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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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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 No.)
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Common Stock, $0.001 Par Value
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The Nasdaq Stock Market LLC
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(Title of class)
|
(Name of each exchange on which registered)
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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x
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Emerging growth company
|
¨
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Page
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PART I
|
||
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
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PART II
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|
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Item 5.
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||
Item 6.
|
||
Item 7.
|
||
Item 7A.
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||
Item 8.
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||
Item 9.
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||
Item 9A.
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||
Item 9B.
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||
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PART III
|
|
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Item 10.
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||
Item 11.
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||
Item 12.
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||
Item 13.
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||
Item 14.
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||
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PART IV
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|
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Item 15.
|
||
Item 16.
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||
•
|
Leverage Growth Opportunities from the Merger.
We believe the expanded geographic reach of the combined company and the enhanced functionality and range of our product offerings following the Merger represent attractive opportunities for growth in our business. Prior to the Merger, DNS provided communications equipment primarily in the Asia-Pacific region with a particular focus on Korea, Japan and Vietnam, and Legacy Zhone provided communications equipment primarily in the Americas and EMEA region. DNS and Legacy Zhone had complementary product portfolios prior to the Merger, with both DNS and Legacy Zhone offering broadband access solutions and related products. We intend to continue to leverage the combination of DNS and Legacy Zhone products to enhance the functionality and range of our product offerings and create increased sales opportunities worldwide.
|
•
|
Drive Cost Efficiencies through Integration of DNS and Legacy Zhone Operations.
We intend to continue to drive cost efficiencies in our business through continuing efforts to integrate the DNS and Legacy Zhone global operations,
|
•
|
Maintain Focus on Technology Leadership.
We believe that our future success is built upon our investment in the development of advanced communications technologies. We intend to continue to focus on research and development to maintain our leadership position in network access solutions and communications equipment.
|
•
|
U.S. Sales.
Our U.S. Sales organization establishes and maintains direct and indirect relationships with domestic customers, which include carriers and service providers, cable operators utilities and enterprises. In addition, this organization is responsible for managing our distribution channel.
|
•
|
International Sales.
Our International Sales organization targets foreign carriers, service providers, enterprise customers and is staffed with individuals with specific experience dealing with carriers, service providers and channel partners, in their designated international territories.
|
•
|
product performance;
|
•
|
interoperability with existing products;
|
•
|
scalability and upgradeability;
|
•
|
conformance to standards;
|
•
|
breadth of services;
|
•
|
reliability;
|
•
|
ease of installation and use;
|
•
|
geographic footprints for products;
|
•
|
ability to provide customer financing;
|
•
|
pricing;
|
•
|
technical support and customer service; and
|
•
|
brand recognition.
|
Name
|
Age
|
Position
|
Il Yung Kim
|
61
|
Chief Executive Officer
|
Michael Golomb
|
42
|
Chief Financial Officer, Corporate Treasurer and Secretary
|
•
|
increasing our vulnerability to adverse economic conditions in our industry or the economy in general;
|
•
|
requiring substantial amounts of cash to be used for debt servicing, rather than other purposes, including operations;
|
•
|
limiting our ability to plan for, or react to, changes in our business and industry; and
|
•
|
influencing investor and customer perceptions about our financial stability and limiting our ability to obtain financing or acquire customers.
|
•
|
the market for our products develops more slowly than anticipated;
|
•
|
we fail to establish market share or generate revenue at anticipated levels;
|
•
|
our capital expenditure forecasts change or prove inaccurate; or
|
•
|
we fail to respond to unforeseen challenges or take advantage of unanticipated opportunities.
|
•
|
the diversion of management’s attention from day-to-day operations;
|
•
|
the management of a significantly larger company than before the Merger;
|
•
|
the assimilation of DNS employees and the integration of the two business cultures;
|
•
|
challenges in attracting and retaining key personnel;
|
•
|
the need to integrate information, accounting, finance, sales, billing, payroll and regulatory compliance systems;
|
•
|
challenges in keeping existing customers and obtaining new customers; and
|
•
|
challenges in combining product offerings and sales and marketing activities.
|
•
|
limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes;
|
•
|
limiting our flexibility to plan for, or react to, changes in our business or market conditions;
|
•
|
requiring us to use a significant portion of any future cash flow from operations to repay or service the debt, thereby reducing the amount of cash available for other purposes;
|
•
|
making us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; and
|
•
|
making us more vulnerable to the impact of adverse economic and industry conditions and increases in interest rates.
|
•
|
unexpected changes in laws, policies and regulatory requirements, including but not limited to regulations related to import-export control;
|
•
|
trade protection measures, tariffs, embargoes and other regulatory requirements which may affect our ability to import or export our products into or from various countries;
|
•
|
political unrest or instability, acts of terrorism or war in countries where we or our suppliers or customers have operations, including heightened security concerns relating to our operations in Korea stemming from North Korea’s nuclear weapons and ballistic missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community;
|
•
|
political considerations that affect service provider and government spending patterns;
|
•
|
differing technology standards or customer requirements;
|
•
|
developing and customizing our products for foreign countries;
|
•
|
fluctuations in currency exchange rates, foreign exchange controls and restrictions on cash repatriation;
|
•
|
longer accounts receivable collection cycles and financial instability of customers;
|
•
|
requirements for additional liquidity to fund our international operations;
|
•
|
difficulties and excessive costs for staffing and managing foreign operations;
|
•
|
ineffective legal protection of our intellectual property rights in certain countries;
|
•
|
potentially adverse tax consequences; and
|
•
|
changes in a country’s or region’s political and economic conditions.
|
•
|
product performance;
|
•
|
interoperability with existing products;
|
•
|
scalability and upgradeability;
|
•
|
conformance to standards;
|
•
|
breadth of services;
|
•
|
reliability;
|
•
|
ease of installation and use;
|
•
|
geographic footprints for products;
|
•
|
ability to provide customer financing;
|
•
|
pricing;
|
•
|
technical support and customer service; and
|
•
|
brand recognition.
|
•
|
issue stock that would dilute our current stockholders’ percentage ownership;
|
•
|
consume a substantial portion of our cash resources;
|
•
|
incur substantial debt;
|
•
|
assume liabilities;
|
•
|
increase our ongoing operating expenses and level of fixed costs;
|
•
|
record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges;
|
•
|
incur amortization expenses related to certain intangible assets;
|
•
|
incur large and immediate write-offs; and
|
•
|
become subject to litigation.
|
•
|
difficulties in integrating the operations, technologies, products and personnel of the acquired companies;
|
•
|
unanticipated costs;
|
•
|
diversion of management’s time and attention away from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions;
|
•
|
difficulties in entering markets in which we have no or limited prior experience;
|
•
|
insufficient revenues to offset increased expenses associated with acquisitions and where competitors in such markets have stronger market positions; and
|
•
|
potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
|
2017:
|
|
|
|
||||
|
High
|
|
Low
|
||||
Fourth Quarter ended December 31, 2017
|
$
|
9.49
|
|
|
$
|
6.25
|
|
Third Quarter ended September 30, 2017
|
7.49
|
|
|
5.71
|
|
||
Second Quarter ended June 30, 2017
|
6.25
|
|
|
5.46
|
|
||
First Quarter ended March 31, 2017
|
6.28
|
|
|
4.32
|
|
2016:
|
|
|
|
||||
|
High
|
|
Low
|
||||
Fourth Quarter ended December 31, 2016
|
$
|
5.95
|
|
|
$
|
4.65
|
|
Third Quarter ended September 30, 2016
|
7.10
|
|
|
5.25
|
|
||
Second Quarter ended June 30, 2016
|
8.25
|
|
|
5.60
|
|
||
First Quarter ended March 31, 2016
|
8.10
|
|
|
5.00
|
|
|
12/31/12
|
|
12/31/13
|
|
12/31/14
|
|
12/31/15
|
|
12/31/16
|
|
12/31/17
|
||||||||||||
DASAN Zhone Solutions, Inc.
