UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2025

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

For the transition period from ____________ to _____________

Commission File Number: 000-55925

AERKOMM INC.

(Exact name of registrant as specified in its charter)

Nevada		46-3424568
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

44043 Fremont Blvd., Fremont, CA 94538

(Address of principal executive offices, Zip Code)

(877) 742-3094

(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
None		N/A		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 ☐ No ☒

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

Indicate by check mark 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 ☐
	Non-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 October 24, 2025, there were 19,638,849 shares of the registrant’s common stock issued and outstanding.

AERKOMM INC.

Quarterly Report on Form 10-Q

Period Ended March 31, 2025

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Periods Ended March 31, 2025 and 2024	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Periods Ended March 31, 2025 and 2024	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Periods Ended March 31, 2025 and 2024	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4.	Controls and Procedures	62
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	64

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

	March 31,			December 31,
	2025			2024
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	89,871		$	93,974
Short-term investment		107			107
Inventories, net		1,008,449			1,007,461
Prepaid expenses		221,014			195,633
Other receivable - related parties		4,109,314			4,155,511
Other receivable		382,807			383,216
Other current assets		90,580			90,651
Total Current Assets		5,902,142			5,926,553

NON-CURRENT ASSETS
Long-term Investment, net		2,101,612			2,127,249
Property and Equipment, net		1,552,919			1,728,227
Intangible asset, net		10,836,603			11,279,893
Construction in progress		3,750,000			3,750,000
Prepayment for land		40,169,413			40,223,001
Right of use assets, net		149,379			176,406
Prepayment for equipment and intangible assets – customer projects – related parties		736,027			2,146,807
Prepayment for equipment and intangible assets – customer projects		279,710			279,710
Restricted cash		15,253			15,253
Deposits		384,904			392,907
Goodwill		4,573,819			4,573,819
Total Non-Current Assets		64,549,639			66,693,272

Total Assets	$	70,451,781		$	72,619,825

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Short-term loans	$	7,311,275		$	6,976,721
Convertible long-term bonds payable – current		200,000			200,000
Convertible long-term note payable - current		23,173,200			23,173,200
SAFE liabilities		5,460,000			5,410,000
Accounts payable		2,485,170			2,489,080
Accrued expenses		8,311,810			8,260,411
Other payable - related parties		1,238,485			1,168,597
Other payable		11,289,848			10,435,027
Prepayment from customer - related party		5,470,434			5,323,044
Contract liability - current		762,000			762,000
Lease liabilities - current		138,602			168,251
Total Current Liabilities		65,840,824			64,366,331

Long-term Liabilities
Lease liabilities - non-current		25,654			56,303
Total Long-Term Liabilities		25,654			56,303

Total Liabilities		65,866,478			64,422,634

STOCKHOLDERS’ EQUITY
Preferred Stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		-			-
Common Stock, $0.001 par value,90,000,000 shares authorized, 19,638,849 and 18,352,613 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		19,638			18,352
Additional paid-in capital		115,509,627			114,391,555
Subscribed capital		-			527,783
Accumulated deficit		(110,353,287	)		(106,674,555	)
Accumulated other comprehensive loss		(590,675	)		(65,944	)
Total Stockholders’ Equity		4,585,303			8,197,191

Total Liabilities and Stockholders’ Equity	$	70,451,781		$	72,619,825

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

	For the Three Months Ended March 31
	2025			2024
	(Unaudited)			(Unaudited)

Net sales		-			18,480
Service income - related party		-			34,775
Total Sales		-			53,255

Cost of sales		-			38,116
Total cost of sales		-			38,116

Gross margin		-			15,139

Operating expenses		3,079,484			5,108,102

LOSS FROM OPERATIONS		(3,079,484	)		(5,092,963	)

NON - OPERATING INCOME (LOSS)
Unrealized investment gain		-			672
Foreign currency exchange loss		(50,614	)		(688,595	)
Other income		3,041			-
Interest expense		(267,229	)		(286,631	)
Change in SAFE liabilities		(50,000	)		-
Loss on deconsolidation of subsidiaries		(234,454	)		-
Other income (loss), net		8			(12,656	)
Net non - operating loss		(599,248	)		(987,210	)

LOSS BEFORE INCOME TAXES		(3,678,732	)		(6,080,173	)

INCOME TAX EXPENSE		-			2,400

NET LOSS		(3,678,732	)		(6,082,573	)

OTHER COMPREHENSIVE LOSS
Change in foreign currency translation adjustments		(550,029	)		(669,236	)

TOTAL COMPREHENSIVE LOSS	$	(4,228,761	)	$	(6,751,809	)

NET LOSS PER COMMON SHARE:
Basic		(0.20	)		(0.34	)
Diluted		(0.20	)		(0.34	)

Weighted Average Shares Outstanding - Basic		18,609,860			17,839,228
Weighted Average Shares Outstanding - Diluted		18,609,860			17,839,228

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2024

	Common stock				Additional paid in		Capital			Accumulated			Accumulated other comprehensive
	Shares		Amount		capital		Injection			Deficit			loss			Total
BALANCE, December 31, 2023		16,720,451	$	16,720	$	97,015,470	$	5,004,000		$	(77,479,704	)	$	(366,604	)	$	24,189,882
Issuance of common stock		1,093,000		1,093		6,556,907		(5,004,000	)		-			-			1,554,000
Stock compensation expense		-		-		633,048		-			-			-			633,048
Foreign currency translation adjustments		-		-		-		-			-			(669,236	)		(669,236	)
Net loss for the period		-		-		-		-			(6,082,573	)		-			(6,082,573	)
BALANCE, March 31, 2024		17,813,451	$	17,813	$	104,205,425	$	-		$	(83,562,277	)	$	(1,035,840	)	$	19,625,121

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		18,352,613	$	18,352	$	114,391,555		$	527,783		$	(106,674,555	)	$	(65,944	)	$	8,197,191
Issuance of common stock		109,280		109		527,674			(527,783	)		-			-			-
Cashless exercise of stock options		1,176,956		1,177		(1,177	)		-			-			-			-
Stock compensation expense		-		-		591,575			-			-			-			591,575
Net loss for the period		-		-		-			-			(3,678,732	)		-			(3,678,732	)
Deconsolidation of subsidiaries		-		-		-			-			-			25,298			25,298
Foreign currency translation adjustments		-		-		-			-			-			(550,029	)		(550,029	)
BALANCE, March 31, 2025		19,638,849	$	19,638	$	115,509,627		$	-		$	(110,353,287	)	$	(590,675	)	$	4,585,303

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

	For the Three Months Ended March 31
	2025			2024
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,678,732	)	$	(6,082,573	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		573,921			506,980
Amortization of right of use assets		29,641			-
Stock-based compensation		591,575			633,048
Change in fair value of SAFE liabilities		50,000			-
Unrealized losses on trading security		-			(672	)
Loss on disposal of subsidiaries		234,454			-
Change in operating assets and liabilities:
Accounts receivable					41,088
Prepaid expenses		(32,811	)		-
Other receivable		(1,962	)		-
Other current assets		(1,032	)		(1,271,205	)
Deposits		6,798			3,418
Accounts payable		-			(2,497	)
Accrued expenses		625,963			2,620,514
Other payable		942,827			-
Other payable, related parties		76,373			-
Operating lease liability		(7,327	)		14,401
Net cash used in operating activities		(590,312	)		(3,537,498	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Prepayment for land		-			(346,070	)
Disbursement for other receivable-related parties loans		(114,199	)		(331,375	)
Proceeds from other receivable-related parties loans		122,017			-
Cash outflow from disposal of subsidiaries		(2,741	)		-
Purchase of property and equipment		-			(11,275	)
Net cash provided by (used in) investing activities		5,077			(688,720	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loan		556,149			1,349,995
Repayment of short-term loan		(32,926	)		-
Repayment of long-term bond payable		-			(7,251,237	)
Repayment of long-term loan		-			(3,086	)
Proceeds from subscribed capital		-			(5,004,000	)
Proceeds from issuance of common stock		-			6,558,000
Payment on finance lease liability		-			(2,826	)
Net cash provided by (used in) financing activities		523,223			(4,353,154	)

Net Decrease in Cash and Restricted Cash		(62,012	)		(8,579,372	)

CASH AND RESTRICTED CASH, beginning of Period		109,227			7,428,702

Foreign Currency Translation Effect on Cash and Restricted Cash		57,909			1,269,445

CASH AND RESTRICTED CASH, end of Period	$	105,124		$	118,775

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	-		$	-
Cash paid during the period for interest	$	1,854		$	-

CASH AND RESTRICTED CASH:
Cash	$	89,871		$	103,756
Restricted cash		15,253			15,019
Total	$	105,124		$	118,775

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Issuance of common stock	$	527,783		$	-
Cashless exercise of stock options	$	1,177		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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 August 14, 2013 in the State of Nevada. Aerkomm was a retail distribution company selling all of its products over the internet in the United States, operating in the infant and toddler products business market. Aerkomm’s common stock is quoted for trading on the OTC Markets Group Inc. OTCQX Market under the symbol “AKOM.” On July 17, 2019, the French Autorité des Marchés Financiers (the “AMF”) granted visa number 19-372 on the prospectus relating to the admission of Aerkomm’s common stock to list and trade on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). Aerkomm’s common stock began trading on Euronext Paris on July 23, 2019 under the symbol “AKOM” and is denominated in Euros on Euronext Paris. This listing did not alter Aerkomm’s share count, capital structure, or current common stock listing on the OTCQX, where it is also traded (in US dollars) under the symbol “AKOM.”

On December 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 86.3% of Aerkomm’s issued and outstanding common stock as of the closing date of purchase. As a result of the transaction, Aircom became the controlling shareholder of Aerkomm. Aircom was incorporated on September 29, 2014 under the laws of the State of California.

On February 13, 2017, Aerkomm entered into a share exchange agreement (“Exchange Agreement”) with Aircom and its stockholders, pursuant to which Aerkomm acquired 100% of the issued and outstanding capital stock of Aircom in exchange for approximately 99.7% of the issued and outstanding capital stock of Aerkomm. As a result of the share exchange, Aircom became a wholly-owned subsidiary of Aerkomm, and the former shareholders of Aircom became the holders of approximately 99.7% of Aerkomm’s issued and outstanding capital stock.

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 25,500,000 shares (the “Shares”) of Aerkomm Taiwan (51% of the issued and outstanding shares of Aerkomm Taiwan) to the Buyer for NT$255,000,000 (approximately $8,300,000). The Buyer has not yet paid for the transferred shares and under the terms of the equity sales contract Aerkomm has the right to demand that the transferred shares be returned.

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.

Despite the sale of 51% of Aerkomm Taiwan to the Buyer, Aerkomm treats Aerkomm Taiwan as a consolidated subsidiary because Aerkomm owns 49% of the shares of Aerkomm Taiwan and controls the other 51% by contract. The Buyer has not yet paid Aerkomm the amount due to Aerkomm for the sale of Aerkomm Taiwan shares to the Buyer. Under the Equity Sales Contract, Aerkomm has the right to declare a breach of contract and demand return of the transferred shares from the Buyer if the purchase price has not been paid within 180 days of date of the Equity Sales Contract, which date has passed because the contract is dated December 29, 2022. Furthermore, the shares held by Buyer in Aerkomm Taiwan and all rights to exercise rights in respect of such shares are pledged to Aerkomm’s designee, Mr. Albert Hsu, who is to execute all rights with respect to the pledged shares as a pledgee under the instruction of Aerkomm and who is a shareholder and director of Aerkomm.

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, 100% ownership of Beijing Yatai was transferred from Aircom Taiwan to Aerkomm Taiwan.

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:

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.

Liquidity and Going Concern

The accompanying financial statements have been prepared on a going concern basis. The Company’s ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As result of the Company’s primary operations being in the area of research and development of communication equipment in the aerospace industry that is still in the testing phases, The Company has not yet been able to generate sustainable recurring revenue from the sales of its products, as it has only achieved limited sales; however, the Company does believe that it has made significant progress towards gaining approval from the U.S. Federal Aviation Administration (“FAA”) and other regulatory agencies, but success is not guaranteed.

In assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been utilized to finance the working capital requirements of the Company. As of March 31, 2025, the Company had cash outflow from operating activities of approximately $0.6 million and had cash of approximately $0.1 million. The Company’s working capital deficit was approximately $60.0 million as of March 31, 2025. These conditions give rise to substantial doubt and uncertainty regarding the Company’s ability to continue as a going concern. If the Company is able to carry out its plans as detailed below, the Company could alleviate this doubt.

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 $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 Company’s cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) that the Company purchased in Taiwan. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon the Company’s request prior to the time that title to the Land is vested in the Company’s subsidiary, Aerkomm Taiwan, to pay the outstanding payable to the Company’s 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 the Company.

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, $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, 2025, from one of the Lenders under the Loan Commitment the Company did not have any loans and the Company had received Loans totaling NT$136,371,529 (approximately $4.1 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,891,186 of the $20 million in aggregate loan commitments from the two Lenders was still available as of March 31, 2025.

In connection with the planned Merger with IXAQ, the Company has obtained $35 million in private investment in public equity (“PIPE”) investment commitments and expects additional approximately $2.0 million in Simple Agreement for Future Equity (“SAFE”) investments to be funded before closing of the Merger. Further, the Company 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 the Company (including attaining research coverage, assisting in road-shows and investor meetings and other advisory services) and to act as placement agent for the private placement of securities by the Company. In connection with the arrangement with Benchmark, the Company is targeting the raise of $100 million in connection with the closing of and after the Merger, in addition to the $35 million in already committed PIPE investment and up to approximately $19.2 million of cash (net of transaction costs and depending on the amount of shareholder redemptions) contributed from the IXAQ side as a result of the Merger.

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, 2025, the Company expect approximately $28.8 million convertible notes and SAFE can be converted into equity upon Merger.

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 $15.9 million in aggregate available loan commitments from two lenders, $35 million in PIPE investment commitments signed concurrently with entering into the Merger Agreement with IXAQ, and additional capital expected to be raised through SAFE financings and the Benchmark relationship. In addition, approximately $28.4 million of outstanding convertible notes and SAFE are expected to convert into equity upon consummation of the Merger, which would further strengthen the Company’s capital resources and reduce cash obligations. The Company 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, the Company believes its working capital will be adequate to sustain the Company’s 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, the Company expects 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 existing investors in the Company and have a strong interest in its success), slowing the pace of hiring and other investments that the Company 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, the Company will be able to fund the operations and development for the next 12 months.

NOTE 2 - Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheet as of March 31, 2025, and the condensed consolidated statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2025 and 2024 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 financial position as of March 31, 2025 and the results of operations and cash flows for the three months ended March 31, 2025 and 2024. 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, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other interim period or other future year.

