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, 20212022

☐ 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. 000-55925

AERKOMM INC.

(Exact name of registrant as specified in its charter)

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:

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ☐  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 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. ☐

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, 20212022 (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 Thethe OTCQB Market) was approximately $15,070,542.  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 9,893,1379,869,165 shares of the registrant’s common stock outstanding as of July 1, 2022.6, 2023.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Aerkomm Inc.

Annual Report on Form 10-K

Year Ended December 31, 20202022

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.

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 Related to Our Business

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

Risks Relating to Our Industry

Risks and uncertainties related to our industry 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:

PART I

ITEM 1. BUSINESS.

Overview

Our current business plan reflects the impact created as a result of the global COVID 19 pandemic, and how it afforded Aerkomm the development time needed to shift its focus to becoming a multi-orbit LEO/MEO/GEO/HEO space technology provider. With air travel for the most part being halted during the pandemic, a negative impact in the inflight entertainment and connectivity, or IFEC, market was experienced globally, Aerkomm at this time identified these weaknesses in marketing and business expectations, and, thus, we saw the opportunity to utilize LEO/MEO satellites to address overwhelmed networks as usage skyrocketed globally.

As the IFEC market is expected to experience a slow recovery, Aerkomm expects to be able to create new business opportunities and new revenue streams, to address past business scope endeavors as the IFEC market recovers. Prior to the global pandemic, connectivity was primarily offered via fiber line, creating bottlenecks in most networks as traffic increased over time. With the increased desire to utilize LEO satellite systems for connectivity, intensified by the ongoing conflict in Ukraine, Aerkomm is positioning itself to provide solutions with what we believe to be never seen before resilience. This sudden and globally experienced impact of the pandemic as well as increasing international tensions has created the opportunity for Aerkomm to develop our proprietary Full-Dominance-Glass-Semiconductor Antenna technology.

From Aerkomm’s experience preparing to service the IFEC markets and focusing on delivering Ka/Ku connectivity, we have been able to utilize our industry expertise and engineering capabilities to develop a state-of-the-art technology to apply across multiple sectors of satellite communications. Aerkomm has successfully invented a proprietary Full-Dominance Glass Semiconductor Antenna(FGSA) technology which, we believe, is a game changer in the current satellite ecosystem. During our proof-of-concept stage, which we expect to exit during the six to nine months, we have been able to design our new FGSA antenna using multilayered panel display glass with a semiconductor process and integrated circuit, or IC, designed by Aerkomm and intended to be manufactured by Taiwan Semiconductor Manufacturing Company Limited, or TSMC, and WIN Semiconductor Corp. The results of our proof-of-concept testing phase, in laboratory, show that our FGSA antenna is able to successfully connect to LEO/MEO/GEO satellite beams.

FGSA technology revolutionizes phased array antenna technology from PCB-based systems to semiconductor-based. This innovation we are developing is ahead of industry standards and is, we believe, the most unique technology utilizing semiconductor scale-down capabilities to create a new era of full-functioned satellite mobile communications.

FGSA can be installed on satellites and used in ground equipment. By utilizing this remarkable high-efficiency antenna, current satellite operators can significantly reduce the constellation CAPEX and offer lower cost antennas to customers by increasing the effective bandwidth capacity of each satellite to provide services. FGSA can achieve simultaneous multi-orbit tracking of satellite communication links. This paves the way for AERKOMM to bring innovation to the broadcast TV market by offering this unique antenna for versatile satellite services catering to the existing and expanding global customer base.

As of April 27^th, 2023, Aerkomm has been awarded a regional satellite operator license. Please refer to the attached exhibits 99.1 through 99.4 for a copy of this license.

With this satellite operator license along with our proprietary FGSA technology, Aerkomm has created a much stronger position to define specifications for satellite communications and, as we believe, this will enable us to create a revenue stream from satellite services. This now positions Aerkomm as not only a hardware supplier, but also a value-added service and ISP provider, and expands the markets in which we can participate.

As a licensed satellite operator in Taiwan, AERKOMM is legally authorized to provide satellite services in the mobile backhaul market, aero/maritime markets, automotive market , and this will lead, we expect, to numerous network resiliency contracts.

Moving forward, we will show how Aerkomm intends to capitalize on our initiatives in the mobile backhaul, aero, maritime and government satcom markets, which markets we believe, we will be able to penetrate in the short and long term. This broadened market reach, we believe, will enable Aerkomm to move to the forefront in a booming space tech industry.

Regional Satellite Service Operation (TW)

With advanced technologies and a unique business model, we, as a development stagethe approval from Taiwan’s Ministry of Digital Affairs, Aerkomm will provide one of the few legal avenues for satellite service provider of IFEC solutions, intend to provide airline passengers with a broadband in-flight experience that encompasses a wide range of service options. Such options include Wi-Fi, cellular, movies, gaming, live TV, and music. We planproviders to offer these coresatellite services which weto customers. Beyond this, Aerkomm is in the unique position to be the only Non-Geostationary Satellite Orbit, or NGSO, service operator in the Taiwan market.

As a satellite service operator Aerkomm will be able to operate in most connectivity markets, unlike our regional competitors who are currently still developing, through both built-in in-flight entertainment systems, such as a seat-back display,legally limited to only operate within the maritime market and only on Ka band satellites.

The markets Aerkomm will now be able to serve increases to and includes, data center trunking, mobile backhaul, automotive, maritime, aero, teleport services, government projects, as well as on passengers’ own personal devices. Wemany other segments of the ever-expanding space tech market.

The receipt of our satellite operator license in Taiwan, also expectqualifies AERKOMM to apply for an ITU (International Telecommunication Union) operator’s membership, to enable us to expand global operations.

As a qualified ITU member, AERKOMM would gain access to the global radio frequency spectrum, regulatory compliance, international coordination and cooperation, and representation in global forums.

AERKOMM is currently the only legal avenue for NGSO satellite operators to provide services, which should enable us to create an ongoing revenue stream.

Aerkomm is partnering with global content managementconnectivity service provider SES to leverage O3b mPOWER, SES’s next generation MEO (Medium Earth Orbit) communications system to target markets, including data-center trunking, mobile backhaul, automotive, maritime, aviation, teleport services, government projects, and e-commerce solutions relatedmany other segments of the ever-expanding space tech market.

Designed to deliver high throughput, ultra-flexible and carrier-grade MEO services, SES’s O3b mPOWER will enable Aerkomm to connect its customers from even the most remote regions across Taiwan. O3b mPOWER is scheduled to start delivering global services in the third quarter of 2023.

With partnership support from SES, Aerkomm expects to continue to expand its portfolio, extending services globally.

Proprietary Full-Dominance Glass Semiconductor Antenna (FGSA) Technology

Currently, flat panel satellite antennas are being built on Printed Circuit Boards (PCB). This conventional technology and manufacturing process are outdated and have limiting performance issues. Drawbacks to this material and process are, among others susceptibility to temperature variation which leads to system instability and warpage of the PCB, creating reliability issues. In the ultra-low temperatures of space, PCB also becomes increasingly brittle. Additionally, the trace width of copper circuit lines printed on PCB does not allow for further size reduction.

Aerkomm has invented a proprietary glass-based Antenna which utilizes Thin Film Transistor (TFT) manufacturing process to integrate control circuit on sheet glass. This TFT technology has been commonly used in Liquid Crystal Display (LCD) manufacturing. Aerkomm has successfully adopted the TFT design concept and process into our IFEC solutions.antenna element structure, creating a revolutionary product.

We plan to partner with airlines and offer airline passengers free IFEC services. We expect 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 intend to build satellite ground stations and related data centers within the geographic regions where we expect to be providing IFEC airline services.

Additionally, we have developed and begun to market two internet connectivity systems, one for hotels primarily located in remote regions and the other for maritime use. Both systems operate through a Ku/Ku high throughput satellite, or HTS. We also expect to develop a remote connectivity system that will be applicable to the highspeed rail industry.

Recent Developments

Changes in Company’s Certifying Accountant

Former Independent Registered Public Accounting Firm

On January 27, 2022, Chen & Fan Accountancy Corporation (“Chen & Fan”) resigned as the independent accounting firm of Aerkomm Inc. (the “Company”), effective as of January 27, 2022.

The audit reports of Chen & FanAERKOMM’s Antenna Circuits on the Company’s financial statements as of and for the fiscal years ended December 31, 2020 and 2019 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s two most recent fiscal years ended December 31, 2020 and 2019, and for the subsequent interim period through September 30, 2021, the Company had no “disagreements” (as described in Item 304(a)(1)(iv) of Regulation S-K) with Chen & Fan on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Chen & Fan, would have caused it to make reference in connection with its opinion to the subject matter of the disagreements.

During the Company’s two most recent fiscal years ended December 31, 2020 and 2019, and for the subsequent interim period through September 30, 2021, there was no “reportable event,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K and the instructions related thereto.

New Independent Registered Public Accounting Firm

On January 27, 2022, the Audit Committee and the Board of Directors of the Company appointed Friedman LLP (“Friedman”) as its new independent registered public accounting firm. Friedman was subsequently dismissed on May 19, 2022, and on May 19, 2022, the Audit Committee and the Board of Directors of the Company appointed WWC, P.C. (“WWC”) as its new independent registered public accounting firm to audit and review the Company’s financial statements, effective May 20, 2022.

During the Company’s two most recent fiscal years ended December 31, 2020 and 2019, and for the subsequent interim period through the date hereof prior to the engagement of WWC, neither the Company nor anyone on its behalf consulted WWC regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; or on the type of audit opinion that might be rendered on the consolidated financial statements of the Company, and neither a written report nor oral advice was provided to the Company that WWC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.

Aircom Pacific Ltd. (Seychelles)

On November 8, 2021, our Company completed the transfer of ownership of Aircom Pacific Ltd. to Aerkomm from Aircom and the name was also changed to Aerkomm SY Ltd.

Aircom Pacific Inc. Limited (Hong Kong)

On November 8, 2021, our Company completed the transfer of ownership of Aircom Pacific Inc. Limited to Aerkomm from Aircom and the name was also changed to Aerkomm Hong Kong Limited.

Aircom Japan, Inc. (Japan)

On November 9, 2021, our Company completed the transfer of ownership of Aircom Japan, Inc. to Aerkomm from Aircom and the name was also changed to Aerkomm Japan, Inc.

Aerkomm Trademark

On December 1, 2020, the United States Patent and Trademark Office (the “USPTO”) issued a Final Office Action relating to Aerkomm Inc. indicating that our US trademark application (Serial No. 88464588) for the name “AERKOMM,” which was originally filed with the USPTO on June 7, 2019, was being rejected because of a likelihood of confusion with a similarly sounding name trademarked at, and in use from, an earlier date. We successfully appealed this USPTO action and the USPTO issued a trademark registration for the service mark AERKOMM under Trademark Class 38 (telecommunications) on November 2, 2021 and Trademark Class 41 (entertainment services) on November 23, 2021.

Aircom Telecom obtains Telecom License from the National Communications Commission of Taiwan

On May 25, 2021, Aircom Telecom was awarded a telecom license from the National Communications Commission of Taiwan. This is significant achievement for Aerkomm as it is a prerequisite for our future planned entry into the Asia/Pacific rim satellite market.

Vietjet Service Agreement

On October 25, 2021, we signed an agreement with Vietjet Air (“Vietjet”) to provide them with our Aerkomm AirCinema In-Flight Entertainment and Connectivity (“IFEC”) solutions.

Under the terms of the agreement, we will provide to Vietjet our Aerkomm AirCinema Cube IFEC system for installation on Vietjet’s fleet of Airbus A320, A321 and Airbus A330-300 aircraft.

