AKOM 10-K & 10-Q changes, risk factors and insider trading

We cannot be sure that we will be able to integrate successfully any businesses, products, technologies, or personnel that we have acquired or that we might acquire in the future. Any such integration failure could disrupt our business and have a material adverse effect on our consolidated financial condition and results of operations. Moreover, from time to time, we may enter into negotiations for a proposed acquisition, acquisition but be unable or unwilling to consummate the acquisition under consideration. This could cause significant diversion of management’s attention and out-of-pocket expenses for us. We could also be exposed to litigation as a result of any consummated or unconsummated acquisition.

Excluding non-recurring revenues that we earned from affiliates and one non-affiliate in 2021 and in the second quarter of fiscal 2019, we have incurred operating losses since our inception in 2014, and we may not be able to generate sufficient revenue in the future to generate operating income. We also expect our costs to increase materially in future periods, which could negatively affect our future operating results. We expect to continue to expend substantial financial and other resources on the continued development and future expansion of our business. The amount and timing of these costs are subject to numerous variablesvariables, and such initiatives may require additional funding.

Our company is in the development stage and has a limited operating history,history in its current business focus and evolving operational scale, which may make it difficult to evaluate our current business and predict our future performance.

Our company and our core business are in the developmentAny stage and we continue to face all of the risks and uncertainties associated with a new and unproven business. The limited operating history of our business may make it difficult to accurately evaluate the business and predict its future performance. Any assessments of our current business and predictions that we or youinvestors make aboutregarding our future successsuccess, operational execution, or long-term viability may not be as accurate as they couldwould be if we had a longer operating history.history at our current scale. We have encountered and willexpect to continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to scaling operations, integrating technologies, managing strategic partnerships, securing customer adoption, and theexpanding size and nature of our market opportunity will change as we scale our business and increase deployment of our service. If we do not address any of the foregoing risks successfully, our business will be harmed.capabilities.

We expect to rely on a few key customers for all of our initial revenue.

We may not be able to grow our business with our current and potential satellite and satellite constellation partners or to successfully negotiate agreements with satellite and satellite constellation partners whose bandwidth and services we do not currently resell or otherwise distribute; distribute.

Currently, our primarysatellite existing or potential satellite partners include SES (including SES Space & Defense), Viasat Inc., Intelsat SA, Eutelsat Group (including Eutelsat Communications, Eutelsat SASA, and Eutelsat OneWeb), and a global U.S.-based satellite communications provider. We also engage with, and may pursue commercial opportunities involving, other satellite operators and service providers, including Intelsat S.A., Rivada Space Networks, Astranis Space Technologies Corp. andCorp., Telesat Corp., butand weothers. We aimseek to havemaintain the technical capability to providesupport linksconnectivity toacross anymultiple andsatellite all satellitesnetworks and constellations, subject to future potential applicable commercial agreements.arrangements Weand areregulatory currently in,approvals. orHowever, planning,there can be no assurance that discussions or negotiations with certain of our existing or potentialprospective operators satelliteand partnersservice toproviders servewill as a value-added reseller of their servicesresult in certaindefinitive countriesagreements, andexpanded regions,authorizations, butfavorable docommercial notterms, yetor haveadditional revenue in place any such value-added reseller agreements.opportunities.

We may not be able to grow our business with our current and potential aerospace and defense partners or to successfully negotiate agreements with aerospace and defense partners to which we do not currently provide our technologies or services;services.

Our primary potential aerospace & defense partners include prime contractors like Kratos Defense, Lockheed Martin, Anduril, Shield.AI, Boeing Defense, Airbus Defense, Northrop Grumman, General Atomics and RTX, although we do not yet have in place binding agreements to serve as a joint venture partner, mentor-protégé partner, subcontractor, vendor, or system integrator with these prime contractors. We are currently in discussions with certain of our potential aerospace & defense partners to enter into binding contracts together. Currently, we also have a number of potential aerospace & defense customers, including militaries and governments, regarding providing our products and services to meet their classified programs and missions.