Principle of Consolidation

Aerkomm consolidates the accounts of its subsidiaries, Aircom, Aircom Seychelles, Aircom Japan, Aircom Taiwan, Aerkomm Taiwan, Aerkomm Malta, MEPA Labs, and Mesh Technology Taiwan. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications of Prior Year Presentation

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the unaudited condensed consolidated financial statement presentation. Such reclassifications did not affect total revenues, operating income or net income or cash flows as previously reported.

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, 2025 and December 31, 2024, 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 $4,700 as of March 31, 2025 and December 31, 2024, respectively.

The Company performs ongoing credit evaluation of its customers and requires no collateral. An allowance for credit loss and doubtful account is provided based on a review of the collectability of accounts receivable, and other receivable, respectively. The Company determines the amount of allowance for credit loss and doubtful account by examining its historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies. Actual credit losses may differ from management’s estimates.

Investment in Equity Securities

According to FASB issued Accounting Standards Updates 2016-01 (ASU 2016-01), it requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value being recorded in current period earnings, impacting the net income. For the investments in equity securities without readily determinable fair values, the investments may be recorded at cost, subject to impairment, and adjusted through net income for observable price changes.

Holdings of marketable equity securities with no significant influence over the investee are accounted for using cost method. Marketable equity security costs are initially recognized at fair value plus transaction costs which are directly attributable to the acquisition. The cost of the securities sold is based on the weighted average cost method. Stock dividends from the investment are included to recalculate the cost basis of the investment based on the total number of shares.

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, 2025 and 2024, the Company recorded $0 impairment charges for its investments, respectively.

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, 2025 and December 31, 2024, the Company had $0 Accounts Receivable, respectively. Allowances for expected credit losses were $0 as of March 31, 2025 and December 31, 2024.

Inventories

Inventories are recorded at the lower of weighted-average cost or net realizable value. The Company assesses the impact of changing technology on its inventory and writes off inventories that are considered obsolete.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. When value impairment is determined, the related assets are stated at the lower of fair value or book value. Significant additions, renewals and betterments are capitalized. Maintenance and repairs are expensed as incurred.

Depreciation is computed by using the straight-line methods over the following estimated service lives: ground station equipment - 5 years, computer equipment - 3 to 5 years, furniture and fixtures - 5 years, satellite equipment - 5 years, vehicles - 5 to 6 years and lease improvement - 5 years or remaining lease term, whichever is shorter.

Upon sale or disposal of property and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to income in the period of sale or disposal.

The Company reviews the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It determined that there was no impairment loss for the three months ended March 31, 2025 and 2024.

Right-of-Use Asset and Lease Liability

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which modifies lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases and finance leases under previous accounting standards and disclosing key information about leasing arrangements.

A lessee should recognize the lease liability to make lease payments and the right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases and finance leases, a right-of-use asset and a lease liability are initially measured at the present value of the lease payments by discount rates. The Company’s lease discount rates are generally based on its incremental borrowing rate, as the discount rates implicit in the Company’s leases is readily determinable. Operating leases are included in operating lease right-of-use assets and lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment and lease liability in our consolidated balance sheets. Lease expense for operating expense payments is recognized on a straight-line basis over the lease term. Interest and amortization expenses are recognized for finance leases on a straight-line basis over the lease term.

For the leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.

Goodwill and Purchased Intangible Assets

The Company’s goodwill represents the amount by which the total purchase price paid exceeded the estimated fair value of net assets acquired from acquisition of subsidiaries. The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment.

As Aerkomm is currently still in the development stage and has not yet commenced generating recurring revenue as of March 31 ,2025. Management has evaluated the potential benefits of the acquisitions after the year 2023 and decided that there was no impairment on goodwill for the three months ended March 31, 2025. As of March 31, 2025 and December 31, 2024, goodwill net of impairment was $4,573,819.

Purchased intangible assets with finite life are amortized on the straight-line basis over the estimated useful lives of respective assets. Purchased intangible assets with indefinite life are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Purchased intangible asset consists of satellite system software and is amortized over 10 years.

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.

The carrying amounts of the Company’s cash and restricted cash, accounts receivable, other receivable, prepaid expenses, accounts payable, short-term loan, accrued expense, accrued unpaid salaries, prepayment from customer, and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable, long-term note payable and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. The Company believes that the fair value of its long-term investment approximates its carrying amount based on management’s best estimate, given the investment’s restricted nature.

The following table sets forth by level within the fair value hierarchy our financial liability that were accounted for at fair value on a recurring basis as of March 31, 2025 and December 31, 2024:

	Carrying Value at March 31,		Fair Value Measurement at March 31, 2025
	2025		Level 1		Level 2		Level 3
	(Unaudited)		(Unaudited)
Short-term investment	$	107	$	107	$	-	$	-
SAFE liability	$	5,460,000	$	-	$	-	$	5,460,000

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2024
	2024		Level 1		Level 2		Level 3
Short-term investment	$	107	$	107	$	-	$	-
SAFE liability	$	5,410,000	$	-	$	-	$	5,410,000

The following is a reconciliation of the beginning and ending balance of the financial liability measured at fair value on a recurring basis for the three months ended March 31, 2025 and December 31, 2024 :

	SAFE liability

Ending balance as of December 31, 2023	$	-
Issuance of SAFE notes		4,997,200
Change in fair value of contingent consideration for acquisition		412,800
Ending balance as of December 31, 2024	$	5,410,000
Change in fair value		50,000
Ending balance as of March 31, 2025 (Unaudited)	$	5,460,000

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 one segment (“Defense and Aerospace Systems”) related to the delivery of sale of communications and sensing equipment and systems and the provision of technical support services for defense and aerospace applications to public and private sector. The Company generates revenues, earnings, net income, and cash flows through the single segment. The Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial responsibility. The results of the reportable segment is derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are in conformity with accounting principles generally accepted in the United States. Management measures the performance of the segment on several metrics, including contribution income (loss). Segment contribution income (loss) includes all product line segment revenue less the related costs of sales, research and development and sales and marketing costs. Contribution income (loss) is used, in part, to evaluate the performance of, and allocate resources to, the segment. The CODM assesses performance for Defense and Aerospace Systems segment and decides how to better allocate resources based on the segment strategy and net income (losses) that are reported on the Statements of Operations. The Company’s objective in making resource allocation decisions is to optimize the financial results.

Revenue Recognition

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The Company’s revenue is composed of the sales of ground antenna units and provision of data connectivity service, and technical support services to third party and a related party. Revenue from product sales is recognized at a point in time, typically upon the product being picked up by the customer, when control transfers to the customer. For technical support services, if the service results in the customer receiving and consuming the benefits as the service is performed—such as ongoing support is recognized over time. Otherwise, if the benefit of the service is only transferred upon completion, revenue is recognized at a point in time. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. The Company adopted the provisions of ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. Customers may make payments to the Company either in advance or in arrears.

In evaluating whether the Company is acting as a principal or an agent, management assesses whether the Company controls the specified goods or services before transferring them to the customer. This assessment considers whether the Company is primarily responsible for fulfilling the promise to provide the goods or services, has discretion in establishing pricing, and bears inventory or performance risk. Based on these factors, the Company has concluded that it acts as the principal in all of its sales and service arrangements and therefore recognizes revenue on a gross basis.

Disaggregated information of revenues by products/services are as follows:

	For the three months ended March 31,
	2025		2024
	(Unaudited)		(Unaudited)
Sales of ground antenna units (1)	$	-	$	18,480
Technical support service (1) (2)		-		34,775
Total	$	-	$	53,255

	(1)	Revenue recognized at a point in time.
	(2)	Revenue recognized over time

Disaggregated information of revenues by regions are as follows:

	For the three months ended March 31,
	2025		2024
	(Unaudited)		(Unaudited)
Japan	$	-	$	-
Taiwan		-		53,255
Total	$	-	$	53,255

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, 2025 and December 31, 2024, the Company did not have any contract assets.

Research and Development cost

The Company expenses research and development costs as incurred. Research and development activities primarily include the design, development, and testing of new products, technologies, or significant improvements to existing products. Costs incurred in connection with these activities, including third-party development costs, mainly in product development, are charged to expenses as incurred. Research and development costs for the three months ended March 31, 2025 and 2024 were $0.

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 unaudited condensed 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.

Translation Adjustments

If a foreign subsidiary’s functional currency is the local currency, translation adjustments will result from the process of translating the subsidiary’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported under other comprehensive loss as a separate component of stockholders’ equity.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options, shares to be purchased by employees under the Company’s employee stock purchase plan. The Company had 6,613,927 and 6,500,900 common stock equivalents, primarily stock options and warrants, for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, the assumed exercise of the Company’s common stock equivalents were not included in the calculation as the effect would be anti-dilutive.

NOTE 3 - Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Effective

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires incremental disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.

In January 2025, the FASB issued ASU 2025-01 Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024. ASU 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in an annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheet, statements of (loss) income and comprehensive (loss) income and statements of cash flows.

NOTE 4 – Deconsolidation of Aerkomm HK and Beijing Yatai

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 consolidated financial statements, and the related investments in these subsidiaries were written off. Upon deconsolidation, the Company recognized a loss of $234,454. The deconsolidation of Aerkomm HK and Beijing Yatai did not have a material impact on the Company’s overall operations.

NOTE 5 - Short-term Investment

On September 9, 2019, the Company entered into a liquidity agreement with a security company (“the Liquidity Provider”) in France, which is consistent with customary practice in the French securities market. The liquidity agreement complies with applicable laws and regulations in France and authorizes the Liquidity Provider to carry out market purchases and sales of shares of the Company’s common stock on the Euronext Paris market. To enable the Liquidity Provider to carry out the interventions provided for in the contract, the Company contributed approximately $225,500 (200,000 euros) into the account. The transaction was initiated in the beginning of 2020, and the Company pays annual compensation of 20,000 euros to the Liquidity Provider in advance by semi-annual installments at the beginning of each semi-annual period under the agreement. The liquidity agreement had an initial term of one year and has been renewed automatically until terminated as indicated below. As of March 31, 2025, the Company had purchased 5,361 shares of its common stock with the fair value of $107. The securities were recorded as short-term investment with an accumulated unrealized loss of $19,297. In January 2022, the Liquidity Provider terminated the agreement and the Company is determining whether to continue a similar program with a different provider.

On September 30, 2022, the Company entered into a stock purchase agreement to purchase common stock of Shinbao in a total amount of NT$35,000,000 (approximately $1.1 million as of March 31 ,2025). Shinbao is a privately-held company in Taiwan. As of March 31, 2025, the stock title transfer is still under process. Given the Company’s intention to hold the investment in Shinbao for a period exceeding twelve months, the investment was reclassified from short-term investment to long-term investment.

As of March 31, 2025 and December 31, 2024, the fair value of the investment was $107. For the three months ended March 31, 2025 and 2024, the Company recorded unrealized losses on trading securities amounted to $0 and $672, respectively.

NOTE 6 - Inventories, net

As of March 31, 2025 and December 31, 2024 , inventories consisted of the following:

	March 31, 2025		December 31, 2024
	(Unaudited)
Satellite equipment for sale under development	$	1,008,449	$	1,007,461

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, 2025 and 2024, the Company did not record any write-down of obsolete inventory.

NOTE 7 - Prepaid Expenses and Prepayments for Equipment and Intangible Assets

As of March 31, 2025 and December 31, 2024, prepaid expenses consisted of the following:

	March 31, 2025		December 31, 2024
	(Unaudited)
Prepaid professional expense	$	108,257	$	108,844
Others		112,757		86,789
Prepaid expenses total	$	221,014	$	195,633

Prepayment for equipment and intangible assets – customer projects – related parties	$	736,027	$	2,146,807
Prepayment for equipment and intangible assets – customer projects	$	279,710	$	279,710

These prepayments for equipment and intangible assets are related to ongoing projects.

NOTE 8 - Property and Equipment, Net

As of March 31, 2025 and December 31, 2024, the balances of property and equipment were as follows:

	March 31, 2025			December 31, 2024
	(Unaudited)
Ground station equipment	$	1,568,926		$	1,611,192
Computer software and equipment		2,913,710			2,915,256
Satellite equipment		275,410			275,410
Vehicle		333,418			332,616
Leasehold improvement		60,297			83,959
Furniture and fixture		30,573			38,532
Subtotal		5,182,334			5,256,965
Accumulated depreciation		(3,629,415	)		(3,528,738	)
Net		1,552,919			1,728,227
Construction in progress		3,750,000			3,750,000
Prepayments - land		40,169,413			40,223,001
Total	$	45,472,332		$	45,701,228

On July 10, 2018, the Company and Aerkomm Taiwan entered into a real estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with respect to the acquisition by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite ground station and data center. Pursuant to the terms of the Land Purchase Contract, and subsequent amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3, 2019, the Company paid to the seller in installments, prepayments of $34,474,462 (NT$1,056,297,507) in total. The estimated commission payable for the land purchase in the amount of NT$42,251,900 (approximately $1,273,031 as of March 31, 2025 and 1,302,062 as of December 31, 2024) was recorded to the cost of land. The company is also under the discussion of extending the commission payable to December 31,2023. According to the amended Land Purchase Contract dated on November 10, 2020, the transaction may be terminated at any time by both the buyer and the seller and agreed by all parties if the Company is unable to obtain the qualified satellite license issued by Taiwan authority before July 31, 2021. As of March 31, 2025, the title of the land has not transfer to the Company as the qualified license applications are still in progress from Taiwan National Communications Commission (“NCC”). As of the date of the issuance of these unaudited condensed consolidated financial statements, the Company is in the stage of applying for approval of its operation plan and network plan with NCC before proceeding to final stage of network installation, public telecommunications reporting, and obtaining the frequency usage certificate

On November 15, 2022, the Company entered into another real estate sale contracts (the “Land Purchase Contracts 2”) with Hsu Rong-Tang (the “Seller 2”) with respect to the acquisition by Aircom Telecom of a parcel of land and property located in Taiwan. The land is expected to be used for Aerkomm’s future projects. As of March 31, 2025, the Company paid to the Seller 2 installments refundable prepayments of NT$145,800,000 (approximately $4,392,889 as of March 31, 2025) in total.

Depreciation expense was $133,974 and $72,051 for the three months ended March 31, 2025 and 2024, respectively.

NOTE 9 - Long-term Investment, net

On December 3, 2020, the Company entered into three separate stock purchase agreements from three individuals to purchase an aggregate of 6,000,000 shares of one of the Company’s related parties, YuanJiu Inc. (“YuanJiu”) in a total amount of NT$141,175,000 (approximately US$5,027,600 as of December 31, 2020). YuanJiu was then a listed company on the Taiwan Exchange. Albert Hsu, a member of the Company’s board of directors, is the Chairman of YuanJiu. On July 19, 2021, YuanJiu Inc. changed its name to “EJECTT INC” (“Ejectt”).

