|
|
35
|
%
|
Operating income (loss)
|
2
|
%
|
|
(16
|
)%
|
|
(1
|
)%
|
|
(10
|
)%
|
Interest income
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Interest expense
|
0
|
%
|
|
(1
|
)%
|
|
0
|
%
|
|
(1
|
)%
|
Other income, net
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Income (loss) before income taxes
|
2
|
%
|
|
(17
|
)%
|
|
(1
|
)%
|
|
(11
|
)%
|
Income tax provision (benefit)
|
0
|
%
|
|
(2
|
)%
|
|
1
|
%
|
|
(1
|
)%
|
Net income (loss)
|
2
|
%
|
|
(15
|
)%
|
|
(2
|
)%
|
|
(10
|
)%
|
Net loss attributable to non-controlling interest
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
2
|
%
|
|
(15
|
)%
|
|
(2
|
)%
|
|
(10
|
)%
|
Foreign currency translation adjustments
|
0
|
%
|
|
7
|
%
|
|
1
|
%
|
|
3
|
%
|
Comprehensive income (loss)
|
2
|
%
|
|
(8
|
)%
|
|
(1
|
)%
|
|
(7
|
)%
|
Comprehensive income attributable to non-controlling interest
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
Comprehensive income (loss) attributable to DASAN Zhone Solutions, Inc.
|
2
|
%
|
|
(8
|
)%
|
|
(1
|
)%
|
|
(7
|
)%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
Increase/(decrease)
|
|
% change
|
|
2017
|
|
2016
|
|
Increase/(decrease)
|
|
% change
|
||||||||||||||
|
|
|
(As Revised)
|
|
|
|
|
|
|
|
(As Revised)
|
|
|
|
|
||||||||||||||
Products
|
$
|
63.2
|
|
|
$
|
28.9
|
|
|
$
|
34.3
|
|
|
119
|
%
|
|
$
|
169.8
|
|
|
$
|
84.6
|
|
|
$
|
85.2
|
|
|
101
|
%
|
Services
|
3.2
|
|
|
2.3
|
|
|
0.9
|
|
|
39
|
%
|
|
8.7
|
|
|
6.2
|
|
|
2.5
|
|
|
40
|
%
|
||||||
Total
|
$
|
66.4
|
|
|
$
|
31.2
|
|
|
$
|
35.2
|
|
|
113
|
%
|
|
$
|
178.5
|
|
|
$
|
90.8
|
|
|
$
|
87.7
|
|
|
97
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
Increase/(decrease)
|
|
% change
|
|
2017
|
|
2016
|
|
Increase/(decrease)
|
|
% change
|
||||||||||||||
|
|
|
(As Revised)
|
|
|
|
|
|
|
|
(As Revised)
|
|
|
|
|
||||||||||||||
Revenue by geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
United States
|
$
|
13.1
|
|
|
$
|
3.4
|
|
|
$
|
9.7
|
|
|
285
|
%
|
|
$
|
37.2
|
|
|
$
|
7.4
|
|
|
$
|
29.8
|
|
|
403
|
%
|
Canada
|
1.5
|
|
|
0.3
|
|
|
1.2
|
|
|
100
|
%
|
|
4.1
|
|
|
0.3
|
|
|
3.8
|
|
|
100
|
%
|
||||||
Total North America
|
14.6
|
|
|
3.7
|
|
|
10.9
|
|
|
295
|
%
|
|
41.3
|
|
|
7.7
|
|
|
33.6
|
|
|
436
|
%
|
||||||
Latin America
|
7.5
|
|
|
1.9
|
|
|
5.6
|
|
|
295
|
%
|
|
19.4
|
|
|
2.9
|
|
|
16.5
|
|
|
569
|
%
|
||||||
Europe, Middle East, Africa
|
7.4
|
|
|
2.2
|
|
|
5.2
|
|
|
236
|
%
|
|
19.1
|
|
|
5.2
|
|
|
13.9
|
|
|
267
|
%
|
||||||
Korea
|
20.5
|
|
|
18.4
|
|
|
2.1
|
|
|
11
|
%
|
|
69.0
|
|
|
60.1
|
|
|
8.9
|
|
|
15
|
%
|
||||||
Asia Pacific
|
16.4
|
|
|
5.0
|
|
|
11.4
|
|
|
228
|
%
|
|
29.7
|
|
|
14.9
|
|
|
14.8
|
|
|
99
|
%
|
||||||
Total International
|
51.8
|
|
|
27.5
|
|
|
24.3
|
|
|
88
|
%
|
|
137.2
|
|
|
83.1
|
|
|
54.1
|
|
|
65
|
%
|
||||||
Total
|
$
|
66.4
|
|
|
$
|
31.2
|
|
|
$
|
35.2
|
|
|
113
