DASAN ZHONE SOLUTIONS, INC. (NASDAQ:DZSI) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Item 4.02(a)
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Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review. |
As previously reported, on September 9, 2016, DASAN Zhone
Solutions, Inc. (the Company) acquired Dasan Network Solutions,
Inc. (DNS) through the merger of a wholly owned subsidiary of the
Company with and into DNS, with DNS surviving as a wholly owned
subsidiary of the Company (the Merger). The Merger has been
accounted for as a reverse acquisition under which DNS was
considered the accounting acquirer of the Company.
Solutions, Inc. (the Company) acquired Dasan Network Solutions,
Inc. (DNS) through the merger of a wholly owned subsidiary of the
Company with and into DNS, with DNS surviving as a wholly owned
subsidiary of the Company (the Merger). The Merger has been
accounted for as a reverse acquisition under which DNS was
considered the accounting acquirer of the Company.
>On February 20, 2017, the Audit Committee of the Board of
Directors of the Company concluded, in consultation with management
and after informing the Companys independent registered public
accountants, that there are material errors in the accounting for
the Merger, including its impact on the Companys statement of cash
flows and earnings per share (EPS), and that, as a result, the
Companys unaudited condensed consolidated financial statements
contained in its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2016 (the Form 10-Q), which was filed with the
Securities and Exchange Commission (the SEC) on November 14, 2016,
should no longer be relied upon and require restatement. In
addition, certain disclosures included in the unaudited condensed
consolidated financial statements previously filed will also be
restated. These mainly include the disclosure relating to purchase
price allocation (including the unaudited condensed combined
financial information), commitments and contingencies, and related
party disclosures (including identifying related party transactions
on the face of the unaudited condensed consolidated Balance
Sheets). The Company expects to restate the unaudited condensed
consolidated financial statements for the quarter ended September
30, 2016 in an amendment to the Form 10-Q as soon as practicable.
Directors of the Company concluded, in consultation with management
and after informing the Companys independent registered public
accountants, that there are material errors in the accounting for
the Merger, including its impact on the Companys statement of cash
flows and earnings per share (EPS), and that, as a result, the
Companys unaudited condensed consolidated financial statements
contained in its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2016 (the Form 10-Q), which was filed with the
Securities and Exchange Commission (the SEC) on November 14, 2016,
should no longer be relied upon and require restatement. In
addition, certain disclosures included in the unaudited condensed
consolidated financial statements previously filed will also be
restated. These mainly include the disclosure relating to purchase
price allocation (including the unaudited condensed combined
financial information), commitments and contingencies, and related
party disclosures (including identifying related party transactions
on the face of the unaudited condensed consolidated Balance
Sheets). The Company expects to restate the unaudited condensed
consolidated financial statements for the quarter ended September
30, 2016 in an amendment to the Form 10-Q as soon as practicable.
Summarized below are the likely material changes resulting from the
restatement that will be reflected in the amendment to the Form
10-Q. All adjustments described herein are preliminary and subject
to revision due to the ongoing review and assessment of these
matters by the Company.
restatement that will be reflected in the amendment to the Form
10-Q. All adjustments described herein are preliminary and subject
to revision due to the ongoing review and assessment of these
matters by the Company.
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Decrease in intangibles as of September 30, 2016, by
approximately $8.9 million, from $22.6 million to $13.7 million. |
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Decrease in total assets as of September 30, 2016, by
approximately $6.4 million, from $160.3 million to $153.9 million. |
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Decrease in total liabilities as of September 30, 2016, by
approximately $6.1 million, from $82.3 million to $76.2 million. |
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Decrease in net revenue for the three and nine month period
ended September 30, 2016, by approximately $0.6 million, from $32.2 million to $31.6 million. |
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Change in basic and diluted earnings net loss per share from
($0.06) to ($0.09) for the three month period ended September 30, 2016, and from ($0.10) to ($0.17) for the nine month period ended September 30, 2016. |
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Increase in net cash from investing activities by $6.2
million. This includes $7.0 million in the cash balance of legacy Zhone Technologies, Inc. on the date of Merger, which had previously been included in the cash and cash equivalents at the beginning of the period in the cash flow statement. |
These changes were also reflected in the earnings release for the
fourth quarter and year ended December 31, 2016, issued on February
21, 2017.
fourth quarter and year ended December 31, 2016, issued on February
21, 2017.
The Company concluded that the impact of these errors were
immaterial to the unaudited condensed consolidated financial
statements for the quarter ended September 30, 2015, except for the
impact relating to the calculation of EPS as the weighted average
shares were not retroactively adjusted for the impact from the
Merger. The likely adjustments for this period are as follows:
immaterial to the unaudited condensed consolidated financial
statements for the quarter ended September 30, 2015, except for the
impact relating to the calculation of EPS as the weighted average
shares were not retroactively adjusted for the impact from the
Merger. The likely adjustments for this period are as follows:
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Change in basic and diluted earnings net loss per share from
($0.01) to ($0.06) for the three month period ended September 30, 2015, and from ($0.01) to ($0.11) for the nine month period ended September 30, 2015. |
In connection with the restatement, the Company re-evaluated the
effectiveness of the design and operation of its disclosure
controls and procedures as of September 30, 2016. This
re-evaluation was done under the supervision and with the
participation of management, including the Companys Co-Chief
Executive Officers and our Chief Financial Officer. Based upon this
reevaluation, the Companys Co-Chief Executive Officers and Chief
Financial Officer have concluded that, because of the material
weakness in its internal control over financial reporting described
below, its disclosure controls and procedures were not effective as
of September 30, 2016. In connection with the restatement,
management identified that effective controls were not maintained
over the period-end financial reporting process for the quarterly
period ended September 30, 2016 and material weaknesses exist. A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of the registrants annual or interim financial statements will not
be prevented or detected on a timely basis. The Company will amend
its disclosures pertaining to its evaluation of such controls and
procedures in the Form 10-Q to report a material weakness in those
controls and procedures.