Our AirCinema Cube system, will provide Vietjet with connectivity to passengers’ personal electronic devices with WiFi capability, including laptops, mobile phones and tablets, using an intranet-based solution. The AirCinema Cube system will host music, documentaries and movies provided by Google Play Movies and Television, as well as news feeds, both in the English and Vietnamese languages, provided by global and local news suppliers. The AirCinema Cube will also be customized to Vietjet’s branding, will host an in-flight moving map, an in-flight sales platform and a cabin management system together with Vietjet’s own in-flight services.

Joint Venture Agreement

On January 10, 2022, we entered into a joint venture (the “Joint Venture”) agreement (the “Agreement”) with Sakai Display Products Corporation, a company incorporated under the laws of Japan (“SDPJ”), and PanelSemi Corporation, a company incorporated under the laws of Taiwan (“PanelSemi”). We did not have any relationship with SDPJ or PanelSemi prior to entering into the Agreement.

Through this Joint Venture, we will develop and commercialize a tile antenna (“Tile Antenna”). The Joint Venture will be operated through Mepa Labs Inc., a newly formed California corporation (“MLI”), which will be owned initially 100% by SDPJ. We will license to MLI our intellectual property, know-how and research and development results related to the Tile Antenna. SDPJ will provide MLI with working capital to develop the Tile Antenna proof of concept (“POC”). Upon approval of the POC by an initial customer or a laboratory each approved by SDPJ, we will contribute the intellectual property to MLI in exchange for 52% of the equity interest in Newco, and SDPJ and PanelSemi collectively will contribute $20 million in cash (less the contributions funded prior to the POC approval). SDPJ will hold 45% of Newco’s equity interest and PanelSemi will hold the remaining 3%.

Moreover, according to the Agreement, SDPJ will invest €7.5 million in Aerkomm via private placement subject to and upon approval of the POC.

In the event that the POC is not approved within 11 months following the signing of the Agreement, the Joint Venture will be terminated, at which time we will terminate the intellectual property license to Newco and Newco will remain 100% owned by SDPJ.

Effective October 1, 2021, we entered into a finder’s agreement with a Seychelles based company that introduced us to SDPJ. In accordance with the terms of this finder’s agreement and as the fee for the introduction to SDPJ, we have agreed to issue to the finder warrants to purchase a number of shares of our common stock equal to 10% of the gross proceeds of capital contributed to the Joint Venture by SDPJ and its related parties.Glass

FGSA can be installed on satellites and adopted for installation on ground equipment as well.

By utilizing this remarkably high efficiency antenna, current satellite operators can not only significantly reduce the maintenance and replacement schedule of satellites but also offer lower cost antennas to customers by increasing the effective bandwidth capacity of each satellite to provide services.

FGSA Technology: The World’s First Full Glass Antenna

The following factors differentiate FGSA technology from PCB based Antennas:

FGSA Architecture

Full-Glass and Bare IC Integration Enables Ultra High-Performance Antenna(s)

Aerkomm chairs MIH Consortium “Next Generation Communication” Interest Group 

In February 2022, Aerkomm was appointed as the chair of the “Next Generation Communication” interest group of the MIH Consortium. This MIH group was formed to begin an industry discussion on the standardization of 6G satellite communication protocols.

The MIH Consortium of Taipei operates the MIH Open EV Alliance and was formed with the objective of creating an open EV ecosystem to promote collaboration in the mobility industry. MIH’s goal is to bring strategic partners together to build the next generation of EV, autonomous driving, and mobility service applications.AERKOMM’s Self-Calibration Elements

Our Corporate HistoryFGSA Technology Can Achieve Multi-Beam and StructureMulti-Orbit on A Single Antenna

One Antenna, All Satellites

Aircom was incorporatedCompetitor Benchmark: Satellite Internet Service Provider Market

FGSA semiconductor antenna can greatly improve the bandwidth efficiency and sensitivity by 100%+ compared to competitors in internet service provider, or ISP market.

When comparing similar sized antennas in the State of California on September 29, 2014. On December 28, 2016, Aircom purchased 140,000 shares, or approximately 86.3%, of the outstanding common stock of the public company then known as Maple Tree Kids, Inc. (“MTKI”) for the purpose of engaging in a reverse acquisition with MTKI. MTKI was incorporated on August 14, 2013 in the State of Nevada. On January 10, 2017, in anticipation of the reverse acquisition and Aircom’s new business, MKTI changed its name to Aerkomm Inc. On February 13, 2017, Aircom and its shareholders entered into a share exchange agreement with Aerkomm pursuant to which Aerkomm acquired 100% of the issued and outstanding capital stock of Aircom in exchange for approximately 99.7% of the issued and outstanding capital stock of Aerkomm (or 87.8% on a fully-diluted basis). As a result of the share exchange, Aircom became a wholly-owned subsidiary of Aerkomm, and the former shareholders of Aircom became the holders of approximately 99.7% ofcurrent market, Aerkomm’s issued and outstanding capital stock.Antenna stands out:

Aerkomm SY was formed under the laws of Seychelles on December 15, 2009 as Gulach Ltd. and changed its name to Aircom Pacific Ltd. on August 19, 2014 and to Aerkomm SY Ltd. on November 8, 2021. Aerkomm SY was acquired by Aircom on December 31, 2014 and the ownership was transferred to Aerkomm on November 8, 2021 to facilitate Aerkomm’s global corporate structure for both business operations and tax planning. Presently, Aerkomm SY has no operations. Aerkomm is working with corporate and tax advisers in optimizing its global corporate structure and has not yet concluded a revised plan of organization.2X performance

On October 17, 2016, Aircom acquired Aerkomm HK. Aerkomm HK is a Hong Kong limited company formed on October 3, 2008 as Yanwei Information Technology Limited. Aerkomm HK changed its name to Dadny Inc Limited on September 6, 2011 and changed its name again to Aircom Pacific Inc. Limited on July 22, 2015 and again to Aerkomm Hong Kong Limited on November 8, 2021. On November 8, 2021, the ownershipComparison of Aerkomm HK was transferred from Aircom to Aerkomm. Aerkomm HK is in charge of all of Aircom’s business and operations in Hong Kong and China. Presently, Aerkomm 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 Aerkomm may leverage its product offerings to provide enhanced services to prospective customers. Aerkomm also plans to provide local support to Hong Kong-based airlines via Aerkomm HKperformance between competitor (S Company) and Aerkomm HK owned teleports located in Hong Kong.

On December 15, 2016, Aircom acquired Aerkomm Japan. Aerkomm Japan was formed under the laws of Japan on August 29, 2011 as Dadny (Japan) Inc. and changed its name to Aircom Japan, Inc. on July 1, 2016 and changed its name again to Aerkomm Japan, Inc. on November 8, 2021. The ownership of Aerkomm Japan was transferred from Aircom to Aerkomm on November 8, 2021. Aerkomm Japan is responsible for Aerkomm’s business development efforts and general operations located within Japan.

Aircom Taiwan, which became a wholly owned subsidiary of Aircom in December 2017, was organized under the laws of Taiwan on June 29, 2016. During 2017, prior to Aircom Taiwan becoming a wholly owned subsidiary of Aircom, Aircom advanced a total of $460,000 (the “Prepayment”) to Aircom Taiwan for working capital as part of a planned $1,500,000 aggregate equity investment (the “Equity Investment”) in Aircom Taiwan. Aircom Taiwan at that time acted as Aircom’s agent in Taiwan. Before Aircom Taiwan was allowed to issue equity to Aircom, because Aircom was a foreign investor, the Equity Investment had to be approved by the Investment Review Committee of the Ministry of Economic affairs of Taiwan (the “Committee”). Aircom entered into an Equity Pre-Subscription Agreement with Aircom Taiwan dated as of August 13, 2017, to memorialize the terms of the Equity Investment. On December 19, 2017, 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 Aircom Taiwan’s founding owner’s total equity of NT$100,000 (approximately US$3,350). As a result of the approval of the Equity Investment, Aircom Taiwan became a 100% wholly owned subsidiary of Aircom.

On June 13, 2018, Aerkomm established Aerkomm Taiwan Inc. as a new wholly owned subsidiary underTechnology and Product Overview

AERKOMM will provide next generation antenna solutions at lower cost and ultra-high performance by integrating U.S. advanced satellite technology and superior TFT and semiconductor development utilizing the lawssophisticated manufacturing infrastructures of Taiwan. Aerkomm Taiwan Inc. is responsible for Aircom’s business development effortsJapan and general operations within Taiwan. We are currently planning to locate the site of our first ground station in Taiwan and we expect that if we raise sufficient funds to move forward with this project (although that cannot be guaranteed), Aerkomm Taiwan Inc. will play a significant role in building and operating that ground station.

On November 15, 2018, Aircom Taiwan acquired Beijing Yatai. The purpose of this acquisition is for Beijing Yatai is to conduct Aircom’s business and operations in China. Presently, Beijing Yatai’s primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in China as most business conducted in China requires a local registered company. Beijing Yatai is also actively seeking strategic partnerships through which Aircom may leverage its product offerings in order to provide enhanced services to prospective customers. Aircom also plans to provide local support to China-based airlines via Beijing Yatai and its future planned teleports to be located in China. On November 6, 2020, 100% ownership of Beijing Yatai was transferred from Aircom Taiwan to Aerkomm Taiwan for restructuring purpose.In-House Proprietary IC – GaN/GaAs RF IC, ADC IC, Panel Driver IC, And Power Management IC

On October 31, 2019, Aerkomm SY established a new wholly owned subsidiary, Aerkomm Pacific Limited, or Aerkomm Malta, a corporation formed under the laws of Malta. The purpose of Aerkomm Malta is to conduct Aerkomm’s business and operations and to engage with suppliers and potential airline customers both in Europe and worldwide.

Our Corporate Operational Structure

We are a holding company. All of our business operations are conducted through our several operating subsidiaries with our core operational and business activities being directed through Aircom. The chart below presents our corporate structure as of the date of this annual report:

Our principal executive offices are located at 44043 Fremont Blvd., Fremont, CA 94538. The telephone number at our principal executive office is (877) 742-3094.

Our Industry

The following discussion takes into account the negative impact on our industry and markets of the onset of the COVID-19 coronavirus which was reported to have surfaced in Wuhan, China in December 2019, to the extent that it is currently possible to quantify such impact. Although it is too early to determine the medium- and long-term impact and effect of the coronavirus and to quantitatively measure that impact and effect, there can be no certainty with respect to any of the growth projections referenced below, and we expect that, at least in the short term, the coronavirus could have a negative impact on our business prospects and the market introduction of our IFEC product offerings. See our discussion of the coronavirus in the Risk Factors section of this annual report, below.

Impact of the COVID-19 PandemicProprietary IC On FGSA

The COVID-19 pandemic is having a particularly adverse impact on the airline industry. The outbreak in China and throughout the world since December 2019 has led to a precipitous decrease in the number of daily departures and arrivals for domestic and international flights.

Recent Market Information

In the IATA (International Air Transportation Association) Report COVID-19 Airline Industry Outlook, published on October 4, 2021, the following key points were highlighted:

RF IC

We are developing III-V series ICs which can be used for high performance products:

RF ICs (Radio Frequency Integrated Circuit) are essential components in satellite communication systems as they enable signal amplification, frequency conversion, filtering, modulation/demodulation, and power control. They ensure efficient and reliable communication between the satellite and ground stations, contributing to the overall performance and effectiveness of satellite communication links.

They could be integrated into the antenna system via FGSA technique.

UDC (Up-Down Converter)

Aerkomm Software-Defined Modem--A Universal Modem for Various Constellation Connections

Software-defined modems 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 single hardware platform for multiple standards, we have created this unique system to be more flexible and compatible to different satellite constellation waveforms, and more easily upgraded for new waveforms via software updates.

LEO satellite communication systems often have limited power / bandwidth resources and suffer time-varying channel / high mobility issues. Software-defined modems can be designed to optimize the use of those resources and combat channel impairments by implementing advanced signal processing techniques and algorithms.