Negotiations with prospective airline partners require substantial time, effort and resources. The time required to reach a final agreement with an airline is unpredictable and may lead to variances in our operating results from quarter to quarter. We may ultimately fail in our negotiations negotiations, and any such failure could harm our results of operations due to, among other things, a diversion of our focus and resources, actual costs and opportunity costs of pursuing these opportunities. In addition, the terms of any future agreements could be materially different than the terms included in our existing agreement with Hong Kong Airlines. To the extent that any negotiations with current or future potential airline partners are unsuccessful, or any new agreements contain terms that are less favorable to us, our growth prospects could be materially and adversely affected.

We may experience network capacity constraints in our future operations regionsregions, and we expect capacity demands to increase, and we may in the future experience capacity constraints internationally. If we are unable to successfully implement planned or future technology enhancements to increase our network capacity, or our airline partners do not agree to such enhancements, our ability to acquire and maintain sufficient network capacity and our business could be materially and adversely affected.

We are currently developing a host of in-flight entertainment and connectivity service offerings to deliver to our future customers. We plan to offer a number of services to our customers customers, and no assurance can be given that we will ultimately be able to launch any service. Additionally, we plan to generate a revenue stream from our video on demand and other in-flight entertainment services. If we are unable to generate revenue from our services or if other entertainment services do not ultimately develop, our growth and financial prospects would be materially adversely impacted.

We have a significant amount of indebtedness. As of December 31, 2024,2025, the aggregate principal amount of our total outstanding indebtedness was approximately $____$33.2 million, which was comprised of approximately $__$23.2 million in principal amount of our Convertible Bond (as defined below) and approximately $__ million in principal amount of our Convertible Note (as defined below) and approximately $10.0 million in principal amount of our SAFE Note (as defined below). As of December 31, 2024, we had undrawn availability of $__ million under our Convertible Note. Our high level of indebtedness could have important consequences. For example, it could:

We may not be able to generate sufficient cash to service all of our indebtedness and fund our working capital and capital expenditures or refinance our indebtedness,indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Satellite construction and launch are subject to significant risks, including construction delays, manufacturer error, cost overruns, regulatory conditions or delays, unavailability of launch opportunities, launch failure, damage or destruction during launchlaunch, and improper orbital placement, any of which could result in significant additional costcosts or materially impair the useful life, capacity, coveragecoverage, or operational capabilities of thea satellite. The technologies inincorporated into our partners’ satellite designssystems are also veryhighly complex, and there can be no assurance that thesuch technologies will work perform as our partners expectexpected or that our partners will realize any or all of their anticipated benefits. The identification of construction-related issues inissues, ourdeployment partnersanomalies, satellitesand operational challenges is not uncommon.uncommon Forwithin example, our partner Viasat’s ViaSat-2the satellite experiencedindustry. anIn antenna deploymentaddition, issue which reduced its output capabilities. Ourour satellite partners have also experienced delays in satellite constructionconstruction, deployment, and launch, such as the delay experienced, also by Viasat, in launching their ViaSat-2 satellite caused by civil unrest in French Guiana (the location of the satellite launch), construction delays in ViaSat’s ViaSat-3 satellites caused by the COVID-19 pandemic and delays in the launch ofschedules theresulting ViaSat-3from Americassupply satellitechain disruptions, duepandemic-related to high priorityimpacts, launch missionsscheduling andconstraints, adverse weather conditionsconditions, atand theother launchfactors site.beyond their control. If satellite construction schedules are not met or other events prevent a satellite launchfrom being launched on schedule, a suitable launch opportunity may not be available at the timewhen the satellite is ready tofor be launched.launch.