|
$
|
100
|
|
|
$
|
1,127
|
|
|
$
|
373
|
|
|
$
|
211
|
|
|
$
|
208
|
|
|
$
|
391
|
|
S&P 500 Index - Total Returns
|
100
|
|
|
132
|
|
|
151
|
|
|
153
|
|
|
171
|
|
|
208
|
|
||||||
NASDAQ Telecommunications Index
|
100
|
|
|
127
|
|
|
142
|
|
|
134
|
|
|
158
|
|
|
190
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||
Statement of Comprehensive Income (Loss) Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
$
|
215,732
|
|
|
$
|
121,670
|
|
|
$
|
114,421
|
|
|
$
|
108,634
|
|
|
$
|
108,046
|
|
Net revenue - related parties
|
31,382
|
|
|
28,634
|
|
|
24,775
|
|
|
30,760
|
|
|
10,164
|
|
|||||
Total net revenue
|
247,114
|
|
|
150,304
|
|
|
139,196
|
|
|
139,394
|
|
|
118,210
|
|
|||||
Gross profit
|
81,369
|
|
|
40,947
|
|
|
35,886
|
|
|
40,842
|
|
|
40,953
|
|
|||||
Total operating expenses
|
80,647
|
|
|
53,996
|
|
|
38,863
|
|
|
37,639
|
|
|
32,814
|
|
|||||
Operating income (loss)
|
722
|
|
|
(13,049
|
)
|
|
(2,977
|
)
|
|
3,203
|
|
|
8,139
|
|
|||||
Interest income
|
129
|
|
|
183
|
|
|
136
|
|
|
418
|
|
|
550
|
|
|||||
Interest expense
|
(1,019
|
)
|
|
(830
|
)
|
|
(532
|
)
|
|
(526
|
)
|
|
(629
|
)
|
|||||
Other (expense) income, net
|
(731
|
)
|
|
(145
|
)
|
|
266
|
|
|
122
|
|
|
656
|
|
|||||
(Loss) income before income taxes
|
(899
|
)
|
|
(13,841
|
)
|
|
(3,107
|
)
|
|
3,217
|
|
|
8,716
|
|
|||||
Income tax (benefit) provision
|
(2,072
|
)
|
|
1,487
|
|
|
232
|
|
|
1,380
|
|
|
2,208
|
|
|||||
Net income (loss)
|
1,173
|
|
|
(15,328
|
)
|
|
(3,339
|
)
|
|
1,837
|
|
|
6,508
|
|
|||||
Net income (loss) attributable to non-controlling interest
|
102
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
1,071
|
|
|
$
|
(15,326
|
)
|
|
$
|
(3,339
|
)
|
|
$
|
1,837
|
|
|
$
|
6,508
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings (loss) per share attributable to DASAN Zhone Solutions, Inc.(1)
|
$
|
0.07
|
|
|
$
|
(1.32
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
0.20
|
|
|
$
|
0.71
|
|
Diluted earnings (loss) per share attributable to DASAN Zhone Solutions, Inc. (1)
|
0.07
|
|
|
(1.32
|
)
|
|
(0.36
|
)
|
|
0.20
|
|
|
0.71
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average shares outstanding used to compute basic net income (loss) per share (1)
|
16,383
|
|
|
11,637
|
|
|
9,314
|
|
|
9,199
|
|
|
9,146
|
|
|||||
Weighted average shares outstanding used to compute diluted net income (loss) per share (1)
|
16,396
|
|
|
11,637
|
|
|
9,314
|
|
|
9,199
|
|
|
9,146
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short-term investments
|
$
|
17,475
|
|
|
$
|
18,886
|
|
|
$
|
9,095
|
|
|
$
|
7,150
|
|
|
$
|
24,719
|
|
Working capital
|
62,286
|
|
|
56,819
|
|
|
33,159
|
|
|
40,033
|
|
|
37,987
|
|
|||||
Total assets
|
159,127
|
|
|
145,447
|
|
|
83,226
|
|
|
103,279
|
|
|
88,384
|
|
|||||
Stockholders’ equity and non-controlling interest
|
73,767
|
|
|
66,868
|
|
|
41,465
|
|
|
48,633
|
|
|
47,124
|
|
•
|
Our broadband access products offer a variety of solutions for carriers and service providers to connect residential and business customers, either using high-speed fiber or leveraging their existing deployed copper networks to offer broadband services to customer premises. Once our broadband access products are deployed, the service provider can offer voice, high-definition and ultra-high-definition video, high-speed internet access and business class services to their customers.
|
•
|
Our Ethernet switching products provide a high-performance and manageable solution that bridges the gap from carrier access technologies to the core network. Our products support pure Ethernet switching as well as layer 3 IP and MPLS and are currently being developed for deployment as part of SDNs.
|
•
|
Our mobile backhaul products provide a robust, manageable and scalable solution for mobile operators that enable them to upgrade their mobile backhaul systems and migrate from 3G networks to LTE and beyond. Our mobile backhaul products may be collocated at the RAN BS and can aggregate multiple RAN BS into a single backhaul for delivery of mobile traffic to the RAN network controller. We provide standard Ethernet/IP or MPLS interfaces and interoperate with other vendors in these networks.
|
•
|
Our FiberLAN portfolio of POLAN products are designed for enterprise, campus, hospitality, and entertainment arena usage. Our FiberLAN portfolio includes our high-performance, high-bandwidth GPON OLTs connected to the industry’s most diverse ONT product line, which include units with integrated PoE to power a wide range of PoE-enabled access devises.
|
•
|
Our SDN and NFV strategy is to develop tools and building blocks that will allow service providers to migrate their networks’ full complement of legacy control plane and data plane devices to a centralized intelligent controller that can reconfigure the services of the hundreds of network elements in real time for more controlled and efficient provision of bandwidth and latency across the network. The migration move to SDN and NFV will provide better service for end customers and a more efficient and cost-effective use of hardware resources for service providers.
|
•
|
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.
|
|
Year ended December 31,
|
||||||||
|
2017
|
|
2016
|
|
2015
|
|
|||
Net revenue:
|
|
|
|
|
|
|
|||
Net revenue
|
87
|
%
|
|
81
|
%
|
|
82
|
%
|
|
Net revenue - related parties
|
13
|
%
|
|
19
|
%
|
|
18
|
%
|
|
Total net revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
||
Products and services
|
56
|
%
|
|
56
|
%
|
|
58
|
%
|
|
Products and services - related parties
|
11
|
%
|
|
16
|
%
|
|
16
|
%
|
|
Amortization of intangible assets
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Total cost of revenue
|
67
|
%
|
|
73
|
%
|
|
74
|
%
|
|
Gross profit
|
33
|
%
|
|
27
|
%
|
|
26
|
%
|
|
Operating expenses:
|
|
|
|
|
|
|
|||
Research and product development
|
14
|
%
|
|
17
|
%
|
|
15
|
%
|
|
Selling, marketing, general and administrative
|
18
|
%
|
|
18
|
%
|
|
13
|
%
|
|
Amortization of intangible assets
|
1
|
%
|
|
1
|
%
|
|
0
|
%
|
|
Gain from sale of assets
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Total operating expenses
|
33
|
%
|
|
36
|
%
|
|
28
|
%
|
|
Operating income (loss)
|
0
|
%
|
|
(9
|
)%
|
|
(2
|
)%
|
|
Interest income
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Interest income (expense)
|
0
|
%
|
|
(1
|
)%
|
|
0
|
%
|
|
Other income (expense), net
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Income (loss) before income taxes
|
0
|
%
|
|
(9
|
)%
|
|
(2
|
)%
|
|
Income tax (benefit) provision
|
(1
|
)%
|
|
1
|
%
|
|
0
|
%
|
|
Net income (loss)
|
0
|
%
|
|
(10
|
)%
|
|
(2
|
)%
|
|
Net income (loss) attributable to non-controlling interest
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
0
|
%
|
|
(10
|
)%
|
|
(2
|
)%
|
|
|
2017
|
|
2016
|
|
Increase (Decrease)
|
|
%
change
|
|||||||
Products
|
$
|
235.1
|
|
|
$
|
142.2
|
|
|
$
|
92.9
|
|
|
65
|
%
|
Services
|
12.0
|
|
|
8.1
|
|
|
3.9
|
|
|
48
|
%
|
|||
|
$
|
247.1
|
|
|
$
|
150.3
|
|
|
$
|
96.8
|
|
|
64
|
%
|
|
2017
|
|
2016
|
|
Increase
(Decrease)
|
|
%
change
|
|||||||
Revenue by geography:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
48.9
|
|
|
$
|
16.9
|
|
|
$
|
32.0
|
|
|
189
|
%
|
Canada
|
5.6
|
|
|
2.0
|
|
|
3.6
|
|
|
180
|
%
|
|||
Total North America
|
54.5
|
|
|
18.9
|
|
|
35.6
|
|
|
188
|
%
|
|||
Latin America
|
26.2
|
|
|
9.6
|
|
|
16.6
|
|
|
173
|
%
|
|||
Europe, Middle East, Africa
|
30.8
|
|
|
13.6
|
|
|
17.2
|
|
|
126
|
%
|
|||
Korea
|
81.5
|
|
|
77.9
|
|
|
3.6
|
|
|
5
|
%
|
|||
Other Asia Pacific
|
54.1
|
|
|
30.3
|
|
|
23.8
|
|
|
79
|
%
|
|||
Total International
|
192.6
|
|
|
131.4
|
|
|
61.2
|
|
|
47
|
%
|
|||
Total
|
$
|
247.1
|
|
|
$
|
150.3
|
|
|
$
|
96.8
|
|
|
64
|
%
|
|
2016
|
|
2015
|
|
Increase
(Decrease)
|
|
%
change
|
|||||||
Products
|
$
|
142.2
|
|
|
$
|
133.0
|
|
|
$
|
9.2
|
|
|
7
|
%
|
Services
|
8.1
|
|
|
6.2
|
|
|
1.9
|
|
|
31
|
%
|
|||
|
$
|
150.3
|
|
|
$
|
139.2
|
|
|
$
|
11.1
|
|
|
8
|
%
|
|
2016
|
|
2015
|
|
Increase
(Decrease)
|
|
%
change
|
|||||||
Revenue by geography:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
16.9
|
|
|
$
|
4.4
|
|
|
$
|
12.5
|
|
|
284
|
%
|
Canada
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|
N/A
|
|
|||
Total North America
|
18.9
|
|
|
4.4
|
|
|
14.5
|
|
|
330
|
%
|
|||
Latin America
|
9.6
|
|
|
2.5
|
|
|
7.1
|
|
|
284
|
%
|
|||
Europe, Middle East, Africa
|
13.6
|
|
|
9.4
|
|
|
4.2
|
|
|
45
|
%
|
|||
Korea
|
77.9
|
|
|
114.7
|
|
|
(36.8
|
)
|
|
(32
|
)%
|
|||
Other Asia Pacific
|
30.3
|
|
|
8.2
|
|
|
22.1
|
|
|
270
|
%
|
|||
Total International
|
131.4
|
|
|
134.8
|
|
|
(3.4
|
)
|
|
(3
|
)%
|
|||
Total
|
$
|
150.3
|
|
|
$
|
139.2
|
|
|
$
|
11.1
|
|
|
8
|
%
|
•
|
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 expenses, 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.