Software-Defined Modem Architecture

We have been developing our first-generation software-defined modem using FPGA (Field Programmable Gate Array), expected to be in operation by Q1 2024.

The second-generation architecture will be implemented by SoC (System On Chip) with CPU/GPU-embedded which can leverage high parallel-processing capability.

EdgeKomm Box:

Aerkomm’s EdgeKomm Box is an advanced computing device that optimizes connectivity services and over-the-top (OTT) content delivery by providing local caching, reducing latency, and improving network performance, revolutionizing the way content is accessed and delivered.

Market-Proven Distributed CDN Network for ISP CAPEX Reduction

Satellite-Enabled Distributed CDN Network To Reduce ISP’s Last Mile CAPEX

Aerkomm’s EdgeKomm Box will define and implement the most advanced satellite DTH 2.0 to enable IP-delivered and multicast-based video applications for hybrid cloud computing services.

What is DTH 2.0?

 EdgeKomm Box defines and implements the most advanced satellite DTH 2.0 to enable IP-delivered and multicast-based video applications.

Our Technology Roadmap

The roadmap below shows our high-level summary and time frame of the technology under development.

GEO/MEO and LEO antennas will commence mass production on Q1 2024 and Q4 2024 respectively.

Our Product Roadmap

The Integrated Outdoor Unit, or ODU, system comprises of Antennas and Modems of several bands that are uniquely dedicated for satellite applications. We mainly focus on ODU devices of Ka-band, Ku-band, V-band, and E-band. ODU refers to equipment used in satellite communication systems that is located outside or in the vicinity of a building or facility. The antenna is the primary component of the ODU and is designed to receive and transmit signals to and from the satellite.

The product roadmap timeline below also shows the development of the EdgeKomm Box together with the applicable related Solutions.

Our Market

Utilizing our revolutionary FGSA technology, Aerkomm aims to acquire significant market share across all sectors of Ground Equipment and Satellite Services. As stated in the 2021 report by the Satellite Industry Association Report, Ground Equipment and Satellite services account for nearly 68% of an industry that was a $386B Market.

This growing market is anticipated to explode over the next decade, and reach a total value of some $1,053B by 2040. Aerkomm believes it can leverage our industry leading technology to offer cost-competitive data services to market.

Mobile BackHaul Market

Currently millions of existing 4G/5G base stations are in desperate need of upgrade for satellite connectivity. FGSA technology can provide ultra-high-performance throughput/small form factor antennas for existing base stations. We are currently engaged in business discussions with major satellite operators in this 5G segment currently underway.

Emerging high demand in the satellite 5G/6G mobile backhaul market in developing nations and global conflict zones, has created a need to address network resilience by utilizing satellite connectivity.

The cost involved to build out a fiber network can be too cumbersome for developing and under serviced nations, which often see fiber lines cut and stripped for resale. In global conflict zones, communications infrastructure is an immediate military target, resulting in marine and land lines being destroyed.

New Generation Teleport Services

With global teleport antenna technology evolving away from analog/parabolic antennas to digital beamforming flat panel antennas, parabolic antennas are set for rapid replacement as the satellite industry shifts from GEO services to multi-orbit services. This means massive numbers of LEO satellites will need to be tracked and connected simultaneously. As NGSO elevation is extremely low, a low-profile antenna is required to avoid obstacles and interference. We believe that Aerkomm’s FGSA technology can accommodate this market demand by offering a digital beamforming flat panel antenna that can fulfill multi-orbit tracking simultaneously. With this revolutionary antenna, beaming and tracking is not limited by mechanical movement (as seen in parabolic antennas), FGSA antennas are also small enough to not be visible from the sky.

ISR Projects

Aerkomm expects to be awarded a GEO/MEO Aero ISR (Intelligence, Surveillance and Reconnaissance) project in 2024 by a certain national government which we cannot name due to the confidential nature of the proposed contract. This six-year project will be based on Aerkomm’s robust quality and innovative technology in aviation and maritime applications.

Aerkomm will offer high-throughput antennas for real-time data transmission, unique small form factor FGSA technology resulting in consistent advantages for UAV and SatCom applications. This will allow for the implementation of AI technology for identification and real-time calibration of high value objects.

Network Resilience Market

The recent conflict between Russia and Ukraine has set off the trend of satellite communication as an essential means of comprehensive emergency support worldwide. With GEO, HEO, MEO, and LEO satellites providing supportive services, tailored to different application domains for critical emergency rescue operations, intelligence, surveillance, and reconnaissance (ISR) missions, coastal and maritime monitoring, technological research, and addressing communication blind spots in civilian areas.

Over the past year globally, government budgets have seen massive increases to secure network resiliency. When comparing flat panel antennas to conventional parabolic antennas, flat panel antennas are becoming highly desired products due to the advantages of small form factor, high efficiency, high gain and are especially inconspicuous from-the-sky.

FGSA Offers Small Form Factor and Low-Cost Solutions to Various Markets:

5G/6G Mobile Backhaul Market

FGSA Technology will Serve 5G/6G Mobile Backhaul Market

 AERKOMM’s Flat Panel Antenna Technology Will Lead the Revolution of New Generation Teleport Services

Aviation Connectivity

The February 24, 2023, IATA Economics Chart, following a Business Confidence Survey, shows a broadly positive outlook for the air transport industry in this post-COVID recovery period. The outlook is more favorable for the passenger than cargo segment, with passenger demand expected to continue to recover strongly over the year ahead. In contrast, the outlook for cargo volumes has softened over the past year, with a much more moderate expectation for growth over the next twelve months. 

especially amongst the major economies in the Asia Pacific.

challenges. Macro-economic headwinds – particularly inflation and fuel prices – remain key concerns for the industry. Compared with expectations from a year ago, only 14% of respondents expect input costs to moderate over the year ahead vs 34% in January 2022. Despite concerns regarding ongoing wage pressures in some markets, 71% of respondents expect to increase employment this year, up solidly from 59% a year ago. 

respondents expecting yields to decline this year and a similar proportion expecting no change.

There is a clear expectation that cargo yields are likely to decline over the course of the year. 

The March 3, 2023, IATA Economics Chart, demonstrates that Aircraft deliveries are poised for a solid rebound in 2023, with a total of 1,540 aircraft scheduled to be delivered this year, up 300 units (24%) compared to 2022. Where the new deliveries lead to replacement of old aircraft with modern, more fuel-efficient alternatives, they not only improve operational efficiency, but also contribute to a reduction in harmful emissions.

On current estimates, aircraft deliveries are set to surpass their 2019-level for the first time since the onset of the Covid-19 pandemic. The largest portion of the year-on-year (YoY) increase in 2023 can be attributed to orders from North America and Europe, whose deliveries are up by a significant 32% and 33% YoY, respectively. 

IATA’s Air Passenger Market Analysis, issued in February 2023, shows that air travel growth remains strong. 

In the IATA (International Air Transportation Association) Airlines Financial Monitor dated December 2021 – January 2022, published on January 17, 2022, the following key points were highlighted:

Aviation Industry

Impact of the conflict between Russia and Ukraine on aviation

The impact on aviation pales in comparison to the unfolding humanitarian crisis, though the aviation industry promotes peace and freedom by bringing people together, and its implications need to be both assessed and addressed. IATA has issued the latest fact sheet on the conflict issued March 8, 2022:

Immediately prior to the onset of the COVID-19 pandemic, there were, according to Airbus and Boeing, more than 23,000 commercial aircraft flying globally, a number that was expected to more than double in the next 20 years. Both Airbus and Boeing had estimated that the global fleet of commercial aircraft would increase from 23,000 planes in 2019 to more than 45,00046,000 in 2040,2041, according to their respective 20212022 reports, “Global Market Forecast report 20212022 – 2040”2041” and “Commercial Market Outlook 20212022 – 2040.2041.”  

The Airbus Global Market Forecast report 20212022 – 20402041 predicted that the increase would include 40% for aircraft replacement and 60% for growth, with Asia-Pacific (excluding Peoples Republic of China) accounting for 25% of deliveries.

following:

Boeing, in their Commercial Market Outlook 2022-2041 Report, presents an excellent Executive Summary of the 20-Year Market Demand which is depicted below: 

Prior to COVID-19, passenger numbers were also experiencing strong growth. While COVID-19 brought disruption to business practices and shifted demand, it is important to remember the resiliency of this market and the significance of servicing the industry. This is driven by global commerce, peoples’ desire to travel, the need to visit family and friends, explore the world and build relationships.

Airbus expects a full recovery of air traffic between 2023 and 2025.

Rapidly Growing In-Flight Internet Markets

We cannot predict the future; however, the success of our business is predicated on the return to sustainability of the airlines industry and the acceptance of our IFEC product offerings which are discussed below.

Recently, there have been more than 4 billion passengers flying globally, annually, spread across 23,000 airplanes. Only approximately 25% of these airplanes are equipped to offer some form of onboard connectivity with sometimes erratic quality, slow speeds and low broadband.  According to the industry’s largest poll of passenger attitudes, Inmarsat’s Inflight Connectivity Survey³, in-flight Wi-Fi is a key driver in forming customer loyalty and satisfaction among today’s airline passengers.

Aviation – an industry hammered by the fallout from COVID-19 more than most – is certainly facing the future with a reset ethos powered by the potential of digitalization. That’s the belief of a new paper by Cranfield University. Entitled Digital Now: Why the Future of Aviation Starts with Connectivity, the report, presented in partnership with Inmarsat, outlines how a ‘perfect storm’ of the pandemic and a heightened awareness of climate change, and what needs to be done to mitigate these affects, has caused aviation’s “key industry stakeholders, its customers, and governments across the globe to fundamentally reconsider their priorities and the sector’s future service offering.”

Central to this change is digital connectivity. In her foreword, Cranfield University’s Chief Executive and Vice-Chancellor Professor Karen Holford CBE FREng notes that technology can put aviation on a path “towards a brighter and more sustainable future.”

The report considers how digital connectivity “in all its forms, can enable and accelerate the rapidly changing needs of air travellers and of the aviation sector itself. It has identified specific challenges and opportunities that, if addressed, will have a direct effect on the sector’s resilience, its contribution to reducing climate change, and to new customer service offerings that will enhance passengers’ willingness to travel in the post-pandemic world.”

The Cranfield University report is divided into seven highly illuminating chapters and the main conclusions from this report are the following:

Currently, less than 25% of the world’s airline companies are providing some form of in-flight WiFi services through third-party providers. We believe that there is a huge market potential among the remaining unconnected airlines.

According to the Boeing Report titled “Commercial Market Outlook 2019 – 2038,”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, the majority ofmost 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 one thousand commercial aircraft are being upgraded annually. Eventually, more airplanes will be delivered from the production line with connectivity installed. However, whether aircraft connectivity is being carried out as a retrofit, or built into the initial aircraft production line, the evolution of IFEC technology shows that the demand for connectivity is increasing.

The Internet of Things (IOT) will also be an important enabler, to link in real time not only passenger but also core cabin components, including aircraft galleys, meal trolleys and other cabin elements. These IOT enhancements will allow simultaneous data exchange for the crew of an aircraft throughout the cabin.

Furthermore, airlines will be able to use increased cabin connectivity to perform predictive maintenance analytics over their entire fleet, thus improving the overall cabin service reliability, quality and performance on board all of their aircraft.

Our IFECAviation IFC Solutions

AviationAerkomm has two systems which can be offered to the aviation market.

With our advanced technologies and an innovative business model,proprietary FGSA antenna system which will be qualified for aviation use, we plan to provide airline passengers with a broadband in-flight experience that encompasses a wide range of service options. Such options include Wi-Fi, cellular, movies, gaming, live TV,both commercial airlines and music. We plan to offer these core services through both built-in in-flight entertainment systems, such as a seatback display,private business jet operators, as well as on passengers’ personal devices including laptops, mobile telephonesthe different aircraft manufacturers with a cost-effective connectivity solution for both hardware and tablets. We also plan to provide content management services and e-commerce solutions related to our IFEC solutions.broadband.  This system will operate through both Ku and Ka high throughput satellites, or HTSs.connectivity via GEO, MEO and LEO satellites.