Our addressable market and our ability to expand in our operating region is inherently limited by various factors, including limitations on the number of commercial airlines with which we could partner, the number of planes in which our equipment can be installed, the passenger capacity within each plane and the ability of our network infrastructure or bandwidth to accommodate increasing capacity demands. Future expansion is also limited by our ability to develop new technologies on a timely and cost-effective basis, as well as our ability to mitigate network capacity constraints through, among other things, the expansion of our satellite coverage area. Our future growth may slow, or once we begin selling products and services to our customers, we may stop growing altogether, to the extent that we have exhausted all potential airline partners and as we approach installation on full fleets and maximum penetration rates on all flights. In order toTo grow our future revenue, we will have to rely on customer and airline partner adoption of currently available and new or developing services and additional offerings. We cannot assure you that we will be able to obtain a market presence or establish new markets and, if we fail to do so, our business and results of operations could be materially adversely affected.

We operate in a highly dynamic industryindustry, and our future quarterly operating results may fluctuate significantly. Our future revenue and operating results may vary from quarter to quarter due to many factors, many of which are not within our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Further, it is difficult to accurately forecast our revenue, margin and operating results, and if we fail to match our expected results or the results expected by financial analysts or investors, the future trading price of our common stock may be adversely affected. In addition, due to generally lower demand for business travel during the summer months and holiday periods, and leisure and other travel at other times during the year, our quarterly results may not be indicative of results for the full year. Due to these and other factors, quarter-to-quarter comparisons of our historical operating results should not be relied upon as accurate indicators of our future performance.

Our sales were $1,342,931 for the year ended December 31, 2024, as compared to $731,090$0 for the year ended December 31, 2023.2025, Ouras salescompared wereto $1,342,931 for the year ended December 31, 2024,2024. Our total revenue aswas compared to the $731,090$0 for the year ended December 31, 2023.2025, Ouras totalcompared revenue forto the year ended December 31, 20242024, which consisted of the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others. These figures reflect ongoing investment in product development, regulatory positioning, and commercial readiness to support future growth and deployment at scale.

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 recoveredrecovered, and the wide-body market continues to be paced by the the international travel recovery. Notably, outbound international air travel from China has gained momentum throughout 2024, helping to 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.

The global adoption of 5G is projected to exceedreach 2between 3.2 billion connectionsand 4.8 billion by the end of 2024,2026. This rapid expansion represents a significant shift in mobile technology, with one projection suggesting 5G will constitute over one-third of all global mobile connections by 2026, with significant growth led by nations such as Japan, South Korea, China, and India. This adoption is paving the way for the development of 6G technologies, with government and private sector investments already underway in research, standardization, and early-stage development. Alongside 5G, there is an accelerating demand for enterprise and industrial connectivity solutions, particularly in the form of private 5G networks and satellite-enabled backhaul services. These developments reflect the growing need for robust, scalable, and flexible networks that can meet the demands of a rapidly evolving digital landscape.

Mobile technologies and services continue to play a crucial role in global economic development, contributing an estimated 5.8%6.4% of global GDP in 2025, with reports indicating this substantial impact continued into early 2026 as the sector generated $7.6 trillion in economic value added. This contribution is projected to grow to 8.4% of global GDP in 2024,by which2030, representswith overthe $6.5 trillion intotal economic value.impact expected to reach $11.3 trillion. Looking to the future, innovations in AI-driven network optimization, edge computing, and secure mobile backhaul are expected to further drive the adoption of mobile services across various critical sectors, including energy, transportation, and disaster response. These advancements will be pivotal in ensuring the continued resilience and growth of global telecommunications infrastructure.

TheBased on reports covering the Business Continuity Management (BCM) Solutions market, the global BCM market was valued at approximately $6.28$2.33 billion to $2.60 billion in 2025 2026 and is projected to reach a CAGR of 16.33% from 2025 to 2032 (P&S Intelligence). Market expansion is led by heightened awareness of business continuity risks and increasing regulatory pressures across key industries.

