UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended:December 31, 20172023

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

For the transition period from ____________ to _____________

Commission File No. 333-192093000-55925

AERKOMM INC.

(Exact name of registrant as specified in its charter)

923 Incline Way #39, Incline Village, NV 89451

44043 Fremont Blvd., Fremont, CA 94538

(Address of principal executive offices)

(877) 742-3094

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: NoneCommon Stock, $0.001 par value per share

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐  No ☒

As of June 30, 20172023 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported on The OTCQB Market)the OTC Pink Market tier) was approximately $65,741,478.$23,524,331.  Shares of the registrant’s common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were a total of 41,460,09717,962,613 shares of the registrant’s common stock outstanding as of March 15, 2018.May 6, 2024.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Aerkomm Inc.

Annual Report on Form 10-K

Year Ended December 31, 20172023

TABLE OF CONTENTS

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” and elsewhere in this annual report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this annual report may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements. 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law. 

You should read this annual report and the documents that we reference in this report and have filed with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. 

This report includes market and industry data that has been obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management’s knowledge of such industries has been developed through its experience and participation in these industries. While our management believes the third-party sources referred to in this annual report are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this report or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts, in particular, are estimates only and may be inaccurate, especially over long periods of time. Furthermore, references in this report to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this report.

ii

Summary of Risk Factors

Our annual report should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by similar companies. Our ability to realize our business objectives and execute our strategies is subject to risks and uncertainties, including, among others, the following:

Risks Relating to Our Business

Risks and uncertainties related to our current and future business include, but are not limited to, the following:

Risks Relating to Our Industries

Risks and uncertainties related to our industries include, but are not limited to, the following:

Risks Relating to Our Technology and Intellectual Property

Risks and uncertainties related to our technology and intellectual property include, but are not limited to, the following:  

Risks Relating to Ownership of our Common Stock

Risks and uncertainties related to our common stocks include, but are not limited to, the following:

In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed in Item 1A. “Risk Factors” and elsewhere in this annual report before investing in our common stocks.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

Stock Split

On January 9, 2017, we completed a 1-for-10 reverse split of our issued and outstanding common stock. Accordingly, all share and per share information in this report has been adjusted to give retroactive effect to such reverse split.

PART I

ITEM 1. BUSINESS.

Overview

With advancedWe are a development stage innovative satellite communication technology company providing carrier-neutral and software-defined infrastructure to deliver mission-critical, multi-orbit satellite broadband connectivity for the public and private sectors.

We offer a range of next-generation technologies that bring high-throughput performance, interoperability and a uniquevirtualization to provide high performance and resilient end-to-end broadband connectivity to our customers in collaboration with satellite or constellation partners and mobile network operators.

Our business model is asset-light and far less capital intensive than most companies operating in the space industry as we as a service provider of in-flight entertainment and connectivity,do not operate, or IFEC, solutions, intend to provide airline passengers withoperate, our own satellites or constellations.

Our key proprietary cutting-edge technology is a universal terminal that we develop. It provides carrier-neutral satellite broadband in-flight experience that encompassesaccess. These terminals are designed to meet the diverse needs of users across various sectors, and connecting those users to the right satellite, independent of which orbit it is located in, ensuring seamless connectivity and unparalleled performance.

Our universal terminals consist of both a wide range of service options. Such options include Wi-Fi, cellular, movies, gaming, live TV, and music. We plan to offer these core services, which we are currently still developing, through both built-in in-flight entertainment systems, such as a seat-back display,multi-orbit flat panel antenna (FPA), or electronically steered array (ESA), as well as a carrier-neutral, software-defined modem.

Our groundbreaking glass semiconductor ESA antenna technology enhances performance by more than 50% in terms of throughput per square inch, compared to other antenna designs and constructions. The advantages of our ESA technology mean that our universal terminals can be smaller and lighter while also consuming less power and generating less waste heat than other satellite broadband terminals, while also delivering high throughput.

Our work on passengers’ personal devices. We also expectcustom beamformer chips, or application specific integrated circuits (ASICs), and on custom radiofrequency (RF) chipsets aims to optimize power and performance, enabling seamless connectivity across multiple orbits.

Our modem is designed with a software-defined radio (SDR) to provide content management servicessecure and e-commerceagile signal transmission with military-grade security features. Our work on a custom high-speed analog-to-digital (ADC) chipset aims to unlock hybrid-orbit links and to enable advanced signal intelligence capabilities.

In addition to designing and developing proprietary technologies for end-to-end solutions relatedbased around our universal terminal, we also strategically source and integrate partner technologies to create robust and reliable satellite networks that can be tailored to meet the demands of public and private sector clients.

To enable resiliency and scalability, we are also at the forefront of implementing virtualization for satellite communications through our software-defined approach, which enhances flexibility, scalability, and efficiency and allows for dynamically adapting to evolving communication needs.

By orchestrating a comprehensive system of technologies, we endeavor to revolutionize satellite communication alongside our industry partners, delivering unparalleled capabilities to empower industries and individuals worldwide.

Our technologies, combined with our current and prospective regional satellite operators licenses, enable us to be a distribution partner for our current and potential satellite operator partners’ bandwidth. We aim to identify, unlock and expand new use-cases for satellite communications, providing value both to our IFEC solutions.customers, and to enable new revenue streams for both ourselves and for our satellite operator partners whose bandwidth we resell.

We plan

Merger Agreement with IXAQ

On March 29, 2024, we entered into a business combination agreement (the “Merger Agreement”) with IX Acquisition Corp., a Cayman Islands corporation (“IXAQ”) and AKOM Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of IXAQ (“Merger Sub”). Pursuant to partner with airlinesthe terms of the Merger Agreement, we and offer airline passengers free IFEC services. We planIXAQ have agreed to generate revenue through advertising and in-flight transactions. We believe that this is an innovative approach that differentiates us from existing market players.

To complement and facilitate our planned IFEC service offerings, we intendeffect a business combination (the “Merger”), subject to build satellite ground stations and related data centers within the geographic regions where we expect to be providing IFEC airline services. Initially, we are planning to build our first ground station and data centersatisfaction of conditions set forth in the Asia region, subjectMerger Agreement described briefly below. Additional information relating to the availability of sufficient capital and an appropriate ground location.

Our Corporate History and Structure

We were incorporatedMerger along with the Merger Agreement can be found in our Current Report on Form 8-K filed with the State of NevadaSEC on August 14, 2013 underApril 4, 2024. The Merger Agreements contemplates that:

Pursuant to the name Maple Tree Kids, Inc. We were incorporated in order to acquire by merger allterms of the limited liability company interestsMerger Agreement, each share of Maple Tree Kids LLC, a Vermont limited liability company, or MTK LLC, which was completed on September 27, 2013. Our company was the surviving company in the merger and the separate existence of MTK LLC ceased and we succeeded to all of the assets of MTK LLC as a result of the merger. Upon completion of the merger, we were initially engaged in the business of selling infant and toddler products through the internet.

On December 28, 2016, Aircom purchased 700,000 shares of our common stock held by Ms. Irina Goldman, our then sole director, officer and principal stockholder, for $320,000, pursuant to a stock purchase agreement among Aircom, Ms. Goldman and our company dated as of that date. Such shares represented approximately 86.3% of our issued and outstanding common stock as of the closing. Accordingly, as a result of the transaction, Aircom became the controlling stockholder of our company.

On January 10, 2017, we changed our name to Aerkomm Inc. in anticipation of our new business.

On February 13, 2017, we acquired all of the issued and outstanding capital stock of Aircom in exchange for 40,000,000 shares of our common stock. In addition, at the closing of the acquisition, Aircom returned all 700,000 shares of our common stock held by it and we immediately cancelled such shares. As a result of this transaction, Aircom became our wholly-owned subsidiary and the former shareholders of Aircom became the holders of approximately 87.81% of our issued and outstanding capital stock on a fully-diluted basis. For accounting purposes, the share exchange transaction with Aircom was treated as a reverse acquisition, with Aircom as the acquirer and our company as the acquired party. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the acquisition, we are referring to the business and financial information of Aircom and its consolidated subsidiaries.

Following the consummation of this acquisition, we discontinued our business of selling infant and toddler products through the internet and instead solely engaged in the business of providing IFEC solutions through Aircom.

Upon the closing of the reverse acquisition on February 13, 2017, Mr. Jeffrey Wun, our sole director and President, Treasurer and Secretary, resigned from his positions as President, Treasurer and Secretary. On the same date, the following persons were appointed to our board of directors: Peter Chiou, Jan-Yung Lin, Colin Lim and Barbie Shih. In addition, Peter Chiou was appointed as our Chairman, Chief Executive Officer and President.

On December 29, 2017, stockholders of the Company holding 33,230,902 shares of the Company’s outstanding common stock, or approximately 80.15% of the outstanding common stock of the Company votedissued and outstanding immediately before the closing of the Merger (other than any such shares that were held by written consentdissenters to the Merger exercising appraisal rights, the “Merger Shares”) will be converted into shares of Class A Common Stock of IXAQ based on a Closing Purchase Price (as defined in lieuthe Merger Agreement) for the Company of $200,000,000 (as may be adjusted under the Merger Agreement prior to the closing of the Merger) and a price of $11.50 per share of Class A Common Stock of IXAQ (thereby resulting in the holders of Merger Shares receiving 17,391,304 shares of Class A Common Stock of IXAQ assuming no adjustment from the $200,000,000 Closing Purchase Price). Further, if certain milestones are achieved in the five years following the Merger, those who held Merger Shares immediately before consummation of the Merger will be entitled to receive their pro rata share of up to an aggregate of an annual meeting to electadditional 17,391,304 shares of Class D Common Stock of IXAQ (as may be adjusted under the following six (6) personsMerger Agreement prior to the board of directorsclosing of the Company to serve untilMerger), representing an additional Incentive Purchase Price (as defined in the Company’s next annual meeting or until their resignations are duly tendered and accepted: Jeffrey Wun, Jan-Yung Lin, Colin Lim, Raymond Choy, Chih-Ming (Albert) Hsu, and James J. Busuttil. Peter Chiou, Barbie Shih and Robert Lu were not re-electedMerger Agreement) of $200,000,000 that is additional to the Company’s board of directors$200,000,000 Closing Purchase Price for the Company under the stockholders’ written consentMerger Agreement.

In addition to closing conditions that are usual and customary for a transaction like the Merger, the Merger Agreement closing conditions include that at least $45,000,000 of investor PIPE (private investment in lieupublic entity) financing commitments (inclusive of annual meeting.

On December 30, 2017,SAFE (simple agreement for future equity) financing obtained by the Company’s board of directors by unanimous written consent appointed Mr. Jeffrey Wun as President and Chief Executive OfficerCompany before the closing of the Company, effective December 31, 2017. Mr. Chiou resignedMerger) are obtained for the combined company resulting from these positions, effective December 31, 2017, and is expected to becomethe Merger, unless waived by IXAQ. As of date of this filing, PIPE agreements for aggregate commitments of $35,000,000, at a consultant to the Company for a short periodprice of time. On January 22, 2018, our board of directors appointed Mr. Wun as its chairman.

$11.50 per share, have been signed with Investors.

We are a holding company. All of our business operations are conducted through Aircom and its subsidiaries. The chart below presents our corporate structure asAs of the date of this report:

On October 13, 2016, Aircom acquired Aircom HK for $100,000. Aircom HK is a Hong Kong limited company formedAnnual Report on October 3, 2008 as Yanwei Information Technology Limited. Aircom HK changed its name to Dadny Inc Limited on July 22, 2015 and changed its name again to Aircom Pacific Inc. Limited on July 22, 2015. Aircom HK is in chargeForm 10-K, the Insiders of all of Aircom’s business and operations in Hong Kong and China. Aircom HK is applying for, and will be the holder of a Validation of Supplemental Type Certificate, or VSTC, issued by the Hong Kong Civil Aviation Department, or HKCAD. Presently, Aircom HK’s primary function is business development, both with respect to airlines as well as content providers and advertising partners based in Hong Kong and China. It is also actively seeking strategic partnerships in those areas, through which Aircom may leverage its product offerings to provide enhanced services to prospective customers. Aircom also plans to provide local support to Hong Kong-based airlines via Aircom HK and Aircom HK owned teleports locatedCompany (as defined in the Hong Kong areas.Merger Agreement) have all signed Company Support Agreements in favor of the transaction.

On December 12, 2016, Aircom acquired Aircom JapanOur Strategic Position

The Company is an innovative satellite technology company providing multi-orbit broadband connectivity solutions, based around our universal terminal. Our carrier-neutral and software-defined infrastructure enables end-to-end satellite broadband connectivity across multiple orbits, such as low-earth orbit (LEO), medium-earth orbit (MEO), geostationary-earth orbit (GEO), and highly elliptical orbit (HEO). We serve both public and private sectors, including Aerospace & Defense and Civilian Telecommunications.

We have a range of next-generation satellite technologies that offer broadband connectivity by collaborating with satellite partners and mobile network operators to link users and platforms on the edge to core infrastructure hubs. The Company has established a strong engagement with leading satellite constellation operators spanning multiple orbits, including LEO, MEO, GEO and HEO. Additionally, our technology is currently being implemented in the Aerospace & Defense market, having been tested in full-scale operational scenarios.

We are developing partnerships with both public and private sector clients that have increasing demands for $600,000. Aircom Japanmulti-beam and multi-orbit satellite communications solutions. Our solutions deliver high-throughput multi-orbit connectivity in a very compact package. We can leverage these advantages in minimizing size, weight and power without compromising performance to open up new use cases and applications for satellite communications.

We have considerable multi-national technical expertise with executives and innovators drawn from semi-conductors, aerospace, defense, dual-use technology, telecommunications and satellite communications sectors. In the defense sector, we have been pioneering a first-of-its-kind satellite communications architecture for unmanned aerial vehicles (UAVs) engaged in intelligence, surveillance, and reconnaissance (ISR) missions with our development partner and customer.

By late 2023, our technology was formed under the law of Japantested and achieved positive results in operational environments. We anticipate starting to deliver on August 29, 2011 as Dadny (Japan) Inc.our first major contract in 2024. We will continue to invest in our talent, our technology and changed its name to Aircom Japan, Inc. on July 1, 2016. Aircom Japan is responsible for Aircom’s business development effortsour partnerships and general operations located within Japan. Aircom Japan is applying for, and will be the holder of, a Satellite Communication Blanket License, which is necessary for Aircom to provide services within Japan. Aircom Japan will also provide local support to airlines operate within the territory of Japan. We do not expect to be in a position to successfully launch our service offerings in Japan until sometime in 2019.introduce higher volume and higher margin solutions by 2026.

Aircom Seychelles was formed

Overview of our capabilities, competitive edge, markets and opportunities 

Our key standout capabilities deliver differentiated solutions:

Our glass semiconductor antenna transmits and receives 50% Mbps more throughput per square-inch compared to previous state-of-the-art satellite broadband terminals.

Our universal terminals, including our multi-orbit glass semiconductor antennas and software-defined radio (SDR) modems, aim to provide carrier-neutral broadband connectivity. These terminals are designed to meet the diverse needs of users across various sectors, delivering high-quality connectivity and performance regardless of which satellite or which orbit they are using.

