Form 10-Q Aerkomm Inc. For: Mar 31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
For the transition period from ____________ to _____________
Commission File Number:
(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, Zip Code)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A |
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. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large-accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large-accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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 comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 29, 2026, there were
AERKOMM INC.
Quarterly Report on Form 10-Q
Period Ended March 31, 2026
TABLE OF CONTENTS
i
AERKOMM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Inventories, net | ||||||||
| Prepaid expenses | ||||||||
| Other receivable - related parties | ||||||||
| Other receivable | ||||||||
| Deferred merger transaction costs | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Long-term investment, net | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Construction in progress | ||||||||
| Prepayment for land | ||||||||
| 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’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term loans | $ | $ | ||||||
| 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 | ||||||||
| Lease liabilities - current | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Lease liabilities - non-current | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred Stock, $ | ||||||||
| Common Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
AERKOMM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
| For the Three Months Ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| NON - OPERATING INCOME (LOSS) | ||||||||
| Foreign currency exchange loss | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in SAFE liabilities | ( | ) | ||||||
| Loss from deconsolidation of subsidiaries | ( | ) | ( | ) | ||||
| Gain on remeasurement of retained investment upon deconsolidation | ( | ) | ||||||
| Loss from long-term investment | ( | ) | ||||||
| Other (loss) income, net | ( | ) | ||||||
| Net non - operating income (loss) | ( | ) | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ||||||
| INCOME TAX EXPENSE | ||||||||
| NET INCOME (LOSS) | $ | $ | ( | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Change in foreign currency translation adjustments | ( | ) | ||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | $ | ( | ) | ||||
| NET INCOME (LOSS) PER COMMON SHARE: | ||||||||
| Basic | ( | ) | ||||||
| Diluted | ( | ) | ||||||
| Weighted Average Shares Outstanding – Basic | ||||||||
| Weighted Average Shares Outstanding – Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
AERKOMM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the three months ended March 31, 2025
| Common stock | Additional paid in | Subscribed | Accumulated | Accumulated other comprehensive | ||||||||||||||||||||||||
| Shares | Amount | capital | Capital | Deficit | loss | Total | ||||||||||||||||||||||
| BALANCE, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock | ( | ) | ||||||||||||||||||||||||||
| Cashless exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Deconsolidation of subsidiaries | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
For the three months ended March 31, 2026
| Common stock | Additional paid in | Subscribed | Accumulated | Accumulated other comprehensive | ||||||||||||||||||||||||
| Shares | Amount | capital | Capital | Deficit | income | Total | ||||||||||||||||||||||
| BALANCE, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||||||
| Deconsolidation of subsidiaries | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||||||
| BALANCE, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
AERKOMM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Three Months Ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used) for operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use assets | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of SAFE liabilities | ( | ) | ||||||
| Loss from deconsolidation of subsidiaries | ||||||||
| Gain on remeasurement of retained investment upon deconsolidation | ||||||||
| Loss from long-term investment | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Other receivable | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Deposits | ||||||||
| Accrued expenses | ||||||||
| Other payable | ||||||||
| Other payable - related parties | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Disbursement for other receivable-related parties loans | ( | ) | ( | ) | ||||
| Proceeds from other receivable-related parties loans | ||||||||
| Cash outflow from disposal of subsidiaries | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of short-term loan | ( | ) | ( | ) | ||||
| Proceeds from short-term loan | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Increase (Decrease) in Cash and Restricted Cash | ( | ) | ||||||
| CASH AND RESTRICTED CASH, beginning of Period | ||||||||
| Foreign Currency Translation Effect on Cash and Restricted Cash | ||||||||
| CASH AND RESTRICTED CASH, end of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for income taxes | $ | $ | ||||||
| Cash paid during the period for interest | $ | $ | ||||||
| NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock | $ | $ | ||||||
| Cashless exercise of stock options | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
AERKOMM INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 - Organization
Aerkomm Inc. (formerly Maple Tree Kids Inc.) (“Aerkomm”)
was incorporated on
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 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 also provide local supports to airlines operating within the territory of Japan.
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
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 transfer a majority interest of
5
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.
The Company’s organization structure is as following:
6
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.
On December 27, 2024, the Ministry of Foreign Affairs of the People’s Republic of China issued Decree No. 16, designating Aerkomm Inc. among several U.S. and foreign companies subject to countermeasures under the Law of the People’s Republic of China on Countering Foreign Sanctions. The decree ordered the freezing of the Company’s properties, assets, and interests within China and prohibited Chinese entities and individuals from conducting transactions or cooperation with the Company. As a result of these sanctions, the Company determined on January 4, 2025 that it had lost operational control over its subsidiaries, Aerkomm HK and Beijing Yatai whose operations and assets are located in China.
On March 11, 2026, the Company’s subsidiary,
Aerkomm Taiwan, completed the previously announced merger with Ejectt (see Note 4). As a result of the merger, the Company’s ownership
interest in Aerkomm Taiwan was reduced to
Liquidity and Going Concern
The accompanying unaudited condensed 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 had no sales in the first quarter of 2026; 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 March 31, 2026, the Company had cash and restricted cash of
$
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 $
7
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 March 31, 2026, the Company expects 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 unaudited condensed consolidated financial
statements. This assessment considers the Company’s current available cash, approximately $
If the Merger does not close and thus the $
8
NOTE 2 - Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated balance sheet as of March 31, 2026, and the condensed consolidated statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2026 and 2025 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s unaudited financial position as of March 31, 2026 and the results of operations and cash flows for the three months ended March 31, 2026 and 2025. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these three months periods are unaudited. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any other interim period or other future year.
Principle of Consolidation
Aerkomm consolidates the accounts of its subsidiaries, Aircom, Aircom Seychelles, Aerkomm Japan, Aircom Taiwan, Aerkomm Malta, MEPA Labs, and Mesh Technology Taiwan. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of unaudited condensed 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 unaudited condensed 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 March 31, 2026 and December 31, 2025,
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.
Deconsolidation
Upon the loss of control, the Company derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Company retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as cost method investment depending on the level of influence retained.
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.
9
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.
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 three months ended March 31, 2026 and 2025, the Company
recorded $
Entities in which the Company has the ability
to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence
is generally considered to exist when the Company has voting shares of
Equity method investments are generally initially recognized at cost. However, in accordance with ASC 323-10-30-2, a retained investment in the common stock of an investee recognized upon the deconsolidation of a subsidiary is initially measured at fair value on the date control is lost. The fair value of the retained investment on the deconsolidation date becomes the initial carrying amount of the investment for purposes of applying the equity method of accounting subsequently.
Accounts receivable
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 March 31, 2026 and December 31, 2025, the Company had accounts receivable. Allowances for expected credit losses were as of March 31, 2026 and December 31, 2025.
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. For the three months ended March 31, 2026 and 2025, the Company recognized impairment loss in inventories.
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 impairment loss for the three months ended March 31, 2026 and 2025.
10
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 the net assets acquired in connection with the acquisition of subsidiaries. The Company tests goodwill for impairment on an annual basis, or more frequently if events or circumstances indicate that impairment may exist.