The Company is strategically positioned at the forefront ofwithin the rapidly growing satellite communications sector. In addition to being licensed as a Telecom telecommunications operator in Japan and Taiwan, the Company secured a regional satellite service spectrum usage permit in Taiwan on April 27, 2023. Furthermore, as a distribution partner for Eutelsat OneWeb’s Low Earth Orbit (“LEO”) satellite servicesservices, – granted ineffective September 202426, 2024, –and through its Master Services Agreement with a global U.S.-based satellite communications provider, effective May 26, 2026, the Company has expanded its access to satellite connectivity solutions across both LEO and Geostationary Earth Orbit (“GEO”) networks. These relationships enhance the CompanyCompany’s is well-equippedability to support nationalcommercial, government, and enterprise-levelenterprise initiatives aimedrequiring resilient atcommunications strengtheninginfrastructure SATCOMand strengthen its position in addressing growing demand for satellite-enabled connectivity within communicationits resilience.authorized markets.

ThisThese authorizationauthorizations allowsenable usthe Company to provide broadband satellite communications services across keymultiple sectors, including mobile backhaul, enterprise communications, maritime, aviation,aero, land mobility, and tacticaldefense-related defense.applications. WithIn theresponse globalto rise inincreasing demand for resilient communications infrastructure, the Company offers SATCOM Business Continuity Planning (“BCP”) and Network Resilience Solutions, initially focusingfocused on the high-growth Asia-Pacific region. Japan and Taiwan, given their strategic importance amidand risingincreasing geopoliticalemphasis tensions,on arecommunications resilience, atrepresent thekey coremarkets offor these efforts.offerings.

In response to escalating geopolitical tensions and vulnerabilities in undersea communicationcommunications infrastructure, both Taiwan and Japan have significantly increased their investments in network resilience. These investmentsinitiatives reflect a broader commitment to strengthening communications infrastructure, enhancing national security preparedness, and implementing advanced technologies to mitigatemitigating risks fromassociated sabotage,with cyberattacks, infrastructure disruptions, and natural disasters.

As a distribution partner of Eutelsat OneWeb’s Low Earth Orbit (“LEO”) satellite services,services and through its Master Services Agreement with a global U.S.-based satellite communications provider for satellite communications products and services in Japan and Taiwan, the Company is alignedpositioned withto support these national resilience strategies.initiatives. OurThe Company’s solutions include enterprise network redundancy, server load balancing, and disaster recovery infrastructure—each tailored designed to support the security andcommunications continuity goalsobjectives ofin Taiwan, Japan, and alliedother regional partners.markets. Additionally,In addition, the Company’s SATCOM Business Continuity Planning (“BCP”) solutions serve both enterprise and consumer markets. By deploying mobile,mobile and vehicle-based SATCOM systems leveraging both LEO and GEO connectivity, systems,the weCompany seeks to provide criticalcommunications connectivitycapabilities for disaster recoveryrecovery, emergency response, and wartimeother scenarios,scenarios ensuringin operational continuity whenwhich terrestrial networks aremay be unavailable or disrupted.

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 OctoberSeptember 12,30, 2025.2026.

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

Revenue. Our salestotal wererevenue $1,342,931was $0 for the year ended December 31, 2024,2025, as compared to the $731,090 for the year ended December 31, 2023. Our total revenue for the year ended December 31, 2024 consisted of the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others.others for the year ended December 31, 2024.

Cost of sales. Our cost of sales includes the direct costs of our raw materials and component parts, as well as the cost of labor and overhead. Our cost of sales was $1,145,163$0 and $1,810,876$1,145,163 for the years ended December 31, 20242025 and 2023,2024, respectively. The cost of sales for the year ended December 31, 2024 consistconsisted of cost of ground antenna and other equipment units purchased from a related party and and others in the amount of 1,021,563$1,021,563 and $123,600, respectively.

Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses increaseddecreased by $8,287,228 $8,915,218 to $15,202,129 for the year ended December 31, 2025, from $24,117,347 for the year ended December 31, 2024, from $15,830,119 for the year ended December 31, 2023. 2024. Such operating expense increase decrease was mainly due to the increasedecrease in R&D expense, stock basedstock-based compensation, amortizationsalaries expense, and depreciationprofessional expense and other operation expensefee in the amount of $3,283,998,$4,438,652, $3,983,252,$3,018,688, $827,754,$1,946,312 and $1,545,478,$368,490, respectively, which was offset by the decrease increase in professional fee,other andoperation impairment loss on goodwillexpenses in the amount of $512,148, and $4,560,619,$908,951, respectively.