Our software-defined core network waveforms integrate satellites and constellations across all major orbits, as well as 5G advanced and emerging 6G non-terrestrial networks (NTN). This approach enhances flexibility, scalability, and efficiency, allowing for dynamic adaptation to evolving communication needs.

Our competitive edges are:

Markets – We believe that we are at the point of monetization, poised to deliver differentiated solutions in the fast-growing market for satellite communications.

According to a 2023 annual report by Aircom underBoeing on the lawscommercial aviation industry, reports by the Teal Group on the unmanned aerial vehicle (UAV) industry, and reports by NSR on the role of Seychelles on December 15, 2009satellite communications for the telecommunications industry, we believe that our target segments of Aerospace & Defense and Civilian Telecommunications are projected to grow threefold, from approximately $20 billion to $60 billion by 2030. Geopolitical conflicts are driving the adoption of dual-use applications for satellite communications.

We believe there are a numerous opportunities to rapidly develop the Company.

We have successfully delivered solutions to our development partner and customer and are experiencing interest from additional potential customers. The Company’s technology has demonstrated positive results in both operational and lab environments.

We expect to execute our first major contract in 2024 and plan to invest in talent and strategic partnerships to fuel growth. Additionally, we aim to be in a position to introduce higher volume and higher margin solutions by 2026.

We bring together a constellation of expert talent, including semiconductor and satellite communication innovators, as Gulach Ltd.well as veterans in aerospace and changed its nametelecommunications commercializing dual-use technologies.

As of April 27, 2023, the Company has been awarded a regional satellite service spectrum usage permit. With this permit and our proprietary technology, we believe that we will be able to Aircom Pacific Ltd. on August 19, 2014. Aircom Seychelles was formeddevelop and expand our revenue stream from satellite services. This positions us as not only a hardware and system supplier, but also a distributor of multi-orbit satellite bandwidth \and satellite connectivity services provider, which expands the markets in which we can participate.

As a satellite service provider in Taiwan, we will be authorized to facilitate Aircom’s global corporate structureprovide satellite services in the Civilian Telecommunications market, such as for mobile backhaul, and Aerospace & Defense markets, for both business operationsaviation and tax planning. Presently, Aircom Seychelles has no operations. Aircom is working with corporatemaritime applications. We expect these capabilities also to enable us to secure network resiliency contracts.

Outlook

The Company intends to capitalize on our numerous initiatives in the Aerospace & Defense and tax advisers in finalizing its global corporate structure and has not yet concluded its final planCivilian Telecommunications markets to establish a leading position as innovators at the forefront of organization.

Aircom Taiwan, which became a wholly owned subsidiary of Aircom in December 2017, was organized under the laws of Taiwanbooming satellite communications industry. We are primed to capitalize on June 29, 2016. During the first two quarters of 2017, Aircom advanced a total of $425,000 to Aircom Taiwan, which was not during that time affiliated with Aircom, for working capital, as part of a planned $1,500,000 aggregate equity investment in Aircom Taiwan. Before Aircom Taiwan could issue equity to Aircom, because Aircom was a “foreign national” under Taiwan law, the investment must be approvedopportunities presented by the Investment Review Committeerapidly evolving satellite communication landscape, driving innovation and delivering value to customers and stakeholders.

Our Technology and Product Overview

We aim to provide asset-light end-to-end broadband connectivity with satellite partners and mobile network operators, by leveraging advanced technology and partnerships to offer innovative connectivity solutions. We will remain less capital intensive than many comparable companies in the space industry as we do not operate, nor intend in the future to operate, our own satellites or constellations.

We aim to work with a variety of satellite operators across different orbits, including LEO, MEO, GEO, and HEO. We also aim to engage with MNOs on both their 5G and 6G terrestrial technology roadmaps, as well as their plans to implement localized network resiliency to their connectivity services by deploying High Altitude Platform Stations (HAPS). This combination allows for extensive coverage and flexibility in providing broadband services to users and platforms on land, in the air, and at sea.

As a distribution partner to satellite service providers, we aim to provide hybrid-orbit services, combining the strengths of various satellite constellations to optimize connectivity solutions for customers.

Our broadband connectivity solutions aim to cater to a diverse range of users and platforms, for both military and civilian applications, in order to ensure that customers across different domains can benefit from reliable and high-speed satellite connectivity.

Our software-defined satellite core network aims to enable dynamic and programmatically efficient management of satellite networks. This technology aims to improve network and constellation performance, resilience, and adaptability to changing conditions.

We aim to orchestrate a comprehensive system of technologies to deliver differentiated capabilities to revolutionize satellite communication and to deliver unparalleled capabilities and value both to our customers and to our partners.

We design comprehensive solutions for our customers that take advantage of both the proprietary technologies that we design and develop as well as the world-class technologies that we can source and integrate from partners, as outlined below:

Our cutting-edge technology includes the development of universal terminals, providing carrier-neutral satellite broadband access. These terminals are designed to meet the diverse needs of users across various sectors and domains, ensuring seamless connectivity and unparalleled performance.

We are at the forefront of implementing virtualization for satellite communications through our software-defined radios, software-defined modems and our progress towards a software-defined non-terrestrial network (NTN) that connects satellites to users and platforms across domains. This approach enhances flexibility, scalability, and efficiency, allowing for dynamic adaptation to evolving communication needs.

Our expertise extends to system integration where we blend our expertise in satellite communications and satellite network architecture with our understanding of the needs of our customers and the platforms they are operating. We can strategically source partner technologies and integrate them together with our own systems to create robust and reliable satellite communications solutions tailored to meet the mission-critical demands of our current and prospective customers.

One of our key system-level advantages is built on our team’s fabless semiconductor chip and panel design and engineering expertise, which allows us to remain asset-light while also developing state-of-the-art technologies. With a focus on delivering superior connectivity, we believe our universal terminals for satellite communications are poised to set a new high bar for the industry.

Our universal terminals for satellite communications incorporate:

We implement an electronically steered array (ESA) or FPA using glass semiconductor processes, which is the key enabler for our universal terminals capability to connect to satellites in multiple orbits from a single antenna aperture. By virtue of being able to link to different satellites in different orbits with the same hardware, we aim to enable more reliable, higher performance and more resilient satellite communications.

Our semiconductor glass antenna can also transmit and receive 50% more Mbps per square-inch than previous state-of-the-art satellite broadband terminals. This also enables us to optimize size, weight and power, while also delivering competitive performance and resiliency to customers using our universal terminals.

Our glass antenna can also deliver multi-beam connectivity that allows for seamless or “make-before-break” handovers between satellites, as well as multi-channel connectivity that uses difference frequency bands in both licensed and unlicensed spectrum.

We are developing a carrier-neutral software-defined modem in order to provide carrier-neutral broadband connectivity over our software-defined radio (SDR). Our implementation of SDR technology aims to provide secure and agile signal transmission with military-grade security features.

Our implementation of software-defined modems aims to enable the flexibility, security, adaptability and efficiency our customers need by providing programmable signal processing functions that can be reconfigured to support different modulation and coding schemes, as well as the latest protocols and standards.

Our software-defined modems aim to enable flexibility, adaptability, and efficiency by providing programmable signal processing functions that can be reconfigured to support different modulation and coding schemes, as well as the latest protocols and standards. By applying a single hardware platform for multiple standards, we aim to create a unique system to be more flexible and compatible with different satellite constellation waveforms, and more easily upgraded for new waveforms via software updates.

Both end users and our satellite operator partners can benefit from deploying our universal terminals with our high efficiency antennas and software-defined modems. Customers benefit because they can use a single terminal to communicate across satellites, orbits and operators, which means they do not need to invest in dedicated terminals for each satellite, orbit or operator they wish to connect with. Furthermore, our universal terminals aim to deliver high-performance in a package that takes up less size, weight and power than other systems, end users may experience additional benefits in terms of total cost of ownership when choosing our universal terminals.

For satellite operators, the high efficiency of our glass semiconductor antenna and the software-programmability of our modem, when used by their customers—on land, in the air, or at sea—can potentially reduce the maintenance and replacement schedule of satellites and constellations, which hare huge drivers of cost and capital expenditures across the satellite industry.

Regional Satellite Service Operation (TW)

We made strides in licensing, securing our first satellite spectrum usage permit from the Government of Taiwan. With the approval from Taiwan’s Ministry of Economic affairsDigital Affairs in 2023 of Taiwan, or the Committee. Aircom entered into an Equity Pre-Subscription Agreement with Aircom Taiwan on August 13, 2017our satellite operator license, we will continue to memorialize the termsbe one of the proposed investment. Subsequentfew satellite service providers to June 30, 2017, Aircom advanced an additional $25,000offer satellite services to Aircom Taiwan for working capital purposes. On December 19, 2017,customers in the Committee approved Aircom’s initial equity investment (valued as of that date at NT$15,150,000, or approximately US$500,000) and the purchase of the founding owner’s total equity of NT$100,000 (approximately US$3,350).region. As a result, Aircomwe are in the unique position to be the only Non-Geostationary Satellite Orbit, or NGSO, service operator in the Taiwan became a wholly owned subsidiary of Aircom.

Aircom Taiwan is responsible for Aircom’s business development effortsmarket. We have established ties with operators in the LEO, MEO, GEO, and general operations within Taiwan.  We are currently planning to locate the siteHEO sectors. 

The receipt of our first ground stationsatellite service spectrum usage permit in Taiwan, also qualifies us to apply for an ITU (International Telecommunication Union) operator’s membership. As a qualified ITU member, we should be able to expand our global operations by gaining access to the global radio frequency spectrum, regulatory compliance, international coordination and we expect that if we raise sufficient fundscooperation, and representation in global forums.

Our Markets

In recent years, with the accelerated development of the satellite industry, particularly in significant investment in LEO and MEO development, the ecosystem has matured considerably. We aim to move forward with this project (although that cannot be guaranteed), Aircom Taiwan will playsecure a significant rolesubstantial market share in buildingboth the “Ground Equipment” and operating that ground station.“Satellite Services” sectors.

Our Industry

According to William Blair’s equitya 2021 report titled “The Internetby the Satellite Industry Association, these sectors represent nearly 68% of Everything,” dated January 30, 2017, commercial in-flight connectivity, or IFC, is a rapidlyan industry valued at $386 billion. This growing $6 billion market. Global industry penetration of commercial aircraft installed with IFC has grown from less than 1% in 2008 to 25% in 2016, with the expectation of 60%-plus by 2022. Industry growth should occur from not only increased penetration, but also expected increases in the average revenue generated per aircraft.  

The global IFEC market is expected to experience highsignificant growth dueover the next decade and a half, reaching a total value of approximately $1,053 billion by 2040.

With the competitive advantages of our products and solutions, we aim to factorsleverage emerging trends and capitalize on business opportunities for growth.

We recognize rapid growth in the satellite technology communications market serving customers in both the public and private sector across the civilian telecommunications, aerospace and defense sectors. Our target segments of the global market are growing from approximately $20 billion in 2023 to approximately $60 billion by 2030, representing a 16% blended compound annual growth rate (CAGR), as outlined below.

Within civilian telecommunications, the key subset of the market we are targeting is anticipated to grow from $3 billion in 2023 to $25 billion by 2030. Market reports published by NSR indicate that “non-terrestrial networks” (NTN) will become a central feature of 5G Advanced and 6G networks, and that satellite connectivity needs of MNOs will evolve from a nice-to-have “back-up” in their 4G LTE networks into a must-have “back bone” of their 5G Advanced and 6G.

Within aerospace, one of the key subsets we are targeting is commercial aviation, which is anticipated to grow from $7 billion in 2023 to $21 billion by 2030. According to annual reports by Boeing and Airbus, commercial airlines plan to outfit approximately 70% of passenger aircraft for high-throughput inflight broadband by 2030 up from just approximately 25% in 2023, meaning that delivering a solution that is approved and qualified for both retrofit and “line-fit” installations will be necessary.

Within defense, one of the key subsets of the market we are targeting is UAVs for the military, which is anticipated to grow from $12 billion in 2023 to $16 billion by 2030, according to the Teal Group. According to the same reports, an even steeper growth trajectory is anticipated in the civilian UAV market, which is forecast to grow from $7 billion in 2023 to $20 billion by 2030.

We do not yet include this projected civilian UAV market in our target segments, but we aim to be in a strong position to enter the civilian UAV market in the future after first focusing on the defense UAV market. Similarly, we see future opportunities to enter the market for both manned and unmanned maritime and land-based vehicles and platforms for the defense industry, which are complementary to our focus on the defense UAV market, as they often include the same prime contractors and military customers.

Dual-use technologies expand how satellite broadband is used and is being driven by geopolitical conflict, as has been evident in Ukraine, where satellite broadband has been deployed with great effectiveness, including in combination with UAVs.

In response to growing demand from governments and militaries, prime defense contractors in US, NATO and Japan are reportedly developing unmanned systems for both intelligence, surveillance and reconnaissance missions (ISR) as well as for collaborative combat aircraft (CCA), or the teaming of manned and unmanned aircraft, the latter sometimes referred to as “loyal wingman”, and next generation air dominance (NGAD).

Our technologies are relevant and differentiated for all of these programs, as well as for additional manned and unmanned maritime and land-based platforms and vehicles.

Aerospace & Defense Market

In the aerospace and defense sectors, satellite communication plays a critical role in enabling various applications, including commercial aviation, in-flight connectivity (IFC), and defense ISR-type and CCA-type programs.

Commercial aviation relies on satellite communication for in-flight connectivity, enabling passengers to access high-speed internet and other services during flights. The adoption of satellite-based in-flight connectivity (IFC) solutions is expected to increase significantly in the coming years. Airlines are seeking to enhance passenger experience and differentiate their services in a competitive market.

The Fortune Business Insight report projects that approximately 70% of commercial aircraft will be equipped with high-throughput inflight broadband by 2030, up from just around 25% in 2023. This significant increase in adoption rates will necessitate both retrofitting and “line-fit” installations. As a result, the market for inflight broadband services is anticipated to grow from $7 billion to $21 billion, presenting lucrative opportunities for satellite communication providers.

In the defense sector, satellite communication supports ISR and unmanned platforms programs by providing secure and reliable communication links for unmanned aerial, maritime, and land vehicles and the vast majority of military platforms. Satellite-based communication enables real-time data transmission, command and control, and situational awareness, enhancing operational efficiency and effectiveness in defense missions.

Industry projections indicate an increase in market size from $12 billion in 2023 to $16 billion by 2030. In the Defense sector, we have been pioneering a first-of-its-kind satellite communications architecture for unmanned aerial, maritime, and land vehicles engaged in intelligence, surveillance, and reconnaissance (ISR) missions in collaboration with our development partner and the customer.

Defense

Unmanned platforms have revolutionized military operations with their versatility and agility. However, their reliance on connectivity handoffs between ground-based line-of-sight antennas, typically operating in C-band, and GEO, or GSO, satellites present several challenges that limit their effectiveness in certain scenarios.

Prime defense contractors in the US, NATO, Australia, and Japan are actively developing unmanned systems for ISR, and numerous other unmanned platforms to include CCA-type and NGAD applications. This strategic shift towards unmanned systems is expected to drive the demand for satellite communication technology, particularly for data transmission and remote-control capabilities, which can keep a “human-in-the-loop” (HITL).

