UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended: March 31, 2023

 

or

 

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

 

For the transition period from ____________ to _____________

 

Commission File Number: 000-55925

 

AERKOMM INC.

(Exact name of registrant as specified in its charter)

 

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

 

44043 Fremont Blvd., Fremont, CA 94538

(Address of principal executive offices, Zip Code)

 

(877) 742-3094

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

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

 

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

 

  Large accelerated filer ☐   Accelerated filer ☐
  Non-accelerated filer ☐   Smaller reporting company ☒
      Emerging growth company ☐

 

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

 

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

  

As of October 23, 2023, there were 9,869,165 shares of the registrant’s common stock issued and outstanding.

 

 

 

 

 

 

AERKOMM INC.

 

Quarterly Report on Form 10-Q

Period Ended March 31, 2023

 

TABLE OF CONTENTS

 

PART I
FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
Item 3. Quantitative and Qualitative Disclosures About Market Risk 45
Item 4. Controls and Procedures 45
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 46
Item 1A. Risk Factors 46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
Item 3. Defaults Upon Senior Securities 46
Item 4. Mine Safety Disclosures 46
Item 5. Other Information 46
Item 6. Exhibits 47

 

i

 

 

PART I

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

AERKOMM INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 2
   
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Periods Ended March 31, 2023 and 2022 3
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Periods Ended March 31, 2023 and 2022 4
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Periods Ended March 31, 2023 and 2022 5
   
Notes to Unaudited Consolidated Financial Statements 6

 

1

 

 

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Assets        
Current Assets        
Cash  $2,299,190   $6,878,362 
Short-term investment   2,018,209    2,009,238 
Inventories, net   1,366,282    1,366,282 
Prepaid expenses   7,849,154    6,030,516 
Other current assets   

530,420

    

460,893

 
Total Current Assets   14,063,255    16,745,291 
Long-term Investment   4,281,496    4,572,243 
Property and Equipment          
Cost   4,037,497    4,011,883 
Accumulated depreciation   (2,669,196)   (2,486,836)
    1,368,301    1,525,047 
Prepayment for land   36,041,647    35,748,435 
Prepayment for equipment   326,359    458,998 
Net Property and Equipment   37,736,307    37,732,480 
Other Assets          
Prepaid expenses – non-current   

2,245,937

    

1,995,937

 
Restricted cash   3,224,357    3,223,558 
Intangible asset, net   1,278,750    1,402,500 
Goodwill   4,561,037    4,561,037 
Right-of-use assets, net   60,606    92,451 
Deposits   321,251    315,015 
Total Other Assets   11,691,938    11,590,498 
Total Assets  $67,772,996   $70,640,512 
           
Liabilities and Stockholders’ Equity          
Current Liabilities          
Short-term loans  $2,074,692   $1,316,253 
Accounts payable   1,597,236    1,950,939 
Accrued expenses and other current liabilities   9,272,433    9,049,693 
Long-term loan - current   11,642    11,271 
Lease liability – current   92,367    131,181 
Total Current Liabilities   13,048,370    12,459,337 
Long-term Liabilities          
Long-term bonds payable   9,262,141    9,137,006 
Convertible long-term note payable   23,173,200    23,173,200 
Long-term loan – non-current   2,051    5,027 
Contract liability – non-current   762,000    762,000 
Lease liability – non-current   21,755    35,172 
Restricted stock deposit liability   1,000    1,000 
Total Long-Term Liabilities   33,222,147    33,113,405 
Total Liabilities   46,270,517    45,572,742 
Stockholders’ Equity          
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022   
-
    
-
 
Common stock, $0.001 par value, 90,000,000 shares authorized, 9,720,003 shares (excluding 149,162 unvested restricted shares) issued and outstanding as of March 31, 2023 and December 31, 2022   9,720    9,720 
Additional paid in capital   79,132,896    79,078,005 
Accumulated deficits   (57,400,417)   (53,645,981)
Accumulated other comprehensive loss   (239,720)   (373,974)
Total Stockholders’ Equity   21,502,479    25,067,770 
Total Liabilities and Stockholders’ Equity  $67,772,996   $70,640,512 

 

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

 

2

 

 

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

 

   For the
Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Net sales  $454,281   $
-
 
           
Service income – related party   
-
    2,953 
           
Total Revenue   454,281    2,953 
           
Cost of sales   447,781    
-
 
           

Gross Profit

   

6,500

    

2,953

 
           
Operating expenses   3,643,426    1,780,438 
           
Loss from Operations   (3,636,926)   (1,777,485)
           
Non-operating loss          
Foreign currency exchange gain (loss)   179,589    (578,654)
Unrealized investment loss   (7,829)   (5,256)
Bond issuance cost   (125,134)   (118,364)
Other gain (loss), net   (164,136)   2,146 
Net Non-Operating Loss   (117,510)   (700,128)
Loss Before Income Taxes   (3,754,436)   (2,477,613)
Income Tax Expense   
-
    1,600 
Net Loss   (3,754,436)   (2,479,213)
           
Other Comprehensive Income          
Change in foreign currency translation adjustments   134,254    518,027 
Total Comprehensive Loss  $(3,620,182)  $(1,961,186)
           
Net Loss Per Common Share:          
Basic  $(0.3804)  $(0.2513)
Diluted  $(0.3804)  $(0.2513)
           
Weighted Average Shares Outstanding - Basic   9,869,165    9,865,051 
Weighted Average Shares Outstanding - Diluted   9,869,165    9,865,051 

 

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

 

3

 

 

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

 

For the three months ended March 31, 2022

 

   Common Stock   Additional Paid in   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Capital   Deficits   Income (Loss)   Equity 
Balance as of January 1, 2022   9,715,889   $9,716   $77,825,976   $(41,767,258)  $(1,896,158)  $34,172,276 
Stock compensation expense   -    
-
    246,999    
-
    
-
    246,999 
Other comprehensive income   -    
-
    
-
    
-
    518,027    518,027 
Net loss for the period   -    
-
    
-
    (2,479,213)   
-
    (2,479,213)
Balance as of March 31, 2022   9,715,889   $9,716   $78,072,975   $(44,246,471)  $(1,378,131)  $32,458,089 

 

For the three months ended March 31, 2023

 

   Common Stock   Additional Paid in   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Capital   Deficits   Income (Loss)   Equity 
Balance as of January 1, 2023   9,720,003   $9,720   $79,078,005   $(53,645,981)  $(373,974)  $25,067,770 
Stock compensation expense   -    
-
    54,891    
-
    
-
    54,891 
Other comprehensive income   -    
-
    
-
    
-
    134,254    134,254 
Net loss for the period   -    
-
    
-
    (3,754,436)   
-
    (3,754,436)
Balance as of March 31, 2023   9,720,003   $9,720   $79,132,896   $(57,400,417)  $(239,720)  $21,502,479 

 

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

 

4

 

 

AERKOMM INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

 

   For the
Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Cash Flows from Operating Activities        
Net loss  $(3,754,436)  $(2,479,213)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   316,272    268,939 
Stock-based compensation   54,891    246,999 
Unrealized investment loss   7,829    5,256 
Amortization of bonds issuance costs   125,135    118,364 
Changes in operating assets and liabilities:          
Accounts receivable   
-
    136,800 
Inventories   
-
    
-
 
Prepaid expenses and other current assets   (2,138,165)   (121,913)
Deposits   (6,236)   (45,548)
Accounts payable   (353,703)   - 
Accrued expenses and other current liabilities   655,362    1,225,046 
Operating lease liability   (17,880)   (34,281)
Net Cash Used for Operating Activities   (5,110,931)   (679,551)
           
Cash Flows from Investing Activities          
Proceeds from disposal of short-term investment   
-
    7,823 
Proceeds from disposal of long-term investment   325,578    
-
 
Purchase of property and equipment   (335,825)   (1,165)
Net Cash (Used) Provided by Investing Activities   (10,247)   6,658 
           
Cash Flows from Financing Activities          
Proceeds from short-term loan   758,439    161,298 
Repayment of long-term loan   (2,605)   (3,549)
Payment on finance lease liability   (2,924)   (3,164)
Net Cash Provided by Financing Activities   752,910    154,585 
           
Net Decrease in Cash and Restricted Cash   (4,368,268)   (518,308)
Cash and Restricted Cash, Beginning of Period   10,101,920    3,288,813 
Foreign Currency Translation Effect on Cash   (210,105)   518,027 
Cash and Restricted Cash, End of Period  $5,523,547   $3,288,532 
           
Supplemental disclosures of cash flow information:          
Cash paid during the period for interest  $
-
   $7,522 
           
Cash and Restricted Cash:          
Cash  $2,299,190   $39,989 
Restricted cash   3,224,357    3,248,543 
Total  $5,523,547   $3,288,532 

 

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

 

5

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 - Organization

 

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

 

On December 28, 2016, Aircom Pacific Inc. (“Aircom”) purchased approximately 86.3% of Aerkomm’s issued and outstanding common stock as of the closing date of purchase. As a result of the transaction, Aircom became the controlling shareholder of Aerkomm. Aircom was incorporated on September 29, 2014 under the laws of the State of California.

 

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

 

On December 31, 2014, Aircom acquired a newly incorporated subsidiary, Aircom Pacific Ltd. (“Aircom Seychelles”), a corporation formed under the laws of the Republic of Seychelles. On November 8, 2021, Aircom Seychelles changed its name to Aerkomm SY Ltd. (“Aerkomm SY”) and the ownership was transferred from Aircom to Aerkomm. Aerkomm SY was formed to facilitate Aircom’s global corporate structure for both business operations and tax planning. Presently, Aerkomm SY has no operations. Aerkomm is working with corporate and tax advisers in finalizing its global corporate structure and has not yet concluded its final plan.

 

On October 17, 2016, Aircom acquired a wholly owned subsidiary, Aircom Pacific Inc. Limited (“Aircom HK”), a corporation formed under the laws of Hong Kong. On November 8, 2021, Aircom HK changed its name to Aerkomm Hong Kong Limited (“Aerkomm HK”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm HK is to conduct Aircom’s business and operations in Hong Kong. Presently, its primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in Hong Kong. Aerkomm HK is also actively seeking strategic partnerships whom Aerkomm may leverage in order to provide more and better services to its customers. Aerkomm also plans to provide local supports to Hong Kong-based airlines via Aerkomm HK and teleports located in Hong Kong.

 

On December 15, 2016, Aircom acquired a wholly owned subsidiary, Aircom Japan, Inc. (“Aircom Japan”), a corporation formed under the laws of Japan. On November 9, 2021, Aircom Japan changed its name to Aerkomm Japan, Inc. (“Aerkomm Japan”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm. The purpose of Aerkomm Japan is to conduct business development and operations located within Japan. Aerkomm Japan is in the process of applying for, and will be the holder of, Satellite Communication Blanket License in Japan, which is necessary for Aerkomm to provide services within Japan. Aerkomm Japan will also provide local supports to airlines operating within the territory of Japan.

 

Aircom Telecom LLC (“Aircom Taiwan”), which became a wholly owned subsidiary of Aircom in December 2017, was organized under the laws of Taiwan on June 29, 2016. Aircom Taiwan is responsible for Aircom’s business development efforts and general operations within Taiwan.

 

On June 13, 2018, Aerkomm established a then wholly owned subsidiary, Aerkomm Taiwan Inc. (“Aerkomm Taiwan”), a corporation formed under the laws of Taiwan. The purpose of Aerkomm Taiwan is to purchase a parcel of land and raise sufficient fund for ground station building and operate the ground station for data processing (although that cannot be guaranteed). On December 29, 2022, Aerkomm and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract pursuant to the terms of which Aerkomm sold a majority interest of 25,500,000 shares (the “Shares”) of Aerkomm Taiwan to the Buyer for NT$255,000,000 (approximately US $8,300,000 as of December 31, 2022).

 

On November 15, 2018, Aircom Taiwan acquired a wholly owned subsidiary, Beijing Yatai Communication Co., Ltd. (“Beijing Yatai”), a corporation formed under the laws of China. The purpose of Beijing Yatai is to conduct Aircom’s business and operations in China. Presently, its primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in China as most business conducted in China requires a local registered company. Beijing Yatai is also actively seeking strategic partnerships whom Aircom may leverage in order to provide more and better services to its customers. Aircom also plans to provide local supports to China-based airlines via Beijing Yatai and teleports located in China. On November 6, 2020, 100% ownership of Beijing Yatai was transferred from Aircom Taiwan to Aerkomm Taiwan.

 

6

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 - Organization - Continued

 

On October 31, 2019, Aerkomm SY established a new a wholly owned subsidiary, Aerkomm Pacific Limited (“Aerkomm Malta”), a corporation formed under the laws of Malta. The purpose of Aerkomm Malta is to conduct Aerkomm’s business and operations and to engage with suppliers and potential airlines customers in the European Union.

 

The Company’s organization structure is as following:

 

 

On September 04, 2022, Aerkomm acquired a wholly owned subsidiary, MEPA Labs Inc. (MEPA), a California corporation. The purpose of the acquisition is to extend business development and operations related to the satellite products.

 

Aerkomm and its subsidiaries (the “Company”) are full-service, development stage providers of in-flight entertainment and connectivity solutions with their initial market in the Asian Pacific region.

 

The Company has not generated significant revenues, excluding non-recurring revenues, and will incur additional expenses as a result of being a public reporting company. Currently, the Company has taken measures that management believes will improve its financial position by financing activities, including through public offerings, private placements, short-term borrowings and equity contributions. Two of the Company’s current shareholders (the “Lenders”) each committed to provide to the Company a $10 million bridge loan (together, the “Loans”) for an aggregate principal amount of $20 million, to bridge the Company’s cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) the Company purchased in Taiwan. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon the Company’s request prior to the time that title to the Land is vested in the Company’s subsidiary, Aerkomm Taiwan, to pay the outstanding payable to the Company’s vendors. On April 25, 2022, the Lenders further amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100% and the full $20 million is available to the Company.

 

With the $20 million in Loans committed by the Lenders and our holdings of marketable securities in Ejectt, the Company believes its working capital will be adequate to sustain its operations for the next sixteen months. However, there is no assurance that management will be successful in furthering the Company’s business plan, especially if the Company is not able to raise additional funding from the above sources or from other sources. There are a number of additional factors that could potentially arise that could result in shortfalls in the Company’s business plan, such as general worldwide economic conditions, competitive pricing in the connectivity industry, the continuing impact of the COVID 19 pandemic, the Company’s operating results continuing to deteriorate and the Company’s banks and shareholders not being able to provide continued financial support.

 

The Company’s common stock is quoted for trading on the OTC Markets Group Inc. OTCQX Market under the symbol “AKOM.” On July 17, 2019, the French Autorité des Marchés Financiers (the “AMF”) granted visa number 19-372 on the prospectus relating to the admission of the Company’s common stock to list and trade on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). The Company’s common stock began trading on Euronext Paris on July 23, 2019 under the symbol “AKOM” and is denominated in Euros on Euronext Paris. This listing did not alter the Company’s share count, capital structure, or current common stock listing on the OTCQX, the Company’s primary trading market for its common stock.

 

7

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 2 - Summary of Significant Accounting Policies

 

Unaudited Interim Financial Information

 

The accompanying condensed consolidated balance sheet as of March 31, 2023, and the condensed consolidated statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2023 and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these three months periods are unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period or other future year.

 

Principle of Consolidation

 

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

 

Reclassifications of Prior Year Presentation

 

Certain prior year balance sheet, and cash flow statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash in banks. As of March 31, 2023 and December 31, 2022, the total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the Company was approximately $1,518,000 and $6,153,000, respectively.   The balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance is approximately $3,148,000 and $3,134,000 as of March 31, 2023 and December 31, 2022, respectively.

 

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

 

8

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 2 - Summary of Significant Accounting Policies - Continued

 

Investment in Equity Securities

 

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

 

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

 

Accounts receivable

 

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires the Company to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, based on historical experience, current market conditions and supportable forecasts. The Company’s accounts receivable are carried at the amounts invoiced to customer. The risk of credit loss is mitigated by the Company’s credit evaluation process. Receivables are presented as net of an allowance for credit losses. Allowances for expected credit losses are determined based on an assessment of historical experience, the current economic conditions, future expectations of economic conditions, future expectation regarding customer solvency, and other collection factors. The Company will apply adjustments for specific factors and current economic conditions as needed at each reporting date. As of March 31, 2023 and December 31, 2022, the Company had $0 Account Receivable. Therefore, allowances for expected credit losses were $0 as of March 31, 2023 and December 31, 2022.

 

Inventories

 

Inventories are recorded at the lower of weighted-average cost or net realizable value. The Company assesses the impact of changing technology on its inventory on hand and writes off inventories that are considered obsolete. Estimated losses on scrap and slow-moving items are recognized in the write down cost for losses. 

 

Property and Equipment

 

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

 

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

 

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

  

The Company reviews the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It determined that there was no impairment loss for the years ended December 31, 2022 and 2021.

 

9

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 2 - Summary of Significant Accounting Policies - Continued

 

Right-of-Use Asset and Lease Liability

 

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

 

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

 

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

 

Goodwill and Purchased Intangible Assets

 

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

 

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

 

Fair Value of Financial Instruments

 

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

 

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

 

Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions.

  

The carrying amounts of the Company’s cash and restricted cash, short-term investment, accounts receivable, inventory, prepaid expenses, other receivable, accounts payable, short-term loan, accrued expenses, and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable, long-term notes payable, long-term loan and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. There were no outstanding derivative financial instruments as of March 31, 2023 and December 31, 2022.

 

10

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 2 - Summary of Significant Accounting Policies - Continued

 

Revenue Recognition

 

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The Company’s revenue for the year ended December 31, 2021 composed of the sales of ground antenna units to a related party and sales of network hardware to a non-related party. The majority of the Company’s revenue is recognized at a point in time when product is shipped, or service is provided to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. The Company adopted the provisions of ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. Customers may make payments to the Company either in advance or in arrears. If payment is made in advance, the Company will recognize a contract liability under prepayments from customers until which point the Company has satisfied the requisite performance obligations to recognize revenue.

 

Stock-based Compensation

 

The Company adopted the modified prospective method to measure stock-based compensation expense. Under the modified prospective method, stock-based compensation expense recognized during the period is based on the portion of the share-based payment awards granted after the effective date and ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s statement of income is based on the vesting terms and the estimated fair value of the award at grant date. As stock-based compensation expense recognized in the statement of income is based on awards ultimately expected to vest, it is reduced for estimated forfeiture. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

The Company uses the Black-Scholes option pricing model in its determination of fair value of share-based payment awards on the date of grant. Such option pricing model is affected by assumptions based on a number of highly complex and subjective variables.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Adjustments to prior period’s income tax liabilities are added to or deducted from the current period’s tax provision.

 

The Company follows FASB guidance on uncertain tax positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax authorities for years before 2018. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

 

The Company’s policy for recording interest and penalties associated with any uncertain tax positions is to record such items as a component of income before taxes. Penalties and interest paid or received, if any, are recorded as part of other operating expenses in the consolidated statement of operations.

 

Foreign Currency Transactions

 

Foreign currency transactions are recorded in U.S. dollars at the exchange rates in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in income for the period. 

 

11

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 2 - Summary of Significant Accounting Policies - Continued

 

Translation Adjustments

 

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

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options, shares to be purchased by employees under the Company’s employee stock purchase plan. The Company had 2,011,867 and 1,849,868 common stock equivalents, primarily stock options and warrants, for the year ended March 31, 2023 and 2022, respectively. For the fiscal years ended March 31, 2023 and 2022, the assumed exercise of the Company’s common stock equivalents were not included in the calculation as the effect would be anti-dilutive.

 

NOTE 3 - Recent Accounting Pronouncements

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, Debt with Conversion and Other Options and ASC 815, Contracts in Equity’s Own Entity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2020-06 does not have a significant impact on the Company’s consolidated financial statements as of and for the year ended March 31, 2023.

 

Financial Instruments

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. In March 2022, the FASB issued ASU 2022-02 and eliminate the Troubled Debt Restructuring recognition and measurement guidance. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. The adoption of ASU 2021-04 does not have a significant impact on the Company’s consolidated financial statements as of and for the year ended March 31, 2023.

 

12

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

  

NOTE 4 - Short-term Investment

 

On September 9, 2019, the Company entered into a liquidity agreement with a security company (“the Liquidity Provider”) in France, which is consistent with customary practice in the French securities market. The liquidity agreement complies with applicable laws and regulations in France and authorizes the Liquidity Provider to carry out market purchases and sales of shares of the Company’s common stock on the Euronext Paris market. To enable the Liquidity Provider to carry out the interventions provided for in the contract, the Company contributed approximately $225,500 (200,000 euros) into the account. The transaction was initiated in the beginning of 2020, and the Company pays annual compensation of 20,000 euros to the Liquidity Provider in advance by semi-annual installments at the beginning of each semi-annual period under the agreement. The liquidity agreement had an initial term of one year and is being renewed automatically unless otherwise terminated by either party. As of March 31, 2023, the Company had purchased 5,361 shares of its common stock with the fair value of $12,759. The securities were recorded as short-term investment with an accumulated unrealized loss of $7,829. In January 2022, the Liquidity Provider terminated the agreement and the Company is determining whether to continue a similar program.

 

On December 3, 2020, the Company entered into three separate stock purchase agreements (or “Stock Purchase Agreement”) from three individuals to purchase an aggregate of 6,000,000 restricted shares of one of the Company’s related parties, YuanJiu Inc. (“YuanJiu”) in a total amount of NT$141,175,000 (approximately US$5,027,600 as of December 31, 2020). YuanJiu is a listed company in Taiwan Stock Exchange and the stock title transfer is subject to certain restrictions. Albert Hsu, a member of the Company’s board of directors, is the Chairman of YuanJiu. On July 19, 2021, YuanJiu Inc. changed its name to “EJECTT INC” (“Ejectt”). On March 24, 2021, the Company purchased additional 2,000 shares of Ejectt’s common stock for a total amount of $1,392 from a related party.

 

As of December 31, 2021, 5,000,000 shares of Ejectt’s common stock were restricted and booked under long-term investment. (See Note 8) As of March 31, 2023 and December 31, 2022, this investment totaled approximately a 8% ownership of Ejectt.

 

On September 30, 2022, the Company entered into a stock purchase agreement (or “Stock Purchase Agreement”) to purchase common stock of Shinbao in a total amount of NT$35,000,000 (approximately $1,148,294 as of March 31, 2023 and $1,138,952 as of December 31, 2022). Shinbao is a privately-held company in Taiwan. As of October 23, 2023, the stock title transfer is still under process.

 

As of March 31, 2023 and December 31, 2022, the fair value of the investment was as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – short-term  $632,108   $626,966 
Investment cost - Liquidity   20,589    70,817 
Total Investment Cost   652,697    697,783 
Appreciation in market value (Allowance for value decline)   217,218    172,503 
Prepaid investment   1,148,294    1,138,952 
Total  $2,018,209   $2,009,238 

 

13

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 5 - Inventories

 

As of March 31, 2023 and December 31, 2022, inventories consisted of the following:

  

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite equipment for sale under construction  $1,366,282   $1,366,282 

 

NOTE 6 - Prepaid Expenses

 

As of March 31, 2023 and December 31, 2022, prepaid expenses consisted of the following:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Prepaid engineering expense  $9,645,839   $7,536,409 
Prepaid professional expense   119,753    79,954 
Others   329,499    410,090 
Total  $10,095,091   $8,026,453 
Prepaid expense - current   7,849,154    6,030,516 
Prepaid expense – non-current   2,245,937    1,995,937 

 

NOTE 7 - Property and Equipment

 

As of March 31, 2023 and December 31, 2022, the balances of property and equipment were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Ground station equipment  $1,854,027   $1,854,027 
Computer software and equipment   1,441,759    1,419,697 
Satellite equipment   275,410    275,410 
Vehicle   343,934    342,646 
Leasehold improvement   83,721    83,721 
Furniture and fixture   38,646    36,382 
    4,037,497    4,011,883 
Accumulated depreciation   (2,669,196)   (2,486,836)
Net   1,368,301    1,525,047 
Prepayments - land   36,041,647    35,748,435 
Prepaid equipment   326,359    458,998 
Total  $37,736,307   $37,732,480 

 

On July 10, 2018, the Company and Aerkomm Taiwan entered into a real estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with respect to the acquisition by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite ground station and data center. Pursuant to the terms of the Land Purchase Contract, and subsequent amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3, 2019, the Company paid to the seller in installments refundable prepayments of NT$1,098,549,407 (approximately $36,041,647 as of March 31, 2023 and $35,748,435 as of December 31, 2022) in total. The estimated commission payable for the land purchase in the amount of NT$42,251,900 (approximately $1,386,217 as of March 31, 2023 and 1,374,940 as of December 31, 2022) was recorded to the cost of land. And the company is under the discussion of extending the commission payable to December 31,2023. According to the amended Land Purchase Contract dated on November 10, 2020, the transaction may be terminated at any time by both the buyer and the seller and agreed by all parties if the Company is unable to obtain the qualified satellite license issued by Taiwan authority before July 31, 2021. As of October 23, 2023, the qualified license applications are still in progress.

 

Depreciation expense was $181,652 and $145,189 for the three months periods ended March 31, 2023 and 2022, respectively.

 

14

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 8 - Long-term Investment

  

As of March 31, 2023 and December 31, 2022, 5,000,000 shares of Ejectt’s common stock were restricted.

 

Also on September 29, 2022, the Company entered into a stock purchase agreement (or “Stock Purchase Agreement”) to purchase 2,670,000 shares of common stock of AnaNaviTek Corp. (AnaNaviTek) in a total amount of NT$40,050,000 (approximately $1,303,287 as of December 31, 2022). AnaNaviTek is a privately-held company in Taiwan. As of November 21, 2022, the Company has paid NT$10,005,000 (approximately $325,578 as of December 31, 2022) for 667,000 shares of AnaNaviTek stock and the stock title transfer for these shares has been completed.

 

In Q1 2023, the Company disposed AnaNaviTek for amount of $325,578.

 

As of March 31, 2023 and December 31, 2022, the fair value of the long-term investment was as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – long-term  $4,281,496   $4,246,665 
Investment cost – AnaNaviTek   
-
    325,578 
Net  $4,281,496   $4,572,243 

 

NOTE 9 - Intangible Asset, Net

 

As of March 31, 2023 and December 31, 2022, the cost and accumulated amortization for intangible asset were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite system software  $4,950,000   $4,950,000 
Accumulated amortization   (3,671,250)   (3,547,500)
Net  $1,278,750   $1,402,500 

 

Amortization expense was $123,750 for each of the three months periods ended March 31, 2023 and 2022.

 

15

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 10 - Goodwill

 

The Company obtained the goodwill from various merge and acquisition events described in Note 1. On September 4, 2022, the Company acquired 100% of the ownership of MEPA Labs Inc. (MEPA) with total consideration of $100,000. The fair value of MEPA at acquisition date was $-2,985,703. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was $3,085,703, which is recorded as goodwill.  