The diagram below shows Aircom’s planned services options and e-commerce options.

2.

Aerkomm AirCinema Cube: This is an intranet-based wireless connectivity solution also offered to both commercial airlines and private business operators. The Aerkomm AirCinema Cube which is described in more detail below, will provide passengers access to media content, including movies, videos, music, news feeds, video games, advertising and promotions. It streams content from an onboard server to existing cabin IFE devices and/or passenger mobile devices.

We also plan to provide related content management services and on-board e-commerce solutions for commercial airlines. We expect that a complete e-commerce and mobile entertainment platform will place control of content, service delivery and commercial strategy firmly in Aircom’s hands vis a vis the airlines that may acquire our IFEC products and services. Our in-flight e-commerce solution will encompass on-line shopping, trading, travel options and duty-free sales, as well as other varied product offerings.

We have twovarious business models in place for our approach to the IFECIFC aviation market, one relating to commercial airlines and one to corporate business jets:market.

Traditionally, providers of in-flight connectivity have focused primarily on the profit margin derived from the sale of hardware to airlines and of bandwidth to passengers. Both airlines and passengers must “pay to play,” which results in low participation and usage rates.

We break away from this model and expect to set a new trend with our innovative business approach which, we believe, will set us apart from our competitors by our partnering with airlines and other strategic partners, such as online advertisers and content providers, to offer commercial airlines our IFEC system hardware at no cost and to airline passengers free connectivity solutions. Airlines will potentially be able to generate new revenues through participating in our revenue sharing model while passengers will not be required to pay for connectivity. We believe that, taken together, this novel approach will create an incentive for airlines to work with us, and this collaboration should act to drive up passenger usage rates. We believe that this is an innovative approach that will differentiate us from most existing market players. We currently have an agreement in place with our first commercial airliner customer, Hong Kong Airlines (discussed below).

Our main source of revenue is expected to be derived from the content channeledsale of the hardware as well as subscription-based plan for the bandwidth connectivity from selected satellite operator partners. This can be achieved from 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 an 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 IFEC network from selected partners including internet companies, content providers, advertisers, telecom service providers, e-commerce participants, and premium sponsors. In other words, we plan to use connectivity as a tool rather than as a commodity for sale, which we believe will allow us to achieve a greater return. By providing free connectivity which, we expect, will result in the generation of a large volume of content traffic, we believecorporate network. We cannot give any assurances at this time, however, that we will create a multiplying effect that will result in a value that exceeds the “sumbe able to successfully complete any of its parts.”these additional discussions.

Once our Aerkomm K++ system is approved by Airbus and receives the applicable airworthiness certifications, which process we expect to be completed in the beginning of secondfourth quarter of 2021,2024, as further discussed below, we will begin providing our Aerkomm K++ systems for installation on commercial airline aircraft.

According to the 2018 business aviation forecast published by Honeywell Aerospace⁴, during the next five years, 87% of new purchased business jets are expected to require satellite communications technology to facilitate internet connectivity. The same report states that business jet manufacturers are projected to deliver 7,700 new aircraft valued at $251 billion during the next 10 years. We believe that these statistics, as well as our own research, indicate that there is a strong demand by corporate jet owners to have high-speed internet connectivity installed on their aircraft. We do not believe, however, that corporate jet customers would generate sufficient internet traffic to make a free-service business model profitable for us. Consequently, we have modified our business model to address the limitations of this additional market.

To capitalize on this market, we plan to sell our IFECIFC system hardware to corporate jet owners through the Airbus Corporate Jets (ACJ) and Boeing Business Jets (BBJ) programs. In addition to selling our IFECIFC systems equipment, we will also sell these corporate jet aircraft owners the bandwidth required for the operation of our services, priced on a subscription plan basis. This business model would generate revenue and income directly from the sale of our IFECIFC hardware and related bandwidth. We already have an agreement in place with our first corporate jet and launch customer, MJet GMBH (discussed below), and we are in advanced discussion with a number ofseveral additional potential customers both directly through our corporate network and through Airbus. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these additional discussions.

Once our Aerkomm K++ system is approved by Airbus and receives the applicable airworthiness certifications, which process we expect to be completed during the firstfourth quarter of 2023,2024, we will begin selling our Aerkomm K++ systems for installation on Airbus ACJ aircraft.

Aircom Pacific,

Our Different Business Solutions

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

Commercial airline customers having an existing fleet with aircraft already operating in service will require a retrofit solution.  For those airline customers who already have aircraft in operation, Aerkomm shall offer a retrofit solution by selling at Airbus’ invitation, attended the Airbus ACJ Customer Forum which was held in Singapore in February 2019. This Airbus ACJ Customer Forum provided Aircom a unique opportunity to network with ACJ customers, operators and key industry players within the Airbus Corporate Jet community. At the Airbus ACJ Customer Forum, Aircom was provided the opportunity to demonstrate thecompetitive price, our Aerkomm K++ system. ASystem. The airline would be responsible for installing the equipment whilst the aircraft is undergoing scheduled maintenance which can be carried out under the supervision of Aerkomm.  The airline would also require purchasing from Aerkomm the necessary bandwidth to provide connectivity to its passengers.

Today, airliners can choose from among a wide range of selectable features that provide value to their operation. Optional provisions such as satellite communications and In-Flight Connectivity (IFC) systems give airlines the ability to improve passenger experience and enhance operating efficiencies. Selectable features are generally made up of independent selections and package selections, which are discussed below.  

Independent selectable features are pre-qualified equipment options offered from a wide variety of industry suppliers. The options offered are used to modify or add to the standard features described in the aircraft’s baseline specification. 

Independent selections are made up of selectable Seller-Furnished Equipment (SFE), which is optional equipment offered directly by the aircraft manufacturer, and Buyer-Furnished Equipment (BFE), which is optional equipment which the airlines choose during the production of the aircraft, and which the airline is fully responsible for negotiating directly with the Original Equipment Manufacturer (OEM), such as Aerkomm, for all terms of the purchase. Another category used is Seller Purchased Equipment (SPE), which is simply (BFE) that the aircraft manufacturer purchases on behalf of the customer. 

3.1Supplier Furnished Equipment (SFE): SFE is standard equipment which makes up the bulk of the hardware installed on an aircraft. SFE is generally sole-sourced to suppliers under a partnership/cost-sharing agreement and includes equipment used in various aircraft systems. Generally, there are limited SFE options for the operator to choose from, and when available they are commercially managed between airline and the aircraft manufacturer. The price of all SFE is commonly included in the airframe price. 

SFE suppliers are generally not required to bid for contracts at each phase of the design and manufacturing process but are expected to be highly responsive to the needs of the manufacturer as part of a longer-term partnership. This strategy reassures equipment suppliers of the manufacturer’s commitment, avoids costs associated with frequent re-competitions, and puts SFE suppliers in a position to influence the establishment of future industry standards and specifications for new equipment. 

More recently, airframers and system integrators have taken to make risk-sharing more attractive by reducing the number of ACJ clients atsuppliers with whom they contract with. The airlines like this concept because it offers them a choice of equipment without requiring them to make contract arrangements with suppliers. And the Airbus ACJ Customer Forum showed interest in our IFEC product offeringmanufacturers prefer this alternative given it gives them better control of the production process and we are currently in active discussionsreduces manufacturing costs. 

3.2       Buyer Furnished Equipment (BFE): BFE is optional equipment chosen during the production of the aircraft and is commercially managed between the airline and the BFE suppliers. Aircraft manufacturers offer customers a choice of BFE equipment from a catalog listing qualified suppliers. The customers would then have to negotiate with these parties. We expect to participate in future Airbus ACJ Customer Forums tothe suppliers themselves and would be scheduledcontractually responsible for choosing the right equipment and ensuring it is delivered on time. Generally, the price of BFE is not included in the future in one or more European venues.airframe price. Most of this equipment is largely standard from airplane to airplane, such as navigation, communication, and entertainment systems. An airline will thus usually select a supplier for their entire fleet and then have the supplier adapt it to the particular airplane installation. This allows for the owner to standardize BFE on other aircraft and take advantage of interchangeability and bulk purchases.

Our Connectivity Solutions – Ka/Ku Band Satellites

We expect to bring1. Aerkomm K++ System

Our full internet connectivity on-board to aircraft through communication satellites. As depicted inIFC system, which is called the diagram below, aircraft equippedAERKOMM K++ system, will include an adaptor plate where our proprietary FGSA Ka and Ku band antennas for transmission and receiving will be mounted and covered by an ultra-low-profile radome which is capable for both Ka and Ku bands. The system will comply with an on-board connectivityARINC 791 and 781 standards of Aeronautical Radio, Incorporated (ARINC) and meet the necessary design approvals. The number of proprietary antenna tiles installed will depend on the required download speeds and will work with SES O3bmPower, Telesat and OneWeb satellite constellations.

The standard Aerkomm K++ system can communicate with a satellite via an airborne antenna. The satellite then relays the informationdeliver up to a ground station,350 Mbps to each aircraft which is equipped with a high-power satellite dishenough to enable all passengers to access streaming-capable internet connectivity at the same time. Passengers can also do online gaming, e-commerce and is connected to the Internet through ourother activities requiring high data rate.  We can also offer higher Mbps capability by installing additional proprietary ground system.antennas for which we will charge an additional amount. 

Most in-flight connectivity systems currently in the market rely on the Ku-band satellite signals for communication. Many players in the market are working to provide higher bandwidth and faster transmitting rates using the Ka-band.

Below is a diagram, provided by the European Space Agency, showing the variety of satellite frequency bands. The higher the frequency bands, such as Ka, the wider the bandwidth. With the variety of satellite frequency bands that can be used, designations have been developed so that they can be referred to easily.

In1.1 Our Connectivity Solutions using Ku-band and Ka-band GEO/MEO/LEO Band Satellites

We expect to bring connectivity on-board to aircraft through communication satellites.

Most in-flight connectivity systems currently in the market rely on the Ku-band satellite communications,signals for communication. Many players in the Ka-band allowsmarket are working to provide higher bandwidth communication. Ka-band high-throughput-satellite systems reuse frequency bands in spot beams for much higher system capacity and better spectrum efficiency.

faster transmitting rates using the Ka-band. Currently, there are few Ka-enabled satellites which limitsand as a result, the coverage area in certain areas of the Asia-Pacific region.region is limited. However, new GEO (Geostationary Earth Orbiting) and LEO (Low Earth Orbiting) Ka-band satellites are being regularly launched and this should provide worldwide Ka band coverage over the next few years.

New GEO (Geostationary Earth Orbiting) and LEO (Low Earth Orbiting) Ka-band satellites are being regularly launched and this increase in satellites is expected to provide worldwide Ka-band coverage within the next few years.

Our Aerkomm K++ system architecture will bring our aviation partners and their passengers the benefits of both GEO, MEO and LEO Ka-band satellite technology. GEO satellites may scan a hemisphere of earth, or fixed regions of that hemisphere at regular intervals. Performance of GEO satellites diminishes greatly in the areas near the Earth’s poles. LEO satellites orbit the earth from pole to pole and collect data from the areas beneath them. Only LEO satellites can collect high quality data over the poles. The Ka-band satellite increases data throughput. Aircom plans to haveAerkomm has the necessary technology ready to take advantage of this new trend in Ka-band aviation connectivity. Future SpaceX,To-date a number of satellites belonging to different satellite companies and using Ku and Ka bands are already in operation. SES O3b already have 20 classic Ka band satellites in orbit and this year they would have launched 6 new O3bmPower Ka band satellites which are more powerful than the classic ones. One Web will launch 618 Ku and Ka band satellites, whilst Telesat satellites are expected to be ready by end of 2022 and with full-service availability by 2023. As of February 3, 2022, SpaceX has launched 2,091 Starlink satellites. As of April 2022, Starlink services were on offer in 29 counties covering North and South America, Europe and Oceania, with applications pending regulatory approval in many more regions.