Innovative programs such as the US Air Force’s Loyal Wingman Program, aim at enhancing collaborative combat capabilities. The program involves the deployment of 1,000 CCA with $6.2 billion budget by 2028, which we expect will require advanced satellite communication systems for real-time data sharing, over-the-horizon coordination, and mission execution. These CCA units serve as force multipliers, working in tandem with manned platforms to achieve strategic objectives and maintain battlefield superiority, but are just one example of how governments and militaries are considering how best to deploy both manned and unmanned platforms to accomplish defense objectives.

Collaborative Combat Aircraft, Concept Art (Source: Boeing Image)

Source: The Washington Post: How drones are controlled, 2014

We aim to offer unparalleled flexibility to defense unmanned platforms by enabling communication across six dimensions: domain, orbit, beam, carrier, frequency, and satellite. This innovative approach aims to allow users to establish multiple communication paths simultaneously, enhancing redundancy, resilience, and adaptability in dynamic operational environments, while also offering complementary functionality such as jamming.

We are well positioned to deliver high-value functionality that effectively balances performance with total cost of ownership. We are actively engaged in discussions with leading prime contractors to provide a differentiated satellite communications system tailored specifically for unmanned platforms across all domains to include CCA-type programs and are co-creating new concepts of employment and concepts of operation for satellite communications on these platforms.

Two high profile examples from the US Air Force include planning to spend more than $6 billion on CCA drone programs over the next five years, in addition to an estimate of $16 billion on the NGAD program over the same time period.

Commercial Aviation Connectivity

The February 2024 IATA (International Air Transport Association) Air Passenger Market Analysis report announced that industry- industry-wide air passenger traffic, measured in revenue passenger-kilometers (RPK), surpassed 2019 levels in February 2024, marking the first occurrence of full global recovery in both domestic and international travel segments (Chart 1).

Total RPK were 5.7% higher than February 2019 figures, while international and domestic traffic saw 0.9% and 13.7% growth over the same period, respectively. Passenger load factors in all segments were also close to pre-COVID levels, indicating the return of available seat supply and passenger demand on a global scale. Compared to the previous year, total traffic increased in 21.5%.

Growth of Aviation Industry

Immediately prior to the onset of the COVID-19 pandemic, there were, according to Airbus and Boeing, more than 23,000 commercial aircraft expansion, increasing passenger rates, rising penetration rates,flying globally, a number that was expected to more than double in the next 20 years. Both Airbus and technological advances. Boeing estimated in their respective 2023 reports that the global fleet of commercial aircraft would increase from 23,000 planes in 2019 to more than 46,000 in 2042.  

The Airbus Global Market Forecast report 2023 – 2042 predicted the following:

Source:https://www.airbus.com/en/products-services/commercial-aircraft/market/global-market-forecast

Boeing, in their Commercial Market Outlook 2023-2042 Report, presents an excellent Executive Summary of the 20-Year Market Demand.

Source: https://www.boeing.com/commercial/market/commercial-market-outlook

Growth of Private Aircraft (Business Jets / VIP)

In 2022, Airbus Corporate Jets (ACJ) conducted a survey among senior executives of U.S. businesses with an annual revenue of over $500 million. The study showed that 89% of those surveyed expected their organizations to increase their use of business jet aviation in 2023, with 25% predicting it would increase by more than half. Such customers can be expected to consider inflight connectivity to be essential.

Rapidly Growing In-Flight Internet Markets

The International Air Transport Association (IATA) expects overall traveler numbers to reach 4.0 billion in 2024 spread across 23,000 airplanes. Only about 25% of these airplanes are equipped to offer some form of onboard connectivity, and that connectively is often marked by erratic quality, slow speeds and low broadband.  Less than 25% of the world’s airline companies are providing some form of in-flight WiFi services. We believe that there is a huge market potential among the many unconnected airlines. 

According to the Boeing Report titled “Commercial Market Outlook 2019 – 2038”, it has been projected that by the end of 2030, two-thirds of the world’s aircraft fleet will have some form of connectivity, whether through retrofit or line fit at production stage. Currently, most connectivity upgrades are being done through aircraft modification as in-service aircraft are outfitted with new and high-speed systems. It is estimated that more than 1,000 commercial aircraft are being upgraded annually.

Whether aircraft connectivity is being carried out as a retrofit or built into the initial aircraft production line, demand for in-flight connectivity is increasing.

Civilian Telecommunications

In the 5G Advanced era and during the transition to 6G as defined by the 3GPP (3^rd Generation Partnership Project), the Non-Territorial Network (NTN) plays a major role in communication standards. This includes utilizing satellites across all orbits (LEO, MEO, GEO, HEO) and HAPS to extend coverage to areas currently not served by mobile communication systems, such as the sky, sea, and space.

Since the outbreak of the Russia-Ukraine war in 2022, which has showcased the importance of communications networks as critical infrastructure for modern nations, the global IFEC marketlandscape has been marked by geopolitical pressures.

The resilience of communication networks has emerged as a focal point of global attention with satellite communication assuming a critical and pivotal role.

We are prioritizing civilian telecommunications within the satellite communication industry, alongside Aerospace & Defense. This focus encompasses two key sectors: mobile backhaul via satellite and network resilience.

Mobile Backhaul via Satellite

The mobile backhaul sector is projected to see revenue was forecastedgrowth from $3 billion in 2023 to grow at$25 billion by 2030, with a compound annual growth rate (CAGR) of 49.7% (2013 Global Industry Analyst17.6% (Source: NSR “Wireless Backhaul via Satellite, 15^th Edition Report). The Asia Pacific regionnumber of 4G base stations is expectedapproximately 6 million to 7 million, while that of 5G is 3.8 million (Sources: GSMA, Huawei). Similarly, the network resilience sector is forecasted to experience more rapidrevenue growth because offrom $16.2 billion in 2023 to $33 billion by 2028 (Source: Mordor Intelligence: Network Resilience Market Forecast).

These market statistics clearly signal potential business opportunities that the demand fromCompany aims to actively pursue.

In telecommunications networks, the backhaul network provides high-capacity connections between cell sites and the core network, utilizing fiber optic cables, microwave links, and satellites. Satellite transmission is predominantly employed for mobile backhaul not only in remote areas but also in major backbones and serves as a huge population. Boeing estimates that commercial aircraft will increase from 22,510 planes in 2015 to more than 45,000 in 2035, according to its 2016 market report.crucial technology.

Satellite backhaul offers an alternative method for connecting cell sites and the core network. Despite being traditionally considered a last resort by mobile operators due to past experiences, recent advancements in satellite technologies, combined with professional services, have addressed these concerns. Today, cost-effective, and high-performing fully managed satellite backhaul solutions are readily available. These solutions empower mobile operators to swiftly deploy 4G, 5G, 5G advanced or Internet of Things (IoT) services in any location. Apart from rural deployments, mobile backhaul via satellite also serves as a backup and backbone solution in the event of outages on fiber or microwave backhauled networks.

At present, MNOs are transitioning their perception of satellite connectivity needs, moving from considering it a supplementary backup to an essential backbone, particularly as non-terrestrial networks (NTN) become integrated into 5G Advanced and 6G systems. Amidst this shift, our products and solutions are well-aligned with and fulfill the evolving market demands.

Currently, MNOs are contending with the challenges posed by oversized and costly antennas. We address this issue with our glass semiconductor flat panel antennas, featuring small form factors and high throughput capabilities. These high throughput antennas are well-suited for managing large volumes of data transmission in mobile backhaul and mobile backbone applications while also facilitating compact installation on cell sites, effectively resolving this prevalent telecommunications industry challenge.

Our Business Model

NTT DoCoMo’s document on “Research and Development for 6G Wireless” emphasizes the pivotal role of satellites in the research and development of 6G. This strategic emphasis on satellite technology as a solution has been integrated into their practical technical plan and investment strategy.

Source Link: https://www.docomo.ne.jp/27nglish/binary/pdf/info/media_center/event/mwc24/Research_and_Development_for_6G_Wireless.pdf

We are engaged in close collaboration with strategic partners, including global telecommunications service operators, telecommunications equipment manufacturers, and solution providers.

We are poised to actively pursue business opportunities within the 5G and 6G ecosystem, creating a promising future and generating solid revenue income.

We believe that our business model sets us apart from our competitors. We combine cutting-edge connectivity technology

Network Resilience

Network resilience is becoming increasingly crucial due to several interconnected factors. The growing dependence on digital services and interconnected systems amplifies the impact of network outages and disruptions, making them more costly and disruptive. Moreover, the escalation of cyberattacks, natural disasters, geographical conflicts, and infrastructure failures underscores the significance of resilient networks capable of enduring a variety of challenges. As the world moves towards 5G, 6G, and beyond, with a unique content-driven approach. Traditionally,focus on low latency and high reliability, network resilience emerges as an essential design principle to ensure uninterrupted connectivity in the face of evolving threats and increased network reliance.

Software-Defined Networking (SDN) and Network Function Virtualization (NFV) are crucial technologies that provide dynamic and flexible solutions for network management. SDN centralizes control of network traffic, enabling swift rerouting and resource allocation during disruptions. Similarly, NFV enables virtualized network functions, allowing for rapid deployment and scaling of resources to meet evolving demands or emergencies. The integration of these technologies strengthens network resilience and adaptability, ensuring smooth operations even in challenging scenarios.

The integration of diverse technologies plays a crucial role in enhancing network robustness and resilience. By combining various technologies such as fiber optics, satellites, and microwave links for backhaul, a more resilient network infrastructure can be established. Moreover, leveraging edge computing to process data locally reduces reliance on centralized infrastructure, thereby further strengthening network resilience. This strategic integration of diverse technologies ensures a more flexible and adaptable network architecture capable of withstanding various challenges and disruptions.

Major countries and governments worldwide are increasingly prioritizing network resilience. These entities are allocating significant budgets and making efforts to enhance national network infrastructure to address challenges and prevent disruptions in communication services. This emphasis extends to leveraging satellite technology and service providers, including LEO and MEO solutions.

Our Strategy

Spotlight: Utilizing Our Universal Terminal for Satellite Communications on Unmanned Platforms

We are pioneering a breakthrough in the application of in-flightsatellite communication technology by installing our universal terminals on unmanned aerial, maritime, and land vehicles. Unlike traditional C-band communications, our small form factor antenna and terminal aims to deliver new capabilities and performance for unmanned operations with compelling size, weight and power.

Today: Challenges of Current UAV Connectivity with GEO Satellites

While unmanned platforms have revolutionized military operations with their versatility and agility, their reliance on connectivity focus primarilyhandoffs between ground-based line-of-sight antennas, typically operating in C-band, and Geostationary Equatorial Orbit (GEO), or geosynchronous orbit (GSO), satellites present several challenges that limit their effectiveness in certain scenarios.

While unmanned platforms have brough compelling capabilities to militaries and governments over the profit margin derived fromlast two decades, in the sale of hardware to airlines and of bandwidth to passengers. Both airlines and passengers have to “pay to play,” which results in low participation and usage rates. We break away from this model and set a new trendlast two years with our business model, under which neither airlines nor passengersthe conflict involving Ukraine, the urgent need to pay for products or services. Furthermore, our business plan will provide our future airline partners with an opportunity to participate in our revenue sharing model. Taken together, this novel approach creates incentive for the airlinescapabilities of unmanned platforms to work with uscontinue to evolve has become evident.

Aerkomm’s Solution: “Multi-Path ^6” (domain, orbit, beam, carrier, frequency, satellite)  

We aim to offer unparalleled flexibility to defense unmanned platforms by enabling communication across six dimensions: domain, orbit, beam, carrier, frequency, and satellite. This innovative approach aims to allow users to establish multiple communication paths simultaneously, enhancing redundancy, resilience, and adaptability in dynamic operational environments, while driving passenger usage ratesalso offering complementary functionality such as jamming.

Our universal terminal for defense aims to levels management believes could reach 90% or more, consideringdrive a paradigm shift in unmanned platform satellite communication, offering unparalleled connectivity, resilience, and security for mission-critical operations. With our innovative solution, unmanned platform operators can confidently navigate complex operational environments, ensuring continuous communication and mission success.

With our extensive experience in satellite communication technology, we are uniquely positioned to serve as a systems integrator for defense payloads. By leveraging our hardware and software platforms, we have the fact that many passengers now carry more than one smart device.capability to seamlessly integrate onboard sensor payloads and other mission-specific equipment, ensuring interoperability, compatibility, and performance optimization in complex operational environments.

Our Solutions and Business Models

Defense & Aerospace

Our Defense Connectivity Solutions

Our universal terminal for defense aims to drive a paradigm shift in unmanned platform satellite communication, offering unparalleled connectivity, resilience, and security for mission-critical operations. With our innovative solution, unmanned platform operators can confidently navigate complex operational environments, ensuring continuous communication and mission success.

With our extensive experience in satellite communication technology, we are uniquely positioned to serve as a systems integrator for defense payloads. By leveraging our hardware and software platforms, we have the capability to seamlessly integrate onboard sensor payloads and other mission-specific equipment, ensuring interoperability, compatibility, and performance optimization in complex operational environments. 

We are currently developing three solutions which can be offered to the defense market.

Defense Connectivity Solutions market.

Within the defense segment, our main source of revenue is expected to be derived from contracts with militaries, governments and defense contractors for both the content channeled throughsale of our network. In other words, we plan to usesystems—the universal terminal for defense—as well as subscription-based plans for the bandwidth connectivity as a tool rather than as a commodity for sale, which we believe will allow usfrom our selected satellite operator partners.

We aim to achieve this with both retrofit solutions on manned and unmanned defense platforms already in operation being maintained by militaries and governments, as well as line-fit solutions for new manned and unmanned systems being assembled at the different defense contractors’ facilities prior to delivery to the respective militaries.

We already have an agreement in place with our first classified defense development partner and customer to develop a greater return. By providing freefirst-of-its-kind satellite communications architecture for unmanned aerial vehicles (UAVs) engaged in classified ISR missions.

We are in advanced discussion with this development partner and customer to expand the engagement based on successful technology demonstrations in 2023 and 2024. We are also directly engaged with several additional potential partners developing unmanned platforms for ISR and CCA-type missions regarding implementing our connectivity and a large volumesolutions as part of content, we believetheir programs. We cannot give any assurances at this time, however, that we will generatebe able to successfully complete any of these additional discussions. 

To capitalize on the increasing demand for satellite communications for terrestrial and maritime installations for militaries and governments, we will aim to sell or to integrate end-to-end satellite communications systems to militaries, governments and defense contractors. In addition to selling integrated end-to-end satellite communications systems, we will also aim to sell to these military and government customers the bandwidth required for the operation of our services, priced on a multiplying effectsubscription plan basis.

In some cases, we expect that the terrestrial and maritime installations may be components of a wholistic end-to-end satellite communications solution, but in other cases we expect that militaries and government customers may contract for standalone terrestrial or maritime solutions, such as to provide connectivity to individual ships or command posts.

We already have an agreement in place with our first classified defense development partner and customer for maritime and terrestrial installations as part of our end-to-end solution to support the classified ISR missions mentioned above. We also already are in discussions for standalone terrestrial customers. We cannot give any assurances at this time, however, that we will resultbe able to successfully complete any of these additional discussions. 

