Aerkomm Inc 10-K for FY2024
Aerkomm Inc. (AKOM)
About this 10-K
Aerkomm Inc filed this 10-K on August 18, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.34M
- up 83.7% from $731.09K a year earlier
- Net loss
- $29.19M
- compared with a net loss of $23.83M a year earlier
- Diluted EPS
- -$1.60
- compared with -$2.04 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal year ended:
For the transition period from ____________ to _____________
Commission File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of June 30, 2025 (the last business day of the registrant’s
most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by
non-affiliates (based upon the closing price of such shares as reported on the OTC Pink Market tier) was approximately $
There were a total of
DOCUMENTS INCORPORATED BY REFERENCE
Aerkomm Inc.
Annual Report on Form 10-K
Year Ended December 31, 2024
TABLE OF CONTENTS
i
Special Note Regarding Forward Looking Statements
In addition to historical information, this Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:
| ● | our future financial and operating results; |
| ● | our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business; |
| ● | the impact and effects of potential pandemics or contagious diseases or fear of such outbreaks, on the global airline and tourist industries, especially in the Asia Pacific region; |
| ● | our ability to attract and retain customers; |
| ● | our dependence on growth in our customers’ businesses; |
| ● | the effects of changing customer needs in our market; |
| ● | the effects of market conditions on our stock price and operating results; |
| ● | our ability to successfully complete the development, testing and initial implementation of our product offerings; |
| ● | our ability to maintain our competitive advantages against competitors in our industry; |
| ● | our ability to timely and effectively adapt our existing technology and have our technology solutions gain market acceptance; |
| ● | delays in the launch schedules of satellite network operators from whom we will acquire satellite network access services and our ability to acquire network access services from them; |
| ● | our ability to introduce new product offerings and bring them to market in a timely manner; |
| ● | our ability to obtain required telecommunications, aviation and other licenses and approvals necessary for our operations |
| ● | our ability to maintain, protect and enhance our intellectual property; |
| ● | the effects of increased competition in our market and our ability to compete effectively; |
| ● | our expectations concerning relationships with customers and other third parties; |
| ● | the attraction and retention of qualified employees and key personnel; |
| ● | future acquisitions of our investments in complementary companies or technologies; |
|
● |
the results of negotiations among the U.S. and other countries about tariffs and related matters; and |
| ● | our ability to comply with evolving legal standards and regulations. |
ii
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue our operations. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024, and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur.
Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
The specific discussions herein about our company include financial projections and future estimates and expectations about our business. The projections, estimates and expectations are presented in this Annual Report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of our business, the industry in which we work and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.
Potential investors should not make an investment decision based solely on our company’s projections, estimates or expectations. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this annual report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
iii
Summary of Risk Factors
Our annual report should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by similar companies. Our ability to realize our business objectives and execute our strategies is subject to risks and uncertainties, including, among others, the following:
Risks Relating to Our Business
Risks and uncertainties related to our current and future business include, but are not limited to, the following:
| ● | Excluding non-recurring revenues in 2019 and 2021 from affiliates, we have incurred operating losses in every quarter since we launched our business and may continue to incur quarterly operating losses, which could negatively affect the value of our company; |
| ● | We may not be successful in our efforts to develop and monetize new products and services that are currently in development, including value-added resale of satellite bandwidth in certain geographies where we are already licensed or intend to be licensed, our multi-orbit universal satellite communications terminals that incorporate flat panel antennas (FPAs) or electronically steered arrays (ESAs) with both hardware and software defined modems, communications systems for manned and unmanned aerospace and defense platforms, system integration for manned and unmanned aerospace and defense platforms, our proprietary glass semiconductor antenna (also referred to as “FGSA”), distributed content delivery network (“CDN”), distributed computing or mesh computing applications and inflight entertainment and connectivity services; |
| ● | We may not be able to grow our business with our current satellite and satellite constellation partners or to successfully negotiate agreements with satellite and satellite constellation partners whose bandwidth and services we do not currently resell or otherwise distribute; |
| ● | We may not be able to grow our business with our current aerospace and defense partners or to successfully negotiate agreements with aerospace and defense partners to which we do not currently provide our technologies or services; |
| ● | We may not be able to grow our business with our current civilian telecommunications partners or successfully negotiate agreements with civilian telecommunications partners to which we do not currently provide our service; |
| ● | We may not be able to grow our business with our current commercial aviation partners or successfully negotiate agreements with commercial aviation partners to which we do not currently provide our service; |
| ● | We may experience network capacity constraints in both our current and our future operation regions as we expect capacity demands to increase, and we may in the future experience capacity constraints internationally. If we are unable to successfully implement planned or future technology enhancements to increase our network capacity, or our aerospace and defense partners or civilian telecommunication partners do not agree to such enhancements, our ability to acquire and maintain sufficient network capacity and our business could be materially and adversely affected; |
| ● | The demand for satellite bandwidth may decrease or develop more slowly than we expect. We cannot predict with certainty the development of the international satellite bandwidth market in general or the general market acceptance for our products and services; |
| ● | The price of satellite bandwidth may decrease or develop more slowly than we expect. |
| ● | An extended delay in the transfer of title to Aerkomm Taiwan of the Taiwan land parcel that we purchased could delay the building of our first satellite ground station and have a negative impact on our business prospects; |
| ● | If the transactions contemplated by several memorandums of understanding (MOU) do not proceed, our results of operations and financial condition could be materially adversely affected; and |
| ● | We will source components and products, both hardware and software as well as content, from other companies, which we then assemble or integrate into our products and service offerings from other companies, and any disruptions in their supply chains or businesses or reductions in the quality or availability of the components or products produced by such partners could hurt our business by providing us with less quality or quantity components and products and resulting in potentially less attractive offerings for customers, |
iv
Risks Relating to Our Industries
Risks and uncertainties related to our industries include, but are not limited to, the following:
| ● | In the satellite industry, satellite service operators may face delays in deploying their satellites or constellations due to technological challenges or regulatory hurdles, or may otherwise have insufficient bandwidth, which could hinder the services we offer to our customers and damage customer relations; |
| ● | In the aerospace and defense industry, government budget uncertainties, geopolitical conflicts, public perception, or ITAR issues could adversely affect industry stability and growth; and |
| ● | In the semiconductor industry, supply chain concentration, geopolitical conflicts, single-source dependency, or natural disasters could present challenges for semiconductor manufacturers’ operations and resilience. |
Risks Relating to Our Technology and Intellectual Property
Risks and uncertainties related to our technology and intellectual property include, but are not limited to, the following:
| ● | We rely on service providers for certain critical components of and services relating to our satellite connectivity network; |
| ● | Our use of open-source software could limit our ability to commercialize our technology; |
| ● | The satellites that we currently or may in the future rely on have minimum design lives, but could fail or suffer reduced capacity before then; |
| ● | Satellites that are not yet in service may not be manufactured and successfully launched at rates adequate to meet demand; and |
| ● | The development of our proprietary glass semiconductor antenna may require licenses to intellectual property rights from third parties, including standards-based patent pools for Wi-Fi, audio-visual compression, or data transmission technologies. |
Risks Relating to Ownership of our Common Stock
Risks and uncertainties related to our common stocks include, but are not limited to, the following:
| ● | Our common stock is currently quoted on the OTC Pink Market, which may have an unfavorable impact on our stock price and liquidity; |
| ● | Our common stock is quoted on the Professional Segment of the regulated market of Euronext Paris, which may have an unfavorable impact on our stock price and liquidity; |
| ● | We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock; |
| ● | Investors may experience immediate and substantial dilution; and |
| ● | Our articles of incorporation, bylaws and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock price to decline. |
In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed in Item 1A. “Risk Factors” and elsewhere in this annual report before investing in our common stocks.
v
Use of Terms
For the purposes of this Annual Report only, references in this report to “we,” “us,” “our,” or “our company” are to the combined business of Aerkomm Inc., a Nevada corporation, and its consolidated subsidiaries, including Aircom Pacific, Inc., a California corporation and wholly-owned subsidiary, or Aircom; Aircom Pacific Ltd., a Republic of Seychelles company and wholly-owned subsidiary of Aircom; Aerkomm Pacific Limited, a Malta company and wholly owned subsidiary of Aircom Pacific Ltd.; Aircom Pacific Inc. Limited, a Hong Kong company and wholly-owned subsidiary of Aircom; Aircom Japan, Inc., a Japanese company and wholly-owned subsidiary of Aircom; and Aircom Telecom LLC, a Taiwanese company and wholly-owned subsidiary of Aircom, Aircom Taiwan, or Aircom Beijing; MEPA Labs Inc., a California corporation and wholly-owned subsidiary; and Mesh Technology Limited, a Taiwan company and wholly-owned subsidiary.
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:
| ● | “Aerkomm”, “we,” “us,” “our,” or “our company,” or “the Company” are to the combined business of Aerkomm Inc., a Nevada corporation, and its consolidated subsidiaries; |
| ● | “Aircom” are to Aircom Pacific, Inc., a California corporation and wholly owned subsidiary of our company; |
| ● | “Aerkomm HK” are to Aerkomm Hong Kong Limited, previously Aircom Pacific Inc. Limited, a Hong Kong company and wholly owned subsidiary of Aircom; |
| ● | “Aerkomm Japan” are to Aerkomm Japan Inc., previously Aircom Japan, Inc., a Japanese company and wholly owned subsidiary of Aircom; |
| ● | “Aerkomm Malta” are to Aerkomm Pacific Limited, a Malta company and wholly owned subsidiary of Aircom Seychelles; |
| ● | “Aerkomm Taiwan” are to Aerkomm Taiwan Inc., a Taiwanese company and subsidiary of our company; |
| ● | “Aerkomm SY” are to Aerkomm SY Ltd., previously Aircom Pacific Ltd., a Republic of Seychelles company and wholly owned subsidiary of Aerkomm; |
| ● | “Aircom Taiwan” are to Aircom Telecom LLC, a Taiwanese company and wholly owned subsidiary of Aircom; |
| ● | “Beijing Yatai” are to Beijing Yatai Communication Co., Ltd., a company organized under the laws of China and a wholly owned subsidiary of Aerkomm Taiwan; |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| ● | “IXAQ” means IX Acquisition Corp., a Cayman Islands corporation; |
| ● | “MEPA” are to MEPA Labs Inc., a US company and wholly owned subsidiary of our company; |
| ● | “Merger” means the business combination contemplated by the Merger Agreement whereby IXAQ will redomicile from being a Cayman Islands company to becoming a Delaware corporation, Merger Sub will merge with and into Aerkomm, with Aerkomm being the surviving company following the merger, each issued and outstanding share of Aerkomm common stock will automatically be converted into common stock of IXAQ at the conversion ratio, as defined in the Merger Agreement, and the outstanding convertible securities of Aerkomm will be assumed by IXAQ; |
| ● | “Merger Agreement” means the business combination agreement entered into on March 29, 2024 between Aerkomm, IXAQ and Merger Sub, as amended; |
| ● | “Merger Sub” means AKOM Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of IXAQ; |
| ● | “Mesh Tech” are to Mesh Technology Taiwan Limited, a Taiwanese company and wholly owned subsidiary of Mixnet Technology Limited Seychelles; |
| ● | “Mixnet” are to Mixnet Technology Limited, name changed to Mesh Technology Limited as of September 7, 2023, a Republic of Seychelles company and wholly owned subsidiary of Aerkomm Inc.; |
| ● | “SEC” refers to the U.S. Securities and Exchange Commission; and |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
vi
PART I
ITEM 1. BUSINESS.
Overview
The Company is an innovative, development-stage satellite communications provider delivering mission-critical, multi-orbit broadband connectivity through carrier-neutral and software-defined infrastructure. Our platform is designed to support both public and private sector applications across defense, aerospace, and civilian telecommunications sectors.
By leveraging next-generation technologies, we operate as a full-systems integrator—delivering high-throughput performance, seamless interoperability, and advanced network virtualization to ensure resilient, end-to-end connectivity. Through strategic partnerships with satellite constellation providers, mobile network operators, and hardware and software partners, we extend secure, scalable broadband services to the edge of global operations.
Our integrated communication solutions are specifically tailored to meet the distinct requirements of defense, aerospace, and civilian telecommunications markets. Engineered for agility and reliability, our solutions deliver exceptional performance in even the most challenging environments—empowering customers with flexible, future-ready connectivity.
Our asset-light business model sets us apart in the capital-intensive space industry. By not owning or operating our own satellites or constellations, we maintain flexibility, accelerate deployment, and focus on integrating value-added services that meet the evolving needs of our customers.
In addition to serving as a systems integrator, our core proprietary technology is the universal terminal, developed to provide carrier-neutral satellite broadband access. These terminals are engineered to cater to the diverse needs of customers across various sectors, ensuring seamless connectivity by dynamically connecting to the most suitable satellite, regardless of its orbital position, and delivering unparalleled performance.
The universal terminal integrates a multi-orbit flat-panel antenna (FPA) or electronically steered array (ESA) with a carrier-neutral, software-defined modem, ensuring flexibility and adaptability in all operational environments.
Our innovative glass semiconductor ESA antenna technology enhances throughput by over 50% per square inch compared to traditional antenna designs, resulting in a smaller, lighter, and more power-efficient terminal. These advantages enable high-performance broadband connectivity while reducing power consumption and heat generation. Designed for seamless connectivity across LEO, MEO, and GEO satellite constellations, the terminals ensure resilient and continuous operation across all orbital layers.
We are also advancing custom beamforming application-specific integrated circuits (ASICs) and radiofrequency (RF) chipsets to optimize power and performance, ensuring seamless connectivity across multiple orbital regimes.
Our software-defined radio (SDR) modem is built to provide secure, agile signal transmission with military-grade encryption, enhancing the flexibility and security of communication. We are also developing a custom high-speed analog-to-digital converter (ADC) chipset to enable hybrid-orbit links and enhance signal intelligence capabilities.
Alongside the development of proprietary technologies for end-to-end solutions based on our universal terminal, we strategically integrate partner technologies to create robust and reliable satellite networks, tailored to meet the specific needs of both public and private sector clients.
To drive resiliency and scalability, we are leading the way in implementing virtualization for satellite communications through our software-defined approach. This enables greater flexibility, scalability, and efficiency, allowing our systems to dynamically adapt to evolving communication demands.
1
By integrating a comprehensive suite of technologies, we aim to revolutionize satellite communications in collaboration with our industry partners, delivering exceptional capabilities that empower industries and individuals around the globe.
Since the onset of Russia-Ukraine war in 2022, the importance of network resilience and uninterrupted connectivity has moved to the forefront of strategic defense planning. The nature of modern warfare has evolved rapidly, with increasing reliance on secure, agile, and real-time communications across multi-domain operations. As new global hotspots emerge, governments have significantly increased defense budgets and are actively seeking cutting-edge technological solutions to address the growing demands of future conflict scenarios.
In response to global trends and evolving market demands, we have swiftly and strategically reallocated resources within the company to focus on the defense market, while actively seeking strategic partnerships through mergers and acquisitions to enhance our presence in the growing defense sector. In this sector, we concentrate on delivering carrier-neutral, software-defined infrastructure that guarantees mission-critical connectivity across multi-domain environments.
Our core platform integrates proprietary technologies, including software-defined modems, multi-orbit satellite terminals, and over-the-horizon (OTH) communications systems, all engineered to perform in contested, infrastructure-limited, and degraded environments. This modular ecosystem supports a diverse array of platforms, such as unmanned systems, ISR aircraft, commercial aviation, and telecom applications, delivering secure, high-throughput connectivity optimized for edge deployment. The strength of our company lies in our ability to offer innovative technological solutions and exceptional system integration capabilities to meet the needs of our customers.
In 2024, we made significant strides in business development, establishing new engagements with key players across the ecosystem and strengthening our position within the defense market. These efforts have led to tangible progress, including the achievement of critical milestones in select national markets, further cementing our role as a trusted partner in delivering next-generation defense communications infrastructure.
As we enter the early stages of revenue generation, we are accelerating our expansion in the defense market while maintaining a strong focus on the aerospace and commercial sectors. Our asset-light, highly scalable business model positions us to grow efficiently across all target domains.
On April 27, 2023, we were granted a regional satellite service spectrum usage permit, authorizing the provision of broadband satellite services across mobile backhaul, enterprise, maritime, and aviation sectors. This regulatory milestone strengthens our strategic position in critical communications infrastructure, particularly within the Indo-Pacific region.
In addition, we secured a Distribution Partner Agreement (DPA) with Eutelsat OneWeb Group, enabling us to leverage OneWeb’s Low-Earth Orbit (LEO) satellite services. Concluded in September 2024, the agreement grants AERKOMM Inc.’s subsidiary, AERKOMM Japan, distribution rights for LEO connectivity services in Japan’s commercial fixed and land mobile sectors, as well as in Taiwan’s land mobile market. This partnership underscores our commitment to expanding our global footprint and delivering advanced satellite communication solutions across Asia. The DPA opens new commercial opportunities in these strategic markets, positioning us for future revenue growth and enhancing our credibility in the region.
As a satellite telecommunications provider in Japan and Taiwan, we operate both as a systems integrator and a value-added services provider. This dual capability expands our market reach and enhances our ability to support strategic communications and infrastructure initiatives across the Asia-Pacific. The service design and delivery experience gained in these regions provides a scalable model that we plan to extend to additional markets through both existing satellite operator relationships and future partnerships.
2
Merger Agreement with IXAQ
On March 29, 2024, we entered into a business combination agreement (the “Merger Agreement”) with IX Acquisition Corp., a Cayman Islands corporation (“IXAQ”) and AKOM Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of IXAQ (“Merger Sub”). Pursuant to the terms of the Merger Agreement, we and IXAQ have agreed to effect a business combination (the “Merger”), subject to satisfaction of conditions set forth in the Merger Agreement described briefly below. Additional information relating to the Merger along with the Merger Agreement can be found in our Current Report on Form 8-K filed with the SEC on April 4, 2024. The Merger Agreements contemplates that:
| ● | Before the closing the Merger, IXAQ will redomicile from being a Cayman Islands company to becoming a Delaware corporation. |
| ● | Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger. |
| ● | Each issued and outstanding share of the Company common stock will automatically be converted into the common stock of IXAQ at the Conversion Ratio (as defined in the Merger Agreement); and |
| ● | Outstanding Company convertible securities of the Company will be assumed by IXAQ. |
| ● | In connection with the Merger, IXAQ will be renamed “AKOM Inc.” |
Pursuant to the terms of the Merger Agreement, each share of common stock of the Company issued and outstanding immediately before the closing of the Merger (other than any such shares that were held by dissenters to the Merger exercising appraisal rights, the “Merger Shares”) will be converted into shares of Class A Common Stock of IXAQ based on a Closing Purchase Price (as defined in the Merger Agreement) for the Company of $200,000,000 (as may be adjusted under the Merger Agreement prior to the closing of the Merger) and a price of $11.50 per share of Class A Common Stock of IXAQ (thereby resulting in the holders of Merger Shares receiving 17,391,304 shares of Class A Common Stock of IXAQ assuming no adjustment from the $200,000,000 Closing Purchase Price). Further, if certain milestones are achieved in the five years following the Merger, those who held Merger Shares immediately before consummation of the Merger will be entitled to receive their pro rata share of up to an aggregate of an additional 17,391,304 shares of Class D Common Stock of IXAQ (as may be adjusted under the Merger Agreement prior to the closing of the Merger), representing an additional Incentive Purchase Price (as defined in the Merger Agreement) of $200,000,000 that is additional to the $200,000,000 Closing Purchase Price for the Company under the Merger Agreement.
In addition to closing conditions that are usual and customary for a transaction like the Merger, the Merger Agreement closing conditions include that at least $45,000,000 of investor PIPE (private investment in public entity) financing commitments (inclusive of SAFE (simple agreement for future equity) financing obtained by the Company before the closing of the Merger) are obtained for the combined company resulting from the Merger, unless waived by IXAQ. As of date of this filing, PIPE agreements for aggregate commitments of $35,000,000, at a price of $11.50 per share, have been signed with Investors.
As of the date of this Annual Report on Form 10-K, the Insiders of the Company (as defined in the Merger Agreement) have all signed Company Support Agreements in favor of the transaction.
Our Strategic Position
The Company uniquely positioned to lead the evolution of satellite communications through a combination of innovative technology, strategic partnerships, and a flexible business model. By leveraging next-generation, multi-orbit, software-defined infrastructure, we provide mission-critical connectivity for both public and private sector applications, with a focus on defense, aerospace, and civilian telecommunications markets. Our core capabilities as a full-systems integrator, combined with proprietary technologies—including universal terminals, advanced antenna systems, and software-defined modems—set us apart in the highly competitive satellite communications sector.
Our asset-light business model is a key competitive advantage. By not owning or operating satellites, we maintain flexibility in responding to market demands and accelerating service deployment while focusing on integrating cutting-edge technologies and value-added services. This model allows us to offer high-performance solutions that are both scalable and adaptable, meeting the evolving needs of our customers across various industries.
3
We have placed increased focus on the defense sector in 2024, as the demand for secure, resilient, and high-throughput communications grows rapidly. The geopolitical climate, particularly since the onset of the Russia-Ukraine conflict, has highlighted the critical need for agile satellite communications systems capable of supporting multi-domain operations. In response, we have strategically reallocated resources and sought key partnerships to strengthen our presence in the defense sector.
Our strategic partnerships, such as the Distribution Partner Agreement (DPA) with Eutelsat OneWeb Group, exemplify our commitment to expanding our global reach, particularly in the Indo-Pacific region. This agreement provides AERKOMM Japan with distribution rights for OneWeb’s Low-Earth Orbit (LEO) satellite services in Japan and Taiwan, enabling us to tap into growing commercial and land mobile markets. These partnerships support our strategy of expanding into strategic markets, with the goal of driving future revenue growth.
Additionally, we continue to enhance our competitive edge by advancing technologies such as custom ASICs and SDR modems that optimize performance and security. Our comprehensive suite of solutions, designed for seamless connectivity across LEO, MEO, and GEO constellations, positions us as a leading provider of end-to-end satellite communications infrastructure.
Looking ahead, we aim to extend our service offerings into new markets through both existing relationships and future satellite constellation partnerships, leveraging the experience and scalability gained from our operations in Japan and Taiwan. This strategic positioning, backed by our strong technological foundation and adaptable business model, ensures that we are well-prepared to capitalize on emerging opportunities in the global satellite communications landscape.
Overview of our capabilities, competitive edge, markets and opportunities
Our Capabilities
We are strategically positioned to leverage cutting-edge technology and partnerships to become a leader in satellite communications. With a focus on both mission-critical infrastructure and agile service delivery, we provide robust, high-performance connectivity solutions to diverse sectors. Our capabilities, competitive advantages, and market opportunities are aligned to drive growth, expand our presence, and enhance our global footprint.
We provide mission-critical satellite communications services, leveraging a combination of cutting-edge technologies and strategic partnerships to offer secure, scalable, and high-performance broadband connectivity solutions. Our capabilities include the development of proprietary technologies, such as universal terminals, multi-orbit antennas, and software-defined modems, designed for flexible, agile, and reliable operations across a variety of sectors. Additionally, our expertise as a full-systems integrator allows us to seamlessly deliver comprehensive solutions that meet the specific requirements of both public and private sector customers.
Our core platform integrates several advanced components, including:
| ● | Universal Terminals: |
Providing carrier-neutral broadband access with dynamic connectivity to the most suitable satellite across multiple orbital layers.
| ● | Multi-Orbit Antennas: |
Enabling efficient, high-throughput communications across LEO, MEO, and GEO constellations.
| ● | Software-Defined Modems: |
Offering secure, flexible transmission with military-grade encryption.
| ● | Virtualization: |
Ensuring scalability and flexibility to meet evolving customer demands in diverse environments.
4
Through these technologies, we deliver end-to-end communications solutions that are resilient, scalable, and future-ready.
Competitive Edge
Our competitive edge stems from a combination of proprietary technology, a flexible business model, and our position within strategic markets. We differentiate ourselves in the satellite communications space through:
| ● | Asset-Light Business Model: |
By not owning satellites or constellations, we maintain operational flexibility and scalability, reducing capital expenditure and accelerating time-to-market.
| ● | Technological Innovation: |
Our proprietary technologies, such as the universal terminal with multi-orbit antennas and software-defined modems, offer unparalleled performance in diverse, contested environments. Our advanced ESA antenna technology enhances throughput and efficiency while reducing size, weight, and power consumption.
| ● | Systems Integration Expertise: |
Our ability to integrate complex satellite communication technologies into comprehensive, mission-critical solutions enables us to provide tailored services that meet the unique needs of various sectors, including defense, aerospace, and commercial telecommunications.
Markets
We believe that we are at the point of monetization, poised to deliver differentiated solutions in the fast-growing market for satellite communications.
| ● | Market Growth -- According to a 2023 annual report by Boeing on the commercial aviation industry, reports by the Teal Group on the unmanned aerial vehicle (UAV) industry, and reports by NSR on the role of satellite communications for the telecommunications industry, we believe that our target segments of Aerospace & Defense and Civilian Telecommunications are projected to grow threefold, from approximately $20 billion to $60 billion by 2030. Geopolitical conflicts are driving the adoption of dual-use applications for satellite communications. |
We believe there are numerous opportunities to rapidly develop the Company.
| ● | Product Readiness -- We have successfully delivered solutions to our development partner and customer and are experiencing interest from additional potential customers. The Company’s technology has demonstrated positive results in both operational and lab environments. |
| ● | Poised for Expansion -- We expect to execute our first major contract in 2024 and plan to invest in talent and strategic partnerships to fuel growth. Additionally, we aim to be in a position to introduce higher volume and higher margin solutions by 2026. |
| ● | Top-tier Talent -- We bring together a constellation of expert talent, including semiconductor and satellite communication innovators, as well as veterans in aerospace and telecommunications commercializing dual-use technologies. |
With the award of a regional satellite service spectrum usage permit on April 27, 2023, the Company has solidified its position as a licensed satellite telecommunications provider in the Asia-Pacific region. Building on this regulatory milestone, we entered into a Distribution Partner Agreement (DPA) with Eutelsat OneWeb Group in September 2024. This agreement grants our subsidiary the rights to distribute OneWeb’s Low-Earth Orbit (LEO) satellite connectivity services across targeted commercial fixed and land mobile sectors within key regional markets. Together, these developments support the expansion of our satellite service offerings and revenue streams throughout the Asia-Pacific.
5
These strategic advancements have elevated our role from a hardware and systems supplier to a full-service satellite connectivity provider and distributor of multi-orbit satellite bandwidth. We are now positioned to deliver a broad range of services across the Civilian Telecommunications market—including mobile backhaul—and the Aerospace & Defense sectors, supporting both aviation and maritime applications. Our expanding footprint also strengthens our ability to compete for network resiliency contracts, contributing to long-term revenue growth.
By operating as both a systems integrator and value-added services provider, we are able to deliver end-to-end satellite-based solutions tailored to the specific needs of diverse regional markets. This dual capability broadens our addressable market and reinforces our role in supporting critical communications infrastructure. The experience gained through deployments in these markets provides a scalable foundation that we plan to extend to additional geographies through existing relationships with satellite operators and future strategic partnerships.
Opportunities
We are uniquely positioned to capitalize on several emerging opportunities, driven by geopolitical trends, technological advancements, and strategic partnerships:
| ● | Defense Sector Growth: |
With increased defense budgets and an evolving security landscape, particularly since the onset of the Ukraine conflict, demand for resilient communications infrastructure is accelerating. Our solutions are specifically designed to meet the needs of modern defense operations, providing high-throughput connectivity in multi-domain environments.
| ● | Strategic Partnerships: |
Our Distribution Partner Agreement with Eutelsat OneWeb Group, combined with existing and future satellite operator relationships, enables us to leverage LEO satellite services to expand our presence in critical markets such as Japan, Taiwan, and other parts of Asia.
| ● | Global Expansion: |
The success of our projects in Japan and Taiwan provides a scalable model that can be replicated in other high-growth regions, positioning us for further market expansion. As we expand our service offerings across different sectors, our asset-light business model allows us to grow efficiently without the capital constraints of owning satellites.
| ● | Regulatory and Distribution Partner Authorization Milestones |
Recent regulatory approvals, such as the regional satellite service spectrum permit in the Indo-Pacific, strengthen our position in key markets and enhance our ability to deliver mission-critical connectivity services in high-demand sectors. In addition, the Distribution Partner Agreement (DPA) secured with Eutelsat OneWeb Group expands our commercial footprint and creates new revenue opportunities in strategic markets.
Outlook
The Company intends to capitalize on our numerous initiatives in the Aerospace & Defense and Civilian Telecommunications markets to establish a leading position as innovators at the forefront of the booming satellite communications industry. We are primed to capitalize on the opportunities presented by the rapidly evolving satellite communication landscape, driving innovation and delivering value to customers and stakeholders.
6
Our Technology and Product Overview
We aim to provide asset-light end-to-end broadband connectivity with satellite partners and mobile network operators, by leveraging advanced technology and partnerships to offer innovative connectivity solutions. We will remain less capital intensive than many comparable companies in the space industry as we do not operate, nor intend in the future to operate, our own satellites or constellations.
We aim to work with a variety of satellite operators across different orbits, including LEO, MEO, GEO, and HEO. We also aim to engage with MNOs on both their 5G and 6G terrestrial technology roadmaps, as well as their plans to implement localized network resiliency to their connectivity services by deploying High Altitude Platform Stations (HAPS). This combination allows for extensive coverage and flexibility in providing broadband services to users and platforms on land, in the air, and at sea.
As a distribution partner to satellite service providers, we aim to provide hybrid-orbit services, combining the strengths of various satellite constellations to optimize connectivity solutions for customers. Our broadband connectivity solutions aim to cater to a diverse range of users and platforms, for both military and civilian applications, in order to ensure that customers across different domains can benefit from reliable and high-speed satellite connectivity.
Our software-defined satellite core network aims to enable dynamic and programmatically efficient management of satellite networks. This technology aims to improve network and constellation performance, resilience, and adaptability to changing conditions.
7
We aim to orchestrate a comprehensive system of technologies to deliver differentiated capabilities to revolutionize satellite communication and to deliver unparalleled capabilities and value both to our customers and to our partners.
We design comprehensive solutions for our customers that take advantage of both the proprietary technologies that we design and develop as well as the world-class technologies that we can source and integrate from partners, as outlined below:
| ● | Revolutionary Communication Device Design -- Our cutting-edge technology includes the development of universal terminals, providing carrier-neutral satellite broadband access. These terminals are designed to meet the diverse needs of users across various sectors and domains, ensuring seamless connectivity and unparalleled performance. |
| ● | Next-Generation Software-Defined Non-Terrestrial Network -- We are at the forefront of implementing virtualization for satellite communications through our software-defined radios, software-defined modems and our progress towards a software-defined non-terrestrial network (NTN) that connects satellites to users and platforms across domains. This approach enhances flexibility, scalability, and efficiency, allowing for dynamic adaptation to evolving communication needs. |
| ● | Innovative System Integrator -- Our expertise extends to system integration where we blend our expertise in satellite communications and satellite network architecture with our understanding of the needs of our customers and the platforms they are operating. We can strategically source partner technologies and integrate them together with our own systems to create robust and reliable satellite communications solutions tailored to meet the mission-critical demands of our current and prospective customers. |
8
One of our key system-level advantages is built on our team’s fabless semiconductor chip and panel design and engineering expertise, which allows us to remain asset-light while also developing state-of-the-art technologies. With a focus on delivering superior connectivity, we believe our universal terminals for satellite communications are poised to set a new high bar for the industry.
Our universal terminals for satellite communications incorporate:
| ● | Multi-orbit flat panel antenna (FPA) -- We implement an electronically steered array (ESA) or FPA using glass semiconductor processes, which is the key enabler for our universal terminals capability to connect to satellites in multiple orbits from a single antenna aperture. By virtue of being able to link to different satellites in different orbits with the same hardware, we aim to enable more reliable, higher performance and more resilient satellite communications. Our semiconductor glass antenna can also transmit and receive 50% more Mbps per square-inch than previous state-of-the-art satellite broadband terminals. This also enables us to optimize size, weight and power, while also delivering competitive performance and resiliency to customers using our universal terminals. Our glass antenna can also deliver multi-beam connectivity that allows for seamless or “make-before-break” handovers between satellites, as well as multi-channel connectivity that uses difference frequency bands in both licensed and unlicensed spectrum. |
| ● | Software-defined modem -- We are developing a carrier-neutral software-defined modem in order to provide carrier-neutral broadband connectivity over our software-defined radio (SDR). Our implementation of SDR technology aims to provide secure and agile signal transmission with military-grade security features. Our implementation of software-defined modems aims to enable the flexibility, security, adaptability and efficiency our customers need by providing programmable signal processing functions that can be reconfigured to support different modulation and coding schemes, as well as the latest protocols and standards. |
Our software-defined modems aim to enable flexibility, adaptability, and efficiency by providing programmable signal processing functions that can be reconfigured to support different modulation and coding schemes, as well as the latest protocols and standards. By applying a single hardware platform for multiple standards, we aim to create a unique system to be more flexible and compatible with different satellite constellation waveforms, and more easily upgraded for new waveforms via software updates. Both end users and our satellite operator partners can benefit from deploying our universal terminals with our high efficiency antennas and software-defined modems. Customers benefit because they can use a single terminal to communicate across satellites, orbits and operators, which means they do not need to invest in dedicated terminals for each satellite, orbit or operator they wish to connect with. Furthermore, our universal terminals aim to deliver high-performance in a package that takes up less size, weight and power than other systems, end users may experience additional benefits in terms of total cost of ownership when choosing our universal terminals.
9
For satellite operators, the high efficiency of our glass semiconductor antenna and the software-programmability of our modem, when used by their customers—on land, in the air, or at sea—can potentially reduce the maintenance and replacement schedule of satellites and constellations, which hare huge drivers of cost and capital expenditures across the satellite industry.
| ● | Regional Satellite Service Operation (TW) -- We made strides in licensing, securing our first satellite spectrum usage permit from the Government of Taiwan. With the approval from Taiwan’s Ministry of Digital Affairs in 2023 of our satellite operator license, we will continue to be one of the few satellite service providers to offer satellite services to customers in the region. As a result, we are in the unique position to be the only Non-Geostationary Satellite Orbit, or NGSO, service operator in the Taiwan market. We have established ties with operators in the LEO, MEO, GEO, and HEO sectors. The receipt of our satellite service spectrum usage permit in Taiwan, also qualifies us to apply for an ITU (International Telecommunication Union) operator’s membership. As a qualified ITU member, we should be able to expand our global operations by gaining access to the global radio frequency spectrum, regulatory compliance, international coordination and cooperation, and representation in global forums. |
Our Markets
In recent years, the satellite industry has experienced rapid growth, driven in large part by significant investments in Low Earth Orbit (LEO) and Medium Earth Orbit (MEO) satellite development. As the ecosystem continues to mature, we are strategically focused on capturing a substantial share of the market in both the Ground Equipment and Satellite Services segments.
The Satellite Industry Association released the 28th Annual State of the Satellite Industry Report (the “SIA Report”) in May 2025 reporting a historic number of launches in 2024 to power commercial satellite industry growth. During 2024, a historic number totaling 259 launches were deployed to a record of 2,172 tons and 2,695 satellites into Earth orbit with U.S. launch market share increasing to 65%. Also in 2024, the global space economy expanded by 4 percent with the commercial satellite industry accounting for 71 percent of the world’s space business and satellite manufacturing revenue increased by 17 percent with U.S. market share increasing to 69 percent – a whopping increase of 50 percent over 2023. The commercial satellite sector sustained its momentum, recording its seventh consecutive year of growth in satellite deployments. (Source: Historic Number of Launches Powers Commercial Satellite Industry Growth – Satellite Industry Association Releases the 28th Annual State of the Satellite Industry Report – Satellite Industry Association)
The satellite industry highlights from the 2025 State of the Satellite Industry Report (SSIR) are as follows:
Industry Growth and Performance
| ● | Global Satellite Industry Revenue: |
The global satellite industry generated $350 billion in 2024, reflecting an estimated increase of nearly 17 percent over 2023.
| ● | Record Satellite Launches: |
For the seventh consecutive year, the commercial satellite industry set a new record with 2,695 commercial satellites launched in 2024, marking a 3% increase compared to the previous year. This increase helped drive the industry’s growth.
10
| ● | Active Satellites: |
By the end of 2024, the global satellite fleet reached 11,539 active satellites orbiting Earth, compared with 9,691 active satellites in 2023 and just 3,371 in 2020, showcasing the rapid expansion of the satellite ecosystem.
Revenue Breakdown
| ● | Ground Equipment: |
According to the SIA report, the Satellite Ground Segment generated more than $155.3 billion in revenue in 2024 with ground equipment, a sub-segment, was the highest earning industry segment, generating $150.4 billion, or approximately 53% of the industry’s overall revenue in 2023. While there are slight variations in the exact figures, the overall trend confirms the dominance of the ground segment in terms of revenue.
| ● | Satellite Services: |
In 2024, the satellite services segment generated a total revenue of $108.3 billion, driven in part by significant growth in satellite broadband services. Specifically, the satellite broadband market saw substantial growth in 2024, with revenue increasing by 29% compared to the previous year, according to the S SIA report, which growth was also reflected in subscriber numbers, which rose by 46% during the same period. While traditional satellite TV services experienced a decline in revenue in 2024, the growth in satellite broadband significantly offset this decline, contributing to an overall 3% increase in the commercial satellite industry’s revenue, which reached $293 billion in 2024.
| ● | Satellite Manufacturing: |
The global satellite manufacturing sector experienced significant growth in 2024, with revenues reaching $20 billion, a 17% increase over 2023. The U.S. dominated this market, accounting for 69% of global manufacturing revenues. This growth was fueled by increased demand for both large government satellites and smaller, more numerous satellites, particularly for commercial applications like broadband internet and Earth observation.
| ● | Launch Services: |
The global commercial launch services market generated $9.3 billion in revenue in 2024 compared to $7.2 billion in revenue in 2023, a 30% increase from the previous year. This growth was driven by a record 259 orbital launches in 2024 compared to 221 orbital launches in 2023.
Source: Click Here To View - State of the Satellite Industry Report
11
Emerging Trends and Opportunities
| ● | Broadband Services: |
The demand for satellite broadband services continued to grow in 2024. The market size increased from $5.33 billion in 2023 to $5.99 billion in 2024, demonstrating a 12.4% compound annual growth rate, according to The Business Research Company. This growth is fueled by the increasing need for reliable connectivity in rural and remote areas, as well as the demand for global internet access and disaster recovery solutions.
| ● | Space Sustainability: |
The growing market for space sustainability, including in-orbit servicing and space situational awareness (SSA), generated revenue of $1.65 billion in 2024 as compared to $300+ million in revenue in 2023. SSA accounted for about three-quarters of this figure.
Market Outlook
| ● | Growth Areas: |
The satellite broadband sector and space sustainability are expected to be key drivers of future industry expansion. Continued advancements in satellite technology and increased demand for secure, agile, and high-throughput communications will likely fuel growth across various sectors.
The 2024 State of the Satellite Industry Report (SSIR) highlights ongoing growth and maturation in the satellite industry, with steady increases in satellite launches, revenue generation, and emerging opportunities in satellite services and space sustainability. While the SSIR does not provide specific revenue projections for future years, the highlighted trends—particularly in broadband services and space sustainability—suggest areas of potential growth.
Industry analysts and investment banks project that the global space economy could reach $1 trillion by 2040, signaling a positive long-term outlook for the satellite industry, which is poised for continued expansion and increased market share in the broader space economy. (Source: SpaceNews)
According to the November 2024 report, “Satellite Manufacturing Market Size - By Orbit, Satellite Mass, Propulsion Technology, Application, End Use Analysis, Share, Growth Forecast, 2025 – 2034,” The global satellite manufacturing market size is estimated to grow at a CAGR of 14.8% from 2025 to 2034. The market is growing as demand rises for advanced Earth observation and data analytics. This growth stems from the need for real-time, high-resolution data in areas like environmental monitoring, disaster response, agriculture, and urban planning. Technological progress in satellite miniaturization and operational efficiency has led to the deployment of small satellites and CubeSats that can perform complex observation tasks, further driving market expansion.
Source: Satellite Manufacturing Market Size, Growth Trends 2025-2034
12
Within civilian telecommunications, the key subset of the market we are targeting is anticipated to grow from $3 billion in 2023 to $25 billion by 2030. Market reports published by NSR indicate that “non-terrestrial networks” (NTN) will become a central feature of 5G Advanced and 6G networks, and that satellite connectivity needs of MNOs will evolve from a nice-to-have “back-up” in their 4G LTE networks into a must-have “back bone” of their 5G Advanced and 6G.
Within aerospace, one of the key subsets we are targeting is commercial aviation, which is anticipated to grow from $7 billion in 2023 to $21 billion by 2030. According to annual reports by Boeing and Airbus, commercial airlines plan to outfit approximately 70% of passenger aircraft for high-throughput inflight broadband by 2030 up from just approximately 25% in 2023, meaning that delivering a solution that is approved and qualified for both retrofit and “line-fit” installations will be necessary.
Within defense, one of the key subsets of the market we are targeting is UAVs for the military, which is anticipated to grow from $12 billion in 2023 to $16 billion by 2030, according to the Teal Group. According to the same reports, an even steeper growth trajectory is anticipated in the civilian UAV market, which is forecast to grow from $7 billion in 2023 to $20 billion by 2030.
We do not yet include this projected civilian UAV market in our target segments, but we aim to be in a strong position to enter the civilian UAV market in the future after first focusing on the defense UAV market. Similarly, we see future opportunities to enter the market for both manned and unmanned maritime and land-based vehicles and platforms for the defense industry, which are complementary to our focus on the defense UAV market, as they often include the same prime contractors and military customers.
Dual-use technologies expand how satellite broadband is used and is being driven by geopolitical conflict, as has been evident in Ukraine, where satellite broadband has been deployed with great effectiveness, including in combination with UAVs. In response to growing demand from governments and militaries, prime defense contractors in US, NATO and Japan are reportedly developing unmanned systems for both intelligence, surveillance and reconnaissance missions (ISR) as well as for collaborative combat aircraft (CCA), or the teaming of manned and unmanned aircraft, the latter sometimes referred to as “loyal wingman”, and next generation air dominance (NGAD). Our technologies are relevant and differentiated for all of these programs, as well as for additional manned and unmanned maritime and land-based platforms and vehicles.
Aerospace & Defense Market
In the aerospace and defense sectors, satellite communication plays a critical role in enabling various applications, including commercial aviation, in-flight connectivity (IFC), defense ISR-type and CCA-type programs. Commercial aviation relies on satellite communication for in-flight connectivity, enabling passengers to access high-speed internet and other services during flights. The adoption of satellite-based in-flight connectivity (IFC) solutions is expected to increase significantly in the coming years. Airlines are seeking to enhance passenger experience and differentiate their services in a competitive market.
The Fortune Business Insight report projects that approximately 70% of commercial aircraft will be equipped with high-throughput inflight broadband by 2030, up from just around 25% in 2023. This significant increase in adoption rates will necessitate both retrofitting and “line-fit” installations. As a result, the market for inflight broadband services is anticipated to grow from $7 billion to $21 billion, presenting lucrative opportunities for satellite communication providers.
In the defense sector, satellite communication supports ISR and unmanned platforms programs by providing secure and reliable communication links for unmanned aerial, maritime, and land vehicles and the vast majority of military platforms. Satellite-based communication enables real-time data transmission, command and control, and situational awareness, enhancing operational efficiency and effectiveness in defense missions. Industry projections indicate an increase in market size from $12 billion in 2023 to $16 billion by 2030. In the Defense sector, we have been pioneering a first-of-its-kind satellite communications architecture for unmanned aerial, maritime, and land vehicles engaged in intelligence, surveillance, and reconnaissance (ISR) missions in collaboration with our development partner and the customer.
13
Defense
Unmanned platforms have revolutionized military operations with their versatility and agility. However, their reliance on connectivity handoffs between ground-based line-of-sight antennas, typically operating in C-band, and GEO, or GSO satellites present several challenges that limit their effectiveness in certain scenarios. Prime defense contractors in the US, NATO, Australia, and Japan are actively developing unmanned systems for ISR, and numerous other unmanned platforms to include CCA-type and NGAD applications. This strategic shift towards unmanned systems is expected to drive the demand for satellite communication technology, particularly for data transmission and remote-control capabilities, which can keep a “human-in-the-loop” (HITL).
Innovative programs such as the US Air Force’s Loyal Wingman Program, aim at enhancing collaborative combat capabilities. The program involves the deployment of 1,000 CCA with $6.2 billion budget by 2028, which we expect will require advanced satellite communication systems for real-time data sharing, over-the-horizon coordination, and mission execution. These CCA units serve as force multipliers, working in tandem with manned platforms to achieve strategic objectives and maintain battlefield superiority, but are just one example of how governments and militaries are considering how best to deploy both manned and unmanned platforms to accomplish defense objectives.
Collaborative Combat Aircraft, Concept Art (Source: Boeing Image)
Source: The Washington Post: How drones are controlled, 2014
We aim to offer unparalleled flexibility to defend unmanned platforms by enabling communication across six dimensions: domain, orbit, beam, carrier, frequency, and satellite. This innovative approach aims to allow users to establish multiple communication paths simultaneously, enhancing redundancy, resilience, and adaptability in dynamic operational environments, while also offering complementary functionality such as jamming.
14
We are well positioned to deliver high-value functionality that effectively balances performance with total cost of ownership. We are actively engaged in discussions with leading prime contractors to provide a differentiated satellite communications system tailored specifically for unmanned platforms across all domains to include CCA-type programs and are co-creating new concepts of employment and concepts of operation for satellite communications on these platforms. Two high profile examples from the US Air Force include planning to spend more than $6 billion on CCA drone programs over the next five years, in addition to an estimate of $16 billion on the NGAD program over the same time period.
Our company recognizes the critical role of UAVs and UAS (Unmanned Aircraft System) in contemporary defense strategies. As global military expenditures continue to rise and the demand for advanced unmanned systems grows, we are strategically positioned to capitalize on these trends. Our focus includes:
| ● | Research and Development: |
Investing in cutting-edge technologies to enhance UAV capabilities, including AI integration and advanced propulsion systems.
| ● | Strategic Partnerships: |
Collaborating with defense agencies and industry leaders to deliver innovative solutions tailored to evolving military needs.
| ● | Market Expansion: |
Targeting growth opportunities in emerging markets, particularly in regions with increasing defense budgets and a focus on modernizing military infrastructure.
We remain committed to delivering high-performance, reliable, and technologically advanced UAV solutions to meet the dynamic requirements of defense operations worldwide.
Commercial Aviation Connectivity
In-Flight Entertainment and Connectivity (IFEC) Market
According to the In-Flight Internet Market report published by MarketsandMarkets in March 2025, the global in-flight internet services market is estimated to be valued at USD 1.6 billion in 2024 and is estimated to grow at CAGR of 6.1% to reach USD 2.87 billion by 2034. Rising demand from passengers for in-flight internet connectivity and advancement in satellite technology are the major factors contributing to the growth of the market. This growth is driven by heightened passenger expectations for seamless connectivity and personalized entertainment options during flights.
Within the broader IFEC (In-Flight Entertainment and Connectivity) market, the in-flight internet segment alone is valued at USD 1.6 billion in 2024, underscoring the rising demand for onboard connectivity solutions.
The market’s momentum is fueled by modern passengers’ expectations to stay connected at all times—even while airborne. Business travelers seek to remain productive during flights, while leisure passengers increasingly demand uninterrupted access to entertainment and social media. Key technological advancements supporting this expansion include the deployment of high-throughput satellites (HTS), the rise of Low Earth Orbit (LEO) satellite constellations, and continuous innovations in onboard Wi-Fi systems.
The global in-flight internet market is projected to reach USD 2.1 billion by 2029. During the forecast period from 2023 to 2029, North America is expected to account for the highest share of regional revenue, driven by strong demand and market expansion. Within the region, Canada is identified as the fastest-growing market. In terms of technology, satellite-based systems continue to dominate the In-Flight Entertainment and Connectivity (IFEC) market. By end user, business aviation accounts for the largest share of revenue, followed by commercial aviation, reflecting the increasing adoption of connectivity solutions across both segments.
15
Source: In-Flight Internet Market Report, March 2025
Source: In-Flight Internet Market Report, May 2024
Market Projections (2025 and Beyond)
Looking ahead, the IFEC market is projected to experience robust growth:
| ● | Global IFEC Market: Expected to reach $19.36 billion by 2032, growing at a compound annual growth rate (CAGR) of 10.5% from 2024 to 2032. |
16
| ● | In-Flight Internet Segment: Anticipated to grow at a CAGR of 5.7% from 2024 to 2029, reaching $2.1 billion by 2029. |
| ● | In-Flight Wi-Fi Market: Projected to expand from $10.5 billion in 2025 to $22.92 billion by 2032, with a CAGR of 11.8% during the forecast period. Coherent. |
(Sources: Credence Research, Fortune Business Insights, MarketsandMarkets, and Coherent Market Insights.)
The anticipated growth in the in-flight internet services market presents significant opportunities for stakeholders in the aerospace and telecommunications industries. Airlines are increasingly investing in advanced connectivity systems to enhance passenger experience, differentiate their services, and generate ancillary revenue streams.
We are strategically positioned to capitalize on these trends by offering innovative solutions that cater to the evolving needs of both airlines and passengers. We are committed to delivering high-quality, reliable, and scalable in-flight internet services that align with the industry’s growth trajectory.
The December 2024 “IATA (International Air Transport Association) Global Outlook for Air Transport”, report that over the past year, the global economy has been remarkably stable. Unemployment rates in OECD countries were below historical averages, global inflation rates continued to fall, and ticket prices moderated, fueling demand. Of course, uncertainties persist because of wars, and the policy shifts that the new US administration likely imply. As for the approaching end of 2024, demand for air travel is not only strong, but has set a new all-time high.
This buoyant aviation activity has pushed industry-wide passenger traffic to new record highs in spite of capacity constraints in 2024. The growth in revenue passenger-kilometer (RPK) and available seat-kilometer (ASK) have aligned with the trend observed in the decade leading up to the pandemic (see chart above). RPK, also known as Revenue Passenger Miles (RPM) in some regions, is a key metric in the airline industry that measures the total number of kilometers (or miles) traveled by paying passengers. It is calculated by multiplying the number of revenue passengers by the distance they travel on a flight. RPKs are a primary indicator of an airline’s traffic and passenger demand. ASK is an airline capacity metric that represents the total number of seats available for passenger travel, multiplied by the distance flown in kilometers. It essentially quantifies an airline’s ability to transport passengers over a given distance.
In the near future, the rise in passenger traffic is expected to follow this trajectory, supported by persistent demand and the expansion of airline operations in key emerging economies. Supply chain issues, however, could cap the potential growth in traffic, as passenger load factors reached all-time highs across the different regions and at the industry level, while in 2024, the rise in RPK matched that in ASK.
17
Growth of Aviation Industry
Immediately prior to the onset of the COVID-19 pandemic, there were, according to Airbus and Boeing, more than 23,000 commercial aircraft flying globally, a number that was expected to more than double in the next 20 years.
Airbus, in their 2024 Global Market Report, highlights the following forecast for the next 20 years 2024 – 2043:
https://www.airbus.com/en/products-services/commercial-aircraft/global-market-forecast
| i. | As COVID is behind us, traffic is reconnecting with previous trends. |
| ii. | Expanding economies and global population, growing middle class, improved infrastructure and traffic stimulation from airlines offering new affordable flights all contribute to traffic growth. |
| iii. | People want and need to fly. Aviation connects people, is a catalyst for trade, enables commerce, and supports communities. |
| iv. | Initial average traffic growth rate of 8.4% CAGR until 2027 as it recovers growth lost during the pandemic. |
| v. | Long term trend: average annual pax traffic growth of 3.6% per year from 2027 to 2043, and 3.1% for freight. |
| vi. | China and India, and more generally Asia-Pacific as a whole, will power growth, further shifting aviation’s center of gravity’ towards Asia. |
| vii. | The projected 2043 world Fleet-In-Service will be 48,230 in 2043 vs. 24,240 beginning of 2024 |
| viii. | Demand for 42,430 new passenger and freighter deliveries in the 2024-2043 period. Of these: 33,510 single aisle and 8,920 widebodies. |
| ix. | Growth primarily driven by GDP increase (+2.6% 2023-2043), middle class expansion, first time fliers, and growing trade (+3.1% 2023-2043 CAGR vs. +2.9 % GMF23). |
18
Boeing, in their Commercial Market Outlook, issued in July 2024, also predict that airlines will need over 43,000 new airplanes over the next 20 years.
https://www.boeing.com/content/dam/boeing/boeingdotcom/market/assets/downloads/2024-cmo-executive-presentation.pdf
Growth of Private Aircraft (Business Jets / VIP)
In 2022, Airbus Corporate Jets (ACJ) conducted a survey among senior executives of U.S. businesses with an annual revenue of over $500 million. The study showed that 89% of those surveyed expected their organizations to increase their use of business jet aviation in 2023, with 25% predicting it would increase by more than half. Such customers can be expected to consider inflight connectivity to be essential.
Rapidly Growing In-Flight Internet Markets
The International Air Transport Association (IATA) expects overall traveler numbers to reach 4.0 billion in 2024 spread across 23,000 airplanes. Only about 25% of these airplanes are equipped to offer some form of onboard connectivity, and that connectively is often marked by erratic quality, slow speeds and low broadband. Less than 25% of the world’s airline companies are providing some form of in-flight Wi-Fi services. We believe that there is a huge market potential among the many unconnected airlines.
According to the Boeing Report titled “Commercial Market Outlook 2019 – 2038”, it has been projected that by the end of 2030, two-thirds of the world’s aircraft fleet will have some form of connectivity, whether through retrofit or line fit at production stage. Currently, most connectivity upgrades are being done through aircraft modification as in-service aircraft are outfitted with new and high-speed systems. It is estimated that more than 1,000 commercial aircraft are being upgraded annually.
Whether aircraft connectivity is being carried out as a retrofit or built into the initial aircraft production line, demand for in-flight connectivity is increasing.
19
Civilian Telecommunications
As the telecommunications industry advances toward 5G Advanced and prepares for the eventual adoption of 6G standards defined by the 3rd Generation Partnership Project (3GPP), the importance of Non-Terrestrial Networks (NTN) continues to grow. These networks—leveraging satellite systems across Low Earth Orbit (LEO), Medium Earth Orbit (MEO), Geostationary Orbit (GEO), Highly Elliptical Orbit (HEO), and High-Altitude Platform Stations (HAPS)—are increasingly seen as essential to extending coverage to underserved and remote environments, including maritime, aviation, and rural regions.