|
|
Year Ended December 31,
|
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
|
||||||
Net income (loss)
|
$
|
1,173
|
|
|
$
|
(15,328
|
)
|
|
$
|
(3,339
|
)
|
|
Add:
|
|
|
|
|
|
|
||||||
Interest expense, net
|
890
|
|
|
647
|
|
|
396
|
|
|
|||
Income tax (benefit) provision
|
(2,072
|
)
|
|
1,487
|
|
|
232
|
|
|
|||
Depreciation and amortization
|
3,817
|
|
|
3,173
|
|
|
1,404
|
|
|
|||
Stock-based compensation
|
902
|
|
|
336
|
|
|
—
|
|
|
|||
Merger transaction costs
|
—
|
|
|
1,273
|
|
|
—
|
|
|
|||
Adjusted EBITDA
|
$
|
4,710
|
|
|
$
|
(8,412
|
)
|
|
$
|
(1,307
|
)
|
|
•
|
increasing our vulnerability to adverse economic conditions in our industry or the economy in general;
|
•
|
requiring substantial amounts of cash to be used for debt servicing, rather than other purposes, including operations;
|
•
|
limiting our ability to plan for, or react to, changes in our business and industry; and
|
•
|
influencing investor and customer perceptions about our financial stability and limiting our ability to obtain financing or acquire customers.
|
|
Total
|
|
Payments due by period
|
||||||||||||||||||||||||
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|||||||||||||||||
Operating leases
|
$
|
23,243
|
|
|
$
|
3,794
|
|
|
$
|
2,928
|
|
|
$
|
2,844
|
|
|
$
|
2,590
|
|
|
$
|
2,664
|
|
|
$
|
8,423
|
|
Purchase commitments
|
8,037
|
|
|
8,037
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Short-term debt
|
19,790
|
|
|
19,790
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Long-term debt - others
|
2,987
|
|
|
—
|
|
|
2,987
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Long-term debt - related party
|
6,800
|
|
|
—
|
|
|
1,800
|
|
|
—
|
|
|
5,000
|
|
|
—
|
|
|
—
|
|
|||||||
Other payable - related party
|
1,956
|
|
|
1,956
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Royalty obligations
|
1,000
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total future contractual commitments
|
$
|
63,814
|
|
|
$
|
34,577
|
|
|
$
|
7,715
|
|
|
$
|
2,844
|
|
|
$
|
7,590
|
|
|
$
|
2,664
|
|
|
$
|
8,423
|
|
|
Page
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
17,475
|
|
|
$
|
17,893
|
|
Restricted cash
|
12,425
|
|
|
6,650
|
|
||
Short-term investments
|
—
|
|
|
993
|
|
||
Accounts receivable, net of allowances for sales returns and doubtful accounts of $1,691 in 2017 and $1,143 in 2016
|
|
|
|
|
|||
Trade receivables
|
48,257
|
|
|
38,324
|
|
||
Related parties
|
13,498
|
|
|
13,311
|
|
||
Other receivables
|
|
|
|
|
|||
Others
|
12,494
|
|
|
12,068
|
|
||
Related parties
|
164
|
|
|
171
|
|
||
Inventories
|
25,344
|
|
|
31,032
|
|
||
Prepaid expenses and other current assets
|
3,652
|
|
|
4,131
|
|
||
Total current assets
|
133,309
|
|
|
124,573
|
|
||
Property and equipment, net
|
5,873
|
|
|
6,288
|
|
||
Goodwill
|
3,977
|
|
|
3,977
|
|
||
Intangible assets, net
|
6,785
|
|
|
8,767
|
|
||
Non-current deferred tax assets
|
2,954
|
|
|
—
|
|
||
Long-term restricted cash
|
1,512
|
|
|
—
|
|
||
Other assets
|
4,717
|
|
|
1,842
|
|
||
Total assets
|
$
|
159,127
|
|
|
$
|
145,447
|
|
Commitments and Contingencies
|
|
|
|
||||
Liabilities, Stockholders’ Equity and Non-controlling Interest
|
|
|
|
|
|||
Current liabilities:
|
|
|
|
|
|||
Accounts payable
|
|
|
|
|
|||
Others
|
31,441
|
|
|
29,428
|
|
||
Related parties
|
1,351
|
|
|
1,683
|
|
||
Short-term debt
|
19,790
|
|
|
17,599
|
|
||
Other payables
|
|
|
|
|
|||
Others
|
2,032
|
|
|
2,040
|
|
||
Related parties
|
1,956
|
|
|
7,107
|
|
||
Deferred revenue
|
3,279
|
|
|
1,901
|
|
||
Accrued and other liabilities
|
11,174
|
|
|
7,996
|
|
||
Total current liabilities
|
71,023
|
|
|
67,754
|
|
||
Long-term debt
|
|
|
|
||||
Others
|
2,987
|
|
|
—
|
|
||
Related parties
|
6,800
|
|
|
6,800
|
|
||
Deferred revenue
|
1,883
|
|
|
1,674
|
|
||
Other long-term liabilities
|
2,667
|
|
|
2,351
|
|
||
Total liabilities
|
85,360
|
|
|
78,579
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
|
|
||
Stockholders’ equity and non-controlling interest
|
|
|
|
||||
Common stock, authorized 36,000 shares, 16,410 and 16,375 shares outstanding as of December 31, 2017 and December 31, 2016 at a $0.001 par value
(1)
|
16
|
|
|
16
|
|
||
Additional paid-in capital
|
90,198
|
|
|
89,174
|
|
||
Other comprehensive income (loss)
|
1,871
|
|
|
(2,815
|
)
|
||
Accumulated deficit
|
(18,852
|
)
|
|
(19,923
|
)
|
||
Total stockholders' equity
|
73,233
|
|
|
66,452
|
|
||
Non-controlling interest
|
534
|
|
|
416
|
|
||
Total stockholders' equity and non-controlling interest
|
73,767
|
|
|
66,868
|
|
||
Total liabilities, stockholders’ equity and non-controlling interest
|
$
|
159,127
|
|
|
$
|
145,447
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net revenue:
|
|
|
|
|
|
||||||
Net revenue
|
$
|
215,732
|
|
|
$
|
121,670
|
|
|
$
|
114,421
|
|
Net revenue - related parties
|
31,382
|
|
|
28,634
|
|
|
24,775
|
|
|||
Total net revenue
|
247,114
|
|
|
150,304
|
|
|
139,196
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|||||
Products and services
|
138,792
|
|
|
84,415
|
|
|
81,420
|
|
|||
Products and services - related parties
|
26,341
|
|
|
24,738
|
|
|
21,890
|
|
|||
Amortization of intangible assets
|
612
|
|
|
204
|
|
|
—
|
|
|||
Total cost of revenue
|
165,745
|
|
|
109,357
|
|
|
103,310
|
|
|||
Gross profit
|
81,369
|
|
|
40,947
|
|
|
35,886
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|||||
Research and product development
|
35,437
|
|
|
25,396
|
|
|
21,331
|
|
|||
Selling, marketing, general and administrative
|
43,888
|
|
|
27,348
|
|
|
17,528
|
|
|||
Amortization of intangible assets
|
1,322
|
|
|
1,556
|
|
|
4
|
|
|||
Gain from sale of assets
|
—
|
|
|
(304
|
)
|
|
—
|
|
|||
Total operating expenses
|
80,647
|
|
|
53,996
|
|
|
38,863
|
|
|||
Operating income (loss)
|
722
|
|
|
(13,049
|
)
|
|
(2,977
|
)
|
|||
Interest income
|
129
|
|
|
183
|
|
|
136
|
|
|||
Interest expense
|
(1,019
|
)
|
|
(830
|
)
|
|
(532
|
)
|
|||
Other income (expense), net
|
(731
|
)
|
|
(145
|
)
|
|
266
|
|
|||
Income (loss) before income taxes
|
(899
|
)
|
|
(13,841
|
)
|
|
(3,107
|
)
|
|||
Income tax (benefit) provision
|
(2,072
|
)
|
|
1,487
|
|
|
232
|
|
|||
Net income (loss)
|
1,173
|
|
|
(15,328
|
)
|
|
(3,339
|
)
|
|||
Net income (loss) attributable to non-controlling interest
|
102
|
|
|
(2
|
)
|
|
—
|
|
|||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
1,071
|
|
|
$
|
(15,326
|
)
|
|
$
|
(3,339
|
)
|
|
|
|
|
|
|
|
|||||
Foreign currency translation adjustments
|
4,702
|
|
|
(1,047
|
)
|
|
(2,790
|
)
|
|||
Comprehensive income (loss)
|
5,875
|
|
|
(16,375
|
)
|
|
(6,129
|
)
|
|||
Comprehensive income attributable to non-controlling interest
|
118
|
|
|
1
|
|
|
—
|
|
|||
Comprehensive income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
5,757
|
|
|
$
|
(16,376
|
)
|
|
$
|
(6,129
|
)
|
|
|
|
|
|
|
||||||
Basic earnings (loss) per share attributable to DASAN Zhone Solutions, Inc.