Within the defense segment, as an additional service to the customers interested in installing our satellite communications solutions on their manned and unmanned platforms, we are also able to support integration with onboard sensor payloads, and other payloads required by certain customer missions, as well as guidance, navigation and controls (GNC) systems, which we are already connecting to through our hardware and our software.

We already have an agreement in place with our first classified defense development partner and customer for a valuecertain level of systems integrator support for the UAV engaged in the classified ISR missions mentioned above.

We also already are in discussions for an agreement with another systems integration partner expressing interest in our universal terminal for defense as well as our wrap-around services for system integration with other payloads. We cannot give any assurances at this time, however, that exceedswe will be able to successfully complete any of these additional discussions. 

Our Defense Business Solutions

We can provide different business solutions to defense contractors, militaries and governments:

Militaries, governments and defense contractors having an existing fleet manned and unmanned platforms already operating in service will require a retrofit solution. For those defense customers who already have manned and unmanned systems in operation with no multi-orbit satellite communications system installed, we aim to offer a retrofit solution, which could be used in addition to or in place of an existing satellite communications system, if any. In most situations, we expect that the “sumfleet owner would be responsible for installing our systems under our supervision, as well as uninstalling any systems they may want to remove. The fleet owner would also be required to purchase the necessary satellite bandwidth from us to provide connectivity to its fleet.

Defense contractors manufacturing manned and unmanned platforms to which they want to add our multi-orbit universal terminals will require a line-fit solution. In most situations, we expect the installation would be done by the manufacturer of its parts.” Throughthe manned or unmanned platforms in production and certified with the platform, so our extended products, continuously expandingsystems would be delivered to the manufacturer upon request of the defense contractors or of the militaries and governments that are purchasing the platforms. 

Our customers, militaries and governments, may require custom, proprietary or classified system level integrations on the manned and unmanned platforms onto which they want our communications solutions to be installed, and may request that we provide wrap-around system integrator services to perform such installations and integrations. Similarly, some of our defense contractors partners may, from time to time, require additional system integrator support from our team due to the complex design of contemporary manned and unmanned systems. In some situations, we expect the installation of third-party payloads onto the manned and unmanned systems may still be done by the manufacturer of the manned or unmanned platforms in production, but with close supervision by and certification by our team.

Commercial Aviation Connectivity and Entertainment Solutions

We have been developing two systems which can be offered to the aviation market.

Commercial Aviation Connectivity and Entertainment market business models.

Within the commercial aviation segment, our main source of revenue is expected to be derived from contracts with commercial airlines for both the sale of our systems—both the universal terminal as well as the distributed content system—as well as subscription-based plans for the bandwidth connectivity from our selected satellite operator partners. We aim to achieve this with both retrofit solutions on commercial aircraft already in operation by airline customers, as well as line-fit solutions for new aircraft being assembled at the different aircraft manufacturers’ facilities prior to delivery to the respective aircraft lessors and airline customers. 

We already have a definitive agreement in place with our first commercial airline customer, Hong Kong Airlines (discussed below). We are in advanced discussion with several additional potential customers directly through our corporate network. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions.

We aim to complete our universal terminal for aviation system approval by Airbus and receiving the applicable airworthiness certifications, namely the European Union Aviation Safety Agency (EASA) and the US Federal Aviation Administration (FAA), by the last quarter of 2025. We will then be able to begin providing our universal terminal for aviation systems for installation on commercial airline aircraft.  

To capitalize on the private business aviation market, we will aim to sell our systems to corporate jet owners through the Airbus Corporate Jets (ACJ) and Boeing Business Jets (BBJ) programs. In addition to selling our systems, we will also aim to sell to these corporate jet aircraft owners the bandwidth required for the operation of our services, priced on a subscription plan basis.

We already have an agreement in place with our first corporate jet and launch customer, MJet GMBH (discussed below), and we have had advanced discussion with several additional potential customers both directly through our corporate network and integrated service,through Airbus. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions. 

Sales of our universal terminal for aviation system to the corporate jet market will also require the EASA and FAA certification, which we expect to delivercomplete by the last quarter of 2025, as mentioned above.

To the extent that eVTOL aircraft become a total end-to-endreal product, we aim to be in a position to sell our solutions to those companies and platforms as well.

Commercial Aviation Business Solutions

We can provide different business solutions to airline customers and business jet operators, all of which generate revenue.

Retrofit solution for ourAirlines

We aim to offer a retrofit solution to potential commercial airline customers alonghaving an existing fleet with uninterrupted professional and social life to passengers during air travel.

Weaircraft in operation having no satellite communications installed. In most situations, we expect that the fleet owner would be responsible for installing our business will generate revenue primarily through revenue sharingsystems, under our supervision, as well as uninstalling any systems they may want to remove. The fleet owner would also be required to purchase the necessary satellite bandwidth from us to provide connectivity to its fleet.

Line Fit solution for Airlines

We also aim to offer our multi-orbit universal terminals as a line-fit solution. Under this situation, the installation would be done by the manufacturer of the commercial aircraft and certified with select partners. Our revenue partners include Internet companies, content providers, advertisers, telecom service providers, e-commerce, and premium sponsors. In addition, we expectthe aircraft, so our systems would be delivered to generate incomethe manufacturer upon request of the aircraft manufacturer or its customers, either commercial airlines or aircraft lessors, that are purchasing the platforms. The fleet owner would also be required to purchase the necessary satellite bandwidth from selling premium access passesus to frequent flyers which would enable the holders to access our network with less restrictions and fewer interruptions from advertisement.provide connectivity on its fleet.

Our Contracts with Commercial Aviation Partners

Airbus SAS

On November 30, 2018, we entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus aims to develop and certify a complete retrofit solution allowing the installation of our “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models.

We expect to launch our business offerings in 2018, initially in China or Southeast Asia. We may expand our operationsagreement with Airbus to include other international markets if we determine that we can compete in such markets.

Our IFEC Solutions

We plan to provide airline passengers withAirbus models including the Airbus A330, A340, A350 and A380 series. Airbus would then apply for and obtain on our behalf a broadband in-flight experience that encompasses a wide range of service options. Such options include WiFi, cellular, movies, gaming, live TV, and music. We plan to offer our services through both built-in in-flight entertainment systems, such as a seatback display,Supplemental Type Certificate (STC) from the European Aviation Safety Agency, or EASA, as well as on passengers’ personal devices. We also plan to provide related content management services and on-board e-commerce solutions.

Our Connectivity Solutions

We expect to bring connectivity on-board aircraft with communication satellites. As depicted in the diagram below, aircraft equipped with connectivity instruments can communicate with satellites via an airborne antenna. The satellite then relays the information to a ground station, which is equipped with a high-power satellite dish and is connected to the internet through our proprietary ground system.

Satellites can communicate on different microwave frequency bands. The higher the frequency, the faster the rate at which data transmits. However, higher frequency waves are more susceptible to interference from the environment, such as rain fade. Most in-flight connectivity systems currently rely on the Ku-band for communication, though many players in the market are working to provide higher bandwidth and faster transmitting rates using the Ka-band. However, there are few Ka-enabled satellites, which limits the coverage area. We are developing a hybrid Ka/Ku satellite communication system that enables a high throughput where Ka-band coverage is available and offers global coverage where it is not. Our policy engine will make near real-time decisions based on best available bandwidth to choose between Ka and Ku-bands. In an area where Ka and Ku-band coverage overlaps, our airborne system can use both Ka and Ku-band bandwidth or choose the best option based on capacity, cost, and loading. It can also roam seamlessly between Ka and Ku-band satellites when the aircraft is moving in to or out of the Ka-band coverage area.

Our dual band system architecture brings our airline customers and their passengers the benefits of both Ka and Ku-band satellite technology. The Ka-band increases data throughput, while the Ku-band offers reliable service outside of the Ka-band coverage area or when Ka-band is not available due to weather or other interference.

In July 2015, we entered into a digital transmission service agreement with Asia Satellite Telecommunications Company Limited, or AsiaSat, for use of its AsiaSat 7 and 8 satellites, which provide access to both Ku and Ka-bands in China and Southeast Asia, for the provision of telecommunication services, including internet service. This agreement runs for a period of three years from its date of commencement, December 31, 2015. We paid AsiaSat a deposit of $775,000, which will be held by AsiaSat as security for our payment obligations and which AsiaSat may apply towards any defaults in such obligations. We are required to pay AsiaSat an annual service fee of $3,100,000, on a quarterly basis. The contract was subsequently suspended and both sides reached a settlement with respect to the Agreement in July 2017.

In March 2017, we entered into a Master Service Agreement with SKY Perfect JSAT Corporation for use of its JCSAT-2B/Asia Beam Ku-band satellite telecommunication services, teleport services and housing services. The agreement’s initial term runs for a period of three years from its commencement date of April 15, 2017, subject to the receipt of all governmental licenses and approval, and will continue be effective provided any of the services continues after the initial term. We are required to prepay $285,300 and a security deposit plus applicable Japanese consumption tax upon commencement date.

We are actively working with other satellite providers in order to accommodate airlines’ global routes and growing fleets. We are monitoring the satellite industry for growth in coverage, with recent attention on China Satcom’s plan to launch high-capacity Ka-band and Ka HTS multispot-beam satellites over the Asia Pacific region.

We plan to provide airline partners with the equipment necessary for in-flight connectivity, which is to be installed by the maintenance, repair, and overhaul service provider, or MRO, selected by the airline. The main components of each installation kit include a radome, one antenna each for Ka and Ku-band, a modem, servers, and wireless access points, among others. The complete bill of materials encompasses more than 5,000 individual parts and components. All components of the installation kit will require an Supplemental Type Certificate, or STC, from the U.S. Federal Aviation Administration or FAA, for our retrofit universal terminal for aviation, or its equivalentsAERKOMM K++ system.  

Airbus agreed to provide us with the retrofit solution, including the Service Bulletin and the material kits including the update of technical and operating manuals pertaining to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit solution, including the certification, is expected to be in the fourth quarter of 2025, although there is no guarantee that the project will be successfully completed in the relevant jurisdiction. Forprojected timeframe.

Multiple airlines, and in particular aircraft outside oflessors, will accept only Service Bulletins issued by the FAA’s jurisdiction, an additional VSTCaircraft manufacturers for the jurisdiction is required. Eachretrofit installation of any system on board their aircraft. Our agreement with Airbus aims to ensure that our system will meet this requirement for aircraft type requires its own STC and VSTC as needed. For example, a STC for anlessors who intend to purchase Airbus A320 wouldaircraft, although it does not permit us to install the same equipment onboard a Boeing 737.guarantee that airlines or aircraft lessors will purchase our AERKOMM K++ system.  

Airbus Interior Services

On October 15, 2014,July 24, 2020, our wholly owned subsidiary, Aircom,Aerkomm Malta, entered into an agreement with dMobileAirbus Interior Services, a wholly owned subsidiary of Airbus as a follow-on to the agreement that Aerkomm signed with Airbus on November 30, 2018. Airbus agreed to develop, install and certify the Aerkomm K++ System Co., Ltd., or dMobile,on a Taiwanese corporation whose Chairmanprototype A320 aircraft to EASA and FAA certification standards, and Airbus Interior Services agreed to provide current cabin upgrade solutions for Airbus aircraft operators while bringing additional flexibility and reduced lead times to the cabin upgrade process.

under this agreement, Airbus Interior Services will provide and certify, via the Airbus Design Organization Approval process, a complete retrofit solution to develop EASA/FAA certified Service Bulletins, to supply related Aircraft Modification Kits and to install the Aerkomm K++ Connectivity solution on the A320 family of commercial aircraft. This agreement also includes Airbus support for the integration of the Board is Daniel Shih, our co-founder, a former material beneficial owner of our common stockAerkomm K++ System components on the aircraft including ARINC 791 structural reinforcements and the husband of Barbie Shih, one of our former directors,related engineering work.

Airbus Interior Services will provide support for the deliveryEuropean National Airworthiness Authorities (NAA) certification as required in addition to dMobile of ground station equipment to be resold to Priceplay Taiwan Inc., or PPTW, of which Mr. Shih may be a deemed beneficial owner. According to the terms of this agreement, the purchase price for the initial system was $10,202,455, which was reduced to $6,980,000 on March 10, 2015. We delivered the initial system to dMobile on October 20, 2015 and the purchase price receivable from dMobile was offset by our payable to dMobile for a certain software purchase and a portion of the $1,000,000 prepayment dMobile paid towards the ground station equipment purchase price, leaving a balance owed by Aircom to dMobile of $471,100. In March 2017, due to changes in ground station equipment technology, both parties mutually agreed to terminate the contracts between them and dMobile agreed to accept 94,220 shares of our common stock in settlement of the $471,100 balance. For a more detailed discussion of this settlement agreement, see “Item 13. Certain Relationships and Related Transactions, and Director Independence” below. 

We will work with our hardware providers to obtain the necessary STCs or VSTCs for individual aircraft types. WeEASA certification. Airbus Interior Services will also provide training andon-site technical support to each airline’s MRO services provider(s)at the Maintenance Repair Organization (MRO) base for the installation of our equipment. Such support will also include technical, management, and operational support, with 24/7 network monitoring of the performancefirst aircraft retrofit of each aircraft’s equipment.new customer.

Our Content Solutions

Traditionally, airlines view in-flight entertainment content as a budgeted expense for which they have to pay hefty royalties. With our business model and technologies, we are able to transform in-flight entertainment into a source of revenue for our airline customers. We are teaming up with our current and future prospective airline customers to provide free onboard Wi-Fi services to passengers, which allows us to maintain data traffic control, specifically in terms of blocking or placing advertisements as needed and inserting targeted commercials.

Premium Content Sponsorship

Recently, merchants have begun to take advantage of in-flight connectivity. In May of 2015, Amazon announced its plan to sponsor free video and music streaming for its Prime Video subscribers onboard JetBlue’s planes. The Amazon and JetBlue partnership is a paradigm of a win-win affiliation between an Internet powerhouse and a provider of in-flight connectivity. Amazon gained a platform through which it could display its premium subscription services and expanded its distribution network, while JetBlue generated significant revenue simply by making its in-flight connectivity available to Amazon.

The Amazon-JetBlue partnership is only one of many examples whereby an Internet company can vastly increase its competitive edge by gaining access to in-flight connectivity. We seek to exemplify this type of relationship through collaboration with major Internet companies, such as a search engine company. We plan to promoteinstall the partner’s brand through its in-flight services by channeling all searches to the partner’s search engine. By designing the user interface around the partnered company, we can present passengers with an on-screen environment populated by its apps, logos,Airbus Interior Services-created Service Bulletin and colors, providing a powerful marketing toolAirbus kits for the company. We can also enhance recognition of our sponsors’ brand by creating a list of portalsAERKOMM K++ retrofit solution first on the in-flight system’s home screen, which leads to each sponsor’s individual page where passengers can resume their normal entertainment, social, and professional activities.

We are actively negotiating with Internet content providers to establish premium sponsorships. We have entered into a memorandumHong Kong Airlines fleet of understanding with Yahoo! to provide bandwidth sponsorship with branding potential.

Live TV

We are negotiating with television providers along12 Airbus A320 aircraft, following our certification approval. With this installation, Hong Kong Airlines should become Aerkomm’s first commercial airline partners’ flight routes to make live TV available through our IFEC system. Airlines can select live TV channels that are appropriate for each flight route. An Electronic Program Guide channel listing will be available for easy viewing and selection.customer.