As of March 31, 2025 and December 31, 2024, 6,000,000 shares of Ejectt’s common stock were pledged as collateral for debt obligations of the Company and booked under long-term investment, respectively. These shares are pledged to Bank of Panhsin and Hsiao, Chia-Sung. Bank of Panhsin provides collateral for the issuance of convertible bonds by U.S.-based Aerkomm Inc. Since the Company sold 5,000,000 shares of the 6,000,000 pledged shares and then later acquired 5,000,000 Ejectt shares once again, the Company used the average acquisition cost of NT$25.58 per share or NT$153,523,000 to determine the value of long-term investments as of December 31, 2023. During the year ended December 31, 2024, the Company reviews several factors and determined that the decline in value of investment in Ejectt was other-than-temporary and recognized an impairment of NT$101,123,141 (approximately US$3.1 million). As of March 31, 2025 and December 31, 2024, the value of investment in Ejectt was NT$52,399,859 (approximately US$1.6 million).

On July 20, 2023, the Taipei Exchange (the “Exchange”) announced that the securities of Ejectt Inc. would be suspended from trading on the Exchange as of that date, in accordance with Article 12-1 of the Business Rules of the Exchange due to significant changes in the scope of Ejectt’s business within a certain period before and after a change in control, that Ejectt’s new business accounted for more than 51% of its operations and due to the dismissal of independent director, Lin Yi-Bin, due to issues of independence. The Company’s management believes the suspension will have no impact on the value of its investment in the Ejectt stock. The management understood that the Ejectt’s management intended to modify Ejectt’s business such that its new business activities would constitute no more than 49% of the business of Ejectt, thereby enabling the resumption of trading in Ejectt conducting substantially the same business, as when its trading was suspended. However, Ejectt’s stock did not resume trading on the Exchange.

On July 28, 2023, the Company and Ejectt signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan Inc. and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and an offer of merger was delivered to Ejectt on February 1, 2024. On March 4, 2024, Ejectt was officially delisted.

Aerkomm Taiwan Inc. held a shareholders’ meeting on May 23, 2024 to approve the merger with Ejectt. On the same day, the Ejectt shareholders also approved the merger and the merger agreement became effective as of that date. On May 27, 2024, Aerkomm Taiwan Inc. amended its articles of incorporation to increase its capital. Aerkomm Taiwan and Ejectt agreed in the merger agreement to merge on June 27, 2024. However, for the merger to become legally effective under Taiwanese law, it must be approved by the Department of Investment Review in Taiwan. An application for approval was submitted on July 10, 2024. Aerkomm expects that the review process may require approximately 4-6 months. Aerkomm cannot assure whether the Department of Investment Review will approve the transaction. As of the date of the report, the review is still ongoing. During the year ended December 31, 2024, the Company recorded impairment of $3,149,625 against investment in Ejectt. For the three months ended March 31, 2025 and 2024, the Company recorded impairment of $0 against investment in Ejectt.

As of March 31, 2025 and December 31, 2024, 6,000,000 shares of Ejectt’s common stock were restricted.

As of March 31, 2025 and December 31, 2024, through Aerkomm Taiwan and Aircom Telecom the Company held approximately 9.22% of the issued and outstanding shares of Ejectt.

In connection with the planned merger with Ejectt, Aerkomm Taiwan retained an independent specialist firm that, in a report published to Aerkomm Taiwan dated April 29, 2024, valued Ejectt’s shares at between NT$25.62 to NT$27.17 per share. This valuation supports the value of the Company’s investment in Ejectt as of June 30, 2024 as well as the terms of merger agreed with Ejectt and approved by the board and shareholders of Aerkomm Taiwan. The merger with Ejectt is a structured as a one-for-one stock exchange with Aerkomm Taiwan being the surviving company. As a result of the merger, the shareholders of Aerkomm Taiwan will own approximately 48.65% of the merged entity.

On September 30, 2022, the Company entered into a stock purchase agreement to purchase common stock of Shinbao in a total amount of NT$95,000,000 (approximately $2,897,225) for Shinbao’s 7,500,000 shares (25% of total shares). The Company paid NT$35,000,000 (approximately $1,054,535 and $1,067,399, as of March 31, 2025 and December 31, 2024, respectively) as downpayment. Shinbao is a privately-held company in Taiwan. During the year ended December 31,2024, the Company reviews several factors and determined that the decline in value of the prepaid investment in Shinbao was other-than-temporary and recognized an impairment of NT$17,647,368 (approximately US$0.5 million). As of March 31, 2025, the value of prepaid investment in Shinbao was NT$17,352,632 (approximately US$0.5 million). For the three months ended March 31, 2025, the Company recorded impairments of $0 against prepaid investment in Shinbao.

As of March 31, 2025 and December 31, 2024, the long-term investment was as follows:

	Investment in Ejectt			Investment in Shinbao			Total
January 1, 2024	$	5,013,814		$	-		$	5,013,814
Reclassified from short-term investment		-			1,143,044			1,143,044
Impairment		(3,149,625	)		(549,653	)		(3,699,278	)
Exchange rate adjustment		(266,145	)		(64,186	)		(330,331	)
December 31, 2024		1,598,044			529,205			2,127,249
Exchange rate adjustment		(19,259	)		(6,378	)		(25,637	)
March 31, 2025 (Unaudited)	$	1,578,785		$	522,827		$	2,101,612

NOTE 10 - Intangible Asset, Net

As of March 31, 2025 and December 31, 2024, the cost and accumulated amortization for intangible asset were as follows:

	Satellite System Software			Accumulated Amortization			Net
January 1, 2024	$	17,406,469		$	(4,381,777	)	$	13,024,692
Addition		15,134			(1,753,435	)		(1,738,301	)
Exchange rate adjustment		(23,458	)		16,960			(6,498	)
December 31, 2024		17,398,145			(6,118,252	)		11,279,893
Addition		-			(439,828	)		(439,828	)
Exchange rate adjustment		(4,172	)		710			(3,462	)
March 31, 2025 (Unaudited)	$	17,393,973		$	(6,557,370	)	$	10,836,603

Amortization expense was $439,118 and $434,929 for each of the three months ended March 31, 2025 and 2024.

The following table sets forth the Company’s amortization expense for the next five years ending:

	Amortization
	expenses
Twelve months ending March 31, 2026	$	1,531,904
Twelve months ending March 31, 2027		1,244,397
Twelve months ending March 31, 2028		1,244,397
Twelve months ending March 31, 2029		1,244,397
Twelve months ending March 31, 2030 and thereafter		5,571,508
Total	$	10,836,603

Note 11 - Goodwill

On September 28, 2023, the Company acquired 100% of the ownership of Mixnet Technology Limited (Mixnet) and its subsidiary Mesh Technology Taiwan Limited (Mesh) with total consideration of $16,500,000 by issuing 7,000,448 shares of the Company’s common stock valued at approximately $2.36 per share. The fair value of Mixnet and Mesh at acquisition date was $11,926,181. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was $4,573,819, which is recorded as goodwill.

There is no impairment loss on goodwill that was recognized for the three months ended March 31, 2025 and 2024 for all past merger activities.

NOTE 12 - Other Payable and Accrued Expenses

Nature	March 31, 2025		December 31, 2024
	(Unaudited)
Outside service, professional, and consultant fee	$	4,207,759	$	3,947,677
Land commission payable		1,288,561		1,288,561
Interest payable		2,353,439		2,086,390
Bonus, health insurance, and payroll taxes		1,276,607		1,049,191
R&D supplies		673,567		673,567
Employee reimbursement		281,106		281,106
Office expense		55,429		63,354
Others		1,153,380		1,045,182
Total	$	11,289,848	$	10,435,028

The Company also notes that $7,233,801 from the total accrued expenses balance of $8,311,810 as of March 31, 2025 was related to unpaid salaries due to substantially all of the Company’s employees (including those of the Company’s wholly owned subsidiaries) continuing to perform their duties despite salary deferrals that began for substantially all of the employees in 2023. As of December 31, 2024, approximately $3.1 million accrued unpaid salaries have been settled pursuant to a form of letter outlining Aerkomm employee’s stock option exercise forms., Employees signing such agreements have agreed to the accelerated vesting and exercise of options to acquire an aggregate of 1,176,956 shares of the Company’s common stock in return for waiving the right to receive an aggregate of approximately $3.1 million in unpaid salary.

NOTE 13 - Operating and Finance Leases

As of March 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, 2025			December 31, 2024
	(Unaudited)
Weighted-average remaining lease term
Operating lease		1.19 Years			1.44 Years
Finance lease		- Years			- Years
Weighted-average discount rate
Operating lease		6.00	%		6.00	%
Finance lease		-	%		-	%

The supplemental balance sheet information related to leases for the period is as follows:

	March 31, 2025		December 31, 2024
	(Unaudited)
Operating leases
Right of use assets		149,379		176,406

Lease Liability – current portion		138,602		168,251
Lease Liability – net of current portion		25,654		56,303
Total operating lease liabilities	$	164,256	$	224,554

The components of lease expense are as follows within the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024:

Operating Leases

	March 31, 2025			March 31, 2024
	(Unaudited)			(Unaudited)
Lease expense	$	32,167		$	32,001
Sublease rental income		(1,969	)		(2,019	)
Net lease expense	$	30,198		$	29,982

Finance Leases

	March 31, 2025		March 31, 2024
	(Unaudited)		(Unaudited)
Amortization of right-of-use asset	$	-	$	2,700
Interest on lease liabilities		-		109
Total finance lease cost	$	-	$	2,809

The following table sets forth the Company’s minimum lease payments in future periods:

	Operating lease payments

Twelve months ending March 31, 2026	$	144,200
Twelve months ending March 31, 2027		25,883
Total lease payments	$	170,083
Less: Imputed interest		(5,827	)
Present value of lease liabilities	$	164,256
Current portion		(138,602	)
Non-current portion	$	25,654

NOTE 14 - Short-term Loan

In June 2021, the Company entered into a loan agreement in the amount of $1,263,823 (NT $40,000,000) with a non-related party. This loan, which carries no interest, was originally set to mature on July 16, 2021, and further renewed the maturity date to March 16, 2023 with update the loan amount to $914,913 (NTD 30,000,000) with no interest. As of March 31, 2025 and December 31, 2024, the outstanding loan balance was $903,887 (NTD 30,000,000) and $914,913 (NTD 30,000,000), respectively. This loan is collateralized by 3,500,000 shares of Ejectt stock owned by the Company.

The temporary fundings as of March 31, 2025 and December 31, 2024, were $4,108,814 (NTD 136,371,529) and $4,149,787 (NTD 136,071,529), respectively. These loans were made by multiple individual lenders arranged by Well Thrive Limited, a shareholder of the Company that entered into an agreement with the Company (and another lender) pursuant to which Well Thrive Limited agreed to provide $10 million in lending to the Company (the “Loan Commitment”). The terms of Well Thrive Limited’s commitment under the Loan Commitment were amended on March 1, 2023 to provide that, to support the Company, Well Thrive Limited would fulfill one-half of its Loan Commitment (thus, $5 million) by making itself, or by arranging from others, loans on an interest free, no fixed maturity date basis. All of the above temporary fundings that has been loaned to the Company by induvial lenders arranged by Well Thrive Limited has been on such basis. The Company plans to repay the temporary fundings as promptly as feasible given its overall obligations and in light of its repayment plans made in light of managing its working capital. The Company is also in discussion with Well Thrive about possible debt equity swaps for the Loans following closing of the planned Merger with IXAQ.

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 2,000,000 (approximately USD 62,500). The facility bears interest at an annual rate of 2.9% and is repayable in 48 monthly installments. The agreement includes a one-year grace period during which no payments were required, with repayments commencing in 2022 and scheduled to conclude in 2026. As of March 31, 2025 and December 31, 2024, the outstanding balance under the Credit Loan Agreement was $25,108 and $29,226, respectively.

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 and March 31, 2025, the outstanding principal is $1,683,667 and the accrued interest is $163,526 (Note 12) pertained to above mentioned Zero Coupon Bond.

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 $93,500 of the total premiums, taxes and fees of $110,000. The loan bears interest at an annual rate of 9.45% and is payable in ten monthly installments of $9,760. As of March 31, 2025 and December 31, 2024, the outstanding balance under this agreement was $0 and $29,126, respectively.

On March 4, 2025, the Company entered into a loan agreement in the amount of NT $17,663,728 (approximately $0.5 million) with a non-related party. This loan, which carried no interest, was set to mature on September 21, 2025. As of March 31, 2025, the outstanding loan balance was $532,200 (NT$ 17,663,728).

Other than the short-term loan mentioned above, the Company had additional borrowings from several third parties totaling $57,600 and $47,600 as of March 31, 2025 and December 31, 2024, respectively. These loans are interest-free and payable on demand.

NOTE 15 - Convertible Long-term Bonds Payable and Restricted Cash

On December 3, 2020, the Company closed a private placement offering consisting of US$10,000,000 in aggregate principal amount of its Credit Enhanced Zero Coupon Convertible Bonds (the “Zero Coupon Bonds”) and US$200,000 in aggregate principal amount of its 7.5% convertible bonds (the “Coupon Bonds”), both due on December 2, 2025 (collectively the “Bonds”). Unless previously redeemed, converted or repurchased and cancelled, the Zero-Coupon Bonds will be redeemed on December 2, 2025 at 105.11% of their principal amount and the Coupon Bonds will be redeemed on December 2, 2025 at 100% of their principal amount plus any accrued and unpaid interest. The Coupon Bonds will bear interest from and including December 2, 2020 at the rate of 7.5% per annum. Interest on the Coupon Bonds is payable semi-annually in arrears on June 1 and December 1 each year, commencing on June 1, 2021.

The Company has the option to redeem the Bonds at a redemption amount equal to the Early Redemption Amount, as defined in the Offering Memorandum, at any time on or after December 2, 2023 and prior to the Maturity Date, if the Closing Price of the Company’s Common Stock listed on the Euronext Paris for 20 trading days in any period of 30 consecutive trading days, the last day of which occurs not more than fifteen trading days prior to the date on which notice of such redemption is given, is greater than 130% of the Conversion Price on each applicable trading day or (ii) in whole or in part of the Bonds on the second anniversary of the issue date or (iii) where 90% or more in principal amount of the Bonds issued have been redeemed, converted or repurchased and cancelled.

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 $0.001 each. The initial conversion price for the Bonds is $13.30 per share and is subject to adjustment in specified circumstances.

