IONI 10-K Fiscal year ended Dec. 31, 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to ______________

Commission File Number 000-549995

(Exact name of registrant as specified in its charter)

(formerly known as I-ON Digital Corp.)

+82-2-3430-1200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐

---

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of June 30, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $7.3 million based on the closing sales price of $0.35 on the OTC Markets. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of December 31, 2019, there were approximately 35,030,339 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

TABLE OF CONTENTS

PART I

Organization and Corporate History

I-ON Digital Corp. (formerly known as I-ON Digital Corp.) was incorporated under the laws of the State of Delaware on June 18, 2013 as ALPINE 3 Inc. Alpine 3 Inc. was set up to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and subsequently changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014 the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock.

On October 15, 2014, Bayhawk and EBC entered into an Asset Purchase and Share Exchange Agreement (the “Agreement”), subject to receiving approval of the independent Bayhawk shareholders who voted on the transaction. On September 17, 2015, the independent Bayhawk shareholders approved the agreement and Bayhawk sold to EBC and EBC purchased from Bayhawk assets of Bayhawk, including but not limited to the assets relating to the Bayhawk Ales label and the Evans Brands (collectively, the “Transferred Assets”). Bayhawk retained ownership of 100% of the stock in Evans Brewing Corp. (CA) (“Evans Brewing California”) which has the brewers license at City Brewery in Lacrosse, WI. Based on the affirmative vote by the independent Bayhawk shareholders to approve the Asset Purchase transaction, EBC proceeded with the share exchange and tender offer to the Bayhawk shareholders, pursuant to which EBC offered to exchange shares of EBC common stock for shares of Bayhawk common stock, on a one-for-one basis (the “Exchange Offer”). At the close of the share exchange on December 2, 2015, 4,033,863 Bayhawk shares were accepted and exchanged for 4,033,863 shares of EBC common stock.

On January 25, 2018, Evans Brewing Company, Inc. consummated an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”), with I-ON Digital Corp.., a company organized under the laws of the Republic of Korea (South Korea) (“I-ON”) and I-ON Acquisition Corp., a wholly-owned subsidiary of the Company (“Acquisition”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into I-ON in a statutory reverse triangular merger (the “Merger”) with I-ON surviving as a wholly-owned subsidiary of the Registrant.  As consideration for the Merger, the Registrant agreed to issue the shareholders of I-ON (the “I-ON Holders”) an aggregate of 26,000,000 shares of our Common Stock, in accordance with their pro rata ownership of I-ON capital stock.  Following the Merger, the Registrant adopted the business plan of I-ON in information technology consultancy and software development.  On December 14, 2017, in connection with the Merger, the Company’s Board of Directors approved an amendment to its Certificate of Incorporation (the “Amendment”) to change its name to I-ON Digital Corp.

At the effective time of the Merger, our board of directors and officers were reconstituted by the appointment of Jae Cheol James Oh as Chairman, Chief Executive Officer, and Chief Financial Officer, Hong Rae Kim as Executive Director and Jae Ho Cho as Director.  Michael Rapport resigned as President, Chief Executive Officer, and Chairman in connection with the Transaction and Evan Rapport resigned as Vice President and Director, Kenneth Wiedrich resigned as Chief Financial Officer and Director and Kyle Leingang resigned as Secretary. Roy Robertson, Mark Lamb, Joe Ryan, and Kevin Hammons resigned as members of the Board of Directors and their respective committees.

On March 21, 2019, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company to I-ON Digital Corp. The Company filed a Certificate of Amendment to effectuate the name change on or about April 2, 2019

ITEM I: BUSINESS

Evans Brewing Company

Until the date of the Merger, I-ON Digital Corp., formerly known as I-ON Digital Corp. and Evans Brewing Company Inc. (“EBC”) was a craft brewery based on Orange County, California that produces and sells premium craft beers, including a variety of ales and lagers. EBC’s beers are currently produced in its 17-barrel brewery in Irvine, California, the oldest continuously operating brewing facility in Orange County and one of the oldest in all of Southern California. This facility has been producing craft beers since January 1995. The brewery is located in a leased building in the McCormick & Schmick’s Seafood Restaurant.

In addition to manufacturing and selling the products above, EBC also produces and packages beers for other craft breweries in Southern California on a contract-basis. Further, in addition to beer production and sales generally, EBC also produces and offers for sale certain “Evans Brewing Company” branded merchandise including apparel, glassware and other beer accessories.

On September 29, 2016, Evans Brewing Company, Inc., closed the acquisition of a restaurant business located in the downtown SOCO District of Fullerton, California, through the acquisition of all the outstanding stock of EBC Public House, Inc., which the Company now operates as its first branded restaurant and taproom under the trade name “The Public House by Evans Brewing Company”. The Public House features the Company’s beers – as well as beers from other selected local Orange County, California breweries, -- food and, potentially, occasional entertainment.

In connection with such closing, the Company acquired 100% of the outstanding shares of EBC Public House from Mr. Rapport and issued 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Rapport. The asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management.

Background

EBC and Bayhawk filed a registration statement on Form S-4 with the U.S. Securities and Exchange Commission (the “Registration Statement”), which went effective on August 10, 2015. The Registration Statement included a proxy statement seeking the votes of the Bayhawk shareholders on the Asset Purchase Transaction by written consent. On September 17, 2015, the voting period closed, and EBC announced that approximately 99% of the shares that were voted had voted in favor of the Asset Purchase Transaction.

In connection with the Asset Purchase Transaction, EBC and Bayhawk entered into a General Assignment and Bill of Sale agreement (the “Bill of Sale”) which outlined the specific assets purchased, as well as an Assignment and Assumption of Liabilities agreement (the “Assumption Agreement) which outlined the specific liabilities of Bayhawk assumed by EBC.

In connection with the closing of the Asset Purchase Transaction and the entry into the Bill of Sale and the Assumption Agreement, EBC acquired the assets (other than the ownership of Evans Brewing California), the liabilities, and the operations of Bayhawk. As such, on December 10, 2015, in connection with this acquisition, EBC ceased to be a shell company as defined in Rule 12b-2, in that it had assets consisting of more than cash and cash equivalents, and has a business plan and operations.

Bayhawk Ales

Bayhawk Ales, Inc. (formerly Orange County Brewing Company) (“Bayhawk”) was formed in February 1994 for the purpose of developing and operating one or more breweries in California for the production of high quality, hand-crafted ales for sale in bottle and draft. The Company built a 17-barrel showcase brewery (the “Southern California Brewery”) in a leased building in the McCormick & Schmick’s Seafood Restaurant in Irvine, California.

I-ON Digital

PRODUCTS AND SERVICES

I-ON’s product line is comprised of:

Sports & IT Convergence Service

Ticket Advanced Marketing Management – TAMM- pro-sports marketing & analytics

VoiceBall – Amateur League Umpire & Data Service

The following is a brief description of I-ON’s key products:

ICS6 (I-ON Content Server) – ICS6 is I-ON’s generation 6 web content management system that helps reduce burdens of complex website management by organizing vast amounts of ever-increasing digital content and big data into physical directory and logical site structure.  ICS6 is one of South Korea’s first-to-market cloud-based CMS platforms and a market share leader in both Korea & Japan.