OneWeb Satellites, which is a joint venture between Airbus and OneWeb, the low Earth orbit (LEO) satellite communications company, on December 2021 confirmed its successful deployment of 36 satellites by Arianespace from the Baikonur Cosmodrome. This latestwill launch its twelfth overall and ninth since December 2020, brings OneWeb’s total in-orbit constellation to 394 satellites. This represents over 60 percent of OneWeb’s planned 648 LEO satellite fleet that will deliver high-speed and low-latency global connectivity.

Telesat, which is a privately held Canadian company, launched a test satellite in 2018. To-date, Telesat have 298 LEO satellites which it plans to expand to 1,700188 Ka band satellites in 2023. Starlink has by far the near future to provide fullbiggest number of satellites in orbit with Ku and Ka band satellites already launched and another 2000 expected for 2023. Full global service targetedwith Ka-band is target for the second half of 2024.

The chart below depicts the coverage of both GEO and LEO Ka-band satellites.

2.

Aerkomm AirCinema Cube

Source: AircomThis is an intranet-based wireless connectivity solution also offered to both commercial airlines and private business operators. The Aerkomm AirCinema Cube will provide passengers access to media content, including movies, videos, music, news feeds, video games, advertising and promotions. It streams content from an onboard server to existing cabin IFE devices and/or passenger mobile devices. It is capable of up to 16TB worth of content available for streaming. Contents are accessed on mobile devices from web browsers or an app.

Narrow body aircraft such as the Airbus A320 and Boeing B737 require only one Aerkomm AirCinema cube to be fitted to cater for all passengers. Wide body aircraft such as the Airbus A330/340/350 and Boeing B777/787 will require two Aerkomm AirCinema cubes per aircraft to cater for all passengers. The installation of the cube can be carried out relatively quickly during an overnight stop of the aircraft and The Aerkomm AirCinema Cube is non-battery operated and will require connection to the 28V DC system of the aircraft through a Supplemental Type Certificate and cabling which will also include the cabling and connectors supplied from an Engineering company such as AKKA Technologies (now Sabena Technics) in France.

The Ku-band offers reliable service outside of the Ka-band coverage over the oceanWe partner with SES (GEO/MEO) and in mountainous regions which is aimed to cover hotels and resorts remotely located as well as the maritime sector. The Ku-band also supports the OneWeb LEO satellite systems.Telesat (GEO/LEO)

The map below shows areas of satellite coverage that could potentially be served by Aircom’s IFEC product offering.

Source: Aircom

We are actively working with other satellite providers in order to accommodate global airline routes and growing fleets. We are monitoring the satellite industry for growth in coverage, including China Satcom’s plan to launch high-capacity Ka-band and Ka HTS multispot-beam satellites over the Asia-Pacific region, as described in more detail below under Ku-band and GEO/LEO Hybrid Satellite Technology.

In March 2017, we entered into a Master Service Agreement with SKY Perfect JSAT Corporation of Japan for use of its JCSAT-2B/Asia Beam Ku-band satellite telecommunication services, teleport services and housing services. The agreement’s initial term ran for a period of three years from its commencement date of April 15, 2017, subject to the receipt of all governmental licenses and approvals, and will continue to be effective provided any of the services continue after the initial three-year term. We were required to prepay $285,300 of the contract price and a security deposit plus applicable Japanese consumption taxes upon the commencement date of the agreement. Under this agreement, we are able to test the connectivity equipment that we have been developing for ground and maritime uses.

Our Aerkomm K++ system

Our proprietary IFEC system, which is called the AERKOMM K++ system, will contain an ultra-low profile radome containing two Ka-band antennas, one for transmitting and the other for receiving, and will comply with ARINC 791 standard of Aeronautical Radio, Incorporated, or ARINC and meets Airbus Design Organisation Approval.

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 expect to be able to transform in-flight entertainment into a source of ancillary revenue for our airline customers. We will team up with our current and future prospective airline customers to provide them with our Aerkomm K++ hardware system at no cost and with free onboard Wi-Fi connectivity services to passengers, which will allow 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 improve its reach by gaining access to in-flight connectivity. We seek to exemplify this type of relationship through collaboration with major Internet companies, such as search engine companies. We plan to promote a partner’s brand through our in-flight services by channeling all searches to the partner’s search engine. By designing our user interface around the partnered company, we can present passengers with an on-screen environment populated by the partner’s apps, logos, and colors, providing a powerful marketing tool for the partner company. We can also enhance recognition of our sponsors’ brands by creating a list of portals on the in-flight system’s home screen, which lead to each sponsor’s individual page where passengers can resume their normal entertainment, social, and professional activities.

We are actively in discussions with Internet content providers to establish such premium sponsorships.

Live TV

We are negotiating with television providers along our prospective airline partners’ flight routes to make live TV available through our IFEC system. Airlines will be able to 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.

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 should 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 should be able to receive sponsorship premiums from select TV programs, such as pay-per-view and shopping channels.

Social Media and Instant Messaging: Content Management

We will have firewalls in place both on the ground and in the air. These, in combination with our policy enforcement software, will allow us to filter, classify, block, or forward services in accordance with our service and quality policies. We will be able to 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 or other periodic 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 will be able to 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 providers’ networks 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 programming, as well as through banners advertisements. Passengers will be able to choose to pay for premium content, such as first-run movies, where available. For programming of all types, our partnered advertising agents will be able to 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. Passengers will not be able to skip or close this commercial without closing out of the program. We will be able to place similar advertisements before games or radio programs and during online duty-free shopping.

Frequent flyer 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 options.

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 plan to manage search engines on a white list basis, which means that the in-flight connectivity system will only permit the passage of traffic to and from approved search engines. 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 agreements 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

In Internet traffic, more than 50% of the bandwidth that passes through satellites 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 will enable our partners to place their advertisements accordingly and generate revenue for them and us. Advertisers can offer destination-specific commercials and banners, which can be placed in our in-flight entertainment system and in apps and portals on personal devices. By utilizing commercial agents to sell ad space on our systems, we plan to cover all marketable areas, expanding sales opportunities and increasing revenue.

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

Online/Streaming Gaming

We plan to make it possible to stream console-quality games in the airline cabin. Through gaming content partnerships, we expect to be able to offer PlayStation, Xbox, and other console games. Passengers will be able to play popular games from their personal devices or in-flight entertainment systems, invite friends to play over the network, and save their gaming data for continued play on the ground. It will require high speed networks to play these interactive action games and we expect to be able to provide the services necessary for the functioning of these interactive 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 plan to allow passengers to use 4G messaging services while in flight. Our in-flight system is designed to detect whether a passenger is using one of our 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. Passengers will also be able to purchase a premium package to enable text message services.

Destination-Based Services

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

In-flight Trading and e-Commerce

We have found that in-flight connectivity through our AERKOMM K++ system will allow travelers to make better use of their travel time. With uninterrupted broadband available onboard, passengers will be able to conduct business with professionalism and ease. For example, we plan to partner with trading partners who are registered with the various regulatory authorities to offer financial product trading services and we expect to charge a processing fee when a passenger conducts a trade in-flight. Additionally, a complete e-commerce platform made available through the AERKOMM K++ system will enable travelers to engage in unlimited on-line shopping, to make travel arrangements including holiday destinations, hotel bookings and car rentals and to complete duty-free purchases, among other options.

Black Box Live

For reasons of flight safety, a flight recorder, commonly known as a “black box”, is legally required on every aircraft of a certain size. The Flight Data Recorder (FDR) records data with respect to various metrics 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 a number of aviation accidents happen over oceans, 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 materials used in manufacturing flight recorders, records show that a large number of flight recorders are damaged and unreadable following accidents, if not lost altogether. For this reason, effective, real-time storage and transmission of in-flight data is beneficial for deducing the cause of aviation crashes and preventing them from happening again.

In March 2019, the aviation authorities around the world grounded the Boeing B737 MAX passenger airplane global fleet. This occurred after two new Boeing B737 MAX passenger airplanes crashed within 5 months of each other with fatal consequences. The first aircraft which crashed on October 29, 2018 belonged to Lion Air and the second aircraft which crashed on March 10, 2019 belonged to Ethiopian Airlines. The U.S. Federal Aviation Administration (FAA) and other worldwide aviation authorities worked in coordination to determine the cause of the crashes before issuing additional guidance. Before the causes could be determined, and within 24 hours of the Ethiopian Airlines crash, however, worldwide aviation authorities and operators began banning MAX flight operations. Although the minimal aircraft flight data available from the Ethiopian Airlines crash was not sufficient to link it to the Lion Air crash, there has been pressure from the aviation authorities and the airline operators to implement protective measures. The Boeing B737 MAX fleet was grounded more than two full days before the Ethiopian Airlines’ FDR information was downloaded. 

A path to a flight data retrieval solution has been initiated based on work that stems from the two earlier major accidents. The first case is the disappearance of the Malaysia Airlines Boeing B777 aircraft Flight 370 in March 2014. To-date, neither the aircraft nor the flight data recorder has been recovered and thus the case remains one of the biggest mysteries in aviation. The second case is an Air France Airbus A330 aircraft Flight 447 from Brazil to France which crashed in the Atlantic Ocean in June 2009. Although the major wreckage of this aircraft was found within 5 days of the accident, the initial investigation by the French aviation authorities was hampered because the aircraft’s flight recorders were not recovered from the ocean until May 2011, nearly two years later.

The most widely discussed resulting changes from those two accidents are new International Civil Aviation Organization (ICAO) standards for tracking aircraft, included in Amendment 40 to ICAO Annex 6. However, Amendment 40 includes another element that could ultimately prove to be more useful: timely access to flight data. Airlines could meet the ICAO standard, which goes into effect in 2021, by streaming FDR data while in flight. Providers of the necessary hardware, software and communications services are teaming up to offer timely flight data solutions to operators.

With our new product, Black Box Live, we expect to be able to provide a system of real-time flight information back-up and streaming which will be aimed at advancing flight safety. Under strict security measures, this new product is being designed and engineered to securely stream flight data and crewmembers’ cockpit voice records to our cloud-based storage solution 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.

Other Markets (Remote Locations and Maritime)

In addition to our focus on IFEC systems for aircraft, we have begun to develop related internet connectivity systems for other markets and applications. In this regard, we have already developed two connectivity systems, one for hotels, primarily for remote locations, and one for maritime use. Both systems operate through the Ku HTSs (high throughput satellites).

The Ku-band offers reliable service outside of the Ka-band coverage over the ocean and in mountainous regions and is aimed to cover remotely located hotels and resorts as well as the maritime sector. The Ku-band also supports the OneWeb and other LEO satellite constellation systems.

In these additional markets:

We are currently in the customer demonstration stage in the East Asia market with our maritime satellite communications equipment and services.

The picture below depicts Aircom’s current maritime antenna.

We cannot be sure at this time that we will be successful marketing this product offering for remote locations and maritime use.

Satellite Ground Stations and Data Centers

To provide and operate our IFEC services, we will be required to obtain a telecommunications license. To obtain this license, we will need to have access to, or the planned availability of, a satellite ground station through which we will route our IFEC communications. A telecommunications license is issued by a telecommunications authority in the country where the satellite ground station is located. We plan to build our first satellite ground station and a data center in Taiwan, to support our operations in the Asian region, and, thus, we will have to apply for a telecommunications license in Taiwan.