Several revenue sources will be available for live TV broadcasting, including commercials before and during programs, and banners at the bottom of the screen. Banner advertisements at the bottom of the screen can be interactive which will generate pay per click, or PPC, or cost per click, or CPC, revenue in addition to the lower priced cost per thousand impressions, or CPM, revenue. In addition, we could receive sponsorship premiums from select TV programs, such as pay-per-view and shopping channels.

Social Media and Instant Messaging

We have firewalls in place both on the ground and in the air. These, in combination with our policy enforcement software, allow us to filter, classify, block, or forward services in accordance to our service and quality policies. We can control the flow of traffic for each individual application, enabling us to use a white list model through which social media and instant messaging partners can provide their users with onboard access by paying an annual fee.

We are in active discussions with Line, WeChat, WhatsApp, and other social media partners regarding an annual premium fee in exchange for user access to their applications and services during air travel. The access to other networks may be limited to a single direction or blocked entirely. For example, we could allow the users of a non-paying instant message service to receive, but not send, instant messages. When a user tries to respond to a received message, the system would present a pop-up message encouraging the user to urge the service provider to enter into a relationship with us.

Airlines can select movies, videos, and other content for their passengers through our content management system. The management system will tailor content suggestions according to the flight route and destination and automatically upload selected content to an onboard server while the aircraft is on the ground. This creates a cache that allows in-flight viewing in areas with limited or no satellite bandwidth connectivity. For premium content, we may maintain a live connection with the providers’ network for accounting and digital rights management purposes.

Video/Content on Demand

Content that is available to passengers for free will generate advertising-based revenue through commercials before and during the programming, as well as through banners advertisements. Passengers can choose to pay for premium content, such as first-run movies where available. For programming of all types, our partnered advertising agents can integrate appropriate and effective advertisements targeted to the viewer. Prior to the start of any program, users will be required to view a commercial with a length determined by the duration of the selected program. Passenger may not skip or close this commercial without closing out of the program. We can place similar advertisements before games or radio programs and during online duty-free shopping.

Frequent flying passengers will be able to purchase a premium package to allow access to unlimited movies, games, and other entertainment contents with no layered advertising. These packages will include day, trip, monthly, and annual based membership.

Search Engine

In this information age, people often refer to the Internet for information, yet few individuals are aware that every Internet search they perform generates revenue for the search engine company. Search engine providers, such as Google, Bing, and Yahoo, sell keywords, page ranking in search results, advertisement placement, and other related services. The revenue generated by a search engine fluctuates in relation to its volume of activity. We will manage search engines on a white list basis, which means that the in-flight connectivity system will only permit traffic to and from approved search engines to go through. If a passenger performs a search on a search engine that is not partnered with us, the search will be redirected to one that is.

We plan to enter into an agreement with search engine partners to share the revenue generated from passengers’ searches. As discussed under “Premium Content Sponsorship” above, we may grant exclusivity to a particular search engine provider that is a premium sponsor. Such exclusivity may be specific to certain airlines or routes.

Internet Advertising Replacement

We have invested millions of dollars in airborne satellite infrastructure in order to deliver Internet access to passengers. In the Internet traffic, more than 50% of bandwidth is consumed by advertisements in the data stream. In order to streamline bandwidth usage, our ground system will detect advertisements from a webpage and replaces them with advertisements from our advertisers or partners. We will work with Internet advertisers to present advertisements that are relevant to passengers’ interests. This system enables our partners to place their advertisements accordingly and generate revenue for both parties. These industry-leading advertisers offer destination-specific commercials and banners, which can be placed in the in-flight entertainment system and in apps and portal on personal devices. By utilizing these commercial agents to sell ad space on these systems, we plan to cover all marketable areas, expanding sales opportunities and increasing revenue.

With online advertisement utilizing both CPM and CPC models, we are able to capitalize on virtually all available ad space and work with any advertising partner.

Online/Streaming Gaming

We will make it possible to stream console-quality games in the cabin. Through gaming content partnerships, we will be able to offer PlayStation, Xbox, and other console games. Passengers will be able to play popular games from their personal device or in-flight entertainment system, invite friends to play over the network, and save their gaming data for continued play on the ground, which require high speed network in order to play those interactive action games. Our online gaming service will bring our passengers a gaming experience never seen before. We expect to generate revenue from advertisements, including banners and commercials, and from fees for premium games or sales of access passes.

Telecommunications Text Messaging Services

Through strategic partnerships with telecommunication providers, we will allow passengers to use 4G messaging services while in flight. Our in-flight system will detect whether the passenger is using a partner carrier’s network and will deliver or block messages to and from a passenger’s mobile phone accordingly. For those using a non-partner’s network, the system will urge the passenger to request that their service provider join our network. These passengers can also purchase a premium package to enable the text message service.

Destination-Based Service

With flight route and passenger information, our partners will be able to offer destination-specific merchandise and services, including hotel and rental car bookings, transportation arrangements, restaurant reservations, local tours, and ticket purchases. Travel insurance may be offered on the flight. By signing up with service partners in the region, we will share the transaction-based revenue by a fixed dollar amount or percentage of the transaction.

In-flight Trading

We have found that in-flight connectivity allows travelers to make better use of their travel time. With the uninterrupted broadband available onboard, passengers can conduct business with professionalism and ease. One example of this benefit is that we plan to collaborate with trading partners to offer financial trading services and charge a processing fee when a passenger conducts a trade in-flight.

Black Box LiveHong Kong Airlines

For reasons of flight safety, a flight recorder, commonly known as a black box, is required on every aircraft over a certain size. The flight recorder records data with respect to the various status of the flight and stores the data on a magnetic tape or solid-state disk with special coding. After retrieving the relevant information from the device, an individual can decode the data and learn what the aircraft encountered during the flight. This makes it possible to determine the potential causes of an accident. When the black box is needed, the aircraft has likely suffered an accident. A massive impact or explosion accompanies most airplane crashes, thus requiring the flight recorder to be shockproof and fire resistant. As the majority of aviation accidents happen over an ocean, the flight recorder must also be waterproof and corrosion-resistant to avoid being damaged by salt water. Despite advancements in flight recorder design and the continual improvement of the strength of its materials, records show that a large number of flight recorders were damaged and unreadable following accidents, if not lost altogether. For this reason, effective, real-time storage of in-flight data is beneficial for deducing the cause of aviation crashes and preventing them from happening again.

With this new product, Black Box Live, we expect to provide a system of real-time flight information back-up which is aimed at advancing flight safety. Under strict security measures, this new product will securely stream the flight data and crewmembers’ cockpit voice records to our cloud for airlines and authorized individuals to access and monitor. Black Box Live is in the early stages of development and, at this time, we cannot assure you when this product will reach market, if at all.

AirCinema

Our planned AirCinema solution is designed to transfer passengers’ visual and audio experience. Traditional built-in in-flight entertainment systems, in particular those in the economic cabin, are confined to very small screen and primitive audio sound. Our planned AirCinema utilizes the pico projector technology to bring supersized screen display onboard airplanes without incurring outrageous costs or adding significant weight. AirCinema will aim to deliver a screen size of up to 20” in economy seats and even bigger screen in business or first-class cabins. With such screen sizes, it will be possible for AirCinema to obtain IMAX certification. Moreover, AirCinema will be capable of providing full HD 3D Cinema experience in-flight. In addition, AirCinema will incorporate a special designed head rest with embedded speaker arrays that will deliver THX surround sound without headphones. We plan to qualify AirCinema for a theater license, which would enable us to provide first-run theater only movie titles and sell movie tickets on pay-per-view basis. Our satellite-based connectivity system could stream the movie title from ground to aircraft and simultaneously provide digital rights management, which is a prerequisite of showing a theater-only movie title. AirCinema will transform airline coach seating into theater seating and the passengers could enjoy movies with the same look and feel of sitting in a movie theater.

Aircom entered into a development agreement with Priceplay.com, Inc., or PPUS, a California corporation whose chairman is Daniel Shih, our co-founder, a former material beneficial owner of our common stock and the husband of our former director, Barbie Shih, for development of airplane passenger seats incorporating our AirCinema technology which we were to sell to PPUS and the delivery by PPUS to us of two prototype three-seat rows of seats for economy cabins. In March 2017, PPUS and Aircom mutually agreed to terminate the remainder of this contract due to changes in related technology and PPUS’ exit from this segment of the IFEC business. We will resume the development of this product upon the availability of certain new technology and additional funding. We cannot assure you at this time that we will be able to complete development of this new product offering. In settlement of the agreement with PPUS, we agreed to convert PPUS’ remaining prepayments to us of $737,000 into a subscription for 147,400 shares of our common stock. For a more detailed discussion of this settlement agreement, see “Item 13. Certain Relationships and Related Transactions, and Director Independence” below.

Yacht Communications

We have begun to develop new equipment and services to provide satellite communications to yachts, initially in the East Asia market. Our new yachts service will utilize the same satellite communication infrastructure we have developed for IFEC. We are currently in the customer demonstration stage with our yacht satellite communications equipment and services. We cannot be sure at this time that we will be successful developing or marketing this yacht product offering.

Satellite Ground Stations and Data Centers

We plan to build a satellite ground station and a data center in Asia region to support our operations in that region.

A ground station’s main purpose is to establish telecommunication links with satellites.  It houses satellite antennae and other communication equipment.  Satellite antennae must be located within the coverage of the satellites being used.  Ground station satellite antennae are substantial in size, generally between 20 to 30 feet (7 to 9 meters) in diameter.  As we expand our operation, we expect to have multiple dish antennae connecting to various satellites.  Due to the strong electromagnetic radiation emitted by the antennae, a ground station must be located in rural or industrial areas and it requires a substantial setback zone around the ground station. 

Since our IFEC business model will require collecting and processing large amounts of data, it will be beneficial for us to have access to a high capacity data center for the storage and processing of big data.  Such a data center should be built within the same region of, and close to, the ground station, because of synergies and technical advantages such as shorter network latency and cost savings in ground links between the ground station and data center. We expect that building our own satellite ground stations and data centers will, in the long run, create economic efficiencies and operational independence.   

We are actively searching for appropriate sites for our first ground station and data center in the Asia region. 

Our Contracts with Airline Partners

In June 2016,2015, we entered into a master agreement with Hong Kong Airlines Limited, a Hong Kong based airline, or Hong Kong Airlines, to install IFEC systems on-board their aircraft. Also party

On January 30, 2020, further to thisthe master agreement is Klingon Aerospace Inc., formerly known as LUXE Electric Co., Ltd., a Taiwanese corporation, or Klingon, our product development partner and value-added reseller in the region wherewith Hong Kong Airlines, operates. Daniel Shih,we signed an agreement with Hong Kong Airlines to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ solutions. 

We aim to provide our co-founder, was Chairmanuniversal terminal for aviation, or AERKOMM K++ system, for installation on Hong Kong Airlines’ fleet of Klingon from February 2015 to February 2016,12 Airbus A320 and Peter Chiou,5 Airbus A330-300 aircraft as well as our former Chairman, Chief Executive Officer and President, was Chief Executive Officer and President of Klingon from March 2015 through April 2016, prior to his joining our company in February 2017.

The implementation ofAERKOMM AirCinema system for the Hong Kong Airlines project is conditioned upon VSTC approval fromAirbus A320 aircraft. Hong Kong Airlines aims to become our first commercial airliner launch customer. 

On November 17, 2021, we signed a new agreement with Hong Kong Airlines Ltd and Ejectt Inc. (formerly known as Yuanjiu Inc.). Based on the HKCAD.long-term relationship and anticipated further co-operation between Aerkomm and Hong Kong Airlines, we agreed to aim to provide to Hong Kong Airlines a LEO-compatible universal for aviation with LEO constellation service when available. We andwill aim to deliver our equipment supplier have submitted the VSTC applicationuniversal terminal for aviation with a full certified Service Bulletin by Airbus.

Our universal terminal for aviation aims to HKCAD, but the application process is presently on hold dueintroduce high-speed internet access to the supplier’s failure to deliver a key componentseatback screens of Hong Kong Airlines’ Airbus A320 aircraft, connected via the distributed content system for airlines. Instead of the IFEC system. Presently, we do not expecttraditionally preloaded and fixed selection of in-flight entertainment, passengers would have access to high-speed internet steaming services for videos, music and social media.

In order to install the supplier to be able to delivery such key component. As a result, we are actively seeking alternative options to implementAERKOMM K++ system on the Hong Kong Airline project, including developing necessary equipmentAirlines aircraft, we will have to obtain local approval for the AERKOMM K++ system from the Hong Kong Civil Aviation (HKCAD). This HKCAD local approval will be based on our obtaining the Airbus Service Bulletin, which we expect to receive from Airbus, together with EASA certification, by sometime in 2025 or components thereof2026.

Once we receive the Airbus Service Bulletin and the EASA certification, jointly with other strategic partners. Because we cannot be sure whenthe support of Airbus, we will be able to obtainapply to the IFECHKCAD for the required local approval.

Other Airline Partners and Business Jet Prospective Customers

We are actively working with prospective airline customers to provide them with the universal terminal for aviation, or our AERKOMM K++ system. 

In connection with the Airbus project, we have also identified owners of Airbus Corporate Jet, or ACJ, as potential customers of our AERKOMM K++ system. To capitalize on this additional market, we plan to sell our AERKOMM K++ system hardware for installation on ACJ corporate jets and provide connectivity through subscription-based plans. This new corporate jet market could generate additional revenue and income for our company. As discussed below, we have entered into an agreement with Mjet GMBH, an Airbus ACJ customer.   

While, to date, we have been concentrating on Airbus customers in view of our existing agreement with Airbus, our current plan is to also begin marketing to Boeing aircraft customers and Boeing Business Jets (BBJ) customers, and we intend to acquire the necessary certification of our AERKOMM K++ system equipment for the VSTC approval, we cannot be sure when we will begin to generate revenues fromdifferent Boeing aircraft models, with a particular focus on the agreement with Hong Kong Airlines, if at all.Boeing B737 aircraft family.  

Until such time as all approvals from the HKCAD have been received, our agreement with Hong Kong Airlines only expresses the parties’ desires and understandings and will not create any legal rights, liabilities or responsibilities whatsoever and will not be legally binding on us or Hong Kong Airlines. There can be no assurance as to when we will receive the required HKCAD approvals.

Additionally, we had expected that our services would be provided to Hong Kong Airlines through AsiaSat pursuant to the terms of our agreement with AsiaSat. Now that our agreement with AsiaSat has been terminated, we will have to find a replacement satellite services provider for our future arrangement with Hong Kong Airlines. We may not be able to find a replacement of AsiaSat on reasonable terms, if at all.

We planaim to enter into business agreements with additional airline partners that willand corporate jet owners, which would allow our satellite equipment and/or entertainment servicesuniversal terminals for aviation to be installed andtogether with our bandwidth services provided, on theiradditional fleet aircraft. Under theseany such agreements, we expect that the airlines will commit to have our equipment installed on some or all of the aircraft they operate. We cannot guarantee that we will be able to enter into any such additional agreements. 