The evolving geopolitical landscape, including ongoing instability in Eastern Europe and heightened global tensions, has further highlighted the strategic importance of resilient and secure communications infrastructure. Satellite communication, in particular, has become a vital element in ensuring continuity of service and national preparedness during times of disruption.
In response to these industry and geopolitical developments, we continue to prioritize the civilian telecommunications sector as a core pillar of our satellite communications strategy, alongside our focus on Aerospace and Defense. Our efforts in this sector center around three key areas: satellite-enabled mobile backhaul to support the expansion of 5G and future 6G networks; satellite-based Business Continuity Planning (BCP) to ensure service continuity during disruptions; and comprehensive network resilience solutions to safeguard connectivity across critical infrastructure. These capabilities position us to meet rising connectivity demands while enhancing the reliability and adaptability of telecommunications systems in both public and private sectors.
Mobile Backhaul via Satellite
The mobile backhaul sector is projected to grow significantly, with revenues expected to increase from $3 billion in 2023 to $25 billion by 2030, representing a compound annual growth rate (CAGR) of 17.6% (Source: NSR “Wireless Backhaul via Satellite, 15th Edition Report”). This growth is driven by the ongoing expansion of 4G and 5G networks, with an estimated 6 to 7 million 4G base stations and 3.8 million 5G base stations already deployed worldwide (Sources: GSMA, Huawei). Similarly, the network resilience sector is forecasted to experience revenue growth from $16.2 billion in 2023 to $33 billion by 2028 (Source: Mordor Intelligence: Network Resilience Market Forecast).
In the rapidly evolving civilian telecommunications landscape, mobile backhaul via satellite has become an increasingly critical component. This technology facilitates the reliable transmission of data between remote base stations and the core network, enabling uninterrupted mobile connectivity even in areas where terrestrial infrastructure is limited or unavailable. As mobile operators strive to extend network coverage and capacity—particularly in underserved or geographically challenging regions—the demand for flexible, scalable, and high-performance satellite-based backhaul solutions continues to rise.
We recognize the vital role that mobile backhaul via satellite plays in supporting next-generation mobile networks. With the global push toward 5G and the future transition to 6G, backhaul capacity and resilience are more important than ever. Our satellite communication solutions are designed to complement and enhance terrestrial infrastructure, offering mobile network operators a reliable alternative for expanding their coverage and ensuring service continuity across a wide range of environments.
In modern telecommunications infrastructure, the backhaul network is essential for delivering high-capacity connectivity between cell sites and the core network. While fiber optics and microwave links remain widely used, satellite transmission has become an increasingly critical component—not only for remote and underserved regions but also as part of strategic backbone deployments in broader network architectures.
Mobile backhaul via satellite has evolved significantly. Although historically viewed as a last resort by mobile network operators, advancements in satellite technologies—such as high-throughput satellites (HTS), low Earth orbit (LEO) constellations, and improved network orchestration—have transformed satellite connectivity into a viable, high-performance alternative. Coupled with professional managed services, today’s satellite backhaul solutions are cost-effective, scalable, and capable of supporting the rapid deployment of 4G, 5G, 5G Advanced, and IoT services across diverse geographies.
20
In addition to enabling coverage in hard-to-reach areas, satellite backhaul plays a vital role in strengthening network resilience. It serves as a reliable backup or supplementary backbone solution in cases of fiber or microwave network failures, ensuring business continuity and uninterrupted service delivery.
Looking ahead, the mobile backhaul market via satellite is bolstered by factors such as:
| ● | The increasing number of mobile devices and users |
| ● | The growing volume of mobile data traffic |
| ● | The adoption of 5G and IoT technologies, which require enhanced connectivity solutions |
| ● | The growing demand for small cell deployments to improve network coverage and capacity |
| ● | The continued advancements in satellite technologies and growing market demand |
In addition, the ongoing expansion of 5G infrastructure—coupled with the growing demand for higher-capacity mobile data transmission—is expected to further accelerate the need for satellite-enabled connectivity solutions. This is particularly true in regions where terrestrial networks are limited or economically unfeasible, and where advanced satellite technologies such as LEO, MEO, and GEO constellations, along with High-Throughput Satellites (HTS), can provide critical coverage and capacity.
This momentum reflects a broader trend within the telecommunications industry, where the demand for high-throughput, resilient, and scalable satellite connectivity solutions—driven by technological advancements and the increasing number of satellites launched over the past two years—is continuing to rise. This growth is expected to accelerate over the next two to three years. In response, we are committed to delivering integrated, end-to-end satellite-based mobile backhaul solutions that complement terrestrial infrastructure and meet the evolving needs of telecom operators and end users.
Mobile Network Operators (MNOs) are increasingly shifting their view of satellite connectivity—from a secondary backup option to a core element of their network backbone—particularly as non-terrestrial networks (NTNs) become integral to 5G Advanced and the future 6G ecosystem. Our products and solutions are designed to align with this industry evolution, effectively addressing the emerging demands of the market.
Source: GSMA IPLOOK Satellite Solution – Satellite Backhaul
21
One of the key challenges MNOs currently face is the reliance on bulky and expensive antenna systems. Our advanced glass semiconductor flat panel antennas offer a compact form factor combined with high throughput performance. These antennas are engineered to support high-volume data transmission, making them ideal for both mobile backhaul and backbone applications. Their streamlined design also enables easier installation on cell sites, providing a practical and efficient solution to a widespread issue in the telecommunications sector.
In conclusion, the mobile backhaul via satellite market presents a significant growth opportunity, underpinned by the continued global expansion of mobile networks, increased mobile data consumption, and the deployment of next-generation technologies like 5G. As a company, we are strategically positioned to leverage our satellite communications infrastructure to meet the growing demand for high-performance, scalable backhaul solutions.
NTT DoCoMo’s publication, “Research and Development for 6G Wireless,” highlights the critical importance of satellite technology in shaping the future of 6G. This strategic focus has been incorporated into both their technical roadmap and investment planning.
Source Link: https://www.docomo.ne.jp/27nglish/binary/pdf/info/media_center/event/mwc24/Research_ and_Development_for_6G_Wireless.pdf
We maintain strong collaborative relationships with strategic partners such as global telecom service providers, equipment manufacturers, and solution integrators.
22
Positioned at the forefront of the evolving 5G and 6G ecosystem, we are well-prepared to capitalize on emerging business opportunities, paving the way for a promising future and sustainable revenue growth.
Network Resilience
In today’s hyper-connected environment, network resilience has become a top priority across both public and private sectors. The increasing reliance on digital infrastructure for critical services—from defense and transportation to healthcare and finance—means that even short-lived network outages can lead to significant operational, financial, and reputational damage. Recent global events, such as the ongoing Russia–Ukraine conflict, heightened geopolitical tensions, and rising occurrences of cyber threats, have further emphasized the need for robust, fail-safe connectivity solutions that can withstand both intentional attacks and unforeseen disruptions.
As global networks evolve toward 5G, 6G, and beyond, low latency, high reliability, and uninterrupted service are no longer optional—they are foundational. Network resilience has therefore become a core design principle in next-generation connectivity architecture. This includes a shift toward decentralized models, integration of intelligent routing, and greater redundancy across communication layers.
Technologies like Software-Defined Networking (SDN) and Network Function Virtualization (NFV) remain central to enabling dynamic network management. SDN allows centralized, programmable control of network traffic for quick rerouting and mitigation during failures, while NFV facilitates rapid deployment and scaling of virtual network functions in response to real-time conditions. Together, these technologies enable networks to adapt rapidly and continue functioning under stress.
In addition, the fusion of multiple transport technologies—including fiber, high-capacity microwave, and multi-orbit satellite networks (LEO, MEO, and GEO)—enhances network redundancy and geographic reach. The strategic adoption of edge computing also plays a pivotal role by minimizing dependency on centralized infrastructure, allowing critical services to continue locally even during core network outages.
Governments and national security agencies around the world are recognizing the strategic importance of resilient networks. Increased investments are being channeled into modernizing network infrastructure, particularly in mission-critical sectors. This includes collaborative efforts with satellite operators to strengthen sovereign communication capabilities, secure backhaul, and ensure continuity of operations during emergencies or natural disasters.
As the global threat landscape evolves, network resilience is no longer simply a technical consideration—it is a critical enabler of national security, economic stability, and societal continuity.
Our Strategy
Spotlight: Utilizing Our Universal Terminal for Satellite Communications on Unmanned Platforms
We are pioneering a breakthrough in the application of satellite communication technology by installing our universal terminals on unmanned aerial, maritime, and land vehicles. Unlike traditional C-band communications, our small form factor antenna and terminal aims to deliver new capabilities and performance for unmanned operations with compelling size, weight and power.
23
Today: Challenges of Current UAV Connectivity with GEO Satellites
While unmanned platforms have revolutionized military operations with their versatility and agility, their reliance on connectivity handoffs between ground-based line-of-sight antennas, typically operating in C-band, and Geostationary Equatorial Orbit (GEO), or geosynchronous orbit (GSO), satellites present several challenges that limit their effectiveness in certain scenarios.
| ● | Line-of-Sight Limitations: One of the key reasons that satellite communications have been a critical addition to connectivity over the last two decades is to eliminate the reliance on line-of-sight (LOS) communications, not just for take-off and landing, but also for the full mission autonomy. For unmanned platforms without satellite communications, operations are restricted to areas where direct visibility to the base is maintained, limiting their flexibility and operational range as well as their operational altitude. For example, as the UAV flies further away from the base, even if it can maintain a line-of-sight communication link with the base, due to the curvature of the Earth, the UAV will gradually fly at a higher and higher altitude, resulting in limited operational capability, especially for intelligence, surveillance and reconnaissance (ISR) missions where the UAV may need to fly close to the ground for its cameras and sensors to provide intelligence with sufficient resolution to be informative, usable or actionable. For land or maritime platforms, the issue is compounded because the platform is by nature on the surface of the land or sea, and has to overcome unanticipated movement due to the sea or restrictions from overhead canopies or LOS limitations caused by terrain features. |
| ● | High-Latency Limitations: One of the weaknesses of unmanned platform connectivity over GEO/GSO satellites is the significant latency, estimated at approximately 600 milliseconds, which is too long for example to remotely control a UAV during critical mission phases, such as take-off and landing, evasive maneuvers and, in some cases, very low altitude flight. Although certain unmanned platforms include software features for automatic take-off and automatic landing, most unmanned platforms still rely on line-of-sight antennas for takeoff and landing operations, which pose additional vulnerabilities related to dependency on the ground infrastructure, noted below. The high-latency of the link over GEO/GSO satellites delivers senor data and camera data with approximately a half second of delay, which similarly delays responsiveness to rapidly unfolding situations in the field. In critical moments, such a delay can lead to a loss of the mission or a failure of mission objectives. |
| ● | Dependency on Ground Infrastructure and Ground Crew: The persistent dependency on line-of-sight antennas can require significant numbers of forward-deployed personnel to handle the take-off and landing operations on site, and this can place more personnel in the literal line of fire. Similarly, if the line-of-sight antennas are damaged, destroyed or jammed, all unmanned platforms airborne at that time that require line-of-sight communications to land are likely to be lost. This introduces a single-point-of-failure on the ground infrastructure making the UAV base a high-value target, which puts the ground crew personnel at high risk. |
24
| ● | Vulnerability to Jamming: In scenarios where the gateway station communicating to the GEO/GSO satellite is disrupted by on-orbit jammers or the GEO/GSO satellite itself is disabled by terrestrial jammers, the unmanned platform may lose its communication link and be rendered unable to perform its mission effectively. Because a GEO/GSO satellite is geo-stationary by design, it becomes a relatively easy target for terrestrial jamming. This dependency on GEO/GSO satellites introduces multiple single points-of-failure and compromises the reliability and resilience of unmanned platform operations. |
| ● | Mission Disruption: The loss of communication link between the unmanned platform and the GEO/GSO satellite not only halts ongoing missions but also jeopardizes the safety and security of the platform and its payload. Without real-time communication capabilities, the platform may be unable to receive commands or transmit critical data leading to mission failure and potential loss of assets. |
While unmanned platforms have brough compelling capabilities to militaries and governments over the last two decades, in the last two years with the conflict involving Ukraine, the urgent need for the capabilities of unmanned platforms to continue to evolve has become evident.
Aerkomm’s Solution: “Multi-Path ^6” (domain, orbit, beam, carrier, frequency, satellite)
We aim to offer unparalleled flexibility to defend unmanned platforms by enabling communication across six dimensions: domain, orbit, beam, carrier, frequency, and satellite. This innovative approach aims to allow users to establish multiple communication paths simultaneously, enhancing redundancy, resilience, and adaptability in dynamic operational environments, while also offering complementary functionality such as jamming.
| ● | Enhanced Connectivity: Our universal terminal for defense aim to enable unmanned platforms to establish communication links with non-geosynchronous satellite constellations (NGSO), such as those operating in LEO or MEO, which are less susceptible to jamming due to their proliferation in the sky. We aim to use this groundbreaking feature to allow for remote control of seamless takeoff and landing operations of UAVs over NGSO satellites, which have significantly lower latency than GEO/GSO satellites, thus eliminating the limitations imposed by traditional line-of-sight communication methods, overcoming the high latency issues of GEO/GSO satellites and reducing the need for forward deployed staff. |
25
| ● | Resilient Communication: In the face of adversary actions such as satellite jamming, our technology aims to ensure mission continuity and resilience through multi-beam and multi-orbit connectivity. By connecting to different friendly satellites simultaneously, our antennas aim to provide redundancy and alternate communication paths, enabling unmanned platforms to maintain operational effectiveness even in challenging environments. |
| ● | Mission Continuity: With our universal terminal for defense onboard, unmanned platforms could seamlessly transition between different satellite orbits, such as GEO, MEO and LEO, or between different satellites in the same orbit or constellation, in the event of satellite jamming or disruption. This design aims to ensure uninterrupted mission execution and real-time data transmission, enhancing situational awareness and operational flexibility. |
| ● | Secure Communication: Leveraging advanced features such as Low Probability of Intercept (LPI) and Low Probability of Detection (LPD), our multi-beam antennas aim to keep unmanned platforms and other manned platforms such as, ships, airplanes, and ground command centers securely connected. Our approach aims to ensure that critical communication remains confidential and protected from hostile interference, enhancing overall mission security and effectiveness. |
| ● | Jamming Capabilities: As an additional feature, we aim to enable one or more of the multiple beams of our universal terminal for defense to be used in a jamming mode to disrupt adversary communications or operations. Due to the high transmit power capability that we aim to deliver with our multi-orbit system design, our antennas aim to provide sufficient signal strength to disrupt or impair adversary communications and operations across domains: satellites in all orbits and airborne, maritime and land-based manned and unmanned platforms. For example, our approach aims to make our antennas capable to disrupt the guidance navigation and control systems of adversary manned and unmanned platforms, potentially providing a nimble and cost-effective approach to handling inbound ballistic and drone-based projectiles to complement traditional missile defense systems in the future. |
Our universal terminal for defense aims to drive a paradigm shift in unmanned platform satellite communication, offering unparalleled connectivity, resilience, and security for mission-critical operations. With our innovative solution, unmanned platform operators can confidently navigate complex operational environments, ensuring continuous communication and mission success.
With our extensive experience in satellite communication technology, we are uniquely positioned to serve as a systems integrator for defense payloads. By leveraging our hardware and software platforms, we have the capability to seamlessly integrate onboard sensor payloads and other mission-specific equipment, ensuring interoperability, compatibility, and performance optimization in complex operational environments.
Our Solutions and Business Models
Defense & Aerospace
Our Defense Connectivity Solutions
Our universal terminal for defense aims to drive a paradigm shift in unmanned platform satellite communication, offering unparalleled connectivity, resilience, and security for mission-critical operations. With our innovative solution, unmanned platform operators can confidently navigate complex operational environments, ensuring continuous communication and mission success.
With our extensive experience in satellite communication technology, we are uniquely positioned to serve as a systems integrator for defense payloads. By leveraging our hardware and software platforms, we have the capability to seamlessly integrate onboard sensor payloads and other mission-specific equipment, ensuring interoperability, compatibility, and performance optimization in complex operational environments.
We are currently developing three solutions which can be offered to the defense market.
26
1. Universal Terminal for Defense: Our universal terminals for defense aim to deliver a full satellite connectivity solution to both ISR and CCA UAVs. The universal terminal for defense UAVs, may contain antennas for transmission and receiving in one or more of the key frequency bands for high-throughput satellite connectivity for defense, principally Ka and Ku, which are used by satellites in GEO, MEO and in LEO orbits.
The building blocks of our multi-orbit universal terminals are modular tiles. We can implement terminals of different sizes and capacity without material additional engineering, by combining more or fewer tiles based on the requirements of the mission or the program. While we aim to deliver a universal terminal for defense UAVs using only our proprietary technologies in the medium term, in order to meet customer timelines, we may also source and integrated partner technologies in the short term. The requirements for defense programs and missions may differ from the requirements for commercial products. Our universal terminals for defense UAVs may not be required to comply with ARINC 791 and 781 standards of Aeronautical Radio, Incorporated (ARINC), but will meet the necessary design approvals of our customers and their programs. We aim to also be able to deliver universal terminals for unmanned systems across domains of air, land, and sea, but our initial focus is on airborne platforms.
2. Satellite Communications for Terrestrial and Maritime Installations: Our customers in the defense sector may require comprehensive communications solutions across domains of land, air and sea. We aim to provide end-to-end solutions for our customers, which means that we may be required to deliver satellite communications solutions for both stationary and mobile ground-based installations, such as control cars and command posts, as well as maritime based installations.
The satellite communications for terrestrial and maritime installations may contain antennas for transmission and receiving in one or more of the key frequency bands for high-throughput satellite connectivity for defense, principally Ka and Ku, which are used by satellites in GEO, MEO and in LEO orbits. We aim to deliver universal terminals using only our proprietary technologies in the medium term across all domains of land, air and sea, in order to meet customer timelines. Given that ground-based and sea-based installations typically have lesser requirements for size, weight and power, we may also source and integrated partner technologies in the short term.
Requirements for defense programs and missions may be materially similar to requirements for commercial products, therefore our satellite communications for terrestrial and maritime installations may leverage dual-use technologies that are already certified for commercial use.
3. Systems Integration for Defense Platforms: Our multi-orbit universal terminals provide communications solution that we expect to be critical to the operations of both ISR and CCA-type missions. Our satellite communications systems will therefore typically need to be integrated with onboard sensor payloads, and other payloads required by certain customer missions, as well as guidance, navigation and controls (GNC) systems.
We expect that we may have the opportunity to expand our services beyond providing the communications solution to serving as an end-to-end systems integrator for the payloads that we are already connecting to through our hardware and our software. At this time, we do not expect to have the opportunity to serve as a system integrator for platforms that do not already include or require our communication systems and our value-added resale of satellite bandwidth, but we will remain open to requests from our present and future customers and partners to fill such role.
Defense Connectivity Solutions market.
1. Communications for Manned and Unmanned Systems
Within the defense segment, our main source of revenue is expected to be derived from contracts with militaries, governments and defense contractors for both the sale of our systems—the universal terminal for defense—as well as subscription-based plans for the bandwidth connectivity from our selected satellite operator partners.
We aim to achieve this with both retrofit solutions on manned and unmanned defense platforms already in operation being maintained by militaries and governments, as well as line-fit solutions for new manned and unmanned systems being assembled at the different defense contractors’ facilities prior to delivery to the respective militaries.
27
We already have an agreement in place with our first classified defense development partner and customer to develop a first-of-its-kind satellite communications architecture for unmanned aerial vehicles (UAVs) engaged in classified ISR missions.
We are in advanced discussion with this development partner and customer to expand the engagement based on successful technology demonstrations in 2023 and 2024. We are also directly engaged with several additional potential partners developing unmanned platforms for ISR and CCA-type missions regarding implementing our connectivity solutions as part of their programs. We cannot give any assurance at this time, however, that we will be able to successfully complete any of these additional discussions.
2. Terrestrial and Maritime Installations
To capitalize on the increasing demand for satellite communications for terrestrial and maritime installations for militaries and governments, we will aim to sell or to integrate end-to-end satellite communications systems to militaries, governments and defense contractors. In addition to selling integrated end-to-end satellite communications systems, we will also aim to sell to these military and government customers the bandwidth required for the operation of our services, priced on a subscription plan basis.
In some cases, we expect that the terrestrial and maritime installations may be components of a wholistic end-to-end satellite communications solution, but in other cases we expect that militaries and government customers may contract for standalone terrestrial or maritime solutions, such as to provide connectivity to individual ships or command posts.
We already have an agreement in place with our first classified defense development partner and customer for maritime and terrestrial installations as part of our end-to-end solution to support the classified ISR missions mentioned above. We also already are in discussions for standalone terrestrial customers. We cannot give any assurance at this time, however, that we will be able to successfully complete any of these additional discussions.
3. Systems Integrator for Manned and Unmanned Platforms
Within the defense segment, as an additional service to the customers interested in installing our satellite communications solutions on their manned and unmanned platforms, we are also able to support integration with onboard sensor payloads, and other payloads required by certain customer missions, as well as guidance, navigation and controls (GNC) systems, which we are already connecting to through our hardware and our software.
We already have an agreement in place with our first classified defense development partner and customer for a certain level of systems integrator support for the UAV engaged in the classified ISR missions mentioned above.
We also already are in discussions for an agreement with another systems integration partner expressing interest in our universal terminal for defense as well as our wrap-around services for system integration with other payloads. We cannot give any assurance at this time, however, that we will be able to successfully complete any of these additional discussions.
Our Defense Business Solutions
We can provide different business solutions to defense contractors, militaries and governments:
1. Retrofit solution for Militaries, Governments and Defense Contractors
Militaries, governments and defense contractors having an existing fleet manned and unmanned platforms already operating in service will require a retrofit solution. For those defense customers who already have manned and unmanned systems in operation with no multi-orbit satellite communications system installed, we aim to offer a retrofit solution, which could be used in addition to or in place of an existing satellite communications system, if any. In most situations, we expect that the fleet owner would be responsible for installing our systems under our supervision, as well as uninstalling any systems they may want to remove. The fleet owner would also be required to purchase the necessary satellite bandwidth from us to provide connectivity to its fleet.
28
2. Line Fit solution for Defense Contractors
Defense contractors manufacturing manned and unmanned platforms to which they want to add our multi-orbit universal terminals will require a line-fit solution. In most situations, we expect the installation would be done by the manufacturer of the manned or unmanned platforms in production and certified with the platform, so our systems would be delivered to the manufacturer upon request of the defense contractors or of the militaries and governments that are purchasing the platforms.
3. Systems Integrator for Militaries, Governments and Defense Contractors
Our customers, militaries and governments, may require custom, proprietary or classified system level integrations on the manned and unmanned platforms onto which they want our communications solutions to be installed, and may request that we provide wrap-around system integrator services to perform such installations and integrations. Similarly, some of our defense contractors partners may, from time to time, require additional system integrator support from our team due to the complex design of contemporary manned and unmanned systems. In some situations, we expect the installation of third-party payloads onto the manned and unmanned systems may still be done by the manufacturer of the manned or unmanned platforms in production, but with close supervision by and certification by our team.
Commercial Aviation Connectivity and Entertainment Solutions
We have been developing two systems which can be offered to the aviation market.
1. Universal Terminal for Aviation: Our universal terminals aim to deliver a full internet connectivity solution to both commercial airlines and private business jet operators. The universal terminal for aviation, which we also refer to as the Aerkomm K++ System, will contain antennas for transmission and receiving in the key frequency bands for high-throughput commercial satellite connectivity, called Ka and Ku, which are used by satellites in GEO, MEO and in LEO orbits. While we aim to deliver a universal terminal for aviation using only our proprietary technologies in the medium term, in order to meet customer timelines, we may also source an integrated partner technologies in the short term. All of our universal terminals for aviation will comply with ARINC 791 and 781 standards of Aeronautical Radio, Incorporated (ARINC), meeting the necessary design approvals.
2. Distributed Content System for Airlines: We have developed an intranet-based wireless connectivity solution, which we can also offer to both commercial airlines and to private business jet operators. Our distributed content system for airlines, which we also refer to as the Aerkomm AirCinema Cube, will provide passengers access to media content, including movies, videos, music, news feeds, video games, advertising and promotions. It will stream content from an onboard server to existing screens in stalled in the cabin or seats, and/or to passenger mobile devices.
Commercial Aviation Connectivity and Entertainment market business models.
1. Commercial Airlines
Within the commercial aviation segment, our main source of revenue is expected to be derived from contracts with commercial airlines for both the sale of our systems—both the universal terminal as well as the distributed content system—as well as subscription-based plans for the bandwidth connectivity from our selected satellite operator partners. We aim to achieve this with both retrofit solutions on commercial aircraft already in operation by airline customers, as well as line-fit solutions for new aircraft being assembled at the different aircraft manufacturers’ facilities prior to delivery to the respective aircraft lessors and airline customers.
We already have a definitive agreement in place with our first commercial airline customer, Hong Kong Airlines (discussed below). We are in advanced discussion with several additional potential customers directly through our corporate network. We cannot give any assurance at this time, however, that we will be able to successfully complete any of these additional discussions.
We aim to complete our universal terminal for aviation system approval by Airbus and receiving the applicable airworthiness certifications, namely the European Union Aviation Safety Agency (EASA) and the US Federal Aviation Administration (FAA), by the last quarter of 2025. We will then be able to begin providing our universal terminal for aviation systems for installation on commercial airline aircraft.
29
2. Corporate Jet Customers
To capitalize on the private business aviation market, we will aim to sell our systems to corporate jet owners through the Airbus Corporate Jets (ACJ) and Boeing Business Jets (BBJ) programs. In addition to selling our systems, we will also aim to sell to these corporate jet aircraft owners the bandwidth required for the operation of our services, priced on a subscription plan basis.
We already have an agreement in place with our first corporate jet and launch customer, MJet GMBH (discussed below), and we have had advanced discussions with several additional potential customers both directly through our corporate network and through Airbus. We cannot give any assurance at this time, however, that we will be able to successfully complete any of these additional discussions. Sales of our universal terminal for aviation system to the corporate jet market will also require the EASA and FAA certification, which we expect to complete by the last quarter of 2025, as mentioned above.
3. Electric vertical take-off and landing (eVTOL) aircraft
To the extent that eVTOL aircraft become a real product, we aim to be in a position to sell our solutions to those companies and platforms as well.
Commercial Aviation Business Solutions
We can provide different business solutions to airline customers and business jet operators, all of which generate revenue.
Retrofit solution for Airlines
We aim to offer a retrofit solution to potential commercial airline customers having an existing fleet with aircraft in operation having no satellite communications installed. In most situations, we expect that the fleet owner would be responsible for installing our systems, under our supervision, as well as uninstalling any systems they may want to remove. The fleet owner would also be required to purchase the necessary satellite bandwidth from us to provide connectivity to its fleet.
Line Fit solution for Airlines
We also aim to offer our multi-orbit universal terminals as a line-fit solution. Under this situation, the installation would be done by the manufacturer of the commercial aircraft and certified with the aircraft, so our systems would be delivered to the manufacturer upon request of the aircraft manufacturer or its customers, either commercial airlines or aircraft lessors, that are purchasing the platforms. The fleet owner would also be required to purchase the necessary satellite bandwidth from us to provide connectivity on its fleet.
Our Contracts with Commercial Aviation Partners
Airbus SAS -- On November 30, 2018, we entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus aims to develop and certify a complete retrofit solution allowing the installation of our “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models.
We expect to expand our agreement with Airbus to include other Airbus models including the Airbus A330, A340, A350 and A380 series. Airbus would then apply for and obtain on our behalf a Supplemental Type Certificate (STC) from the European Aviation Safety Agency, or EASA, as well as from the U.S. Federal Aviation Administration or FAA, for our retrofit universal terminal for aviation, or AERKOMM K++ system.
30
Airbus agreed to provide us with the retrofit solution, including the Service Bulletin and the material kits including the update of technical and operating manuals pertaining to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit solution, including the certification, is expected to be in the fourth quarter of 2025, although there is no guarantee that the project will be successfully completed in the projected timeframe.
Multiple airlines, and in particular aircraft lessors, will accept only Service Bulletins issued by the aircraft manufacturers for the retrofit installation of any system on board their aircraft. Our agreement with Airbus aims to ensure that our system will meet this requirement for aircraft lessors who intend to purchase Airbus aircraft, although it does not guarantee that airlines or aircraft lessors will purchase our AERKOMM K++ system.
Airbus Interior Services -- On July 24, 2020, our wholly owned subsidiary, Aerkomm Malta, entered into an agreement with Airbus Interior Services, a wholly owned subsidiary of Airbus as a follow-on to the agreement that Aerkomm signed with Airbus on November 30, 2018. Airbus agreed to develop, install and certify the Aerkomm K++ System on a prototype A320 aircraft to EASA and FAA certification standards, and Airbus Interior Services agreed to provide current cabin upgrade solutions for Airbus aircraft operators while bringing additional flexibility and reduced lead times to the cabin upgrade process.
under this agreement, Airbus Interior Services will provide and certify, via the Airbus Design Organization Approval process, a complete retrofit solution to develop EASA/FAA certified Service Bulletins, to supply related Aircraft Modification Kits and to install the Aerkomm K++ Connectivity solution on the A320 family of commercial aircraft. This agreement also includes Airbus support for the integration of the Aerkomm K++ System components on the aircraft including ARINC 791 structural reinforcements and related engineering work.
Airbus Interior Services will provide support for the European National Airworthiness Authorities (NAA) certification as required in addition to EASA certification. Airbus Interior Services will also provide on-site technical support at the Maintenance Repair Organization (MRO) base for the first aircraft retrofit of each new customer.
We plan to install the Airbus Interior Services-created Service Bulletin and Airbus kits for the AERKOMM K++ retrofit solution first on the Hong Kong Airlines fleet of 12 Airbus A320 aircraft, following our certification approval. With this installation, Hong Kong Airlines should become Aerkomm’s first commercial airline customer.
Hong Kong Airlines -- In June 2015, we entered into a master agreement with Hong Kong Airlines Limited, or Hong Kong Airlines, to install IFEC systems on-board their aircraft. On January 30, 2020, further to the master agreement with Hong Kong Airlines, we signed an agreement with Hong Kong Airlines to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ solutions.
We aim to provide our universal terminal for aviation, or AERKOMM K++ system, for installation on Hong Kong Airlines’ fleet of 12 Airbus A320 and 5 Airbus A330-300 aircraft as well as our AERKOMM AirCinema system for the Hong Kong Airlines Airbus A320 aircraft. Hong Kong Airlines aims to become our first commercial airliner launch customer.
On November 17, 2021, we signed a new agreement with Hong Kong Airlines Ltd and Ejectt Inc. (formerly known as Yuanjiu Inc.). Based on the long-term relationship and anticipated further co-operation between Aerkomm and Hong Kong Airlines, we agreed to aim to provide to Hong Kong Airlines a LEO-compatible universal for aviation with LEO constellation service when available. We will aim to deliver our universal terminal for aviation with a full certified Service Bulletin by Airbus.
Our universal terminal for aviation aims to introduce high-speed internet access to the seatback screens of Hong Kong Airlines’ Airbus A320 aircraft, connected via the distributed content system for airlines. Instead of the traditionally preloaded and fixed selection of in-flight entertainment, passengers would have access to high-speed internet steaming services for videos, music and social media.
In order to install the AERKOMM K++ system on the Hong Kong Airlines aircraft, we will have to obtain local approval for the AERKOMM K++ system from the Hong Kong Civil Aviation (HKCAD). This HKCAD local approval will be based on our obtaining the Airbus Service Bulletin, which we expect to receive from Airbus, together with EASA certification, by some time in 2026. Once we receive the Airbus Service Bulletin and the EASA certification, jointly with the support of Airbus, we will be able to apply to the HKCAD for the required local approval.
31
Other Airline Partners and Business Jet Prospective Customers -- We are actively working with prospective airline customers to provide them with the universal terminal for aviation, or our AERKOMM K++ system. In connection with the Airbus project, we have also identified the owners of Airbus Corporate Jet, or ACJ, as potential customers of our AERKOMM K++ system. To capitalize on this additional market, we plan to sell our AERKOMM K++ system hardware for installation on ACJ corporate jets and provide connectivity through subscription-based plans. This new corporate jet market could generate additional revenue and income for our company. As discussed below, we have entered into an agreement with Mjet GMBH, an Airbus ACJ customer.
While, to date, we have been concentrating on Airbus customers in view of our existing agreement with Airbus, our current plan is to also begin marketing to Boeing aircraft customers and Boeing Business Jets (BBJ) customers, and we intend to acquire the necessary certification of our AERKOMM K++ system equipment for the different Boeing aircraft models, with a particular focus on the Boeing B737 aircraft family.
We aim to enter into business agreements with additional airline partners and corporate jet owners, which would allow our universal terminals for aviation to be installed together with our bandwidth services provided, on additional fleet aircraft. Under any such agreements, we expect that the airlines will commit to have our equipment installed on some or all the aircraft they operate. We cannot guarantee that we will be able to enter into any such additional agreements.
Other Agreements and Understandings with our Business Partners
Mjet Definitive Agreement: On March 6, 2019, we signed a General Terms Agreement (GTA) with Mjet GMBH, or Mjet, a corporate jet owner operating an Airbus ACJ A319 based in Vienna, Austria. On June 11, 2019, we converted this GTA into a definitive agreement with Mjet, and on June 12, 2019, Mjet placed a first purchase order with Aerkomm. The purchase order, which remains valid, provides for the provision, installation, testing and certification of our AERKOMM K++ system equipment, including the Airbus Service Bulletin and associated material kit and related connectivity services, on an Mjet Airbus ACJ A319 aircraft under the supervision of Airbus. Assuming the installation, testing and certification of our AERKOMM K++ system on the Mjet A319 (which is expected by sometime in 2026) is successful, something we cannot guarantee at this time, Mjet will pay us a one-time fee for our equipment and a monthly fee for our connectivity services, and we will also aim to begin charging Mjet for the bandwidth required to use the AERKOMM K++ system services. Assuming the success of this installation, Mjet will likely become the first recurring payment customer of our AERKOMM K++ system as well as being the launch customer of our Aerkomm K++ solution. We cannot assure you, however, we will be able to deliver on the agreement with Mjet, or that the Mjet GTA will lead to any Aerkomm product sales.
Contracts with Satellite Partners
SES Agreement -- Aerkomm and New Skies Satellites B.V. (“SES”), a Dutch company that operates a constellation of satellites in medium-earth orbit (MEO) and geostationary-earth orbit (GEO), entered into a master services agreement dated January 19, 2022 and under such agreement has entered into multiple service orders pursuant to which SES has provided the Company terminal equipment and satellite connectivity and other related services.
Aerkomm and SES also entered into a non-binding cooperation agreement dated January 10, 2022 (at Exhibit 10.77) in which the parties confirmed their intent to explore opportunities to collaborate with respect to technical and commercial matters making use of their combined service offerings. We aim to expand its technical and commercial collaboration with SES in the future. We cannot assure you, however, we will be able to enter into additional material definitive agreements with SES, or that our relationship with SES will lead to any Aerkomm product sales
32
Civilian Telecommunications Solutions
We are actively developing and offering two core solutions to serve the civilian telecommunications market:
| 1. | Universal Terminal for Network Resiliency |
Our universal terminal for network resiliency is designed to provide mobile backhaul satellite connectivity to support both 4G LTE and 5G networks. This terminal can be deployed either as a backup system or as a primary solution, depending on the customer’s network architecture and reliability requirements.
These terminals may incorporate antennas capable of transmitting and receiving in one or more of the key frequency bands—primarily Ka and Ku—commonly used for high-throughput satellite communications. These bands are supported across multiple orbital regimes, including geostationary (GEO), medium Earth orbit (MEO), and low Earth orbit (LEO) satellites.
While our long-term objective is to deliver fully proprietary universal terminals, in the short term we may integrate third-party technologies to accelerate deployment and meet urgent customer requirements.
Given the nature of satellite communication systems, our universal terminals for network resiliency are typically subject to earth station licensing requirements. These may include regulatory approvals from the U.S. Federal Communications Commission (FCC), the International Telecommunication Union (ITU), and other national or regional telecommunications authorities. Compliance with type approvals and certifications for both electronic and radiofrequency components will also be required. Depending on the market and customer arrangement, we may pursue such licensing directly or in partnership with local stakeholders.
| 2. | Universal Terminal for Non-Terrestrial Networks (NTN) |
Our universal terminal for non-terrestrial networks (NTN) is intended to serve as a high-throughput mobile backhaul solution for next-generation 5G Advanced and future 6G networks. These NTN terminals are generally deployed as a primary solution, forming the satellite-based communications backbone of emerging mobile infrastructures.
Like our resiliency terminals, the NTN terminal will support Ka and Ku bands and will be compatible with GEO, MEO, and LEO satellite constellations. However, the distinguishing feature of our NTN offering lies in its higher throughput capability—driven by the performance of our proprietary glass semiconductor antennas and our software-defined modem technologies.
We intend to fully utilize proprietary technology in the medium term. However, due to less stringent requirements for size, weight, and power in NTN applications compared to defense use cases, we may integrate third-party components in the near term to accelerate market entry.
We anticipate that the regulatory framework for NTN deployments will mirror that of our network resiliency terminals, requiring similar licensing and certification procedures across different jurisdictions.
Civilian Telecommunications Solutions market business models
Our civilian telecommunications strategy is structured around multiple revenue models to meet diverse market demands and optimize scalability. These include: (1) hardware leasing combined with value-added reseller services, (2) hardware sales with bundled bandwidth offerings, and (3) revenue-sharing arrangements with satellite operators.
| 1. | Hardware Leasing Combined with Value-Added Reseller Services |
In the civilian telecommunications market, our primary long-term revenue objective is to engage with mobile network operators and equipment vendors through a hybrid model involving the leasing of our proprietary systems—namely, the Universal Terminal for Network Resilience and the Universal Terminal for Non-Terrestrial Networks (NTN)—in combination with subscription-based satellite bandwidth plans. Under this model, we serve as a distribution partner for select satellite operators, allowing us to offer a complete and integrated connectivity solution.
This approach supports consistent recurring revenue streams and positions us to deliver the most up-to-date technology enhancements to our customers. To support the capital requirements associated with hardware leasing, we are actively pursuing partnerships with leasing firms or asset-based financing providers. As of August 9, 2023, we secured a key milestone in this direction by winning the first phase of the Taiwan Telecom Technology Center’s (TTC) verification project, titled “Emerging Technology Application for Enhancing Communication Network Resilience in Emergencies or War.” This project is designed to validate the effectiveness of our proposed heterogeneous resilient network architecture.
33
We are continuing commercial discussions with mobile network operators and ecosystem vendors to secure our first revenue-generating contracts under this model. Concurrently, we are progressing in our negotiations with financial partners to structure appropriate working capital support. While we remain optimistic, there is no assurance at this time that these discussions will result in finalized agreements.
| 2. | Hardware Sales with Value-Added Reseller of Bandwidth Services |
In the near term, to manage working capital more efficiently, we may prioritize direct hardware sales in place of leasing. Under this structure, our revenue would be derived from the sale of our Universal Terminals—both for network resilience and NTN—along with subscription-based bandwidth services from our satellite operator partners, where we act as a value-added reseller.
Although this model does not provide the same level of recurring revenue as leasing, it offers a more immediate path to market entry without requiring significant upfront capital. Until suitable financing arrangements are secured, we anticipate that this model will be our primary operating structure. As with the leasing model, we continue to engage in active discussions with potential customers but cannot guarantee the successful completion of these negotiations.
| 3. | Revenue Sharing on Bundled Connectivity Solutions |
To further enhance flexibility and competitiveness, we also plan to engage in revenue-sharing agreements with selected satellite operators. In this model, mobile network operators may procure bundled solutions that include both hardware and connectivity under a single service plan. In some scenarios, the billing entity may be Aerkomm—particularly when delivering multi-orbit, multi-carrier solutions—while in others, the satellite operator may serve as the primary service provider.
In either case, revenue generated from these bundled services will be shared between Aerkomm and the respective satellite operator. The compact size, low power consumption, and high performance of our Universal Terminals make satellite communications viable in locations that were previously impractical or uneconomical. By enabling net-new deployments, especially in remote or underserved areas, we expect to earn a proportional share of the revenue generated at these newly accessible sites.
While early-stage discussions are underway with both customers and satellite partners under this model, we cannot provide assurance at this time that these will result in signed contracts or revenue realization.
Our Contracts with Civilian Telecommunications Partners
We operate as a satellite telecommunications provider in Japan and Taiwan, offering both systems integration and value-added services. This dual-role model allows us to deliver tailored satellite connectivity solutions and extend our presence in strategically important civilian telecommunications markets. Our experience in service design and deployment within these regions has created a replicable framework that supports future geographic expansion, enabled by existing relationships with satellite operators and the development of new strategic partnerships.
In Taiwan, our subsidiary, Aerkomm Taiwan Inc., in cooperation with its exclusive local agent EJECTT Inc. (Ejectt), was awarded the initial phase of a government-backed verification project titled “Emerging Technology Application for Enhancing Communication Network Resilience in Emergencies or War” by the Taiwan Telecom Technology Center (TTC) on August 9, 2023. Our proposed solution, submitted under the project name “Asynchronous Satellite Network Leasing and Transmission Service Procurement Project,” is focused on demonstrating the effectiveness of a heterogeneous resilient network architecture aimed at improving communication robustness during crises.
34
Further strengthening our market presence in Asia, we entered into a Distribution Partner Agreement (DPA) with Eutelsat OneWeb Group in September 2024. This agreement authorizes our subsidiary, AERKOMM Japan, to distribute OneWeb’s Low Earth Orbit (LEO) satellite connectivity services in Japan’s commercial fixed and land mobile markets, as well as in Taiwan’s land mobile sector. The DPA enhances our service offerings with next-generation LEO capabilities and represents a significant commercial milestone. It positions us for long-term revenue growth and further validates our credibility as a key regional player in satellite communications.
Acquisitions and Dispositions
In our fiscal year 2023, we announced the acquisition of Mesh Tech, a developer of distributed computing solutions. This acquisition enhanced our software capabilities and distributed computing portfolio for both the Aerospace & Defense and Civilian Telecommunications segments, which we expect to drive both customer acquisition and retention in the future. We aim to continue to evaluate opportunities to advance our strategy and to better serve our customers and our partners through both acquisitions and dispositions in the future.
Research & Development (R&D)
The industries in which we compete are subject to rapid technological developments, evolving standards, changes in customer requirements and continuing developments in the communications and networking environment. Our continuing ability to adapt to these changes, and to develop innovative satellite and communications technologies, and new and enhanced products and services, is a significant factor in maintaining or improving our competitive position and our prospects for growth. We continue to make significant investments in next-generation technologies and communications product and services development. We conduct the majority of our R&D activities in-house and have R&D and engineering staff. Focused, efficient investments in research and development are important to our future growth and competitive position in the marketplace. Our product development activities focus on products that we consider viable revenue opportunities to support all of our segments. Our research and development efforts are directly related to timely development of new and enhanced services and related products that are central to our core business strategy and our ability to drive profitable and sustainable growth.
The industries in which we compete are subject to rapid technological developments, evolving industry standards, changes in customer requirements, and new service and product introductions and enhancements. As a result, our success depends in part upon our ability, on a cost-effective and timely basis, to continue to enhance our existing services and to develop and introduce new products and services that improve performance and meet customers’ operational and cost requirements. Our current research and development activities relate to antennas, modems, distributed computing, and multi-orbit service development, enhancing our universal terminal product lines with new features desired by our customers, and integrating available geostationary orbit (GSO) and emerging non-geostationary satellite orbit (NGSO) products and services into our overall satellite communications offering.
Intellectual Property Rights
We currently hold intellectual property rights relating to various aspects of our hardware products, software and services. We believe that our ability to compete effectively depends in part on our ability to protect these intellectual property rights and our proprietary information. We rely primarily on copyright and trade secret laws, as well as trademarks, service marks and trade dress, to protect our valuable products and services. We use confidentiality undertakings and licensing arrangements to protect our intellectual property rights worldwide. In the future, when appropriate, we may seek to file patent applications to protect innovations arising from our research, development and design activities.
Manufacturing Operations
We outsource our manufacturing operations to well-known contract manufacturers located primarily in Taiwan and Japan, and we aim to engage manufacturing partners in North America, in the future. We rely on third party foundries or companies that use third party foundries for manufacture of our semiconductor devices that are Application Specific Integrated Circuits (“ASICs”). These foundries are located primarily in Taiwan. We also outsource printed circuit board production and amorphous silicon or glass substrate semiconductor thin-film-transistor (TFT) manufacturing.
35
Outsourcing our operations to manufacturers and foundries allows us to reduce our fixed costs, maintain production flexibility. Our proprietary products are manufactured to our designs with standard and custom components. Most of the components are available from multiple sources. We have several single-sourced supplier relationships, either because alternative sources are not yet available or because the relationship is advantageous to us.
Our manufacturing operations are dependent on relationships with these suppliers who are subject to occasional supply chain disruptions. As is the case across the industry, if key suppliers fail to provide timely and reliable supply of components, we could experience manufacturing delays that could adversely affect our consolidated results of operations in a material way. In an effort to mitigate supply chain exposure, we have increased our inventory over historical levels and will monitor whether adjustments to inventory levels are necessary to mitigate any future exposures. Further, a range of conditions and circumstances beyond our control such as global conflicts, recessionary economic conditions in various regions of the world or a recurrence of the Covid-19 pandemic could disrupt the availability of raw materials and components as well as our capacity to make and distribute our products.
Raw Materials, Components and Services
We purchase raw materials and most of the components used in our manufacturing processes, such as printed circuit boards, injection-molded plastic parts, machined metal components, connectors and housings. In addition, we purchase third party services, predominantly networking and mobile broadband services, to support the delivery of our solutions. The materials, molds and dies, subassemblies and components purchased from other manufacturers, and other materials and supplies used in our manufacturing processes are generally available from multiple sources. We believe there is a sufficient number of acceptable vendors for the components we purchase. We regularly evaluate both domestic and foreign suppliers for quality, dependability and cost effectiveness. From time to time, the cost and availability of materials and services is affected by the demands of other industries, as well as other factors.
Whenever practical, we seek to establish multiple sources for the purchase of raw materials, components and services to achieve competitive pricing, maintain flexibility, reduce tariff exposure, and protect against supply disruption. When possible, we employ a company-wide procurement strategy designed to reduce the purchase price of materials, purchased components and services. For reasons of quality assurance, scarcity or cost effectiveness, certain components and raw materials used in the manufacturing of our products, as well as certain services utilized in the delivery of our solutions, are available only from a limited number of suppliers or from a sole source supplier. We work with our suppliers to develop contingency plans and redundancy intended to ensure continuity of supply while maintaining high quality and reliability. In some cases, we established long-term supply contracts with our suppliers.
Due to the scarcity or market volatility of certain raw materials, purchased components and services, we may not be able to quickly re-establish additional or replacement sources for certain components, materials or services. In the event that we are unable to obtain sufficient quantities of raw materials or components, or unable to obtain sufficient access to the services needed to deliver our solutions on commercially reasonable terms or in a timely manner, our ability to manufacture and deliver our products and services on a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations. We also experienced increased raw material costs. We are continuing to monitor global developments, including the impact of inflation, and are prepared to implement actions that we determine to be necessary to sustain our business.
Competition
We operate in the rapidly evolving communications technology industry, where innovation, regulatory developments, and emerging customer needs continually shape the competitive landscape. As of 2024, the market for multi-orbit satellite connectivity—encompassing Low Earth Orbit (LEO), Medium Earth Orbit (MEO), and Geostationary Orbit (GEO)—continues to grow, driven by increasing demand for secure, resilient, and high-throughput connectivity across the defense, aerospace, and civilian telecommunications sectors.
We operate in collaboration with companies that develop satellite terminals, connectivity platforms, and integrated ground segment solutions. Many of these companies specialize in specific market verticals such as maritime, mobility, tactical communications, or public safety, often offering proprietary architectures or tailored form factors. Aerkomm differentiates itself by developing lightweight, modular, and power-efficient universal terminals optimized for both Network Resiliency and Non-Terrestrial Network (NTN) applications, supported by software-defined modems and open-architecture design. As a full-systems integrator, Our capabilities have positioned the company to navigate competitive pressures effectively while maintaining strong partnerships.
36
We continue to differentiate ourselves through our partnership-first approach. In 2024, we have strengthened relationships with major global satellite operators, including Eutelsat OneWeb, Viasat, Telesat (Lightspeed) and Amazon’s Project Kuiper, enabling us to deliver bundled and value-added services using their networks. These partnerships allow us to access flexible bandwidth across LEO, MEO, and GEO constellations without vertically integrating, allowing Aerkomm to remain carrier-neutral while optimizing performance for end users. As these satellite partners expand coverage and capacity, we are positioned to scale alongside them to support new markets and use cases.
A key competitor in the LEO space is Starlink, whose extensive satellite network, developed by SpaceX, plays a significant role in the growing LEO market. Starlink’s LEO constellation is focused on providing low-latency, high-throughput services and has positioned itself as a major player in both the commercial and government sectors. While Starlink’s LEO network is a competitive force, our emphasis on multi-orbit solutions and interoperability across LEO, MEO, and GEO constellations provides a broader and more adaptable approach to meeting the diverse needs of our customers. SpaceX’s Starlink, alongside Eutelsat OneWeb, Viasat, Telesat (Lightspeed), and Amazon’s Project Kuiper, are all potential partners, but securing commercial agreements with these companies that define mutually beneficial partnerships is not guaranteed.
The emergence of ESA (electronically steered array) terminals from companies like Starlink has significantly increased competitive pressure on traditional parabolic antennas. However, these incumbents, including companies like KVH, Intellian, and Cobham SATCOM, remain well-established with loyal customers and extensive global networks. Despite the competitive pressure from ESA terminals, We continue to focus on universal terminal solutions that integrate with multiple constellations, offering flexibility, adaptability, and efficiency across various market verticals.
We also face competition from providers of high-performance antennas and connectivity solutions for specialized sectors like commercial aviation. Notable competitors in this segment include Ball Aerospace (recently acquired by BAE Systems) and ThinKom, both of which specialize in low-profile, high-performance antenna systems for harsh or regulated environments. These companies provide robust solutions for commercial aviation connectivity, but Aerkomm’s modular, multi-orbit terminal strategy differentiates us with open-architecture flexibility and enhanced performance across a range of networks.
Additionally, we may face indirect competition from vertically integrated satellite service providers that develop proprietary terminal hardware and bundle them with satellite services. However, as the satellite communications market shifts toward open ecosystems and carrier-neutral approaches, we believe Aerkomm’s role as a neutral integrator and hardware innovator will become increasingly valuable.
In summary, while the competitive landscape remains intense and continues to evolve, Aerkomm is well-positioned through its focus on interoperability, innovation, and partnership-driven service delivery. We will continue investing in next-generation terminals and working with global satellite partners to expand our footprint and deliver reliable, high-performance solutions to meet growing customer needs.
Government Procurement
Substantial portions of our current and future revenues are and will be generated from contracts and subcontracts with government agencies. Such contracts are subject to a competitive bid process and are awarded on the basis of technical merit, personnel qualifications, experience and price. We also receive some contract awards involving special technical capabilities on a negotiated, noncompetitive basis due to our unique mix of communication products, satellite services, engineering capabilities and technical expertise in specialized areas. Our future revenues and income could be materially affected by changes in government procurement policies and related oversight, a reduction in expenditure for the products and services we provide, and other risks generally associated with federal government contracts.
37
We provide products and services under government contracts that usually require performance over a period of several months to multiple years. Long-term contracts may be impacted based on when the government appropriated funds are available and to what level, which may result in a delay, reduction or termination of these contracts. Government contracts may be performed under cost-reimbursement contracts, time-and-materials contracts and fixed-price contracts. Cost-reimbursement contracts provide for reimbursement of costs and payment of a fee. The fee may be either fixed by the contract or variable, based upon cost control, quality, delivery and the customer’s subjective evaluation of the work. Government contracts may be terminated, in whole or in part, at the convenience of the relevant government office. If a termination for convenience occurs, the government office generally is obligated to pay for work completed or services rendered and/or the cost incurred by us under the contract, which may include a fee or allowance for profit. Contracts with prime contractors may have negotiated termination schedules that apply. When we participate as a subcontractor, we are at risk if the prime contractor does not perform its contract. Similarly, when we act as a prime contractor employing subcontractors, we are at risk if a subcontractor does not perform its subcontract.
Government Regulation
We are subject to the laws and regulations of the U.S. and foreign jurisdictions in which we provide and sell our satellite communication products and services, including those of the Taiwan and Japan. Many of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment, and, in some cases, the reception of certain video programming services.
In the U.S., many of these matters are regulated by the Federal Communications Commission. In other countries or foreign jurisdictions where we may aim to provide and sell our satellite communication products and services in the future, many of these matters are regulated by the telecom regulatory authority of each national government. While there are attempts to harmonize and standardize requirements among international regulators, there is still a significant amount of heterogeneity in licensing conditions and enforcement on a country-by-country basis. Furthermore, due to the rapid pace of advancement of satellite communications technology, the regulatory landscape is similarly evolving, so we are at risk of our technology not fitting neatly into an existing licensing category and thereby slowing our access to a given market as we seek a path to service which remains in compliance with all local regulations.
Radio-frequency and Communications Regulation - International Telecommunication Union (ITU)
The orbital location and frequencies for our partner satellites are subject to the ITU’s regulations, including its frequency registration and coordination procedures, and its various provisions on spectrum usage. Those procedures are specified in the ITU Radio Regulations and seek to facilitate shared international use of limited spectrum and orbital resources in a manner that avoids harmful interference. Among other things, the ITU regulations set forth procedures for establishing international priority with respect to the use of such resources, deadlines for bringing satellite networks into use in order to maintain such priority, and coordination rights and obligations with respect to other networks, which vary depending on whether such networks have higher or lower ITU priority.
The ITU regulations provide allocations or designations for how spectrum can be used for various purposes, and whether such uses operate on a primary or secondary basis with respect to one another. Secondary uses may not cause harmful interference to primary uses and may not claim interference protection from primary uses. The orbital arc is becoming increasingly congested with respect to such ITU filings and the satellite networks operated under those filings.
The ITU’s Radio Regulations are also subject to change at periodic ITU World Radiocommunication Conferences (WRCs), and their application is determined by various governing bodies within the ITU. WRCs typically are convened approximately every four years, with the last one occurring at the end of calendar year 2023.
Other Legal Requirements
As a result of our international operations, we are subject to a number of additional legal requirements, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the customs, export, trade sanctions and anti-boycott laws of the United States, including those administered by the U.S. Customs and Border Protection, the Bureau of Industry and Security, the Department of Commerce, the Department of State, and the Office of Foreign Assets Control of the Treasury Department, as well as those of other nations in which we do business.