(1)
|
$
|
0.07
|
|
|
$
|
(1.32
|
)
|
|
$
|
(0.36
|
)
|
Diluted earnings (loss) per share attributable to DASAN Zhone Solutions, Inc. (1)
|
$
|
0.07
|
|
|
$
|
(1.32
|
)
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding used to compute basic net income (loss) per share
(1)
|
16,383
|
|
|
11,637
|
|
|
9,314
|
|
|||
Weighted average shares outstanding used to compute diluted net income (loss) per share (1)
|
16,396
|
|
|
11,637
|
|
|
9,314
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
Additional
paid-in
capital
|
|
Other
comprehensive
income (loss)
|
|
Accumulated
deficit
|
|
Total stockholders' equity
|
|
Non-controlling interest
|
|
Total
stockholders' equity and non-controlling interest
|
|||||||||||||||
Balances as of December 31, 2014
|
9,221
|
|
|
$
|
9
|
|
|
$
|
48,857
|
|
|
$
|
1,025
|
|
|
$
|
(1,258
|
)
|
|
$
|
48,633
|
|
|
$
|
—
|
|
|
$
|
48,633
|
|
Issuance of common stock
|
272
|
|
|
—
|
|
|
1,800
|
|
|
—
|
|
|
—
|
|
|
1,800
|
|
|
—
|
|
|
1,800
|
|
|||||||
Net increase in parent company investment
|
—
|
|
|
—
|
|
|
(2,977
|
)
|
|
—
|
|
|
—
|
|
|
(2,977
|
)
|
|
—
|
|
|
(2,977
|
)
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,339
|
)
|
|
(3,339
|
)
|
|
—
|
|
|
(3,339
|
)
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,790
|
)
|
|
—
|
|
|
(2,790
|
)
|
|
—
|
|
|
(2,790
|
)
|
|||||||
Acquisition of controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
138
|
|
|
138
|
|
|||||||
Balances as of December 31, 2015
|
9,493
|
|
|
9
|
|
|
47,680
|
|
|
(1,765
|
)
|
|
(4,597
|
)
|
|
41,327
|
|
|
138
|
|
|
41,465
|
|
|||||||
Stock-based compensation
|
8
|
|
|
—
|
|
|
336
|
|
|
—
|
|
|
—
|
|
|
336
|
|
|
—
|
|
|
336
|
|
|||||||
Shares of Legacy Zhone stock as of September 8, 2016 acquired through business combination
|
6,874
|
|
|
7
|
|
|
41,435
|
|
|
—
|
|
|
—
|
|
|
41,442
|
|
|
—
|
|
|
41,442
|
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,326
|
)
|
|
(15,326
|
)
|
|
(2
|
)
|
|
(15,328
|
)
|
|||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,050
|
)
|
|
—
|
|
|
(1,050
|
)
|
|
3
|
|
|
(1,047
|
)
|
|||||||
Acquisition of additional interest
|
—
|
|
|
—
|
|
|
(277
|
)
|
|
—
|
|
|
—
|
|
|
(277
|
)
|
|
277
|
|
|
—
|
|
|||||||
Balances as of December 31, 2016
|
16,375
|
|
|
16
|
|
|
89,174
|
|
|
(2,815
|
)
|
|
(19,923
|
)
|
|
66,452
|
|
|
416
|
|
|
66,868
|
|
|||||||
Exercise of stock options
|
35
|
|
|
—
|
|
|
122
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
—
|
|
|
122
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
902
|
|
|
—
|
|
|
—
|
|
|
902
|
|
|
—
|
|
|
902
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,071
|
|
|
1,071
|
|
|
102
|
|
|
1,173
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
4,686
|
|
|
—
|
|
|
4,686
|
|
|
16
|
|
|
4,702
|
|
|||||||
Balance as of December 31, 2017
|
16,410
|
|
|
$
|
16
|
|
|
$
|
90,198
|
|
|
$
|
1,871
|
|
|
$
|
(18,852
|
)
|
|
$
|
73,233
|
|
|
$
|
534
|
|
|
$
|
73,767
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
1,173
|
|
|
$
|
(15,328
|
)
|
|
$
|
(3,339
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|||||
Depreciation and amortization
|
3,817
|
|
|
3,173
|
|
|
1,404
|
|
|||
Gain from sale of assets
|
—
|
|
|
(304
|
)
|
|
—
|
|
|||
Stock-based compensation
|
902
|
|
|
336
|
|
|
—
|
|
|||
Losses on inventory write-down
|
1,848
|
|
|
547
|
|
|
165
|
|
|||
Unrealized loss (gain) on foreign currency transactions
|
786
|
|
|
62
|
|
|
(1,301
|
)
|
|||
Deferred taxes
|
(2,915
|
)
|
|
1,408
|
|
|
(86
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|||||
Accounts receivable
|
(3,132
|
)
|
|
(2,092
|
)
|
|
11,442
|
|
|||
Inventories
|
6,233
|
|
|
(1,627
|
)
|
|
5,861
|
|
|||
Prepaid expenses and other current assets
|
(3,526
|
)
|
|
3,074
|
|
|
196
|
|
|||
Accounts payable
|
(3,576
|
)
|
|
4,488
|
|
|
(6,676
|
)
|
|||
Accrued expenses
|
292
|
|
|
9,759
|
|
|
(3,415
|
)
|
|||
Net cash provided by operating activities
|
1,902
|
|
|
3,496
|
|
|
4,251
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|||||
Cash acquired through the Merger
|
—
|
|
|
7,013
|
|
|
—
|
|
|||
Cash acquired through common control transactions
|
1,254
|
|
|
—
|
|
|
—
|
|
|||
(Increase) decrease in restricted cash
|
(5,862
|
)
|
|
(2,128
|
)
|
|
1,479
|
|
|||
Decrease in short-term and long-term loans to others
|
—
|
|
|
516
|
|
|
88
|
|
|||
Increase in short-term and long-term loans to others
|
—
|
|
|
(214
|
)
|
|
(446
|
)
|
|||
Proceeds from disposal of property and equipment and other assets
|
6
|
|
|
10
|
|
|
2,230
|
|
|||
Proceeds from sale of short-term investments
|
1,463
|
|
|
—
|
|
|
—
|
|
|||
Purchase of short-term investments
|
(429
|
)
|
|
(1,034
|
)
|
|
(1,856
|
)
|
|||
Purchases of property and equipment
|
(1,072
|
)
|
|
(1,311
|
)
|
|
(794
|
)
|
|||
Purchases of intangible assets
|
(90
|
)
|
|
(61
|
)
|
|
—
|
|
|||
Payment for purchase of shares of HandySoft, net of cash acquired
|
—
|
|
|
—
|
|
|
(548
|
)
|
|||
Net cash provided by (used in) investing activities
|
(4,730
|
)
|
|
2,791
|
|
|
153
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|||||
Repayments of borrowings
|
(24,447
|
)
|
|
(27,336
|
)
|
|
(17,796
|
)
|
|||
Proceeds from short-term borrowings
|
25,834
|
|
|
25,069
|
|
|
17,950
|
|
|||
Proceeds from long-term borrowings - related party
|
—
|
|
|
5,000
|
|
|
—
|
|
|||
Government grants received
|
—
|
|
|
—
|
|
|
217
|
|
|||
Proceeds from issuance of common stock
|
121
|
|
|
—
|
|
|
1,800
|
|
|||
Decrease in other capital
|
—
|
|
|
—
|
|
|
(2,977
|
)
|
|||
Net cash provided by (used in) financing activities
|
1,508
|
|
|
2,733
|
|
|
(806
|
)
|
|||
Effect of exchange rate changes on cash
|
902
|
|
|
(222
|
)
|
|
(510
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
(418
|
)
|
|
8,798
|
|
|
3,088
|
|
|||
Cash and cash equivalents at beginning of period
|
17,893
|
|
|
9,095
|
|
|
6,007
|
|
|||
Cash and cash equivalents at end of period
|
$
|
17,475
|
|
|
$
|
17,893
|
|
|
$
|
9,095
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Shares of the Company's common stock held in escrow
|
949
|
|
|
949
|
|
|
—
|
|
|||
Cash paid during the period for:
|
|
|
|
|
|
|
|||||
Interest
|
$
|
838
|
|
|
$
|
663
|
|
|
$
|
570
|
|
Income taxes
|
327
|
|
|
353
|
|
|
1,496
|
|
•
|
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 our business and industry; and
|
•
|
influencing investor and customer perceptions about its financial stability and limiting its ability to obtain financing or acquire customers.
|
|
|
|
|
Percentage of ownership (%)
|
||||
|
|
Location
|
|
December 31, 2017
|
|
December 31, 2016
|
||
Dasan Network Solutions, Inc. (U.S. subsidiary)
|
|
US
|
|
100
|
%
|
|
100
|
%
|
Dasan Network Solutions, Inc. (Korean subsidiary)
|
|
Korea
|
|
100
|
%
|
|
100
|
%
|
DASAN Network Solutions Japan Co., Ltd. (formerly: HandySoft Japan Co., Ltd.)