 

As of March 31, 2023 and December 31, 2022, the goodwill were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Gross amount  $4,561,037   $4,561,037 
Accumulated Impairment   
-
    
-
 
Net  $4,561,037   $4,561,037 

 

No impairment loss on goodwill were recognized for three-month period ended March 31, 2023 and the year ended December 31, 2022.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Goodwill as a result of the acquisition of MEPA is calculated as follows;

 

Total purchase considerations  $100,000 
Fair Value of tangible assets acquired:     
Cash   482,247 
Loan receivable   500,000 
Prepaid expenses and other current assets   252,792 
Property and equipment   218,042 
Deposits   5,400 
Total identifiable assets acquired   1,458,481 
      
Fair value of liabilities assumed:     
Accounts payable   11,075 
Loan from stockholder   (4,324,000)
Other payable   (131,259)
Total liabilities assumed   (4,444,184)
Net identifiable liabilities assumed   (2,985,703)
Goodwill as a result of the acquisition  $3,085,703 

 

NOTE 11 - Operating and Finance Leases

 

  A. Lease term and discount rate:

 

The weighted-average remaining lease term and discount rate related to the leases were as follows:

  

   2023   2022 
Weighted-average remaining lease term  (Unaudited)     
Operating lease   1.25 Year    1.50 Years 
Finance lease   1.60 Years    1.85 Years 
Weighted-average discount rate          
Operating lease   6.00%   6.00%
Finance lease   3.82%   3.82%

 

16

 

 

AERKOMM INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 11 - Operating and Finance Leases - Continued

 

  B. The balances for the operating and finance leases are presented as follows within the unaudited condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022:

 

Operating Leases

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Right-of-use assets  $60,606   $92,451 
Lease liability – current  $81,316   $120,323 
Lease liability – non-current  $11,830   $22,547 

 

Finance Leases

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Property and equipment, at cost  $56,770   $56,770 
Accumulated depreciation   (39,718)   (36,925)
Property and equipment, net  $17,052   $19,845 
           
Lease liability - current  $11,052   $10,858 
Lease liability – non-current   9,925    12,624 
Total finance lease liabilities  $20,977   $23,482 

 

The components of lease expense are as follows within the unaudited condensed consolidated statements of operations and comprehensive loss for the three months periods ended March 31, 2023 and 2022:

 

Operating Leases

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Lease expense  $33,184   $51,083 
Sublease rental income   (24,580)   (17,036)
Net lease expense  $8,604   $34,047 

 

Finance Leases

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Amortization of right-of-use asset  $2,794   $3,031 
Interest on lease liabilities   218    347 
Total finance lease cost  $3,012   $3,378 

 

17

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 11 - Operating and Finance Leases - Continued

 

Supplemental cash flow information related to leases for the three months periods ended March 31, 2023 and 2022 is as follows:

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash outflows from operating leases  $9,531   $34,682 
Operating cash outflows from finance lease  $2,706   $2,825 
Financing cash outflows from finance lease  $218   $347 
Leased assets obtained in exchange for lease liabilities:          
Operating leases  $345,204   $
-
 

 

Maturity of lease liabilities:

 

Operating Leases

 

   Others   Total 
   (Unaudited)   (Unaudited) 
April 1, 2023 – March 31, 2024  $58,240   $58,240 
April 1, 2024 – March 31, 2025   11,960    11,960 
Total lease payments  $70,200   $70,200 
Less: Imputed interest   (2,305)   (2,305)
Present value of lease liabilities  $67,895   $67,895 
Current portion   (56,065)   (56,065)
Non-current portion  $11,830   $11,830 

 

Finance Leases

 

   Total 
   (Unaudited) 
April 1, 2023 – March 31, 2024  $11,661 
April 1, 2024 – March 31, 2025   10,083 
Total lease payments  $21,744 
Less: Imputed interest   (767)
Present value of lease liabilities  $20,977 
Current portion   (11,052)
Non-current portion  $9,925 

 

18

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 12 - Short-term Loan

 

In June 2021, the Company entered into a loan agreement in the amount of $1,433,177 as of June 30, 2021 (NT $40,000,000) with a non-related party. This loan, which carries no interest, would originally mature on July 16, 2021. This loan is collateralized with 3,000,000 shares of Ejectt stocks that the Company currently owns. As of March 31, 2023, the outstanding loan balance was $984,252 (NTD 30,000,000). As of October 23, 2023, the amendment agreement to extend the loan repayment is still under progress.

 

NOTE 13 - Long-term Loan

 

The Company has a car loan credit line of NT$1,500,000 (approximately US$49,213 as of March 31, 2023 and US$48,812 as of December 31, 2022), which matures on May 21, 2024, from a Taiwan financing company with annual interest rate of 9.7%. The installment payment plan is 60 months to pay off the balance on the 21st of each month. Future installment payments as of March 31, 2023 and December 31, 2022 are as follows:

 

Twelve months ending March 31,  (Unaudited) 
2024   12,461 
2025   2,077 
Total installment payments   14,538 
Less: Imputed interest   (845)
Present value of long-term loan   13,693 
Current portion   (11,642)
Non-current portion  $2,051 

 

Year ending December 31,    
2023  $12,359 
2024   5,150 
Total installment payments   17,509 
Less: Imputed interest   (1,211)
Present value of long-term loan   16,298 
Current portion   (11,271)
Non-current portion  $5,027 

 

NOTE 14 - Convertible Long-term Bonds Payable and Restricted Cash

 

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

 

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

 

Unless previously redeemed, converted or repurchased and cancelled, the Bonds may be converted at any time on or after December 3, 2020 up to November 20, 2025 into shares of Common Stock of the Company with a par value of $0.001 each. The initial conversion price for the Bonds is $13.30 per share and is subject to adjustment in specified circumstances.

 

Holders of the Bonds may also require the Company to repurchase all or part of the Bonds on the third anniversary of the Issue Date, at the Early Redemption Amount. Unless the Bonds have been previously redeemed, converted or repurchased and cancelled, Holders of the Bonds will also have the right to require the Company to repurchase the Bonds for cash at the Early Redemption Amount if an event of delisting or a change of control occurs.

 

19

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 14 - Long-term Bonds Payable and Restricted Cash - Continued

 

Pursuant to the agreements of Bonds, Bank of Panhsin Co., Ltd. (the “BG Bank”) committed to issue a bank guarantee for the benefit of the holders of the Bonds. The Bank Guarantee is intended to provide a source of funds for the principal, premium, interest (if any) and any other payment obligations of the Company which shall include the default interest under the Bonds upon the Company’s failure to pay amounts pursuant to the Indenture or upon the Bonds being declared due and payable on the occurrence of an Event of Default pursuant to this Indenture. In order to obtain the guarantee from BG Bank, the Company entered into a line of credit in the amount of $10,700,000 with BG Bank on December 1, 2020. The line of credit will be expired on December 2, 2025. The annual fee is based on 1% of the line of credit amount and due quarterly. The line of credit is guaranteed by one of the Company’s shareholders with his personal property, and the Company’s time deposit of $3,210,000 (the “Deposit”) at BG Bank is pledged as collateral as of December 31, 2022 and 2021, and the Deposit was recorded as restricted cash.

 

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

 

As of March 31, 2023 and December 31, 2022, the long-term bonds payable consisted of the following:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Credit Enhanced Zero Coupon Convertible Bonds  $10,000,000   $10,000,000 
Coupon Bonds   200,000    200,000 
    10,200,000    10,200,000 
Unamortized loan fee   (937,859)   (1,062,994)
Net  $9,262,141   $9,137,006 

 

Bond issuance cost was $ 125,134 and $118,364 for the three months ended March 31, 2023 and 2022, respectively.

 

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

 

On December 7, 2022, Aerkomm Inc. (the “Company”) entered into an investment conversion and note purchase agreement (the “Agreement”) with World Praise Limited, a Samoa registered company (“WPL”). Pursuant to the terms of this agreement, (i) a subscription for the common stock of the Company in the amount of $3,175,200 which was entered into between WPL and the Company on June 28, 2022 and funded (the “June Subscription”), (ii) a subscription for the common stock of the Company in the amount of $5,674,000 which was entered into between WPL and the Company on September 15, 2022 and funded (the “September Subscription”), and (iii) a subscription for the capital stock of MEPA Labs, Inc. (“MEPA”), a wholly owned subsidiary of the Company, in the amount of $4,324,000 which was entered into between MEPA and the Company on June 28, 2022 and funded (the “MEPA Subscription,” and together with the June Subscription and the September Subscription, the “WPL Subscriptions”), the WPL Subscriptions in the aggregate totaling $13,173,200, were converted into loans to the Company evidenced by that certain convertible bond of the Company in favor of WPL and dated December 7, 2022 (the “Convertible Bond”)

 

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

 

The Convertible Note allows for loans to the Company up to an aggregate principal amount of $30,000,000 and acknowledges an aggregate principal amount of $23,173,200 in loans under the Convertible Bond outstanding as of December 31, 2022. The Convertible Note carries an annual interest rate of four percent (4%) which is due and payable, along with the then principal amount outstanding, on the Convertible Note maturity date, December 7, 2024. The Convertible Note is pre-payable in whole or in part at any time without penalty, on five days’ prior written notice to WPL. In the event of a change of control of the Company (as that term is defined in the Convertible Note), the Convertible Note shall become immediately payable in full. The Convertible Note along with accrued interest $48K as of December 31, 2022, is convertible in whole or in part by WPL at any time into shares of common stock of the Company at a conversion price of $6.00 per share.

 

20

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 16 - Contract Liability

 

On March 9, 2015, the Company entered into a 10-year purchase agreement with Klingon Aerospace, Inc. (“Klingon”), which was formerly named as Luxe Electronic Co., Ltd. In accordance with the terms of this agreement, Klingon agreed to purchase from the Company an initial order of onboard equipment comprising an onboard system for a purchase price of $909,000, with payments to be made in accordance with a specific milestones schedule. As of March 31, 2023 and December 31, 2022, the Company received $762,000 from Klingon in milestone payments towards the equipment purchase price. As of March 31, 2023, the project is still ongoing.

 

NOTE 17 - Income Taxes

 

Income tax expense for the three months periods ended March 31, 2023 and 2022 consisted of the following:

 

   Three Months Ended
March 31,		 
   2023   2022 
Current:  (Unaudited)   (Unaudited) 
Federal  $
                 -
   $
-
 
State   
-
    1,600 
Foreign   
-
    
-
 
Total  $
-
   $1,600 

 

The following table presents a reconciliation of the Company’s income tax at statutory tax rate and income tax at effective tax rate for the three months periods ended March 31, 2023 and 2022.

 

   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Tax benefit at statutory rate  $(642,805)  $(594,755)
Net operating loss carryforwards (NOLs)   1,008,874    736,007 
Foreign investment losses   (140,193)   (187,620)
Stock-based compensation expense   11,500    51,900 
Amortization expense   18,900    21,800 
Accrued payroll   31,600    73,900 
Unrealized exchange losses   (273,276)   161,168 
Others   (14,600)   (260,800)
Tax expense at effective tax rate  $
-
   $1,600 

 

21

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 17 - Income Taxes - Continued

 

Deferred tax assets (liability) as of March 31, 2023 and December 31, 2022 consist approximately of:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Net operating loss carryforwards (NOLs)  $12,352,000   $10,694,000 
Stock-based compensation expense   3,114,000    3,098,000 
Accrued expenses and unpaid expense payable   494,000    412,000 
Tax credit carryforwards   68,000    68,000 
Unrealized exchange losses (gain)   37,000    311,000 
Excess of tax amortization over book amortization   (357,000)   (344,000)
Others   (108,000)   (97,000)
Gross   15,600,000    14,142,000 
Valuation allowance   (15,600,000)   (14,142,000)
Net  $
-
   $
-
 

 

Management does not believe the deferred tax assets will be utilized in the near future; therefore, a full valuation allowance is provided. The net change in deferred tax assets valuation allowance was an increase of approximately $1,458,000 for the three months ended March 31, 2023.

 

As of March 31, 2023 and December 31, 2022, the Company had federal NOLs of approximately $8,243,000 available to reduce future federal taxable income, expiring in 2037, and additional federal NOLs of approximately $29,744,000 and $28,545,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of March 31, 2023 and December 31, 2022, the Company had State NOLs of approximately $39,857,000 and $37,662,000 respectively, available to reduce future state taxable income, expiring in 2042.

 

As of March 31, 2023 and December 31, 2022, the Company has Japan NOLs of approximately $269,000 and $326,000, respectively, available to reduce future Japan taxable income, expiring in 2031.

 

As of March 31, 2023 and December 31, 2022, the Company has Taiwan NOLs of approximately $4,267,000 and $3,452,000, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

 

As of March 31, 2023 and December 31, 2022, the Company had approximately $37,000 and $37,000 of federal research and development tax credit, available to offset future federal income tax. The credit begins to expire in 2034 if not utilized. As of March 31, 2023 and December 31, 2022, the Company had approximately $39,000 and $39,000 of California state research and development tax credit available to offset future California state income tax. The credit can be carried forward indefinitely.

 

The Company’s ability to utilize its federal and state NOLs to offset future income taxes is subject to restrictions resulting from its prior change in ownership as defined by Internal Revenue Code Section 382. The Company does not expect to incur the limitation on NOLs utilization in future annual usage.

 

22

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 18 - Capital Stock

 

1)Preferred Stock:

 

The Company is authorized to issue 50,000,000 shares of preferred stock, with par value of $0.001. As of March 31, 2023 and December 31, 2022, there were no preferred stock shares outstanding. The Board of Directors has the authority to issue preferred stock in one or more series, and in connection with the creation of any such series, by resolutions providing for the issuance of the shares thereof, to determine dividends, voting rights, conversion rights, redemption privileges and liquidation preferences.

 

2)Common Stock:

 

The Company is authorized to issue 90,000,000 shares of common stock as of March 31, 2023 and December 31, 2022.

 

   March 31, 2023   December 31,
2022		 
   (Unaudited)     
Restricted stock - vested   1,802,373    1,802,373 
Restricted stock - unvested   149,162    149,162 
Total restricted stock   1,951,535    1,951,535 

 

The unvested shares of restricted stock were recorded under a deposit liability account awaiting future conversion to common stock when they become vested.

 

On June 16, 2022, the Company issued 4,114 shares of common stock to Bevilaqua PLLC for the legal services rendered.

 

  3) Stock Warrant:

 

On October 31, 2021, following approval by the Board of Directors, the Company issued a warrant to Mr. Sheng-Chun Chang for the purchase of up to 751,879 shares of the Company’s common stock, exercisable at a price of $2.60 per share, the closing price of the common stock on the OTC Markets, Inc. QX tier on October 21, 2021. The issuance of the warrant is (i) in recognition of Mr. Chang’s support of the Company through his previous personal guarantee of the Company’s $10,000,000 line of credit with the Panhsin Bank (the “Bank”) in relation to the private placement offering of $10,000,000 credit enhanced zero coupon convertible bonds and (ii) in exchange for Mr. Chang’s agreement to renew his guarantee with the Bank for so long as the guarantee would be required by the Bank. The warrant will vest 20% on issuance. On each anniversary of the issue date, beginning with December 3, 2021 and ending with December 3, 2025, the warrant will vest with respect to 20% of the number of shares of the Company’s common stock issuable upon conversion of the principal amount of the credit enhanced bonds still required to be guaranteed by the Panhsin Bank.

 

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

 

23

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 19 - Significant Related Party Transactions

 

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

 

A.Name of related parties and relationships with the Company:

 

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

  

B.Significant related party transactions:

 

The Company has extensive transactions with its related parties. It is possible that the terms of these transactions are not the same as those which would result from transactions among wholly unrelated parties.

  

  a. As of March 31, 2023 and December 31, 2022:

 

   March 31,
2023		   December 31,
2022		 
  

(Unaudited)

     
Other receivable from:        
EESquare JP 1  $51,224   $11,380 
StarJec2   280,075    282,073 
Others6   16,226    15,092 
Total  $347,525   $308,545 
           
Rent deposit to Ejectt3   1,378    1,367 
           
 Loan from WTL 4  $1,088,812   $337,357 
           
Prepayment from Ejectt 3  $1,610,868   $1,258,786 
           
Other payable to:          
AATWIN 5  $35,047   $35,047 
Interest payable to WTL4   59,293    58,810 
Others 6   204,084    246,610 
Total  $298,423   $340,467 

 

1. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1. This amount represents outstanding balance receivable from EESquare JP as of March 31, 2023.
   
2. Aircom Japan entered into a housing service order on December 14, 2021 and a satellite service order on January 22, 2022 for one year period till January 21, 2023. On June 20, 2022, Aircom Japan also entered a teleport service order with StarJec for a half year period from June 1, 2022 to January 14, 2023. The amount represents receivable from StarJec for monthly service provided due to the service agreements. The monthly service charges is approximately ￥6,820,000 (approximately $51,800).
   
3. Represents inventory prepayment paid by Ejectt to provide design and installation service in cabin with Aerkomm. Aircom Telecom also entered into 2 sales agreements with Ejectt for 6 sets of antennas. 
   
4. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2023, the Company borrowed approximately $1,088,812 (approximately NTD 33,187,000) from WTL under the loans and interest payable balance of $59,293 (approximately NTD 1,807,000).
   
5. Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and was expired on December 31, 2021.
   
6. Represents receivable/payable from/to employees as a result of regular operating activities.

 

24

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 19 - Significant Related Party Transactions - Continued

 

  b. For the three months periods ended March 31, 2023 and 2022:

 

   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Purchase from Ejectt1  $454,281   $
-
 
Revenue from Star Jec 2   
-
    2,953 
Interest expense charged by WTL 3   
-
    2,428 
Rental income from EESqaure JP 4   (2,266)   (2,578)

 

1. Represents 2 sets of antennas sold to Ejectt on January 30, 2023.

 

2. On December 14, 2021, Aerkomm Japan and Star Jet, a Taiwan limited liability company, signed a Housing Service Order. Further on January 22, 2022, Aerkomm Japan and Star Jet signed a Satellite Service Order. Under the two orders, Aerkomm Japan agreed to provide satellite services and housing services to Star Jec.
   
3. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2022, the Company had interest expense accrued $2,428 (approximately NTD 68,000) from WTL under the loans.
   
4. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2021 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1.

 

NOTE 20 - Stock Based Compensation

 

In March 2014, Aircom’s Board of Directors adopted the 2014 Stock Option Plan (the “Aircom 2014 Plan”). The Aircom 2014 Plan provided for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of Aircom. On February 13, 2017, pursuant to the Exchange Agreement, Aerkomm assumed the options of Aircom 2014 Plan and agreed to issue options for an aggregate of 1,088,882 shares to Aircom’s stock option holders.

 

One-third of stock option shares will be vested as of the first anniversary of the time the option shares are granted or the employee’s acceptance to serve the Company, and 1/36th of the shares will be vested each month thereafter. Option price is determined by the Board of Directors. The Aircom 2014 Plan became effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms of Aircom 2014 Plan.

 

On May 5, 2017, the Board of Directors of Aerkomm adopted the Aerkomm Inc. 2017 Equity Incentive Plan (the “Aerkomm 2017 Plan” and together with the Aircom 2014 Plan, the “Plans”) and the reservation of 1,000,000 shares of common stock for issuance under the Aerkomm 2017 Plan. The Aerkomm 2017 Plan has been adopted by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms. On June 23, 2017, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,000,000 shares. The Aerkomm 2017 Plan provides for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of the Company, as determined by the Compensation Committee of the Board of Directors (or, prior to the establishment of the Compensation Committee on January 23, 2018, the Board of Directors). The Aerkomm 2017 Plan was approved by the Company’s stockholders on March 28, 2018. On October 21, 2021, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,400,000 shares.

 

25

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 20 - Stock Based Compensation - Continued

  

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 20 - Stock Based Compensation - Continued

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Valuation and Expense Information

 

Measurement and recognition of compensation expense based on estimated fair values is required for all share-based payment awards made to its employees and directors including employee stock options. The Company recognized compensation expense of $54,891 and $246,999 for the three months periods ended March 31, 2023 and 2022, respectively, related to such employee stock options.

 

27

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 20 - Stock Based Compensation - Continued

 

Determining Fair Value

 

Valuation and amortization method

 

The Company uses the Black-Scholes option-pricing-model to estimate the fair value of stock options granted on the date of grant or modification and amortizes the fair value of stock-based compensation at the date of grant on a straight-line basis for recognizing stock compensation expense over the vesting period of the option.

 

Expected term

 

The expected term is the period of time that granted options are expected to be outstanding. The Company uses the SEC’s simplified method for determining the option expected term based on the Company’s historical data to estimate employee termination and options exercised.

 

Expected dividends

 

The Company does not plan to pay cash dividends before the options are expired. Therefore, the expected dividend yield used in the Black-Scholes option valuation model is zero.

 

Expected volatility

 

Since the Company has no historical volatility, it used the calculated value method which substitutes the historical volatility of a public company in the same industry to estimate the expected volatility of the Company’s share price to measure the fair value of options granted under the Plans.

 

Risk-free interest rate

 

The Company based the risk-free interest rate used in the Black-Scholes option valuation model on the market yield in effect at the time of option grant provided in the Federal Reserve Board’s Statistical Releases and historical publications on the Treasury constant maturities rates for the equivalent remaining terms for the Plans.

 

Forfeitures

 

The Company is required to estimate forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

 

The Company used the following assumptions to estimate the fair value of options granted in three months period ended March 31, 2023 and year ended December 31, 2022 under the Plans as follows:

 

Assumptions      
Expected term     5-10 years  
Expected volatility     45.79% - 72.81 %
Expected dividends     0 %
Risk-free interest rate     0.69% - 2.99 %
Forfeiture rate     0% - 5 %

 

28

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 20 - Stock Based Compensation - Continued

 

Aircom 2014 Plan

 

Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:

 

   Number of Shares   Weighted Average Exercise Price Per Share   Weighted Average Fair Value Per Share 
Options outstanding at January 1, 2022   111,871   $3.3521   $1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at December 31, 2022   111,871    3.3521    1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   111,871    3.3521    1.0539 

 

 

There are no unvested stock awards under Aircom 2014 Plan for the three months period ended March 31, 2023 and the year ended December 31, 2022.

  

Of the shares covered by options outstanding as of March 31, 2023, 111,871 are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:

 

    Options Outstanding (Unaudited)   Options Exercisable (Unaudited) 
Range of
Exercise
Prices		   Shares
Outstanding at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		   Shares
Exercisable at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		 
$3.3521    111,871    3.25    3.3521    111,871    3.25    3.3521 

 

As of March 31, 2023, there was no unrecognized stock-based compensation expense for the Aircom 2014 Plan. No option was exercised during the three months periods ended March 31, 2023 and 2022.

 

Aerkomm 2017 Plan

 

Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:

 

   Number of
Shares		   Weighted
Average
Exercise
Price Per
Share		   Weighted
Average
Fair Value
Per Share		 
Options outstanding at January 1, 2022   1,207,897    11.2537    7.5309 
Granted   162,000    8.1566    6.3320 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   (90,209)   11.9003    8.3775 
Options outstanding at December 31, 2022   1,279,688    10.8161    7.3194 
Granted   18,750    3.0000    2.3459 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   1,298,438    10.7032    7.2476 

 

29

 

 

AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 20 - Stock Based Compensation - Continued

 

Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months period ended March 31, 2023 and the year ended December 31, 2022 are as follows:

  

   Number of
Shares		   Weighted
Average
Fair Value
Per Share		 
Options unvested at January 1, 2022   40,194    8.9422 
Granted   162,000    6.3320 
Vested   (183,194)   6.7206 
Forfeited/Cancelled   (8,000)   14.4305 
Options unvested at December 31, 2022   11,000    3.5070 
Granted   18,750    2.3459 
Vested   (21,750)   2.5237 
Forfeited/Cancelled   
-
    
-
 
Options unvested at March 31, 2023 (unaudited)   8,000    3.4590 

 

Of the shares covered by options outstanding under the Aerkomm2017 Plan as of March 31, 2023, 1,290,438 are now exercisable; 8,000 shares will be exercisable for the twelve-month period ending March 31, 2024. Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:

 

      Options Outstanding (Unaudited)     Options Exercisable (Unaudited)  
Range of
Exercise
Prices		     Shares
Outstanding at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		     Shares
Exercisable at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		  
$   2.72 – 4.30       524,000       7.40     $ 3.8752       518,000       7.37     $ 3.8767  
  6.00 – 10.00       419,288       8.11       8.3356       417,288       8.10       8.3446  
  11.00 – 14.20       126,150       7.00       11.4688       126,150       7.00       11.4688  
  20.50 – 27.50       109,000       4.53       25.4982       109,000       4.53       25.4982  
  30.00 – 35.00       120,000       4.27       34.5479       120,000       4.27       34.5479  
          1,298,438       7.06       10.7032       1,290,438       7.04       10.7421  

 

As of March 31, 2023, total unrecognized stock-based compensation expense related to stock options was approximately $26,000, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 0.65 year. No option was exercised during the three months period ended March 31, 2023 and the year ended December 31, 2022.

 

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AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 21 - Commitments

 

As of March 31, 2023, the Company’s significant commitment is summarized as follows: 

 

    Airbus SAS Agreement: On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, the Company entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus will develop and certify a complete retrofit solution allowing the installation of the Company’s “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. Airbus will also apply for and obtain on the Company’s behalf a Supplemental Type Certificate (STC) from the European Aviation Safety Agency, 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, or BASA, went into effect on September 3, 2020, giving a boost to the regions’ aviation manufacturers by simplifying the process of gaining product approvals from the European Union Aviation Safety Agency, or EASA, and the Civil Aviation Administration of China, or CAAC, while also ensuring high safety and environment standards will continue to be met. Pursuant to the terms of our Airbus agreement, Airbus agreed to provides the Company 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 2024, although there is no guarantee that the project will be successfully completed in the projected timeframe.
     
    Airbus Interior Service Agreement: On July 24, 2020, 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. 
     
    Hong Kong Airlines Agreement: On January 30, 2020, Aircom signed an agreement with Hong Kong Airlines Ltd. (HKA) to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ IFEC solutions. Under the terms of this new agreement, Aircom will provide HKA its Ka-band AERKOMM K++ IFEC system and its AERKOMM AirCinema system. HKA will become the first commercial airliner launch customer for Aircom.
     
    Vietjet Air: On October 25, 2021, the Company 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, the Company 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.
     
    Republic Engineers Complaint: On October 15, 2018, Aircom Telecom entered into a product purchase agreement, or the October 15th PPA, with Republic Engineers Maldives Pte. Ltd., a company affiliated with Republic Engineers Pte. Ltd., or Republic Engineers, a Singapore based, private construction and contracting company. On November 30, 2018, the October 15th PPA was re-executed with Republic Engineers Pte. Ltd. as the signing party. The Company refers to this new agreement as the November 30th PPA and, together with the October 15th PPA, the PPA. Under the terms of the PPA, Republic Engineers committed to the purchase of a minimum of 10 shipsets of the AERKOMM K++ system at an aggregate purchase price of $10 million. Additionally, under the terms of the PPA, the Executive Director of Republic Engineers, C. A. Raja, agreed to sign an agreement, or the Guarantee, to guarantee all of the obligations of Republic Engineers under the PPA. Republic Engineers had submitted a purchase order, or PO, dated October 15, 2018 for the 10 shipsets and was supposed to have made payments to Aircom Telecom against the purchase order shortly thereafter. Republic Engineers made no payments against the purchase order and the Company did not begin any work on the ordered shipsets. On July 7, 2020, Republic Engineers and Mr. Raja filed a complaint against Aerkomm, Aircom and Aircom Telecom (the “Aircom Parties”) in the Superior Court of the State of California for the County of Almeda, or the Court, seeking declaratory relief only and no money damages, alleging that the PPA and the PO were not executed or authorized by Republic Engineers and that the Guarantee was not executed or authorized by Mr. Raja. Republic Engineers and C. A. Raja requested from the Court (i) orders that the PPA, the PO and the Guarantee be declared null and void and (ii) the payment of their reasonable attorney’s fees. On July 29, 2020, Aircom Telecom provided notice to Republic Engineers that the PPA and the PO was terminated according to their terms as a result of the non-performance of Republic Engineers and the Failure of Mr. Raja to provide the Guarantee. The Aircom Parties filed a motion for judgment on the pleadings in August 2021, asking the Court to find the Complaint for Declaratory Relief to be moot, because the contracts that are the subject of the Complaint have been terminated. On September 22, 2021, the Court granted that motion, and dismissed the complaint. At the request of Republic Engineers, the Court granted Republic Engineers leave to amend its complaint to attempt to allege a viable claim. On May 10, 2022, Republic Engineers and Aircom Parties entered into a settlement and mutual release agreement, which included, among other things, a denial of wrongdoing by both parties, a requirement that Republic Engineering file a motion with the Court to dismiss its lawsuit against the Aircom Parties and a mutual release by each party of any and all claims against the other party relating to this dispute. On May 17, 2022, Republic Engineers filed with the Court a motion to dismiss with prejudice, its lawsuit against the Aircom Parties and on that same day the Court officially dismissed the lawsuit.