38
Our operations are also subject to various domestic and international privacy laws, including the European Union’s General Data Protection Regulation. These laws and regulations, as well as the interpretation and application of these laws and regulations, are subject to change, and any such change may affect our ability to offer and sell existing and planned satellite communications products and services. For more information, see “Further Risks Related to Government Regulation.”
ITEM 1A. RISK FACTORS.
Investment in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this annual report, including the financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to the Merger with IXAQ
The Merger is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all.
Unless waived by the parties to the Merger Agreement, and subject to applicable law, the consummation of the Merger is subject to several conditions set forth in the Merger Agreement.
The Merger Agreement provides that IXAQ’s obligation to consummate the Merger is conditioned on, among other things, that as of the closing of the Merger, the combined company resulting from the Merger (the “Combined Company”) has obtained at least $45,000,000 (“PIPE Minimum Investment Amount”) in financing from investors in the form of (i) the proceeds of private placements in IXAQ in connection with consummation of the Merger (the “PIPE Investments”) and (ii) the proceeds of the SAFE investments in Company prior to consummation of the Merger (the “SAFE Investments”).
As of the date of this filing, agreements have been signed with investors for $35 million in PIPE Investment commitments to PIPE Investments and no SAFE Investment have yet been made. There is no assurance that subscriptions for the remaining $10 million PIPE Minimum Investment Amount. The actual additional amounts committed to PIPE Investments or funded to the Company under SAFE Investments will depend on market conditions and other factors.
If the PIPE Minimum Investment Amount or other conditions to IXAQ’s obligation to consummate the Merger are not met, and such conditions are not waived by IXAQ under the terms of the Merger Agreement, then the Merger Agreement could terminate, and the proposed Merger may not be consummated.
If such condition is waived and the Merger is consummated with less than the PIPE Minimum Investment Amount, the cash held by the Combined Company upon consummation of the closing may not be sufficient to allow the Combined Company to operate and pay its bills as they become due. Any such event in the future may negatively impact the analysis regarding the Combined Company’s ability to continue as a going concern at such time.
There can be no assurance that the shares of the Combined Company’s Common Stock that will be issued in connection with the Merger will be approved for listing on Nasdaq, or another U.S national exchange, following the closing, or that the Combined Company will be able to comply with the continued listing rules of Nasdaq, or another U.S. national exchange.
In connection with the Merger and as a condition to the Company’s obligations to complete the Merger, the Combined Company will be required to demonstrate compliance with Nasdaq’s initial listing requirements. The Company and IXAQ cannot be sure that the Combined Company will be able to meet those initial listing requirements or qualify to list on another national securities exchange. Even if the Combined Company’s Common Stock is approved for listing on Nasdaq, the Combined Company may not meet the Nasdaq continued listing requirements following the Merger.
39
The announcement of the proposed Merger could disrupt the Company’s relationships with its customers, suppliers, business partners and others, as well as its operating results and business generally.
Whether or not the Merger and related transactions are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the Merger on the Company’s business include the following:
| ● | its employees may experience uncertainty about their future roles, which might adversely affect the Combined Company’s ability to retain and hire key personnel and other employees; |
| ● | customers, suppliers, business partners and other parties with which we maintain business relationships may experience uncertainty about the Company’s future and seek alternative relationships with third parties, seek to alter their business relationships with us or fail to extend an existing relationship with the Company; and |
| ● | The Company has expended and will continue to expend significant fees and expenses for professional services and other transaction costs in connection with the proposed Merger. |
If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact the Company and, in the future, the Combined Company’s results of operations and cash available to fund its business.
We will be subject to contractual restrictions while the Merger is pending.
The Merger Agreement restricts the Company from making certain expenditures and taking other specified actions without the consent of IXAQ until the Merger occurs. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Merger.
The Company and IXAQ will incur significant transaction and transition costs in connection with the Merger.
The Company and IXAQ have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Merger and following the consummation of the Merger. The Company and IXAQ may also incur additional costs to retain key employees. Costs incurred in connection with the Merger Agreement and Merger include legal, tax, accounting, consulting, investment banking and other fees, expenses, and costs, all of which have not been paid by the Company or IXAQ before the closing of the Merger will be paid by the Combined Company following the closing.
If the Merger does not meet the expectations of investors or securities analysts, the market price of IXAQ’s securities (prior to the closing), or the market price of the Combined Company’s Class A Common Stock after the closing, may decline.
If the Merger does not meet the expectations of investors, the market price of IXAQ’s securities prior to the Closing may decline. The market values of IXAQ’s securities at the time of the Merger may vary significantly from their prices on the date the Merger Agreement was executed, or the date the Company’s Stockholders vote on the Merger. Because the number of shares to be issued pursuant to the Merger Agreement will not be adjusted to reflect any changes in the market price of IXAQ’s Class A Common Stock, the market value of Class A Common Stock issued in connection with the Merger may be higher or lower than the values of these shares on earlier dates.
In addition, following the Merger, fluctuations in the price of securities of the Combined Company could contribute to the loss of all or part of your investment. The valuation ascribed to the Company in the Merger may not be indicative of the price that will prevail in the trading market following the Merger. If an active market for IXAQ’s securities develops and continues, the trading price of the securities of the Combined Company following the Merger could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Combined Company’s control. Any of the factors listed below could have a material adverse effect on the Combined Company’s securities and the Combined Company’s securities may trade at prices significantly below the price paid for them by investors in the Company or IXAQ. In such circumstances, the trading price of the Combined Company’s securities may not recover and may experience a further decline.
40
Broad market and industry factors may materially harm the market price of securities, irrespective of a company’s operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Combined Company’s securities, may not be predictable. A loss of investor confidence in the market for the stock of other companies that investors perceive to be similar to the Combined Company could depress the Combined Company’s stock price regardless of its business, prospects, financial conditions, or results of operations. A decline in the market price of the Combined Company’s securities also could adversely affect the Combined Company’s ability to issue additional securities and to obtain additional financing in the future.
Risks Related to Our Business
Operational Risks
We depend on manufacturing relationships and a broad set of suppliers, some of whom provide us with limited-source components and parts, and disruptions in these relationships may cause damage to our customer relationships or otherwise negatively impact our business. Although most of the components of our products are available from multiple vendors, we have several single-source supplier relationships, either because alternative sources are not available or because the relationship is advantageous to us. Further, in recent years supply chains globally have experienced stress due to a range of factors.
There can be no assurance that our suppliers will be able to meet our future requirements for products and components in a timely fashion. In addition, the availability of many of the components we need is dependent in part on our ability to provide our suppliers with accurate forecasts of our future requirements. Delays or lost revenue could be caused by other factors beyond our control, including late deliveries by vendors of components, or force majeure events.
The sales of our products and services may require a significant technical evaluation and commitment of capital and other resources by potential customers and end users, as well as delays frequently associated with end users’ internal procedures to deploy new technologies and to test and accept new technologies. For these and other reasons, the sales cycle associated with certain of our products is typically lengthy and is subject to a number of significant risks, such as end users’ internal purchasing reviews, as well as the availability of capital for purchases, that are beyond our control.
While we believe we have a strong foundation to compete, it is uncertain whether our strategies will attract the customers or generate the revenue required to be successful. Certain potential customers were adversely impacted by the Covid-19 pandemic and the resulting global economic downturn. Any future economic slowdown could impede our ability to win and retain customers.
Risks Related to Competition
We have and expect to encounter competition from other solutions providers, some of whom may have more significant resources than us. Whether we are successful in this business model depends on a number of factors, including:
| ● | our ability to establish the infrastructure to deploy and evolve our solutions effectively and continuously; |
| ● | the features and functionality of our offerings relative to competing offerings as well as our ability to market effectively; |
| ● | our ability to engage in successful strategic relationships with third parties such as satellite operators, defense contractors, telecommunications carriers, component makers and contract manufacturers; |
41
| ● | our ability to meet service assurance commitments required by certain contracts; |
| ● | competing effectively for market share; and |
| ● | deploying complete end-to-end solutions that meet the needs of the marketplace generally as well as the particular requirements of our customers more effectively and efficiently than competitive solutions. |
Risks Related to Acquisitions
Acquisitions could disrupt our business and seriously harm our financial condition. We will continue to consider acquisitions of businesses, products or technologies. In the event of any future acquisitions, we could issue stock that would dilute our current stockholders’ percentage ownership, incur additional debt, assume liabilities or incur large and immediate write-offs.
Our operation of any acquired business also involves numerous risks, including but not limited to:
| ● | problems combining the acquired operations, technologies, or products; |
| ● | unanticipated costs; |
| ● | diversion of management’s attention from our core business; |
| ● | difficulties integrating businesses in different countries and cultures; |
| ● | effectively implementing internal control over financial reporting; |
| ● | adverse effects on existing business relationships with suppliers and customers; |
| ● | risks associated with entering markets in which we have no or limited prior experience; and |
| ● | potential loss of key employees, particularly those of the acquired business. |
We cannot be sure that we will be able to integrate successfully any businesses, products, technologies, or personnel that we have acquired or that we might acquire in the future. Any such integration failure could disrupt our business and have a material adverse effect on our consolidated financial condition and results of operations. Moreover, from time to time, we may enter into negotiations for a proposed acquisition, but be unable or unwilling to consummate the acquisition under consideration. This could cause significant diversion of management’s attention and out-of-pocket expenses for us. We could also be exposed to litigation as a result of any consummated or unconsummated acquisition.
Risks Related to Economic and Market Conditions
Our business and operating results are affected by the global business environment and economic conditions, including changes in interest rates, consumer credit conditions, consumer debt levels, consumer confidence, rates of inflation, unemployment rates, energy costs, geopolitical issues and other macro-economic factors. For example, high unemployment levels or energy costs may impact our customer base in our civilian telecommunications segment by reducing the mobile network operators’ end-users’ discretionary income and affecting their ability to subscribe for cell phone services.
Our consolidated operating results and financial condition may be adversely impacted by worldwide economic conditions and credit tightening. If worldwide economic conditions experience a significant downturn, these conditions may make it difficult or impossible for our customers and suppliers to accurately forecast and plan future business activities, which may cause them to slow or suspend spending on products and services.
42
Our customers or suppliers may find it difficult to gain sufficient credit or service existing credit in a timely manner, which could result in an impairment of their ability to process or place orders with us, deliver inventory or services to us in the case of suppliers, or to make timely payments to us for previous purchases in the case of customers. If this occurs, our revenue may be reduced, thereby having a negative impact on our results of operations. In addition, we may be forced to increase our allowance for credit losses and our days sales outstanding may increase, which would have a negative impact on our cash position, liquidity and financial condition.
To the extent we incur debt, we may be unable to adhere to financial covenants or to service the debt. These risks associated with credit and debt are more pronounced for the parties with whom we do business and ourselves in the current environment, which has seen interest rates rise rapidly, especially if they remain elevated for an extended period of time. We cannot predict either the timing or duration of an economic downturn in the economy, should one occur. Any downturn could have a material adverse impact on our business, results of operations, financial condition and prospects.
Our commercial aerospace segment similarly depends on the economic health and willingness of our customers and potential customers, principally commercial airlines, to make and adhere to capital and financial commitments to purchase our products and services. During periods of slowing global economic growth or recession, our customers or key suppliers may experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing or insolvency. Existing or potential customers may reduce or postpone spending in response to tighter credit, reduced consumer demand, negative financial news or declines in income or asset values, which could have a material negative effect on the demand for our products and services.
For example, the business and financial condition of our commercial airline customers were materially impacted during the COVID-19 pandemic by the severe decline in global air travel. In addition, current supply chain and labor market challenges and inflationary pressures have negatively affected and may continue to negatively affect our performance as well as the performance of our suppliers and customers. Moreover, natural disasters (including those resulting from climate change), political instability, civil unrest, terrorist activity, acts of war, and public health issues such as the COVID-19 pandemic or epidemics could disrupt supplies and raise prices globally which, in turn, may have adverse effects on the world and U.S. economies. Any of these factors could result in reduced demand for, and pricing pressure on, our products and services, which could reduce our revenues and adversely affect our business, financial condition and results of operations. In addition, U.S. credit and capital markets have experienced significant dislocations and liquidity disruptions from time to time.
In addition, recent policy shifts under the current U.S. administration led by President Donald Trump have introduced new dynamics into the global economic and regulatory landscape. The administration’s positions on trade, tariffs, defense spending, taxation, and international alliances are creating both opportunities and uncertainties across global markets. These evolving policies may impact global supply chains, capital flows, regulatory approvals, and procurement cycles—particularly in sectors such as telecommunications, aerospace, and defense. As a result, we may face increased volatility in customer demand, delays in contract execution, or shifts in regulatory compliance requirements, all of which could adversely affect our operations, financial condition, and long-term growth prospects.
Uncertainty or volatility in credit or capital markets may negatively impact our ability to access additional debt or equity financing or to refinance existing indebtedness in the future on favorable terms or at all. Any of these risks could impair our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.
Excluding non-recurring revenues in the second quarter of 2019 and 2021 from affiliates, we have incurred operating losses in every quarter since we launched our business and may continue to incur quarterly operating losses, which could negatively affect the value of our company.
Excluding non-recurring revenues that we earned from affiliates and one non-affiliate in 2021 and in the second quarter of fiscal 2019, we have incurred operating losses since our inception in 2014, and we may not be able to generate sufficient revenue in the future to generate operating income. We also expect our costs to increase materially in future periods, which could negatively affect our future operating results. We expect to continue to expend substantial financial and other resources on the continued development and future expansion of our business. The amount and timing of these costs are subject to numerous variables and such initiatives may require additional funding.
43
In addition, we may incur significant costs in connection with our pursuit of next generation satellite communications technology or other new technologies such as our glass antenna. With respect to our growth, significant variables may include costs related to sales and marketing activities and administrative support functions, government defense spending, equipment subsidies to airlines and additional legal and regulatory expenses associated with operating in the international commercial aviation market. In addition, we expect to incur additional general and administrative expenses, including legal and accounting expenses, related to being a public company. Our investments may not result in revenue or growth in our business. If we fail to grow our overall business and generate revenue, our financial condition and results of operations would be adversely affected.
Our company is in the development stage and has a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
Our company and our core business are in the development stage and we continue to face all of the risks and uncertainties associated with a new and unproven business. The limited operating history of our business may make it difficult to accurately evaluate the business and predict its future performance. Any assessments of our current business and predictions that we or you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, and the size and nature of our market opportunity will change as we scale our business and increase deployment of our service. If we do not address any of the foregoing risks successfully, our business will be harmed.
We expect to rely on a few key customers for all of our initial revenue.
Our near term, future business will be substantially dependent on our relationship with a few key customers. There can be no assurance that we will be able to maintain our relationship with these customers. If we are unable to maintain and renew our relationship with these customers, or if our arrangement is modified so that the economic terms become less favorable to us, then our business would be materially adversely affected.
The Markets in Which We Compete Are Highly Competitive and Our Competitors May Have Greater Resources than Us
The markets in which we compete are highly competitive and competition is increasing. In addition, because the markets in which we operate are constantly evolving and characterized by rapid technological change, it is difficult for us to predict whether, when and by whom new competing technologies, products or services may be introduced into our markets. Currently, we face substantial competition in each of our segments.
Many of our competitors have significant competitive advantages, including strong customer relationships, more experience with regulatory compliance, greater financial and management resources and access to technologies not available to us. Many of our competitors are also substantially larger than we are and may have more extensive engineering, manufacturing and marketing capabilities than we do. As a result, these competitors may be able to adapt more quickly to changing technology or market conditions or may be able to devote greater resources to the development, promotion and sale of their products.
Our ability to compete in each of our segments may also be adversely affected by limits on our capital resources and our ability to invest in maintaining and expanding our market share.
Our Anticipated Reliance on U.S. Government and Foreign Governments Contracts and Approvals Exposes Us to Significant Risks
We expect our defense segment is to represent a significant percentage of our total revenues in the future and is likely to consist of both U.S. Government and Foreign Government, in particular, Taiwanese government applications. Therefore, any significant disruption or deterioration of our relationship with the U.S. Government or with relevant Foreign Governments would significantly reduce our revenues. U.S. Government and Foreign Government business exposes us to various risks, including:
| ● | changes in governmental procurement legislation and regulations and other policies, which may reflect military and political developments; |
| ● | unexpected contract or project terminations or suspensions; |
44
| ● | unpredictable order placements, reductions or cancellations; |
| ● | reductions or delays in government funds available for our projects due to government policy changes, budget cuts or delays, changes in available funding, reductions in defense expenditures and contract adjustments; |
| ● | delays in obtaining government approvals or clearances to receive information subject to export control; |
| ● | adverse changes in U.S. Government and Foreign Government export control laws that restrict our ability to conduct joint research activities with, or receive technical information from, US based defense contractor companies; |
| ● | the ability of competitors to protest contractual awards; |
| ● | additional costs or penalties arising from post-award contract audits; |
| ● | the reduction in the value of our contracts as a result of the routine audit and investigation of our costs by U.S. Government agencies or, similarly, by Foreign Government agencies; |
| ● | higher-than-expected final costs, particularly relating to software and hardware development, for work performed under contracts where we commit to specified deliveries for a fixed price; |
| ● | limited profitability from cost-reimbursement contracts under which the profit is limited to a specified amount; |
| ● | unpredictable cash collections of unbilled receivables that may be subject to acceptance of deliverables by the customer and contract close-out procedures, including government approval of final indirect rates; |
| ● | competition with programs managed by other government contractors for limited resources and for uncertain levels of funding; |
| ● | significant changes in contract scheduling or program structure, which generally result in delays or reductions in deliveries; and |
| ● | intense competition for available U.S. Government, or Foreign Government, business necessitating increases in time and investment for design and development. |
We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government, and Foreign Government, contracts. Government contract laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business, including the establishment of compliance procedures. A violation of specific laws and regulations could result in the imposition of fines and penalties, the termination of our contracts or debarment from bidding on contracts. Substantially all of our potential U.S. Government or Foreign Government backlog scheduled for delivery could be terminated at the convenience of the U.S. Government, or a Foreign Government, because our potential contracts with the U.S. Government, or a Foreign Government, typically would be anticipated to provide that orders may be terminated with limited or no penalties. If we are unable to address any of the risks described above, or if we were to lose all or a substantial portion of our sales to the U.S. Government, or to a Foreign Government, it could materially harm our business and impair the value of our common stock.
The funding of U.S. Government, or Foreign Government, programs is subject to congressional appropriations, or such similar mechanism in each country. In the U.S., Congress generally appropriates funds on a fiscal year basis even though a program may extend over several fiscal years. Foreign Governments may appropriate funds with a materially similar or materially different approach. Consequently, programs are often only partially funded initially and additional funds are committed only as Congress, or the relevant Foreign Government body, makes further appropriations.
45
We may not be successful in our efforts to develop and monetize new products and services that are currently in development, including value-added resale of satellite bandwidth in certain geographies where we are already licensed or intend to be licensed, our multi-orbit universal satellite communications terminals that incorporate flat panel antennas (FPAs) or electronically steered arrays (ESAs) with both hardware and software defined modems, communications systems for manned and unmanned aerospace and defense platforms, system integration for manned and unmanned aerospace and defense platforms, our proprietary, full-dominance glass semiconductor antenna (also referred to as “FGSA”), distributed content delivery network (“CDN”), distributed computing or mesh computing applications and inflight entertainment and connectivity services.
In order to meet the evolving needs of our future customers and partners, we must continue to develop new products and services that are responsive to those needs. Our ability to realize the benefits of enabling our products, and to use these applications, including monetizing our services at a profitable price point, depends, in part, on the adoption and utilization of such applications by different potential customers including militaries, governments, defense contractors, airlines, other aircraft operators and other companies in the aviation industry such as aircraft equipment suppliers, mobile network operators, other telecommunications service operators and other companies in the telecommunications industry such as communications equipment suppliers, and we cannot be certain that our potential customers, outlined above will adopt such offerings in the near term or at all.
We also expect to continue to rely on third parties to operate and maintain the satellites and satellite constellations to be used to provide bandwidth to our potential customers, and we cannot be certain that such satellites or satellite constellations will be capable to meet the service level requirements, quality of service expectations or service reliability metrics necessary to meet the needs our potential customers. If we are not successful in our efforts to develop and monetize new products and services, including our operations-oriented communications services, our future business prospects, financial condition and results of operations would be materially adversely affected.
Our development and implementation of our semiconductor glass antenna, while poised to offer significant advantages in terms of performance and cost-effectiveness, introduces additional layers of risk. This technology involves highly specialized and novel manufacturing processes that may encounter operational hurdles, higher than anticipated production costs, or delays in scaling production to meet market demands. Additionally, our semiconductor glass antenna’s reliance on proprietary technology and materials might limit rapid adaptation in the face of changing industry standards or emerging competitive technologies. Given the rapid evolution of technology in the aerospace and telecommunications sectors, there is a risk that our newly developed technology may become obsolete more quickly than expected, or fail to gain sufficient market acceptance, thereby negatively impacting our competitive position and financial performance.
Our semiconductor glass antenna technology is not yet commercialized and has not been widely applied or developed for the markets being targeted by our company.
As an emerging technology, our semiconductor glass antenna has not undergone extensive field testing across different market applications, which is crucial for establishing its viability and reliability in real-world scenarios. The unproven nature of our semiconductor glass antenna in operational environments, particularly in space and satellite communications—a sector marked by exceptionally high requirements for accuracy and durability—presents a substantial risk.
Without established performance data and market acceptance, the potential for our semiconductor glass antenna to meet the specific needs of satellite operators and other telecommunications stakeholders remains uncertain. This untested status could delay adoption and affect our ability to attract partnerships and customers necessary for successful market entry and scaling.
46
We cannot accurately predict future revenues or profitability in the emerging market for our semiconductor glass antenna technology.
The market for advanced satellite communication technologies is rapidly evolving. As is typical of a rapidly evolving industry, demand and market acceptance for newly developing technologies like our semiconductor glass antenna are subject to a high level of uncertainty. Moreover, since the market for satellite antenna technology is evolving, it is difficult to predict the future growth rate, if any, and size of this market.
Because of our limited development history with our semiconductor glass antenna and the emerging nature of the markets in which we expect to compete, we are unable to accurately forecast any revenues or our profitability that we might generate through the marketing of our semiconductor glass antenna technology. The market for our semiconductor glass antenna products and the long-term acceptance of our technology are uncertain, and our ability to attract and retain qualified personnel with industry expertise, particularly in engineering, sales, and marketing, is uncertain. To the extent we are unsuccessful in generating revenues from FGSA, we may be required to appropriately adjust spending to compensate for any unexpected revenue shortfall, or to reduce our operating expenses, causing us to forego potential revenue-generating activities.
We may face challenges in the development and monetization of new products and services, specifically related to our universal terminals.
In order to meet the ever-changing needs of our target customers, we must continuously innovate and introduce new offerings that cater to their requirements. However, the successful adoption and utilization of these products depend on the interest and acceptance of our target customers. There is no guarantee that they will embrace our offerings in the near future or at all.
Additionally, as we strive to provide comprehensive and efficient multi-orbit broadband connectivity, we may need to collaborate with third-party developers or technology providers to enhance our product and service offerings and ensure compatibility with our potential partners’ satellites and ground infrastructure. However, uncertainties exist regarding the seamless integration and effectiveness of these technical collaborations in meeting the unique needs of our potential customers. Should we encounter obstacles in effectively developing and monetizing new products and services, specifically pertaining to our universal terminals, it could significantly impact our business prospects, financial performance, and overall success in the market.
We may not be able to grow our business with our current and potential satellite and satellite constellation partners or to successfully negotiate agreements with satellite and satellite constellation partners whose bandwidth and services we do not currently resell or otherwise distribute;
Currently, our primary existing or potential satellite partners include SES (including SES Space & Defense), Viasat Inc., Intelsat SA, Eutelsat Group (including Eutelsat Communications, Eutelsat SA and Eutelsat OneWeb), Rivada Space Networks, Astranis Space Technologies Corp. and Telesat Corp., but we aim to have the technical capability to provide links to any and all satellites and constellations, subject to future potential commercial agreements. We are currently in, or planning, discussions or negotiations with certain of our existing or potential satellite partners to serve as a value-added reseller of their services in certain countries and regions, but do not yet have in place any such value-added reseller agreements.
We have acquired terminal equipment and satellite connectively and related services from SES and also have participated in demonstration and testing with SES under a confidential agreement with our development customer since 2022.
Negotiations with prospective satellite partners require substantial time, effort and resources. The time required to reach a final agreement with a satellite operator is unpredictable and may lead to variances in our operating results from quarter to quarter. We may ultimately fail in our negotiations and any such failure could harm our results of operations due to, among other things, a diversion of our focus and resources, actual costs and opportunity costs of pursuing these opportunities. To the extent that any negotiations with current or future potential satellite partners are unsuccessful, or any new agreements contain terms that are less favorable to us, our growth prospects could be materially and adversely affected.
47
We may not be able to grow our business with our current and potential aerospace and defense partners or to successfully negotiate agreements with aerospace and defense partners to which we do not currently provide our technologies or services;
Our primary potential aerospace & defense partners include prime contractors like Kratos Defense, Lockheed Martin, Anduril, Shield.AI, Boeing Defense, Airbus Defense, Northrop Grumman, General Atomics and RTX, although we do not yet have in place binding agreements to serve as a joint venture partner, mentor-protégé partner, subcontractor, vendor, or system integrator with these prime contractors. We are currently in discussions with certain of our potential aerospace & defense partners to enter into binding contracts together. Currently, we also have a number of potential aerospace & defense customers, including militaries and governments, regarding providing our products and services to meet their classified programs and missions.
Negotiations with prospective aerospace & defense partners and potential customers require substantial time, effort and resources. The time required to reach a final agreement with an aerospace & defense prime contractor or a military customer is unpredictable and may lead to variances in our operating results from quarter to quarter. We may ultimately fail in our negotiations and any such failure could harm our results of operations due to, among other things, a diversion of our focus and resources, actual costs and opportunity costs of pursuing these opportunities. To the extent that any negotiations with current or future potential aerospace & defense partners or customers are unsuccessful, or any new agreements contain terms that are less favorable to us, our growth prospects could be materially and adversely affected.
We may not be able to grow our business with our current airline partners or successfully negotiate agreements with airlines and other partners or grow our additional businesses.
Currently, our only airline partners are MJet GmbH, an Austrian-based private jet operator, MJet, Hong Kong Airlines Limited, a Hong Kong-based airline, or Hong Kong Airlines, and Vietjet Aviation Joint Stock Company, a Vietnam-based airline, or Vietjet, although we have not yet begun to provide our universal terminals for aviation with associated bandwidth services or our distributed content system for airlines to these companies under our agreement with them. We are currently in advanced negotiations or discussions with certain other airline partners to provide our products and services on additional aircraft in their fleets. We have no assurance that these efforts will be successful.
Negotiations with prospective airline partners require substantial time, effort and resources. The time required to reach a final agreement with an airline is unpredictable and may lead to variances in our operating results from quarter to quarter. We may ultimately fail in our negotiations and any such failure could harm our results of operations due to, among other things, a diversion of our focus and resources, actual costs and opportunity costs of pursuing these opportunities. In addition, the terms of any future agreements could be materially different than the terms included in our existing agreement with Hong Kong Airlines. To the extent that any negotiations with current or future potential airline partners are unsuccessful, or any new agreements contain terms that are less favorable to us, our growth prospects could be materially and adversely affected.
We may not be able to successfully negotiate agreements with potential civilian telecommunications partners for our backhaul solutions or grow this additional business.
The varying awareness and sense of urgency regarding network resilience in different countries will directly impact the growth of our mobile backhaul business. Network resilience is the ability of a network to withstand and recover from unexpected disruptions, ensuring uninterrupted service and minimizing downtime. However, the importance placed on network resilience can differ across countries due to varying factors such as geographical location, infrastructure stability, and previous experiences with network failures. In countries where there is a high level of awareness and a sense of urgency regarding network resilience, there is a greater demand for robust mobile backhaul solutions. Customers in these regions prioritize the reliability and resilience of their networks, driving the adoption of mobile backhaul technologies that offer built-in redundancy, failover mechanisms, and efficient disaster recovery capabilities. Conversely, in regions where network resilience is not a primary concern or where there is limited awareness, the demand for advanced satellite mobile backhaul solutions may be relatively lower.
48
We are dependent on airline partners to be able to access our customers. We expect that future payments by these customers for our services to be provided to them will account for most, if not all, of our initial revenues.
Under our existing contract with MJet, Hong Kong Airlines and Vietjet, we will provide our equipment for installation on, and provide our services to passengers on, a portion of the aircraft operated by these airlines. We expect to enter into similar contracts with other airlines in the future but there is no assurance that we will be successful in signing up additional airline partners. We expect that revenue from the successful installation of our Aerkomm AirCinema cube on Hong Kong Airlines and Vietjet sometime in 2025 as well as the successful installation of our Aerkomm K++ System on MJet and Hong Kong Airlines in the fourth quarter of 2025 and first quarter of 2026 respectively, together with the monthly bandwidth charge, will account for a material portion of our projected initial revenue from commercial aviation once we begin our services.
As of the date of this Annual Report, we do not yet have any revenue from equipment sales and installation. Our growth will be dependent on our ability to have our equipment installed on the aircraft of airline partners and increased use of our service on installed aircraft. Any delays in installations under these contracts may negatively affect our ability to grow our user base and revenue.
We will be dependent on backhaul partners to be able to access our future customers. We expect that future payments by these customers for our services to be provided to them will account for a percentage of our revenues.
As of the date of this Annual Report, we do not yet have any revenue from equipment sales and the installation of our mobile backhaul business. Our growth will be dependent on our ability to have our equipment installed on 4G/5G mobile base stations. Any delays in installations negatively may affect our ability to increase our user base and revenue.
A failure to maintain customers’ satisfaction with our equipment or our service could have a material adverse effect on our revenue and results of operations.
Our relationships with our current and future development and commercialization partners are critical to the growth and ongoing success of our business. If partners are not satisfied with our equipment or our service for any reason, they may reduce efforts to co-market our service to their customers, which could result in lower usage and reduced revenue, which could in turn give our partners the right to terminate their contracts with us. In addition, airline dissatisfaction with us for any reason, including delays in obtaining certification for or installing our equipment, could negatively affect our ability to expand our service to additional commercialization partners or lead to claims for damages, which may be material, or termination rights under our existing or potential contracts with airline partners.
A failure to maintain backhaul customers satisfaction with our equipment or our service could have a material adverse effect on our revenue and results of operations.
If our mobile backhaul solution fails to effectively ensure network resilience, customers may turn to competitors’ offerings. This would have a direct impact on our revenue and operations. Network resilience is a critical requirement for customers seeking mobile backhaul solutions. Backhaul customers will rely on our services to maintain a robust and reliable network infrastructure that will be able to withstand disruptions and ensure uninterrupted connectivity. If our solution does not meet their expectations in terms of network resilience, customers may perceive it as a risk to their operations and seek alternative options.
We may experience network capacity constraints in our future operations regions and we expect capacity demands to increase, and we may in the future experience capacity constraints internationally. If we are unable to successfully implement planned or future technology enhancements to increase our network capacity, or our airline partners do not agree to such enhancements, our ability to acquire and maintain sufficient network capacity and our business could be materially and adversely affected.
All providers of wireless connectivity services, including all providers of in-flight connectivity services, face certain limits on their ability to provide connectivity service, including escalating capacity constraints due to expanding consumption of wireless services and the increasing prevalence of higher bandwidth uses such as file downloads and streaming media content. The success of our business depends on our ability to provide adequate bandwidth to meet customer demands while in-flight. We may find it difficult to provide this adequate bandwidth.
As the number of base stations increases with the implementation of 4G/5G mobile backhaul, it indicates a growing user base. However, when the network capacity reaches its initial design threshold, if we fail to timely develop new technologies to increase capacity and meet customer demands, such a failure will negatively impact our business. If we are unable to develop and introduce new technologies that can expand our network’s capacity, customers may experience congestion, slow data speeds, and poor service quality. This can lead to customer dissatisfaction, churn, and a negative impact on our business.
49
We face the risk of network capacity constraints in our future CDN business as the demand for high-speed content delivery continues to grow. If we are unable to effectively scale our network infrastructure to meet increasing capacity demands, this failure may result in degraded performance, slower content delivery, and potential customer dissatisfaction. To mitigate this risk, we need to continuously invest in expanding our network capacity and implementing advanced technologies to ensure optimal performance and scalability. Failure to do so may adversely impact our competitiveness and market position.
The demand for satellite bandwidth may decrease or develop more slowly than we expect. We cannot predict with certainty the development of the international satellite bandwidth market in general or the general market acceptance for our products and services
We have invested significant resources towards the roll-out of value-added resale of satellite bandwidth services, which represent part of our growth strategy. We face the risk that the U.S. and international markets for satellite bandwidth services may decrease or develop more slowly or differently than we currently expect, or that our services may not achieve widespread market acceptance. We may be unable to market and sell our services successfully and cost-effectively to a sufficiently large number of customers.
Our business depends on the continued proliferation of satellite-based broadband connectivity as a critical business or program need for our potential customers. The growth in demand for satellite broadband internet access services also depends in part on the continued and increased use of manned and unmanned airborne, maritime and land-based vehicles and platforms and the rate of evolution of data-intensive applications on such platforms and vehicles.
If satellite bandwidth ceases to be a critical feature in manned and unmanned platforms, if the rate of integration of satellite bandwidth on manned and unmanned platforms decreases or is slower than expected, or if the use of satellite bandwidth enabled devices or development of related applications decreases or grows more slowly than anticipated, the market for our services may be substantially diminished.
Competition from a number of companies, as well as other market forces, could result in price reduction, reduced revenue and loss of market share and could harm our results of operations.
We face strong competition from satellite-based providers of broadband services that include in-flight internet and live television services. Competition from such providers has in the past and could have in the future, an adverse effect on our ability to maintain or gain market share.
Most of our competitors are larger, more diversified corporations that have greater financial, marketing, production, and research and development resources. As a result, they may be better able to withstand the effects of periodic economic downturns or may offer a broader product line to customers. In addition, to the extent that competing in-flight connectivity services offered by commercial airlines that are not our airline partners are available on more aircraft or offer improved quality or reliability as compared to our service, our business and results of operations could be adversely affected. Competition could increase our sales and marketing expenses and related customer acquisition costs. We may not have the financial resources, technical expertise or marketing and support capabilities to continue to compete successfully. A failure to effectively respond to established and new competitors could have a material adverse impact on our business and results of operations.
50
Competition from various companies in the content delivery and edge computing industry, as well as market dynamics, may lead to price pressures, reduced revenue, and potential loss of market share, which could adversely affect our business operations. We operate in a highly competitive landscape where other providers of content delivery solutions and edge computing services offer products and services similar to those we intend to introduce. These competitors may have greater financial resources, established customer bases, and extensive marketing and research and development capabilities. Increased competition could result in price reductions, which may impact our profitability and revenue generation. Additionally, if competing solutions offer enhanced features, performance, or reliability compared to our planned CDN service, this could negatively impact our market position and customer adoption.
To maintain a competitive edge, we must continuously invest in innovation, technology advancements, and marketing efforts to differentiate ourselves from competitors. Failure to effectively address competitive pressures, anticipate market trends, and adapt to evolving customer needs may limit our growth potential and financial performance.
The price of satellite bandwidth may decrease or develop more slowly than we expect.
Due to the recent and anticipated proliferation of satellites and constellations into LEO, MEO, GEO and HEO orbits by our potential partners and potential competitors, as noted above, there is an increased supply of satellite bandwidth. As a result, in the event that a large quantity of satellite bandwidth is sold on the market without commensurate demand, we face the inherent risk that the price of satellite bandwidth may decrease or develop more slowly than we expect, or than our potential partners expect. As we aim to be a distribution partner, or value-added reseller, of satellite bandwidth, in the event that the price of satellite bandwidth decreases or develops more slowly than we expect, the potential revenue we may be able to generate in the future may decrease, which could have a material adverse effect on our growth prospects.
We may be unsuccessful in generating revenue from entertainment services.
We are currently developing a host of in-flight entertainment and connectivity service offerings to deliver to our future customers. We plan to offer a number of services to our customers and no assurance can be given that we will ultimately be able to launch any service. Additionally, we plan to generate a revenue stream from our video on demand and other in-flight entertainment services. If we are unable to generate revenue from our services or if other entertainment services do not ultimately develop, our growth and financial prospects would be materially adversely impacted.
The future growth prospects for our business depend, in part, on revenue from sale of equipment and bandwidth, advertising fees and e-commerce revenue share arrangements on passenger purchases of goods and services, including video and media services. Our ability to generate revenue from these service offerings depends on:
| ● | growth of commercial airline customer base; |
| ● | the attractiveness of our customer base to media partners; |
| ● | rolling out media on demand on more aircraft and with additional airline customers and increasing passenger adoption both in the U.S. and abroad; |
| ● | establishing and maintaining beneficial contractual relationships with media partners whose content, products and services are attractive to airline passengers; and |
| ● | our ability to customize and improve our service offerings in response to trends and customer interests. |
If we are unsuccessful in generating revenue from our service offerings, that failure could have a material adverse effect on our growth prospects.
We may be unsuccessful in expanding our operations internationally.
Our ability to grow our international business involves various risks, including the need to invest significant resources in unfamiliar markets and the possibility that we may not realize a return on our investments in the near future or at all. In addition, we have incurred and expect to continue to incur significant expenses before we generate any material revenue in these new markets. Under our agreements with providers of satellite capacity, we are obligated to purchase bandwidth for specified periods in advance. If we are unable to generate sufficient passenger demand or airline partners to which we provide satellite service to their aircraft terminate their agreements with us for any reason during these periods, we may be forced to incur satellite costs in excess of connectivity revenue generated through such satellites.
51
Any future international operations may fail to succeed due to risks inherent in foreign operations, including:
| ● | legal and regulatory restrictions, including different communications, privacy, censorship, aerospace and liability standards, intellectual property laws and enforcement practices; |
| ● | changes in international regulatory requirements and tariffs; |
| ● | restrictions on the ability of U.S. companies to do business in foreign countries, including restrictions on foreign ownership of telecommunications providers imposed by the U.S. Office of Foreign Assets Control, which we refer to as OFAC; |
| ● | changes in U.S. export and control laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (ITAR), the Export Control Reform Act of 2018 (ECRA) and the Export Administration Regulations (EAR). |
| ● | inability to find content or service providers to partner with on commercially reasonable terms, or at all; |
| ● | compliance with the Foreign Corrupt Practices Act, the (U.K.) Bribery Act 2010 and other similar corruption laws and regulations in the jurisdictions in which we operate and related risks; |
| ● | difficulties in staffing and managing foreign operations; |
| ● | currency fluctuations; and |
| ● | potential adverse tax consequences. |
As a result of these obstacles, we may find it difficult or prohibitively expensive to grow our business internationally or we may be unsuccessful in our attempt to do so, which could harm our future operating results and financial condition.
Acquisitions such as the Mesh Tech Transaction, Joint Ventures and Other Strategic Alliances May Have an Adverse Effect on Our Business; We May Fail to Realize the Anticipated Benefits of such Transactions.
In order to position ourselves to take advantage of growth opportunities, from time to time we make strategic acquisitions and enter into joint ventures and other strategic alliances that involve significant risks and uncertainties. For example, during 2023 we announced and closed on the Mesh Tech Transaction and announced an intent for a merger with EJECTT. Risks and uncertainties relating to these transactions and any other acquisitions, joint ventures and other strategic alliances we may undertake include:
| ● | the difficulty in combining, integrating and managing newly acquired businesses or any businesses of a joint venture or strategic alliance in an efficient and effective manner; |
| ● | the challenges in achieving the objectives, cost savings, synergies and other benefits expected from such transactions; |
| ● | the risk of diverting resources and the attention of senior management from the operations of our business; |
| ● | additional demands on management related to integration efforts or the increase in the size and scope of our company following an acquisition or to the complexities of a joint venture or strategic alliance, including challenges of coordinating geographically dispersed organizations and addressing differences in corporate cultures or management philosophies; |
52
| ● | difficulties in the assimilation and retention of key employees and in maintaining relationships with present and potential customers, distributors and suppliers; |
| ● | the lack of unilateral control over a joint venture or strategic alliance and the risk that joint venture or strategic partners have business goals and interests that are not aligned with ours, or the failure of a joint venture partner to satisfy its obligations or its bankruptcy or malfeasance; |
| ● | costs and expenses associated with any undisclosed or potential liabilities of an acquired business; |
| ● | delays, difficulties or unexpected costs in the integration, assimilation, implementation or modification of platforms, systems, functions (including corporate, administrative, information technology, marketing and distribution functions), technologies, infrastructure, and product and service offerings of the acquired business, joint venture or strategic alliance, or in the harmonization of standards, controls (including internal accounting controls), procedures and policies; |
| ● | the risk that funding requirements of the acquired business, joint venture or combined company may be significantly greater than anticipated; |
| ● | the risks of entering markets in which we have less experience; and |
| ● | the risks of disputes concerning indemnities and other obligations that could result in substantial costs. |
We may not achieve the anticipated growth, cost savings or other benefits from the Mesh Tech Transaction or any other transaction we may undertake without adversely affecting current revenues and investments in future growth. Moreover, the anticipated growth, cost savings, synergies and other benefits of the Mesh Tech Transaction or any other transaction we may undertake may not be realized fully, or at all, or may take longer to realize than expected.
Additionally, we may inherit legal, regulatory, operational and other risks of the acquired business, whether known or unknown to us, which may be material to the combined company. Moreover, uncertainty about the effect of the recently closed transaction such as the Mesh Tech Transaction on employees, suppliers and customers may have an adverse effect on us and/or the acquired business, which uncertainties may impair our or its ability to attract, retain and motivate key personnel, and could cause our or its customers, suppliers and distributors to seek to change existing business relationships with either of us.
In addition, in connection with acquisitions, joint ventures or strategic alliances, we may incur debt, issue equity securities, assume contingent liabilities or have amortization expenses and write-downs of acquired assets, which could cause our earnings per share to decline. In addition, companies such as Mesh Tech that are private companies at the time of acquisition are not subject to reporting requirements and may not have accounting personnel specifically employed to review internal controls over financial reporting and other procedures or to ensure compliance with the requirements of the Sarbanes-Oxley Act of 2002. Bringing the legacy systems for these businesses into compliance with those requirements and integrating them into our compliance and accounting systems may cause us to incur substantial additional expenses, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.
Mergers, acquisitions, joint ventures and strategic alliances are inherently risky and subject to many factors outside of our control, and we cannot be certain that our previous or future acquisitions, joint ventures and strategic alliances will be successful and will not materially adversely affect our business, operating results or financial condition. We may not be able to successfully integrate the businesses, products, technologies or personnel that we might acquire in the future, and any strategic investments we make may not meet our financial or other investment objectives. Any failure to do so could seriously harm our business, financial condition and results of operations.
53
An extended delay in the transfer of title to Aerkomm Taiwan of the Taiwan land parcel that we recently purchased could delay the building of our first satellite ground station and have a negative impact on our business prospects.
In July 2019, we completed payment of the NT$1,098,549,407, or US$35,861,589, purchase price for our acquisition of approximately 6.3 acres of undeveloped land (which we refer to as the Taiwan land parcel) located at the Taishui Grottoes in the Xinyi District of Keelung City, Taiwan. Our agent has received all of the necessary title transfer documentation from the seller however, according to the land use law of Taiwan, our Taiwan based subsidiary, Aerkomm Taiwan, needed to first, obtain a telecommunications license in Taiwan, which it has obtained, then second, submit a usage plan to the local land office and to obtain the necessary operational/development license or authorization for the intended usage before Aerkomm Taiwan can obtain an official certificate of title. Aerkomm Taiwan is currently preparing the plan of usage and has worked with various regulatory authorities to obtain the necessary license and approval to meet the local land use law requirements.
We do not know at this time how long it will take to complete this process and receive the certificate of title to the parcel. Although we expected to complete the entire process and receive or certificate of title during 2024, the process is not yet completed. We do expect the process to be completed during 2025 and, once title to the Taiwan land parcel is transferred to Aerkomm Taiwan, we expect we may lease a portion of the land parcel, pursuant to the terms of an existing binding memorandum of understanding, to a Samoa based telecom company who intends to use the land for their own satellite ground station and to mortgage the land to be able to raise funds to build our first satellite ground station and data center.
If there is an extended delay in the transfer of the Taiwan land parcel title to Aerkomm Taiwan, our agreement with the Samoa telecom company may be terminated and we may not be able to raise the funds needed to build our ground station in a timely fashion. Either or both of these eventualities could have a negative impact on our business plans, prospects and future results of operations.
From time to time, we enter into memorandums of understanding (MOUs) with various third parties. If the transactions contemplated by these MOUs do not proceed, our results of operations and financial condition could be materially adversely affected.
From time to time, we enter into MOUs with potential prospective collaborative partners or potential customers. These MOUs typically are nonbinding and as a result, they only express the desires and understandings between the parties and do not create any legally binding rights, obligations or contracts except for certain customary provisions such as exclusivity, costs and expenses, confidentiality and governing law. Any binding obligation to proceed with the transactions contemplated by the MOUs would need to be included in a definitive agreement that is subject to negotiations of the parties, approvals by the board of directors of respective parties and in certain instances, approvals from regulatory authorities. There can be no assurance that we will be able to reach definitive agreements with any parties who may sign MOUs with us. If for whatever reason the transactions contemplated by signed MOUs do not proceed, our results of operations and financial condition could be materially adversely affected.
A future act or threat of terrorism or other events could result in a prohibition on the use of Wi-Fi enabled connectivity devices.
A future act of terrorism, the threat of such acts or other airline incidents could have an adverse effect on the airline industry. In the event of a terrorist attack, terrorist threats or unrelated airline accidents, the industry would likely experience significantly reduced passenger demand. The U.S. federal government or any other government could respond to such events by prohibiting the use of Wi-Fi enabled devices on aircraft, which would eliminate demand for our equipment and service. In addition, any association or perceived association between our equipment or service and incidents involving aircraft on which our equipment or service operates would likely have an adverse effect on demand for our equipment and service. Reduced demand for our products and services would adversely affect our business prospects, financial condition and results of operations.
The demand for in-flight broadband internet access services may decrease or develop more slowly than we expect. We cannot predict with certainty the development of the U.S. or international in-flight broadband internet access market or the market acceptance for our products and services.
We have invested significant resources towards the roll-out of commercial aviation service offerings, which represent part of our growth strategy. We face the risk that the U.S. and international markets for in-flight broadband internet access services may decrease or develop more slowly or differently than we currently expect, or that our services, including our offerings, may not achieve widespread market acceptance. We may be unable to market and sell our services successfully and cost-effectively to a sufficiently large number of customers.
54
Our business depends on the continued proliferation of Wi-Fi as a standard feature in mobile devices. The growth in demand for in-flight broadband internet access services also depends in part on the continued and increased use of laptops, smartphones, tablet computers, and other Wi-Fi enabled devices and the rate of evolution of data-intensive applications on the mobile internet. If Wi-Fi ceases to be a standard feature in mobile devices, if the rate of integration of Wi-Fi on mobile devices decreases or is slower than expected, or if the use of Wi-Fi enabled devices or development of related applications decreases or grows more slowly than anticipated, the market for our services may be substantially diminished.
Increased costs and other demands associated with our growth could impact our ability to achieve profitability over the long term and could strain our personnel, technology and infrastructure resources.
We expect our costs to increase in future periods, which could negatively affect our future operating results. We expect to experience growth in our headcount and operations, which will place significant demands on our management, administrative, technological, operational and financial infrastructure. Anticipated future growth will require the outlay of significant operating and capital expenditure and will continue to place strains on our personnel, technology and infrastructure.
Our success will depend in part upon our ability to contain costs with respect to growth opportunities. To successfully manage the expected growth of our operations, on a timely and cost-effective basis we will need to continue to improve our operational, financial, technological and management controls and our reporting systems and procedures. In addition, as we continue to grow, we must effectively integrate, develop and motivate new employees, and we must maintain the beneficial aspects of our corporate culture. If we fail to successfully manage our growth, it could adversely affect our business, financial condition and results of operations.
Regulation by United States and foreign government agencies, including the Federal Aviation Administration and the Federal Communications Commission, may increase our costs of providing service or require us to change our services.
The commercial and private aviation industries, including civil aviation manufacturing and repair industries, are highly regulated in the United States by the FAA, in Europe by EASA as well as other compatible civil aviation authorities. FAA and/or EASA certification is required for all equipment we install on commercial aircraft and type certificated business aircraft, and certain of our operating activities require that we obtain FAA/EASA certification as a parts manufacturer. As discussed in more detail in the section entitled “Business—Regulation—Federal Aviation Administration,” FAA and/or EASA approvals required to operate our business include Supplemental Type Certificates, or STCs and Parts Manufacturing Authorities, or PMAs and Service Bulletins, or SBs. Obtaining SBs, STCs and PMAs is an expensive and time-consuming process that requires significant focus and resources. Any inability to obtain, delay in obtaining, or change in, needed FAA/EASA certifications, authorizations, or approvals, could have an adverse effect on our ability to meet our installation commitments, manufacture and sell parts for installation on aircraft, or expand our business and could, therefore, materially adversely affect our growth prospects, business and operating results.
The FAA/EASA closely regulates many of our operations. If we fail to comply with the FAA’s and/or EASA’s many regulations and standards that apply to our activities, we could lose the FAA/EASA certifications, authorizations, or other approvals on which our manufacturing, installation, maintenance, preventive maintenance, and alteration capabilities are based. In addition, from time to time, the FAA/EASA or comparable foreign authorities adopt new regulations or amend existing regulations. The FAA/EASA could also change its policies regarding the delegation of inspection and certification responsibilities to private companies, which could adversely affect our business. To the extent that any such new regulations or amendments to existing regulations or policies apply to our activities, those new regulations or amendments to existing regulations generally increase our costs of compliance.
55
As a broadband Internet provider, we must comply with the Communications Assistance for Law Enforcement Act of 1994, or CALEA, which requires communications carriers to ensure that their equipment, facilities and services can accommodate certain technical capabilities in executing authorized wiretapping and other electronic surveillance. Currently, our CALEA solution is being deployed in our network. However, we could be subject to an enforcement action by the FCC or law enforcement agencies for any delays related to meetings, or if we fail to comply with, any current or future CALEA, or similarly mandated law enforcement related obligations. Such enforcement actions could subject us to fines, cease and desist orders, or other penalties, all of which could adversely affect our business. Further, to the extent the FCC adopts additional capability requirements applicable to broadband Internet providers, its decision may increase the costs we incur to comply with such regulations.
In addition to these U.S. agencies, we are also subject to regulation by foreign government agencies that choose to assert jurisdiction over us as a result of the service we provide on aircraft that fly international routes. Adverse decisions or regulations of these U.S. and foreign regulatory bodies could negatively impact our operations and costs of doing business and could delay the roll-out of our services and have other adverse consequences for us. Our ability to obtain certain regulatory approvals to offer our services internationally may also be the responsibility of a third party, and, therefore, may be out of our control. We are unable to predict the scope, pace or financial impact of regulations and other policy changes that could be adopted by the various governmental entities that oversee portions of our business.
The certification time for 4G/5G mobile backhaul by regulatory authorities varies among different countries. Each country has its own standards and procedures for assessing and certifying the compliance and safety of satellite communication products. Therefore, the time required for products to obtain certification may vary depending on the country. Some countries may have faster certification processes that can be completed in a shorter period of time. In other countries, the certification process may be relatively longer, requiring more time for review and testing. Therefore, when selling satellite communication systems for 4G/5G mobile backhaul in the global market, it is necessary to consider the differences in certification time among different countries which may increase our costs of providing service. We are unable to predict the scope, pace or financial impact of regulations and other policy changes that could be adopted by the various governmental entities that oversee portions of our business.
We are subject to various regulations, including those regulations promulgated by various federal, state and local regulatory agencies and legislative bodies and comparable agencies outside the United States where we may do business. The two U.S. government agencies that have primary regulatory authority over our operations are the Federal Aviation Administration, or FAA, and the Federal Communications Commission, or FCC, the European Administration and Safety Agency, or EASA and other compatible civil aviation authorities.
Regulation by government agencies, such as the Federal Communications Commission (FCC) and other relevant regulatory bodies, may impact our satellite internet service and our CDN business for households, resulting in increased costs and the need to modify our services. As a future provider of satellite internet service and CDN solutions for households, we will be subject to various regulations imposed by government agencies at the federal, state, and local levels. The FCC will play a significant role in regulating our future broadband internet services and ensuring compliance with applicable rules and requirements.
Compliance with FCC regulations, including licensing, spectrum usage, and service quality standards, is crucial to our operations. Failure to comply with FCC rules and guidelines may lead to penalties, fines, or restrictions that could adversely impact our ability to provide reliable and high-speed internet connectivity to households. Furthermore, other regulatory bodies may have jurisdiction over aspects of our planned satellite internet service and our CDN business, such as data privacy and consumer protection. Compliance with these regulations, including privacy laws and fair business practices, is essential to maintaining customer trust and avoiding legal and reputational risks.
We face the risk of potential cybersecurity breaches and data privacy concerns that could harm our reputation, disrupt our services, and result in legal and financial liabilities.
As a potential future provider of CDN services for households, we will handle a significant amount of data, including user information, content delivery, and advertising data. The increasing prevalence of cyber threats and data breaches poses a substantial risk to our business operations and customer trust. Despite implementing robust security measures, such as encryption protocols and firewalls, there is no guarantee that our systems will be immune to unauthorized access or malicious attacks. Cybercriminals could exploit vulnerabilities in our network infrastructure, software, or third-party services, leading to unauthorized access, data breaches, service disruptions, or theft of sensitive information.
56
A cybersecurity breach or unauthorized disclosure of customer data could result in significant reputational damage, loss of customer trust, and legal and financial liabilities. We may be subject to legal and regulatory obligations to notify affected individuals and authorities, provide remedies, and face potential lawsuits and fines. The costs associated with investigating and mitigating the effects of a breach, as well as potential legal settlements and regulatory penalties, could have a material adverse impact on our business and financial position.
Furthermore, data privacy concerns and evolving privacy regulations, such as the General Data Protection Regulation (GDPR) in the European Union, require us to implement stringent data protection measures and obtain appropriate consents from users. Failure to comply with these regulations, or any changes in privacy laws or regulations, could result in legal consequences, reputational harm, and disruptions to our operations. To address these risks, we invest in cybersecurity technologies, conduct regular security assessments, and train our employees on best practices. However, the evolving nature of cyber threats and the sophistication of attackers require ongoing vigilance and investment in cybersecurity measures. It is essential for us to maintain the trust of our customers by safeguarding their data and addressing potential cybersecurity threats effectively. Failure to adequately protect against cyber threats and address data privacy concerns could adversely affect our reputation, customer relationships, and financial performance.