Net non-operating loss. We had $5,272,872 $3,070,144 and $2,360,799$5,272,872 net non-operating loss for year ended December 31, 2024,2025, and 2023,2024, respectively. Net non-operating loss for the year ended December 31, 2024,2025, primarily consisted of interest expense of $1,164,631,$1,428,168, loss from change in fair value of SAFE liabilities of $412,800, $610,000, and impairmentforeign loss on investment of $3,699,278. Net non-operating income for the year ended December 31, 2023, primarily consisted of redemptioncurrency loss of $855,620, interest expense of $1,509,429, foreign currency exchange loss of $131,214, and unrealized investment loss of $105,796.$516,590.

Loss before income taxes. Our loss before income tax is $18,272,273 for the year ended December 31, 2025, as compared to the loss of $29,192,451 for the year ended December 31, 20242024, asa compared to the lossdecrease of $23,831,323$10,920,178, for the year ended December 31, 2023, an increase of $5,361,128, or 22.5%,37.4%, as a result of the factors described above.

Total comprehensive loss. As a result of the cumulative effect of the factors described above, our total comprehensive loss increaseddecreased by $5,067,838,$10,740,399, or 21.3%,37.2%, to $18,153,792 for the year ended December 31, 2025, from $28,894,191 for the year ended December 31, 2024, from $23,826,353 for the year ended December 31, 2023.2024.

In assessing our liquidity, we monitor and analyzes its cash on-hand and its operating and capital expenditure commitments. Our liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been utilized to finance our working capital requirements. As of December 31, 2024,2025, we had cash outflow from operating activities of $5,649,924$5,635,927 and had cash and restricted cash of $109,227.$72,579. Our working capital deficit was $58,439,778$70,539,468 as of December 31, 2024.2025. These conditions give rise to substantial doubt and uncertainty regarding the our ability to continue as a going concern. If we are able to carry out our plans as detailed below, we could alleviate this doubt.

In connection with the planned Merger with IXAQ, we hashave 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-showsroadshows 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$8.9 million of cash (net of transaction costs and depending on the amount of shareholder redemptions) contributed from the IXAQ side as a result of the Merger.

Our ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As of December 31, 2024,2025, we expect approximately $28.4$23.2 million convertible notes and approximately $10.0 million SAFE can be converted into equity upon Merger.

We also expects to begin generating significant recurring revenues in fourthfirst quarter 2025,2027, including in connection with the OneWeb Distribution Partner Agreement entered into between Aerkomm Japan, as Distribution Partner, and OneWeb on October 1, 2024, pursuant to which Aerkomm Japan was appointed as a distributor for OneWeb in Japan and Taiwan and we had made our first delivery of a certain classified radar system to a governmental defense customer on October 24, 2024.

Net cash provided by and used in operating activities was $5,649,924 for the year ended December 31, 2024, as compared to $2,145,787$5,635,927 for the year ended December 31, 2023.2025, as compared to $5,649,924 for the year ended December 31, 2024. In addition to the net loss of $29,194,851, $18,274,673, the decrease in net cash used in operating activities during the year ended December 31, 20242025 was mainly due to increasedecrease in inventories, otheraccounts receivable,payable and prepaymentoperating fromlease customer – related partyliability of $567,443, $269,882,$300,099 and $644,570,$145,783, respectively, offset by non-cash items of $12,179,923$5,961,248, which consisted of depreciation and amortization, stock-based compensation, non-cashloss R&Dfrom expense,disposal equipment, change in fair value of SAFE liabilities, and impairment loss on investment.investment, loss on inventories write off, loss on disposal of subsidiaries, and gain on settlement of accounts payable. The decrease also offset by decrease in prepayment for equipment and intangible assets – customer projects, increase in account payable, increase in accrued expense,expense and increase in other payable of $3,9552,458,$5,016,463 and $611,213, $5,461,681and $2,489,968,$2,135,460, respectively.