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 $10,700,000 with BG Bank on December 1, 2020. The line of credit will be expired on December 2, 2025. The annual fee is based on 1% of the line of credit amount and due quarterly. The line of credit is guaranteed by one of the Company’s shareholders with his personal property, and the Company’s time deposit of $3,210,000 (the “Deposit”) at BG Bank and Ejectt stock 2,500,000 shares is pledged as collateral, and the Deposit was recorded as restricted cash.

Management has accounted for the convertible bonds by assuming that they will be repaid and redeemed at maturity; accordingly, the Company has included the redemption premium as part of the accretion tables and calculation of interest and issuance cost to be amortized over the life of the bond. Any value borne from the conversion feature of the bond and or issuance costs related to the origination and distribution of these bonds have been accounted for as debt discounts to be amortized using the effective interest method over the life of the bond.

On October 27, 2023, Citicorp International Limited, as Trustee with respect to the Bonds, submitted to the Company a request for redemption of the Bonds in full. During the year ended December 31, 2024, the entire balance of Zero Coupon Bond was tendered for redemption. Therefore, the related conversion feature was paused and forfeited until the payment of the redemption is fully settled or upon the expiration of the agreement, while the amount owed to the Zero Coupon Bond holder is reclassified as an ordinary short-term loan, and continued to accrued interest until full repayment. As of March 31, 2025 and December 31, 2024, the Company had repaid $8,330,160 of principal and interest due on the Bonds as of that date. We expect to repay the remaining balance of the amount of $2,178,324 owed on the bonds, plus any additional accrued interest, within the next few months.

As of March 31, 2025 and December 31, 2024, the long-term bonds payable consisted of the following:

	March 31, 2025		December 31, 2024
	(Unaudited)
Current:
Zero Coupon Bonds*	$	-	$	-
Coupon Bond	$	200,000	$	200,000

*	The Zero Coupon Bonds net carrying value are calculated as following:

	Net Carrying Value
Balance as of January 1, 2024		10,303,775
Repayment		(8,330,160	)
Accrued interest		204,709
Tender for redemption		(2,178,324	)
Balance as of December 31, 2024 and March 31, 2025 (Unaudited)	$	-

The Company has been charged with 5% default interest since December 4, 2023. The total default interest payable as of March 31, 2025 and December 31, 2024, were $163,526 and $131,957, respectively.

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 $3,175,200, which was entered into between WPL and the Company on June 28, 2022 and funded (the “June Subscription”), (ii) a subscription for the common stock of the Company in the amount of $5,674,000, which was entered into between WPL and the Company on September 15, 2022 and funded (the “September Subscription”), and (iii) a subscription for the capital stock of MEPA Labs, Inc. (“MEPA”), a wholly owned subsidiary of the Company, in the amount of $4,324,000, which was entered into between MEPA and the Company on June 28, 2022 and funded (the “MEPA Subscription,” and together with the June Subscription and the September Subscription, the “WPL Subscriptions”), the WPL Subscriptions in the aggregate totaling $13,173,200, were converted into loans to the Company evidenced by that certain convertible bond of the Company in favor of WPL and dated December 7, 2022 (the “Convertible Bond”)

In addition, and as indicated in the Agreement, WPL agreed to lend an additional $10,000,000 to the Company under the Convertible Note (the “New Loan”) and to cap the aggregate amount of loans to the Company under the Convertible Note, including the New Loan, the WPL Subscriptions and any future advances under the Convertible Note, at $30,000,000. The loan matures on second anniversary of the date of this convertible note.

The Convertible Note allows for loans to the Company up to an aggregate principal amount of $30,000,000 and acknowledges an aggregate principal amount of $23,173,200 in loans under the Convertible Note outstanding as of March 31, 2025 and December 31, 2024. The Convertible Note carries an annual interest rate of four percent (4%) which was due and payable, along with the then principal amount outstanding, on the Convertible Note maturity date, December 7, 2024. The Convertible Note is pre-payable in whole or in part at any time without penalty, on five days’ prior written notice to WPL. In the event of a change of control of the Company (as that term is defined in the Convertible Note), the Convertible Note shall become immediately payable in full. The Convertible Note along with accrued interest of $2,162,373 as of March 31, 2025, is convertible in whole or in part by WPL at any time into shares of common stock of the Company at a conversion price of $6.00 per share.

NOTE 17 - SAFE Liabilities

In June and November, 2024, the Company entered into four Simple Agreement for Future Equity (“SAFE”) agreements with Hsiao Chia-Sung, Liu Ya Ting, Luk Fook Securities (HK) Ltd., and G-Tech Optoelectronics Corp. for a total of $4,997,200. The SAFE Agreements convert upon closing of the merger at $11.50 (“redemption price”) per share of common stock of IXAQ and the SAFE investors are eligible for additional incentive shares that will be issued by the merged company if following performance metrics are met in the five years following the closing of the Merger.

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 $5.00 per share. If the Company experiences a dissolution event before conversion of the SAFEs, the holders of SAFEs will be treated like holders of standard non-participating preferred stock.

As of March 31, 2025 and December 31, 2024, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $5,460,000 and $5,410,000, respectively. 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 as of March 31,2025 and December 31, 2024, included an IXAQ stock price of $11.86 and $11.55, respectively, a risk-free rate of 4.01% and 4.43%, respectively, and an annualized volatility of 48.1%. The Company has received aggregate proceeds of $4,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the three months ended March 31, 2025, was $50,000.

NOTE 18 - Contract Liability

On March 9, 2015, the Company entered into a 10-year purchase agreement with Klingon Aerospace, Inc. (“Klingon”), which was formerly named as Luxe Electronic Co., Ltd. In accordance with the terms of this agreement, Klingon agreed to purchase from the Company an initial order of onboard equipment comprising an onboard system for a purchase price of $909,000, with payments to be made in accordance with a specific milestones schedule. As of March 31, 2025 and December 31, 2024, the Company received $762,000 from Klingon in milestone payments towards the equipment purchase price. As of March 31, 2025, Aerkomm is in discussion about the renewal of this project and has reclassified it as contract liability at this time. The project remains ongoing, and since the related performance obligations have not yet been fully satisfied, the balance continues to be classified as a contract liability until Klingon’s acceptance.

NOTE 19 - Income Taxes

Income tax expense for the three months ended March 31, 2025 and 2024 consisted of the following:

	For the Three Months Ended March 31,
	2025		2024
	(Unaudited)		(Unaudited)
Current:
Federal	$	-	$	-
State		-		2,400
Total	$	-	$	2,400

Deferred tax assets (liability) as of March 31, 2025 and December 31, 2024 consist approximately of:

	March 31, 2025			December 31, 2024
	(Unaudited)
Net operating loss carryforwards (NOLs)	$	17,871,000		$	17,047,000
Stock-based compensation expense		5,186,000			5,021,000
Accrued expenses and unpaid expenses payable		1,454,000			1,416,000
Tax credit carryforwards		68,000			68,000
Unrealized exchange losses (gain)		-			(358,000	)
Excess of tax amortization over book amortization		(76,000	)		(112,000	)
Others		(75,000	)		(48,000	)
Gross		24,428,000			23,034,000
Valuation allowance		(24,428,000	)		(23,034,000	)
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 $1.4 million for the three months ended March 31, 2025.

As of March 31, 2025 and December 31, 2024, the Company had federal NOLs of approximately $8.2 million available to reduce future federal taxable income, expiring in 2037, and additional federal NOLs of approximately $41.5 million and $33.3 million, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of March 31, 2025 and December 31, 2024, the Company had State NOLs of approximately $30.4 million, available to reduce future state taxable income, expiring in 2042.

As of March 31, 2025 and December 31, 2024, the Company has Japan NOLs of approximately $0.4 million and $1.1 million, respectively, available to reduce future Japan taxable income, expiring in 2031.

As of March 31, 2025 and December 31, 2024, the Company has Taiwan NOLs of approximately $3.8 million and $4.5 million, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

As of March 31, 2025 and December 31, 2024, the Company had approximately $37,000 of federal research and development tax credit, available to offset future federal income tax. The credit begins to expire in 2034 if not utilized. As of March 31, 2025 and December 31, 2024, the Company had approximately $39,000 of California state research and development tax credit available to offset future California state income tax. The credit can be carried forward indefinitely.

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 50,000,000 shares of preferred stock, with par value of $0.001. As of March 31, 2025 and December 31, 2024, there were no preferred stock shares outstanding. The Board of Directors has the authority to issue preferred stock in one or more series, and in connection with the creation of any such series, by resolutions providing for the issuance of the shares thereof, to determine dividends, voting rights, conversion rights, redemption privileges and liquidation preferences.

(2)

Common Stock:

The Company is authorized to issue 90,000,000 shares of common stock as of March 31, 2025 and December 31, 2024.

	March 31, 2025		December 31, 2024
	(Unaudited)
Restricted stock – vested		5,133,696		5,133,696
Total restricted stock		5,133,696		5,133,696

On February 2, 2024, the Company issued 175,000 shares of common stock to one new subscriber for a total of $1,050,000 capital injection.

On March 8, 2024, the Company issued 84,000 shares of common stock to one new subscriber for a total of $504,000 capital injection.

On April 24, 2024, the Company issued 390,000 shares of common stock to one new subscriber for a total of $2,340,000 capital injection.

In March 2025, the Company issued an aggregate of 109,280 shares of its common stock to new shareholders in connection with the share subscription proceeds of $527,782 received from April to May 2024.

In March 2025, the Company issued an aggregate of 1,176,956 shares of its common stock to employees in connection with the exercise of stock options. These issuances were made pursuant to the accelerated vesting and exercise provisions agreed to by the employees in exchange for waiving their rights to receive an aggregate of approximately $3.1 million in unpaid salaries.

On June 6, 2017, the Company issued 149,162 shares of common stock to Jeffrey Wun, the Company’s Chief Technology Officer, pursuant to a service agreement. The shares were subject to a performance-based vesting condition and were classified as restricted stock until the fulfillment of the specified condition. The shares were not considered outstanding until the vesting condition was met. On December 3, 2024, the performance condition was satisfied upon the occurrence of a specified triggering event, and the shares fully vested on that date.

(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 751,879 shares of the Company’s common stock, exercisable at a price of $2.60 per share, the closing price of the common stock on the OTC Markets, Inc. QX tier on October 21, 2021. The issuance of the warrant is (i) in recognition of Mr. Chang’s support of the Company through his previous personal guarantee of the Company’s $10,000,000 line of credit with the Panhsin Bank (the “Bank”) in relation to the private placement offering of $10,000,000 credit enhanced zero coupon convertible bonds and (ii) in exchange for Mr. Chang’s agreement to renew his guarantee with the Bank for so long as the guarantee would be required by the Bank. The warrant will vest 20% on issuance. On each anniversary of the issue date, beginning with December 3, 2021 and ending with December 3, 2025, the warrant will vest with respect to 20% of the number of shares of the Company’s common stock issuable upon conversion of the principal amount of the credit enhanced bonds still required to be guaranteed by the Panhsin Bank.

For the year ended December 31, 2022, the Company recorded an increase of $1,252,029 in additional paid-in capital as adjustment for the issuance costs of these stock warrants.

NOTE 21 - Significant Related Party Transactions

In addition to the information disclosed in other notes, the Company has significant related party transactions as follows:

Name of related parties and relationships with the Company:

Related Party		Relationship
Well Thrive Limited (“WTL”)		Major stockholder
Ejectt Inc. (“Ejectt”)		Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
STAR JEC INC. (“StarJec”)		Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
AA Twin Associates Ltd. (“AATWIN”)		Georges Caldironi, COO of Aerkomm, is sole owner
EESquare Japan (“EESquare JP”)		Yih Lieh (Giretsu) Shih, President Aircom Japan, is the Director
Kevin Wong		Stockholder of Mixnet

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.

As of March 31, 2025 and December 31, 2024:

	March 31, 2025		December 31, 2024
	(Unaudited)
Other receivable from:
- Loan:
EESquare JP ¹	$	78,719	$	196,988

WTL⁴		3,946,077		3,879,683
- Others:
EESquare JP ¹		20,013		19,063
Ejectt³		544		518
Kevin Wong⁶		36,859		37,288
Others⁷		27,102		21,971
Total	$	4,109,314	$	4,155,511

Prepaid expenses to Ejectt³	$	736,027	$	2,146,807

Prepayment from Ejectt³	$	5,470,435		5,323,044

Other payable to:
AATWIN⁵	$	-	$	19,047
Interest payable to WTL⁴		54,451		55,116
Ejectt³		342,028		353,004
StarJec²		84,151		100,025
Kevin Wong⁶		182,947		172,675
Others⁷		574,908		468,730
Total	$	1,238,485	$	1,168,597

Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023 and extended another 2 years to March 4, 2025. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $662 per month as of March 31, 2025. $78,719 represents other receivable loans from EESquare JP as of March 31, 2025. These loans are interest free and have no maturity dates.

Aircom Japan entered into a housing service order on December 14, 2021 and a satellite service order on January 22, 2022 for one year period till January 21, 2023. On June 20, 2022, Aircom Japan also entered a teleport service order with StarJec for a half year period from June 1, 2022 to January 14, 2023. The amount represents receivable from StarJec for monthly service provided due to the service agreements. The monthly service charge is approximately ￥6,820,000 (approximately $51,800 as of December 31, 2022). Other payable represents deposits should be returned to Ejectt after service contracts ended as of March 31, 2025.

Represents prepayment paid by Ejectt to order 6 sets of antennas from Aircom Telecom with prepayment of $2,144,595 as of December 31, 2024 and $2,144,595 as of March 31, 2025. As of June 17, 2023, Aerkomm Taiwan entered into an agreement with Ejectt to appoints Ejectt as its exclusive sales agent in Taiwan with NTD 20,000,000 security deposit (approximately $609,942 as of December 31, 2024 and $602,591 as of March 31, 2025). In 4th quarter of 2023, Ejectt also entered into 3 orders with Aerkomm Japan to purchase 5 sets of equipment with approximately $4,330,592 as of December 31, 2023 and $3,877,912 as of December 31, 2024. Besides, 6 months service ordered in October 2023 for NTD 5,333,333 (approximately $174,178 as of December 31, 2023 and $168,510 as of December 31, 2024) with the Company. The number also includes the equipment purchased with Aerkomm for about $133,722 in October, 2023. The prepaid expenses of $2,076,138 as of December 31, 2023 and $2,146,807 as of December 31, 2024 which represents 3 new agreements signed with AKOM different entities for AirCinema Cube orders in year 2023.

4.	The Company had loans from Well Thrive Limited (“WTL”) and paid off during 2023. The Company has interest payable balance of $54,451 as of March 31, 2025 and $55,116 as of December 31, 2024 (approximately NTD 1,807,000) from the past loans. The Company has other receivable of $3,946,077 and $3,879,683 from WTL due to operational needs as of March 31, 2025 and December 31, 2024. These other receivable loans do not have any stated interest rates or maturity dates.