A ground station’s main purpose is to establish telecommunication links with satellites.  IFEC systems on aircraft route their communications from a passenger’s data terminal, such as a laptop, mobile phone or other internet accessible device, via satellites and through a ground station which acts as a traffic gateway, directing the onboard IFEC originated satellite signal to terrestrial networks such as the internet and back again. The ground station will house satellite antennae and other communication equipment.  Satellite antennas must be located within the coverage of the satellites being used.  Ground station satellite antennas 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 antennas connecting to various satellites.  Due to the strong electromagnetic radiation emitted by the antennas, a satellite 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.   

On July 10, 2018, we entered into a real estate sales contract with Tsai Ming-Yin, as seller, and Sunty Development Co., Ltd., as trustee, pursuant to which the parties agreed to definitive terms and conditions relating to the acquisition by Aerkomm Taiwan of a parcel of land located at the Taishui Grottoes in the Xinyi District of Keelung City, Taiwan. The parcel consists of approximately 6.3 acres of undeveloped land and is expected to be used by us to build our first satellite ground station and data center. We completed payment of the purchase price for the Taiwan land parcel in July 2019 and our agent has received all of the necessary title transfer documentation from the seller. According to the land use laws of Taiwan, we need to submit a usage plan and to obtain the necessary license or authorization for the intended usage before we can obtain an official certificate of title for the Keelung City land parcel. To complete this process, our Taiwan-based subsidiary, Aerkomm Taiwan, will submit an application for a telecommunications license, or as it is known in Taiwan, a “Concession License for Satellite Mobile Communications Operation,” to the National Communications Commission of the Republic of China (Taiwan), the government entity responsible for regulating telecommunications in Taiwan. Following the issuance of this Concession License, Aerkomm Taiwan will file an application with the Keelung City municipality, where our Taiwan land parcel is located, for a land development license. Once we receive this development license, Aerkomm Taiwan will then be able to file an application with the Keelung City land office to receive the certificate of title to our Taiwan land parcel. Although we expect to complete this process and receive or certificate of title by sometime in the third quarter of 2022, we cannot provide any assurance of this timing. Once we receive the certificate of title, we expect to be able to mortgage the property to borrow the funds we will need to build the ground station. Aerkomm Taiwan is currently preparing the plan of usage and is working with various regulatory authorities to obtain the necessary license and approval to meet the local land use law requirements. We do not know at this time how long it will take to complete the process and receive the certificate of title to the parcel.

Additionally, we have signed a binding memorandum of understanding with a Samoa based telecom company to lease the Taiwan land parcel, once title has been transferred to us, for a period of five years at an expected rental income to us of approximately $2.3 million per year. This telecom company plans to build a separate satellite ground station and data center on the parcel and we may lease back a portion of the land to build our own satellite ground station and data center if and when we have sufficient funds to do so. The five-year lease, if it is consummated, would provide us with additional working capital to supplement the funds that we raised in our 2020 Offering, to help us further our core corporate development efforts.

There can be no assurance that we will be able to successfully complete the land lease arrangements with the Samoa based telecom company or otherwise finance and build our planned satellite ground station and data center or that we will be able cover the various costs, including but not limited to property taxes, to maintain the Taiwan land parcel.

Our Contracts with Airline Partners

Airbus SAS

On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, Aircom entered into an agreement with Airbus SAS, or Airbus, pursuant to which Airbus will develop and certify a complete retrofit solution allowing the installation of our “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. We expect to expand our agreement with Airbus to include other Airbus models including the Airbus A330, A340, A350 and A380 series. Airbus will apply for and obtain on our behalf a Supplemental Type Certificate (STC) from the European Aviation Safety Agency, or EASA, as well as from the U.S. Federal Aviation Administration or FAA, for the retrofit AERKOMM K++ system. The EU-China Bilateral Aviation Safety Agreement (“BASA”) went into effect September 3, 2020, giving a boost to the regions’ aviation manufacturers by simplifying the process of gaining product approvals from the European Union Aviation Safety Agency (“EASA”) and the Civil Aviation Administration of China (the “CAAC”), while also ensuring high safety and environment standards, will continue to be met. With this Bilateral Agreement in place, the STC approved by EASA will be mutually accepted by the CAAC. This shall significantly reduce the cost and time required for us to launch our business with China based customers.

Pursuant to the terms of our Airbus agreement, Airbus agreed to provide Aircom with the retrofit solution which will include the Service Bulletin and the material kits including the update of technical and operating manuals pertaining to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit solution, including the certification, is expected to be in third quarter of 2021, although there is no guarantee that the project will be successfully completed in the projected timeframe. Once the project is completed, Aircom, or Airbus on behalf of Aircom, will be able to commence installation of the AERKOMM K++ system on aircraft in the first quarter of 2023.

A number of airlines, and in particular aircraft lessors, will accept only Service Bulletins issued by the aircraft manufacturers for the retrofit installation of any system on board their aircraft. Our agreement with Airbus ensures that our system will meet this requirement for aircraft lessors who intend to purchase Airbus aircraft, although it does not guarantee that airlines or aircraft lessors will purchase our AERKOMM K++ system.

Airbus Interior Services

On July 24, 2020, our wholly owned subsidiary, Aerkomm Malta, entered into an agreement with Airbus Interior Services, a wholly-owned subsidiary of Airbus. This new agreement follows the agreement that Aircom signed with Airbus on November 30 2018 pursuant to which Airbus agreed to develop, install and certify the Aerkomm K++ System on a prototype A320 aircraft to EASA and FAA certification standards, Airbus Interior Services provides current cabin upgrade solutions for Airbus aircraft operators while bringing additional flexibility and reduced lead times to the cabin upgrade process. Pursuant to the agreement with Aerkomm Malta, 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 new agreement also includes Airbus support for the integration of the Aerkomm K++ System components on the aircraft, including ARINC 791 structural reinforcements and related engineering work.

Airbus Interior Services will provide support for European National Airworthiness Authorities (NAA) certification as required in addition to EASA certification. Airbus Interior Services will also provide on-site technical support at the Maintenance Repair Organization (MRO) base for the first aircraft retrofit of each new customer.

We plan to install the Airbus Interior Services created Service Bulletin and Airbus kits for the AERKOMM K++ retrofit solution first on the Hong Kong Airlines fleet of 12 Airbus A320 aircraft. With this installation, Hong Kong Airlines will become Aerkomm’s first commercial airline customer.

Hong Kong Airlines

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

On January 30, 2020, further to the master agreement with Hong Kong Airlines, Aircom signed an agreement with Hong Kong Airlines to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ IFEC solutions. This agreement does not include Klingon as a party and Klingon is no longer involved in our contractual relationship with Hong Kong Airlines.

Under the terms of this new agreement, Aircom will provide its Ka-band AERKOMM K++ IFEC system for installation on Hong Kong Airlines’ fleet of 12 Airbus A320 and 5 Airbus A330-300 aircraft as well as its AERKOMM AirCinema system for the Hong Kong Airlines Airbus A320 aircraft. Hong Kong Airlines will become the first commercial airliner launch customer for Aircom.

The AERKOMM AirCinema system, which Aircom is designing and implementing specifically for Hong Kong Airlines, will introduce free high-speed internet access to the seatback screens of Hong Kong Airlines’ Airbus A320 aircraft, connected via the Ka-band AERKOMM K++ IFEC system. Instead of the traditionally preloaded and fixed selection of in-flight entertainment, passengers will have access to high-speed internet steaming services for videos, music, live TV and social media. Aircom and Hong Kong Airlines will work closely together to develop the AERKOMM AirCinema system. Hong Kong Airlines will be our launch customer for this innovative seatback solution.

The AERKOMM K++ IFEC system will also provide passengers of Hong Kong Airlines with an “at home” network experience by giving free access to on-board WiFi internet connectivity to all passenger personal devices, including laptops, mobile phones and tablets. The AERKOMM K++ system will be ready “future-proof” and compatible with the next generation of satellite technologies. This system will also provide passengers of Hong Kong Airlines with access to e-commerce amenities, such as In-Flight shopping and travel services. Details and terms about the services to be provided via the AERKOMM K++ system is being actively discussed by Aircom and Hong Kong Airlines and will be set forth in one or more service level agreements to be entered into by the parties.

In order to install the AERKOMM K++ system on the Hong Kong Airlines aircraft, we will have to obtain local approval for the AERKOMM K++ system from the Hong Kong Civil Aviation (HKCAD). This HKCAD local approval will be based on our obtaining the Airbus Service Bulletin, which we expect to receive from Airbus, together with EASA certification, by sometime in the first quarter of 2023. Once we receive the Airbus Service Bulletin and the EASA certification, jointly with the support of Airbus, we will be able to apply to the HKCAD for the required local approval.

As an interim solution for Hong Kong Airlines, until the Aerkomm K++ System can be fully retrofitted onto the Hong Kong Airlines aircraft fleet, Aircom plans to install the Aerkomm AirCinema “Cube” on Hong Kong Airlines fleet of A320 and A330 aircraft during the third quarter of 2022. The AirCinema Cube is a portable inflight entertainment, or IFE, box intranet server which will provide to passengers’ personal entertainment devices pre-loaded videos, news, music and games, on demand. Media content will be jointly managed by Aircom and Hong Kong Airlines and content updates will be provided regularly by Aircom.

On May 11, 2020, our Taiwan based subsidiary, Aircom Telecom, entered into a binding product purchase agreement with Ejectt Inc., or Ejectt, a Taiwan company whose Chairman is a member of our board of directors, to purchase 100 sets of the AirCinema Cube from Ejectt for installation on Hong Kong Airlines’ fleet of aircraft.  On July 15, 2020, Aircom Telecom signed a second product purchase agreement with Ejectt for an additional 100 sets of the AirCinema Cube.

Vietjet Air

On October 25, 2021, we signed an agreement with Vietjet Air (“Vietjet”) to provide them with our Aerkomm AirCinema In-Flight Entertainment and Connectivity (“IFEC”) solutions.

Under the terms of the agreement, we will provide to Vietjet our Aerkomm AirCinema Cube IFEC system for installation on Vietjet’s fleet of Airbus A320, A321 and Airbus A330-300 aircraft.

Our AirCinema Cube system, will provide Vietjet with connectivity to passengers’ personal electronic devices with WiFi capability, including laptops, mobile phones and tablets, using an intranet-based solution. The AirCinema Cube system will host music, documentaries and movies provided by Google Play Movies and Television, as well as news feeds, both in the English and Vietnamese languages, provided by global and local news suppliers. The AirCinema Cube will also be customized to Vietjet’s branding, will host an in-flight moving map, an in-flight sales platform and a cabin management system together with Vietjet’s own in-flight services.

Aerkomm is planning to install the AirCinema Cubes on the first 23 Airbus A320/A321 aircraft and 3 Airbus A330 aircraft of Vietjet during the second quarter of 2022 subject to obtaining local approval for the AirCinema Cubes from the Civil Aviation Authority of Vietnam (CAAV). This CAAV local approval will be based on providing a minor modification Supplemental Type Certificate from AKKA Technologies of France during April 2022.

Other Airline Partners and Business Jets Customers

We are actively working with prospective airline customers to provide them with the Airbus to-be-certified AERKOMM K++ system.

We have entered into non-binding memoranda of understanding, or MOUs, including, most recently, with Thai Smile which operates a fleet of 20 Airbus A320 aircraft. There can be no assurances, however, that any MOUs we enter into will lead to actual purchase agreements.

Currently, we are finalizing MOUs with the following airlines, although we cannot assure you that we will be able to finalize any of these agreements:

We are in advanced active discussions with a number of major airlines in Europe, the Middle East and Asia, and we are confident, although we cannot guarantee, that we will be successful in signing MOUs with one or more of these companies. Additionally, we are close to signing a definitive agreement with a major airline company having a large fleet of aircraft; however, in view of a mutual non-disclosure agreement with this party, we cannot disclose the name at this stage, and we cannot guarantee that we will be successful in signing a definitive agreement with this company.