Net cash cashprovided by and used in operating activities was $2,145,787$5,649,924 for the year ended December 31, 2024, as compared to $2,145,787 for the year ended December 31, 2023. In addition to the net loss of $23,833,723,$29,194,851, the decrease in net cash used byin operating activities during the year ended December 31, 20232024 was mainly due to increase in theinventories, cashother usedreceivable, and prepayment from customer – related party of $567,443, $269,882, and $644,570, respectively, offset by non-cash items of $12,179,923 which consisted of depreciation and amortization, stock-based compensation, non-cash R&D expense, change in prepaidfair expensevalue of SAFE liabilities, and impairment loss on investment. The decrease also offset by decrease in prepayment for equipment and intangible assets – customer projects, increase in account payable, increase in accrued expense, and deposits of $1,626,933, $219,500, respectively, offset by the increase in other receivable-related parties, and accrued expenses, prepaid from customer-related party and other payable of $252,329,$3,952,458, $3,446,193,$611,213, $5,276,122,$5,461,682 and $3,836,063,$2,483,498, respectively.

Net cash provided by financing activities for the yearsyear ended December 31, 2025 was $5,027,678 compared to $895,228 for the year ended December 31, 2023 was $8,430,528.2024. Net cash provided by financing activities for the year ended December 31, 20232025, was mainly attributable to the net proceeds from proceedsSAFE from injectionnotes of subscribed capital of $5,004,000$4,000,000 and proceeds from short-term loansloan of $3,780,041,$2,953,872, offset by the repayment of short-term loan of $330,848.$1,929,563.

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” or “our company” are to the combined business of Aerkomm Inc., a Nevada corporation, and its consolidated subsidiaries, including Aircom Pacific, Inc., a California corporation and wholly-owned subsidiary, or Aircom; Aircom Pacific Ltd., a Republic of Seychelles company and wholly-owned subsidiary of Aircom; Aerkomm Pacific Limited, a Malta company and wholly owned subsidiary of Aircom Pacific Ltd.; Aircom Pacific Inc. Limited, a Hong Kong company and wholly-owned subsidiary of Aircom; Aerkomm Japan, Inc., a Japanese company and wholly-owned subsidiary of Aerkomm; and Aircom Telecom LLC, a Taiwanese company and wholly-owned subsidiary of Aircom, Aircom Taiwan, or Aircom Beijing.Aircom.

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.

The IATA (International Air Transport Association) in MayJune 20252026 issued a report entitled Passenger Market Analysis.

The discussion below relates to our twothree three months periods ended on MarchJune 31,30, 2026 and 2025.

Comparison of Three Months Ended MarchJune 31, 30, 2026 and 2025

The following table sets forth key components of our results of operations during the three months ended MarchJune 31,30, 2026 and 2025.

Revenue. Our total revenue was $28,454 and $0 for the three months ended MarchJune 31,30, 2026 and 2025, asrespectively, weprimarily didattributable notto recognizethe anyrecognition of $28,454 in revenue from the sale of satellite tracking boxes with transmission function during eitherthe period.three months ended June 30, 2026.

Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses decreased by $203,016$832,275 to $2,876,468 for the three months ended March 31, 2026, from $3,079,484$2,480,668 for the three months ended MarchJune 31,30, 2026, from $3,312,943 for the three months ended June 30, 2025. Such operating expense decrease was mainly due to the decrease in stock-based compensation and professionalother feeoperation expenses in the amount of $373,699$600,622 and $107,086,$642,998, respectively, which was offset by the increase in other operation expenses and salaries expense in the amount of $164,239 and $87,704, respectively.$452,633.