 

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AERKOMM INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 21 - Commitments - Continued

 

    Shenzhen Yihe: On June 20, 2018, the Company entered into that certain Cooperation Framework Agreement, as supplemented on July 19, 2019, with Shenzhen Yihe Culture Media Co., Ltd., or Yihe, the authorized agent of Guangdong Tengnan Internet, or Tencent Group, pursuant to which Yihe agreed to assist the Company with public relations, advertising, market and brand promotion, as well as with the development of a working application of the Tencent Group WeChat Pay payment solution and WeChat applets applicable for Chinese users and relating to cell phone and WiFi connectivity on airplanes. As compensation under this Yihe agreement, the Company paid Yihe RMB 8 million (approximately US$1.2 million). On October 16, 2020, in accordance with the provisions of the agreement with Yihe, as supplemented, the Company filed an arbitration action with the Shenzhen International Arbitration Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking a complete refund of its RMB 8 million payment to Yihe. The Company received notice from the Arbitration Court on October 16, 2020 of receipt of its arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration. These fees were paid on October 28, 2020. The Company intends to aggressively pursue this matter. As of September 30, 2021, the prepayment was reclassified to other receivable and full allowance was reserved. On March 25, 2022, the Shenzhen International Arbitration Court issued a judgment in our favor. The Court deemed the Company’s agreement with Yihe terminated as of November 24, 2020, the date of the Company’s filing with the Court, and held that Yihe is required to promptly repay us RMB 7.5 million and reimburse the Company RMB 178,125 in court costs. The Company will make every effort to collect these amounts from Yihe.
     
   

US 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 the Company’s 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. The Company successfully appealed this USPTO action and the USPTO issued to the Company 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.

 

Equity Contract: On December 29, 2022, Aerkomm Inc. (the “Company” or the “Seller”) and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract (the “Equity Sales Contract”). Pursuant to the terms of the Equity Sales Contract, (i) the Company will sell 25,500,000 shares (the “Shares”) of Aerkomm Taiwan Inc., the Company’s wholly-owned subsidiary (the “Aerkomm Taiwan”), to dMobile System Co., Ltd. (the “Buyer”) for NT$255,000,000 (approximately US $8,300,000 as of December 31, 2022), and (ii) the Buyer is required to pay the full amount to the Seller within 180 days of signing the Equity Sales Contract. If the Buyer fails to make the payment, the Seller has the right to claim the compensation from the Buyer due to the Buyer’s breach of the Equity Sales Contract. Furthermore, Mr. Albert Hsu who is designated by the seller as the pledgee of the Shares in the Equity Sales Contract will execute all the rights of the pledgee under the instruction from the Seller. The parties agree to be bound by the laws of the Republic of China and agree that the Taipei District Court in Taiwan is the court of jurisdiction for initial trial.

 

The Buyer, dMobile System Co., Ltd., is owned by Sheng-Chun Chang, a more than 10% equity owner of the Company.

 

The purpose of this transaction was to have Aerkomm Taiwan become a qualified company to apply for a telecommunication license in Taiwan.

 

NOTE 22 - Subsequent Events

 

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

 

32

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Use of Terms

 

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

 

Special Note Regarding Forward Looking Statements

 

Certain information contained in this report includes forward-looking statements. The statements herein which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our interpretation of what is believed to be significant factors affecting the businesses, including many assumptions regarding future events. The following factors, among others, may affect our forward-looking statements:

 

  ● our future financial and operating results;

 

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

 

  ● the impact and effects of the global outbreak of the coronavirus (COVID-19) pandemic, and other potential pandemics or contagious diseases or fear of such outbreaks, on the global airline and tourist industries, especially in the Asia Pacific region;

 

  ● our ability to attract and retain customers;

 

  ● our dependence on growth in our customers’ businesses;

 

  ● the effects of changing customer needs in our market;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  ● our expectations concerning relationship with customers and other third parties;

 

  ● the attraction and retention of qualified employees and key personnel;

 

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

 

  ● our ability to comply with evolving legal standards and regulations.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue our operations. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will in fact occur.

 

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

33

 

 

The specific discussions herein about our company include financial projections and future estimates and expectations about our business. The projections, estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of our business, the industry in which we work and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.

 

Potential investors should not make an investment decision based solely on our company’s projections, estimates or expectations. 

 

Overview

 

Aerkomm Inc., is a development stage Non-Geostationary Orbit NGSO Low Earth Orbit and Medium Earth Orbit (LEO/MEO) satellite communication technology provider, focusing on B5G / 6G communications. With our advanced technology, we intend to provide our partners the benefits of E / V / Ka / Ku and X band unique solutions that encompasses a wide range of service options. Such options include connectivity solutions (IVI) on Vehicles (RVs, EVs….etc), Internet of Things (IOT) scenarios, internet in rural and remote sites to complement mobile communication weakness, maritime market and aviation market, including Government UAVs, as well as the provision of in-flight broadband entertainment and connectivity (IFEC) for commercial airlines and corporate jets.

 

Our technology will have several uses including:

 

  1.

Aviation: Target customers will be Government UAVs, commercial airlines and corporate jet operators. For Government UAVs we plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth. We plan to generate revenue from e-commerce and monthly subscription fee for satellite bandwidth from commercial airlines. From corporate jet operators we plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth.

 

  2. Vehicles and Autopilot Trucks: Target customers will be all autopilot vehicles, using B5G, LEO satellites. We plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth.

 

  3. Trains and Fixed Infrastructure: Target customers will be train operators and associated infrastructure. We plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth.

 

  4. Remote Locations: Target customers will be remote islands and mountain regions. We plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth.

 

  5. Maritime: Target customers will be cruise liners, freighters, tankers, ferry boats, yachts, and oilrigs. We plan to generate revenue from the product price and monthly subscription fee for satellite bandwidth.

 

With our advanced technologies and a unique business model, our initial focus has been to become a service provider of IFEC solutions through which we 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 plan to offer these core services, which we are currently still developing, through both built-in in-flight entertainment systems, such as seat-back display, as well as on passengers’ own personal devices. We also expect to provide content management services and e-commerce solutions related to our IFEC solutions.

 

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. We plan to offer a choice of different business models of our IFEC system to commercial airlines. We plan to offer the choice of free hardware while the airline will pay for the monthly connectivity cost. We will also offer the option of the airline paying for the hardware while we pay for the connectivity cost. Airlines will potentially be able to generate new revenues through participating in our different revenue sharing model depending on which model they select, while passengers will not be required to pay for connectivity. That is, for passengers, connectivity will be free. 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.

 

Our main source of revenue is expected to be derived from fees related to the content channeled 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.

 

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. We expect that our first such ground station will be built in Taiwan, on land that we have acquired, to service our East Asia market.

 

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 LEO/MEO satellite connectivity. We also expect to develop a remote connectivity system that will be applicable to the highspeed rail industry.

 

Our total sales were $454,281 and $0 for the three months ended March 31, 2023 and the year ended December 31, 2022.

  

34

 

 

Business Development

 

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 aircrafts. There can be no assurances, however, that any MOUs we entered into will lead to actual purchase agreements.

 

In view of the increasing demand by the airlines for a bigger data throughput, during the course of discussions between us and Airbus, we have revised our strategy to focus primarily on LEO/MEO connectivity IFEC solutions for airlines and have suspended work on our dual band (Ka/Ku) satellite inflight connectivity solution.

 

In connection with the Airbus project, we also identified owners of Airbus Corporate Jet, or ACJ, aircraft, 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.

 

Our AERKOMM K++ System

 

Our proprietary IFEC system, which is called the AERKOMM K++ system, will contain a ultra-low-profile radome (that is, a dome or similar structure protecting our radio equipment) containing two antennas, one for transmitting and the other for receiving, and will comply with the ARINC 791 standard of Aeronautical Radio, Incorporated. Our AERKOMM K++ system also meets Airbus Design Organisation Approval.

 

GEO (Geostationary Earth Orbiting) and NGSO (Non-Stationary Orbit) MEO (Medium Earth Orbiting) / LEO (Low Earth Orbiting) Satellites

 

Our initial AERKOMM K++ system will work with geostationary earth orbiting, or GEO satellites. Performance of GEO satellites diminishes greatly in the areas near the Earth’s poles. One of the main advantages of NGSO satellites over GEO satellites is considerably lower latency as well as worldwide coverage, particularly over the poles. Whereas GEO satellites have roughly 550 milliseconds of round-trip latency time, LEO satellites boast a latency of 240 milliseconds, signifying a distinct advantage in the sphere of real-time applications. Only LEO satellites can collect high quality data over the North and South poles. We are developing technologies to work with MEO/LEO satellites and plans to partner with Airbus to develop aircraft installation solutions. As new MEO and LEO satellites are being regularly launched over the next few years, which, we expect, will enable the provision of worldwide aircraft coverage, we plan to have the necessary technology ready to take advantage of this new trend in MEO/LEO satellite connectivity, although it cannot assure you that it will be successful in this new area of endeavor. We have two cooperation agreements in place with LEO/MEO satellite providers. On June 23, 2020, we entered into a cooperation agreement with Telesat LEO Inc., 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, Aircom 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’s IFEC product portfolio and network. Aircom and Telesat will collaborate in both technical and commercial activity. On January 10, 2022, Aerkomm entered into a cooperation agreement with New Skies Satellites B.V., a Dutch company with its principal offices located at Rooseveltplantsoen The 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”) as part of the SES Satellite Network. Through this agreement, Aerkomm and SES will jointly collaborate both technically and commercially.

 

Ground-based Satellite System Sales

 

Since our acquisition of Aircom Taiwan in December 2017, this wholly owned subsidiary has been developing ground-based satellite connectivity components which have an application in remote regions that lack regular affordable ground-based communications. In September 2018, Aircom Taiwan consummated its first sale of such a component, a small cell server terminal, in the amount of $1,730,000. This server terminal will be utilized by the purchaser in the construction of a satellite-based ground communication system which will act as a multicast service extension of existing networks. The system is designed to extend local existing networks, such as ISPs and mobile operators, into rural areas and create better coverage and affordable connectivity in these areas. Aircom Taiwan expects to sell additional satellite connectivity components, systems and services to be used in ground mobile units in the future, although there can be no assurances that it will be successful in these endeavors.

 

In addition, in September 2018, Aircom Taiwan provided installation and testing services of a satellite-based ground connectivity system to a remote island resort and received service income related to this project in the amount of $15,000. Upon the completion of this system’s testing phase, and assuming that the system operates satisfactorily, Aircom Taiwan expects to begin to sell this system to multiple, remotely located resorts. We can make no assurances at this time however, that this system will operate satisfactorily, that we will be successful in introducing this system as a viable product offering or that we will be able to generate any additional revenue from the sale and deployment of this system.

 

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Recent Events

 

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 that 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 while 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, or FGSA, technology.

 

New FGSA Antenna Development

 

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 next 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 the way phased array antenna technology is applied, taking it from PCB-based systems to semiconductor-based. This innovation is far ahead of industry standards and 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 high-efficiency antenna, we believe that current satellite operators can significantly reduce their capital expenditures, or 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 ability paves the way for AERKOMM to innovate the broadcast TV market by offering this unique antenna for versatile satellite services catering to the existing and expanding global customer base.

 

Satellite License Awards

 

On April 27th, 2023, Aerkomm was awarded a regional satellite operator license by the Taiwan Ministry of Digital Affairs.

 

We believe that 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 that will enable us to create a revenue stream from FGSA related 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 in.

 

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

 

With this license, Aerkomm will be able to offer high-throughput, ultra-flexible and carrier-grade connectivity services delivered via O3b mPOWER, SES’s second-generation MEO communications system, from even the most remote regions across Taiwan.

 

Board of Director Changes

 

On May 5, 2023, Mr. Jan-Yueng Lin resigned from his position as a member of our board of directors, effective as of that date. Also on May 5, 2023, our board of directors appointed Mr. Jeff T. C. Hsu to become a member of the board of directors effectively immediately, to fill the vacancy created by the resignation of Mr. Lin.

 

Sale of Equity Securities

 

On July 20, 2023, we entered into a subscription agreement with one investor (the “Investor”) who agreed to purchase an aggregate of 800,000 shares of the Company’s common stock, $0.001 par value per share, at a price of $12.50 per share (the “Shares”) for an aggregate purchase of $10,000,000. The Shares were offered and sold by the Company in a private placement offering (the “Offering”) under Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The investor represented in its subscription agreement that it not a resident of the United States or otherwise a “U.S. Person,” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

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Pursuant to the terms of the subscription agreement, the parties have agreed that if the Company has not met the following conditions relating to the development of its new Full-Dominance Glass Semiconductor Antenna (the “FGSA Antenna”) by the end of business on June 30, 2024, the Subscriber shall have the right to sell the Shares back to the Company for the full amount the Subscriber originally paid for the Shares:

 

i. The Company shall have completed a “Design Release” meaning that it shall have an engineering sample of the FGSA Antenna publicly available and ready for sale;

 

ii. The Company shall have passed the “small batch market test” meaning that it shall have sold 5,000 sample units of the designed released FGSA Antenna; and

 

iii. The Company shall be ready for the “commercial release” of the FGSA Antenna meaning that the Company shall be ready to take orders for the mass production of the FGSA Antenna.

 

The Company and the Investor will separately agree on the timing of the Investor’s cash payments to the Company under the subscription agreement and the related issuances upon payment of the Shares to the Investor.

 

Letter of Intent with Ejectt, Inc.

 

On July 28, 2023, we and Ejectt, Inc. (“Ejectt”), a publicly traded Taiwan company, signed a non-binding letter of intent (the “LOI”) with respect to a possible merger  between Aerkomm and Ejectt. 

 

The LOI signing marks a decisive step towards consolidation and growth in Taiwan's satellite communication industry. We and Ejectt are committed to synergizing our strengths and expertise to maximize our impact in the market and strengthen our joint position in the satellite communications sector.

 

Mesh Tech Acquisition

 

On July 31, 2023, we entered into a share purchase agreement (the “Share Purchase Agreement”) with Mesh Technology Taiwan Limited (“Mesh Tech”) and Mixnet Technology Limited (“Mixnet”). Mesh Tech is a Taiwan based company that creates products to accelerate data transfer and distribution across different geographical locations through its hybrid CDN technology.

 

Pursuant to the terms of the Share Purchase Agreement, the Company will acquire all of the outstanding capital stock of Mesh Tech and Mixnet. The shares of Mesh Tech will be held through Mixnet, a Seychelles organized company. As consideration for this acquisition the Company will issue to the shareholders of Mesh Tech (the “Sellers”) 7,000,448 shares of its common stock (the “Consideration Shares”) valued at approximately $2.36 per share for an aggregate valuation of $16,500,000. The Company has agreed to register the Consideration Shares for resale under a Form S-1 registration statement (the “Resale Registration Statement”) and the Sellers have given the Chief Executive Officer of the Company an irrevocable proxy to vote the Consideration Shares on behalf of the Sellers until the Consideration Shares are sold through the Resale Registration Statement.

 

The 7,000,448 Consideration Shares have been issued and are currently being held in escrow until this acquisition closes.

 

Taiwan Telecommunications Project Bid

 

On August 9, 2023, our Taiwan based subsidiary, Aerkomm Taiwan Inc., and its exclusive agent in Taiwan, Ejectt, successfully obtained a first-stage bid for the verification project of “Emerging Technology Application for Enhancing Communication Network Resilience in Emergencies or War” (the “Verification Project”) from the Taiwan Telecom Technology Center (TTC). The Ministry of Digital Affairs (MoDA) in Taiwan has actively promoted the Verification Project in recent months. MoDA is dedicated to building a diverse and robust satellite communication system in Taiwan to ensure seamless communication during emergencies.

 

To fortify the resilience of communication networks, Taiwan’s MODA has initiated the two-year Verification Project. This initiative is being carried out by the TTC, a government-funded foundation in Taiwan. The project’s goal is to establish a total of 773 sites both domestically and internationally by the end of 2024. This comprehensive network setup aims to validate the effectiveness of a heterogeneous resilient network architecture.

 

In this first-stage winning bid, titled “Asynchronous Satellite Network Leasing and Transmission Service Procurement Project,” Aerkomm Taiwan and Ejectt will collaborate with SES, utilizing SES’s O3b Medium Earth Orbit satellite constellation. We expect that this ongoing collaboration will continue to strengthen the partnership between us and SES in the Taiwan market. Our joint effort aims to expand and deepen our satellite communication business in Taiwan, capture new business opportunities, and solidify our positions as key players in the satellite communications landscape.

 

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Principal Factors Affecting Financial Performance

 

We believe that our operating and business performance will be driven by various factors that affect the commercial airline industry, including trends affecting the travel industry and trends affecting the customer bases that we target, as well as factors that affect wireless Internet service providers and general macroeconomic factors. Key factors that may affect our future performance include:

 

  ● our ability to enter into and maintain long-term business arrangements with airline partners, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors;
     
  ● the extent of the adoption of our products and services by airline partners and customers;
     
  ● costs associated with implementing, and our ability to implement on a timely basis, our technology, upgrades and installation technologies;
     
  ● costs associated with and our ability to execute our expansion, including modification to our network to accommodate satellite technology, development and implementation of new satellite-based technologies, the availability of satellite capacity, costs of satellite capacity to which we may have to commit well in advance, and compliance with regulations;
     
  ● costs associated with managing a rapidly growing company;
     
  ● the impact and effects of the global outbreak of the coronavirus (COVID-19) pandemic, and other potential pandemics or contagious diseases or fear of such outbreaks, on the global airline and tourist industries, especially in the Asia Pacific region;
     
  ● the number of aircraft in service in our markets, including consolidation of the airline industry or changes in fleet size by one or more of our commercial airline partners;
     
  ● the economic environment and other trends that affect both business and leisure travel;
     
  ● continued demand for connectivity and proliferation of Wi-Fi enabled devices, including smartphones, tablets and laptops;
     
  ● our ability to obtain required telecommunications, aviation and other licenses and approvals necessary for our operations; and
     
  ● changes in laws, regulations and interpretations affecting telecommunications services and aviation, including, in particular, changes that impact the design of our equipment and our ability to obtain required certifications for our equipment.

 

Smaller Reporting Company

 

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

 

 

Recent Market Information

 

The IATA (International Air Transport Association) in August 2023 issued the report entitled Passenger Market Analysis.

 

●Industry-wide revenue passenger-kilometers (RPKs) increased 28.4% year-on-year (YoY) in August. Compared to 2019 levels, passenger traffic recovered to 95.7%.

 

●Available seat-kilometers (ASKs) rose at a slower annual pace of 24.9%, lifting passenger load factors (PLFs) close to pre-pandemic levels. The PLF in August was 84.6%, 1.1 ppts lower than the PLF for the same month in 2019.

 

●Domestic passenger traffic grew 9.2% over pre-pandemic levels. Most monitored markets saw stable growth in domestic traffic, while Japan experienced disruptions due to Typhoon Khanun.

 

●The recovery of international RPKs remained at 88.5% of 2019 levels. Regions experienced different outcomes while Asia Pacific carriers continued to restore international traffic.

 

●Ticket sales data signaled unwinding domestic demand while international bookings remained on the same positive trend.

 

Passenger traffic expanded further in August 2023, with industry-wide revenue passenger kilometers (RPKs) growing 28.4% year-on0year (YoY) and reaching 95.7% of August 2019 levels. In seasonally-adjusted terms, passenger traffic increased 1.0% month-on-month (MoM), indicating a slowing but still positive trend globally.

 

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Results of Operations

 

Comparison of Three Months Ended March 31, 2023 and 2022

 

The following table sets forth key components of our results of operations during the three months periods ended March 31, 2023 and 2022.

 

   Three Months Ended
March 31,		   Change 
   2023   2022   $   % 
Net Sales  $454,281   $-   $454,281    100.0%
Service income – related party   -    2,953    (2,953)   (100.0)%
Cost of sales   447,781    -    447,781    100.0%
Operating expenses   3,643,426    1,780,438    1,862,988    104.6%
Loss from operations   (3,636,926)   (1,777,485)   (1,859,410)   104.6%
Net non-operating expense   (117,510)   (700,128)   582,618    (83.2)%
Loss before income taxes   (3,754,436)   (2,477,613)   (1,276,823)   (51.5)%
Income tax expense   -    1,600    (1,600)   (100.0)%
Net Loss   (3,754,436)   (2,479,213)   (1,275,223)   51.4%
Other comprehensive income   134,254    518,027    (383,773)   (74.1)%
Total comprehensive loss  $(3,620,182)  $(1,961,186)  $(1,658,996)   (84.6)%

 

Revenue. We have $ 454,281 of net sales for the three-month period ended March 31, 2023 and $2,953 service income for the three-month period ended March 31, 2022, respectively. Our revenue for the three months ended March 31, 2023 was $454,281 as we are still developing our core business in in-flight entertainment and connectivity and there was no non-recurring sale of equipment to related parties during the period. The service income of $2,953 ended March 31, 2022 represents an income from providing satellite service to one of our related parties.

 

Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, research and development expenses, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses increased by $1,862,988, or 104.6% to $3,643,426 for the three-month period ended March 31, 2023, from $1,780,438 for the three-month period ended March 31, 2022. Such increase was mainly due to increases in salary expenses, R&D expenses and consulting fees of $969,311, $834,271 and $177,158, respectively, which was offset by the decreases in professional fees and stock compensation expense of $236,856 and $192,108.

 

Net non-operating expense. We had $117,510 in net non-operating expense for the three-month period ended March 31, 2023, as compared to net non-operating expense of $700,128 for the three-month period ended March 31, 2022. Net non-operating expense in the three-month period ended Mach 31, 2023 represents gain on foreign exchange translation of $179,589, unrealized loss from the transactions of our liquidity contract and prepaid investment of $7,829, other financing cost due to amortization of convertible bonds issuing cost of $125,134 and net interest expense of $236,073, which was offset by the interest income and other incomes of $71,937. The net non-operating expense in the three-month period ended March 31, 2022 includes foreign exchange loss of $578,654, amortization of bond issuing costs of $118,365 and net interest expense of $7,381.

 

Loss before income taxes. Our loss before income taxes increased by $1,276,823, or 51.5%, to $ 3,754,436 for the three-month period ended March 31, 2023, from a loss of $2,477,613 for the three-month period ended March 31, 2022, as a result of the factors described above.

 

Income tax expense. Income tax expense was $0 for the three-month period ended March 31, 2023, as compared to the income tax expense of $1,600 for the three-month period ended March 31, 2022.

 

Total comprehensive loss. As a result of the cumulative effect of the factors described above, our total comprehensive loss increased by $1,658,996, or 84.6%, to $3,620,182 for the three-month period ended March 31, 2023, from $1,961,186 for the three-month period ended March 31, 2022.

 

Liquidity and Capital Resources 

 

As of March 31, 2023, we had cash and cash equivalents of $2,299,190 and restricted cash of $3,224,357. We have financed our operations primarily through cash proceeds from financing activities, including from our 2020 Offering, the issuance of convertible bonds, short-term borrowings and equity contributions by our stockholders. 

 

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The following table provides detailed information about our net cash flow:

 

Cash Flow

 

   Three Months Ended
March 31,		 
   2023   2022 
Net cash used for operating activities  $(5,110,931)  $(679,551)
Net cash provided by investing activity   (10,247)   6,658 
Net cash provided by financing activity   752,910    154,585 
Net decrease in cash and cash equivalents   (4,368,268)   (518,308)
Cash at beginning of year   10,101,920    3,288,813 
Foreign currency translation effect on cash   (210,105)   518,027 
Cash at end of year  $5,523,547   $3,288,532 

 

Operating Activities 

 

Net cash used for operating activities was $5,110,931 for the three months ended March 31, 2023, as compared to $679,551 for the three months ended March 31, 2022. In addition to the net loss of $3,754,436, the increase in net cash used for operating activities during the three-month period ended March 31, 2023 was mainly due to increase in prepaid expenses, accounts payable, and other payable of $2,068,638, $353,703, and $425,562, respectively, offset by the increase in accrued payroll liability and prepayment from customer, interest payable of $152,518, $352,081, and $235,482. In addition to the net loss of $2,479,213, the decrease in net cash used for operating activities during the three-month period ended March 31, 2022 was mainly due to the decrease in accounts receivable and the increase in accrued expenses and other current liabilities of $136,800 and $1,225,046, respectively, offset by the decrease in prepaid expenses and other current assets and deposits of $121,913 and $45,548, respectively.

 

Investing Activities 

 

Net cash provided by investing activities for the three months ended March 31, 2023 was $10,247 as compared to net cash used by investing activities of $6,658 for the three months ended March 31, 2022. The net cash provided by investing activities for the three months ended March 31, 2023 was mainly for the proceeds from disposal of long term investment of $325,578, which was offset by the purchase of property and equipment of $335,825. The net cash provided by investing activities for the three months ended March 31, 2022 was mainly the proceeds from disposal of trading securities of $7,823, which was offset by the cash used for the purchase of property and equipment of $1,165.

 

Financing Activities 

 

Net cash provided by financing activities for the three months ended March 31, 2023 and 2022 was $752,910 and $154,585, respectively. Net cash provided by financing activities for the three months ended March 31, 2023 were mainly attributable to proceeds from the increase in short-term loans in the amount of $758,439. Net cash provided by financing activities for the three months ended March 31, 2022 were mainly attributable to net proceeds from the borrowing of short-term loan in the amount of $161,298.

 

On May 9, 2019, two of our current shareholders, whom we refer to as the Lenders, each committed to provide us with a $10 million bridge loan, or together, the Loans, for an aggregate principal amount of $20 million, to bridge our cash flow needs prior to our obtaining a mortgage loan to be secured by our Taiwan land parcel which we recently purchased. The Taiwan land parcel consists of approximately 6.36 acres of undeveloped land located at the Taishui Grottoes in the Xinyi District of Keelung City, Taiwan. Aerkomm Taiwan contracted to purchase the Taiwan land parcel for NT$1,056,297,507, or US$34,474,462, and as of July 3, 2019 we completed payment of the purchase price for the Taiwan land parcel in full. We are now waiting for title to the Taiwan land parcel to be transferred to us pending the completion of our satellite ground station licensing process. The Loans will be secured by the Taiwan land parcel with the initial closing date of the Loans to be a date, designated by us, within 30 days following the date that the title for the Taiwan land parcel is fully transferred to and vested in our subsidiary, Aerkomm Taiwan. The Loans will bear interest, non-compounding, at the Bank of America Prime Rate plus 1%, annually, calculated on the actual number of days the Loans are outstanding and based on a 365-day year and will be due and payable upon the earlier of (1) the date of our obtaining a mortgage loan secured by the Taiwan land parcel with a principal amount of not less than $20 million and (2) one year following the initial closing date of the Loans. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon our request prior to the time that title to the Taiwan land parcel is transferred to our subsidiary, Aerkomm Taiwan, provided that we provide adequate evidence to the Lenders that the proceeds of such an earlier closing would be applied to pay our vendors. We, of course, cannot provide any assurances that we will be able to obtain a mortgage on the Taiwan land parcel once the acquisition is completed. On April 25, 2022, the Lenders amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100%. As of the date of this report, we have drawn down approximately $190,000 (approximately NTD 5,640,000) under the Loans from one of the Lenders.

 

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On July 10, 2018, in conjunction with our agreement to acquire the Taiwan land parcel, we entered into a binding letter of commitment with Metro Investment Group Limited, or MIGL, pursuant to which we agreed to pay MIGL an agent commission of four percent (4%) of the full purchase price of the Taiwan land parcel, equivalent to approximately US$1,387,127, for MIGL’s services provided with respect to the acquisition. Under the terms of the initial agreement with MIGL, we agreed to pay this commission no later than 90 days following payment in full of the Taiwan land parcel purchase price. On May 2019 and December 2021, we amended the binding letter of commitment with MIGL to extend the payment to be paid after the full payment of the Land acquisition price until no later than June 30, 2022. If there is a delay in payment, we shall be responsible for punitive liquidated damages at the rate of one tenth of one percent (0.1%) of the commission per day of delay with a maximum cap to these damages of five percent (5%). Under applicable Taiwanese law, the commission was due and payable upon signing of the letter of commitment even if the contract is cancelled for any reason and the acquisition is not completed. We have recorded the estimated commission to the cost of land and will be paying the amount no later than June 30, 2022. We are currently negotiating with MIGL to amend the agreement to further extend the payment term.