5.	Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and expired on December 31, 2021.

6.	Represents long-term loan that Mixnet borrowed from its stockholder for business operating needs for $182,947 (approximately NTD 6,072,000) as of March 31, 2025 and $172,675 (approximately NTD 5,322,000) as of December 31, 2024.

7.	Represents receivable/payable from/to management levels as a result of regular operating activities.

For the three months ended March 31, 2025 and 2024

	For the Three Months Ended March 31,
	2025		2024
	(Unaudited)		(Unaudited)
Purchase from Ejectt¹	$	-	$	53,255
Rental income charged from EESquare JP⁵		1,969		2,019

1.	Represents 2 sets of antennas sold to Ejectt on January 30, 2023 and service income and handling fee charged to Ejectt for consultant service provided in 2023 per the exclusive agent agreement signed as of June 17, 2023.

2.	Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023 and it has been renewed to March 4, 2025. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $710 (JPY 100,000) per month.

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 1,088,882 shares to Aircom’s stock option holders.

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 10 years unless sooner terminated under the terms of Aircom 2014 Plan.

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 1,000,000 shares of common stock for issuance under the Aerkomm 2017 Plan. The Aerkomm 2017 Plan has been adopted by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms. On June 23, 2017, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,000,000 shares. The Aerkomm 2017 Plan provides for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of the Company, as determined by the Compensation Committee of the Board of Directors (or, prior to the establishment of the Compensation Committee on January 23, 2018, the Board of Directors). The Aerkomm 2017 Plan was approved by the Company’s stockholders on March 28, 2018. On October 21, 2021, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,400,000 shares.

On June 23, 2017, the Board of Directors agreed to issue options for an aggregate of 291,000 shares under the Aerkomm 2017 Plan to certain officers and directors of the Company. The option agreements are classified into three types of vesting schedule, which includes, 1) 1/6 of the shares subject to the option shall be vested commencing on the vesting start date and the remaining shares shall be vested at the rate of 1/60 for the next 60 months on the same day of the month as the vesting start date; 2) 1/4 of the shares subject to the option shall be vested commencing on the vesting start date and the remaining shares shall be vested at the rate of 1/36 for the next 36 months on the same day of the month as the vesting start date; 3) 1/3 of the shares subject to the option shall be vested commencing on the first anniversary of vesting start date and the remaining shares shall vest at the rate of 50% each year for the next two years on the same day of the month as the vesting start date.

On July 31, 2017, the Board of Directors approved to issue options for an aggregate of 109,000 shares under the Aerkomm 2017 Plan to 11 of its employees. One third (1/3) of these shares subject to the option shall vest commencing on the first anniversary of vesting start date and the remaining shares shall vest at the rate of 50% each year for the next two years on the same day of the month as the vesting start date.

On December 29, 2017, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options were vested immediately upon issuance.

On June 19, 2018, the Compensation Committee approved to issue options for 32,000 and 30,000 shares under the Aerkomm 2017 Plan to two of the Company executives. One-fourth of the 32,000 shares subject to the option shall vest on May 1, 2019, 2020, 2021 and 2022, respectively. One-third of the 30,000 shares subject to the option shall vest on May 29, 2019, 2020 and 2021, respectively.

On September 16, 2018, the Compensation Committee approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested immediately.

On December 29, 2018, the Compensation Committee approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options were vested immediately upon issuance.

On July 2, 2019, the Board of Directors approved the grant of options to purchase an aggregate of 339,000 shares under the Aerkomm 2017 Plan to 22 of its directors, officers and employees. 25% of the shares vested on the grant date, 25% of the shares vested on July 17, 2019, 25% of the shares shall be vested on the first anniversary of the grant date, and 25% of the shares will vest upon the second anniversary of the grant date.

On October 4, 2019, the Board of Directors approved the grant of options to purchase an aggregate of 85,400 shares under the Aerkomm 2017 Plan to three (3) of its employees. 25% of the shares are vested on the grant date, and 25% of the shares shall be vested on each of October 4, 2020, October 4, 2021 and October 4, 2022, respectively.

On December 29, 2019, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options shall be vested at the date of 1/12th each month for the next 12 months on the same day of December 2019.

On February 19, 2020, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2019. These options shall be vested immediately.

On September 17, 2020, the Board of Directors approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested at the date of 1/12th each month for the next 12 months on the same day of September 2020.

On December 11, 2020, the Board of Directors approved the grant of options to purchase an aggregate of 284,997 shares under the Aerkomm 2017 Plan to 37 of its directors, officers, employees and consultants. Shares shall be vested in full on the earlier of the filing date of the Company’s Form 10-K for the year ended December 31, 2020 or March 31, 2021.

On January 23, 2021, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options shall vest 1/12th each month for the next 12 months at the end of each month up to December 2021. On January 23, 2021, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2020. These options vested immediately.

On September 1, 2021, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On September 17, 2021, the Board of Directors approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested at the rate of 1/12th each month for the next 12 months on the same day of September 2021.

On October 21, 2021, the Board of Directors approved to issue options for 150,000 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On December 1, 2021, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On December 29, 2021, the Board of Directors approved to issue options for an aggregate of 8,000 shares under the Aerkomm 2017 Plan to two of the Company’s independent directors, 4,000 shares each. All of these options shall be vested at the date of 1/12th each month for the next 12 months on the same day of December 2021.

On December 31, 2021, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2020. These options vested immediately.

On March 1, 2022, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On June 1, 2022, the Board of Directors approved to issue options for 18,750 and 75,000 shares under the Aerkomm 2017 Plan to two of the Company’s officers, respectfully. These options shall be vested immediately.

On September 1, 2022, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On September 17, 2022, the Board of Directors approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested at the rate of 1/12th each month for the next 12 months on the same day of September 2022.

On December 1, 2022, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On December 29, 2022, the Board of Directors approved to issue options for an aggregate of 8,000 shares under the Aerkomm 2017 Plan to two of the Company’s independent directors, 4,000 shares each. All of these options shall be vested at the date of 1/12th each month for the next 12 months on the same day of December 2022.

On March 1, 2023, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

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 3,683,929 shares of common stock for issuance under the Aerkomm 2023 Plan. The Aerkomm 2023 Plan has been adopted by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms.

On June 1, 2023, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2023 Plan to one of the Company’s officers. These options shall be vested immediately.

On June 13, 2023, the Board of Directors agreed to issue options for an aggregate 3,627,677 shares under the Aerkomm 2023 Plan to certain company’s employees. The shares subject to the option shall be vested commencing on the vesting start date and the remaining shares shall be vested at the rate of 1/48 for the next 48 months on the same day of the month as the vesting start date.

On September 1, 2023, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2023 Plan to one of the Company’s officers. These options shall be vested immediately.

On December 1, 2023, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2023 Plan to one of the Company’s officers. These options shall be vested immediately.

On March 1, 2024, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On March 4, 2024, the Board of Directors approved to issue options for 7,064 shares under the Aerkomm 2017 Plan to one of the Company’s consultants. These options shall be vested immediately.

On June 1, 2024, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On June 6, 2024, the Board of Directors approved to issue options for 7,064 shares under the Aerkomm 2017 Plan to one of the Company’s consultants. These options shall be vested immediately.

On September 1, 2024, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On September 6, 2024, the Board of Directors approved to issue options for 7,064 shares under the Aerkomm 2017 Plan to one of the Company’s consultants. These options shall be vested immediately.

On December 1, 2024, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On December 6, 2024, the Board of Directors approved to issue options for 7,064 shares under the Aerkomm 2017 Plan to one of the Company’s consultants. These options shall be vested immediately.

On March 1, 2025, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

On March 6, 2025, the Board of Directors approved to issue options for 7,064 shares under the Aerkomm 2017 Plan to one of the Company’s consultants. These options shall be vested on April 6, 2025.

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 $591,575 and $642,374 for the three months ended March 31, 2025 and 2024, respectively, related to such employee stock options.

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, 2025 and 2024 under the Plans as follows:

Assumptions
Expected term	5-10 years
Expected volatility	45.79% - 72.81	%
Expected dividends	0	%
Risk-free interest rate	0.69% - 4.41	%
Forfeiture rate	0% - 5	%

Aircom 2014 Plan

Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024 are as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Fair Value Per Share
Options outstanding at January 1, 2024		74,580		3.3521		1.0539
Granted		-		-		-
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options outstanding at December 31, 2024		74,580		3.3521		1.0539
Granted		-		-		-
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options outstanding at March 31, 2025 (Unaudited)		74,580		3.3521		1.0539

There are no unvested stock awards under Aircom 2014 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024.

Of the shares covered by options outstanding as of March 31, 2025, 74,580 are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2025, is as follows:

		Options Outstanding (Unaudited)						Options Exercisable (Unaudited)
Range of Exercise Prices		Shares Outstanding at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Shares Exercisable at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	3.3521		74,580		1.50		3.3521		74,580		1.50		3.3521

As of March 31, 2025, there was no unrecognized stock-based compensation expense for the Aircom 2014 Plan. No option was exercised for the three months ended March 31, 2025, and the year ended December 31, 2024.

Aerkomm 2017 Plan

Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024 are as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Fair Value Per Share
Options outstanding at January 1, 2024		2,084,791		7.6279		5.2566
Granted		143,256		2.5800		1.9462
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options outstanding at December 31, 2024		2,228,047		7.3897		5.1155
Granted		25,814		2.5800		1.9487
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options outstanding at March 31, 2025 (Unaudited)		2,253,861		7.2493		5.0229

Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024 are as follows:

	Number of Shares			Weighted Average Fair Value Per Share
Options unvested at January 1, 2024		671,677			1.9691
Granted		143,256			1.9461
Vested		(566,957	)		1.9478
Forfeited/Cancelled		-			-
Options unvested at December 31, 2024		247,976			2.0045
Granted		25,814			1.9487
Vested		(70,395	)		1.9897
Forfeited/Cancelled		-			-
Options unvested at March 31, 2025 (Unaudited)		203,395			2.0025

Of the shares covered by options outstanding under the Aerkomm 2017 Plan as of March 31, 2025, 2,050,466 are now exercisable; 925,564 shares will be exercisable for the twelve-month period ending March 31, 2026. Information related to stock options outstanding and exercisable at March 31, 2025, is as follows:

		Options Outstanding (Unaudited)						Options Exercisable (Unaudited)
Range of Exercise Prices		Shares Outstanding at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Shares Exercisable at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	2.55 - 4.30		1,479,423		7.29	$	2.9778		1,276,028		5.79	$	3.1910
	6.00 - 10.00		419,288		6.11		8.3356		419,288		6.11		8.3356
	11.00 - 14.20		126,150		5.00		11.4688		126,150		5.00		11.4688
	20.50 - 27.50		109,000		2.53		25.4982		109,000		2.53		25.4982
	30.00 - 35.00		120,000		2.37		34.5479		120,000		2.37		34.5479
			2,253,861		6.45		7.2197		2,050,466		5.38		8.4448

As of March 31, 2025, total unrecognized stock-based compensation expense related to stock options was approximately $407,294, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 2.21 years. No options was exercised during the three months ended March 31, 2025 and the year ended December 31, 2024, respectively.

Aerkomm 2023 Plan

Activities related to options outstanding under Aerkomm 2023 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024 are as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Fair Value Per Share
Options outstanding at January 1, 20234		-		-		-
Granted		3,683,929		2.5914		2.0420
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options outstanding at December 31, 2024		3,683,929		2.5914		2.0420
Granted		-		-		-
Exercised		-		-		-
Forfeited/Cancelled		-		-		-
Options unvested at March 31, 2025 (Unaudited)		3,683,929		2.5914		2.0420

Activities related to unvested stock awards under Aerkomm 2023 Plan for the three months ended March 31, 2025 and the year ended December 31, 2024 are as follows:

	Number of Shares			Weighted Average Fair Value Per Share
Options unvested at January 1, 2024		3,083,533			2.0415
Granted		-			-
Vested*		(2,117,747	)		2.0415
Forfeited/Cancelled		-			-
Options unvested at December 31, 2024		965,786			2.0415
Granted		-			-
Vested		(221,110	)		2.0420
Forfeited/Cancelled		-			-
Options unvested at March 31, 2025 (Unaudited)		744,676			2.0413

including accelerated vesting an aggregate of 1,176,956 shares for the year ended December 31, 2024 to settled approximately $3.1 million accrued unpaid salaries pursuant to a form of letter outlining Aerkomm employee’s stock option exercise forms. (See Note 12)

Of the shares covered by options outstanding as of March 31, 2025, 2,939,253 shares are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2025, is as follows:

		Options Outstanding (Unaudited)						Options Exercisable (Unaudited)
Range of Exercise Prices		Shares Outstanding at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Shares Exercisable at 3/31/2025		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	2.58-2.89		3,683,929		8.24		2.5914		2,939,253		7.00		2.5918

As of March 31, 2025, total unrecognized stock-based compensation expense related to stock options was approximately $1,520,143, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 2.25 years. 1,176,956 and 0 options were exercised for the three months ended March 31, 2025 and the year ended December 31, 2024.

NOTE 23 - Commitments and contingencies

As of March 31, 2025, 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 8 million (approximately US$1.2 million). On October 16, 2020, in accordance with the provisions of the agreement with Yihe, as supplemented, the Company filed an arbitration action with the Shenzhen International Arbitration Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking a complete refund of its RMB 8 million payment to Yihe. The Company received notice from the Arbitration Court on October 16, 2020 of receipt of its arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration. These fees were paid on October 28, 2020. The Company intends to aggressively pursue this matter. As of September 30, 2021, the prepayment was reclassified to other receivable and full allowance was reserved. On March 25, 2022, the Shenzhen International Arbitration Court issued a judgment in our favor. The Court deemed the Company’s agreement with Yihe terminated as of November 24, 2020, the date of the Company’s filing with the Court, and held that Yihe is required to promptly repay us RMB 7.5 million and reimburse the Company RMB 178,125 in court costs. The Company will make every effort to collect these amounts from Yihe.