|
|
Japan
|
|
69.06
|
%
|
|
69.06
|
%
|
DASAN Vietnam Co., Ltd
|
|
Vietnam
|
|
100
|
%
|
|
100
|
%
|
D-Mobile
|
|
Taiwan
|
|
100
|
%
|
|
N/A
|
|
DASAN India
|
|
India
|
|
99.99
|
%
|
|
N/A
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of year
|
$
|
1,143
|
|
|
$
|
868
|
|
|
$
|
136
|
|
Charged to revenue
|
1,387
|
|
|
466
|
|
|
767
|
|
|||
Utilization/write offs
|
(974
|
)
|
|
(149
|
)
|
|
—
|
|
|||
Exchange differences
|
135
|
|
|
(42
|
)
|
|
(35
|
)
|
|||
Balance at end of year
|
$
|
1,691
|
|
|
$
|
1,143
|
|
|
$
|
868
|
|
Asset Category
|
Useful Life
|
Furniture and fixtures
|
3 to 4 years
|
Machinery and equipment
|
3 to 10 years
|
Computers and software
|
3 years
|
Leasehold improvements
|
Shorter of remaining lease term or estimated useful lives
|
|
|
Shares
|
|
Estimated Fair Value
|
|||
Shares of Legacy Zhone stock as of September 8, 2016
(1)
|
|
6,874
|
|
|
$
|
40,902
|
|
Legacy Zhone stock options
(1)
|
|
198
|
|
|
540
|
|
|
Total purchase consideration
|
|
|
|
$
|
41,442
|
|
|
|
Fair Value as of
December 31, 2016
|
||
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
|
|
|
Total Acquired Intangible Assets
|
|
|
|
$
|
10,479
|
|
|
|
Years Ended December 31,
|
||||||
(in thousands)
|
|
2016
|
|
2015
|
||||
Pro forma total net revenue
|
|
$
|
202,321
|
|
|
$
|
240,342
|
|
Pro forma net loss
|
|
(29,514
|
)
|
|
(11,369
|
)
|
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)
|
Cash and Cash Equivalents and Restricted Cash
|
|
2017
|
|
2016
|
||||
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
12,671
|
|
|
$
|
13,547
|
|
Work in process
|
2,150
|
|
|
3,705
|
|
||
Finished goods
|
10,523
|
|
|
13,780
|
|
||
|
$
|
25,344
|
|
|
$
|
31,032
|
|
|
2017
|
|
2016
|
||||
Property and equipment, net:
|
|
|
|
||||
Furniture and fixtures
|
$
|
22,988
|
|
|
$
|
20,040
|
|
Machinery and equipment
|
5,455
|
|
|
4,530
|
|
||
Leasehold improvements
|
3,647
|
|
|
3,573
|
|
||
Computers and software
|
621
|
|
|
411
|
|
||
Other
|
1,007
|
|
|
922
|
|
||
|
33,718
|
|
|
29,476
|
|
||
Less accumulated depreciation and amortization
|
(27,584
|
)
|
|
(22,922
|
)
|
||
Less government grants
|
(261
|
)
|
|
(266
|
)
|
||
|
$
|
5,873
|
|
|
$
|
6,288
|
|
|
2017
|
|
2016
|
||||
Accrued and other liabilities (in thousands):
|
|
|
|
||||
Accrued warranty
|
$
|
931
|
|
|
$
|
878
|
|
Accrued compensation
|
1,905
|
|
|
2,834
|
|
||
Other accrued expenses
|
8,338
|
|
|
4,284
|
|
||
|
$
|
11,174
|
|
|
$
|
7,996
|
|
Balance at December 31, 2015
|
$
|
441
|
|
Balance assumed with the Merger
|
652
|
|
|
Charged to cost of revenue
|
717
|
|
|
Claims and settlements
|
(925
|
)
|
|
Foreign exchange impact
|
(7
|
)
|
|
Balance at December 31, 2016
|
878
|
|
|
Charged to cost of revenue
|
723
|
|
|
Claims and settlements
|
(695
|
)
|
|
Foreign exchange impact
|
25
|
|
|
Balance at December 31, 2017
|
$
|
931
|
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
Beginning balance
|
$
|
3,977
|
|
|
$
|
693
|
|
Goodwill from Merger
|
—
|
|
|
2,820
|
|
||
Correction of errors
|
—
|
|
|
464
|
|
||
Less: accumulated impairment
|
—
|
|
|
—
|
|
||
Ending balance
|
$
|
3,977
|
|
|
$
|
3,977
|
|
|
|
December 31, 2017
|
|||||||||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Government Grant
|
|
Net
|
|
||||||||
Developed Technology
|
|
$
|
3,060
|
|
|
$
|
(816
|
)
|
|
$
|
—
|
|
|
$
|
2,244
|
|
|
Customer Relationships
|
|
5,240
|
|
|
(699
|
)
|
|
—
|
|
|
4,541
|
|
|
||||
Backlog
|
|
2,179
|
|
|
(2,179
|
)
|
|
—
|
|
|
—
|
|
|
||||
Total intangible assets, net
|
|
$
|
10,479
|
|
|
$
|
(3,694
|
)
|
|
$
|
—
|
|
|
$
|
6,785
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2016
|
|||||||||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Government Grant
|
|
Net
|
|
||||||||
Developed Technology
|
|
$
|
3,060
|
|
|
$
|
(203
|
)
|
|
$
|
—
|
|
|
$
|
2,857
|
|
|
Customer Relationships
|
|
5,240
|
|
|
(321
|
)
|
|
—
|
|
|
4,919
|
|
|
||||
Backlog
|
|
2,179
|
|
|
(1,236
|
)
|
|
—
|
|
|
943
|
|
|
||||
Other
|
|
105
|
|
|
(34
|
)
|
|
(23
|
)
|
|
48
|
|
|
||||
Total intangible assets, net
|
|
$
|
10,584
|
|
|
$
|
(1,794
|
)
|
|
$
|
(23
|
)
|
|
$
|
8,767
|
|
|
Period
|
|
Expected Amortization Expense
|
||
2018
|
|
$
|
1,136
|
|
2019
|
|
1,136
|
|
|
2020
|
|
1,136
|
|
|
2021
|
|
932
|
|
|
2022
|
|
524
|
|
|
Thereafter
|
|
1,921
|
|
|
Total
|
|
$
|
6,785
|
|
|
|
|
|
As of December 31, 2017
|
|||||
|
|
|
|
Interest rate (%)
|
|
Amount
|
|||
Industrial Bank of Korea
|
|
Credit facility
|
|
2.89 ~ 3.26
|
|
$
|
2,328
|
|
|
Industrial Bank of Korea
|
|
Trade Finance
|
|
4.47 ~ 5.97
|
|
2,401
|
|
|
|
Shinhan Bank
|
|
General loan
|
|
5.91
|
|
2,987
|
|
|
|
Shinhan Bank
|
|
Trade finance
|
|
3.90 ~ 4.14
|
|
3,050
|
|
|
|
NongHyup Bank (Korea)
|
|
Credit facility
|
|
2.83 ~ 3.42
|
|
860
|
|
|
|
The Export-Import Bank of Korea
|
|
Export development loan
|
|
3.20 ~ 3.28
|
|
7,570
|
|
|
|
Mitsubishi Bank (Japan)
|
|
SoftBank AR Factoring
|
|
1.58
|
|
1,872
|
|
|
|
Shinhan Bank (India)
|
|
General loan
|
|
8.70-8.90
|
|
1,709
|
|
|
|
|
|
|
|
|
|
$
|
22,777
|
|
|
|
|
|
|
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 (Korea)
|
|
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
|
|
|
|
Year ended December 31,
|
|||||
|
2017
|
2016
|
||||
Compensation expense relating to employee stock options, restricted stock units and restricted stock
|
$
|
902
|
|
$
|
336
|
|
|
Year ended December 31,
|
||||
|
2017
|
|
2016
|
||
Expected term (years)
|
4.87
|
|
|
4.78
|
|
Expected volatility
|
81.32
|
%
|
|
79.70
|
%
|
Risk free interest rate
|
1.92
|
%
|
|
1.14
|
%
|
|
Options
Outstanding
|
|
Weighted
Average
Exercise
Price
(1)
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding as of December 31, 2016
|
787
|
|
|
$
|
6.84
|
|
|
|
|
|
|
|
Granted
|
733
|
|
|
6.01
|
|
|
|
|
|
|||
Canceled/Forfeited
|
(282
|
)
|
|
6.57
|
|
|
|
|
|
|||
Exercised
|
(25
|
)
|
|
4.91
|
|
|
|
|
|
|||
Outstanding as of December 31, 2017
|
1,213
|
|
|
6.50
|
|
|
7.83
|
|
$
|
3,586
|
|
|
Vested and expected to vest at December 31, 2017
|
1,213
|
|
|
6.50
|
|
|
7.83
|
|
3,586
|
|
||
Vested and exercisable at December 31, 2017
|
310
|
|
|
7.65
|
|
|
4.14
|
|
713
|
|
|
Options
Outstanding
|
|
Weighted
Average
Exercise
Price
(1)
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding as of December 31, 2015
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Options assumed as part of the Merger
|
265
|
|
|
8.68
|
|
|
|
|
|
|||
Granted
|
530
|
|
|
5.95
|
|
|
|
|
|
|||
Canceled/Forfeited
|
(8
|
)
|
|
11.75
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding as of December 31, 2016
|
787
|
|
|
6.84
|
|
|
8.56
|
|
$
|
60
|
|
|
Vested and expected to vest at December 31, 2017
|
684
|
|
|
7.01
|
|
|
8.39
|
|
52
|
|
||
Vested and exercisable at December 31, 2016
|
233
|
|
|
8.34
|
|
|
5.85
|
|
14
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
$
|
1,071
|
|
|
$
|
(15,326
|
)
|
|
$
|
(3,339
|
)
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average number of shares outstanding:
|
|
|
|
|
|
||||||
Basic
(1)
|
16,383
|
|
|
11,637
|
|
|
9,314
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
||||||
Stock options, restricted stock units and share awards
|
13
|
|
|
—
|
|
|
—
|
|
|||
Diluted
(1)
|
16,396
|
|
|
11,637
|
|
|
9,314
|
|
|||
Net income (loss) per share attributable to DASAN Zhone Solutions Inc.:
|
|
|
|
|
|
||||||
Basic
(1)
|
$
|
0.07
|
|
|
$
|
(1.32
|
)
|
|
$
|
(0.36
|
)
|
Diluted
(1)
|
$
|
0.07
|
|
|
$
|
(1.32
|
)
|
|
$
|
(0.36
|
)
|
|
2017
|
|
Weighted average
option exercise price
|
|
2016
|
|
Weighted average
option exercise price |
||||||
Outstanding stock options, restricted stock units and unvested restricted shares
|
1,037
|
|
|
$
|
8.93
|
|
|
796
|
|
|