We may not be in compliance with all government regulations, which could harm our results of operations.
The current legal environment for Internet communications, products and services is uncertain and subject to statutory, regulatory or interpretive change. We cannot be certain that we, our vendors or our customers, are currently in compliance with applicable regulatory or other legal requirements in the countries in which our service is used. Our failure, or the failure of our vendors, customers and others with whom we transact business to comply with existing or future legal or regulatory requirements could materially adversely affect our business, financial condition and results of operations. Regulators may disagree with our interpretations of existing laws or regulations or the applicability of existing laws or regulations to our business, and existing laws, regulations and interpretations may change in unexpected ways.
If government regulation of the Internet changes, we may need to change the way we conduct our business to a manner that incurs greater operating expenses, which could harm our results of operations.
The current legal environment for Internet communications, products and services is uncertain and subject to statutory, regulatory or interpretive change. For example, our mobile wireless broadband Internet access services were previously classified as information services, and not as telecommunications services. Therefore, these services were not subject to FCC common carrier regulation. However, effective June 12, 2015, the FCC reclassified mobile (and fixed) broadband Internet access services as Title II telecommunications services pursuant to the Open Internet Order. The Open Internet Order also adopted broad net neutrality rules. For example, broadband providers may not block access to lawful content, applications, services, or non-harmful devices. Broadband providers also may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices. In addition, broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind, and they may not prioritize the content and services of their affiliates. Other than for paid prioritization, the rules contain an exception for “reasonable network management.” The Open Internet Order recognizes that whether a network management practice is reasonable varies according to the broadband technology involved and may provide more flexibility to implement network management practices in the context of our capacity-constrained air-to-ground and satellite broadband networks.
Other jurisdictions may adopt similar or different regulations that could affect our ability to use “network management” techniques. Likewise, the United States and the European Union, among other jurisdictions, are considering proposals regarding data protection that, if adopted, could impose heightened restrictions on certain of our activities relating to the collection and use of data of end users. Further, as we promote exclusive content and services and increase targeted advertising with our media partners to customers of our services, we may attract increased regulatory scrutiny.
57
We cannot be certain what positions regulators may take regarding our compliance with, or lack of compliance with, current and future legal and regulatory requirements or what positions regulators may take regarding any past or future actions we have taken or may take in any jurisdiction. Regulators may determine that we are not in compliance with legal and regulatory requirements, and impose penalties, or we may need to make changes to our services, which could be costly and difficult. Any of these events would adversely affect our operating results and business.
Further Risks Related to Government Regulation.
Our international operations complicate our business and require us to comply with multiple regulatory environments. Historically, sales to customers outside the United States have accounted for all of our net sales. Risks associated with our international business activities may increase our costs and require significant management attention. These risks include restrictions on international travel, which may restrict our ability to grow and service our business; international shipping delays; tariffs; sanctions or other trade restrictions that preclude or restrict doing business with particular foreign governments, companies or individuals; technical challenges we may face in adapting our solutions to function with different satellite services and technology in use in various regions around the world; satisfaction of international regulatory requirements and delays and costs associated with procurement of any necessary licenses or permits; the potential unavailability of content licenses covering international waters and foreign locations; increased costs of providing customer support in multiple languages; increased costs of managing operations that are international in scope; potentially adverse tax consequences, including restrictions on the repatriation of earnings; protectionist laws and business practices that favor local competitors, which could slow our growth in international markets; potentially longer sales cycles; potentially longer accounts receivable payment cycles and difficulties in collecting accounts receivable; and economic and political instability in some international markets. We could incur additional legal compliance costs associated with our international operations and could become subject to legal penalties if we do not comply with certain regulations.
Our international operations subject us to a number of legal requirements, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the customs, export, trade sanctions and anti-boycott laws of the United States, including those administered by the U.S. Customs and Border Protection, the Bureau of Industry and Security, the Department of Commerce, the Department of State, and the Office of Foreign Assets Control of the Treasury Department, as well as those of other nations.
In addition, many of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment and the reception of certain video programming services. These laws and regulations are continually changing, making compliance complex.
We incur significant costs identifying and maintaining compliance with applicable licensing and regulatory requirements. Our training and compliance programs and our other internal control policies may be insufficient to protect us from acts committed by our employees, agents or third-party contractors. Any violation of these requirements by us or our employees, agents or third-party contractors may subject us to significant criminal and civil liability. Further, many of our commercial suppliers of satellite transmission capacity impose contractual obligations on us that permit them to suspend or terminate their provision of satellite services to support our network if we fail to maintain compliance with these laws and regulations.
The loss of access to satellite capacity would materially and adversely affect our satellite communications service offerings. We are subject to FCC rules and regulations, and any non-compliance could subject us to FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services. The satellite communications industry in the United States is regulated by the Federal Communications Commission (FCC), and we are subject to FCC regulations relating to privacy, contributions to the Universal Service Fund, or USF, and other requirements. If we do not comply with FCC regulations, we could face enforcement actions, substantial fines, penalties, loss of licenses and possibly restrictions on our ability to operate or offer services. Any enforcement action by the FCC, which may be a public process, could hurt our reputation, impair our ability to sell our services to customers and harm our business and results of operations.
58
Privacy concerns and domestic or foreign laws and regulations may reduce demand for our services, increase our costs and harm our business. Our company and our customers can use our services to collect, use and store personal, confidential and sensitive information regarding the content and manner of usage of our services by them, their employees and maritime crews. Federal, state and foreign governments have adopted and are proposing more stringent laws and regulations regarding the collection, use, storage and transfer of information, such as the European Union’s General Data Protection Regulation (“GDPR”).
The costs of compliance with, and other burdens imposed by, such laws and regulations may limit the use and adoption of our services and reduce overall demand. Noncompliance with these laws and regulations could lead to significant remediation expenses, fines, penalties or other liabilities, such as orders or consent decrees that require modifications to our privacy practices, as well as reputational damage or third-party lawsuits seeking damages or other relief. For example, the GDPR imposes a strict data protection compliance regime with penalties of up to the greater of 2%-4% of worldwide revenue or €11-22 million.
Domestic and international legislative and regulatory initiatives may harm our ability, and the ability of our customers, to process, handle, store, use and transmit information, which could reduce demand for our services, increase our costs and force us to change our business practices. These laws and regulations are still evolving, are likely to be in flux and may be subject to uncertain interpretation for the foreseeable future. Our business also could be harmed if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent from country to country or inconsistent with our current policies and practices or those of our customers. Risks related to owning our common stock The market price of our common stock may be volatile.
Our stock price has historically been volatile. Many factors may cause our stock price to fluctuate, including variations in quarterly results; the introduction of new products and services by us or our competitors; adverse business developments; reductions-in-force; changes in estimates of our performance or recommendations by securities analysts; the hiring or departure of key personnel; acquisitions or strategic alliances involving us or our competitors; market conditions in our industry; and the global macroeconomic and geopolitical environment. Broad market fluctuations may adversely affect our stock price. When the market price of a company’s stock drops significantly, stockholders often institute securities litigation against that company. Any such litigation could cause us to incur significant expenses defending against the claim, divert the time and attention of our management and result in significant damage.
Risks related to the regulation of our business we may be unable to obtain or maintain required authorizations or contractual arrangements.
Various types of U.S. domestic and international authorizations and contractual arrangements are required in connection with the products and services that we provide. See “Regulatory Environment.” Compliance with certain laws, regulations, conditions and other requirements, including the payment of fees, may be required to maintain the rights provided by such authorizations, including the rights to operate satellite earth stations in certain radio frequencies. Failure to comply with such requirements, or comply in a timely manner, could lead to the loss of such authorizations and could have a material adverse impact on our business, financial condition and results of operations.
We, or our group companies, currently hold authorizations to, among other things, operate various satellite earth stations (including but not limited to user terminals, facilities that interconnect with the internet backbone, and network hubs) and operate satellite space stations and/or use those space stations to provide service to certain jurisdictions. Such authorizations are conditioned upon meeting certain milestone conditions and/or due diligence requirements, which if not met or extended could result in loss of the authorization. While we anticipate that these authorizations will be extended or renewed in the ordinary course to the extent that they otherwise would expire, or replaced by authorizations covering more advanced facilities, we can provide no assurance that this will be the case. Our inability to timely obtain or maintain such authorizations could delay or preclude our operation of such satellites or our provision of products and services that rely upon such satellites.
Further, changes to the laws and regulations under which we operate could adversely affect our ability to obtain or maintain authorizations. Any of these circumstances could have a material adverse impact on our business, financial condition and results of operations. The satellites of our partners that we connect to in our business are subject to the regulatory authority of, and conditions imposed by, foreign governments, as well as contractual arrangements with third parties and the regulations and procedures of the ITU governing access to orbital and spectrum rights and the international coordination of satellite networks. The use of spacecraft by our partners in our business is subject to various conditions in the underlying authorizations held by us and third parties, as well as the requirements of the laws and regulations of those jurisdictions.
59
Any failure to meet these types of requirements in a timely manner, maintain our contractual arrangements, obtain or maintain our authorizations, or manage potential conflicts with the orbital slot rights afforded to third parties, could lead to us losing our rights to operate from these orbital locations or may otherwise require us to modify or limit our operations from these locations, which could materially adversely affect our ability to operate a satellite at full capacity or at all, and could have a material adverse impact on our business, financial condition and results of operations.
Changes in the regulatory environment could have a material adverse impact on our competitive position, growth and financial performance.
Our business is highly regulated. We are subject to the regulatory authority of the jurisdictions in which we operate, including the United States and other jurisdictions around the world. Those authorities regulate, among other things, the launch and operation of satellites, the use of radio spectrum, the ability to operate satellites at specific orbital locations in space, the licensing of earth stations and other radio transmitters, the provision of communications services, privacy and data security, and the design, manufacture and marketing of communications systems and networking infrastructure. The space stations and ground network we use to provide our broadband services operate using some spectrum that is regulated for use on a primary basis for certain types of the satellite services we provide, some spectrum that is regulated for use on a shared basis with terrestrial wireless services, and some spectrum that is regulated primarily for terrestrial wireless and other uses but that we are authorized to use on a secondary or non-interference basis.
Moreover, spectrum availability varies from country to country, and even within countries, within our service areas. Laws and regulations affecting our business are subject to change in response to industry developments, new technology, and political considerations, among other things. Legislators and regulatory authorities in various countries are considering, and may in the future adopt, new laws, policies and regulations, as well as changes to existing regulations. We cannot predict when or whether applicable laws or regulations may come into effect or change, or what the cost and time necessary to comply with such new or updated laws or regulations may be. For example, cybersecurity and data privacy security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm and expose us to substantial fines or other penalties.
Changes in laws or regulations, including changes in the way spectrum is regulated and/or in regulations governing our products and services, changes in the way spectrum is made available to us, or is allowed to be used by others, or competing uses of spectrum or orbital locations, could, directly or indirectly, affect our operations or the operations of our distribution partners, increase the cost of providing our products and services and make our products and services less competitive. Some regulators are considering new or additional terrestrial services in the spectrum in which we operate, which may not be compatible with the way we use, or plan to use, that same spectrum.
In certain instances, such changes could have a material adverse effect on our business, financial condition and results of operations. Among other things, changes to laws and regulations could materially harm our business by (1) affecting our ability to obtain or retain required governmental authorizations, (2) restricting our ability to provide certain products or services, (3) restricting development efforts by us and our customers, (4) making our current products and services less attractive or obsolete, (5) increasing our operational costs, or (6) making it easier or less expensive for our competitors to compete with us. Failure to comply with applicable laws or regulations could result in the imposition of financial penalties against us, the adverse modification or cancellation of required authorizations, or other material adverse actions. Any such matters could materially harm our business and impair the value of our common stock.
60
Our international sales and operations are subject to applicable laws relating to trade, sanctions, export controls and foreign corrupt practices, the violation of which could have a material adverse impact on our business.
We must comply with all applicable export control laws and regulations of the United States and other countries. U.S. export and control laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (ITAR), the Export Control Reform Act of 2018 (ECRA) and the Export Administration Regulations (EAR). The export of certain satellite communications hardware, antenna control hardware, software services and technical data relating to communicating with satellites and communicating with manned and unmanned defense platforms is regulated by the U.S. Department of State under ITAR.
Certain satellite communications technologies and other items are controlled for export by the U.S. Department of Commerce under the EAR. Adverse changes in U.S. and Foreign export control laws that restrict our ability to conduct joint research activities with, or receive technical information from, US based defense contractor companies, will have a material adverse effect on our ability to conduct our business as currently contemplated. In addition, we must comply with trade and economic sanctions laws and regulations, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). We cannot provide certain products and services to certain countries or persons subject to U.S. trade sanctions unless we first obtain the necessary authorizations from OFAC. We are also subject to the Foreign Corrupt Practices Act and the UK Bribery Act, which generally bar bribes to foreign governments or officials.
Although we have in place policies for our respective employees, directors and officers, and we have clauses in our contracts with our distribution partners, resellers and other intermediaries, we cannot be certain that any such activities are not undertaken, and cannot guarantee that our policies and contracts will prevent situations occurring, including actions by distribution partners, resellers and other intermediaries, for which we may be held responsible. Non-compliance with any applicable trade control, sanctions, export control or anti-corruption laws or other legal requirements may result in criminal and/or civil penalties, disgorgement and/or other sanctions and remedial measures, and may result in unexpected legal or compliance costs.
Violations of any of these laws or regulations could also result in more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our business, and could materially adversely affect our business, financial condition and results of operations. Moreover, any investigation of alleged violations of any such laws could have a material adverse impact on our reputation, business, financial condition and results of operations.
Our possession and use of personal information and the use of credit cards by our customers present risks and expenses that could harm our business. Unauthorized disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to costly litigation and damage our reputation.
Maintaining our network security is of critical importance because our online systems will store confidential registered users, employees and other sensitive data, such as names, email addresses, addresses and other personal information. We will depend on the security of our networks and the security of the network infrastructures of our third-party telecommunications service providers, our customer support providers and our other vendors. Unauthorized use of our, or our third-party service providers’, networks, computer systems and services could potentially jeopardize the security of confidential information, including credit card information, of our future customers.
There can be no assurance that any security measures we, or third parties, take will be effective in preventing these activities. As a result of any such breaches, customers may assert claims of liability against us as a result of any failure by us to prevent these activities. Further, our in-cabin network operates as an open, unsecured Wi-Fi hotspot, and non-encrypted transmissions users send over this network may be vulnerable to access by users on the same plane. These activities may subject us to legal claims, adversely impact our reputation, and interfere with our ability to provide our services, all of which could have a material adverse effect on our business prospects, financial condition and results of operations.
Failure to protect confidential customer data or to provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts. For example, the FCC’s Consumer Proprietary Network Information, or CPNI rules, applicable to our satellite-based offerings, require us to comply with a range of marketing and privacy safeguards. The Federal Trade Commission, or FTC, could assert jurisdiction to impose penalties related our service if it found our privacy policies or security measures to be inadequate under existing federal law. We could also be subject to certain state laws that impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements. Our failure to comply with any of these rules or regulations could have an adverse effect on our business, financial condition and results of operations.
61
Other countries in which we may operate or from which our services may be offered, including those in the European Union, also have certain privacy and data security requirements that may apply to our business, either now or in the future. These countries’ laws may in some cases be more stringent than the requirements in the United States. For example, European Union member countries have specific requirements relating to cross border transfers of personal information to certain jurisdictions, including to the United States.
In addition, some countries have stricter consumer notice and/or consent requirements relating to personal information collection, use or sharing. Moreover, international privacy and data security regulations may become more complex. For example, the European Union is considering a draft proposed data protection regulation which, if enacted, may result in even more restrictive privacy-related requirements. Our failure to comply with other countries’ privacy or data security-related laws, rules or regulations could also have an adverse effect on our business, financial condition and results of operations.
In addition, we expect that our customers in the future will use credit cards to purchase our products and services. Problems with our or our vendors billing software could adversely affect our customer satisfaction and could cause one or more of the major credit card companies to disallow our continued use of their payment services. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our subscribers’ credit cards on a timely basis or at all, our business, financial condition and results of operations could be adversely affected.
Our reputation and business could be materially harmed as a result of data breaches, data theft, unauthorized access or hacking.
Our success depends, in part, on the secure and uninterrupted performance of our information technology systems. These systems may be subject to damage or interruption from, among other things, earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, acts of war, rogue employees, power loss, telecommunications failures and cybersecurity risks. An increasing number of companies have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on their computer networks. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Additionally, outside parties may attempt to induce employees or users to disclose sensitive or confidential information in order to gain access to data. If unauthorized parties gain access to our information technology systems, they may be able to misappropriate assets or sensitive information (such as personal information of our customers, business partners and employees), cause interruption in our operations, corrupt our data or computers, or otherwise damage our reputation and business. In such circumstances, we could be held liable to our customers or other parties, or be subject to regulatory or other actions for breaching privacy rules. Any compromise of our security could result in a loss of confidence in our security measures, and subject us to litigation, civil or criminal penalties, and negative publicity that could adversely affect our financial condition and results of operations.
We could also suffer other negative consequences, including significant remediation costs, significant increased cybersecurity protection costs, loss of material revenues resulting from attacks on our satellites or technology, and the unauthorized use of proprietary information or the failure to retain or attract customers following an attack. Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions, and expulsion from card acceptance programs, which could adversely affect our operations.
One customer accounted for 100% of our total revenues in fiscal year 2024.
The failure of this customer, or our inability to secure additional orders for any reason, including any downturn in their business or financial condition or our inability to renew this contract with this customer or obtain new contracts when they expire, could materially harm our business and impair the value of our common stock.
62
Our development contracts may be difficult for us to comply with and may expose us to third-party claims for damages, and we may experience losses from fixed-price contracts.
We may be party to government and commercial contracts involving the development of new products. We derived 100% of our total revenues for fiscal year 2024 from one such development contract. These contracts typically contain strict performance obligations and project milestones. We cannot assure you we will comply with these performance obligations or meet these project milestones in the future. If we are unable to comply with these performance obligations or meet these milestones, our current and future customers may terminate these contracts and, under some circumstances, recover damages or other penalties from us. We cannot assure you that the other parties to any such contract will not terminate the contract or seek damages from us. If other parties elect to terminate their contracts or seek damages from us, it could materially harm our business and impair the value of our common stock.
A substantial majority of revenues in our peer’s government systems and commercial networks segments are derived from contracts with fixed prices. These types of contracts carry the risk of potential cost overruns because we could assume all of the cost burden. We could assume greater financial risk on fixed-price contracts than on other types of contracts because if we do not anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-price contract, it would significantly reduce our net profit or cause a loss on the contract.
In the past, our peers have experienced significant cost overruns and losses on fixed-price contracts. Because these kinds of contracts typically involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in or a sustained period of increased inflation, problems with suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to our peers over time (which, especially in the case of sharp increases in or significant sustained inflation, could happen quickly and have long-lasting impacts).
Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. Although we will attempt to accurately estimate costs for any fixed-price contracts, we cannot assure you our estimates will be adequate or that substantial losses on fixed-price contracts will not occur in the future. If we are unable to address any of the risks described above, it could materially harm our business, financial condition and results of operations, and impair the value of our common stock.
Our reliance on a limited number of third parties to manufacture and supply our products and the components contained therein exposes us to various risks.
We expect our internal manufacturing capacity to be limited to supporting new product development activities, building customized products that need to be manufactured in strict accordance with a customer’s specifications or delivery schedules, and building proprietary, highly sensitive AERKOMM-designed products and components for use in our proprietary technology platform. Therefore, our internal manufacturing capacity has been, and is expected to continue to be, very limited and we intend to continue to rely on contract manufacturers to produce the majority of our products. In addition, some components, subassemblies and services necessary for the manufacture of our products are obtained from a sole source supplier or a limited group of suppliers.
Our reliance on contract manufacturers and on sole source suppliers or a limited group of suppliers involves several risks. We may not be able to obtain an adequate supply of required components, and our control over the price, timely delivery, reliability and quality of finished products may be reduced. The process of manufacturing our products and some of our components and subassemblies is extremely complex. We have in the past experienced and may in the future experience delays in the delivery of and quality problems with products and components and subassemblies from vendors. Some of the suppliers we rely upon have relatively limited financial and other resources. Significant events such as an outbreak of a pandemic such as the COVID-19 pandemic and its lingering effects, natural disasters or extreme weather events (including as a result of climate change), acts of terrorism or civil unrest, cyberattacks, labor market instability or global shortages of components or materials may cause temporary or long-term disruptions in our supply chain and distribution systems and/or delays in the delivery of inventory.
63
If we are not able to obtain timely deliveries of components and subassemblies of acceptable quality or if we are otherwise required to seek alternative sources of supply or to substitute alternative technology, or to manufacture our finished products or components and subassemblies internally, our ability to satisfactorily and timely complete our customer obligations could be negatively impacted which could result in reduced sales, termination of contracts and damage to our reputation and relationships with our customers. This failure could also result in a customer terminating our contract for default. A default termination could expose us to liability and have a material adverse effect on our ability to compete for future contracts and orders. In addition, a delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our customers’ needs and may have an adverse effect upon our profitability.
We depend upon third parties to manufacture equipment components and to provide services for our network.
We rely on third-party suppliers for equipment components that we use to provide our planned services. The supply of third-party components could be interrupted or halted by a termination of our relationships, a failure to make timely contracted payments to such suppliers, a failure of quality control or other operational problems at such suppliers or a significant decline in their financial condition. If we are not able to continue to engage suppliers with the capabilities or capacities required by our business, or if such suppliers fail to deliver quality products, parts, equipment and services on a timely basis consistent with our schedule, our business prospects, financial condition and results of operations could be adversely affected.
We depend on a limited number of key employees who would be difficult to replace.
We depend on a limited number of key technical, marketing and management personnel to manage and operate our business. In particular, we believe our success depends to a significant degree on our ability to attract and retain highly skilled personnel, including our Executive Director of the Board (Jeff Hsu), our Chief Executive Officer (Louis Giordimaina), our Chief Operating Officer (Georges Caldironi) and our President and Chief Technology Officer (Jeffrey Wun), and those highly skilled design, process and test engineers involved in the development of existing products and the development of new products and processes. The competition for these types of personnel is intense, and the loss of key employees could materially harm our business and impair the value of our common stock. To the extent that the demand for qualified personnel exceeds supply, we could experience higher labor, recruiting or training costs to attract and retain such employees, or experience difficulties in performing under our contracts if our needs for such employees were unmet.
Because we conduct business internationally, we face additional risks, including risks related to global political and economic conditions, changes in regulation and currency fluctuations.
Conducting business internationally involves additional risks, including unexpected changes in laws, policies and regulatory requirements (including regulations related to import-export control); increased cost of localizing systems in foreign countries; increased sales and marketing and R&D expenses; availability of suitable export financing; timing and availability of export licenses; imposition of taxes, tariffs, embargoes, sanctions and other trade barriers; political and economic instability, wars, insurrections and other conflicts, such as the ongoing conflict involving Ukraine; issues related to the political relationship between the United States and other countries; fluctuations in currency exchange rates (including their effect on sales denominated in foreign currencies), foreign exchange controls and restrictions on cash repatriation; compliance with international laws and U.S. laws affecting the activities of U.S. companies abroad, including existing and future privacy and cyber-related laws; challenges in staffing and managing foreign operations; difficulties in managing distributors; requirements for additional liquidity to fund our international operations; ineffective legal protection of our intellectual property rights in certain countries; potentially adverse tax consequences; potential difficulty in making adequate payment arrangements; and potential difficulty in collecting accounts receivable.
64
In addition, some of our component purchase agreements are governed by foreign laws, which may differ significantly from U.S. laws and we may be limited in our ability to enforce our rights under these agreements and to collect damages, if awarded. As a result of these and other risks, we may be unsuccessful in implementing our business plan for our business internationally, or we may not be able to achieve the revenues that we expect. If we are unable to address any of the risks described above, it could materially harm our business and impair the value of our common stock. Due to the global nature of our operations, we are subject to the complex and varying tax laws and rules of many countries and have material tax-related contingent liabilities that are difficult to predict or quantify. We are also subject to tax audits, including with respect to transfer pricing, in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. There can be no assurance that our current tax provisions will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, financial condition and results of operations.
Our Investment in Ejectt Inc. (formerly Yuanjiu Inc.) could result in losses to us.
On December 3, 2020, we made a prepayment to three individuals to purchase from them an aggregate of 6,000,000 restricted shares of Ejectt Inc. for approximately $5 million, for business purposes in Taiwan relating to the AirCinema Cube. Ejectt Inc. is a local business partner of ours. Although we are purchasing these shares as a long-term investment, the shares are currently restricted. If we determine that we need to sell these shares to raise funds for other business purposes, there may not be an immediate buyer and we may have to sell the shares at a loss. This could have a negative effect on our income statement and our ability to raise funds when needed.
We may fail to recruit, train and retain the highly skilled employees that are necessary to remain competitive and execute our growth strategy. The loss of one or more of our key personnel could harm our business.
Competition for key technical personnel in high-technology industries such as ours is intense. We believe that our future success depends in large part on our continued ability to hire, train, retain and leverage the skills of qualified engineers and other highly skilled personnel needed to maintain and grow our business and technology. We may not be as successful as our competitors at recruiting, training, retaining and utilizing these highly skilled personnel. In particular, we may have more difficulty attracting or retaining highly skilled personnel during periods of poor operating performance. Any failure to recruit, train and retain highly skilled employees could negatively impact our business and results of operations.
We depend on the continued service and performance of our key personnel, including Louis Giordimaina, our Chief Executive Officer, Jeffrey Wun, our President and Chief Technology Officer, and Georges Caldironi, our Chief Operating Officer. Such individuals have acquired specialized knowledge and skills with respect to our operations. As a result, if any of these individuals were to leave us, we could face substantial difficulty in hiring qualified successors and could experience a loss of productivity while any such successor obtains the necessary training and expertise. We do not maintain key man insurance on any of our officers or key employees. The loss of key personnel, including key members of our management team, as well as certain of our key marketing or technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our business.
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential stockholders could lose confidence in our financial statements, which would harm the trading price of our common stock.
Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report of their auditors in annual reports.
A report of our management is included under the section titled “Controls and Procedures.” We are a smaller reporting company and, consequently, are not required to include an attestation report of our auditor in our annual transition report. However, if and when we become subject to the auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors.
65
During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2023, management identified a material weakness. The material weakness was associated with our lack of sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements and our need to rely heavily on the use of external legal and accounting professionals to mitigate these deficiencies. We are undertaking remedial measures, which measures will take time to implement and test, to address this material weakness.
However, these material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. The Company will monitor the effectiveness of the remediation plan and will refine the remediation plan, as needed. Until remediated, the material weaknesses could result in future errors to the Company’s financial statements. Remediation measures are time-consuming on the Company’s financial and operational resources. In order to improve the effectiveness of its internal control over financial reporting, the Company will need to continue to expend resources, including accounting-related costs and management oversight. In view of the Company’s liquidity position, the Company can give no assurance that the measures the Company takes will remediate the material weaknesses or that additional material weaknesses will not arise in the future. Further, there can be no assurance that such measures will be sufficient to remedy the material weakness identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future.
If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price.
Expenses or liabilities resulting from litigation could adversely affect our results of operations and financial condition.
From time to time, we may be subject to claims or litigation in the ordinary course of our business, including for example, claims related to employment matters and class action lawsuits. Our operations are characterized by the use of new technologies and services across multiple jurisdictions that implicate a number of statutory schemes and a range of rules and regulations that may be subject to broad or creative interpretation, which may subject to us to litigation, including class action lawsuits, the outcome of which may be difficult to assess or quantify due to the potential ambiguity inherent in these regulatory schemes and/or the nascence of our technologies and services. Plaintiffs in these types of litigation may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. Any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our products and services, or have other adverse effects on our business. Any of the foregoing could have a material adverse effect on our results of operations and could require us to pay significant monetary damages. In addition, costly and time-consuming litigation could be necessary to enforce our existing contracts and, even if successful, could have an adverse effect on us. In addition, prolonged litigation against any airline partner, customer or supplier could have the effect of negatively impacting our reputation and goodwill with existing and potential airline partners, customers and suppliers.
66
Technological advances may harm our business.
Due to the widening use of state-of-the-art, personal electronic devices such as Apple’s iPad, ever-increasing numbers of passengers have their own mobile devices, which they might use to bring their own content such as movies, music or games with them on a flight. This could decrease demand for our in-flight offerings. Carriers now also have greater technical means at their disposal to offer passengers in-flight access to the Internet, including through our offerings and those of our competitors. At present, these offerings do not allow passengers to fully stream content on their mobile devices.
If, however, in-flight Internet access in the future allows passengers to fully stream content on their mobile devices, this could decrease demand for our in-flight offerings. While both trends will give rise to risks as well as opportunities for us, it is impossible to foresee at present whether and, if so, to what extent these trends will have lasting effects. Note, too, that the in-flight entertainment connectivity systems currently in place are unable to support these developments. Given average useful lives of 15 to 20 years, the conventional systems will continue to dominate the in-flight entertainment industry for the foreseeable future. As a result, possible changes will happen slowly, giving all market players sufficient time to adapt.
We may have exposure to foreign currency risks in the future and our future hedging activities could create losses.
Currency risks essentially arise from the fact that sales to customers and purchasing are affected in one currency while fixed costs are incurred in other currencies. If necessary, we will engage in hedging transactions to counteract direct currency risks. However, we cannot always guarantee that all currency risks will have been hedged in full. Severe currency fluctuations could also cause the hedging transactions to fail if agreed thresholds (triggers) are not met or exceeded. We therefore cannot fully preclude negative foreign currency effects in the future – some of which might be substantial – due to unforeseen exchange rate fluctuations and/or inaccurate assessments of market developments.
We will source our content from studios, distributors and other content providers, and any reduction in the volume of content produced by such content providers could hurt our business by providing us with less quality content to choose from and resulting in potentially less attractive offerings for customers.
We will receive content from studios, distributors and other content providers, and in some circumstances, we will depend on the volume and quality of the content that these content providers produce. If studios, distributors or other content providers were to reduce the volume or quality of content they make available to us over any given time period, whether because of their own financial limitations or other factors influencing their businesses, we would have less quality content to choose from and our programmers would have more difficulty finding relevant and appropriate content to provide to our customers. This could negatively impact the passenger experience, which could in turn reduce the demand for our offerings, which would have a negative impact on our revenue and results of operations.
One of our CDN services is intended to be the pre-loaded OTT (over-the-top) service, which requires negotiating alliances with multiple OTT players. Several risk factors may impact subscriber and revenue growth and projections:
| ● | Securing contracts with influential OTT players is crucial for attracting subscribers. Failure to establish contracts with them would hinder business growth. |
| ● | Maintaining the long-term strong bonds and relationships with OTT players poses a potential risk. |
| ● | The varying attractiveness of OTT players across countries complicates negotiations and weakens Aerkomm’s bargaining power, hindering the benefits of economies of scale. |
| ● | There is a risk of a breakdown in agreements with signed OTT players, leading to potential requests for increased profit sharing or minimum guarantees as our subscriber base grows. Such risks would potentially damage our business margin gain. |
67
We are a holding company with no operations of our own, and we depend on our subsidiaries for cash.
Currently, we are a holding company and do not have any material assets or operations other than ownership of equity interests of our subsidiaries. Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans. The ability of our subsidiaries to generate sufficient cash flow from future operations to allow us and them to make scheduled payments on our obligations will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. We cannot assure you that the cash flow and future earnings of our operating subsidiaries will be adequate for our subsidiaries to service their debt obligations.
If our subsidiaries do not generate sufficient cash flow from future operations to satisfy corporate obligations, we may have to: undertake alternative financing plans (such as refinancing), restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. We cannot assure you that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of operations. Furthermore, we and our subsidiaries may incur substantial additional indebtedness in the future that may severely restrict or prohibit our subsidiaries from making distributions, paying dividends or making loans to us.
Risks Related to Our Indebtedness.
Our Level of Indebtedness May Adversely Affect Our Ability to Operate Our Business, Remain in Compliance with Debt Covenants, React to Changes in Our Business or the Industry in which We Operate, or Prevent Us from Making Payments on Our Indebtedness.
We have a significant amount of indebtedness. As of December 31, 2024, the aggregate principal amount of our total outstanding indebtedness was approximately $____ million, which was comprised of approximately $__ million in principal amount of our Convertible Bond (as defined below) and approximately $__ million in principal amount of our Convertible Note (as defined below). As of December 31, 2024, we had undrawn availability of $__ million under our Convertible Note. Our high level of indebtedness could have important consequences. For example, it could:
| ● | make it more difficult for us to satisfy our debt obligations; |
| ● | increase our vulnerability to general adverse economic and industry conditions; |
| ● | impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, product development, satellite construction, acquisitions or general corporate or other purposes, or to refinance existing debt on commercially reasonable terms (or at all); |
| ● | require us to dedicate a material portion of our cash flows to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, product development, satellite construction, acquisitions and other general corporate purposes; |
| ● | expose us to variable interest rate risk with respect to borrowings under our Term Loan Facility and Revolving Credit Facility; |
| ● | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
| ● | place us at a disadvantage compared to our competitors that have less indebtedness; and |
| ● | limit our ability to adjust to changing market conditions. |
Any of these risks could materially impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations. We may also incur significant additional indebtedness in the future, which may include financing relating to future satellites, potential acquisitions, joint ventures and strategic alliances, working capital, capital expenditures or general corporate purposes.
68
We may not be able to generate sufficient cash to service all of our indebtedness and fund our working capital and capital expenditures or refinance our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness will depend upon our future operating performance and on our ability to generate cash flow in the future, which is subject to economic, financial, business, competitive, legislative, regulatory and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, or that future borrowings will be sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Moreover, there can be no assurance that we will be able to refinance our debt obligations on commercially reasonable terms, or at all.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investment and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations. If we cannot make scheduled payments on our debt, we will be in default and, as a result, the lenders under our Convertible Bond and the holders of the Convertible Note and our Bonds (as defined below) could declare all outstanding principal and interest to be due and payable, and could foreclose against the assets securing the borrowings under our Bonds and Notes, and we could be forced into bankruptcy or liquidation, which could result in you losing your investment in our company.
Risks Relating to our Industries.
The satellites that we currently rely on or may rely on in the future have minimum design lives but could fail or suffer reduced capacity before then.
The usefulness of the satellites upon which we currently rely and may rely on in the future is limited by each satellite’s minimum design life. For example, the satellites through which we provide will our services have minimum design lives ranging from 10 to 15 years. Our ability to offer in-flight connectivity and alleviate capacity constraints throughout our network will depend on the continued operation of the satellites or any replacement satellites, each of which will have a limited useful life. We can provide no assurance, however, as to the actual operational lives of those or future satellites, which may be shorter than their design lives, nor can we provide assurance that replacement satellites will be developed, authorized or successfully deployed.
In the event of a failure or loss of any of these satellites, our satellite service providers may relocate another satellite and use it as a replacement for the failed or lost satellite, which could have an adverse effect on our business, financial condition and results of operations. Such a relocation may require regulatory approval, including through, among other things, a showing that the replacement satellite would not cause additional interference compared to the failed or lost satellite. We cannot be certain that our satellite service provider could obtain such regulatory approval. In addition, we cannot guarantee that another satellite will be available for use as a replacement for a failed or lost satellite, or that such relocation can be accomplished without disrupting or otherwise adversely impacting our business.
69
Satellites that are not yet in service are subject to construction and launch related risks.
Satellite construction and launch are subject to significant risks, including delays, launch failure and incorrect orbital placement. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites and to obtain other launch opportunities. Construction and launch delays could materially and adversely affect our ability to generate revenues.
Satellite Failures or Degradations in Satellite Performance for our Partners Could Affect Our Business, Financial Condition and Results of Operations.
While we do not own and operate our own satellites, because we are a value-added reseller of bandwidth on our partners’ satellites, it is critical to note the general risks related to satellites, which are faced by our partners. Satellites utilize highly complex technology, operate in the harsh environment of space and are subject to significant operational risks while in orbit. These risks include malfunctions (commonly referred to as anomalies), such as malfunctions in the deployment of subsystems and/or components, interference from electrostatic storms, and collisions with meteoroids, decommissioned spacecraft or other space debris. Anomalies can occur as a result of various factors, including satellite manufacturer error, problems with the power or control sub-system of a satellite or general failures caused by the harsh space environment.
Our partners’ satellites have experienced various anomalies in the past and we will likely experience anomalies in the future. Any single anomaly or other operational failure or degradation on the satellites we use could have a material adverse effect on our business, financial condition and results of operations. Anomalies may also reduce the expected useful life of a satellite, thereby creating additional expense due to the need to provide replacement or backup capacity, which may not be available on reasonable economic terms, a reasonable schedule or at all. In addition, anomalies may cause a reduction of the revenues generated by the applicable satellite or the recognition of an impairment loss, and could lead to claims from third parties for damages. Finally, anomalies may adversely affect our ability to insure our satellites at commercially reasonable premiums or terms, if at all. While some anomalies are covered by insurance policies, others may not be covered or may be subject to large deductibles. Although our partners’ satellites typically have redundant or backup systems and components that operate in the event of an anomaly, operational failure or degradation of primary critical components, these redundant or backup systems and components are subject to risk of failure similar to those experienced by the primary systems and components. The occurrence of a failure of any of these redundant or backup systems and components could materially impair the useful life, capacity, coverage or operational capabilities of the satellite.
Our Partners’ Satellites Have a Finite Useful Life, and Their Actual Operational Life May Be Shorter than Their Design Life.
Our ability to earn revenues from integrating and reselling our partners’ satellite services depends on the continued operation of the satellites they own and operate or use. Each satellite has a limited useful life, referred to as its design life. There can be no assurance as to the actual operational life of a satellite, which may be shorter than its design life. A number of factors affect the useful lives of the satellites, including the quality of design and construction, durability of component parts and back-up units, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, consumption of on-board fuel, degradation and durability of solar panels, the actual space environment experienced and the occurrence of anomalies or other in-orbit risks affecting the satellite. In addition, continued improvements in satellite technology may make satellites obsolete prior to the end of their operational life.
70
Our Partners’ New or Proposed Satellites are Subject to Significant Risks Related to Construction and Launch that Could Limit Our Ability to Utilize these Satellites.
Satellite construction and launch are subject to significant risks, including construction delays, manufacturer error, cost overruns, regulatory conditions or delays, unavailability of launch opportunities, launch failure, damage or destruction during launch and improper orbital placement, any of which could result in significant additional cost or materially impair the useful life, capacity, coverage or operational capabilities of the satellite. The technologies in our partners’ satellite designs are also very complex, and there can be no assurance that the technologies will work as our partners expect or that our partners will realize any or all of their anticipated benefits. The identification of construction-related issues in our partners satellites is not uncommon. For example, our partner Viasat’s ViaSat-2 satellite experienced an antenna deployment issue which reduced its output capabilities. Our satellite partners have also experienced delays in satellite construction and launch, such as the delay experienced, also by Viasat, in launching their ViaSat-2 satellite caused by civil unrest in French Guiana (the location of the satellite launch), construction delays in ViaSat’s ViaSat-3 satellites caused by the COVID-19 pandemic and delays in the launch of the ViaSat-3 Americas satellite due to high priority launch missions and adverse weather conditions at the launch site. If satellite construction schedules are not met or other events prevent satellite launch on schedule, a launch opportunity may not be available at the time the satellite is ready to be launched.
In addition, delays in construction or launch could impact our partners’ ability to meet milestone conditions in their satellite authorizations and/or to maintain the rights they may enjoy under various ITU or FCC filings, which in turn could impact our own business, to the extent that we are reliant on certain satellites being in operation to deliver and resell services to our customers. A launch failure may result in significant delays because of the need both to construct a replacement satellite and to obtain other launch opportunities. The overall historical loss rate in the satellite industry for all launches of commercial satellites in fixed orbits in the last five years is estimated by some industry participants to be close to 0% but could at any time be higher. Launch vehicles may also underperform, in which case the satellite may still be able to be placed into service by using its onboard propulsion systems to reach the desired orbital location, but this would cause a reduction in its useful life. Moreover, even if launch is successful, there can be no assurance that the satellite will successfully reach its geostationary orbital slot and pass in-orbit testing prior to transfer of control of the satellite to its operator. The failure to implement a satellite deployment plan on schedule could have a material adverse effect on our partners’—and by extension our own—business, financial condition and results of operations.
Our Partners’ Potential Satellite Losses May Not Be Fully Covered By Insurance, or at All
Our partners may not be able to obtain or renew pre-launch, launch or in-orbit insurance for their satellites on reasonable economic terms or at all. A failure by our partners to obtain or renew their satellite insurance may also result in a default under their debt instruments. In addition, the occurrence of anomalies on other satellites, or failures of a satellite using similar components or failures of a similar launch vehicle to any launch vehicle our partners intend to use, may materially adversely affect our partners’ ability to insure their satellites at commercially reasonable premiums or terms, if at all. The policies covering our partners insured satellites will not cover the full cost of constructing and launching or replacing a satellite nor fully cover our losses in the event of a satellite failure or significant degradation.
Moreover, such policies do not cover lost profits, business interruptions, fixed operating expenses, loss of business or similar losses, including contractual payments that our partners may be required to make under their agreements with their customers, including ourselves, for interruptions or degradations in service. Our partners’ insurance typically contains customary exclusions, material change and other conditions that could limit recovery under those policies, and may contain exclusions for past satellite anomalies. Further, any insurance proceeds may not be received on a timely basis in order to launch a replacement satellite or take other remedial measures. In addition, the policies are subject to limitations involving uninsured losses, large satellite performance deductibles and policy limits. To the extent that these risks weaken our satellite partners and negatively impact their business and financial position, our own business and financial position may similarly be impacted by extension.
Our future airline industry business may be affected by factors beyond the airlines’ control. The airline industry is highly competitive and sensitive to changing economic conditions.
Our planned commercial aviation connectivity business is directly affected by the number of passengers flying on commercial aircraft, the financial condition of the airlines and other economic factors. If consumer demand for air travel declines, including due to increased use of technology such as videoconferencing for business travelers, or the number of aircraft and flights shrinks due to, among other reasons, another pandemic, reduction in capacity by airlines, the number of passengers available to use our service will be reduced, which would have a material adverse effect on our business and results of operations. Unfavorable general economic conditions and other events that are beyond the airlines’ control, including higher unemployment rates, higher interest rates, reduced stock prices, reduced consumer and business spending, terrorist attacks or threats and pandemics could have a material adverse effect on the airline industry.
A general reduction or shift in discretionary spending can result in decreased demand for leisure and business travel and lead to a reduction in airline flights offered and the number of passengers flying. Further, unfavorable economic conditions could also limit airlines’ ability to counteract increased fuel, labor or other costs though raised prices. Our airline partners operate in a highly competitive business market and, as a result, continue to face pressure on offerings and pricing. These unfavorable conditions and the competitiveness of the air travel industry could cause one or more of our airline partners to reduce expenses on passenger services including deployment of our service or file for bankruptcy. Any of these events would have a material adverse effect on our business prospects, financial condition and results of operations.
71
Limited satellite availability may delay or curtail our ability to develop our satellite backhaul business.
If the number of satellite launches is delayed or falls short of the current planned quantity, it will directly impact the adoption rate of satellite communication for mobile backhaul, which, in turn, will directly affect our planned backhaul business. The availability of an adequate number of satellites is crucial for establishing a robust satellite communication infrastructure to support mobile backhaul services. However, if the planned number of satellite launches is not met, it can limit the capacity and coverage capabilities of the satellite communication system. Insufficient satellite coverage may result in reduced availability of mobile backhaul services via satellite, impacting our ability to offer comprehensive solutions to customers. Furthermore, a lower adoption rate of satellite communication for mobile backhaul due to limited satellite availability may also affect our competitiveness in the market. Customers may turn to competitors offering alternative solutions or may delay their adoption of mobile backhaul services altogether.
Our planned CDN business will be subject to certain industry-specific risks that may affect our operations and financial performance.
The Company’s CDN business will be subject to certain industry-specific risks that may affect our operations and financial performance. These risks include:
| ● | Technology Changes: The content delivery industry evolves rapidly, and we need to keep up with technological advancements to remain competitive. Failure to stay current could result in losing market share to more advanced solutions. |
| ● | Market Competition: The content delivery market is highly competitive, with numerous providers offering similar services. We must differentiate ourselves, handle price pressures, and scale effectively to maintain a competitive edge. |
| ● | Network Performance: Our success depends on delivering high-performance content delivery services. Network limitations, such as bandwidth constraints or insufficient server capacity, could lead to slower delivery and service disruptions. |
| ● | Security and Data Privacy: Protecting customer data and content is crucial. Security breaches or data leaks could damage our reputation and result in legal consequences. Compliance with data protection regulations and robust security measures are necessary. |
| ● | Dependency on ISPs: We rely on the cooperation of Internet Service Providers (ISPs) for efficient content delivery. Conflicts or disruptions with ISPs may impact service quality and availability. |
| ● | Intellectual Property Infringement: Unauthorized distribution of copyrighted content could lead to legal claims and reputational damage. Implementing content monitoring mechanisms and complying with intellectual property laws are important. |
| ● | Regulatory Environment: Regulatory changes related to net neutrality, data protection, and copyright regulations may affect our operations and revenue streams. Adapting to evolving regulations is necessary for compliance. |
Monitoring these risks and implementing proactive measures is essential. Adapting to market dynamics, investing in technology, and prioritizing customer satisfaction will help us maintain a strong position in the competitive content delivery landscape.
72
Air traffic congestion at airports, air traffic control inefficiencies, weather conditions, such as hurricanes or blizzards, increased security measures, new travel-related taxes, the outbreak of disease or any other similar event could harm the airline industry.
Airlines are subject to cancellations or delays caused by factors beyond their control. Cancellations or delays due to weather conditions or natural disasters, air traffic control problems, breaches in security or other factors could reduce the number of passengers on commercial flights and thereby reduce demand for the services provided by us and our products and services and harm our businesses, results of operations and financial condition.
Our Defense Business Requires Compliance with Myriad Regulations and Introduces Requirements on our Operations.
For certain potential classified programs which we aim to support in the future, we may need special security clearances to work on and advance certain of our potential programs and potential contracts with U.S. and foreign governments. Classified programs generally will require that we comply with various Executive Orders, federal laws and regulations, as well as customer security requirements, that may include restrictions on how we develop, store, protect and share information, and may require our employees to obtain government clearances.
In addition, we are subject to industry-specific regulations due to the nature of the products and services we provide. For example, certain aspects of our business are subject to further regulation by additional U.S. government authorities, or their foreign government counterparts abroad, including (i) the Federal Aviation Administration, which regulates airspace for all air vehicles in the U.S. National Airspace System, (ii) the National Telecommunications and Information Administration and the Federal Communications Commission, which regulate the wireless communications upon which our potential customers manned and unmanned platforms depend in the United States and (iii) the Directorate of Defense Trade Controls (DDTC) at the U.S. Department of State that administers the International Traffic in Arms Regulations, which regulate manufacturing, exporting or temporarily importing defense articles, or furnishing defense services.
In addition, the export, reexport and transfer of certain of our potential products and technology may require the issuance of a license by the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce under the Export Control Reform Act, and its implementing regulations, the Export Administration Regulations (EAR). Some of our potential products may require the issuance of a license by DDTC, which licenses can be more difficult to obtain than BIS licenses. As our research and development and customer base continue to evolve, the requirements on our business and on our employees to comply with these regulations may increase.
Our Technologies may Be Subject to Export Control Regulations, which May Limit or Restrict the Universe of Potential Investors and Acquirers of our Common Stock, which May Impact the Performance of our Share Price.
The nature of the work we do for the federal government may also limit the parties who may invest in or acquire us. For instance, export control laws may keep us from providing potential foreign acquirers with a review of the technical data they would be acquiring. In addition, there are special requirements for foreign parties who wish to buy or acquire certain rights with respect to companies that undertake activities that present potential national security concerns, including those related to controlled technology and/or U.S. government contracts. There may need to be a review of foreign investment by the Committee on Foreign Investment in the United States (CFIUS) under the Defense Production Act and the Foreign Investment Risk Review Modernization Act, which could result in mitigation measures imposed on the company or prohibitions against certain investments in the company by foreign parties.
Finally, the government may require a prospective foreign owner to agree to certain limitations on its ownership, control and/or influence over the company, including by establishing intermediaries to manage and control that part of the company that does classified work. These limitations may make such an acquisition less appealing to such potential acquirers.
73
Risks Relating to our Technology
Our Success Depends on the Investment in and Development of New Broadband Technologies and Advanced Communications and Secure Networking Systems, Products and Services, as well as their Market Acceptance.
Broadband, advanced communications and secure networking markets are subject to rapid technological change, frequent new and enhanced product and service introductions, product obsolescence and changes in user requirements. Our ability to compete successfully in these markets depends on our success in applying our expertise and technology to existing and emerging broadband, advanced communications and secure networking markets, as well as our ability to successfully develop, introduce and sell new products and services on a timely and cost-effective basis that respond to ever-changing customer requirements, which depends on numerous factors, including our ability to: continue to develop market-leading satellite technologies (including high-capacity universal terminals and associated ground networks); continue to increase universal terminal performance, bandwidth cost-efficiencies and service quality; develop and introduce competitive products, services and technologies with innovative features that differentiate our offerings from those of our competitors; successfully integrate our complex technologies and system architectures with those of our partners; and implement design, manufacturing and assembly innovations and cost reduction efforts. We cannot assure you that our new technology, product or service offerings will be successful or that any of our offerings will achieve market acceptance.
Many of these risks are amplified in new and emerging markets where we do not currently operate or have limited operations, but which present opportunities for international expansion, alongside our satellite partners. The time from conception through product launch for a new universal terminal design may be two years or longer, thereby delaying our ability to realize the benefits of our investments in new universal terminal designs and technologies. We may experience difficulties that could delay or prevent us from successfully selecting, developing, manufacturing or marketing new technologies, products or services, which could increase costs and divert our attention and resources from other projects.
We cannot be sure that our efforts and expenditures will ultimately lead to the timely development of new offerings and technologies. In addition, defects may be found in our products after we begin deliveries that could degrade service quality, or result in the delay or loss of market acceptance. If we are unable to design, manufacture, integrate and market profitable new products and services for existing or emerging markets, it could materially harm our business, financial condition and results of operations, and impair the value of our common stock.
In addition, we believe that significant investments by our partners into next-generation broadband satellites and associated infrastructure will continue to be required as demand for broadband services and satellite systems with higher capacity and higher speed continues to grow. The development of these capital-intensive next-generation systems may require our partners to undertake debt financing and/or the issuance of additional equity, which could expose our partners to increased risks, which could be passed along to our customers as price increases, which could impair our margins and therefore could impair the value of our common stock. In addition, if we are unable to effectively or profitably design, manufacture, integrate and market such next-generation technologies, it could materially harm our business, financial condition and results of operations, and impair the value of our common stock.
Because Our Products Are Complex and Are Deployed in Complex Environments, Our Products May Have Defects that We Discover Only After Full Deployment, which Could Seriously Harm Our Business
We produce highly complex products that incorporate leading-edge technology, including both hardware and software. Software typically contains defects or programming flaws that can unexpectedly interfere with expected operations. In addition, our products are complex and are designed to be deployed across complex networks, which one day may include over a million users. Because of the nature of these products, there is no assurance that our pre-shipment testing programs will be adequate to detect all defects. As a result, our customers may discover errors or defects in our hardware or software, or our products may not operate as expected after they have been fully deployed.
If we are unable to cure a product defect, we could experience damage to our reputation, reduced customer satisfaction, loss of existing customers and failure to attract new customers, failure to achieve market acceptance, cancellation of orders, loss of revenues, reduction in backlog and market share, increased service and warranty costs, diversion of development resources, legal actions by our customers, product returns or recalls, issuance of credit to customers and increased insurance costs. Further, due to the high-volume nature of the satellite broadband business, defects of products used in this business in the future could significantly increase these risks. Defects, integration issues or other performance problems in our products could also result in financial or other damage to our customers.
74
Our future customers could seek damages for related losses from us, which could seriously harm our business, financial condition and results of operations. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly. The occurrence of any of these problems would seriously harm our business, financial condition and results of operations.
We could be adversely affected if we suffer service interruptions or delays, technology failures or damage to our equipment.
Our reputation and ability to attract, retain and serve our future customers will depend upon the reliable performance of our satellite transponder capacity, network infrastructure and connectivity system. We may experience service interruptions, service delays or technology or systems failures in the future, which may be due to factors beyond our control. If we experience frequent system or network failures, our reputation could be harmed, and our future airline customers may have the right to terminate their contracts with us or pursue other remedies.
Our operations and services will depend upon the extent to which our equipment and the equipment of our third-party network providers is protected against damage from fire, flood, earthquakes, power loss, solar flares, telecommunication failures, computer viruses, break-ins, acts of war or terrorism and similar events. Damage to our networks could cause interruptions in the services that we will provide, which could have a material adverse effect on service revenue, our reputation and our ability to attract or retain customers.
We rely on service providers for certain critical components of and services relating to our satellite connectivity network.
We design our proprietary phased array antenna and ICs and currently source from third parties key portions of the manufacturing process of our hardware, including the IC foundry, glass-based antenna fabrication, mobile backhaul system assembly and key aspects of our connectivity services, including all of our current satellite transponder services from SES. If we experience a disruption in the delivery of products and services from either of these providers, it may be difficult for us to continue providing our own products and services to our customers. We have experienced component delivery issues in the past and there can be no assurance that we will avoid similar issues in the future.
We will rely on third-party service providers for critical components and services essential to our planned CDN business. Currently, we depend on these providers for key hardware components and connectivity services. Any disruption in their product delivery or service provision could impact our ability to deliver our own products and services to customers. Past experiences with component delivery issues highlight the potential for similar challenges in the future. Moreover, if we were to lose exclusive access to a hardware provider, our competitive advantage in satellite-based connectivity could be compromised, posing a material risk to our business and operations.
Cybersecurity breaches could disrupt our operations, expose us to liability, damage our reputation, and require us to incur significant costs or otherwise adversely affect our financial results.
We are highly dependent on information technology networks and systems, including the Internet and third-party systems, to securely process, transmit and store electronic information, including personal information of our customers. We also retain sensitive data, including intellectual property, proprietary business information, personally identifiable information, credit card information, and usage data of our employees and customers on our computer networks and those of third parties. Although we take certain protective measures and endeavor to modify them as we believe circumstances warrant, invasive technologies and techniques continue to evolve rapidly, and increasingly sophisticated hacking organizations are targeting business systems. As a result, the computer systems, software and networks that we use are vulnerable to disruption, shutdown, unauthorized access, misuse, erasure, alteration, employee error, phishing, computer viruses, ransomware or other malicious code, and other events that could have a material security impact.
