Related Party Transactions

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Related Party Debt

As of June 30, 2023, the Company had KRW 4.0 billion ($3.0 million USD) outstanding of the related party borrowing from DNI. See Note 7 Debt for additional information about the Company’s related party debt. DNI owns approximately 28.9% of the outstanding shares of the Company's common stock.

The following table sets forth payment guarantees of the Company's obligations as of June 30, 2023 that have been provided by DNI. The amount guaranteed exceeds the principal amounts of outstanding obligations due to collateral requirements by the banks.

Guarantor	Amount Guaranteed (in thousands)		Description of Obligations Guaranteed
Dasan Networks, Inc.	$	5,471	Payment guarantee to Industrial Bank of Korea
Dasan Networks, Inc.	547		Payment guarantee to Shinhan Bank
	$	6,018

Other Related Party Transactions

Net revenue, cost of revenue, operating expense, interest expense, net and other expenses to and from related parties were as follows (in thousands) for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended June 30, 2023
Counterparty	Net revenue		Cost of revenue		Operating expense		Interest expense, net		Other expenses, net
Dasan Networks, Inc.	$	131	$	101	$	220	$	50	$	10

	Three Months Ended June 30, 2022
Counterparty	Net revenue		Cost of revenue		Operating expense		Interest expense, net		Other expenses, net
Dasan Networks, Inc.	$	718	$	629	$	316	$	—	$	16

	Six Months Ended June 30, 2023
Counterparty	Net revenue		Cost of revenue		Operating expense		Interest expense, net		Other expenses, net
Dasan Networks, Inc.	$	284	$	229	$	514	$	129	$	26

	Six Months Ended June 30, 2022
Counterparty	Net revenue		Cost of revenue		Operating expense		Interest expense, net		Other expenses, net
Dasan Networks, Inc.	$	916	$	806	$	723	$	—	$	33

The Company has entered into sales agreements with DNI to sell certain services and finished goods produced by the Company. The Company also has an agreement with DNI in which DNI acts as a sales channel to third party customers. The above transactions are included in net revenue and cost of revenue on the unaudited condensed consolidated statement of comprehensive loss. Net revenue from DNI is recorded net of royalty fees for a sales channel arrangement.

DNS Korea has a lease agreement with DNI related to the lease of a warehouse facility. Operating lease cost related to the DNI lease totaled $0.1 million and $0.2 million for the three and six months ended June 30, 2023, respectively. Operating lease cost related to the DNI leases totaled $0.1 million and $0.4 million for the three and six months ended June 30, 2022, respectively. Operating lease expense is allocated between cost of revenue, research and product development, and selling, marketing, general and administrative expenses on the unaudited condensed consolidated statement of comprehensive loss. As of June 30, 2023, the right-of-use asset and operating lease liability related to DNI leases were $1.5 million. As of December 31, 2022, the right-of-use asset and operating lease liability related to DNI leases were $1.7 million.

The Company also pays a license fee under the Trademark License Agreement with DNI. The license fee is calculated as 0.4% of DNS Korea annual sales. For the three and six months ended June 30, 2023, license related expense were $0.1 million and $0.3 million, respectively. For the three and six months ended June 30, 2022, license related expense were $0.1 million and $0.3 million, respectively. License related expense are included in selling, marketing, general and administrative expenses on the consolidated statements of comprehensive loss.

Interest expense represents interest paid to DNI for the related party debt. Interest due to DNI was included in accrued and other liabilities on the unaudited condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022. See Note 7 Debt for additional information about the Company’s related party debt.

Other expenses represent charges from DNI for its payment guarantees relating to the Company's obligations. The Company pays DNI a guarantee fee which is calculated as 0.9% per annum of the guaranteed amount. Refer to the table above for further information about obligations guaranteed by DNI.

Balances of Receivables and Payables with Related Parties

Balances of receivables and payables arising from sales and purchases of goods and services with related parties as of June 30, 2023 and December 31, 2022 were included in the following balance sheet captions on the unaudited condensed consolidated balance sheets, as follows (in thousands):

	As of June 30, 2023
Counterparty	Account receivables		Other receivables		Loans Payable		Accounts payable		Accrued and other liabilities
Dasan Networks, Inc.	$	364	$	—	$	3,039	$	1,186	$	333

	As of December 31, 2022
Counterparty	Account receivables		Other receivables		Loans Payable		Accounts payable		Accrued and other liabilities
Dasan Networks, Inc.	$	943	$	123	$	5,706	$	1,019	$	483