$
|
6.84
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
(86
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
17
|
|
|
(9
|
)
|
|
—
|
|
|||
Foreign
|
912
|
|
|
88
|
|
|
318
|
|
|||
Total current tax expense
|
$
|
843
|
|
|
$
|
79
|
|
|
$
|
318
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|||
Federal
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign
|
(2,903
|
)
|
|
1,408
|
|
|
(86
|
)
|
|||
Total deferred tax expense
|
$
|
(2,915
|
)
|
|
$
|
1,408
|
|
|
$
|
(86
|
)
|
Total tax expense
|
$
|
(2,072
|
)
|
|
$
|
1,487
|
|
|
$
|
232
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Expected tax expense (benefit) at statutory rate (34%)
|
$
|
(306
|
)
|
|
$
|
(4,644
|
)
|
|
$
|
(929
|
)
|
State taxes, net of Federal effect
|
4
|
|
|
(348
|
)
|
|
—
|
|
|||
Foreign rate differential
|
(927
|
)
|
|
391
|
|
|
328
|
|
|||
Tax impact on US corporate income tax change
|
5,287
|
|
|
—
|
|
|
—
|
|
|||
Valuation allowance
|
(4,555
|
)
|
|
7,004
|
|
|
218
|
|
|||
Permanent differences
|
234
|
|
|
687
|
|
|
40
|
|
|||
Tax credit carry-forwards
|
(1,235
|
)
|
|
(896
|
)
|
|
(674
|
)
|
|||
Tax on accumulated earnings from prior year
|
—
|
|
|
29
|
|
|
1,348
|
|
|||
Tax paid to overseas jurisdictions
|
—
|
|
|
71
|
|
|
—
|
|
|||
Tax expense adjustments after tax return for prior period
|
(574
|
)
|
|
(837
|
)
|
|
—
|
|
|||
Foreign currency translation
|
—
|
|
|
124
|
|
|
—
|
|
|||
Other
|
—
|
|
|
(94
|
)
|
|
(99
|
)
|
|||
Total tax expense
|
$
|
(2,072
|
)
|
|
$
|
1,487
|
|
|
$
|
232
|
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss, capital loss, and tax credit carryforwards
|
$
|
11,945
|
|
|
$
|
14,243
|
|
Reduction of gross deferred tax assets due to built-in loss limitation
|
(678
|
)
|
|
(4,402
|
)
|
||
Fixed assets and intangible assets
|
2,158
|
|
|
3,775
|
|
||
Inventory and other reserves
|
3,516
|
|
|
4,573
|
|
||
Other
|
2,279
|
|
|
2,661
|
|
||
Gross deferred tax assets
|
19,220
|
|
|
20,850
|
|
||
Less valuation allowance
|
(16,266
|
)
|
|
(20,850
|
)
|
||
Total net deferred tax assets
|
$
|
2,954
|
|
|
$
|
—
|
|
Balance at December 31, 2015
|
$
|
—
|
|
Increases related to current year tax positions
|
77
|
|
|
Balance at December 31, 2016
|
77
|
|
|
Increases related to prior year tax positions
|
17
|
|
|
Increases related to current year tax positions
|
286
|
|
|
Balance at December 31, 2017
|
$
|
380
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Beginning non-controlling interests
|
|
$
|
416
|
|
|
$
|
138
|
|
Acquisition of additional interest in a subsidiary
|
|
—
|
|
|
277
|
|
||
Net income (loss) attributable to non-controlling interests
|
|
102
|
|
|
(2
|
)
|
||
Foreign currency translation adjustments (Other Comprehensive Income)
|
|
16
|
|
|
3
|
|
||
Ending non-controlling interests
|
|
$
|
534
|
|
|
$
|
416
|
|
|
|
|
|
For the year ended December 31, 2016
|
||||||||||||||||||||||||||
Counterparty
|
|
DNI ownership interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing, general and administrative
|
|
Other income
|
|
Other expenses
|
||||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
21,214
|
|
|
$
|
18,173
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,079
|
|
|
$
|
—
|
|
|
$
|
389
|
|
ABLE
|
|
61.99%
|
|
50
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
720
|
|
|
149
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
DASAN France
|
|
100%
|
|
19
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
DASAN INDIA Private Limited
|
|
99.99%
|
|
2,710
|
|
|
2,080
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
DMC
|
|
100%
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
D-Mobile
|
|
100%
|
|
4,431
|
|
|
3,610
|
|
|
—
|
|
|
—
|
|
|
421
|
|
|
—
|
|
|
—
|
|
|||||||
DTS
|
|
81.56%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
155
|
|
|
136
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
||||||||
J-Mobile Corporation
|
|
68.56%
|
|
54
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
634
|
|
|
25
|
|
|
—
|
|
|||||||
PANDA Media, Inc.
|
|
90%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
$
|
28,634
|
|
|
$
|
24,018
|
|
|
$
|
720
|
|
|
$
|
899
|
|
|
$
|
6,136
|
|
|
$
|
26
|
|
|
$
|
390
|
|
|
|
|
|
For the year ended December 31, 2015
|
||||||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Sales
|
|
Cost of revenue
|
|
Manufacturing (Cost of revenue)
|
|
Research and product development
|
|
Selling, marketing, general and administrative
|
|
Other income
|
|
Other expenses
|
||||||||||||||
DNI (Parent Company)
|
|
N/A
|
|
$
|
23,365
|
|
|
$
|
19,822
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,230
|
|
|
$
|
24
|
|
|
$
|
363
|
|
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
731
|
|
|
358
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
DASAN RND Co., LTD
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
—
|
|
|
—
|
|
|||||||
D-Mobile
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|||||||
HANDYSOFT, Inc.
|
|
17.64%
|
|
1,410
|
|
|
1,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|||||||
J-Mobile Corporation
|
|
68.56%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,511
|
|
|
15
|
|
|
—
|
|
|||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
631
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
$
|
24,775
|
|
|
$
|
21,159
|
|
|
$
|
731
|
|
|
$
|
989
|
|
|
$
|
9,437
|
|
|
$
|
39
|
|
|
$
|
547
|
|
|
|
|
|
As of December 31, 2017
|
||||||||||||||||||||||||||
Counterparty
|
|
DNI Ownership Interest
|
|
Account receivables
|
|
Other receivables
|
|
Deposits for lease*
|
|
Long-term debt
|
|
Accounts payable
|
|
Other payables
|
|
Accrued and other current liabilities**
|
||||||||||||||
DNI (parent company)
|
|
N/A
|
|
$
|
12,576
|
|
|
$
|
93
|
|
|
$
|
786
|
|
|
$
|
6,800
|
|
|
$
|
1,264
|
|
|
$
|
1,859
|
|
|
$
|
59
|
|
Tomato Soft Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|||||||
Tomato Soft (Xi'an) Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|||||||
D-Mobile
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
ABLE
|
|
94.57%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
DASAN France
|
|
100%
|
|
870
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
HANDYSOFT, Inc.
|
|
17.63%
|
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
CHASAN Networks Co., Ltd.
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87
|
|
|
—
|
|
|
—
|
|
|||||||
Solueta
|
|
100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|||||||
|
|
|
|
$
|
13,498
|
|
|
$
|
164
|
|
|
$
|
786
|
|
|
$
|
6,800
|
|
|
$
|
1,351
|
|
|
$
|
1,956
|
|
|
$
|
59
|
|
|
Minimum Future Lease Payments
|
||
Year ending December 31:
|
|
||
2018
|
$
|
3,794
|
|
2019
|
2,928
|
|
|
2020
|
2,844
|
|
|
2021
|
2,590
|
|
|
2022
|
2,664
|
|
|
Thereafter
|
8,423
|
|
|
Total minimum lease payments
|
$
|
23,243
|
|
Guarantor
|
|
Amount Guaranteed
(in thousands)
|
|
Description of Obligations Guaranteed
|
||
|
|
|
|
|
||
DNI
|
|
$
|
3,584
|
|
|
Borrowings from Shinhan Bank
|
DNI
|
|
1,792
|
|
|
Purchasing card from Shinhan Bank
|
|
DNI
|
|
10,640
|
|
|
Letter of credit from Industrial Bank of Korea
|
|
DNI
|
|
6,000
|
|
|
Letter of credit from NongHyup Bank
|
|
DNI
|
|
560
|
|
|
Purchasing card from NongHyup Bank
|
|
DNI
|
|
6,368
|
|
|
Borrowings from Export-Import Bank of Korea
|
|
Industrial Bank of Korea
|
|
6,221
|
|
|
Letter of credit
|
|
Industrial Bank of Korea
|
|
284
|
|
|
Letter of credit (local)
|
|
NongHyup Bank
|
|
2,983
|
|
|
Letter of credit
|
|
Shinhan Bank
|
|
330
|
|
|
Purchasing card
|
|
Industrial Bank of Korea
|
|
1,806
|
|
|
Performance bonds
|
|
KEB Hana Bank
|
|
34
|
|
|
Performance bonds
|
|
State Bank of India
|
|
39
|
|
|
Performance bonds
|
|
Seoul Guarantee Insurance Co.