Other Agreements and Understandings with our Business Partners

Mjet Definitive Agreement: On March 6, 2019, we signed a General Terms Agreement (GTA) with Mjet GMBH, or Mjet, a corporate jet owner operating an Airbus ACJ A319 based in Vienna, Austria. On June 11, 2019, we converted this GTA into a definitive agreement with Mjet, and on June 12, 2019, Mjet placed a first purchase order with Aerkomm. The purchase order, which remains valid, provides for the provision, installation, testing and certification of our AERKOMM K++ system equipment, including the Airbus Service Bulletin and associated material kit and related connectivity services, on an Mjet Airbus ACJ A319 aircraft under the supervision of Airbus. Assuming the installation, testing and certification of our AERKOMM K++ system on the Mjet A319 (which is expected by sometime in 2025 or 2026) is successful, something we cannot guarantee at this time, Mjet will pay us a one-time fee for our equipment and a monthly fee for our connectivity services, and we will commitalso aim to begin charging Mjet for the bandwidth required to use the AERKOMM K++ system services. Assuming the success of this installation, Mjet will likely become the first recurring payment customer of our AERKOMM K++ system as well as being the launch customer of our Aerkomm K++ solution.  We cannot assure you, however, we will be able to deliver on the agreement with Mjet, or that the Mjet GTA will lead to any Aerkomm product sales.

Vietjet Air: On October 25, 2021, we signed an agreement with Vietjet Air (“Vietjet”) to provide passenger connectivity and/or entertainment services on such aircraftthem with our Aerkomm AirCinema In-Flight Entertainment and to remit toConnectivity (“IFEC”) solutions. Under the airlines a specified percentage of the revenue that we generate. We will have the exclusive right to provide Internet connectivity services on these aircraft throughout the termterms of the agreement, in contracts with airline partners. Dependingwhich remains valid, we aim to provide to Vietjet our Aerkomm AirCinema Cube IFEC system for installation on Vietjet’s fleet of Airbus A320, A321 and Airbus A330-300 aircraft. We cannot assure you, however, we will be able to deliver on the contract, installation and maintenance services may be performed by us and/agreement with Vietjet, or that the airline. These agreementsVietjet agreement will also vary aslead to who pays for installation and maintenance of the equipment.any Aerkomm product sales.

Arrangements with Our Business Partners

YahooThai Smile MOU: On JanuaryOctober 19, 2016, Aircom2021, which remains valid until October 2024, we entered into a nonbinding memorandum of understanding, which we refer to as the YahooThai Smile MOU, with Yahoo! Hong KongThai Smile Airways Company Limited, or Yahoo, pursuant to which, the parties intend to collaboratively market and provide their products and services to commercial airlines in Asia. Through its affiliates, Yahoo provides customers internet related services including software, content, communications, media and commerce services. According to the Yahoo MOU, Yahoo intends to use our in-flight entertainment and connectivity system, or IFEC, to provide in-flight services to its customers. By 2018, through co-marketing and co-branding with Yahoo, we expect to install IFEC on at least 50 aircraft in Asia. In addition, the parties intend to collaborate on destination-based marketing and develop a revenue-share scheme on the advertising revenue arising from the in-flight services. We expect that Yahoo will be the exclusive provider of pre-roll video ads on our IFEC in exchange for committed revenue from Yahoo. The parties further intend to collaborate and develop the necessary interface to support interaction and/or integration between our backend and each of Yahoo’s websites and Yahoo’s applications. All present and future intellectual property rights related to IFEC are expected to solely belong to us or the third-party or third parties from whom we obtained the right to use. The Yahoo MOU has a term of two years unless otherwise modified or terminated by the parties. This MOU expired on January 19, 2018 and we are working with Yahoo! Hong Kong to extend this MOU.

LeTV MOU: On January 29, 2016, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the LeTV MOU, with LeTV Cloud Computing Co., Ltd, or LeTV, pursuant to which, the parties intend to collaboratively market and provide their respective products and services to commercial airlines in Asia. LeTV is a public company in China that provides internet related services including video streaming, software and content to its customers. According to the LeTV MOU, LeTV intends to use our IFEC to provide in-flight services to its customers. By 2018, through co-marketing and co-branding with LeTV, we expect to install IFEC on at least 50 aircraft in Asia. The parties also intend that all present and future intellectual property rights related to IFEC will solely belong to us or the third-party or third parties from whom we obtained the right to use. The LeTV MOU has a term of two years unless otherwise modified or terminated by the parties. This MOU expired on January 29, 2018, and the Company is currently negotiating with LeTV to extend this MOU.

India MOU: On June 16, 2016, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the India MOU, with Nelco Limited, or NELCO, and NELCO’s wholly owned subsidiary, Tatanet Services Limited, or TNSL, pursuant to which, the parties intend to collaboratively market and provide their products and services to commercial airlines in India. NELCO and TNSL are both Indian companies that provide satellite communications services in India and its surrounding regions. Under the terms of the India MOU, the parties intend to jointly market our IFEC and provide in-flight services to commercial airlines in India. The parties expect to apply respectively for regulatory approvals in India as may be required for the airworthiness certificate. In addition, the parties intend to collaborate on technical and business assessment to incorporate our IFEC with NELCO’s and TNSL’s services and contents to the mutually agreed customers. The India MOU has a term of two years unless otherwise modified or terminated by the parties.

Malta MOU: On October 28, 2017, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the Malta MOU, with PanAfriqiyah, a company organized under the laws of Malta,Thailand, pursuant to which the parties intend to collaboratively market and provide their products and services to passengers of a Malta-basedto the Thai-based airline fleet.

Under the terms of the MaltaThai Smile MOU, which remains valid, the parties intend to develop, install and operate in-flight connectivity systems onboard the Malta-basedThai-based airline fleet and provide related services to its passengers.

Onurair MOU: On March 1, 2018, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the Onurair MOU, with Onurair Tasimacilik A.S., a company organized under the laws of Turkey, pursuant to which the parties intend to collaboratively market and provide their products and services to passengers of the Turkey-based airline fleet. Under the terms of the Onurair MOU, the parties intend to develop, install and operate in-flight connectivity systems onboard the Turkey-based airline fleet and provide related services to its passengers.

Global Eagle LOI: On September 26, 2017, Aircom entered into a nonbinding letter of intent, which we refer to as the Global Eagle LOI, with Global Eagle Entertainment Inc., or Global Eagle, for the development, installation and operation of certain IFEC services on selected aircraft of Malindo Airways Sdn. Bhd. Global Eagle and its affiliates are in the business of developing and manufacturing IFEC systems and solutions, including hardware, software, installation, networks services, content delivery and related services. Malindo Air is a Malaysia-based airline that operates a network of scheduled regional passenger services throughout Malaysia and to over 40 destinations. According to the Global Eagle LOI, the parties intend to develop, install and operate an IFEC system to provide onboard Wi-Fi services and content delivery on 64 aircraft of Malindo Air. The parties plan to collaborate on technical and business assessments to best combine Global Eagle’s onboard equipment and ground management systems, Global Eagle’s entertainment portal and related billing and authentication services, and our IFEC system to provide IFEC services to Malindo Air. We are expected to fund the capital expenditure for this project, including initial nonrecurring engineering, equipment and satellite bandwidth costs while Global Eagle intends to fund the operational expenditures for this project including network and bandwidth costs. In addition, until December 31, 2017, we may not directly or indirectly enter into or continue discussions with any party operating in the business of providing products and services similar to the in-flight entertainment and/or connectivity products offered by Global Eagle, in each case for the benefit of Malindo Air. This exclusivity restriction does not apply to negotiations and discussions with respect to the provision of services or products to any persons other than Malindo Air.

Airbus S.A.S. MOU: On March 7, 2018, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the Airbus MOU, with Airbus S.A.S., a company organized under the laws of France, for the development by Airbus of a complete solution relating to the installation of Aircom’s IFEC system on Airbus single aisle aircraft and the procurement by Airbus of the relevant regulatory certifications.

All of the above memorandums of understanding, or MOUs, and the Global Eagle LOI are nonbinding and as a result, they only express the desires and understandings between the parties and do not create any legally binding rights, obligations or contracts except for certain customary provisions such as exclusivity, costs and expenses, confidentiality and governing law. Any binding obligation to proceed with the transactions contemplated by the MOUs and the Global Eagle LOI would need to be included in a definitive agreement that is subject to negotiations of the parties, approvals by the board of directors of respective parties and in certain instances, approvals from regulatory authorities. There can be no assurance thatcannot assure you, however, we will be able to enter into a definitive agreement with Thai Smile, or that the Thai Smile MOU will lead to any Aerkomm product sales.

Contracts with Satellite Partners

SES Agreement:

Aerkomm and New Skies Satellites B.V. (“SES”), a Dutch company that operates a constellation of satellites in medium-earth orbit (MEO) and geostationary-earth orbit (GEO), entered into a master services agreement dated January 19, 2022 and under such agreement has entered into multiple service orders pursuant to which SES has provided the Company terminal equipment and satellite connectivity and other related services.

Aerkomm and SES also entered into a non-binding cooperation agreement dated January 10, 2022 (see Exhibit No. 10.77) in which the parties confirmed their intent to explore opportunities to collaborate with respect to technical and commercial matters making use of their combined service offerings.

We aim to expand its technical and commercial collaboration with SES in the future. We cannot assure you, however, we will be able to enter into additional material definitive agreements with SES, or that our relationship with SES will lead to any Aerkomm product sales.

Civilian Telecommunications Solutions

We are developing two solutions which can be offered to the civilian telecommunications market.

Civilian Telecommunications Solutions market business models

Within the civilian telecommunications segment, our main source of revenue is expected to be derived from contracts with mobile network operators or with mobile network equipment providers for both the leasing of our systems—the universal terminal for network resilience and the universal terminal for NTN—as well as subscription-based plans for the bandwidth connectivity from our selected satellite operator partners, where we are the distribution partner.

We aim to achieve this with hardware leasing solutions, which will provide more consistent recurring revenue, while we also aim to ensure that our customers receive the latest updates to our technology to ensure they are receiving the best service to meet their requirements. To the extent that this model would require a significant amount of working capital, we would aim to secure through a partnership with a leasing company or an asset-based financing partner.

We successfully secured the first stage bid for the verification project titled “Emerging Technology Application for Enhancing Communication Network Resilience in Emergencies or War” from the Taiwan Telecom Technology Center (TTC) on August 9, 2023. This extensive network setup is designed to validate the effectiveness of the heterogeneous resilient network architecture we proposed.

We are also in discussion with mobile network operators and selected key vendors to the mobile network operator ecosystem to secure our first commercial contracts in this segment. In parallel, we have kicked off discussions with leasing companies and financing partners to secure the necessary working capital for this business model. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions.

To manage our working capital balance, we may not be able to provide a hardware leasing model to our customers at this time. In the short term, our main source of revenue may be derived from contracts with mobile network operators or with mobile network equipment providers for both the sale of our systems—the universal terminal for network resilience and the universal terminal for NTN—as well as subscription-based plans for the bandwidth connectivity from our selected satellite operator partners, where we are the value-added reseller.

While under this model, we will not receive as much recurring revenue, until we can secure the appropriate leasing or financing partner this will be the most likely model to be implemented.

As noted above, while we are in discussions to secure our first commercial contract in this segment, we cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions. 

Our customers, principally mobile network operators, may require a bundled solution with a single charge either to Aerkomm, if we are providing a multi-orbit and multi-carrier connectivity solution, or to the selected satellite operator partner, in which case the customer would be charged a monthly fee to cover the bundle of both the universal terminals installed and the satellite bandwidth required governmental approvals. Ifor used. In these situations, we will agree a revenue sharing formula between ourselves and the selected satellite operators who are providing bandwidth to the customer through our system. Due to the small size, weight and power of our universal terminals, we aim to make it economical for whatever reasonour customers to procure satellite communications solutions at more sites across and within their networks than would be reasonable, or even practical, using a larger, less performant terminal. Therefore, by enabling net new site-acquisition for satellite communications, we aim to receive a commensurate share of the transactions contemplatedrevenue generated from our customers at those sites that are enabled by the MOUssize, weight, power and performance of our universal terminals.

As noted above, while we are in discussions to secure our first commercial contract in this segment, we cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions. 

Our Contracts with Civilian Telecommunications Partners

In Taiwan, the Global Eagle LOI doCompany’s subsidiary, Aerkomm Taiwan Inc., in collaboration with its exclusive agent, EJECTT Inc., successfully secured the first stage bid for the verification project titled “Emerging Technology Application for Enhancing Communication Network Resilience in Emergencies or War” from the Taiwan Telecom Technology Center (TTC) on August 9, 2023. The extensive network setup we proposed, “Asynchronous Satellite Network Leasing and Transmission Service Procurement Project,” is designed to validate the effectiveness of the heterogeneous resilient network architecture.

Acquisitions and Dispositions

In our fiscal year 2023, we announced the acquisition of Mesh Tech, a developer of distributed computing solutions. This acquisition enhanced our software capabilities and distributed computing portfolio for both the Aerospace & Defense and Civilian Telecommunications segments, which we expect to drive both customer acquisition and retention in the future.

We aim to continue to evaluate opportunities to advance our strategy and to better serve our customers and our partners through both acquisitions and dispositions in the future.

Research & Development (R&D)

The industries in which we compete are subject to rapid technological developments, evolving standards, changes in customer requirements and continuing developments in the communications and networking environment. Our continuing ability to adapt to these changes, and to develop innovative satellite and communications technologies, and new and enhanced products and services, is a significant factor in maintaining or improving our competitive position and our prospects for growth.

We continue to make significant investments in next-generation technologies and communications product and services development. We conduct the majority of our R&D activities in-house and have R&D and engineering staff.

Focused, efficient investments in research and development are important to our future growth and competitive position in the marketplace. Our product development activities focus on products that we consider viable revenue opportunities to support all of our segments. Our research and development efforts are directly related to timely development of new and enhanced services and related products that are central to our core business strategy and our ability to drive profitable and sustainable growth.

The industries in which we compete are subject to rapid technological developments, evolving industry standards, changes in customer requirements, and new service and product introductions and enhancements. As a result, our success depends in part upon our ability, on a cost-effective and timely basis, to continue to enhance our existing services and to develop and introduce new products and services that improve performance and meet customers’ operational and cost requirements.

Our current research and development activities relate to antennas, modems, distributed computing, and multi-orbit service development, enhancing our universal terminal product lines with new features desired by our customers, and integrating available geostationary orbit (GSO) and emerging non-geostationary satellite orbit (NGSO) products and services into our overall satellite communications offering.

Intellectual Property Rights

We currently hold intellectual property rights relating to various aspects of our hardware products, software and services. We believe that our ability to compete effectively depends in part on our ability to protect these intellectual property rights and our proprietary information. We rely primarily on copyright and trade secret laws, as well as trademarks, service marks and trade dress, to protect our valuable products and services. We use confidentiality undertakings and licensing arrangements to protect our intellectual property rights worldwide. In the future, when appropriate, we may seek to file patent applications to protect innovations arising from our research, development and design activities.

Manufacturing Operations

We outsource our manufacturing operations to well-known contract manufacturers located primarily in Taiwan and Japan, and we aim to engage manufacturing partners in North America, in the future. We rely on third party foundries or companies that use third party foundries for manufacture of our semiconductor devices that are Application Specific Integrated Circuits (“ASICs”). These foundries are located primarily in Taiwan. We also outsource printed circuit board production and amorphous silicon or glass substrate semiconductor thin-film-transistor (TFT) manufacturing.