75
The protective measures on which we rely may be inadequate to prevent or detect all material cybersecurity breaches or determine the extent of any material breach, and there can be no assurance that material undetected breaches have not already occurred. If any material cybersecurity event were to occur, it could disrupt our operations, distract our management, cause us to lose existing customers and fail to attract new customers, as well as subject us to regulatory actions, litigation, fines, damage to our reputation or competitive position, or orders or decrees requiring us to modify our business practices, any of which could have a material adverse effect on our financial position, results of operations or cash flows.
Risks Relating to Intellectual Property
We may not be able to protect our intellectual property rights.
We regard our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our success. We rely on trademark, copyright and patent law, trade secret protection and confidentiality agreements with our employees, vendors, airline customers, customers and others to protect our proprietary rights. Many of the trademarks that we use contain words or terms having a somewhat common usage and, as a result, we may have difficulty registering them in certain jurisdictions. We have not yet obtained registrations for our most important marks in all markets in which we may do business in the future, including countries in Asia, Africa, the Middle East and the US. If other companies have registered or have been using in commerce similar trademarks for services similar to ours in foreign jurisdictions, we may have difficulty in registering, or enforcing an exclusive right to use, our marks in those foreign jurisdictions.
There can be no assurance that our efforts to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products or services, or that our patents, trademarks and other intellectual property in the future will not be challenged, invalidated, misappropriated or infringed by others. Additionally, the intellectual property laws and enforcement practices of other countries in which our service is or may in the future be offered may not protect our products and intellectual property rights to the same extent as the laws of the United States. If we are unable to protect our intellectual property from unauthorized use, our brand image may be harmed, and our business and results of operations may suffer.
Disclosure of trade secrets could cause harm to our business.
We attempt to protect our trade secrets by entering into confidentiality and intellectual property assignment agreements with third parties, our employees and consultants. However, these agreements can be breached and, if they are, there may not be an adequate remedy available to us. In addition, others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using our trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. If we are unable to protect our intellectual property, our competitors could market services or products similar to our services and products, which could reduce demand for our offerings. Any litigation to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others could result in substantial costs and diversion of resources, with no assurance of success.
Assertions by third parties of infringement, misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.
In recent years, there has been significant litigation involving intellectual property rights in many technology-based industries, including the wireless communications industry. Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming, diverts technical and management personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. Certain of our suppliers do not provide indemnity to us for the use of the products and services that these providers supply to us.
76
At the same time, we generally offer third-party intellectual property infringement indemnity to our customers which, in some cases, does not cap our indemnity obligations and thus could render us liable for both defense costs and judgments. Any of these events could result in increases in operating expenses, limit our service offerings or result in a loss of business if we are unable to meet our indemnification obligations and our airline customers terminate or fail to renew their contracts.
Our Ability to Protect Our Proprietary Technology Is Limited
Our success will depend, in part, on our ability to protect our proprietary rights to the technologies we use in our products and services. In the future, we will rely on a combination of patents, copyrights, trademarks and trade secret laws and contractual rights to protect our proprietary rights. We also enter into confidentiality agreements with our employees, consultants and corporate partners, and control access to and distribution of our proprietary information. Despite our efforts, unauthorized parties may attempt to copy or obtain and use our proprietary information. If we are unable to protect our proprietary rights adequately, our competitors could use the intellectual property we developed to enhance their own products and services, which could materially harm our business and impair the value of our common stock. Monitoring and preventing unauthorized use of our technology is difficult. Misappropriation by competitors may not be readily detectable.
From time to time, we may undertake actions to prevent unauthorized use of our technology, including sending cease and desist letters. In addition, we may be required to commence litigation to protect our intellectual property rights or to determine the validity and scope of the proprietary rights of others. If we are unsuccessful in any such litigation in the future, our rights to enforce such intellectual property may be impaired or we could lose our rights to such intellectual property. We do not know whether the steps we have taken will prevent unauthorized use of our technology, including in foreign countries where the laws may not protect our proprietary rights as extensively as in the United States. If we are unable to protect our proprietary rights, we may find ourselves at a competitive disadvantage to others who need not incur the substantial expense, time and effort required to create the innovative products.
Our Involvement in Litigation Relating to Intellectual Property Claims May Have a Material Adverse Effect on Our Business
In the future, we may be party to intellectual property infringement, invalidity, right to use or ownership claims by third parties, or claims for indemnification from customers and business partners resulting from infringement claims. Regardless of the merit of these claims, intellectual property litigation can be time consuming and costly and may result in the diversion of the attention of technical and management personnel. An adverse result in any litigation could have a material adverse effect on our business, financial condition and results of operations.
Asserted claims or initiated litigation can include claims against us or our manufacturers, suppliers or customers alleging infringement of their proprietary rights with respect to our existing or future products, or components of those products. If our products are found to infringe or violate the intellectual property rights of third parties, we may be forced to (1) seek licenses or royalty arrangements from such third parties, (2) stop selling, incorporating or using products that included the challenged intellectual property, or (3) incur substantial costs to redesign those products that use the technology. We cannot assure you that we would be able to obtain any such licenses or royalty arrangements on reasonable terms or at all or to develop redesigned products or, if these redesigned products were developed, they would perform as required or be accepted in the applicable markets.
Our use of open-source software could limit our ability to commercialize our technology.
Open-source software is widely and freely available to the public in human-readable source code form, usually with liberal rights to modify and improve such software. Some open-source licenses require as a condition of use that proprietary software that is combined with licensed open-source software and distributed must be released to the public in source code form and under the terms of the open-source license. Accordingly, depending on the manner in which such licenses were interpreted and applied to software code that combines proprietary ad open source software and source code, we could face restrictions on our ability to commercialize certain of our products and we could be required to (i) release the source code of certain of our proprietary software to the public, including competitors; (ii) seek licenses from third parties for replacement software; and/or (iii) re-engineer our software in order to continue offering our products. Such consequences could materially adversely affect our business.
77
The laws of some foreign countries do not protect our proprietary technology to the same extent as the laws of the United States, which could increase the likelihood of misappropriation.
Any misappropriation of our technology could seriously harm our competitive position, which could lead to a substantial reduction in net sales. If we resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome, disruptive and expensive. The proceedings could distract the attention of management, and we may not prevail. Claims by others that we infringe their intellectual property rights could harm our business and financial condition. Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. We cannot be certain that our products and services do not and will not infringe issued patents, patents that may be issued in the future, or other intellectual property rights of others.
Risks Relating to Ownership of our Common Stock
Our common stock is quoted on the OTC Pink Market, which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTC Pink Market. The OTC Pink Market is a significantly more limited market than the New York Stock Exchange or the Nasdaq Stock Market. The quotation of our shares on the OTC Pink Market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
Our common stock is quoted on the Professional Segment of the regulated market of Euronext Paris, which may have an unfavorable impact on our stock price and liquidity.
Since July 23, 2019, our common stock has also been listed on the Professional Segment of the regulated market of Euronext Paris under the symbol “AKOM”. The Professional Segment of the regulated market of Euronext Paris is a significantly more limited market than the regulated market of Euronext Paris (Compartment A, B or C). The quotation of our shares on the Professional Segment of the regulated market of Euronext Paris may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
Our common stock may be subject to significant price volatility which may have an adverse effect on your ability to liquidate your investment in our common stock.
The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, our shares of common stock are currently sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our shares of common stock are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.
Secondly, an investment in us is a speculative or “risky” investment due to our lack of meaningful profits to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
78
We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If an active public trading market does not develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.
At present, there is minimal public trading in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable.
As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our common stock.
We are subject to penny stock regulations and restrictions, and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is currently a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
There can be no assurance that our common stock will be able to qualify for exemption from the Penny Stock Rule in the future now that our stock price has dropped below the point where we became subject to the Penny Stock Rule. This rule could affect the ability of broker-dealers to sell our securities and affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital in the future. Additionally, now that our common stock is subject to the Penny Stock Rule, we are subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
Our board of directors has broad discretion to issue additional securities and any such issuance may cause substantial dilution to our stockholders.
We are entitled under our articles of incorporation to issue up to 90,000,000 shares of common stock and 50,000,000 shares of “blank check” preferred stock, although these amounts may change in the future subject to stockholder approval. Shares of our blank check preferred stock provide our board of directors with broad authority to determine voting, dividend, conversion, and other rights. As of the date of this annual report, we have issued and outstanding 19,638,849 shares of common stock, no shares of preferred stock, and we have 6,083,929 shares of common stock reserved for issuance under our 2017 and 2023 Equity Incentive Plans, of which 289,397 shares remain available for issuance. As of December 31, 2024, we had no shares of preferred stock issued and outstanding. Accordingly, at the date of this annual report, we could issue up to 430,361,151 additional shares of common stock (including shares reserved under our 2017 Equity Incentive Plan) and 50,000,000 shares of “blank check” preferred stock.
79
Any additional stock issuances could be made at a price that reflects a discount or premium to the then-current market price of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval by our stockholders. Any preferred shares we may issue could have such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions. We may also issue additional securities to our directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our stock incentive plans. The issuance of additional securities may cause substantial dilution to our stockholders.
Our articles of incorporation, bylaws and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock price to decline.
Our articles of incorporation, bylaws and Nevada law contain provisions which could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are currently authorized to issue up to 50,000,000 shares of “blank check” preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. No shares of our preferred stock are currently outstanding. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by current management.
Provisions of our articles of incorporation, bylaws and Nevada law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our articles of incorporation, our bylaws and Nevada law, as applicable, among other things, provide our board of directors with the ability to alter our bylaws without stockholder approval, and provide that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum.
Adverse Resolution of Litigation May Harm Our Operating Results or Financial Condition.
We are not currently party to any lawsuits or claims, but it is possible that they may arise in the normal course of our business. Moreover, significant transactions like the MESHUB Transaction are frequently subject to litigation or other legal proceedings, including actions alleging that our board of directors breached their fiduciary duties to our stockholders by entering into the transaction. Litigation can be expensive, lengthy and disruptive to normal business operations, including through the possible diversion of company resources or distraction of key personnel. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on our business, financial condition and results of operations.
General Risk Factors
We will likely need additional financing to execute our business plan or new initiatives, which we may not be able to secure on acceptable terms, or at all.
We will require additional financing in the near and long term to fully execute our business plan. Our success may depend on our ability to raise such additional financing on reasonable terms and on a timely basis. Conditions in the economy and the financial markets may make it more difficult for us to obtain necessary additional capital or financing on acceptable terms, or at all. If we cannot secure sufficient additional financing, we may be forced to forego strategic opportunities or delay, scale back or eliminate additional service deployment, operations and investments or employ internal cost savings measures. Furthermore, we will be forced to take some or all of these measures if we do not raise sufficient funds in our public offering, the successful completion of which we cannot guarantee.
80
We face limitations on our ability to grow our operations which could harm our operating results and financial condition.
Our addressable market and our ability to expand in our operating region is inherently limited by various factors, including limitations on the number of commercial airlines with which we could partner, the number of planes in which our equipment can be installed, the passenger capacity within each plane and the ability of our network infrastructure or bandwidth to accommodate increasing capacity demands. Future expansion is also limited by our ability to develop new technologies on a timely and cost-effective basis, as well as our ability to mitigate network capacity constraints through, among other things, the expansion of our satellite coverage area. Our future growth may slow, or once we begin selling products and services to our customers, we may stop growing altogether, to the extent that we have exhausted all potential airline partners and as we approach installation on full fleets and maximum penetration rates on all flights. In order to grow our future revenue, we will have to rely on customer and airline partner adoption of currently available and new or developing services and additional offerings. We cannot assure you that we will be able to obtain a market presence or establish new markets and, if we fail to do so, our business and results of operations could be materially adversely affected.
Furthermore, our ability to develop and deploy new technologies in a timely and cost-effective manner is crucial for future expansion. If we encounter challenges in technological advancements or fail to keep pace with market demands, our growth prospects could be significantly affected. We cannot provide assurance that we will be able to overcome these limitations and successfully expand our business. Failure to achieve market presence or establish new markets could have a material adverse effect on our business and financial performance.
Our revenues, results of operations, and financial condition may be negatively impacted by continued economic uncertainty, geopolitical tensions, and shifts in government policy.
Global economic and political conditions remain complex and dynamic, with many regions facing continued uncertainty due to factors such as slowing economic growth, inflationary pressures, rising interest rates, and evolving trade dynamics. Geopolitical events—including the ongoing conflict between Russia and Ukraine—have introduced additional volatility into the global economy. While the broader impact of the war remains difficult to predict, its continuation has contributed to disruptions in energy markets, supply chain logistics, and transportation routes, all of which may affect our cost structure and operational timelines.
In the United States, recent policy initiatives and regulatory shifts under the current administration of President Donald Trump may also have implications for cross-border trade, international partnerships, and the broader investment climate. The administration’s continued focus on domestic industry protection, adjustments to international agreements, and an evolving approach to foreign policy could reshape the regulatory environment in which we operate. Additionally, our business could be adversely impacted by factors such as constrained consumer and enterprise spending, political gridlock, changes in government funding priorities, labor shortages, or volatility in capital markets. While the intensity and duration of these risks vary across geographic regions and sectors, any prolonged period of macroeconomic or political instability may result in reduced demand for our products and services, delays in procurement decisions, and higher operational costs, all of which could have a material adverse effect on our business and financial performance.
Changes in U.S. trade policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on us.
The U.S. may continue to alter its approach to international trade, which may impact existing bilateral or multi-lateral trade agreements and treaties with foreign countries. The U.S. has imposed tariffs on certain foreign goods and may increase tariffs or impose new ones, and certain foreign governments have retaliated and may continue to do so.
We derive the majority of our revenues from international sales, which makes us especially vulnerable to increased tariffs.
A substantial portion of our revenue is generated from international markets, exposing us to risks associated with global trade policies, tariffs, foreign currency fluctuations, and shifting geopolitical dynamics.
81
Recent trade and foreign policy measures under the administration of President Donald Trump have contributed to heightened uncertainty in global trade relations. The administration’s focus on strengthening domestic industries—through increased tariffs, tighter import regulations, and the revision or withdrawal from international trade agreements—may have lasting implications for global supply chains and market accessibility. These evolving policies, particularly those involving complex geopolitical relationships, may create additional regulatory and logistical challenges for companies operating internationally. As a result, we may face increased production and transportation costs, changes in market dynamics, and potential disruptions to the sourcing and delivery of goods and services across borders. Continued tension in international trade relations could adversely affect our ability to operate efficiently in certain regions and may have a material impact on our global business operations.
In addition, changes in foreign currency exchange rates could negatively affect our financial performance. We are particularly exposed to fluctuations involving the pound sterling and the euro. For instance, the U.S. dollar’s appreciation during 2022 reduced the value of our reported international revenue, while its depreciation during 2023 had the opposite effect. These currency shifts not only impact our reported earnings and asset values but also affect intercompany obligations, such as loans, which can result in significant foreign exchange gains or losses.
Many of our international sales are denominated in U.S. dollars. As the dollar strengthens, the relative cost of our offerings increases for customers using local currencies, which could reduce demand and hurt export sales. Meanwhile, the majority of our operating costs and financial obligations must be settled in U.S. dollars, which may further expose us to foreign exchange risk. As our global footprint expands and our financial obligations evolve, these currency impacts may become more pronounced. Although we may employ hedging strategies, there can be no assurance that such efforts will be effective in mitigating the adverse effects of currency fluctuations on our cash flow or profitability.
Adverse economic conditions may have a material adverse effect on our business.
Macro-economic challenges are capable of creating volatile and unpredictable environments for doing business. We cannot predict the nature, extent, timing or likelihood of any economic slowdown or the strength or sustainability of any economic recovery, worldwide, in the United States or in the industry. For many travelers, air travel and spending on in-flight internet access are discretionary purchases that they can eliminate in difficult economic times. Additionally, a weaker business environment may lead to a decrease in overall business travel, which is an important contributor to our service revenue. These conditions may make it more difficult or less likely for customers to purchase our equipment and services. If economic conditions in the United States or globally deteriorate further or do not show improvement, we may experience material adverse effects to our business, cash flow and results of operations.
Our operating results may fluctuate unpredictably and may cause us to fail to meet the expectations of investors, adversely affecting our stock price.
We operate in a highly dynamic industry and our future quarterly operating results may fluctuate significantly. Our future revenue and operating results may vary from quarter to quarter due to many factors, many of which are not within our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Further, it is difficult to accurately forecast our revenue, margin and operating results, and if we fail to match our expected results or the results expected by financial analysts or investors, the future trading price of our common stock may be adversely affected. In addition, due to generally lower demand for business travel during the summer months and holiday periods, and leisure and other travel at other times during the year, our quarterly results may not be indicative of results for the full year. Due to these and other factors, quarter-to-quarter comparisons of our historical operating results should not be relied upon as accurate indicators of our future performance.
If our marketing and advertising efforts fail to generate revenue on a cost-effective basis, or if we are unable to manage our marketing and advertising expenses, it could harm our results of operations and growth.
Our future growth and profitability, as well as the maintenance and enhancement of our brands, will depend in large part on the effectiveness and efficiency of our future marketing and advertising expenditures. We plan to use a diverse mix of television, print, trade show, and online marketing and advertising programs to promote our business. Increases in the pricing of one or more of our marketing and advertising channels could increase our expenses or cause us to choose less expensive, but potentially less effective, marketing and advertising channels. In addition, to the extent we implement new marketing and advertising strategies, we may in the future have significantly higher expenses. We may in the future incur marketing and advertising expenses in advance of the time we anticipate recognizing revenue associated with such expenses, and our marketing and advertising expenses may not result in increased revenue or generate sufficient levels of brand awareness. If we are unable to maintain our marketing and advertising channels on cost-effective terms, our marketing and advertising expenses could increase substantially, our customer levels could be affected adversely, and our business, financial condition and results of operations may suffer.
82
Businesses or technologies we acquire could prove difficult to integrate, disrupt our ongoing business, dilute stockholder value or have an adverse effect on our results of operations.
As part of our business strategy, we may engage in acquisitions of businesses or technologies to augment our organic or internal growth. We do not have any relevant experience with integrating and managing acquired businesses or assets. Acquisitions involve challenges and risks in negotiation, execution, valuation and integration. Moreover, we may not be able to find suitable acquisition opportunities on terms that are acceptable to us. Even if successfully negotiated, closed and integrated, certain acquisitions may not advance our business strategy, may fall short of expected return-on-investment targets or may fail. Any future acquisition could involve numerous risks, including:
| ● | potential disruption of our ongoing business and distraction of management; |
| ● | difficulty integrating the operations and products of the acquired business; |
| ● | use of cash to fund the acquisition or for unanticipated expenses; |
| ● | limited market experiences in new businesses; |
| ● | exposure to unknown liabilities, including litigation against the companies we acquire; |
| ● | additional costs due to differences in culture, geographical locations and duplication of key talent; |
| ● | delays associated with or resources being devoted to regulatory review and approval; |
| ● | acquisition-related accounting charges affecting our balance sheet and operations; |
| ● | difficulty integrating the financial results of the acquired business in our consolidated financial statements; |
| ● | controls in the acquired business; |
| ● | potential impairment of goodwill; |
| ● | dilution to our current stockholders from the issuance of equity securities; or |
| ● | potential loss of key employees or customers of the acquired company. |
In the event that we enter into any acquisition agreements, closing of the transactions could be delayed or prevented by regulatory approval requirements, including antitrust review, or other conditions. We may not be successful in addressing these risks or any other problems encountered in connection with any attempted acquisitions, and we could assume the economic risks of such failed or unsuccessful acquisitions.
We have never paid cash dividends on our stock and do not intend to pay dividends for the foreseeable future.
We have paid no cash dividends on any class of our stock to date and we do not anticipate paying cash dividends in the near future. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.
83
Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002, is expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.
As a public company, the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require us to implement various corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. Compliance with these public company obligations requires us to devote significant time and resources and places significant additional demands on our finance and accounting staff and on our financial accounting and information systems. We plan to hire additional accounting and financial staff with appropriate public reporting experience and technical accounting knowledge. Other expenses associated with being a public company include increased auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
We are required under the Sarbanes-Oxley Act of 2002 to document and test the effectiveness of our internal control over financial reporting. In addition, we are required under the Exchange Act to maintain disclosure controls and procedures and internal control over financial reporting. Any failure to maintain effective controls or implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our common stock. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
We may not be able to utilize all of our deferred tax assets.
We believe that we are likely to have sufficient taxable income in the future to fully realize our net deferred tax assets (consisting primarily of net operating loss and tax credit carryforwards, reserves and accruals that are not currently deductible for tax purposes). However, some or all of these deferred tax assets could expire unused if we are unable to generate sufficient taxable income in the future to take advantage of them or we enter into transactions that limit our right to use them.
If it became more likely than not that deferred tax assets would expire unused, we would have to increase our valuation allowance against deferred tax assets to reflect this fact, which could materially increase our income tax expense, and adversely affect our results of operations and tangible net worth in the period in which it is recorded. Moreover, our ability to utilize our net operating loss and tax credit carryforwards to offset future taxable income and reduce future cash tax liabilities would be negatively impacted if we were to experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the Code). In general terms, an “ownership change” can occur whenever the ownership of a company by one or more “5% shareholders” changes by more than 50 percentage points within a rolling three-year period. The determination of whether an ownership change has occurred for purposes of Section 382 of the Code is complex and requires significant judgment.
Moreover, the number of shares of our common stock outstanding at any time for purposes of Section 382 of the Code may differ from the number of shares that we report as outstanding in our filings with the SEC. In the event that an ownership change occurs, our ability to utilize our net operating loss and tax credit carryforwards would be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations.
Provisions in our certificate of incorporation and bylaws, under Nevada law and in our convertible bonds may discourage, delay or prevent a change in control or prevent an acquisition of our business at a premium price.
Some of the provisions of our certificate of incorporation, our bylaws and Nevada law could discourage, delay or prevent an acquisition of our business, even if a change in control of Aerkomm would be beneficial to the interests of our stockholders and was made at a premium price. These provisions permit the board of directors to increase its own size and fill the resulting vacancies and to authorize the issuance of blank check preferred stock in one or more series. In addition, under the Indentures, if certain “change of control” events occur, each holder of Notes may require us to repurchase all of such holder’s Notes at a purchase price greater than 100% of the principal amount of such Notes. Additionally, our Credit Facilities provide for an event of default upon the occurrence of certain specified “change of control” events.
84
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Aircom currently leases approximately 4,958 square feet of space at the Fremont, CA address, comprised of administrative offices, from Global Venture Development, LLC, which lease expires on May 31, 2026. We pay a monthly base rent of $7,438.
Aircom Japan leases approximately 78 square meters of space at our Japan office. The lease expired on June 30, 2024 and was renewed on July 1, 2024 through June 30, 2026 bearing a monthly lease payment of approximately $2,359.
Aerkomm Malta previously leased approximately 150 square meters of space at our Malta office. The lease expired on December 31, 2020, and the monthly lease payment was €2,000. The lease was renewed on December 6, 2020, for a further period of one year and extended until the end of February 2022 under the same conditions. The lease terminated at the end of February 2022 and Aerkomm Malta gave up this office space at the end of the lease.
We believe that our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently involved in any legal proceedings. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business or otherwise. Litigation is subject to inherent uncertainties, and an adverse result in any dispute matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
85
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock began trading on the OTCQB Venture Market on May 30, 2017 under the symbol “AKOM.” On July 31, 2017, our stock began trading on the OTCQX Market. On June 14, 2023, the quotation of our common stock moved to the OTC Pink Market. To date, there has been limited trading for our common stock on the OTC Markets. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transaction.
Since July 23, 2019, our common stock has also been listed on the Professional Segment of the regulated market of Euronext Paris under the symbol “AKOM”.
Consistent with customary practice in the French securities market, we entered into a liquidity agreement (contrat de liquidité) with Invest Securities SA, dated September 9, 2019. The liquidity agreement complied with applicable laws and regulations in France. The liquidity agreement authorized Invest Securities SA to carry out market purchases and sales of shares of our common stock on the Euronext Paris market. The balance of liquidity is classified in other non-current financial assets in our statement of financial position. At April 15, 2024, 5,361 shares of our common stock were in the liquidity account. The liquidity agreement had a term of one year and was to be renewed automatically unless otherwise terminated by either party. In January 2022, Invest Securities SA terminated the agreement and we are determining whether to continue a similar program.
Approximate Number of Holders of Our Common Stock
As of August 11, 2025, there were approximately 78 holders of record of our common stock. This number excludes the shares of our common stock owned by stockholders holding stock under nominee security position listings.
Dividend Policy
We have never declared or paid a cash dividend. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future, if at all. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Securities Authorized for Issuance Under Equity Compensation Plans.”
Recent Sales of Unregistered Securities
We have not sold any equity securities during the 2024 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the 2024 fiscal year.
Purchases of Equity Securities
No repurchases of our common stock were made during the year ended December 31, 2024.
ITEM 6. [RESERVED]
None.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the Company’s financial condition as of December 31, 2024, and its results of operations for the years ended December 31, 2024 and 2023.
The following discussion and analysis of our financial condition and result of operations should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this annual report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward-looking statements. Our financial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles.
86
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect to the restatement of our financial statements, as more fully described in Note 2 to our financial statements entitled “Restatement of Previously Issued Financial Statements”. For further detail regarding the restatement, see “Explanatory Note” and “Item 9A. Controls and Procedures.”
Overview
Aerkomm Inc. is an advanced defense and aerospace communications company entering early-stage revenue generation, with products tailored for deployment in contested, infrastructure-limited, and multi-domain environments. Our platform integrates software-defined modems, multi-orbit satellite terminals, and over-the-horizon systems to support unmanned, autonomous, and ISR platforms. Our near-term commercial trajectory focuses on converting strategic defense engagements into long-term contracts, while leveraging dual-use technologies for commercial aviation and telecom markets.
Our platform is built on a carrier-neutral, software-defined architecture that enables seamless integration of satellite communications, over-the-horizon (OTH) radio and radar systems, terrestrial networks, and hybrid connectivity pathways. This multi-layered design supports interoperability, modular scalability, and persistent resiliency in dynamic and degraded operational environments.
Recent global events have heightened concerns over the vulnerability of subsea communications infrastructure. The persistent threat of submarine cable tampering or cutting – whether due to malign state actors or gray-zone conflict – has underscored the need for alternate, resilient communication pathways. As undersea cable route disruptions and targeting continue to grow, especially in critical regions such as the Indo-Pacific and Northern Europe, defense and civilian agencies are accelerating the adoption of space-based solutions. However, satellite density in high-traffic conflict zones is likely to become strained and contended during crisis events, placing additional emphasis on platforms that offer secure, intelligent, and adaptable terminal-level connectivity. Our technology addresses this challenge by offering dynamic, multi-orbit access and prioritization capabilities, enabling mission continuity even under contested or degraded satellite access conditions.
As part of our broader communications ecosystem, we have developed a carrier-neutral, software-defined platform that enables dynamic connectivity to the most appropriate satellite—regardless of orbit or operator. This architecture is built around a suite of multi-orbit antennas, including both proprietary and partner-developed systems. Among these is our advanced electronically steered antenna (ESA), which leverages a proprietary glass semiconductor substrate to deliver over 50% higher throughput per square inch than conventional designs. These antennas are engineered to operate seamlessly across GEO, MEO, and LEO networks, ensuring persistent, resilient performance in dynamic and contested environments.
These hardware components are tightly integrated with our software-defined, carrier-neutral modem, which supports real-time satellite selection, waveform agility, and military-grade security. The system is further enhanced by custom-developed RF chipsets, beamforming ASICs, and high-speed analog-to-digital converters (ADCs) currently in development. Together, this modular, end-to-end ecosystem delivers secure, high-throughput connectivity optimized for edge-deployed platforms, including unmanned systems, ISR aircraft, and other mission-critical assets operating in denied or infrastructure-limited environments.
Our value as a full systems integrator lies in our ability to bring together proprietary technologies and third-party components into cohesive, mission-ready solutions. Leveraging our software-defined architecture, we enable network-level virtualization, modular scalability, and rapid deployment across a wide spectrum of operational requirements. From unmanned platforms to manned defense systems, we deliver end-to-end communications and sensing capabilities that are tailored, adaptable, and operationally resilient, supporting the full spectrum of mission demands in multi-domain environments.
Complementing our communications suite, we offer advanced OTH radar systems that provide long-range surveillance, early warning, and persistent situational awareness across maritime and terrestrial domains. We have also successfully fielded a compact electronic warfare (EW) solution, an integrated ESM/ELINT system for UAVs, designed to detect, track, and analyze electromagnetic signals in real time to support tactical ISR missions and platform survivability.
87
We have also developed and partnered to support purpose-built communication modalities beyond satellite, including line-of-sight, obstructed line-of-sight, and over-the-horizon solutions. This multi-layered architecture ensures resilient, end-to-end connectivity across diverse operational theaters, providing redundancy, seamless network handoffs, and sustained communications in high-risk and rapidly evolving scenarios.
We operate under an asset-light model. While we do not own or manage satellite constellations, we maintain regional satellite licensing and act as a value-added reseller of satellite bandwidth. This enables cost-effective, scalable offerings and creates new revenue opportunities for both the Company and our satellite operator partners.
On April 27, 2023, we were awarded a regional satellite service spectrum usage permit, authorizing the provision of broadband satellite services across mobile backhaul, enterprise communications, maritime, aviation, and tactical defense markets. This regulatory achievement strengthens our role in critical communications infrastructure and resiliency programs, particularly in the Indo-Pacific region.
As a satellite service telecom provider in Japan and Taiwan, we are positioned not only as a hardware and systems integrator, but also as a value-added services provider. This expands our addressable markets and enhances our ability to support strategic communications infrastructure throughout the Indo-Pacific and beyond.
Our sales were $1,342,931 for the year ended December 31, 2024, as compared to $731,090 for the year ended December 31, 2023. Our sales were $1,342,931 for the year ended December 31, 2024, as compared to the $731,090 for the year ended December 31, 2023. Our total revenue for the year ended December 31, 2024 consisted of the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others. These figures reflect ongoing investment in product development, regulatory positioning, and commercial readiness to support future growth and deployment at scale.
We remain committed to enabling a hyper-connected, secure, and adaptive user ecosystem. With a technology portfolio that spans satellite and over-the-horizon communications, radar sensing, electronic warfare, virtualized networking, and fully integrated platform deployment, we are well-positioned to address the complex and evolving demands of modern defense and commercial operations in multi-domain environments.
Key Trends and Uncertainties
The following key trends and uncertainties may materially impact our operational performance, financial condition, and long-term outlook:
| ● | U.S. defense appropriations uncertainty, due to recurring Continuing Resolutions, restricts new program starts and delays contract finalization. |
| ● | Geopolitical instability in the Indo-Pacific region is increasing demand for resilient satellite and OTH communications but may delay procurement timelines. |
| ● | Supply chain pressures in semiconductors and RF components continue to impact production scalability and lead times, and recently announced tariffs. |
| ● | Early-stage commercialization: As we transition from development to revenue generation, our results will remain volatile, and timing of contract execution remains a critical variable. |
U.S. Budget Environment
The U.S. Government continues to maintain the largest defense budget globally, and U.S. defense spending levels, along with the timing and structure of appropriations, may significantly influence our business prospects over the medium to long term. While we do not currently generate revenue from contracts funded by the U.S. Government, we are actively engaged in discussions with potential partners and customers regarding participation in programs that may be supported by U.S. Government defense funding. Our ability to enter into such programs may be affected by the availability, prioritization, and allocation of federal defense spending.
88
Then President Biden’s Fiscal Year (FY) 2025 budget request, released in March 2024, included $895 billion in total national defense funding, consistent with the spending caps established by the Fiscal Responsibility Act (FRA). Of this amount, $842 billion was designated for the Department of Defense (DoD) base budget. The Senate Appropriations Committee’s draft FY 2025 Defense Appropriations Bill proposed $852.2 billion in total funding, representing a $27.2 billion (3.3%) increase over FY 2024 enacted levels. This funding is intended to support modernization, readiness, force structure, and strategic deterrence objectives in alignment with the 2022 National Defense Strategy.
A key focus area within the DoD’s modernization strategy is the development and fielding of Collaborative Combat Aircraft (CCA) under the U.S. Air Force’s Next Generation Air Dominance (NGAD) initiative. The CCA program is expected to drive significant investment in unmanned aerial systems, autonomy, and resilient communications infrastructure. Since FY 2023, Congress has appropriated more than $1.7 billion for CCA-related research, development, and prototyping. The FY 2025 budget request includes an additional $559 million to continue CCA development efforts. According to recent U.S. Air Force estimates, procurement of at least 1,000 CCA units is anticipated over the coming decade, with early production beginning mid-to-late decade. These aircraft will require highly integrated, secure, and low-latency communications systems—particularly those that can perform in denied or contested electromagnetic environments—aligning directly with our core competencies in multi-orbit satellite, over-the-horizon, and software-defined networking technologies.
In parallel, the Department of Defense is advancing the Next Generation Air Dominance (NGAD) program, which includes the development of the F-47, a sixth-generation fighter jet expected to replace the F-22 Raptor. In March 2025, Boeing was awarded a multibillion-dollar contract to lead F-47 development, with the Air Force targeting at least 200 manned NGAD aircraft supported by CCA systems. The NGAD program is projected to receive approximately $28.5 billion in funding over the next five years. The F-47’s operational design emphasizes survivability, advanced autonomy, and the ability to operate seamlessly alongside unmanned CCA platforms—creating an ecosystem of networked assets dependent on secure, high-throughput, and resilient communications systems. These program requirements directly align with our integrated terminal systems, over-the-horizon communications technologies, and platform-level integration expertise for unmanned and autonomous systems.
As of the date of this filing, the federal government continues to operate under a Continuing Resolution (CR) extending prior-year funding. While stopgap funding allows for ongoing operations, it restricts new program starts and contract awards, which may delay or limit opportunities for us to participate in newly funded initiatives or integration efforts with potential prime contractors. If a full-year CR or a government shutdown occurs, these restrictions may continue or intensify, potentially resulting in further delays in procurement activity, program execution, or technology adoption—especially for new or emerging systems that align with future modernization objectives.
As the defense industry rapidly incorporates artificial intelligence (AI) into command, control, surveillance, targeting, and autonomous systems, it is increasingly evident that AI’s operational effectiveness is heavily dependent on secure, low-latency, and persistent communications infrastructure. Without access to resilient, high-performance communications—particularly satellite, over-the-horizon, and software-defined networking—AI-enabled systems may be degraded or rendered inoperable in contested or disconnected environments. As a result, we believe that advanced communications technologies are not only enablers, but essential infrastructure for the successful deployment and scalability of AI in defense operations.
Future U.S. Government funding will continue to be shaped by political negotiations, economic conditions, and shifting national security priorities. While we cannot provide any assurance that our ongoing engagements will result in binding agreements or revenue, we believe that our secure satellite and over-the-horizon connectivity, software-defined modems, integrated terminal systems, and support for unmanned platforms position us well to address the evolving needs of DoD modernization and resilience efforts. We will continue to monitor developments in the federal budget process and assess potential impacts on our strategic positioning and business outlook.
89
Geopolitical and Economic Environment
We operate in a dynamic and increasingly complex geopolitical and macroeconomic environment that directly impacts our strategic outlook, market opportunities, and potential demand for our technologies and services. The following discussion includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially due to a number of factors, including those discussed under “Risk Factors” and elsewhere in this report.
Geopolitical tensions in the Asia-Pacific region – particularly involving China, Taiwan, and Japan – and concerns about the direction of the Trump Administration in the United States and anticipated increasing pressure on countries to fund defense spending have led to elevated concerns around regional security, operational resiliency, and defense modernization. In particular, increased Chinese military activity around Taiwan and the broader Indo-Pacific has prompted governments and defense organizations across the region to reevaluate strategic readiness and accelerate investments in command, control, communications, and intelligence capabilities. These developments may create longer-term opportunities for the Company’s solutions, particularly in the areas of over-the-horizon connectivity, radar, unmanned systems integration, and secure multi-network communications infrastructure.
In this connection, the Company notes that on December 27, 2024 the Foreign Ministry of the People’s Republic of China (PRC) announced that in response to United States announcements about arms sales and military assistance to Taiwan and related negative statements the PRC considered objectionable, the PRC had decided to take countermeasures against seven companies including Aerkomm (the six in addition to Aerkomm are Insitu, Inc., Hudson Technologies Co., Saronic Technologies, Inc., Raytheon Canada, Raytheon Australia, and Oceaneering International, Inc.). For these companies, the PRC Foreign Ministry announced that their movable and immovable properties, and other kinds of assets within China were frozen and that all organizations and individuals within China were prohibited from engaging in transactions, cooperation and other activities with them. Aerkomm does not have commercial operations in the PRC nor plans to develop business in the PRC and Aerkomm is not aware of any concrete measures that may have been taken following the PRC Foreign Ministry’s announcement. However, the announcement underscores the inherent geopolitical risk associated with involvement in defense industries.
The ongoing conflict in Ukraine has further underscored the global need for adaptable and resilient defense systems. One key trend that has emerged from this conflict is the demonstrated operational effectiveness and strategic value of unmanned systems—including UAVs, UUVs, and remotely operated assets—over traditional manned platforms in contested and dynamic environments. This shift aligns with our technology roadmap and systems integration strategy. Our platform is specifically designed to support high-value unmanned and autonomous systems through lightweight, low-power, software-defined communication terminals, over-the-horizon (OTH) radar solutions, and integrated C4ISR components that enable persistent situational awareness and command flexibility.
While the Company does not currently have binding contracts related to these strategic developments, we continue to engage with potential partners – including prime contractors and government entities – to align our offering with anticipated procurement priorities and to account for the effects of changes in tariff rates and policies. We believe our integrated, software-defined architecture and asset-light model position us to respond effectively to emerging demand across both public and private sector markets.
Macroeconomic and geopolitical conditions remain challenging and present continued risks to our potential partners, suppliers, and customers. Global supply chains – particularly those involving semiconductors, advanced materials, and RF components – remain subject to disruptions, extended lead times, and price volatility. These supply chain pressures, exacerbated by ongoing trade tensions, changes in tariff policies, and export controls in the region, may impact our ability to meet future production or integration timelines, particularly if current constraints persist.
In addition, inflationary pressures and elevated interest rates in key markets such as Taiwan, Japan, and the United States may constrain defense budgets or delay funding cycles. Rising labor and input costs could also put pressure on margins in future periods. While we continue to implement strategies to mitigate the impact of inflation and supply chain risk—including through strategic sourcing, inventory management, and cost control—there can be no assurance that these measures will fully offset external economic pressures.
We remain focused on collaborating with potential partners, their supply chains, and end customers to evaluate projected demand and ensure our solutions are aligned with both near- and long-term operational requirements. As global and regional defense priorities evolve, we believe our integrated approach to communications, sensing, and unmanned systems enablement positions the Company to contribute meaningfully to the development of resilient, next-generation capabilities in Asia-Pacific and beyond.
90
International Business
A key component of our strategic growth plan is the expansion of international sales, particularly within defense-focused markets in Europe and the Asia-Pacific region. Our international efforts are centered on building long-term relationships with defense agencies, integrators, and government partners through both Direct Commercial Sales (DCS) and, in the future, Foreign Military Sales (FMS) executed through the U.S. Government.
We continue to pursue international opportunities aligned with our core product portfolio—spanning satellite connectivity, over-the-horizon (OTH) communications, radar systems, virtualized modems, RF chipsets, and integration of these technologies into high-value platforms including unmanned aerial vehicles (UAVs), unmanned underwater vehicles (UUVs), unmanned surface vessels (USVs), and manned military systems. Our modular, carrier-neutral architecture is designed to meet modern requirements for network resilience, secure communications, and autonomy across mission domains.
Europe
The European defense landscape has undergone significant transformation, with defense spending reaching unprecedented levels. In March 2025, European Commission President Ursula von der Leyen introduced the “ReArm Europe” initiative, a sweeping plan to mobilize up to €800 billion in defense investments across EU member states by 2030. This includes suspending EU fiscal rules to enable greater national defense spending, allocating €150 billion in EU-backed defense loans, and redirecting EU funds toward procurement, infrastructure, and technology development. The goal is to reduce Europe’s reliance on non-EU defense providers and accelerate internal capability development.
In 2024, European Union (EU) defense expenditure reached €326 billion, with procurement spending projected to exceed €90 billion. Research and technology (R&T) investments rose to €5 billion, and defense investment overall accounted for a record 31% of total spending. These increases reflect the EU’s long-term commitment to strategic autonomy and regional deterrence.
Amid this shift, member states are reassessing their reliance on non-European communications infrastructure. Italy suspended talks with SpaceX on Starlink, and Poland has publicly explored alternative satellite providers for defense communications. In parallel, the EU launched the IRIS² (Infrastructure for Resilience, Interconnectivity and Security by Satellite) initiative – a €10.6 billion program to deploy a sovereign, multi-orbit satellite constellation aimed at serving both government and commercial users. The initial constellation, expected to include approximately 290 satellites, is targeting partial operational capability by 2027, with full deployment expected by 2030. IRIS² is backed by a mix of public funding and private investment via the SpaceRISE consortium.
These developments present a significant opportunity for us to offer sovereign, secure satellite communications solutions across European defense programs. Our multi-orbit terminals, software-defined radios, over-the-horizon systems, and virtualized network infrastructure directly align with EU objectives to create resilient, autonomous communications networks that can perform in contested environments.
We are actively engaged in discussions with European-based integrators, prime contractors, and government stakeholders to support initiatives related to ISR modernization, tactical communications, and secure network integration across manned and unmanned defense platforms. These engagements are expected to support both Direct Commercial Sales (DCS) and future Foreign Military Sales (FMS) as European allies diversify their defense architecture and increase regional independence.
Asia-Pacific
The Asia-Pacific region continues to experience robust growth in defense spending, driven by geopolitical tensions and the need to enhance national security infrastructures. China’s defense budget has seen a 7.2% increase in 2025, reflecting its ongoing efforts to modernize and expand its military capabilities.
91
In response, neighboring countries are significantly boosting their defense investments. Japan, for instance, has approved a record defense budget of 8.7 trillion yen (approximately $55.1 billion) for the fiscal year starting April 1, 2025, marking a 9.4% increase from the previous year. Similarly, Australia has unveiled plans to reach an annual defense budget exceeding AU$100 billion by 2033-2034, equating to 2.4% of its gross domestic product.
As part of Japan’s broader defense posture shift, the Japan Self-Defense Forces (JSDF) are undergoing rapid modernization, with a strategic emphasis on unmanned systems and drone warfare capabilities. Recent public reporting highlights that UAVs are now central to Japan’s defense transformation, supporting surveillance, strike, and rapid-response operations. The JSDF is actively investing in both domestically produced and allied-developed unmanned platforms capable of operating in contested and GPS-denied environments. This includes the integration of AI, autonomous operations, and long-range, survivable communications infrastructure—key areas of alignment with our existing technology roadmap.
In parallel, growing concern over a potential conflict in the Taiwan Strait has prompted the U.S. Department of Defense and Indo-Pacific partners to prioritize the rapid fielding of autonomous systems and resilient communications infrastructure. The Pentagon has described the potential battlespace as a “drone hellscape,” calling for thousands of low-cost, survivable unmanned assets capable of operating in denied, degraded, and disconnected environments. These scenarios further underscore the urgent need for adaptable ISR architectures and reliable communications at the tactical edge.
We are fully engaged in supporting this regional shift. We are actively accelerating engagement with regional governments and partners and stand firm in our commitment to enhance defense resiliency and safeguard U.S. allies and partners throughout the Asia-Pacific. Our secure, over-the-horizon (OTH) communications systems, multi-orbit satellite terminals, software-defined radios, OTH radar, EW/ESM, and modular integration capabilities offer operational advantages in environments where continuity of communications and autonomous operations are paramount.
We are currently engaged in advanced discussions with prospective customers and partners in the Asia-Pacific region regarding the integration of our technologies into unmanned systems and airborne ISR platforms, and next-generation defense systems. These efforts are focused on delivering interoperable, AI-enabled, and mission-adaptable communications networks that address the evolving operational needs of Indo-Pacific allies and support regional deterrence and resilience initiatives.
Near-Term International Delivery Plans
In 2024, international customers accounted for 100% of Aerospace & Defense segment revenue, derived from a development contract initiated in 2021 with a non-U.S. customer to build and test a satellite communications architecture for UAVs conducting ISR missions. Following successful testing in late 2024 under operational conditions, we anticipate initial deliveries and revenue recognition from the first major contract associated with this project to commence in 2025.
We intend to expand our international engagement through both DCS and FMS channels, leveraging our software-defined, hardware-integrated solutions to meet growing global demand for resilient defense communications and unmanned platform capabilities. While we cannot guarantee the successful conversion of discussions into binding agreements or revenue, we believe ongoing shifts in the global defense landscape and increased allied spending present a strategic opportunity for long-term growth.
Across these efforts, we are pursuing revenue opportunities through strategic partnerships, licensing, and terminal sales. As of the date of this filing, we are actively engaged with over 25 government agencies, defense integrators, and commercial primes across the U.S., Japan, EU, and Indo-Pacific. These engagements span stages from early requests for information (RFI) to pilot testing and integration evaluations. The indicative value of our aggregate opportunity pipeline exceeds $150 million, though no assurance can be given that these engagements will convert to binding agreements. We anticipate initial award decisions on a subset of these opportunities during 2025.
92
Commercial Aviation Business Environment and Trends
In 2024, global air traffic continued its strong recovery from the COVID pandemic, with both domestic and international travel showing sustained growth, surpassing pre-pandemic levels. International travel has mostly recovered and the wide-body market continues to be paced by the international travel recovery. Notably, outbound international air travel from China has gained momentum throughout 2024, helping to normalize global capacity and demand dynamics. Aircraft manufacturers are reporting strong order books as airlines seek to modernize fleets and expand capacity to meet sustained demand.
Airline financial performance, which influences demand for new capacity, has benefited from the resilient demand for travel. In 2025, the International Air Transport Association (IATA) projects the airline industry to achieve a combined net profit of $36 billion. This profit is based on an expected revenue of $979 billion, with a net profit margin of 3.7%, according to Business Traveler USA. While this signifies a strong and resilient industry, IATA points out that the margin remains relatively thin, especially when considering the vast number of passengers and the industry’s contribution to the global economy..
A major development reshaping the in-flight connectivity (IFC) space is Starlink’s expansion into commercial aviation. In 2024, Starlink secured multiple agreements with global carriers – including United Airlines and Air France – with plans to equip hundreds of aircraft beginning in 2025. These developments signal an intensifying competitive landscape in aviation broadband services, as airlines seek to meet passenger expectations for seamless, high-speed connectivity across fleets.
In light of these shifts, we are positioning our solutions to deliver differentiated value in the IFC market. Specifically, our proprietary ultra-low-profile antenna system is designed for seamless fuselage integration—offering airlines aerodynamic advantages that reduce drag and fuel consumption, while simplifying maintenance and preserving aircraft aesthetics. Our software-defined modem architecture complements this by enabling carrier neutrality and cross-orbit connectivity, making it well-suited for both commercial and government aviation use cases.
The long-term outlook for the commercial aviation industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries. The commercial aviation industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.
While we do not yet generate revenue from contracts in the commercial aviation industry, we aim to initiate and to continue discussions with our potential partners and our potential customers in the commercial aviation industry to provide our products and our services to such potential partners and potential customers under binding and definitive contracts. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these discussions, or that we will generate revenue from contracts in the commercial aviation industry in the future.
Civilian Telecommunications Business Environment and Trends
The civilian telecommunications industry is experiencing a rapid transformation, driven by advancements in mobile infrastructure, growing data demands, and an increasing need for secure and resilient connectivity across both public and private sectors. These trends are especially pronounced in the Asia-Pacific region, which stands as one of the fastest-growing markets for mobile and broadband services. Despite this growth, the region is also grappling with emerging challenges, including infrastructure vulnerabilities and geopolitical risks that threaten the stability of digital communications.
Growth in Mobile and Broadband Connectivity
The global adoption of 5G is projected to exceed 2 billion connections by the end of 2024, with significant growth led by nations such as Japan, South Korea, China, and India. This adoption is paving the way for the development of 6G technologies, with government and private sector investments already underway in research, standardization, and early-stage development. Alongside 5G, there is an accelerating demand for enterprise and industrial connectivity solutions, particularly in the form of private 5G networks and satellite-enabled backhaul services. These developments reflect the growing need for robust, scalable, and flexible networks that can meet the demands of a rapidly evolving digital landscape.
93
Infrastructure Vulnerabilities and Geopolitical Risks
However, as telecommunications infrastructure expands, the Asia-Pacific region is witnessing a rise in threats to its digital backbone. In 2023 and 2024, multiple subsea and terrestrial fiber optic cables were damaged or severed due to natural causes, maritime activities, and suspected deliberate interference. These incidents resulted in disrupted internet connectivity, particularly affecting island nations and remote areas. This highlights the urgent need for resilient, redundant, and automatically restorable network architectures, especially in regions where connectivity is essential for emergency response, financial transactions, and national infrastructure.
The security of critical infrastructure has become a growing concern globally. Over the past months, there have been multiple incidents involving deep-sea cable sabotage, raising alarms about the vulnerability of global communications systems. For instance, China recently unveiled an advanced deep-sea cable cutter, escalating geopolitical and economic risks to network stability. Additionally, in December 2024, authorities intercepted a Russian oil tanker suspected of carrying espionage equipment involved in deep-sea cable disruption activities. In Taiwan, Chinese vessels have been repeatedly suspected of severing internet cables, further contributing to tensions and potential national security threats.
The most recent development occurred in February 2025, when Taiwan’s coast guard detained a Chinese cargo vessel suspected of intentionally cutting undersea cables. This prompted an investigation into potential sabotage, underscoring the need for enhanced cybersecurity measures and resilient network architectures to safeguard communications in an increasingly complex geopolitical environment.
Addressing the Digital Divide and Expanding Connectivity Solutions
Alongside these challenges, the persistent digital divide remains a significant issue, particularly in underserved regions where access to mobile broadband is hindered by factors such as affordability, coverage gaps, and limited infrastructure. These gaps present significant opportunities for hybrid connectivity models, such as carrier-neutral and satellite-integrated solutions, which can extend coverage and provide resilient communications in hard-to-reach or high-risk areas. These solutions are critical for ensuring reliable connectivity in both rural and vulnerable regions, where the risk of service disruptions is high.
Economic Impact and Future Innovations
Mobile technologies and services continue to play a crucial role in global economic development, contributing an estimated 5.8% of global GDP in 2024, which represents over $6.5 trillion in economic value. Looking to the future, innovations in AI-driven network optimization, edge computing, and secure mobile backhaul are expected to further drive the adoption of mobile services across various critical sectors, including energy, transportation, and disaster response. These advancements will be pivotal in ensuring the continued resilience and growth of global telecommunications infrastructure.
Global Network Resilience Overview and Budget Environment
As cyber and physical threats to communication systems escalate worldwide, several nations have launched substantial initiatives to enhance network resilience, with satellite communications emerging as a central component of these efforts.
| ● | United States: The U.S. has committed over $1.6 billion through the Secure and Trusted Communications Networks Reimbursement Program and DOD SATCOM modernization plans, focusing on 5G and multi-orbit satellite redundancy. |
| ● | European Union: The EU’s IRIS² initiative plans to invest €6 billion in a sovereign satellite constellation to ensure secure governmental and emergency communications. |
| ● | India: Through the Digital India program and ISRO’s collaboration with OneWeb, India has allocated over $1 billion to deliver satellite connectivity for rural resilience. |
| ● | South Korea: Under its Digital New Deal 2.0, South Korea is investing ₩2.6 trillion (~US$2B) through 2026 in quantum communications, SATCOM ground stations, and AI-based network monitoring. |
94
Satellite-Based Business Continuity Planning (BCP) Market and Services
Business Continuity Planning (BCP) is a strategic framework designed to ensure the continuity of essential operations during or after a crisis, disaster, or disruption. As organizations prioritize operational resilience, BCP investments have expanded globally, with satellite-based solutions emerging as a critical component of modern resilience strategies.
The increasing commercialization of satellite technology has enabled Satellite-Based BCP to provide a robust network resilience framework, ensuring uninterrupted operations in the event of terrestrial infrastructure failures. While precise global expenditure figures remain difficult to quantify, market analyses highlight the growing demand for BCP solutions across industries.
Satellite-Based BCP encompasses key resilience measures, including:
| ● | Data Backup and Disaster Recovery – Ensuring secure data storage and rapid restoration of critical systems. |
| ● | Alternate Communication and IT Infrastructure – Providing redundancy in cases of network failure. |
| ● | Mobile and Off-Grid Communication Systems – Supporting operations in remote or disaster-affected areas. |
| ● | Emergency Access to Cloud Services and Applications – Enabling secure and continuous cloud connectivity. |
A well-structured BCP minimizes operational downtime, safeguards critical assets, and sustains service delivery for enterprises and public sector entities. As disruptions become more frequent and severe, demand for satellite-based continuity solutions continues to expand across multiple industries.
Key Suppliers for Satellite-Based BCP and Network Resilience Solutions
The following are some of the leading technology providers and integrators supporting BCP and satellite-based resilience worldwide:
| ● | Eutelsat OneWeb – LEO satellite constellation provider delivering global broadband coverage |
| ● | Viasat / Inmarsat – Government-grade secure satellite communications |
| ● | SES – GEO and MEO satellite services for enterprise and defense networks |
| ● | Starlink (SpaceX) – Real-time high-throughput LEO connectivity for backup comms |
| ● | Cisco Systems – Redundant networking, SD-WAN, and edge infrastructure |
| ● | Palo Alto Networks / Fortinet – Cybersecurity and network protection |
| ● | Thales Group – BCP and emergency communications for defense and aviation |
| ● | Aerkomm – Integrated SATCOM distribution, mobile BCP deployment, server load balancing, and localized disaster response capabilities via mobile units and hybrid network design |
95
Global Business Continuity Management (BCM) Market Overview
Business Continuity Management (BCM) remains a critical investment priority as organizations seek to enhance operational resilience against disruptions. While precise global expenditure figures are not readily available, market analyses indicate sustained growth in BCM solutions, driven by regulatory compliance, risk mitigation, and the increasing frequency of natural disasters and cyber threats.
Investment in Business Continuity Planning (BCP), a core component of BCM, continues to expand as businesses and government entities prioritize infrastructure resilience and disaster recovery strategies. The demand for BCM solutions is further supported by evolving regulatory frameworks and the need for robust contingency planning across key industries, including finance, healthcare, energy, and telecommunications.