Net non-operating income ( loss). We had $7,666,775$45,903 net non-operating income and $599,248$1,693,173 net non-operating loss for three months ended MarchJune 31,30, 2026, and 2025, respectively. Net non-operating income for the three months ended MarchJune 31,30, 2026, primarily consisted of interest expense of $255,823,$256,719, decreasedloss from change in fair value of SAFE liabilities of $120,000, loss from deconsolidation of subsidiaries of $393,452,$230,000, and gain onfrom remeasurementlong-term investment of retained investment upon deconsolidation of $8,332,715.$508,775.

Income (loss)Loss before income taxes. Our income loss before income tax is $4,790,307$2,426,044 for the three months ended March 31,June 30, 2026, as compared to the loss of $3,678,732$5,006,116 for the three months ended MarchJune 31,30, 2025, ana increasedecrease of $8,469,039,$2,580,072, or 230.2%,51.5%, as a result of the factors described above.

Income tax expense. Income tax expense for the three months ended MarchJune 31,30, 2026, and 2025 were nil.$2,400. The income tax expenses mainly consist of California franchise tax and foreign subsidiary’s income tax expenses.

Total comprehensive incomeloss. (loss). As a result of the cumulative effect of the factors described above, our total comprehensive incomeloss (loss) increaseddecreased by $9,730,268,$1,371,415, or 230.1%,37.1%, to $5,501,507$2,328,129 total comprehensive income for the three months ended March 31,June 30, 2026, from $4,228,761$3,699,544 total comprehensive loss for the three months ended MarchJune 31,30, 2025.

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 MarchJune 31,30, 2026, we had cash and restricted cash of $189,036.$100,807. Our working capital deficit was $83,351,198$85,650,472 and accumulated deficit of $120,158,921$122,587,365 as of MarchJune 31,30, 2026. These conditions give rise to substantial doubt and uncertainty regarding our ability to continue as a going concern. If we are able to carry out our plans as detailed below, we could alleviate this doubt.

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 MarchJune 31,30, 2026, we had received Loans totaling NT$131,219,729 and JPY 8,900,000 (approximately $4.1$4.2 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,905,781$15,825,339 of the $20 million in aggregate loan commitments from the two Lenders was still available as of MarchJune 31,30, 2026.

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 MarchJune 31,30, 2026, we expect approximately $23.2 million convertible notes and approximately $9.9$10.1 million SAFE can be converted into equity upon Merger.

We believe it will have sufficient liquidity to fund its operations for at least the next twelve months following the issuance of these consolidated financial statements. This assessment considers our current available cash, approximately $15.9$15.8 million in aggregate available loan commitments from two lenders, $35 million in PIPE investment commitments signed concurrently with entering into the Merger Agreement with IXAQ, and additional capital expected to be raised through SAFE financings and the Benchmark relationship. In addition, approximately $33.1$33.3 million of outstanding convertible notes and SAFE are expected to convert into equity upon consummation of the Merger, which would further strengthen the our capital resources and reduce cash obligations. We also expects to benefit from the cash to be brought in by IXAQ in connection with the Merger (subject to shareholder redemptions), the anticipated ramp-up of revenue-generating commercial sales, synergies from the merger of Aerkomm Taiwan with its exclusive distributor EJECTT, Inc., and continued disciplined management of hiring and other investments. Based on these factors, we believe its working capital will be adequate to sustain our operations for the next twelve months.

Net cash providedused byin operating activities was $196,315$132,447 for the three six months ended MarchJune 31,30, 2026, as compared to net cash used in operating activities of $590,312$3,673,975 for the threesix months ended MarchJune 31,30, 2025. In additionNet cash used in operating activities during the six months ended June 30, 2026 was primarily due to non-cash items of $6,786,186, which primarily consisted of depreciation and amortization, stock-based compensation, change in fair value of SAFE liabilities, loss from deconsolidation of subsidiaries, gain on remeasurement of retained investment upon deconsolidation, and gain from long-term investment, and the decrease in operating lease liability of $114,136, offset by the net income of $4,790,307, the increase in net cash provided by operating activities during the three months ended March 31, 2026 was mainly due to$2,361,863, the increased in other payable of $1,595,525$2,224,693 and accrued expenses of $909,729, offset by decreased in non-cash items of $7,092,488, which consisted of gain from long-term investment and change in fair value of SAFE liabilities. The increase was also offset by decrease in operating lease liability of $60,644.$2,179,641.