 

On December 3, 2020, the Company closed a private placement offering (the “Bond Offering”) consisting of US$10,000,000 in aggregate principal amount of its Credit Enhanced Zero Coupon Convertible Bond due 2025 (the “Credit Enhanced Bonds”) and US$200,000 in aggregate principal amount of its 7.5% convertible bonds due 2025 (the “Coupon Bonds,” and together with the Credited Enhanced Bonds, the “Bonds”).

 

Payments of principal, premium, interest and any payments thereof in respect of the Credit Enhanced Bonds will have the benefit of a bank guarantee denominated in U.S. dollars and issued by Bank of Panhsin Co., Ltd., based in Taiwan. Unless previously redeemed, converted or repurchased and canceled, the Credit Enhanced Bonds will be redeemed on December 2, 2025 at 105.11% of their principal amount and the Coupon Bonds will be redeemed on December 2, 2025 at 100% of their principal amount plus any accrued and unpaid interest. The Coupon Bonds will bear interest from and including December 2, 2020 at the rate of 7.5% per annum. Interest on the Coupon Bonds is payable semi-annually in arrears on June 1 and December 1 each year, commencing on June 1, 2021. Unless previously redeemed, converted or repurchased and cancelled, the Bonds may be converted at any time on or after December 3, 2020 up to November 20, 2025 into shares of Common Stock of the Company with a par value US$0.001 each (such shares of Common Stock, the “Conversion Shares”). The initial conversion price for the Bonds is US$13.30 per Conversion Share and is subject to adjustment in specified circumstances. Please refer to our Current Report on Form 8-K filed with SEC on December 4, 2020.

 

We have not generated significant revenues, excluding non-recurring revenues in 2021 and 2019, and will incur additional expenses as a result of being a public reporting company. Currently, we have taken measures that management believes will improve our financial position by financing activities, including having successfully completed our Bond Offering, 2020 Offering, short-term borrowings and other private loan commitments, including the Loans from our investors, discussed above. With our current available cash, the $20 million in loan commitments from the Lenders and our expectations for our ability to raise funds in the near term, we believe our working capital will be adequate to sustain our operations for the next twelve months.

 

However, even if we successfully raise sufficient capital to satisfy our needs over the next twelve months, following that period we will require additional cash resources for the implementation of our strategy to expand our business or for other investments or acquisitions we may decide to pursue. If our internal financial resources are insufficient to satisfy our capital requirements, we will need seek to sell additional equity or debt securities or obtain additional credit facilities, although there can be no assurances that we will be successful in these efforts. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. 

 

On June 28, 2022, we entered into a subscription agreement with an investor who agreed to purchase 516,666 shares of our common stock for 6.00 Euros per share for an aggregate purchase price of 3,100,000 Euros (the “Purchase Price”). On June 29, 2022, we received the first installment of the Purchase Price of $3,175,201, equivalent to 3,000,000 Euros, from this investor. Despite the fact that we have received the investor’s funds, the subscription agreement is subject to a cooling off period pursuant to which it may be terminated prior to July 29, 2022 by either party at any time and for any reason. If the subscription agreement is terminated by the investor, we will be required to return the Purchase Price funds to the investor, without interest. Because of the wording of the subscription agreement, we cannot assure you at this time that we will not be required to return the Purchase Price funds to the investor.

 

Capital Expenditures

 

Our operations continue to require significant capital expenditures primarily for technology development, equipment and capacity expansion. Capital expenditures are associated with the supply of airborne equipment to our prospective airline partners, which correlates directly to the roll out and/or upgrade of service to our prospective airline partners’ fleets. Capital spending is also associated with the expansion of our network, ground stations and data centers and includes design, permitting, network equipment and installation costs.

 

Capital expenditures for the three months ended March 31, 2023 and 2022 were $335,825 and $1,165, respectively.

 

We anticipate an increase in capital spending in our fiscal year ended December 31, 2023 and estimate that capital expenditures will range from $10 million to $50 million as we begin airborne equipment installations and continue to execute our expansion strategy. We expect to raise these funds through our planned public offering, the registration statement for which is currently under review by the SEC, and/or through other sources of equity or debt financings. There can be no assurance, however, that our planned public offering will proceed successfully, if at all, or that we will be able to raise the required funds through other means on acceptable terms to us, if at all.

 

41

 

 

Inflation

 

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

 

Off Balance Sheet Arrangements

 

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

 

Seasonality

 

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

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements: 

 

Concentrations of Credit Risk. Financial instruments that potentially subject to significant concentrations of credit risk consist primarily of cash in banks. As of March 31, 2023 and December 31, 2022, the total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the Company was approximately $1,518,000 and $6,153,000, respectively. The balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance is approximately $3,148,000 and $3,134,000 as of March 31, 2023 and December 31, 2022, respectively. We perform ongoing credit evaluation of its customers and requires no collateral. An allowance for doubtful accounts is provided based on a review of the collectability of accounts receivable. We determine the amount of allowance for doubtful accounts by examining its historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies. Actual credit losses may differ from our estimates.

 

Inventories. Inventories are recorded at the lower of weighted-average cost or net realizable value. We assess the impact of changing technology on our inventory on hand and writes off inventories that are considered obsolete. Estimated losses on scrap and slow-moving items are recognized in the allowance for losses.

 

Research and Development Costs. Research and development costs are charged to operating expenses as incurred. For the three-month periods ended March 31, 2023 and 2022, we incurred approximately $0 and $0 of research and development costs, respectively.

 

Property and Equipment. Property and equipment are stated at cost less accumulated depreciation. When value impairment is determined, the related assets are stated at the lower of fair value or book value. Significant additions, renewals and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed by using the straight-line and double declining method over the following estimated service lives: computer equipment - 3 to 5 years, furniture and fixtures - 5 years, satellite equipment – 5 years, vehicles – 5 years and lease improvement – 5 years. Construction costs for on-flight entertainment equipment not yet in service are recorded under construction in progress. Upon sale or disposal of property and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to income in the period of sale or disposal. We review the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We determined that there was no impairment loss for the three-month periods ended March 31, 2023 and 2022.

 

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Right-of-Use Asset and Lease Liability. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which modifies lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases and finance leases under previous accounting standards and disclosing key information about leasing arrangements. A lessee should recognize the lease liability to make lease payments and the right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases and finance leases, a right-of-use asset and a lease liability are initially measured at the present value of the lease payments by discount rates. The Company’s lease discount rates are generally based on its incremental borrowing rate, as the discount rates implicit in the Company’s leases is readily determinable. Operating leases are included in operating lease right-of-use assets and lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment and lease liability in our consolidated balance sheets. Lease expense for operating expense payments is recognized on a straight-line basis over the lease term. Interest and amortization expenses are recognized for finance leases on a straight-line basis over the lease term. For the leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. We adopted ASU 2016-02 effective January 1, 2019.

 

Goodwill and Purchased Intangible Assets. Goodwill represents the amount by which the total purchase price paid exceeded the estimated fair value of net assets acquired from acquisition of subsidiaries. We test goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. Purchased intangible assets with finite life are amortized on the straight-line basis over the estimated useful lives of respective assets. Purchased intangible assets with indefinite life are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Purchased intangible asset consists of satellite system software and is amortized over 10 years.

 

Fair Value of Financial Instruments. We utilize the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

 

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

 

Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

 

Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions.

 

The carrying amounts of the Company’s cash and restricted cash, accounts payable, short-term loan and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s short-term investment and long-term investment are classified within Level 1 of the fair value hierarchy on March 31, 2023. The Company’s long-term bonds payable, long-term loan and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. There were no outstanding derivative financial instruments as of March 31, 2023.

 

Revenue Recognition. We recognize revenue when performance obligations identified under the terms of contracts with our customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. Our revenue for the three months ended March 31, 2023 composed of the service income to one of our related parties. The majority of our revenue is recognized at a point in time when product is shipped or service is provided to the customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods, which includes estimates for variable consideration. We adopted the provisions of ASU 2014-09 Revenue from Contract with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) we satisfy a performance obligation. Customers may make payments to the Company either in advance or in arrears. If payment is made in advance, the Company will recognize a contract liability under prepayments from customers until which point the Company has satisfied the requisite performance obligations to recognize revenue.

 

Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Adjustments to prior period’s income tax liabilities are added to or deducted from the current period’s tax provision.

 

The Company follows FASB guidance on uncertain tax positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax authorities for years before 2017. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

 

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The Company’s policy for recording interest and penalties associated with any uncertain tax positions is to record such items as a component of income before taxes. Penalties and interest paid or received, if any, are recorded as part of other operating expenses in the consolidated statement of operations.

 

Foreign Currency Transactions. Foreign currency transactions are recorded in U.S. dollars at the exchange rates in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in income for the period. 

 

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

  

Earnings (Loss) Per Share. Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options, shares to be purchased by employees under the Company’s employee stock purchase plan.

 

Subsequent Events. The Company has evaluated events and transactions after the reported period up to October 23, 2023, the date on which these consolidated financial statements were available to be issued. All subsequent events requiring recognition as of March 31, 2023 have been included in these consolidated financial statements.

 

Recent Accounting Pronouncements

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, Debt with Conversion and Other Options and ASC 815, Contracts in Equity’s Own Entity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We adopted ASU 2020-06 as of March 31, 2023 and the adoption does not have significant impact on our consolidated financial statements and related disclosures as of and for the three months period ended March 31, 2023.

 

Financial Instruments

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. We are currently evaluating the impact of adopting ASU 2016-13 on our unaudited condensed consolidated financial statements. 

 

Simplifying the Accounting for Income Taxes

 

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, Income Taxes. This guidance removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2019-12 does not have a significant impact on our unaudited condensed consolidated financial statements as of and for the three months period ended March 31, 2023.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted. we adopted ASU 2021-04 as of March 31, 2023 and the adoption does not have significant impact on our condensed consolidated financial statements as of and for the three months period ended March 31, 2023.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2023.

 

Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on July 1, 2022, and further referenced below, which we are still in the process of remediating as of March 31, 2023, our disclosure controls and procedures were not effective. 

 

Changes in Internal Control Over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

 

During its evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2023, our management identified the following material weaknesses:

 

  ● We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements. To mitigate the current limited resources and limited employees, we rely heavily on the use of external legal and accounting professionals.

 

In order to cure the foregoing material weakness, we have taken or plan to take the following remediation measures:

 

  ● On November 5, 2018, we added a staff accountant with a CPA and technical accounting expertise to further support our current accounting personnel. As necessary, we will continue to engage consultants or outside accounting firms in order to ensure proper accounting for our consolidated financial statements.

 

We intend to complete the remediation of the material weakness discussed above as soon as practicable, but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weakness that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

45

 

 

PART II
OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

There were no material developments during the quarter ended March 31, 2023 to the legal proceedings previously disclosed in Item 3 “Legal Proceedings” of our Annual Report on Form 10-K filed on July 14, 2023.

 

ITEM 1A. RISK FACTORS.

  

For information regarding additional risk factors, please refer to our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on July 14, 2023.

 

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

 

We have not sold any equity securities during the quarter ended March 31, 2023 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

We have no information to disclose that was required to be in a report on Form 8-K during the quarter ended March 31, 2023 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

 

46

 

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
2.1   Agreement and Plan of Merger, dated September 26, 2013, between Aerkomm Inc. and Maple Tree Kids LLC (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-1 filed on November 5, 2013)
2.2   Form of Share Exchange Agreement, dated February 13, 2017, among Aerkomm Inc., Aircom Pacific, Inc. and the shareholders of Aircom Pacific, Inc. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on February 14, 2017)
3.1   Restated Articles of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on May 4, 2017)
3.2   Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 16, 2019)
3.3   Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on March 30, 2020)
31.1*   Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certifications of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

  * Filed herewith

 

47

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: October 25, 2023 AERKOMM INC.
   
  /s/ Louis Giordimaina
  Name:  Louis Giordimaina
  Title: Chief Executive Officer
  (Principal Executive Officer)
   
  /s/ Louis Giordimaina
  Name: Louis Giordimaina
  Title: Interim Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

48

 

 

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Exhibit 31.1

CERTIFICATIONS

 

I, Louis Giordimaina, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Aerkomm Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 25, 2023

 

/s/ Louis Giordimaina

  
Louis Giordimaina  

Chief Executive Officer

(Principal Executive Officer)

  

 

 

Exhibit 31.2

CERTIFICATIONS

 

I, Louis Giordimaina, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Aerkomm Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 25, 2023

 

/s/ Louis Giordimaina

  
Louis Giordimaina  

Interim Chief Financial Officer

(Principal Financial and Accounting Officer)

  

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Louis Giordimaina, the Chief Executive Officer of AERKOMM INC. (the “Company”), DOES HEREBY CERTIFY that:

 

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this statement this 25th day of October 2023.

 

 

/s/ Louis Giordimaina

  Louis Giordimaina
 

Chief Executive Officer

(Principal Executive Officer)

 

A signed original of this written statement required by Section 906 has been provided to Aerkomm Inc. and will be retained by Aerkomm Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Louis Giordimaina, the Interim Chief Financial Officer of AERKOMM INC. (the “Company”), DOES HEREBY CERTIFY that:

 

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this statement this 25th day of October 2023.

 

 

/s/ Louis Giordimaina

  Louis Giordimaina
 

Interim Chief Financial Officer

(Principal Financial and Accounting Officer)

 

A signed original of this written statement required by Section 906 has been provided to Aerkomm Inc. and will be retained by Aerkomm Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

v3.23.3
Document And Entity Information - shares
 3 Months Ended
Mar. 31, 2023
Oct. 23, 2023
Document Information Line Items    
Entity Registrant Name AERKOMM INC.  
Trading Symbol N/A  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   9,869,165
Amendment Flag false  
Entity Central Index Key 0001590496  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Document Period End Date Mar. 31, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q1  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 000-55925  
Entity Incorporation, State or Country Code NV  
Entity Tax Identification Number 46-3424568  
Entity Address, Address Line One 44043 Fremont Blvd.  
Entity Address, City or Town Fremont  
Entity Address, Country CA  
Entity Address, Postal Zip Code 94538  
City Area Code (877)  
Local Phone Number 742-3094  
Title of 12(b) Security None  
Security Exchange Name NONE  
Entity Interactive Data Current Yes  
v3.23.3
Unaudited Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Current Assets    
Cash $ 2,299,190 $ 6,878,362
Short-term investment 2,018,209 2,009,238
Inventories, net 1,366,282 1,366,282
Prepaid expenses 7,849,154 6,030,516
Other current assets 530,420 460,893
Total Current Assets 14,063,255 16,745,291
Long-term Investment 4,281,496 4,572,243
Property and Equipment    
Cost 4,037,497 4,011,883
Accumulated depreciation (2,669,196) (2,486,836)
Total Property and Equipment 1,368,301 1,525,047
Prepayment for land 36,041,647 35,748,435
Prepayment for equipment 326,359 458,998
Net Property and Equipment 37,736,307 37,732,480
Other Assets    
Prepaid expenses – non-current 2,245,937 1,995,937
Restricted cash 3,224,357 3,223,558
Intangible asset, net 1,278,750 1,402,500
Goodwill 4,561,037 4,561,037
Right-of-use assets, net 60,606 92,451
Deposits 321,251 315,015
Total Other Assets 11,691,938 11,590,498
Total Assets 67,772,996 70,640,512
Current Liabilities    
Short-term loans 2,074,692 1,316,253
Accounts payable 1,597,236 1,950,939
Accrued expenses and other current liabilities 9,272,433 9,049,693
Long-term loan - current 11,642 11,271
Lease liability – current 92,367 131,181
Total Current Liabilities 13,048,370 12,459,337
Long-term Liabilities    
Long-term bonds payable 9,262,141 9,137,006
Convertible long-term note payable 23,173,200 23,173,200
Long-term loan – non-current 2,051 5,027
Contract liability – non-current 762,000 762,000
Lease liability – non-current 21,755 35,172
Restricted stock deposit liability 1,000 1,000
Total Long-Term Liabilities 33,222,147 33,113,405
Total Liabilities 46,270,517 45,572,742
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022
Common stock, $0.001 par value, 90,000,000 shares authorized, 9,720,003 shares (excluding 149,162 unvested restricted shares) issued and outstanding as of March 31, 2023 and December 31, 2022 9,720 9,720
Additional paid in capital 79,132,896 79,078,005
Accumulated deficits (57,400,417) (53,645,981)
Accumulated other comprehensive loss (239,720) (373,974)
Total Stockholders’ Equity 21,502,479 25,067,770
Total Liabilities and Stockholders’ Equity $ 67,772,996 $ 70,640,512
v3.23.3
Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Mar. 31, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Preferred stock, par value (in Dollars per share) $ 0.001 $ 0.001
Preferred stock, authorized 50,000,000 50,000,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Common stock, par value (in Dollars per share) $ 0.001 $ 0.001
Common stock, authorized 90,000,000 90,000,000
Common stock, issued 9,720,003 9,720,003
Common stock, outstanding 9,720,003 9,720,003
Unvested restricted shares 149,162 149,162
v3.23.3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Total Revenue $ 454,281 $ 2,953
Cost of sales 447,781
Gross Profit 6,500 2,953
Operating expenses 3,643,426 1,780,438
Loss from Operations (3,636,926) (1,777,485)
Non-operating loss    
Foreign currency exchange gain (loss) 179,589 (578,654)
Unrealized investment loss (7,829) (5,256)
Bond issuance cost (125,134) (118,364)
Other gain (loss), net (164,136) 2,146
Net Non-Operating Loss (117,510) (700,128)
Loss Before Income Taxes (3,754,436) (2,477,613)
Income Tax Expense 1,600
Net Loss (3,754,436) (2,479,213)
Other Comprehensive Income    
Change in foreign currency translation adjustments 134,254 518,027
Total Comprehensive Loss $ (3,620,182) $ (1,961,186)
Net Loss Per Common Share:    
Basic (in Dollars per share) $ (0.3804) $ (0.2513)
Diluted (in Dollars per share) $ (0.3804) $ (0.2513)
Weighted Average Shares Outstanding - Basic (in Shares) 9,869,165 9,865,051
Weighted Average Shares Outstanding - Diluted (in Shares) 9,869,165 9,865,051
Net sales    
Total Revenue $ 454,281
Service income – related party    
Total Revenue $ 2,953
v3.23.3
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity - USD ($)
Common Stock
Additional Paid in Capital
Accumulated Deficits
Accumulated Other Comprehensive Income (Loss)
Total
Balance at Dec. 31, 2021 $ 9,716 $ 77,825,976 $ (41,767,258) $ (1,896,158) $ 34,172,276
Balance (in Shares) at Dec. 31, 2021 9,715,889        
Stock compensation expense 246,999 246,999
Other comprehensive income 518,027 518,027
Net loss for the period (2,479,213) (2,479,213)
Balance at Mar. 31, 2022 $ 9,716 78,072,975 (44,246,471) (1,378,131) 32,458,089
Balance (in Shares) at Mar. 31, 2022 9,715,889        
Balance at Dec. 31, 2022 $ 9,720 79,078,005 (53,645,981) (373,974) 25,067,770
Balance (in Shares) at Dec. 31, 2022 9,720,003        
Stock compensation expense 54,891 54,891
Other comprehensive income 134,254 134,254
Net loss for the period (3,754,436) (3,754,436)
Balance at Mar. 31, 2023 $ 9,720 $ 79,132,896 $ (57,400,417) $ (239,720) $ 21,502,479
Balance (in Shares) at Mar. 31, 2023 9,720,003        
v3.23.3
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Cash Flows from Operating Activities    
Net loss $ (3,754,436) $ (2,479,213)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 316,272 268,939
Stock-based compensation 54,891 246,999
Unrealized investment loss 7,829 5,256
Amortization of bonds issuance costs 125,135 118,364
Changes in operating assets and liabilities:    
Accounts receivable 136,800
Inventories
Prepaid expenses and other current assets (2,138,165) (121,913)
Deposits (6,236) (45,548)
Accounts payable (353,703)  
Accrued expenses and other current liabilities 655,362 1,225,046
Operating lease liability (17,880) (34,281)
Net Cash Used for Operating Activities (5,110,931) (679,551)
Cash Flows from Investing Activities    
Proceeds from disposal of short-term investment 7,823
Proceeds from disposal of long-term investment 325,578
Purchase of property and equipment (335,825) (1,165)
Net Cash (Used) Provided by Investing Activities (10,247) 6,658
Cash Flows from Financing Activities    
Proceeds from short-term loan 758,439 161,298
Repayment of long-term loan (2,605) (3,549)
Payment on finance lease liability (2,924) (3,164)
Net Cash Provided by Financing Activities 752,910 154,585
Net Decrease in Cash and Restricted Cash (4,368,268) (518,308)
Cash and Restricted Cash, Beginning of Period 10,101,920 3,288,813
Foreign Currency Translation Effect on Cash (210,105) 518,027
Cash and Restricted Cash, End of Period 5,523,547 3,288,532
Supplemental disclosures of cash flow information:    
Cash paid during the period for interest 7,522
Cash and Restricted Cash:    
Cash 2,299,190 39,989
Restricted cash 3,224,357 3,248,543
Total $ 5,523,547 $ 3,288,532
v3.23.3
Organization
 3 Months Ended
Mar. 31, 2023
Organization [Abstract]  
Organization

NOTE 1 - Organization

 

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

 

On December 28, 2016, Aircom Pacific Inc. (“Aircom”) purchased approximately 86.3% of Aerkomm’s issued and outstanding common stock as of the closing date of purchase. As a result of the transaction, Aircom became the controlling shareholder of Aerkomm. Aircom was incorporated on September 29, 2014 under the laws of the State of California.

 

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

 

On December 31, 2014, Aircom acquired a newly incorporated subsidiary, Aircom Pacific Ltd. (“Aircom Seychelles”), a corporation formed under the laws of the Republic of Seychelles. On November 8, 2021, Aircom Seychelles changed its name to Aerkomm SY Ltd. (“Aerkomm SY”) and the ownership was transferred from Aircom to Aerkomm. Aerkomm SY was formed to facilitate Aircom’s global corporate structure for both business operations and tax planning. Presently, Aerkomm SY has no operations. Aerkomm is working with corporate and tax advisers in finalizing its global corporate structure and has not yet concluded its final plan.

 

On October 17, 2016, Aircom acquired a wholly owned subsidiary, Aircom Pacific Inc. Limited (“Aircom HK”), a corporation formed under the laws of Hong Kong. On November 8, 2021, Aircom HK changed its name to Aerkomm Hong Kong Limited (“Aerkomm HK”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm HK is to conduct Aircom’s business and operations in Hong Kong. Presently, its primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in Hong Kong. Aerkomm HK is also actively seeking strategic partnerships whom Aerkomm may leverage in order to provide more and better services to its customers. Aerkomm also plans to provide local supports to Hong Kong-based airlines via Aerkomm HK and teleports located in Hong Kong.

 

On December 15, 2016, Aircom acquired a wholly owned subsidiary, Aircom Japan, Inc. (“Aircom Japan”), a corporation formed under the laws of Japan. On November 9, 2021, Aircom Japan changed its name to Aerkomm Japan, Inc. (“Aerkomm Japan”) and its ownership was transferred from Aircom to Aerkomm. The purpose of Aerkomm. The purpose of Aerkomm Japan is to conduct business development and operations located within Japan. Aerkomm Japan is in the process of applying for, and will be the holder of, Satellite Communication Blanket License in Japan, which is necessary for Aerkomm to provide services within Japan. Aerkomm Japan will also provide local supports to airlines operating within the territory of Japan.

 

Aircom Telecom LLC (“Aircom Taiwan”), which became a wholly owned subsidiary of Aircom in December 2017, was organized under the laws of Taiwan on June 29, 2016. Aircom Taiwan is responsible for Aircom’s business development efforts and general operations within Taiwan.

 

On June 13, 2018, Aerkomm established a then wholly owned subsidiary, Aerkomm Taiwan Inc. (“Aerkomm Taiwan”), a corporation formed under the laws of Taiwan. The purpose of Aerkomm Taiwan is to purchase a parcel of land and raise sufficient fund for ground station building and operate the ground station for data processing (although that cannot be guaranteed). On December 29, 2022, Aerkomm and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract pursuant to the terms of which Aerkomm sold a majority interest of 25,500,000 shares (the “Shares”) of Aerkomm Taiwan to the Buyer for NT$255,000,000 (approximately US $8,300,000 as of December 31, 2022).

 

On November 15, 2018, Aircom Taiwan acquired a wholly owned subsidiary, Beijing Yatai Communication Co., Ltd. (“Beijing Yatai”), a corporation formed under the laws of China. The purpose of Beijing Yatai is to conduct Aircom’s business and operations in China. Presently, its primary function is business development, both with respect to airlines as well as content providers and advertisement partners based in China as most business conducted in China requires a local registered company. Beijing Yatai is also actively seeking strategic partnerships whom Aircom may leverage in order to provide more and better services to its customers. Aircom also plans to provide local supports to China-based airlines via Beijing Yatai and teleports located in China. On November 6, 2020, 100% ownership of Beijing Yatai was transferred from Aircom Taiwan to Aerkomm Taiwan.

 

On October 31, 2019, Aerkomm SY established a new a wholly owned subsidiary, Aerkomm Pacific Limited (“Aerkomm Malta”), a corporation formed under the laws of Malta. The purpose of Aerkomm Malta is to conduct Aerkomm’s business and operations and to engage with suppliers and potential airlines customers in the European Union.

 

The Company’s organization structure is as following:

 

 

On September 04, 2022, Aerkomm acquired a wholly owned subsidiary, MEPA Labs Inc. (MEPA), a California corporation. The purpose of the acquisition is to extend business development and operations related to the satellite products.

 

Aerkomm and its subsidiaries (the “Company”) are full-service, development stage providers of in-flight entertainment and connectivity solutions with their initial market in the Asian Pacific region.

 

The Company has not generated significant revenues, excluding non-recurring revenues, and will incur additional expenses as a result of being a public reporting company. Currently, the Company has taken measures that management believes will improve its financial position by financing activities, including through public offerings, private placements, short-term borrowings and equity contributions. Two of the Company’s current shareholders (the “Lenders”) each committed to provide to the Company a $10 million bridge loan (together, the “Loans”) for an aggregate principal amount of $20 million, to bridge the Company’s cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) the Company purchased in Taiwan. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon the Company’s request prior to the time that title to the Land is vested in the Company’s subsidiary, Aerkomm Taiwan, to pay the outstanding payable to the Company’s vendors. On April 25, 2022, the Lenders further amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100% and the full $20 million is available to the Company.

 

With the $20 million in Loans committed by the Lenders and our holdings of marketable securities in Ejectt, the Company believes its working capital will be adequate to sustain its operations for the next sixteen months. However, there is no assurance that management will be successful in furthering the Company’s business plan, especially if the Company is not able to raise additional funding from the above sources or from other sources. There are a number of additional factors that could potentially arise that could result in shortfalls in the Company’s business plan, such as general worldwide economic conditions, competitive pricing in the connectivity industry, the continuing impact of the COVID 19 pandemic, the Company’s operating results continuing to deteriorate and the Company’s banks and shareholders not being able to provide continued financial support.