ICE (I-ON Content Ecosystem) - ICE is I-ON’s 7th generation DXP offering that manages the digital content management lifecycle commencing from creation, registration, distribution, deletion, billing to analytics. ICE is geared for SOs seeking ways to enhance business to business to consumer (B2B2C) value.

IDS (I-ON Deploy Server) – IDS, in conjunction with ICS6, securely, conveniently and automatically deploys files and content between servers when distribution inefficiencies and services issues arise.

IDAS (I-ON Digital Asset Management System) – IDAS, in conjunction with ICS6, ensures a virtuous cycle of an organization’s digital assets through an integrated framework that collects, manages, deploys and distributes content. It also provides ample storage and categorization functionalities necessary to address high multi-media content demand including high-resolution video. The software supports digital archiving, scalability and changes in physical environment.

iCAFE (I-ON Content Application Framework Engine) – iCAFE is a content delivery platform optimized for N-Screen environments, offering a robust wire-wireless service delivery platform for broadcasting, imaging & mobile content

e.Form – e.Form is a one-stop mobile contract solution for smartphones and tablets that digitizes and expedites document creation and execution processes for organizations.  The platform supports over 200 application programming interfaces (APIs).

iDrive – iDrive is a SaaS-based EDMS (e-document management system) which centralizes all categories of e-documents within an organization, iDrive is geared for streamlining and managing the e-document lifecycle from creation, approval, archiving to destruction.

GAIA – GAIA is a back-end unstructured data repository platform that manages a cloud-based ecosystem that enterprises or individuals can use to build and share mobile applications.

LAMS (Load Aggregator’s Management System) - LAMS is one of South Korea’s first Open ADR 2.0-based demand response management solutions designed to manage and reduce electricity consumption and peak demand through demand response program participation.

TAMM (Ticket Admission Marketing Management) - TAMM is a mobile B2B2C platform that integrates and manages the professional sports event experience from marketing and promotion and ticket purchases and reservations to the delivery of a mobile analytics dashboard for followers.  Event organizers/sponsors have included, among others, the LPGA Hana Bank Championship and SK Telecom Open.  I-ON acquired the core TAMM developers and intellectual property from South Korea-based MoceanPeople in March 2016.

Assist9 – Assist9 is a mobile all-in-one work flow process and data management dashboard geared towards small and medium-sized businesses and startups. Core functions revolve around ERP, PMS, SFA, HR, and e-approval – with up to fifteen others- and are designed to improve operational efficiencies and provide CEOs with greater analytical insight into their businesses.

ADDRESSABLE MARKETS

South Korea, Japan and Southeast Asia

Econsultancy and Adobe reported in recent studies that less than 15% of CMO respondents identified as working for digital-first organizations, despite a study by Forrester Research that indicated 51% of B2B enterprises were ratcheting up digital marketing initiatives in 2018 and into 2019.  A key driver of I-ON’s ability to tap further into existing and future addressable markets, the Company believes, will depend on how quickly mid to large enterprises can adopt a digital-first mindset through continued client engagement.

According to many industry researchers, such as Forrester and Gartner, the combined enterprise digital marketing and CMS sector in South Korea and Japan is expected to generate a high single digit compounded annual growth rate to over $800 million by 2020.

Given its market share-leading in both South Korea and Japan, I-ON remains uniquely positioned to serve as a localized partner and to address the evolving marketing needs of mid to large enterprises.  CMOs continue to seek new and innovative ways to analyze, improve return on investment (ROI) and justify the value of increased digital marketing spending.

According to numerous industry sources, including Forbes, South Korea has emerged as one of Asia’s fastest growing technology startup hubs, attracting increasing investment from domestic funds and foreign investment.

Today, South Korea remains the eleventh largest economy in the world and, with 51 million people, the twenty-eighth largest population in the world, while boasting the world’s highest broadband penetration at 97%.  South Korea was recently highlighted in Bloomberg’s list of most innovative countries, owing to the country’s research and development intensity, as well as productivity and educational standards.  Home to Samsung, Hyundai and over 10 other Fortune 500 companies, South Korea, for the past several decades, has also been on a path pivoting from big industry and manufacturing to transformative technology, thanks to government and private/public partnership initiatives.  Favorable policy initiatives have recently led to larger budget allocation towards science and technology, matching funds with international investors, establishing international entrepreneurship programs at universities, opening up many of the country’s research institutes, and providing safety nets for technologists and scientists that take capital risk.

Similarly, Japan remains the third largest economy and second largest developed economy in the world, the third largest automobile manufacturing, and the largest electronics goods industry in the world.  Despite being home to over 50 Fortune 500 companies, and facing growing competition from China and South Korea, manufacturing and investment in Japan have also pivoted toward software development, high-technology, and precision goods sectors, such as robotics and optical instruments.

Asia-Pacific and Global

Across not only South Korea and Japan, but the entire Asia-Pacific region, businesses and consumers today increasingly demand personalized content and experiences in their online interactions, across multiple digital channels and devices.  This is accelerating growth in the CMS and digital marketing arenas as well demand from marketers seeking solutions that optimize customers’ experiences, demonstrate the success of their programs with objective metrics, and deliver the greatest return on their marketing spend.

According to Gartner, the enterprise CMS market across the Asia-Pacific region, which includes China, South Korea, Hong Kong, Japan, Indonesia, Malaysia, Singapore and Vietnam – exceeded $700 million in 2016, up significantly from $500 million in 2014 and is projected to exceed $900 million by 2019, reflecting a compounded annual growth rate of at least 12%.  Malaysia, Indonesia and Singapore collectively generated $180 million in enterprise CMS revenue last year and Gartner projects a 16% annual growth rate into 2020.

In North America, aggregate digital marketing spend, which includes CMS for both products and professional services by both mid and large-sized enterprises, exceeded $135 billion in 2016 from approximately $95 billion in 2014, and according to forecasts from both IDC and Statista, is projected to grow 18% annually to over $225 billion by 2019.

Globally, sources such as the CMO Council and Gartner estimate the current web and mobile digital marketing industry size at $450 billion, while forecasting a high single digit 5 year compounded annual growth rate to over $600 billion by 2019.