Outsourcing our operations to manufacturers and foundries allows us to reduce our fixed costs, maintain production flexibility. Our proprietary products are manufactured to our designs with standard and custom components. Most of the components are available from multiple sources. We have several single-sourced supplier relationships, either because alternative sources are not proceed,yet available or because the relationship is advantageous to us.

Our manufacturing operations are dependent on relationships with these suppliers who are subject to occasional supply chain disruptions. As is the case across the industry, if key suppliers fail to provide timely and reliable supply of components, we could experience manufacturing delays that could adversely affect our consolidated results of operations in a material way. In an effort to mitigate supply chain exposure, we have increased our inventory over historical levels and will monitor whether adjustments to inventory levels are necessary to mitigate any future exposures.

Further, a range of conditions and circumstances beyond our control such as global conflicts, recessionary economic conditions in various regions of the world or a recurrence of the Covid-19 pandemic could disrupt the availability of raw materials and components as well as our capacity to make and distribute our products.

Raw Materials, Components and Services

We purchase raw materials and most of the components used in our manufacturing processes, such as printed circuit boards, injection-molded plastic parts, machined metal components, connectors and housings. In addition, we purchase third party services, predominantly networking and mobile broadband services, to support the delivery of our solutions. The materials, molds and dies, subassemblies and components purchased from other manufacturers, and other materials and supplies used in our manufacturing processes are generally available from multiple sources.

We believe there is a sufficient number of acceptable vendors for the components we purchase. We regularly evaluate both domestic and foreign suppliers for quality, dependability and cost effectiveness. From time to time, the cost and availability of materials and services is affected by the demands of other industries, as well as other factors.

Whenever practical, we seek to establish multiple sources for the purchase of raw materials, components and services to achieve competitive pricing, maintain flexibility, reduce tariff exposure, and protect against supply disruption. When possible, we employ a company-wide procurement strategy designed to reduce the purchase price of materials, purchased components and services.

For reasons of quality assurance, scarcity or cost effectiveness, certain components and raw materials used in the manufacturing of our products, as well as certain services utilized in the delivery of our solutions, are available only from a limited number of suppliers or from a sole source supplier. We work with our suppliers to develop contingency plans and redundancy intended to assure continuity of supply while maintaining high quality and reliability. In some cases, we established long-term supply contracts with our suppliers.

Due to the scarcity or market volatility of certain raw materials, purchased components and services, we may not be able to quickly re-establish additional or replacement sources for certain components, materials or services. In the event that we are unable to obtain sufficient quantities of raw materials or components, or unable to obtain sufficient access to the services needed to deliver our solutions on commercially reasonable terms or in a timely manner, our ability to manufacture and deliver our products and services on a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations.

We also experienced increased raw material costs. We are continuing to monitor global developments, including the impact of inflation, and are prepared to implement actions that we determine to be necessary to sustain our business.

Competition

We compete primarily in the communications technology industry. This industry is characterized by rapid technological advances and evolving industry standards. This market can be affected significantly by new product introductions and marketing activities of industry participants. It is possible new market entrants may market and sell disruptive technologies that impact one or more of our product or service offerings. In addition, we may compete with companies to acquire new businesses or technologies and the competition to secure such assets may be intense.

We will compete for customers on the basis of existing and planned product features, service and software application capabilities, company reputation, brand recognition, technical support, alliance relationships, the quality and reliability of our offerings, product development capabilities, price and availability. While we believe that no competitor currently offers a comparable range of products and services, multiple companies do compete with us with respect to one or more of our product and service offerings.

With respect to many of our product and service offerings, we face competition from companies who dedicate more resources and attention to a narrower product and service offering compared to the breadth of our business. As the marketplace for multi-orbit satellite connectivity products and solutions continues to grow, we expect to encounter increased competition. Some of these competitors may have access to significantly more financial and technical resources than we possess which could give them advantages in their ability to develop new and better offerings, to meet customer demands, to comply more quickly with new regulatory regimes and to promote and sell their products.

We encounter intense competition in the markets we serve, and we expect the intensity of competition to increase in the future. Many of our primary competitors are large, well-established companies, many have substantially greater financial, managerial, technical, marketing, operational, and other resources than we do, and others have entered the markets with standardized and widely accepted technology and services. At the same time, many of our competitors are also our potential partners, especially satellite operators that have traditionally vertically integrated in providing customer terminals specific to their satellites or constellations.

Recently, SpaceX’s Starlink has emerged as a significant competitor with flat panel, electronically steered array (ESA) terminals and its new LEO network. Other LEO services, such as Eutelsat OneWeb and Amazon’s Project Kuiper are also entering the market. SpaceX’s Starlink, Amazon’s Project Kuiper and Eutelsat OneWeb are all potential partners, but it is not guaranteed that we can secure commercial agreements that define mutually beneficial partnerships between our companies. In addition, we face some competition from providers of parabolic antennas, which include KVH, Intellian and Cobham SATCOM, among others.

The emergence of ESA terminals from companies like Starlink has significantly increased competitive pressure on traditional parabolic antennas, but these incumbents appear to be well-established with loyal customers, as well. In the market for commercial aviation connectivity, we face competition from Ball Aerospace, recently acquired by BAE Systems, as well as ThinKom.

Government Procurement

Substantial portions of our current and future revenues are and will be generated from contracts and subcontracts with government agencies. Such contracts are subject to a competitive bid process and are awarded on the basis of technical merit, personnel qualifications, experience and price. We also receive some contract awards involving special technical capabilities on a negotiated, noncompetitive basis due to our unique mix of communication products, satellite services, engineering capabilities and technical expertise in specialized areas.

Our future revenues and income could be materially adversely affected.affected by changes in government procurement policies and related oversight, a reduction in expenditures for the products and services we provide, and other risks generally associated with federal government contracts.

We provide products and services under government contracts that usually require performance over a period of several months to multiple years. Long-term contracts may be impacted based on when the government appropriated funds are available and to what level, which may result in a delay, reduction or termination of these contracts.

Government contracts may be performed under cost-reimbursement contracts, time-and-materials contracts and fixed-price contracts. Cost-reimbursement contracts provide for reimbursement of costs and payment of a fee. The fee may be either fixed by the contract or variable, based upon cost control, quality, delivery and the customer’s subjective evaluation of the work.

Product Development, Manufacturing, Installation

Government contracts may be terminated, in whole or in part, at the convenience of the relevant government office. If a termination for convenience occurs, the government office generally is obligated to pay for work completed or services rendered and/or the cost incurred by us under the contract, which may include a fee or allowance for profit. Contracts with prime contractors may have negotiated termination schedules that apply. When we participate as a subcontractor, we are at risk if the prime contractor does not perform its contract. Similarly, when we act as a prime contractor employing subcontractors, we are at risk if a subcontractor does not perform its subcontract.

Government Regulation

We are subject to the laws and Maintenance

On March 9, 2015, we entered into a 10-year purchase agreement with Klingon, pursuant toregulations of the U.S. and foreign jurisdictions in which we agreed toprovide and sell our in-flight connectivity systems to Klingon for joint developmentsatellite communication products and resale to Hong Kong based airlines under the brand name Aircom4U. In accordance with the terms of this agreement, Klingon agreed to purchase from us 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. To date, we have received $762,000 from Klingon in milestone payments towards the equipment purchase price.

Klingon may, at its option, purchase additional onboard system packages in connection with the marketing of the Aircom4U business. In furtherance of this arrangement, Klingon is a party to our agreement with Hong Kong Airlines. We expect Klingon to purchase additional onboard systems for resale to Hong Kong Airlines once our VSTC is approved by the HKCAD, although we can give no assurance as to when this will take place, if at all.

Because of the delay by our onboard system equipment supplier for the approval of the VSTC from the HKCAD, we have not been able to deliver to Klingon a ready for sale, certified onboard system equipment package. Instead, we have delivered to Klingon a development kit of the ordered equipment, which is the same as the finished product but for the lack of HKCAD certification. Although there is no specified deadline in the agreement with Klingon for delivering the certified onboard system, Klingon has the right to terminate its agreement upon 60 days’ prior notice, subject to a 60-day cure period, if we fail to timely deliver the certified product. If Klingon terminates its agreement, we may be responsible for refunding to Klingon the milestone payments that we have received. We will have to suspend or modify our agreement with Klingon if our current equipment supplier is not able to provide certifiable onboard system equipment package for the VSTC certification purpose.

We will provide airline partners with the equipment necessary for in-flight connectivity, which is to be installed by the MRO service provider selected by the airline. We will also provide training and technical support to each airline’s MRO for the installation of our equipment. Such support will also include technical, management, and operational support, with 24/7 network monitoring of the performance of each aircraft’s equipment.

We will rely on third-party suppliers for equipment components that we use to provide our services, including those discussed below.

We will purchaseof the Taiwan and Japan. Many of the countries where our ground station equipment from Blue Topaz Consultants, Ltd., a British Virgin Islands corporation, or BTC, under an agreement that wecustomers use our products and services have with BTC dated December 15, 2015. Under the terms of this agreement, BTC will developlicensing and provide to us four sets of ground station hub equipment, or the Hub Equipment, for our use and sale into our Asian markets. We and BTC will separately enter into service agreementsregulatory requirements for the installationimportation and maintenanceuse of satellite communications and reception equipment, including the Hub Equipment systems. We have agreeduse of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment, and, in some cases, the reception of certain video programming services.

In the U.S., many of these matters are regulated by the Federal Communications Commission. In other countries or foreign jurisdictions where we may aim to pay BTC $6,205,216 forprovide and sell our satellite communication products and services in the first Hub Equipment systemfuture, many of these matters are regulated by the telecom regulatory authority of each national government. While there are attempts to harmonize and have already made milestone payments to BTC totaling $3,250,000. The purchase price was increased to $6,234,260standardize requirements among international regulators, there is still a significant amount of heterogeneity in licensing conditions and enforcement on November 30, 2016a country-by-country basis.

Furthermore, due to the increaserapid pace of advancement of satellite communications technology, the regulatory landscape is similarly evolving, so we are at risk of our technology not fitting neatly into an existing licensing category and thereby slowing our access to a given market as we seek a path to service which remains in cost of a software license. We will be required to pay BTC the balance of $2,984,260 owed on the first Hub Equipment system following deliverycompliance with all local regulation.

Radio-frequency and service commencement of this system.Communications Regulation - International Telecommunication Union (ITU)

On January 15, 2015, we entered into a statement of work with dMobileThe orbital location and frequencies for the development by dMobile of a next generation satellite-based data link system that can utilize advanced protocols such as WiMAX 2.1. Accordingour partner satellites are subject to the termsITU’s regulations, including its frequency registration and coordination procedures, and its various provisions on spectrum usage. Those procedures are specified in the ITU Radio Regulations and seek to facilitate shared international use of this agreement, deliveries of work product were deliveredlimited spectrum and orbital resources in a manner that avoids harmful interference. Among other things, the ITU regulations set forth procedures for establishing international priority with respect to us over a scheduled period of time with the final delivery having been completed. The purchase price for this project was $4,950,000. We paid dMobile a non-refundable prepayment of $1,000,000. We and dMobile agreed to offset each other’s accounts receivable and accounts payable under this agreement and the agreement referred to under “—Our IFEC Solutions—Our Connectivity Solutions” above. After reconciliation of both accounts, we owed dMobile $471,100 which we agreed to settle through the issuance to dMobile of 94,220 shares of our common stock.

In January 2016, we entered into a purchase order, which we refer to as the Purchase Order, pursuant to which PPTW agreed to purchase from Aircom a set of mobile satellite communication equipment priced at $909,000. In March 2017, PPTW informed us that it desired to terminate its satellite communications related business and return the equipment that it purchased from us for a full refund. In settlement of this agreement, we agreed to accept a return of the equipment and to convert PPTW’s payment to us of $819,300 into a subscription for 163,860 shares of our common stock. For a more detailed discussion of this settlement agreement, see Item 13. “Certain Relationships and Related Transactions, and Director Independence” below.

Our Technology

Dual-Band Hybrid Satellite System

We believe that mobile satellite broadband service requires the bandwidth efficiency provided by Ka band satellite and spot beam based HTS. However, limited Asia-Pacific coverage area of Ka HTS systems restrict the use of such resources, deadlines for bringing satellite networks into use in order to maintain such priority, and coordination rights and obligations with respect to other networks, which vary depending on whether such networks have higher or lower ITU priority.

The ITU regulations provide allocations or designations for how spectrum can be used for various purposes, and whether such uses operate on a pure Ka band system. Our design of dual Ka/Ku band satellite terminal allows independent acquisition of Ka and Ku band satellites at different orbital positions thus maximizing the utilization of satellite bandwidth.

Transcoding

The current mainstream video compression format is H.264, also known as MPEG-4 Advanced Video Coding. It is widely used in Blu-ray discs, online videos, web software, and HDTV broadcasts terrestrially and over cable and satellite.

H.265, also known as High Efficiency Video Coding, is a newly developed video compression standard designedprimary or secondary basis with respect to replace H.264. It is capable of delivering H.264 video quality at half the bit rate. H.265 has several significant advantages over H.264, including better compression, higher image quality, and lower bandwidth usage.

We incorporate hardware-based, real-time technology that transcodes content from multiple streaming or broadcast input forms. We convert the content into H.265-encoded Internet protocol, or IP, streams, which reduces the amount of bandwidth required while enhancing the quality of the content. By deploying real-time transcoding technology in its ground and airborne systems, we enable live TV and video streaming in an IP format that optimizes satellite bandwidth utilization and achieves cost-effective content delivery.

Satellite Link Acceleration

The most common transmission control protocols, or TCPs, used in the Internet have been designed for terrestrial wired networks. TCPs doone another. Secondary uses may not perform well in long-delay satellite environmentcause harmful interference to primary uses and may cause bad user experiences in web surfingnot claim interference protection from primary uses. The orbital arc is becoming increasingly congested with respect to such ITU filings and Internet access.

Ourthe satellite link acceleration technology improves TCP/IP-based data transmission overnetworks operated under those filings.

The ITU’s Radio Regulations are also subject to change at periodic ITU World Radiocommunication Conferences (WRCs), and their application is determined by various governing bodies within the ITU. WRCs typically are convened approximately every four years, with the last one occurring at the end of calendar year 2023.

Other Legal Requirements

As a satellite system through compression, deduplication, caching, latency optimization, packet aggregation, and cross-layer enhancement. This technology includes end-to-end software in airborne system and ground server for cost effective application accelerator and optimization of live TV and video streaming. This combination of technologies makes airborne Web access and contents access feel like fiber at home.

AirCinema

AirCinema incorporates projector-based H.265 steaming technology onboard an aircraft. We have optimized this projector system technology for in-flight viewing and entertainment purposes by utilizing auto focusing, zooming, and alignment, as well as dynamic brightness control. Passengers can use the AirCinema directional audio system to enjoy onboard music and content without the need for a separate headset.

Our Intellectual Property

We rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks and domain names, as well as contractual restrictions to protect intellectual property and proprietary technology owned or used by us.