|
%
|
|
$
|
178.5
|
|
|
$
|
90.8
|
|
|
$
|
87.7
|
|
|
97
|
%
|
•
|
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.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
(As Revised)
|
|
|
|
(As Revised)
|
||||||||
Net income (loss)
|
$
|
1,387
|
|
|
$
|
(4,789
|
)
|
|
$
|
(2,985
|
)
|
|
$
|
(9,083
|
)
|
Add:
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
227
|
|
|
173
|
|
|
711
|
|
|
463
|
|
||||
Income tax provision (benefit)
|
107
|
|
|
(610
|
)
|
|
646
|
|
|
(1,041
|
)
|
||||
Depreciation and amortization
|
752
|
|
|
628
|
|
|
3,105
|
|
|
1,165
|
|
||||
Stock-based compensation
|
195
|
|
|
128
|
|
|
670
|
|
|
128
|
|
||||
Merger-related costs
|
—
|
|
|
3,536
|
|
|
—
|
|
|
3,536
|
|
||||
Adjusted EBITDA
|
$
|
2,668
|
|
|
$
|
(934
|
)
|
|
$
|
2,147
|
|
|
$
|
(4,832
|
)
|
|
|
|
Payments due by period
|
||||||||||||||||||||||||
|
Total
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||||
Operating leases
|
$
|
20,166
|
|
|
$
|
967
|
|
|
$
|
3,359
|
|
|
$
|
2,496
|
|
|
$
|
2,358
|
|
|
$
|
2,264
|
|
|
$
|
8,722
|
|
Purchase commitments
|
2,966
|
|
|
2,966
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Short-term debt
|
18,382
|
|
|
18,382
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Related-party debt
|
8,544
|
|
|
1,744
|
|
|
1,800
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
—
|
|
|||||||
Total future contractual commitments
|
$
|
50,058
|
|
|
$
|
24,059
|
|
|
$
|
5,159
|
|
|
$
|
2,496
|
|
|
$
|
2,358
|
|
|
$
|
7,264
|
|
|
$
|
8,722
|
|
Exhibit
Number
|
Description
|
|
|
|
|
10.1
|
|
10.2
|
|
10.3
|
|
31.1
|
|
32.1
|
|
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
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
DASAN ZHONE SOLUTIONS, INC.
|
||
|
|
|
|
Date: November 14, 2017
|
By:
|
|
/s/ IL YUNG KIM
|
|
Name:
|
|
Il Yung Kim
|
|
Title:
|
|
President, Chief Executive Officer and Acting Chief Financial Officer
|
|
|
|
|
|
DASAN ZHONE SOLUTIONS, INC.
|
|
|
|
|
|
Date:
|
September 11, 2017
|
By:
|
/s/ Il Yung Kim
|
|
|
Name:
|
Il Yung Kim
|
|
|
Title:
|
Chief Executive Officer
|
|
|
EXECUTIVE
|
|
|
|
|
|
Date:
|
September 11, 2017
|
By:
|
/s/ James Norrod
|
|
|
|
James Norrod
|
|
|
DASAN ZHONE SOLUTIONS, INC.
|
|
|
|
|
|
Date:
|
September 11, 2017
|
By:
|
/s/ Il Yung Kim
|
|
|
Name:
|
Il Yung Kim
|
|
|
Title:
|
Chief Executive Officer
|
|
|
EXECUTIVE
|
|
|
|
|
|
Date:
|
September 11, 2017
|
By:
|
/s/ Il Yung Kim
|
|
|
|
Kirk Misaka
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of DASAN Zhone Solutions, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
|
|
|
/s/ IL YUNG KIM
|
|
Il Yung Kim
|
|
President, Chief Executive Officer, Acting Chief Financial Officer and Director
|
1.
|
The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ IL YUNG KIM
|
|
Il Yung Kim
|
|
President, Chief Executive Officer, Acting Chief Financial Officer and Director
|