MARKETING AND GROWTH STRATEGY

Growth in omni-channel DXP, digital marketing and big data

CMS and digital marketing budgets at global brands continue to increase relative to traditional marketing dollars, according to Gartner and many CMO surveys, which describe a general atmosphere keen on shifting marketing dollars towards ROI enhancing tools such as audience analytics and curation, consumer engagement, smart mobility and artificial intelligence.  In South Korea, existing and prospective clients across many sectors are often consulting with I-ON on how best to integrate disparate and increasingly complex needs, which may for example apply digital asset management, e-commerce, sports software and SaaS capabilities.  As competition has been intensifying, the pace of overall M&A activity has also been accelerating as small and mid-size players such as I-ON, seek to diversify and address the trends and demands.  Accordingly, enterprise CMS globally is being viewed less as tools for building web pages and standard analytics, but more so as vital software and value-added solutions that can help drive the effectiveness of often complex, data driven and expensive digital strategies and marketing campaigns.  Interoperability remains a key differentiator across the dynamic South Korean and East Asian markets.  Companies small and large, particularly those with intricate distribution and supply chain responsibilities, not only require a portal for their intranet for external needs, but demand that their CMS software facilitate a real-time connection between the business, people and things that allow all to communicate, transact and even negotiate with each other across all touch points.  As a result, I-ON also intends to play further into the unstructured and big data, analytics, e-commerce and smart mobility arenas as part of its DXP offering.

Defining Value Proposition

I-ON believes it remains uniquely positioned to address the evolving digital experience and marketing needs of medium to large enterprises.  Given the growth across the global enterprise digital marketing spectrum and I-ON’s 19-year track record serving a marquee clientele in South Korea, Japan, and parts of Southeast Asia, I-ON’s objective is to continue to aggressively gain market share by closely engaging with existing and prospective clients, while driving sales for both its core CMS offering and complementary solutions that enable organizations to transform traditional marketing initiatives into analytics and data-driven strategies vital to delivering measurable results.

I-ON believes that its software products and solutions will continue to be a primary revenue source for the Company over time and that its growing portfolio of products may generate profitable demand for associated maintenance, support, implementation, consulting, and training services that the Company, and a channel of licensees and value-added resellers (VARs), can provide.

Near-term, I-ON intends to do the following to drive organic growth:

•

Continue to leverage knowledge and experience into new or enhanced solutions and products

•

Continue to procure contracts directly, via strategic partnerships and increasing sales personnel

•

Recruit seasoned executives as well as younger talent to utilize unique training model that addresses resource shortages

•

Incubate and build-out focused profitable technology practices

•

Continue to participate in multi-lateral joint research and development projects in concert with its partners across many different countries

South East Asia

According to Gartner, Malaysia, Indonesia and Singapore generated $180 million in enterprise CMS revenue last year and project a 16% annual growth rate by 2020.  As a result, I-ON intends to continue to build off of its initial successes in the Southeast Asia region, which include, among other projects, the following: implementation of a fully integrated mobile/online trading solution for Malaysia’s MNC Securities; a CMS implementation for a leading USA cable manufacturer, Commscope-  supporting 13 languages to meet global standards; the implementation of a CMS solution based on CSDP (Convergence Service Delivery Platform) for Indonesia’s BOLEH Mobile; and an integration of CMS platforms for the Malaysia Ministry of Works.

Announced on October 1, 2018, I-ON and Singapore-based Hyper Resources Interactive Pte Ltd. executed an MoU whereby Hyper Resources will assist with marketing and utilize I-ON’s core CMS suite of ICS6, IDAS, IDS, ICS and eForm solutions to address the needs of Singaporean enterprises.  I-ON will assist with operational and technical support as well as solutions training.

Sports ICT

I-ON absorbed the TAMM team and technology in 2016.  Currently the exclusive and secure web and mobile payment gateway provider for the KLGPA and technology partners with most of the major sponsors of the events, TAMM and its next generation omni-channel sports data management solution are well-positioned to address the $5 billion global sports software market, which is projected to increase at a 13% CAGR through 2024.  Significant global investment in sports infrastructure including stadiums, complexes and leagues has been the leading driver of sports software development and implementation, which helps organizers automate various administrative functions, ticket sales, promotions, as well as player and game management utilizing both cloud-based and on-premise technology.  North America currently holds a market share of close to 60% and is expected to continue its dominant trend through 2024, according to Hexa Research.

As announced in 2018, I-ON formed a partnership with the Ministry of Culture, Sports and Tourism and the Korea Institute of Sports Science to develop a domestic multi-sport marketing and analytics platform addressing amateur and pro golf and baseball participants and engagement.  The initiative also integrates reputable University research and high-tech private sector resources.  More recently in January 2019, I-ON announced a letter of intent, subject to a multi-year framework, with California-based Pacific Pro Football league, a new amateur-pro D-league targeting future NFL recruits, which is led by a distinguished team of former NFL executives, players and coaches.  The engagement represents I-ON’s initial foray into the US market with respect to TAMM and sports software initiatives.  I-ON’s scope of service is broad, but entails building out the league’s CMS infrastructure while serving as their digital strategist of choice leading up to the 2020 league launch and well beyond.  This could be in association with Pacific Pro’s exclusive sponsor Adidas.

Energy ICT

In early 2018, I-ON and its various partners including Japan-based TIS INTEC Group – a leading systems integrator- began a deeper dive on how to best address the fast-growing need for distributed energy management and virtual power plant (VPP) solutions for grid connected renewable energy sources in hopes of delivering an enhanced, reliable energy and cost-efficient product offering to East Asia markets.  By employing key components of I-ON’s energy management system to address the demand response needs of power grid companies, I-ON intends to introduce its own proprietary next generation VPP solution that operate within cloud-based service environments to address the energy management needs of enterprises.

Popular in the U.S. and Europe, but a rapidly emerging sector in Japan and across East Asia, VPP is a cloud-based distributed power plant that aggregates the capacities of energy resources at the requests of power transmission and distribution service providers for the purposes of enhancing power generation more reliably.  VPP typically integrates small-scale power plants or energy storage facilities for residential settings, buildings, factories and incorporates them into a remotely controlled virtual power station using a sophisticated set of software and IT systems.  These systems tap into existing grid networks to tailor electricity supply and demand services under changing load conditions both quickly and in real time, thus maximizing value for both the power generator and end user.  Most industry observers currently peg the global VPP industry at $8-$12 billion -- double from just a few years ago -- and forecast the industry will grow annually at a mid to high double-digit rate through 2025, driven by investment in the U.S., Europe and Australia with South Korea and Japan leading the way in East Asia.

Announced on November 21, 2018, Sweden-based Telenor Connexion and I-ON formed a collaboration agreement in order to provide South Korean customers in the energy sector with high-value and quality IoT solutions and services by utilizing I-ON’s capabilities in data management, smart mobility, and advanced analytics.

Acquisition Strategy

I-ON intends to continue to leverage its international partnerships and ongoing success in enterprise CMS to move upstream, cross-sell, and serve clients more directly as either their digital strategist of choice and/or by acquiring businesses with (i) a revenue producing platform with existing enterprise clients, (ii) subject matter expertise and or (iii) rights to intellectual property in at least one of the following digital marketing-related disciplines: predictive analytics, smart mobility, marketing automation, search engine optimization (SEO), enterprise resource planning (ERP), workflow automation, and eCommerce.  I-ON has already identified multiple compelling acquisition opportunities within these domains, particularly in South Korea and Japan.  However, there can be no assurance that I-ON will be able to acquire one or more of these businesses or that it will be able to do so on terms that are favorable to I-ON.