 

The Company’s common stock is quoted for trading on the OTC Markets Group Inc. OTCQX Market under the symbol “AKOM.” On July 17, 2019, the French Autorité des Marchés Financiers (the “AMF”) granted visa number 19-372 on the prospectus relating to the admission of the Company’s common stock to list and trade on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”). The Company’s common stock began trading on Euronext Paris on July 23, 2019 under the symbol “AKOM” and is denominated in Euros on Euronext Paris. This listing did not alter the Company’s share count, capital structure, or current common stock listing on the OTCQX, the Company’s primary trading market for its common stock.
v3.23.3
Summary of Significant Accounting Policies
 3 Months Ended
Mar. 31, 2023
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 - Summary of Significant Accounting Policies

 

Unaudited Interim Financial Information

 

The accompanying condensed consolidated balance sheet as of March 31, 2023, and the condensed consolidated statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2023 and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these three months periods are unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period or other future year.

 

Principle of Consolidation

 

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

 

Reclassifications of Prior Year Presentation

 

Certain prior year balance sheet, and cash flow statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash in banks. As of March 31, 2023 and December 31, 2022, the total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the Company was approximately $1,518,000 and $6,153,000, respectively.   The balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance is approximately $3,148,000 and $3,134,000 as of March 31, 2023 and December 31, 2022, respectively.

 

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

 

Investment in Equity Securities

 

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

 

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

 

Accounts receivable

 

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires the Company to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, based on historical experience, current market conditions and supportable forecasts. The Company’s accounts receivable are carried at the amounts invoiced to customer. The risk of credit loss is mitigated by the Company’s credit evaluation process. Receivables are presented as net of an allowance for credit losses. Allowances for expected credit losses are determined based on an assessment of historical experience, the current economic conditions, future expectations of economic conditions, future expectation regarding customer solvency, and other collection factors. The Company will apply adjustments for specific factors and current economic conditions as needed at each reporting date. As of March 31, 2023 and December 31, 2022, the Company had $0 Account Receivable. Therefore, allowances for expected credit losses were $0 as of March 31, 2023 and December 31, 2022.

 

Inventories

 

Inventories are recorded at the lower of weighted-average cost or net realizable value. The Company assesses the impact of changing technology on its inventory on hand and writes off inventories that are considered obsolete. Estimated losses on scrap and slow-moving items are recognized in the write down cost for losses. 

 

Property and Equipment

 

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

 

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

 

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

  

The Company reviews the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It determined that there was no impairment loss for the years ended December 31, 2022 and 2021.

 

Right-of-Use Asset and Lease Liability

 

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

 

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

 

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

 

Goodwill and Purchased Intangible Assets

 

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

 

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

 

Fair Value of Financial Instruments

 

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

 

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

 

Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions.

  

The carrying amounts of the Company’s cash and restricted cash, short-term investment, accounts receivable, inventory, prepaid expenses, other receivable, accounts payable, short-term loan, accrued expenses, and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable, long-term notes payable, long-term loan and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. There were no outstanding derivative financial instruments as of March 31, 2023 and December 31, 2022.

 

Revenue Recognition

 

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The Company’s revenue for the year ended December 31, 2021 composed of the sales of ground antenna units to a related party and sales of network hardware to a non-related party. The majority of the Company’s revenue is recognized at a point in time when product is shipped, or service is provided to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. The Company adopted the provisions of ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. Customers may make payments to the Company either in advance or in arrears. If payment is made in advance, the Company will recognize a contract liability under prepayments from customers until which point the Company has satisfied the requisite performance obligations to recognize revenue.

 

Stock-based Compensation

 

The Company adopted the modified prospective method to measure stock-based compensation expense. Under the modified prospective method, stock-based compensation expense recognized during the period is based on the portion of the share-based payment awards granted after the effective date and ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s statement of income is based on the vesting terms and the estimated fair value of the award at grant date. As stock-based compensation expense recognized in the statement of income is based on awards ultimately expected to vest, it is reduced for estimated forfeiture. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

The Company uses the Black-Scholes option pricing model in its determination of fair value of share-based payment awards on the date of grant. Such option pricing model is affected by assumptions based on a number of highly complex and subjective variables.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Adjustments to prior period’s income tax liabilities are added to or deducted from the current period’s tax provision.

 

The Company follows FASB guidance on uncertain tax positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax authorities for years before 2018. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

 

The Company’s policy for recording interest and penalties associated with any uncertain tax positions is to record such items as a component of income before taxes. Penalties and interest paid or received, if any, are recorded as part of other operating expenses in the consolidated statement of operations.

 

Foreign Currency Transactions

 

Foreign currency transactions are recorded in U.S. dollars at the exchange rates in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in income for the period. 

 

Translation Adjustments

 

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

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options, shares to be purchased by employees under the Company’s employee stock purchase plan. The Company had 2,011,867 and 1,849,868 common stock equivalents, primarily stock options and warrants, for the year ended March 31, 2023 and 2022, respectively. For the fiscal years ended March 31, 2023 and 2022, the assumed exercise of the Company’s common stock equivalents were not included in the calculation as the effect would be anti-dilutive.
v3.23.3
Recent Accounting Pronouncements
 3 Months Ended
Mar. 31, 2023
Recent Accounting Pronouncements [Abstract]  
Recent Accounting Pronouncements

NOTE 3 - Recent Accounting Pronouncements

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, Debt with Conversion and Other Options and ASC 815, Contracts in Equity’s Own Entity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2020-06 does not have a significant impact on the Company’s consolidated financial statements as of and for the year ended March 31, 2023.

 

Financial Instruments

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. In March 2022, the FASB issued ASU 2022-02 and eliminate the Troubled Debt Restructuring recognition and measurement guidance. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. The adoption of ASU 2021-04 does not have a significant impact on the Company’s consolidated financial statements as of and for the year ended March 31, 2023.
v3.23.3
Short-Term Investment
 3 Months Ended
Mar. 31, 2023
Short-Term Investment [Abstract]  
Short-term Investment

NOTE 4 - Short-term Investment

 

On September 9, 2019, the Company entered into a liquidity agreement with a security company (“the Liquidity Provider”) in France, which is consistent with customary practice in the French securities market. The liquidity agreement complies with applicable laws and regulations in France and authorizes the Liquidity Provider to carry out market purchases and sales of shares of the Company’s common stock on the Euronext Paris market. To enable the Liquidity Provider to carry out the interventions provided for in the contract, the Company contributed approximately $225,500 (200,000 euros) into the account. The transaction was initiated in the beginning of 2020, and the Company pays annual compensation of 20,000 euros to the Liquidity Provider in advance by semi-annual installments at the beginning of each semi-annual period under the agreement. The liquidity agreement had an initial term of one year and is being renewed automatically unless otherwise terminated by either party. As of March 31, 2023, the Company had purchased 5,361 shares of its common stock with the fair value of $12,759. The securities were recorded as short-term investment with an accumulated unrealized loss of $7,829. In January 2022, the Liquidity Provider terminated the agreement and the Company is determining whether to continue a similar program.

 

On December 3, 2020, the Company entered into three separate stock purchase agreements (or “Stock Purchase Agreement”) from three individuals to purchase an aggregate of 6,000,000 restricted shares of one of the Company’s related parties, YuanJiu Inc. (“YuanJiu”) in a total amount of NT$141,175,000 (approximately US$5,027,600 as of December 31, 2020). YuanJiu is a listed company in Taiwan Stock Exchange and the stock title transfer is subject to certain restrictions. Albert Hsu, a member of the Company’s board of directors, is the Chairman of YuanJiu. On July 19, 2021, YuanJiu Inc. changed its name to “EJECTT INC” (“Ejectt”). On March 24, 2021, the Company purchased additional 2,000 shares of Ejectt’s common stock for a total amount of $1,392 from a related party.

 

As of December 31, 2021, 5,000,000 shares of Ejectt’s common stock were restricted and booked under long-term investment. (See Note 8) As of March 31, 2023 and December 31, 2022, this investment totaled approximately a 8% ownership of Ejectt.

 

On September 30, 2022, the Company entered into a stock purchase agreement (or “Stock Purchase Agreement”) to purchase common stock of Shinbao in a total amount of NT$35,000,000 (approximately $1,148,294 as of March 31, 2023 and $1,138,952 as of December 31, 2022). Shinbao is a privately-held company in Taiwan. As of October 23, 2023, the stock title transfer is still under process.

 

As of March 31, 2023 and December 31, 2022, the fair value of the investment was as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – short-term  $632,108   $626,966 
Investment cost - Liquidity   20,589    70,817 
Total Investment Cost   652,697    697,783 
Appreciation in market value (Allowance for value decline)   217,218    172,503 
Prepaid investment   1,148,294    1,138,952 
Total  $2,018,209   $2,009,238 
v3.23.3
Inventories
 3 Months Ended
Mar. 31, 2023
Inventories [Abstract]  
Inventories

NOTE 5 - Inventories

 

As of March 31, 2023 and December 31, 2022, inventories consisted of the following:

  

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite equipment for sale under construction  $1,366,282   $1,366,282 
v3.23.3
Prepaid Expenses
 3 Months Ended
Mar. 31, 2023
Prepaid Expenses [Abstract]  
Prepaid Expenses

NOTE 6 - Prepaid Expenses

 

As of March 31, 2023 and December 31, 2022, prepaid expenses consisted of the following:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Prepaid engineering expense  $9,645,839   $7,536,409 
Prepaid professional expense   119,753    79,954 
Others   329,499    410,090 
Total  $10,095,091   $8,026,453 
Prepaid expense - current   7,849,154    6,030,516 
Prepaid expense – non-current   2,245,937    1,995,937 
v3.23.3
Property and Equipment, Net
 3 Months Ended
Mar. 31, 2023
Property and Equipment, Net [Abstract]  
Property and Equipment, Net

NOTE 7 - Property and Equipment

 

As of March 31, 2023 and December 31, 2022, the balances of property and equipment were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Ground station equipment  $1,854,027   $1,854,027 
Computer software and equipment   1,441,759    1,419,697 
Satellite equipment   275,410    275,410 
Vehicle   343,934    342,646 
Leasehold improvement   83,721    83,721 
Furniture and fixture   38,646    36,382 
    4,037,497    4,011,883 
Accumulated depreciation   (2,669,196)   (2,486,836)
Net   1,368,301    1,525,047 
Prepayments - land   36,041,647    35,748,435 
Prepaid equipment   326,359    458,998 
Total  $37,736,307   $37,732,480 

 

On July 10, 2018, the Company and Aerkomm Taiwan entered into a real estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with respect to the acquisition by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite ground station and data center. Pursuant to the terms of the Land Purchase Contract, and subsequent amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3, 2019, the Company paid to the seller in installments refundable prepayments of NT$1,098,549,407 (approximately $36,041,647 as of March 31, 2023 and $35,748,435 as of December 31, 2022) in total. The estimated commission payable for the land purchase in the amount of NT$42,251,900 (approximately $1,386,217 as of March 31, 2023 and 1,374,940 as of December 31, 2022) was recorded to the cost of land. And the company is under the discussion of extending the commission payable to December 31,2023. According to the amended Land Purchase Contract dated on November 10, 2020, the transaction may be terminated at any time by both the buyer and the seller and agreed by all parties if the Company is unable to obtain the qualified satellite license issued by Taiwan authority before July 31, 2021. As of October 23, 2023, the qualified license applications are still in progress.

 

Depreciation expense was $181,652 and $145,189 for the three months periods ended March 31, 2023 and 2022, respectively.
v3.23.3
Long-Term Investment
 3 Months Ended
Mar. 31, 2023
Long-Term Investment [Abstract]  
Long-term Investment

NOTE 8 - Long-term Investment

  

As of March 31, 2023 and December 31, 2022, 5,000,000 shares of Ejectt’s common stock were restricted.

 

Also on September 29, 2022, the Company entered into a stock purchase agreement (or “Stock Purchase Agreement”) to purchase 2,670,000 shares of common stock of AnaNaviTek Corp. (AnaNaviTek) in a total amount of NT$40,050,000 (approximately $1,303,287 as of December 31, 2022). AnaNaviTek is a privately-held company in Taiwan. As of November 21, 2022, the Company has paid NT$10,005,000 (approximately $325,578 as of December 31, 2022) for 667,000 shares of AnaNaviTek stock and the stock title transfer for these shares has been completed.

 

In Q1 2023, the Company disposed AnaNaviTek for amount of $325,578.

 

As of March 31, 2023 and December 31, 2022, the fair value of the long-term investment was as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – long-term  $4,281,496   $4,246,665 
Investment cost – AnaNaviTek   
-
    325,578 
Net  $4,281,496   $4,572,243 
v3.23.3
Intangible Asset, Net
 3 Months Ended
Mar. 31, 2023
Intangible Assets Disclosure [Abstract]  
Intangible Asset, Net

NOTE 9 - Intangible Asset, Net

 

As of March 31, 2023 and December 31, 2022, the cost and accumulated amortization for intangible asset were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite system software  $4,950,000   $4,950,000 
Accumulated amortization   (3,671,250)   (3,547,500)
Net  $1,278,750   $1,402,500 

 

Amortization expense was $123,750 for each of the three months periods ended March 31, 2023 and 2022.
v3.23.3
Goodwill
 3 Months Ended
Mar. 31, 2023
Goodwill [Abstract]  
Goodwill

Note 10 - Goodwill

 

The Company obtained the goodwill from various merge and acquisition events described in Note 1. On September 4, 2022, the Company acquired 100% of the ownership of MEPA Labs Inc. (MEPA) with total consideration of $100,000. The fair value of MEPA at acquisition date was $-2,985,703. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was $3,085,703, which is recorded as goodwill.  

 

As of March 31, 2023 and December 31, 2022, the goodwill were as follows:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Gross amount  $4,561,037   $4,561,037 
Accumulated Impairment   
-
    
-
 
Net  $4,561,037   $4,561,037 

 

No impairment loss on goodwill were recognized for three-month period ended March 31, 2023 and the year ended December 31, 2022.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Goodwill as a result of the acquisition of MEPA is calculated as follows;

 

Total purchase considerations  $100,000 
Fair Value of tangible assets acquired:     
Cash   482,247 
Loan receivable   500,000 
Prepaid expenses and other current assets   252,792 
Property and equipment   218,042 
Deposits   5,400 
Total identifiable assets acquired   1,458,481 
      
Fair value of liabilities assumed:     
Accounts payable   11,075 
Loan from stockholder   (4,324,000)
Other payable   (131,259)
Total liabilities assumed   (4,444,184)
Net identifiable liabilities assumed   (2,985,703)
Goodwill as a result of the acquisition  $3,085,703 
v3.23.3
Operating and Finance Leases
 3 Months Ended
Mar. 31, 2023
Operating and Finance Leases [Abstract]  
Operating and Finance Leases

NOTE 11 - Operating and Finance Leases

 

  A. Lease term and discount rate:

 

The weighted-average remaining lease term and discount rate related to the leases were as follows:

  

   2023   2022 
Weighted-average remaining lease term  (Unaudited)     
Operating lease   1.25 Year    1.50 Years 
Finance lease   1.60 Years    1.85 Years 
Weighted-average discount rate          
Operating lease   6.00%   6.00%
Finance lease   3.82%   3.82%

 

  B. The balances for the operating and finance leases are presented as follows within the unaudited condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022:

 

Operating Leases

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Right-of-use assets  $60,606   $92,451 
Lease liability – current  $81,316   $120,323 
Lease liability – non-current  $11,830   $22,547 

 

Finance Leases

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Property and equipment, at cost  $56,770   $56,770 
Accumulated depreciation   (39,718)   (36,925)
Property and equipment, net  $17,052   $19,845 
           
Lease liability - current  $11,052   $10,858 
Lease liability – non-current   9,925    12,624 
Total finance lease liabilities  $20,977   $23,482 

 

The components of lease expense are as follows within the unaudited condensed consolidated statements of operations and comprehensive loss for the three months periods ended March 31, 2023 and 2022:

 

Operating Leases

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Lease expense  $33,184   $51,083 
Sublease rental income   (24,580)   (17,036)
Net lease expense  $8,604   $34,047 

 

Finance Leases

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Amortization of right-of-use asset  $2,794   $3,031 
Interest on lease liabilities   218    347 
Total finance lease cost  $3,012   $3,378 

 

Supplemental cash flow information related to leases for the three months periods ended March 31, 2023 and 2022 is as follows:

 

   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash outflows from operating leases  $9,531   $34,682 
Operating cash outflows from finance lease  $2,706   $2,825 
Financing cash outflows from finance lease  $218   $347 
Leased assets obtained in exchange for lease liabilities:          
Operating leases  $345,204   $
-
 

 

Maturity of lease liabilities:

 

Operating Leases

 

   Others   Total 
   (Unaudited)   (Unaudited) 
April 1, 2023 – March 31, 2024  $58,240   $58,240 
April 1, 2024 – March 31, 2025   11,960    11,960 
Total lease payments  $70,200   $70,200 
Less: Imputed interest   (2,305)   (2,305)
Present value of lease liabilities  $67,895   $67,895 
Current portion   (56,065)   (56,065)
Non-current portion  $11,830   $11,830 

 

Finance Leases

 

   Total 
   (Unaudited) 
April 1, 2023 – March 31, 2024  $11,661 
April 1, 2024 – March 31, 2025   10,083 
Total lease payments  $21,744 
Less: Imputed interest   (767)
Present value of lease liabilities  $20,977 
Current portion   (11,052)
Non-current portion  $9,925 
v3.23.3
Short-Term Loan
 3 Months Ended
Mar. 31, 2023
Short-Term Loan [Abstract]  
Short-term Loan

NOTE 12 - Short-term Loan

 

In June 2021, the Company entered into a loan agreement in the amount of $1,433,177 as of June 30, 2021 (NT $40,000,000) with a non-related party. This loan, which carries no interest, would originally mature on July 16, 2021. This loan is collateralized with 3,000,000 shares of Ejectt stocks that the Company currently owns. As of March 31, 2023, the outstanding loan balance was $984,252 (NTD 30,000,000). As of October 23, 2023, the amendment agreement to extend the loan repayment is still under progress.
v3.23.3
Long-Term Loan
 3 Months Ended
Mar. 31, 2023
Long-Term Loan [Abstract]  
Long-term Loan

NOTE 13 - Long-term Loan

 

The Company has a car loan credit line of NT$1,500,000 (approximately US$49,213 as of March 31, 2023 and US$48,812 as of December 31, 2022), which matures on May 21, 2024, from a Taiwan financing company with annual interest rate of 9.7%. The installment payment plan is 60 months to pay off the balance on the 21st of each month. Future installment payments as of March 31, 2023 and December 31, 2022 are as follows:

 

Twelve months ending March 31,  (Unaudited) 
2024   12,461 
2025   2,077 
Total installment payments   14,538 
Less: Imputed interest   (845)
Present value of long-term loan   13,693 
Current portion   (11,642)
Non-current portion  $2,051 

 

Year ending December 31,    
2023  $12,359 
2024   5,150 
Total installment payments   17,509 
Less: Imputed interest   (1,211)
Present value of long-term loan   16,298 
Current portion   (11,271)
Non-current portion  $5,027 
v3.23.3
Convertible Long-term Bonds Payable and Restricted Cash
 3 Months Ended
Mar. 31, 2023
Convertible Long-term Bonds Payable and Restricted Cash [Abstract]  
Convertible Long-term Bonds Payable and Restricted Cash

NOTE 14 - Convertible Long-term Bonds Payable and Restricted Cash

 

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

 

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

 

Unless previously redeemed, converted or repurchased and cancelled, the Bonds may be converted at any time on or after December 3, 2020 up to November 20, 2025 into shares of Common Stock of the Company with a par value of $0.001 each. The initial conversion price for the Bonds is $13.30 per share and is subject to adjustment in specified circumstances.

 

Holders of the Bonds may also require the Company to repurchase all or part of the Bonds on the third anniversary of the Issue Date, at the Early Redemption Amount. Unless the Bonds have been previously redeemed, converted or repurchased and cancelled, Holders of the Bonds will also have the right to require the Company to repurchase the Bonds for cash at the Early Redemption Amount if an event of delisting or a change of control occurs.

 

Pursuant to the agreements of Bonds, Bank of Panhsin Co., Ltd. (the “BG Bank”) committed to issue a bank guarantee for the benefit of the holders of the Bonds. The Bank Guarantee is intended to provide a source of funds for the principal, premium, interest (if any) and any other payment obligations of the Company which shall include the default interest under the Bonds upon the Company’s failure to pay amounts pursuant to the Indenture or upon the Bonds being declared due and payable on the occurrence of an Event of Default pursuant to this Indenture. In order to obtain the guarantee from BG Bank, the Company entered into a line of credit in the amount of $10,700,000 with BG Bank on December 1, 2020. The line of credit will be expired on December 2, 2025. The annual fee is based on 1% of the line of credit amount and due quarterly. The line of credit is guaranteed by one of the Company’s shareholders with his personal property, and the Company’s time deposit of $3,210,000 (the “Deposit”) at BG Bank is pledged as collateral as of December 31, 2022 and 2021, and the Deposit was recorded as restricted cash.

 

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

 

As of March 31, 2023 and December 31, 2022, the long-term bonds payable consisted of the following:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Credit Enhanced Zero Coupon Convertible Bonds  $10,000,000   $10,000,000 
Coupon Bonds   200,000    200,000 
    10,200,000    10,200,000 
Unamortized loan fee   (937,859)   (1,062,994)
Net  $9,262,141   $9,137,006 

 

Bond issuance cost was $ 125,134 and $118,364 for the three months ended March 31, 2023 and 2022, respectively.
v3.23.3
Convertible Long-Term Notes Payable and Restricted Cash
 3 Months Ended
Mar. 31, 2023
Convertible Long-term notes Payable and Restricted Cash [Abstract]  
Convertible Long-term notes Payable and Restricted Cash

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

 

On December 7, 2022, Aerkomm Inc. (the “Company”) entered into an investment conversion and note purchase agreement (the “Agreement”) with World Praise Limited, a Samoa registered company (“WPL”). Pursuant to the terms of this agreement, (i) a subscription for the common stock of the Company in the amount of $3,175,200 which was entered into between WPL and the Company on June 28, 2022 and funded (the “June Subscription”), (ii) a subscription for the common stock of the Company in the amount of $5,674,000 which was entered into between WPL and the Company on September 15, 2022 and funded (the “September Subscription”), and (iii) a subscription for the capital stock of MEPA Labs, Inc. (“MEPA”), a wholly owned subsidiary of the Company, in the amount of $4,324,000 which was entered into between MEPA and the Company on June 28, 2022 and funded (the “MEPA Subscription,” and together with the June Subscription and the September Subscription, the “WPL Subscriptions”), the WPL Subscriptions in the aggregate totaling $13,173,200, were converted into loans to the Company evidenced by that certain convertible bond of the Company in favor of WPL and dated December 7, 2022 (the “Convertible Bond”)

 

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

 

The Convertible Note allows for loans to the Company up to an aggregate principal amount of $30,000,000 and acknowledges an aggregate principal amount of $23,173,200 in loans under the Convertible Bond outstanding as of December 31, 2022. The Convertible Note carries an annual interest rate of four percent (4%) which is due and payable, along with the then principal amount outstanding, on the Convertible Note maturity date, December 7, 2024. The Convertible Note is pre-payable in whole or in part at any time without penalty, on five days’ prior written notice to WPL. In the event of a change of control of the Company (as that term is defined in the Convertible Note), the Convertible Note shall become immediately payable in full. The Convertible Note along with accrued interest $48K as of December 31, 2022, is convertible in whole or in part by WPL at any time into shares of common stock of the Company at a conversion price of $6.00 per share.
v3.23.3
Contract Liability
 3 Months Ended
Mar. 31, 2023
Prepayment From Customer [Abstract]  
Contract Liability

NOTE 16 - Contract Liability

 

On March 9, 2015, the Company entered into a 10-year purchase agreement with Klingon Aerospace, Inc. (“Klingon”), which was formerly named as Luxe Electronic Co., Ltd. In accordance with the terms of this agreement, Klingon agreed to purchase from the Company an initial order of onboard equipment comprising an onboard system for a purchase price of $909,000, with payments to be made in accordance with a specific milestones schedule. As of March 31, 2023 and December 31, 2022, the Company received $762,000 from Klingon in milestone payments towards the equipment purchase price. As of March 31, 2023, the project is still ongoing.
v3.23.3
Income Taxes
 3 Months Ended
Mar. 31, 2023
Income Taxes [Abstract]  
Income Taxes

NOTE 17 - Income Taxes

 

Income tax expense for the three months periods ended March 31, 2023 and 2022 consisted of the following:

 

   Three Months Ended
March 31,		 
   2023   2022 
Current:  (Unaudited)   (Unaudited) 
Federal  $
                 -
   $
-
 
State   
-
    1,600 
Foreign   
-
    
-
 
Total  $
-
   $1,600 

 

The following table presents a reconciliation of the Company’s income tax at statutory tax rate and income tax at effective tax rate for the three months periods ended March 31, 2023 and 2022.

 

   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Tax benefit at statutory rate  $(642,805)  $(594,755)
Net operating loss carryforwards (NOLs)   1,008,874    736,007 
Foreign investment losses   (140,193)   (187,620)
Stock-based compensation expense   11,500    51,900 
Amortization expense   18,900    21,800 
Accrued payroll   31,600    73,900 
Unrealized exchange losses   (273,276)   161,168 
Others   (14,600)   (260,800)
Tax expense at effective tax rate  $
-
   $1,600 

 

Deferred tax assets (liability) as of March 31, 2023 and December 31, 2022 consist approximately of:

 

   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Net operating loss carryforwards (NOLs)  $12,352,000   $10,694,000 
Stock-based compensation expense   3,114,000    3,098,000 
Accrued expenses and unpaid expense payable   494,000    412,000 
Tax credit carryforwards   68,000    68,000 
Unrealized exchange losses (gain)   37,000    311,000 
Excess of tax amortization over book amortization   (357,000)   (344,000)
Others   (108,000)   (97,000)
Gross   15,600,000    14,142,000 
Valuation allowance   (15,600,000)   (14,142,000)
Net  $
-
   $
-
 

 

Management does not believe the deferred tax assets will be utilized in the near future; therefore, a full valuation allowance is provided. The net change in deferred tax assets valuation allowance was an increase of approximately $1,458,000 for the three months ended March 31, 2023.

 

As of March 31, 2023 and December 31, 2022, the Company had federal NOLs of approximately $8,243,000 available to reduce future federal taxable income, expiring in 2037, and additional federal NOLs of approximately $29,744,000 and $28,545,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of March 31, 2023 and December 31, 2022, the Company had State NOLs of approximately $39,857,000 and $37,662,000 respectively, available to reduce future state taxable income, expiring in 2042.

 

As of March 31, 2023 and December 31, 2022, the Company has Japan NOLs of approximately $269,000 and $326,000, respectively, available to reduce future Japan taxable income, expiring in 2031.

 

As of March 31, 2023 and December 31, 2022, the Company has Taiwan NOLs of approximately $4,267,000 and $3,452,000, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

 

As of March 31, 2023 and December 31, 2022, the Company had approximately $37,000 and $37,000 of federal research and development tax credit, available to offset future federal income tax. The credit begins to expire in 2034 if not utilized. As of March 31, 2023 and December 31, 2022, the Company had approximately $39,000 and $39,000 of California state research and development tax credit available to offset future California state income tax. The credit can be carried forward indefinitely.

 

The Company’s ability to utilize its federal and state NOLs to offset future income taxes is subject to restrictions resulting from its prior change in ownership as defined by Internal Revenue Code Section 382. The Company does not expect to incur the limitation on NOLs utilization in future annual usage.
v3.23.3
Capital Stock
 3 Months Ended
Mar. 31, 2023
Capital Stock [Abstract]  
Capital Stock

NOTE 18 - Capital Stock

 

1)Preferred Stock:

 

The Company is authorized to issue 50,000,000 shares of preferred stock, with par value of $0.001. As of March 31, 2023 and December 31, 2022, there were no preferred stock shares outstanding. The Board of Directors has the authority to issue preferred stock in one or more series, and in connection with the creation of any such series, by resolutions providing for the issuance of the shares thereof, to determine dividends, voting rights, conversion rights, redemption privileges and liquidation preferences.