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 25,500,000 shares (the “Subject Shares”) of Aerkomm Taiwan Inc., representing 51% of the issued and outstanding shares of Aerkomm Taiwan, to the “Buyer for NT$255,000,000 (approximately $8,300,000). Although as a result of the share transfer transaction under the Equity Sales Agreement 51% of the shares of Aerkomm Taiwan are held in the name of the Buyer, Aerkomm treats Aerkomm Taiwan as a consolidated subsidiary because Aerkomm has de facto voting, governance and economic control of Aerkomm Taiwan as: (i) Aerkomm continues to hold 49% of the shares of Aerkomm Taiwan, (ii) the sole director of Aerkomm Taiwan, Albert Hsu, is a member of the board of the Company, (iii) the Buyer has not yet paid the amount due for purchase of the Subject Shares, and, under the Equity Sales Agreement, the Company has the right to demand return of the Subject Shares if payment for them has not been made within 180 days of the date of the Equity Sales Agreement, which such period has elapsed, (iv) concurrently with the Company and the Buyer entering into the Equity Sales Agreement, the Buyer and Mr. Hsu entered into an equity pledge pursuant to which the Buyer pledged the Subject Shares to Mr. Hsu and Mr. Hsu was granted the right to exercise all rights in respect of the Subject Shares pending the Buyer’s payment to the Company for the Subject Shares, and the Company and Mr. Hsu entered into an entrustment agreement pursuant to which the Company entrusted Mr. Hsu and Mr. Hsu agreed to be entrusted as the pledgee of the Subject Shares, and (v) the sole shareholder of the Buyer, is a founder of Aerkomm and a holder of more than 10% of the voting equity of Aerkomm.

NOTE 24 - Segment Information

The Company conducts business as a single operating segment which is based upon the Company’s organizational and management structure, as well as information used by the CODM to allocate resources and other factors. The accounting policies of the segment are the same as those described in Note 2. The key measure of segment profitability that the CODM, which is the Company’s CEO, uses to allocate resources and assess performance is consolidated net income (loss), as reported on the consolidated statements of operations. The following table presents the significant revenue and expense categories of the Company’s single operating segment

	For the Three Months Ended March 31,
	2025			2024
	(Unaudited)			(Unaudited)
Revenues	$	-		$	53,255
Less:
Cost of revenues		-			38,116
Other operating expense		461,975			148,335
Salaries expenses		1,091,685			2,987,731
Professional fee		360,319			768,274
Amortization and depreciation expense		573,922			515,165
Foreign currency exchange loss		50,614			687,923
Interest expense		267,229			286,631
Change in SAFE liabilities		50,000			-
Stock based compensation		591,575			688,596
Loss on disposal of subsidiaries		234,454			-
Other (income) loss, net		(3,041	)		12,657
Loss before income tax		(3,678,732	)		(6,080,173	)

Income tax expense		-			2,400
Net loss	$	(3,678,732	)	$	(6,082,573	)

NOTE 25 - Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-Q, and determined that, other than as indicated below, there have been no events that have occurred that would require adjustments to our disclosures in the unaudited condensed consolidated financial statements.

On June 9, 2025 and July 23, 2025, the Company entered into two Simple Agreements for Future Equity (“SAFEs”) with G-Tech Global Pte. Ltd., a third-party investor. Under the terms of the SAFEs, the Company received aggregated gross proceeds of approximately $2.0 million. The SAFEs are non-interest-bearing. They remain outstanding until the occurrence of certain triggering events, including (i) an equity financing, (ii) a liquidity event such as a merger, acquisition, or other business combination, or (iii) a dissolution event. Upon an equity financing, the SAFEs will automatically convert into preferred shares at the lower of (a) the price per share of the new preferred stock multiplied by a discount rate of 80%, or (b) a price per share based on a valuation cap. In a liquidity event prior to conversion, the investor may elect to receive either a cash repayment equal to the SAFE purchase amount or to convert into common stock at a price per share based on the valuation cap.

On July 18, 2025, the Company and Invest Securities SA (Paris) (“Invest Securities”), entered into a Liquidity Agreement (the “Agreement”), pursuant to which, the Company appointed Invest Securities as its liquidity provider in connection with the Company’s common stock (the “Shares”) traded on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). The services of Invest Security is expected to enhance the liquidity of the Shares, improve the regularity of trading, and prevent volatility that is not warranted by the current market trends. To enable Invest Securities to carry out the interventions provided for in this Agreement, the Company shall credit the liquidity account with the sum of €80,000 (Eighty Thousand Euro) and 28,500 Shares at the rate of €2.8 (Two point Eight Euro).

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; Aircom Japan, Inc., a Japanese company and wholly-owned subsidiary of Aircom; and Aircom Telecom LLC, a Taiwanese company and wholly-owned subsidiary of Aircom, Aircom Taiwan, or Aircom Beijing.

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:

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our future financial and operating results;

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our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business;

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our ability to attract and retain customers;

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our dependence on growth in our customers’ businesses;

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the effects of changing customer needs in our market;

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the effects of market conditions on our stock price and operating results;

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our ability to successfully complete the development, testing and initial implementation of our product offerings;

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our ability to maintain our competitive advantages against competitors in our industry;

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our ability to timely and effectively adapt our existing technology and have our technology solutions gain market acceptance;

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our ability to introduce new product offerings and bring them to market in a timely manner;

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our ability to obtain required telecommunications, aviation and other licenses and approvals necessary for our operations;

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our ability to maintain, protect and enhance our intellectual property;

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the effects of increased competition in our market and our ability to compete effectively;

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our expectations concerning relationship with customers and other third parties;

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the attraction and retention of qualified employees and key personnel;

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future acquisitions of our investments in complementary companies or technologies; and

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our ability to comply with evolving legal standards and regulations.

Overview

Aerkomm Inc. is an advanced defense and aerospace communications company entering early-stage revenue generation, with products tailored for deployment in contested, infrastructure-limited, and multi-domain environments. Our platform integrates software-defined modems, multi-orbit satellite terminals, and over-the-horizon systems to support unmanned, autonomous, and ISR platforms. Our near-term commercial trajectory focuses on converting strategic defense engagements into long-term contracts, while leveraging dual-use technologies for commercial aviation and telecom markets.

Our platform is built on a carrier-neutral, software-defined architecture that enables seamless integration of satellite communications, over-the-horizon (OTH) radio and radar systems, terrestrial networks, and hybrid connectivity pathways. This multi-layered design supports interoperability, modular scalability, and persistent resiliency in dynamic and degraded operational environments.

Recent global events have heightened concerns over the vulnerability of subsea communications infrastructure. The persistent threat of submarine cable tampering or cutting – whether due to malign state actors or gray-zone conflict – has underscored the need for alternate, resilient communication pathways. As undersea cable route disruptions and targeting continue to grow, especially in critical regions such as the Indo-Pacific and Northern Europe, defense and civilian agencies are accelerating the adoption of space-based solutions. However, satellite density in high-traffic conflict zones is likely to become strained and contended during crisis events, placing additional emphasis on platforms that offer secure, intelligent, and adaptable terminal-level connectivity. Our technology addresses this challenge by offering dynamic, multi-orbit access and prioritization capabilities, enabling mission continuity even under contested or degraded satellite access conditions.

As part of our broader communications ecosystem, we have developed a carrier-neutral, software-defined platform that enables dynamic connectivity to the most appropriate satellite—regardless of orbit or operator. This architecture is built around a suite of multi-orbit antennas, including both proprietary and partner-developed systems. Among these is our advanced electronically steered antenna (ESA), which leverages a proprietary glass semiconductor substrate to deliver over 50% higher throughput per square inch than conventional designs. These antennas are engineered to operate seamlessly across GEO, MEO, and LEO networks, ensuring persistent, resilient performance in dynamic and contested environments.

These hardware components are tightly integrated with our software-defined, carrier-neutral modem, which supports real-time satellite selection, waveform agility, and military-grade security. The system is further enhanced by custom-developed RF chipsets, beamforming ASICs, and high-speed analog-to-digital converters (ADCs) currently in development. Together, this modular, end-to-end ecosystem delivers secure, high-throughput connectivity optimized for edge-deployed platforms, including unmanned systems, ISR aircraft, and other mission-critical assets operating in denied or infrastructure-limited environments.

Our value as a full systems integrator lies in our ability to bring together proprietary technologies and third-party components into cohesive, mission-ready solutions. Leveraging our software-defined architecture, we enable network-level virtualization, modular scalability, and rapid deployment across a wide spectrum of operational requirements. From unmanned platforms to manned defense systems, we deliver end-to-end communications and sensing capabilities that are tailored, adaptable, and operationally resilient, supporting the full spectrum of mission demands in multi-domain environments.

Complementing our communications suite, we offer advanced OTH radar systems that provide long-range surveillance, early warning, and persistent situational awareness across maritime and terrestrial domains. We have also successfully fielded a compact electronic warfare (EW) solution, an integrated ESM/ELINT system for UAVs, designed to detect, track, and analyze electromagnetic signals in real time to support tactical ISR missions and platform survivability.

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:

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U.S. defense appropriations uncertainty, due to recurring Continuing Resolutions, restricts new program starts and delays contract finalization.

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Geopolitical instability in the Indo-Pacific region is increasing demand for resilient satellite and OTH communications but may delay procurement timelines.

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Supply chain pressures in semiconductors and RF components continue to impact production scalability and lead times, and recently announced tariffs.

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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.

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.

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.

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.

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.

Commercial Aviation Business Environment and Trends

In 2024, global air traffic continued its strong recovery from the COVID pandemic, with both domestic and international travel showing sustained growth, surpassing pre-pandemic levels. International travel has mostly recovered and the wide-body market continues to be paced by the international travel recovery. Notably, outbound international air travel from China has gained momentum throughout 2024, helping to normalize global capacity and demand dynamics. Aircraft manufacturers are reporting strong order books as airlines seek to modernize fleets and expand capacity to meet sustained demand.

Airline financial performance, which influences demand for new capacity, has benefited from the resilient demand for travel. In 2025, the International Air Transport Association (IATA) projects the airline industry to achieve a combined net profit of $36 billion. This profit is based on an expected revenue of $979 billion, with a net profit margin of 3.7%, according to Business Traveler USA. While this signifies a strong and resilient industry, IATA points out that the margin remains relatively thin, especially when considering the vast number of passengers and the industry’s contribution to the global economy.

A major development reshaping the in-flight connectivity (IFC) space is Starlink’s expansion into commercial aviation. In 2024, Starlink secured multiple agreements with global carriers – including United Airlines and Air France – with plans to equip hundreds of aircraft beginning in 2025. These developments signal an intensifying competitive landscape in aviation broadband services, as airlines seek to meet passenger expectations for seamless, high-speed connectivity across fleets.

In light of these shifts, we are positioning our solutions to deliver differentiated value in the IFC market. Specifically, our proprietary ultra-low-profile antenna system is designed for seamless fuselage integration—offering airlines aerodynamic advantages that reduce drag and fuel consumption, while simplifying maintenance and preserving aircraft aesthetics. Our software-defined modem architecture complements this by enabling carrier neutrality and cross-orbit connectivity, making it well-suited for both commercial and government aviation use cases.

The long-term outlook for the commercial aviation industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries. The commercial aviation industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.

While we do not yet generate revenue from contracts in the commercial aviation industry, we aim to initiate and to continue discussions with our potential partners and our potential customers in the commercial aviation industry to provide our products and our services to such potential partners and potential customers under binding and definitive contracts. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these discussions, or that we will generate revenue from contracts in the commercial aviation industry in the future.

Civilian Telecommunications Business Environment and Trends

The civilian telecommunications industry is experiencing a rapid transformation, driven by advancements in mobile infrastructure, growing data demands, and an increasing need for secure and resilient connectivity across both public and private sectors. These trends are especially pronounced in the Asia-Pacific region, which stands as one of the fastest-growing markets for mobile and broadband services. Despite this growth, the region is also grappling with emerging challenges, including infrastructure vulnerabilities and geopolitical risks that threaten the stability of digital communications.

Growth in Mobile and Broadband Connectivity

The global adoption of 5G is projected to exceed 2 billion connections by the end of 2024, with significant growth led by nations such as Japan, South Korea, China, and India. This adoption is paving the way for the development of 6G technologies, with government and private sector investments already underway in research, standardization, and early-stage development. Alongside 5G, there is an accelerating demand for enterprise and industrial connectivity solutions, particularly in the form of private 5G networks and satellite-enabled backhaul services. These developments reflect the growing need for robust, scalable, and flexible networks that can meet the demands of a rapidly evolving digital landscape.

Infrastructure Vulnerabilities and Geopolitical Risks

However, as telecommunications infrastructure expands, the Asia-Pacific region is witnessing a rise in threats to its digital backbone. In 2023 and 2024, multiple subsea and terrestrial fiber optic cables were damaged or severed due to natural causes, maritime activities, and suspected deliberate interference. These incidents resulted in disrupted internet connectivity, particularly affecting island nations and remote areas. This highlights the urgent need for resilient, redundant, and automatically restorable network architectures, especially in regions where connectivity is essential for emergency response, financial transactions, and national infrastructure.

The security of critical infrastructure has become a growing concern globally. Over the past months, there have been multiple incidents involving deep-sea cable sabotage, raising alarms about the vulnerability of global communications systems. For instance, China recently unveiled an advanced deep-sea cable cutter, escalating geopolitical and economic risks to network stability. Additionally, in December 2024, authorities intercepted a Russian oil tanker suspected of carrying espionage equipment involved in deep-sea cable disruption activities. In Taiwan, Chinese vessels have been repeatedly suspected of severing internet cables, further contributing to tensions and potential national security threats.

The most recent development occurred in February 2025, when Taiwan’s coast guard detained a Chinese cargo vessel suspected of intentionally cutting undersea cables. This prompted an investigation into potential sabotage, underscoring the need for enhanced cybersecurity measures and resilient network architectures to safeguard communications in an increasingly complex geopolitical environment.

Addressing the Digital Divide and Expanding Connectivity Solutions

Alongside these challenges, the persistent digital divide remains a significant issue, particularly in underserved regions where access to mobile broadband is hindered by factors such as affordability, coverage gaps, and limited infrastructure. These gaps present significant opportunities for hybrid connectivity models, such as carrier-neutral and satellite-integrated solutions, which can extend coverage and provide resilient communications in hard-to-reach or high-risk areas. These solutions are critical for ensuring reliable connectivity in both rural and vulnerable regions, where the risk of service disruptions is high.

Economic Impact and Future Innovations

Mobile technologies and services continue to play a crucial role in global economic development, contributing an estimated 5.8% of global GDP in 2024, which represents over $6.5 trillion in economic value. Looking to the future, innovations in AI-driven network optimization, edge computing, and secure mobile backhaul are expected to further drive the adoption of mobile services across various critical sectors, including energy, transportation, and disaster response. These advancements will be pivotal in ensuring the continued resilience and growth of global telecommunications infrastructure.

Global Network Resilience Overview and Budget Environment

As cyber and physical threats to communication systems escalate worldwide, several nations have launched substantial initiatives to enhance network resilience, with satellite communications emerging as a central component of these efforts.

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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.

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European Union: The EU’s IRIS² initiative plans to invest €6 billion in a sovereign satellite constellation to ensure secure governmental and emergency communications.

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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.

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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:

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Data Backup and Disaster Recovery – Ensuring secure data storage and rapid restoration of critical systems.

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Alternate Communication and IT Infrastructure – Providing redundancy in cases of network failure.