Management evaluated the potential future economic
benefits associated with acquisitions completed after 2023 and determined that no impairment of goodwill existed for the three months
ended March 31, 2026 and 2025. As of March 31, 2026 and December 31, 2025, goodwill was $ $
Purchased intangible assets with finite useful
lives are amortized on a straight-line basis over the estimated useful lives of the respective assets. Purchased intangible assets with
indefinite useful lives are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. Purchased intangible assets consist primarily of satellite system software and are 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.
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.
11
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 asset and liability that were accounted for at fair value on a recurring basis as of March 11, 2026, March 31, 2026, and December 31, 2025:
| Carrying Value at March 11, | Fair Value Measurement at March 11, 2026 | |||||||||||||||
| 2026 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Long-term investment – Aerkomm Taiwan | $ | $ | $ | $ | ||||||||||||
| Carrying Value at March 31, | Fair Value Measurement at March 31, 2026 | |||||||||||||||
| 2026 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| SAFE liability | $ | $ | $ | $ | ||||||||||||
| Carrying Value at December 31, |
Fair Value Measurement at December 31, 2025 |
|||||||||||||||
| 2025 | Level 1 | Level 2 | Level 3 | |||||||||||||
| 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 as of March 31, 2026 and December 31, 2025:
| SAFE liability | ||||
| Ending balance as of December 31, 2024 | $ | |||
| Issuance of SAFE notes | ||||
| Change in fair value of contingent consideration for acquisition | ||||
| Ending balance as of December 31, 2025 | $ | |||
| Issuance of SAFE notes | ||||
| Change in fair value | ( | ) | ||
| Ending balance as of March 31, 2026 (Unaudited) | $ | |||
12
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
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.
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 March 31, 2026 and December 31, 2025, the Company did have any contract assets.
Deferred merger transaction costs
Deferred merger transaction costs consist primarily
of legal, underwriting, and other professional fees that are directly attributable to the Merger. These costs are deferred pending consummation
of the Merger. Upon consummation, such costs will be accounted for as part of the Merger transaction, as applicable. If the Merger is
not consummated, the deferred merger transaction costs will be charged to expense in the period the Merger is determined to be unsuccessful.
As of March 31, 2026 and December 31, 2025, the deferred merger transaction costs were $
13
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 three months ended March
31, 2026 and 2025 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.
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.
14
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 (deficit).
Income (Loss) Per Share
Basic income (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. Dilutive equivalent shares are excluded from
the computation of diluted income (loss) per share if their effects would be anti-dilutive. Common stock issuable upon the conversion
of the stock options and warrants are using the treasury stock method. Common stock issuable in connection with the Company’s convertible
notes are using the if-converted method. For the three months ended March 31, 2026 and 2025, the Company had
NOTE 3 - Recent Accounting Pronouncements
Recently issued accounting standards which have not yet been adopted
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.
In early 2025, the FASB issued ASU 2025-03, “Business Combinations (Topic 805): Determining the Accounting Acquirer When a VIE Is Acquired,” which provides clarifying guidance to help entities identify the accounting acquirer in a business combination when the entity being acquired is a VIE. The Company is currently evaluating the impact of this standard on its unaudited condensed consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date; or follow a modified transition approach that is based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively to any or all prior periods presented in the unaudited condensed consolidated financial statements. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on the unaudited condensed consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on the Company’s unaudited condensed consolidated financial statements.
15
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 - Deconsolidation of Subsidiaries
Due to sanctions imposed by China (see Note 1),
on January 4, 2025, the Company lost operational control over its subsidiaries, Aerkomm HK and Beijing Yatai, whose operations and assets
are located in China. Since that date, the Company has been unable to access the bank accounts or obtain updated financial information
from these subsidiaries. Accordingly, Aerkomm HK and Beijing Yatai were deconsolidated from the Company’s unaudited condensed consolidated
financial statements, and the related investments in these subsidiaries were written off. Upon deconsolidation, the Company recognized
a loss of $
On March 11, 2026, Aerkomm Taiwan received official approval from the
Taiwan Depository & Clearing Corporation and completed its merger with Ejectt. Upon completion of the merger, Ejectt’s shares
were cancelled and new shares of Aerkomm Taiwan were issued to the former shareholders of Ejectt. As a result, the Company collectively
holds a
Gain on remeasurement of retained investment upon deconsolidation
| March 11, 2026 | ||||
| Fair value of retained investment | $ | |||
| Carrying value of retained investment | ||||
| Gain on remeasurement of retained investment upon deconsolidation | $ | |||
Loss on deconsolidation
| March 11, 2026 | ||||
| Aerkomm Taiwan’s net assets | $ | |||
| Loss on deconsolidation | $ | ( | ) | |
Upon the loss of control of Aerkomm Taiwan on March 11, 2026, the Company derecognized the assets and liabilities of Aerkomm Taiwan and recognized its retained investment in Aerkomm Taiwan at fair value. The resulting difference was recognized as a gain (loss) on deconsolidation. Following the deconsolidation, the Company accounts for its retained investment in Aerkomm Taiwan under the equity method of accounting, as the Company continues to exercise significant influence over Aerkomm Taiwan. The fair value of the retained investment as of March 11, 2026 became the initial carrying amount of the equity method investment. (see Note 8 for details).
The deconsolidation of Aerkomm HK, Beijing Yatai and Aerkomm Taiwan, Inc did not have a material impact on the Company’s overall operations.
NOTE 5 - Inventories, net
As of March 31, 2026 and December 31, 2025, inventories consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Satellite equipment for sale under development | $ | $ | ||||||
| Less: impairment loss on inventories | ||||||||
| Inventories, net | $ | $ | ||||||
The write-down of potential obsolete inventories is recorded based on management’s assumptions about future demands and market conditions. For the three months ended March 31, 2026 and 2025, the Company did not record any write-down of obsolete inventory.
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NOTE 6 - Prepaid Expenses and Prepayments for Equipment and Intangible Assets
As of March 31, 2026 and December 31, 2025, prepaid expenses consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| 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 March 31, 2026 and December 31, 2025, the balances of property and equipment were as follows:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Ground station equipment | $ | $ | ||||||
| Computer software and equipment | ||||||||
| Satellite equipment | ||||||||
| Vehicle | ||||||||
| Leasehold improvement | ||||||||
| Furniture and fixture | ||||||||
| Subtotal | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net | ||||||||
| Construction in progress | ||||||||
| Prepayments - land | ||||||||
| Total | $ | $ | ||||||
On July 10, 2018, the Company entered into a real
estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with respect to the acquisition
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 $
17
On November 15, 2022, the Company entered into
two 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 March 31, 2026, the Company paid to the Seller 2 installments refundable prepayments of NT$
On January 4, 2025, the Company lost control of
and access to the ground station equipment located in Hong Kong. Accordingly, the Company derecognized the fully depreciated related equipment
of approximately $
During the first quarter of 2026, approximately
$
Depreciation expense was $
NOTE 8 - Long-term Investment, net
-Investment in Aerkomm Taiwan
On December 3, 2020, the Company entered into
three separate stock purchase agreements with three individuals to acquire an aggregate of
On July 20, 2023, the Taipei Exchange suspended trading of Ejectt’s securities pursuant to Article 12-1 of the Taipei Exchange Business Rules due to significant changes in the scope of Ejectt’s business following a change in control and the dismissal of an independent director. Although Ejectt intended to undertake actions necessary to satisfy the requirements for resumption of trading, its shares did not resume trading and were subsequently delisted from the Taipei Exchange on March 4, 2024.