Notably, I-ON believes that overall macro conditions that drive consolidation and acquisitions also remain ideal including the historical low interest rate environment, a large, evolving and fragmented technology services and solutions market across South Korea and East Asia, and the relatively low organic growth opportunities that ordinarily may not exist for smaller businesses.  These existential conditions could enable I-ON to identify and purchase compelling assets inexpensively.

Expand Product Offering and Geographic Coverage over the long-term

Over the next 5 years, I-ON’s growth strategy is to significantly expand its client base in South Korea, Japan, and Southeast Asia, while also expanding into new geographic areas, such as the U.S. and Europe to provide clients with global coverage and around the clock services that CMS and digital marketing requires.   I-ON’s continued business model is to allow its work and unique technical skills to attract new clients as well as win repeat projects with past and current clients.  At the same time, ION intends to expand its core offerings and increase brand awareness with new service capabilities and software products that produce significant value for clients.

PATENTS AND TRADEMARKS

Key Patents:

Key Certifications:

AWARDS AND INDUSTRY RECOGNITION HISTORY

CUSTOMERS

Because organizations in virtually every sector of the economy perform or need the functions I-ON supports, the Company has successfully deployed its software solutions to over 1,000 blue-chip and middle-market enterprises across virtually all industries and verticals in both the private and public sectors.  Such industries include but are not limited to financial services, banking, informational technology services, teleDigital, internet, automotive, healthcare, publishing, media, education, energy, logistics, retail, consumer and business services, as well as government institutions. Over 400 enterprise clients in South Korea, 500 in Japan, and 100 across Southeast Asia and globally currently utilize I-ON products, solutions and professional services capabilities.

Given its current foothold, I-ON believes it remains uniquely positioned to address the evolving marketing needs of medium to large enterprises as CMOs continue to lack the wherewithal to analyze, improve ROI, and justify the value of increased digital marketing spend.  I-ON’s diversified product suite, introduction of new products, tools and data sources, combined with media consumption devices such as mobile and tablets have created an environment that’s been uncharted by numerous enterprise marketers and their CMOs, particularly in South Korea, Japan, Southeast Asia and China.

Below is a sample of I-ON’s clientele based on region.

Entry into new markets combined with relevant new product introductions has also enabled I-ON to diversify its client mix, thereby minimizing client concentration risk as reflected by the decline in top 10 client contribution since 2013.

Below highlights I-ON’s top 10 clients as percentage of total revenue (Fiscal Years 2016-2019):

MARKETING, SALES AND DISTRIBUTION

I-ON relies both on inside and outside sales efforts as well as value-added resellers based in specific geographies to drive a bulk of their business development efforts.  The Company has over 100 partners, formal and informal, across 28 countries that provides client leads   The Company also relies on client references and its track record and regularly attends reputable industry and technology conferences internationally.

COMPETITION

The market for I-ON’s products and solutions, primarily in South Korea, Japan and Southeast Asia is competitive but not considerably fragmented.  We compete primarily with digital marketing agencies, systems consulting firms and boutique consulting firms, that maintain specialized skills or products or are geographically focused, and clients’ own IT firms.  Many of the firms we compete with have longer operating histories and are more developed than we are.  The principal competitive factors in these addressable markets include the ability to solve problems; the ability to deliver creative concepts and solutions; expertise and talent with advanced technologies; availability of resources; the quality and speed of solutions; a deep understanding of user experiences; and the price of solutions.  I-ON competes favorably when considering these factors and believes that its ability to deliver business innovation and outstanding value to its clients on time and on budget, along with its successful track record, distinguishes them from competitors.

Interoperability has emerged as a key differentiator in I-ON’s addressable markets, as CMS is now seldom viewed as a stand-alone system for an enterprise’s online presence.  Large enterprises and to a growing extent small and middle market companies, particularly those with complex distribution and supply chain issues, not only require a portal for their intranet for external needs, but expect CMS platforms to allow for a real-time connection between the business, people, behavior and things that allow all to communicate, transact and even negotiate with each other.  Thus, in order to be better served and remain competitive in their own circles, clients are increasingly looking to I-ON to consult with and integrate disparate and increasingly complex systems.

In addition to holding a first mover advantage, I-ON has been able to compete by offering flexible and often less expensive pricing, offering time-tested & proven licensing joint venture partnerships such as with Ashisuto in Japan and focusing on R&D to drive product upgrade cycles such as ICE and introduce new products built off existing technology related to sports, energy and mobile.   From a domestic DXP front, I-ON competes with companies such as deCos Interactive and contentWise.  Much larger competitors such as Adobe, Stellent, and IBM which service at significantly higher prices and complexity, lack mid-market cachet, are not built locally for scale, or are merely focused on other disciplines.  Opensource models tend to have a truer SME focus, are vague & lack vendor responsibilities, and do not address the needs of complex large to blue-chip enterprises.

RESEARCH AND DEVELOPMENT

Because the verticals in which I-ON competes are characterized by rapid technological change, the Company’s ability to compete successfully depends upon maintaining and enhancing expertise in its core business segments and product lines.  As a result, I-ON has reinvested and continues to spend substantial revenue on research and development.  The Company currently employs over 100 junior, mid to senior level engineers and developers, most of whom are based at the Company’s headquarters in Seoul.  In order enable its employees to provide expert, timely, competitive services to the marketplace, I-ON also provides ongoing training and sponsors advanced university education to enhance employee skills and knowledge of all current and future product offerings.

MANAGEMENT AND EMPLOYEES

As of December 31, 2019, I-ON has 120 full time and 1 part time employees.  We believe we enjoy good employee relations. None of our employees are members of any labor union, and we are not a party to any collective bargaining agreement.

PROPERTIES

The Company does not own any physical location.  I-ON currently leases its corporate headquarters and other offices in Seoul, South Korea which expires on December 31, 2020.  I-ON’s lease for its Tokyo, Japan office expires on September 30, 2020. We believe that our current offices are sufficient in size for current and future operations.

POTENTIAL FUTURE PROJECTS AND CONFLICTS OF INTEREST

Members of the Company’s management may serve in the future as an officer, director or investor in other entities.  Neither the Company nor any of its shareholders would have any interest in these other companies’ projects.  Management believes that it has sufficient resources to fully discharge its responsibilities for all current and future projects.

GOVERNMENT REGULATION

We believe we are in compliance with applicable federal, state and other regulations and that we have compliance programs in place to ensure compliance going forward.  There are no regulatory notifications or actions pending.

LEGAL MATTERS

None.

RELATED PARTY TRANSACTIONS

The Company receives loan guarantees from the chief executive officer with regards to its long-term borrowing, and the Company’s restricted cash provided as collateral to the Company’s chief executive officer’s loans.

Available Information

We will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission (“SEC”). We are not including the information contained in our website as part of, or incorporating it by reference into, this report on Form 10-K.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov .

Within our website’s “Investor” section, “SEC Filings” tab, all of our filings with the Commission and all amendments to these reports are available as soon as reasonably practicable after filing.

Website

Our website address is www.i-on.net.