 

2)Common Stock:

 

The Company is authorized to issue 90,000,000 shares of common stock as of March 31, 2023 and December 31, 2022.

 

   March 31, 2023   December 31,
2022		 
   (Unaudited)     
Restricted stock - vested   1,802,373    1,802,373 
Restricted stock - unvested   149,162    149,162 
Total restricted stock   1,951,535    1,951,535 

 

The unvested shares of restricted stock were recorded under a deposit liability account awaiting future conversion to common stock when they become vested.

 

On June 16, 2022, the Company issued 4,114 shares of common stock to Bevilaqua PLLC for the legal services rendered.

 

  3) Stock Warrant:

 

On October 31, 2021, following approval by the Board of Directors, the Company issued a warrant to Mr. Sheng-Chun Chang for the purchase of up to 751,879 shares of the Company’s common stock, exercisable at a price of $2.60 per share, the closing price of the common stock on the OTC Markets, Inc. QX tier on October 21, 2021. The issuance of the warrant is (i) in recognition of Mr. Chang’s support of the Company through his previous personal guarantee of the Company’s $10,000,000 line of credit with the Panhsin Bank (the “Bank”) in relation to the private placement offering of $10,000,000 credit enhanced zero coupon convertible bonds and (ii) in exchange for Mr. Chang’s agreement to renew his guarantee with the Bank for so long as the guarantee would be required by the Bank. The warrant will vest 20% on issuance. On each anniversary of the issue date, beginning with December 3, 2021 and ending with December 3, 2025, the warrant will vest with respect to 20% of the number of shares of the Company’s common stock issuable upon conversion of the principal amount of the credit enhanced bonds still required to be guaranteed by the Panhsin Bank.

 

For the years ended December 31, 2022, the Company recorded an increase of $1,252,029 in additional paid-in capital as adjustment for the issuance costs of these stock warrants.
v3.23.3
Significant Related Party Transactions
 3 Months Ended
Mar. 31, 2023
Significant Related Party Transactions [Abstract]  
Significant Related Party Transactions

NOTE 19 - Significant Related Party Transactions

 

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

 

A.Name of related parties and relationships with the Company:

 

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

  

B.Significant related party transactions:

 

The Company has extensive transactions with its related parties. It is possible that the terms of these transactions are not the same as those which would result from transactions among wholly unrelated parties.

  

  a. As of March 31, 2023 and December 31, 2022:

 

   March 31,
2023		   December 31,
2022		 
  

(Unaudited)

     
Other receivable from:        
EESquare JP 1  $51,224   $11,380 
StarJec2   280,075    282,073 
Others6   16,226    15,092 
Total  $347,525   $308,545 
           
Rent deposit to Ejectt3   1,378    1,367 
           
 Loan from WTL 4  $1,088,812   $337,357 
           
Prepayment from Ejectt 3  $1,610,868   $1,258,786 
           
Other payable to:          
AATWIN 5  $35,047   $35,047 
Interest payable to WTL4   59,293    58,810 
Others 6   204,084    246,610 
Total  $298,423   $340,467 

 

1. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1. This amount represents outstanding balance receivable from EESquare JP as of March 31, 2023.
   
2. Aircom Japan entered into a housing service order on December 14, 2021 and a satellite service order on January 22, 2022 for one year period till January 21, 2023. On June 20, 2022, Aircom Japan also entered a teleport service order with StarJec for a half year period from June 1, 2022 to January 14, 2023. The amount represents receivable from StarJec for monthly service provided due to the service agreements. The monthly service charges is approximately ￥6,820,000 (approximately $51,800).
   
3. Represents inventory prepayment paid by Ejectt to provide design and installation service in cabin with Aerkomm. Aircom Telecom also entered into 2 sales agreements with Ejectt for 6 sets of antennas. 
   
4. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2023, the Company borrowed approximately $1,088,812 (approximately NTD 33,187,000) from WTL under the loans and interest payable balance of $59,293 (approximately NTD 1,807,000).
   
5. Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and was expired on December 31, 2021.
   
6. Represents receivable/payable from/to employees as a result of regular operating activities.

 

  b. For the three months periods ended March 31, 2023 and 2022:

 

   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Purchase from Ejectt1  $454,281   $
-
 
Revenue from Star Jec 2   
-
    2,953 
Interest expense charged by WTL 3   
-
    2,428 
Rental income from EESqaure JP 4   (2,266)   (2,578)

 

1. Represents 2 sets of antennas sold to Ejectt on January 30, 2023.

 

2. On December 14, 2021, Aerkomm Japan and Star Jet, a Taiwan limited liability company, signed a Housing Service Order. Further on January 22, 2022, Aerkomm Japan and Star Jet signed a Satellite Service Order. Under the two orders, Aerkomm Japan agreed to provide satellite services and housing services to Star Jec.
   
3. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2022, the Company had interest expense accrued $2,428 (approximately NTD 68,000) from WTL under the loans.
   
4. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2021 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1.
v3.23.3
Stock Based Compensation
 3 Months Ended
Mar. 31, 2023
Stock Based Compensation [Abstract]  
Stock Based Compensation

NOTE 20 - Stock Based Compensation

 

In March 2014, Aircom’s Board of Directors adopted the 2014 Stock Option Plan (the “Aircom 2014 Plan”). The Aircom 2014 Plan provided for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of Aircom. On February 13, 2017, pursuant to the Exchange Agreement, Aerkomm assumed the options of Aircom 2014 Plan and agreed to issue options for an aggregate of 1,088,882 shares to Aircom’s stock option holders.

 

One-third of stock option shares will be vested as of the first anniversary of the time the option shares are granted or the employee’s acceptance to serve the Company, and 1/36th of the shares will be vested each month thereafter. Option price is determined by the Board of Directors. The Aircom 2014 Plan became effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms of Aircom 2014 Plan.

 

On May 5, 2017, the Board of Directors of Aerkomm adopted the Aerkomm Inc. 2017 Equity Incentive Plan (the “Aerkomm 2017 Plan” and together with the Aircom 2014 Plan, the “Plans”) and the reservation of 1,000,000 shares of common stock for issuance under the Aerkomm 2017 Plan. The Aerkomm 2017 Plan has been adopted by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms. On June 23, 2017, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,000,000 shares. The Aerkomm 2017 Plan provides for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of the Company, as determined by the Compensation Committee of the Board of Directors (or, prior to the establishment of the Compensation Committee on January 23, 2018, the Board of Directors). The Aerkomm 2017 Plan was approved by the Company’s stockholders on March 28, 2018. On October 21, 2021, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,400,000 shares.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Valuation and Expense Information

 

Measurement and recognition of compensation expense based on estimated fair values is required for all share-based payment awards made to its employees and directors including employee stock options. The Company recognized compensation expense of $54,891 and $246,999 for the three months periods ended March 31, 2023 and 2022, respectively, related to such employee stock options.

 

Determining Fair Value

 

Valuation and amortization method

 

The Company uses the Black-Scholes option-pricing-model to estimate the fair value of stock options granted on the date of grant or modification and amortizes the fair value of stock-based compensation at the date of grant on a straight-line basis for recognizing stock compensation expense over the vesting period of the option.

 

Expected term

 

The expected term is the period of time that granted options are expected to be outstanding. The Company uses the SEC’s simplified method for determining the option expected term based on the Company’s historical data to estimate employee termination and options exercised.

 

Expected dividends

 

The Company does not plan to pay cash dividends before the options are expired. Therefore, the expected dividend yield used in the Black-Scholes option valuation model is zero.

 

Expected volatility

 

Since the Company has no historical volatility, it used the calculated value method which substitutes the historical volatility of a public company in the same industry to estimate the expected volatility of the Company’s share price to measure the fair value of options granted under the Plans.

 

Risk-free interest rate

 

The Company based the risk-free interest rate used in the Black-Scholes option valuation model on the market yield in effect at the time of option grant provided in the Federal Reserve Board’s Statistical Releases and historical publications on the Treasury constant maturities rates for the equivalent remaining terms for the Plans.

 

Forfeitures

 

The Company is required to estimate forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

 

The Company used the following assumptions to estimate the fair value of options granted in three months period ended March 31, 2023 and year ended December 31, 2022 under the Plans as follows:

 

Assumptions      
Expected term     5-10 years  
Expected volatility     45.79% - 72.81 %
Expected dividends     0 %
Risk-free interest rate     0.69% - 2.99 %
Forfeiture rate     0% - 5 %

 

Aircom 2014 Plan

 

Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:

 

   Number of Shares   Weighted Average Exercise Price Per Share   Weighted Average Fair Value Per Share 
Options outstanding at January 1, 2022   111,871   $3.3521   $1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at December 31, 2022   111,871    3.3521    1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   111,871    3.3521    1.0539 

 

 

There are no unvested stock awards under Aircom 2014 Plan for the three months period ended March 31, 2023 and the year ended December 31, 2022.

  

Of the shares covered by options outstanding as of March 31, 2023, 111,871 are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:

 

    Options Outstanding (Unaudited)   Options Exercisable (Unaudited) 
Range of
Exercise
Prices		   Shares
Outstanding at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		   Shares
Exercisable at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		 
$3.3521    111,871    3.25    3.3521    111,871    3.25    3.3521 

 

As of March 31, 2023, there was no unrecognized stock-based compensation expense for the Aircom 2014 Plan. No option was exercised during the three months periods ended March 31, 2023 and 2022.

 

Aerkomm 2017 Plan

 

Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:

 

   Number of
Shares		   Weighted
Average
Exercise
Price Per
Share		   Weighted
Average
Fair Value
Per Share		 
Options outstanding at January 1, 2022   1,207,897    11.2537    7.5309 
Granted   162,000    8.1566    6.3320 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   (90,209)   11.9003    8.3775 
Options outstanding at December 31, 2022   1,279,688    10.8161    7.3194 
Granted   18,750    3.0000    2.3459 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   1,298,438    10.7032    7.2476 

 

Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months period ended March 31, 2023 and the year ended December 31, 2022 are as follows:

  

   Number of
Shares		   Weighted
Average
Fair Value
Per Share		 
Options unvested at January 1, 2022   40,194    8.9422 
Granted   162,000    6.3320 
Vested   (183,194)   6.7206 
Forfeited/Cancelled   (8,000)   14.4305 
Options unvested at December 31, 2022   11,000    3.5070 
Granted   18,750    2.3459 
Vested   (21,750)   2.5237 
Forfeited/Cancelled   
-
    
-
 
Options unvested at March 31, 2023 (unaudited)   8,000    3.4590 

 

Of the shares covered by options outstanding under the Aerkomm2017 Plan as of March 31, 2023, 1,290,438 are now exercisable; 8,000 shares will be exercisable for the twelve-month period ending March 31, 2024. Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:

 

      Options Outstanding (Unaudited)     Options Exercisable (Unaudited)  
Range of
Exercise
Prices		     Shares
Outstanding at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		     Shares
Exercisable at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		  
$   2.72 – 4.30       524,000       7.40     $ 3.8752       518,000       7.37     $ 3.8767  
  6.00 – 10.00       419,288       8.11       8.3356       417,288       8.10       8.3446  
  11.00 – 14.20       126,150       7.00       11.4688       126,150       7.00       11.4688  
  20.50 – 27.50       109,000       4.53       25.4982       109,000       4.53       25.4982  
  30.00 – 35.00       120,000       4.27       34.5479       120,000       4.27       34.5479  
          1,298,438       7.06       10.7032       1,290,438       7.04       10.7421  

 

As of March 31, 2023, total unrecognized stock-based compensation expense related to stock options was approximately $26,000, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 0.65 year. No option was exercised during the three months period ended March 31, 2023 and the year ended December 31, 2022.
v3.23.3
Commitments
 3 Months Ended
Mar. 31, 2023
Commitments [Abstract]  
Commitments

NOTE 21 - Commitments

 

As of March 31, 2023, the Company’s significant commitment is summarized as follows: 

 

    Airbus SAS Agreement: On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, the Company entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus will develop and certify a complete retrofit solution allowing the installation of the Company’s “AERKOMM K++” system on Airbus’ single aisle aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. Airbus will also apply for and obtain on the Company’s behalf a Supplemental Type Certificate (STC) from the European Aviation Safety Agency, 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, or BASA, went into effect on September 3, 2020, giving a boost to the regions’ aviation manufacturers by simplifying the process of gaining product approvals from the European Union Aviation Safety Agency, or EASA, and the Civil Aviation Administration of China, or CAAC, while also ensuring high safety and environment standards will continue to be met. Pursuant to the terms of our Airbus agreement, Airbus agreed to provides the Company 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 2024, although there is no guarantee that the project will be successfully completed in the projected timeframe.
     
    Airbus Interior Service Agreement: On July 24, 2020, 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. 
     
    Hong Kong Airlines Agreement: On January 30, 2020, Aircom signed an agreement with Hong Kong Airlines Ltd. (HKA) to provide to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ IFEC solutions. Under the terms of this new agreement, Aircom will provide HKA its Ka-band AERKOMM K++ IFEC system and its AERKOMM AirCinema system. HKA will become the first commercial airliner launch customer for Aircom.
     
    Vietjet Air: On October 25, 2021, the Company 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, the Company 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.
     
    Republic Engineers Complaint: On October 15, 2018, Aircom Telecom entered into a product purchase agreement, or the October 15th PPA, with Republic Engineers Maldives Pte. Ltd., a company affiliated with Republic Engineers Pte. Ltd., or Republic Engineers, a Singapore based, private construction and contracting company. On November 30, 2018, the October 15th PPA was re-executed with Republic Engineers Pte. Ltd. as the signing party. The Company refers to this new agreement as the November 30th PPA and, together with the October 15th PPA, the PPA. Under the terms of the PPA, Republic Engineers committed to the purchase of a minimum of 10 shipsets of the AERKOMM K++ system at an aggregate purchase price of $10 million. Additionally, under the terms of the PPA, the Executive Director of Republic Engineers, C. A. Raja, agreed to sign an agreement, or the Guarantee, to guarantee all of the obligations of Republic Engineers under the PPA. Republic Engineers had submitted a purchase order, or PO, dated October 15, 2018 for the 10 shipsets and was supposed to have made payments to Aircom Telecom against the purchase order shortly thereafter. Republic Engineers made no payments against the purchase order and the Company did not begin any work on the ordered shipsets. On July 7, 2020, Republic Engineers and Mr. Raja filed a complaint against Aerkomm, Aircom and Aircom Telecom (the “Aircom Parties”) in the Superior Court of the State of California for the County of Almeda, or the Court, seeking declaratory relief only and no money damages, alleging that the PPA and the PO were not executed or authorized by Republic Engineers and that the Guarantee was not executed or authorized by Mr. Raja. Republic Engineers and C. A. Raja requested from the Court (i) orders that the PPA, the PO and the Guarantee be declared null and void and (ii) the payment of their reasonable attorney’s fees. On July 29, 2020, Aircom Telecom provided notice to Republic Engineers that the PPA and the PO was terminated according to their terms as a result of the non-performance of Republic Engineers and the Failure of Mr. Raja to provide the Guarantee. The Aircom Parties filed a motion for judgment on the pleadings in August 2021, asking the Court to find the Complaint for Declaratory Relief to be moot, because the contracts that are the subject of the Complaint have been terminated. On September 22, 2021, the Court granted that motion, and dismissed the complaint. At the request of Republic Engineers, the Court granted Republic Engineers leave to amend its complaint to attempt to allege a viable claim. On May 10, 2022, Republic Engineers and Aircom Parties entered into a settlement and mutual release agreement, which included, among other things, a denial of wrongdoing by both parties, a requirement that Republic Engineering file a motion with the Court to dismiss its lawsuit against the Aircom Parties and a mutual release by each party of any and all claims against the other party relating to this dispute. On May 17, 2022, Republic Engineers filed with the Court a motion to dismiss with prejudice, its lawsuit against the Aircom Parties and on that same day the Court officially dismissed the lawsuit.

 

    Shenzhen Yihe: On June 20, 2018, the Company entered into that certain Cooperation Framework Agreement, as supplemented on July 19, 2019, with Shenzhen Yihe Culture Media Co., Ltd., or Yihe, the authorized agent of Guangdong Tengnan Internet, or Tencent Group, pursuant to which Yihe agreed to assist the Company with public relations, advertising, market and brand promotion, as well as with the development of a working application of the Tencent Group WeChat Pay payment solution and WeChat applets applicable for Chinese users and relating to cell phone and WiFi connectivity on airplanes. As compensation under this Yihe agreement, the Company paid Yihe RMB 8 million (approximately US$1.2 million). On October 16, 2020, in accordance with the provisions of the agreement with Yihe, as supplemented, the Company filed an arbitration action with the Shenzhen International Arbitration Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking a complete refund of its RMB 8 million payment to Yihe. The Company received notice from the Arbitration Court on October 16, 2020 of receipt of its arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration. These fees were paid on October 28, 2020. The Company intends to aggressively pursue this matter. As of September 30, 2021, the prepayment was reclassified to other receivable and full allowance was reserved. On March 25, 2022, the Shenzhen International Arbitration Court issued a judgment in our favor. The Court deemed the Company’s agreement with Yihe terminated as of November 24, 2020, the date of the Company’s filing with the Court, and held that Yihe is required to promptly repay us RMB 7.5 million and reimburse the Company RMB 178,125 in court costs. The Company will make every effort to collect these amounts from Yihe.
     
   

US 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 the Company’s 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. The Company successfully appealed this USPTO action and the USPTO issued to the Company 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.

 

Equity Contract: On December 29, 2022, Aerkomm Inc. (the “Company” or the “Seller”) and dMobile System Co., Ltd. (the “Buyer”) entered into an equity sales contract (the “Equity Sales Contract”). Pursuant to the terms of the Equity Sales Contract, (i) the Company will sell 25,500,000 shares (the “Shares”) of Aerkomm Taiwan Inc., the Company’s wholly-owned subsidiary (the “Aerkomm Taiwan”), to dMobile System Co., Ltd. (the “Buyer”) for NT$255,000,000 (approximately US $8,300,000 as of December 31, 2022), and (ii) the Buyer is required to pay the full amount to the Seller within 180 days of signing the Equity Sales Contract. If the Buyer fails to make the payment, the Seller has the right to claim the compensation from the Buyer due to the Buyer’s breach of the Equity Sales Contract. Furthermore, Mr. Albert Hsu who is designated by the seller as the pledgee of the Shares in the Equity Sales Contract will execute all the rights of the pledgee under the instruction from the Seller. The parties agree to be bound by the laws of the Republic of China and agree that the Taipei District Court in Taiwan is the court of jurisdiction for initial trial.

 

The Buyer, dMobile System Co., Ltd., is owned by Sheng-Chun Chang, a more than 10% equity owner of the Company.

 

The purpose of this transaction was to have Aerkomm Taiwan become a qualified company to apply for a telecommunication license in Taiwan.
v3.23.3
Subsequent Events
 3 Months Ended
Mar. 31, 2023
Subsequent Events [Abstract]  
Subsequent Events

NOTE 22 - Subsequent Events

 

The Company has evaluated subsequent events through the filing of this Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements. 
v3.23.3
Accounting Policies, by Policy (Policies)
 3 Months Ended
Mar. 31, 2023
Summary of Significant Accounting Policies [Abstract]  
Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2023, and the condensed consolidated statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2023 and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these three months periods are unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period or other future year.
Principle of Consolidation

Principle of Consolidation

Aerkomm consolidates the accounts of its subsidiaries, MEPA, Aircom, Aircom Seychelles, Aircom HK, Aircom Japan, Aircom Taiwan, Aerkomm Taiwan, Beijing Yatai and Aerkomm Malta. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications of Prior Year Presentation

Reclassifications of Prior Year Presentation

Certain prior year balance sheet, and cash flow statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.
Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash in banks. As of March 31, 2023 and December 31, 2022, the total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the Company was approximately $1,518,000 and $6,153,000, respectively.   The balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance is approximately $3,148,000 and $3,134,000 as of March 31, 2023 and December 31, 2022, respectively.

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

 
Investment in Equity Securities

Investment in Equity Securities

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

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

Accounts receivable

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires the Company to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, based on historical experience, current market conditions and supportable forecasts. The Company’s accounts receivable are carried at the amounts invoiced to customer. The risk of credit loss is mitigated by the Company’s credit evaluation process. Receivables are presented as net of an allowance for credit losses. Allowances for expected credit losses are determined based on an assessment of historical experience, the current economic conditions, future expectations of economic conditions, future expectation regarding customer solvency, and other collection factors. The Company will apply adjustments for specific factors and current economic conditions as needed at each reporting date. As of March 31, 2023 and December 31, 2022, the Company had $0 Account Receivable. Therefore, allowances for expected credit losses were $0 as of March 31, 2023 and December 31, 2022
Inventories

Inventories

Inventories are recorded at the lower of weighted-average cost or net realizable value. The Company assesses the impact of changing technology on its inventory on hand and writes off inventories that are considered obsolete. Estimated losses on scrap and slow-moving items are recognized in the write down cost for losses. 
Property and Equipment

Property and Equipment

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

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

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

The Company reviews the carrying amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It determined that there was no impairment loss for the years ended December 31, 2022 and 2021.

 
Right-of-Use Asset and Lease Liability

Right-of-Use Asset and Lease Liability

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

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

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

Goodwill and Purchased Intangible Assets

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

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

Fair Value of Financial Instruments

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions.

The carrying amounts of the Company’s cash and restricted cash, short-term investment, accounts receivable, inventory, prepaid expenses, other receivable, accounts payable, short-term loan, accrued expenses, and other payable approximated their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable, long-term notes payable, long-term loan and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and leases, respectively. There were no outstanding derivative financial instruments as of March 31, 2023 and December 31, 2022.

 
Revenue Recognition

Revenue Recognition

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. The Company’s revenue for the year ended December 31, 2021 composed of the sales of ground antenna units to a related party and sales of network hardware to a non-related party. The majority of the Company’s revenue is recognized at a point in time when product is shipped, or service is provided to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. The Company adopted the provisions of ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and the principal versus agent guidance within the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. Customers may make payments to the Company either in advance or in arrears. If payment is made in advance, the Company will recognize a contract liability under prepayments from customers until which point the Company has satisfied the requisite performance obligations to recognize revenue.
Stock-based Compensation

Stock-based Compensation

The Company adopted the modified prospective method to measure stock-based compensation expense. Under the modified prospective method, stock-based compensation expense recognized during the period is based on the portion of the share-based payment awards granted after the effective date and ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s statement of income is based on the vesting terms and the estimated fair value of the award at grant date. As stock-based compensation expense recognized in the statement of income is based on awards ultimately expected to vest, it is reduced for estimated forfeiture. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company uses the Black-Scholes option pricing model in its determination of fair value of share-based payment awards on the date of grant. Such option pricing model is affected by assumptions based on a number of highly complex and subjective variables.
Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Adjustments to prior period’s income tax liabilities are added to or deducted from the current period’s tax provision.

The Company follows FASB guidance on uncertain tax positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax authorities for years before 2018. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

The Company’s policy for recording interest and penalties associated with any uncertain tax positions is to record such items as a component of income before taxes. Penalties and interest paid or received, if any, are recorded as part of other operating expenses in the consolidated statement of operations.
Foreign Currency Transactions

Foreign Currency Transactions

Foreign currency transactions are recorded in U.S. dollars at the exchange rates in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in income for the period. 

 
Translation Adjustments

Translation Adjustments

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

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include stock warrants and outstanding stock options, shares to be purchased by employees under the Company’s employee stock purchase plan. The Company had 2,011,867 and 1,849,868 common stock equivalents, primarily stock options and warrants, for the year ended March 31, 2023 and 2022, respectively. For the fiscal years ended March 31, 2023 and 2022, the assumed exercise of the Company’s common stock equivalents were not included in the calculation as the effect would be anti-dilutive.
v3.23.3
Short-Term Investment (Tables)
 3 Months Ended
Mar. 31, 2023
Short-Term Investment [Abstract]  
Schedule of Fair Value of the Investment As of March 31, 2023 and December 31, 2022, the fair value of the investment was as follows:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – short-term  $632,108   $626,966 
Investment cost - Liquidity   20,589    70,817 
Total Investment Cost   652,697    697,783 
Appreciation in market value (Allowance for value decline)   217,218    172,503 
Prepaid investment   1,148,294    1,138,952 
Total  $2,018,209   $2,009,238 
v3.23.3
Inventories (Tables)
 3 Months Ended
Mar. 31, 2023
Inventories [Abstract]  
Schedule of Inventories As of March 31, 2023 and December 31, 2022, inventories consisted of the following:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite equipment for sale under construction  $1,366,282   $1,366,282 
v3.23.3
Prepaid Expenses (Tables)
 3 Months Ended
Mar. 31, 2023
Prepaid Expenses [Abstract]  
Schedule of Prepaid Expenses As of March 31, 2023 and December 31, 2022, prepaid expenses consisted of the following:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Prepaid engineering expense  $9,645,839   $7,536,409 
Prepaid professional expense   119,753    79,954 
Others   329,499    410,090 
Total  $10,095,091   $8,026,453 
Prepaid expense - current   7,849,154    6,030,516 
Prepaid expense – non-current   2,245,937    1,995,937 
v3.23.3
Property and Equipment, Net (Tables)
 3 Months Ended
Mar. 31, 2023
Property and Equipment, Net [Abstract]  
Schedule of Changes in Cost of Property and Equipment As of March 31, 2023 and December 31, 2022, the balances of property and equipment were as follows:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Ground station equipment  $1,854,027   $1,854,027 
Computer software and equipment   1,441,759    1,419,697 
Satellite equipment   275,410    275,410 
Vehicle   343,934    342,646 
Leasehold improvement   83,721    83,721 
Furniture and fixture   38,646    36,382 
    4,037,497    4,011,883 
Accumulated depreciation   (2,669,196)   (2,486,836)
Net   1,368,301    1,525,047 
Prepayments - land   36,041,647    35,748,435 
Prepaid equipment   326,359    458,998 
Total  $37,736,307   $37,732,480 
v3.23.3
Long-Term Investment (Tables)
 3 Months Ended
Mar. 31, 2023
Long-Term Investment [Abstract]  
Schedule of Fair Value of the Long-Term Investment As of March 31, 2023 and December 31, 2022, the fair value of the long-term investment was as follows:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Investment cost – Ejectt – long-term  $4,281,496   $4,246,665 
Investment cost – AnaNaviTek   
-
    325,578 
Net  $4,281,496   $4,572,243 
v3.23.3
Intangible Asset, Net (Tables)
 3 Months Ended
Mar. 31, 2023
Intangible Asset Net Abstract  
Schedule of Accumulated Amortization for Intangible Asset As of March 31, 2023 and December 31, 2022, the cost and accumulated amortization for intangible asset were as follows:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Satellite system software  $4,950,000   $4,950,000 
Accumulated amortization   (3,671,250)   (3,547,500)
Net  $1,278,750   $1,402,500 
v3.23.3
Goodwill (Tables)
 3 Months Ended
Mar. 31, 2023
Goodwill [Abstract]  
Schedule of Goodwill As of March 31, 2023 and December 31, 2022, the goodwill were as follows:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Gross amount  $4,561,037   $4,561,037 
Accumulated Impairment   
-
    
-
 
Net  $4,561,037   $4,561,037 
Schedule of Fair Values of the Assets Acquired and Liabilities Goodwill as a result of the acquisition of MEPA is calculated as follows;
Total purchase considerations  $100,000 
Fair Value of tangible assets acquired:     
Cash   482,247 
Loan receivable   500,000 
Prepaid expenses and other current assets   252,792 
Property and equipment   218,042 
Deposits   5,400 
Total identifiable assets acquired   1,458,481 
      