As organizations adapt to an increasingly complex risk environment, the BCM market is expected to experience continued growth, with investments focusing on advanced technologies, cloud-based recovery solutions, and satellite-enabled continuity strategies.
Market Size and Growth
The global BCM market was valued at approximately $6.28 billion in 2025 and is projected to reach a CAGR of 16.33% from 2025 to 2032 (P&S Intelligence). Market expansion is led by heightened awareness of business continuity risks and increasing regulatory pressures across key industries.
The Asia-Pacific region – including Japan, India, South Korea, Australia, and Southeast Asia – represents a significant driver of growth, as organizations enhance resilience strategies to address regional vulnerabilities. North America, led by the United States, remains a critical contributor, with enterprises investing in BCM solutions to mitigate cybersecurity threats, natural disasters, and infrastructure disruptions.
Regional Insights
North America
| ● | 2023 Market Contribution: North America accounted for approximately 40% of the total revenue in the BCM solutions market (Verified Market Reports). |
| ● | 2030 Market Projection: The market is expected to reach $2.39 billion by 2033, reflecting a CAGR of 14.6% from 2023 to 2033. |
Asia-Pacific Region
| ● | 2023 Market Size: The Asia-Pacific BCM market was valued at $718.8 million in 2023, with a projected CAGR of 18.8%, reaching $2.39 billion by 2033 (cognitivemarketresearch.com). Growth is primarily driven by increasing awareness of business resilience and the region’s susceptibility to natural disasters. |
Country-Specific Projections (2023-2030)
| ● | Japan |
| 2023 Market Size: $99.19 million |
| 2030 Market Size: $370 million (CAGR of 17.3%) |
96
| ● | India |
| 2023 Market Size: $86.26 million |
| 2030 Market Size: $370 million (CAGR of 20.6%) |
| ● | Australia |
| 2023 Market Size: $37.38 million |
| 2030 Market Size: $150 million (CAGR of 18.5%) |
| ● | South Korea |
| 2023 Market Size: $71.88 million |
| 2030 Market Size: $300 million (CAGR of 17.9%) |
| ● | Southeast Asia |
| 2023 Market Size: $49.60 million |
| 2030 Market Size: $230 million (CAGR of 19.8%) |
The budget focuses on improving resilience across various sectors, particularly in the face of potential disruptions to communication systems and includes initiatives for strengthening satellite communications and other technological infrastructure.
Key Drivers of BCM Market Growth
| ● | Increasing Frequency of Disruptions: The rise in natural disasters and cyber-attacks has heightened the demand for robust BCM solutions to ensure operational resilience. |
| ● | Regulatory Compliance: Stringent regulations across industries mandate the implementation of comprehensive BCM strategies to mitigate risks and ensure business continuity. |
| ● | Growing Awareness of Operational Risks: Organizations are investing in BCM solutions to safeguard operations, enhance resilience, and protect reputational value. |
(Source: imarcgroup.com)
BCP Investments in Key Markets
Business Continuity Planning (BCP) investments are critical for ensuring operational resilience, disaster recovery, and risk mitigation. Below is an overview of key markets investing in BCP solutions:
United States
The U.S. remains a leader in BCP investments, with the market estimated at $2.8 billion in 2020 (Enterprise Storage Forum). Investments in business continuity and disaster recovery solutions continue to expand across industries, including finance, healthcare, and energy.
| ● | Market Growth Projection: The U.S. BCP market is expected to grow from $7 billion in 2021 to $15 billion by 2030, reflecting sustained investment in resilience-enhancing solutions. |
97
Japan and Canada
Both Japan and Canada are experiencing steady growth in BCM investments.
| ● | Japan: The market is projected to grow at a CAGR of 6.1%, driven by increasing regulatory requirements and resilience initiatives. |
| ● | Canada: The BCM market in Canada is expected to expand at a CAGR of 7.8%, reflecting a growing emphasis on business continuity strategies. (Source: Enterprise Storage Forum) |
Taiwan
Taiwan has prioritized business continuity investments, particularly in telecommunications, semiconductor manufacturing, and public sector infrastructure. Given its strategic position in the global semiconductor industry and susceptibility to natural disasters, Taiwan continues to strengthen its resilience measures.
| ● | Investment in Resilient Infrastructure: The government has allocated $790 million under a 10-year plan to enhance communication infrastructure, including satellite services and other resilient systems (Enterprise Storage Forum). |
| ● | Disaster Recovery and Preparedness: Estimates suggest Taiwan’s total investment in disaster recovery and infrastructure resilience could range from $500 million to $1 billion over the next 5 to 10 years, focusing on technological enhancements, particularly in satellite communications and disaster recovery solutions. |
These investments underscore Taiwan’s commitment to strengthening critical infrastructure and ensuring continuity in the face of potential disruptions.
Our Business Potential
The Company is strategically positioned at the forefront of the rapidly growing satellite communications sector. In addition to being licensed as a Telecom operator in Japan and Taiwan, the Company secured a regional satellite service spectrum usage permit in Taiwan on April 27, 2023. Furthermore, as a distribution partner for Eutelsat OneWeb’s Low Earth Orbit (LEO) satellite services – granted in September 2024 – the Company is well-equipped to support national and enterprise-level initiatives aimed at strengthening SATCOM communication resilience.
This authorization allows us to provide broadband satellite services across key sectors, including mobile backhaul, enterprise communications, maritime, aviation, and tactical defense. With the global rise in demand for resilient infrastructure, the Company offers SATCOM Business Continuity Planning (BCP) and Network Resilience Solutions, initially focusing on the high-growth Asia-Pacific region. Japan and Taiwan, given their strategic importance amid rising geopolitical tensions, are at the core of these efforts.
Strategic Investment in Network Resilience: Japan and Taiwan’s Response to Emerging Threats
In response to escalating geopolitical tensions and vulnerabilities in undersea communication infrastructure, both Taiwan and Japan have significantly increased their investments in network resilience. These investments reflect a broader commitment to strengthening national security and implementing advanced technologies to mitigate risks from sabotage, cyberattacks, and natural disasters.
As a distribution partner of Eutelsat OneWeb’s Low Earth Orbit (LEO) satellite services, the Company is aligned with these national resilience strategies. Our solutions include enterprise network redundancy, server load balancing, and disaster recovery infrastructure—each tailored to support the security and continuity goals of Taiwan, Japan, and allied regional partners. Additionally, the Company’s SATCOM Business Continuity Planning (BCP) solutions serve both enterprise and consumer markets. By deploying mobile, vehicle-based SATCOM systems, we provide critical connectivity for disaster recovery and wartime scenarios, ensuring operational continuity when terrestrial networks are disrupted.
98
Rising Threats to Global Communication Infrastructure
The global reliance on undersea cables for internet and data connectivity has reached unprecedented levels, with over 95% of international data traffic passing through these submarine networks. Recent incidents of sabotage and suspected grey-zone activities, particularly in the Asia-Pacific region, have prompted governments to re-assess and strengthen their communication systems. In response to these growing vulnerabilities, both Taiwan and Japan have taken decisive action by investing in alternative communication systems, particularly satellite-based networks, while reinforcing their existing infrastructure. This strategic shift not only addresses military and national security concerns but also ensures business continuity, guarantees civilian access to essential services, and enhances resilience in the face of natural disasters.
1. Japan’s Network Resilience and SATCOM BCP and Strategy
1.1 Strategic Imperatives
Japan, located in a highly seismic zone and facing growing regional security concerns, has integrated network resilience into both its national defense and disaster recovery planning. The 2024 Noto earthquake, along with increasing cyber threats from regional adversaries, has reinforced the need for robust, flexible communication systems.
1.2 Budget and Program Highlights
| ● | In FY2025, Japan earmarked 123.8 billion yen (~US$784 million) for the development of a next-generation military communication satellite to support the Japan Self-Defense Forces (JSDF). |
| ● | Japan’s Ministry of Defense is integrating hardened, jamming-resistant satellite systems to ensure secure, real-time battlefield communications. |
| ● | A new supplementary budget (post-election) will include additional funds for civilian disaster resilience, including communications. |
1.3 National Research Infrastructure
Japan’s National Research Institute for Earth Science and Disaster Resilience (NIED) operates on a 14-billion-yen annual budget and leads R&D in backup communication technologies, including:
| ● | Severe weather and seismic communication protocols. |
| ● | Emergency satellite deployment mechanisms. |
| ● | Real-time disaster data transmission systems. |
1.4 Integration with Civilian Systems and Subsidy Programs
Japan is pursuing a dual-use approach, where military-grade satellite infrastructure supports civilian disaster communication and emergency response systems. Nationwide drills and inter-agency coordination are regularly conducted to test resilience frameworks.
In addition, Japan’s Ministry of Internal Affairs and Communications has allocated over 25 billion yen (approx. US$170 million) in fiscal support between 2024 and 2026 to accelerate adoption of BCP-related technologies, including satellite phones, mobile communication hubs, and transportable SATCOM vehicles for municipalities and critical infrastructure operators.
2. Taiwan’s Network Resilience and SATCCOM BCP and Strategy
2.1 Context and Geopolitical Risk
Taiwan faces continuous threats from China, including cyberattacks and the physical disruption of its undersea cable network. In 2023–2024 alone, multiple incidents involving the severing of undersea cables connecting Taiwan’s outer islands occurred, with at least one case involving a Chinese vessel detained for suspected sabotage.
99
2.2 Satellite Communication Initiatives
To address these threats, Taiwan has launched a comprehensive 10-year plan to establish an independent, resilient satellite internet system. The plan includes:
| ● | Initial budget of US$790 million, focused on developing Taiwan’s own low Earth orbit (LEO) satellite constellation. |
| ● | Strategic collaboration with Eutelsat OneWeb to provide immediate coverage for emergency communications and internet access. |
| ● | Development of over 700 satellite ground stations across Taiwan to support seamless integration and redundancy. |
| ● | Launch of Taiwan-made LEO satellites, with the first deployment expected by 2026–2027. |
2.3 Backup Infrastructure and Microwave Networks
In parallel, Taiwan is enhancing terrestrial microwave communication systems, retrofitting existing mountain facilities for secure line-of-sight communication to outlying islands. This ensures at least partial functionality if submarine cables are compromised.
2.4 Government SATCOM BCP Subsidies
The Taiwanese government is also launching a targeted NT$2.5 billion (approx. US$80 million) subsidy program between 2024 and 2027 to support BCP (Business Continuity Planning) deployments. These funds will help enterprises and local governments invest in mobile SATCOM units, off-grid power systems, and hybrid backup communication solutions.
The company plays a critical role in this ecosystem as a trusted distribution partner of Eutelsat OneWeb, offering resilient LEO connectivity combined with value-added services such as:
| ● | Enterprise network redundancy to ensure uninterrupted operations. |
| ● | Server load balancing to optimize system performance and stability. |
| ● | Disaster recovery solutions to maintain business continuity under extreme scenarios. |
SATCOM BCP systems mounted on vehicles to deliver emergency broadband access during disasters or conflicts, designed for both enterprise and public use.
National Budget for SATCOM BCP
| Category | Taiwan | Japan | ||
| Budget Allocation | US$790M (10-year plan) | US$784M (FY2025 defense satellite only) | ||
| BCP Subsidies | US$80M (2024–2027) | US$170M (2024–2026) | ||
| Timeline | First satellite by 2026–2027 | Satellite launch timeline TBD | ||
| Civil-Military Integration | High (Foxconn, private sector) | Very High (JSDF + NIED + civilian use) | ||
| International Partners | Eutelsat OneWeb, U.S. (partial) | U.S., domestic R&D focus |
100
A Shared Vision for a Secure, Connected Future
The rising threats to digital infrastructure have made network resilience a top priority for governments and enterprises worldwide. Taiwan and Japan stand as leading examples in Asia, proactively investing in satellite communication, integrating civil-military response systems, and future-proofing their networks against cyber threats, geopolitical instability, and natural disasters. Their efforts reflect a broader global shift, as nations recognize the urgent need to safeguard critical connectivity. As a distribution partner of Eutelsat OneWeb, our company plays a pivotal role in this transformation, delivering mission-critical solutions such as enterprise network redundancy, server load balancing, disaster recovery systems, and SATCOM BCP solutions for disaster and wartime scenarios. These capabilities are essential for governments, critical infrastructure providers, and private enterprises seeking to ensure uninterrupted operations in an unpredictable world.
With geopolitical and environmental risks on the rise, network resilience is no longer just a technical consideration – it is a strategic imperative. By embedding this vision in national planning, Taiwan and Japan not only secure their digital futures but also set a global benchmark for allied democracies striving for a more secure and connected world. While the Company does not currently generate revenue from contracts in the civilian telecommunications sector, we are actively engaged in discussions with prospective partners – including governments, enterprises, mobile network operators, satellite providers, and infrastructure stakeholders – about using our solutions to support hybrid, resilient communications. Our platform, which is software-defined and carrier-neutral, is specifically designed to enable automatic recovery, satellite-based failover, and dynamic traffic routing in the event of fiber disruptions or terrestrial infrastructure loss.
We believe our technology is well-positioned to support the growing demand for resilient connectivity across mobile backhaul, disaster response, rural access, business continuity, and critical infrastructure markets. However, there can be no assurance that these discussions will result in binding agreements or generate revenue in the near term.
Principal Factors Affecting Financial Performance
We believe that our operating and business performance will be driven by various factors that affect the Aerospace & Defense and Civilian Telecommunications segments including the magnitude of defense spending by the U.S. and its allies, trends in air travel affecting the commercial airline industry, and trends in the evolution of the digital infrastructure and technologies deployed by mobile network operators, which collectively constitute the customer bases that we target, as well as general macroeconomic factors. Key factors that may affect our future performance include:
| ● | our ability to enter into and maintain long-term business arrangements with potential partners that are defense contractors and other potential military and government customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in the commercial aviation and airline industries and other potential aerospace customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in civilian telecommunications industries and other potential telecommunications customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in satellite communications industries, including satellite and constellation operators with satellites in various orbits such as LEO, MEO, GEO and HEO, which depends on numerous factors including the technical integration of our technology and services with their satellites and core networks; |
| ● | our ability to secure and maintain the relevant licenses and regulatory approvals to operate as a distribution partner of satellite bandwidth from our current and potential satellite and constellation partners in our potential target countries and regions, which depends on numerous factors including the navigation of both national and international regulatory regimes and coordination with ministries of communications or their equivalent; |
101
| ● | our ability to secure and maintain the relevant type approvals, as necessary, to install our universal terminals on airborne, maritime and land-based vehicles and platforms, such as the DO-160 certification for installation of our systems on aircraft, which depends on numerous factors including the navigation of both governmental and third-party regulatory regimes and coordination with key stakeholders; |
| ● | the extent of the adoption of our products and services by potential Aerospace & Defense and Civilian Telecommunications partners and customers; |
| ● | costs associated with implementing, and our ability to implement on a timely basis, our technology, upgrades and installation technologies; |
| ● | costs associated with and our ability to execute our expansion, including modification to our network to accommodate satellite technology, development and implementation of new satellite-based technologies, the availability of satellite capacity, costs of satellite capacity to which we may have to commit well in advance, and compliance with regulations; |
| ● | costs associated with managing a rapidly growing company; |
| ● | the number of manned and unmanned defense platforms in service in our markets, including changes in fleet size by one or more of our potential military or government customers; |
| ● | the geopolitical environment and other trends that affect defense spending; |
| ● | continued demand for connectivity and proliferation of manned and unmanned defense platforms, including UAVs and drones; |
| ● | the number of aircraft in service in our markets, including consolidation of the airline industry or changes in fleet size by one or more of our commercial airline partners; |
| ● | the economic environment and other trends that affect both business and leisure travel; |
| ● | the number of cell towers, base stations and antennas deployed by mobile network operators and digital infrastructure developers in our markets, including consolidation of the telecommunications industry or changes in network topology due to transitions from 4G to 5G and, eventually to 6G mobile networks by one or more of our potential civilian telecommunications partners; |
| ● | continued demand for connectivity and proliferation of Wi-Fi enabled devices, including smartphones, tablets and laptops; |
| ● | our ability to obtain required licenses and approvals necessary for our operations; and |
| ● | changes in laws, regulations and interpretations affecting telecommunications services and aviation, including, in particular, changes that impact the design of our equipment and our ability to obtain required certifications for our equipment. |
Recent Events
Merger with IX Acquisition Corp.
On March 29, 2024, we entered into a merger agreement the “Merger Agreement”) with IX Acquisition Corp. (“IXAQ”), a Cayman Islands exempted company (which will re-domicile from being a Cayman Islands company and become a Delaware corporation), and AKOM Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of IQAC (“Merger Sub”).
102
The Merger is intended to provide Aerkomm with enhanced access to public capital markets, institutional investors, and strategic partners. If consummated, we expect this transaction to improve our liquidity position and support the scale-up of defense and telecom commercialization initiatives.
The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, following the domestication to Delaware of IXAQ, Merger Sub will merge with and into the Company (the “Merger”), after which the Company will be the surviving corporation and a wholly-owned subsidiary of IXAQ. In connection with the Merger, IXAQ will be renamed “AKOM Inc.” The Merger will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the parties to the Merger Agreement and specified in the articles of merger. The Merger is expected to close prior to October 12, 2025.
The Amendment provides that any lock-up period applicable to the Sponsor or any officers, directors or affiliates of Parent will terminate at the Closing of the Merger and changes the percentage of the Founder Shares being treated as Escrowed Sponsor Shares from 50% to 25%, adds a provision providing for the Company to pay certain amounts to Parent to cover its working capital and extension expenses, and adds a provision that Parent may terminate the Merger Agreement at any time prior to the Closing Date if the Company or any Subsidiary of the Company enters into voluntary bankruptcy or fails to remove within 60 days any petition in bankruptcy filed against it prior to Closing.
Additional information relating to the Merger along with the Merger Agreement can be found in our Current Report on Form 8-K filed with the SEC on April 4, 2024. In connection with the transaction described herein, the Company filed relevant materials with the SEC, including the Registration Statement on Form S-4 and a proxy statement/prospectus. Additional information relating to the S-4 can be found in our Current Report on Form 8-K filed with the SEC on May 16, 2024.
Planned Merger with Ejectt
On July 28, 2023, we and Ejectt, Inc. signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and delivery of a notice and merger contract to Ejectt, which were delivered to Ejectt on February 1, 2024. At a May 23, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved the terms of the merger plan and agreement and its being signed by the chairperson of Aerkomm Taiwan. On the same day, the shareholders of Ejectt approved the proposed merger and the merger agreement was then signed by the parties on May 23, 2024. Under the merger agreement and contingent only on the merger’s receiving necessary governmental approvals, the merger will be consummated and the surviving company of the merger will be Aerkomm Taiwan.
Because Aerkomm Taiwan has foreign (non-Taiwanese) shareholders (Aerkomm holds 49% of the outstanding shares of Aerkomm Taiwan) for the merger to become legally effective under Taiwanese law, it must be approved by the Taiwan Department of Investment Review. Aerkomm and Ejectt submitted an application to the Department of Investment Review on July 10, 2024. Reviews by the Department of Investment Review often take four to six months and possibly longer, may require extensive inquiries and requests for further information by the Department of Investment Review, and sometimes result in denial of approval. Consequently, Aerkomm cannot assure that the merger will be approved or, if approved, when the approval may be granted.
Strategic and International Defense Pipelines
As of this filing, we are shifting from pursuing international growth through Direct Commercial Sales (DCS) to Foreign Military Sales (FMS) pathways:
| ● | Japan: Engaged with local integrators and defense authorities regarding UAV communications terminals and software-defined modems; three ongoing pilot evaluations. |
| ● | Taiwan: Collaborating with telecom operators and disaster resilience agencies on mobile SATCOM BCP deployments; application-based discussions tied to regional contingency planning. |
| ● | European Union: In active dialogue with five EU-based primes in connection with the IRIS² satellite sovereignty initiative and C4ISR modernization programs; R&D co-development discussions underway. |
103
Across these efforts, we are pursuing revenue opportunities through strategic partnerships, licensing, and terminal sales. As of the date of this filing, we are actively engaged with over 25 government agencies, defense integrators, and commercial primes across the U.S., Japan, EU, and Indo-Pacific. These engagements span stages from early requests for information (RFI) to pilot testing and integration evaluations. The indicative value of our aggregate opportunity pipeline exceeds $150 million, though no assurance can be given that these engagements will convert to binding agreements. We anticipate initial award decisions on a subset of these opportunities during 2025.
Smaller Reporting Company
Although we no longer qualify as an Emerging Growth Company, or EGC, we continue to qualify as a smaller reporting company, which allows us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation that are available to an EGC. In addition, as a smaller reporting company with less than $100 million in annual revenue, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on these exemptions, we have taken advantage of reduced reporting obligations in this quarterly report on Form 10-Q.
Recent Market Information
The IATA (International Air Transport Association) in May 2025 issued a report entitled Passenger Market Analysis.
| ● | Industry-wide revenue passenger-kilometers (RPKs), a measure of passenger traffic volume, have shown a strong recovery in recent years, surpassing pre-pandemic (2019) levels by 3.8% in 2024. |
| ● | Available seat-kilometers (ASKs) in the airline industry experienced an 8.7% increase in 2024 compared to 2023. |
| ● | In 2024, both global and domestic passenger traffic saw significant growth, with some regions experiencing particularly strong increases. Globally, air passenger demand increased by 10.4% compared to 2023 and surpassed pre-pandemic levels by 3.8%, and domestic traffic in particular grew by 5.7%. |
| ● | In 2024, international RPKs (Revenue Passenger Kilometers) recovered strongly, with global traffic exceeding pre-pandemic levels. IATA reported that total full-year traffic rose 10.4% compared to 2023 and was 3.8% above 2019 levels. International demand specifically rose 9.5% in October 2024 compared to October 2023. Furthermore, IATA’s passenger market analysis indicates that international RPKs surpassed 2019 levels by 0.5% in 2024, with load factors reaching a record high of 83.2%. Asia Pacific airlines played a significant role in this recovery, contributing to more than half of the global growth. |
Results of Operations
The discussion below relates to our two fiscal years ended on December 31, 2024 and 2023.
Comparison of Years Ended December 31, 2024 and 2023
The following table sets forth key components of our results of operations during the years ended December 31, 2024 and 2023.
| Year Ended December 31, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Sales | $ | 1,342,931 | $ | 731,090 | $ | 611,841 | 83.7 | % | ||||||||
| Cost of sales | 1,145,163 | 1,810,876 | (655,713 | ) | (36.8 | )% | ||||||||||
| Operating expenses | 24,117,347 | 15,830,119 | 8,287,228 | 52.4 | % | |||||||||||
| Impairment loss on goodwill | - | 4,560,619 | (4,560,619 | ) | 100.0 | % | ||||||||||
| Loss from operations | (23,919,579 | ) | (21,470,524 | ) | (2,449,055 | ) | 11.4 | % | ||||||||
| Net non-operating income (loss) | (5,272,872 | ) | (2,360,799 | ) | (2,912,073 | ) | 123.4 | % | ||||||||
| Loss before income taxes | (29,192,451 | ) | (23,831,323 | ) | (5,361,128 | ) | 22.5 | % | ||||||||
| Income tax expense | 2,400 | 2,400 | - | - | % | |||||||||||
| Net Loss | (29,194,851 | ) | (23,833,723 | ) | (5,361,128 | ) | 22.5 | % | ||||||||
| Other comprehensive income | 300,660 | 7,370 | (293,290 | ) | 3,979.5 | % | ||||||||||
| Total comprehensive loss | $ | (28,894,191 | ) | $ | (23,826,353 | ) | $ | (5,067,838 | ) | 21.3 | % | |||||
104
Revenue. Our sales were $1,342,931 for the year ended December 31, 2024, as compared to the $731,090 for the year ended December 31, 2023. Our total revenue for the year ended December 31, 2024 consisted of the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others.
Cost of sales. Our cost of sales includes the direct costs of our raw materials and component parts, as well as the cost of labor and overhead. Our cost of sales was $1,145,163 and $1,810,876 for the years ended December 31, 2024 and 2023, respectively. The cost of sales for the year ended December 31, 2024 consist of cost of ground antenna and other equipment units purchased from a related party and others in the amount of 1,021,563 and $123,600, respectively.
Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses increased by $8,287,228 to $24,117,347 for the year ended December 31, 2024, from $15,830,119 for the year ended December 31, 2023. Such operating expense increase was mainly due to the increase in R&D expense, stock based compensation, amortization and depreciation expense and other operation expense in the amount of $3,283,998, $3,983,252, $827,754, and $1,545,478, respectively, which was offset by the decrease in professional fee, and impairment loss on goodwill in the amount of $512,148, and $4,560,619, respectively.
Net non-operating loss. We had $5,272,872 and $2,360,799 net non-operating loss for year ended December 31, 2024, and 2023, respectively. Net non-operating loss for the year ended December 31, 2024, primarily consisted of interest expense of $1,164,631, loss from change in fair value of SAFE liabilities of $412,800, and impairment loss on investment of $3,699,278. Net non-operating income for the year ended December 31, 2023, primarily consisted of redemption loss of $855,620, interest expense of $1,509,429, foreign currency exchange loss of $131,214, and unrealized investment loss of $105,796.
Loss before income taxes. Our loss before income tax is $29,192,451 for the year ended December 31, 2024 as compared to the loss of $23,831,323 for the year ended December 31, 2023, an increase of $5,361,128, or 22.5%, as a result of the factors described above.
Income tax expense. Income tax expense for the year ended December 31, 2024 and 2023 were $2,400. The income tax expenses mainly consist of California franchise tax and foreign subsidiary’s income tax expenses.
Total comprehensive loss. As a result of the cumulative effect of the factors described above, our total comprehensive loss increased by $5,067,838, or 21.3%, to $28,894,191 for the year ended December 31, 2024, from $23,826,353 for the year ended December 31, 2023.
Liquidity and Capital Resources
In assessing our liquidity, we monitor and analyzes its cash on-hand and its operating and capital expenditure commitments. Our liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been utilized to finance our working capital requirements. As of December 31, 2024, we had cash outflow from operating activities of $5,649,924 and had cash and restricted cash of $109,227. Our working capital deficit was $58,439,778 as of December 31, 2024. These conditions give rise to substantial doubt and uncertainty regarding the our ability to continue as a going concern. If we are able to carry out our plans as detailed below, we could alleviate this doubt.
105
We have taken measures and is experiencing and anticipates developments that management believes will improve its financial position. These include that two of the our current shareholders (the “Lenders”) have each committed to provide to a $10 million bridge loan (together, the “Loan Commitments” and loans made under the Loan Commitments, “Loans”) for an aggregate committed principal amount of $20 million, to bridge the our cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) that we purchased in Taiwan. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon our request prior to the time that title to the Land is vested in our subsidiary, Aerkomm Taiwan, to pay the outstanding payable to our vendors. On April 25, 2022, the Lenders further amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100%, thus making the full $20 million of the Loan Commitments available to us.
In addition to the foregoing, on March 1, 2023, we entered into a letter agreement with Well Thrive Limited, one of the lenders under the Loan Commitment, in which it was agreed that, to support us, one-half of the Loan Commitment amount of Well Thrive Limited (thus, $5,000,000) would be funded (by Well Thrive or by lenders arranged by Well Thrive) at no interest and with no fixed maturity date, with the remaining $5,000,000 of Well Thrive Limited’s Loan Commitment to be funded on the basis of the originally agreed terms. As of December 31, 2024, we had received Loans totaling NT$136,071,529 (approximately $4.1 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,850,213 of the $20 million in aggregate loan commitments from the two Lenders was still available as of December 31, 2024.
In connection with the planned Merger with IXAQ, we has obtained $35 million in private investment in public equity (“PIPE”) investment commitments and expects additional approximately $2.0 million in Simple Agreement for Future Equity (“SAFE”) investments to be funded before closing of the Merger. Further, us and IXAQ have entered into a letter agreement with Benchmark Company LLC (“Benchmark”) under which Benchmark has agreed to provide capital markets advisory services to us (including attaining research coverage, assisting in road-shows and investor meetings and other advisory services) and to act as placement agent for the private placement of securities by us. In connection with the arrangement with Benchmark, we are targeting the raise of $100 million in connection with the closing of and after the Merger, in addition to the $35 million in already committed PIPE investment and up to approximately $19.2 million of cash (net of transaction costs and depending on the amount of shareholder redemptions) contributed from the IXAQ side as a result of the Merger.
Our ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As of December 31, 2024, we expect approximately $28.4 million convertible notes and SAFE can be converted into equity upon Merger.
We also expects to begin generating significant recurring revenues in fourth quarter 2025, including in connection with the OneWeb Distribution Partner Agreement entered into between Aerkomm Japan, as Distribution Partner, and OneWeb on October 1, 2024, pursuant to which Aerkomm Japan was appointed as a distributor for OneWeb in Japan and Taiwan and we had made our first delivery of a certain classified radar system to a governmental defense customer on October 24, 2024.
We believe it will have sufficient liquidity to fund its operations for at least the next twelve months following the issuance of these consolidated financial statements. This assessment considers our current available cash, approximately $15.9 million in aggregate available loan commitments from two lenders, $35 million in PIPE investment commitments signed concurrently with entering into the Merger Agreement with IXAQ, and additional capital expected to be raised through SAFE financings and the Benchmark relationship. In addition, approximately $28.4 million of outstanding convertible notes and SAFE are expected to convert into equity upon consummation of the Merger, which would further strengthen the our capital resources and reduce cash obligations. We also expects to benefit from the cash to be brought in by IXAQ in connection with the Merger (subject to shareholder redemptions), the anticipated ramp-up of revenue-generating commercial sales, synergies from the merger of Aerkomm Taiwan with its exclusive distributor EJECTT, Inc., and continued disciplined management of hiring and other investments. Based on these factors, we believe its working capital will be adequate to sustain our operations for the next twelve months.
106
If the Merger does not close and thus the $35 million in PIPE commitments that are contingent on closing of the Merger are no longer committed, we expect to be able to fund operations over the next 12 months by short-term borrowings and other loan commitments, the balance of approximately $15.9 million of the $20 million in above-referenced loan commitments from two shareholders, renegotiating financing arrangements with some or all of the committed PIPE investors (who are our existing investors and have a strong interest in its success), slowing the pace of hiring and other investments that we would otherwise undertake if the Merger closes, synergies and efficiencies from the planned merger with EJECTT, and revenues received from the ramp-up of commercial sales. In conclusion, per the non-binding term sheet agreement aforementioned, we will be able to fund the operations and development for the next 12 months.
The following table provides detailed information about our net cash flow:
| Years Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (5,649,924 | ) | $ | (2,145,787 | ) | ||
| Net cash used in investing activities | (2,292,336 | ) | (8,096,308 | ) | ||||
| Net cash provided by financing activities | 895,228 | 8,430,528 | ||||||
| Net increase (decrease) in cash and restricted cash | (7,047,032 | ) | (1,811,567 | ) | ||||
| Cash and restricted cash at beginning of year | 7,428,702 | 10,101,920 | ||||||
| Foreign currency translation effect on cash and restricted cash | (272,443 | ) | (861,651 | ) | ||||
| Cash and restricted cash at end of year | $ | 109,227 | $ | 7,428,702 | ||||
Operating Activities
Net cash provided by and used in operating activities was $5,649,924 for the year ended December 31, 2024, as compared to $2,145,787 for the year ended December 31, 2023. In addition to the net loss of $29,194,851, the decrease in net cash used in operating activities during the year ended December 31, 2024 was mainly due to increase in inventories, other receivable, and prepayment from customer – related party of $567,443, $269,882, and $644,570, respectively, offset by non-cash items of $12,179,923 which consisted of depreciation and amortization, stock-based compensation, non-cash R&D expense, change in fair value of SAFE liabilities, and impairment loss on investment. The decrease also offset by decrease in prepayment for equipment and intangible assets – customer projects, increase in account payable, increase in accrued expense, and increase in other payable of $3,9552,458, $611,213, $5,461,681and $2,489,968, respectively.
Net cash used in operating activities was $2,145,787 for the year ended December 31, 2023. In addition to the net loss of $23,833,723, the decrease in net cash used by operating activities during the year ended December 31, 2023 was mainly due to increase in the cash used in prepaid expense and prepayment for equipment and intangible assets and deposits of $1,626,933, $219,500, respectively, offset by the increase in other receivable-related parties, and accrued expenses, prepaid from customer-related party and other payable of $252,329, $3,446,193, $5,276,122, and $3,836,063, respectively.
107
Investing Activities
The net cash used in investing activities for the year ended December 31, 2024 was $2,292,336 as compared to $8,096,308 for the year ended December 31, 2023. Net cash used in investing activities for the year ended December 31, 2024 was mainly due to disbursement for other receivable - related parties loans of $2,203,619, and purchase of property and equipment of $88,717.
The net cash used in investing activities for the year ended December 31, 2023 was $8,096,308. Net cash used in investing activities for the year ended December 31, 2023 was mainly due to disbursement for other receivable - related parties loans of $2,091,285, purchase of property and equipment of $1,738,705, purchase of intangible asset of $354,469, and prepayment for land of $4,237,427. The net cash used in investing activities for the year ended December 31, 2022 was mainly due to the purchase of short-term investment of $1,138,952, purchase of property and equipment of $1,306,610.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2024 was $895,228 compared to $8,430,528 for the year ended December 31, 2023. Net cash provided by financing activities for the year ended December 31, 2024 was mainly attributable to the net proceeds from injection of subscribed capital of $527,783, proceeds from issuance of common stock of $3,894,000, proceeds from SAFE notes of $4,997,200, proceeds from other payable-related parties of $172,675, and proceeds from short-term loan of $606,544 offset by the repayment of short-term loan of $960,731, and repayment of convertible long-term bonds payable of $8,330,160.
Net cash provided by financing activities for the years ended December 31, 2023 was $8,430,528. Net cash provided by financing activities for the year ended December 31, 2023 was mainly attributable to the net proceeds from proceeds from injection of subscribed capital of $5,004,000 and proceeds from short-term loans of $3,780,041, offset by the repayment of short-term loan of $330,848.
Capital Expenditures
Our operations continue to require significant capital expenditures primarily for technology development, equipment and capacity expansion. Capital expenditures are associated with the supply of airborne equipment to our prospective airline partners, which correlates directly to the roll out and/or upgrade of service to our prospective airline partners’ fleets. Capital spending is also associated with the expansion of our network, ground stations and data centers and includes design, permitting, network equipment and installation costs.
Capital expenditures for the years ended December 31, 2024 and 2023 were $88,717 and $6,330,601, respectively.
We anticipate an increase in capital spending in fiscal year 2025 and estimate that capital expenditures will range from $6 million to $10 million as we will continue to advance our semiconductor designs, our software-defined platforms and continue to execute our network expansion strategy. We expect to be able to raise these required funds in connection with our planned Merger with IXAQ although we cannot provide assurance that we will be successful in this effort.
Inflation
Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
Our operating results and operating cash flows historically have not been subject to significant seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.
Critical Accounting Estimates
Financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Certain accounting estimates are particularly sensitive because of our significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe that the following accounting estimates are critical to our business operations and understanding our consolidated financial results.
108
SAFE Liabilities
In connection with the Simple Agreement for Future Equity (“SAFE”) agreements that we entered into with four third parties set forth in Note 17, we determined that the SAFE liabilities should classified as a derivative liability in accordance with ASC 815-40 “Derivatives and Hedging”. As a result, the SAFE liabilities shall be measured initially, and subsequently at fair value on each reporting date. We will continue to adjust the carrying value of the SAFE liabilities until contingencies are finally determined. Any changes in fair value will be recorded as a gain or loss in the statements of operations and comprehensive loss. As of December 31, 2024, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $5,410,000. The valuation was determined using a Monte Carlo simulation reflecting a probability-weighted outcome of multiple scenarios, including equity financing, optional conversion, and dissolution. Key assumptions used in the simulation included an IXAQ stock price of $11.55, a risk-free rate of 4.43%, and an annualized volatility of 48.1%. The Company had received aggregate proceeds of $4,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the year ended December 31, 2024, was $412,800.
Goodwill Impairment
As we are currently still in the development stage and will not start generating recurring revenue until after late 2024. Management has evaluated that the potential benefits of the acquisitions before the year 2023 are limited and uncertain, and due to this reason, management has decided to impair goodwill that generated from 2022 and prior periods with total of $4,561,037 in 2023. Management has also evaluated the potential benefits of the acquisitions after the year 2023 and decided that there was no impairment on goodwill for the year ended December 31, 2024. As of December 31, 2024 and 2023, goodwill net of impairment was $4,573,819.
Impairment of long-term investment.
Cost method investment is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security Cost method investment is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. During the year ended December 31, 2024 and 2023, the Company recorded $3,699,278 and $0 impairment charges for its investments, respectively.
Recent Accounting Pronouncements
See Note 3 of the notes to the consolidated financial statements included elsewhere in this annual report for a discussion of recently issued accounting standards.
109
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The full text of our audited financial statements as of December 31, 2024 and 2023 begins on page F-1 of this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based upon, and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer determined that, because of the material weakness described below, our disclosure controls and procedures were not effective.
110
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2024, our internal control over financial reporting was not effective due to the following material weakness:
| ● | We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements. To mitigate the current limited resources and limited employees, we rely heavily on the use of external legal and accounting professionals. |
In order to cure the foregoing material weakness, we have taken or plan to take the following remediation measures
| ● | We intend to hire additional personnel with technical accounting expertise to further support our current accounting personnel. As necessary, we will continue to engage consultants or outside accounting firms in order to ensure proper accounting for our consolidated financial statements. |
111
We intend to complete the remediation of the material weakness discussed above as soon as practicable but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weakness that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Controls over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There have been no changes in our internal control over financial reporting during the fiscal year 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
We
have
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
112
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following sets forth information about our directors and executive officers as of the date of this Annual Report:
| Name | Age | Position | ||
| Louis Giordimaina | 68 | Chief Executive Officer, Interim Chief Financial Officer and Director | ||
| Georges Caldironi | 68 | Chief Operating Officer | ||
| Richmond Akumiah | 70 | Director | ||
| Chih-Ming (Albert) Hsu | 48 | Director | ||
| Robert McGuire | 60 | Director | ||
| Jan-Yung Lin | 63 | Secretary and former Director | ||
| Jeff T. C. Hsu | 61 | Director | ||
| Jeffrey Wun | 60 | President and Chief Technology Officer and Director |
Louis Giordimaina. Mr. Giordimaina was appointed as our Chief Executive Officer by our Board of directors on March 22, 2020 and was appointed as a director by our Board of directors on October 7, 2021. Mr. Giordimaina was appointed our Interim Chief Financial Officer on September 1, 2022 and was appointed as interim Chairman of the Board of Directors on February 03, 2025. Prior to joining our company, Mr. Giordimaina served as Chief Operating Officer-Aviation of Aircom from May 25, 2018 until November 1, 2019, and of Aerkomm Malta from November 1, 2019 until March 22, 2020, the date of his being appointed as our Chief Executive Officer by the Board. Mr. Giordimaina joined Aircom as a consultant in June 2017. Mr. Giordimaina is an experienced aviation executive with more than 40 years of experience in airline executive management, operations, Maintenance and Repair Organizations (MROs), aircraft purchasing from aircraft manufacturers, sales and leasing with major aircraft lessors. Prior to joining the Company, Mr. Giordimaina served as Chief Executive Officer of Air Malta in 2014, the national airline of Malta, as well as CEO of Lufthansa Technik Malta from 2002 to 2011. He joined Air Malta’s engineering department in 1975 as an aircraft engineer where he occupied various positions in Air Malta’s engineering department with additional active roles in Air Malta relating to airline strategic planning, aircraft purchasing and deliveries from Airbus Industrie, Boeing and British Aerospace, aircraft leasing from various international aircraft lessors and aircraft contract negotiations. In 1994, he was appointed as the first Maltese Chief Engineer of Air Malta. Mr. Giordimaina was instrumental in setting up Lufthansa Technik Malta, a Joint Venture between Lufthansa Technik and Air Malta, of which he was appointed Chief Executive Officer and Director in 2002. In 2006, he spearheaded Lufthansa Technik Malta’s expansion to become one of the major worldwide MRO players, based in the center of the Mediterranean. He occupied the position of CEO until September 2011, after which he remained as member of the board of directors of that company until September 2013 He also served as the General Manager, the Accountable Manager and a director of Hyperion Aviation, where he worked from May 2016 to September 2017, managing a fleet of private jet aircraft; he served in similar capacities at EuroJet Ltd., from January 2015 to April 2016; and he served for a number of years as a director of Tailwind Leasing Company and Peregrine Aviation Leasing Company based in Shannon, Ireland. An aircraft engineer by profession, Mr. Giordimaina also obtained an Engineering Business Management degree from Warwick University, UK. He is a Fellow of the Royal Aeronautical Society.
Georges Caldironi. Mr. Caldironi was appointed as our Chief Operating Officer by our board of directors on March 22, 2020. Prior to that, Mr. Caldironi served as a Project Director for Aircom beginning on January 1, 2019, on an independent contractor basis. Mr. Caldironi is an aviation professional with 40 years of experience in aircraft modification, avionics communication and in-flight entertainment systems. Prior to joining Aircom, Mr. Caldironi was employed by Airbus for 25 years, most recently as Technical & Support Director in Airbus’ Business and Government Division. During his career at Airbus, Mr. Caldironi managed and supervised various complex projects including, but not limited to, aircraft upgrades. He is a specialist in system and cabin innovation (connectivity & IFE), having carried out numerous feasibility studies and associated design projects for numerous airlines and leasing companies. During his career, Mr. Caldironi has prioritized ensuring cost efficiency and on time delivery in the successful completion of aviation projects. Mr. Caldironi received a diplôme d’études supérieures techniques (DEST) in engineering from Conservatoire national des arts et métiers (CNAM) of Bordeaux in 1986.
113
Chih-Ming (Albert) Hsu. Mr. Chih-Ming (Albert) Hsu has served as a member of our Board of directors since December 2017. Mr. Hsu has served as a member of Aircom’s board since April 2017. Mr. Hsu was admitted to practice law in Taiwan as a corporate and business lawyer and as a patent attorney in 2002. Mr. Hsu is the owner of Chascord Law Firm. Mr. Hsu has also been the chairman of the board of directors of Ejectt Inc., a Taiwanese publicly traded company, since May 2019. Mr. Hsu previously served as the arbitrator& mediator of the Chinese Arbitration Association, Taipei. In addition, Mr. Hsu was the Chairman of Unitel High Technology Corporation, a listed company on the Taiwan over-the-counter market from December 2015 to September 2016. Mr. Hsu received an LL.M. and Bachelor of Law degree from National Taiwan University in 2003 and 1997, respectively. Mr. Hsu is an expert of real estate securitization in Taiwan.
Robert McGuire. Mr. Robert McGuire has served as a member of our Board of directors since February 2025. Mr. McGuire has more than 35 years of experience as an international business manager in industrial companies and as an entrepreneur, having been based in Japan for much of his career. Mr. McGuire was the President of the Japan subsidiary of Lord Corporation, a global leader in specialty chemicals, from 2013 to 2018; the President of the China subsidiary of glass industry leader Owens Illinois from 2011 to 2013, where he managed more than 4,000 employees; the Vice-President and then President of Sekisui-Fuller, a joint venture in Japan and China between industrial adhesives leader HB Fuller and Sekisui Chemical, from 2005-2010; and before then served as the President of HB Fuller’s Japan subsidiary and in positions with Donaldson Company and Deere & Company. Following a successful career managing the Japan and China operations of industrial manufacturers, Mr. McGuire focused on establishing his own companies, including McGuire Specialty Chemical, which he founded in 2019 and where he is currently the President, and Solar Power Partners, which he founded in Japan in February 2018 and where he is currently the President, and in residential and hospitality real estate investments in Japan, the United States and Thailand.
Mr. McGuire earned his MBA from the University of Minnesota in 1994 and his B.A. in International Management from Gustavus Adolphus College in 1987. Mr. McGuire is fluent in speaking, reading and writing Japanese and has a working knowledge of Mandarin.
Richmond Akumiah. Mr. Akumiah has served as a member of our Board of directors since September 2018. Mr. Akumiah is an engineering and financial management professional with years of experience in decision support, budgeting, forecasting, credit analysis, cost accounting, mergers and acquisitions, quantitative analysis, financial and operational analysis, strategic planning, and corporate development. Since September 2018, he has been employed as a Senior Advisor, Investments and Operations by the State of New Jersey, Division of Investment, where he advises on the Division’s range of investment activities, and is on the Board of the New Jersey Culture Trust, as representative of the New Jersey State Treasurer. From 2014 to 2018, Mr. Akumiah was a research consultant for WorldQuant LLC, a Greenwich, Connecticut-based investment management firm. Prior to that, from 2009 to 2013, he was employed as a consultant for Wolters Kluwer. Prior to Wolters Kluwer, Mr. Akumiah was employed in a number of positions in various financial management capacities, including at The Dun & Bradstreet Corporation where he spent a decade in leadership roles in Finance & General Management. At AT&T, he served as Director of Finance in the Business Case Center of Excellence managing AT&T’s investments in IP (Internet Protocol) and Managed Services. Mr. Akumiah also served as Chief Financial Officer of Hands On Network (Points of Light). Mr. Akumiah began his career in New York City with Marine Midland Bank (HSBC). Mr. Akumiah is a member of the American Society of Mechanical Engineers and the American Society of Civil Engineers. Mr. Akumiah graduated from Harvard University with a BA in Engineering and holds an MBA in Finance from New York University, Leonard Stern School of Business. Mr. Akumiah was selected to serve as a member of our board of directors due to his engineering and finance background.
114
Jan-Yung Lin. Mr. Jan-Yung Lin, who served as a member of our board of directors since February 2017 resigned from that position on May 5, 2023. Mr. Lin served as Aircom’s President from June 2017 to February 2019, as Aircom’s Chief Executive Officer from February 2015 to October 2016, as Aircom’s Chief Operating Officer from September 2014 to February 2015, and as a director of Aircom since September 2014. Mr. Lin has practiced corporate and business law at Concorde Law PC as a solo practitioner since 2012. Prior to that Mr. Lin was the General Counsel and Chief Financial Officer of EMG Properties, Inc. in California. Prior to that Mr. Lin was a corporate associate of Goodwin Proctor LLP. Mr. Lin graduated magna cum laude from Cornell Law School with a J.D. degree and an LL.M. degree in International and Comparative Law. Mr. Lin received an M.B.A. degree from the University of California, Berkeley and a Bachelor’s degree from the National Taiwan University. Mr. Lin was selected to serve as a member of our board of directors due to his legal background.
Jeff T. C. Hsu. Mr. Hsu has served as a member of our Board of directors since May 5, 2023. Mr. Hsu earned a PH. D in Electrical and Computer Engineering from the University of Texas at Austin in 1991. After earning this degree, Mr. Hsu accepted an engineering position at Motorola Inc. followed by a managerial position at Applied Materials Inc. With more than twenty years’ experience in semiconductor and TFT LCD application and manufacturing processes, Mr. Hsu focused his skill set toward display panel manufacturing becoming the foremost expert in the industry. Highlights of Mr. Hsu’s extensive list of professional accomplishments include founding Chimei Electronics Inc., one of the first TFT LCD companies in Taiwan. After that, he successfully founded Jemitek Electronics which merged with Innolux within 3 years. In 2010, he was able to successfully merge Innolux, Chimei and Toppoly Electronics Corp. to create the largest LCD conglomerate in Taiwan at the time. In 2013, Mr. Hsu was invited by Innovation Network Corporation of Japan as a strategic advisor to contribute his expertise on business and investment to Japan Display Inc. In 2018-2020, Mr. Hsu was able to successfully raise a 900M fund for Japan Display Inc. From June 2021 up to June 2023, Mr. Hsu held a board seat at Sharp Corp. and actively advises on investment strategies for companies across various industries.
Jeffrey Wun – Mr. Wun has served as a member of our Board of directors since the closing of the reverse acquisition of Aircom on February 13, 2017 and as our President since December 31, 2017. Mr. Wun was appointed as our Chief Technology Officer by our Board of directors on March 22, 2020. He served as our Chief Executive Officer from December 31, 2017 to March 22, 2020. Mr. Wun served as our Chairman of the board of directors from January 22, 2018 to March 22, 2020. Mr. Wun is also currently the Chairman and Chief Technology Officer at AirCom Pacific, Inc. since March 2015. Mr. Wun is a technologist with more than 25 years of experience in the communications industry. Prior to joining Aircom, Mr. Wun served as Senior Staff Engineer at Samsung Electronics Co., Ltd. from December 2012 to May 2015. Prior to that, Mr. Wun was a professional engineer at MediaTEK USA Inc. from November 2010 to December 2012 and served as Chief Executive Officer at Kairos System Inc. from 2003 to 2010 since 2017. Previously, he served as the Chief Executive Officer at Kairos Systems, Inc. from 2003 to 2010 and as a Senior Staff Engineer at Samsung Electronics Co., Ltd. from 2012 to 2015. Mr. Wun also held the position of President, Secretary and Treasurer at Maple Tree Kids, Inc. A Mr. Wun completed his undergraduate degree at The Chinese University of Hong Kong in 1988.
Directors and executive officers are elected until their successors are duly elected and qualified.
There are no arrangements or understandings known to us pursuant to which any director was or is to be selected as a director (or director nominee) or executive officer.
Family Relationships
There are no family relationships among any of our officers or directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
115
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| ● | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Board Composition and Committees
Our board of directors is comprised of 6 members: Louis Giordimaina, Jeffrey Wun, Chih-Ming (Albert) Hsu, Richmond Akumiah, Robert McGuire, and Jeff Hsu. Our board of directors has determined that Messrs. McGuire and Akumiah are independent directors as that term is defined in the rules of the Nasdaq Stock Market. Each of Messrs. C McGuire and Akumiah are members of all of our standing committees.
Our board of directors currently has four standing committees which perform various duties on behalf of and report to the board of directors: (i) Audit Committee, (ii) Compensation Committee, (iii) Nominating and Governance Committee and (iv) Regulatory, Compliance& Government Affairs Committee. Each of the four standing committees is comprised entirely of our independent directors. From time to time, the board of directors may establish other committees.
Board Role in Risk Oversight
Our board of directors plays an active role, as a whole and also at the committee level, in overseeing management of our risks and strategic direction. Our board of directors regularly reviews information regarding our liquidity and operations, as well as the risks associated with each. Our Audit Committee oversees the process by which our senior management and relevant employees assess and manage our exposure to, and management of, financial risks. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. Our Nominating and Governance Committee also manages risks associated with the independence of members of our board of directors and potential conflicts of interest. Our Regulatory, Compliance& Government Affairs Committee oversees regulatory, compliance and governmental matters that may impact the Company. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is regularly informed about such risks.
Audit Committee
Our Audit Committee currently consists of Robert McGuire and Richmond Akumiah with Richmond Akumiah serving as chairman. Our board of directors has determined that each member of our Audit Committee is able to read and understand fundamental financial statements and has substantial business experience that results in such member’s financial sophistication.
116
Accordingly, our board of directors believes that each member of our Audit Committee has sufficient knowledge and experience necessary to fulfill such member’s duties and obligations on our Audit Committee. The primary purposes of our Audit Committee are to assist our board of directors in fulfilling its responsibility to oversee the accounting and financial reporting processes of our company and audits of our financial statements, including (i) reviewing the scope of the audit and all non-audit services to be performed by our independent accountant and the fees incurred by us in connection therewith, (ii) reviewing the results of such audit, including the independent accountant’s opinion and letter of comment to management and management’s response thereto, (iii) reviewing with our independent accountants our internal accounting principles, policies and practices and financial reporting, (iv) engaging our independent accountants and (v) reviewing our quarterly and annual financial statements prior to public issuance. The role and responsibilities of our Audit Committee are more fully set forth in a written Charter adopted by our board of directors on June 6, 2017, which is available on our website at www.aerkomm.com.
Compensation Committee
Our board of directors established our Compensation Committee effective as of January 22, 2018, appointing Messrs. Busuttil, Choy and Lim as members, with Mr. Lim serving as chairman of this committee. On February 16, 2020, our board of directors voted to add Mr. Akumiah to this committee. On October 4, 2021, Mr. Busuttil resigned from his positions as a member and chairman of the board of directors (the “Board”) of the Company. Messrs. Choy, Lim and Akumiah are the current members of the Compensation Committee.
On December 28, 2024, Colin Lim resigned from his position as a member of the Board, effective as of that date. Mr. Lim was a member of the Company’s audit committee and the Chairman of the Company’s compensation committee. Mr. Lim’s resignation was not the result of any disagreement with the Company on any matter relating to its operation, policies (including accounting or financial policies) or practices.
On December 30, 2024, Raymond Choy resigned from his position as a member of the Board of the Company, effective as of that date. Mr. Choy was a member of the Company’s compensation committee and the Chairman of the Company’s audit committee. Mr. Choy’s resignation was not the result of any disagreement with the Company on any matter relating to its operation, policies (including accounting or financial policies) or practices.
On February 3, 2025, at a meeting of the Board, the Board appointed Mr. Robert McGuire to become an independent member of the Board effectively immediately, to fill one of the vacancies recently created by the resignation of two of the Company’s independent directors, Mr. Colin Lim and Mr. Raymond Choy. Also at this Board meeting, the Board took the following additional actions:
| ● | Appointed Mr. McGuire as a member of, and Chairman of, the Company’s Compensation Committee (this position formerly held by Mr. Colin Lim); |
| ● | Appointed Louis Giordimaina as the interim Chairman of the Board; (this position formerly held by Mr. Jeffrey Wun) and |
| ● | Appointed Richmon Akumiah as Chairman of the Company’s Audit Committee (this position formerly held by Mr. Raymond Choy) |
117
The Compensation Committee is structured as follows: The primary purpose of our Compensation Committee is to assist our board of directors in fulfilling its responsibility to determine the compensation of our executive officers and to approve and evaluate the compensation policies and programs of our company, including (i) reviewing the compensation packages of executive officers and making recommendations to our board of directors for said compensation packages, (ii) reviewing and approving proposed stock incentive grants and (iii) providing our board of directors with recommendations regarding bonus plans, if any. The role and responsibilities of our Compensation Committee are more fully set forth in a written Charter adopted by our board of directors and made available on our website at www.aerkomm.com.