Our Information

Our principal executive offices are located at 15, Teheran-ro 10-gil, Gangnam-gu, Seoul, Korea 06234 and our telephone number is 82-2-3430-1200. We can be contacted by email at intlbiz@i-on.net .

ITEM 1A. RISK FACTORS

Our business, financial condition, operating results and prospects are subject to the following risks. Additional risks and uncertainties not presently foreseeable to us may also impair our business operations. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and our stockholders may lose all or part of their investment in the shares of our common stock.

This Form 10-K contains forward-looking statements that involve risks and uncertainties. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. Actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors, including those set forth below and elsewhere in this Form 10-K.

Risks Specific to Our Business

Our proprietary software or service delivery may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results.

We may encounter human or technical obstacles that prevent our proprietary applications from operating properly. If our applications do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers. We provide a limited warranty, have not paid warranty claims in the past, and do not have a reserve for warranty claims.

Moreover, information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors. We cannot assure you that material performance problems or defects in our products or services will not arise in the future. Errors may result from receipt, entry, or interpretation of customer information or from interface of our services with legacy systems and data that we did not develop and the function of which is outside of our control. Despite testing, defects or errors may arise in our existing or new software or service processes. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation, and increased service and maintenance costs. Defects or errors in our software might discourage existing or potential customers from purchasing our products and services. Correction of defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.

If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.

Our services involve the web-based storage and transmission of customers’ proprietary information. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. If our security measures are breached or fail as a result of third-party action, acts of terror, social unrest, employee error, malfeasance or for any other reasons, someone may be able to obtain unauthorized access to customer data. Improper activities by third-parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our security systems. Our security measures may not be effective in preventing unauthorized access to the customer data stored on our servers. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.

Disruptions in Internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products.

We depend on key information systems and third party service providers.

We depend on key information systems to accurately and efficiently transact our business. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, natural disasters, terrorist attacks, software, equipment or teleDigital failures, processing errors, computer viruses, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.

As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information. These risks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business.

We may be unable to adequately establish, protect or enforce our intellectual property rights.

Our success depends in part upon our ability to establish, protect and enforce our intellectual property and other proprietary rights. If we fail to establish, protect or enforce our intellectual property rights, we may lose an important advantage in the market in which we compete. We rely on a combination of trademark, copyright and trade secret law and contractual obligations to protect our key intellectual property rights, all of which provide only limited protection. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages.

We hold several patents and also rely on trade secrets to protect certain of our proprietary technology. However, trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. However, the steps we have taken may not be sufficient to prevent unauthorized use of our technology, and adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and proprietary technology. Moreover, others may reverse engineer or independently develop technologies that are competitive to ours or infringe our intellectual property.

Claims by others that we infringe their intellectual property could force us to incur significant costs or revise the way we conduct our business.

Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third-parties, who may have patents or patent applications relating to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property rights. Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. Any such claims or lawsuit could:

Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition.

The majority of our operations, including the development and maintenance of our Web-based platform and our customer support services, are performed by our highly educated workforce of approximately 120 employees in South Korea which may experience unrest due to the threats posed by North Korea. The performance of our operations in South Korea, and our ability to maintain our offshore offices, is an essential element of our business model, as South Korea is a tech hub for Enterprise CMS/Digital marketing as well as all of our senior leadership are located in South Korea. Our competitive advantage will be greatly diminished and may disappear altogether if our operations in South Korea are negatively impacted.

Our offshore operations expose us to additional business and financial risks which could adversely affect us and subject us to civil and criminal liability.

The risks and challenges associated with our operations outside the United States include laws and business practices favoring local competitors; compliance with multiple, conflicting and changing governmental laws and regulations, including employment and tax laws and regulations; and fluctuations in foreign currency exchange rates. Foreign operations subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act, or FCPA, and comparable foreign laws and regulations that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. Safeguards we implement to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action lawsuits and enforcement actions from the SEC, Department of Justice and overseas regulators.

Future product development is dependent upon access to and reliability of third party software products and open source software.

Certain of our software products contain components developed and maintained by third party software vendors. We expect that we may have to incorporate software from third party vendors in our future products. We also incorporate open source software in certain of our software products. We may not be able to replace the functionality provided by the third party or open source software currently offered with our products if that software becomes obsolete, defective, non-compliant with third party patent restrictions or incompatible with future versions of our products or is not adequately maintained or updated, or if our relationship with the third party vendor terminates. In addition, we must carefully monitor and manage our use of, and compliance with the licensing requirements of, open source software. Any significant interruption in the availability of these third party software products on commercially acceptable terms, defects in these products, non-compliance with third party patent restrictions or our inability to comply with the licensing terms of either third party commercial software or open source software could delay development of future products or enhancement of future products and could have a material adverse effect on our business, financial condition, operating results and cash flows.

Future product development is dependent on adequate research and development resources.

In order to remain competitive, we must continue to develop new products and enhancements to our existing products. This is particularly true as we further expand our cloud and SaaS offerings and capabilities. Maintaining adequate research and development resources to meet the demands of the market is essential, and failure to do so could present an advantage to our competitors. If we are unable to develop products due to certain constraints, such as high employee turnover, lack of management ability or a lack of other development resources, including through third party outsourcing firms, our competitiveness could be harmed.

Discovery of errors in our software could adversely affect our earnings.

The software products we offer are inherently complex. Despite testing and quality control, we cannot be certain that errors will not be found in current versions, new versions or enhancements of our products after commencement of commercial delivery. If new or existing customers have difficulty deploying our products or require significant amounts of customer support, our operating margins could be harmed. Moreover, we could face possible claims and higher development costs if our software contains undetected errors or if we fail to meet our customers’ expectations. With our BSM strategy, these risks increase because we are combining already complex products to create solutions that are even more complicated than the aggregation of their product components. Significant technical challenges could also arise with our products because our customers purchase and deploy our products across a variety of computer platforms and integrate them with a number of third party software applications and databases. These combinations increase our risk further because in the event of a system-wide failure, it may be difficult to determine which product is at fault; thus, we may be harmed by the failure of another supplier’s products.

As a result of the foregoing, we could experience loss of or delay in revenue and loss of market share; loss of customers; damage to our reputation; failure to achieve market acceptance; diversion of development resources; increased service and warranty costs; legal actions by customers against us which could, whether or not successful, increase costs and distract our management; and increased insurance costs.

Risks Related to Securities Markets and Investments in Our Securities

Our executive officers and certain stockholders possess the majority of our voting power, and through this ownership, control our Company and our corporate actions.

Our current executive officers, directors and largest stockholders of the Company, hold approximately 37% of the voting power of the outstanding shares as of December 31, 2019. These officers, directors and certain stockholders have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions.  The interests of our executive officers and certain shareholders may give rise to a conflict of interest with the Company and the Company’s stockholders. For additional details concerning voting power please refer to the section below entitled “Description of Securities.”