Fair value of liabilities assumed:     
Accounts payable   11,075 
Loan from stockholder   (4,324,000)
Other payable   (131,259)
Total liabilities assumed   (4,444,184)
Net identifiable liabilities assumed   (2,985,703)
Goodwill as a result of the acquisition  $3,085,703 
v3.23.3
Operating and Finance Leases (Tables)
 3 Months Ended
Mar. 31, 2023
Operating and Finance Leases Table [Abstract]  
Schedule of Weighted-Average Remaining Lease Term and Discount Rate Related to the Leases The weighted-average remaining lease term and discount rate related to the leases were as follows:
   2023   2022 
Weighted-average remaining lease term  (Unaudited)     
Operating lease   1.25 Year    1.50 Years 
Finance lease   1.60 Years    1.85 Years 
Weighted-average discount rate          
Operating lease   6.00%   6.00%
Finance lease   3.82%   3.82%

 
Schedule of Operating Leases Operating Leases
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Right-of-use assets  $60,606   $92,451 
Lease liability – current  $81,316   $120,323 
Lease liability – non-current  $11,830   $22,547 
Schedule of Finance Leases Finance Leases
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Property and equipment, at cost  $56,770   $56,770 
Accumulated depreciation   (39,718)   (36,925)
Property and equipment, net  $17,052   $19,845 
           
Lease liability - current  $11,052   $10,858 
Lease liability – non-current   9,925    12,624 
Total finance lease liabilities  $20,977   $23,482 
Schedule of Incomes and Expenses Within Operating Leases Operating Leases
   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Lease expense  $33,184   $51,083 
Sublease rental income   (24,580)   (17,036)
Net lease expense  $8,604   $34,047 
Schedule of Incomes and Expenses Within Finance Leases Finance Leases
   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Amortization of right-of-use asset  $2,794   $3,031 
Interest on lease liabilities   218    347 
Total finance lease cost  $3,012   $3,378 

 
Schedule of Supplemental Cash Flow Information Related to Leases Supplemental cash flow information related to leases for the three months periods ended March 31, 2023 and 2022 is as follows:
   March 31,
2023		   March 31,
2022		 
   (Unaudited)   (Unaudited) 
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash outflows from operating leases  $9,531   $34,682 
Operating cash outflows from finance lease  $2,706   $2,825 
Financing cash outflows from finance lease  $218   $347 
Leased assets obtained in exchange for lease liabilities:          
Operating leases  $345,204   $
-
 
Schedule of Maturity of Operating Leases Operating Leases
   Others   Total 
   (Unaudited)   (Unaudited) 
April 1, 2023 – March 31, 2024  $58,240   $58,240 
April 1, 2024 – March 31, 2025   11,960    11,960 
Total lease payments  $70,200   $70,200 
Less: Imputed interest   (2,305)   (2,305)
Present value of lease liabilities  $67,895   $67,895 
Current portion   (56,065)   (56,065)
Non-current portion  $11,830   $11,830 
Schedule of Maturity of Finance Leases Finance Leases
   Total 
   (Unaudited) 
April 1, 2023 – March 31, 2024  $11,661 
April 1, 2024 – March 31, 2025   10,083 
Total lease payments  $21,744 
Less: Imputed interest   (767)
Present value of lease liabilities  $20,977 
Current portion   (11,052)
Non-current portion  $9,925 
v3.23.3
Long-Term Loan (Tables)
 3 Months Ended
Mar. 31, 2023
Long-Term Loan [Abstract]  
Schedule of Future Installment Payments Future installment payments as of March 31, 2023 and December 31, 2022 are as follows:
Twelve months ending March 31,  (Unaudited) 
2024   12,461 
2025   2,077 
Total installment payments   14,538 
Less: Imputed interest   (845)
Present value of long-term loan   13,693 
Current portion   (11,642)
Non-current portion  $2,051 
Year ending December 31,    
2023  $12,359 
2024   5,150 
Total installment payments   17,509 
Less: Imputed interest   (1,211)
Present value of long-term loan   16,298 
Current portion   (11,271)
Non-current portion  $5,027 
v3.23.3
Convertible Long-term Bonds Payable and Restricted Cash (Tables)
 3 Months Ended
Mar. 31, 2023
Convertible Long-term Bonds Payable and Restricted Cash [Abstract]  
Schedule of Long-Term Bonds Payable As of March 31, 2023 and December 31, 2022, the long-term bonds payable consisted of the following:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Credit Enhanced Zero Coupon Convertible Bonds  $10,000,000   $10,000,000 
Coupon Bonds   200,000    200,000 
    10,200,000    10,200,000 
Unamortized loan fee   (937,859)   (1,062,994)
Net  $9,262,141   $9,137,006 
v3.23.3
Income Taxes (Tables)
 3 Months Ended
Mar. 31, 2023
Income Taxes [Abstract]  
Schedule of Income Tax Expense Income tax expense for the three months periods ended March 31, 2023 and 2022 consisted of the following:
   Three Months Ended
March 31,		 
   2023   2022 
Current:  (Unaudited)   (Unaudited) 
Federal  $
                 -
   $
-
 
State   
-
    1,600 
Foreign   
-
    
-
 
Total  $
-
   $1,600 
Schedule of Reconciliation of the Company's Income Tax at Statutory Tax Rate and Income Tax at Effective Tax Rate The following table presents a reconciliation of the Company’s income tax at statutory tax rate and income tax at effective tax rate for the three months periods ended March 31, 2023 and 2022.
   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Tax benefit at statutory rate  $(642,805)  $(594,755)
Net operating loss carryforwards (NOLs)   1,008,874    736,007 
Foreign investment losses   (140,193)   (187,620)
Stock-based compensation expense   11,500    51,900 
Amortization expense   18,900    21,800 
Accrued payroll   31,600    73,900 
Unrealized exchange losses   (273,276)   161,168 
Others   (14,600)   (260,800)
Tax expense at effective tax rate  $
-
   $1,600 

 
Schedule of Deferred Tax Assets (Liability) Deferred tax assets (liability) as of March 31, 2023 and December 31, 2022 consist approximately of:
   March 31,
2023		   December 31,
2022		 
   (Unaudited)     
Net operating loss carryforwards (NOLs)  $12,352,000   $10,694,000 
Stock-based compensation expense   3,114,000    3,098,000 
Accrued expenses and unpaid expense payable   494,000    412,000 
Tax credit carryforwards   68,000    68,000 
Unrealized exchange losses (gain)   37,000    311,000 
Excess of tax amortization over book amortization   (357,000)   (344,000)
Others   (108,000)   (97,000)
Gross   15,600,000    14,142,000 
Valuation allowance   (15,600,000)   (14,142,000)
Net  $
-
   $
-
 
v3.23.3
Capital Stock (Tables)
 3 Months Ended
Mar. 31, 2023
Capital Stock [Abstract]  
Schedule of Restricted Shares of Common Stock The Company is authorized to issue 90,000,000 shares of common stock as of March 31, 2023 and December 31, 2022.
   March 31, 2023   December 31,
2022		 
   (Unaudited)     
Restricted stock - vested   1,802,373    1,802,373 
Restricted stock - unvested   149,162    149,162 
Total restricted stock   1,951,535    1,951,535 
v3.23.3
Significant Related Party Transactions (Tables)
 3 Months Ended
Mar. 31, 2023
Significant Related Party Transactions [Abstract]  
Schedule of Name of Related Parties and Relationships with the Company A.Name of related parties and relationships with the Company:
Related Party   Relationship
Well Thrive Limited (“WTL”)   Major stockholder
Ejectt Inc. (“Ejectt”)   Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
STAR JEC INC. (“StarJec”)   Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
AA Twin Associates Ltd. (“AATWIN”)   Georges Caldironi, COO of Aerkomm, is sole owner
EESquare Japan (“EESquare JP”)   Yih Lieh (Giretsu) Shih, President Aircom Japan, is the Director
Schedule of Significant Related Party Transactions a.As of March 31, 2023 and December 31, 2022:
   March 31,
2023		   December 31,
2022		 
  

(Unaudited)

     
Other receivable from:        
EESquare JP 1  $51,224   $11,380 
StarJec2   280,075    282,073 
Others6   16,226    15,092 
Total  $347,525   $308,545 
           
Rent deposit to Ejectt3   1,378    1,367 
           
 Loan from WTL 4  $1,088,812   $337,357 
           
Prepayment from Ejectt 3  $1,610,868   $1,258,786 
           
Other payable to:          
AATWIN 5  $35,047   $35,047 
Interest payable to WTL4   59,293    58,810 
Others 6   204,084    246,610 
Total  $298,423   $340,467 
1. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1. This amount represents outstanding balance receivable from EESquare JP as of March 31, 2023.
   
2. Aircom Japan entered into a housing service order on December 14, 2021 and a satellite service order on January 22, 2022 for one year period till January 21, 2023. On June 20, 2022, Aircom Japan also entered a teleport service order with StarJec for a half year period from June 1, 2022 to January 14, 2023. The amount represents receivable from StarJec for monthly service provided due to the service agreements. The monthly service charges is approximately ￥6,820,000 (approximately $51,800).
   
3. Represents inventory prepayment paid by Ejectt to provide design and installation service in cabin with Aerkomm. Aircom Telecom also entered into 2 sales agreements with Ejectt for 6 sets of antennas. 
   
4. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2023, the Company borrowed approximately $1,088,812 (approximately NTD 33,187,000) from WTL under the loans and interest payable balance of $59,293 (approximately NTD 1,807,000).
   
5. Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and was expired on December 31, 2021.
   
6. Represents receivable/payable from/to employees as a result of regular operating activities.

 
Schedule of Related Party Transactions b.For the three months periods ended March 31, 2023 and 2022:
   Three Months Ended
March 31,		 
   2023   2022 
   (Unaudited)   (Unaudited) 
Purchase from Ejectt1  $454,281   $
-
 
Revenue from Star Jec 2   
-
    2,953 
Interest expense charged by WTL 3   
-
    2,428 
Rental income from EESqaure JP 4   (2,266)   (2,578)
1. Represents 2 sets of antennas sold to Ejectt on January 30, 2023.
2. On December 14, 2021, Aerkomm Japan and Star Jet, a Taiwan limited liability company, signed a Housing Service Order. Further on January 22, 2022, Aerkomm Japan and Star Jet signed a Satellite Service Order. Under the two orders, Aerkomm Japan agreed to provide satellite services and housing services to Star Jec.
   
3. The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2022, the Company had interest expense accrued $2,428 (approximately NTD 68,000) from WTL under the loans.
   
4. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2021 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1.
v3.23.3
Stock Based Compensation (Tables)
 3 Months Ended
Mar. 31, 2023
Stock Based Compensation [Abstract]  
Schedule of Assumptions to Estimate the Fair Value of Options Granted The Company used the following assumptions to estimate the fair value of options granted in three months period ended March 31, 2023 and year ended December 31, 2022 under the Plans as follows:
Assumptions      
Expected term     5-10 years  
Expected volatility     45.79% - 72.81 %
Expected dividends     0 %
Risk-free interest rate     0.69% - 2.99 %
Forfeiture rate     0% - 5 %

 
Aircom 2014 Plan [Member]  
Stock Based Compensation [Abstract]  
Schedule of Activities Related to Options Outstanding Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:
   Number of Shares   Weighted Average Exercise Price Per Share   Weighted Average Fair Value Per Share 
Options outstanding at January 1, 2022   111,871   $3.3521   $1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at December 31, 2022   111,871    3.3521    1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   111,871    3.3521    1.0539 
Schedule of Stock Options Outstanding and Exercisable Of the shares covered by options outstanding as of March 31, 2023, 111,871 are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:
    Options Outstanding (Unaudited)   Options Exercisable (Unaudited) 
Range of
Exercise
Prices		   Shares
Outstanding at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		   Shares
Exercisable at
3/31/2023		   Weighted
Average
Remaining
Contractual
Life (years)		   Weighted
Average
Exercise
Price		 
$3.3521    111,871    3.25    3.3521    111,871    3.25    3.3521 
Aerkomm 2017 Plan [Member]  
Stock Based Compensation [Abstract]  
Schedule of Activities Related to Options Outstanding Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2023 and the year ended December 31, 2022 are as follows:
   Number of
Shares		   Weighted
Average
Exercise
Price Per
Share		   Weighted
Average
Fair Value
Per Share		 
Options outstanding at January 1, 2022   1,207,897    11.2537    7.5309 
Granted   162,000    8.1566    6.3320 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   (90,209)   11.9003    8.3775 
Options outstanding at December 31, 2022   1,279,688    10.8161    7.3194 
Granted   18,750    3.0000    2.3459 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2023 (unaudited)   1,298,438    10.7032    7.2476 

 
Schedule of Stock Options Outstanding and Exercisable Information related to stock options outstanding and exercisable at March 31, 2023, is as follows:
      Options Outstanding (Unaudited)     Options Exercisable (Unaudited)  
Range of
Exercise
Prices		     Shares
Outstanding at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		     Shares
Exercisable at
3/31/2023		     Weighted
Average
Remaining
Contractual
Life (years)		     Weighted
Average
Exercise
Price		  
$   2.72 – 4.30       524,000       7.40     $ 3.8752       518,000       7.37     $ 3.8767  
  6.00 – 10.00       419,288       8.11       8.3356       417,288       8.10       8.3446  
  11.00 – 14.20       126,150       7.00       11.4688       126,150       7.00       11.4688  
  20.50 – 27.50       109,000       4.53       25.4982       109,000       4.53       25.4982  
  30.00 – 35.00       120,000       4.27       34.5479       120,000       4.27       34.5479  
          1,298,438       7.06       10.7032       1,290,438       7.04       10.7421  
Schedule of Activities Related to Unvested Stock Awards Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months period ended March 31, 2023 and the year ended December 31, 2022 are as follows:
   Number of
Shares		   Weighted
Average
Fair Value
Per Share		 
Options unvested at January 1, 2022   40,194    8.9422 
Granted   162,000    6.3320 
Vested   (183,194)   6.7206 
Forfeited/Cancelled   (8,000)   14.4305 
Options unvested at December 31, 2022   11,000    3.5070 
Granted   18,750    2.3459 
Vested   (21,750)   2.5237 
Forfeited/Cancelled   
-
    