effectiveness of the design and operation of its disclosure
controls and procedures as of September 30, 2016. This
re-evaluation was done under the supervision and with the
participation of management, including the Companys Co-Chief
Executive Officers and our Chief Financial Officer. Based upon this
reevaluation, the Companys Co-Chief Executive Officers and Chief
Financial Officer have concluded that, because of the material
weakness in its internal control over financial reporting described
below, its disclosure controls and procedures were not effective as
of September 30, 2016. In connection with the restatement,
management identified that effective controls were not maintained
over the period-end financial reporting process for the quarterly
period ended September 30, 2016 and material weaknesses exist. A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of the registrants annual or interim financial statements will not
be prevented or detected on a timely basis. The Company will amend
its disclosures pertaining to its evaluation of such controls and
procedures in the Form 10-Q to report a material weakness in those
controls and procedures.
The Audit Committee of the Companys Board of Directors and
management have discussed the matters disclosed in this filing to
Item 4.02(a) with the Companys independent registered accounting
firm.
management have discussed the matters disclosed in this filing to
Item 4.02(a) with the Companys independent registered accounting
firm.
Cautionary Note Regarding Forward Looking Statements: This Current
Report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
including statements related to the Companys restatement (including
the estimated adjustments described herein) and amendment to the
Form 10-Q and the timing of the filing of such amendment. The
Company uses words such as anticipate, believe, continue, could,
estimate, expect, goal, intend, may, plan, project, seek, should,
target, will, would, variations of such words, and similar
expressions to identify forward-looking statements. Readers are
cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions
that are difficult to predict, including those identified in the
Companys other filings with the
Report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
including statements related to the Companys restatement (including
the estimated adjustments described herein) and amendment to the
Form 10-Q and the timing of the filing of such amendment. The
Company uses words such as anticipate, believe, continue, could,
estimate, expect, goal, intend, may, plan, project, seek, should,
target, will, would, variations of such words, and similar
expressions to identify forward-looking statements. Readers are
cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions
that are difficult to predict, including those identified in the
Companys other filings with the
SEC. Such risks, uncertainties and assumptions include, but are not
limited to, the fact that the Company is continuing to review the
misstatements and other matters described above and the Company’s
analysis is still preliminary, the risk that additional information
may arise or different conclusions are reached prior to the
expected filing with the SEC of the amendment to the Form 10-Q, the
preparation of the Company’s restated financial statements or
other subsequent events that would require it to make additional
adjustments, as well as inherent limitations in internal controls
over financial reporting Therefore, actual results may differ
materially and adversely from those expressed in any
forward-looking statements. For information about the factors that
could cause such differences, please refer to the Companys SEC
filings, including its Annual Report on Form 10-K for the year
ended December 31, 2015 and subsequent Quarterly Reports on Form
10-Q. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. The forward-looking
statements contained in this Current Report on Form 8-K speaks only
as of the date of this report and the Company assumes no obligation
to update any forward-looking statements for any reason.
limited to, the fact that the Company is continuing to review the
misstatements and other matters described above and the Company’s
analysis is still preliminary, the risk that additional information
may arise or different conclusions are reached prior to the
expected filing with the SEC of the amendment to the Form 10-Q, the
preparation of the Company’s restated financial statements or
other subsequent events that would require it to make additional
adjustments, as well as inherent limitations in internal controls
over financial reporting Therefore, actual results may differ
materially and adversely from those expressed in any
forward-looking statements. For information about the factors that
could cause such differences, please refer to the Companys SEC
filings, including its Annual Report on Form 10-K for the year
ended December 31, 2015 and subsequent Quarterly Reports on Form
10-Q. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. The forward-looking
statements contained in this Current Report on Form 8-K speaks only
as of the date of this report and the Company assumes no obligation
to update any forward-looking statements for any reason.
About DASAN ZHONE SOLUTIONS, INC. (NASDAQ:DZSI)
DASAN Zhone Solutions, Inc., formerly Zhone Technologies, Inc., designs, develops and manufactures communications network equipment for telecommunications operators and enterprises across the world. The Company’s products provide enterprise solutions that enable both network service providers and enterprises to deliver high speed fiber access, while transporting voice, video and data to the end user. In addition to its product offerings in its core business, it offers FiberLAN Passive Optical local area network (LAN), which provides an alternative to switched copper-based LANs. The customers of its FiberLAN business include hospitality, government, education, manufacturing and business enterprises. Its products span two categories: SLMS Products, and Legacy, Service and Other Products. Its SLMS Products include Broadband Aggregation and Service, Customer Premise Equipment (CPE), Zhone Management System and FiberLAN Passive Optical LAN. DASAN ZHONE SOLUTIONS, INC. (NASDAQ:DZSI) Recent Trading Information
DASAN ZHONE SOLUTIONS, INC. (NASDAQ:DZSI) closed its last trading session up +0.04 at 1.10 with 136,700 shares trading hands.