		Price Range
Quarter Ended		High ($)				Low ($)
December 31, 2019		$	0.11				0.06
September 30, 2019		$	0.14				0.05
June 30, 2019		$	0.35				0.08
March 31, 2019		$	0.60				0.06
December 31, 2018		$	0.42				0.40
September 30, 2018		$	2.00				1.30
June 30, 2018		$	2.55				2.55
March 31, 2018		$	2.23				2.35

		Year Ended																Change
		December 31, 2019								December 31, 2018
		Amount				% of Revenue				Amount				% of Revenue				Amount			%
Net sales		$	7,954,015				100.0	%		$	7,091,647				100.0	%		$	862,368				12.2	%
Cost of goods sold			5,519,931				69.4	%			5,259,399				74.2	%			260,532				5.0	%
Gross profit (loss)			2,434,084				30.6	%			1,832,248				25.8	%			601,836				32.8	%
Operating expense:
Research and development			838,237				10.5	%			329,366				4.6	%			508,871				154.5	%
General and administrative			1,871,818				23.5	%			1,934,899				27.3	%			(63,081	)			-3.3	%
Total operating expense			2,710,055				34.1	%			2,264,265				31.9	%			445,790				19.7	%
Loss from operations			(275,971	)			-3.5	%			(432,017	)			-6.1	%			156,046				-36.1	%
Other income (expense):
Loss on extinguishment of debt			(216,208	)			-2.7	%			-				0.0	%			(216,208	)			n/a
Interest income			52,104				0.7	%			49,990				0.7	%			2,114				4.2	%
Foreign currency transaction gain			14,966				0.2	%			10,503				0.1	%			4,463				42.5	%
Government subsidized income			6,391				0.1	%			33,256				0.5	%			(26,865	)			-80.8	%
Miscellaneous income, net			35,308				0.4	%			53,457				0.8	%			(18,149	)			-34.0	%
Interest expense			(45,262	)			-0.6	%			(22,763	)			-0.3	%			(22,499	)			98.8	%
Total other income (expense), net			(155,480	)			-2.0	%			124,443				1.8	%			(279,923	)			-224.9	%
Income (Loss) before income or loss on equity investments in affiliates, and non-controlling interest			(431,451	)			-5.4	%			(307,574	)			-4.3	%			(123,877	)			40.3	%
Provision for income tax			276,015				3.5	%			(423,093	)			-6.0	%			699,108				-165.2	%
Net income (loss) before income or loss on equity investments in affiliates and non-controlling interest			(707,466	)			-8.9	%			115,519				1.6	%			(822,985	)			-712.4	%
Income (Loss) on equity investments			-				0.0	%			(33,515	)			-0.5	%			33,515				n/a
Net loss before non-controlling interest			(707,466	)			-8.9	%			82,004				1.2	%			(789,470	)			-962.7	%
Non-controlling interest income (loss)			4,982				0.1	%			167				0.0	%			4,815				2,883.2	%
Net income (loss)		$	(712,448	)			-9.0	%		$	81,837				1.2	%		$	(794,285	)			-970.6	%

		Year Ended December 31,								Changes
		2019				2018				Amount				%
Net cash provided in operating activities		$	134,444			$	146,880			$	(12,436	)			-8.5	%
Net cash used in investing activities			(462,131	)			(162,680	)			(299,451	)			184.1	%
Net cash provided in financing activities			57,296				353,923				(296,627	)			-83.8	%
Effect of foreign currency translation on cash and cash equivalents			(159,366	)			(165,063	)			5,697				-3.5	%
Net decrease in cash and cash equivalents		$	(429,757	)		$	173,060			$	(602,817	)			-348.3	%

Name	Age	Position
Jae Cheol Oh	50	Chairman, Chief Executive Officer, Chief Financial Officer
Hong Rae Kim	49	Executive Director
Jae Ho Cho	45	Director
Eugene Hong	62	Director
Jean Koh	59	Director
Charlie Baik	50	Director

Name and Principal Position		Year		Salary ($)				Bonus ($)				Stock Awards				Option Awards				Non-Equity Incentive Plan Compensation				Nonqualified Deferred Compensation Earnings				All Other Comp. ($)				Total ($)
Jae Cheol Oh, Chairman, Chief Executive Officer, Chief Financial Officer (5)		2019 2018		$ $	86,086 88,344				- -			$ $	- -				- -				- -				- -				- -			$ $	86,086 88,344
Hong Rae Kim, Director (5)		2019 2018		$ $	76,092 17,414				- -			$ $	- -				- -				- -				- -				- -			$ $	76,092 17,414
Jae Ho Cho, Director (5)		2019 2018		$ $	89,992 86,795				- -			$ $	- -				- -				- -				- -				- -			$ $	89,992 86,795
Eugene Hong, Director (6)		2019 2018		$ $	- -				- -			$ $	- -				- -				- -				- -				- -			$ $	- -
Jean Koh, Director (6)		2019 2018		$ $	- -				- -			$ $	- -				- -				- -				- -				- -			$ $	- -
Charlie Baik, Director (6)		2019 2018		$ $	5,147 5,453				- -			$ $	- -				- -				- -				- -				- -			$ $	5,147 5,453

Shareholder (1)		Beneficial Ownership				Percent of Class (2)
Jae Cheol Oh			12,898,600				36.9	%
Hong Rae Kim			915,200				2.6	%
Jae Ho Cho			0				0	%
Eugene Hong			0				0	%
Jean Koh			0				0	%
Charlie Baik			0				0	%
Officers and Directors as a Group (3 persons)			12,898,600				36.9	%

		Year Ended December 31, 2019(1) ($)				Year Ended December 31, 2018(2) ($)
Audit fees		$	75,000			$	66,000
Audit-related fees			-0-				-0-
Tax fees			-0-				-0-
All other fees			-0-				-0-
Total		$	75,000			$	66,000

Number		Description
2.1		Agreement of Merger and Plan of Reorganization among Evans Brewing Company, Inc., I-ON Digital Corp.., I-ON Acquisition Corp. and I-on Digital, Ltd. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 26, 2017, and incorporated herein by reference)
2.2		Spin-Off Agreement among Evans Brewing Company, Inc., Michael J. Rapport Trust, Evans Brewing Company, Inc. and EBC Public House, Inc. (previously filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed on February 1, 2018, and incorporated herein by reference)
3.1		Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form 10, filed on July 3, 2013, and incorporated herein by reference)
3.2		Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed on April 22, 2014, and incorporated herein by reference)
3.3		Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 23, 2015, and incorporated herein by reference)