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. ACJ customers, however, would not generate enough internet traffic to make our free-service business model viable. 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, and we are currently in advanced discussions with a number of additional ACJ customers, some of whom have more than one aircraft in their fleets.

While, to date, we have been concentrating on Airbus customers in view of our existing agreement with Airbus, our current plan is to also begin marketing to Boeing aircraft customers and Boeing Business Jets (BBJ) customers, and we intend to acquire the necessary certification of our AERKOMM K++ system equipment for the different Boeing aircraft models, with a particular focus on the Boeing B737 aircraft family. We have already carried out discussions and negotiations with AKKA Technologies based in Toulouse France, which is a specialist aerospace and aviation design organization, for providing us with a Service Bulletin and Supplemental Type Certificate for the Boeing B737 family, including certification from EASA. We anticipate that we will sign an agreement with AKKA Technologies in the third quarter 2020, although we cannot guarantee this. Once an agreement is signed with AKKA, the project of developing the Service Bulletin and Supplemental Type Certificate for our AERKOMM K++ system equipment for the Boeing B737 family of aircraft and obtaining EASA certification for this aircraft line is expected to take approximately nine months.

We plan to enter into business agreements with additional airline partners and corporate jet owners, which will allow our antenna equipment and/or entertainment services to be installed, and our services provided, on additional fleet aircraft. Under any such agreements, we expect that the airlines will commit to have our equipment installed on some or all of the aircraft they operate, and we will commit to provide passenger connectivity and/or entertainment services on such aircraft and to remit to the airlines a specified percentage of the revenue that we generate. We expect to have the exclusive right to provide Internet connectivity services on these aircraft throughout the term of the agreements we expect to enter into with such airline partners. Depending on the contract, installation and maintenance services may be performed by the airline under our supervision or sub-contracted to a maintenance repair organization, or MRO, mutually agreed upon by both Aircom and the airline. These agreements will also vary as to who pays for installation and maintenance of our AERKOMM K++ system. We cannot guarantee that we will be able to enter into any such additional agreements.

Other Agreements and Understandings with Our Business Partners

MJet GTA: 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 Aircom. The purchase order 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 is successful, something we cannot guarantee at this time, MJet will pay us a one-time fee for our equipment and a monthly fee for our connectivity services, and we will also begin charging MJet for the bandwidth required to use the AERKOMM K++ system services. Assuming the success of this installation, MJet will become the first recurring payment customer of our AERKOMM K++ system as well as being the launch customer of our Aerkomm K++ solution.

Malta MOU: On February 23, 2018, Aircom entered into a nonbinding memorandum of understanding which we refer to as the Air Malta MOU, with Air Malta, a company organized under the laws of Malta, pursuant to which the parties intend to collaboratively market and provide their products and servers to passengers of the Malta-based airline fleet. Under the terms of the Air Malta MOU, the parties intend to develop, install and operate in-flight connectivity systems onboard the Malta-based airline fleet and provide related services to its passengers. We cannot assure you, however, we will be able to enter into a definitive agreement with Air Malta, or that the Malta MOU will lead to any Aerkomm product sales.

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. We cannot assure you, however, we will be able to enter into a definitive agreement with Onurair, or that the Onurair MOU will lead to any Aerkomm product sales.

Thai Smile MOU: On October 19, 2021, Aerkomm entered into a nonbinding memorandum of understanding, which we refer to as the Thai Smile MOU, with Thai Smile Airways Company Limited, a company organized under the laws of Thailand, pursuant to which the parties intend to collaboratively market and provide their products and services to passengers to the Thai-based airline fleet. Under the terms of the Thai Smile MOU, the parties intend to develop, install and operate in-flight connectivity systems onboard the Thai-based airline fleet and provide related services to its passengers. We cannot 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.

Telesat Cooperation AgreementAgreement:: On June 23, 2020, AircomAerkomm entered into a cooperation agreement with Telesat Leo Inc., or Telesat, a wholly owned subsidiary of Telesat Canada. Telesat is one of the world’s largest and most successful satellite operators providing critical connectivity solutions that tackle complex communications challenges. Through this agreement, AircomAerkomm and Telesat will jointly collaborate to develop a test program for the Telesat low-Earth-orbit (LEO) Network, Telesat’s network of low-earth orbit satellites for aircraft connectivity, to assess the technical and commercial viability of incorporating the Telesat LEO Network capacity into Aircom’sAerkomm’s IFEC product portfolio and network. AircomAerkomm and Telesat will collaborate in both technical and commercial activity.

The two parties’ technical collaboration is expected to include testing network performance, leveraging Telesat’s Phase 1 LEO satellite which has been in polar orbit since 2018, ensuring compatibility with existing AircomAerkomm IFEC solutions and future user terminal solutions, and end-to-end implementation within regulatory guidelines. Commercial collaboration will include optimizing business and operating models, joint presentations and information sessions with key customers and partners and exploring a long-term joint development plan.

This cooperation agreement between AircomAerkomm and Telesat is preliminary and nonbinding and subject to the negotiation and execution of a definitive agreement. Aerkomm expects that a definitive agreement will be signed, although there can be no assurance when this will happen, if at all. The Telesat Cooperation Agreement was renewed by both parties on November 10, 2021.

SES Cooperation Agreement:On January 10, 2022, Aerkomm entered into a non-binding cooperation agreement (see Exhibit No. 10.77) with New Skies Satellites B.V., a Dutch company with its principal offices located at Rooseveltplantsoen Thethe Hague, Netherlands (“SES”). SES is one of the world leaders in satellite operations and is operating a constellation of satellites in medium-earth orbit (MEO) and geostationary-earth orbit (GEO) with a multi-terabit, high-throughput, low-latency network infrastructure (the “SES Satellite Network”), used for the global mobility market, including aviation, maritime, and the global fixed location market, including equipment, mobile back haul, teleport and data center co-location. SES has launched SES-17, a GEO satellite, and a series of MEO satellites (O3b), and will launch additional MEO satellites (“O3b mPOWER"mPOWER”) as part of the SES Satellite Network. Through this agreement, Aerkomm and SES will jointly collaborate respect to the following areas relating to the Project:

This cooperation agreement between Aerkomm and SES is preliminary and nonbinding and subject to the negotiation and execution of a definitive agreement. Aerkomm expects that a definitive agreement will be signed, although there can be no assurance when this will happen, if at allall.  .

The MOUs we enter into are nonbinding and, as a result, they only express the desires and understandings between the parties and do not create any legally binding rights, obligations or contracts except for certain customary provisions such as exclusivity, costs and expenses, confidentiality and governing law. Any binding obligation to proceed with the transactions contemplated by the MOUs would need to be included in a definitive agreement that is subject to negotiation by the parties, approvals by the board of directors of respective parties and in certain instances, approvals from regulatory authorities. There can be no assurance that we will be able to enter into such definitive agreements or receive the required governmental approvals, and there can be no assurances that any of the expired MOUs will be extended or renewed. If for whatever reason the transactions contemplated by the MOUs do not proceed, our results of operations and financial condition could be materially adversely affected.

Our Contracts with Airbus and Airline Partners

Airbus SAS

On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, Aerkomm entered into an agreement with Airbus SAS, or Airbus, pursuant to which Airbus will develop and certify a complete retrofit solution allowing the installation of our “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. We expect to expand our agreement with Airbus to include other Airbus models including the Airbus A330, A340, A350 and A380 series. Airbus will apply for and obtain on our behalf a Supplemental Type Certificate (STC) from the European Aviation Safety Agency, or EASA, as well as from the U.S. Federal Aviation Administration or FAA, for the retrofit AERKOMM K++ system.  

Pursuant to the terms of our Airbus agreement, Airbus agreed to provide Aerkomm with the retrofit solution which will include the Service Bulletin and the material kits including the update of technical and operating manuals pertaining to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit solution, including the certification, is expected to be in the fourth quarter of 20241, although there is no guarantee that the project will be successfully completed in the projected timeframe. Once the project is completed, Aerkomm, or Airbus on behalf of Aerkomm, will be able to commence installation of the AERKOMM K++ system on aircraft in the fourth quarter of 2024. 

Multiple airlines, and in particular aircraft lessors, will accept only Service Bulletins issued by the aircraft manufacturers for the retrofit installation of any system on board their aircraft. Our agreement with Airbus ensures that our system will meet this requirement for aircraft lessors who intend to purchase Airbus aircraft, although it does not guarantee that airlines or aircraft lessors will purchase our AERKOMM K++ system.  

Airbus Interior Services

On July 24, 2020, our wholly owned subsidiary, Aerkomm Malta, entered into an agreement with Airbus Interior Services, a wholly owned subsidiary of Airbus. This new agreement follows the agreement that Aerkomm signed with Airbus on November 30, 2018, pursuant to which Airbus agreed to develop, install and certify the Aerkomm K++ System on a prototype A320 aircraft to EASA and FAA certification standards, Airbus Interior Services provides current cabin upgrade solutions for Airbus aircraft operators while bringing additional flexibility and reduced lead times to the cabin upgrade process. Pursuant to the agreement with Aerkomm Malta, 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 new agreement also includes Airbus support for the integration of the Aerkomm K++ System components on the aircraft, including ARINC 791 structural reinforcements and related engineering work. 

Airbus Interior Services will provide support for European National Airworthiness Authorities (NAA) certification as required in addition to EASA certification. Airbus Interior Services will also provide on-site technical support at the Maintenance Repair Organization (MRO) base for the first aircraft retrofit of each new customer. 

We plan to install the Airbus Interior Services created Service Bulletin and Airbus kits for the AERKOMM K++ retrofit solution first on the Hong Kong Airlines fleet of 12 Airbus A320 aircraft. With this installation, Hong Kong Airlines will become Aerkomm’s first commercial airline customer.

Hong Kong Airlines

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

On January 30, 2020, further to the master agreement with Hong Kong Airlines, Aerkomm signed an agreement with Hong Kong Airlines to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ IFEC solutions. This agreement does not include Klingon as a party and Klingon is no longer involved in our contractual relationship with Hong Kong Airlines. 

Under the terms of this new agreement, Aerkomm will provide its Ka-band AERKOMM K++ IFEC system for installation on Hong Kong Airlines’ fleet of 12 Airbus A320 and 5 Airbus A330-300 aircraft as well as its AERKOMM AirCinema system for the Hong Kong Airlines Airbus A320 aircraft. Hong Kong Airlines will become the first commercial airliner launch customer for Aerkomm. 

On November 17, 2021, we signed a new agreement with Hong Kong Airlines Ltd and Ejectt Inc. (formerly known as Yuanjiu Inc.). Based on the long-term relationship and anticipated further co-operation between Aerkomm and Hong Kong Airlines, Aerkomm agreed that it will provide to Hong Kong Airlines the Low Earth Orbit (LEO) satellite version of the Aerkomm K++ System with the Telesat Lightspeed service when available. The Aerkomm K++ System will be delivered with a full certified Service Bulletin by Airbus.

The AERKOMM K++ system, will introduce high-speed internet access to the seatback screens of Hong Kong Airlines’ Airbus A320 aircraft, connected via the AERKOMM K++ IFEC system. Instead of the traditionally preloaded and fixed selection of in-flight entertainment, passengers will have access to high-speed internet steaming services for videos, music and social media.

The AERKOMM K++ IFEC system will also provide passengers of Hong Kong Airlines with an “at home” network experience by providing on-board Wi-Fi internet connectivity to all passenger personal devices, including laptops, mobile phones and tablets. The AERKOMM K++ system will be ready “future-proof” and compatible with the next generation of satellite technologies.

In order to install the AERKOMM K++ system on the Hong Kong Airlines aircraft, we will have to obtain local approval for the AERKOMM K++ system from the Hong Kong Civil Aviation (HKCAD). This HKCAD local approval will be based on our obtaining the Airbus Service Bulletin, which we expect to receive from Airbus, together with EASA certification, by sometime in the fourth quarter of 2024. Once we receive the Airbus Service Bulletin and the EASA certification, jointly with the support of Airbus, we will be able to apply to the HKCAD for the required local approval. 