|
|
594
|
|
|
Performance payment guarantee*
|
|
|
|
$
|
41,235
|
|
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue by geography:
|
|
|
|
|
|
||||||
United States
|
$
|
48,840
|
|
|
$
|
16,872
|
|
|
$
|
4,426
|
|
Canada
|
5,631
|
|
|
1,967
|
|
|
7
|
|
|||
Total North America
|
54,471
|
|
|
18,839
|
|
|
4,433
|
|
|||
Latin America
|
26,206
|
|
|
9,604
|
|
|
2,510
|
|
|||
Europe, Middle East, Africa
|
30,768
|
|
|
13,611
|
|
|
9,383
|
|
|||
Korea
|
81,533
|
|
|
77,979
|
|
|
114,676
|
|
|||
Other Asia Pacific
|
54,136
|
|
|
30,271
|
|
|
8,194
|
|
|||
Total International
|
192,643
|
|
|
131,465
|
|
|
134,763
|
|
|||
Total
|
$
|
247,114
|
|
|
$
|
150,304
|
|
|
$
|
139,196
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue by products and services:
|
|
|
|
|
|
||||||
Products
|
$
|
235,117
|
|
|
$
|
142,238
|
|
|
$
|
133,036
|
|
Services
|
11,997
|
|
|
8,066
|
|
|
6,160
|
|
|||
Total
|
$
|
247,114
|
|
|
$
|
150,304
|
|
|
$
|
139,196
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
United States
|
$
|
3,393
|
|
|
$
|
4,094
|
|
Korea
|
1,633
|
|
|
1,455
|
|
||
Japan and Vietnam
|
810
|
|
|
739
|
|
||
Taiwan and India
|
37
|
|
|
—
|
|
||
|
$
|
5,873
|
|
|
$
|
6,288
|
|
|
Year ended December 31, 2017
|
||||||||||||||
|
Q1
(1)
|
|
Q2
(1)
|
|
Q3
(1)
|
|
Q4
|
||||||||
|
(in thousands, except per share data)
|
||||||||||||||
Net revenue
|
$
|
52,112
|
|
|
$
|
59,941
|
|
|
$
|
66,438
|
|
|
$
|
68,623
|
|
Gross profit
|
17,792
|
|
|
19,189
|
|
|
22,073
|
|
|
22,315
|
|
||||
Operating income (loss)
|
(2,529
|
)
|
|
(803
|
)
|
|
1,661
|
|
|
2,393
|
|
||||
Net income (loss)
|
(3,498
|
)
|
|
(874
|
)
|
|
1,387
|
|
|
4,157
|
|
||||
Net income (loss) attributable to non-controlling interest
|
249
|
|
|
(65
|
)
|
|
(12
|
)
|
|
(70
|
)
|
||||
Net income (loss) attributable to DASAN Zhone Solutions, Inc.
|
(3,747
|
)
|
|
(809
|
)
|
|
1,399
|
|
|
4,227
|
|
||||
Net income (loss) per share attributable to DASAN Zhone Solutions, Inc.:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.23
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.09
|
|
|
$
|
0.26
|
|
Diluted
|
$
|
(0.23
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.09
|
|
|
$
|
0.26
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
16,378
|
|
|
16,380
|
|
|
16,382
|
|
|
16,391
|
|
||||
Diluted
|
16,378
|
|
|
16,380
|
|
|
16,382
|
|
|
16,445
|
|
|
Year ended December 31, 2016
|
||||||||||||||
|
Q1
|
|
Q2
|
|
Q3
(1)
|
|
Q4
(1)
|
||||||||
|
(in thousands, except per share data)
|
||||||||||||||
Net revenue
|
$
|
25,340
|
|
|
$
|
34,252
|
|
|
$
|
31,240
|
|
|
$
|
59,472
|
|
Gross profit
|
4,611
|
|
|
9,002
|
|
|
9,300
|
|
|
18,034
|
|
||||
Operating loss
|
(4,341
|
)
|
|
(165
|
)
|
|
(5,114
|
)
|
|
(3,429
|
)
|
||||
Net loss
|
(3,761
|
)
|
|
(533
|
)
|
|
(4,789
|
)
|
|
(6,245
|
)
|
||||
Net income (loss) attributable to non-controlling interest
|
6
|
|
|
33
|
|
|
(56
|
)
|
|
15
|
|
||||
Net loss attributable to DASAN Zhone Solutions, Inc.
|
(3,767
|
)
|
|
(566
|
)
|
|
(4,733
|
)
|
|
(6,260
|
)
|
||||
Net loss per share attributable to DASAN Zhone Solutions, Inc.:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.40
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
(0.38
|
)
|
Diluted
|
$
|
(0.40
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
(0.38
|
)
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
9,493
|
|
|
9,493
|
|
|
11,139
|
|
|
16,375
|
|
||||
Diluted
|
9,493
|
|
|
9,493
|
|
|
11,139
|
|
|
16,375
|
|
1.
|
Financial Statements
|
2.
|
Exhibits
|
Exhibit
Number
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed or Furnished
Herewith
|
||||||
Form
|
|
File
Number
|
|
Exhibit
|
|
Filing Date
|
|
||||
3.1
|
|
10-K
|
|
000-32743
|
|
3.1
|
|
September 9, 2017
|
|
|
|
3.2
|
|
8-K
|
|
000-32743
|
|
3.2
|
|
September 12, 2016
|
|
|
|
10.1#
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
January 10, 2017
|
|
|
|
10.1.1#
|
|
8-K
|
|
000-32743
|
|
10.2
|
|
January 10, 2017
|
|
|
|
10.1.2#
|
|
10-K
|
|
000-32743
|
|
10-1
|
|
September 9, 2017
|
|
|
|
10.2 #
|
|
8-K
|
|
000-32743
|
|
10.6
|
|
September 13, 2016
|
|
|
|
10.2.1#
|
|
8-K
|
|
000-32743
|
|
10.7
|
|
September 13, 2016
|
|
|
|
10.2.2#
|
|
8-K
|
|
000-32743
|
|
10.2
|
|
May 17, 2007
|
|
|
|
10.2.3#
|
|
10-Q
|
|
000-32743
|
|
10.3
|
|
November 14, 2016
|
|
|
|
10.3#
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
May 17, 2006
|
|
|
|
10.4#
|
|
|
|
|
|
|
|
|
|
X
|
|
10.5#
|
|
10-Q
|
|
000-32743
|
|
10.20
|
|
May 14, 2004
|
|
|
|
10.6#
|
|
10-Q
|
|
000-32743
|
|
10.1
|
|
August 9, 2012
|
|
|
|
10.7#
|
|
10-Q
|
|
000-32743
|
|
10.1
|
|
November 8, 2013
|
|
|
|
10.8#
|
|
|
|
|
|
|
|
|
|
X
|
|
10.9#
|
|
|
|
|
|
|
|
|
|
X
|
Exhibit
Number
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed or Furnished
Herewith
|
||||||
Form
|
|
File
Number
|
|
Exhibit
|
|
Filing Date
|
|
||||
10.10#
|
|
8-K
|
|
000-32743
|
|
10.2
|
|
September 13, 2016
|
|
|
|
10.11#
|
|
10-Q
|
|
000-32743
|
|
10.2
|
|
November 15, 2017
|
|
|
|
10.12#
|
|
8-K
|
|
000-32743
|
|
10.3
|
|
September 13, 2016
|
|
|
|
10.13
|
|
10-Q
|
|
000-32743
|
|
10.3
|
|
November 15, 2017
|
|
|
|
10.14#
|
|
8-K
|
|
000-32743
|
|
10.4
|
|
September 13, 2016
|
|
|
|
10.15#
|
|
8-K
|
|
000-32743
|
|
10.5
|
|
September 13, 2016
|
|
|
|
10.16#
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
November 14, 2016
|
|
|
|
10.17#
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
April 5, 2016
|
|
|
|
10.18
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
September 12, 2016
|
|
|
|
10.19
|
|
8-K
|
|
000-32743
|
|
10.2
|
|
September 12, 2016
|
|
|
|
10.20
|
|
8-K
|
|
000-32743
|
|
10.3
|
|
September 12, 2016
|
|
|
|
10.21
|
|
8-K
|
|
000-32743
|
|
10.4
|
|
September 12, 2016
|
|
|
Exhibit
Number
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed or Furnished
Herewith
|
||||||
Form
|
|
File
Number
|
|
Exhibit
|
|
Filing Date
|
|
||||
10.22
|
|
10-K
|
|
000-32743
|
|
10.16
|
|
March 15, 2012
|
|
|
|
10.22.1
|
|
10-K
|
|
000-32743
|
|
10.12.1
|
|
March 15, 2013
|
|
|
|
10.22.2
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
October 1, 2013
|
|
|
|
10.22.3
|
|
10-K
|
|
000-32743
|
|
10.13.3
|
|
March 5, 2014
|
|
|
|
10.22.4
|
|
10-K
|
|
000-32743
|
|
10.14.4
|
|
March 6, 2015
|
|
|
|
10.22.5
|
|
10-K
|
|
000-32743
|
|
10.14.5
|
|
March 23, 2016
|
|
|
Exhibit
Number
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed or Furnished
Herewith
|
||||||
Form
|
|
File
Number
|
|
Exhibit
|
|
Filing Date
|
|
||||
10.22.11
|
|
8-K
|
|
000-32743
|
|
10.1
|
|
July 6, 2017
|
|
|
|
10.22.12
|
|
|
|
|
|
|
|
|
|
X
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10.23
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10-K
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000-32743
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10.17
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March 15, 2012
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10.24
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8-K
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000-32743
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10.1
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February 23, 2016
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10.24.1
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10-Q
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000-32743
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10.1
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August 9, 2016
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10.25
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8-K
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000-32743
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10.1
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April 2, 2018
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21.2
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X
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23.1
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X
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23.2
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X
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31.1
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X
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31.2
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X
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32.1
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X
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101.INS
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XBRL Instance Document
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X
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Exhibit
Number
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Exhibit Description
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Incorporated by Reference
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Filed or Furnished
Herewith
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||||||
Form
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File
Number
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Exhibit
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Filing Date
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||||
101.SCH
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XBRL Taxonomy Extension Schema
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X
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase
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X
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase
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X
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101.LAB
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XBRL Taxonomy Extension Labels Linkbase
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X
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase
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X
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#
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Management contract or compensatory plan or arrangement in which one or more executive officers or directors participates.