The policies underlying our Compensation Committee’s compensation decisions are designed to attract and retain the best-qualified management personnel available. We routinely compensate our executive officers through salaries. At our discretion, we may reward executive officers and employees through bonus programs based on profitability and other objectively measurable performance factors. Additionally, we use stock options and other incentive awards to compensate our executives and other key employees to align the interests of our executive officers with the interests of our stockholders. In establishing executive compensation, our Compensation Committee will evaluate compensation paid to similar officers employed at other companies of similar size in the same industry and the individual performance of each officer as it impacts our overall performance with particular focus on an individual’s contribution to the realization of operating profits and the achievement of strategic business goals. Our Compensation Committee will further attempt to rationalize a particular executive’s compensation with that of other executive officers of our company in an effort to distribute compensation fairly among the executive officers. Although the components of executive compensation (salary, bonus and incentive grants) will be reviewed separately, compensation decisions will be made based on a review of total compensation.
Nominating and Governance Committee
Our board of directors established our Nominating and Governance Committee effective January 22, 2018, appointing Messrs. Busuttil, Choy and Lim as members, with Mr. Busuttil serving as chairman of this committee. On February 16, 2020, our board of directors voted to add Mr. Akumiah to this committee. On October 4, 2021, Mr. Busuttil resigned from his positions as a member and chairman of the board of directors (the “Board”) of the Company. On December 28, 2024, Colin Lim resigned from his position as a member of the Board, effective as of that date, whilst on December 30, 2024, Raymond Choy resigned from his position as a member of the Board of the Company Mr. Akumiah and Mr. McGuire are with Mr. Akumiah the current member of the Nominating and Governance Committee with Mr. Akumiah serving as chairman. The Nominating and Governance Committee is structured as follows: The primary purposes of our Nominating and Governance Committee are to (i) identify individuals qualified to become members of our board of directors and recommend to our board of directors the nominees for the next annual meeting of our stockholders and candidates to fill vacancies on our board of directors, (ii) recommend to our board of directors the directors to be appointed to committees of our board of directors and (iii) oversee the effectiveness of our corporate governance in accordance with regulatory guidelines and any other guidelines we establish, including evaluations of members of executive management, our board of directors and its committees. The role and responsibilities of our Nominating and Governance Committee are more fully set forth in a written Charter adopted by our board of directors and made available on our website at www.aerkomm.com.
Our Nominating and Governance Committee’s methods for identifying candidates for election to our board of directors (other than those proposed by our stockholders, as discussed below) includes the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other researches. Our Nominating and Governance Committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.
A stockholder of our company may nominate one or more persons for election as a director at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our Bylaws. In addition, the notice must be made in writing and set forth as to each proposed nominee who is not an incumbent Director (i) their name, age, business address and, if known, residence address, (ii) their principal occupation or employment, (iii) the number of shares of stock of our company beneficially owned, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person pursuant to which the nominations are to be made and (v) any other information concerning the nominee that must be disclosed respecting nominees in proxy solicitations pursuant to Rule 14(a) of the Exchange Act. The recommendation should be addressed to our Secretary.
118
Among other matters, our governance and nominating committee will:
| ● | Review the desired experience, mix of skills and other qualities to assure appropriate board composition, taking into account the current members of our board of directors and the specific needs of our company and our board of directors; |
| ● | Conduct candidate searches, interviews prospective candidates and conducts programs to introduce candidates to our management and operations, and confirms the appropriate level of interest of such candidates; |
| ● | Recommend qualified candidates who bring the background, knowledge, experience, independence, skill sets and expertise that would strengthen and increase the diversity of our board of directors; and |
| ● | Conduct appropriate inquiries into the background and qualifications of potential nominees. |
Regulatory, Compliance & Government Affairs Committee
Our regulatory, compliance & government affairs committee currently consists of Mr. Robert McGuire and Akumiah, with Mr. Akumiah serving as chairman. The primary purposes of our regulatory, compliance& government affairs committee are to assist our board of directors by providing oversight of regulatory, compliance and governmental matters that may impact the Company, which including (i) overseeing our major compliance programs with respect to legal and regulatory requirements, except with respect to matters of financial compliance, (ii) overseeing compliance with any ongoing Corporate Integrity Agreements or similar undertakings by us with the U.S. Department of Justice, U.S. Securities and Exchange Commission, or any other government agency, (iii) reviewing with our Chief Compliance Officer the organization, implementation and effectiveness of our compliance programs and the adequacy of the resources for those programs, (iv) reviewing with our Chief Executive Officer the organization, implementation and effectiveness of our quality and compliance programs and the adequacy of the resources for those programs and (v) overseeing our exposure to risks relating to regulatory compliance matters. The role and responsibilities of our regulatory, compliance & government affairs committee are more fully set forth in a written charter adopted by our board of directors on September 25, 2018, which is available on our website at www.aerkomm.com.
Stockholder Communications with the Board of Directors
Our board of directors has established a process for stockholders to communicate with the board of directors or with individual directors. Stockholders who wish to communicate with our board of directors or with individual directors should direct written correspondence to our Corporate Secretary at Aerkomm Inc., 44043 Fremont Blvd., Fremont, California 94538.
The Corporate Secretary will forward such communications to our board of directors or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Corporate Secretary has the authority to discard the communication or to take appropriate legal action regarding such communication.
Code of Ethics
We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. We have also adopted a code of professional conduct that applies specifically to our chief executive officer and our senior financial officers. These codes address, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the codes.
We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.
119
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our outstanding common stock, to file with the SEC, initial reports of ownership and reports of changes in ownership of our equity securities. Such persons are required by SEC regulations to furnish us with copies of all such reports they file.
To our knowledge and except as otherwise indicated below, based solely on a review of the copies of such reports furnished to us regarding the filing of required reports, we believe that, except with respect to option grants received by our executive officers and directors during the 2024 fiscal year with respect to which Forms 5 have not yet been filed, all Section 16(a) reports applicable to our directors, executive officers and greater-than-ten-percent beneficial owners with respect to the reporting period ended December 31, 2024 were timely filed. Additionally, one of our greater-than-ten-percent beneficial owners may be late in filing a Form 5 update report.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table - Fiscal Years Ended December 31, 2024 and 2023
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.
| Name and Principal Position | Year | Salary ($) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||||||||
| Louis Giordimaina, | 2024 | 584,672 | 144,626 | 729,298 | ||||||||||||||||
| Chief Executive Officer and Interim Chief | 2023 | 584,672 | 1,117,573 | 28,692 | 1,730,937 | |||||||||||||||
| Financial Officer (2) | 2022 | 567,999 | 460,157 | 71,088 | 1,099,244 | |||||||||||||||
| Georges Caldironi (3) | 2024 | 324,818 | - | - | - | |||||||||||||||
| 2023 | 324,818 | - | - | - | ||||||||||||||||
| 2022 | 265,066 | 522,000 | 33,648 | 324,818 | ||||||||||||||||
| Jeffrey Wun, | 2024 | 384,000 | - | - | 2,253,980 | |||||||||||||||
| President and Chief Technology Officer (4) | 2023 | 384,000 | 1,869,980 | - | - | |||||||||||||||
| 2022 | 192,301 | 192,301 | ||||||||||||||||||
| (1) | These amounts shown represent the aggregate grant date fair value for options granted to the named executive officers computed in accordance with FASB ASC Topic 718. |
| (2) | Mr. Giordimaina, a former consultant to us, became a full-time employee on May 25, 2018 and was appointed, as of that date, Chief Operating Officer – Aviation. On March 22, 2020, Mr. Giordimaina was appointed as our Chief Executive Officer. On August 29, 2022, Mr. Giordimaina was also appointed as our interim Chief Financial Officer. |
| (3) | Mr. Caldironi, a former consultant to us, became a full-time employee and was appointed as our Chief Operating Officer on March 22, 2020. The option awards were granted to AA Twins, which is controlled by Mr. Caldironi, according to the consulting agreement. |
| (4) | Mr. Wun has served as our President since December 31, 2017 and as our Chief Technology Officer since March 22, 2020. |
Employment Agreements
Louis Giordimaina
Pursuant to the terms of his employment agreement, we agreed to pay Mr. Giordimaina an annual salary of €540,000, or $567,999. A bonus will be considered, comparable to those that may be offered to other executives once a satisfactory revenue stream is established at Aerkomm as a result of Mr. Giordimaina’s efforts. Mr. Giordimaina was granted options on 18,750 shares of common stock of the Company each calendar quarter, at the prevailing market price on Euronext at the time of grant in accordance with the equity incentive plan of the Company. These options will vest when issued. We will cover and pay any premium up to a maximum of €2,500, or $2,830, per annum for any international private health insurance which Mr. Giordimaina may have in place from time to time covering Mr. Giordimaina and his wife; we will pay Mr. Giordimaina the sum of €6,000, or $6,408, per year to any private pension fund scheme/s designated by Mr. Giordimaina, we will pay Mr. Giordimaina €18,000, or $19,224, per annum as an allowance for a leased car and fuel expenses, to be paid in equal monthly instalments, we will provide Mr. Giordimaina with a mobile telephone for his business use, as well as a lap top computer and an iPad, and we will reimburse Mr. Giordimaina for all actual, necessary and reasonable expenses incurred by him in the course of his performance of services for the Company. The employment agreement contains customary confidentiality provisions and covenants prohibiting Mr. Giordimaina from competing with us during his employment, and from soliciting any of our employees or consultants for a period of one year after his employment end. If Mr. Giordimaina’s employment is terminated by us without cause, he shall be entitled to one-half of his full salary for the remainder of the initial three-year term of his agreement.
120
Outstanding Equity Awards Fiscal Year Ended December 31, 2024 and 2023
As of December 31, 2024 and 2023, Mr. Wun had options outstanding and exercisable for 23,141 and 23,141 shares of our common stock at an average exercise price of $9.66 and $9.66 per share, respectively. As of December 31, 2022 and December 31, 2021, Mr. Giordimaina had options outstanding and exercisable for 366,099 and 291,099 shares of our common stock at an average exercise price of $6.56 and $6.21 per share. As of December 31, 2022 and 2021, Mr. Caldironi had options outstanding and exercisable for 99,676 and 24,676 shares of our common stock at an average exercise price of $8.91 and $8.82 per share, respectively. As of December 31, 2022 and 2021, Mr. Lin had options outstanding and exercisable for 19,605 and 19,605 shares of our common stock at an average exercise price of $10.33 and $10.33 per share, respectively.
| Option Awards | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||
| Louis Giordimaina | December 31, 2024 | 18,750 | - | - | $ | 2.95 | 12/01/2034 | |||||||||||||
| December 31, 2024 | 18,750 | - | - | $ | 2.86 | 09/01/2034 | ||||||||||||||
| December 31, 2024 | 18,750 | - | - | $ | 2.84 | 06/01/2034 | ||||||||||||||
| December 31, 2024 | 18,750 | - | - | $ | 2.99 | 03/01/2034 | ||||||||||||||
| December 31, 2024 | 18,750 | - | - | $ | 2.58 | 12/01/2033 | ||||||||||||||
| December 31, 2023 | 18,750 | - | - | $ | 2.58 | 09/01/2033 | ||||||||||||||
| December 31, 2023 | 351,500 | - | - | $ | 2.59 | 06/13/2033 | ||||||||||||||
| December 31, 2023 | 18,750 | - | - | $ | 2.89 | 06/01/2033 | ||||||||||||||
| December 31, 2023 | 18,750 | - | - | $ | 3.00 | 03/01/2033 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 4.26 | 12/01/2032 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 6.42 | 09/01/2032 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 8.94 | 06/01/2032 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 12.10 | 03/01/2032 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 2.72 | 12/01/2031 | ||||||||||||||
| December 31, 2022 | 150,000 | - | - | $ | 3.89 | 10/21/2031 | ||||||||||||||
| December 31, 2022 | 18,750 | - | - | $ | 4.12 | 09/01/2031 | ||||||||||||||
| December 31, 2022 | 43,599 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2022 | 30,000 | - | - | $ | 3.96 | 07/02/2029 | ||||||||||||||
| December 31, 2022 | 30,000 | - | - | $ | 20.50 | 05/25/2028 | ||||||||||||||
| December 31, 2021 | 18,750 | - | - | $ | 2.72 | 12/01/2031 | ||||||||||||||
| December 31, 2021 | 150,000 | - | - | $ | 3.89 | 10/21/2031 | ||||||||||||||
| December 31, 2021 | 18,750 | - | - | $ | 4.12 | 09/01/2031 | ||||||||||||||
| December 31, 2021 | 43,599 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2021 | 30,000 | - | - | $ | 3.96 | 07/02/2029 | ||||||||||||||
| December 31, 2021 | 30,000 | - | - | $ | 20.50 | 05/25/2028 | ||||||||||||||
| Georges Caldironi | December 31, 2022 | 75,000 | - | - | $ | 8.94 | 06/01/2032 | |||||||||||||
| December 31, 2022 | 2,000 | - | - | $ | 9.90 | 12/31/2031 | ||||||||||||||
| December 31, 2022 | 2,000 | - | - | $ | 7.25 | 12/29/2030 | ||||||||||||||
| December 31, 2022 | 18,676 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2022 | 2,000 | - | - | $ | 14.20 | 02/29/2030 | ||||||||||||||
| December 31, 2021 | 2,000 | - | - | $ | 9.90 | 12/31/2031 | ||||||||||||||
| December 31, 2021 | 2,000 | - | - | $ | 7.25 | 12/29/2030 | ||||||||||||||
| December 31, 2021 | 18,676 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2021 | 2,000 | - | - | $ | 14.20 | 02/29/2030 | ||||||||||||||
| Jeffrey Wun | December 31, 2023 | 722,000 | - | - | $ | 2.59 | 06/13/2033 | |||||||||||||
| December 31, 2022 | 14,141 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2022 | 6,000 | - | - | $ | 3.96 | 07/02/2029 | ||||||||||||||
| December 31, 2022 | 3,000 | - | - | $ | 27.50 | 06/23/2027 | ||||||||||||||
| December 31, 2021 | 14,141 | - | - | $ | 8.30 | 12/11/2030 | ||||||||||||||
| December 31, 2021 | 6,000 | - | - | $ | 3.96 | 07/02/2029 | ||||||||||||||
| December 31, 2021 | 3,000 | - | - | $ | 27.50 | 06/23/2027 | ||||||||||||||
121
Director Compensation
Directors who are also our employees receive no separate compensation for serving as directors or as members of committees of our board of directors. We have entered into independent director agreements with Richmond Akumiah, Raymond Choy and Colin Lim. Under the terms of these independent director agreements, we have agreed to pay the independent directors an annual cash fee of $20,000, paid quarterly in four equal installments, commencing in the first quarter following closing of our public offering, and an additional $5,000 cash compensation fee for serving as board of directors committee chairmen. We commenced payment of these fees on September 30, 2018.
Each independent director received an initial, fully vested stock option to purchase 4,000 shares of our common stock. If the director is still a member of the board of directors and continues to serve as a non-employee director immediately following each annual meeting of our stockholders, the director will be automatically granted an additional option to purchase 4,000 shares of our common stock as of the date of each such annual meeting. These additional option grants will vest and become exercisable in twelve (12) equal monthly installments over the first year following the date of grant, subject to the director continuing in service on the board of directors through each such vesting date. The per share exercise price of each option granted to the independent director will equal 100% of the fair market value (as defined by the board of directors) of a share of our common stock on the date the option is granted, and the term of each stock option granted to the director will be ten (10) years from the date of grant.
We purchased a Directors and Officers Liability Insurance with coverage up to an aggregate maximum of $3 million commencing promptly upon the final closing of our prior public offering, and to reimburse the independent directors for pre-approved reasonable business expenses incurred by them. In November 2019, with the approval of the board, we purchased a directors and officers liability insurance with $5 million coverage effective November 25, 2019. In November 2020, we renewed and increased the Directors and Officers Liability Insurance with $10 million coverage effective November 25, 2020 and subsequently reduced the coverage to $6 million to conserve expenses. In December 2021, we decided not to renew this coverage, to further reduce our insurance expenses, and this policy has been terminated.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership of our common stock as of April 15, 2024 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of our company, 44043 Fremont Blvd., Fremont, CA 94538.
| Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership(1) |
Percent of Class(2) |
|||||||
| Jeffrey Wun, Chairman, President and Chief Technology Officer(3) | Common Stock | 1,375,894 | 7.66 | % | ||||||
| Louis Giordimaina, Chief Executive Officer and Director(4) | Common Stock | 787,048 | 4.38 | % | ||||||
| Georges Caldironi, Chief Operating Officer(5) | Common Stock | 99,676 | * | % | ||||||
| Richmond Akumiah, Director(6) | Common Stock | 45,630 | * | % | ||||||
| Raymond Choy, Director(7) | Common Stock | 49,630 | * | % | ||||||
| Chih-Ming (Albert) Hsu, Director(8) | Common Stock | 856,698 | 4.77 | % | ||||||
| Colin Lim, Director(9) | Common Stock | 136,210 | * | % | ||||||
| Jan-Yung Lin, Secretary (10) | Common Stock | 482,008 | 2.68 | % | ||||||
| Jeff T. C. Hsu, Director(13) | Common Stock | 339,319 | 1.89 | % | ||||||
| All officers and directors as a group (11 persons named above) | Common Stock | 4,520,570 | 25.17 | % | ||||||
| dMedia Inc (11) | Common Stock | 2,237,428 | 12.46 | % | ||||||
| Sheng-Chun Chang(12) | Common Stock | 1,320,284 | 7.35 | % | ||||||
| * | Less than 1% |
122
| (1) | Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock. |
| (2) | A total of 17,962,613 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of April 15, 2024. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator. |
| (3) | Includes (i) 579,687 shares of our common stock held directly; (ii) 120,914 shares of our common stock which Mr. Wun has the right to acquire within 60 days through the exercise of vested options; and (iii) 2,237,428 shares of our common stock owned by dMedia Holding LP. Through his ownership interest in dMedia Holding LP, Mr. Wun indirectly beneficially owns 348,721 shares of our common stock held by dMedia Holding LP. Mr. Wun disclaims beneficial ownership of the remaining 1,888,707 shares of our common stock held by dMedia Holding LP. |
| (4) | Consists of 787,048 shares of our common stock which Mr. Giordimaina has the right to acquire within 60 days through the exercise of vested options. |
| (5) | Consists of 93,676 shares held directly and 6,000 shares of common stock which AA TWIN ASSOCIATES LTD has the right to acquire within 60 days through the exercise of vested options. Mr. Caldironi is the principal of AA TWIN ASSOCIATES LTD and has voting and dispositive control of the securities held by AA TWIN ASSOCIATES LTD. |
| (6) | Consists of 45,630 shares of our common stock which Mr. Akumiah has the right to acquire within 60 days through the exercise of vested options but does not include 334 shares of our common stock issuable upon the exercise of options not exercisable within 60 days. |
| (7) | Consists of 49,630 shares of our common stock which Mr. Choy has the right to acquire within 60 days through the exercise of vested options but does not include 1,334 shares of our common stock issuable upon the exercise of options not exercisable within 60 days. |
| (8) | Represents (i) 3,312 shares of our common stock held directly by Mr. Hsu and (ii) 156,217 shares of our common stock which Mr. Hsu has the right to acquire within 60 days through the exercise of vested options (iii) 2,237,428 shares of our common stock owned by dMedia Holding LP. Through his ownership interest in in dMedia Holding LP, Mr. Hsu indirectly beneficially owns 697,169 shares of our common stock held by dMedia Holding LP. Mr. Hsu disclaims beneficial ownership of the remaining 1,540,259 shares of our common stock held by dMedia Holding LP. |
| (9) | Consists of 136,210 shares of our common stock which Mr. Lim has the right to acquire within 60 days through the exercise of vested options but does not include 1,334 shares of our common stock issuable upon the exercise of options not exercisable within 60 days. |
| (10) | Includes 462,403 shares of our common stock owned by Mr. Lin directly and 19,605 shares of our common stock which Mr. Lin has the right to acquire within 60 days through the exercise of vested options. Does not include 348,731 shares of our common stock owned by Mr. Lin through his approximately 15.57% ownership interest in dMedia Holding LP, as Mr. Lin does not, directly or indirectly, have voting or dispositive power over these shares although he does own a pecuniary interest in them. |
| (11) | dMedia Inc. (formerly named dMedia Holding LP) was changed to C Corporation in 2022. Therefore, it is no longer that Mr. Wun has sole voting and dispositive power over these shares of our common stock. |
| (12) | Consists of (i) 881,500 shares of common stock held by Well Thrive Limited; (ii) 65,281 shares of our common stock owned directly by Mr. Sheng-Chun Chang; and (iii) 373,503 of our common stock which Mr. Chang has the right to acquire within 60 days through the exercise of vested warrants (but does not include 451,127 shares of our common stock issuable upon the exercise of warrants not exercisable within 60 days). Mr. Chang is the Chief Executive Officer and owner of Well Thrive Limited and has voting and dispositive power of the securities held by it. Mr. Chang disclaims beneficial ownership of the shares held by Well Thrive Limited. The address of Well Thrive Limited is No 79, Heng Yang Road, Taipei City, Taiwan. |
| (13) | Consists of 339,319 shares of our common stock which Mr. Hsu has the right to acquire within 60 days through the exercise of vested options. |
123
Changes in Control
We do not currently have any arrangements which if consummated may result in a change of control of our company
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information about the securities authorized for issuance under our equity incentive plans as of December 31, 2024.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plans approved by security holders | 2,000,000 | $ | 7.6279 | 0 | ||||||||
| Equity compensation plans not approved by security holders | 4,083,929 | $ | 2.5915 | 423,961 | ||||||||
| Total | 6,083,929 | $ | 4.4466 | 423,961 | ||||||||
Equity Compensation Plan Information
Our 2017 Equity Incentive Plan
On May 5, 2017, we established our 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan was approved by our board of directors on May 5, 2017, and an amendment to increase the number of shares of our common stock available for grant under the 2017 Plan was approved by the board of directors on June 26, 2017. The 2017 Plan was approved by our stockholders at our annual meeting in 2018. The purpose of the 2017 Plan is to grant stock and options to purchase our common stock to our employees, directors and key consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Plan, as amended, is 2,000,000 shares. On October 21, 2021, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,400,000 shares. Cancelled and forfeited stock options and stock awards may again become available for grant under the 2017 Plan. There were 423,961 shares available for grant under the 2017 Plan as of December 31, 2024.
The following summary briefly describes the principal features of the 2017 Plan and is qualified in its entirety by reference to the full text of the Plan.
Administration. The Plan is administered by our Compensation Committee. Our Compensation Committee has the authority to select the eligible participants to whom awards will be granted, to determine the types of awards and the number of shares covered and to set the terms, conditions and provisions of such awards, to cancel or suspend awards under certain conditions, and to accelerate the exercisability of awards. Our Compensation Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms of agreements entered into with recipients under the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
Eligibility. All employees, directors and individuals providing services to our company or its subsidiaries are eligible to participate in the Plan.
Shares Subject to Plan. The number of shares of common stock that is available for grant of awards under the Plan, as amended, is 2,000,000 shares.
Stock Option and SAR Grants. The exercise price per share of common stock purchasable under any stock option or stock appreciation right, or SAR, will be determined by our Compensation Committee, but cannot in any event be less than 100% of the fair market value of our common stock on the date the option is granted. Our Compensation Committee will determine the term of each stock option or SAR (subject to a maximum of 10 years) and each stock option or SAR will be exercisable pursuant to a vesting schedule determined by our Compensation Committee. The grants and the terms of incentive stock options, or ISOs, shall be restricted to the extent required for qualification as ISOs by the Internal Revenue Code, or the Code. Subject to approval of our Compensation Committee, stock options or SARs may be exercised by payment of the exercise price in cash, shares of our common stock, which have been held for at least six months, or pursuant to a “cashless exercise” through a broker-dealer under an arrangement approved by us. We may require the grantee to pay to us any applicable withholding taxes that we are required to withhold with respect to the grant or exercise of any award. The withholding tax may be paid in cash or, subject to applicable law, our Compensation Committee may permit the grantee to satisfy such obligations by the withholding or delivery of shares of our common stock. We may withhold from any shares of our common stock issuable pursuant to a stock option or SAR or from any cash amounts otherwise due from us to the recipient of the award an amount equal to such taxes.
124
Stock Grants. Shares may be sold or awarded for consideration and with or without restriction as determined by the Compensation Committee, including cash, full-recourse promissory notes, as well as past and future services. Any award of shares will be subject to the vesting schedule, if any, determined by the Compensation Committee. In general, holders of shares sold or awarded under the Plan will have the same voting, dividend and other rights as our other stockholders. As a condition to the purchase of shares under the Plan, the purchaser will make such arrangements as our Compensation Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase.
Adjustments. In the event of any change affecting the shares of our common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distribution to stockholders other than cash dividends, our board of directors will make such substitution or adjustment in the aggregate number of shares that may be distributed under the Plan and in the number and option price (or exercise or purchase price, if applicable) as it deems to be appropriate in order to maintain the purpose of the original grant.
Termination of Service. If a participant’s service to our company terminates on account of death or disability, then the participant’s unexercised options, if exercisable immediately before the participant’s death, disability or retirement, may be exercised in whole or in part, on the earlier of the date on which such stock option would otherwise expire or one year after the event. If a participant’s service to us terminates for any other reason, then the participant’s unexercised options, to the extent exercisable immediately before such termination, will remain exercisable, and may be exercised in whole or in part, for a period ending on the earlier of the date on which such stock option would otherwise expire or three months after such termination of service.
Amendment and Termination. Our board of directors may, at any time, alter, amend, suspend, discontinue, or terminate the Plan; provided that such action shall not adversely affect the right of grantees to stock awards or stock options previously granted and no amendment, without the approval of our stockholders, shall increase the maximum number of shares which may be awarded under the Plan in the aggregate, materially increase the benefits accruing to grantees under the Plan, change the class of employees eligible to receive options under the Plan, or materially modify the eligibility requirements for participation in the Plan.
Our 2023 Equity Incentive Plan
On June 13, 2023, we established our 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan was approved by our board of directors on June 13, 2023.
The purpose of the 2023 Plan is to advance our interests and the interests of our shareholders by providing an incentive to attract, retain, and reward persons performing services for us and by motivating such persons to contribute to our growth and profitability. Under the 2023 Plan, we are authorized to grant stock and options to purchase our common stock to our, and our affiliates, current and prospective employees, directors and key consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2023 Plan is 3,683,929 shares, subject to automatic increases in accordance with Section 4.1 to the 2023 Plan. Notwithstanding the foregoing, the maximum number of Shares that may be issued as incentive stock options is equal to the maximum number of shares available for issuance under the 2023 Plan without taking into account any automatic increases in the share reserve thereunder. Cancelled and forfeited stock options and stock awards may again become available for grant under the 2023 Plan. As of the date of this 10-K, we have granted 3,683,927 awards under the 2023 Plan.
The following summary briefly describes the principal features of the 2023 Plan and is qualified in its entirety by reference to the full text of the 2023 Plan.
Administration. The 2023 Plan is administered by our Compensation Committee. Our Compensation Committee has the authority to select the eligible participants to whom awards will be granted, to determine the types of awards and the number of shares covered and to set the terms, conditions and provisions of such awards, to cancel or suspend awards under certain conditions, and to accelerate the exercisability of awards. Our Compensation Committee is authorized to interpret the 2023 Plan, to establish, amend, and rescind any rules and regulations relating to the 2023 Plan, to determine the terms of agreements entered into with recipients under the 2023 Plan, and to make all other determinations that may be necessary or advisable for the administration of the 2023 Plan.
125
Eligibility. All current and prospective employees, directors and individuals providing, or reasonably expected to provide, services to our company or its affiliates are eligible to participate in the 2023 Plan.
Shares Subject to 2023 Plan. The number of shares of common stock that is available for grant of awards under the 2023 Plan, as amended, is 3,683,929 shares, subject to automatic, annual increases according to Section 4.1 of the 2023 Plan.
Stock Option and SAR Grants. The exercise price per share of common stock purchasable under any stock option or stock appreciation right, or SAR, will be determined by our Compensation Committee, but cannot in any event be less than 100% of the fair market value of our common stock on the date the option is granted. Our Compensation Committee will determine the term of each stock option or SAR (subject to a maximum of 10 years) and each stock option or SAR will be exercisable pursuant to a vesting schedule determined by our Compensation Committee. The grants and the terms of incentive stock options, or ISOs, shall be restricted to the extent required for qualification as ISOs by the Internal Revenue Code, or the Code. Subject to approval of our Compensation Committee, stock options or SARs may be exercised by payment of the exercise price in cash, shares of our common stock, which have been held for at least six months, or pursuant to a “cashless exercise” through a broker-dealer under an arrangement approved by us. We may require the grantee to pay to us any applicable withholding taxes that we are required to withhold with respect to the grant or exercise of any award. The withholding tax may be paid in cash or, subject to applicable law, our Compensation Committee may permit the grantee to satisfy such obligations by the withholding or delivery of shares of our common stock. We may withhold from any shares of our common stock issuable pursuant to a stock option or SAR or from any cash amounts otherwise due from us to the recipient of the award an amount equal to such taxes.
Stock Grants. Shares may be sold or awarded for consideration and with or without restriction as determined by the Compensation Committee, including cash, full-recourse promissory notes, as well as past and future services. Any award of shares will be subject to the vesting schedule, if any, determined by the Compensation Committee. In general, holders of shares sold or awarded under the 2023 Plan will have the same voting, dividend and other rights as our other stockholders. As a condition to the purchase of shares under the 2023 Plan, the purchaser will make such arrangements as our Compensation Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase.
Adjustments. In the event of any change affecting the shares of our common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distribution to stockholders other than cash dividends, our board of directors will make such substitution or adjustment in the aggregate number of shares that may be distributed under the 2023 Plan and in the number and option price (or exercise or purchase price, if applicable) as it deems to be appropriate in order to maintain the purpose of the original grant.
Termination of Service. If a participant’s service to our company terminates on account of death or disability, then the participant’s unexercised options, if exercisable immediately before the participant’s death, disability or retirement, may be exercised in whole or in part, on the earlier of the date on which such stock option would otherwise expire or one year after the event. If a participant’s service to us terminates for any other reason, then the participant’s unexercised options, to the extent exercisable immediately before such termination, will remain exercisable, and may be exercised in whole or in part, for a period ending on the earlier of the date on which such stock option would otherwise expire or three months after such termination of service.
Amendment and Termination. Our board of directors may, at any time, alter, amend, suspend, discontinue, or terminate the 2023 Plan; provided that such action shall not adversely affect the right of grantees to stock awards or stock options previously granted and no amendment, without the approval of our stockholders, shall increase the maximum number of shares which may be awarded under the 2023 Plan in the aggregate, materially increase the benefits accruing to grantees under the 2023 Plan, change the class of employees eligible to receive options under the 2023 Plan, or materially modify the eligibility requirements for participation in the 2023 Plan.
In April 2024, in recognition of their commitment to our mission, certain of our employees and consultants entered into binding agreements with the Company to accelerate and exercise the vesting of a portion of their outstanding options under the 2023 Plan in lieu of $2,870,736 of deferred cash salaries, a portion of which constitute a portion of the accrued payables noted on the balance sheet in our consolidated financial statements. The form of letter outlining this agreement is included in Exhibit 10.85.
126
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with Related Persons
The following includes a summary of transactions since the beginning of the 2021 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
Our board of directors conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate. Our board of directors has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, our board of directors generally reviews related party transactions to ensure that they are fair and reasonable to our company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by our board of directors.
In May 2019, two of our shareholders (the “Lenders”) each committed to provide to us a $10 million bridge loan (together, the “Loans”) for an aggregate principal amount of $20 million, to bridge our cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) we purchased in Taiwan. The Lenders also initially agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon our request prior to the time that title to the Land is vested in the subsidiary, Aerkomm Taiwan, to pay the outstanding payable to our vendors. On April 25, 2022, the Lenders further amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100%. As of May 15, 2023, we have borrowed approximately $190,000 (NTD 5,640,000) under the Loans from one of the Lenders.
On May 11, 2020, Aircom entered into a binding product purchase agreement with Ejectt (formerly known as Yuanjiu) for the purchase of 100 sets of the AERKOMM K++, AirCinema Cube for installation on the aircraft of Hong Kong Airlines. The total purchase amount under this agreement was $1,807,100 and the Company has paid 20% of the total amount, or US $180,710, as an initial deposit. On July 15, 2020, Aircom signed a second product purchase agreement with Ejectt for an additional 100 sets of the AirCinema Cube for the same purchase amount and paid an additional 10% initial deposit ($180,710) on this agreement as well. Additionally, on December 3, 2020, we made a prepayment to three individuals to purchase from them an aggregate of 6,000,000 restricted shares of Ejectt, for business purposes in Taiwan relating to local operations. This purchase resulted in our owning approximately 10% of Ejectt. Albert Hsu, a member of our board of directors, is the Chairman of Ejectt. In the Stock Purchase Agreement, there was a restriction on the stock title transfer until May 13, 2021. On August 12, 2021, this restriction on the stock transfer was released and the stock title transfer process has been completed. On March 24, 2021, we purchased additional 2,000 shares of Ejectt’s common stock for a total amount of $1,392) from a related party. As of December 31, 2022 and December 31, 2021, this investment totaled approximately a 10% ownership of Ejectt.
On December 29, 2022, Aerkomm, Chih-Ming (Albert) Hsu (“Mr. Hsu”), a director of our Company, and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract (the “Equity Sales Contract”). Pursuant to the terms of the Equity Sales Contract, a copy of which is attached hereto as Exhibits 10.71 and 10.72, (i) the Company sold a majority interest consisting of 25,500,000 shares (the “Shares”) of Aerkomm Taiwan Inc., the Company’s then wholly-owned subsidiary (“Aerkomm Taiwan”), to the “Buyer for NT$255,000,000 (approximately US $8,300,000) and (ii) the Buyer is required to pay the full amount to Aerkomm within 180 days of signing the Equity Sales Contract. If the Buyer fails to make the payment, Aerkomm has the right to claim breach of contract, and Mr. Hsu, pursuant to a related pledge agreement (Exhibits 10.73 and 10.74) and trust agreement (Exhibits 10.75 and 10.76) will execute the rights under the instructions from the seller pursuant to the Pledge Agreement (as defined below). For purposes of these agreements, the parties have agreed to be bound by the laws of the Republic of China and agree that the Taipei District Court in Taiwan is the court of jurisdiction for initial trial.
127
The Buyer and Mr. Hsu have entered into a pledge agreement (the “Pledge Agreement”) on the same day to establish a security interest on the Shares as collateral to ensure payment of the full purchase price to Aerkomm and to fulfill obligations under the Equity Sales Contract. Pursuant to the terms of the Pledge Agreement, the security interest guarantees the creditor’s rights of Aerkomm, including compensation for damages, interest, delayed interest, fees related to breach of contract, and costs of preserving the collateral. The Buyer agrees to transfer the collateral to Mr. Hsu and to notify Aerkomm of the relevant information to register the pledge. Mr. Hsu may cancel the security interest after the Buyer pays the full purchase price to Aerkomm. The Buyer guarantees legal ownership of the collateral and agrees to fulfill the contract within a reasonable time period if there is any violation. Mr. Hsu may exercise his rights under the instruction from Aerkomm under the Pledge Agreement if the Buyer fails to make full payment. Additionally, Aerkomm may claim compensation for breach of the Equity Sales Contract. The Buyer cannot transfer, burden, or dispose of the collateral without written consent from Aerkomm or Mr. Hsu. The Buyer must deliver all derivative income from the collateral to Mr. Hsu.
On the same day, the Aerkomm and Mr. Hsu entered into a trust agreement (the “Trust Agreement”). Pursuant to the terms of the Trust Agreement, (i) Aerkomm will sell the Shares of Aerkomm Taiwan to the Buyer and (ii) to guarantee that the Buyer pays the full purchase price and fulfills its contractual obligations, the Buyer will pledge the Shares to Aerkomm’s designated trustee, Mr. Hsu. Aerkomm transferred the collateral, the Shares, to the Buyer within three (3) days after signing the Equity Sales Contract, and the Buyer also simultaneously established a NT$255,000,000 pledge on the Shares. After the Buyer pays the full purchase price to Aerkomm, Mr. Hsu will release the security interest. If the Buyer fails to pay the total purchase price, Mr. Hsu may exercise his right under the Pledge Agreement and Aerkomm may claim compensation for breach of contract.
The Buyer, dMobile System Co., Ltd., is a Taiwan based company owned by Sheng-Chun Chang, a more than 10% equity owner of Aerkomm.
The purpose of this transaction was to allow Aerkomm Taiwan to apply for a telecommunications license in Taiwan, which are only granted to Taiwanese majority owned companies.
The description above does not provide all of the terms and details of the Equity Sales Contract, Pledge Agreement and Entrustment Agreement, which documents are attached hereto as exhibits (originals in Mandarin and unofficial copies in English) and incorporated herein by reference.
Director Independence
Our board of directors has determined that Robert McGuire and Richard Akumiah are independent directors as that term is defined in the applicable rules of the Nasdaq Stock Market.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Independent Auditors’ Fees
The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31, 2024 and December 31, 2023:
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Audit Fees | $ | 140,000 | $ | 140,000 | ||||
| Audit-Related Fees | 150,000 | 150,000 | ||||||
| Tax Fees | 35,000 | 35,000 | ||||||
| All Other Fees | 40,000 | 40,000 | ||||||
| TOTAL | $ | 365,000 | $ | 365,000 | ||||
“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagement.
“Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.
“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.
“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.
Pre-Approval Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by WWC, P.C. for our financial statements as of and for the year ended December 31, 2024.
128
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
| (a) | List of Documents Filed as a Part of This Report: |
| (1) | Index to Financial Statements: |
(2) Index to Financial Statement Schedules:
All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required.
(3) Index to Exhibits:
See exhibits listed under Part (b) below.
(b) Exhibits:
129
130
131
132
133
134
| * | Filed herewith |
| † | Executive Compensation Plan or Agreement |
ITEM 16. FORM 10-K SUMMARY
None.
135
FINANCIAL STATEMENTS
AERKOMM INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
TABLE OF CONTENTS
F-1
AERKOMM INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2024 and 2023
Audited Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To: The Board of Directors and stockholders of Aerkomm Inc. and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Aerkomm Inc. and subsidiaries (collectively the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has experienced recurring losses from operations and negative cash flows from operating activities during the year ended December 31, 2024. The company had a working capital deficit as of December 31, 2024. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-3
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Prepayments for Land
We assessed valuation and rights and obligations of the prepayments for land as a critical audit matter. As discussed in Note 7 to the consolidated financial statements, as of December 31,2024, the Company’s total of prepayments for land was $40.22 million which was quantitatively material to the financial statements as a whole. The auditing of prepayments for land required challenging, subjective and complex judgment and assumptions regarding the estimation of the land’s value to determine that the balance is reasonable and not materially misstated, and the status of the title is appropriately disclosed.
The principal audit procedures we performed to address this critical audit matter included the following, among others:
| ● | Reviewed the land purchase agreement and subsequent amendments to assess the validity of the transaction. |
| ● | Conducted an on-site visit to verify the land’s existence and examined prepayment records to confirm the original purchase cost. |
| ● | Obtained a legal opinion regarding the transferability of the land without restrictions. |
| ● | Performed market research on recent sales transactions of parcels of land in the same area and compared recent results with the government-published city growth rate index for real estate. |
Intangible Assets
We assessed the valuation of intangible assets as a critical audit matter. As discussed in Note 9, as of December 31, 2024 the Company’s intangible assets were $11.27 million which was quantitatively material to the financial statements as a whole. The auditing of intangible assets required challenging, subjective and complex judgment and assumptions regarding the estimation of future cash flows derived from intangible assets to assess whether the carrying amounts were recoverable.
The principal audit procedures performed to address this critical audit matter included the following, among others:
| ● | Reviewed management’s assessment of qualitative and quantitative factors. |
| ● | Performed a sensitivity analysis on management’s qualitative and quantitative impairment assessment. Obtained an understanding of the underlying methodology and evaluated significant assumptions and estimates associated with cash flow projections- particularly those related to future revenue, cost of sales and operating expenses- to assess the impact of changes in assumptions on fair values. |
| ● | Independently confirmed with a third-party potential buyer on their procurement plans within the planned payloads budget to support management’s claim on sales forecasts. |
| ● | Assessed the reasonableness between estimated cost of sales by comparison with historical vendor invoice or contract. |
| ● | Examined the amortization method and remaining useful life and recalculated the net value. |
F-4
Goodwill
We assessed the valuation of goodwill as a critical audit matter. As discussed in Note 10, as of December 31, 2024 the Company’s goodwill was $4.57 million which was quantitatively material to the financial statements as a whole. The auditing of goodwill required challenging, subjective and complex judgment and assumptions regarding the estimation of future cash flows of the reporting unit to assess whether the carrying value of the reporting unit exceeded its fair value.
Our principal audit procedures performed to address the carrying value of the goodwill and related impairment, included the following:
| ● | Assessed management’s analysis of the allocation of goodwill to the appropriate reporting unit. |
| ● | Reviewed management’s assessment of qualitative and quantitative factors. |
| ● | Performed a sensitivity analysis on management’s qualitative and quantitative impairment assessment. Obtained an understanding of the underlying methodology and evaluated significant assumptions and estimates associated with cash flow projections- particularly those related to future revenue, cost of sales, operating expenses, and the discount rate -- to assess the impact of changes in assumptions on fair values. |
| ● | Independently confirmed with a third-party potential buyer on their procurement plans within the planned payloads budget to support management’s claim on sales forecasts. |
| ● | Assessed the reasonableness between estimated cost of sales by comparison with historical vendor invoice or contract. |
/s/ WWC, P.C.
Certified Public Accountants
PCAOB ID:
August 18, 2025
We have served as the Company’s auditor since 2022.
F-5
AERKOMM INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2024 and 2023
| As of Year Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Short-term investment | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses | ||||||||
| Other receivable - related parties | ||||||||
| Other receivable | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Long-term Investment, net | ||||||||
| Property and Equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Prepayment for land | ||||||||
| Prepayment for equipment | ||||||||
| Right of use assets, net | ||||||||
| Prepayment for equipment and intangible assets – customer projects – related parties | ||||||||
| Prepayment for equipment and intangible assets – customer projects | ||||||||
| Restricted cash | ||||||||
| Deposits | ||||||||
| Goodwill | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term loans | $ | $ | ||||||
| Convertible long-term bonds payable – current | ||||||||
| Convertible long-term note payable - current | ||||||||
| SAFE liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Other payable - related parties | ||||||||
| Other payable | ||||||||
| Prepayment from customer - related party | ||||||||
| Contract liability - current | ||||||||
| Term loan | ||||||||
| Lease liabilities - current | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Convertible long-term bonds payable | ||||||||
| Contract liability - non-current | ||||||||
| Lease liabilities - non-current | ||||||||
| Restricted stock deposit liability | ||||||||
| Total Liabilities | ||||||||
| COMMITMENT AND CONTINGENCIES (NOTE 25) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred Stock, $ | ||||||||
| Common Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Subscribed capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
AERKOMM INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2024 and 2023
| For Years Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Sales - related party | $ | $ | ||||||
| Sales - others | ||||||||
| Total Sales | ||||||||
| Cost of goods sold - related party | ||||||||
| Cost of goods sold - others | ||||||||
| Total Cost of Goods Sold | ||||||||
| Gross Profit/(Loss) | ( | ) | ||||||
| Operating Expenses | ||||||||
| Impairment Loss on Goodwill | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| NON - OPERATING INCOME (LOSS) | ||||||||
| Unrealized investment loss | ( | ) | ( | ) | ||||
| Foreign currency exchange loss | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Redemption loss | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in fair value of SAFE liabilities | ( | ) | ||||||
| Impairment loss on investment | ( | ) | ||||||
| Other gain (loss), net | ( | ) | ||||||
| Net non - operating loss | ( | ) | ( | ) | ||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| INCOME TAX EXPENSE | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| OTHER COMPREHENSIVE LOSS | ||||||||
| Change in foreign currency translation adjustments | ||||||||
| TOTAL COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER SHARE-BASIC AND DILUTED, COMMON STOCK: | ( | ) | ( | ) | ||||
| Weighted Average Number of Common Stock Outstanding | ||||||||
| Basic & Diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
AERKOMM INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2024 and 2023
| Common stock | Additional paid in | Subscribed | Accumulated | Accumulated other comprehensive | ||||||||||||||||||||||||
| Shares | Amount | capital | Capital | Deficit | loss | Total | ||||||||||||||||||||||
| BALANCE, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||||||||||
| Capital injection | - | |||||||||||||||||||||||||||
| Net loss for the year | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||||||
| BALANCE, December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of common stock | ( | ) | ||||||||||||||||||||||||||
| Vesting of restricted shares | ||||||||||||||||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||||||||||
| Stock subscription | - | |||||||||||||||||||||||||||
| Settlement of accrued expense through accelerated vesting of stock option | - | |||||||||||||||||||||||||||
| Net loss for the year | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||||||
| BALANCE, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
AERKOMM INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2024 and 2023
| For the Years Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used) for operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use assets | ||||||||
| Stock-based compensation | ||||||||
| Research and development expense - Reclassified | ||||||||
| Gain or loss from disposal equipment | ||||||||
| Change in fair value of SAFE liabilities | ||||||||
| Unrealized losses on trading security | ||||||||
| Amortization of bonds issuance costs | ||||||||
| Impairment loss on Goodwill | ||||||||
| Impairment loss on investment | ||||||||
| Loss on inventories write off | ||||||||
| Redemption loss | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable - related parties | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Prepayment for equipment and intangible assets – customer projects | ||||||||
| Other receivable - related parties | ||||||||
| Other receivable | ( | ) | ( | ) | ||||
| Other current assets | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Prepayment from customer – related party | ( | ) | ||||||
| Prepayment from customer – others | ( | ) | ||||||
| Other payable | ||||||||
| Other payable, related parties | ||||||||
| Operating lease liability | ( | ) | ||||||
| Long-term Liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds from disposal of long-term investment | ||||||||
| Prepayment for land | ( | ) | ||||||
| Disbursement for other receivable-related parties loans | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of short-term loan | ( | ) | ( | ) | ||||
| Proceeds from short-term loan | ||||||||
| Repayment of convertible long-term bonds payable – current | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from stock subscription | ||||||||
| Proceeds from SAFE notes | ||||||||
| Proceeds from other payable - related parties | - | |||||||
| Repayment of long-term loan | ( | ) | ||||||
| Principal payment of finance lease liability | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net Decrease in Cash and Restricted Cash | ( | ) | ( | ) | ||||
| CASH AND RESTRICTED CASH, beginning of Year | ||||||||
| Foreign Currency Translation Effect on Cash and Restricted Cash | ( | ) | ( | ) | ||||
| CASH AND RESTRICTED CASH, end of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS: | ||||||||
| Cash paid during the year for income taxes | $ | $ | ||||||
| Cash paid during the year for interest | $ | $ | ||||||
| NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock in business combination | $ | $ | ||||||
| Vesting of restricted shares | $ | $ | ||||||
| Settlement of accrued salaries expense through accelerated vesting of options by the employee | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-9
AERKOMM INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
NOTE 1 - Organization
Aerkomm Inc. (formerly Maple Tree Kids Inc.) (“Aerkomm”) was incorporated on August 14, 2013 in the State of Nevada. Aerkomm was a retail distribution company selling all of its products over the internet in the United States, operating in the infant and toddler products business market. Aerkomm’s common stock is quoted for trading on the OTC Markets Group Inc. OTCQX Market under the symbol “AKOM.” On July 17, 2019, the French Autorité des Marchés Financiers (the “AMF”) granted visa number 19-372 on the prospectus relating to the admission of Aerkomm’s common stock to list and trade on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). Aerkomm’s common stock began trading on Euronext Paris on July 23, 2019 under the symbol “AKOM” and is denominated in Euros on Euronext Paris. This listing did not alter Aerkomm’s share count, capital structure, or current common stock listing on the OTCQX, where it is also traded (in US dollars) under the symbol “AKOM.”
On December 28, 2016, Aircom Pacific Inc. (“Aircom”)
purchased approximately
On February 13, 2017, Aerkomm entered into a share
exchange agreement (“Exchange Agreement”) with Aircom and its stockholders, pursuant to which Aerkomm acquired
On December 31, 2014, Aircom acquired a newly incorporated subsidiary, Aircom Pacific Ltd. (“Aircom Seychelles”), a corporation formed under the laws of the Republic of Seychelles. On November 8, 2021, Aircom Seychelles changed its name to Aerkomm SY Ltd. (“Aerkomm SY”) and the ownership was transferred from Aircom to Aerkomm. Aerkomm SY was formed to facilitate Aircom’s global corporate structure for both business operations and tax planning. Presently, Aerkomm SY has no operations. Aerkomm is working with corporate and tax advisers in finalizing its global corporate structure and has not yet concluded its final plan.
On October 17, 2016, Aircom acquired a wholly owned subsidiary, Aircom Pacific Inc. Limited (“Aircom HK”), a corporation formed under the laws of Hong Kong. On November 8, 2021, Aircom HK changed its name to Aerkomm Hong Kong Limited (“Aerkomm HK”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm HK is to conduct Aircom’s business and operations in Hong Kong. Presently, its primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in Hong Kong. Aerkomm HK is also actively seeking strategic partnerships whom Aerkomm may leverage in order to provide more and better services to its customers. Aerkomm also plans to provide local supports to Hong Kong-based airlines via Aerkomm HK and teleports located in Hong Kong.
On December 15, 2016, Aircom acquired a wholly owned subsidiary, Aircom Japan, Inc. (“Aircom Japan”), a corporation formed under the laws of Japan. On November 9, 2021, Aircom Japan changed its name to Aerkomm Japan, Inc. (“Aerkomm Japan”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm Japan is to conduct business development and operations located within Japan. Aerkomm Japan is in the process of applying for, and intends to be the holder of, Satellite Communication Blanket License in Japan, which is necessary for Aerkomm to provide services within Japan. Aerkomm Japan intends to also provide local supports to airlines operating within the territory of Japan.
F-10
Aircom Telecom LLC (“Aircom Taiwan”), which became a wholly owned subsidiary of Aircom in December 2017, was organized under the laws of Taiwan on June 29, 2016. Aircom Taiwan is responsible for Aircom’s business development efforts and general operations within Taiwan.
On June 13, 2018, Aerkomm established a then wholly
owned subsidiary, Aerkomm Taiwan Inc. (“Aerkomm Taiwan”), a corporation formed under the laws of Taiwan. The purpose of Aerkomm
Taiwan is to purchase a parcel of land and raise sufficient funds to build and operate a ground station for data processing. As operation
of such a ground station would, as a matter of local law, require that Aerkomm Taiwan not be a majority foreign-owned entity, on December
29, 2022, Aerkomm and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract (the “Equity Sales
Contract”) pursuant to the terms of which Aerkomm agreed to transferred a majority interest of
Despite the sale of
On November 15, 2018, Aircom Taiwan acquired a
wholly owned subsidiary, Beijing Yatai Communication Co., Ltd. (“Beijing Yatai”), a corporation formed under the laws of China.
The purpose of Beijing Yatai is to conduct Aircom’s business and operations in China. Presently, its primary function is business
development, both with respect to airlines as well as content providers and advertisement partners based in China as most business conducted
in China requires a local registered company. Beijing Yatai is also actively seeking strategic partnerships whom Aircom may leverage in
order to provide more and better services to its customers. Aircom also plans to provide local supports to China-based airlines via Beijing
Yatai and teleports located in China. On November 6, 2020,
On October 31, 2019, Aerkomm SY established a new a wholly owned subsidiary, Aerkomm Pacific Limited (“Aerkomm Malta”), a corporation formed under the laws of Malta. The purpose of Aerkomm Malta is to conduct Aerkomm’s business and operations and to engage with suppliers and potential airlines customers in the European Union.
On September 04, 2022, Aerkomm acquired a wholly owned subsidiary, MEPA Labs Inc. (MEPA), a California corporation. The purpose of the acquisition is to extend business development and operations related to the satellite products.
On September 28, 2023, Aerkomm acquired a wholly owned subsidiary, Mixnet Technology Limited (Mixnet) and its wholly owned subsidiary, Mesh Technology Taiwan Limited (Mesh), a Taiwan company. The purpose of the acquisition is to extend business development and operations related to the satellite products. Mixnet’s name changed to Mesh Technology Limited as of September 7, 2023.
F-11
The Company’s organization structure is as following:
On March 29, 2024, the Company entered into a merger agreement (the “Merger Agreement”) with IX Acquisition Corp. (“IXAQ”), a Cayman Islands exempted company (which will re-domicile from being a Cayman Islands company and become a Delaware corporation), and AKOM Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of IQAC (“Merger Sub”). The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, following the domestication to Delaware of IXAQ, Merger Sub will merge with and into the Company (the “Merger”), after which the Company will be the surviving corporation and a wholly-owned subsidiary of IXAQ. In connection with the Merger, IXAQ will be renamed “AKOM Inc.” The Merger will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the parties to the Merger Agreement and specified in the articles of merger.
Liquidity and Going Concern
The accompanying financial statements have been prepared on a going concern basis. The Company’s ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As result of the Company’s primary operations being in the area of research and development of communication equipment in the aerospace industry that is still in the testing phases, The Company has not yet been able to generate sustainable recurring revenue from the sales of its products, as it has only achieved limited sales; however, the Company does believe that it has made significant progress towards gaining approval from the U.S. Federal Aviation Administration (“FAA”) and other regulatory agencies, but success is not guaranteed.
In assessing the Company’s liquidity, the Company monitors and
analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working
capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been
utilized to finance the working capital requirements of the Company. As of December 31, 2024, the Company had cash outflow from operating
activities of approximately $
The Company has taken measures and is experiencing
and anticipates developments that management believes will improve its financial position. These include that two of the Company’s
current shareholders (the “Lenders”) have each committed to provide to the Company a $
F-12
In addition to the foregoing, on March 1, 2023,
the Company entered into a letter agreement with Well Thrive Limited, one of the lenders under the Loan Commitment, in which it was agreed
that, to support the Company, one-half of the Loan Commitment amount of Well Thrive Limited (thus, $
In connection with the planned Merger with IXAQ,
the Company has obtained $
The Company’s ability to remain solvent
and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity
and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors
that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock
that could be traded in an orderly market. As of December 31, 2024, the Company expect approximately $
The Company believes it will have sufficient liquidity
to fund its operations for at least the next twelve months following the issuance of these consolidated financial statements. This assessment
considers the Company’s current available cash, approximately $
If the Merger does not close and thus the $
F-13
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The Company’s fiscal year end date is December 31.
The Company’s management discovered errors in previously issued financial statements as of December 31, 2023, and for the year then ended 2023, The financial statements should no longer be relied upon. The Company restated its financial statements as of and for the year ended December 31, 2023.