3.4		Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 1, 2018, and incorporated herein by reference)
3.5		Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on April 3, 2019, and incorporated herein by reference)
3.6		By-laws of the Company (previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form 10, filed on July 3, 2013, and incorporated herein by reference)
4.2		Certificate of Designation of Rights and Preferences for Series A Convertible Preferred Stock (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on December 15, 2015, and incorporated herein by reference)
4.3		Convertible Note Debenture in favor of Peak One Opportunity Fund, L.P., due August 13, 2021 (previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
4.4		Common Stock Purchase Warrant of Peak One Opportunity Fund, L.P. (previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
10.1		Securities Purchase Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
10.2		Equity Purchase Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
10.3		Registration Rights Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
14.1		Code of Business Conduct and Ethics (previously filed as Exhibit 14.1 to the Company’s Registration Statement on Form S-1, filed on September 27, 2017, and incorporated herein by reference)
21.1		List of Subsidiaries*
23.1		Consent of Benjamin & Young, LLP
31.1		Certification of Chief Executive and Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended*
32.1		Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS		XBRL Instance Document*
101.SCH		XBRL Schema Document*
101.CAL		XBRL Calculation Linkbase Document*
101.DEF		XBRL Definition Linkbase Document*
101.LAB		XBRL Label Linkbase Document*
101.PRE		XBRL Presentation Linkbase Document*

	I-ON DIGITAL CORP.
	By:	/s/ Jae Cheol Oh
		Name:	Jae Cheol Oh
		Title:	Chairman, Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer)

March 24, 2020
	/s/ Jae Cheol Oh
	Name: Jae Cheol Oh
	Title: Chairman, Chief Executive Officer and Chief Financial officer
	(Principal Executive, Financial and Accounting Officer)

March 24, 2020	/s/ Hong Rae Kim
	Name: Hong Rae Kim
	Title: Executive Director

March 24, 2020	/s/ Jae Ho Cho
	Name: Jae Ho Cho
	Title: Director

March 24, 2020	/s/ Eugene Hong
	Name: Eugene Hong
	Title: Director

March 24, 2020	/s/ Jean Koh
	Name: Jean Koh
	Title: Director

March 24, 2020	/s/ Charlie Baik
	Name: Charlie Baik
	Title: Director

Report of Independent Registered Public Accounting Firm		3
Consolidated Financial Statements
	Consolidated Balance Sheets	5
	Consolidated Statements of Income and Comprehensive Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements		10

December 31,		2019				2018
ASSETS
Current assets:
Cash and cash equivalents		$	1,337,741			$	1,709,210
Restricted cash			1,641,043				1,699,331
Short-term financial instruments			716,013				741,417
Short-term loans			197,741				25,000
Accounts receivables, net of allowance for doubtful accounts $674,129 and $725,389, respectively			2,875,384				2,692,933
Deferred tax assets			232,766				65,947
Prepaid expenses and other current assets			1,055,553				856,959
Total current assets			8,056,241				7,790,797
Non-current assets:
Investments			105,437				102,756
Property and equipment, net			203,754				163,995
Intangible assets, net			192,868				136,432
Deposits			354,300				358,028
Derivate asset			105,594				109,343
Deferred tax assets			774,307				1,211,621
Total non-current assets			1,736,260				2,082,175
Total Assets		$	9,792,501			$	9,872,972
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	48,802			$	375,318
Accrued expenses and other			1,705,485				790,676
Value added tax payable			107,717				108,534
Income tax payable			8,179				20,353
Short-term loan			475,039				626,062
Current portion of long term debt			194,300				89,509
Total current liabilities			2,539,522				2,010,452
Convertible debt, net of debt discount of $0 and $175,000, respectively			-				25,000
Long term debt, net of current portion			194,300				402,397
Total liabilities			2,733,822				2,437,849
Commitments and contingencies
Stockholders’ Equity
Common stock, $0.0001 par value; authorized 100,000,000 shares; 35,030,339 and 35,030,339 shares issued and outstanding at December 31, 2019 and 2018, respectively			3,603				3,603
Treasury stock			(709,478	)			(709,478	)
Additional paid-in-capital			3,646,740				3,582,987
Accumulated other comprehensive loss			(259,960	)			(52,193	)
Accumulated retained earnings			3,897,337				4,609,785
Total company stockholders’ equity			6,578,242				7,434,704
Preferred stock (I-ON Korea) - $.4380 par value; authorized 2,000,000 shares; 157,142 and 0 shares issued and outstanding at December 31, 2019 and 2018, respectively			475,036				-
Non-controlling interests			5,401				419
Total stockholders’ equity			7,058,679				7,435,123
Total Liabilities and Stockholders’ Equity		$	9,792,501			$	9,872,972

		Years Ended December 31,
		2019				2018
Net sales		$	7,954,015			$	7,091,647
Cost of goods sold			5,519,931				5,259,399
Gross profit			2,434,084				1,832,248
Operating expenses:
Research and development			838,237				329,366
General and administrative			1,871,818				1,934,899
Total operating expense			2,710,055				2,264,265
Income (loss) from operations			(275,971	)			(432,017	)
Other income (expense):
Interest income			52,104				49,990
Loss on extinguishment of convertible debt			(216,208	)			-
Foreign currency transaction gain (loss)			14,966				10,503
Government subsidized income			6,391				33,256
Miscellaneous income (expense), net			35,308				53,457
Interest expense			(48,041	)			(22,763	)
Total other income (expense), net			(155,480	)			124,443
Income (loss) before provision for income taxes, loss on equity investments in affiliates, and non-controlling interest			(431,451	)			(307,574	)
Provision for (benefit from) income tax			276,015				(423,093	)
Net income before income or loss on equity investments in affiliates and non-controlling interest			(707,466	)			115,519
Loss on equity investments in affiliates			-				(33,515	)
Net income before non-controlling interest			(707,466	)			82,004
Non-controlling interest income			4,982				167
Net income		$	(712,448	)		$	81,837
Comprehensive income statement:
Net income (loss)		$	(712,448	)		$	81,837
Foreign currency translation			(207,767	)			(326,661	)
Total Comprehensive income (loss)		$	(920,215	)		$	(244,824	)
Earnings per share – Basic and diluted
Net income (loss) before non-controlling interest		$	(0.02	)		$	0.00
Non-controlling interest			0.00				0.00
Earnings per share to stockholders			(0.02	)			0.00
Weighted average number of common shares outstanding:
Basic and diluted			35,030,339				35,030,339

		Common Stock								Additional Paid-in				Retained				Treasury				Accumulated Other Comprehensive				Total Company Stockholders’				Non- Controlling				Preferred				Total Stockholders’
		Shares				Amount				Capital				Earnings				Stock				Income (Loss)				Equity				Interest				Stock				Equity
Balance - January 1, 2018			26,000,000			$	2,600			$	3,212,037			$	4,527,781			$	-			$	274,468			$	8,016,886			$	252			$	-			$	8,017,138
Issuance of common stock			9,030,339				903				-				-				-				-				903				-				-				903
Recognition of beneficial conversion feature in connection with convertible debt			-				-				85,212				-				-				-				85,212				-				-				85,212
Recognition of common stock warrant issued in connection with convertible debt			-				-				89,788				-				-				-				89,788				-				-				89,788
Issuance of common stock in connection with equity purchase agreement			-				100				109,243																109,343				-				-				109,343
Foreign currency translation			-				-				-				-				-				(326,661	)			(326,661	)			-				-				(326,661	)
Repurchase of treasury stock			-				-				-				-				(709,478	)			-				(709,478	)			-				-				(709,478	)
Stock compensation expense			-				-				86,707				-				-				-				86,707				-				-				86,707
Net income			-				-				-				82,004				-				-				82,004				167				-				82,171
Balance - December 31, 2018			35,030,339			$	3,603			$	3,582,987			$	4,609,785			$	(709,478	)		$	(52,193	)		$	7,434,704			$	419			$	-			$	7,435,123
Foreign currency translation			-				-				-				-				-				(207,767	)			(207,767	)			-				-				(207,767	)
Stock compensation expense			-				-				63,753				-				-				-				63,753				-								63,753
Issuance of preferred stock of subsidiary (I-ON Korea)			-				-				-				-				-				-				-				-				475,036				475,036
Net income (loss)			-				-				-				(712,448	)			-				-				(712,448	)			4,982				-				(707,466	)
Balance - December 31, 2019			35,030,339			$	3,603			$	3,646,740			$	3,897,337			$	(709,478	)		$	(259,960	)		$	6,578,242			$	5,401			$	475,036			$	7,058,679