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DASAN ZHONE SOLUTIONS, INC.
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||
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Date: April 4, 2018
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By:
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/s/ IL YUNG KIM
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Il Yung Kim
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President, Chief Executive Officer and Director
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Signature
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Title
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Date
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||
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/s/ IL YUNG KIM
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President, Chief Executive Officer (Principal Executive Officer)
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April 4, 2018
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Il Yung Kim
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/s/ MICHAEL GOLOMB
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Chief Financial Officer, Corporate (Principal Financial and Accounting), Corporate Treasurer, and Secretary
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April 4, 2018
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Michael Golomb
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/s/ MIN WOO NAM
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Chairman of the Board of Directors
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April 4, 2018
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Min Woo Nam
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/s/ MICHAEL CONNORS
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Director
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April 4, 2018
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Michael Connors
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/s/ SEONG GYUN KIM
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Director
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April 4, 2018
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Seong Gyun Kim
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/s/ SUNG-BIN PARK
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Director
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April 4, 2018
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Sung-Bin Park
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By:
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/s/ Il Yung Kim
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Il Yung Kim
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(Printed Name of Employee)
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Date:
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October 10, 2017
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Witnessed by:
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/s/ Laura Larsen-Misunas
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Laura Larsen-Misunas
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(Printed Name of Company Representative)
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Dated: October 10, 2017
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•
|
Stanford Graduate School of Business - Ignite Program - Advisor
|
•
|
500Startups Fund - LP and Resident Mentor/Advisor
|
•
|
Occidental College - Entrepreneurial Program - Mentor/Advisor
|
•
|
Blockchain Industry: participation at blockchain conferences as keynote speaker and panelist
|
•
|
The ICO Governance Foundation* - Board Member/MP
|
•
|
EdenCoin* - Board Member/MP
|
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By:
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/s/ Michael Golomb
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M. Golomb
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(Printed Name of Employee)
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Date:
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11/17/2017
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Witnessed by:
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/s/ Laura Larsen-Misunas
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Laura Larsen Misunas
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(Printed Name of Company Representative)
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Dated: 11/17/17
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•
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Chief Financial Officer, Treasurer and Secretary;
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•
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Day-to-day accounting activities;
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•
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Strategic financial planning;
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•
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Budget development;
|
•
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Treasury control;
|
•
|
Implementation of financial policies and procedures;
|
•
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Financial reporting;
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•
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Participating in fundraising activities, investor relations, and financial public relations;
|
•
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Handling dealings with auditors and tax advisors;
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•
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Handling all dealings with financial institutions;
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•
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Reporting to the Chief Executive Officer; and
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•
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Other projects as requested by Chief Executive Officer
|
Re:
|
(i) Credit and Security Agreement, dated March 13, 2012 (as heretofore amended, the “
Domestic Credit Agreement
”), among Dasan Zhone Solutions, Inc. (f/k/a Zhone Technologies, Inc.) and ZTI Merger Subsidiary III, Inc. (collectively, the “
Borrowers
”), Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation, and Dasan Network Solutions, Inc. (collectively, the “
Guarantors
”), and Wells Fargo Bank, National Association (the “
Lender
”), and (ii) Credit and Security Agreement (Ex-Im Subfacility), dated March 13, 2012 (as heretofore amended, the “
Ex-Im Credit Agreement
”; and together with the Domestic Credit Agreement, collectively, the “
Credit Agreements
”), among the Borrowers, the Guarantors, and Lender
|
DASAN ZHONE SOLUTIONS, INC.
|
|
ZTI MERGER SUBSIDIARY III, INC.
|
|
|
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By:
/s/ Michael Golomb
|
|
By:
/s/ Michael Golomb
|
Name: Michael Golomb
|
|
Name: Michael Golomb
|
Title: Chief Financial Officer
|
|
Title: Chief Financial Officer
|
|
|
|
PREMISYS COMMUNICATIONS, INC.
|
|
ZHONE TECHNOLOGIES INTERNATIONAL, INC.
|
|
|
|
By:
/s/ Michael Golomb
|
|
By:
/s/ Michael Golomb
|
Name: Michael Golomb
|
|
Name: Michael Golomb
|
Title: Chief Financial Officer
|
|
Title: Chief Financial Officer
|
|
|
|
PARADYNE NETWORKS, INC.
|
|
PARADYNE CORPORATION
|
|
|
|
By:
/s/ Michael Golomb
|
|
By:
/s/ Michael Golomb
|
Name: Michael Golomb
|
|
Name: Michael Golomb
|
Title: Chief Financial Officer
|
|
Title: Chief Financial Officer
|
|
|
|
DASAN NETWORK SOLUTIONS, INC.
|
|
|
|
|
|
By:
/s/ Michael Golomb
|
|
|
Name: Michael Golomb
|
|
|
Title: Chief Financial Officer
|
|
|
Exhibit 21.2
|
|
DASAN Zhone Solutions, Inc.
|
|
List of Subsidiaries
|
|
DASAN Zhone Solutions, Inc. had the following subsidiaries at December 31, 2017:
|
|
|
|
Name
|
Organized under the laws of
|
Ark Electronic Products, Inc.
|
Florida
|
Astarte Fiber Networks, Inc.
|
Colorado
|
DASAN Network Solutions, Inc.
|
United States
|
DASAN Network Solutions, Inc. (Korea)
|
Korea
|
DASAN India Private Limited
|
India
|
DASAN Network Solutions, Japan Co., Ltd. (Formerly: HandySoft Japan Co., Ltd.)
|
Japan
|
DASAN Vietnam Co., Ltd.
|
Vietnam
|
D-Mobile Limited
|
Taiwan
|
Osicom Technologies Europe Limited
|
United Kingdom
|
Paradyne Canada, LTD
|
Canada
|
Paradyne Corporation
|
Delaware
|
Paradyne Finance Corp.
|
Delaware
|
Paradyne Networks, Inc.
|
Delaware
|
Paradyne Worldwide Corporation
|
Delaware
|
Premisys Communications, Inc.
|
Delaware
|
Premisys Communications Ltd.
|
United Kingdom
|
R-Net International, Inc.
|
Nevada
|
Sciteq Communications, Inc.
|
Nevada
|
Simpulan Mutiara Sdn. Bhd. ***
|
Malaysia
|
Sorrento Networks Corporation
|
Delaware
|
Sorrento Networks Europe SA
|
Belgium
|
Sorrento Networks GmbH *
|
Germany
|
Sorrento Networks, SA
|
France
|
Sorrento Valley Real Estate Holdings, LLC
|
California
|
Xybridge Technologies, Inc.
|
Texas
|
Zhone AB
|
Sweden
|
Zhone International Ltd.
|
Cayman Islands
|
Zhone International Limited
|
UK
|
Zhone Technologies Australia PTY LTD **
|
Australia
|
Zhone Technologies B.V.
|
Netherlands
|
Zhone Technologies Campus, LLC
|
California
|
Zhone Technologies De Argentina SRL
|
Argentina
|
Zhone Technologies de Colombia Limitada
|
Colombia
|
Zhone Technologies do Brasil LTDA
|
Brazil
|
Zhone Technologies GMBH
|
Germany
|
Zhone Technologies, Inc.
|
Canada
|
Zhone Technologies International, Inc.
|
Delaware
|
Zhone Technologies KK
|
Japan
|
Zhone Technologies Limited
|
Hong Kong
|
Zhone Technologies Ltd.
|
United Kingdom
|
Zhone Technologies Pte. Ltd.
|
Singapore
|
Zhone Technologies S. de R.L. de C.V.
|
Mexico
|
Zhone Technologies S.R.L.
|
Italy
|
ZTI Merger Subsidiary III, Inc.
|
Delaware
|
Zhone Technologies, SA (PTY) LTD
|
South Africa
|
1.
|
I have reviewed this Annual Report on Form 10-K 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
|
1.
|
I have reviewed this Annual Report on Form 10-K 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/ MICHAEL GOLOMB
|
|
Michael Golomb
|
|
Chief Financial Officer, Corporate Treasurer and Secretary
|
1.
|
The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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
|
|
|
|
/s/ MICHAEL GOLOMB
|
Il Yung Kim
|
|
|
|
Michael Golomb
|
President, Chief Executive Officer
|
|
|
|
Chief Financial Officer, Corporate Treasurer and Secretary
|