The restatement of the financial statement is related to correction for four errors: 1.) the Company’s error in the selection of the proper accounting standard for its investment in equity securities after discovering that it had omitted certain facts and circumstances that are indicative of the Company’s intent for the investment including the duration and strategic purpose for the investment that are critical to the selection of the right accounting standard, consequently the Company is accounting for the investment using the cost method versus the fair value method, 2.) the Company’s error in classification of its convertible notes and convertible bonds as non-current liabilities; Management’s review of the terms of the note and bond indicated that there was less than one operating period before their respective maturities; accordingly, they have been reclassified to current liabilities; in connection with the reclassification, the Company also recognized an early redemption loss and accrued default interest expense, 3.) the Company reversed an erroneous entry that setoff and balance receivable from a related party against a loan owed to a third party; therefore, the balances are stilled owed by the related party, and there is still a loan outstanding to a third party, and 4.) the Company also reclassified its temporary interest-free loans: these debts were previously erroneously classified as other payables, but have been reclassified as short-term loans to reflect the nature of the loans.
The Company has included in this report certain restated items on the previously issued balance sheet, statement of operations, statement of stockholders’ equity and statement of cashflow dated as of December 31, 2023 that were previously reported in the Original 10-K, to restate, in pertinent part, the following:
The Company’s financial statements for the
12-month period ended December 31, 2023 (the “Affected Period”), are restated in the Annual Report on Form 10-K/A (Amendment No.
1) to correct the Company’s accounting for certain debt previously characterized as long-term debt, as short-term debt instead.
Also, due to the Company’s evidence indicating an intention to hold an investment for more than one year, the Company has reclassified
the investment from short-term to long-term. Consequently, the valuation method has been adjusted from market value (used for short-term
investments) to cost (used for long-term investments). In addition, a correction has been made to reclassify other receivable-related
party loans to short-term loan-others, based on the confirmation letter. In addition, Credit Enhanced Zero Coupon Convertible Bonds has
early redemption price at $
Principle of Consolidation
Aerkomm consolidates the accounts of its subsidiaries, Aircom, Aircom Seychelles, Aircom HK, Aircom Japan, Aircom Taiwan, Aerkomm Taiwan, Beijing Yatai, Aerkomm Malta, MEPA Labs, and Mesh Technology Taiwan. All significant intercompany accounts and transactions have been eliminated in consolidation.
F-14
Reclassifications of Prior Year Presentation
Certain prior year cash flow statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash in banks. As of December 31, 2024 and 2023, the Company’s
cash balances held in U.S. banking institutions did not exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC).
The balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance is approximately $
The Company performs ongoing credit evaluation of its customers and requires no collateral. An allowance for credit loss and doubtful account is provided based on a review of the collectability of accounts receivable, and other receivable respectively. The Company determines the amount of allowance for credit loss and doubtful account by examining its historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies. Actual credit losses may differ from management’s estimates.
Investment in Equity Securities
According to FASB issued Accounting Standards Updates 2016-01 (ASU 2016-01), it requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value being recorded in current period earnings, impacting the net income. For the investments in equity securities without readily determinable fair values, the investments may be recorded at cost, subject to impairment, and adjusted through net income for observable price changes.
Holdings of marketable equity securities with no significant influence over the investee are accounted for using cost method. Marketable equity security costs are initially recognized at fair value plus transaction costs which are directly attributable to the acquisition. The cost of the securities sold is based on the weighted average cost method. Stock dividends from the investment are included to recalculate the cost basis of the investment based on the total number of shares.
F-15
Cost method investment is evaluated for impairment
when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is
recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether
a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration
of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments;
and (v) ability to hold the security Cost method investment is evaluated for impairment when facts or circumstances indicate that the
fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined
to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include,
but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value
is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period
of time sufficient to allow for any anticipated recovery in fair value. During the year ended December 31, 2024 and 2023, the Company
recorded $
Accounts receivable
The Company adopted ASU 2016-13, Financial Instruments
- Credit Losses (Topic 326), which requires the Company to estimate all expected credit losses for financial assets measured at amortized
cost basis, including trade receivables, based on historical experience, current market conditions and supportable forecasts. The Company’s
accounts receivable are carried at the amounts invoiced to the customer. The risk of credit loss is mitigated by the Company’s credit
evaluation process. Receivables are presented as net of an allowance for credit losses. Allowances for expected credit losses are determined
based on an assessment of historical experience, the current economic conditions, future expectations of economic conditions, future expectation
regarding customer solvency, and other collection factors. The Company will apply adjustments for specific factors and current economic
conditions as needed at each reporting date. As of December 31, 2024 and 2023, the Company had and $
Inventories
Inventories are recorded at the lower of weighted-average cost or net realizable value. The Company assesses the impact of changing technology on its inventory and writes off inventories that are considered obsolete.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. When value impairment is determined, the related assets are stated at the lower of fair value or book value. Significant additions, renewals and betterments are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is computed by using the straight-line
methods over the following estimated service lives: ground station equipment -
Upon sale or disposal of property and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to income in the period of sale or disposal.
The Company reviews the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It determined that there was no impairment loss for the year ended December 31, 2024 and 2023.
F-16
Right-of-Use Asset and Lease Liability
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which modifies lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases and finance leases under previous accounting standards and disclosing key information about leasing arrangements.
A lessee should recognize the lease liability to make lease payments and the right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases and finance leases, a right-of-use asset and a lease liability are initially measured at the present value of the lease payments by discount rates. The Company’s lease discount rates are generally based on its incremental borrowing rate, as the discount rates implicit in the Company’s leases is readily determinable. Operating leases are included in operating lease right-of-use assets and lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment and lease liability in our consolidated balance sheets. Lease expense for operating expense payments is recognized on a straight-line basis over the lease term. Interest and amortization expenses are recognized for finance leases on a straight-line basis over the lease term.
For the leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.
Goodwill and Purchased Intangible Assets
The Company’s goodwill represents the amount by which the total purchase price paid exceeded the estimated fair value of net assets acquired from acquisition of subsidiaries. The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment.
As Aerkomm is currently still in the development stage and will not
start generating recurring revenue until after late 2024. Management has evaluated that the potential benefits of the acquisitions before
the year 2023 are limited and uncertain, and due to this reason, management has decided to impair goodwill that generated from 2022 and
prior periods with total of $
Purchased intangible assets with finite life are
amortized on the straight-line basis over the estimated useful lives of respective assets. Purchased intangible assets with indefinite
life are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. Purchased intangible asset consists of satellite system software and is amortized over
SAFE Liabilities
In connection with the Simple Agreement for Future Equity (“SAFE”) agreements that the Company entered into with four third parties set forth in Note 17, the Company determined that the SAFE liabilities should classified as a derivative liability in accordance with ASC 815-40 “Derivatives and Hedging”. As a result, the SAFE liabilities shall be measured initially, and subsequently at fair value on each reporting date. The Company will continue to adjust the carrying value of the SAFE liabilities until contingencies are finally determined. Any changes in fair value will be recorded as a gain or loss in the statements of operations and comprehensive loss.
Fair Value of Financial Instruments
The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
F-17
Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.
Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions.
The carrying amounts of the Company’s cash and restricted cash, accounts receivable, other receivable, prepaid expenses, accounts payable, short-term loan, accrued expense, accrued unpaid salaries, prepayment from customer, and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable, long-term note payable and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. The Company believes that the fair value of its long-term investment approximates its carrying amount based on management’s best estimate, given the investment’s restricted nature.
The following table sets forth by level within the fair value hierarchy our financial liability that were accounted for at fair value on a recurring basis as of December 31, 2024 and 2023:
| Carrying Value at | Fair
Value Measurement at | |||||||||||||||
| December 31, 2024 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Short-term investment | $ | $ | $ | $ | ||||||||||||
| SAFE liability | $ | $ | $ | $ | ||||||||||||
| Carrying Value at | Fair Value Measurement at December 31, 2023 | |||||||||||||||
| December 31, 2023 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Short-term investment | $ | $ | $ | $ | ||||||||||||
| SAFE liability | $ | $ | $ | $ | ||||||||||||
The following is a reconciliation of the beginning and ending balance of the financial liability measured at fair value on a recurring basis for the years ended December 31, 2024 and 2023:
| SAFE liability | ||||
| Ending balance as of December 31, 2023 | $ | |||
| Issuance of SAFE notes | ||||
| Change in fair value of contingent consideration for acquisition | ||||
| Ending balance as of December 31, 2024 | $ | |||
Segment Reporting
Operating segments are components of an enterprise
about which separate financial information is available and is evaluated quarterly, by management, namely the Chief Operating Decision
Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. The Company operates
and reports in
F-18
Nonmonetary Transaction
The Company accounts for the issuance of shares
of the Company’s common stock to acquired
Revenue Recognition
The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The Company’s revenue is composed of the sales of ground antenna units and provision of data connectivity service, and technical support services to third party and a related party. Revenue from product sales is recognized at a point in time, typically upon the product being picked up by the customer, when control transfers to the customer. For technical support services, if the service results in the customer receiving and consuming the benefits as the service is performed—such as ongoing support is recognized over time. Otherwise, if the benefit of the service is only transferred upon completion, revenue is recognized at a point in time. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. The Company adopted the provisions of ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. Customers may make payments to the Company either in advance or in arrears.
In evaluating whether the Company is acting as a principal or an agent, management assesses whether the Company controls the specified goods or services before transferring them to the customer. This assessment considers whether the Company is primarily responsible for fulfilling the promise to provide the goods or services, has discretion in establishing pricing, and bears inventory or performance risk. Based on these factors, the Company has concluded that it acts as the principal in all of its sales and service arrangements and therefore recognizes revenue on a gross basis.
Disaggregated information of revenues by products/services are as follows:
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Sales of ground antenna units (1) | $ | $ | ||||||
| Technical support service (1) (2) | ||||||||
| Total | $ | $ | ||||||
| (1) | ||
| (2) |
F-19
Disaggregated information of revenues by regions are as follows:
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Japan | $ | $ | ||||||
| Taiwan | ||||||||
| Total | $ | $ | ||||||
The Company recognized advance payments from its customers prior to revenue recognition as contract liability or prepayment from customer-related party until the revenue recognition performance obligation are met.
As of December 31, 2024 and 2023, the Company did have any contract assets.
Research and Development cost
The Company expenses research and development
costs as incurred. Research and development activities primarily include the design, development, and testing of new products, technologies,
or significant improvements to existing products. Costs incurred in connection with these activities, including third-party development
costs, mainly in product development, are charged to expenses as incurred. Research and development costs for the years ended December
31, 2024 and 2023 were $
Stock-based Compensation
The Company adopted the modified prospective method to measure stock-based compensation expense. Under the modified prospective method, stock-based compensation expense recognized during the period is based on the portion of the share-based payment awards granted after the effective date and ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s statement of income is based on the vesting terms and the estimated fair value of the award at grant date. As stock-based compensation expense recognized in the statement of income is based on awards ultimately expected to vest, it is reduced for estimated forfeiture. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company uses the Black-Scholes option pricing model in its determination of fair value of share-based payment awards on the date of grant. Such option pricing model is affected by assumptions based on a number of highly complex and subjective variables.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Adjustments to prior period’s income tax liabilities are added to or deducted from the current period’s tax provision.
The Company follows FASB guidance on uncertain tax positions and has analyzed Its filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax authorities for years before 2018. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.
The Company’s policy for recording interest and penalties associated with any uncertain tax positions is to record such items as a component of income before taxes. Penalties and interest paid or received, if any, are recorded as part of other operating expenses in the consolidated statement of operations.
F-20
Foreign Currency Transactions
Foreign currency transactions are recorded in U.S. dollars at the exchange rates in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in statements of operations for the period.
Translation Adjustments
If a foreign subsidiary’s functional currency is the local currency, translation adjustments will result from the process of translating the subsidiary’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported under other comprehensive loss as a separate component of stockholders’ equity.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by
dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of
common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding
if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options,
shares to be purchased by employees under the Company’s employee stock purchase plan. The Company had
NOTE 3 - Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In November 2023, the FASB issued ASU 2023-07, which included Topic 280 “Segment Reporting”. This guidance improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU 2023-07 is effective for all entities for fiscal years beginning after December 15, 2023. The Company adopted this ASU for the year ended December 31, 2024. The adoption did not have any impact on the Company’s financial position, results of operations or cash flows. Refer to Note 26, Segment Information, for details.
Accounting Pronouncements Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, which included Topic 740 “Income Taxes”. This guidance requires business entities to disclose additional information related to the income taxes. The ASU 2023-09 is effective for all entities for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements.
F-21
In March 2024, the FASB issued ASU 2024-02, “Codification Improvements — Amendments to Remove References to the Concepts Statements”. This update contains amendments to the Codification that remove references to various FASB Concepts Statements. These changes remove references to various Concepts Statements and the amendments apply to all reporting entities within the scope of the affected accounting guidance. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2024. Early application of the amendments in this Update is permitted for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). The Company believes the future adoption of this ASU is not expected to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires incremental disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In January 2025, the FASB issued ASU 2025-01 Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024. ASU 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in an annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheet, statements of (loss) income and comprehensive (loss) income and statements of cash flows.
NOTE 4 - Short-term Investment
On September 9, 2019, the Company entered into
a liquidity agreement with a security company (“the Liquidity Provider”) in France, which is consistent with customary practice
in the French securities market. The liquidity agreement complies with applicable laws and regulations in France and authorizes the Liquidity
Provider to carry out market purchases and sales of shares of the Company’s common stock on the Euronext Paris market. To enable
the Liquidity Provider to carry out the interventions provided for in the contract, the Company contributed approximately $
On September 30, 2022, the Company entered into a stock purchase agreement
to purchase common stock of Shinbao in a total amount of NT$
F-22
As of December 31, 2024 and December 31, 2023,
the fair value of the investment was as $
NOTE 5 - Inventories, net
As of December 31, 2024 and 2023, inventories consisted of the following:
| December 31, 2024 | December 31, 2023 | |||||||
| Satellite equipment for sale under development | $ | $ | ||||||
The write-down of potential obsolete inventories
is recorded based on management’s assumptions about future demands and market conditions. For the year ended December 31, 2024,
the Company did not record any write-down of obsolete inventory. For the year ended December 31, 2023, the Company wrote-down $
NOTE 6 - Prepaid Expenses and Prepayments for Equipment and Intangible Assets
As of December 31, 2024 and 2023, prepaid expenses consisted of the following:
| December 31, 2024 | December 31, 2023 | |||||||
| Prepaid professional expense | $ | $ | ||||||
| Others | ||||||||
| Prepaid expenses total | $ | $ | ||||||
| Prepayment for equipment and intangible assets – customer projects – related parties | $ | $ | ||||||
| Prepayment for equipment and intangible assets – customer projects | $ | $ | ||||||
These prepayments for equipment and intangible assets are related to ongoing projects.
NOTE 7 - Property and Equipment, Net
As of December 31, 2024 and 2023, the balances of property and equipment were as follows:
| December 31, 2024 | December 31, 2023 | |||||||
| Ground station equipment | $ | $ | ||||||
| Computer software and equipment | ||||||||
| Satellite equipment | ||||||||
| Vehicle | ||||||||
| Leasehold improvement | ||||||||
| Furniture and fixture | ||||||||
| Subtotal | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net | ||||||||
| Prepayments - land | ||||||||
| Prepaid equipment | ||||||||
| Total | $ | $ | ||||||
F-23
On July 10, 2018, the Company and Aerkomm Taiwan
entered into a real estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with
respect to the acquisition by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite
ground station and data center. Pursuant to the terms of the Land Purchase Contract, and subsequent amendments on July 30, 2018, September
4, 2018, November 2, 2018 and January 3, 2019, the Company paid to the seller in installments, prepayments of $
On November 15, 2022, the Company entered
into another real estate sale contracts (the “Land Purchase Contracts 2”) with Hsu Rong-Tang (the “Seller
2”) with respect to the acquisition by Aircom Telecom of a parcel of land and property located in Taiwan. The land is expected
to be used for Aerkomm’s future projects. As of December 31, 2024, the Company paid to the Seller 2 installments refundable
prepayments of NT$
Depreciation expense was $
NOTE 8 - Long-term Investment, net
On December 3, 2020, the Company entered into
three separate stock purchase agreements from three individuals to purchase an aggregate of
As of December 31, 2024 and 2023,
On July 20, 2023, the Taipei Exchange (the “Exchange”)
announced that the securities of Ejectt Inc. would be suspended from trading on the Exchange as of that date, in accordance with Article
12-1 of the Business Rules of the Exchange due to significant changes in the scope of Ejectt’s business within a certain period
before and after a change in control, that Ejectt’s new business accounted for more than
On July 28, 2023, the Company and Ejectt signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan Inc. and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and an offer of merger was delivered to Ejectt on February 1, 2024. On March 4, 2024, Ejectt was officially delisted.
F-24
Aerkomm Taiwan Inc. held a shareholders’
meeting on May 23, 2024 to approve the merger with Ejectt. On the same day, the Ejectt shareholders also approved the merger and the merger
agreement became effective as of that date. On May 27, 2024, Aerkomm Taiwan Inc. amended its articles of incorporation to increase its
capital. Aerkomm Taiwan and Ejectt agreed in the merger agreement to merge on June 27, 2024. However, for the merger to become legally
effective under Taiwanese law, it must be approved by the Department of Investment Review in Taiwan. An application for approval was submitted
on July 10, 2024. Aerkomm expects that the review process may require approximately 4-6 months. Aerkomm cannot assure whether the Department
of Investment Review will approve the transaction. As of the date of the report, the review is still ongoing. For the years ended December 31, 2024 and 2023, the Company recorded impairment of $
As of December 31, 2024 and 2023,
As of December 31, 2024, through Aerkomm Taiwan
and Aircom Telecom the Company held approximately
In connection with the planned merger with Ejectt,
Aerkomm Taiwan retained an independent specialist firm that, in a report published to Aerkomm Taiwan dated April 29, 2024, valued Ejectt’s
shares at between NT$
Also on September 29, 2022, the Company entered
into a stock purchase agreement (or “Stock Purchase Agreement”) to purchase
During year ended December 31, 2023, the Company
disposed of the AnaNaviTek stock for amount of $
On September 30, 2022, the Company entered into
a stock purchase agreement to purchase common stock of Shinbao in a total amount of NT$
As of December 31, 2024 and 2023, the long-term investment was as follows:
| Investment in Ejectt | Investment in Shinbao | Total | ||||||||||
| January 1, 2023 | $ | $ | $ | |||||||||
| Addition | ||||||||||||
| December 31, 2023 | ||||||||||||
| Reclassified from short-term investment | ||||||||||||
| Impairment | ( | ) | ( | ) | ( | ) | ||||||
| Exchange rate adjustment | ( | ) | ( | ) | ( | ) | ||||||
| December 31, 2024 | $ | $ | $ | |||||||||
F-25
NOTE 9 - Intangible Asset, Net
As of December 31, 2024 and 2023, the cost and accumulated amortization for intangible asset were as follows:
| Satellite System Software | Accumulated Amortization | Net | ||||||||||
| January 1, 2023 | $ | $ | ( | ) | $ | |||||||
| Addition | ( | ) | ||||||||||
| December 31, 2023 | ( | ) | ||||||||||
| Addition | ( | ) | ( | ) | ||||||||
| Exchange rate adjustment | ( | ) | ( | ) | ||||||||
| December 31, 2024 | $ | $ | ( | ) | $ | |||||||
Amortization expense was $
The following table sets forth the Company’s amortization expense for the next five years ending:
| Amortization | ||||
| expenses | ||||
| Twelve months ending December 31, 2025 | $ | |||
| Twelve months ending December 31, 2026 | ||||
| Twelve months ending December 31, 2027 | ||||
| Twelve months ending December 31, 2028 | ||||
| Twelve months ending December 31, 2029 and thereafter | ||||
| Total | $ | |||
Note 10 - Goodwill
As of December 31, 2024 and 2023, the goodwill were as follows.
| Gross Goodwill | Accumulated Impairment | Net | ||||||||||
| January 1, 2023 | $ | $ | $ | |||||||||
| Addition | ( | ) | ||||||||||
| December 31, 2024 and 2023 | $ | $ | ( | ) | $ | |||||||
There is $
As Aerkomm is currently still in the development
stage and will not start generating recurring revenue until after late 2025. Management has evaluated that the potential benefits of the
acquisitions before year 2023 is limited and uncertain. Due to this reason, management has decided to impair goodwill that generated from
2022 and prior periods with total of $
On September 28, 2023, the Company acquired
Management has evaluated that the potential benefits of the acquisitions and decided that there was no impairment on goodwill for the year ended December 31, 2024 performing the two-step goodwill impairment test.
F-26
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.
Goodwill as a result of the acquisition of Mixnet and its subsidiary is calculated as follows;
| Total purchase considerations | $ | |||
| Fair Value of tangible assets acquired: | ||||
| Cash | ||||
| Other receivable | ||||
| Prepaid expenses and other current assets | ||||
| Intangible assets | ||||
| Total identifiable assets acquired | ||||
| Fair value of liabilities assumed: | ||||
| Loan payable - current | ( | ) | ||
| Prepayment from customer | ( | ) | ||
| Other payable | ( | ) | ||
| Loan from stockholder - non-current | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Net identifiable liabilities assumed | ||||
| Goodwill as a result of the acquisition | $ |
NOTE 11 - Other Payable and Accrued Expenses
| Nature | December 31, 2024 | December 31, 2023 | ||||||
| Outside service, professional, and consultant fee | $ | $ | ||||||
| Land commission payable | ||||||||
| Interest payable | ||||||||
| Bonus, health insurance, and payroll taxes | ||||||||
| R&D supplies | ||||||||
| Employee reimbursement | ||||||||
| Office expense | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
The Company also notes that $
F-27
NOTE 12 - Operating and Finance Leases
As of December 31, 2024, the Company had four operating leases for office usage remaining.
Lease term and discount rate:
The weighted-average remaining lease term and discount rate related to the leases were as follows:
| December 31, 2024 | December 31, 2023 | |||||||
| Weighted-average remaining lease term | ||||||||
| Operating lease | ||||||||
| Finance lease | ||||||||
| Weighted-average discount rate | ||||||||
| Operating lease | % | % | ||||||
| Finance lease | - | % | % | |||||
The supplemental balance sheet information related to leases for the period is as follows:
| December 31, 2024 | December 31, 2023 | |||||||
| Operating leases | ||||||||
| Right of use assets | ||||||||
| Lease Liability – current portion | ||||||||
| Lease Liability – net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Financing leases | ||||||||
| Right of use assets | ||||||||
| Lease Liability – current portion | ||||||||
| Total financing lease liabilities | $ | $ | ||||||
F-28
The components of lease expense are as follows within the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024 and 2023:
Operating Leases
| December 31, 2024 | December 31, 2023 | |||||||
| Lease expense | $ | $ | ||||||
| Sublease rental income | ( | ) | ( | ) | ||||
| Net lease expense | $ | $ | ||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Amortization of right-of-use asset | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | $ | $ | ||||||
The following table sets forth the Company’s minimum lease payments in future periods:
| Operating lease payments | ||||
| Twelve months ending December 31, 2025 | $ | |||
| Twelve months ending December 31, 2026 | ||||
| Total lease payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Current portion | ( | ) | ||
| Non-current portion | $ | |||
F-29
NOTE 13 - Short-term Loan
In June 2021, the Company entered into a loan
agreement in the amount of $
The temporary fundings as of December 31, 2024
and 2023, were $
On November 29, 2021, the Company entered into
a credit loan agreement (the “Credit Loan Agreement”) with Mega International Commercial Bank Co., Ltd. (“Mega”).
Pursuant to the Credit Loan Agreement, Mega agreed to provide a facility of NTD
During the year ended December 31, 2023, the entire
balance of Zero Coupon Bond (see Note 15) was tendered for redemption. Therefore, the related conversion feature was paused and being
forfeited until the payment of the redemption is fully settled or upon the expiration of the agreement, while the amount owed to the Zero
Coupon Bond holder is reclassified as an ordinary short-term loan, and continued to accrued interest until full repayment. As of December
31, 2024, the remaining balance of $
On April 23, 2024, the Company entered into a premium finance agreement
with First Insurance Funding to finance its annual directors and officers insurance. Pursuant to the agreement, First Insurance Funding
agreed to the unpaid balance of $
NOTE 14 – Term Loan
The Company has a car loan credit line of NT$
NOTE 15 - Convertible Long-term Bonds Payable and Restricted Cash
On December 3, 2020, the Company closed a private
placement offering consisting of US$
F-30
Unless previously redeemed, converted or repurchased
and cancelled, the Bonds may be converted at any time on or after December 3, 2020 up to November 20, 2025 into shares of Common Stock
of the Company with a par value of $
Holders of the Bonds may also require the Company to repurchase all or part of the Bonds on the third anniversary of the Issue Date, at the Early Redemption Amount. Unless the Bonds have been previously redeemed, converted or repurchased and cancelled, Holders of the Bonds will also have the right to require the Company to repurchase the Bonds for cash at the Early Redemption Amount if an event of delisting or a change of control occurs.
Pursuant to the agreements of Bonds, Bank of Panhsin
Co., Ltd. (the “BG Bank”) committed to issue a bank guarantee for the benefit of the holders of the Bonds. The Bank Guarantee
is intended to provide a source of funds for the principal, premium, interest (if any) and any other payment obligations of the Company
which shall include the default interest under the Bonds upon the Company’s failure to pay amounts pursuant to the Indenture or
upon the Bonds being declared due and payable on the occurrence of an Event of Default pursuant to this Indenture. In order to obtain
the guarantee from BG Bank, the Company entered into a line of credit in the amount of $
Management has accounted for the convertible bonds by assuming that they will be repaid and redeemed at maturity; accordingly, the Company has included the redemption premium as part of the accretion tables and calculation of interest and issuance cost to be amortized over the life of the bond. Any value borne from the conversion feature of the bond and or issuance costs related to the origination and distribution of these bonds have been accounted for as debt discounts to be amortized using the effective interest method over the life of the bond.
On October 27, 2023, Citicorp International Limited,
as Trustee with respect to the Bonds, submitted to the Company a request for redemption of the Bonds in full. During the year ended December
31, 2023, the entire balance of Zero Coupon Bond was tendered for redemption. Therefore, the related conversion feature was paused and
forfeited until the payment of the redemption is fully settled or upon the expiration of the agreement, while the amount owed to the Zero
Coupon Bond holder is reclassified as an ordinary short-term loan, and continued to accrued interest until full repayment. As of December
31, 2024, the Company had repaid $
As of December 31, 2024 and 2023, the long-term bonds payable consisted of the following:
| December 31, 2024 | December 31, 2023 | |||||||
| Current: | ||||||||
| Early redemption convertible bonds payable- default | $ | $ | ||||||
| Non-current: | ||||||||
| Coupon Bond | $ | $ | ||||||
| * |
| Net Carrying Value | ||||
| Balance as of December 31, 2022 | $ | |||
| Amortization of discount | ||||
| Accretion to redemption value | ||||
| Balance as of December 31, 2023 | ||||
| Repayment | ( | ) | ||
| Accrued interest | ||||
| Tender for redemption | ( | ) | ||
| Balance as of December 31, 2024 | $ | |||
The Company has been charged with
F-31
NOTE 16 - Convertible Long-term Notes Payable
On December 7, 2022, Aerkomm Inc. (the “Company”)
entered into an investment conversion and note purchase agreement (the “Agreement”) with World Praise Limited, a Samoa registered
company (“WPL”). Pursuant to the terms of this Agreement, (i) a subscription for the common stock of the Company in the amount
of $
In addition, and as indicated in the Agreement,
WPL agreed to lend an additional $
The Convertible Note allows for loans to the Company up to an aggregate
principal amount of $
NOTE 17 - SAFE Liabilities
In June and November, 2024, the Company entered
into four Simple Agreement for Future Equity (“SAFE”) agreements with Hsiao Chia-Sung, Liu Ya Ting, Luk Fook Securities (HK)
Ltd., and G-Tech Optoelectronics Corp. for a total of $
F-32
Under each SAFE, if the Merger has not occurred
within two years from the issuance date of the SAFE, then upon a vote of a majority (based on the face amounts of the SAFEs) of the holders
of SAFEs, the SAFEs will convert into equity of the Company at a price of $
As of December 31, 2024, based on the Fair Value
Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $
NOTE 18 - Contract Liability
On March 9, 2015, the Company entered into a
NOTE 19 - Income Taxes
Income tax expense for the year ended December 31, 2024 and 2023 consisted of the following:
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total | $ | $ | ||||||
The following table presents a reconciliation of the Company’s income tax at statutory tax rate and income tax at effective tax rate for the year ended December 31, 2024 and 2023.
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Tax benefit at statutory rate | $ | ( | ) | $ | ( | ) | ||
| Net operating loss carryforwards (NOLs) | ||||||||
| Foreign investment losses (gains) | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Amortization expense | ||||||||
| Accrued payroll | ||||||||
| Unrealized exchange losses (gains) | ( | ) | ( | ) | ||||
| Others | ( | ) | ||||||
| Tax expense at effective tax rate | $ | $ | ||||||
F-33
Deferred tax assets (liability) as of December 31, 2024 and December 31, 2023 consist approximately of:
| December 31, 2024 | December 31, 2023 | |||||||
| Net operating loss carryforwards (NOLs) | $ | $ | ||||||
| Stock-based compensation expense | ||||||||
| Accrued expenses and unpaid expenses payable | ||||||||
| Tax credit carryforwards | ||||||||
| Unrealized exchange losses (gain) | ( | ) | ||||||
| Excess of tax amortization over book amortization | ( | ) | ( | ) | ||||
| Others | ( | ) | ||||||
| Gross | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
Management does not believe the deferred tax assets
will be utilized in the near future; therefore, a full valuation allowance is provided. The net change in deferred tax assets valuation
allowance was an increase of approximately $
As of December 31, 2024 and 2023, the Company
had federal NOLs of approximately $
As of December 31, 2024 and 2023, the Company
has Japan NOLs of approximately $
As of December 31, 2024 and 2023,
the Company has Taiwan NOLs of approximately $
As of December 31, 2024 and 2023,
the Company had approximately $
The Company’s ability to utilize its federal and state NOLs to offset future income taxes is subject to restrictions resulting from its prior change in ownership as defined by Internal Revenue Code Section 382. The Company does not expect to incur the limitation on NOLs utilization in future annual usage.
NOTE 20 - Capital Stock
| (1) | Preferred Stock: |
The Company is authorized to issue
F-34
| (2) | Common Stock: |
The Company is authorized to issue
| December 31, 2024 | December 31, 2023 | |||||||
| Restricted stock – vested | ||||||||
| Restricted stock – unvested | - | |||||||
| Total restricted stock | ||||||||
The unvested shares of restricted stock were recorded under a deposit liability account awaiting future conversion to common stock when they become vested.
On September 28,
2023, the Company issued
On December 13, 2023, two new subscribers subscribed
for
On February 2, 2024, the Company issued
On March 8, 2024, the Company issued
On April 24, 2024, the Company issued
On June 6, 2017, the Company issued
| (3) | Stock Warrant |
On October 31, 2021, following approval by the
Board of Directors, the Company issued a warrant to Mr. Sheng-Chun Chang for the purchase of up to
For the year ended December 31, 2022, the Company
recorded an increase of $
(4) Stock subscription
From April to May 2024, various new subscribers
subscribed for
NOTE 21 - Major Customer
The Company has one customer who is the Company’s related party,
which represents
NOTE 22 - Major Vendors
| Purchase | Accounts Payable | |||||||||||||||
| Vendor | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| A | $ | $ | $ | $ | ||||||||||||
| B | ||||||||||||||||
| C | ||||||||||||||||
| D | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
F-35
NOTE 23 - Significant Related Party Transactions
In addition to the information disclosed in other notes, the Company has significant related party transactions as follows:
| A. |
| Related Party | Relationship | |
| Well Thrive Limited (“WTL”) | ||
| Ejectt Inc. (“Ejectt”) | ||
| STAR JEC INC. (“StarJec”) | ||
| AA Twin Associates Ltd. (“AATWIN”) | ||
| EESquare Japan (“EESquare JP”) | ||
| Kevin Wong |
| B. | Significant related party transactions: |
The Company has extensive transactions with its related parties. It is possible that the terms of these transactions are not the same as those which would result from transactions among wholly unrelated parties.
| a. |
| December 31, 2024 | December 31, 2023 | |||||||
| Other receivable from: | ||||||||
| - Loan: | ||||||||
| EESquare JP 1 | $ | $ | ||||||
| WTL4 | ||||||||
| - Others: | ||||||||
| EESquare JP 1 | ||||||||
| Ejectt3 | ||||||||
| Kevin Wong6 | ||||||||
| Others7 | ||||||||
| Total | $ | $ | ||||||
| Prepaid expenses to Ejectt3 | $ | $ | ||||||
| Prepayment from Ejectt3 | $ | |||||||
| Other payable to: | ||||||||
| AATWIN5 | $ | $ | ||||||
| Interest payable to WTL4 | ||||||||
| Ejectt3 | ||||||||
| StarJec2 | ||||||||
| Kevin Wong6 | ||||||||
| Others7 | ||||||||
| Total | $ | $ | ||||||
| 1. |
F-36
| 2. |
| 3. |
| 4. | |
| 5. | |
| 6. | |
| 7. |
| b. |
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Purchase from Ejectt1 | $ | $ | ||||||
| Cost of goods sold from Ejectt1 | ||||||||
| Connection Service income from Ejectt2 | ||||||||
| Revenue Income from Ejectt3 | ||||||||
| Other Income from WTL6 | ||||||||
| Non-operating service Income from StarJec4 | ||||||||
| Rental income charged from EESquare JP5 | ||||||||
| Rent expense from Ejectt3 | ||||||||
| 1. |
F-37
| 2. | |
| 3. | |
| 4. | |
| 5. |
NOTE 24 - Stock Based Compensation
In March 2014, Aircom’s Board of Directors
adopted the 2014 Stock Option Plan (the “Aircom 2014 Plan”). The Aircom 2014 Plan provided for the granting of incentive stock
options and non-statutory stock options to employees, consultants and outside directors of Aircom. On February 13, 2017, pursuant to the
Exchange Agreement, Aerkomm assumed the options of Aircom 2014 Plan and agreed to issue options for an aggregate of
One-third of stock option shares will be vested
as of the first anniversary of the time the option shares are granted or the employee’s acceptance to serve the Company, and 1/36th
of the shares will be vested each month thereafter. Option price is determined by the Board of Directors. The Aircom 2014 Plan became
effective upon its adoption by the Board and shall continue in effect for a term of
On May 5, 2017, the Board of Directors of Aerkomm
adopted the Aerkomm Inc. 2017 Equity Incentive Plan (the “Aerkomm 2017 Plan” and together with the Aircom 2014 Plan, the “Plans”)
and the reservation of
On June 23, 2017, the Board of Directors agreed
to issue options for an aggregate of
F-38
On July 31, 2017, the Board of Directors approved
to issue options for an aggregate of
On December 29, 2017, the Board of Directors approved
to issue options for an aggregate of
On June 19, 2018,
the Compensation Committee approved to issue options for
On September 16, 2018, the Compensation Committee
approved to issue options for
On December 29, 2018, the Compensation Committee
approved to issue options for an aggregate of
On July 2, 2019, the Board of Directors approved
the grant of options to purchase an aggregate of
On October 4, 2019, the Board of Directors approved
the grant of options to purchase an aggregate of
On December 29, 2019, the Board of Directors approved
to issue options for an aggregate of
On February 19, 2020, the Board of Directors approved
to issue options for
On September 17, 2020, the Board of Directors
approved to issue options for
On December 11, 2020, the Board of Directors approved
the grant of options to purchase an aggregate of
On January 23, 2021, the Board of Directors approved
to issue options for an aggregate of
On September 1, 2021, the Board of Directors approved
to issue options for
F-39
On September 17, 2021, the Board of Directors
approved to issue options for
On October 21, 2021,
the Board of Directors approved to issue options for
On December 1, 2021, the Board of Directors approved
to issue options for
On December 29, 2021, the Board of Directors approved
to issue options for an aggregate of
On December 31, 2021, the Board of Directors approved
to issue options for
On March 1, 2022, the Board of Directors approved
to issue options for
On June 1, 2022, the Board of Directors approved
to issue options for
On September 1, 2022, the Board of Directors approved
to issue options for
On September 17, 2022, the Board of Directors
approved to issue options for
On December 1, 2022, the Board of Directors approved
to issue options for
On December 29, 2022, the Board of Directors approved
to issue options for an aggregate of
On March 1, 2023, the Board of Directors approved
to issue options for
On May 5, 2023, the Board of Directors of Aerkomm
adopted the Aerkomm Inc. 2023 Equity Incentive Plan (the “Aerkomm 2023 Plan” and together with the Aerkomm 2017 Plan, and
Aircom 2014 Plan, the “Plans”) and the reservation of
On June 1, 2023, the Board of Directors approved
to issue options for
On June 13, 2023, the Board of Directors agreed
to issue options for an aggregate
F-40
On September 1,
2023, the Board of Directors approved to issue options for
On December 1, 2023, the Board of Directors approved
to issue options for
On March 1, 2024, the Board of Directors approved
to issue options for
On March 4, 2024, the Board of Directors approved
to issue options for
On June 1, 2024, the Board of Directors approved
to issue options for
On June 6, 2024, the Board of Directors approved
to issue options for
On September 1, 2024, the Board of Directors approved
to issue options for
On September 6, 2024, the Board of Directors approved
to issue options for
On December 1, 2024, the Board of Directors approved
to issue options for
On December 6, 2024, the Board of Directors approved
to issue options for
Valuation and Expense Information
Measurement and recognition of compensation expense
based on estimated fair values is required for all share-based payment awards made to its employees and directors including employee stock
options. The Company recognized compensation expense of $
Determining Fair Value
Valuation and amortization method
The Company uses the Black-Scholes option-pricing-model to estimate the fair value of stock options granted on the date of grant or modification and amortizes the fair value of stock-based compensation at the date of grant on a straight-line basis for recognizing stock compensation expense over the vesting period of the option.
Expected term
The expected term is the period of time that granted options are expected to be outstanding. The Company uses the SEC’s simplified method for determining the option expected term based on the Company’s historical data to estimate employee termination and options exercised.
Expected dividends
The Company does not plan to pay cash dividends before the options are expired. Therefore, the expected dividend yield used in the Black-Scholes option valuation model is zero.
F-41
Expected volatility
Since the Company has no historical volatility, it used the calculated value method which substitutes the historical volatility of a public company in the same industry to estimate the expected volatility of the Company’s share price to measure the fair value of options granted under the Plans.
Risk-free interest rate
The Company based the risk-free interest rate used in the Black-Scholes option valuation model on the market yield in effect at the time of option grant provided in the Federal Reserve Board’s Statistical Releases and historical publications on the Treasury constant maturities rates for the equivalent remaining terms for the Plans.
Forfeitures
The Company is required to estimate forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate option forfeitures and records share-based compensation expense only for those awards that are expected to vest.
The Company used the following assumptions to estimate the fair value of options granted in the year ended December 31, 2024 and year ended December 31, 2023 under the Plans as follows:
| Assumptions | ||||
| Expected term | | |||
| Expected volatility | % | |||
| Expected dividends | % | |||
| Risk-free interest rate | | % | ||
| Forfeiture rate | | % | ||
Aircom 2014 Plan
Activities related to options for the Aircom 2014 Plan for the year ended December 31, 2024 and the year ended December 31, 2023 are as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Fair Value Per Share | ||||||||||
| Options outstanding at January 1, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2023 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2024 | ||||||||||||
There are no unvested stock awards under Aircom 2014 Plan for the year ended December 31, 2024 and the year ended December 31, 2023.
F-42
Of the shares covered by options outstanding as
of December 31, 2024,
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 12/31/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 12/31/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
As of December 31, 2024, there was unrecognized stock-based compensation expense for the Aircom 2014 Plan. option was exercised during the year ended December 31, 2024 and 2023.
Aerkomm 2017 Plan
Activities related to options outstanding under Aerkomm 2017 Plan for the year ended December 31, 2024 and the year ended December 31, 2023 are as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Fair Value Per Share | ||||||||||
| Options outstanding at January 1, 2023 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2023 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2024 | ||||||||||||
Activities related to unvested stock awards under Aerkomm 2017 Plan for the year ended December 31, 2024 and the year ended December 31, 2023 are as follows:
| Number of Shares | Weighted Average Fair Value Per Share | |||||||
| Options unvested at January 1, 2023 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2023 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2024 | ||||||||
Of the shares covered by options outstanding under
the Aerkomm 2017 Plan as of December 31, 2024,
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 12/31/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 12/31/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||
| $ | 2.55 - 4.30 | $ | $ | |||||||||||||||||||||||||
| 6.00 - 10.00 | ||||||||||||||||||||||||||||
| 11.00 - 14.20 | ||||||||||||||||||||||||||||
| 20.50 - 27.50 | ||||||||||||||||||||||||||||
| 30.00 - 35.00 | ||||||||||||||||||||||||||||
F-43
As of December 31, 2024, total unrecognized stock-based
compensation expense related to stock options was approximately $
Aerkomm 2023 Plan
Activities related to options outstanding under Aerkomm 2023 Plan for the year ended December 31, 2024 and the year ended December 31, 2023 are as follows:
| Number of Shares |
Weighted Average Exercise Price Per Share |
Weighted Average Fair Value Per Share |
||||||||||
| Options outstanding at December 31, 2022 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2023 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options unvested at December 31, 2024 | ||||||||||||
Activities related to unvested stock awards under Aerkomm 2023 Plan for the year ended December 31, 2024 is as follows:
| Number of Shares |
Weighted Average Fair Value Per Share |
|||||||
| Options unvested at January 1, 2023 | ||||||||
| Granted | ||||||||
| Vested | ( |
) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2023 | ||||||||
| Granted | ||||||||
| Vested* | ( |
) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2024 | ||||||||
| * |
Of the shares covered by options outstanding as
of December 31, 2024,
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 12/33/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 12/33/2024 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||
| $ | | |||||||||||||||||||||||||||
As of December 31,
2024, total unrecognized stock-based compensation expense related to stock options was approximately $
F-44
NOTE 25 - Commitments and contingencies
As of December 31, 2024, the Company’s significant commitment is summarized as follows:
Contingencies
Legal
From time to time, the Company is party to certain legal proceedings, as well as certain asserted and un-asserted claims.
Commitment
Airbus SAS Agreement: On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, the Company entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus will develop and certify a complete retrofit solution allowing the installation of the Company’s “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. Airbus will also apply for and obtain on the Company’s behalf a Supplemental Type Certificate (“STC”) from the European Aviation Safety Agency (“EASA”), as well as from the U.S. Federal Aviation Administration (“FAA”), for the retrofit AERKOMM K++ system. The EU-China Bilateral Aviation Safety Agreement, or BASA, went into effect on September 3, 2020, giving a boost to the regions’ aviation manufacturers by simplifying the process of gaining product approvals from the European Union Aviation Safety Agency, or EASA, and the Civil Aviation Administration of China, or CAAC, while also ensuring high safety and environment standards will continue to be met. Pursuant to the terms of our Airbus agreement, Airbus agreed to provide the Company with the retrofit solution which will include the Service Bulletin and the material kits including the update of technical and operating manuals pertaining to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit solution, including the certification, is expected to be in the fourth quarter of 2024, although there is no guarantee that the project will be successfully completed in the projected timeframe.
Shenzhen Yihe: On June 20, 2018,
the Company entered into that certain Cooperation Framework Agreement, as supplemented on July 19, 2019, with Shenzhen Yihe Culture Media
Co., Ltd., or Yihe, the authorized agent of Guangdong Tengnan Internet, or Tencent Group, pursuant to which Yihe agreed to assist the
Company with public relations, advertising, market and brand promotion, as well as with the development of a working application of the
Tencent Group WeChat Pay payment solution and WeChat applets applicable for Chinese users and relating to cell phone and WiFi connectivity
on airplanes. As compensation under this Yihe agreement, the Company paid Yihe RMB
Equity Contract:
On December 29, 2022, Aerkomm Inc. (the “Company” or the “Seller”) and dMobile System Co., Ltd. (the “Buyer”)
entered into an equity sales contract (the “Equity Sales Agreement”), pursuant to which the Company agreed to sell
F-45
NOTE 26 - Segment Information
The
Company conducts business as a operating segment which is based upon the Company’s organizational and management
structure, as well as information used by the CODM to allocate resources and other factors. The accounting policies of the segment are
the same as those described in Note 2. The key measure of segment profitability that the CODM, which is the Company’s CEO, uses
to allocate resources and assess performance is consolidated net income (loss), as reported on the consolidated statements of operations.
| For
the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Less: | ||||||||
| Cost of revenues | ||||||||
| Sales and marketing expenses | ||||||||
| Other operating expense | ||||||||
| Research and development expenses | ||||||||
| Salaries expenses | ||||||||
| Professional fee | ||||||||
| Amortization and depreciation expense | ||||||||
| Foreign currency exchange loss | ||||||||
| Interest expense | ||||||||
| Change in SAFE liabilities | ||||||||
| Stock based compensation | ||||||||
| Amortization of bonds issuance costs | ||||||||
| Redemption loss | ||||||||
| Impairment loss of goodwill | ||||||||
| Impairment loss on investment | ||||||||
| Other (income) loss, net | ( | ) | ( | ) | ||||
| Loss before income tax | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
NOTE 27 - Subsequent Events
The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that, other than as indicated below, there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.
In
February 2025, the Company issued an aggregate of
In
February 2025, the Company issued an aggregate of
On February 6, 2025, the Company entered into a Memorandum of Understanding with Telesat Canada, designating the Company as a commercial partner in connection with Telesat’s Lightspeed low Earth orbit satellite network. The partnership aims to expand the Company’s capabilities in delivering secure, high-throughput satellite communications services across government and enterprise sectors.
On March 7, 2025, the Company received a formal notice from OneWeb regarding an update to its previously executed Distribution Partner Agreement dated October 1, 2024. The update modified certain exhibit terms related to pricing and service authorization, which may impact future operational planning and contract fulfillment.
On
June 9, 2025 and July 23, 2025, the Company entered into two Simple Agreements for Future Equity (“SAFEs”) with G-Tech Global
Pte. Ltd., a third-party investor. Under the terms of the SAFEs, the Company received aggregated gross proceeds of approximately $
On July 18, 2025, the Company and Invest Securities
SA (Paris) (“Invest Securities”), entered into a Liquidity Agreement (the “Agreement”), pursuant to which, the
Company appointed Invest Securities as its liquidity provider in connection with the Company’s common stock (the “Shares”)
traded on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). The services of Invest Security
is expected to enhance the liquidity of the Shares, improve the regularity of trading, and prevent volatility that is not warranted by
the current market trends. To enable Invest Securities to carry out the interventions provided for in this Agreement, the Company
shall credit the liquidity account with the sum of €
F-46
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 18, 2025 | ||
| AERKOMM INC. | ||
| Name: | /s/ Louis Giordimaina | |
| Title: | Chief Executive Officer and Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Louis Giordimaina | Chief Executive Officer, Interim Chief Financial Officer and Director | August 18, 2025 | ||
| Louis Giordimaina | (principal executive officer, principal financial and accounting officer) | |||
| /s/ Jeffrey Wun | Director | August 18, 2025 | ||
| Jeffrey Wun | ||||
| /s/ Robert McGuire | Director | August 18, 2025 | ||
| Robert McGuire | ||||
| /s/ Chih-Ming (Albert) Hsu | Director | August 18, 2025 | ||
| Chih-Ming (Albert) Hsu | ||||
| /s/ Jeff T. C. Shu | Director | August 18, 2025 | ||
| Jeff T. C. Shu | ||||
| /s/ Richmond Akumiah | Director | August 18, 2025 | ||
| Richmond Akumiah |
136
Exhibit 2.3
DESCRIPTION OF SECURITIES
The following is a summary of the rights of our common stock and preferred stock and certain provisions of our restated articles of incorporation and our amended and restated bylaws. This summary does not purport to be complete and is qualified in its entirety by the provisions of our restated articles of incorporation and amended and restated bylaws, each of which is filed as an exhibit to the registration statement, of which this prospectus forms a part.
Our authorized capital stock consists of 90,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.001 per share
As of August 15, 2025, there were 18,352,613 shares of common stock and no shares of preferred stock issued and outstanding. All of our currently issued and outstanding shares of capital stock were validly issued, fully paid and non-assessable under the Nevada Revised Statutes.
Common Stock
The holders of our common stock are entitled to one vote per share on each matter submitted to a vote at a meeting of our stockholders, except to the extent that the voting rights of our shares of any class or series of stock are determined and specified as greater or lesser than one vote per share in the manner provided by our restated articles of incorporation. Our stockholders have no pre-emptive rights to acquire additional shares of our common stock or other securities. Our common stock is not subject to redemption rights and carries no subscription or conversion rights. In the event of liquidation of our company, the shares of our common stock are entitled to share equally in corporate assets after satisfaction of all liabilities. All shares of our common stock now outstanding are fully paid and non-assessable. Our amended and restated bylaws authorize the board of directors to declare dividends on our outstanding shares.
Preferred Stock
Our board of directors is authorized to determine and alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of preferred shares, and to fix the number of shares and the designation of any series of preferred shares. Our board of directors may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of those shares. The rights of the holders of common stock will be subject to and may be affected adversely by the rights of the holders of any preferred stock that may be issued in the future. Issuance of a new series of preferred stock could make it more difficult for a third party to acquire, or discourage a third party from acquiring, the outstanding shares of common stock and make removal of our board of directors more difficult. No rights, preferences or privileges have yet been determined and no shares of preferred stock have been issued.
Warrants
The Company had 6,548,113 and 6,482,150 common stock equivalents, primarily stock options and warrants, for the year ended December 31, 2024 and 2023, respectively. For the fiscal year ended December 31, 2024 and 2023, the assumed exercise of the Company’s common stock equivalents were not included in the calculation as the effect would be anti-dilutive.
Anti-Takeover Provisions
Provisions of the Nevada Revised Statutes and our amended and restated bylaws could have the effect of delaying or preventing a third-party from acquiring us, even if the acquisition would benefit our stockholders. Such provisions of the Nevada Revised Statutes and our amended and restated bylaws are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control of our company. These provisions are designed to reduce our vulnerability to an unsolicited proposal for a takeover that does not contemplate the acquisition of all of our outstanding shares, or an unsolicited proposal for the restructuring or sale of all or part of our company.
Nevada Anti-Takeover Statutes
We have elected not to be governed by the terms and provisions of Nevada’s control share acquisition laws (Nevada Revised Statutes 78.378 - 78.3793), which prohibit an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation’s stockholders. The first such threshold is the acquisition of at least one-fifth but less than one-third of the outstanding voting power.
We have also elected not to be governed by the terms and provisions of Nevada’s combination with interested stockholders statute (Nevada Revised Statutes 78.411 - 78.444) which prohibits an “interested stockholder” from entering into a “combination” with the corporation, unless certain conditions are met. An “interested stockholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior three years, did beneficially own) 10 percent or more of the corporation’s voting stock, or otherwise has the ability to influence or control such corporation’s management or policies.
Bylaws
In addition, various provisions of our amended and restated bylaws may also have an anti-takeover effect. These provisions may delay, defer or prevent a tender offer or takeover attempt of the company that a stockholder might consider in his or her best interest, including attempts that might result in a premium over the market price for the shares held by our stockholders. Our amended and restated bylaws may be adopted, amended or repealed by the affirmative vote of the holders of at least a majority of our outstanding shares of capital stock entitled to vote for the election of directors, and except as provided by Nevada law, our board of directors shall have the power to adopt, amend or repeal the amended and restated bylaws by a vote of not less than a majority of our directors. Any bylaw provision adopted by the board of directors may be amended or repealed by the holders of a majority of the outstanding shares of capital stock entitled to vote for the election of directors. Our amended and restated bylaws also contain limitations as to who may call special meetings as well as require advance notice of stockholder matters to be brought at a meeting. Additionally, our amended and restated bylaws also provide that no director may be removed by less than a two-thirds vote of the issued and outstanding shares entitled to vote on the removal.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock are available for our board of directors to issue without stockholder approval. We may use these additional shares for a variety of corporate purposes, including raising additional capital, corporate acquisitions and employee stock plans. The existence of our authorized but unissued shares of common stock could render it more difficult or discourage an attempt to obtain control of the company by means of a proxy context, tender offer, merger or other transaction since our board of directors can issue large amounts of capital stock as part of a defense to a take-over challenge. In addition, we have authorized in our articles of incorporation 50,000,000 shares of preferred stock, none of which are currently designated or outstanding. However, the board acting alone and without approval of our stockholders can designate and issue one or more series of preferred stock containing super-voting provisions, enhanced economic rights, rights to elect directors, or other dilutive features, that could be utilized as part of a defense to a take-over challenge.
Supermajority Voting Provisions
Nevada Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s articles of incorporation or bylaws, unless a corporation’s articles of incorporation or bylaws, as the case may be, require a greater percentage. Although our articles of incorporation and bylaws do not currently provide for such a supermajority vote on any matters, our board of directors can amend our amended and restated bylaws and we can, with the approval of our stockholders, amend our articles of incorporation to provide for such a super-majority voting provision.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Vstock Transfer, LLC. The transfer agent’s address is 18 Lafayette Place, Woodmere, NY 11598, and its telephone number is (212) 828-8436.
Exhibit 21.1
List of Subsidiaries
Aerkomm Taiwan Inc. (Taiwan)
Aerkomm Hong Kong Ltd. (Hong Kong)
Aircom Pacific, Inc., (a California corporation)
Aerkomm SY Ltd. (Seychelles)
Aerkomm Pacific Ltd. (Malta)
Aerkomm Japan, Inc. (Japan)
Aircom Telecom, LLC (Taiwan)
Beijing Yatai Communication Co., Ltd. (China)
MEPA Labs Inc. (a California corporation)
Mesh Technology Ltd (Seychelles)
Mesh Technology Taiwan Ltd. (Taiwan)
Exhibit 31.1
CERTIFICATIONS
I, Louis Giordimaina, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Aerkomm Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 18, 2025
| /s/ Louis Giordimaina | |
| Louis Giordimaina | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Louis Giordimaina, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Aerkomm Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 18, 2025 | |
| /s/ Louis Giordimaina | |
| Louis Giordimaina | |
| Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Louis Giordimaina, the Chief Executive Officer of AERKOMM INC. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement on August 18, 2025.
| /s/ Louis Giordimaina | |
| Louis Giordimaina | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to Aerkomm Inc. and will be retained by Aerkomm Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Louis Giordimaina, the Interim Chief Financial Officer of AERKOMM INC. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement on August 18, 2025.
| /s/ Louis Giordimaina | |
| Louis Giordimaina | |
| Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to Aerkomm Inc. and will be retained by Aerkomm Inc. and furnished to the Securities and Exchange Commission or its staff upon request.