-
 
Options unvested at March 31, 2023 (unaudited)   8,000    3.4590 
v3.23.3
Organization (Details)
 3 Months Ended 12 Months Ended
Dec. 29, 2022
TWD ($)
shares
Apr. 25, 2022
USD ($)
Feb. 13, 2017
Dec. 28, 2016
Mar. 31, 2023
USD ($)
Dec. 31, 2022
USD ($)
Nov. 06, 2020
Organization (Details) [Line Items]              
Percentage of common stock     99.70% 86.30%      
Majority interest of shares (in Shares) | shares 25,500,000            
Taiwan buyer $ 255,000,000         $ 8,300,000  
Bridge loan (in Dollars)         $ 10,000,000    
Aggregate principal amount (in Dollars)         $ 20,000,000    
Principal Loan percentage         25.00%    
Loans committed by the lenders (in Dollars)         $ 20,000,000    
Private Placement [Member]              
Organization (Details) [Line Items]              
Available amount (in Dollars)   $ 20,000,000          
Minimum [Member]              
Organization (Details) [Line Items]              
Commitment percentage   25.00%          
Maximum [Member]              
Organization (Details) [Line Items]              
Commitment percentage   100.00%          
Aerkomm [Member]              
Organization (Details) [Line Items]              
Percentage of common stock     100.00%        
Aircom [Member]              
Organization (Details) [Line Items]              
Percentage of common stock     99.70%        
Aerkomm Taiwan [Member]              
Organization (Details) [Line Items]              
Ownership percentage             100.00%
v3.23.3
Summary of Significant Accounting Policies (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Summary of Significant Accounting Policies (Details) [Line Items]    
Balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) (in Dollars) $ 1,518,000 $ 6,153,000
Account Receivable (in Dollars) 0 0
Allowances for expected credit losses (in Dollars) $ 0 $ 0
Common stock equivalents (in Shares) 2,011,867 1,849,868
Concentrations of Credit Risk [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Balance of cash deposited in foreign financial institutions exceeding the amount insured by local insurance (in Dollars) $ 3,148,000 $ 3,134,000
Ground Station Equipment [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Computer Equipment [Member] | Minimum [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 3 years  
Computer Equipment [Member] | Maximum [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Furniture and Fixtures [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Satellite Equipment [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Vehicles [Member] | Minimum [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Vehicles [Member] | Maximum [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 6 years  
Lease Improvement [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Property and equipment, useful life 5 years  
Goodwill and Purchased Intangible Assets [Member]    
Summary of Significant Accounting Policies (Details) [Line Items]    
Purchased intangible asset 10 years  
v3.23.3
Short-Term Investment (Details)
 3 Months Ended 12 Months Ended
Mar. 24, 2021
USD ($)
shares
Dec. 03, 2020
TWD ($)
shares
Sep. 09, 2019
USD ($)
Mar. 31, 2023
USD ($)
shares
Dec. 31, 2021
shares
Dec. 31, 2022
USD ($)
Sep. 30, 2022
TWD ($)
Dec. 31, 2020
USD ($)
Sep. 09, 2019
EUR (€)
Short-term Investment                  
Contributed amount     $ 225,500           € 200,000
Annual compensation (in Euro) | €                 € 20,000
Fair value amount | $       $ 12,759          
Short-term investment with accumulated unrealized loss | $     $ 7,829            
Restricted common shares (in Shares)   6,000,000              
Total amount of related party | $               $ 5,027,600  
Total amount       $ 1,148,294   $ 1,138,952 $ 35,000,000    
Common Stock [Member]                  
Short-term Investment                  
Purchased of common stock shares (in Shares)       5,361          
Ejectt [Member]                  
Short-term Investment                  
Purchased additional shares (in Shares) 2,000                
Ownership percentage       8.00%   8.00%      
Ejectt [Member] | Common Stock [Member]                  
Short-term Investment                  
Restricted common shares (in Shares)         5,000,000        
Related Party [Member]                  
Short-term Investment                  
Total amount of related party $ 1,392 $ 141,175,000              
v3.23.3
Short-Term Investment (Details) - Schedule of Fair Value of the Investment - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of Fair Value of the Investment [Abstract]    
Investment cost – Ejectt – short-term $ 632,108 $ 626,966
Investment cost - Liquidity 20,589 70,817
Total Investment Cost 652,697 697,783
Appreciation in market value (Allowance for value decline) 217,218 172,503
Prepaid investment 1,148,294 1,138,952
Total $ 2,018,209 $ 2,009,238
v3.23.3
Inventories (Details) - Schedule of Inventories - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Schedule of inventories [Abstract]    
Satellite equipment for sale under construction $ 1,366,282 $ 1,366,282
v3.23.3
Prepaid Expenses (Details) - Schedule of Prepaid Expenses - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of Prepaid Expenses [Abstract]    
Prepaid engineering expense $ 9,645,839 $ 7,536,409
Prepaid professional expense 119,753 79,954
Others 329,499 410,090
Total 10,095,091 8,026,453
Prepaid expense - current 7,849,154 6,030,516
Prepaid expense – non-current $ 2,245,937 $ 1,995,937
v3.23.3
Property and Equipment, Net (Details) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Property and Equipment, Net (Details) [Line Items]    
Depreciation expense $ 181,652 $ 145,189
Land Purchase Contract [Member] | Tsai Ming-Yin [Member]    
Property and Equipment, Net (Details) [Line Items]    
Acquisition, description On July 10, 2018, the Company and Aerkomm Taiwan entered into a real estate sale contract (the “Land Purchase Contract”) with Tsai Ming-Yin (the “Seller”) with respect to the acquisition by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite ground station and data center. Pursuant to the terms of the Land Purchase Contract, and subsequent amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3, 2019, the Company paid to the seller in installments refundable prepayments of NT$1,098,549,407 (approximately $36,041,647 as of March 31, 2023 and $35,748,435 as of December 31, 2022) in total. The estimated commission payable for the land purchase in the amount of NT$42,251,900 (approximately $1,386,217 as of March 31, 2023 and 1,374,940 as of December 31, 2022) was recorded to the cost of land. And the company is under the discussion of extending the commission payable to December 31,2023. According to the amended Land Purchase Contract dated on November 10, 2020, the transaction may be terminated at any time by both the buyer and the seller and agreed by all parties if the Company is unable to obtain the qualified satellite license issued by Taiwan authority before July 31, 2021. As of October 23, 2023, the qualified license applications are still in progress.  
v3.23.3
Property and Equipment, Net (Details) - Schedule of Changes in Cost of Property and Equipment - USD ($)
 3 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost $ 4,037,497 $ 4,011,883
Accumulated depreciation (2,669,196) (2,486,836)
Net 1,368,301 1,525,047
Prepayments - land 36,041,647 35,748,435
Prepaid equipment 326,359 458,998
Total 37,736,307 37,732,480
Ground station equipment [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost 1,854,027 1,854,027
Computer software and equipment [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost 1,441,759 1,419,697
Satellite equipment [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost 275,410 275,410
Vehicle [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost 343,934 342,646
Leasehold improvement [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost 83,721 83,721
Furniture and fixture [Member]    
Schedule of Changes in Cost of Property and Equipment [Abstract]    
Property and equipment cost $ 38,646 $ 36,382
v3.23.3
Long-Term Investment (Details)
 1 Months Ended 2 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2022
USD ($)
Sep. 29, 2022
TWD ($)
shares
Nov. 21, 2022
TWD ($)
Dec. 31, 2022
shares
Mar. 31, 2023
USD ($)
shares
Dec. 31, 2022
USD ($)
shares
Long-Term Investment (Details) [Line Items]            
Share purchase amount   $ 40,050,000       $ 1,303,287
Company paid $ 325,578   $ 10,005,000      
Share purchased       667,000    
Common Stock [Member]            
Long-Term Investment (Details) [Line Items]            
Aggregate restricted shares         5,000,000 5,000,000
Stock Purchase Agreement [Member]            
Long-Term Investment (Details) [Line Items]            
Purchase shares of common stock   2,670,000        
AnaNaviTek [Member]            
Long-Term Investment (Details) [Line Items]            
Disposed AnaNaviTek for amount (in Dollars) | $         $ 325,578  
v3.23.3
Long-Term Investment (Details) - Schedule of Fair Value of the Long-Term Investment - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Schedule of Fair Value of the Long-Term Investment [Abstract]    
Investment cost – Ejectt – long-term $ 4,281,496 $ 4,246,665
Investment cost – AnaNaviTek 325,578
Net $ 4,281,496 $ 4,572,243
v3.23.3
Intangible Asset, Net (Details) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Intangible Assets Disclosure [Abstract]    
Amortization expense $ 123,750 $ 123,750
v3.23.3
Intangible Asset, Net (Details) - Schedule of Accumulated Amortization for Intangible Asset - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Schedule of Accumulated Amortization for Intangible Asset [Abstract]    
Satellite system software $ 4,950,000 $ 4,950,000
Accumulated amortization (3,671,250) (3,547,500)
Net $ 1,278,750 $ 1,402,500
v3.23.3
Goodwill (Details) - USD ($)
 3 Months Ended
Sep. 04, 2022
Mar. 31, 2023
Goodwill (Details) [Line Items]    
Fair value of MEPA at acquisition   $ (2,985,703)
The excess amount recorded as goodwill   $ 3,085,703
Acquisition [Member]    
Goodwill (Details) [Line Items]    
Ownership percentage 100.00%  
MEPA Labs Inc [Member]    
Goodwill (Details) [Line Items]    
Total consideration $ 100,000  
v3.23.3
Goodwill (Details) - Schedule of Goodwill - Goodwill [Member] - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Schedule of Goodwill [Abstract]    
Gross amount $ 4,561,037 $ 4,561,037
Accumulated impairment
Net $ 4,561,037 $ 4,561,037
v3.23.3
Goodwill (Details) - Schedule of Fair Values of the Assets Acquired and Liabilities
Mar. 31, 2023
USD ($)
Schedule of Fair Values of the Assets Acquired and Liabilities [Abstract]  
Total purchase considerations $ 100,000
Fair Value of tangible assets acquired:  
Cash 482,247
Loan receivable 500,000
Prepaid expenses and other current assets 252,792
Property and equipment 218,042
Deposits 5,400
Total identifiable assets acquired 1,458,481
Fair value of liabilities assumed:  
Accounts payable 11,075
Loan from stockholder (4,324,000)
Other payable (131,259)
Total liabilities assumed (4,444,184)
Net identifiable liabilities assumed (2,985,703)
Goodwill as a result of the acquisition $ 3,085,703
v3.23.3
Operating and Finance Leases (Details) - Schedule of Weighted-Average Remaining Lease Term and Discount Rate Related to the Leases
Mar. 31, 2023
Mar. 31, 2022
Schedule of Weighted Average Remaining Lease Term and Discount Rate Related to the Leases [Abstract]    
Operating lease 1 year 3 months 1 year 6 months
Finance lease 1 year 7 months 6 days 1 year 10 months 6 days
Weighted-average discount rate    
Operating lease 6.00% 6.00%
Finance lease 3.82% 3.82%
v3.23.3
Operating and Finance Leases (Details) - Schedule of Operating Leases - Operating Leases [Member] - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Operating and Finance Leases (Details) - Schedule of Operating Leases [Line Items]    
Right-of-use assets $ 60,606 $ 92,451
Lease liability – current 81,316 120,323
Lease liability – non-current $ 11,830 $ 22,547
v3.23.3
Operating and Finance Leases (Details) - Schedule of Finance Leases - Finance Leases [Member] - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Operating and Finance Leases (Details) - Schedule of Finance Leases [Line Items]    
Property and equipment, at cost $ 56,770 $ 56,770
Accumulated depreciation (39,718) (36,925)
Property and equipment, net 17,052 19,845
Lease liability – current 11,052 10,858
Lease liability – non-current 9,925 12,624
Total finance lease liabilities $ 20,977 $ 23,482
v3.23.3
Operating and Finance Leases (Details) - Schedule of Incomes and Expenses Within Operating Leases - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Schedule of Incomes and Expenses within Operating Leases [Abstract]    
Lease expense $ 33,184 $ 51,083
Sublease rental income (24,580) (17,036)
Net lease expense $ 8,604 $ 34,047
v3.23.3
Operating and Finance Leases (Details) - Schedule of Incomes and Expenses Within Finance Leases - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Schedule of Incomes and Expenses within Finance Leases [Abstract]    
Amortization of property and equipment $ 2,794 $ 3,031
Interest on lease liabilities 218 347
Total finance lease cost $ 3,012 $ 3,378
v3.23.3
Operating and Finance Leases (Details) - Schedule of Supplemental Cash Flow Information Related to Leases - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:    
Operating cash outflows from operating leases $ 9,531 $ 34,682
Operating cash outflows from finance lease 2,706 2,825
Financing cash outflows from finance lease 218 347
Leased assets obtained in exchange for lease liabilities:    
Operating leases $ 345,204
v3.23.3
Operating and Finance Leases (Details) - Schedule of Maturity of Operating Leases
 12 Months Ended
Dec. 31, 2008
USD ($)
Others [Member]  
Operating and Finance Leases (Details) - Schedule of Maturity of Operating Leases [Line Items]  
April 1, 2023 – March 31, 2024 $ 58,240
April 1, 2024 – March 31, 2025 11,960
Total lease payments 70,200
Less: Imputed interest (2,305)
Present value of lease liabilities 67,895
Current portion (56,065)
Non-current portion 11,830
Total [Member]  
Operating and Finance Leases (Details) - Schedule of Maturity of Operating Leases [Line Items]  
April 1, 2023 – March 31, 2024 58,240
April 1, 2024 – March 31, 2025 11,960
Total lease payments 70,200
Less: Imputed interest (2,305)
Present value of lease liabilities 67,895
Current portion (56,065)
Non-current portion $ 11,830
v3.23.3
Operating and Finance Leases (Details) - Schedule of Maturity of Finance Leases
$ in Thousands
 3 Months Ended
Mar. 31, 2023
USD ($)
Schedule of Maturity of Finance Leases [Abstract]  
April 1, 2023 – March 31, 2024 $ 11,661
April 1, 2024 – March 31, 2025 10,083
Total lease payments 21,744
Less: Imputed interest (767)
Present value of lease liabilities 20,977
Current portion (11,052)
Non-current portion $ 9,925
v3.23.3
Short-Term Loan (Details) - A non-related party [Member]
 1 Months Ended
Jun. 30, 2021
USD ($)
shares
Jun. 30, 2021
TWD ($)
shares
Mar. 31, 2023
USD ($)
Mar. 31, 2023
TWD ($)
Short-Term Loan (Details) [Line Items]        
Loan agreement amount $ 1,433,177 $ 40,000,000    
Agreed shares 3,000,000 3,000,000    
Outstanding loan     $ 984,252 $ 30,000,000
v3.23.3
Long-Term Loan (Details)
 3 Months Ended
Mar. 31, 2023
USD ($)
Mar. 31, 2023
TWD ($)
Dec. 31, 2022
USD ($)
Long-Term Loan [Abstract]      
Car loan credit line $ 49,213 $ 1,500,000 $ 48,812
Maturity date May 21, 2024    
Annual interest rate 9.70%    
Installment payment, description The installment payment plan is 60 months to pay off the balance on the 21st of each month.    
v3.23.3
Long-Term Loan (Details) - Schedule of Future Installment Payments - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Long-Term Loan (Details) - Schedule of Future Installment Payments [Line Items]    
2024 $ 12,461  
2025 2,077  
Total installment payments 14,538  
Less: Imputed interest (845)  
Present value of long-term loan 13,693  
Current portion (11,642)  
Non-current portion $ 2,051  
Long-Term Debt [Member]    
Long-Term Loan (Details) - Schedule of Future Installment Payments [Line Items]    
2023   $ 12,359
2024   5,150
Total installment payments   17,509
Less: Imputed interest   (1,211)
Present value of long-term loan   16,298
Current portion   (11,271)
Non-current portion   $ 5,027
v3.23.3
Convertible Long-term Bonds Payable and Restricted Cash (Details) - USD ($)
 3 Months Ended
Dec. 03, 2020
Dec. 02, 2020
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Dec. 31, 2021
Dec. 01, 2020
Convertible Long-term Bonds Payable and Restricted Cash [line Item]              
Aggregate principal amount of convertible bond $ 200,000            
Interest of percentage   7.50%          
Redemption of debt description     The Company has the option to redeem the Bonds at a redemption amount equal to the Early Redemption Amount, as defined in the Offering Memorandum, at any time on or after December 2, 2023 and prior to the Maturity Date, if the Closing Price of the Company’s Common Stock listed on the Euronext Paris for 20 trading days in any period of 30 consecutive trading days, the last day of which occurs not more than fifteen trading days prior to the date on which notice of such redemption is given, is greater than 130% of the Conversion Price on each applicable trading day or (ii) in whole or in part of the Bonds on the second anniversary of the issue date or (iii) where 90% or more in principal amount of the Bonds issued have been redeemed, converted or repurchased and cancelled.        
Common stock, per value (in Dollars per share) $ 0.001   $ 0.001   $ 0.001    
Initial conversion price per share (in Dollars per share) $ 13.3            
Bond issuance cost     $ 125,134 $ 118,364      
Private Placement [Member]              
Convertible Long-term Bonds Payable and Restricted Cash [line Item]              
Aggregate principal amount of convertible bond $ 10,000,000            
Coupon Bonds [Member]              
Convertible Long-term Bonds Payable and Restricted Cash [line Item]              
Convertible bonds percentage 7.50%            
Redeemed % of principal amount 100.00%            
Coupon Bonds [Member] | December 2, 2025 [Member]              
Convertible Long-term Bonds Payable and Restricted Cash [line Item]              
Redeemed % of principal amount 105.11%            
BG Bank [Member]              
Convertible Long-term Bonds Payable and Restricted Cash [line Item]              
Line of credit             $ 10,700,000
Line credit will be expired     Dec. 02, 2025        
Line of credit annual fee, due quarterly     1.00%        
Deposit         $ 3,210,000 $ 3,210,000  
v3.23.3
Convertible Long-term Bonds Payable and Restricted Cash (Details) - Schedule of Long-Term Bonds Payable - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Convertible Long-term Bonds Payable and Restricted Cash (Details) - Schedule of Long-Term Bonds Payable [Line Items]    
Aggregate principal amount $ 10,200,000 $ 10,200,000
Unamortized loan fee (937,859) (1,062,994)
Net 9,262,141 9,137,006
Credit Enhanced Zero Coupon Convertible Bonds [Member]    
Convertible Long-term Bonds Payable and Restricted Cash (Details) - Schedule of Long-Term Bonds Payable [Line Items]    
Aggregate principal amount 10,000,000 10,000,000
Coupon Bonds [Member]    
Convertible Long-term Bonds Payable and Restricted Cash (Details) - Schedule of Long-Term Bonds Payable [Line Items]    
Aggregate principal amount $ 200,000 $ 200,000
v3.23.3
Convertible Long-Term Notes Payable and Restricted Cash (Details) - USD ($)
 1 Months Ended 11 Months Ended 12 Months Ended
Sep. 15, 2022
Jun. 28, 2022
Dec. 07, 2022
Dec. 31, 2022
Mar. 31, 2023
Convertible Long-Term Notes Payable and Restricted Cash (Details) [Line Items]          
Common stock amount $ 5,674,000 $ 3,175,200      
Aggregate totaling     $ 13,173,200    
Additional amount         $ 10,000,000
Convertible bond         $ 30,000,000
Interest rate       4.00%  
Conversion price (in Dollars per share)       $ 6  
Convertible Note [Member]          
Convertible Long-Term Notes Payable and Restricted Cash (Details) [Line Items]          
Maximum aggregate allowed principal amount       $ 30,000,000  
Aggregate principal amount       23,173,200  
Accrued interest       $ 48,000  
MEPA [Member]          
Convertible Long-Term Notes Payable and Restricted Cash (Details) [Line Items]          
Common stock amount   $ 4,324,000      
v3.23.3
Contract Liability (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 09, 2015
Mar. 31, 2023
Dec. 31, 2022
Prepayment From Customer [Abstract]      
Purchase agreement terms 10 years    
Purchase price $ 909,000    
Received amount   $ 762,000 $ 762,000
v3.23.3
Income Taxes (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Income Taxes (Details) [Line Items]    
Change in deferred tax assets valuation allowance $ 1,458,000  
Federal Research And Development Tax Credit [Member]    
Income Taxes (Details) [Line Items]    
Research and development tax credit 37,000 $ 37,000
California State Research And Development Tax Credit [Member]    
Income Taxes (Details) [Line Items]    
Research and development tax credit 39,000 39,000
Japan [Member]    
Income Taxes (Details) [Line Items]    
Amount to reduce future taxable income 269,000 326,000
Taiwan [Member]    
Income Taxes (Details) [Line Items]    
Amount to reduce future taxable income 4,267,000 3,452,000
Federal [Member]    
Income Taxes (Details) [Line Items]    
Amount to reduce future taxable income 8,243,000 8,243,000
Additional federal NOLs 29,744,000 28,545,000
State [Member]    
Income Taxes (Details) [Line Items]    
Additional federal NOLs $ 39,857,000 $ 37,662,000
v3.23.3
Income Taxes (Details) - Schedule of Income Tax Expense - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Schedule of Income Tax Expense [Abstract]    
Federal
State 1,600
Foreign
Total $ 1,600
v3.23.3
Income Taxes (Details) - Schedule of Reconciliation of the Company's Income Tax at Statutory Tax Rate and Income Tax at Effective Tax Rate - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Schedule of Reconciliation of the Company's Income Tax at Statutory Tax Rate and Income Tax at Effective Tax Rate [Abstract]    
Tax benefit at statutory rate $ (642,805) $ (594,755)
Net operating loss carryforwards (NOLs) 1,008,874 736,007
Foreign investment losses (140,193) (187,620)
Stock-based compensation expense 11,500 51,900
Amortization expense 18,900 21,800
Accrued payroll 31,600 73,900
Unrealized exchange losses (273,276) 161,168
Others (14,600) (260,800)
Tax expense at effective tax rate $ 1,600
v3.23.3
Income Taxes (Details) - Schedule of Deferred Tax Assets (Liability) - USD ($)
Mar. 31, 2023
Dec. 31, 2022
Schedule of Deferred Tax Assets (Liability) [Abstract]    
Net operating loss carryforwards (NOLs) $ 12,352,000 $ 10,694,000
Stock-based compensation expense 3,114,000 3,098,000
Accrued expenses and unpaid expense payable 494,000 412,000
Tax credit carryforwards 68,000 68,000
Unrealized exchange losses (gain) 37,000 311,000
Excess of tax amortization over book amortization (357,000) (344,000)
Others (108,000) (97,000)
Gross 15,600,000 14,142,000
Valuation allowance (15,600,000) (14,142,000)
Net
v3.23.3
Capital Stock (Details) - USD ($)
 1 Months Ended 3 Months Ended 12 Months Ended
Jun. 16, 2022
Mar. 31, 2023
Dec. 31, 2022
Capital Stock [Line Items]      
Preferred stock, shares authorized   50,000,000 50,000,000
Preferred stock, par value (in Dollars per share)   $ 0.001 $ 0.001
Preferred stock, outstanding   0 0
Common stock, shares authorized   90,000,000 90,000,000
Public Offering [Member]      
Capital Stock [Line Items]      
APIC increase for issuance costs of stock warrants (in Dollars)     $ 1,252,029
Preferred Stock [Member]      
Capital Stock [Line Items]      
Preferred stock, shares authorized   50,000,000  
Preferred stock, par value (in Dollars per share)   $ 0.001  
Preferred stock, outstanding  
Common Stock [Member]      
Capital Stock [Line Items]      
Common stock, shares authorized   90,000,000 90,000,000
Shares of the common stock 4,114    
Mr. Sheng-Chun Chang [Member]      
Capital Stock [Line Items]      
Issuance of warrant description   On October 31, 2021, following approval by the Board of Directors, the Company issued a warrant to Mr. Sheng-Chun Chang for the purchase of up to 751,879 shares of the Company’s common stock, exercisable at a price of $2.60 per share, the closing price of the common stock on the OTC Markets, Inc. QX tier on October 21, 2021. The issuance of the warrant is (i) in recognition of Mr. Chang’s support of the Company through his previous personal guarantee of the Company’s $10,000,000 line of credit with the Panhsin Bank (the “Bank”) in relation to the private placement offering of $10,000,000 credit enhanced zero coupon convertible bonds and (ii) in exchange for Mr. Chang’s agreement to renew his guarantee with the Bank for so long as the guarantee would be required by the Bank. The warrant will vest 20% on issuance. On each anniversary of the issue date, beginning with December 3, 2021 and ending with December 3, 2025, the warrant will vest with respect to 20% of the number of shares of the Company’s common stock issuable upon conversion of the principal amount of the credit enhanced bonds still required to be guaranteed by the Panhsin Bank.  
v3.23.3
Capital Stock (Details) - Schedule of Restricted Shares of Common Stock - shares
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of Restricted Shares of Common Stock [Abstract]    
Restricted stock - vested 1,802,373 1,802,373
Restricted stock - unvested 149,162 149,162
Total restricted stock 1,951,535 1,951,535
v3.23.3
Significant Related Party Transactions (Details)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
USD ($)
Mar. 31, 2023
JPY (¥)
Dec. 31, 2021
USD ($)
Dec. 31, 2021
EUR (€)
Mar. 31, 2023
TWD ($)
Jul. 12, 2022
USD ($)
Jul. 12, 2022
TWD ($)
Significant Related Party Transactions (Details) [Line Items]              
Monthly service charges $ 51,800 ¥ 6,820,000          
Loan amount 1,088,812            
Interest payable amount (in New Dollars)         $ 59,293    
Monthly consulting fees     $ 17,000 € 15,120      
EESQAURE JP [Member]              
Significant Related Party Transactions (Details) [Line Items]              
Rental fee 760            
EESQAURE JP [Member] | Sublease Agreement [Member]              
Significant Related Party Transactions (Details) [Line Items]              
Rental fee $ 760            
WTL [Member]              
Significant Related Party Transactions (Details) [Line Items]              
Loan amount           $ 2,428 $ 68,000
v3.23.3
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company
 3 Months Ended
Mar. 31, 2023
Well Thrive Limited (“WTL”) [Member]  
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company [Line Items]  
Relationship Major stockholder
Ejectt Inc. (“Ejectt”) [Member]  
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company [Line Items]  
Relationship Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
STAR JEC INC. (“StarJec”) [Member]  
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company [Line Items]  
Relationship Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
AA Twin Associates Ltd. (“AATWIN”) [Member]  
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company [Line Items]  
Relationship Georges Caldironi, COO of Aerkomm, is sole owner
EESquare Japan (“EESquare JP”) [Member]  
Significant Related Party Transactions (Details) - Schedule of Name of Related Parties and Relationships with the Company [Line Items]  
Relationship Yih Lieh (Giretsu) Shih, President Aircom Japan, is the Director
v3.23.3
Significant Related Party Transactions (Details) - Schedule of Significant Related Party Transactions - USD ($)
Mar. 31, 2023
Dec. 31, 2022
EESquare JP [Member]    
Related Party Transaction [Line Items]    
Other receivable [1] $ 51,224 $ 11,380
StarJec [Member]    
Related Party Transaction [Line Items]    
Other receivable [2] 280,075 282,073
Others [Member]    
Related Party Transaction [Line Items]    
Other receivable [3] 16,226 15,092
Total[Member]    
Related Party Transaction [Line Items]    
Other receivable 347,525 308,545
Other payable to:    
Other payable 298,423 340,467
Rent deposit to Ejectt [Member]    
Related Party Transaction [Line Items]    
Rent deposit to Ejectt [4] 1,378 1,367
Loan from WTL [Member]    
Related Party Transaction [Line Items]    
Loan from WTL [5] 1,088,812 337,357
Prepayment from Ejectt [Member]    
Related Party Transaction [Line Items]    
Prepayment from Ejectt [4] 1,610,868 1,258,786
AATWIN [Member]    
Other payable to:    
Other payable [6] 35,047 35,047
Interest payable to WTL [Member]    
Other payable to:    
Other payable [5] 59,293 58,810
Others [Member[    
Other payable to:    
Other payable [3] $ 204,084 $ 246,610
[1] Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1. This amount represents outstanding balance receivable from EESquare JP as of March 31, 2023.
[2] Aircom Japan entered into a housing service order on December 14, 2021 and a satellite service order on January 22, 2022 for one year period till January 21, 2023. On June 20, 2022, Aircom Japan also entered a teleport service order with StarJec for a half year period from June 1, 2022 to January 14, 2023. The amount represents receivable from StarJec for monthly service provided due to the service agreements. The monthly service charges is approximately ￥6,820,000 (approximately $51,800).
[3] Represents receivable/payable from/to employees as a result of regular operating activities.
[4] Represents inventory prepayment paid by Ejectt to provide design and installation service in cabin with Aerkomm. Aircom Telecom also entered into 2 sales agreements with Ejectt for 6 sets of antennas.
[5] The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2023, the Company borrowed approximately $1,088,812 (approximately NTD 33,187,000) from WTL under the loans and interest payable balance of $59,293 (approximately NTD 1,807,000).
[6] Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and was expired on December 31, 2021.
v3.23.3
Significant Related Party Transactions (Details) - Schedule of Related Party Transactions - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Schedule of Related Party Transactions [Abstract]    
Purchase from Ejectt [1] $ 454,281
Revenue from Star Jec [2] 2,953
Interest expense charged by WTL [3] 2,428
Rental income from EESqaure JP [4] $ (2,266) $ (2,578)
[1] Represents 2 sets of antennas sold to Ejectt on January 30, 2023.
[2] On December 14, 2021, Aerkomm Japan and Star Jet, a Taiwan limited liability company, signed a Housing Service Order. Further on January 22, 2022, Aerkomm Japan and Star Jet signed a Satellite Service Order. Under the two orders, Aerkomm Japan agreed to provide satellite services and housing services to Star Jec.
[3] The Company has loans from WTL due to operational needs under the Loans (Note 1). As of March 31, 2022, the Company had interest expense accrued $2,428 (approximately NTD 68,000) from WTL under the loans.
[4] Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2021 and March 4, 2023. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $760 per month in 2023 Q1.
v3.23.3
Stock Based Compensation (Details) - USD ($)
 1 Months Ended 3 Months Ended 12 Months Ended
Mar. 01, 2023
Dec. 01, 2022
Sep. 01, 2022
Jun. 01, 2022
Mar. 01, 2022
Dec. 01, 2021
Sep. 01, 2021
Oct. 04, 2020
Oct. 04, 2019
Jul. 02, 2019
May 05, 2017
Dec. 29, 2022
Dec. 31, 2021
Dec. 29, 2021
Oct. 21, 2021
Sep. 17, 2021
Jan. 23, 2021
Sep. 17, 2020
Feb. 19, 2020
Dec. 29, 2019
Dec. 29, 2018
Sep. 17, 2018
Sep. 16, 2018
Jun. 19, 2018
Dec. 29, 2017
Jul. 31, 2017
Jun. 23, 2017
Feb. 13, 2017
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Mar. 31, 2024
Dec. 11, 2020
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares 18,750 18,750 18,750   18,750 18,750           8,000 2,000 8,000               4,000                      
Vest rate percentage               25.00% 25.00%                                   50.00%            
Shares vested rate                                                   50.00%              
Independent directors shares                                 4,000     4,000 4,000       4,000                
Aggregate shares                 85,400                                                
Options issued shares                                                         1,802,373   1,802,373    
Stock options issued to each director                           4,000                                      
Shares issued                       4,000                                          
Stock-based compensation (in Dollars)                                                         $ 54,891 $ 246,999      
Unrecognized stock-based compensation expense (in Dollars)                                                         $ 26,000        
Weighted average period                                                         7 months 24 days        
Maximum [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares       75,000                                                          
Minimum [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares       18,750                                                          
Aerkomm 2017 Plan [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares                                                     291,000            
Board of Directors [Member] | Minimum [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares                                               30,000                  
Forecast [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Exercisable in 2023                                                               8,000  
Aircom 2014 Plan [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares                                                       1,088,882          
Term                                                         10 years        
Options outstanding                                                         111,871        
Aerkomm 2017 Plan [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Description of plan agreements                                                         25% of the shares vested on the grant date, 25% of the shares vested on July 17, 2019, 25% of the shares shall be vested on the first anniversary of the grant date, and 25% of the shares will vest upon the second anniversary of the grant date.        
Options issued shares                                 2,000                                
Options outstanding                                                         1,290,438        
Aerkomm 2017 Plan [Member] | Board of Directors [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares             18,750     339,000         150,000 4,000 12,000 4,000 2,000 12,000 12,000   4,000   12,000 109,000              
Term                     10 years                                            
Shares of common stock reserved for issuance                     1,000,000                               2,000,000            
Common stock reserved for issuance                             2,400,000                                    
Aggregate shares issued                                                                 284,997
Aerkomm 2017 Plan [Member] | Board of Directors [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Description of plan agreements                                                         One-fourth of the 32,000 shares subject to the option shall vest on May 1, 2019, 2020, 2021 and 2022, respectively. One-third of the 30,000 shares subject to the option shall vest on May 29, 2019, 2020 and 2021, respectively.        
Board of Directors [Member] | Aerkomm 2017 Plan [Member] | Maximum [Member]                                                                  
Stock Based Compensation (Details) [Line Items]                                                                  
Stock option aggregate shares                                               32,000                  
v3.23.3
Stock Based Compensation (Details) - Schedule of Assumptions to Estimate the Fair Value of Options Granted
 3 Months Ended
Mar. 31, 2023
Minimum [Member]  
Assumptions  
Expected term 5 years
Expected volatility 45.79%
Expected dividends 0.00%
Risk-free interest rate 0.69%
Forfeiture rate 0.00%
Maximum [Member]  
Assumptions  
Expected term 10 years
Expected volatility 72.81%
Expected dividends 0.00%
Risk-free interest rate 2.99%
Forfeiture rate 5.00%
v3.23.3
Stock Based Compensation (Details) - Schedule of Activities Related to Options Outstanding - Stock Options [Member] - $ / shares
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Stock Based Compensation (Details) - Schedule of Activities Related to Options Outstanding [Line Items]    
Number of Shares, at beginning balance (in Shares) 111,871 111,871
Weighted Average Exercise Price Per Share, at beginning balance $ 3.3521 $ 3.3521
Weighted Average Fair Value Per Share, at beginning balance $ 1.0539 $ 1.0539
Number of Shares, Granted (in Shares)
Weighted Average Exercise Price Per Share, Granted
Weighted Average Fair Value Per Share, Granted
Number of Shares, Exercised (in Shares)
Weighted Average Exercise Price Per Share, Exercised
Weighted Average Fair Value Per Share, Exercised
Number of Shares, Forfeited/Cancelled (in Shares)
Weighted Average Exercise Price Per Share, Forfeited/Cancelled
Weighted Average Fair Value Per Share, Forfeited/Cancelled
Number of Shares, at ending balance (in Shares) 111,871 111,871
Weighted Average Exercise Price Per Share, at ending balance $ 3.3521 $ 3.3521
Weighted Average Fair Value Per Share, at ending balance $ 1.0539 $ 1.0539
v3.23.3
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable - 3.3521 [Member]
shares in Millions
 3 Months Ended
Mar. 31, 2023
$ / shares
shares
Options Outstanding [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Range of Exercise Prices $ 3.3521
Shares Outstanding at 3/31/2023 (in Shares) | shares 111,871
Weighted Average Remaining Contractual Life (years) 3 years 3 months
Weighted Average Exercise Price $ 3.3521
Options Exercisable [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Exercisable at 3/31/2023 (in Shares) | shares 111,871
Weighted Average Remaining Contractual Life (years) 3 years 3 months
Weighted Average Exercise Price $ 3.3521
v3.23.3
Stock Based Compensation (Details) - Schedule of Activities Related to Options Outstanding - $ / shares
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of activities related to options outstanding [Abstract]    
Number of Shares, Options outstanding at Beginning (in Shares) 1,279,688 1,207,897
Weighted Average Exercise Price Per Share, Options outstanding at Beginning $ 10.8161 $ 11.2537
Weighted Average Fair Value Per Share Options outstanding at Beginning $ 7.3194 $ 7.5309
Number of Shares, Granted (in Shares) 18,750 162,000
Weighted Average Exercise Price Per Share, Granted $ 3 $ 8.1566
Weighted Average Fair Value Per Share Granted $ 2.3459 $ 6.332
Number of Shares, Exercised (in Shares)
Weighted Average Exercise Price Per Share, Exercised
Weighted Average Fair Value Per Share Exercised
Number of Shares, Forfeited/Cancelled (in Shares) (90,209)
Weighted Average Exercise Price Per Share, Forfeited/Cancelled $ 11.9003
Weighted Average Fair Value Per Share Forfeited/Cancelled $ 8.3775
Number of Shares, Options outstanding at Ending (in Shares) 1,298,438 1,279,688
Weighted Average Exercise Price Per Share, Options outstanding at Ending $ 10.7032 $ 10.8161
Weighted Average Fair Value Per Share Options outstanding at Ending $ 7.2476 $ 7.3194
v3.23.3
Stock Based Compensation (Details) - Schedule of Activities Related to Unvested Stock Awards - $ / shares
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Schedule of activities related to unvested stock awards [Abstract]    
Number of Shares, Options unvested, Beginning 11,000 40,194
Weighted Average Fair Value Per Share, Beginning $ 3.507 $ 8.9422
Number of Shares, Granted 18,750 162,000
Weighted Average Fair Value Per Share, Granted $ 2.3459 $ 6.332
Number of Shares, Vested (21,750) (183,194)
Weighted Average Fair Value Per Share, Vested $ 2.5237 $ 6.7206
Number of Shares, Forfeited (8,000)
Weighted Average Fair Value Per Share, Forfeited $ 14.4305
Number of Shares, Options unvested, Ending 8,000 11,000
Weighted Average Fair Value Per Share, Ending $ 3.459 $ 3.507
v3.23.3
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable - Equity Option [Member]
 3 Months Ended
Mar. 31, 2023
$ / shares
shares
2.72 – 4.30 [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 524,000
Weighted Average Remaining Contractual Life (years) 7 years 4 months 24 days
Weighted Average Exercise Price | $ / shares $ 3.8752
Shares Exercisable | shares 518,000
Weighted Average Remaining Contractual Life (years) 7 years 4 months 13 days
Weighted Average Exercise Price | $ / shares $ 3.8767
6.00 – 10.00 [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 419,288
Weighted Average Remaining Contractual Life (years) 8 years 1 month 9 days
Weighted Average Exercise Price | $ / shares $ 8.3356
Shares Exercisable | shares 417,288
Weighted Average Remaining Contractual Life (years) 8 years 1 month 6 days
Weighted Average Exercise Price | $ / shares $ 8.3446
11.00 – 14.20 [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 126,150
Weighted Average Remaining Contractual Life (years) 7 years
Weighted Average Exercise Price | $ / shares $ 11.4688
Shares Exercisable | shares 126,150
Weighted Average Remaining Contractual Life (years) 7 years
Weighted Average Exercise Price | $ / shares $ 11.4688
20.50 – 27.50 [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 109,000
Weighted Average Remaining Contractual Life (years) 4 years 6 months 10 days
Weighted Average Exercise Price | $ / shares $ 25.4982
Shares Exercisable | shares 109,000
Weighted Average Remaining Contractual Life (years) 4 years 6 months 10 days
Weighted Average Exercise Price | $ / shares $ 25.4982
30.00 – 35.00 [Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 120,000
Weighted Average Remaining Contractual Life (years) 4 years 3 months 7 days
Weighted Average Exercise Price | $ / shares $ 34.5479
Shares Exercisable | shares 120,000
Weighted Average Remaining Contractual Life (years) 4 years 3 months 7 days
Weighted Average Exercise Price | $ / shares $ 34.5479
Total[Member]  
Stock Based Compensation (Details) - Schedule of Stock Options Outstanding and Exercisable [Line Items]  
Shares Outstanding | shares 1,298,438
Weighted Average Remaining Contractual Life (years) 7 years 21 days
Weighted Average Exercise Price | $ / shares $ 10.7032
Shares Exercisable | shares 1,290,438
Weighted Average Remaining Contractual Life (years) 7 years 14 days
Weighted Average Exercise Price | $ / shares $ 10.7421
v3.23.3
Commitments (Details)
 1 Months Ended 3 Months Ended 12 Months Ended
Dec. 29, 2022
TWD ($)
shares
Mar. 25, 2022
CNY (¥)
Nov. 30, 2018
USD ($)
Jun. 20, 2018
USD ($)
Jun. 20, 2018
CNY (¥)
Mar. 31, 2023
Dec. 31, 2022
USD ($)
Commitments (Details) [Line Items]              
Equity sales contract shares | shares 25,500,000            
Equity purchase $ 255,000,000           $ 8,300,000
Sheng-Chun Chang [Member]              
Commitments (Details) [Line Items]              
Equity owner percentage           10.00%  
Republic Engineers Complaint [Member]              
Commitments (Details) [Line Items]              
Aggregate purchase price | $     $ 10,000,000        
Yihe agreement [Member]              
Commitments (Details) [Line Items]              
Compensation         ¥ 8,000,000    
Yihe Culture Media Agreement [Member]              
Commitments (Details) [Line Items]              
Compensation | $       $ 1,200,000      
Arbitration action, description           On October 16, 2020, in accordance with the provisions of the agreement with Yihe, as supplemented, the Company filed an arbitration action with the Shenzhen International Arbitration Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking a complete refund of its RMB 8 million payment to Yihe. The Company received notice from the Arbitration Court on October 16, 2020 of receipt of its arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration. These fees were paid on October 28, 2020. The Company intends to aggressively pursue this matter.  
Repay amount by Yihe to the company   ¥ 7,500,000          
Reimburse amount for court costs   ¥ 178,125          
Aerkomm (PK) (USOTC:AKOM)
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Aerkomm (PK) (USOTC:AKOM)
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부터 11월(11) 2023 으로 11월(11) 2024 Aerkomm (PK) 차트를 더 보려면 여기를 클릭.