---

		December 31,		December 31,		Average Year Ended December 31,
Currency		2019		2018		2019		2018
Japanese Yen to Korean Won		JPY10.63		JPY 10.13		JPY10.69		JPY9.96
Korean Won to US Dollar ($)		KRW1,157.80		KRW 1,118.30		KRW1,165.65		KRW 1,100.30

December 31,		2019				2018
Korea:
Current assets		$	7,821,531			$	7,550,184
Non-current assets			1,735,978				2,081,897
Current liabilities			2,437,550				1,802,402
Non-current liabilities			194,300				427,397
Net Sales			7,141,655				6,805,968
Japan:
Current assets		$	234,710			$	240,613
Non-current assets			282				278
Current liabilities			101,972				280,050
Non-current liabilities			-				-
Net Sales			812,360				285,679

Facility equipment	4 years
Automobile	4 years
Office equipment	4 years

Development costs	3 years
Intangible asset excluding development costs	10 years
Other Intangible assets	3 to 5 years

December 31, 2019
		Level 1				Level 2				Level 3
Available-for-sale securities		$	-			$	-			$	105,437
Common stock purchase warrant			-				-				-
Equity purchase put option			-				-				105,594
Fair value, at December 31, 2019		$	-			$	-			$	211,031

December 31, 2018
		Level 1				Level 2				Level 3
Available-for-sale securities		$	-			$	-			$	102,756
Common stock purchase warrant			-				89,788				-
Equity purchase put option			-				-				109,343
Fair value, at December 31, 2018		$	-			$	89,788			$	212,099

December 31,		2019				2018
Facilities		$	185,528			$	192,115
Vehicles			39,989				41,409
Equipment			1,615,288				1,355,710
Government grants			(213,526	)			(109,272	)
Total property and equipment			1,627,279				1,479,962
Less: accumulated depreciation			(1,423,525	)			(1,315,967	)
Property and equipment, net		$	203,754			$	163,995

Investments		Percentage of Ownership				December 31, 2019			December 31, 2018
PT IONSOFT			0.90	%			-				3,972
ACDE Consulting VN PTE LED			20.00	%			10,040				-
4Grit			2.50	%			43,189				44,723
E-channel			0.07	%			40,849				42,299
KSFC			0.00	%			11,359				11,762
Total Investment Securities			0.00	%		$	105,437			$	102,756

December 31,		2019				2018
Patents		$	251,798			$	174,823
Other intangible assets			551,865				568,276
Government grants			(8,729	)			(13,428	)
Total intangible assets			794,634				729,671
Less: Accumulated amortization		$	(601,766	)			(593,239	)
Intangible assets, net		$	192,868			$	136,432

Years ending December 31,
2020		$	26,609
2021			24,324
2022			23,482
2023			22,224
2024			22,782
Thereafter			73,447
Total		$	192,868

December 31,		2019				2018
A note payable to a financial institution bearing interest at 2.75% and 2.81% at December 31, 2019 and 2018, respectively, and guaranteed by the officer of the Company. The Company was required to make interest-only payments until December 2018, then monthly payments of both principal and interest starting from January 2019.		$	388,600			$	491,906
Long-term debt			388,600				491,906
Less: current portion			(194,300	)			(89,509	)
Long-term debt, net of current portion		$	194,300			$	402,397

Years ending December 31,
2020		$	194,300
2021			194,300
Total		$	388,600

December 31,		2019				2018
A $200,000 convertible note, issued at 10% discount, five year term, no monthly interest due, maturing August 13, 2021		$	-			$	200,000
Long-term convertible debt			-				200,000
Less: debt discount			-				(175,000	)
Long-term convertible debt, net of debt discount		$	-			$	25,000

Fair value, at December 31, 2018		$	109,343
Issuance of equity purchase put option			-
Change in fair value			(3,749	)
Fair value, at December 31, 2019		$	105,594

Fair value, at December 31, 2017		$	-
Issuance of equity purchase put option			109,343
Change in fair value			-
Fair value, at December 31, 2018		$	109,343

December 31,		Amount
2020			144,126
Total		$	144,126

Years Ended December 31,		2019				2018
Net income before non-controlling interest		$	(707,466	)		$	82,004
Non-controlling interest			4,982				167
Net income			(712,448	)			81,837
Weighted-average shares of common stock outstanding:
Basic			35,030,339				35,030,339
Dilutive effect of common stock equivalents arising from
share option, excluding antidilutive effect from loss			-				-
Dilutive shares			35,030,339				35,030,339
Earnings per share – Basic and diluted
Net income before non-controlling interest		$	(0.02	)		$	0.00
Non-controlling interest		$	0.00			$	0.00
Earnings per share to stockholders		$	(0.02	)		$	0.00

		Current				Deferred				Total
Year ended December 31, 2019:
Federal		$	-			$	-			$	-
State			-				-				-
Foreign			16,786				259,229				276,015
Total income tax provision (benefit)		$	16,786			$	259,229			$	276,015
Year ended December 31, 2018:
Federal		$	-			$	-			$	-
State			-				-				-
Foreign			17,988				(441,081	)			(423,093	)
Total income tax provision (benefit)		$	17,988			$	(441,081	)		$	(423,093	)

		As of December 31,
		2019				2018
Deferred income tax assets:
Allowance for bad debt		$	165,378			$	122,715
Government grants			32,385				27,814
Available-for-sale securities			44,314				10,371
Research and development tax credit			1,232,877				1,015,919
Loss on equity investments			-				35,778
Net operating income (loss)			90,550				-
Retirement benefits			74,232				72,881
Total deferred income tax assets			1,639,736				1,285,478
Less - valuation allowance			(625,819	)			-
Deferred tax assets, net of valuation allowance			1,013,917				1,285,478
Deferred income tax liabilities:
Other			(6,844	)			(7,910	)
Total deferred income tax liabilities			(6,844	)			(7,910	)
Net deferred tax assets		$	1,007,073			$	1,277,568
Current deferred tax assets:		$	232,766			$	65,947
Non-current deferred tax assets		$	774,307			$	1,211,621