On July 28, 2023, the Company and Ejectt entered into a non-binding letter of intent regarding a proposed merger between Aerkomm Taiwan Inc. (“Aerkomm Taiwan”) and Ejectt, with Aerkomm Taiwan as the surviving entity. On January 30, 2024, the shareholders of Aerkomm Taiwan approved pursuing the merger, and a merger proposal was delivered to Ejectt on February 1, 2024. On May 23, 2024, the shareholders of both Aerkomm Taiwan and Ejectt approved the merger, and the merger agreement became effective. Aerkomm Taiwan subsequently amended its articles of incorporation to increase its authorized capital in connection with the transaction. The merger required approval from the Taiwan Depository & Clearing Corporation (“TDCC”), and an application for approval was submitted on July 10, 2024.
As of March 11, 2026, the Company held
18
On March 11, 2026, Aerkomm Taiwan received official
approval from TDCC and completed its merger with Ejectt. Upon completion of the merger, Ejectt’s shares were cancelled and new shares
of Aerkomm Taiwan were issued to the former shareholders of Ejectt. As a result, the Company collectively holds a
Following the completion of the merger and the resulting change in
ownership structure, the Company determined that it no longer had a controlling financial interest in Aerkomm Taiwan and therefore deconsolidated
Aerkomm Taiwan effective March 11, 2026 (see Note 4). Upon deconsolidation, the Company initially measured its retained investment in
Aerkomm Taiwan at fair value and subsequently accounted for the investment under the equity method of accounting. On March 11, 2026, the
Company recognized a gain on its retained investment of $
-Investment in Shinbao
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 March 31, 2026 and December 31, 2025, the long-term investment was as follows:
| Investment in Aerkomm Taiwan | Investment in Shinbao | Total | ||||||||||
| January 1, 2025 | $ | $ | $ | |||||||||
| Impairment | ( | ) | ( | ) | ||||||||
| Exchange rate adjustment | ||||||||||||
| December 31, 2025 | ||||||||||||
| Derecognition of investment in Ejectt upon merger | ( | ) | ( | ) | ||||||||
| Fair value of retained investment in Aerkomm Taiwan upon deconsolidation | ||||||||||||
| Loss on investment | ( | ) | ( | ) | ||||||||
| Exchange rate adjustment | ( | ) | ( | ) | ( | ) | ||||||
| March 31, 2026 (Unaudited) | $ | |||||||||||
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NOTE 9 - Intangible Asset, Net
As of March 31, 2026 and December 31, 2025, the cost and accumulated amortization for intangible asset were as follows:
| Satellite System Software | Accumulated Amortization | Net | ||||||||||
| January 1, 2025 | $ | ( | ) | |||||||||
| Addition | ( | ) | ( | ) | ||||||||
| Exchange rate adjustment | ( | ) | ||||||||||
| December 31, 2025 | $ | ( | ) | $ | ||||||||
| Addition | ( | ) | ( | ) | ||||||||
| Exchange rate adjustment | ( | ) | ( | ) | ||||||||
| March 31, 2026 (Unaudited) | $ | ( | ) | |||||||||
Amortization expense was $
The following table sets forth the Company’s amortization expense for the next five years ending:
| Amortization | ||||
| expenses | ||||
| Twelve months ending March 31, 2027 | $ | |||
| Twelve months ending March 31, 2028 | ||||
| Twelve months ending March 31, 2029 | ||||
| Twelve months ending March 31, 2030 | ||||
| Twelve months ending March 31, 2031 | ||||
| Thereafter | ||||
| Total | $ | |||
Note 10 - Goodwill
As of March 31, 2026 and December 31, 2025, the goodwill were as follows.
| Gross Goodwill | Accumulated Impairment | Net | ||||||||||
| January 1, 2025 | $ | $ | ( | ) | $ | |||||||
| Addition | ||||||||||||
| December 31, 2025 | ( | ) | ||||||||||
| Addition | ||||||||||||
| March 31, 2026 (Unaudited) | $ | $ | ( | ) | $ | |||||||
There is impairment loss on goodwill that was recognized for the three months ended March 31, 2026 and 2025 for all past merger activities.
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 three months ended March 31, 2026, after performing a goodwill impairment test considering both qualitative factors and quantitative analyses.
20
NOTE 11 - Other Payable
| Nature | March 31, 2026 | December 31, 2025 | ||||||
| (Unaudited) | ||||||||
| Outside service, professional, and consultant fee | $ | $ | ||||||
| Land commission payable | ||||||||
| Interest payable | ||||||||
| Bonus, health insurance, and payroll taxes | ||||||||
| R&D supplies | ||||||||
| Employee reimbursement | ||||||||
| Office expense | ||||||||
| Disputed accounts payable* | ||||||||
| Strategic development deposit** | ||||||||
| Others | ||||||||
| Total other payable | $ | $ | ||||||
| * | |
| ** |
NOTE 12 - Accrued Expenses
The Company notes that $
NOTE 13 - Operating and Finance Leases
As of March 31, 2026 and December 31, 2025, 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:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Weighted-average remaining lease term | ||||||||
| Operating lease | ||||||||
| Finance lease | ||||||||
| Weighted-average discount rate | ||||||||
| Operating lease | % | % | ||||||
| Finance lease | % | % | ||||||
21
The supplemental balance sheet information related to leases for the period is as follows:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Operating leases | ||||||||
| Right of use assets | ||||||||
| Lease Liability – current portion | ||||||||
| Lease Liability – net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The components of lease expense are as follows within the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2026 and 2025:
Operating Leases
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Lease expense | ||||||||
| Sublease rental income | ( | ) | ( | ) | ||||
| Net lease expense | $ | $ | ||||||
The following table sets forth the Company’s minimum lease payments in future periods:
| Operating lease payments | ||||
| Twelve months ending March 31, 2027 | $ | |||
| Twelve months ending March 31, 2028 | ||||
| Twelve months ending March 31, 2029 | ||||
| Total lease payments | $ | |||
| Less: Imputed interest | ||||
| Present value of lease liabilities | $ | |||
| Current portion | ( | ) | ||
| Non-current portion | $ | |||
22
NOTE 14 - Short-term Loan
In June 2021, the Company entered into a loan
agreement in the amount of $
The temporary fundings as of March 31, 2026 and
December 31, 2025, 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 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 December 2, 2025, the maturity date of the
Zero Coupon Bond, the Company repaid $
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 $
Other than the short-term loan mentioned above,
the Company had additional borrowings from several third parties totaling $
23
NOTE 15 - Convertible Long-term Bonds Payable
On December 3, 2020, the Company closed a private
placement offering consisting of US$
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 December 2, 2025, (i) the Coupon Bond of $
The Company has been charged with
24
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 2024, December 2024, June 2025, July 2025,
September 2025 and October 2025, the Company entered into eight 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 $
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 March 31, 2026 and 2025, based on the Fair
Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $
25
NOTE 18 - Contract Liability
On March 9, 2015, the Company entered into a
NOTE 19 - Income Taxes
U.S.