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Mobile and Off-Grid Communication Systems – Supporting operations in remote or disaster-affected areas.

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Emergency Access to Cloud Services and Applications – Enabling secure and continuous cloud connectivity.

A well-structured BCP minimizes operational downtime, safeguards critical assets, and sustains service delivery for enterprises and public sector entities. As disruptions become more frequent and severe, demand for satellite-based continuity solutions continues to expand across multiple industries.

Key Suppliers for Satellite-Based BCP and Network Resilience Solutions

The following are some of the leading technology providers and integrators supporting BCP and satellite-based resilience worldwide:

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Eutelsat OneWeb – LEO satellite constellation provider delivering global broadband coverage

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Viasat / Inmarsat – Government-grade secure satellite communications

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SES – GEO and MEO satellite services for enterprise and defense networks

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Starlink (SpaceX) – Real-time high-throughput LEO connectivity for backup comms

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Cisco Systems – Redundant networking, SD-WAN, and edge infrastructure

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Palo Alto Networks / Fortinet – Cybersecurity and network protection

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Thales Group – BCP and emergency communications for defense and aviation

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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

The global BCM market was valued at approximately $6.28 billion in 2025 and is projected to reach a CAGR of 16.33% from 2025 to 2032 (P&S Intelligence). Market expansion is led by heightened awareness of business continuity risks and increasing regulatory pressures across key industries.

The Asia-Pacific region – including Japan, India, South Korea, Australia, and Southeast Asia – represents a significant driver of growth, as organizations enhance resilience strategies to address regional vulnerabilities. North America, led by the United States, remains a critical contributor, with enterprises investing in BCM solutions to mitigate cybersecurity threats, natural disasters, and infrastructure disruptions.

Regional Insights

North America

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2024 Market Contribution: North America accounted for approximately 38% to 41% of the total revenue in the BCM solutions market (Verified Market Reports).

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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

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2024 Market Size: The Asia-Pacific BCM market was valued at $806.7 million in 2024 and is projected to grow at a CAGR of 17.2% through 2030. The market is expected to reach approximately $2,086.6 million by 2030 (grandviewresearch.com). Growth is primarily driven by increasing awareness of business resilience and the region’s susceptibility to natural disasters.

Country-Specific Projections (2023-2030) (2024 data not available)

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Japan

2023 Market Size: $99.19 million

2030 Market Size: $370 million (CAGR of 17.3%)

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India

2023 Market Size: $86.26 million

2030 Market Size: $370 million (CAGR of 20.6%)

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Australia

2023 Market Size: $37.38 million

2030 Market Size: $150 million (CAGR of 18.5%)

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South Korea

2023 Market Size: $71.88 million

2030 Market Size: $300 million (CAGR of 17.9%)

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Southeast Asia

2023 Market Size: $49.60 million

2030 Market Size: $230 million (CAGR of 19.8%)

The budget focuses on improving resilience across various sectors, particularly in the face of potential disruptions to communication systems and includes initiatives for strengthening satellite communications and other technological infrastructure.

Key Drivers of BCM Market Growth

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Increasing Frequency of Disruptions: The rise in natural disasters and cyber-attacks has heightened the demand for robust BCM solutions to ensure operational resilience.

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Regulatory Compliance: Stringent regulations across industries mandate the implementation of comprehensive BCM strategies to mitigate risks and ensure business continuity.

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Growing Awareness of Operational Risks: Organizations are investing in BCM solutions to safeguard operations, enhance resilience, and protect reputational value.

(Source: imarcgroup.com)

BCP Investments in Key Markets

Business Continuity Planning (BCP) investments are critical for ensuring operational resilience, disaster recovery, and risk mitigation. Below is an overview of key markets investing in BCP solutions:

United States

The U.S. remains a leader in BCP investments, with the market estimated at $2.8 billion in 2020 (Enterprise Storage Forum). Investments in business continuity and disaster recovery solutions continue to expand across industries, including finance, healthcare, and energy.

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Market Growth Projection: The U.S. BCP market is expected to grow from $7 billion in 2021 to $15 billion by 2030, reflecting sustained investment in resilience-enhancing solutions.

Japan and Canada

Both Japan and Canada are experiencing steady growth in BCM investments.

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Japan: The market is projected to grow at a CAGR of 6.1%, driven by increasing regulatory requirements and resilience initiatives.

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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.

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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).

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Disaster Recovery and Preparedness: Estimates suggest Taiwan’s total investment in disaster recovery and infrastructure resilience could range from $500 million to $1 billion over the next 5 to 10 years, focusing on technological enhancements, particularly in satellite communications and disaster recovery solutions.

These investments underscore Taiwan’s commitment to strengthening critical infrastructure and ensuring continuity in the face of potential disruptions.

Our Business Potential

The Company is strategically positioned at the forefront of the rapidly growing satellite communications sector. In addition to being licensed as a Telecom operator in Japan and Taiwan, the Company secured a regional satellite service spectrum usage permit in Taiwan on April 27, 2023. Furthermore, as a distribution partner for Eutelsat OneWeb’s Low Earth Orbit (LEO) satellite services – granted in September 2024 – the Company is well-equipped to support national and enterprise-level initiatives aimed at strengthening SATCOM communication resilience.

This authorization allows us to provide broadband satellite services across key sectors, including mobile backhaul, enterprise communications, maritime, aviation, and tactical defense. With the global rise in demand for resilient infrastructure, the Company offers SATCOM Business Continuity Planning (BCP) and Network Resilience Solutions, initially focusing on the high-growth Asia-Pacific region. Japan and Taiwan, given their strategic importance amid rising geopolitical tensions, are at the core of these efforts.

Strategic Investment in Network Resilience: Japan and Taiwan’s Response to Emerging Threats

In response to escalating geopolitical tensions and vulnerabilities in undersea communication infrastructure, both Taiwan and Japan have significantly increased their investments in network resilience. These investments reflect a broader commitment to strengthening national security and implementing advanced technologies to mitigate risks from sabotage, cyberattacks, and natural disasters.

As a distribution partner of Eutelsat OneWeb’s Low Earth Orbit (LEO) satellite services, the Company is aligned with these national resilience strategies. Our solutions include enterprise network redundancy, server load balancing, and disaster recovery infrastructure—each tailored to support the security and continuity goals of Taiwan, Japan, and allied regional partners. Additionally, the Company’s SATCOM Business Continuity Planning (BCP) solutions serve both enterprise and consumer markets. By deploying mobile, vehicle-based SATCOM systems, we provide critical connectivity for disaster recovery and wartime scenarios, ensuring operational continuity when terrestrial networks are disrupted.

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

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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).

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Japan’s Ministry of Defense is integrating hardened, jamming-resistant satellite systems to ensure secure, real-time battlefield communications.

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A new supplementary budget (post-election) will include additional funds for civilian disaster resilience, including communications.

1.3 National Research Infrastructure

Japan’s National Research Institute for Earth Science and Disaster Resilience (NIED) operates on a 14-billion-yen annual budget and leads R&D in backup communication technologies, including:

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Severe weather and seismic communication protocols.

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Emergency satellite deployment mechanisms.

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Real-time disaster data transmission systems.

1.4 Integration with Civilian Systems and Subsidy Programs

Japan is pursuing a dual-use approach, where military-grade satellite infrastructure supports civilian disaster communication and emergency response systems. Nationwide drills and inter-agency coordination are regularly conducted to test resilience frameworks.

In addition, Japan’s Ministry of Internal Affairs and Communications has allocated over 25 billion yen (approx. US$170 million) in fiscal support between 2024 and 2026 to accelerate adoption of BCP-related technologies, including satellite phones, mobile communication hubs, and transportable SATCOM vehicles for municipalities and critical infrastructure operators.

2. Taiwan’s Network Resilience and SATCCOM BCP and Strategy

2.1 Context and Geopolitical Risk

Taiwan faces continuous threats from China, including cyberattacks and the physical disruption of its undersea cable network. In 2023–2024 alone, multiple incidents involving the severing of undersea cables connecting Taiwan’s outer islands occurred, with at least one case involving a Chinese vessel detained for suspected sabotage.

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:

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Initial budget of US$790 million, focused on developing Taiwan’s own low Earth orbit (LEO) satellite constellation.

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Strategic collaboration with Eutelsat OneWeb to provide immediate coverage for emergency communications and internet access.

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Development of over 700 satellite ground stations across Taiwan to support seamless integration and redundancy.

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Launch of Taiwan-made LEO satellites, with the first deployment expected by 2026–2027.

2.3 Backup Infrastructure and Microwave Networks

In parallel, Taiwan is enhancing terrestrial microwave communication systems, retrofitting existing mountain facilities for secure line-of-sight communication to outlying islands. This ensures at least partial functionality if submarine cables are compromised.

2.4 Government SATCOM BCP Subsidies

The Taiwanese government is also launching a targeted NT$2.5 billion (approx. US$80 million) subsidy program between 2024 and 2027 to support BCP (Business Continuity Planning) deployments. These funds will help enterprises and local governments invest in mobile SATCOM units, off-grid power systems, and hybrid backup communication solutions.

The company plays a critical role in this ecosystem as a trusted distribution partner of Eutelsat OneWeb, offering resilient LEO connectivity combined with value-added services such as:

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Enterprise network redundancy to ensure uninterrupted operations.

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Server load balancing to optimize system performance and stability.

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Disaster recovery solutions to maintain business continuity under extreme scenarios.

SATCOM BCP systems mounted on vehicles to deliver emergency broadband access during disasters or conflicts, designed for both enterprise and public use.

National Budget for SATCOM BCP

Category	Taiwan	Japan
Budget Allocation	US$790M (10-year plan)	US$784M (FY2025 defense satellite only)
BCP Subsidies	US$80M (2024–2027)	US$170M (2024–2026)
Timeline	First satellite by 2026–2027	Satellite launch timeline TBD
Civil-Military Integration	High (Foxconn, private sector)	Very High (JSDF + NIED + civilian use)
International Partners	Eutelsat OneWeb, U.S. (partial)	U.S., domestic R&D focus

A Shared Vision for a Secure, Connected Future

The rising threats to digital infrastructure have made network resilience a top priority for governments and enterprises worldwide. Taiwan and Japan stand as leading examples in Asia, proactively investing in satellite communication, integrating civil-military response systems, and future-proofing their networks against cyber threats, geopolitical instability, and natural disasters. Their efforts reflect a broader global shift, as nations recognize the urgent need to safeguard critical connectivity. As a distribution partner of Eutelsat OneWeb, our company plays a pivotal role in this transformation, delivering mission-critical solutions such as enterprise network redundancy, server load balancing, disaster recovery systems, and SATCOM BCP solutions for disaster and wartime scenarios. These capabilities are essential for governments, critical infrastructure providers, and private enterprises seeking to ensure uninterrupted operations in an unpredictable world.

With geopolitical and environmental risks on the rise, network resilience is no longer just a technical consideration – it is a strategic imperative. By embedding this vision in national planning, Taiwan and Japan not only secure their digital futures but also set a global benchmark for allied democracies striving for a more secure and connected world. While the Company does not currently generate revenue from contracts in the civilian telecommunications sector, we are actively engaged in discussions with prospective partners – including governments, enterprises, mobile network operators, satellite providers, and infrastructure stakeholders – about using our solutions to support hybrid, resilient communications. Our platform, which is software-defined and carrier-neutral, is specifically designed to enable automatic recovery, satellite-based failover, and dynamic traffic routing in the event of fiber disruptions or terrestrial infrastructure loss.

We believe our technology is well-positioned to support the growing demand for resilient connectivity across mobile backhaul, disaster response, rural access, business continuity, and critical infrastructure markets. However, there can be no assurance that these discussions will result in binding agreements or generate revenue in the near term.

Principal Factors Affecting Financial Performance

We believe that our operating and business performance will be driven by various factors that affect the Aerospace & Defense and Civilian Telecommunications segments including the magnitude of defense spending by the U.S. and its allies, trends in air travel affecting the commercial airline industry, and trends in the evolution of the digital infrastructure and technologies deployed by mobile network operators, which collectively constitute the customer bases that we target, as well as general macroeconomic factors. Key factors that may affect our future performance include:

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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;

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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;

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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;

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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;

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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;

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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;

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the extent of the adoption of our products and services by potential Aerospace & Defense and Civilian Telecommunications partners and customers;

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costs associated with implementing, and our ability to implement on a timely basis, our technology, upgrades and installation technologies;

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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;

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costs associated with managing a rapidly growing company;

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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;

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the geopolitical environment and other trends that affect defense spending;

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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;

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the economic environment and other trends that affect both business and leisure travel;

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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;

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continued demand for connectivity and proliferation of Wi-Fi enabled devices, including smartphones, tablets and laptops;

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our ability to obtain required licenses and approvals necessary for our operations; and

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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 October 12, 2025.

The Amendment provides that any lock-up period applicable to the Sponsor or any officers, directors or affiliates of Parent will terminate at the Closing of the Merger and changes the percentage of the Founder Shares being treated as Escrowed Sponsor Shares from 50% to 25%, adds a provision providing for the Company to pay certain amounts to Parent to cover its working capital and extension expenses, and adds a provision that Parent may terminate the Merger Agreement at any time prior to the Closing Date if the Company or any Subsidiary of the Company enters into voluntary bankruptcy or fails to remove within 60 days any petition in bankruptcy filed against it prior to Closing.

Additional information relating to the Merger along with the Merger Agreement can be found in our Current Report on Form 8-K filed with the SEC on April 4, 2024. In connection with the transaction described herein, the Company filed relevant materials with the SEC, including the Registration Statement on Form S-4 and a proxy statement/prospectus. Additional information relating to the S-4 can be found in our Current Report on Form 8-K filed with the SEC on May 16, 2024.

Planned Merger with Ejectt

On July 28, 2023, we and Ejectt, Inc. signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and delivery of a notice and merger contract to Ejectt, which were delivered to Ejectt on February 1, 2024. At a May 23, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved the terms of the merger plan and agreement and its being signed by the chairperson of Aerkomm Taiwan. On the same day, the shareholders of Ejectt approved the proposed merger and the merger agreement was then signed by the parties on May 23, 2024. Under the merger agreement and contingent only on the merger’s receiving necessary governmental approvals, the merger will be consummated and the surviving company of the merger will be Aerkomm Taiwan.

Because Aerkomm Taiwan has foreign (non-Taiwanese) shareholders (Aerkomm holds 49% of the outstanding shares of Aerkomm Taiwan) for the merger to become legally effective under Taiwanese law, it must be approved by the Taiwan Department of Investment Review. Aerkomm and Ejectt submitted an application to the Department of Investment Review on July 10, 2024. Reviews by the Department of Investment Review often take four to six months and possibly longer, may require extensive inquiries and requests for further information by the Department of Investment Review, and sometimes result in denial of approval. Consequently, Aerkomm cannot assure that the merger will be approved or, if approved, when the approval may be granted.