Net cash used in operating activities was $590,312$3,673,975 for the threesix months ended MarchJune 31,30, 2025, as compared to $3,537,498$5,841,724 for the threesix months ended MarchJune 31,30, 2024. In addition to the net loss of $3,678,732, $8,687,248, the decrease in net cash used in operating activities during the threesix months ended MarchJune 31,30, 2025 was mainly due to the increased in prepaid expenses of $32,811,$41,196, other receivable of $1,962,$50,186, other current assets of $1,032$2,336, deposit of $9,495, account payable of $300,000 and operating lease liability of $7,327, $15,594, respectively, offset by decreased in deposits of $6,798 and non-cash items of $1,479,591$2,838,211 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,$1,483,250, $942,827$939,378 and $76,373, $134,941, respectively.

The net cash used in investing activities for the threesix months ended March 31,June 30, 2026 was $153,633$149,616 as compared to net cash provided by investing activities of $5,077$111,643 for the threesix months ended MarchJune 31,30, 2025. Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 was mainly due to the disbursement for other receivable - related parties loans of $144,360,$140,347, cash outflow from disposal of subsidiaries of $8,280$8,284 and purchase of property and equipment of $993.$985.

The net cash provided by and used in investing activities for the threesix months ended MarchJune 31,30, 2025 was $5,077$111,643 as compared to $688,720$1,583,417 for the threesix months ended MarchJune 31,30, 2024. Net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2025 was mainly due to proceeds from other receivable – related parties loans, of $122,017,$203,284, and offset by the disbursement for other receivable - related parties loans of $114,199$88,903 and cash outflow from disposal of subsidiaries of $2,741.$2,738.

Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 was $27,601$206,828 as compared to $523,223$2,263,013 for the threesix months ended MarchJune 31,30, 2025. Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 was mainly attributable to the proceeds from short-term loan of $168,141, $347,430, and offset by repayment of short-term loan of $140,540.$140,602.

Net cash provided by financing activities for the threesix months ended March 31,June 30, 2025 was $523,223$2,263,013 as compared to net cash used in financing activities of $4,353,154$1,299,953 for the threesix months ended MarchJune 31,30, 2024. Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2025 was mainly attributable to the proceeds from short-term loan of $556,149,$985,004, proceeds from SAFE notes of $1,500,000 and offset by repayment of short-term loan of $32,926.$221,991.

Capital expenditures for the threesix months ended March 31,June 30, 2026 and 2025 were $993$985 and $0, respectively.

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 isare material to an investor in our securities.

In connection with the Simple Agreement for Future Equity (“SAFE”) agreements that we entered into with four third parties set forth in Note 16,17, 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 MarchJune 31,30, 2026, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $9,900,000.$10,130,000. The valuation was determined using a Monte Carlo simulation reflecting a probability-weighted outcome of multiple scenarios, including equity financing, optional conversion, and dissolution. Key assumptions used in the simulation included an IXAQ stock price of $12.06, a risk-free rate of 3.97%,4.20%, and an annualized volatility of 48.3%.50.2%. The Company had received aggregate proceeds of $8,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the three and six months ended MarchJune 31,30, 2026, waswere ($120,000).$230,000 and $110,000, respectively.

Management subsequently evaluated goodwill associated with acquisitions completed after 2023 and determined that no impairment existed for the threesix months ended MarchJune 31,30, 2026 and 2025.

As of MarchJune 31,30, 2026 and December 31, 2025, goodwill was $4,573,819.

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 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 and six months ended MarchJune 31,30, 2026 and 2025, the Company recorded no impairment charges for its investments.