As an interim solution for Hong Kong Airlines, until the Aerkomm K++ System can be fully retrofitted onto the Hong Kong Airlines aircraft fleet, Aerkomm plans to install the Aerkomm AirCinema Cube on Hong Kong Airlines fleet of A320 and A330 aircraft during the third to fourth quarter of 2023. The AirCinema Cube is a portable inflight entertainment, or IFE, intranet server which will provide to passengers’ personal entertainment devices pre-loaded videos, news, music and games, on demand. Media content will be jointly managed by Aerkomm and Hong Kong Airlines and content updates will be provided regularly by Aerkomm.  

On May 11, 2020, our Taiwan based subsidiary, Aerkomm Telecom, entered into a binding product purchase agreement with Ejectt Inc., or Ejectt, a Taiwan company whose Chairman is a member of our board of directors, to purchase 100 sets of the AirCinema Cube from Ejectt for installation on Hong Kong Airlines’ fleet of aircraft. On July 15, 2020, Aerkomm Telecom signed a second product purchase agreement with Ejectt for an additional 100 sets of the AirCinema Cube. To date, Ejectt has delivered 20 AirCinema Cubes to Aerkomm.

Product Development, Manufacturing, Installation and Maintenance 

Other Airline Partners and Business Jet Prospective Customers

We are actively working with prospective airline customers to provide them with the 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 different Boeing aircraft models, with a particular focus on the Boeing B737 aircraft family.  

We plan to provideenter into business agreements with additional airline partners and corporate jet owners, with the equipment necessary for in-flight connectivity, which will allow our proprietary FGSA antenna equipment to be installed by eithertogether with our bandwidth services provided, on additional fleet aircraft. Under any such agreements, we expect that the airlineairlines will commit to have our equipment installed on some or all the aircraft they operate. We cannot guarantee that we will be able to enter into any such additional agreements. 

Other Agreements and Understandings with our Business Partners

MJet Definitive Agreement: On March 6, 2019, we signed a General Terms Agreement (GTA) with MJet GMBH, or MJet, a corporate jet owner operating an Airbus ACJ A319 based in Vienna, Austria. On June 11, 2019, we converted this GTA into a definitive agreement with MJet, and on June 12, 2019, MJet placed a first purchase order with Aerkomm. The purchase order 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 is successful, something we cannot guarantee at their own maintenance facility or at an approved maintenance repair organization, or MRO, service provider mutually selected by Aircomthis time, MJet will pay us a one-time fee for our equipment and the airline. Wea monthly fee for our connectivity services, and we will also provide training and technical support to each airline’s MRObegin charging MJet for the bandwidth required to use the AERKOMM K++ system services. Assuming the success of this installation, MJet will become the first recurring payment customer of our equipment. Such supportAERKOMM K++ system as well as being the launch customer of our Aerkomm K++ solution.   

Vietjet Air: On October 25, 2021, we signed an agreement with Vietjet Air (“Vietjet”) to provide them with our Aerkomm AirCinema In-Flight Entertainment and Connectivity (“IFEC”) solutions. Under the terms of the agreement, we will provide to Vietjet our Aerkomm AirCinema Cube IFEC system for installation on Vietjet’s fleet of Airbus A320, A321 and Airbus A330-300 aircraft.

Our AirCinema Cube system, will provide Vietjet with connectivity to passengers’ personal electronic devices with WiFi capability, including laptops, mobile phones and tablets, using an intranet-based solution. The AirCinema Cube system will host music, documentaries and movies provided by Google Play Movies and Television, as well as news feeds, both in the English and Vietnamese languages, provided by global and local news suppliers. The AirCinema Cube will also include technical,be customized to Vietjet’s branding, will host an in-flight moving map, an in-flight sales platform and a cabin management and operational support,system together with 24/7 network monitoring of the performance of each aircraft’s equipment once in operation.Vietjet’s own in-flight services.

WeAerkomm is planning to install the AirCinema Cubes on the first 23 Airbus A320/A321 aircraft and 3 Airbus A330 aircraft of Vietjet during the fourth quarter of 2023 subject to obtaining local approval for the AirCinema Cubes from the Civil Aviation Authority of Vietnam (CAAV). This CAAV local approval will relybe based on third-party suppliers for equipment components that we will use to provide our services, including those discussed below.providing a minor modification Supplemental Type Certificate from AKKA Technologies (now Sabena Technics) of France.

We will purchase our ground station equipment from Blue Topaz Consultants, Ltd., or BTC,

Malta MOU: On February 23, 2018, Aircom entered into a nonbinding memorandum of understanding which we refer to as the Air Malta MOU, with Air Malta, a company organized under an agreement that we have with BTC dated December 15, 2015.the laws of Malta, pursuant to which the parties intend to collaboratively market and provide their products and servers to passengers of the Malta-based airline fleet. Under the terms of this agreement, BTC willthe Air Malta MOU, the parties intend to develop, install and operate in-flight connectivity systems onboard the Malta-based airline fleet and provide related services to us four (4) sets of ground station hub equipment, or the Hub Equipment, for our use and sale into our Asian markets.its passengers. We and BTCcannot assure you, however, we will separatelybe able to enter into service agreements fora definitive agreement with Air Malta, or that the installationMalta MOU will lead to any Aerkomm product sales.

Thai Smile MOU: On October 19, 2021, Aerkomm entered into a nonbinding memorandum of understanding, which we refer to as the Thai Smile MOU, with Thai Smile Airways Company Limited, a company organized under the laws of Thailand, pursuant to which the parties intend to collaboratively market and maintenanceprovide their products and services to passengers to the Thai-based airline fleet. Under the terms of the Hub Equipment systems.Thai Smile MOU, the parties intend to develop, install and operate in-flight connectivity systems onboard the Thai-based airline fleet and provide related services to its passengers. We have agreed to pay BTC $6,205,216 for the first Hub Equipment system and have already made milestone payments to BTC totaling $3,250,000. The purchase price for the first Hub Equipment system was increased to $6,234,260 on November 30, 2016 due to the increase in cost of a system required software license. Wecannot assure you, however, we will be requiredable to pay BTC the balance of $2,984,260 owed on the first Hub Equipment system following delivery and service commencement of this system. We expect to install this Hub Equipment in the ground station that we intend to build on the parcel of land we have acquired in Taiwan, once we receive title to that land and can proceedenter into a definitive agreement with a related ground station financing arrangement. We cannot at this time estimate when this project will move forwardThai Smile, or be completed.

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 designed 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.

In our AERKOMM K++ system, 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, we expect, can optimize satellite bandwidth utilization and achieves cost-effective content delivery.

Satellite Link Acceleration

The most common transmission control protocols, or TCPs, used on the Internet have been designed for terrestrial wired networks. TCPs do not perform well in a long-delay satellite environment and may cause bad user experiences in web surfing and Internet access. Our satellite link acceleration technology improves TCP/IP-based data transmission over a satellite system through compression, deduplication (i.e., eliminating redundant information), caching, latency optimization, packet aggregation, and cross-layer enhancement. This technology includes end-to-end software in airborne systems and ground servers for cost effective application acceleration and optimization of live TV and video streaming. This combination of technologies makes airborne internet access and content access feel like fiber at home.

Our Competition

Our key competitors include Gogo Inc., which has the largest installed base in the IFEC market mainly via air-to-ground technology, L-band connectivity services which provide 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 Anuvu (previously Global Eagle Entertainment, Inc.,) SITAONAIR, Panasonic, Zodiac Aerospace and Honeywell, 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 is expected to continue to face capacity constraints and unique technology challenges, which are expected to increase due to historically projected increased demand for in-flight Internet.

We believe that the following competitive strengths enable usThai Smile MOU will lead to compete effectively in and capitalize on the growing IFEC market.

Creative business modelany Aerkomm product sales.. We believe that our business model sets us apart from most of our competitors. We combine cutting-edge connectivity technology with a creative content-driven approach. Traditionally, providers of in-flight connectivity have focused primarily on the profit margin derived from the sale of hardware to commercial 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 trend with our creative business model, which, we expect, will set us apart from our competitors. Commercial airline companies will recover their costs through participating in our revenue sharing model while passengers will not be required to pay for connectivity. Taken together, this novel approach creates an incentive for airlines to work with us and should act to drive up passenger usage rates.

Ku-band and Ka/GEO/LEO HybridNetwork Resilience by Satellite TechnologyIs a Surging Global Trend

Most in-flight connectivity systems currently in the market rely on the Ku-bandThe ongoing conflict between Russia and Ukraine has given rise to a trend with satellite signals for communication. Many players in the market are working to provide higher bandwidth and faster transmitting rates using the Ka-band. Currently, there are few Ka-enabled satellites and as a result, the coverage area in the Asia-Pacific region is limited. However, new GEO (Geostationary Earth Orbiting) and LEO (Low Earth Orbiting) Ka-band satellites are being regularly launched and this should provide worldwide Ka band coverage over the next few years. See our discussion above relating to the Telesat cooperation agreement to address our LEO IFEC integration solution.communication becoming an essential means of comprehensive emergency support worldwide.

Our Growth Strategy

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

AERKOMM Awarded α-Government’s GEO/MEO UAV Surveillance Projects

To further our growth strategy, we plan to:

Automotive Market

With Satellite IoT Market Applications have massive commercial potentials Aerkomm will first focus on the “Automotive Mobility” sector. Aerkomm’s small form FGSA antenna offers advantages in Automotive Applications.

Automotive IoT Market Shows Robust Growth: The global automotive IoT market size was valued at USD 82.7 billion in 2021 and is projected to surpass USD 621.8 billion by 2030. The global automotive IoT market is expected to grow at a compound annual growth rate (CAGR) of 25.13% during the forecast period 2022 to 2030.

Aerkomm currently holds the chair position of the MIH Interest Group. MIH mission is to redefine what the Next Generation of Automotive Communication will be and create a new standard within the automotive industry.

MIH (Mobility in Harmony) – Open EV Ecosystem Initiated by Foxconn Technology Group

An Open Electric Vehicle Ecosystem Promotes Collaboration In The Automotive Industry

Satcom Service Business

Aerkomm’s Business Model: Offering Subsidized FGSA Antenna Replacement to Existing Broadcast TV Customers and Provide Additional High Value-Added ISP Service

Employees

As of the date of this annual report, we had a total of 32 employees, 26 of whom are full-time employees. The following table sets forth the number of our full-time employees by function.

None of our employees belongs to a union or is a party to any collective bargaining or similar agreement. We consider our relationships with our employees to be good.

RegulationBy utilizing FGSA, Aerkomm Enables Revitalization of Broadcast TV Subscription Business

As a participant in the global airline and global telecommunication industries we are subject to a variety of government regulatory obligations. 

Federal Aviation AdministrationWith highly competitive FGSA technology and its new, in development EdgeKomm Box product, Aerkomm expects to be able to cooperate with satellite TV operators/mobile telcos and CATV MSO operators, to provide:

The FAA prescribes standards and certification 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 installation 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, 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 installed and separate STCs typically are required for different configurations of the same aircraft type, such as when they are configured differently for different airlines.

Aerkomm’s Business Roadmap

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 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 outside of the United States for U.S.-registered aircraft that already have an STC issued by the FAA covering our equipment. For aircraft registered with a CAA other than the United States, the installation of our equipment requires airworthiness certification from an airworthiness certification body. Typically, the CAA of the country 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 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.

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. 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 CPNI requirements.

Our services are also subject to CPNI rules that require carriers to comply with a range of marketing 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 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 services 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 personal 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) fail to reasonably protect the security, privacy and confidentiality of nonpublic consumer information.

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 usage 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 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.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the 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 Our Business