Aerkomm Inc.
05/28/2026 | Press release | Distributed by Public on 05/28/2026 12:36
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the Company's financial condition as of December 31, 2025, and its results of operations for the years ended December 31, 2025 and 2024.
The following discussion and analysis of our financial condition and result of operations should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this annual report. In addition to historical information, the following discussion contains certain forward-looking information. See "Special Note Regarding Forward Looking Statements" above for certain information concerning those forward-looking statements. Our financial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles.
Overview
Aerkomm Inc. is an advanced defense and aerospace communications company entering early-stage revenue generation, with products tailored for deployment in contested, infrastructure-limited, and multi-domain environments. Our platform integrates software-defined modems, multi-orbit satellite terminals, and over-the-horizon systems to support unmanned, autonomous, and ISR platforms. Our near-term commercial trajectory focuses on converting strategic defense engagements into long-term contracts, while leveraging dual-use technologies for commercial aviation and telecom markets.
Our platform is built on a carrier-neutral, software-defined architecture that enables seamless integration of satellite communications, over-the-horizon (OTH) radio and radar systems, terrestrial networks, and hybrid connectivity pathways. This multi-layered design supports interoperability, modular scalability, and persistent resiliency in dynamic and degraded operational environments.
Recent global events have heightened concerns over the vulnerability of subsea communications infrastructure. The persistent threat of submarine cable tampering or cutting - whether due to malign state actors or gray-zone conflict - has underscored the need for alternate, resilient communication pathways. As undersea cable route disruptions and targeting continue to grow, especially in critical regions such as the Indo-Pacific and Northern Europe, defense and civilian agencies are accelerating the adoption of space-based solutions. However, satellite density in high-traffic conflict zones is likely to become strained and contended during crisis events, placing additional emphasis on platforms that offer secure, intelligent, and adaptable terminal-level connectivity. Our technology addresses this challenge by offering dynamic, multi-orbit access and prioritization capabilities, enabling mission continuity even under contested or degraded satellite access conditions.
As part of our broader communications ecosystem, we have developed a carrier-neutral, software-defined platform that enables dynamic connectivity to the most appropriate satellite-regardless of orbit or operator. This architecture is built around a suite of multi-orbit antennas, including both proprietary and partner-developed systems. Among these is our advanced electronically steered antenna (ESA), which leverages a proprietary glass semiconductor substrate to deliver over 50% higher throughput per square inch than conventional designs. These antennas are engineered to operate seamlessly across GEO, MEO, and LEO networks, ensuring persistent, resilient performance in dynamic and contested environments.
These hardware components are tightly integrated with our software-defined, carrier-neutral modem, which supports real-time satellite selection, waveform agility, and military-grade security. The system is further enhanced by custom-developed RF chipsets, beamforming ASICs, and high-speed analog-to-digital converters (ADCs) currently in development. Together, this modular, end-to-end ecosystem delivers secure, high-throughput connectivity optimized for edge-deployed platforms, including unmanned systems, ISR aircraft, and other mission-critical assets operating in denied or infrastructure-limited environments.
Our value as a full systems integrator lies in our ability to bring together proprietary technologies and third-party components into cohesive, mission-ready solutions. Leveraging our software-defined architecture, we enable network-level virtualization, modular scalability, and rapid deployment across a wide spectrum of operational requirements. From unmanned platforms to manned defense systems, we deliver end-to-end communications and sensing capabilities that are tailored, adaptable, and operationally resilient, supporting the full spectrum of mission demands in multi-domain environments.
Complementing our communications suite, we offer advanced OTH radar systems that provide long-range surveillance, early warning, and persistent situational awareness across maritime and terrestrial domains. We have also successfully fielded a compact electronic warfare (EW) solution, an integrated ESM/ELINT system for UAVs, designed to detect, track, and analyze electromagnetic signals in real time to support tactical ISR missions and platform survivability.
We have also developed and partnered to support purpose-built communication modalities beyond satellite, including line-of-sight, obstructed line-of-sight, and over-the-horizon solutions. This multi-layered architecture ensures resilient, end-to-end connectivity across diverse operational theaters, providing redundancy, seamless network handoffs, and sustained communications in high-risk and rapidly evolving scenarios.
We operate under an asset-light model. While we do not own or manage satellite constellations, we maintain regional satellite licensing and act as a value-added reseller of satellite bandwidth. This enables cost-effective, scalable offerings and creates new revenue opportunities for both the Company and our satellite operator partners.
On April 27, 2023, we were awarded a regional satellite service spectrum usage permit, authorizing the provision of broadband satellite services across mobile backhaul, enterprise communications, maritime, aviation, and tactical defense markets. This regulatory achievement strengthens our role in critical communications infrastructure and resiliency programs, particularly in the Indo-Pacific region.
As a satellite service telecom provider in Japan and Taiwan, we are positioned not only as a hardware and systems integrator, but also as a value-added services provider. This expands our addressable markets and enhances our ability to support strategic communications infrastructure throughout the Indo-Pacific and beyond.
Our sales were $0 for the year ended December 31, 2025, as compared to $1,342,931 for the year ended December 31, 2024. Our total revenue was $0 for the year ended December 31, 2025, as compared to the year ended December 31, 2024, which consisted of the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others. These figures reflect ongoing investment in product development, regulatory positioning, and commercial readiness to support future growth and deployment at scale.
We remain committed to enabling a hyper-connected, secure, and adaptive user ecosystem. With a technology portfolio that spans satellite and over-the-horizon communications, radar sensing, electronic warfare, virtualized networking, and fully integrated platform deployment, we are well-positioned to address the complex and evolving demands of modern defense and commercial operations in multi-domain environments.
Key Trends and Uncertainties
The following key trends and uncertainties may materially impact our operational performance, financial condition, and long-term outlook:
| ● | U.S. defense appropriations uncertainty, due to recurring Continuing Resolutions, restricts new program starts and delays contract finalization. |
| ● | Geopolitical instability in the Indo-Pacific region is increasing demand for resilient satellite and OTH communications but may delay procurement timelines. |
| ● | Supply chain pressures in semiconductors and RF components continue to impact production scalability and lead times, and recently announced tariffs. |
| ● | Early-stage commercialization: As we transition from development to revenue generation, our results will remain volatile, and timing of contract execution remains a critical variable. |
U.S. Budget Environment
The U.S. Government continues to maintain the largest defense budget globally, and U.S. defense spending levels, along with the timing and structure of appropriations, may significantly influence our business prospects over the medium to long term. While we do not currently generate revenue from contracts funded by the U.S. Government, we are actively engaged in discussions with potential partners and customers regarding participation in programs that may be supported by U.S. Government defense funding. Our ability to enter into such programs may be affected by the availability, prioritization, and allocation of federal defense spending.
Then President Biden's Fiscal Year (FY) 2025 budget request, released in March 2024, included $895 billion in total national defense funding, consistent with the spending caps established by the Fiscal Responsibility Act (FRA). Of this amount, $842 billion was designated for the Department of Defense (DoD) base budget. The Senate Appropriations Committee's draft FY 2025 Defense Appropriations Bill proposed $852.2 billion in total funding, representing a $27.2 billion (3.3%) increase over FY 2024 enacted levels. This funding is intended to support modernization, readiness, force structure, and strategic deterrence objectives in alignment with the 2022 National Defense Strategy.
A key focus area within the DoD's modernization strategy is the development and fielding of Collaborative Combat Aircraft (CCA) under the U.S. Air Force's Next Generation Air Dominance (NGAD) initiative. The CCA program is expected to drive significant investment in unmanned aerial systems, autonomy, and resilient communications infrastructure. Since FY 2023, Congress has appropriated more than $1.7 billion for CCA-related research, development, and prototyping. The FY 2025 budget request includes an additional $559 million to continue CCA development efforts. According to recent U.S. Air Force estimates, procurement of at least 1,000 CCA units is anticipated over the coming decade, with early production beginning mid-to-late decade. These aircraft will require highly integrated, secure, and low-latency communications systems-particularly those that can perform in denied or contested electromagnetic environments-aligning directly with our core competencies in multi-orbit satellite, over-the-horizon, and software-defined networking technologies.
In parallel, the Department of Defense is advancing the Next Generation Air Dominance (NGAD) program, which includes the development of the F-47, a sixth-generation fighter jet expected to replace the F-22 Raptor. In March 2025, Boeing was awarded a multibillion-dollar contract to lead F-47 development, with the Air Force targeting at least 200 manned NGAD aircraft supported by CCA systems. The NGAD program is projected to receive approximately $28.5 billion in funding over the next five years. The F-47's operational design emphasizes survivability, advanced autonomy, and the ability to operate seamlessly alongside unmanned CCA platforms-creating an ecosystem of networked assets dependent on secure, high-throughput, and resilient communications systems. These program requirements directly align with our integrated terminal systems, over-the-horizon communications technologies, and platform-level integration expertise for unmanned and autonomous systems.
As of the date of this filing, the federal government continues to operate under a Continuing Resolution (CR) extending prior-year funding. While stopgap funding allows for ongoing operations, it restricts new program starts and contract awards, which may delay or limit opportunities for us to participate in newly funded initiatives or integration efforts with potential prime contractors. If a full-year CR or a government shutdown occurs, these restrictions may continue or intensify, potentially resulting in further delays in procurement activity, program execution, or technology adoption-especially for new or emerging systems that align with future modernization objectives.
As the defense industry rapidly incorporates artificial intelligence (AI) into command, control, surveillance, targeting, and autonomous systems, it is increasingly evident that AI's operational effectiveness is heavily dependent on secure, low-latency, and persistent communications infrastructure. Without access to resilient, high-performance communications-particularly satellite, over-the-horizon, and software-defined networking-AI-enabled systems may be degraded or rendered inoperable in contested or disconnected environments. As a result, we believe that advanced communications technologies are not only enablers, but essential infrastructure for the successful deployment and scalability of AI in defense operations.
Future U.S. Government funding will continue to be shaped by political negotiations, economic conditions, and shifting national security priorities. While we cannot provide any assurance that our ongoing engagements will result in binding agreements or revenue, we believe that our secure satellite and over-the-horizon connectivity, software-defined modems, integrated terminal systems, and support for unmanned platforms position us well to address the evolving needs of DoD modernization and resilience efforts. We will continue to monitor developments in the federal budget process and assess potential impacts on our strategic positioning and business outlook.
Geopolitical and Economic Environment
We operate in a dynamic and increasingly complex geopolitical and macroeconomic environment that directly impacts our strategic outlook, market opportunities, and potential demand for our technologies and services. The following discussion includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially due to a number of factors, including those discussed under "Risk Factors" and elsewhere in this report.
Geopolitical tensions in the Asia-Pacific region - particularly involving China, Taiwan, and Japan - and concerns about the direction of the Trump Administration in the United States and anticipated increasing pressure on countries to fund defense spending have led to elevated concerns around regional security, operational resiliency, and defense modernization. In particular, increased Chinese military activity around Taiwan and the broader Indo-Pacific has prompted governments and defense organizations across the region to reevaluate strategic readiness and accelerate investments in command, control, communications, and intelligence capabilities. These developments may create longer-term opportunities for the Company's solutions, particularly in the areas of over-the-horizon connectivity, radar, unmanned systems integration, and secure multi-network communications infrastructure.
In this connection, the Company notes that on December 27, 2024 the Foreign Ministry of the People's Republic of China (PRC) announced that in response to United States announcements about arms sales and military assistance to Taiwan and related negative statements the PRC considered objectionable, the PRC had decided to take countermeasures against seven companies including Aerkomm (the six in addition to Aerkomm are Insitu, Inc., Hudson Technologies Co., Saronic Technologies, Inc., Raytheon Canada, Raytheon Australia, and Oceaneering International, Inc.). For these companies, the PRC Foreign Ministry announced that their movable and immovable properties, and other kinds of assets within China were frozen and that all organizations and individuals within China were prohibited from engaging in transactions, cooperation and other activities with them. Aerkomm does not have commercial operations in the PRC nor plans to develop business in the PRC and Aerkomm is not aware of any concrete measures that may have been taken following the PRC Foreign Ministry's announcement. However, the announcement underscores the inherent geopolitical risk associated with involvement in defense industries.
The ongoing conflict in Ukraine has further underscored the global need for adaptable and resilient defense systems. One key trend that has emerged from this conflict is the demonstrated operational effectiveness and strategic value of unmanned systems-including UAVs, UUVs, and remotely operated assets-over traditional manned platforms in contested and dynamic environments. This shift aligns with our technology roadmap and systems integration strategy. Our platform is specifically designed to support high-value unmanned and autonomous systems through lightweight, low-power, software-defined communication terminals, over-the-horizon (OTH) radar solutions, and integrated C4ISR components that enable persistent situational awareness and command flexibility.
While the Company does not currently have binding contracts related to these strategic developments, we continue to engage with potential partners - including prime contractors and government entities - to align our offering with anticipated procurement priorities and to account for the effects of changes in tariff rates and policies. We believe our integrated, software-defined architecture and asset-light model position us to respond effectively to emerging demand across both public and private sector markets.
Macroeconomic and geopolitical conditions remain challenging and present continued risks to our potential partners, suppliers, and customers. Global supply chains - particularly those involving semiconductors, advanced materials, and RF components - remain subject to disruptions, extended lead times, and price volatility. These supply chain pressures, exacerbated by ongoing trade tensions, changes in tariff policies, and export controls in the region, may impact our ability to meet future production or integration timelines, particularly if current constraints persist.
In addition, inflationary pressures and elevated interest rates in key markets such as Taiwan, Japan, and the United States may constrain defense budgets or delay funding cycles. Rising labor and input costs could also put pressure on margins in future periods. While we continue to implement strategies to mitigate the impact of inflation and supply chain risk-including through strategic sourcing, inventory management, and cost control-there can be no assurance that these measures will fully offset external economic pressures.
We remain focused on collaborating with potential partners, their supply chains, and end customers to evaluate projected demand and ensure our solutions are aligned with both near- and long-term operational requirements. As global and regional defense priorities evolve, we believe our integrated approach to communications, sensing, and unmanned systems enablement positions the Company to contribute meaningfully to the development of resilient, next-generation capabilities in Asia-Pacific and beyond.
International Business
A key component of our strategic growth plan is the expansion of international sales, particularly within defense-focused markets in Europe and the Asia-Pacific region. Our international efforts are centered on building long-term relationships with defense agencies, integrators, and government partners through both Direct Commercial Sales (DCS) and, in the future, Foreign Military Sales (FMS) executed through the U.S. Government.
We continue to pursue international opportunities aligned with our core product portfolio-spanning satellite connectivity, over-the-horizon (OTH) communications, radar systems, virtualized modems, RF chipsets, and integration of these technologies into high-value platforms including unmanned aerial vehicles (UAVs), unmanned underwater vehicles (UUVs), unmanned surface vessels (USVs), and manned military systems. Our modular, carrier-neutral architecture is designed to meet modern requirements for network resilience, secure communications, and autonomy across mission domains.
Europe
The European defense landscape has undergone significant transformation, with defense spending reaching unprecedented levels. In March 2025, European Commission President Ursula von der Leyen introduced the "ReArm Europe" initiative, a sweeping plan to mobilize up to €800 billion in defense investments across EU member states by 2030. This includes suspending EU fiscal rules to enable greater national defense spending, allocating €150 billion in EU-backed defense loans, and redirecting EU funds toward procurement, infrastructure, and technology development. The goal is to reduce Europe's reliance on non-EU defense providers and accelerate internal capability development.
In 2024, European Union (EU) defense expenditure reached €326 billion, with procurement spending projected to exceed €90 billion. Research and technology (R&T) investments rose to €5 billion, and defense investment overall accounted for a record 31% of total spending. These increases reflect the EU's long-term commitment to strategic autonomy and regional deterrence.
Amid this shift, member states are reassessing their reliance on non-European communications infrastructure. Italy suspended talks with SpaceX on Starlink, and Poland has publicly explored alternative satellite providers for defense communications. In parallel, the EU launched the IRIS² (Infrastructure for Resilience, Interconnectivity and Security by Satellite) initiative - a €10.6 billion program to deploy a sovereign, multi-orbit satellite constellation aimed at serving both government and commercial users. The initial constellation, expected to include approximately 290 satellites, is targeting partial operational capability by 2027, with full deployment expected by 2030. IRIS² is backed by a mix of public funding and private investment via the SpaceRISE consortium.
These developments present a significant opportunity for us to offer sovereign, secure satellite communications solutions across European defense programs. Our multi-orbit terminals, software-defined radios, over-the-horizon systems, and virtualized network infrastructure directly align with EU objectives to create resilient, autonomous communications networks that can perform in contested environments.
We are actively engaged in discussions with European-based integrators, prime contractors, and government stakeholders to support initiatives related to ISR modernization, tactical communications, and secure network integration across manned and unmanned defense platforms. These engagements are expected to support both Direct Commercial Sales (DCS) and future Foreign Military Sales (FMS) as European allies diversify their defense architecture and increase regional independence.
Asia-Pacific
The Asia-Pacific region continues to experience robust growth in defense spending, driven by geopolitical tensions and the need to enhance national security infrastructures. China's defense budget has seen a 7.2% increase in 2025, reflecting its ongoing efforts to modernize and expand its military capabilities.
In response, neighboring countries are significantly boosting their defense investments. Japan, for instance, has approved a record defense budget of 8.7 trillion yen (approximately $55.1 billion) for the fiscal year starting April 1, 2025, marking a 9.4% increase from the previous year. Similarly, Australia has unveiled plans to reach an annual defense budget exceeding AU$100 billion by 2033-2034, equating to 2.4% of its gross domestic product.
As part of Japan's broader defense posture shift, the Japan Self-Defense Forces (JSDF) are undergoing rapid modernization, with a strategic emphasis on unmanned systems and drone warfare capabilities. Recent public reporting highlights that UAVs are now central to Japan's defense transformation, supporting surveillance, strike, and rapid-response operations. The JSDF is actively investing in both domestically produced and allied-developed unmanned platforms capable of operating in contested and GPS-denied environments. This includes the integration of AI, autonomous operations, and long-range, survivable communications infrastructure-key areas of alignment with our existing technology roadmap.
In parallel, growing concern over a potential conflict in the Taiwan Strait has prompted the U.S. Department of Defense and Indo-Pacific partners to prioritize the rapid fielding of autonomous systems and resilient communications infrastructure. The Pentagon has described the potential battlespace as a "drone hellscape," calling for thousands of low-cost, survivable unmanned assets capable of operating in denied, degraded, and disconnected environments. These scenarios further underscore the urgent need for adaptable ISR architectures and reliable communications at the tactical edge.
We are fully engaged in supporting this regional shift. We are actively accelerating engagement with regional governments and partners and stand firm in our commitment to enhance defense resiliency and safeguard U.S. allies and partners throughout the Asia-Pacific. Our secure, over-the-horizon (OTH) communications systems, multi-orbit satellite terminals, software-defined radios, OTH radar, EW/ESM, and modular integration capabilities offer operational advantages in environments where continuity of communications and autonomous operations are paramount.
We are currently engaged in advanced discussions with prospective customers and partners in the Asia-Pacific region regarding the integration of our technologies into unmanned systems and airborne ISR platforms, and next-generation defense systems. These efforts are focused on delivering interoperable, AI-enabled, and mission-adaptable communications networks that address the evolving operational needs of Indo-Pacific allies and support regional deterrence and resilience initiatives.
Near-Term International Delivery Plans
In 2024, international customers accounted for 100% of Aerospace & Defense segment revenue, derived from a development contract initiated in 2021 with a non-U.S. customer to build and test a satellite communications architecture for UAVs conducting ISR missions. Following successful testing in late 2024 under operational conditions, we anticipate initial deliveries and revenue recognition from the first major contract associated with this project to commence in 2025.
We intend to expand our international engagement through both DCS and FMS channels, leveraging our software-defined, hardware-integrated solutions to meet growing global demand for resilient defense communications and unmanned platform capabilities. While we cannot guarantee the successful conversion of discussions into binding agreements or revenue, we believe ongoing shifts in the global defense landscape and increased allied spending present a strategic opportunity for long-term growth.
Across these efforts, we are pursuing revenue opportunities through strategic partnerships, licensing, and terminal sales. As of the date of this filing, we are actively engaged with over 25 government agencies, defense integrators, and commercial primes across the U.S., Japan, EU, and Indo-Pacific. These engagements span stages from early requests for information (RFI) to pilot testing and integration evaluations. The indicative value of our aggregate opportunity pipeline exceeds $150 million, though no assurance can be given that these engagements will convert to binding agreements. We anticipate initial award decisions on a subset of these opportunities during 2025.
Commercial Aviation Business Environment and Trends
In 2024, global air traffic continued its strong recovery from the COVID pandemic, with both domestic and international travel showing sustained growth, surpassing pre-pandemic levels. International travel has mostly recovered, and the wide-body market continues to be paced by the international travel recovery. Notably, outbound international air travel from China has gained momentum throughout 2024, helping to normalize global capacity and demand dynamics. Aircraft manufacturers are reporting strong order books as airlines seek to modernize fleets and expand capacity to meet sustained demand.
Airline financial performance, which influences demand for new capacity, has benefited from the resilient demand for travel. In 2025, the International Air Transport Association (IATA) projects the airline industry to achieve a combined net profit of $36 billion. This profit is based on an expected revenue of $979 billion, with a net profit margin of 3.7%, according to Business Traveler USA. While this signifies a strong and resilient industry, IATA points out that the margin remains relatively thin, especially when considering the vast number of passengers and the industry's contribution to the global economy.
A major development reshaping the in-flight connectivity (IFC) space is Starlink's expansion into commercial aviation. In 2024, Starlink secured multiple agreements with global carriers - including United Airlines and Air France - with plans to equip hundreds of aircraft beginning in 2025. These developments signal an intensifying competitive landscape in aviation broadband services, as airlines seek to meet passenger expectations for seamless, high-speed connectivity across fleets.
In light of these shifts, we are positioning our solutions to deliver differentiated value in the IFC market. Specifically, our proprietary ultra-low-profile antenna system is designed for seamless fuselage integration-offering airlines aerodynamic advantages that reduce drag and fuel consumption, while simplifying maintenance and preserving aircraft aesthetics. Our software-defined modem architecture complements this by enabling carrier neutrality and cross-orbit connectivity, making it well-suited for both commercial and government aviation use cases.
The long-term outlook for the commercial aviation industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries. The commercial aviation industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.
While we do not yet generate revenue from contracts in the commercial aviation industry, we aim to initiate and to continue discussions with our potential partners and our potential customers in the commercial aviation industry to provide our products and our services to such potential partners and potential customers under binding and definitive contracts. We cannot give any assurances at this time, however, that we will be able to successfully complete any of these discussions, or that we will generate revenue from contracts in the commercial aviation industry in the future.
Civilian Telecommunications Business Environment and Trends
The civilian telecommunications industry is experiencing a rapid transformation, driven by advancements in mobile infrastructure, growing data demands, and an increasing need for secure and resilient connectivity across both public and private sectors. These trends are especially pronounced in the Asia-Pacific region, which stands as one of the fastest-growing markets for mobile and broadband services. Despite this growth, the region is also grappling with emerging challenges, including infrastructure vulnerabilities and geopolitical risks that threaten the stability of digital communications.
Growth in Mobile and Broadband Connectivity
The global adoption of 5G is projected to reach between 3.2 billion and 4.8 billion by the end of 2026. This rapid expansion represents a significant shift in mobile technology, with one projection suggesting 5G will constitute over one-third of all global mobile connections by 2026, with significant growth led by nations such as Japan, South Korea, China, and India. This adoption is paving the way for the development of 6G technologies, with government and private sector investments already underway in research, standardization, and early-stage development. Alongside 5G, there is an accelerating demand for enterprise and industrial connectivity solutions, particularly in the form of private 5G networks and satellite-enabled backhaul services. These developments reflect the growing need for robust, scalable, and flexible networks that can meet the demands of a rapidly evolving digital landscape.
Infrastructure Vulnerabilities and Geopolitical Risks
As telecommunications infrastructure expands, the global submarine cable ecosystem faces an escalating threat environment driven by geopolitical tensions, limited repair capacity, and insufficient legal frameworks. There are currently approximately 597 subsea cables in operation or under construction worldwide, carrying an estimated 99% of international data traffic and underpinning trillions of dollars in daily financial transactions. An average of 150 to 200 cable faults occur globally each year, with the most common causes being ship anchors and fishing equipment contacting cables at depths of less than 200 meters. However, the risk of deliberate or state-linked interference has risen sharply, and the distinction between accidental damage and intentional sabotage has become increasingly difficult to draw.
In the Baltic Sea, a concentrated series of suspicious incidents has fundamentally altered the security landscape for undersea infrastructure. Since October 2023, at least eleven submarine cables have been damaged in the region, along with a gas pipeline and an underwater power cable. These incidents have included damage to the Balticconnector gas pipeline between Finland and Estonia in October 2023 by the Hong Kong-flagged vessel Newnew Polar Bear; the severing of two fiber-optic data cables connecting Finland-Germany and Sweden-Lithuania in November 2024, attributed to the Chinese-flagged bulk carrier Yi Peng 3; the cutting of the Estlink 2 power cable and multiple data cables between Finland and Estonia on Christmas Day 2024 by the Cook Islands-flagged tanker Eagle S, suspected of belonging to Russia's "shadow fleet"; and a fiber-optic cable rupture connecting Latvia and Sweden in January 2025. In December 2025, Finnish authorities boarded and seized another vessel, the Fitburg, sailing from St. Petersburg after detecting that it was dragging its anchor along the seabed and had damaged telecommunications cables between Finland and Estonia. Fourteen crew members, including several Russian nationals, were taken into custody.
In the Asia-Pacific region, Taiwan has emerged as a focal point for suspected subsea cable sabotage. Between January and February 2025, Taiwan experienced four incidents of submarine cable disruptions, including two suspected acts of vessel sabotage. In January 2025, the Xingshun 39, a Tanzania-flagged vessel controlled by a Chinese entity, severed a key link in the Trans Pacific Express Cable System near Keelung; the vessel had previously operated under alias names and switched its AIS transponder signals when approached by Taiwan's coast guard. In February 2025, the Hongtai 58, a Togolese-registered cargo vessel with a Chinese crew, severed an undersea cable connecting Taiwan and the Penghu Islands. Investigation of the Hongtai 58 revealed a pattern of systematic identity manipulation, with the vessel having frequently changed its name and registration across multiple maritime registries. In June 2025, a Taiwanese court sentenced the Chinese captain of the Hongtai 58 to three years in prison for intentionally damaging undersea cables, marking the first criminal conviction in the recent wave of cable incidents. Prosecutors argued that electronic charts on the ship clearly showed the cable's location, and coast guard analysis demonstrated the vessel had dragged its anchor in a straight line across the seabed in a zigzag pattern around the cable, inconsistent with normal anchoring behavior. China subsequently claimed that two Taiwanese citizens had controlled the vessel as part of a smuggling operation, a characterization rejected by Taiwan's Mainland Affairs Council as "cross-border repression and political manipulation."
The potential for Sino-Russian collaboration on undersea cable operations has further heightened concerns. Analysts have identified suspicious activities by the Xingshun 39 north of Taiwan and a Russian vessel, the Vasili Shukshin, south of Taiwan in early 2025, suggesting possible coordination between Chinese and Russian merchant ships in reconnaissance and sabotage of undersea communications cables. These activities follow from suspected undersea infrastructure sabotage operations conducted by Chinese merchant vessels in the Baltic Sea in 2023 and 2024, with strong indications of Russian assistance and coordination.
The development of dedicated cable-cutting technology has escalated these risks. In April 2026, a Chinese research vessel tested a new device capable of slicing through submarine data cables at a depth of 3,500 meters during a deep-sea science expedition. The technology relies on an electro-hydrostatic actuator enabling a diamond-coated grinding wheel to cut through cables armored with layers of steel, rubber, and polymer, and is compact enough to fit aboard remotely operated underwater vehicles. While Chinese researchers have characterized the tool as intended for civilian "marine resource development," security analysts have noted that it could pose a significant threat to fiber-optic cables linking Pacific islands, including Guam, and could further amplify Chinese military pressure on Taiwan, which relies on only 24 major cables for its global connectivity.
The Red Sea has also experienced significant cable disruptions, compounding global infrastructure risks. In February 2024, three submarine cables were damaged by a vessel hit by Houthi-fired missiles, disrupting 25% of data traffic between Asia, Europe, and the Middle East. On September 6, 2025, multiple submarine cables near Jeddah, Saudi Arabia - including the SEA-ME-WE 4, IMEWE, and FALCON GCX systems - were severed, causing widespread internet disruptions across India, Pakistan, Saudi Arabia, the UAE, and Kuwait. Experts attributed the damage to commercial shipping activity, likely a vessel dragging its anchor, though the area's geopolitical sensitivity amid ongoing Houthi attacks on Red Sea shipping has made attribution and repair particularly challenging.
Three structural factors amplify the risk of severe outcomes from cable damage: lack of redundancy in cable networks, lack of diversity of cable routes, and limited global repair capacity. Regions with limited alternate routing options - including parts of West and Central Africa, isolated Pacific islands, and certain secondary European routes - are disproportionately vulnerable. Globally, approximately 80 vessels are dedicated to maintaining submarine cable infrastructure, and the average repair time has trended upward, reaching approximately 40 days in 2023. Regulatory hurdles, such as complex permitting processes that vary by national territory, and geopolitical factors such as conflict zones denying access to repair vessels, further prolong restoration timelines.
International and multilateral responses have intensified. In January 2025, NATO launched "Baltic Sentry," a multi-domain mission involving frigates, maritime patrol aircraft, and naval drones to strengthen surveillance and deterrence against threats to critical undersea infrastructure in the Baltic Sea. NATO Secretary General Mark Rutte emphasized that "ship captains must understand that potential threats to our infrastructure will have consequences, including possible boarding, impounding, and arrest." By late 2025, the Baltic Sea had not experienced any further suspicious undersea incidents since January 2025, suggesting the deterrent effect of enhanced patrols. The European Union adopted an Action Plan on Cable Security in February 2025, with measures to be implemented between 2025 and 2026 to expand the EU's subsea cable resilience through investments in new technology, enhanced surveillance capabilities, and improved intelligence-sharing. Estonia also passed legal amendments granting its defense forces authority to take action against vessels threatening critical underwater infrastructure. Taiwan, for its part, has deployed a Submarine Cable Automatic Warning System, designated 10 domestic cables as critical infrastructure, amended its Telecommunications Management Act to increase penalties for damaging communications infrastructure, and blacklisted 96 suspicious vessels for close monitoring.
Despite these efforts, the existing international legal framework remains inadequate. The UN Convention on the Law of the Sea does not automatically give coastal states authority to board and search foreign vessels suspected of damaging submarine cables in their exclusive economic zones and does not impose an express international law obligation on states not to deliberately interfere with cables. The difficulty of attributing cable damage to state-sponsored sabotage, combined with jurisdictional limitations and the use of vessels registered under flags of convenience with opaque ownership structures, continues to undermine enforcement. As reliance on submarine cables grows - driven by AI, cloud computing, and the energy transition - the vulnerability of these critical arteries to both accidental damage and deliberate interference represent an escalating risk to global communications, financial systems, and national security.
Addressing the Digital Divide and Expanding Connectivity Solutions
Alongside these challenges, the persistent digital divide remains a significant issue, particularly in underserved regions where access to mobile broadband is hindered by factors such as affordability, coverage gaps, and limited infrastructure. These gaps present significant opportunities for hybrid connectivity models, such as carrier-neutral and satellite-integrated solutions, which can extend coverage and provide resilient communications in hard-to-reach or high-risk areas. These solutions are critical for ensuring reliable connectivity in both rural and vulnerable regions, where the risk of service disruptions is high.
Economic Impact and Future Innovations
Mobile technologies and services continue to play a crucial role in global economic development, contributing an estimated 6.4% of global GDP in 2025, with reports indicating this substantial impact continued into early 2026 as the sector generated $7.6 trillion in economic value added. This contribution is projected to grow to 8.4% of global GDP by 2030, with the total economic impact expected to reach $11.3 trillion. Looking to the future, innovations in AI-driven network optimization, edge computing, and secure mobile backhaul are expected to further drive the adoption of mobile services across various critical sectors, including energy, transportation, and disaster response. These advancements will be pivotal in ensuring the continued resilience and growth of global telecommunications infrastructure.
Global Network Resilience Overview and Budget Environment
As cyber and physical threats to communication systems escalate worldwide, several nations have launched substantial initiatives to enhance network resilience, with satellite communications emerging as a central component of these efforts.
| ● | United States: The U.S. has committed over $1.6 billion through the Secure and Trusted Communications Networks Reimbursement Program and DOD SATCOM modernization plans, focusing on 5G and multi-orbit satellite redundancy. |
| ● | European Union: The EU's IRIS² initiative plans to invest €6 billion in a sovereign satellite constellation to ensure secure governmental and emergency communications. |
| ● | India: Through the Digital India program and ISRO's collaboration with OneWeb, India has allocated over $1 billion to deliver satellite connectivity for rural resilience. |
| ● | South Korea: Under its Digital New Deal 2.0, South Korea is investing ₩2.6 trillion (~US$2B) through 2026 in quantum communications, SATCOM ground stations, and AI-based network monitoring. |
Satellite-Based Business Continuity Planning (BCP) Market and Services
Business Continuity Planning (BCP) is a strategic framework designed to ensure the continuity of essential operations during or after a crisis, disaster, or disruption. As organizations prioritize operational resilience, BCP investments have expanded globally, with satellite-based solutions emerging as a critical component of modern resilience strategies.
The increasing commercialization of satellite technology has enabled Satellite-Based BCP to provide a robust network resilience framework, ensuring uninterrupted operations in the event of terrestrial infrastructure failures. While precise global expenditure figures remain difficult to quantify, market analyses highlight the growing demand for BCP solutions across industries.
Satellite-Based BCP encompasses key resilience measures, including:
| ● | Data Backup and Disaster Recovery - Ensuring secure data storage and rapid restoration of critical systems. |
| ● | Alternate Communication and IT Infrastructure - Providing redundancy in cases of network failure. |
| ● | Mobile and Off-Grid Communication Systems - Supporting operations in remote or disaster-affected areas. |
| ● | Emergency Access to Cloud Services and Applications - Enabling secure and continuous cloud connectivity. |
A well-structured BCP minimizes operational downtime, safeguards critical assets, and sustains service delivery for enterprises and public sector entities. As disruptions become more frequent and severe, demand for satellite-based continuity solutions continues to expand across multiple industries.
Key Suppliers for Satellite-Based BCP and Network Resilience Solutions
The following are some of the leading technology providers and integrators supporting BCP and satellite-based resilience worldwide:
| ● | Eutelsat OneWeb - LEO satellite constellation provider delivering global broadband coverage |
| ● | Viasat / Inmarsat - Government-grade secure satellite communications |
| ● | SES - GEO and MEO satellite services for enterprise and defense networks |
| ● | Starlink (SpaceX) - Real-time high-throughput LEO connectivity for backup comms |
| ● | Cisco Systems - Redundant networking, SD-WAN, and edge infrastructure |
| ● | Palo Alto Networks / Fortinet - Cybersecurity and network protection |
| ● | Thales Group - BCP and emergency communications for defense and aviation |
| ● | Aerkomm - Integrated SATCOM distribution, mobile BCP deployment, server load balancing, and localized disaster response capabilities via mobile units and hybrid network design |
Global Business Continuity Management (BCM) Market Overview
Business Continuity Management (BCM) remains a critical investment priority as organizations seek to enhance operational resilience against disruptions. While precise global expenditure figures are not readily available, market analyses indicate sustained growth in BCM solutions, driven by regulatory compliance, risk mitigation, and the increasing frequency of natural disasters and cyber threats.
Investment in Business Continuity Planning (BCP), a core component of BCM, continues to expand as businesses and government entities prioritize infrastructure resilience and disaster recovery strategies. The demand for BCM solutions is further supported by evolving regulatory frameworks and the need for robust contingency planning across key industries, including finance, healthcare, energy, and telecommunications.
As organizations adapt to an increasingly complex risk environment, the BCM market is expected to experience continued growth, with investments focusing on advanced technologies, cloud-based recovery solutions, and satellite-enabled continuity strategies.
Market Size and Growth
Based on reports covering the Business Continuity Management (BCM) Solutions market, the global market was valued at approximately $2.33 billion to $2.60 billion in 2026 and is projected to reach a CAGR of 16.33% from 2025 to 2032 (P&S Intelligence). Market expansion is led by heightened awareness of business continuity risks and increasing regulatory pressures across key industries.
The Asia-Pacific region - including Japan, India, South Korea, Australia, and Southeast Asia - represents a significant driver of growth, as organizations enhance resilience strategies to address regional vulnerabilities. North America, led by the United States, remains a critical contributor, with enterprises investing in BCM solutions to mitigate cybersecurity threats, natural disasters, and infrastructure disruptions.
Regional Insights
North America
| ● | 2023 Market Contribution: North America accounted for approximately 40% of the total revenue in the BCM solutions market (Verified Market Reports). |
| ● | 2030 Market Projection: The market is expected to reach $2.39 billion by 2033, reflecting a CAGR of 14.6% from 2023 to 2033. |
Asia-Pacific Region
| ● | Market Size: Based on data from 2026, the Asia-Pacific Body Control Module (BCM) market is experiencing significant growth, with market estimates indicating a valuation of approximately USD 14 billion, up from USD 13 billion in 2025, driven by rising vehicle electrification and demand for advanced electronics in the region. |
Country-Specific Projections (2023-2030)
| ● | China: Valued at USD 323.46 million in 2023, growing at a 18.3% CAGR. |
| ● | Japan: Valued at USD 99.19 million in 2023, growing at a 17.3% CAGR. |
| ● | India: Valued at USD 86.26 million in 2023, growing at a 20.6% CAGR. |
| ● | South Korea: Valued at USD 71.88 million in 2023, growing at a 17.9% CAGR. |
| ● | Australia: Valued at USD 37.38 million in 2023, growing at a 18.5% CAGR. |
| ● | Southeast Asia: Valued at USD 49.60 million in 2023, growing at a 19.8% CAGR |
The budget focuses on improving resilience across various sectors, particularly in the face of potential disruptions to communication systems and includes initiatives for strengthening satellite communications and other technological infrastructure.
Key Drivers of BCM Market Growth
| ● | Increasing Frequency of Disruptions: The rise in natural disasters and cyber-attacks has heightened the demand for robust BCM solutions to ensure operational resilience. |
| ● | Regulatory Compliance: Stringent regulations across industries mandate the implementation of comprehensive BCM strategies to mitigate risks and ensure business continuity. |
| ● | Growing Awareness of Operational Risks: Organizations are investing in BCM solutions to safeguard operations, enhance resilience, and protect reputational value. |
(Source: imarcgroup.com)
BCP Investments in Key Markets
Business Continuity Planning (BCP) investments are critical for ensuring operational resilience, disaster recovery, and risk mitigation. Below is an overview of key markets investing in BCP solutions:
United States
The U.S. remains a leader in BCP investments, with the market estimated at $2.8 billion in 2020 (Enterprise Storage Forum). Investments in business continuity and disaster recovery solutions continue to expand across industries, including finance, healthcare, and energy.
| ● | Market Growth Projection: The U.S. Business Continuity Planning (BCP) and management market is projected to experience substantial growth by 2030, with forecasts indicating a compound annual growth rate (CAGR) ranging from 10.1% to over 15% throughout the 2020s. This surge reflects sustained, high-priority investment in digital resilience, driven by increasing cyber threats, climate-related disruptions, and a shift from traditional, manual planning to AI-powered, cloud-native recovery solutions. |
Japan and Canada
Both Japan and Canada are experiencing steady growth in BCM investments.
| ● | Japan: The market is projected to grow at a CAGR of 6.1%, driven by increasing regulatory requirements and resilience initiatives. |
| ● | Canada: The BCM market in Canada is expected to expand at a CAGR of 7.8%, reflecting a growing emphasis on business continuity strategies. (Source: Enterprise Storage Forum) |
Taiwan
Taiwan has prioritized business continuity investments, particularly in telecommunications, semiconductor manufacturing, and public sector infrastructure. Given its strategic position in the global semiconductor industry and susceptibility to natural disasters, Taiwan continues to strengthen its resilience measures.
| ● | Investment in Resilient Infrastructure: The government has allocated $790 million under a 10-year plan to enhance communication infrastructure, including satellite services and other resilient systems (Enterprise Storage Forum). |
| ● | Disaster Recovery and Preparedness: Estimates suggest Taiwan's total investment in disaster recovery and infrastructure resilience could range from $500 million to $1 billion over the next 5 to 10 years, focusing on technological enhancements, particularly in satellite communications and disaster recovery solutions. |
These investments underscore Taiwan's commitment to strengthening critical infrastructure and ensuring continuity in the face of potential disruptions.
Our Business Potential
The Company is strategically positioned within the rapidly growing satellite communications sector. In addition to being licensed as a telecommunications operator in Japan and Taiwan, the Company secured a regional satellite service spectrum usage permit in Taiwan on April 27, 2023. Furthermore, as a distribution partner for Eutelsat OneWeb's Low Earth Orbit ("LEO") satellite services, effective September 26, 2024, and through its Master Services Agreement with a global U.S.-based satellite communications provider, effective May 26, 2026, the Company has expanded its access to satellite connectivity solutions across both LEO and Geostationary Earth Orbit ("GEO") networks. These relationships enhance the Company's ability to support commercial, government, and enterprise initiatives requiring resilient communications infrastructure and strengthen its position in addressing growing demand for satellite-enabled connectivity within its authorized markets.
These authorizations enable the Company to provide broadband satellite communications services across multiple sectors, including mobile backhaul, enterprise communications, maritime, aero, land mobility, and defense-related applications. In response to increasing demand for resilient communications infrastructure, the Company offers SATCOM Business Continuity Planning ("BCP") and Network Resilience Solutions, initially focused on the Asia-Pacific region. Japan and Taiwan, given their strategic importance and increasing emphasis on communications resilience, represent key markets for these offerings.
Strategic Investment in Network Resilience: Japan and Taiwan's Response to Emerging Threats
In response to escalating geopolitical tensions and vulnerabilities in undersea communications infrastructure, both Taiwan and Japan have increased investments in network resilience. These initiatives reflect a broader commitment to strengthening communications infrastructure, enhancing national preparedness, and mitigating risks associated with cyberattacks, infrastructure disruptions, and natural disasters.
As a distribution partner of Eutelsat OneWeb's Low Earth Orbit ("LEO") satellite services and through its Master Services Agreement with a global U.S.-based satellite communications provider for satellite communications products and services in Japan and Taiwan, the Company is positioned to support these resilience initiatives. The Company's solutions include enterprise network redundancy, server load balancing, and disaster recovery infrastructure designed to support communications continuity objectives in Taiwan, Japan, and other regional markets. In addition, the Company's SATCOM Business Continuity Planning ("BCP") solutions serve both enterprise and consumer markets. By deploying mobile and vehicle-based SATCOM systems leveraging both LEO and GEO connectivity, the Company seeks to provide communications capabilities for disaster recovery, emergency response, and other scenarios in which terrestrial networks may be unavailable or disrupted.
Rising Threats to Global Communication Infrastructure
The global reliance on undersea cables for internet and data connectivity has reached unprecedented levels, with over 95% of international data traffic passing through these submarine networks. Recent incidents of sabotage and suspected grey-zone activities, particularly in the Asia-Pacific region, have prompted governments to re-assess and strengthen their communication systems. In response to these growing vulnerabilities, both Taiwan and Japan have taken decisive action by investing in alternative communication systems, particularly satellite-based networks, while reinforcing their existing infrastructure. This strategic shift not only addresses military and national security concerns but also ensures business continuity, guarantees civilian access to essential services, and enhances resilience in the face of natural disasters.
1. Japan's Network Resilience and SATCOM BCP and Strategy
1.1 Strategic Imperatives
Japan, located in a highly seismic zone and facing growing regional security concerns, has integrated network resilience into both its national defense and disaster recovery planning. The 2024 Noto earthquake, along with increasing cyber threats from regional adversaries, has reinforced the need for robust, flexible communication systems.
1.2 Budget and Program Highlights
| ● | In FY2025, Japan earmarked 123.8 billion yen (~US$784 million) for the development of a next-generation military communication satellite to support the Japan Self-Defense Forces (JSDF). |
| ● | Japan's Ministry of Defense is integrating hardened, jamming-resistant satellite systems to ensure secure, real-time battlefield communications. |
| ● | A new supplementary budget (post-election) will include additional funds for civilian disaster resilience, including communications. |
1.3 National Research Infrastructure
Japan's National Research Institute for Earth Science and Disaster Resilience (NIED) operates on a 14-billion-yen annual budget and leads R&D in backup communication technologies, including:
| ● | Severe weather and seismic communication protocols. |
| ● | Emergency satellite deployment mechanisms. |
| ● | Real-time disaster data transmission systems. |
1.4 Integration with Civilian Systems and Subsidy Programs
Japan is pursuing a dual-use approach, where military-grade satellite infrastructure supports civilian disaster communication and emergency response systems. Nationwide drills and inter-agency coordination are regularly conducted to test resilience frameworks.
In addition, Japan's Ministry of Internal Affairs and Communications has allocated over 25 billion yen (approx. US$170 million) in fiscal support between 2024 and 2026 to accelerate adoption of BCP-related technologies, including satellite phones, mobile communication hubs, and transportable SATCOM vehicles for municipalities and critical infrastructure operators.
2. Taiwan's Network Resilience and SATCCOM BCP and Strategy
2.1 Context and Geopolitical Risk
Taiwan continues to face cybersecurity, infrastructure, and geopolitical risks associated with increasing regional tensions. During 2024 and 2025, Taiwan reported multiple incidents involving damage or disruption to undersea communications cables, including several cases that prompted investigations into potential deliberate interference. These incidents highlighted the vulnerability of critical communications infrastructure and reinforced the importance of network resilience, redundancy, and alternative connectivity solutions for both government and commercial users.
2.2 Satellite Communication Initiatives
To address these threats, Taiwan has launched a comprehensive 10-year plan to establish an independent, resilient satellite internet system. The plan includes:
| ● | Initial budget of US$790 million, focused on developing Taiwan's own low Earth orbit (LEO) satellite constellation. |
| ● | Strategic collaboration with Eutelsat OneWeb and a global U.S.-based satellite communications provider to support resilient communications, emergency response capabilities, and broadband internet access. |
| ● | Development of over 700 satellite ground stations across Taiwan to support seamless integration and redundancy. |
| ● | Launch of Taiwan-made LEO satellites, with the first deployment expected by 2026-2027. |
2.3 Backup Infrastructure and Microwave Networks
In parallel, Taiwan is enhancing terrestrial microwave communication systems, retrofitting existing mountain facilities for secure line-of-sight communication to outlying islands. This ensures at least partial functionality if submarine cables are compromised.
2.4 Government SATCOM BCP Subsidies
The Taiwanese government is also launching a targeted NT$2.5 billion (approx. US$80 million) subsidy program between 2024 and 2027 to support BCP (Business Continuity Planning) deployments. These funds will help enterprises and local governments invest in mobile SATCOM units, off-grid power systems, and hybrid backup communication solutions.
The company plays a critical role in this ecosystem as a trusted distribution partner of Eutelsat OneWeb, offering resilient LEO connectivity combined with value-added services such as:
| ● | Enterprise network redundancy to ensure uninterrupted operations. |
| ● | Server load balancing to optimize system performance and stability. |
| ● | Disaster recovery solutions to maintain business continuity under extreme scenarios. |
SATCOM BCP systems mounted on vehicles to deliver emergency broadband access during disasters or conflicts, designed for both enterprise and public use.
National Budget for SATCOM BCP
Japan's FY2026 budget boosts defense spending to a record over $58 billion, with roughly $500 million earmarked for intelligence and communication satellites to strengthen space-based capabilities. Taiwan is developing a massive $1.25 trillion NT ($39B+) eight-year special budget (2026-2033) for weapons and joint U.S. projects, emphasizing regional security
A Shared Vision for a Secure, Connected Future
The rising threats to digital infrastructure have made network resilience a top priority for governments and enterprises worldwide. Taiwan and Japan stand as leading examples in Asia, proactively investing in satellite communication, integrating civil-military response systems, and future-proofing their networks against cyber threats, geopolitical instability, and natural disasters. Their efforts reflect a broader global shift, as nations recognize the urgent need to safeguard critical connectivity. As a distribution partner of Eutelsat OneWeb, our company plays a pivotal role in this transformation, delivering mission-critical solutions such as enterprise network redundancy, server load balancing, disaster recovery systems, and SATCOM BCP solutions for disaster and wartime scenarios. These capabilities are essential for governments, critical infrastructure providers, and private enterprises seeking to ensure uninterrupted operations in an unpredictable world.
With geopolitical and environmental risks on the rise, network resilience is no longer just a technical consideration - it is a strategic imperative. By embedding this vision in national planning, Taiwan and Japan not only secure their digital futures but also set a global benchmark for allied democracies striving for a more secure and connected world. While the Company does not currently generate revenue from contracts in the civilian telecommunications sector, we are actively engaged in discussions with prospective partners - including governments, enterprises, mobile network operators, satellite providers, and infrastructure stakeholders - about using our solutions to support hybrid, resilient communications. Our platform, which is software-defined and carrier-neutral, is specifically designed to enable automatic recovery, satellite-based failover, and dynamic traffic routing in the event of fiber disruptions or terrestrial infrastructure loss.
We believe our technology is well-positioned to support the growing demand for resilient connectivity across mobile backhaul, disaster response, rural access, business continuity, and critical infrastructure markets. However, there can be no assurance that these discussions will result in binding agreements or generate revenue in the near term.
Principal Factors Affecting Financial Performance
We believe that our operating and business performance will be driven by various factors that affect the Aerospace & Defense and Civilian Telecommunications segments including the magnitude of defense spending by the U.S. and its allies, trends in air travel affecting the commercial airline industry, and trends in the evolution of the digital infrastructure and technologies deployed by mobile network operators, which collectively constitute the customer bases that we target, as well as general macroeconomic factors. Key factors that may affect our future performance include:
| ● | our ability to enter into and maintain long-term business arrangements with potential partners that are defense contractors and other potential military and government customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in the commercial aviation and airline industries and other potential aerospace customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in civilian telecommunications industries and other potential telecommunications customers, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors; |
| ● | our ability to enter into and maintain long-term business arrangements with potential partners in satellite communications industries, including satellite and constellation operators with satellites in various orbits such as LEO, MEO, GEO and HEO, which depends on numerous factors including the technical integration of our technology and services with their satellites and core networks; |
| ● | our ability to secure and maintain the relevant licenses and regulatory approvals to operate as a distribution partner of satellite bandwidth from our current and potential satellite and constellation partners in our potential target countries and regions, which depends on numerous factors including the navigation of both national and international regulatory regimes and coordination with ministries of communications or their equivalent; |
| ● | our ability to secure and maintain the relevant type approvals, as necessary, to install our universal terminals on airborne, maritime and land-based vehicles and platforms, such as the DO-160 certification for installation of our systems on aircraft, which depends on numerous factors including the navigation of both governmental and third-party regulatory regimes and coordination with key stakeholders; |
| ● | the extent of the adoption of our products and services by potential Aerospace & Defense and Civilian Telecommunications 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 number of manned and unmanned defense platforms in service in our markets, including changes in fleet size by one or more of our potential military or government customers; |
| ● | the geopolitical environment and other trends that affect defense spending; |
| ● | continued demand for connectivity and proliferation of manned and unmanned defense platforms, including UAVs and drones; |
| ● | 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; |
| ● | the number of cell towers, base stations and antennas deployed by mobile network operators and digital infrastructure developers in our markets, including consolidation of the telecommunications industry or changes in network topology due to transitions from 4G to 5G and, eventually to 6G mobile networks by one or more of our potential civilian telecommunications partners; |
| ● | continued demand for connectivity and proliferation of Wi-Fi enabled devices, including smartphones, tablets and laptops; |
| ● | our ability to obtain required 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. |
Recent Events
Merger with IX Acquisition Corp.
On March 29, 2024, we entered into a merger agreement the "Merger Agreement") with IX Acquisition Corp. ("IXAQ"), a Cayman Islands exempted company (which will re-domicile from being a Cayman Islands company and become a Delaware corporation), and AKOM Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of IQAC ("Merger Sub").
The Merger is intended to provide Aerkomm with enhanced access to public capital markets, institutional investors, and strategic partners. If consummated, we expect this transaction to improve our liquidity position and support the scale-up of defense and telecom commercialization initiatives.
The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, following the domestication to Delaware of IXAQ, Merger Sub will merge with and into the Company (the "Merger"), after which the Company will be the surviving corporation and a wholly-owned subsidiary of IXAQ. In connection with the Merger, IXAQ will be renamed "AKOM Inc." The Merger will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the parties to the Merger Agreement and specified in the articles of merger. The Merger is expected to close prior to September 30, 2026.
The Amendment provides that any lock-up period applicable to the Sponsor or any officers, directors or affiliates of Parent will terminate at the Closing of the Merger and changes the percentage of the Founder Shares being treated as Escrowed Sponsor Shares from 50% to 25%, adds a provision providing for the Company to pay certain amounts to Parent to cover its working capital and extension expenses, and adds a provision that Parent may terminate the Merger Agreement at any time prior to the Closing Date if the Company or any Subsidiary of the Company enters into voluntary bankruptcy or fails to remove within 60 days any petition in bankruptcy filed against it prior to Closing.
Additional information relating to the Merger along with the Merger Agreement can be found in our Current Report on Form 8-K filed with the SEC on April 4, 2024. In connection with the transaction described herein, the Company filed relevant materials with the SEC, including the Registration Statement on Form S-4 and a proxy statement/prospectus. Additional information relating to the S-4 can be found in our Current Report on Form 8-K filed with the SEC on May 16, 2024.
Planned Merger with Ejectt
On July 28, 2023, we and Ejectt, Inc., a Taiwan-based company principally engaged in the manufacture and sale of aluminum foil and the installation and operation of solar power plants, signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and delivery of a notice and merger contract to Ejectt, which were delivered to Ejectt on February 1, 2024. At a May 23, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved the terms of the merger plan and agreement and its being signed by the chairperson of Aerkomm Taiwan. On the same day, the shareholders of Ejectt approved the proposed merger and the merger agreement was then signed by the parties on May 23, 2024. Under the merger agreement and contingent only on the merger's receiving necessary governmental approvals, the merger will be consummated, and the surviving company of the merger will be Aerkomm Taiwan.
On March 11, 2026, Aerkomm Taiwan completed the previously announced merger (the "Merger") with Ejectt. Before consummation of the Merger, Aerkomm Taiwan was owned 49% by the Company but was treated by the Company as a consolidated subsidiary because the Company had de facto voting, governance and economic control of Aerkomm Taiwan. As previously announced, on July 28, 2023, Aerkomm Taiwan and Ejectt signed a non-binding letter of intent with respect to a possible merger between Aerkomm Taiwan and Ejectt. At a January 30, 2024 meeting of the shareholders of Aerkomm Taiwan, the shareholders approved pursuing a merger with Ejectt, under which Aerkomm Taiwan would be the surviving company, and an offer of merger was delivered to Ejectt on February 1, 2024. The proposed merger was approved by the respective shareholders of Aerkomm Taiwan and Ejectt in shareholder meetings held on May 23, 2024 and an Agreement and Plan of Merger (the "Merger Agreement") was signed by the two companies effective as of that date.
Under Taiwanese law, the Merger was subject to approval of the Taiwan Department of Investment Review, to which an application was submitted on July 10, 2024. The Merger became effective on March 11, 2026 (the "Effective Time") pursuant to the recently received official approval notice from the Taiwan Depository & Clearing Corporation confirming that Ejectt's scripless share registration was terminated as of March 11, 2026
Strategic and International Defense Pipelines
As of this filing, we are shifting from pursuing international growth through Direct Commercial Sales (DCS) to Foreign Military Sales (FMS) pathways:
| ● | Japan: Engaged with local integrators and defense authorities regarding UAV communications terminals and software-defined modems; three ongoing pilot evaluations. |
| ● | Taiwan: Collaborating with telecom operators and disaster resilience agencies on mobile SATCOM BCP deployments; application-based discussions tied to regional contingency planning. |
| ● | European Union: In active dialogue with five EU-based primes in connection with the IRIS² satellite sovereignty initiative and C4ISR modernization programs; R&D co-development discussions underway. |
Across these efforts, we are pursuing revenue opportunities through strategic partnerships, licensing, and terminal sales. As of the date of this filing, we are actively engaged with over 25 government agencies, defense integrators, and commercial primes across the U.S., Japan, EU, and Indo-Pacific. These engagements span stages from early requests for information (RFI) to pilot testing and integration evaluations. The indicative value of our aggregate opportunity pipeline exceeds $150 million, though no assurance can be given that these engagements will convert to binding agreements. We anticipate initial award decisions on a subset of these opportunities during 2025.
Smaller Reporting Company
Although we no longer qualify as an Emerging Growth Company, or EGC, we continue to qualify as a smaller reporting company, which allows us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation that are available to an EGC. In addition, as a smaller reporting company with less than $100 million in annual revenue, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on these exemptions, we have taken advantage of reduced reporting obligations in this quarterly report on Form 10-Q.
Recent Market Information
The IATA (International Air Transport Association) in May 2025 issued a report entitled Passenger Market Analysis.
| ● | Industry-wide revenue passenger-kilometers (RPKs), a measure of passenger traffic volume, have shown a strong recovery in recent years, surpassing pre-pandemic (2019) levels by 3.8% in 2024. |
| ● | Available seat-kilometers (ASKs) in the airline industry experienced an 8.7% increase in 2024 compared to 2023. |
| ● | In 2024, both global and domestic passenger traffic saw significant growth, with some regions experiencing particularly strong increases. Globally, air passenger demand increased by 10.4% compared to 2023 and surpassed pre-pandemic levels by 3.8%, and domestic traffic in particular grew by 5.7%. |
| ● | In 2024, international RPKs (Revenue Passenger Kilometers) recovered strongly, with global traffic exceeding pre-pandemic levels. IATA reported that total full-year traffic rose 10.4% compared to 2023 and was 3.8% above 2019 levels. International demand specifically rose 9.5% in October 2024 compared to October 2023. Furthermore, IATA's passenger market analysis indicates that international RPKs surpassed 2019 levels by 0.5% in 2024, with load factors reaching a record high of 83.2%. Asia Pacific airlines played a significant role in this recovery, contributing to more than half of the global growth. |
Results of Operations
The discussion below relates to our two fiscal years ended on December 31, 2025 and 2024.
Comparison of Years Ended December 31, 2025 and 2024
The following table sets forth key components of our results of operations during the years ended December 31, 2025 and 2024.
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Sales | $ | - | $ | 1,342,931 | $ | (1,342,931 | ) | (100.0 | )% | |||||||
| Cost of sales | - | 1,145,163 | 1,145,163 | (100.0 | )% | |||||||||||
| Operating expenses | 15,202,129 | 24,117,347 | (8,915,218 | ) | (37.0 | )% | ||||||||||
| Loss from operations | (15,202,129 | ) | (23,919,579 | ) | 8,717,450 | (36.4 | )% | |||||||||
| Net non-operating loss | (3,070,144 | ) | (5,272,872 | ) | 2,202,728 | (41.8 | )% | |||||||||
| Loss before income taxes | (18,272,273 | ) | (29,192,451 | ) | 10,920,178 | (37.4 | )% | |||||||||
| Income tax expense | 2,400 | 2,400 | - | - | % | |||||||||||
| Net Loss | (18,274,673 | ) | (29,194,851 | ) | 10,920,178 | (37.2 | )% | |||||||||
| Other comprehensive income | 120,881 | 300,660 | (179,779 | ) | (59.8 | )% | ||||||||||
| Total comprehensive loss | $ | (18,153,792 | ) | $ | (28,894,191 | ) | $ | 10,740,399 | (37.2 | )% | ||||||
Revenue. Our total revenue was $0 for the year ended December 31, 2025, as compared to the sales of ground antenna and other equipment units of $1,294,202 to a related party, and service sales of $48,729 provided to others for the year ended December 31, 2024.
Cost of sales. Our cost of sales includes the direct costs of our raw materials and component parts, as well as the cost of labor and overhead. Our cost of sales was $0 and $1,145,163 for the years ended December 31, 2025 and 2024, respectively. The cost of sales for the year ended December 31, 2024 consisted of cost of ground antenna and other equipment units purchased from a related party and others in the amount of $1,021,563 and $123,600, respectively.
Operating expenses. Our operating expenses consist primarily of compensation and benefits, professional advisor fees, cost of promotion, business development, business travel, transportation costs, and other expenses incurred in connection with general operations. Our operating expenses decreased by $8,915,218 to $15,202,129 for the year ended December 31, 2025, from $24,117,347 for the year ended December 31, 2024. Such operating expense decrease was mainly due to the decrease in R&D expense, stock-based compensation, salaries expense, and professional fee in the amount of $4,438,652, $3,018,688, $1,946,312 and $368,490, respectively, which was offset by the increase in other operation expenses in the amount of $908,951, respectively.
Net non-operating loss. We had $3,070,144 and $5,272,872 net non-operating loss for year ended December 31, 2025, and 2024, respectively. Net non-operating loss for the year ended December 31, 2025, primarily consisted of interest expense of $1,428,168, loss from change in fair value of SAFE liabilities of $610,000, and foreign currency loss of $516,590.
Loss before income taxes. Our loss before income tax is $18,272,273 for the year ended December 31, 2025, as compared to the loss of $29,192,451 for the year ended December 31, 2024, a decrease of $10,920,178, or 37.4%, as a result of the factors described above.
Income tax expense. Income tax expense for the year ended December 31, 2025, and 2024 were $2,400. The income tax expenses mainly consist of California franchise tax and foreign subsidiary's income tax expenses.
Total comprehensive loss. As a result of the cumulative effect of the factors described above, our total comprehensive loss decreased by $10,740,399, or 37.2%, to $18,153,792 for the year ended December 31, 2025, from $28,894,191 for the year ended December 31, 2024.
Liquidity and Capital Resources
In assessing our liquidity, we monitor and analyzes its cash on-hand and its operating and capital expenditure commitments. Our liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Cash flow from investing and financing activities have been utilized to finance our working capital requirements. As of December 31, 2025, we had cash outflow from operating activities of $5,635,927 and had cash and restricted cash of $72,579. Our working capital deficit was $70,539,468 as of December 31, 2025. These conditions give rise to substantial doubt and uncertainty regarding our ability to continue as a going concern. If we are able to carry out our plans as detailed below, we could alleviate this doubt.
We have taken measures and is experiencing and anticipates developments that management believes will improve its financial position. These include that two of the our current shareholders (the "Lenders") have each committed to provide to a $10 million bridge loan (together, the "Loan Commitments" and loans made under the Loan Commitments, "Loans") for an aggregate committed principal amount of $20 million, to bridge the our cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel of land (the "Land") that we purchased in Taiwan. The Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon our request prior to the time that title to the Land is vested in our subsidiary, Aerkomm Taiwan, to pay the outstanding payable to our vendors. On April 25, 2022, the Lenders further amended the commitment and agreed to increase the percentage of earlier closing amount from 25% to 100%, thus making the full $20 million of the Loan Commitments available to us.
In addition to the foregoing, on March 1, 2023, we entered into a letter agreement with Well Thrive Limited, one of the lenders under the Loan Commitment, in which it was agreed that, to support us, one-half of the Loan Commitment amount of Well Thrive Limited (thus, $5,000,000) would be funded (by Well Thrive or by lenders arranged by Well Thrive) at no interest and with no fixed maturity date, with the remaining $5,000,000 of Well Thrive Limited's Loan Commitment to be funded on the basis of the originally agreed terms. As of December 31, 2025, we had received Loans totaling NT$131,769,729 (approximately $4.2 million) from multiple individual lenders arranged by Well Thrive. Therefore, the balance of $15,799,499 of the $20 million in aggregate loan commitments from the two Lenders was still available as of December 31, 2025.
In connection with the planned Merger with IXAQ, we have obtained $35 million in private investment in public equity ("PIPE") investment commitments to be funded before closing of the Merger. Further, us and IXAQ have entered into a letter agreement with Benchmark Company LLC ("Benchmark") under which Benchmark has agreed to provide capital markets advisory services to us (including attaining research coverage, assisting in roadshows and investor meetings and other advisory services) and to act as placement agent for the private placement of securities by us. In connection with the arrangement with Benchmark, we are targeting the raise of $100 million in connection with the closing of and after the Merger, in addition to the $35 million in already committed PIPE investment and up to approximately $8.9 million of cash (net of transaction costs and depending on the amount of shareholder redemptions) contributed from the IXAQ side as a result of the Merger.
Our ability to remain solvent and settle its obligations when they come due is dependent on its ability to raise additional capital in the form of permanent equity and to successfully gain listing of its common stock on a national exchange such as the NASDAQ capital markets, so that its current investors that have invested in the form of convertible debt and convertible notes are incentivized to convert their debt holdings into common stock that could be traded in an orderly market. As of December 31, 2025, we expect approximately $23.2 million convertible notes and approximately $10.0 million SAFE can be converted into equity upon Merger.
We also expects to begin generating significant recurring revenues in first quarter 2027, including in connection with the OneWeb Distribution Partner Agreement entered into between Aerkomm Japan, as Distribution Partner, and OneWeb on October 1, 2024, pursuant to which Aerkomm Japan was appointed as a distributor for OneWeb in Japan and Taiwan and we had made our first delivery of a certain classified radar system to a governmental defense customer on October 24, 2024.
We believe it will have sufficient liquidity to fund its operations for at least the next twelve months following the issuance of these consolidated financial statements. This assessment considers our current available cash, approximately $15.8 million in aggregate available loan commitments from two lenders, $35 million in PIPE investment commitments signed concurrently with entering into the Merger Agreement with IXAQ, and additional capital expected to be raised through SAFE financings and the Benchmark relationship. In addition, approximately $33.2 million of outstanding convertible notes and SAFE are expected to convert into equity upon consummation of the Merger, which would further strengthen the our capital resources and reduce cash obligations. We also expects to benefit from the cash to be brought in by IXAQ in connection with the Merger (subject to shareholder redemptions), the anticipated ramp-up of revenue-generating commercial sales, synergies from the merger of Aerkomm Taiwan with its exclusive distributor EJECTT, Inc., and continued disciplined management of hiring and other investments. Based on these factors, we believe its working capital will be adequate to sustain our operations for the next twelve months.
If the Merger does not close and thus the $35 million in PIPE commitments that are contingent on closing of the Merger are no longer committed, we expect to be able to fund operations over the next 12 months by short-term borrowings and other loan commitments, the balance of approximately $15.8 million of the $20 million in above-referenced loan commitments from two shareholders, renegotiating financing arrangements with some or all of the committed PIPE investors (who are our existing investors and have a strong interest in its success), slowing the pace of hiring and other investments that we would otherwise undertake if the Merger closes, synergies and efficiencies from the planned merger with EJECTT, and revenues received from the ramp-up of commercial sales. In conclusion, per the non-binding term sheet agreement aforementioned, we will be able to fund the operations and development for the next 12 months.
The following table provides detailed information about our net cash flow:
| Years Ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (5,635,927 | ) | $ | (5,649,924 | ) | ||
| Net cash provided by (used in) investing activities | 196,688 | (2,292,336 | ) | |||||
| Net cash provided by financing activities | 5,027,678 | 895,228 | ||||||
| Net increase (decrease) in cash and restricted cash | (411,561 | ) | (7,047,032 | ) | ||||
| Cash and restricted cash at beginning of year | 109,227 | 7,428,702 | ||||||
| Foreign currency translation effect on cash and restricted cash | 374,913 | (272,443 | ) | |||||
| Cash and restricted cash at end of year | $ | 72,579 | $ | 109,227 | ||||
Operating Activities
Net cash used in operating activities was $5,635,927 for the year ended December 31, 2025, as compared to $5,649,924 for the year ended December 31, 2024. In addition to the net loss of $18,274,673, the decrease in net cash used in operating activities during the year ended December 31, 2025 was mainly due to decrease in accounts payable and operating lease liability of $300,099 and $145,783, respectively, offset by non-cash items of $5,961,248, which consisted of depreciation and amortization, stock-based compensation, loss from disposal equipment, change in fair value of SAFE liabilities, impairment loss on investment, loss on inventories write off, loss on disposal of subsidiaries, and gain on settlement of accounts payable. The decrease also offset by increase in accrued expense and other payable of $5,016,463 and $2,135,460, respectively.
Net cash provided by and used in operating activities was $5,649,924 for the year ended December 31, 2024, as compared to $2,145,787 for the year ended December 31, 2023. In addition to the net loss of $29,194,851, the decrease in net cash used in operating activities during the year ended December 31, 2024 was mainly due to increase in inventories, other receivable, and prepayment from customer - related party of $567,443, $269,882, and $644,570, respectively, offset by non-cash items of $12,179,923 which consisted of depreciation and amortization, stock-based compensation, non-cash R&D expense, change in fair value of SAFE liabilities, and impairment loss on investment. The decrease also offset by decrease in prepayment for equipment and intangible assets - customer projects, increase in account payable, increase in accrued expense, and increase in other payable of $3,952,458, $611,213, $5,461,682 and $2,483,498, respectively.
Investing Activities
The net cash provided by investing activities for the year ended December 31, 2025 was $196,688 as compared to $2,292,336 net cash used in investing activities for the year ended December 31, 2024. Net cash provided by investing activities for the year ended December 31, 2025 was mainly due to disbursement for other receivable - related parties loans of $92,149 and proceeds from other receivable-related parties loans of $123,761, offset by purchase of property and equipment of 16,484 and cash outflow from disposal of subsidiaries of $2,738.
The net cash used in investing activities for the year ended December 31, 2024 was $2,292,336 as compared to $8,096,308 for the year ended December 31, 2023. Net cash used in investing activities for the year ended December 31, 2024 was mainly due to disbursement for other receivable - related parties loans of $2,203,619, and purchase of property and equipment of $88,717.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2025 was $5,027,678 compared to $895,228 for the year ended December 31, 2024. Net cash provided by financing activities for the year ended December 31, 2025, was mainly attributable to the proceeds from SAFE notes of $4,000,000 and proceeds from short-term loan of $2,953,872, offset by the repayment of short-term loan of $1,929,563.
Net cash provided by financing activities for the year ended December 31, 2024 was $895,228 compared to $8,430,528 for the year ended December 31, 2023. Net cash provided by financing activities for the year ended December 31, 2024 was mainly attributable to the net proceeds from injection of subscribed capital of $527,782, proceeds from issuance of common stock of $3,894,000, proceeds from SAFE notes of $4,997,200, proceeds from other payable-related parties of $172,675, and proceeds from short-term loan of $606,544 offset by the repayment of short-term loan of $960,731, and repayment of convertible long-term bonds payable of $8,330,160.
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 years ended December 31, 2025 and 2024 were $16,484 and $88,717, respectively.
We anticipate an increase in capital spending in fiscal year 2026 and estimate that capital expenditures will range from $6 million to $10 million as we will continue to advance our semiconductor designs, our software-defined platforms and continue to execute our network expansion strategy. We expect to be able to raise these required funds in connection with our planned Merger with IXAQ although we cannot provide assurance that we will be successful in this effort.
Inflation
Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
Our operating results and operating cash flows historically have not been subject to significant seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.
Critical Accounting Estimates
Financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Certain accounting estimates are particularly sensitive because of our significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe that the following accounting estimates are critical to our business operations and understanding our consolidated financial results.
SAFE Liabilities
In connection with the Simple Agreement for Future Equity ("SAFE") agreements that we entered into with four third parties set forth in Note 16, we determined that the SAFE liabilities should classified as a derivative liability in accordance with ASC 815-40 "Derivatives and Hedging". As a result, the SAFE liabilities shall be measured initially, and subsequently at fair value on each reporting date. We will continue to adjust the carrying value of the SAFE liabilities until contingencies are finally determined. Any changes in fair value will be recorded as a gain or loss in the statements of operations and comprehensive loss. As of December 31, 2025, based on the Fair Value Analysis of SAFE prepared by an independent valuation specialist, the fair value of the SAFEs was estimated at $10,020,000. The valuation was determined using a Monte Carlo simulation reflecting a probability-weighted outcome of multiple scenarios, including equity financing, optional conversion, and dissolution. Key assumptions used in the simulation included an IXAQ stock price of $12.20, a risk-free rate of 3.77%, and an annualized volatility of 50.2%. The Company had received aggregate proceeds of $8,997,200 from SAFE holders on the respective issuance dates. The resulting change in fair value of the derivative liability recognized for the year ended December 31, 2025, was $610,000.
Goodwill Impairment
Management evaluates goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
During 2023, management evaluated the carrying value and expected future economic benefits associated with acquisitions completed in 2022 and prior periods. Based on this evaluation, including the Company's strategic repositioning, evolving operational focus, commercialization timeline, and revised expectations regarding the future economic contribution of certain acquired assets and operations, management determined that an impairment charge of $4,561,037 was appropriate for goodwill associated with those prior acquisitions.
Management subsequently evaluated goodwill associated with acquisitions completed after 2023 and determined that no impairment existed for the years ended December 31, 2025 and 2024.
As of December 31, 2025 and 2024, goodwill was $4,573,819.
Impairment of long-term investment.
Cost method investment is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security Cost method investment is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. During the year ended December 31, 2025 and 2024, the Company recorded $299,069 and $3,699,278 impairment charges for its investments, respectively.
Recent Accounting Pronouncements
See Note 3 of the notes to the consolidated financial statements included elsewhere in this annual report for a discussion of recently issued accounting standards.
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