While the Company consolidates its entities under Aerkomm, a Nevada entity as described in Note 1, Organization, management has determined that U.S. represents the Company’s primary tax jurisdiction.
The statutory income tax rate in U.S. is
Taiwan
The Company’s subsidiary incorporated in
Taiwan is governed by the income tax laws of Taiwan, and the income tax provision related to operations in Taiwan is calculated at the
applicable statutory tax rates on taxable income for the periods based on existing legislation, interpretations, and practices. The statutory
corporate income tax rate in Taiwan is
Japan
The Company’s subsidiary incorporated in
Japan is governed by the income tax laws of Japan, and the income tax provision related to operations in Japan is calculated at the applicable
statutory tax rates on taxable income for the periods based on existing legislation, interpretations, and practices. The statutory corporate
income tax rate in Japan is
26
As further described in Note 2, Recently Issued Accounting Standards,
the Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes
Disclosures, or ASU 2023-09.
| For the Three Months Ended March 31, 2026 | ||||
| (Unaudited) | ||||
| Domestic | $ | |||
| Foreign | ||||
| Total income before income taxes | $ | |||
Income tax expense for the three months ended March 31, 2026 and 2025 consisted of the following:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| Total | $ | $ | ||||||
Deferred tax assets as of March 31, 2026 and December 31, 2025 consist approximately of:
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| 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 | ( | ) | ( | ) | ||||
| Investment income in subsidiary | ( | ) | ||||||
| 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 March 31, 2026 and December 31, 2025, the Company had federal
NOLs of approximately $
As of March 31, 2026 and December 31, 2025, the Company has Japan NOLs
of approximately million and $
As of March 31, 2026 and December 31, 2025, the Company has Taiwan
NOLs of approximately $
27
As of March 31, 2026 and December 31, 2025, the Company had $
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
(2) Common Stock:
The Company is authorized to issue
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Restricted stock – vested | ||||||||
| Total restricted stock | ||||||||
On February 2, 2024, the Company issued
On March 8, 2024, the Company issued
On April 24, 2024, the Company issued
In March 2025, the Company issued an aggregate
of
In March 2025, the Company issued an aggregate
of
In December 2025, the Company issued
On June 6, 2017, the Company issued
28
(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 $
NOTE 21 - 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”) | ||
| STAR JEC INC. (“StarJec”) | ||
| AA Twin Associates Ltd. (“AATWIN”) | ||
| EESquare Japan (“EESquare JP”) | ||
| Yih Lieh (Giretsu) Shih | ||
| Louis Giordimaina | ||
| Aerkomm Taiwan, Inc (“Aerkomm Taiwan”) |
29
| B. | Significant related party transactions: |
The Company has extensive transactions with its related parties. It is possible that the terms of these transactions are different from those which would result from transactions among wholly unrelated parties.
| a. |
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Other receivable from: | ||||||||
| - Loan: | ||||||||
| EESquare JP1 | $ | $ | ||||||
| WTL4 | ||||||||
| - Others: | ||||||||
| Aerkomm Taiwan, formerly known as Ejectt Inc., before it merged into Aerkomm Taiwan3 | ||||||||
| Others6 | ||||||||
| Total | $ | $ | ||||||
| Prepayment to Aerkomm Taiwan, formerly known as Ejectt Inc., before it merged into Aerkomm Taiwan3 | $ | $ | ||||||
| Prepayment from Aerkomm Taiwan, formerly known as Ejectt Inc., before it merged into Aerkomm Taiwan3 | $ | |||||||
| Other payable to: | ||||||||
| AATWIN5 | $ | $ | ||||||
| Interest payable to WTL4 | ||||||||
| Aerkomm Taiwan, formerly known as Ejectt Inc., before it merged into Aerkomm Taiwan3 | ||||||||
| StarJec2 | ||||||||
| Others6 | ||||||||
| Total | $ | $ | ||||||
| 1. |
| 2. |
| 3. | Represents prepayment paid by Aerkomm Taiwan, formerly known as Ejectt
Inc., before it merged into Aerkomm Taiwan, to order 6 sets of antennas from Aircom Telecom with prepayment of $ |
On March 11, 2026, Aerkomm Taiwan completed its merger with Ejectt. Upon completion of the merger, Ejectt’s shares were cancelled and new shares of Aerkomm Taiwan were issued to the former shareholders of Ejectt. Aerkomm Taiwan became the surviving company (see Note 8 for details). As of March 31, 2026, $
30
| 4. |
| 5. |
| 6. |
| b. |
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Rental income charged from EESquare JP1 | ||||||||
| 1. |
NOTE 22 - 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
31
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
32
On September 1, 2021, the Board of Directors approved
to issue options for
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
33
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
On March 1, 2025, the Board of Directors approved
to issue options for
On March 6, 2025, the Board of Directors approved
to issue options for
On June 1, 2025, the Board of Directors approved
to issue options for
On June 6, 2025, the Board of Directors approved
to issue options for
On September 1, 2025, the Board of Directors approved
to issue options for
On September 6, 2025, the Board of Directors approved
to issue options for
On December 1, 2025, the Board of Directors approved
to issue options for
On December 6, 2025, the Board of Directors approved
to issue options for
34
On March 1, 2026, the Board of Directors approved
to issue options for
On March 6, 2026, 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.
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 three months ended March 31, 2026 and 2025 under the Plans as follows:
| Assumptions | |||
| Expected term | |||
| Expected volatility | % | ||
| Expected dividends | % | ||
| Risk-free interest rate | % | ||
| Forfeiture rate | % |
35
Aircom 2014 Plan
Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025 are as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Fair Value Per Share | ||||||||||
| Options outstanding at January 1, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at March 31, 2026 (Unaudited) | ||||||||||||
There are no unvested stock awards under Aircom 2014 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025.
Of the shares covered by options outstanding as
of March 31, 2026,
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 03/31/2026 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 03/31/2026 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
As of March 31, 2026, there was unrecognized stock-based compensation expense for the Aircom 2014 Plan. No option was exercised for the three months ended March 31, 2026.
Aerkomm 2017 Plan
Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025 are as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Fair Value Per Share | ||||||||||
| Options outstanding at January 1, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at March 31, 2026 (Unaudited) | ||||||||||||
36
Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025 are as follows:
| Number of Shares | Weighted Average Fair Value Per Share | |||||||
| Options unvested at January 1, 2025 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2025 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at March 31, 2026 (Unaudited) | ||||||||
Of the shares covered by options outstanding under
the Aerkomm 2017 Plan as of March 31, 2026,
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 03/31/2026 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 03/31/2026 | 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 | ||||||||||||||||||||||||||
As of March 31, 2026, total unrecognized stock-based
compensation expense related to stock options was approximately $
37
Aerkomm 2023 Plan
Activities related to options outstanding under Aerkomm 2023 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025 are as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Fair Value Per Share | ||||||||||
| Options outstanding at January 1, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options outstanding at December 31, 2025 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Options unvested at March 31, 2026 (Unaudited) | ||||||||||||
Activities related to unvested stock awards under Aerkomm 2023 Plan for the three months ended March 31, 2026 and the year ended December 31, 2025 are as follows:
| Number of Shares | Weighted Average Fair Value Per Share | |||||||
| Options unvested at January 1, 2025 | ||||||||
| Granted | ||||||||
| Vested* | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at December 31, 2025 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited/Cancelled | ||||||||
| Options unvested at March 31, 2026 (Unaudited) | ||||||||
| * |
Of the shares covered by options outstanding as
of March 31, 2026,
| Options Outstanding (Unaudited) | Options Exercisable (Unaudited) | |||||||||||||||||||||||||
| Range of Exercise Prices | Shares Outstanding at 03/31/2026 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares Exercisable at 03/31/2026 | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
As of March 31, 2026, total unrecognized stock-based
compensation expense related to stock options was approximately $
38
NOTE 23 - Commitments and contingencies
As of March 31, 2026, 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 a 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
39
NOTE 24 - 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.
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| 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 | ||||||||
| Loss from deconsolidation of subsidiaries | ||||||||
| Gain on remeasurement of retained investment upon deconsolidation | ( | ) | ||||||
| Loss from long-term investment | ||||||||
| Other loss (income), net | ( | ) | ||||||
| Income (loss) before income tax | ( | ) | ||||||
| Income tax expense | ||||||||
| Net income (loss) | $ | ( | ) | |||||
NOTE 25 - Subsequent Events
The Company evaluated all events and transactions that from March 31, 2026 up through July 29, 2026, which is the date that these unaudited condensed consolidated financial statements are available to be issued, other than disclosed events below, there were no any material subsequent events that require disclosure in these unaudited condensed consolidated financial statements.
On April 29, 2026, the Company entered into a Co-Development and Collaboration General Agreement with a Japan-based defense prime contractor and trusted service provider to the Japan Ministry of Defense. Pursuant to the General Agreement, the parties will collaborate on the development, manufacturing, and commercialization of Unmanned Aerial Systems (UAS) related products.
On May 26, 2026, the Company entered into a Master Services Agreement (“MSA”) with a global U.S.-based satellite communications provider offering broadband, mobility, and satellite networking services across maritime, aviation, and land-based markets. Pursuant to the agreement, the provider authorized the Company to provide satellite communications products and related services for the maritime, aviation, and land sectors in Japan and Taiwan, including user terminals and Ka-band and L-band airtime products.
On July 20, 2026, the Company entered into a SAFE agreement with G-Tech
Optoelectronics Corp. for $
40
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this 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; Aerkomm Japan, Inc., a Japanese company and wholly-owned subsidiary of Aerkomm; and Aircom Telecom LLC, a Taiwanese company and wholly-owned subsidiary of Aircom, Aircom Taiwan, or Aircom Beijing.
Special Note Regarding Forward Looking Statements
Certain information contained in this report includes forward-looking statements. The statements herein which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our interpretation of what is believed to be significant factors affecting the businesses, including many assumptions regarding future events. The following factors, among others, may affect our forward-looking statements:
| ● | our future financial and operating results; |
| ● | our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business; |
| ● | 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; |
| ● | 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 relationship 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; and |
| ● | our ability to comply with evolving legal standards and regulations. |
41
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.
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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.
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.
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.
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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.
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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.
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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.
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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.
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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 reach between 3.2 billion and 4.8 billion by the end of 2026. This rapid expansion represents a significant shift in mobile technology, with one projection suggesting 5G will constitute over one-third of all global mobile connections by 2026, 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.
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Infrastructure Vulnerabilities and Geopolitical Risks
As telecommunications infrastructure expands, the global submarine cable ecosystem faces an escalating threat environment driven by geopolitical tensions, limited repair capacity, and insufficient legal frameworks. There are currently approximately 597 subsea cables in operation or under construction worldwide, carrying an estimated 99% of international data traffic and underpinning trillions of dollars in daily financial transactions. An average of 150 to 200 cable faults occur globally each year, with the most common causes being ship anchors and fishing equipment contacting cables at depths of less than 200 meters. However, the risk of deliberate or state-linked interference has risen sharply, and the distinction between accidental damage and intentional sabotage has become increasingly difficult to draw.
In the Baltic Sea, a concentrated series of suspicious incidents has fundamentally altered the security landscape for undersea infrastructure. Since October 2023, at least eleven submarine cables have been damaged in the region, along with a gas pipeline and an underwater power cable. These incidents have included damage to the Balticconnector gas pipeline between Finland and Estonia in October 2023 by the Hong Kong-flagged vessel Newnew Polar Bear; the severing of two fiber-optic data cables connecting Finland-Germany and Sweden-Lithuania in November 2024, attributed to the Chinese-flagged bulk carrier Yi Peng 3; the cutting of the Estlink 2 power cable and multiple data cables between Finland and Estonia on Christmas Day 2024 by the Cook Islands-flagged tanker Eagle S, suspected of belonging to Russia’s “shadow fleet”; and a fiber-optic cable rupture connecting Latvia and Sweden in January 2025. In December 2025, Finnish authorities boarded and seized another vessel, the Fitburg, sailing from St. Petersburg after detecting that it was dragging its anchor along the seabed and had damaged telecommunications cables between Finland and Estonia. Fourteen crew members, including several Russian nationals, were taken into custody.
In the Asia-Pacific region, Taiwan has emerged as a focal point for suspected subsea cable sabotage. Between January and February 2025, Taiwan experienced four incidents of submarine cable disruptions, including two suspected acts of vessel sabotage. In January 2025, the Xingshun 39, a Tanzania-flagged vessel controlled by a Chinese entity, severed a key link in the Trans Pacific Express Cable System near Keelung; the vessel had previously operated under alias names and switched its AIS transponder signals when approached by Taiwan’s coast guard. In February 2025, the Hongtai 58, a Togolese-registered cargo vessel with a Chinese crew, severed an undersea cable connecting Taiwan and the Penghu Islands. Investigation of the Hongtai 58 revealed a pattern of systematic identity manipulation, with the vessel having frequently changed its name and registration across multiple maritime registries. In June 2025, a Taiwanese court sentenced the Chinese captain of the Hongtai 58 to three years in prison for intentionally damaging undersea cables, marking the first criminal conviction in the recent wave of cable incidents. Prosecutors argued that electronic charts on the ship clearly showed the cable’s location, and coast guard analysis demonstrated the vessel had dragged its anchor in a straight line across the seabed in a zigzag pattern around the cable, inconsistent with normal anchoring behavior. China subsequently claimed that two Taiwanese citizens had controlled the vessel as part of a smuggling operation, a characterization rejected by Taiwan’s Mainland Affairs Council as “cross-border repression and political manipulation.”
The potential for Sino-Russian collaboration on undersea cable operations has further heightened concerns. Analysts have identified suspicious activities by the Xingshun 39 north of Taiwan and a Russian vessel, the Vasili Shukshin, south of Taiwan in early 2025, suggesting possible coordination between Chinese and Russian merchant ships in reconnaissance and sabotage of undersea communications cables. These activities follow from suspected undersea infrastructure sabotage operations conducted by Chinese merchant vessels in the Baltic Sea in 2023 and 2024, with strong indications of Russian assistance and coordination.
The development of dedicated cable-cutting technology has escalated these risks. In April 2026, a Chinese research vessel tested a new device capable of slicing through submarine data cables at a depth of 3,500 meters during a deep-sea science expedition. The technology relies on an electro-hydrostatic actuator enabling a diamond-coated grinding wheel to cut through cables armored with layers of steel, rubber, and polymer, and is compact enough to fit aboard remotely operated underwater vehicles. While Chinese researchers have characterized the tool as intended for civilian “marine resource development,” security analysts have noted that it could pose a significant threat to fiber-optic cables linking Pacific islands, including Guam, and could further amplify Chinese military pressure on Taiwan, which relies on only 24 major cables for its global connectivity.
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The Red Sea has also experienced significant cable disruptions, compounding global infrastructure risks. In February 2024, three submarine cables were damaged by a vessel hit by Houthi-fired missiles, disrupting 25% of data traffic between Asia, Europe, and the Middle East. On September 6, 2025, multiple submarine cables near Jeddah, Saudi Arabia — including the SEA-ME-WE 4, IMEWE, and FALCON GCX systems — were severed, causing widespread internet disruptions across India, Pakistan, Saudi Arabia, the UAE, and Kuwait. Experts attributed the damage to commercial shipping activity, likely a vessel dragging its anchor, though the area’s geopolitical sensitivity amid ongoing Houthi attacks on Red Sea shipping has made attribution and repair particularly challenging.
Three structural factors amplify the risk of severe outcomes from cable damage: lack of redundancy in cable networks, lack of diversity of cable routes, and limited global repair capacity. Regions with limited alternate routing options — including parts of West and Central Africa, isolated Pacific islands, and certain secondary European routes — are disproportionately vulnerable. Globally, approximately 80 vessels are dedicated to maintaining submarine cable infrastructure, and the average repair time has trended upward, reaching approximately 40 days in 2023. Regulatory hurdles, such as complex permitting processes that vary by national territory, and geopolitical factors such as conflict zones denying access to repair vessels, further prolong restoration timelines.
International and multilateral responses have intensified. In January 2025, NATO launched “Baltic Sentry,” a multi-domain mission involving frigates, maritime patrol aircraft, and naval drones to strengthen surveillance and deterrence against threats to critical undersea infrastructure in the Baltic Sea. NATO Secretary General Mark Rutte emphasized that “ship captains must understand that potential threats to our infrastructure will have consequences, including possible boarding, impounding, and arrest.” By late 2025, the Baltic Sea had not experienced any further suspicious undersea incidents since January 2025, suggesting the deterrent effect of enhanced patrols. The European Union adopted an Action Plan on Cable Security in February 2025, with measures to be implemented between 2025 and 2026 to expand the EU’s subsea cable resilience through investments in new technology, enhanced surveillance capabilities, and improved intelligence-sharing. Estonia also passed legal amendments granting its defense forces authority to take action against vessels threatening critical underwater infrastructure. Taiwan, for its part, has deployed a Submarine Cable Automatic Warning System, designated 10 domestic cables as critical infrastructure, amended its Telecommunications Management Act to increase penalties for damaging communications infrastructure, and blacklisted 96 suspicious vessels for close monitoring.
Despite these efforts, the existing international legal framework remains inadequate. The UN Convention on the Law of the Sea does not automatically give coastal states authority to board and search foreign vessels suspected of damaging submarine cables in their exclusive economic zones and does not impose an express international law obligation on states not to deliberately interfere with cables. The difficulty of attributing cable damage to state-sponsored sabotage, combined with jurisdictional limitations and the use of vessels registered under flags of convenience with opaque ownership structures, continues to undermine enforcement. As reliance on submarine cables grows — driven by AI, cloud computing, and the energy transition — the vulnerability of these critical arteries to both accidental damage and deliberate interference represent an escalating risk to global communications, financial systems, and national security.
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.
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Economic Impact and Future Innovations
Mobile technologies and services continue to play a crucial role in global economic development, contributing an estimated 6.4% of global GDP in 2025, with reports indicating this substantial impact continued into early 2026 as the sector generated $7.6 trillion in economic value added. This contribution is projected to grow to 8.4% of global GDP by 2030, with the total economic impact expected to reach $11.3 trillion. 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. |
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.
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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 |
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
Based on reports covering the Business Continuity Management (BCM) Solutions market, the global market was valued at approximately $2.33 billion to $2.60 billion in 2026 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.
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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
| ● | Market Size: Based on data from 2026, the Asia-Pacific Body Control Module (BCM) market is experiencing significant growth, with market estimates indicating a valuation of approximately USD 14 billion, up from USD 13 billion in 2025, driven by rising vehicle electrification and demand for advanced electronics in the region. |
Country-Specific Projections (2023-2030)
| ● | China: Valued at USD 323.46 million in 2023, growing at a 18.3% CAGR. |
| ● | Japan: Valued at USD 99.19 million in 2023, growing at a 17.3% CAGR. |
| ● | India: Valued at USD 86.26 million in 2023, growing at a 20.6% CAGR. |
| ● | South Korea: Valued at USD 71.88 million in 2023, growing at a 17.9% CAGR. |
| ● | Australia: Valued at USD 37.38 million in 2023, growing at a 18.5% CAGR. |
| ● | Southeast Asia: Valued at USD 49.60 million in 2023, growing at a 19.8% CAGR |
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:
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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. Business Continuity Planning (BCP) and management market is projected to experience substantial growth by 2030, with forecasts indicating a compound annual growth rate (CAGR) ranging from 10.1% to over 15% throughout the 2020s. This surge reflects sustained, high-priority investment in digital resilience, driven by increasing cyber threats, climate-related disruptions, and a shift from traditional, manual planning to AI-powered, cloud-native recovery solutions. |
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 within the rapidly growing satellite communications sector. In addition to being licensed as a telecommunications 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, effective September 26, 2024, and through its Master Services Agreement with a global U.S.-based satellite communications provider, effective May 26, 2026, the Company has expanded its access to satellite connectivity solutions across both LEO and Geostationary Earth Orbit (“GEO”) networks. These relationships enhance the Company’s ability to support commercial, government, and enterprise initiatives requiring resilient communications infrastructure and strengthen its position in addressing growing demand for satellite-enabled connectivity within its authorized markets.
These authorizations enable the Company to provide broadband satellite communications services across multiple sectors, including mobile backhaul, enterprise communications, maritime, aero, land mobility, and defense-related applications. In response to increasing demand for resilient communications infrastructure, the Company offers SATCOM Business Continuity Planning (“BCP”) and Network Resilience Solutions, initially focused on the Asia-Pacific region. Japan and Taiwan, given their strategic importance and increasing emphasis on communications resilience, represent key markets for these offerings.
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Strategic Investment in Network Resilience: Japan and Taiwan’s Response to Emerging Threats
In response to escalating geopolitical tensions and vulnerabilities in undersea communications infrastructure, both Taiwan and Japan have increased investments in network resilience. These initiatives reflect a broader commitment to strengthening communications infrastructure, enhancing national preparedness, and mitigating risks associated with cyberattacks, infrastructure disruptions, and natural disasters.
As a distribution partner of Eutelsat OneWeb’s Low Earth Orbit (“LEO”) satellite services and through its Master Services Agreement with a global U.S.-based satellite communications provider for satellite communications products and services in Japan and Taiwan, the Company is positioned to support these resilience initiatives. The Company’s solutions include enterprise network redundancy, server load balancing, and disaster recovery infrastructure designed to support communications continuity objectives in Taiwan, Japan, and other regional markets. In addition, the Company’s SATCOM Business Continuity Planning (“BCP”) solutions serve both enterprise and consumer markets. By deploying mobile and vehicle-based SATCOM systems leveraging both LEO and GEO connectivity, the Company seeks to provide communications capabilities for disaster recovery, emergency response, and other scenarios in which terrestrial networks may be unavailable or disrupted.
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. |
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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 continues to face cybersecurity, infrastructure, and geopolitical risks associated with increasing regional tensions. During 2024 and 2025, Taiwan reported multiple incidents involving damage or disruption to undersea communications cables, including several cases that prompted investigations into potential deliberate interference. These incidents highlighted the vulnerability of critical communications infrastructure and reinforced the importance of network resilience, redundancy, and alternative connectivity solutions for both government and commercial users.
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 and a global U.S.-based satellite communications provider to support resilient communications, emergency response capabilities, and broadband 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.
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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
Japan’s FY2026 budget boosts defense spending to a record over $58 billion, with roughly $500 million earmarked for intelligence and communication satellites to strengthen space-based capabilities. Taiwan is developing a massive $1.25 trillion NT ($39B+) eight-year special budget (2026–2033) for weapons and joint U.S. projects, emphasizing regional security
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.
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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; |
| ● | 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; |
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| ● | 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”).
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 September 30, 2026.
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.
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Planned Merger with Ejectt
On July 28, 2023, we and Ejectt, Inc., a Taiwan-based company principally engaged in the manufacture and sale of aluminum foil and the installation and operation of solar power plants, 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.
On March 11, 2026, Aerkomm Taiwan completed the previously announced merger (the “Merger”) with Ejectt. Before consummation of the Merger, Aerkomm Taiwan was owned 48.65% by the Company but was treated by the Company as a consolidated subsidiary because the Company had de facto voting, governance and economic control of Aerkomm Taiwan. As previously announced, on July 28, 2023, Aerkomm Taiwan and Ejectt 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 an offer of merger was delivered to Ejectt on February 1, 2024. The proposed merger was approved by the respective shareholders of Aerkomm Taiwan and Ejectt in shareholder meetings held on May 23, 2024 and an Agreement and Plan of Merger (the “Merger Agreement”) was signed by the two companies effective as of that date.
Under Taiwanese law, the Merger was subject to approval of the Taiwan Department of Investment Review, to which an application was submitted on July 10, 2024. The Merger became effective on March 11, 2026 (the “Effective Time”) pursuant to the recently received official approval notice from the Taiwan Depository & Clearing Corporation confirming that Ejectt’s scripless share registration was terminated as of March 11, 2026
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. |
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.
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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 three months periods ended on March 31, 2026 and 2025.
Comparison of Three Months Ended March 31, 2026 and 2025
The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, | Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Sales | $ | - | $ | - | $ | - | - | % | ||||||||
| Cost of sales | - | - | - | - | % | |||||||||||
| Operating expenses | 2,876,468 | 3,079,484 | (203,016 | ) | (6.6 | )% | ||||||||||
| Loss from operations | (2,876,468 | ) | (3,079,484 | ) | 203,016 | (6.6 | )% | |||||||||
| Net non-operating income (loss) | 7,666,775 | (599,248 | ) | 8,266,023 | (1,379.4 | )% | ||||||||||
| Income (loss) before income taxes | 4,790,307 | (3,678,732 | ) | 8,469,039 | (230.2 | )% | ||||||||||
| Income tax expense | - | - | - | - | % | |||||||||||
| Net income (loss) | 4,790,307 | (3,678,732 | ) | 8,469,039 | (230.2 | )% | ||||||||||
| Other comprehensive income (loss) | 711,200 | (550,029 | ) | 1,261,229 | (229.3 | )% | ||||||||||
| Total comprehensive income (loss) | $ | 5,501,507 | $ | (4,228,761 | ) | $ | 9,730,268 | (230.1 | )% | |||||||
Revenue. Our total revenue was $0 for the three months ended March 31, 2026 and 2025, as we did not recognize any revenue during either period.
Cost of sales. We did not incur any cost of sales for the three months ended March 31, 2026 and 2025.
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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 decreased by $203,016 to $2,876,468 for the three months ended March 31, 2026, from $3,079,484 for the three months ended March 31, 2025. Such operating expense decrease was mainly due to the decrease in stock-based compensation and professional fee in the amount of $373,699 and $107,086, respectively, which was offset by the increase in other operation expenses and salaries expense in the amount of $164,239 and $87,704, respectively.
Net non-operating income ( loss). We had $7,666,775 net non-operating income and $599,248 net non-operating loss for three months ended March 31, 2026, and 2025, respectively. Net non-operating income for the three months ended March 31, 2026, primarily consisted of interest expense of $255,823, decreased from change in fair value of SAFE liabilities of $120,000, loss from deconsolidation of subsidiaries of $393,452, and gain on remeasurement of retained investment upon deconsolidation of $8,332,715.
Income (loss) before income taxes. Our income before income tax is $4,790,307 for the three months ended March 31, 2026, as compared to the loss of $3,678,732 for the three months ended March 31, 2025, an increase of $8,469,039, or 230.2%, as a result of the factors described above.
Income tax expense. Income tax expense for the three months ended March 31, 2026, and 2025 were nil. The income tax expenses mainly consist of California franchise tax and foreign subsidiary’s income tax expenses.
Total comprehensive income (loss). As a result of the cumulative effect of the factors described above, our total comprehensive income (loss) increased by $9,730,268, or 230.1%, to $5,501,507 total comprehensive income for the three months ended March 31, 2026, from $4,228,761 total comprehensive loss for the three months ended March 31, 2025.
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 March 31, 2026, we had cash and restricted cash of $189,036. Our working capital deficit was $83,351,198 and accumulated deficit of $120,158,921 as of March 31, 2026. These conditions give rise to substantial doubt and uncertainty regarding 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.
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 March 31, 2026, we had received Loans totaling NT$131,219,729 (approximately $4.1 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,905,781 of the $20 million in aggregate loan commitments from the two Lenders was still available as of March 31, 2026.
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In connection with the planned Merger with IXAQ, we have obtained $35 million in private investment in public equity (“PIPE”) investment commitments 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 roadshows 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 $8.9 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 March 31, 2026, we expect approximately $23.2 million convertible notes and approximately $9.9 million SAFE can be converted into equity upon Merger.
We also expects to begin generating significant recurring revenues in first quarter 2027, 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 $33.1 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.
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:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash provided by (used in) operating activities | $ | 196,315 | $ | (590,312 | ) | |||
| Net cash (used in) provided by investing activities | (153,633 | ) | 5,077 | |||||
| Net cash provided by financing activities | 27,601 | 523,223 | ||||||
| Net increase (decrease) in cash and restricted cash | 70,283 | (62,012 | ) | |||||
| Cash and restricted cash at beginning of period | 72,579 | 109,227 | ||||||
| Foreign currency translation effect on cash and restricted cash | 46,174 | 57,909 | ||||||
| Cash and restricted cash at end of period | $ | 189,036 | $ | 105,124 | ||||
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Operating Activities
Net cash provided by operating activities was $196,315 for the three months ended March 31, 2026, as compared to net cash used in operating activities of $590,312 for the three months ended March 31, 2025. In addition to the net income of $4,790,307, the increase in net cash provided by operating activities during the three months ended March 31, 2026 was mainly due to the increased in other payable of $1,595,525 and accrued expenses of $909,729, offset by decreased in non-cash items of $7,092,488, which consisted of gain from long-term investment and change in fair value of SAFE liabilities. The increase was also offset by decrease in operating lease liability of $60,644.
Net cash used in operating activities was $590,312 for the three months ended March 31, 2025, as compared to $3,537,498 for the three months ended March 31, 2024. In addition to the net loss of $3,678,732, the decrease in net cash used in operating activities during the three months ended March 31, 2025 was mainly due to the increased in prepaid expenses of $32,811, other receivable of $1,962, other current assets of $1,032 and operating lease liability of $7,327, respectively, offset by decreased in deposits of $6,798 and non-cash items of $1,479,591 which consisted of depreciation and amortization, stock-based compensation, non-cash R&D expense, change in fair value of SAFE liabilities, and loss in disposal of subsidiaries. The decrease was also offset by increase in accrued expenses, other payable and other payable-related parties of $625,963, $942,827 and $76,373, respectively.
Investing Activities
The net cash used in investing activities for the three months ended March 31, 2026 was $153,633 as compared to net cash provided by investing activities of $5,077 for the three months ended March 31, 2025. Net cash used in investing activities for the three months ended March 31, 2026 was mainly due to the disbursement for other receivable - related parties loans of $144,360, cash outflow from disposal of subsidiaries of $8,280 and purchase of property and equipment of $993.
The net cash provided by and used in investing activities for the three months ended March 31, 2025 was $5,077 as compared to $688,720 for the three months ended March 31, 2024. Net cash provided by investing activities for the three months ended March 31, 2025 was mainly due to proceeds from other receivable – related parties loans, of $122,017, and offset by the disbursement for other receivable - related parties loans of $114,199 and cash outflow from disposal of subsidiaries of $2,741.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2026 was $27,601 as compared to $523,223 for the three months ended March 31, 2025. Net cash provided by financing activities for the three months ended March 31, 2026 was mainly attributable to the proceeds from short-term loan of $168,141, and offset by repayment of short-term loan of $140,540.
Net cash provided by financing activities for the three months ended March 31, 2025 was $523,223 as compared to net cash used in financing activities of $4,353,154 for the three months ended March 31, 2024. Net cash provided by financing activities for the three months ended March 31, 2025 was mainly attributable to the proceeds from short-term loan of $556,149, and offset by repayment of short-term loan of $32,926.
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 three months ended March 31, 2026 and 2025 were $993 and $0, respectively.
We anticipate an increase in capital spending in fiscal year 2026 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.
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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.
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 16, 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 March 31, 2026, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $9,900,000. 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 $12.06, a risk-free rate of 3.97%, and an annualized volatility of 48.3%. The Company had received aggregate proceeds of $8,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the three months ended March 31, 2026, was ($120,000).
Goodwill Impairment
Management evaluates goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
During 2023, management evaluated the carrying value and expected future economic benefits associated with acquisitions completed in 2022 and prior periods. Based on this evaluation, including the Company’s strategic repositioning, evolving operational focus, commercialization timeline, and revised expectations regarding the future economic contribution of certain acquired assets and operations, management determined that an impairment charge of $4,561,037 was appropriate for goodwill associated with those prior acquisitions.
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Management subsequently evaluated goodwill associated with acquisitions completed after 2023 and determined that no impairment existed for the three months ended March 31, 2026 and 2025.
As of March 31, 2026 and December 31, 2025, goodwill 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 three months ended March 31, 2026 and 2025, the Company recorded no impairment charges for its investments.
Recent Accounting Pronouncements
See Note 3 of the notes to the unaudited condensed consolidated financial statements included elsewhere in this quarterly report for a discussion of recently issued accounting standards.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. 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 chief executive officer and chief financial 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 March 31, 2026.
Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on May 28, 2026, our disclosure controls and procedures were not effective.
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As of March 31, 2026, the Company carried out an evaluation, under the supervision and with the participation of its chief executive officer and chief financial officer, pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended, of the effectiveness of the design and operation of its disclosure controls and procedures.
Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that as of the evaluation date, such disclosure controls and procedures were reasonably designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
Other than as described above, since the evaluation date by the Company’s management of its internal controls, there have not been any significant changes in the internal controls or in other factors that could significantly affect the internal controls.
Changes in Internal Control 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.
During its evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2026, our management identified the following material weaknesses:
| ● | 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:
| ● | As necessary, we will continue to engage consultants or outside accounting firms in order to ensure proper accounting for our consolidated financial statements. |
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.
Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were no material developments during the quarter ended March 31, 2026 to the legal proceedings previously disclosed in Item 3 “Legal Proceedings” of our Annual Report on Form 10-K filed on May 28, 2026.
ITEM 1A. RISK FACTORS.
For information regarding additional risk factors, please refer to our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on May 28, 2026.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We have not sold any equity securities during the quarter ended March 31, 2026.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS
| Exhibit No. | Description | |
| 31.1* | Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certifications of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Filed herewith |
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SIGNATURES
Pursuant to the requirements 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: July 29, 2026 | AERKOMM INC. | |
| /s/ Louis Giordimaina | ||
| Name: | Louis Giordimaina | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Louis Giordimaina | ||
| Name: | Louis Giordimaina | |
| Title: | Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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ATTACHMENTS / EXHIBITS
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