Strategic and International Defense Pipelines

As of this filing, we are shifting from pursuing international growth through Direct Commercial Sales (DCS) to Foreign Military Sales (FMS) pathways:

●

Japan: Engaged with local integrators and defense authorities regarding UAV communications terminals and software-defined modems; three ongoing pilot evaluations.

●

Taiwan: Collaborating with telecom operators and disaster resilience agencies on mobile SATCOM BCP deployments; application-based discussions tied to regional contingency planning.

●

European Union: In active dialogue with five EU-based primes in connection with the IRIS² satellite sovereignty initiative and C4ISR modernization programs; R&D co-development discussions underway.

Smaller Reporting Company

Although we no longer qualify as an Emerging Growth Company, or EGC, we continue to qualify as a smaller reporting company, which allows us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation that are available to an EGC. In addition, as a smaller reporting company with less than $100 million in annual revenue, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on these exemptions, we have taken advantage of reduced reporting obligations in this quarterly report on Form 10-Q.

Recent Market Information

The IATA (International Air Transport Association) in May 2025 issued a report entitled Passenger Market Analysis.

●

Industry-wide revenue passenger-kilometers (RPKs), a measure of passenger traffic volume, have shown a strong recovery in recent years, surpassing pre-pandemic (2019) levels by 3.8% in 2024.

●

Available seat-kilometers (ASKs) in the airline industry experienced an 8.7% increase in 2024 compared to 2023.

●

In 2024, both global and domestic passenger traffic saw significant growth, with some regions experiencing particularly strong increases. Globally, air passenger demand increased by 10.4% compared to 2023 and surpassed pre-pandemic levels by 3.8%, and domestic traffic in particular grew by 5.7%.

●

In 2024, international RPKs (Revenue Passenger Kilometers) recovered strongly, with global traffic exceeding pre-pandemic levels. IATA reported that total full-year traffic rose 10.4% compared to 2023 and was 3.8% above 2019 levels. International demand specifically rose 9.5% in October 2024 compared to October 2023. Furthermore, IATA’s passenger market analysis indicates that international RPKs surpassed 2019 levels by 0.5% in 2024, with load factors reaching a record high of 83.2%. Asia Pacific airlines played a significant role in this recovery, contributing to more than half of the global growth.

Results of Operations

The discussion below relates to our two three months periods ended on March 31, 2025 and 2024.

Comparison of Three Months Ended March 31, 2025 and 2024

The following table sets forth key components of our results of operations during the three months ended March 31, 2025 and 2024.

	Three Months Ended March 31,						Change
	2025			2024			$			%
Sales	$	-		$	53,255		$	(53,255	)		(100.0	)%
Cost of sales		-			38,116			(38,116	)		(100.0	)%
Operating expenses		3,079,484			5,108,102			(2,028,618	)		(39.7	)%
Loss from operations		(3,079,484	)		(5,092,963	)		2,013,479			(38.4	)%
Net non-operating income (loss)		(599,248	)		(987,210	)		387,962			(39.3	)%
Loss before income taxes		(3,678,732	)		(6,080,173	)		2,401,441			(39.5	)%
Income tax expense		-			2,400			(2,400	)		(100.0	)%
Net loss		(3,678,732	)		(6,080,573	)		2,403,841			(39.5	)%
Other comprehensive income		(550,029	)		(669,236	)		119,207			(37.4	)%
Total comprehensive loss	$	(4,228,761	)	$	(6,751,809	)	$	2,523,048			(41.8	)%

Revenue. Our sales were $0 for the three months ended March 31, 2025, as compared to the $53,255 for the three months ended March 31, 2024 as we are still developing our core business in in-flight entertainment and connectivity and there were few sales of equipment to one of our related parties during the period.

Cost of sales. Our cost of sales includes the direct costs of our raw materials and component parts, as well as the cost of labor and overhead. Our cost of sales was $0 and $38,116 for the three months ended March 31, 2025 and 2024, respectively.

Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses decreased by $2,028,618 to $3,079,484 for the three months ended March 31, 2025, from $5,108,102 for the three months ended March 31, 2024. Such operating expense decrease was mainly due to the decrease in salaries expense, professional fee and stock-based compensation in the amount of $1,896,046, $407,956 and $97,021, respectively, which was offset by the increase in amortization and depreciation expense, and other operation expense in the amount of $58,757 and $313,640, respectively.

Net non-operating income (loss). We had $599,248 and $987,210 net non-operating loss for three months ended March 31, 2025, and 2024, respectively. Net non-operating income for the three months ended March 31, 2025, primarily consisted of foreign currency exchange loss of $50,614, interest expense of $267,229, loss from change in fair value of SAFE liabilities of $50,000, loss on disposal of subsidiaries of $234,454 and offset by other income of $3,041. Net non-operating loss for the three months ended March 31, 2024, primarily consisted of foreign exchange loss of $687,923, interest expenses of $286,631, other loss, net of $12,656 and offset by unrealized investment gain of $672.

Loss before income taxes. Our loss before income tax is $3,678,732 for the three months ended March 31, 2025 as compared to the loss of $6,080,173 for the three months ended March 31, 2024, a decrease of $2,401,441, or 39.5%, as a result of the factors described above.

Income tax expense. Income tax expense for the three months ended March 31, 2025 and 2024 were $0 and $2,400, respectively. The income tax expenses mainly consist of California franchise tax and foreign subsidiary’s income tax expenses.

Total comprehensive loss. As a result of the cumulative effect of the factors described above, our total comprehensive loss decreased by $2,824,223, or 41.8%, to $3,927,586 for the three months ended March 31, 2025, from $6,751,809 for the three months ended March 31, 2024.

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, 2025, we had cash outflow from operating activities of $602,777 and had cash and restricted cash of $105,124. Our working capital deficit was $59,938,682 as of March 31, 2025. 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, 2025, we had received Loans totaling NT$136,371,529 (approximately $4.1 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,891,186 of the $20 million in aggregate loan commitments from the two Lenders was still available as of March 31, 2025.

In connection with the planned Merger with IXAQ, we have obtained $35 million in private investment in public equity (“PIPE”) investment commitments and expects additional approximately $2.0 million in Simple Agreement for Future Equity (“SAFE”) investments to be funded before closing of the Merger. Further, us and IXAQ have entered into a letter agreement with Benchmark Company LLC (“Benchmark”) under which Benchmark has agreed to provide capital markets advisory services to us (including attaining research coverage, assisting in road-shows and investor meetings and other advisory services) and to act as placement agent for the private placement of securities by us. In connection with the arrangement with Benchmark, we are targeting the raise of $100 million in connection with the closing of and after the Merger, in addition to the $35 million in already committed PIPE investment and up to approximately $19.2 million of cash (net of transaction costs and depending on the amount of shareholder redemptions) contributed from the IXAQ side as a result of the Merger.

Our ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As of March 31, 2025, we expect approximately $28.8 million convertible notes and SAFE can be converted into equity upon Merger.

We also expects to begin generating significant recurring revenues in fourth quarter 2025, including in connection with the OneWeb Distribution Partner Agreement entered into between Aerkomm Japan, as Distribution Partner, and OneWeb on October 1, 2024, pursuant to which Aerkomm Japan was appointed as a distributor for OneWeb in Japan and Taiwan and we had made our first delivery of a certain classified radar system to a governmental defense customer on October 24, 2024.

We believe it will have sufficient liquidity to fund its operations for at least the next twelve months following the issuance of these unaudited condensed consolidated financial statements. This assessment considers our current available cash, approximately $15.9 million in aggregate available loan commitments from two lenders, $35 million in PIPE investment commitments signed concurrently with entering into the Merger Agreement with IXAQ, and additional capital expected to be raised through SAFE financings and the Benchmark relationship. In addition, approximately $28.8 million of outstanding convertible notes and SAFE are expected to convert into equity upon consummation of the Merger, which would further strengthen our capital resources and reduce cash obligations. We also expect 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,
	2025			2024
Net cash used in operating activities	$	(590,312	)	$	(3,537,498	)
Net cash provided by (used in) investing activities		5,077			(688,720	)
Net cash provided by (used in) financing activities		523,223			(4,353,154	)
Net decrease in cash and restricted cash		(62,012	)		(8,579,372	)
Cash and restricted cash at beginning of year		109,227			7,428,702
Foreign currency translation effect on cash and restricted cash		57,909			1,269,445
Cash and restricted cash at end of year	$	105,124		$	118,775

Operating Activities

Net cash used in operating activities was $602,777 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 $1,035 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 $63,908, respectively.

Net cash used for operating activities was $3,537,498 for the three months ended March 31, 2024, as compared to $5,110,931 for the three months ended March 31, 2023. In addition to the net loss of $6,082,573, the decrease in net cash used for operating activities during the three-month period ended March 31, 2024 was mainly due to the decrease in accounts receivable and the increase in accrued expenses and other current liabilities of $41,088 and $2,620,514, respectively, offset by the decrease in prepaid expenses and other current assets of $2,754,311. In addition to the net loss of $3,754,436, the increase in net cash used for operating activities during the three-month period ended March 31, 2023 was mainly due to increase in prepaid expenses, accounts payable, and other payable of $2,068,638, $353,703, and $425,562, respectively, offset by the increase in accrued payroll liability and prepayment from customer, interest payable of $152,518, $352,081, and $235,482.

Net cash used for operating activities was $2,472,529 for the three months ended March 31, 2024. In addition to the net loss of $6,595,119, the decrease in net cash used for operating activities during the three-month period ended March 31, 2024 was mainly due to the decrease in accounts receivable and the increase in accrued expenses and other current liabilities of $41,088 and $3,029,865, respectively, offset by the decrease in prepaid expenses and other current assets of $703,222. In addition to the net loss of $3,754,436, the increase in net cash used for operating activities during the three-month period ended March 31, 2023 was mainly due to increase in prepaid expenses, accounts payable, and other payable of $2,068,638, $353,703, and $425,562, respectively, offset by the increase in accrued payroll liability and prepayment from customer, interest payable of $152,518, $352,081, and $235,482.

Investing Activities

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.

Net cash provided by investing activities for the three months ended March 31, 2024 was $688,720 as compared to net cash used in investing activities of $10,247 for the three months ended March 31, 2023. The net cash provided by investing activities for the three months ended March 31, 2024 was mainly prepayment for land of $346,070, which was offset by the cash used for the purchase of property and equipment of $11,275. The net cash provided by investing activities for the three months ended March 31, 2023 was mainly for the proceeds from disposal of long term investment of $325,578, which was offset by the purchase of property and equipment of $335,825. Net cash provided by investing activities for the three months ended March 31, 2024 was $357,345. The net cash provided by investing activities for the three months ended March 31, 2024 was mainly prepayment for land of $346,070, which was offset by the cash used for the purchase of property and equipment of $11,275. The net cash provided by investing activities for the three months ended March 31, 2023 was mainly for the proceeds from disposal of long term investment of $325,578, which was offset by the purchase of property and equipment of $335,825.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2025 was $535,688 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.

Net cash used and provided by financing activities for the three months ended March 31, 2024 and 2023 was $5,749,498 and $752,910, respectively. Net cash provided by financing activities for the three months ended March 31, 2024 were mainly attributable to net proceeds from issuance of common stock in the amount of $6,558,000 offset by repayment of long term notes payable of $7,251,237. Net cash provided by financing activities for the three months ended March 31, 2023 were mainly attributable to proceeds from the increase in short-term loans in the amount of $758,439. Net cash used and provided by financing activities for the three months ended March 31, 2024 was $5,749,498. Net cash provided by financing activities for the three months ended March 31, 2024 were mainly attributable to net proceeds from issuance of common stock in the amount of $6,558,000 offset by repayment of long term note payable of $7,330,000. Net cash provided by financing activities for the three months ended March 31, 2023 were mainly attributable to proceeds from the increase in short-term loans in the amount of $758,439.

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, 2025 and 2024 were $0 and $357,345, respectively.

We anticipate an increase in capital spending in fiscal year 2025 and estimate that capital expenditures will range from $6 million to $10 million as we will continue to advance our semiconductor designs, our software-defined platforms and continue to execute our network expansion strategy. We expect to be able to raise these required funds in connection with our planned Merger with IXAQ although we cannot provide assurance that we will be successful in this effort.

Inflation

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to significant seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Critical Accounting Estimates

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed 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 unaudited condensed 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 17, we determined that the SAFE liabilities should classified as a derivative liability in accordance with ASC 815-40 “Derivatives and Hedging”. As a result, the SAFE liabilities shall be measured initially, and subsequently at fair value on each reporting date. We will continue to adjust the carrying value of the SAFE liabilities until contingencies are finally determined. Any changes in fair value will be recorded as a gain or loss in the statements of operations and comprehensive loss. As of March 31, 2025, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $5,460,000. The valuation was determined using a Monte Carlo simulation reflecting a probability-weighted outcome of multiple scenarios, including equity financing, optional conversion, and dissolution. Key assumptions used in the simulation included an IXAQ stock price of $11.86, a risk-free rate of 4.01%, and an annualized volatility of 48.1%. The Company has received aggregate proceeds of $4,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the three months ended March 31, 2025, was $50,000.

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, 2025.

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, 2024, filed with the SEC on August 18, 2025, our disclosure controls and procedures were not effective.

The Company’s management discovered errors in previously issued financial statements as of December 31, 2023, and for the year then ended 2023, The financial statements should no longer be relied upon. The Company restated its financial statements as of and for the year ended December 31, 2023 (the “2023 Restatement”).

For a discussion of the individual restatement adjustments and the impact of such adjustments on the Company’s previously issued financial statements, see “Item 1. Restated Financial Statements—Note 2. Restatement of Previously Issued Financial Statements,” above.

As of March 31, 2025, 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.

In making this evaluation, the Company has considered matters relating to the 2023 Restatement including actions taken by the Company within the past year to identify and enhance the effectiveness of its disclosure controls and procedures and internal controls over financial reporting.

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, 2025, 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, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There were no material developments during the quarter ended March 31, 2025 to the legal proceedings previously disclosed in Item 3 “Legal Proceedings” of our Annual Report on Form 10-K filed on August 18, 2025.

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, 2024 filed with the SEC on August 18, 2025.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the quarter ended March 31, 2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Effective at a Board Meeting on February 15, 2025, the Board approved the appointment of Ms. Jessica Hsu, as Chairperson of the Board and Sole Director of the following companies: Mesh Technology Limited; Mesh Technology Taiwan Limited; Mesh Technology Limited; and Mesh Technology Taiwan Limited. We have no other information to disclose that was required to be in a report on Form 8-K during the quarter ended March 31, 2025 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

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

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: October 24, 2025	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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