We have patented certainresult of our technologies in the United States, Europe, China and Taiwan. Our United States patents will expire at dates ranging from 2030 to 2031, while our patents outside of the United States expire at dates ranging from 2030 to 2031. We do not believe our business is dependent to any material extent on any single patent or group of patents that we own. We also have a number of patent applications pending both in and outside of the United States and we will continue to seek patent protection in the United States and certain other countries to the extent we believe such protection is appropriate and cost-effective.

We consider our brands to be important to the success of our business and our competitive position. We rely on both trademark registrations and common law protection for trademarks. Our registered trademarks in the United States and certain other countries include, among others, “AirCinema”, “AirTelecom”, “AircomPac” although we have not yet obtained registrations for our most important marks in all markets in which we currently do business or intend to do business in the future. Generally, the protection afforded for trademarks is perpetual, if they are renewed on a timely basis, if registered, and continue to be used properly as trademarks.

We license or purchase from third parties’ technology, software and hardware that are critical to providing our products and services. Much of this technology, software and hardware is customized for our use and would be difficult or time-consuming to obtain from alternative vendors.

We have developed certain ideas, processes, and methods that contribute to our success and competitive position that we consider to be trade secrets. We protect our trade secrets by keeping them confidential through the use of internal and external controls, including contractual protections with employees, contractors, customers, vendors, and airline partners. Trade secrets can be protected for an indefinite period so long as their secrecy is maintained.

Our Competition

Our key competitors include Gogo Inc., which has the largest installed base in the IFEC market mainly via air-to-ground technology and L-band connectivity services and provides a passenger-paid system of connectivity solutions and wireless in-flight entertainment services, and Panasonic Avionics Corp., which provides IFEC hardware and solutions via L-band and Ku-band technology. Other competitors include ViaSat, Global Eagle Entertainment, Inc., OnAir and Thales/LiveTV, all of which provide different technologies and strategies to provide in-flight connectivity and/or entertainment. Regardless of the delivery mechanisms used by us or our competitors, the IFEC industry as a whole faces, and is expected to continue to face, capacity constraints and unique technology challenges, which are expected to increase due to increased demand for in-flight Internet.

We believe that the following competitive strengths enable us to compete effectively in and capitalize on the growing IFEC market.

Our Growth Strategy

We will strive to be a leading provider of IFEC solutions by pursuing the following growth strategies:

Regulation

As a participant in the global airline and global telecommunication industriesinternational operations, we are subject to a varietynumber of government regulatory obligations

Federal Aviation Administration

The FAA prescribes standards and certificationadditional legal requirements, for the manufacturing of aircraft and aircraft components, and certifies and rates repair stations to perform aircraft maintenance, preventive maintenance and alterations, including the installationU.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and maintenance of aircraft components. Each type of aircraft operated in the United States under an FAA-issued standard airworthiness certificate must possess an FAA Type Certificate, or TC, which constitutes approval of the design of the aircraft type based on applicable airworthiness standards. When a party other than the holder of the Type Certificate develops a major modification to an aircraft already type-certificated, that party must obtain an FAA-issued STC approving the design of the modified aircraft type. We will regularly obtain an STC for each aircraft type operated by each airline partner on whose aircraft our equipment will be installedcustoms, export, trade sanctions and separate STCs typically are required for different configurations of the same aircraft type, such as when they are configured differently for different airlines.

After obtaining an STC, a manufacturer desiring to manufacture components to be used in the modification covered by the STC must apply to the FAA for a Parts Manufacturing Authority, or PMA, which permits the holder to manufacture and sell components manufactured in conformity with the PMA and its approved design and data package. In general, each initial PMA is an approval of a manufacturing or modification facility’s production quality control system. PMA supplements are obtained to authorize the manufacture of a particular part in accordance with the requirements of the pertinent PMA, including its production quality control system. We routinely apply for and receive such PMAs and supplements.

Our business depends on our continuing access to, or use of, these FAA certifications, authorizations and other approvals, and our employment of, or access to, FAA-certified individual engineering and other professionals.

In accordance with these certifications, authorizations and other approvals, the FAA requires that we maintain, review and document our quality assurance processes. The FAA may also visit our facilities at any time as part of our agreement for certification as a manufacturing facility and repair station to ensure that our facilities, procedures, and quality control systems meet FAA approvals we hold. In addition, we are responsible for informing the FAA of significant changes to our organization and operations, product failures or defects, and any changes to our operational facilities or FAA-approved quality control systems. Other FAA requirements include training procedures and drug and alcohol screening for safety-sensitive employees working at our facilities.

Foreign Aviation Regulation

According to international aviation convention, the airworthiness of FAA-certified equipment installed on U.S.-registered aircraft is recognized by civil aviation authorities, or CAAs, worldwide. As a result, we do not expect to require further airworthiness certification formalities in countries outsideanti-boycott laws of the United States, for U.S.-registered aircraft that already have an STC issuedincluding those administered by the FAA covering our equipment. For aircraft registered with a CAA other thanU.S. Customs and Border Protection, the United States,Bureau of Industry and Security, the installationDepartment of our equipment requires airworthiness certification from an airworthiness certification body. Typically,Commerce, the CAADepartment of State, and the Office of Foreign Assets Control of the countryTreasury Department, as well as those of other nations in which the aircraft is registered is responsible for ensuring the airworthiness of any aircraft modifications under its authority.

The FAA holds bilateral agreements with a number of certification authorities around the globe. Bilateral agreements facilitate the reciprocal airworthiness certification of civil aeronautical products that are imported/exported between two signatory countries. A Bilateral Airworthiness Agreement, or BAA, or Bilateral Aviation Safety Agreement, or BASA, with Implementation Procedures for Airworthiness provides for airworthiness technical cooperation between the FAA and its counterpart civil aviation authorities. Under a BAA or BASA, the CAA of the aircraft’s country of registration generally validates STCs issued by the FAA and then issues a VSTC. For countries with which the FAA does not have a BAA or BASA, we must apply for certification approval with the CAA of the country in which the aircraft is registered. In order to obtain the necessary certification approval, we will be required to comply with the airworthiness regulations of the country in which the aircraft is registered. Failure to address all foreign airworthiness and aviation regulatory requirements at the commencement of each airline partner’s service in any country in which they register aircraft when there are no applicable bilateral agreements may lead to significant additional costs related to certification and could impact the timing of our ability to provide our service on our airline partners’ fleet.

Federal Communications Commission

Under the Communications Act of 1934, as amended, or the Communications Act, the U.S. Federal Communications Commission, or FCC, licenses the spectrum that we use and regulates the construction, operation, acquisition and sale of our wireless operations. The Communications Act and FCC rules also require the FCC’s prior approval of the assignment or transfer of control of an FCC license, or the acquisition, directly or indirectly, of more than 25% of the equity or voting control of our company by non-U.S. individuals or entities.

do business.

Our various services are regulated differently by the FCC. Our business may provide some of its voice and data services by reselling the telecommunications services of satellite operators. Because we may provide these services on a common carrier basis, we may subject to the provisions of Title II of the Communications Act, which require, among other things, that the charges and practices of common carriers be just, reasonable and non-discriminatory.

We provide broadband Internet access to commercial airlines and passengers. We plan to offer this service in the Asia-Pacific region and continental United States through our partner’s facilities, using satellite-based data delivery.

The FCC has classified mobile (and fixed) broadband Internet access services as Title II telecommunications services pursuant to the FCC Open Internet Order of 2010, or the Open Internet Order. The Open Internet Order also adopted broad new net neutrality rules. For example, broadband providers may not block access to lawful content, applications, services or non-harmful devices. Broadband providers also may not impair or degrade lawful Internet traffic on the basis of content, applications, services or non-harmful devices. In addition, broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind, and they may not prioritize the content and services of their affiliates. Other than for paid prioritization, the rules contain an exception for “reasonable network management.” The Open Internet Order recognizes that whether a network management practice is reasonable varies according to the broadband technology involved, and provides more flexibility to implement network management practices in the context of our capacity-constrained satellite broadband networks.

In addition, most of our services are subject to various rules that seek to ensure that the services are accessible by persons with disabilities, including requirements related to the pass-through of closed captioning for certain IP-delivered video content.

Equipment Certification

We may not lease, sell, market or distribute any radio transmission equipment used in the provision of our services unless such equipment is certified by the FCC as compliant with the FCC’s technical rules. All certifications required for equipment currently used in the provision of our services have been obtained by our equipment vendors and/or partners.

Privacy and Data Security-Related Regulations

As noted above, the Open Internet Order reclassified mobile (and fixed) broadband Internet access services as Title II telecommunications services. Certain statutory provisions of Title II now apply to broadband Internet access services, including provisions that impose consumer privacy protections such as the FCC’s Consumer Proprietary Network Information, or CPNI, requirements.

Our servicesoperations are also subject to CPNI rules that require carriers to comply with a rangevarious domestic and international privacy laws, including the European Union’s General Data Protection Regulation. These laws and regulations, as well as the interpretation and application of marketingthese laws and privacy safeguards. These obligations focus on carriers’ access, use, storage and disclosure of CPNI. We believe we are in compliance with these rules and obligations, and we certify annually, as required, that we have established operating procedures adequate to ensure our compliance.

We are also subject to other federal and state consumer privacy and data security requirements. For example, Section 5 of the Federal Trade Commission, or FTC, Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Although the FTC’s authority to regulate the non-common carrier services offered by communications common carriers has not been clearly delineated, FTC officials have publicly stated that they view the FTC as having jurisdiction over Internet service providers’ non-common carrier services. Some of our servicesregulations, are subject to the FTC’s jurisdiction. The FTC has brought enforcement actions under the FTC Act against companies that, inter alia: (1) collect, use, share, or retain personalchange, and any such change may affect our ability to offer and sell existing and planned satellite communications products and services. For more information, in a way that is inconsistent with the representations, commitments, and promises that they make in their privacy policies and other public statements; (2) have privacy policies that do not adequately inform consumers about the company’s actual practices; and (3) failsee “Further Risks Related to reasonably protect the security, privacy and confidentiality of nonpublic consumer information.Government Regulation.”

We plan to collect personally identifiable information, such as name, address, e-mail address and credit card information, directly from our users when they register to use our service. We also may obtain information about our users from third parties. We use the information that we collect to, for example, consummate their purchase transaction, to customize and personalize advertising and content for our users and to enhance the entertainment options when using our service. Our collection and use of such information is intended to comply with our privacy policy, which is posted on our website, applicable law, our contractual obligations with third parties and industry standards, such as the Payment Card Industry Data Security Standard. We are also subject to state “mini-FTC Acts,” which also prohibit unfair or deceptive acts or practices, along with data security breach notification laws requiring entities holding certain personal data to provide notices in the event of a breach of the security of that data. Congress has also been considering similar federal legislation relating to data breaches. A few states have also imposed specific data security obligations. These state mini-FTC Acts, data security breach notification laws, and data security obligations may not extend to all of our services and their applicability may be limited by various factors, such as whether an affected party is a resident of a particular state.

While we intend to implement reasonable administrative, physical and electronic security measures to protect against the loss, misuse and alteration of personally identifiable information, cyber-attacks on companies have increased in frequency and potential impact in recent years and may be successful despite reasonable precautions and result in substantial potential liabilities.

Truth in Billing and Consumer Protection

The FCC’s Truth in Billing rules generally require full and fair disclosure of all charges on customer bills for telecommunications services, except for broadband Internet access services. Thus, these rules apply to our satellite-based services. This disclosure must include brief, clear and non-misleading plain language descriptions of the services provided. States also have the right to regulate wireless carriers’ billing; however, we are not currently aware of any states that impose billing requirements on our services.

CALEA

The FCC has determined that facilities-based broadband Internet access providers are subject to the Communications Assistance for Law Enforcement Act of 1994, or CALEA, which requires covered service providers to build certain law enforcement surveillance assistance capabilities into their communications networks and to maintain CALEA-related system security policies and procedures.

Foreign Government Approvals

In connection with our satellite service, we have implemented a process for obtaining any required authority needed to provide our service over the airspace of foreign countries, or verifying that no additional authorization is needed. Each country over which our equipped aircraft flies has the right to limit, regulate (e.g., through a licensing regime) or prohibit the offering of our service. We may not be able to obtain the necessary authority for every country over which a partner airline flies. For some countries, we have not been and do not expect to be able to obtain a definitive answer regarding their potential regulation of our service, and we may incur some regulatory risk by operating over the airspace of these countries. Failure to comply with foreign regulatory requirements could result in penalties being imposed on us and/or on our airline partners or allow our airline partners affected by such requirements to terminate their contract with us prior to expiration. Moreover, even countries that have previously provided clearance for our service have the right to change their regulations at any time.

Employees

As of December 31, 2017, we had a total of 19 employees, 15 of whom are full-time employees. The following table sets forth the number of our full-time employees by function.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

ITEM 1A. RISK FACTORS.

Investment in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this annual report, including the financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to the Merger with IXAQ

The Merger is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all.

Unless waived by the parties to the Merger Agreement, and subject to applicable law, the consummation of the Merger is subject to several conditions set forth in the Merger Agreement.

The Merger Agreement provides that IXAQ’s obligation to consummate the Merger is conditioned on, among other things, that as of the closing of the Merger, the combined company resulting from the Merger (the “Combined Company”) has obtained at least $45,000,000 (“PIPE Minimum Investment Amount”) in financing from investors in the form of (i) the proceeds of private placements in IXAQ in connection with consummation of the Merger (the “PIPE Investments”) and (ii) the proceeds of the SAFE investments in Company prior to consummation of the Merger (the “SAFE Investments”).

As of the date of this filing, agreements have been signed with investors for $35 million in PIPE Investment commitments to PIPE Investments and no SAFE Investment have yet been made. There is no assurance that subscriptions for the remaining $10 million PIPE Minimum Investment Amount. The actual additional amounts committed to PIPE Investments or funded to the Company under SAFE Investments will depend on market conditions and other factors.

If the PIPE Minimum Investment Amount or other conditions to IXAQ’s obligation to consummate the Merger are not met, and such conditions are not waived by IXAQ under the terms of the Merger Agreement, then the Merger Agreement could terminate, and the proposed Merger may not be consummated.

If such condition is waived and the Merger is consummated with less than the PIPE Minimum Investment Amount, the cash held by the Combined Company upon consummation of the closing may not be sufficient to allow the Combined Company to operate and pay its bills as they become due. Any such event in the future may negatively impact the analysis regarding the Combined Company’s ability to continue as a going concern at such time.

There can be no assurance that the shares of the Combined Company’s Common Stock that will be issued in connection with the Merger will be approved for listing on Nasdaq, or another U.S national exchange, following the closing, or that the Combined Company will be able to comply with the continued listing rules of Nasdaq, or another U.S. national exchange.

In connection with the Merger and as a condition to the Company’s obligations to complete the Merger, the Combined Company will be required to demonstrate compliance with Nasdaq’s initial listing requirements. The Company and IXAQ cannot assure that the Combined Company will be able to meet those initial listing requirements or qualify to list on another national securities exchange. Even if the Combined Company’s Common Stock is approved for listing on Nasdaq, the Combined Company may not meet the Nasdaq continued listing requirements following the Merger.

The announcement of the proposed Merger could disrupt the Company’s relationships with its customers, suppliers, business partners and others, as well as its operating results and business generally.

Whether or not the Merger and related transactions are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the Merger on the Company’s business include the following: