Form 10-K Aerkomm Inc. For: Dec 31 – StreetInsider.com

form-10-k-aerkomm-inc-for:-dec-31-–-streetinsider.com

Firstly as we begin, let me say that geoFence has built in fast and accurate updates!


News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: December 31,
2020

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

For the transition period from ____________
to _____________

Commission File No. 00055925

AERKOMM INC.

(Exact name of registrant as specified in
its charter)

Nevada   46-3424568
(State or other jurisdiction of


incorporation or organization)
  (I.R.S. Employer


Identification No.)

44043 Fremont Blvd., Fremont, CA 94538

 (Address of principal executive offices)

(877) 742-3094

(Registrant’s telephone number, including
area code)

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

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

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

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

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

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

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

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

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

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

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

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

As of June 30, 2020 (the last business
day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s
common stock held by non-affiliates (based upon the closing price of such shares as reported on The OTCQB Market) was approximately
$81,901,661. Shares of the registrant’s common stock held by each executive officer and director and by each person
who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed
to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other
purposes.

There were a total of 9,637,051 shares
of the registrant’s common stock outstanding as of March 24, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Aerkomm Inc.

Annual Report on Form 10-K

Year Ended December 31, 2020

TABLE OF CONTENTS

i

Special Note Regarding Forward Looking Statements

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

  our future financial and operating results;
     
  our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business;
     
  our ability to attract and retain customers;
     
  our dependence on growth in our customers’ businesses;
     
  the effects of changing customer needs in our market;
     
  the impact and effects of the global outbreak of the coronavirus (COVID-19) pandemic, and other potential pandemics or contagious diseases or fear of such outbreaks, on the global airline and tourist industries, especially in the Asia Pacific region;
     
  the effects of market conditions on our stock price and operating results;
     
  our ability to maintain our competitive advantages against competitors in our industry;
     
  our ability to timely and effectively adapt our existing technology and have our technology solutions gain market acceptance;
     
  our ability to introduce new offerings and bring them to market in a timely manner;
     
  our ability to maintain, protect and enhance our intellectual property;
     
  the effects of increased competition in our market and our ability to compete effectively;
     
  our plans to use the proceeds from our completed public offering;
     
  our expectations concerning relationship with customers and other third parties;
     
  the attraction and retention of qualified employees and key personnel;
     
  future acquisitions of our investments in complementary companies or technologies; and
     
  our ability to comply with evolving legal standards and regulations.

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

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

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

ii

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

Summary of Risk Factors

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

Risks Related to Our Business

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

Excluding non-recurring revenues in the
second quarter of 2019 and 2018 from affiliates, we have incurred operating losses in every quarter since we launched our business
and may continue to incur quarterly operating losses, which could negatively affect the value of our company;
An extended delay in the transfer of title
to us of the Taiwan land parcel that we recently purchased could delay the building of our first satellite ground station and have
a negative impact on our business prospects;
If the transactions contemplated by several
memorandums of understanding (MOU) do not proceed, our results of operations and financial condition could be materially adversely
affected;
We may not be able to grow our business
with our current airline partner or successfully negotiate agreements with airlines to which we do not currently provide our service;
We may experience network capacity constraints
in our future operation regions and we expect capacity demands to increase, and we may in the future experience capacity constraints
internationally. If we are unable to successfully implement planned or future technology enhancements to increase our network capacity,
or our airline partners do not agree to such enhancements, our ability to acquire and maintain sufficient network capacity and
our business could be materially and adversely affected;
We may not be successful in our efforts
to develop and monetize new products and services that are currently in development, including our operations-oriented IFEC communications
services;
The demand for in-flight broadband internet
access service may decrease or develop more slowly than we expect. We cannot predict with certainty the development of the U.S.
or international in-flight broadband internet access market or the market acceptance for our products and services;
Our possession and use of personal information
and the use of credit cards by our customers present risks and expenses that could harm our business. Unauthorized disclosure or
manipulation of such data, whether through breach of our network security or otherwise, could expose us to costly litigation and
damage our reputation;
We will source our content from studios,
distributors and other content providers, and any reduction in the volume of content produced by such content providers could hurt
our business by providing us with less quality content to choose from and resulting in potentially less attractive offerings for
passengers; and
We are a holding company with no operations
of our own, and we depend on our subsidiaries for cash.

Risks Relating to Our Industry

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

Air traffic congestion at airports, air
traffic control inefficiencies, weather conditions, such as hurricanes or blizzards, increased security measures, new travel-related
taxes, the outbreak of disease or any other similar event could harm the airline industry; and
The COVID-19 pandemic may result in a
long-term contraction in the global airline industry, the bulk of which likely would be borne by carriers in the Asia-Pacific region.
As a development stage IFEC service provider with an emphasis on Asia Pacific, the continuation of the coronavirus pandemic may
have a material adverse effect on our business, results of operation, financial condition and stock price.

iii

Risks Relating to Our Technology
and Intellectual Property

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

We rely on service providers for certain
critical components of and services relating to our satellite connectivity network;
Our use of open-source software could
limit our ability to commercialize our technology;
The satellites that we currently rely
on or may rely on in the future have minimum design lives, but could fail or suffer reduced capacity before then; and
Satellites that are not yet in service
are subject to construction and launch related risks.

Risks Relating to Ownership of our
Common Stock

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

Our common stock is quoted on the OTCQX
Best Market, which may have an unfavorable impact on our stock price and liquidity;
Our common stock is quoted on the Professional
Segment of the regulated market of Euronext Paris, which may have an unfavorable impact on our stock price and liquidity;
We may be subject to penny stock regulations
and restrictions and you may have difficulty selling shares of our common stock;
Investors may experience immediate and
substantial dilution; and
Our articles of incorporation, bylaws
and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock
price to decline.

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

Use of Terms

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

“we,” “us,” “our,” or “our company,” are to the
combined business of Aerkomm Inc., a Nevada corporation, and its consolidated subsidiaries;
“Aircom” are to Aircom Pacific, Inc., a California corporation and wholly owned subsidiary
of our company;
“Aircom HK” are to Aircom Pacific Inc. Limited, a Hong Kong company and wholly owned
subsidiary of Aircom;
“Aircom Japan” are to Aircom Japan, Inc., a Japanese company and wholly owned subsidiary
of Aircom;
“Aerkomm Malta” are to Aerkomm Pacific Limited, a Malta company and wholly owned subsidiary
of Aircom Seychelles;
“Aerkomm Taiwan” are to Aerkomm Taiwan Inc., a Taiwanese company and wholly owned subsidiary
of our company;
“Aircom Seychelles” are to Aircom Pacific Ltd., a Republic of Seychelles company and
wholly owned subsidiary of Aircom;
“Aircom Taiwan” are to Aircom Telecom LLC, a Taiwanese company and wholly owned subsidiary
of Aircom;
“Beijing Yatai” are to Beijing Yatai Communication Co., Ltd., a company organized under
the laws of China and a wholly owned subsidiary of Aerkomm Taiwan;
“SEC” refers to the U.S. Securities and Exchange Commission;
“Securities Act” refers to the Securities Act of 1933, as amended; and
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended.

Stock Splits

On January 10, 2017, we completed a 1-for-10
reverse split of our issued and outstanding common stock. On January 16, 2019, we completed a 1-for-5 reverse split of our authorized
and issued and outstanding common stock. All share and per share information in this report has been adjusted to give retroactive
effect to such reverse splits. 

iv

PART I

Overview

With advanced technologies and a unique
business model, we, as a development stage service provider of IFEC solutions, intend to provide airline passengers with a broadband
in-flight experience that encompasses a wide range of service options. Such options include Wi-Fi, cellular, movies, gaming, live
TV, and music. We plan to offer these core services, which we are currently still developing, through both built-in in-flight entertainment
systems, such as a seat-back display, as well as on passengers’ own personal devices. We also expect to provide content management
services and e-commerce solutions related to our IFEC solutions.

We plan to partner with airlines and offer
airline passengers free IFEC services. We expect to generate revenue through advertising and in-flight transactions. We believe
that this is an innovative approach that differentiates us from existing market players.

To complement and facilitate our planned
IFEC service offerings, we intend to build satellite ground stations and related data centers within the geographic regions where
we expect to be providing IFEC airline services.

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

Recent Developments

Beijing Yatai Communication Co.,
Ltd. (China)

On November 6, 2020, our Company completed
the transfer of ownership of Beijing Yatai to Aerkomm Taiwan, a wholly owned subsidiary of our Company. Formerly, Beijing Yatai
was a wholly owned subsidiary of Aircom Taiwan, a wholly owned subsidiary of Aircom Pacific, Inc. which, in turn, is a wholly owned
subsidiary of the Company.

Taiwan Land Acquisition

On May 1, 2018, our Company and Aerkomm
Taiwan entered into a binding memorandum of understanding with Tsai Ming-Yin (the “Seller”) with respect to the acquisition
by Aerkomm Taiwan of a parcel of land located in Taiwan (the “Taiwan Land Parcel”). The Taiwan Land Parcel is expected
to be used to build a satellite ground station and data center. On July 10, 2018, our Company, Aerkomm Taiwan and the Seller entered
into a definitive real estate sales contract regarding this acquisition. Pursuant to the terms of the contract, and subsequent
amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3, 2019, the Company had paid to the Seller in installments
refundable prepayments of $33,850,000 as of December 31, 2018. On July 2, 2019, the Company paid the remaining purchase price balance
of $624,462. Under the terms of the real estate sales contract for the Taiwan Land Parcel, these purchase price payments were no
longer refundable as of September 30, 2020. On November 10, 2020, our Company entered into a further contract amendment (the “Amendment”)
with the Seller to allow for a refund of the full purchase price of the Taiwan Land Parcel if licenses and approvals needed to
transfer land title to Aerkomm Taiwan are not granted by July 31, 2021. 

Private Placement Offering

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

Payments of principal, premium,
interest and any payments thereof in respect of the Credit Enhanced Bonds will have the benefit of a bank guarantee
denominated in U.S. dollars and issued by Bank of Panhsin Co., Ltd., or Panhsin Bank, based in Taiwan. In order to obtain the guarantee from Panhsin Bank, we entered
into a line of credit in the amount of $10,700,000 with Panhsin Bank. This line of credit is guaranteed by one of our shareholders
and our deposit of $3,210,000 at Panhsin Bank as pledged collateral. Unless previously
redeemed, converted or repurchased and canceled, the Credit Enhanced Bonds will be redeemed on December 2, 2025 at 105.11% of
their principal amount and the Coupon Bonds will be redeemed on December 2, 2025 at 100% of their principal amount plus any
accrued and unpaid interest. The Coupon Bonds will bear interest from and including December 2, 2020 at the rate of 7.5% per
annum. Interest on the Coupon Bonds is payable semi-annually in arrears on June 1 and December 1 each year, commencing on
June 1, 2021.

Unless previously redeemed, converted or
repurchased and cancelled, the Bonds may be converted at any time on or after December 3, 2020 up to November 20, 2025 into shares
of Common Stock of our Company with a par value US$0.001 each (such shares of Common Stock, the “Conversion Shares”).
The initial conversion price for the Bonds is US$13.30 per Conversion Share and is subject to adjustment in specified circumstances.
Our Company’s Common Stock is quoted for trading on the OTC Markets Group Inc. OTCQX Best Market under the symbol “AKOM”
and on the Professional Segment of the regulated market of Euronext Paris (“Euronext Paris”) under the symbol
“AKOM” denominated in Euros on Euronext Paris. The Conversion Shares will be listed and traded on Euronext Paris. The
last reported closing price of our Company’s Common Stock on Euronext Paris on November 26, 2020 was €7.45 per share
and the exchange rate between U.S. dollar and Euro quoted by European Central Bank on November 26, 2020 was €1.00 = US$1.19.

1

The Bonds will mature on December 2, 2025
(the “Maturity Date”). Aerkomm has the option to redeem the Bonds at a redemption amount equal to the Early
Redemption Amount (as defined in the Offering Memorandum) in the case of (i) and (iii) below or Early Redemption Premium Amount
(as defined in the Offering Memorandum) in the case of (ii) below, as applicable, (i) in whole or in part, at any time on or after
December 2, 2023 and prior to the Maturity Date, if the Closing Price (converted into U.S. dollars at the then prevailing exchange
rate) of our Company’s Common Stock listed on the Euronext Paris for 20 trading days in any period of 30 consecutive trading
days, the last day of which occurs not more than fifteen trading days prior to the date on which notice of such redemption is given,
is greater than 130% of the Conversion Price on each applicable trading day or (ii) in whole or in part of the Bonds on the second
anniversary of the issue date or (iii) where 90% or more in principal amount of the Bonds issued have been redeemed, converted
or repurchased and cancelled. Holders of the Bonds may also require our Company to repurchase all or part of the Bonds on the third
anniversary of the Issue Date, at the Early Redemption Amount. Unless the Bonds have been previously redeemed, converted or repurchased
and canceled, Holders of the Bonds will also have the right to require our Company to repurchase the Bonds for cash at the Early
Redemption Amount if an Event of Delisting (as defined in the Offering Memorandum) or a Change of Control (as defined in the Offering
Memorandum) occurs.

The Bonds will contain provisions for the
adjustment of the Conversion Price in the event of the occurrence of certain dilutive events, including, among other things, bonus
issues to our Company’s stockholders, alterations to the nominal value of our Company’s shares, rights issues and capital
distributions (including any extraordinary dividends).

The Bonds have been listed and quoted on
the Singapore Exchange Securities Trading Limited, or the SGX-ST with effect from 9: 00 a.m., Thursday, December 3, 2020 (Singapore
time). There is currently no public market for the Bonds. 

The Bonds (and the Conversion Shares to
be issued upon conversion thereof) have not been and will not be registered under the United States Securities Act of 1933, as
amended (the “Securities Act”) and are exclusively being offered and sold pursuant to an offering memorandum
dated November 27, 2020 (the “Offering Memorandum”), outside of the United States in offshore transactions in
reliance on Regulation S under the Securities Act.

Each of the Credit Enhanced Bonds and the
Coupon Bonds will be represented by beneficial interests in respective permanent global certificates (the “Global Certificates”)
in registered form, which will be registered in the name of a nominee for, and deposited on or about December 2, 2020, with a common
depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”).
Interests in the Global Certificates will be subject to certain restrictions on transfer for a period of six (6) months after the
later of the commencement of the Offering and the latest closing date for the Offering. Beneficial interests in the Global Certificates
will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream and their
participants. Except as described in the Offering Memorandum, certificates for the Bonds will not be issued in exchange for interest
in the Global Certificates.

Yuanta Securities (Hong Kong) Company Limited
(“Yuanta”) has acted as initial purchaser with respect to the offering of the Bonds and is also acting as the
sole book runner and sole lead manager for the Offering. Our Company has agreed to pay Yuanta an aggregate amount of US$332,000
as management and underwriting commission and service fee being the sum of (i) 3% of the aggregate principal amount of the Credit
Enhanced Bonds, (ii) 6% of the aggregate principal amount of the Coupon Bonds and (iii) a service fee in the amount of US$20,000.

We intend to primarily use the net proceeds
(after deducting fees and expenses payable by us) from the Offering for the purposes of (1) conducting potential strategic investments
and acquisitions, (2) building our Company’s first ground station and data center in Taiwan, (3) engaging in product development,
and (4) supporting its working capital.

Underwritten Public Offering

On December 31, 2020, we completed an initial
closing of a “best efforts” underwritten public offering (the “Offering”) of our common stock, par value
$0.001 per share (the “Common Stock”), in which we issued and sold 96,160 shares of Common Stock at a price per share
of Euro 20.50, or approximately $25.00, for gross proceeds of Euro 1,971,280, or $2,406,915. The sole underwriter for the Offering
was Invest Securities SA, who has entered into a sub-placement agent agreement with Yuanta Securities (Hong Kong) Company Limited.

The material terms of the Offering are
described in the prospectus, dated November 5, 2020, filed by us with the Securities and Exchange Commission (the “Commission”)
on November 12, 2020, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”).
The Offering is registered with the Commission pursuant to a Registration Statement on Form S-1, as amended (File No. 333-237942),
initially filed by the Company on April 30, 2020 (the “Registration Statement”) and declared effective by the Commission
on November 6, 2020.

Although the shares offered by the prospectus
were registered under the Securities Act, no shares were or will be offered, sold or delivered within the United States or to U.S.
persons (as defined in Regulation S under the Securities Act (“Regulation S”)), and no directed selling efforts (as
defined in Regulation S) in the United States relating to the Company or the Offering will be made. The shares offered by the prospectus
are only being offered, sold and delivered to non-U.S. persons (as defined in Regulation S) in offshore transactions (as defined
in Regulation S) outside the United States.

Additional closings of the Offering
may be held from time to time until July 5, 2021, pursuant to an extension of the underwriting agreement with
Invest Securities SA signed on March 23, 2021, and can be further extended for up
to an additional 45 days if the over-subscription option is exercised.

2

With respect to the Offering, the Company
entered into a “best efforts” underwriting agreement (the “Underwriting Agreement”) with Invest Securities
SA (the “Underwriter”). The Underwriting Agreement provides for the offer and sale of up to 1,951,219 shares of Common
Stock on a best-efforts basis, at the public offering price of €20.50 per share, less underwriting commissions. Under the
terms of the Underwriting Agreement, the underwriter is not required to sell any specific number of shares in the Offering and
is under no obligation to purchase any shares in the Offering for its own account. The Company has granted the Underwriter the
option for a period of 45 days to purchase up to an additional 15% of the total number of shares of Common Stock to be offered
by the Company in the Offering at the public offering price, less underwriting commissions, solely to cover over-subscriptions,
if any.

The Underwriting Agreement contains customary
representations and warranties, agreements and obligations, closing conditions and termination provisions. The Company has agreed
to indemnify the Underwriter against certain liabilities and to contribute to payments the Underwriter may be required to make
because of any of those liabilities.

Aerkomm Trademark

On December 1, 2020, the United States
Patent and Trademark Office (the “USPTO”) issued a Final Office Action relating to Aerkomm Inc. indicating that our
US trademark application (Serial No. 88464588) for the name “AERKOMM,” which was originally filed with the USPTO on
June 7, 2019, was being rejected because of a likelihood of confusion with a similarly sounding name trademarked at, and in use
from, an earlier date. We are appealing this USPTO Final Office Action but there can be no guarantee that the USPTO will find on
appeal in favor of us. We are actively considering changing our name and may determine to do so prior to any appeal decision by
the USPTO.

Our Corporate History and Structure

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

For accounting purposes, the share exchange
transaction with Aircom was treated as a reverse acquisition, with Aircom as the acquirer and Aerkomm as the acquired party. To
the extent this report contains business and financial information for partial periods prior to the consummation of the reverse
acquisition, this information pertains to the business and financial information of Aircom and its consolidated subsidiaries. Aircom
owns all of the equity interests of Aircom Seychelles, Aircom HK, Aircom Japan and Aircom Taiwan.

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

On October 17, 2016, Aircom acquired Aircom
HK for $100,000. Aircom HK is a Hong Kong limited company formed on October 3, 2008 as Yanwei Information Technology Limited. Aircom
HK changed its name to Dadny Inc Limited on September 6, 2011 and changed its name again to Aircom Pacific Inc. Limited on July
22, 2015. Aircom HK is in charge of all of Aircom’s business and operations in Hong Kong and China. Presently, Aircom HK’s
primary function is business development, both with respect to airlines as well as content providers and advertising partners based
in Hong Kong and China. It is also actively seeking strategic partnerships in those areas, through which Aircom may leverage its
product offerings to provide enhanced services to prospective customers. Aircom also plans to provide local support to Hong Kong-based
airlines via Aircom HK and Aircom HK owned teleports located in Hong Kong.

On December 15, 2016, Aircom acquired Aircom
Japan for $600,000. Aircom Japan was formed under the laws of Japan on August 29, 2011 as Dadny (Japan) Inc. and changed its name
to Aircom Japan, Inc. on July 1, 2016. Aircom Japan is responsible for Aircom’s business development efforts and general
operations located within Japan.

Aircom Taiwan, which became a wholly owned
subsidiary of Aircom in December 2017, was organized under the laws of Taiwan on June 29, 2016. During 2017, prior to Aircom Taiwan
becoming a wholly owned subsidiary of Aircom, Aircom advanced a total of $460,000 (the “Prepayment”) to Aircom Taiwan
for working capital as part of a planned $1,500,000 aggregate equity investment (the “Equity Investment”) in Aircom
Taiwan. Aircom Taiwan at that time acted as Aircom’s agent in Taiwan. Before Aircom Taiwan was allowed to issue equity to
Aircom, because Aircom was a foreign investor, the Equity Investment had to be approved by the Investment Review Committee of the
Ministry of Economic affairs of Taiwan (the “Committee”). Aircom entered into an Equity Pre-Subscription Agreement
with Aircom Taiwan dated as of August 13, 2017, to memorialize the terms of the Equity Investment. On December 19, 2017, the Committee
approved Aircom’s initial Equity Investment (valued as of that date at NT$15,150,000, or approximately US$500,000) and the
purchase of the Aircom Taiwan’s founding owner’s total equity of NT$100,000 (approximately US$3,350). As a result of
the approval of the Equity Investment, Aircom Taiwan became a 100% wholly owned subsidiary of Aircom.

3

On June 13, 2018, Aerkomm established Aerkomm
Taiwan Inc. as a new wholly owned subsidiary under the laws of Taiwan. Aerkomm Taiwan Inc. is responsible for Aircom’s business
development efforts and general operations within Taiwan. We are currently planning to locate the site of our first ground
station in Taiwan and we expect that if we raise sufficient funds to move forward with this project (although that cannot be guaranteed),
Aerkomm Taiwan Inc. will play a significant role in building and operating that ground station.

On November 15, 2018, Aircom Taiwan acquired
Beijing Yatai for CNY600,000 (approximately $87,266). The purpose of this acquisition is for Beijing Yatai is to conduct Aircom’s
business and operations in China. Presently, Beijing Yatai’s primary function is business development, both with respect
to airlines as well as content providers and advertisement partners based in China as most business conducted in China requires
a local registered company. Beijing Yatai is also actively seeking strategic partnerships through which Aircom may leverage its
product offerings in order to provide enhanced services to prospective customers. Aircom also plans to provide local support to
China-based airlines via Beijing Yatai and its future planned teleports to be located in China. On November 6, 2020, 100% ownership
of Beijing Yatai was transferred from Aircom Taiwan to Aerkomm Taiwan for restructuring purpose.

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

On March 22, 2020, the board of directors,
or the Board, held a special meeting and took certain actions, effectively immediately, to position the Company for future growth.
James Busuttil, a current director, was appointed Chairman of the Board. Louis Giordimaina, previously the Chief Operating Officer-Aviation
of Aerkomm Malta was appointed the Company’s Chief Executive Officer, Jeffrey Wun, the Company’s Chief Executive Officer
prior to March 22, 2020, resigned from that position and confirmed that his resignation from that position was not the result of
any disagreement with the Company or the Board regarding the Company’s financial or accounting policies or operations. Mr.
Wun was appointed the Company’s Chief Technology Officer and will remain as President of the Company and as a director, as
well as the Chief Technology Officer of Aircom. Georges Caldironi, a former consultant to Aircom, was appointed as the Company’s
Chief Operating Officer. We believe that these managerial and Board changes will better position the Company to move forward into
its next phase of operations.

Our Corporate Operational Structure

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

 

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

4

Our Industry

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

Prior to the onset of the COVID-19 pandemic,
the global in-flight entertainment and connectivity, or IFEC, market was expected to experience high growth due to factors such
as aircraft expansion, increasing passenger rates, rising penetration rates, and technological advances. According to a 2019 market
research report by Grand View Research, Inc.2, the IFEC market was projected to reach USD 10.5 billion by 2025, at a
compound annual growth rate, or CAGR, of 10.3% from 2019 to 2025. The same market research report also predicted that the IFEC
market in the Asia Pacific region was projected to grow at the highest CAGR during the forecast period, owing to increasing aircraft
deliveries and rising passenger traffic in this region. This report also concluded that China was expected to be the major market
in the region, owing to the reforms in their regulations and policies, innovative business models, and the development of aircraft
with new technologies. The conclusions of this report and similar historical market analyses and projections are now called into
question as a result of the COVID-19 pandemic and the global actions being taken to slow and stop the spread of the pandemic.

Impact of the COVID-19 Pandemic

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

Recent Market Information

In the IATA (International Air Transportation
Association) Airlines Financial Monitor dated November – December 2020, published on January 21, 2021, the following key points
were highlighted:

  The final Q3 2020 financial results show that airlines continued to suffer from very weak travel demand and burnt cash, albeit at a slower rate compared to Q2 with the help of cost cutting measures and robust cargo revenues.
     
  Initial Q4 2020 earnings announcements indicate that airlines continued to burn cash as the recovery in demand stalled. However, the vaccine news makes IATA estimate that airlines could achieve cash break-even towards the end of 2021.
     
  The global airline share price index rose in December 2020 but still lagged wider equity markets as the resurgence of the virus weighed on the travel demand recovery.
     
  Looking forward, the widespread availability of vaccines and implementation of successful testing regimes will be key for the recovery in travel demand and airline share prices.

In general, because the future of the COVID-19
pandemic is so unpredictable, the future of airline and air traffic recovery is extremely unpredictable as well.

2 Grand View Research, In-flight Entertainment & Connectivity Market Analysis Report by Offering Type (IFE, IFC), By Component (Hardware, Connectivity, Content), By Aircraft Type, By Region, And Segment Forecast, 2019 – 2025.

5

Immediately prior to the onset
of the COVID-19 pandemic, there were, according to Airbus and Boeing, more than 23,000 commercial aircraft flying globally, a number
that was expected to more than double in the next 20 years. Both Airbus and Boeing had estimated that the global fleet of commercial
aircraft would increase from 23,000 planes in 2019 to more than 50,000 in 2038, according to their respective 2019 reports, “Global
Market Forecast report 2019 – 2038” and “Commercial Market Outlook 2019 – 2038.” The Global Market
Forecast report 2019 – 2038 predicted that the increase would include 30% for aircraft replacement and 70% for growth, with
Asia-Pacific accounting for 42% of deliveries.

Prior to COVID-19, passenger numbers
were also experiencing strong growth. The International Air Transport Association (IATA) had predicted that passenger numbers could
double to 8.2 billion by 2037, according to the IATA’s update “20-Year Air Passenger Forecast.” During the next
two decades, this forecast anticipated a 3.5% compound annual growth rate (CAGR), leading to a doubling in passenger numbers from
pre-COVID-19 levels. The pre-COVID-19 strong growth, the IATA had concluded, had been driven by an eastward shift in the aviation
industry’s center of gravity, which, according to the IATA, would lead to more than half of the total number of new passengers
in the next 20 years will come from the Asia Pacific region.

Although historical projections
are no longer valid in the COVID-19 pandemic era, the IATA has reported, as indicated above, a beginning of an improvement in industry
travel statistics. We cannot predict the future; however, the success of our business is predicated on the return to sustainability
of the airlines industry and the acceptance of our IFEC product offerings which are discussed below.

2. In-Flight Entertainment and Connectivity

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

WiFi is everywhere, from cafes
to bus stops, trains to airports, and it’s a service that travelers and consumers value highly. Airline passengers’
expectations for connectivity available while flying are very much set by their experience of connectivity on the ground where
they expect constant access to WiFi. Unfortunately, in-flight WiFi can still feel like a luxury and passengers eagerly await free
connectivity options onboard. As airlines are learning how integral in-flight WiFi affects the quality of a customer’s
flying experience, adding WiFi is just the start. As part of a general industry-wide push, airlines that offer onboard in-flight
WiFi are now working towards making it better, faster, and cheaper.

A study issued in April 2018 by
luxury travel consultants Lets Fly Cheaper reveals that as of the date of that study only a few airlines were offering free in-flight
WiFi. These airlines include Aer Lingus, Emirates, JetBlue, Norwegian, Air China, Philippine Airlines, Nok Air and Vueling. Some
of these airline offerings, however, come with certain limitations such as being offered free for business passengers only or limited
to the amount of data that can be downloaded. See the related map below provided by Lets Fly Cheaper.

3 The fourth annual global Inflight Connectivity Survey published on August 7, 2018 by Inmarsat (LSE: ISAT.L), the world’s leading provider of global mobile satellite communications, in association with market research company Populus. The Inflight Connectivity Survey reflects the responses of more than 9,300 passengers from 32 countries across Europe, the Middle East, Asia Pacific, and North and Latin America, and is the largest global survey of passenger attitudes.

6

 

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

According to the Boeing Report
titled “Commercial Market Outlook 2019 – 2038,” it has been projected that by the end of 2030, two-thirds of
the world’s aircraft fleet will have some form of connectivity, whether through retrofit or line fit at production stage.
Currently, the majority of connectivity upgrades are being done through aircraft modification as in-service aircraft are outfitted
with new and high-speed systems. It is estimated that more than one thousand commercial aircraft are being upgraded annually. Eventually,
more airplanes will be delivered from the production line with connectivity installed. However, whether aircraft connectivity is
being carried out as a retrofit, or built into the initial aircraft production line, the evolution of IFEC technology shows that
the demand for connectivity is increasing.

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

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

On 26 September 2017, a new research
study, Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry,
was published by the London School of Economics and Political Science (LSE) in association with global satellite communication
specialists Inmarsat. This report predicted that in-flight broadband services have the potential to generate up to $30 billion
in additional revenue for airlines by 2035.

7

 

Source: London School of Economics and Political Science (LSE), Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry.

The report based its findings on an independent
forecasting model based on then current (pre-COVID-19) IATA passenger traffic data and forecasts of growth. The report predicted
that, by 2035, there would be a near doubling of annual passenger numbers to 7.2 billion increasing to 7.8 billion in 2036 and
8.2 billion in 2037. The “Sky High Economics” report forecast that broadband-enabled ancillary revenue for airlines
would reach an estimated $30 billion by 2035 (a figure higher that IATA’s projections for the profitability of the global
airline industry in 2017). According to the report, it was projected that this expected revenue growth would create a wider overall
market of $130 billion for content providers, retail goods suppliers, hotel and car suppliers and advertisers.

Source: London School of Economics (LSE), Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry. A strategic overview.

The Sky High Economics report looks at
six key regions: Asia Pacific, Europe, North America, Africa, Middle East and Latin America. Of these, the greatest potential for
broadband-enabled ancillary services is expected to come from the Asia Pacific region – which has been expected to be the fastest
growing aviation sector over the next 20 years. Airlines in Asia Pacific are predicted to benefit from $10.3bn of ancillary revenues
by 2035, followed by Europe ($8.2bn), North America ($7.6bn), Latin America ($1.9bn), Middle East ($1.3bn) and Africa ($0.58bn).

8

Our IFEC Solutions

Aviation

With our advanced technologies and an innovative
business model, we plan to provide airline passengers with a broadband in-flight experience that encompasses a wide range of service
options. Such options include Wi-Fi, cellular, movies, gaming, live TV, and music. We plan to offer these core services through
both built-in in-flight entertainment systems, such as a seatback display, as well as on passengers’ personal devices including
laptops, mobile telephones and tablets. We also plan to provide content management services and e-commerce solutions related to
our IFEC solutions. This system will operate through Ka high throughput satellites, or HTSs.

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

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

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

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

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

Our main source of revenue is
expected to be derived from the content channeled through our IFEC network from selected partners including internet companies,
content providers, advertisers, telecom service providers, e-commerce participants, and premium sponsors. In other words, we plan
to use connectivity as a tool rather than as a commodity for sale, which we believe will allow us to achieve a greater return.
By providing free connectivity which, we expect, will result in the generation of a large volume of content traffic, we believe
that we will create a multiplying effect that will result in a value that exceeds the “sum of its parts.”

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

9

   
2. Corporate Jet Customers

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

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

Once our Aerkomm K++ system is
approved by Airbus and receives the applicable airworthiness certifications, which process we expect to be completed during the
fourth quarter of 2020, we will begin selling our Aerkomm K++ systems for installation on Airbus ACJ aircraft.

Aircom Pacific, at Airbus’
invitation, attended the Airbus ACJ Customer Forum which was held in Singapore in February 2019. This Airbus ACJ Customer Forum
provided Aircom a unique opportunity to network with ACJ customers, operators and key industry players within the Airbus Corporate
Jet community. At the Airbus ACJ Customer Forum, Aircom was provided the opportunity to demonstrate the Aerkomm K++ system. A number
of ACJ clients at the Airbus ACJ Customer Forum showed interest in our IFEC product offering and we are currently in active discussions
with these parties. We expect to participate in future Airbus ACJ Customer Forums to be scheduled in the future in one or more
European venues.

Our Connectivity Solutions –
Ka/Ku Band Satellites

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

 

4 Avionics International, Business & General Aviation, Connectivity “Buying Trends Favorable for Satellite Connectivity”, October 14, 2018

10

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

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

In satellite communications, the Ka-band allows higher bandwidth
communication. Ka-band high-throughput-satellite systems reuse frequency bands in spot beams for much higher system capacity and
better spectrum efficiency.

 

Currently, there are few Ka-enabled satellites,
which limits the coverage area in certain areas of the Asia-Pacific region. However, new GEO (Geostationary Earth Orbiting) and
LEO (Low Earth Orbiting) Ka-band satellites are being regularly launched and this increase in satellites is expected to provide
worldwide Ka-band coverage within the next few years.

Our Aerkomm K++ system architecture will
bring our aviation partners and their passengers the benefits of both GEO and LEO Ka-band satellite technology. GEO satellites
may scan a hemisphere of earth, or fixed regions of that hemisphere at regular intervals. Performance of GEO satellites diminishes
greatly in the areas near the Earth’s poles. LEO satellites orbit the earth from pole to pole and collect data from the areas
beneath them. Only LEO satellites can collect high quality data over the poles. The Ka-band satellite increases data throughput.
Aircom plans to have the necessary technology ready to take advantage of this new trend in Ka-band aviation connectivity. Future
SpaceX, One Web and Telesat satellites are expected to be ready by end of 2022 and with full-service availability by 2023. As of
March 1, 2020, Space X has launched 302 Starlink satellites targeting service in the Northern US and Canada, and expects to expand
to near-global coverage by 2021. OneWeb Satellites, which is a joint venture between Airbus and OneWeb, is on track to provide
global services by 2021. The first six satellites of the OneWeb constellation were launched in February 2019 and the first large
batch of satellites was launched in February 2020. Telesat, which is a privately held Canadian company, launched a test satellite
in 2018. By 2022, Telesat will have the Northern and Southern hemispheres covered and full global service by 2023.

11

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

Source: Aircom

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

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

 

Source: Aircom

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

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

12

Our Aerkomm K++ system

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

Our Content Solutions

Traditionally, airlines view in-flight
entertainment content as a budgeted expense for which they have to pay hefty royalties. With our business model and technologies,
we expect to be able to transform in-flight entertainment into a source of ancillary revenue for our airline customers. We will
team up with our current and future prospective airline customers to provide them with our Aerkomm K++ hardware system at no cost
and with free onboard Wi-Fi connectivity services to passengers, which will allow us to maintain data traffic control, specifically
in terms of blocking or placing advertisements as needed and inserting targeted commercials.

Premium Content Sponsorship

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

The Amazon-JetBlue partnership is only
one of many examples whereby an Internet company can improve its reach by gaining access to in-flight connectivity. We seek to
exemplify this type of relationship through collaboration with major Internet companies, such as search engine companies. We plan
to promote a partner’s brand through our in-flight services by channeling all searches to the partner’s search engine.
By designing our user interface around the partnered company, we can present passengers with an on-screen environment populated
by the partner’s apps, logos, and colors, providing a powerful marketing tool for the partner company. We can also enhance
recognition of our sponsors’ brands by creating a list of portals on the in-flight system’s home screen, which lead
to each sponsor’s individual page where passengers can resume their normal entertainment, social, and professional activities.

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

Live TV

We are negotiating with television providers
along our prospective airline partners’ flight routes to make live TV available through our IFEC system. Airlines will be
able to select live TV channels that are appropriate for each flight route. An electronic program guide channel listing will be
available for easy viewing and selection.

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

Social Media and Instant Messaging:
Content Management

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

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

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

13

Video/Content on Demand

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

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

Search Engine

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

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

Internet Advertising Replacement

In Internet traffic, more than 50% of the
bandwidth that passes through satellites is consumed by advertisements in the data stream. In order to streamline bandwidth usage,
our ground system will detect advertisements from a webpage and replaces them with advertisements from our advertisers or partners.
We will work with Internet advertisers to present advertisements that are relevant to passengers’ interests. This system
will enable our partners to place their advertisements accordingly and generate revenue for them and us. Advertisers can offer
destination-specific commercials and banners, which can be placed in our in-flight entertainment system and in apps and portals
on personal devices. By utilizing commercial agents to sell ad space on our systems, we plan to cover all marketable areas, expanding
sales opportunities and increasing revenue.

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

Online/Streaming Gaming

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

Telecommunications Text Messaging Services

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

Destination-Based Services

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

14

In-flight Trading and e-Commerce

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

Black Box Live

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

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

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

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

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

Other Markets (Remote Locations and
Maritime)

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

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

In these additional markets:

i. We have already made limited sales of our connectivity solutions to hotels/resorts in remote areas. Additionally, we plan to sell our equipment to hotels and resorts located in remote ocean areas and mountain regions. We also plan to sell the bandwidth required through which to operate these systems, priced on a subscription plan basis.
ii. We plan to begin selling our connectivity solutions to maritime vessels such as cruise liners, fishing vessels, ferry boats and yachts. We plan to sell our equipment to these categories of vessels as well as the bandwidth required through which these systems operate, priced on a subscription plan basis.

15

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

The picture below depicts Aircom’s
current maritime antenna.

 

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

Satellite Ground Stations and Data Centers

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

A ground station’s main purpose is
to establish telecommunication links with satellites. IFEC systems on aircraft route their communications from a passenger’s
data terminal, such as a laptop, mobile phone or other internet accessible device, via satellites and through a ground station
which acts as a traffic gateway, directing the onboard IFEC originated satellite signal to terrestrial networks such as the internet
and back again. The ground station will house satellite antennae and other communication equipment. Satellite antennas must
be located within the coverage of the satellites being used. Ground station satellite antennas are substantial in size, generally
between 20 to 30 feet (7 to 9 meters) in diameter. As we expand our operation, we expect to have multiple dish antennas connecting
to various satellites. Due to the strong electromagnetic radiation emitted by the antennas, a satellite ground station must
be located in rural or industrial areas and it requires a substantial setback zone around the ground station. 

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

On July 10, 2018, we entered into a real
estate sales contract with Tsai Ming-Yin, as seller, and Sunty Development Co., Ltd., as trustee, pursuant to which the parties
agreed to definitive terms and conditions relating to the acquisition by Aerkomm Taiwan of a parcel of land located at the Taishui
Grottoes in the Xinyi District of Keelung City, Taiwan. The parcel consists of approximately 6.3 acres of undeveloped land and
is expected to be used by us to build our first satellite ground station and data center. We completed payment of the purchase
price for the Taiwan land parcel in July 2019 and our agent has received all of the necessary title transfer documentation from
the seller. According to the land use laws of Taiwan, we need to submit a usage plan and to obtain the necessary license or authorization
for the intended usage before we can obtain an official certificate of title for the Keelung City land parcel. To complete this
process, our Taiwan-based subsidiary, Aerkomm Taiwan, will submit an application for a telecommunications license, or as it is
known in Taiwan, a “Concession License for Satellite Mobile Communications Operation,” to the National Communications
Commission of the Republic of China (Taiwan), the government entity responsible for regulating telecommunications in Taiwan. Following
the issuance of this Concession License, Aerkomm Taiwan will file an application with the Keelung City municipality, where our
Taiwan land parcel is located, for a land development license. Once we receive this development license, Aerkomm Taiwan will then
be able to file an application with the Keelung City land office to receive the certificate of title to our Taiwan land parcel.
Although we expect to complete this process and receive or certificate of title by sometime in the third quarter of 2021, we cannot
provide any assurance of this timing. Once we receive the certificate of title, we expect to be able to mortgage the property to
borrow the funds we will need to build the ground station. Aerkomm Taiwan is currently preparing the plan of usage and is working
with various regulatory authorities to obtain the necessary license and approval to meet the local land use law requirements. We
do not know at this time how long it will take to complete the process and receive the certificate of title to the parcel.

16

Additionally, we have signed a binding
memorandum of understanding with a Samoa based telecom company to lease the Taiwan land parcel, once title has been transferred
to us, for a period of five years at an expected rental income to us of approximately $2.3 million per year. This telecom company
plans to build a separate satellite ground station and data center on the parcel and we may lease back a portion of the land to
build our own satellite ground station and data center if and when we have sufficient funds to do so. The five-year lease, if it
is consummated, would provide us with additional working capital to supplement the funds that we raised in our 2018/2019 public
offering, to help us further our core corporate development efforts.

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

Our Contracts with Airline Partners

Airbus SAS

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

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

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

Airbus Interior Services

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

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

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

Hong Kong Airlines

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

17

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

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

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

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

In order to install the AERKOMM K++ system
on the Hong Kong Airlines aircraft, we will have to obtain local approval for the AERKOMM K++ system from the Hong Kong Civil Aviation
(HKCAD). This HKCAD local approval will be based on our obtaining the Airbus Service Bulletin, which we expect to receive from
Airbus, together with EASA certification, by sometime in the third quarter 2021. Once we receive the Airbus Service Bulletin and
the EASA certification, jointly with the support of Airbus, we will be able to apply to the HKCAD for the required local approval.

As an interim solution for Hong Kong Airlines,
until the Aerkomm K++ System can be fully retrofitted onto the Hong Kong Airlines aircraft fleet, Aircom plans to install the Aerkomm
AirCinema “Cube” on Hong Kong Airlines fleet of A320 and A330 aircraft during the fourth quarter of 2021. The AirCinema
Cube is a portable inflight entertainment, or IFE, box intranet server which will provide to passengers’ personal entertainment
devices pre-loaded videos, news, music and games, on demand. Media content will be jointly managed by Aircom and Hong Kong Airlines
and content updates will be provided regularly by Aircom.

On March 20, 2020, Aircom and Yuanjiu Inc.,
or Yuanjiu, a Taiwanese public company, signed a nonbinding memorandum of understanding, the Yuanjiu MOU, with respect to the development,
manufacture and purchase of AERKOMM K++, AirCinema Cube equipment for installation on the aircraft of Hong Kong Airlines. On May
11, 2020, we terminated the Yuanjiu MOU and, through our Taiwan based subsidiary, Aircom Telecom, entered into a binding product
purchase agreement with Yuanjiu, replacing the Yuanjiu MOU, to purchase 100 sets of the AirCinema Cube from Yuanjiu. On July
15, 2020, Aircom Telecom signed a second product purchase agreement with Yuanjiu for an additional 100 sets of the AirCinema Cube.

Other Airline Partners and Business
Jets Customers

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

We have entered into non-binding memoranda
of understanding, or MOUs, with a number of airlines, including Air Malta of Malta which owns a fleet of 12 Airbus A320 aircraft,
and Onur Air of Turkey with a fleet of 14 Airbus A320 aircraft. There can be no assurances, however, that these MOUs will lead
to actual purchase agreements.

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

Nouvelair Tunis: Fleet of 6 Airbus A320 aircraft
Tigerair Taiwan: Fleet of 11 Airbus A320
Hong Kong Express: Fleet of 13 Airbus A320 and 11 Airbus A321

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

In connection with the Airbus project,
we have also identified owners of Airbus Corporate Jet, or ACJ, as potential customers of our AERKOMM K++ system. ACJ customers,
however, would not generate enough internet traffic to make our free-service business model viable. To capitalize on this additional
market, we plan to sell our AERKOMM K++ system hardware for installation on ACJ corporate jets and provide connectivity through
subscription-based plans. This new corporate jet market could generate additional revenue and income for our company.

18

As discussed below, we have entered into
an agreement with MJet GMBH, an Airbus ACJ customer, and we are currently in advanced discussions with a number of additional ACJ
customers, some of whom have more than one aircraft in their fleets.

While, to date, we have been concentrating
on Airbus customers in view of our existing agreement with Airbus, our current plan is to also begin marketing to Boeing aircraft
customers and Boeing Business Jets (BBJ) customers, and we intend to acquire the necessary certification of our AERKOMM K++ system
equipment for the different Boeing aircraft models, with a particular focus on the Boeing B737 aircraft family. We have already
carried out discussions and negotiations with AKKA Technologies based in Toulouse France, which is a specialist aerospace and aviation
design organization, for providing us with a Service Bulletin and Supplemental Type Certificate for the Boeing B737 family, including
certification from EASA. We anticipate that we will sign an agreement with AKKA Technologies in the third quarter 2021, although
we cannot guarantee this. Once an agreement is signed with AKKA, the project of developing the Service Bulletin and Supplemental
Type Certificate for our AERKOMM K++ system equipment for the Boeing B737 family of aircraft and obtaining EASA certification for
this aircraft line is expected to take approximately nine months.

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

Other Agreements and Understandings
with Our Business Partners

MJet GTA: On March 6, 2019,
we signed a General Terms Agreement (GTA) with MJet GMBH, or MJet, a corporate jet owner operating an Airbus ACJ A319 based in
Vienna, Austria. On June 11, 2019 we converted this GTA into a definitive agreement with MJet, and on June 12, 2019, MJet placed
a first purchase order with Aircom. The purchase order provides for the provision, installation, testing and certification of our
AERKOMM K++ system equipment, including the Airbus Service Bulletin and associated material kit and related connectivity services,
on an MJet Airbus ACJ A319 aircraft under the supervision of Airbus. Assuming the installation, testing and certification of our
AERKOMM K++ system on the MJet A319 is successful, something we cannot guarantee at this time, MJet will pay us a one-time fee
for our equipment and a monthly fee for our connectivity services, and we will also begin charging MJet for the bandwidth required
to use the AERKOMM K++ system services. Assuming the success of this installation, MJet will become the first recurring payment
customer of our AERKOMM K++ system as well as being the launch customer of our Aerkomm K++ solution.

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

Onurair MOU: On March 1,
2018, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the Onurair MOU, with Onurair Tasimacilik
A.S., a company organized under the laws of Turkey, pursuant to which the parties intend to collaboratively market and provide
their products and services to passengers of the Turkey-based airline fleet. Under the terms of the Onurair MOU, the parties intend
to develop, install and operate in-flight connectivity systems onboard the Turkey-based airline fleet and provide related services
to its passengers. We cannot assure you, however, we will be able to enter into a definitive agreement with Onurair, or that the
Onurair MOU will lead to any Aerkomm product sales.

Yahoo MOU: On January 19,
2016, Aircom entered into a nonbinding memorandum of understanding, which we refer to as the Yahoo MOU, with Yahoo! Hong Kong Limited,
or Yahoo, pursuant to which, the parties intended to collaboratively market and provide their products and services to commercial
airlines in Asia. Through its affiliates, Yahoo provides customers internet related services including software, content, communications,
media and commerce services. According to the Yahoo MOU, Yahoo intended to use our IFEC system to provide in-flight services to
its customers. In addition, the parties intended to collaborate on destination-based marketing and to develop a revenue-share scheme
on the advertising revenue arising from the in-flight services. We expected that Yahoo would be the exclusive provider of pre-roll
video ads on our AERKOMM K++ IFEC system in exchange for committed revenue from Yahoo. The parties further intended to collaborate
and develop the necessary interface to support interaction and/or integration between our backend and each of Yahoo’s websites
and Yahoo’s applications. All present and future intellectual property rights related to IFEC system were expected to solely
belong to us or the third-party or third parties from whom we obtained the right of use. The Yahoo MOU had a term of two years
and expired on January 19, 2018. Aircom expects to enter into discussions with Yahoo! Hong Kong to reinstate this MOU for an additional
period of time, although there can be no assurances that it will be successful in these discussions.

19

Telesat Cooperation Agreement:
On June 23, 2020, Aircom entered into a cooperation agreement with Telesat Leo Inc., or Telesat, a wholly owned subsidiary of Telesat
Canada. Telesat is one of the world’s largest and most successful satellite operators providing critical connectivity solutions
that tackle complex communications challenges. Through this agreement, Aircom and Telesat will jointly collaborate to develop a
test program for the Telesat low-Earth-orbit (LEO) Network, Telesat’s network of low-earth orbit satellites for aircraft
connectivity, to assess the technical and commercial viability of incorporating the Telesat LEO Network capacity into Aircom’s
IFEC product portfolio and network. Aircom and Telesat will collaborate in both technical and commercial activity. The two parties’
technical collaboration is expected to include testing network performance, leveraging Telesat’s Phase 1 LEO satellite which
has been in polar orbit since 2018, ensuring compatibility with existing Aircom IFEC solutions and future user terminal solutions,
and end-to-end implementation within regulatory guidelines. Commercial collaboration will include optimizing business and operating
models, joint presentations and information sessions with key customers and partners, and exploring a long-term joint development
plan. This cooperation agreement between Aircom and Telesat is preliminary and nonbinding and subject to the negotiation and execution
of a definitive agreement. Aerkomm expects that a definitive agreement will be signed, although there can be no assurance when
this will happen, if at all.

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

Product Development, Manufacturing,
Installation and Maintenance

We plan to provide airline partners and
corporate jet owners with the equipment necessary for in-flight connectivity, which will be installed by either the airline at
their own maintenance facility or at an approved maintenance repair organization, or MRO, service provider mutually selected by
Aircom and the airline. We will also provide training and technical support to each airline’s MRO for the installation of
our equipment. Such support will also include technical, management, and operational support, with 24/7 network monitoring of the
performance of each aircraft’s equipment once in operation.

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

We will purchase our ground station equipment
from Blue Topaz Consultants, Ltd., or BTC, under an agreement that we have with BTC dated December 15, 2015. Under the terms of
this agreement, BTC will develop and provide to us four (4) sets of ground station hub equipment, or the Hub Equipment, for our
use and sale into our Asian markets. We and BTC will separately enter into service agreements for the installation and maintenance
of the Hub Equipment systems. We have agreed to pay BTC $6,205,216 for the first Hub Equipment system and have already made milestone
payments to BTC totaling $3,250,000. The purchase price for the first Hub Equipment system was increased to $6,234,260 on November
30, 2016 due to the increase in cost of a system required software license. We will be required to pay BTC the balance of $2,984,260
owed on the first Hub Equipment system following delivery and service commencement of this system. We expect to install this Hub
Equipment in the ground station that we intend to build on the parcel of land we have acquired in Taiwan, once we receive title
to that land and can proceed with a related ground station financing arrangement. We cannot at this time estimate when this project
will move forward or be completed.

20

Transcoding

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

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

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

Satellite Link Acceleration

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

Our Competition

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

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

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

Ku-band and GEO/LEO Hybrid Satellite
Technology

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

21

Our Growth Strategy

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

  Launch and increase number of connected aircraft. As of the date of this annual report, we have not provided our services on any corporate jets or commercial aircraft. However, we now have the following delivery contracts in place:
     
  On June 11, 2019, we converted a General Terms Agreement with MJet GMBH, a corporate jet owner operating an Airbus ACJ A319 based in Austria, into a definitive agreement with MJet, and on June 12, 2019 MJet placed a first purchase order with Aircom. As discussed in more detail above, MJet will be our launch customer for the first planned installation of our AERKOMM K++ system expected to be ready for installation by first quarter of 2021. The installation will enable us to commence a rollout of sale and installation of our IFEC equipment and services to other aircraft.
     
  On January 30, 2020, Aircom signed an agreement with Hong Kong Airlines to provide this airline with both our Aerkomm AirCinema and AERKOMM K++ In-Flight Entertainment and Connectivity solutions. Under the terms of this agreement as discussed in greater detail above, Aircom will provide to Hong Kong Airlines its Ka-band AERKOMM K++ IFEC system for installation on its fleet of twelve Airbus A320 aircraft and five Airbus A330-300 aircraft, as well as the AERKOMM AirCinema system being designed and produced specifically for the Hong Kong Airlines Airbus A320 aircraft. Hong Kong Airlines will become the first commercial airliner launch customer for Aircom.

To further our growth strategy, we plan
to:

  leverage our creative business model and IFEC system to cost-effectively equip corporate jets and commercial aircraft;
     
  increase the number of to be equipped aircraft, targeting full-fleet availability of our IFEC equipment and services for our current and future airline partners;
     
  pursue global growth opportunities by leveraging our broad and innovative technology platform and technical expertise; and
     
  offer attractive business models to our corporate jet and airline partners, giving them the flexibility to determine the connectivity solutions that meet the unique demands of their businesses.
  Increase passenger use of connectivity. We believe that in-flight Internet connectivity has become a necessary utility rather than a novelty because most passengers are trying to remain “connected” while travelling. This trend is evident from the increasing data usage on mobile phones. However, the traditional business model is structured to charge as much as possible for high-end in-flight connectivity services offered to a very small number of people. Such business logic has resulted in the in-flight connectivity option acquiring the reputation of being “pricey” and “only for business travelers whose employers will pay for it.” With a focus on catering to only a small number of people in a narrow market niche, our competitors are paying less attention to an innovative business model that can encourage a wider, broad-based usage of in-flight connectivity services. We believe that certain providers of existing in-flight connectivity services discourage in-flight usage because they believe such usage will increase their overhead expenses without generating additional profit. Due to this business model and the small amount of revenue generated from currently available connectivity services, airlines have considered in-flight connectivity as a “service” to passengers provided at their expense. Under this thinking, in-flight connectivity is a “cost center” from which airlines do not expect to generate profit. We believe that the value of a networking system grows exponentially with its usage and it is a waste of resources to build a networking system to be utilized only by a narrow niche market. Therefore, our business model encourages usage of our in-flight connectivity services on a much broader basis. In order to encourage such broader usage, we plan to offer our in-flight connectivity services to passengers in all travel classes for free, while we generate revenue from add-on services that will tie together passengers’ connectivity and usage. Thus, with our business model, we plan to create connectivity-friendly aircraft cabins to provide free on-board internet connectivity for passengers, and to generate revenue through the sale of advertising commercials, banner advertising, in-app purchases, in-game purchases and other related in-flight transactions. We believe that our business model, under which neither airlines nor passengers will be required to pay for basic products or services, will create an incentive for the airlines to work with us and will drive passenger usage rates.
     
  Expand satellite network coverage. We will continue to expand our global satellite network coverage through the purchase of additional Ka-band capacity, and to seek to install our satellite solutions into multiple aircraft, while continuing to invest in research and development relating to satellite antennas and modem technologies. We are actively working with satellite providers such as Telesat to accommodate airlines’ global routes and growing fleets. We are monitoring the satellite industry for growth in coverage, with recent attention on China Satcom’s plan to launch high-capacity Ka-band and Ka HTS multispot-beam satellites over the Asia-Pacific region. We are also in discussions with Kacific Broadband Satellites Group (Kacific), which is a satellite operator providing high-speed broadband internet service for the South East Asia and Pacific Islands region. Its first Ka-Band HTS satellite, Kacific 1, was designed and built by Boeing and launched into geostationary orbit atop a SpaceX launch vehicle on 16th December 2019, in order to purchase Ka broadband capacity.

22

  Expand satellite-based services to other markets. We anticipate expanding our satellite-based connectivity services to remote area hotels and resorts, maritime and cruise lines, high-speed railways, 4G/5G backhauling, and converged triple-play services in remote communities. We believe that there is substantial potential for expansion internationally into these new markets. Future business prospects will be evaluated on a case-by-case basis by weighing the projected revenue from advertising fees and e-commerce revenue shares against the projected operating and capital expenditures of satellite coverage, bandwidth and operations. Our existing business model could be applied to high-speed railways and cruise lines, both of which have a sufficient passenger base for the service to be viable. High-speed railways in China sit under existing, available Ka satellite coverage areas that are not served by 4G/LTE mobile networks, providing a unique opportunity for the delivery of connectivity services. High-speed railways in other regions of Asia present similar opportunities. Remote communities in Asia lack a telecom infrastructure, partly due to geographical limitations, for example, the islands of the Philippines and Indonesia are spread out over a vast geographic area. Satellite-based communications and mesh network technology make triple play services possible for the delivery of live TV broadcasting, videos, and telecom services to these regions.

Employees

As of the date of this annual report, we
had a total of 35 employees, 32 of whom are full-time employees. The following table sets forth the number of our full-time employees
by function.

Function

  Number of


Employees
Operations   9
Sales and Marketing   9
Research and Development   5
General and Administrative   12
Total   35

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

Regulation

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

Federal Aviation Administration

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

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

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

Foreign Aviation Regulation

According to international aviation convention,
the airworthiness of FAA-certified equipment installed on U.S.-registered aircraft is recognized by civil aviation authorities,
or CAAs, worldwide. As a result, we do not expect to require further airworthiness certification formalities in countries outside
of the United States for U.S.-registered aircraft that already have an STC issued by the FAA covering our equipment. For aircraft
registered with a CAA other than the United States, the installation of our equipment requires airworthiness certification from
an airworthiness certification body. Typically, the CAA of the country in which the aircraft is registered is responsible for ensuring
the airworthiness of any aircraft modifications under its authority.

23

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

Federal Communications Commission

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

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

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

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

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

Equipment Certification

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

Privacy and Data Security-Related
Regulations

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

Our services are also subject to CPNI rules
that require carriers to comply with a range of marketing and privacy safeguards. These obligations focus on carriers’ access,
use, storage and disclosure of CPNI. We believe we are in compliance with these rules and obligations, and we certify annually,
as required, that we have established operating procedures adequate to ensure our compliance.

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

24

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

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

Truth in Billing and Consumer Protection

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

CALEA

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

Foreign Government Approvals

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

Emerging Growth Company Status

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

  have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
     
  comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
     
  submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
     
  disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

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

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

25

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

Risks Related to Our Business

Excluding non-recurring revenues
in the second quarter of 2019 and 2018 from affiliates, we have incurred operating losses in every quarter since we launched our
business and may continue to incur quarterly operating losses, which could negatively affect the value of our company.

Excluding non-recurring revenues that we
earned from affiliates in the second quarter of fiscal 2019 and 2018, we have incurred operating losses since our inception in
2014, and we may not be able to generate sufficient revenue in the future to generate operating income. We also expect our costs
to increase materially in future periods, which could negatively affect our future operating results. We expect to continue to
expend substantial financial and other resources on the continued launch and future expansion of our business. The amount and timing
of these costs are subject to numerous variables and such initiatives may require additional funding. In addition, we may incur
significant costs in connection with our pursuit of next generation air to ground technology or other new technologies. With respect
to our expansion, such variables may include costs related to sales and marketing activities and administrative support functions,
equipment subsidies to airlines and additional legal and regulatory expenses associated with operating in the international commercial
aviation market. In addition, we expect to incur additional general and administrative expenses, including legal and accounting
expenses, related to being a public company. These investments may not result in revenue or growth in our business. If we fail
to grow our overall business and generate revenue, our financial condition and results of operations would be adversely affected.

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

Our company and our core business are in
the development stage and faces all of the risks and uncertainties associated with a new and unproven business. We plan to launch
our services in the last quarter of 2021, initially in Europe with our launch customer MJet. The limited operating history of our
business may make it difficult to accurately evaluate the business and predict its future performance. Any assessments of our current
business and predictions that we or you make about our future success or viability may not be as accurate as they could be if we
had a longer operating history. We have encountered and will continue to encounter risks and difficulties frequently experienced
by growing companies in rapidly changing industries, and the size and nature of our market opportunity will change as we scale
our business and increase deployment of our service. If we do not address any of the foregoing risks successfully, our business
will be harmed.

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

Our initial business will be substantially
dependent on our relationship with a few key airline customers. There can be no assurance that we will be able to maintain our
relationship with these airlines. If we are unable to maintain and renew our relationship with these airlines, or if our arrangement
is modified so that the economic terms become less favorable to us, then our business would be materially adversely affected.

An extended delay in the transfer
of title to us of the Taiwan land parcel that we recently purchased could delay the building of our first satellite ground station
and have a negative impact on our business prospects.

In July 2019, we completed payment of the
NT$1,098,549,407, or US$35,861,589, purchase price for our acquisition of approximately 6.3 acres of undeveloped land (which we
refer to as the Taiwan land parcel) located at the Taishui Grottoes in the Xinyi District of Keelung City, Taiwan. Our agent has
received all of the necessary title transfer documentation from the seller however, according to the land use law of Taiwan, we
need to first, obtain a telecommunications license in Taiwan, then second, submit a usage plan to the local land office and to
obtain the necessary development license or authorization for the intended usage before we can obtain an official certificate of
title. Aerkomm Taiwan is currently preparing the plan of usage and is working with various regulatory authorities to obtain the
necessary license and approval to meet the local land use law requirements. We do not know at this time how long it will take to
complete this process and receive the certificate of title to the parcel. Although we currently expect to complete the entire process
and receive or certificate of title by sometime in the third quarter of 2021, we cannot provide any assurance of this timing. Once
title to the Taiwan land parcel is transferred to us, we expect to lease a portion of the land parcel, pursuant to the terms of
an existing binding memorandum of understanding, to a Samoa based telecom company who will use the land for their own satellite
ground station and to mortgage the land to be able to raise funds to build our first satellite ground station and data center.
If there is an extended delay in the transfer of the Taiwan land parcel title to us, our agreement with the Samoa telecom company
may be terminated and we may not be able to raise the funds needed to build our ground station in a timely fashion. Either or both
of these eventualities could have a negative impact on our business plans, prospects and future results of operations.

26

If the transactions contemplated
by several memorandums of understanding (MOU) do not proceed, our results of operations and financial condition could be materially
adversely affected.

On January 19, 2016, January 29, 2016,
June 16, 2016, October 28, 2017, March 7, 2018 and March 20, 2020, we entered into the Yahoo MOU, the LeTV MOU, the India MOU,
the Malta MOU, the Airbus MOU and the Yuanjiu MOU, respectively. These MOUs are nonbinding and as a result, they only express the
desires and understandings between the parties and do not create any legally binding rights, obligations or contracts except for
certain customary provisions such as exclusivity, costs and expenses, confidentiality and governing law. For more information related
to these MOUs, please refer to the section “Our Contracts with Airline Partners.” Any binding obligation
to proceed with the transactions contemplated by the MOUs would need to be included in a definitive agreement that is subject to
negotiations of the parties, approvals by the board of directors of respective parties and in certain instances, approvals from
regulatory authorities. The Yahoo MOU and LeTV MOU expired in January 2018. We are in the process of negotiating to extend the
Yahoo MOU. We do not intend to extend the LeTV MOU. The Yuanjiu MOU has been terminated and superseded by a definitive agreement
(discussed below). There can be no assurance that we will be able to extend the expired MOUs or enter into such definitive agreements
or receive the required governmental approvals. If for whatever reason the transactions contemplated by the MOUs do not proceed,
our results of operations and financial condition could be materially adversely affected.

We may not be able to grow our business
with our current airline partner or successfully negotiate agreements with airlines to which we do not currently provide our service.

Currently, our only airline partner is
Hong Kong Airlines Limited, a Hong Kong-based airline, or Hong Kong Airlines, although we have not yet begun to provide our IFEC
products and services to Hong Kong Airlines under our agreement with them. We are currently in advanced negotiations or discussions
with certain other airline partners to provide our IFEC services on additional aircraft in their fleets. We have no assurance that
these efforts will be successful. Negotiations with prospective airline partners require substantial time, effort and resources.
The time required to reach a final agreement with an airline is unpredictable and may lead to variances in our operating results
from quarter to quarter. We may ultimately fail in our negotiations and any such failure could harm our results of operations due
to, among other things, a diversion of our focus and resources, actual costs and opportunity costs of pursuing these opportunities.
In addition, the terms of any future agreements could be materially different than the terms included in our existing agreement
with Hong Kong Airlines. To the extent that any negotiations with current or future potential airline partners are unsuccessful,
or any new agreements contain terms that are less favorable to us, our growth prospects could be materially and adversely affected.

We are dependent on airline partners
to be able to access our customers. We expect that future payments by these customers for our services to be provided to them will
account for most, if not all, of our initial revenues.

Under our existing contract with Hong Kong
Airlines, we will provide our equipment for installation on, and provide our services to passengers on, a portion of the aircraft
operated by this airline. We expect to enter into similar contracts with other airlines in the future but there is no assurance
that we will be successful in signing up additional airline partners. We expect that revenue from passengers using our service
while flying on aircraft operated by our airline partners will account for the majority of our projected initial revenue once we
begin our services. As of the date of this report, we do not yet have any revenue from equipment sales and installation. Our growth
will be dependent on our ability to have our equipment installed on the aircraft of airline partners and increased use of our service
on installed aircraft. Any delays in installations under these contracts may negatively affect our ability to grow our user base
and revenue.

A failure to maintain airline satisfaction
with our equipment or our service could have a material adverse effect on our revenue and results of operations.

Our relationships with our current and
future potential airline partners are critical to the growth and ongoing success of our business. If airline partners are not satisfied
with our equipment or our service for any reason, including passenger dissatisfaction with the service as a result of capacity
constraints, they may reduce efforts to co-market our service to their passengers, which could result in lower passenger usage
and reduced revenue, which could in turn give airline partners the right to terminate their contracts with us. In addition, airline
dissatisfaction with us for any reason, including delays in obtaining certification for or installing our equipment, could negatively
affect our ability to expand our service to additional airline partners or aircraft or lead to claims for damages, which may be
material, or termination rights under our existing or potential contracts with airline partners.

27

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

All providers of wireless connectivity
services, including all providers of in-flight connectivity services, face certain limits on their ability to provide connectivity
service, including escalating capacity constraints due to expanding consumption of wireless services and the increasing prevalence
of higher bandwidth uses such as file downloads and streaming media content. The success of our business depends on our ability
to provide adequate bandwidth to meet customer demands while in-flight. We may find it difficult to provide this adequate bandwidth.

Competition from a number of companies,
as well as other market forces, could result in price reduction, reduced revenue and loss of market share and could harm our results
of operations.

We face strong competition from satellite-based
providers of broadband services that include in-flight internet and live television services. Competition from such providers has
had in the past and could have in the future an adverse effect on our ability to maintain or gain market share. Most of our competitors
are larger, more diversified corporations and have greater financial, marketing, production, and research and development resources.
As a result, they may be better able to withstand the effects of periodic economic downturns or may offer a broader product line
to customers. In addition, to the extent that competing in-flight connectivity services offered by commercial airlines that are
not our airline partners are available on more aircraft or offer improved quality or reliability as compared to our service, our
business and results of operations could be adversely affected. Competition could increase our sales and marketing expenses and
related customer acquisition costs. We may not have the financial resources, technical expertise or marketing and support capabilities
to continue to compete successfully. A failure to effectively respond to established and new competitors could have a material
adverse impact on our business and results of operations.

We may be unsuccessful in generating
revenue from live television and other in-flight entertainment services.

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

We are working to acquire a sufficient
number of on-demand movies and television shows and a variety of other content on our system. The future growth prospects for our
business depend, in part, on revenue from advertising fees and e-commerce revenue share arrangements on passenger purchases of
goods and services, including video and media services. Our ability to generate revenue from these service offerings depends on:

  growth of commercial airline customer base;
     
  the attractiveness of our customer base to media partners;
     
  rolling out live television and media on demand on more aircraft and with additional airline customers and increasing passenger adoption both in the U.S. and abroad;
     
  establishing and maintaining beneficial contractual relationships with media partners whose content, products and services are attractive to airline passengers; and
     
  our ability to customize and improve our service offerings in response to trends and customer interests.
     

If we are unsuccessful in generating revenue
from our service offerings, that failure could have a material adverse effect on our growth prospects.

28

We may be unsuccessful in expanding
our operations internationally.

Our business will initially be international
business. Our ability to grow our international business involves various risks, including the need to invest significant resources
in unfamiliar markets and the possibility that we may not realize a return on our investments in the near future or at all. In
addition, we have incurred and expect to continue to incur significant expenses before we generate any material revenue in these
new markets. Under our agreements with providers of satellite capacity, we are obligated to purchase bandwidth for specified periods
in advance. If we are unable to generate sufficient passenger demand or airline partners to which we provide satellite service
to their aircraft terminate their agreements with us for any reason during these periods, we may be forced to incur satellite costs
in excess of connectivity revenue generated through such satellites.

Any future international operations may
fail to succeed due to risks inherent in foreign operations, including:

  legal and regulatory restrictions, including different communications, privacy, censorship, aerospace and liability standards, intellectual property laws and enforcement practices;
     
  changes in international regulatory requirements and tariffs;
     
  restrictions on the ability of U.S. companies to do business in foreign countries, including restrictions on foreign ownership of telecommunications providers imposed by the U.S. Office of Foreign Assets Control, which we refer to as OFAC;
     
  inability to find content or service providers to partner with on commercially reasonable terms, or at all;
     
  compliance with the Foreign Corrupt Practices Act, the (U.K.) Bribery Act 2010 and other similar corruption laws and regulations in the jurisdictions in which we operate and related risks;
     
  difficulties in staffing and managing foreign operations;
     
  currency fluctuations; and
     
  potential adverse tax consequences.
     

As a result of these obstacles, we may
find it difficult or prohibitively expensive to grow our business internationally or we may be unsuccessful in our attempt to do
so, which could harm our future operating results and financial condition.

We may not be successful in our efforts
to develop and monetize new products and services that are currently in development, including our operations-oriented IFEC communications
services.

In order to continue to meet the evolving
needs of our future airline partners and customers, we must continue to develop new products and services that are responsive to
those needs. Our ability to realize the benefits of enabling airlines, other aircraft operators and to use these applications,
including monetizing our services at a profitable price point, depends, in part, on the adoption and utilization of such applications
by airlines, other aircraft operators and other companies in the aviation industry such as aircraft equipment suppliers, and we
cannot be certain that airlines, other aircraft operators and others in the aviation industry will adopt such offerings in the
near term or at all. We also expect to continue to rely on third parties to develop and offer the operational applications to be
used to gather and process data transmitted on our network between the aircraft and the ground, and we cannot be certain that such
applications will be compatible with our network or onboard equipment or otherwise meet the needs of airlines or other aircraft
operators. If we are not successful in our efforts to develop and monetize new products and services, including our operations-oriented
communications services, our future business prospects, financial condition and results of operations would be materially adversely
affected.

A future act or threat of terrorism
or other events could result in a prohibition on the use of Wi-Fi enabled devices on aircraft.

A future act of terrorism, the threat of
such acts or other airline accidents could have an adverse effect on the airline industry. In the event of a terrorist attack,
terrorist threats or unrelated airline accidents, the industry would likely experience significantly reduced passenger demand.
The U.S. federal government or foreign governments could respond to such events by prohibiting the use of Wi-Fi enabled devices
on aircraft, which would eliminate demand for our equipment and service. In addition, any association or perceived association
between our equipment or service and accidents involving aircraft on which our equipment or service operates would likely have
an adverse effect on demand for our equipment and service. Reduced demand for our products and services would adversely affect
our business prospects, financial condition and results of operations.

The demand for in-flight broadband
internet access service may decrease or develop more slowly than we expect. We cannot predict with certainty the development of
the U.S. or international in-flight broadband internet access market or the market acceptance for our products and services.

Our future success depends upon growing
demand for in-flight broadband internet access services, which is inherently uncertain. We have invested significant resources
towards the roll-out of new IFEC service offerings, which represent a substantial part of our growth strategy. We face the risk
that the U.S. and international markets for in-flight broadband internet access services may decrease or develop more slowly or
differently than we currently expect, or that our services, including our new offerings, may not achieve widespread market acceptance.
We may be unable to market and sell our services successfully and cost-effectively to a sufficiently large number of customers.

29

Our business depends on the continued proliferation
of Wi-Fi as a standard feature in mobile devices. The growth in demand for in-flight broadband internet access services also depends
in part on the continued and increased use of laptops, smartphones, tablet computers, and other Wi-Fi enabled devices and the rate
of evolution of data-intensive applications on the mobile internet. If Wi-Fi ceases to be a standard feature in mobile devices,
if the rate of integration of Wi-Fi on mobile devices decreases or is slower than expected, or if the use of Wi-Fi enabled devices
or development of related applications decreases or grows more slowly than anticipated, the market for our services may be substantially
diminished.

Increased costs and other demands
associated with our growth could impact our ability to achieve profitability over the long term and could strain our personnel,
technology and infrastructure resources.

We expect our costs to increase in future
periods, which could negatively affect our future operating results. We expect to experience growth in our headcount and operations,
which will place significant demands on our management, administrative, technological, operational and financial infrastructure.
Anticipated future growth will require the outlay of significant operating and capital expenditures and will continue to place
strains on our personnel, technology and infrastructure. Our success will depend in part upon our ability to contain costs with
respect to growth opportunities. To successfully manage the expected growth of our operations, on a timely and cost-effective basis
we will need to continue to improve our operational, financial, technological and management controls and our reporting systems
and procedures. In addition, as we continue to grow, we must effectively integrate, develop and motivate a large number of new
employees, and we must maintain the beneficial aspects of our corporate culture. If we fail to successfully manage our growth,
it could adversely affect our business, financial condition and results of operations.

Regulation by United States and foreign
government agencies, including the Federal Aviation Administration and the Federal Communications Commission, may increase our
costs of providing service or require us to change our services.

We are subject to various regulations,
including those regulations promulgated by various federal, state and local regulatory agencies and legislative bodies and comparable
agencies outside the United States where we may do business. The two U.S. government agencies that have primary regulatory authority
over our operations are the Federal Aviation Administration, or FAA, and the Federal Communications Commission, or FCC.

The commercial and private aviation industries,
including civil aviation manufacturing and repair industries, are highly regulated in the United States by the FAA. FAA certification
is required for all equipment we install on commercial aircraft and type certificated business aircraft, and certain of our operating
activities require that we obtain FAA certification as a parts manufacturer. As discussed in more detail in the section entitled
“Business—Regulation—Federal Aviation Administration,” FAA approvals required to operate our business include
Supplemental Type Certificates, or STCs and Parts Manufacturing Authorities, or PMAs. Obtaining STCs and PMAs is an expensive and
time-consuming process that requires significant focus and resources. Any inability to obtain, delay in obtaining, or change in,
needed FAA certifications, authorizations, or approvals, could have an adverse effect on our ability to meet our installation commitments,
manufacture and sell parts for installation on aircraft, or expand our business and could, therefore, materially adversely affect
our growth prospects, business and operating results. The FAA closely regulates many of our operations. If we fail to comply with
the FAA’s many regulations and standards that apply to our activities, we could lose the FAA certifications, authorizations,
or other approvals on which our manufacturing, installation, maintenance, preventive maintenance, and alteration capabilities are
based. In addition, from time to time, the FAA or comparable foreign agencies adopt new regulations or amend existing regulations.
The FAA could also change its policies regarding the delegation of inspection and certification responsibilities to private companies,
which could adversely affect our business. To the extent that any such new regulations or amendments to existing regulations or
policies apply to our activities, those new regulations or amendments to existing regulations generally increase our costs of compliance.

As a broadband Internet provider, we must
comply with the Communications Assistance for Law Enforcement Act of 1994, or CALEA, which requires communications carriers to
ensure that their equipment, facilities and services can accommodate certain technical capabilities in executing authorized wiretapping
and other electronic surveillance. Currently, our CALEA solution is being deployed in our network. However, we could be subject
to an enforcement action by the FCC or law enforcement agencies for any delays related to meeting, or if we fail to comply with,
any current or future CALEA, or similarly mandated law enforcement related, obligations. Such enforcement actions could subject
us to fines, cease and desist orders, or other penalties, all of which could adversely affect our business. Further, to the extent
the FCC adopts additional capability requirements applicable to broadband Internet providers, its decision may increase the costs
we incur to comply with such regulations.

In addition to these U.S. agencies, we
are also subject to regulation by foreign government agencies that choose to assert jurisdiction over us as a result of the service
we provide on aircraft that fly international routes. Adverse decisions or regulations of these U.S. and foreign regulatory bodies
could negatively impact our operations and costs of doing business and could delay the roll-out of our services and have other
adverse consequences for us. Our ability to obtain certain regulatory approvals to offer our services internationally may also
be the responsibility of a third party, and, therefore, may be out of our control. We are unable to predict the scope, pace or
financial impact of regulations and other policy changes that could be adopted by the various governmental entities that oversee
portions of our business.

If government regulation of the Internet,
including e-commerce or online video distribution changes, we may need to change the way we conduct our business to a manner that
incurs greater operating expenses, which could harm our results of operations.

The current legal environment for Internet
communications, products and services is uncertain and subject to statutory, regulatory or interpretive change. We cannot be certain
that we, our vendors and media partners or our customers are currently in compliance with applicable regulatory or other legal
requirements in the countries in which our service is used. Our failure, or the failure of our vendors and media partners, customers
and others with whom we transact business to comply with existing or future legal or regulatory requirements could materially adversely
affect our business, financial condition and results of operations. Regulators may disagree with our interpretations of existing
laws or regulations or the applicability of existing laws or regulations to our business, and existing laws, regulations and interpretations
may change in unexpected ways.

30

For example, our mobile wireless broadband
Internet access services were previously classified as information services, and not as telecommunications services. Therefore,
these services were not subject to FCC common carrier regulation. However, effective June 12, 2015, the FCC reclassified mobile
(and fixed) broadband Internet access services as Title II telecommunications services pursuant to the Open Internet Order. The
Open Internet Order also adopted broad new net neutrality rules. For example, broadband providers may not block access to lawful
content, applications, services, or non-harmful devices. Broadband providers also may not impair or degrade lawful Internet traffic
on the basis of content, applications, services, or non-harmful devices. In addition, broadband providers may not favor some lawful
Internet traffic over other lawful traffic in exchange for consideration of any kind, and they may not prioritize the content and
services of their affiliates. Other than for paid prioritization, the rules contain an exception for “reasonable network
management.” The Open Internet Order recognizes that whether a network management practice is reasonable varies according
to the broadband technology involved and may provide more flexibility to implement network management practices in the context
of our capacity-constrained air-to-ground and satellite broadband networks.

Other jurisdictions may adopt similar or
different regulations that could affect our ability to use “network management” techniques. Likewise, the United States
and the European Union, among other jurisdictions, are considering proposals regarding data protection that, if adopted, could
impose heightened restrictions on certain of our activities relating to the collection and use of data of end users. Further, as
we promote exclusive content and services and increase targeted advertising with our media partners to customers of our services,
we may attract increased regulatory scrutiny.

We cannot be certain what positions regulators
may take regarding our compliance with, or lack of compliance with, current and future legal and regulatory requirements or what
positions regulators may take regarding any past or future actions we have taken or may take in any jurisdiction. Regulators may
determine that we are not in compliance with legal and regulatory requirements, and impose penalties, or we may need to make changes
to our services, which could be costly and difficult. Any of these events would adversely affect our operating results and business.

Our possession and use of personal
information and the use of credit cards by our customers present risks and expenses that could harm our business. Unauthorized
disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to costly
litigation and damage our reputation.

Maintaining our network security is of
critical importance because our online systems will store confidential registered user, employee and other sensitive data, such
as names, email addresses, addresses and other personal information. We will depend on the security of our networks and the security
of the network infrastructures of our third-party telecommunications service providers, our customer support providers and our
other vendors. Unauthorized use of our, or our third-party service providers’, networks, computer systems and services could
potentially jeopardize the security of confidential information, including credit card information, of our future customers. There
can be no assurance that any security measures we, or third parties, take will be effective in preventing these activities. As
a result of any such breaches, customers may assert claims of liability against us as a result of any failure by us to prevent
these activities. Further, our in-cabin network operates as an open, unsecured Wi-Fi hotspot, and non-encrypted transmissions users
send over this network may be vulnerable to access by users on the same plane. These activities may subject us to legal claims,
adversely impact our reputation, and interfere with our ability to provide our services, all of which could have a material adverse
effect on our business prospects, financial condition and results of operations.

Failure to protect confidential customer
data or to provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United
States federal and state regulatory agencies or courts. For example, the FCC’s Consumer Proprietary Network Information,
or CPNI rules, applicable to our satellite-based offerings, require us to comply with a range of marketing and privacy safeguards.
The Federal Trade Commission, or FTC, could assert jurisdiction to impose penalties related our service if it found our privacy
policies or security measures to be inadequate under existing federal law. We could also be subject to certain state laws that
impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements.
Our failure to comply with any of these rules or regulations could have an adverse effect on our business, financial condition
and results of operations.

Other countries in which we may operate
or from which our services may be offered, including those in the European Union, also have certain privacy and data security requirements
that may apply to our business, either now or in the future. These countries’ laws may in some cases be more stringent than
the requirements in the United States. For example, European Union member countries have specific requirements relating to cross
border transfers of personal information to certain jurisdictions, including to the United States. In addition, some countries
have stricter consumer notice and/or consent requirements relating to personal information collection, use or sharing. Moreover,
international privacy and data security regulations may become more complex. For example, the European Union is considering a draft
proposed data protection regulation which, if enacted, may result in even more restrictive privacy-related requirements. Our failure
to comply with other countries’ privacy or data security-related laws, rules or regulations could also have an adverse effect
on our business, financial condition and results of operations.

In addition, our customers will use credit
cards to purchase our products and services. Problems with our or our vendors billing software could adversely affect our customer
satisfaction and could cause one or more of the major credit card companies to disallow our continued use of their payment services.
In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our subscribers’
credit cards on a timely basis or at all, our business, financial condition and results of operations could be adversely affected.

31

We depend upon third parties to manufacture
equipment components and to provide services for our network.

We rely on third-party suppliers for equipment
components that we use to provide our services. The supply of third- party components could be interrupted or halted by a termination
of our relationships, a failure of quality control or other operational problems at such suppliers or a significant decline in
their financial condition. If we are not able to continue to engage suppliers with the capabilities or capacities required by our
business, or if such suppliers fail to deliver quality products, parts, equipment and services on a timely basis consistent with
our schedule, our business prospects, financial condition and results of operations could be adversely affected.

Our Investment in Yuanjui Inc. could result in losses
to us.

On December 3, 2020, we made a prepayment to three individuals
to purchase from them an aggregate of 6,000,000 restricted shares of YuanJiu Inc. for approximately $5 million, for business purposes
in Taiwan relating to local operations. YuanJiu is a listed company on the Taiwan Stock Exchange and a local business partner of
ours. Although we are purchasing these shares as a long term investment, the shares are currently restricted. If we determine that
we need to sell these shares to raise funds for other business purposes, there may not be an immediate buyer and we may have to
sell the shares at a loss. This could have a negative effect on our income statement and our ability to raise funds when needed.

We may fail to recruit, train and
retain the highly skilled employees that are necessary to remain competitive and execute our growth strategy. The loss of one or
more of our key personnel could harm our business.

Competition for key technical personnel
in high-technology industries such as ours is intense. We believe that our future success depends in large part on our continued
ability to hire, train, retain and leverage the skills of qualified engineers and other highly skilled personnel needed to maintain
and grow our business and technology. We may not be as successful as our competitors at recruiting, training, retaining and utilizing
these highly skilled personnel. In particular, we may have more difficulty attracting or retaining highly skilled personnel during
periods of poor operating performance. Any failure to recruit, train and retain highly skilled employees could negatively impact
our business and results of operations.

We depend on the continued service and
performance of our key personnel, including Louis Giordimaina, our Chief Executive Officer, Jeffrey Wun, our President and Chief
Technology Officer, and Georges Caldironi, our Chief Operating Officer. Such individuals have acquired specialized knowledge and
skills with respect to our operations. As a result, if any of these individuals were to leave us, we could face substantial difficulty
in hiring qualified successors and could experience a loss of productivity while any such successor obtains the necessary training
and expertise. We do not maintain key man insurance on any of our officers or key employees. The loss of key personnel, including
key members of our management team, as well as certain of our key marketing or technology personnel, could disrupt our operations
and have an adverse effect on our ability to grow our business.

We have identified material weaknesses
in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we
may not be able to accurately report our financial results and prevent fraud. As a result, current and potential stockholders could
lose confidence in our financial statements, which would harm the trading price of our common stock.

Companies that file reports with the SEC,
including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management
to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the
Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial
reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public
companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation
report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial
reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report of
their auditors in annual reports.

A report of our management is included
under the section titled “Controls and Procedures.” We are a smaller reporting company and, consequently, are not required
to include an attestation report of our auditor in our annual transition report. However, if and when we become subject to the
auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our
independent auditors.  

During its evaluation of the effectiveness
of internal control over financial reporting as of December 31, 2020, management identified a material weakness. The material
weakness was associated with our lack of sufficient and skilled accounting personnel with an appropriate level of technical accounting
knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with
our financial reporting requirements and our need to rely heavily on the use of external legal and accounting professionals to
mitigate these deficiencies. We are undertaking remedial measures, which measures will take time to implement and test, to address
this material weakness. There can be no assurance that such measures will be sufficient to remedy the material weakness identified
or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we
continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls,
such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our
financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation
reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead
to a decline in our stock price.

32

Expenses or liabilities resulting
from litigation could adversely affect our results of operations and financial condition.

From time to time, we may be subject to
claims or litigation in the ordinary course of our business, including for example, claims related to employment matters and class
action lawsuits. Our operations are characterized by the use of new technologies and services across multiple jurisdictions that
implicate a number of statutory schemes and a range of rules and regulations that may be subject to broad or creative interpretation,
which may subject to us to litigation, including class action lawsuits, the outcome of which may be difficult to assess or quantify
due to the potential ambiguity inherent in these regulatory schemes and/or the nascence of our technologies and services. Plaintiffs
in these types of litigation may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss
relating to such lawsuits may remain unknown for substantial periods of time. Any such claims or litigation may be time-consuming
and costly, divert management resources, require us to change our products and services, or have other adverse effects on our business.
Any of the foregoing could have a material adverse effect on our results of operations and could require us to pay significant
monetary damages. In addition, costly and time-consuming litigation could be necessary to enforce our existing contracts and, even
if successful, could have an adverse effect on us. In addition, prolonged litigation against any airline partner, customer or supplier
could have the effect of negatively impacting our reputation and goodwill with existing and potential airline partners, customers
and suppliers.

Technological advances may harm our
business.

Due to the widening use of state-of-the-art,
personal electronic devices such as Apple’s iPad, ever-increasing numbers of passengers have their own mobile devices, which
they might use to bring their own content such as movies, music or games with them on a flight. This could decrease demand for
our in-flight offerings. Carriers now also have greater technical means at their disposal to offer passengers in-flight access
to the Internet, including through our offerings and those of our competitors. At present, these offerings do not allow passengers
to fully stream content on their mobile devices. If, however, in-flight Internet access in the future allows passengers to fully
stream content on their mobile devices, this could decrease demand for our in-flight offerings. While both trends will give rise
to risks as well as opportunities for us, it is impossible to foresee at present whether and, if so, to what extent these trends
will have lasting effects. Note, too, that the in-flight entertainment systems currently in place are unable to support these developments.
Given average useful lives of 15 to 20 years, the conventional systems will continue to dominate the in-flight entertainment industry
for the foreseeable future. As a result, possible changes will happen slowly, giving all market players sufficient time to adapt.

We may have exposure to foreign currency
risks in the future and our future hedging activities could create losses.

Currency risks essentially arise from the
fact that sales to customers and purchasing are affected in one currency while fixed costs are incurred in other currencies. If
necessary, we will engage in hedging transactions to counteract direct currency risks. However, we cannot always guarantee that
all currency risks will have been hedged in full. Severe currency fluctuations could also cause the hedging transactions to fail
if agreed thresholds (triggers) are not met or exceeded. We therefore cannot fully preclude negative foreign currency effects in
the future – some of which might be substantial – due to unforeseen exchange rate fluctuations and/or inaccurate assessments of
market developments.

We will source our content from studios,
distributors and other content providers, and any reduction in the volume of content produced by such content providers could hurt
our business by providing us with less quality content to choose from and resulting in potentially less attractive offerings for
passengers.

We will receive content from studios, distributors
and other content providers, and in some circumstances, we will depend on the volume and quality of the content that these content
providers produce. If studios, distributors or other content providers were to reduce the volume or quality of content they make
available to us over any given time period, whether because of their own financial limitations or other factors influencing their
businesses, we would have less quality content to choose from and our programmers would have more difficulty finding relevant and
appropriate content to provide to our customers. This could negatively impact the passenger experience, which could in turn reduce
the demand for our offerings, which would have a negative impact on our revenue and results of operations.

We are a holding company with no
operations of our own, and we depend on our subsidiaries for cash.

Currently, we are a holding company and
do not have any material assets or operations other than ownership of equity interests of our subsidiaries. Our operations are
conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends
is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans. The
ability of our subsidiaries to generate sufficient cash flow from future operations to allow us and them to make scheduled payments
on our obligations will depend on their future financial performance, which will be affected by a range of economic, competitive
and business factors, many of which are outside of our control. We cannot assure you that the cash flow and future earnings of
our operating subsidiaries will be adequate for our subsidiaries to service their debt obligations. If our subsidiaries do not
generate sufficient cash flow from future operations to satisfy corporate obligations, we may have to: undertake alternative financing
plans (such as refinancing), restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital.
We cannot assure you that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the
timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable
terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect.
Our inability to generate sufficient cash flow to satisfy our obligations, or to refinance our obligations on commercially reasonable
terms, would have an adverse effect on our business, financial condition and results of operations. Furthermore, we and our subsidiaries
may incur substantial additional indebtedness in the future that may severely restrict or prohibit our subsidiaries from making
distributions, paying dividends or making loans to us.

33

Risks Relating to our Industry

Our business is highly dependent
on the airline industry, which is itself affected by factors beyond the airlines’ control. The airline industry is highly
competitive and sensitive to changing economic conditions.

Our business is directly affected by the
number of passengers flying on commercial aircraft, the financial condition of the airlines and other economic factors. If consumer
demand for air travel declines, including due to increased use of technology such as videoconferencing for business travelers,
or the number of aircraft and flights shrinks due to, among other reasons, reductions in capacity by airlines, the number of passengers
available to use our service will be reduced, which would have a material adverse effect on our business and results of operations.
Unfavorable general economic conditions and other events that are beyond the airlines’ control, including higher unemployment
rates, higher interest rates, reduced stock prices, reduced consumer and business spending, terrorist attacks or threats and pandemics
could have a material adverse effect on the airline industry. A general reduction or shift in discretionary spending can result
in decreased demand for leisure and business travel and lead to a reduction in airline flights offered and the number of passengers
flying. Further, unfavorable economic conditions could also limit airlines’ ability to counteract increased fuel, labor or
other costs though raised prices. Our airline partners operate in a highly competitive business market and, as a result, continue
to face pressure on offerings and pricing. These unfavorable conditions and the competitiveness of the air travel industry could
cause one or more of our airline partners to reduce expenditures on passenger services including deployment of our service or file
for bankruptcy. Any of these events would have a material adverse effect on our business prospects, financial condition and results
of operations.

Air traffic congestion at airports,
air traffic control inefficiencies, weather conditions, such as hurricanes or blizzards, increased security measures, new travel-related
taxes, the outbreak of disease or any other similar event could harm the airline industry.

Airlines are subject to cancellations or
delays caused by factors beyond their control. Cancellations or delays due to weather conditions or natural disasters, air traffic
control problems, breaches in security or other factors could reduce the number of passengers on commercial flights and thereby
reduce demand for the services provided by us and our products and services and harm our businesses, results of operations and
financial condition.

The COVID-19 pandemic may result
in a long-term contraction in the global airline industry, the bulk of which likely would be borne by carriers in the Asia-Pacific
region. As a development stage IFEC service provider with an emphasis on Asia Pacific, the continuation of the coronavirus pandemic
may have a material adverse effect on our business, results of operation, financial condition and stock price.

On January 30, 2020, the World Health Organization,
or WHO, declared the coronavirus outbreak in China a public health emergency of international concern and on March 11, 2020,
the WHO declared the outbreak a pandemic. In recent months, coronavirus cases have surged outside of China, spreading throughout
the world. Given the high public health risks associated with the disease, governments around the world have imposed various degrees
of travel and gathering restrictions and other quarantine measures. The coronavirus outbreak is currently having an indeterminable
adverse impact on the global economy.

The coronavirus has a particular adverse
impact on the airline industry. The outbreak in China and throughout the world since December 2019 has led to a precipitous decrease
in the number of daily departures and arrivals for domestic and international flights. According to the International Air Transport
Association (IATA) Airlines Financial Monitor dated November – December 2020, published on January 21, 2021, 1) the final
Q3 2020 financial results show that airlines continued to suffer from very weak travel demand and burnt cash, albeit at a slower
rate compared to Q2 with the help of cost cutting measures and robust cargo revenues; 2) initial Q4 2020 earnings announcements
indicate that airlines continued to burn cash as the recovery in demand stalled. However, the vaccine news makes IATA estimate
that airlines could achieve cash break-even towards the end of 2021; 3) The global airline share price index rose in December 2020
but still lagged wider equity markets as the resurgence of the virus weighed on the travel demand recovery; 4) Looking forward,
the widespread availability of vaccines and implementation of successful testing regimes will be key for the recovery in travel
demand and airline share prices. As travel demand is expected to recover only gradually, airlines will likely remain cautious regarding
capacity increases.  IATA expects domestic aviation markets will recover faster than international markets. Of course, there
can be no guarantees that an industry recovery will continue or be sustained or that a resurgence of the coronavirus pandemic will
not reverse recent gains made in the airlines industry.

As a development stage IFEC service provider
with a focus on Asia Pacific, we are vulnerable to any contraction in the airline industry across the region, and we believe our
business may be adversely affected by the coronavirus epidemic. Our operations in Asia Pacific are conducted through our subsidiaries
in the region, including Aircom HK, Aircom Japan, Aircom Taiwan and Aircom Seychelles. Currently, the primary role of these subsidiaries
is business development with respect to airlines and local content providers and advertising partners. The coronavirus epidemic
has slowed down the operations of our Asia-Pacific subsidiaries. In addition, we plan to locate our first ground station in Taiwan,
the implementation of which could be delayed by the coronavirus epidemic.

Furthermore, fears of the economic impacts
of the coronavirus have sparked the deepest weekly slides in publicly traded securities since the 2008 financial crisis. The volatility
of stock prices and an across-the-market selloffs may depress our stock price, and moreover, adversely affect our ability to obtain
equity or debt financings from the financial markets.

Given the uncertainty of the outbreak,
the spread of the coronavirus may be prolonged and worsened. If this outbreak persists, commercial activities throughout the world
could be curtailed with decreased consumer spending, business operation disruptions, interrupted supply chain, difficulties in
travel, and reduced workforces. The duration and intensity of disruptions resulting from the epidemic is uncertain. It is unclear
as to when the outbreak will be contained, and we also cannot predict if the impact will be short-lived or long-lasting. The extent
to which the coronavirus impacts our operations and financial results will depend on its future developments. If the
coronavirus outbreak is not effectively controlled in a short period of time, our business operation, financial condition and stock
price may be materially and adversely affected as a result of a slowdown in economic growth, a contraction in the airline sector,
depressed customer demand, operation disruptions or other factors that we cannot foresee. 

34

Risks Relating to our Technology and
Intellectual Property

We could be adversely affected if
we suffer service interruptions or delays, technology failures or damage to our equipment.

Our reputation and ability to attract,
retain and serve our future commercial airline customers will depend upon the reliable performance of our satellite transponder
capacity, network infrastructure and connectivity system. We have experienced interruptions in these systems in the past, including
component and service failures that temporarily disrupted users’ access to the Internet, and we may experience service interruptions,
service delays or technology or systems failures in the future, which may be due to factors beyond our control. If we experience
frequent system or network failures, our reputation could be harmed and our future airline customers may have the right to terminate
their contracts with us or pursue other remedies.

Our operations and services will depend
upon the extent to which our equipment and the equipment of our third-party network providers is protected against damage from
fire, flood, earthquakes, power loss, solar flares, telecommunication failures, computer viruses, break-ins, acts of war or terrorism
and similar events. Damage to our networks could cause interruptions in the services that we will provide, which could have a material
adverse effect on service revenue, our reputation and our ability to attract or retain customers.

We rely on service providers for
certain critical components of and services relating to our satellite connectivity network.

We currently source key components of our
hardware, including the aircraft installed satellite antenna, from third parties and key aspects of our connectivity services,
including all of our satellite transponder services from SKY Perfect JSAT Corporation. While we have written contracts with these
key component and service providers, if we experience a disruption in the delivery of products and services from either of these
providers, it may be difficult for us to continue providing our own products and services to our customers. We have experienced
component delivery issues in the past and there can be no assurance that we will avoid similar issues in the future. Additionally,
the loss of the exclusive source protections that we have with our hardware provider could eliminate our competitive advantage
in the use of satellites for in-flight connectivity, which could have a material adverse effect on our business and operations.

Assertions by third parties of infringement,
misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially
harm our business and operating results.

In recent years, there has been significant
litigation involving intellectual property rights in many technology-based industries, including the wireless communications industry.
Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming, diverts technical and management
personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages,
enter into royalty or licensing agreements, cease providing certain products or services or take other actions to resolve the claims.
These actions, if required, may be costly or unavailable on terms acceptable to us. Certain of our suppliers do not provide indemnity
to us for the use of the products and services that these providers supply to us. At the same time, we generally offer third-party
intellectual property infringement indemnity to our customers which, in some cases, does not cap our indemnity obligations and
thus could render us liable for both defense costs and judgments. Any of these events could result in increases in operating expenses,
limit our service offerings or result in a loss of business if we are unable to meet our indemnification obligations and our airline
customers terminate or fail to renew their contracts.

Our use of open-source software could
limit our ability to commercialize our technology.

Open-source software is software made widely
and freely available to the public in human-readable source code form, usually with liberal rights to modify and improve such software.
Some open-source licenses require as a condition of use that proprietary software that is combined with licensed open-source software
and distributed must be released to the public in source code form and under the terms of the open-source license. Accordingly,
depending on the manner in which such licenses were interpreted and applied, we could face restrictions on our ability to commercialize
certain of our products and we could be required to (i) release the source code of certain of our proprietary software to the public,
including competitors; (ii) seek licenses from third parties for replacement software; and/or (iii) re-engineer our software in
order to continue offering our products. Such consequences could materially adversely affect our business.

The satellites that we currently
rely on or may rely on in the future have minimum design lives, but could fail or suffer reduced capacity before then.

The usefulness of the satellites upon which
we currently rely and may rely on in the future is limited by each satellite’s minimum design life. For example, the satellites
through which we provide our service have minimum design lives ranging from 10 to 15 years. Our ability to offer in-flight connectivity
and alleviate capacity constraints throughout our network depends on the continued operation of the satellites or any replacement
satellites, each of which has a limited useful life. We can provide no assurance, however, as to the actual operational lives of
those or future satellites, which may be shorter than their design lives, nor can we provide assurance that replacement satellites
will be developed, authorized or successfully deployed.

35

In the event of a failure or loss of any
of these satellites, our satellite service providers may relocate another satellite and use it as a replacement for the failed
or lost satellite, which could have an adverse effect on our business, financial condition and results of operations. Such a relocation
may require regulatory approval, including through, among other things, a showing that the replacement satellite would not cause
additional interference compared to the failed or lost satellite. We cannot be certain that our satellite service provider could
obtain such regulatory approval. In addition, we cannot guarantee that another satellite will be available for use as a replacement
for a failed or lost satellite, or that such relocation can be accomplished without disrupting or otherwise adversely impacting
our business.

Satellites that are not yet in service
are subject to construction and launch related risks.

Satellite construction and launch are subject
to significant risks, including delays, launch failure and incorrect orbital placement. Launch failures result in significant delays
in the deployment of satellites because of the need both to construct replacement satellites and to obtain other launch opportunities.
Construction and launch delays could materially and adversely affect our ability to generate revenues.

A failure to raise sufficient capital
will delay or prohibit our building of a satellite ground station and related data center, which will inhibit our business development.

Because our IFEC services will require
the transmission and processing of large amounts of data, we will need to build satellite ground stations and related data centers
in our regions of operation, to facilitate the effectiveness and efficiency of our IFEC services. If we are not able to raise an
amount of capital sufficient to purchase land for and build a satellite ground station and data center near our area of operations,
initially in the Asia region, we may not be able to provide our IFEC services in an efficient and operationally effective way and,
as a result, our business prospects and results of operations could suffer.

Risks Relating to Ownership of our Common
Stock

Our common stock is quoted on the
OTCQX Best Market, which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTCQX
Best Market. The OTCQX Best Market is a significantly more limited market than the New York Stock Exchange or the Nasdaq Stock
Market. The quotation of our shares on the OTCQX may result in a less liquid market available for existing and potential stockholders
to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact
on our ability to raise capital in the future.

Our common stock is quoted on the
Professional Segment of the regulated market of Euronext Paris, which may have an unfavorable impact on our stock price and liquidity.

Since July 23, 2019, our common stock has
also been listed on the Professional Segment of the regulated market of Euronext Paris under the symbol “AKOM”. The
Professional Segment of the regulated market of Euronext Paris is a significantly more limited market than the regulated market
of Euronext Paris (Compartment A, B or C). The quotation of our shares on the Professional Segment of the regulated market of Euronext
Paris may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock,
could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in
the future.

We cannot predict the extent to which
an active public trading market for our common stock will develop or be sustained. If an active public trading market does not
develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.

At present, there is minimal public trading
in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained
due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock
brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such
as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable.
As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent,
as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance that an active public trading market for our common
stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our
common stock.

36

We may be subject to penny stock
regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally
define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. Our common stock is not currently a “penny stock”
and is not subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements
on broker-dealers that sell such securities to persons other than established customers and “accredited investors”
(generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with
their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser’s written consent to the transaction prior to sale.

For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC
relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer
and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent
disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common
stock will continue to qualify for exemption from the Penny Stock Rule if our stock price drops to the point where we become subject
to the Penny Stock Rule, this rule could affect the ability of broker-dealers to sell our securities and affect the ability of
purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional
capital in the future. Additionally, if our common stock were to become subject to the Penny Stock Rule, we would become subject
to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution
of penny stock, if the SEC finds that such a restriction would be in the public interest.

Substantial future sales of our common
stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common
stock in the public market after our public offering declared effective by the SEC on November 6, 2020, or the perception that
these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through
the sale of additional shares. Following the public offering, we will have approximately 11,492,110 shares of common stock outstanding
(assuming the maximum of 1,951,219 shares are sold in the offering) or 11,784,793 shares of common stock outstanding (assuming
the over-subscription amount is exercised in full). All of the shares of common stock to be sold in the public offering will be
freely tradable without restriction or further registration under the federal securities laws. The remaining shares will be subject
to restrictions on resale under U.S. securities laws.

Our board of directors has broad
discretion to issue additional securities and any such issuance may cause substantial dilution to our stockholders.

We are entitled under our articles of incorporation
to issue up to 90,000,000 shares of common stock and 50,000,000 shares of “blank check” preferred stock, although these
amounts may change in the future subject to stockholder approval. Shares of our blank check preferred stock provide our board of
directors with broad authority to determine voting, dividend, conversion, and other rights. As of the date of this annual report,
we have issued and outstanding 9,637,051 shares of common stock, no shares of preferred stock, and we have 2,000,000 shares of
common stock reserved for issuance under our 2017 Equity Incentive Plan, of which 360,401 shares remain available for issuance.
As of March 23, 2021, we had no shares of preferred stock issued and outstanding. Accordingly, at the date of this annual report,
we could issue up to 78,289,207 additional shares of common stock (including shares reserved under our 2017 Equity Incentive Plan)
and 50,000,000 shares of “blank check” preferred stock. Any additional stock issuances could be made at a price that
reflects a discount or premium to the then-current market price of our common stock. In addition, in order to raise capital, we
may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. Our board
may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval
by our stockholders. Any preferred shares we may issue could have such rights, preferences, privileges and restrictions as may
be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption
rights and liquidation provisions. We may also issue additional securities to our directors, officers, employees and consultants
as compensatory grants in connection with their services, both in the form of stand-alone grants or under our stock incentive plans.
The issuance of additional securities may cause substantial dilution to our stockholders.

37

Our articles of incorporation, bylaws
and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock
price to decline.

Our articles of incorporation, bylaws and
Nevada law contain provisions which could make it more difficult for a third party to acquire us, even if closing such a transaction
would be beneficial to our stockholders. We are currently authorized to issue up to 50,000,000 shares of “blank check”
preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of
issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include
voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion
and redemption rights and sinking fund provisions. No shares of our preferred stock are currently outstanding. The issuance of
any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the
value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict
our ability to merge with, or sell our assets to, a third party and thereby preserve control by current management.

Provisions of our articles of incorporation,
bylaws and Nevada law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying
or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or
frustrate attempts by our stockholders to replace or remove our management. In particular, our articles of incorporation, our bylaws
and Nevada law, as applicable, among other things, provide our board of directors with the ability to alter our bylaws without
stockholder approval, and provide that vacancies on our board of directors may be filled by a majority of directors in office,
although less than a quorum.

General Risk Factors

We will likely need additional financing
to execute our business plan or new initiatives, which we may not be able to secure on acceptable terms, or at all.

We will require additional financing in
the near and long term to fully execute our business plan. Our success may depend on our ability to raise such additional financing
on reasonable terms and on a timely basis. Conditions in the economy and the financial markets may make it more difficult for us
to obtain necessary additional capital or financing on acceptable terms, or at all. If we cannot secure sufficient additional financing,
we may be forced to forego strategic opportunities or delay, scale back or eliminate additional service deployment, operations
and investments or employ internal cost savings measures. Furthermore, we will be forced to take some or all of these measures
if we do not raise sufficient funds in our public offering, the successful completion of which we cannot guarantee.

We face limitations on our ability
to grow our operations which could harm our operating results and financial condition.

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

If our efforts to retain and attract
customers are not successful, our revenue will be adversely affected.

We expect to generate substantially all
of our revenue from sales of services, some of which will be on a subscription basis. We must be able to retain subscribers and
attract new and repeat customers. If we are unable to effectively retain subscribers and attract new and repeat customers, our
business, financial condition and results of operations would be adversely affected.

Unreliable service levels, lack of sufficient
capacity, uncompetitive pricing, lack of availability, security risk and lack of related features of our equipment and services
are some of the factors that may adversely impact our ability to retain customers and partners and attract new and repeat customers.
If our customers are able to satisfy their in-flight entertainment needs through activities other than broadband internet access,
at no or lower cost, they may not perceive value in our products and services. If our efforts to satisfy and retain customers and
subscribers are not successful, we may not be able to attract new customers through word-of-mouth referrals. Any of these factors
could cause our customer growth rate to fall, which would adversely impact our business, financial condition and results of operations.

38

Adverse economic conditions may have
a material adverse effect on our business.

Macro-economic challenges are capable of
creating volatile and unpredictable environments for doing business. We cannot predict the nature, extent, timing or likelihood
of any economic slowdown or the strength or sustainability of any economic recovery, worldwide, in the United States or in the
airline industry. For many travelers, air travel and spending on in-flight internet access are discretionary purchases that they
can eliminate in difficult economic times. Additionally, a weaker business environment may lead to a decrease in overall business
travel, which is an important contributor to our service revenue. These conditions may make it more difficult or less likely for
customers to purchase our equipment and services. If economic conditions in the United States or globally deteriorate further or
do not show improvement, we may experience material adverse effects to our business, cash flow and results of operations.

Our operating results may fluctuate
unpredictably and may cause us to fail to meet the expectations of investors, adversely affecting our stock price.

We operate in a highly dynamic industry
and our future quarterly operating results may fluctuate significantly. Our future revenue and operating results may vary from
quarter to quarter due to many factors, many of which are not within our control. As a result, comparing our operating results
on a period-to-period basis may not be meaningful. Further, it is difficult to accurately forecast our revenue, margin and operating
results, and if we fail to match our expected results or the results expected by financial analysts or investors, the future trading
price of our common stock may be adversely affected.

In addition, due to generally lower demand
for business travel during the summer months and holiday periods, and leisure and other travel at other times during the year,
our quarterly results may not be indicative of results for the full year. Due to these and other factors, quarter-to-quarter comparisons
of our historical operating results should not be relied upon as accurate indicators of our future performance.

If our marketing and advertising
efforts fail to generate revenue on a cost-effective basis, or if we are unable to manage our marketing and advertising expenses,
it could harm our results of operations and growth.

Our future growth and profitability, as
well as the maintenance and enhancement of our brands, will depend in large part on the effectiveness and efficiency of our future
marketing and advertising expenditures. We plan to use a diverse mix of television, print, trade show and online marketing and
advertising programs to promote our business. Significant increases in the pricing of one or more of our marketing and advertising
channels could increase our expenses or cause us to choose less expensive, but potentially less effective, marketing and advertising
channels. In addition, to the extent we implement new marketing and advertising strategies, we may in the future have significantly
higher expenses. We may in the future incur, marketing and advertising expenses significantly in advance of the time we anticipate
recognizing revenue associated with such expenses, and our marketing and advertising expenditures may not result in increased revenue
or generate sufficient levels of brand awareness. If we are unable to maintain our marketing and advertising channels on cost-effective
terms, our marketing and advertising expenses could increase substantially, our customer levels could be affected adversely, and
our business, financial condition and results of operations may suffer.

We believe our business depends on
strong brands, and if we do not develop, maintain and enhance our brand, our ability to gain new customers and retain customers
may be impaired.

We believe that our brands will be a critical
part of our business. We expect to collaborate extensively with our future airline partners on the look and feel of the in-flight
homepage that their passengers encounter when logging into our service in flight. In order to maintain strong relationships with
our airline partners, we may have to reduce the visibility of our brand or make other decisions that do not promote and maintain
our brand. In addition, many of our trademarks contain words or terms having a somewhat common usage and, as a result, we may have
trouble registering or protecting them in certain jurisdictions. If we fail to promote and maintain our brand, or if we incur significant
expenses to promote the brands and are still unsuccessful in maintaining strong brands, our business prospects, financial condition
and results of operations may be adversely affected.

Businesses or technologies we acquire
could prove difficult to integrate, disrupt our ongoing business, dilute stockholder value or have an adverse effect on our results
of operations.

As part of our business strategy, we may
engage in acquisitions of businesses or technologies to augment our organic or internal growth. We do not have any relevant experience
with integrating and managing acquired businesses or assets. Acquisitions involve challenges and risks in negotiation, execution,
valuation and integration. Moreover, we may not be able to find suitable acquisition opportunities on terms that are acceptable
to us. Even if successfully negotiated, closed and integrated, certain acquisitions may not advance our business strategy, may
fall short of expected return-on-investment targets or may fail. Any future acquisition could involve numerous risks, including:

  potential disruption of our ongoing business and distraction of management;
  difficulty integrating the operations and products of the acquired business;
  use of cash to fund the acquisition or for unanticipated expenses;

39

  limited market experiences in new businesses;
  exposure to unknown liabilities, including litigation against the companies we acquire;
  additional costs due to differences in culture, geographical locations and duplication of key talent;
  delays associated with or resources being devoted to regulatory review and approval;
  acquisition-related accounting charges affecting our balance sheet and operations;
  difficulty integrating the financial results of the acquired business in our consolidated financial statements;
  controls in the acquired business;
  potential impairment of goodwill;
  dilution to our current stockholders from the issuance of equity securities; or
  potential loss of key employees or customers of the acquired company.

In the event that we enter into any acquisition
agreements, closing of the transactions could be delayed or prevented by regulatory approval requirements, including antitrust
review, or other conditions. We may not be successful in addressing these risks or any other problems encountered in connection
with any attempted acquisitions, and we could assume the economic risks of such failed or unsuccessful acquisitions.

We may not be able to protect our
intellectual property rights.

We regard our trademarks, service marks,
copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our
success. We rely on trademark, copyright and patent law, trade secret protection and confidentiality agreements with our employees,
vendors, airline customers, customers and others to protect our proprietary rights. We have sought and obtained patent protection
for certain of our technologies in the United States and certain other countries. Many of the trademarks that we use contain words
or terms having a somewhat common usage and, as a result, we may have difficulty registering them in certain jurisdictions. We
have not yet obtained registrations for our most important marks in all markets in which we may do business in the future, including
countries in Asia, Africa and the Middle East. If other companies have registered or have been using in commerce similar trademarks
for services similar to ours in foreign jurisdictions, we may have difficulty in registering, or enforcing an exclusive right to
use, our marks in those foreign jurisdictions.

There can be no assurance that our efforts
to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications
will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior
technologies, products or services, or that our patents, trademarks and other intellectual property will not be challenged, invalidated,
misappropriated or infringed by others. Additionally, the intellectual property laws and enforcement practices of other countries
in which our service is or may in the future be offered may not protect our products and intellectual property rights to the same
extent as the laws of the United States. If we are unable to protect our intellectual property from unauthorized use, our brand
image may be harmed and our business and results of operations may suffer.

Our common stock may be subject to
significant price volatility which may have an adverse effect on your ability to liquidate your investment in our common stock.

The market for our common stock may be
characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more
volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number
of factors. First, our shares of common stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares
in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our
shares of common stock are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb
those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment
due to our lack of meaningful profits to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse
investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more
inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned
issuer.

40

We have never paid cash dividends
on our stock and do not intend to pay dividends for the foreseeable future.

We have paid no cash dividends on any class
of our stock to date and we do not anticipate paying cash dividends in the near term. For the foreseeable future, we intend to
retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends
on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to
earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination
to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations,
financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

Fulfilling our obligations incident
to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002,
is expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect
on our future results of operations and our stock price.

As a public company, the Sarbanes-Oxley
Act of 2002 and the related rules and regulations of the SEC require us to implement various corporate governance practices and
adhere to a variety of reporting requirements and complex accounting rules. Compliance with these public company obligations requires
us to devote significant time and resources and places significant additional demands on our finance and accounting staff and on
our financial accounting and information systems. We plan to hire additional accounting and financial staff with appropriate public
company reporting experience and technical accounting knowledge. Other expenses associated with being a public company include
increased auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director
and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.

We are required under the Sarbanes-Oxley
Act of 2002 to document and test the effectiveness of our internal control over financial reporting. In addition, we are required
under the Exchange Act to maintain disclosure controls and procedures and internal control over financial reporting. Any failure
to maintain effective controls or implement required new or improved controls, or difficulties encountered in their implementation,
could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have
effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements.
This could result in a decrease in the value of our common stock. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially
subject us to sanctions or investigations by the SEC or other regulatory authorities.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

Aircom currently leases approximately 4,958
square feet of space at the Fremont, CA address, comprised of administrative offices, from Global Venture Development, LLC, which
lease expires on May 31, 2023. We pay a monthly base rent of $7,438.

Aircom Japan leases approximately 78 square
meters of space at our Japan office. The lease expires in June 2022 and the monthly lease payment is approximately $3,102. Aircom
Japan also leases additional space at a cost of approximately $1,391 per month.

Aircom HK leases approximately 2,300 square
feet of space at our Hong Kong office. The lease expires on June 27, 2022 and the monthly lease payment is $3,829. Aircom HK also
leases warehouse from the same landlord at a cost of approximately $450 per month.

Aerkomm Malta leases approximately 150
square meters of space at our Malta office. The lease expires on December 31, 2020 and the monthly lease payment is €2,000.
The lease was renewed on December 6, 2020 for a further period of one year under the same conditions.

We believe that our properties have been
adequately maintained, are generally in good condition, and are suitable and adequate for our business.

41

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently
not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial
condition or operating results.

On October 15, 2018, Aircom Telecom entered
into a product purchase agreement, or the October 15th PPA, with Republic Engineers Maldives Pte. Ltd., a company affiliated
with Republic Engineers Pte. Ltd., or Republic Engineers, a Singapore based, private construction and contracting company. On November
30, 2018, the October 15th PPA was re-executed with Republic Engineers Pte. Ltd. as the signing party. We refer to this
new agreement as the November 30th PPA and, together with the October 15th PPA, the PPA. Under the terms
of the PPA, Republic Engineers committed to the purchase of a minimum of 10 shipsets of the AERKOMM K++ system at an aggregate
purchase price of $10 million. Additionally, under the terms of the PPA, the Executive Director of Republic Engineers, C. A. Raja,
agreed to sign an agreement, or the Guarantee, to guarantee all of the obligations of Republic Engineers under the PPA. Republic
Engineers had submitted a purchase order, or PO, dated October 15, 2018 for the 10 shipsets and was supposed to have made payments
to Aircom Telecom against the purchase order shortly thereafter. To date, Republic Engineers has made no payments against the purchase
order and the Company has not begun any work on the ordered shipsets. On July 7, 2020, Republic Engineers and Mr. Raja filed a
complaint against Aerkomm, Aircom and Aircom Telecom in the Superior Court of the State of California for the County of Almeda,
or the Court, seeking declaratory relief only and no money damages, alleging that the PPA and the PO were not executed or authorized
by Republic Engineers and that the Guarantee was not executed or authorized by Mr. Raja. Republic Engineers and C. A. Raja have
requested from the Court (i) orders that the PPA, the PO and the Guarantee be declared null and void and (ii) the payment of their
reasonable attorney’s fees. On July 29, 2020, Aircom Telecom provided notice to Republic Engineers that the PPA and the PO
have been terminated according to their terms as a result of the non-performance of Republic Engineers and the Failure of Mr. Raja
to provide the Guarantee. Aerkomm denies the allegations in the complaint and believes that the claims filed by Republic Engineers
and Mr. Raja have no merit. Aerkomm has retained special litigation counsel and intends to vigorously defend against the claims.
Aerkomm does not expect that this proceeding will have a material adverse effect on its results of operations or cashflow.

On June 20, 2018, we entered into the Cooperation
Framework Agreement, as supplemented on July 19, 2019, with Shenzhen Yihe Culture Media Co., Ltd., or Yihe, the authorized agent
of Guangdong Tengnan Internet, or Tencent Group, pursuant to which Yihe agreed to assist the Company with public relations, advertising,
market and brand promotion, as well as with the development of a working application of the Tencent Group WeChat Pay payment solution
and WeChat applets applicable for Chinese users and relating to cell phone and WiFi connectivity on airplanes. As compensation
under this Yihe agreement, we paid Yihe RMB 8 million (approximately US$1.2 million). On October 16, 2020, in accordance with
the provisions of the agreement with Yihe, as supplemented, we filed an arbitration action with the ShenZhen International Arbitration
Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking
a complete refund of our RMB 8 million payment to Yihe. We received notice from the Arbitration Court on October 16, 2020
of receipt of our arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration. We
intend to aggressively pursue this matter.

On December 1, 2020, the United States
Patent and Trademark Office (the “USPTO”) issued a Final Office Action relating to Aerkomm Inc. indicating that our
US trademark application (Serial No. 88464588) for the name “AERKOMM,” which was originally filed with the USPTO on
June 7, 2019, was being rejected because of a likelihood of confusion with a similarly sounding name trademarked at, and in use
from, an earlier date. We are appealing this USPTO Final Office Action but there can be no guarantee that the USPTO will find on
appeal in favor of us. We are actively considering changing our name and may determine to do so prior to any appeal decision by
the USPTO.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

42

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock began trading on the OTCQB
Venture Market on May 30, 2017 under the symbol “AKOM.” On July 31, 2017, our stock began trading on the OTCQX Best
Market. To date, there has been limited trading for our common stock on the OTC Markets. Any over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transaction.

Since July
23, 2019, our common stock has also been listed on the Professional Segment of the regulated market of Euronext Paris under the
symbol “AKOM”.

Consistent with customary practice in the
French securities market, we entered into a liquidity agreement (contrat de liquidité) with Invest Securities SA, dated
September 9, 2019. The liquidity agreement complies with applicable laws and regulations in France. The liquidity agreement authorizes
Invest Securities SA to carry out market purchases and sales of shares of our common stock on the Euronext Paris market. The balance
of liquidity account is classified in other non-current financial assets in our statement of financial position. At March 23, 2021,
11,402 shares of our common stock were in the liquidity account. The liquidity agreement has a term of one year and will be renewed
automatically unless otherwise terminated by either party.

Approximate Number of Holders of Our
Common Stock

As of March 23, 2021, there were approximately
27 holders of record of our common stock. This number excludes the shares of our common stock owned by stockholders
holding stock under nominee security position listings.

Dividend Policy

We have never declared or paid a cash dividend.
We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future, if at all. Any future determination to declare dividends will be made at the
discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general
business conditions and other factors that our board of directors may deem relevant.

Securities Authorized for Issuance under
Equity Compensation Plans

See “Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters—Securities Authorized for Issuance Under Equity
Compensation Plans.”

Recent Sales of Unregistered Securities

We have not sold any equity securities
during the 2020 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K
that was filed during the 2020 fiscal year.

Purchases of Equity Securities

No repurchases of our common stock were
made during the fourth quarter ended December 31, 2020.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7. 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, 2020, and its results of operations for the years ended December 31,
2020 and 2019. 

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.

43

Overview

We are a full-service development stage
provider of IFEC solutions. With advanced technologies and a unique business model, we, as a service provider of IFEC solutions,
intend to provide airline passengers with a broadband in-flight experience that encompasses a wide range of service options. Such
options include Wi-Fi, cellular, movies, gaming, live TV, and music. We plan to offer these core services, which we are currently
still developing, through both built-in in-flight entertainment systems, such as in seat-back displays, as well as on passengers’
personal devices. We also expect to provide content management services and e-commerce solutions related to our IFEC solutions.

We plan to partner with airlines and offer
airline passengers free IFEC services. We expect to generate revenue through advertising and in-flight transactions. We believe
that this is an innovative approach that differentiates us from existing market players.

To complement and facilitate our planned
IFEC service offerings, we intend to build satellite ground stations and related data centers within the geographic regions where
we expect to be providing IFEC airline services. We have purchased a 6.36 acre parcel of land in Taiwan where we expect to build
our first ground station. We are currently waiting for the title to this Taiwan land parcel to be transferred to us and once that
process is completed, we intend to mortgage the property to finance the cost of the first ground station construction.

Our total sales were $0 and $1,599,864
for the years ended December 31, 2020 and 2019. Our total sales of $1,599,864 for the year ended December 31, 2019 consisted of
a non-recurring sale of compact adaptors for smartphones that allows a user to turn their smartphone into a satellite smartphone
to provide reliable connectivity beyond the coverage of traditional networks.

The COVID-19 Pandemic Expected Impact
on Aerkomm’s Business

Although we cannot predict with any degree
of certainty the long-term impact on our business of the COVID-19 pandemic, we do not expect that the COVID-19 pandemic will have
a material adverse effect on our business in 2020, in view of the fact that Aerkomm is a development stage company. Consequently,
we do not have any contractual agreements with airlines that would result in a decrease or complete halt in revenue generation
due to the grounding of aircraft and reduction in aircraft fleets and new aircraft purchases. Additionally, because we do not currently
have any operational IFEC systems, we are not generating any recurrent operational expenses with satellite companies that provide
bandwidth connectivity for operational IFEC systems. We expect that we will acquire certification of our Aerkomm K++ System by
the third quarter of 2021, and we are currently targeting the commencement of the initial installations of our Aerkomm K++ System
by the end of the fourth quarter of 2021, although these target dates could get pushed back due to various factors, including the
ongoing impact of the COVID-19 pandemic. While according to the current IATA data, the recovery in 2021 is expected to be slow,
this could work to our advantage as it will provide the opportunity to have more aircraft on the ground available for the retrofit
installation of our Aerkomm K++ System equipment. That is, we will not have to wait for a prospective airline customer to cycle
through its scheduled grounding of aircraft for major maintenance checks to be able to install our K++ System retrofit solution.
Of course, there can be no assurance that a grounded airline fleet would make it more probable that an airline company would contract
for our Aerkomm K++ System installation.

Because under our innovative business model
we will be providing the AERKOMM K++ System free of charge to commercial airlines, we believe that the COVID-19 economic environment
may provide us with a competitive advantage in relation to airlines that need to upgrade IFEC solutions to better serve their passengers,
but because of drastically reduced revenues, will not be able to afford to purchase IFEC equipment in the foreseeable future. Additionally,
as the impact of the COVID-19 pandemic begins to become more manageable and air travel begins to increase once again, airlines
will need to attract passengers. Our revenue sharing model may incentivize airlines to install our AERKOMM K++ System in expectation
that they may be able to generate additional revenues from passengers who will not be required to pay for connectivity.

With respect to our AirCinema Cube (discussed
in more detail below), which we are developing exclusively for installation on Hong Kong Airlines aircraft and which is expected
to be ready for installation by the third quarter of 2021, we believe we will still be able to begin installations on schedule.
However, due to the COVID-19 pandemic, even if we can install the AirCinema Cube on schedule, revenue from the AirCinema Cube will,
most likely, be delayed until the fleet of Hong Kong Airlines re-commences its full schedule which, we expect, will be late in
the fourth quarter of 2021.

Because of the unpredictability of the
future developments of the COVID-19 pandemic, we cannot be sure that any of our development, certification, installation or revenue
generation expectations, with respect to timing or otherwise, will be met.

Principal Factors Affecting Financial
Performance

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

  our ability to enter into and maintain long-term business arrangements with airline partners, which depends on numerous factors including the real or perceived availability, quality and price of our services and product offerings as compared to those offered by our competitors;
     
  the extent of the adoption of our products and services by airline partners and customers;
     

44

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

Emerging Growth Company

We are an “emerging growth company,”
as defined in the JOBS Act, and therefore we intend to take advantage of certain exemptions from various public company reporting
requirements, including not being required to have our internal controls over financial reporting audited by our independent registered
public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging
growth company.” In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new
or revised accounting standards until such time as those standards apply to private companies. We have elected to use the extended
transition period for complying with new or revised accounting standards under the JOBS Act. This election allows us to delay the
adoption of new or revised accounting standards that have different effective dates for public and private companies until those
standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies
that comply with public company effective dates. We will remain an “emerging growth company” until the earlier of (1)
the last day of the fiscal year: (a) following the fifth anniversary of the completion of our initial public offering; (b) in which
we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which
means the market value of our common stock that is held by non-affiliates exceeded $700 million as of the prior June 30th,
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References
herein to “emerging growth company” have the meaning associated with that term in the JOBS Act.

Results of Operations

On March 18, 2018, we changed our fiscal
year from December 31 to March 31, to be able to comply with the Nasdaq Stock Market so called “seasoning rules” which
required that we have audited financial statements for a full year following the date of the closing of our reverse acquisition
before we could file a listing application with Nasdaq. Since we were able to meet that seasoning requirement by changing our fiscal
year to March 31 thus enabling us to generate audited financial statements for the full year beginning on April 1, 2017 and ending
on March 31, 2018, our board of directors determined that for practical business reasons, it would be in the Company’s best
interest to revert to a December 31 fiscal year end. Our board of directors voted to change our fiscal year back to December 31
on February 12, 2019. Now that our common stock is listed for trading on the Professional
Segment of the regulated market of Euronext Paris, we have determined to suspend
our Nasdaq listing application.

45

The discussion below relates to our two fiscal years ended on
December 31, 2020 and 2019.

Comparison of Years Ended
December 31, 2020 and 2019

The following table sets forth key components
of our results of operations during the years ended December 31, 2020 and 2019.

    Years Ended

December 31,
    Change  
    2020     2019     $     %  
Sales   $     $ 1,599,864     $ (1,599,864 )     (100.0 )%
Cost of sales           1,587,222       (1,587,222 )     (100.0 )%
Operating expenses     8,335,598       8,569,231       (233,633 )     (2.7 )%
Loss from operations     (8,335,598 )     (8,556,589 )     220,991       (2.6 )%
Net non-operating income (expense)     (773,262 )     580,281       (1,353,543 )     (233.3 )%
Loss before income taxes     (9,108,860 )     (7,976,308 )     (1,132,552 )     14.2 %
Income tax expense     3,286       3,251       35       1.1 %
Net Loss     (9,112,146 )     (7,979,559 )     (1,132,587 )     14.2 %
Other comprehensive loss     (1,272,589 )     (602,603 )     (668,986 )     111.0 %
Total comprehensive loss   $ (10,383,735 )   $ (8,582,162 )   $ (1,801,573 )     21.0 %

Revenue. Our sales were $0
the years ended December 31, 2020, as compared to the $1,599,864 for the year ended December 31, 2019. Our total revenue for the
year ended December 31, 2020 was $0 as we are still developing our core business in in-flight entertainment and connectivity and
there was no non-recurring sale. Our total revenue of $1,599,864 for the year ended December 31, 2019 consisted of a non-recurring
sale of compact adaptors for smartphones that allows a user to turn their smartphone into a satellite smartphone to provide reliable
connectivity beyond the coverage of traditional networks.

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 $1,587,222 for the years ended December 31, 2020 and 2019, respectively. The cost of sales for the year ended
December 31, 2020 was $0 as we did not have any sales during the periods, while the cost of sales for the year ended December 31,
2019 represents the cost of non-recurring sales of satellite-based mobile communication units.

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 $233,633, or 2.7%, to $8,335,598 for the year ended December 31, 2020, from $8,569,231 for the year ended December 31, 2019.
Such decrease was mainly due to the decrease in stock-based compensation expense, research and development cost, legal expense
and amortization expense in the amount of $645,099, $416,230, $212,748 and $52,066, respectively, which was offset by the increase
in consulting expense, outside service expense, insurance expense and payroll and related expenses in the amount of $433,888, $254,796,
$226,632 and $164,522, respectively.

Net non-operating income (expense).
We had $773,262 in net non-operating expense for the year ended December 31, 2020 as compared to $580,281 in net non-operating
income for the year ended December 31, 2019. Net non-operating expense for the year ended December 31, 2020 primarily consisted
of net interest expense of $39,494, other loss of $1,155,623 due to a loss from allowance for other receivable (as explained under
the Legal Proceedings section below), unrealized loss from investments of $868,064 and gain on foreign exchange of $1,088,672,
Covid-19 government subsidy of $38,763 received by Aircom Japan and $15,085 received by Aircom HK and forgiveness of PPP Loan of
$163,200 received by Aircom . Net non-operating expense for the year ended December 31, 2019 primarily consisted of interest expense
of $4,207 and gain on foreign exchange of $586,040.

Loss before income taxes.
Our loss before income taxes is $9,108,860 for the year ended December 31, 2020 as compared to the loss before income taxes for
the year ended December 31, 2019 of $7,976,308, an increase of $1,132,552, or 14.2%, as a result of the factors described above.

Income tax expense (benefit). Income
tax expense decreased by $35 to $3,286 for the year ended December 31, 2020, from an income tax expense of $3,251 for the year
ended December 31, 2019. The income tax expenses were mainly due to 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 increased by $1,801,573, or 21.0%,
to $10,383,735 for the year ended December 31, 2020, from $8,582,162 for the year ended December 31, 2019.

Liquidity and Capital Resources 

As of December 31, 2020, we had cash and
cash equivalents of $584,591 and restricted cash of $3,210,000. To date, we have financed our operations primarily through cash
proceeds from financing activities, including from our 2018/2019 and 2020 public offering, issuance of convertible bonds, short-term
borrowings and equity contributions by our stockholders. 

46

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

Cash Flow

    Years Ended

December 31,
 
    2020     2019  
Net cash used for operating activities   $ (1,912,091 )   $ (8,729,319 )
Net cash used for investing activity     (5,376,667 )     (692,063 )
Net cash provided by financing activity     11,378,109       10,912,505  
Net increase in cash     4,089,351       1,491,123  
Cash and restricted cash at beginning of year     976,829       88,309  
Foreign currency translation effect on cash and restricted cash     (1,271,589 )     (602,603 )
Cash and restricted cash at end of year   $ 3,794,591     $ 976,829  

Operating Activities 

Net cash used for operating activities
was $1,912,091 for the year ended December 31, 2020, as compared to $8,729,319 for the year ended December 31, 2019.
In addition to the net loss of $9,112,146, the increase in net cash used for operating activities during the year ended December
31, 2020 was mainly due to the increase in inventory of $2,172,863, offset by the decrease in accounts receivable, decrease in
prepaid expenses, increase in accounts payable, accrued expenses, other payable – related parties and other payable – others
of $451,130, $1,345,956, $961,610, $886,319, $420,215 and $1,311,246, respectively. In addition to the net loss of $7,979,559,
the increase in net cash used for operating activities during the year ended December 31, 2019 was mainly due to increase in inventory
and prepaid expenses, decrease in accounts payable and other payable – others of $2,143,550, $1,435,164, $1,120,245 and $779,849,
respectively, offset by the decrease in accounts receivable and temporary deposit – related parties of $1,293,870 and $100,067,
respectively.

Investing Activities 

Net cash used for investing activities
for the year ended December 31, 2020 was $5,376,667 as compared to $692,063 for the year ended December 31, 2019. The net
cash used for investing activities for the year ended December 31, 2020 was mainly due to the prepayment on long-term investment
of $5,027,600, purchase of trading securities of $233,174, prepayment for equipment of $86,617 and purchase of property and equipment
of $29,276. The net cash used for investing activities for the year ended December 31, 2019 was mainly due to the $624,462 final
payment toward the purchase of a parcel of land to build our first satellite ground station and data center (the “Land”).
We also used $67,601 for the purchase of property and equipment.

Our $5,027,600 prepayment on long-term investment was made to
purchase 6,000,000 restricted shares of Yuanjiu, one of our business partners and a related party. This purchase was made for business
purposes in Taiwan relating to local operations.

Financing Activities

Net cash provided by financing activities
for the years ended December 31, 2020 and 2019 was $11,378,109 and $10,912,505, respectively. Net cash provided by financing activities
for the year ended December 31, 2020 was mainly attributable to the net proceeds from issuance of common stock of $1,667,080,
net proceeds from issuance of convertible bonds of $9,218,094 and proceeds from short-term loan – related party of $527,066.
Net cash provided by financing activities for the year ended December 31, 2019 was mainly attributable to net proceeds from
the issuance of common stock from our public offering and the borrowing under a long-term loan in the amounts of $10,810,688 and
$45,469, respectively.

On December 16, 2019, we terminated a public
offering (SEC File No. 333-222208) of our common stock begun in May 2018, which we refer to as the 2018/2019 public offering, underwritten
by Boustead Securities LLC on a “best efforts” basis. In the 2018/2019 public offering, we held 13 closings in which
we issued and sold an aggregate of 1,294,627 shares of our common stock, at $42.50 per share, for gross proceeds of approximately
$55.02 million, or net proceeds of approximately $50.83 million after underwriting discounts, commissions and offering expenses
payable by us.

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

47

On July 10, 2018, in conjunction with our
agreement to acquire the Taiwan land parcel, we entered into a binding letter of commitment with Metro Investment Group Limited,
or MIGL, pursuant to which we agreed to pay MIGL an agent commission of four percent (4%) of the full purchase price of the Taiwan
land parcel, equivalent to approximately US$1,387,127, for MIGL’s services provided with respect to the acquisition. Under
the terms of the initial with MIGL, we agreed to pay this commission no later than 90 days following payment in full of the Taiwan
land parcel purchase price. On May 9, 2019, we amended the binding letter of commitment with MIGL to extend the payment to be paid
after the full payment of the Land acquisition price until no later than December 31, 2020. If there is a delay in payment, we
shall be responsible for punitive liquidated damages at the rate of one tenth of one percent (0.1%) of the commission per day of
delay with a maximum cap to these damages of five percent (5%). Under applicable Taiwanese law, the commission was due and payable
upon signing of the letter of commitment even if the contract is cancelled for any reason and the acquisition is not completed.
We have recorded the estimated commission to the cost of land and will be paying the amount no later than December 31, 2021.

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

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

On December 31, 2020, we entered into an
underwriting agreement (the “Underwriting Agreement-Invest Securities”) with Invest Securities SA (“Invest-Securities”)
in connection with the public offering (“2020/2021 Offering”), issuance and sale of up to 1,951,219 shares of the Company’s
common stock on a best-efforts basis at the public offering price of €20.50 (approximately $25.07) per share, less underwriting
discounts, for up to a maximum of €40 million (approximately $48.9 million). As of December 31, 2020, pursuant to the Underwriting
Agreement-Invest Securities, we had completed our first closing and issued an aggregate of 96,160 shares of common stock for gross
proceeds of €1.97 million (approximately $2.41 million), or net proceeds of €1.4 million (approximately $1.7 million).

The Company has not generated significant
revenues, excluding non-recurring revenues in 2019 and 2020, and will incur additional expenses as a result of being a public reporting
company. Currently, we have taken measures that management believes will improve our financial position by financing activities,
including having successfully completed our 2018/2019 public offering and Bond Offering, ongoing 2020/2021 Offering, short-term
borrowings and other private loan commitments, including the Loans from our investors, discussed above. With our current available
cash, the $20 million in loan commitments from the Lenders and our expectations for our ability to raise funds in the near term,
we believe our working capital will be adequate to sustain our operations for the next twelve months.

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

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, construction, network equipment and installation costs.

Capital expenditures for the years ended
December 31, 2020 and 2019 were $349,067, and $635,293, respectively.

We anticipate an increase in capital spending
in fiscal year 2021 and estimate that capital expenditures will range from $10 million to $40 million as we will begin airborne
equipment installations and continue to execute our expansion strategy.

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.

48

Off Balance Sheet Arrangements

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

Seasonality

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

Critical Accounting Policies

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

Concentrations of Credit Risk

Financial instruments that potentially
subject to significant concentrations of credit risk consist primarily of cash in banks. As of December 31, 2020 and 2019, the
total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the Company
was approximately $0 and $233,000, respectively. The balance of cash deposited in foreign financial institutions exceeding the
amount insured by local insurance is approximately $3,514,000 and $37,000 as of December 31, 2020 and December 31, 2019, respectively.

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

Inventories

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

Property and Equipment

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

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

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

We review the carrying amount of property
and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. It determined that there was no impairment loss for the years ended December 31, 2020 and 2019.

49

Right-of-Use Asset and Lease Liability

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

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

For the leases with a term of twelve months
or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets
and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line
basis over the lease term. We adopted ASU 2016-02 effective January 1, 2019.

 Goodwill and Purchased Intangible
Assets

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

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

Fair Value of Financial Instruments

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

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

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

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

The carrying amounts of our cash and restricted
cash, accounts receivable, other receivable, accounts payable, short-term loan and other payable approximated their fair value
due to the short-term nature of these financial instruments. Our long-term bonds payable, long-term loan and lease payable
approximated the carrying amount as its interest rate is considered as approximate to the current rate for comparable loans and
leases, respectively. There were no outstanding derivative financial instruments as of December 31, 2020 and 2019.

Revenue Recognition

During 2019, we adopted the provisions
of ASU 2014-09 Revenue from Contract with Customers (Topic 606) and the principal versus agent guidance within the new revenue
standard. As such, we identify a contract with a customer, identifies the performance obligations in the contract, determines the
transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or
as) the Company satisfies a performance obligation. Our revenue for the year ended December 31, 2019 was the sales of compact adaptor
for smartphone that allows users to turn their smartphone into a satellite smartphone to provide reliable connectivity beyond the
coverage of traditional networks.

50

Research and Development Costs

Research and development costs are charged
to operating expenses as incurred. For the years ended December 31, 2020 and 2019, the Company incurred $0 and $416,231 of research
and development costs, respectively.

Income Taxes

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

We follow FASB guidance on uncertain tax
positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is required to file
income tax returns, as well as all open tax years in those jurisdictions. We file income tax returns in the US federal, state and
foreign jurisdictions where it conducts business. It is not subject to income tax examinations by US federal, state and local tax
authorities for years before 2016. We believe that its income tax filing positions and deductions will be sustained on audit and
does not anticipate any adjustments that will result in a material adverse effect on its consolidated financial position, results
of operations, or cash flows. Therefore, no reserves for uncertain tax positions have been recorded. We do not expect unrecognized
tax benefits to change significantly over the next twelve months.

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

Foreign Currency Transactions

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

Translation Adjustments

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

Earnings (Loss) Per Share

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

51

Recent Accounting Pronouncements

Simplifying the Accounting for Debt
with Conversion and Other Options.

In June 2020, the FASB issued ASU 2020-06
to simplify the accounting in ASC 470, Debt with Conversion and Other Options and ASC 815, Contracts in Equity’s Own Entity.
The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an
entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled
in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s
fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis
or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption.
We are currently evaluating the impact of ASU 2020-06 on our consolidated financial statements and related disclosures, as well
as the timing of adoption.

Simplifying the Accounting for Income
Taxes

In December 2019, the FASB issued ASU 2019-12
to simplify the accounting in ASC 740, Income Taxes. This guidance removes certain exceptions related to the approach for intra-period
tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities
for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning
in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments in this update must
be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be
applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of
adoption. We are currently evaluating the impact this ASU will have on our consolidated financial statements and related disclosures,
as well as the timing of adoption.

Financial Instruments

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

Intangibles

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles
– Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment, under which goodwill shall be tested at
least annually for impairment at a level of reporting referred to as a reporting unit. ASU 2017-04 will be effective for annual
periods beginning after December 15, 2019. The adoption of ASU 2017-04 does not have significant impact on our consolidated financial
statements as of and for the year ended December 31, 2020.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited financial statements as of December
31, 2020 and 2019 begins on page F-1 of this annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

52

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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

As required by Rule 13a-15(e) of the Exchange
Act, our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December
31, 2020. Based upon, and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer determined
that, because of the material weakness described below, our disclosure controls and procedures were not effective.

Management’s Annual Report on
Internal Control over Financial Reporting

Our management is responsible for establishing
and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers
to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting
officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles, and includes those policies and procedures that:

  (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
     
  (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
     
  (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our management evaluated the effectiveness
of our internal control over financial reporting as of December 31, 2017. In making this evaluation, management used the framework
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission,
or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control
environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our
evaluation, we determined that, as of December 31, 2020, our internal control over financial reporting was not effective due to
the following material weakness:

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

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

  We intend to hire additional personnel with technical accounting expertise to further support our current accounting personnel. As necessary, we will continue to engage consultants or outside accounting firms in order to ensure proper accounting for our consolidated financial statements.

53

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

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

Changes in Internal Controls over Financial
Reporting

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

There have been no changes in our internal
control over financial reporting during the fourth quarter of fiscal year 2020 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

We have no information to disclose that
was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year 2020, but was not reported.

54

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following sets forth information about
our directors and executive officers as of the date of this report:

Name   Age   Position
James J. Busuttil   62   Chairman
Louis Giordimaina   64   Chief Executive Officer
Y. Tristan Kuo   66   Chief Financial Officer
Georges Caldironi   64   Chief Operating Officer
Jeffrey Wun   55   Director, President and Chief Technology Officer
Richmond Akumiah   67   Director
Raymond Choy   40   Director
Chih-Ming (Albert) Hsu   45   Director
Colin Lim   58   Director
Jan-Yung Lin   60   Secretary and Director

James J. Busuttil. Dr. James
Busuttil has served as a member of our Board since December 2017 and was appointed Chairman of our board of directors on March
22, 2020. Dr. Busuttil is an attorney admitted to practice before the courts of New York State since 1983, as well as numerous
U.S. Federal Trial and Appeals Courts, practicing international, financial and corporate law. Dr. Busuttil was elected as a Life
Fellow of the U.K.-based Institute of Directors (IoD). Members are invited to become Fellows of the IoD based on their substantial
and sustained experience and contribution to business. Fellows are required to have been a company director for at least five years
and, at some point during this period, the entity must have had an annual turnover or budget that exceeds £10 million. Dr.
Busuttil has represented banks and financial institutions based in the United States and other countries in private sector financing
of domestic and international projects, negotiated alternative energy project financings, handled transnational mergers and joint
ventures, represented equity investors in venture capital transactions and organized investment funds. In addition, Dr. Busuttil
represented the Bank Advisory Group for a major Latin American debtor nation in sovereign debt restructuring and handled a variety
of private sector Latin American debt restructures. Dr. Busuttil was a Member of the Permanent Court of Arbitration (PCA) for twelve
years, from 2007 to 2019. The PCA is the oldest international tribunal in the world established by the 1907 Convention for the
Pacific Settlement of International Disputes. Membership of the PCA is strictly by nomination of contracting states of individuals
of known competency in questions of international law, of the highest moral reputation, and disposed to accept the duties of Arbitrator.
With respect to arbitration, Dr. Busuttil has been involved mainly in investment disputes. Dr. Busuttil created the University
of London’s Postgraduate Laws Program. Dr. Busuttil directed the University of London’s Master of Laws (LL.M), Postgraduate
Diploma in Laws (PG Dip. Laws) and the Postgraduate Certificate in Laws (PG Cert. Laws) from January 2004 to January 2015. Under
Dr. Busuttil’s leadership, the Program grew to over 3,000 persons from more than 150 countries. Dr. Busuttil was appointed
as an Honorary Professor at the Faculty of Law of University College London (UCL) in 2004. Dr. Busuttil has been a member of the
Pugwash Conference on Science and World Affairs, of the Council on Foreign Relations, and of the Executive Council of the American
Society of International Law. In the course of work, Dr. Busuttil has developed experience and understanding in dealing with parties
and organizations, including the private and public sectors, in South East Asia, East Asia, Europe, the Middle East, Russia, North
Africa and Australasia.

Louis Giordimaina. Mr. Giordimaina
was appointed as our Chief Executive Officer by our board of directors on March 22, 2020. Prior to that, Mr. Giordimaina served
as Chief Operating Officer-Aviation of Aircom from May 25, 2018 until November 1, 2019, and of Aerkomm Malta from November 1, 2019
until March 22, 2020, the date of his being appointed as our Chief Executive Officer by the Board. Mr. Giordimaina joined Aircom
as a consultant in June 2017. Mr. Giordimaina is an experienced aviation executive with more than 40 years of experience in airline
executive management, operations, Maintenance and Repair Organizations (MROs), aircraft purchasing from aircraft manufacturers,
sales and leasing with major aircraft lessors. Prior to joining the Company, Mr. Giordimaina served as Chief Executive Officer
of Air Malta in 2014, the national airline of Malta, as well as CEO of Lufthansa Technik Malta from 2002 to 2011. He joined Air
Malta’s engineering department in 1975 as an aircraft engineer where he occupied various positions in Air Malta’s engineering
department with additional active roles in Air Malta relating to airline strategic planning, aircraft purchasing and deliveries
from Airbus Industrie, Boeing and British Aerospace, aircraft leasing from various international aircraft lessors and aircraft
contract negotiations. In 1994, he was appointed as the first Maltese Chief Engineer of Air Malta. Mr. Giordimaina was instrumental
in setting up Lufthansa Technik Malta, a Joint Venture between Lufthansa Technik and Air Malta, of which he was appointed Chief
Executive Officer and Director in 2002. In 2006, he spearheaded Lufthansa Technik Malta’s expansion to become one of the
major worldwide MRO players, based in the centre of the Mediterranean. He occupied the position of CEO until September 2011, after
which he remained as member of the board of directors of that company until September 2013. He currently serves as a Director of
the SUM Aviation Group, which provides aircraft line maintenance to various airlines. He also served as the General Manager, the
Accountable Manager and a director of Hyperion Aviation, where he worked from May 2016 to September 2017, managing a fleet of private
jet aircraft; he served in similar capacities at EuroJet Ltd., from January 2015 to April 2016; and he served for a number of years
as a director of Tailwind Leasing Company and Peregrine Aviation Leasing Company based in Shannon, Ireland. An aircraft engineer
by profession, Mr. Giordimaina also obtained an Engineering Business Management degree from Warwick University, UK. He is a Fellow
of the Royal Aeronautical Society.

55

Y. Tristan Kuo. Mr. Kuo has
served as our Chief Financial Officer and Treasurer since April 10, 2017. Mr. Kuo has served as Chief Financial Officer and Treasurer
of Aircom since May 2017. Mr. Kuo has more than 30 years of experience in accounting, financing and information systems for companies
in the bio-pharmaceutical, manufacturing, commodity trading and banking industries and has served in the capacities of CFO, CIO
and Controller. Mr. Kuo has served as the Vice President of Investor Relations of Nutrastar International, Inc. (OTCPK: NUIN) between
April 2016 and February 2020. Mr. Kuo also served as the Chief Financial Officer of Success Holding Group International, Inc.,
a provider of personal improvement seminars, from August 2015 to April 2017. Prior to that, he served as CFO/CIO Partner of Tatum,
a management and advisory services firm, from December 2014 to August 2015, as an independent board member and audit committee
chairman of KBS Fashion Group Limited (NASDAQ: KBSF) from August 2014 to May 2015, and as the Chief Financial Officer of Crown
Bioscience, Inc. from June 2012 to November 2013. Prior to that, Mr. Kuo served as Chief Financial Officer of China Biologic Products,
Inc. (NASDAQ: CBPO), a Chinese biopharmaceutical company, from June 2008 to May 2012 and served as its Vice President of Finance
between September 2007 and May 2008. Prior to that, Mr. Kuo worked for the Noble Group in Hong Kong as the Senior Business Analysis
Manager from February through August 2007 and as the Controller, Vice President of Finance and CFO of Cuisine Solution, Inc., a
previously publicly traded company in Alexandria, Virginia, from December 2002 to January 2007. Mr. Kuo also served as the Vice
President of Information Systems for Zinc Corporation of America in Monaca, Pennsylvania from 2001 and 2002 and as Chief Information
Officer and Controller of Wise Metals Group in Baltimore, Maryland, from 1991 to 2001. Mr. Kuo received his Master’s degree
in Accounting from The Ohio State University and Bachelor’s degree in Economics from Soochow University, Taipei.

Georges Caldironi. Mr. Caldironi
was appointed as our Chief Operating Officer by our board of directors on March 22, 2020. Prior to that, Mr. Caldironi served as
a Project Director for Aircom beginning on January 1, 2019, on an independent contractor basis. Mr. Caldironi is an aviation
professional with 40 years of experience in aircraft modification, avionics communication and in-flight entertainment systems.
 Prior to joining Aircom, Mr. Caldironi was employed by Airbus for 25 years, most recently as Technical & Support
Director in Airbus’ Business and Government Division. During his career at Airbus, Mr. Caldironi managed and supervised various
complex projects including, but not limited to, aircraft upgrades. He is a specialist in system and cabin innovation (connectivity &
IFE), having carried out numerous feasibility studies and associated design projects for numerous airlines and leasing companies.
During his career, Mr. Caldironi has prioritized ensuring cost efficiency and on time delivery in the successful completion of
aviation projects. Mr. Caldironi received a diplôme d’études supérieures techniques (DEST) in engineering
from Conservatoire national des arts et métiers (CNAM) of Bordeaux in 1986.

Jeffrey Wun. Mr. Wun has
served as our President since December 31, 2017 and was appointed as our Chief Technology Officer by our board of directors on
March 22, 2020. He served as our Chief Executive Officer from December 31, 2017 to March 22, 2020. Mr. Wun has been a member of
our board of directors since the closing of the reverse acquisition of Aircom on February 13, 2017 and served as our Chairman of
the board of directors from January 22, 2018 to March 22, 2020. Mr. Wun previously served as our President, Treasurer and Secretary
from December 2016 to February 2017. Mr. Wun has served as Aircom’s Chief Technology Officer since December 2014. Mr. Wun
is a technologist with more than 25 years of experience in the communications industry. Prior to joining Aircom Mr. Wun served
as Senior Staff Engineer at Samsung Electronics Co., Ltd. from December 2012 to May 2015. Prior to that, Mr. Wun was a Senior System
Engineer at MediaTEK USA Inc. from November 2010 to December 2012 and served as Chief Executive Officer at Kairos System Inc. from
2003 to 2010. Mr. Wun received a Bachelor of Science in Biochemistry and Computer Science from Chinese University of Hong Kong
in 1988.

Raymond Choy. Mr. Raymond
Choy has served as a member of our Board since December 2017. Mr. Choy has served as a member of from the Board of Aircom since
October 2017. Mr. Choy became a certified public accountant (CPA) in the state of California in 2006 and also received his chartered
global management accountant (CGMA) designation in 2013. Mr. Choy has provided accounting, consulting and advisory services to
public and private companies since July 2016 through his partnership with Beyond Century Consulting, LLC, a financial and business
consulting company. Mr. Choy has extensive experience auditing the financial statements and internal controls of public and private
companies as a senior manager at Frazer, LLP, a certified public accountant company, from July 2004 to June 2016. Mr. Choy received
his bachelor’s degree with in business administration with accounting concentration and minor in computer information systems
from California State Polytechnic University, Pomona, in 2003. Mr. Choy was selected to serve as a member of our board of directors
due to his accounting background.

Chih-Ming (Albert) Hsu. Mr.
Chih-Ming (Albert) Hsu has served as a member of our Board since December 2017. Mr. Hsu has served as a member of Aircom’s
board since April 2017. Mr. Hsu was admitted to practice law in Taiwan as a corporate and business lawyer and as a patent attorney
in 2002. Mr. Hsu is the owner of Chascord Law Firm. Mr. Hsu has also been the chairman of the board of directors of Yuanjiu Inc.,
a Taiwanese publicly traded company, since May 2019. Mr. Hsu previously served as the arbitrator& mediator of the Chinese Arbitration
Association, Taipei. In addition, Mr. Hsu was the Chairman of Unitel High Technology Corporation, a listed company on the Taiwan
over-the-counter market from December 2015 to September 2016.  Mr. Hsu received an LL.M. and Bachelor of Law degree from National
Taiwan University in 2003 and 1997, respectively. Mr. Hsu is an expert of real estate securitization in Taiwan.

Richmond Akumiah. Mr. Akumiah
has served as a member of our board of directors since September 2018. Mr. Akumiah is an engineering and financial management
professional with years of experience in decision support, budgeting, forecasting, credit analysis, cost accounting, mergers and
acquisitions, quantitative analysis, financial and operational analysis, strategic planning and corporate development. Since September
2018, he has been employed as a Senior Advisor, Investments and Operations by the State of New Jersey, Division of Investment,
where he advises on the Division’s range of investment activities, and is on the Board of the New Jersey Culture Trust,
as representative of the New Jersey State Treasurer. From 2014 to 2018, Mr. Akumiah was a research consultant for WorldQuant LLC,
a Greenwich, Connecticut based investment management firm. Prior to that, from 2009 to 2013, he was employed as a consultant for
Wolters Kluwer. Prior to Wolters Kluwer, Mr. Akumiah was employed in a number of positions in various financial management capacities,
including at The Dun & Bradstreet Corporation where he spent a decade in leadership roles in Finance & General
Management. At AT&T, he served as Director of Finance in the Business Case Center of Excellence managing AT&T’s
investments in IP (Internet Protocol) and Managed Services. Mr. Akumiah also served as Chief Financial Officer of Hands On Network
(Points of Light). Mr. Akumiah began his career in New York City in 1982 with Marine Midland Bank (HSBC). Mr. Akumiah is a member
of the American Society of Mechanical Engineers and American Society of Civil Engineers. Mr. Akumiah graduated from Harvard University
in 1980 with a BA in Engineering and received his MBA in Finance in 1982 from New York University, Leonard Stern School of Business.
Mr. Akumiah was selected to serve as a member of our board of directors due to his engineering and finance background. 

56

Colin Lim. Mr. Colin Lim
has served as a member of our board of directors since the closing of the reverse acquisition of Aircom on February 13, 2017 and
served as a member of Aircom’s board from July 2015 to February 2017. In 2013, Mr. Lim founded Dynasty Media & Entertainment
Group, a movie production and distribution company and an investment company with interests in a variety of businesses, including
restaurants, wood and timber traders, exotic leather manufacturers, movie producers, copyrights transaction companies, and entertainment
businesses, as well as hi-tech companies, and is the Managing Director who oversees financing, investment, copyrights. Mr. Lim
has served as Executive Chairman of Sunny Leather from June 2006 and is responsible for general management. Mr. Lim has served
as Executive Chairman of Anson International since March 2003 where he oversees investments. Mr. Lim has served as Managing Director
of Euroamerica International since December 1999 where he oversees management and trading operations of the company. Mr. Lim’s
investment experience in the movie and copyright businesses has allowed us to better negotiate and acquire sufficient movie copyrights
and entertainment content to complement our business model. Mr. Lim graduated from New South Wales University in Australia, where
he received his degree in engineering and business.

Jan-Yung Lin. Mr. Jan-Yung
Lin has served as a member of our board of directors since the closing of the reverse acquisition of Aircom on February 13, 2017.
Mr. Lin served as Aircom’s President from June 2017 to February 2019, as Aircom’s Chief Executive Officer from February
2015 to October 2016, as Aircom’s Chief Operating Officer from September 2014 to February 2015, and as a director of Aircom
since September 2014. Mr. Lin has practiced corporate and business law at Concorde Law PC as a solo practitioner since 2012. Prior
to that Mr. Lin was the General Counsel and Chief Financial Officer of EMG Properties, Inc. in California. Prior to that Mr. Lin
was a corporate associate of Goodwin Proctor LLP. Mr. Lin graduated magna cum laude from Cornell Law School with a J.D. degree
and an LL.M. degree in International and Comparative Law. Mr. Lin received an M.B.A. degree from the University of California,
Berkeley and a Bachelor’s degree from the National Taiwan University. Mr. Lin was selected to serve as a member of our board
of directors due to his legal background. Directors and executive officers are elected
until their successors are duly elected and qualified.

Directors and executive officers are elected
until their successors are duly elected and qualified.

There are no arrangements or understandings
known to us pursuant to which any director was or is to be selected as a director (or director nominee) or executive officer.

Family Relationships

There are no family relationships among
any of our officers or directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our
directors or executive officers has, during the past ten years:

  been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
     
  had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
     
  been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
     
  been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
     
  been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
     
  been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

57

Board Composition and Committees

Our board of directors is comprised of
seven members: Jeffrey Wun, James J. Busuttil, Raymond Choy, Chih-Ming (Albert) Hsu, Richmond Akumiah, Colin Lim and Jan-Yung Lin.
Our board of directors has determined that Messrs. Busuttil, Choy, Akumiah and Lim are independent directors as that term is defined
in the rules of the Nasdaq Stock Market. Each of Messrs. Choy, Lim, Busuttil and Akumiah are members of all of our standing committees.

Our board of directors currently has four
standing committees which perform various duties on behalf of and report to the board of directors: (i) Audit Committee, (ii) Compensation
Committee, (iii) Nominating and Governance Committee and (iv) Regulatory, Compliance& Government Affairs Committee. Each of
the four standing committees is comprised entirely of our independent directors. From time to time, the board of directors may
establish other committees.

Board Role in Risk Oversight

Our board of directors plays an active
role, as a whole and also at the committee level, in overseeing management of our risks and strategic direction. Our board of directors
regularly reviews information regarding our liquidity and operations, as well as the risks associated with each. Our Audit Committee
oversees the process by which our senior management and relevant employees assess and manage our exposure to, and management of,
financial risks. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation
plans and arrangements. Our Nominating and Governance Committee also manages risks associated with the independence of members
of our board of directors and potential conflicts of interest. Our Regulatory, Compliance& Government Affairs Committee oversees
regulatory, compliance and governmental matters that may impact the Company. While each committee is responsible for evaluating
certain risks and overseeing the management of such risks, the entire board of directors is regularly informed about such risks.

Audit Committee

Our Audit Committee currently consists
of Messrs. Busuttil, Choy, Akumiah and Lim, with Mr. Choy serving as chairman. Our board of directors has determined that Mr. Choy
is an audit committee financial expert, as defined in Item 407(d)(5) of Regulation S-K, and each member of our Audit Committee
is able to read and understand fundamental financial statements and has substantial business experience that results in such member’s
financial sophistication.

Accordingly, our board of directors believes
that each member of our Audit Committee has sufficient knowledge and experience necessary to fulfill such member’s duties
and obligations on our Audit Committee. The primary purposes of our Audit Committee are to assist our board of directors in fulfilling
its responsibility to oversee the accounting and financial reporting processes of our company and audits of our financial statements,
including (i) reviewing the scope of the audit and all non-audit services to be performed by our independent accountant and the
fees incurred by us in connection therewith, (ii) reviewing the results of such audit, including the independent accountant’s
opinion and letter of comment to management and management’s response thereto, (iii) reviewing with our independent accountants
our internal accounting principles, policies and practices and financial reporting, (iv) engaging our independent accountants and
(v) reviewing our quarterly and annual financial statements prior to public issuance. The role and responsibilities of our Audit
Committee are more fully set forth in a written Charter adopted by our board of directors on June 6, 2017, which is available on
our website at www.aerkomm.com.

Compensation Committee

Our board of directors established our
Compensation Committee effective as of January 22, 2018, appointing Messrs. Busuttil, Choy and Lim as members, with Mr. Lim serving
as chairman of this committee. On February 16, 2020, our board of directors voted to add Mr. Akumiah to this committee. The Compensation
Committee is structured as follows: The primary purpose of our Compensation Committee is to assist our board of directors in fulfilling
its responsibility to determine the compensation of our executive officers and to approve and evaluate the compensation policies
and programs of our company, including (i) reviewing the compensation packages of executive officers and making recommendations
to our board of directors for said compensation packages, (ii) reviewing and approving proposed stock incentive grants and (iii)
providing our board of directors with recommendations regarding bonus plans, if any. The role and responsibilities of our Compensation
Committee are more fully set forth in a written Charter adopted by our board of directors and made available on our website at
www.aerkomm.com.

The policies underlying our Compensation
Committee’s compensation decisions are designed to attract and retain the best-qualified management personnel available.
We routinely compensate our executive officers through salaries. At our discretion, we may reward executive officers and employees
through bonus programs based on profitability and other objectively measurable performance factors. Additionally, we use stock
options and other incentive awards to compensate our executives and other key employees to align the interests of our executive
officers with the interests of our stockholders. In establishing executive compensation, our Compensation Committee will evaluate
compensation paid to similar officers employed at other companies of similar size in the same industry and the individual performance
of each officer as it impacts our overall performance with particular focus on an individual’s contribution to the realization
of operating profits and the achievement of strategic business goals. Our Compensation Committee will further attempt to rationalize
a particular executive’s compensation with that of other executive officers of our company in an effort to distribute compensation
fairly among the executive officers. Although the components of executive compensation (salary, bonus and incentive grants) will
be reviewed separately, compensation decisions will be made based on a review of total compensation.

58

Nominating and Governance Committee

Our board of directors established our
Nominating and Governance Committee effective January 22, 2018, appointing Messrs. Busuttil, Choy and Lim as members, with Mr.
Busuttil serving as chairman of this committee. On February 16, 2020, our board of directors voted to add Mr. Akumiah to this committee.
The Nominating and Governance Committee is structured as follows: The primary purposes of our Nominating and Governance Committee
are to (i) identify individuals qualified to become members of our board of directors and recommend to our board of directors the
nominees for the next annual meeting of our stockholders and candidates to fill vacancies on our board of directors, (ii) recommend
to our board of directors the directors to be appointed to committees of our board of directors and (iii) oversee the effectiveness
of our corporate governance in accordance with regulatory guidelines and any other guidelines we establish, including evaluations
of members of executive management, our board of directors and its committees. The role and responsibilities of our Nominating
and Governance Committee are more fully set forth in a written Charter adopted by our board of directors and made available on
our website at www.aerkomm.com.

Our Nominating and Governance Committee’s
methods for identifying candidates for election to our board of directors (other than those proposed by our stockholders, as discussed
below) includes the solicitation of ideas for possible candidates from a number of sources – members of our board of directors,
our executives, individuals personally known to the members of our board of directors, and other researches. Our Nominating and
Governance Committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.

A stockholder of our company may nominate
one or more persons for election as a director at an annual meeting of stockholders if the stockholder complies with the notice,
information and consent provisions contained in our Bylaws. In addition, the notice must be made in writing and set forth as to
each proposed nominee who is not an incumbent Director (i) their name, age, business address and, if known, residence address,
(ii) their principal occupation or employment, (iii) the number of shares of stock of our company beneficially owned, (iv) a description
of all arrangements or understandings between the stockholder and each nominee and any other person pursuant to which the nominations
are to be made and (v) any other information concerning the nominee that must be disclosed respecting nominees in proxy solicitations
pursuant to Rule 14(a) of the Exchange Act. The recommendation should be addressed to our Secretary.

Among other matters, our governance and
nominating committee will:

  Review the desired experience, mix of skills and other qualities to assure appropriate board composition, taking into account the current members of our board of directors and the specific needs of our company and our board of directors;
     
  Conduct candidate searches, interviews prospective candidates and conducts programs to introduce candidates to our management and operations, and confirms the appropriate level of interest of such candidates;
     
  Recommend qualified candidates who bring the background, knowledge, experience, independence, skill sets and expertise that would strengthen and increase the diversity of our board of directors; and
     
  Conduct appropriate inquiries into the background and qualifications of potential nominees.

Regulatory, Compliance & Government Affairs Committee

Our regulatory, compliance & government
affairs committee currently consists of Messrs. Busuttil, Choy, Lim and Akumiah, with Mr. Akumiah serving as chairman. Mr. Lim
joined this committee on February 16, 2020. The primary purposes of our regulatory, compliance& government affairs committee
are to assist our board of directors by providing oversight of regulatory, compliance and governmental matters that may impact
the Company, which including (i) overseeing our major compliance programs with respect to legal and regulatory requirements, except
with respect to matters of financial compliance, (ii) overseeing compliance with any ongoing Corporate Integrity Agreements or
similar undertakings by us with the U.S. Department of Justice, U.S. Securities and Exchange Commission, or any other government
agency, (iii) reviewing with our Chief Compliance Officer the organization, implementation and effectiveness of our compliance
programs and the adequacy of the resources for those programs, (iv) reviewing with our Chief Executive Officer the organization,
implementation and effectiveness of our quality and compliance programs and the adequacy of the resources for those programs and
(v) overseeing our exposure to risks relating to regulatory compliance matters. The role and responsibilities of our regulatory,
compliance & government affairs committee are more fully set forth in a written charter adopted by our board of directors
on September 25, 2018, which is available on our website at www.aerkomm.com.

Stockholder Communications with the Board of Directors

Our board of directors has established
a process for stockholders to communicate with the board of directors or with individual directors. Stockholders who wish to communicate
with our board of directors or with individual directors should direct written correspondence to our Corporate Secretary at Aerkomm
Inc., 44043 Fremont Blvd., Fremont, CA 94538.

The Corporate Secretary will forward such
communications to our board of directors or the specified individual director to whom the communication is directed unless such
communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Corporate Secretary has the
authority to discard the communication or to take appropriate legal action regarding such communication.

59

Consultants

On February 16, 2020, we entered into a
consultant agreement with Daniel Shih, a co-founder and former shareholder of the Company and former Chief Executive Officer of
Aircom, our wholly owned operating subsidiary. During the past few years, Mr. Shih had stepped back from the Company to pursue
other interests and is no longer a shareholder of the Company.

Pursuant to the terms of the consulting
agreement, Mr. Shih will provide services to us as a “Business Development Consultant” and will establish and implement
a business development strategy for us. We will pay Mr. Shih a monthly retainer of $10,000 and will reimburse Mr. Shih for actual,
necessary and reasonable air travel expenses incurred by Mr. Shih pursuant to the consulting agreement up to a maximum of Twenty
Thousand U.S. Dollars (US$20,000) each calendar month and for actual, necessary and reasonable travel-related hotel and meal expenses
incurred by Mr. Shih pursuant to the consulting agreement up to a maximum of Ten Thousand U.S. Dollars (US$10,000) each calendar
month. The Agreement with Mr. Shih will terminate one year from its start date or earlier under certain circumstances. As an independent
contractor and not our employee, Mr. Shih will not have any power to bind us or to enter into any contracts on our behalf or on
the behalf of any of our subsidiaries. Mr. Shih will not be performing, or be expected or obligated to perform, any broker-dealer,
finder, investment banking or investment advisor functions or services on our behalf or on the behalf of any of our subsidiaries.

Given Mr. Shih’s background in, and
knowledge of, the aviation industry, we believe that Mr. Shih will be able to provide valuable services to us at this time.

Code of Ethics

We have adopted a code of ethics that applies
to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer. We have also adopted a code of professional conduct that applies specifically to our chief executive officer
and our senior financial officers. These codes address, among other things, honesty and ethical conduct, conflicts of interest,
compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting
of violations of the codes.

We are required to disclose any amendment
to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer,
principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of
disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four
business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.

Section 16(a) Beneficial Ownership Reporting
Compliance

Section 16(a) of the Exchange Act
requires our directors and executive officers, and persons who own more than 10% of our outstanding common stock, to file with
the SEC, initial reports of ownership and reports of changes in ownership of our equity securities. Such persons are required by
SEC regulations to furnish us with copies of all such reports they file.

To our knowledge and except as otherwise
indicated below, based solely on a review of the copies of such reports furnished to us regarding the filing of required reports,
we believe that all Section 16(a) reports applicable to our directors, executive officers and greater-than-ten-percent beneficial
owners with respect to the reporting period ended December 31, 2019 were timely filed. One of our greater-than-ten-percent beneficial
owners may be late in filing a Form 5 update report.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table – Fiscal
Years Ended December 31, 2020 and 2019

The following table sets forth information
concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities
during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

Name and Principal Position   Year   Salary

($)
   

Option

Awards

($)(1)

    All Other

Compensation

($)
    Total

($)
 
Louis Giordimaina, Chief Executive Officer (2)   2020     456,855       399,375       29,342       885,572  
    2019     445,521       83,640       26,866       556,027  
Y. Tristan Kuo, CFO (3)   2020     185,000       157,652             342,352  
    2019     185,000       334,560             519,560  
Georges Caldironi   2020     163,340       199,859             363,199  
    2019                        
Jeffrey Wun, President and Chief Technology Officer (5)    2020     160,000       136,352             296,352  
    2019     160,000       16,728             176,728  
(1) These amounts shown represent the aggregate grant date fair value
for options granted to the named executive officers computed in accordance with FASB ASC Topic 718.

60

(2) Mr. Giordimaina, a former consultant to us, became a full-time employee
on May 25, 2018 and was appointed, as of that date, Chief Operating Officer – Aviation. On March 22, 2020, Mr. Giordimaina
was appointed as our Chief Executive Officer.
   
(3) Mr. Kuo has served as our Chief Financial Officer since April 10,
2017.
   
(4) Mr. Caldironi, a former consultant to us, became a full-time employee
and was appointed as our Chief Operating Officer on March 22, 2020.
   
(5) Mr. Wun has served as our President since December 31, 2017 and as
our Chief Executive Officer from December 31, 2017 to March 22, 2020. He also currently serves as the Chief Technology Officer
of Aircom and was appointed as our Chief Technology Officer on March 22, 2020.

Employment Agreements

Louis Giordimaina

On May 25, 2018, Aircom Pacific, Inc. entered
into an employment agreement with Mr. Giordimaina, effective January 1, 2018, pursuant to which Mr. Giordimaina was hired to serve
as Aircom’s European representative. In accordance with the terms of this agreement, as of November 1, 2019, the date of
organization of Aerkomm Malta, Mr. Giordimaina officially became an employee of Aerkomm Malta. Until such time as we enter into
a separate, executive employment agreement relating to Mr. Giordimaina’s position with us as our Chief Executive Officer,
the operative provisions of Mr. Giordimaina’s agreement with Aircom/Aerkomm Malta relating to compensation and benefits shall
apply. Pursuant to the terms of his employment agreement, we agreed to pay Mr. Giordimaina an annual salary of €398,000, or
$425,064. A bonus will be considered, comparable to those that may be offered to other executives once a satisfactory revenue stream
is established at Aircom as a result of Mr. Giordimaina’s efforts. Mr. Giordimaina was granted an option to purchase 150,000
shares of the Company’s common stock, vesting annually in three equal installments on each anniversary of his employment
start date equally provided that he is still employed by the Company on the date of vesting. We will cover and pay any premium
up to a maximum of €2,000, or $2,136, per annum for any international private health insurance which Mr. Giordimaina may have
in place from time to time covering Mr. Giordimaina and his wife; we will recommend board approval for life insurance coverage
for Mr. Giordimaina comparable with other executives of Aircom, commencing in 2018; we will pay Mr. Giordimaina the sum of €6,000,
or $6,408, per year to any private pension fund scheme/s designated by Mr. Giordimaina, we will pay Mr. Giordimaina €18,000,
or $19,224, per annum as an allowance for a leased car and fuel expenses, to be paid in equal monthly instalments, we will provide
Mr. Giordimaina with a mobile telephone for his business use, as well as a lap top computer and an iPad, and we will reimburse
Mr. Giordimaina for all actual, necessary and reasonable expenses incurred by him in the course of his performance of services
for the Company. The employment agreement contains customary confidentiality provisions and covenants prohibiting Mr. Giordimaina
from competing with us during his employment, and from soliciting any of our employees or consultants for a period of one year
after his employment end. If Mr. Giordimaina’s employment is terminated by us without cause, he shall be entitled to one-half
of his full salary for the remainder of the initial three-year term of his agreement.

Y. Tristan Kuo

On March 31, 2017, we entered into an employment
agreement with Mr. Kuo, effective April 10, 2017, pursuant to which we agreed to pay Mr. Kuo an annual salary of $100,000, plus
a guaranteed bonus of $85,000 payable on the earlier of (i) the first anniversary of Mr. Kuo’s employment or (ii) upon closing
of an equity or equity linked financing in which we or one of our subsidiaries raises at least $15 million. Mr. Kuo will also be
entitled to an annual bonus as recommended by our Chief Executive Officer and approved by our board of directors. In addition,
we agreed to grant Mr. Kuo an option to purchase 60,000 shares of our common stock, with one quarter of the shares underlying the
option to be vested immediately and the remaining shares to be vested equally over three years on each anniversary of Mr. Kuo’s
employment. In addition, during the first nine months of Mr. Kuo’s employment or until he relocates, if earlier, we also
agreed to provide a furnished living accommodation, a car allowance of $400 per month, and a personal travel allowance of $600
per month for Mr. Kuo to visit his spouse or vice versa. We also agreed to pay up to $6,000 in relocation expenses, should Mr.
Kuo decide to relocate. We will also be responsible for medical insurance under our medical plan or we will reimburse the premium
of a medical plan that is comparable to the medical plan offered to other employees. Mr. Kuo will also be eligible to participate
in other standard benefits plans offered to similarly situated employees by us from time to time. The employment agreement contains
customary confidentiality provisions and covenants prohibiting Mr. Kuo from competing with us during his employment, or from soliciting
any of our employees or consultants for a period of two years after his employment end. The employment agreement may be terminated
by either party for any reason upon 30 days’ notice. If Mr. Kuo’s employment is terminated by us without cause, the
portion of stock options to be vested for the year if completed shall be vested immediately.

61

Outstanding Equity Awards Fiscal Year
Ended December 31, 2020 and 2019

As of December 31, 2020 and 2019, Mr. Kuo
had options outstanding and exercisable for 150,000 and 112,500 shares of our common stock, at an average exercise price of $13.38
and $14.95 per share, respectively. As of December 31, 2020 and 2019, Mr. Wun had options outstanding and exercisable for 7,500
and 5,000 shares of our common stock at an average exercise price of $13.38 and $13.38 per share, respectively. As of December
31, 2020 and December 31, 2019, Mr. Giordimaina had options outstanding and exercisable for 42,500 and 25,000 shares of our common
stock at an average exercise price of $11.74 and $10.58 per share. As of December 31, 2020, Mr. Caldironi had options outstanding
and exercisable for 2,000 shares of our common stock at an average exercise price of $14.20 per share. 

    Option Awards
Name       Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable
    Number of

Securities


Underlying

Unexercised

Options (#)

Un-exercisable
    Equity

Incentive Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)
    Option

Exercise Price

($)
    Option

Expiration

Date
 
Louis Giordimaina   December 31, 2020             –       43,599     $ 8.30       12/11/2030  
    December 31, 2020     22,500             7,500     $ 3.96       07/02/2029  
    December 31, 2020     20,000             10,000     $ 20.50       05/25/2028  
    December 31, 2019     10,000             20,000     $ 20.50       05/25/2028  
    December 31, 2019     15,000             15,000     $ 3.96       07/02/2029  
Y. Tristan Kuo   December 31, 2020                 16,350     $ 8.30       12/11/2030  
    December 31, 2020     90,000               30,000     $ 3.96       07/02/2029  
    December 31, 2020     60,000                   27.50       06/23/2027  
    December 31, 2019     52,500             7,500     $ 27.50       06/23/2027  
    December 31, 2019     60,000             60,000     $ 3.96       07/02/2029  
Georges Caldironi   December 31, 2020                 18,676     $ 8.30       12/11/2030  
    December 31, 2020     2,000             2,000     $ 14.20       02/29/2030  
Jeffrey Wun   December 31, 2020                 14,141     $ 8.30       12/11/2030  
    December 31, 2020     4,500             1,500     $ 3.96       07/02/2029  
    December 31, 2020     3,000                 $ 27.50       06/23/2027  
    December 31, 2019     2,000             1,000     $ 27.50       06/23/2027  
    December 31, 2019     3,000             3,000     $ 3.96       07/02/2029  

Director Compensation

Directors who are also our employees receive
no separate compensation for serving as directors or as members of committees of our board of directors.

We have entered into independent director
agreements with Richmond Akumiah, James J. Busuttil, Raymond Choy and Colin Lim. Under the terms of these independent director
agreements, we have agreed to pay the independent directors an annual cash fee of $20,000, paid quarterly in four equal installments,
commencing in the first quarter following closing of our public offering, and an additional $5,000 cash compensation fee for serving
as board of directors committee chairmen. We commenced payment of these fees on September 30, 2018.

Each independent director received an initial,
fully vested stock option to purchase 4,000 shares of our common stock. If the director is still a member of the board of directors
and continues to serve as a non-employee director immediately following each annual meeting of our stockholders, the director will
be automatically granted an additional option to purchase 4,000 shares of our common stock as of the date of each such annual meeting.
These additional option grants will vest and become exercisable in twelve (12) equal monthly installments over the first year following
the date of grant, subject to the director continuing in service on the board of directors through each such vesting date. The
per share exercise price of each option granted to the independent director will equal 100% of the fair market value (as defined
by the board of directors) of a share of our common stock on the date the option is granted, and the term of each stock option
granted to the director will be ten (10) years from the date of grant.

We purchased a Directors and Officers Liability
Insurance with coverage up to an aggregate maximum of $3 million commencing promptly upon the final closing of our prior public
offering, and to reimburse the independent directors for pre-approved reasonable business expenses incurred by them. In November
2019, with the approval of the board, we purchased a directors and officers liability insurance with $5 million coverage effective
November 25, 2019. In November 2020, we renewed and increased the Directors and Officers Liability Insurance with $10 million
coverage effective November 25, 2020.

62

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information
regarding beneficial ownership of our common stock as of March 23, 2021 (i) by each person who is known by us to beneficially own
more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as
a group. Unless otherwise specified, the address of each of the persons set forth below is in care of our company, 44043 Fremont
Blvd., Fremont, CA 94538.

Name and Address of Beneficial Owner   Title of Class   Amount and

Nature of

Beneficial

Ownership(1)
    Percent of

Class(2)
 
James Busuttil, Chairman (3)   Common Stock     21,542       *  
Louis Giordimaina, Chief Executive Officer (4)   Common Stock     96,099       *  
Y. Tristan Kuo, Chief Financial Officer (5)   Common Stock     166,350       1.73 %
Georges Caldironi, Chief Operating Officer (6)   Common Stock     21,343       *  
Jeffrey Wun, President, Director and Chief Technology Officer (7)   Common Stock     2,706,555       28.08 %
Richmond Akumiah, Director (8)   Common Stock     14,696       *  
Raymond Choy, Director (9)   Common Stock     21,542       *  
Chih-Ming (Albert) Hsu, Director (10)   Common Stock     343,062       3.56 %
Colin Lim, Director (11)   Common Stock     108,122       1.12 %
Jan-Yung Lin, Secretary and Director (12)   Common Stock     480,508       4.99 %
All officers and directors as a group (10 persons named above)   Common Stock     3,979,819       41.30 %
Dmedia Holding LP (13)   Common Stock     2,237,428       23.22 %
Sheng-Chun Chang (14)   Common Stock     946,781       9.82 %
(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.
   
(2) A total of 9,637,051 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of March 23, 2021. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.
   
(3) Consists of 21,542 shares of our common stock which Mr. Busuttil has the right to acquire within 60 days through the exercise of vested options but does not include 4,667 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(4) Consists of 96,099 shares of our common stock which Mr. Giordimaina has the right to acquire within 60 days through the exercise of vested options but does not include 7,500 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(5) Consists of 166,350 shares of our common stock which Mr. Kuo has the right to acquire within 60 days through the exercise of vested options but does not include 30,000 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(6) Consists of 17,343 shares held directly and 4,000 shares of common stock which AA TWIN ASSOCIATES LTD has the right to acquire within 60 days through the exercise of vested options but does not include 1,333 shares of our common stock issuable upon the exercise of options not exercisable within 60 days. Mr. Caldironi is the principal of AA TWIN ASSOCIATES LTD and has voting and dispositive control of the securities held by AA TWIN ASSOCIATES LTD.
   
(7) Includes (i) 447,486 shares of our common stock held directly; (ii) 21,641 shares of our common stock which Mr. Wun has the right to acquire within 60 days through the exercise of vested options (but does not include 1,500 shares of our common stock issuable upon the exercise of options not exercisable within 60 days); and (iii) 2,237,428 shares of our common stock owned by Dmedia Holding LP. On December 20, 2017, Mr. Wun purchased an 85.7% interest in, and was appointed Manager of, Dmedia LLC, the General Partner of Dmedia Holding LP. As such, Mr. Wun is deemed to be the beneficial owner of the 2,237,428 shares of our common stock held by Dmedia Holding LP by virtue of his voting and dispositive power of those shares. Through his ownership interest in Dmedia LLC, which owns an approximately 6% direct interest in Dmedia Holding LP, Mr. Wun indirectly beneficially owns 117,601 shares of our common stock held by Dmedia Holding LP.  Mr. Wun disclaims beneficial ownership of the remaining 2,119,827 shares of our common stock held by Dmedia Holding LP.

63

   
(8) Consists of 14,696 shares of our common stock which Mr. Akumiah has the right to acquire within 60 days through the exercise of vested options but does not include 3,513 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(9) Consists of 21,542 shares of our common stock which Mr. Choy has the right to acquire within 60 days through the exercise of vested options but does not include 4,667 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(10) Represents (i) 3,312 shares of our common stock held directly by Mr. Hsu; (ii) 26,000 shares of our common stock which Mr. Hsu has the right to acquire within 60 days through the exercise of vested options but does not include 2,000 shares of our common stock issuable upon the exercise of options not exercisable within 60 days; and (iii) 313,750 shares of our common stock owned by Yuanjiu Inc. Mr. Hsu is the Chairman of Yuanjiu, Inc. and, as such, he is the deemed beneficial owner of the 313,807 shares. However, Mr. Hsu disclaims beneficial ownership of the shares held by Yuanjiu.
   
(11) Consists of 108,122 shares of our common stock which Mr. Lim has the right to acquire within 60 days through the exercise of vested options but does not include 4,667 shares of our common stock issuable upon the exercise of options not exercisable within 60 days.
   
(12) Includes 462,403 shares of our common stock owned by Mr. Lin directly and 18,105 shares of our common stock which Mr. Lin has the right to acquire within 60 days through the exercise of vested options (but does not include 1,500 shares of our common stock issuable upon the exercise of options not exercisable within 60 days). Does not include 959,230 shares of our common stock owned by Mr. Lin through his approximately 7% ownership interest in Dmedia LLC and his approximately 42.4% interest Dmedia Holding LP, as Mr. Lin does not, directly or indirectly, have voting or dispositive power over these shares although he does own a pecuniary interest in them.
   
(13) Mr. Wun has sole voting and dispositive power over these shares of our common stock although he disclaims beneficial ownership of 2,237,428 of these shares. Mr. Lin owns a pecuniary interest in 959,230 of these shares although he does not exercise voting or dispositive control over them.
   
(14) Consists of 881,500 shares of common stock held by Well Thrive Limited and 65,281 shares of our common stock owned directly by Mr. Sheng-Chun Chang. Mr. Chang is the Chief Executive Officer and owner of Well Thrive Limited and has voting and dispositive power of the securities held by it. Mr. Chang disclaims beneficial ownership of the shares held by Well Thrive Limited. The address of Well Thrive Limited is No 79, Heng Yang Road, Taipei City, Taiwan.

Changes in Control

We do not currently have any arrangements
which if consummated may result in a change of control of our company.

Securities Authorized for Issuance Under
Equity Compensation Plans

The following table sets forth certain
information about the securities authorized for issuance under our incentive plans as of December 31, 2020.

Plan category   Number of

securities

to be issued

upon

exercise of

outstanding

options,

warrants

and rights
    Weighted-

average

exercise


price of

outstanding

options,

warrants

and rights
    Number of

securities

remaining

available for

future

issuance

under equity

compensation

plans
 
Equity compensation plans approved by security holders     1,924,659     $ 6.7709       71,404  
Equity compensation plans not approved by security holders         $        
Total     1,924,659     $ 6.7709       71,404  

Equity Compensation Plan Information

On May 5, 2017, we established our 2017
Equity Incentive Plan (“the Plan”). The Plan was approved by our board of directors on May 5, 2017, and an amendment
to increase the number of shares of our common stock available for grant under the Plan was approved by the board of directors
on June 26, 2017. The Plan was approved by our stockholders at our annual meeting in 2018. The purpose of the Plan is to grant
stock and options to purchase our common stock to our employees, directors and key consultants. The maximum number of shares of
common stock that may be issued pursuant to awards granted under the Plan, as amended, is 2,000,000 shares. Cancelled and forfeited
stock options and stock awards may again become available for grant under the Plan. There were 356,401 shares available for grant
under the Plan as of October 19, 2020; 932,262 shares of our common stock are issuable upon the exercise of options to be issued
under the Plan to holders of Aircom options assumed by us as a result of the closing of the reverse acquisition with Aircom; and
options exercisable for 707,400 shares of our common stock have been approved by our board of directors for grants to certain of
our officers, directors, employees and service providers.

64

The following summary briefly describes
the principal features of the Plan and is qualified in its entirety by reference to the full text of the Plan.

Administration. The Plan is administered
by our Compensation Committee. Our Compensation Committee has the authority to select the eligible participants to whom awards
will be granted, to determine the types of awards and the number of shares covered and to set the terms, conditions and provisions
of such awards, to cancel or suspend awards under certain conditions, and to accelerate the exercisability of awards. Our Compensation
Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan,
to determine the terms of agreements entered into with recipients under the Plan, and to make all other determinations that may
be necessary or advisable for the administration of the Plan.

Eligibility. All employees, directors
and individuals providing services to our company or its subsidiaries are eligible to participate in the Plan.

Shares Subject to Plan. The number
of shares of common stock that is available for grant of awards under the Plan, as amended, is 2,000,000 shares.

Stock Option and SAR Grants. The
exercise price per share of common stock purchasable under any stock option or stock appreciation right, or SAR, will be determined
by our Compensation Committee, but cannot in any event be less than 100% of the fair market value of our common stock on the date
the option is granted. Our Compensation Committee will determine the term of each stock option or SAR (subject to a maximum of
10 years) and each stock option or SAR will be exercisable pursuant to a vesting schedule determined by our Compensation Committee.
The grants and the terms of incentive stock options, or ISOs, shall be restricted to the extent required for qualification as ISOs
by the Internal Revenue Code, or the Code. Subject to approval of our Compensation Committee, stock options or SARs may be exercised
by payment of the exercise price in cash, shares of our common stock, which have been held for at least six months, or pursuant
to a “cashless exercise” through a broker-dealer under an arrangement approved by us. We may require the grantee to
pay to us any applicable withholding taxes that we are required to withhold with respect to the grant or exercise of any award.
The withholding tax may be paid in cash or, subject to applicable law, our Compensation Committee may permit the grantee to satisfy
such obligations by the withholding or delivery of shares of our common stock. We may withhold from any shares of our common stock
issuable pursuant to a stock option or SAR or from any cash amounts otherwise due from us to the recipient of the award an amount
equal to such taxes.

Stock Grants. Shares may be sold
or awarded for consideration and with or without restriction as determined by the Compensation Committee, including cash, full-recourse
promissory notes, as well as past and future services. Any award of shares will be subject to the vesting schedule, if any, determined
by the Compensation Committee. In general, holders of shares sold or awarded under the Plan will have the same voting, dividend
and other rights as our other stockholders. As a condition to the purchase of shares under the Plan, the purchaser will make such
arrangements as our Compensation Committee may require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with such purchase.

Adjustments. In the event of any
change affecting the shares of our common stock by reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other similar corporate change, or any distribution to stockholders other than cash
dividends, our board of directors will make such substitution or adjustment in the aggregate number of shares that may be distributed
under the Plan and in the number and option price (or exercise or purchase price, if applicable) as it deems to be appropriate
in order to maintain the purpose of the original grant.

Termination of Service. If a participant’s
service to our company terminates on account of death or disability, then the participant’s unexercised options, if exercisable
immediately before the participant’s death, disability or retirement, may be exercised in whole or in part, on the earlier
of the date on which such stock option would otherwise expire or one year after the event. If a participant’s service to
us terminates for any other reason, then the participant’s unexercised options, to the extent exercisable immediately before
such termination, will remain exercisable, and may be exercised in whole or in part, for a period ending on the earlier of the
date on which such stock option would otherwise expire or three months after such termination of service.

Amendment and Termination. Our board
of directors may, at any time, alter, amend, suspend, discontinue, or terminate the Plan; provided that such action shall not adversely
affect the right of grantees to stock awards or stock options previously granted and no amendment, without the approval of our
stockholders, shall increase the maximum number of shares which may be awarded under the Plan in the aggregate, materially increase
the benefits accruing to grantees under the Plan, change the class of employees eligible to receive options under the Plan, or
materially modify the eligibility requirements for participation in the Plan. 

65

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The following includes a summary of transactions
since the beginning of the 2019 fiscal year, or any currently proposed transaction, in which we were or are to be a participant
and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end
for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest
(other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration
that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available
or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

Our board of directors conducts an appropriate
review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations
where appropriate. Our board of directors has not adopted formal standards to apply when it reviews, approves or ratifies any related
party transaction. However, our board of directors generally reviews related party transactions to ensure that they are fair and
reasonable to our company and on terms comparable to those reasonably expected to be agreed to with independent third parties for
the same goods and/or services at the time they are authorized by our board of directors.

On January 1, 2019, Aircom entered into
an independent contractor agreement with AA TWIN ASSOCIATES LTD, or the consulting company, pursuant to which the consulting company
agreed to provide services to Aircom relating to establishing a strategy for promoting Aircom’s products to various airlines.
Aircom agreed to pay the consulting company the sum of €15,120, or $16,148, per month for a period of 24 months and granted
the Consulting company an option to purchase 2,000 shares of the Company’s common stock at an exercise price of $14.20 per
share. Georges Caldironi, who was appointed the Company’s Chief Operating Officer on March 22, 2020, is the principal of
AA TWIN ASSOCIATES LTD. The Company expects to cancel the agreement with AA TWIN ASSOCIATES LTD and to enter into an agreement
directly with Mr. Caldironi in the near future.

In May 2019, two of our shareholders (the
“Lenders”) each committed to provide to us a $10 million bridge loan (together, the “Loans”) for an aggregate
principal amount of $20 million, to bridge our cash flow needs prior to its obtaining a mortgage loan to be secured by a parcel
of land (the “Land”) 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 the subsidiary, Aerkomm Taiwan, to
pay the outstanding payable to our vendors. On March 23, 2021, we have borrowed approximately $2.39 million (NT$67,060,000) under
the Loans from one of the Lenders.

On May 11, 2020, Aircom entered into
a binding product purchase agreement with Yuanjiu for the purchase of 100 sets of the AERKOMM K++, AirCinema Cube for
installation on the aircraft of Hong Kong Airlines. The total purchase amount under this agreement was $1,807,100 and
the Company has paid 20% of the total amount, or US $180,710, as an initial deposit. On July 15, 2020, Aircom signed a
second product purchase agreement with Yuanjiu for an additional 100 sets of the AirCinema Cube for the same purchase amount
and paid an additional 10% initial deposit ($180,710) on this agreement as well. Additionally, on December 3, 2020, we made a
prepayment to three individuals to purchase from them an aggregate of 6,000,000 restricted shares of YuanJiu, for business
purposes in Taiwan relating to local operations. This purchase will result in our owning approximately 10% of Yuanjiu. Albert
Hsu, a member of our board of directors, is the Chairman of Yuanjiu.

Our board of directors conducts an appropriate
review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations
where appropriate. Our board of directors has not adopted formal standards to apply when it reviews, approves or ratifies any related
party transaction. However, our board of directors generally reviews related party transactions to ensure that they are fair and
reasonable to our company and on terms comparable to those reasonably expected to be agreed to with independent third parties for
the same goods and/or services at the time they are authorized by our board of directors.

Director Independence

Our board of directors has determined that Raymond Choy, Colin
Lim, Richard Akumiah and James Busuttil are independent directors as that term is defined in the applicable rules of the Nasdaq
Stock Market.

66

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors’ Fees

The following is a summary of the fees
billed to the Company for professional services rendered for the fiscal years ended December 31, 2020 and December 31, 2019:

    Year Ended

December 31,
 
    2020     2019  
Audit Fees   $ 315,000     $ 226,000  
Audit-Related Fees     235,000       30,000  
Tax Fees     35,000       35,000  
All Other Fees            
TOTAL   $ 585,000     $ 291,000  

“Audit Fees” consisted of fees
billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review
of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements.

“Audit-Related Fees” consisted
of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of
the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

“Tax Fees” consisted of fees
billed for professional services rendered by the principal accountant for tax returns preparation.

“All Other Fees” consisted
of fees billed for products and services provided by the principal accountant, other than the services reported above under other
captions of this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all
audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such
services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors
pre-approved the audit service performed by Chen & Fan for our financial statements as of and for the year ended December
31, 2020.

67

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) List of Documents Filed as a Part of This Report:
   
(1) Index to Financial Statements:
(2) Index to Financial Statement Schedules:

All schedules have been omitted because the required
information is included in the financial statements or the notes thereto, or because it is not required.

See exhibits listed under Part (b) below.

Exhibit No.   Description
     
2.1   Agreement and Plan of Merger, dated September 26, 2013, between Aerkomm Inc. and Maple Tree Kids LLC (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-1 filed on November 5, 2013)
     
2.2   Form of Share Exchange Agreement, dated February 13, 2017, among Aerkomm Inc., Aircom Pacific, Inc. and the shareholders of Aircom Pacific, Inc. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on February 14, 2017)
     
3.1   Restated Articles of Incorporation of the registrant (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on May 4, 2017)
     
3.2   Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 16, 2019)
     
3.3   Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on March 30, 2020)
     
4.1   Form of Underwriter Warrant (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Registration Statement on Form S-1/A filed on February 2, 2018)
     
10.1   Form of Subscription Agreement (incorporated by reference to Exhibit 10.21 to Amendment No. 3 to Registration Statement on Form S-1/A filed on March 30, 2018)
     
10.2   Form of Common Stock Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 27, 2017)
     
10.3   Stock Purchase Agreement, dated as of December 28, 2016, among Irina Goldman, Aircom Pacific, Inc. and Aerkomm Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 29, 2016)
     
10.4   Stock Purchase Agreement, dated May 15, 2015, between Chi Kong Wu and Aircom Pacific, Ltd. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.5   Agreement for the Purchase and Sale of Shares, dated December 12, 2016, between Capricorn Union Limited and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.16 to Amendment No. 1 to Registration Statement on Form S-1/A filed on August 29, 2017)
     
10.6   SKY Perfect JSAT Master Service Agreement, dated March 15, 2017, between Aircom Pacific, Inc. and SKY Perfect JSAT Corporation (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to Registration Statement on Form S-1/A filed on February 2, 2018)
     

68

     
10.7   Digital Transmission Service Agreement, dated July 25, 2015, between Asia Satellite Telecommunications Company Limited and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.8   Statement of Work, dated January 15, 2015, between Aircom Pacific, Inc. and dMobile System Co. Ltd. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.9   Purchase Agreement for Ground Station Equipment, dated as of October 15, 2014, between dMobile System Co., Ltd. and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.10   Settlement Agreement and Mutual Release, dated March 31, 2017, among Aerkomm Inc., Aircom Pacific, Inc. and dMobile System Co. Ltd. (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed on June 27, 2017)
     
10.11   Development Agreement, dated February 10, 2015, between Aircom Pacific, Inc. and Priceplay.com, Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.12   First Amendment to Development Agreement, dated July 17, 2015, between Aircom Pacific, Inc. and Priceplay.com, Inc. (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.13   Second Amendment to Development Agreement, dated August 18, 2015, between Aircom Pacific, Inc. and Priceplay.com, Inc. (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.14   Settlement Agreement and Mutual Release, dated March 31, 2017, among Aerkomm Inc., Aircom Pacific, Inc. and Priceplay.com, Inc. (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed on June 27, 2017)
     
10.15   Settlement Agreement and Mutual Release, dated March 31, 2017, among Aerkomm Inc., Aircom Pacific, Inc. and Priceplay Taiwan Inc. (incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-1 filed on June 27, 2017)
     
10.16   Purchase Agreement for Ground Station Equipment, dated as of December 15, 2015, between Blue Topaz Consultants, Ltd. and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.17   Purchase Agreement for Aircom Onboard Equipment, dated as of March 9, 2015, between LUXE Electric Co., Ltd. and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.18   Strategic Cooperation Framework Agreement, dated June 20, 2018, between Aerkomm Inc. and Guang Dong Tengnan Internet Information Technology Co., Ltd. (Official Chinese Version) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 25, 2018)
     
10.19   Strategic Cooperation Framework Agreement, dated June 20, 2018, between Aerkomm Inc. and Guang Dong Tengnan Internet Information Technology Co., Ltd. (Unofficial English Translation) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 25, 2018)
     
10.20   Cooperation Framework Agreement, dated June 20, 2018, between Aerkomm Inc. and Shenzhen Yihe Culture Media Co., Ltd. (Official Chinese Version) (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on June 25, 2018)
     
10.21   Cooperation Framework Agreement, dated June 20, 2018, between Aerkomm Inc. and Shenzhen Yihe Culture Media Co., Ltd. (Unofficial English Translation) (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on June 25, 2018)
     
10.22   Letter of Commitment, dated May 1, 2018, between Aerkomm Inc. and Metro Investment Group Limited (Official Chinese Version) (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on July 12, 2018)
     
10.23   Letter of Commitment, dated May 1, 2018, between Aerkomm Inc. and Metro Investment Group Limited (Unofficial English Translation) (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on July 12, 2018)
     
10.24   Real Estate Sales Contract, dated July 10, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Chinese Version) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 12, 2018)
     
10.25   Real Estate Sales Contract, dated July 10, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 12, 2018)
     

69

     
10.26   Amendment No. 1 to Real Estate Sales Contract, dated July 30, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Chinese Version) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 30, 2018)
     
10.27   Amendment No. 1 to Real Estate Sales Contract, dated July 30, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 30, 2018)
     
10.28   Amendment No. 2 to Real Estate Sales Contract, dated September 4, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Chinese Version) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 5, 2018)
     
10.29   Amendment No. 2 to Real Estate Sales Contract, dated September 4, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on September 5, 2018)
     
10.30   Amendment No. 3 to Real Estate Sales Contract, dated November 2, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Chinese Version) (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on November 5, 2018)
     
10.31   Amendment No. 3 to Real Estate Sales Contract, dated November 2, 2018, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on November 5, 2018)
     
10.32   Amendment No. 4 to Real Estate Sales Contract, dated January 3, 2019, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Chinese Version) (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on February 15, 2019)
     
10.33   Amendment No. 4 to Real Estate Sales Contract, dated January 3, 2019, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on February 15, 2019)
     
10.34   Agreement, dated November 29, 2018, between Airbus SAS and Aircom Pacific, Inc. for AERKOMM K++ Band System Certification and Installation (Confidential Treatment has been Requested) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 6, 2018)
     
10.35   Product Purchase Agreement, dated November 30, 2018, between Republic Engineers Pte. Ltd. and Aircom Telecom LLC (Confidential Treatment has been Requested) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 13, 2018)
     
10.36   Standard Industrial/Commercial Multi-Tenant Lease, dated April 26, 2016, between Global Venture Development, LLC and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on February 14, 2017)
     
10.37   Consulting Agreement, dated November 15, 2017, between Aerkomm Inc. and Integra Consulting Group, LLC, as supplemented (incorporated by reference to Exhibit 10.17 to the Registration Statement on Form S-1 filed on December 20, 2017)
     
10.38†   Employment Agreement, dated March 31, 2017, between Aerkomm Inc. and Y. Tristan Kuo (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on April 5, 2017)
     
10.39   Form of Independent Director Agreement (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to Registration Statement on Form S-1/A filed on February 2, 2018)
     
10.40   General Terms Agreement between Aircom Pacific, Inc. and MJet GMBH dated March 6, 2019 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 22, 2019)
     
10.41   Loan Commitment by and between Aerkomm Inc. and the Lenders, dated May 9, 2019 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on May 14, 2019)
     
10.41a   Loan Commitment Amendment by and between Aerkomm Inc. and the Lenders, dated May 10, 2019 (incorporated by reference to Exhibit 10.2a to the Quarterly Report on Form 10-Q filed on May 14, 2019)
     

70

     
10.42   Letter of Commitment No. 1 by and between Aerkomm Inc., Aerkomm Taiwan Inc. and Metro Investment Group Limited dated May 9, 2019 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on May 14, 2019)
     
10.43†   Employment Agreement dated May 25, 2018 by and between Louis Giordimaina and Aircom Pacific, Inc. (incorporated by reference to Exhibit 10.45 to the Annual Report on Form 10-K filed on March 30, 2020)
     
10.44   Independent Contractor Agreement dated January 2, 2019 by and between Aircom Pacific, Inc. and AA TWIN ASSOCIATES LTD (incorporated by reference to Exhibit 10.46 to the Annual Report on Form 10-K filed on March 30, 2020)
     
10.45   Letter of Undertaking dated July 16, 2019 (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed on July 16, 2019)
     
10.46   Definitive Agreement between the Registrant and MJet GMBH dated June 11, 2019 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on August 14, 2019
     
10.47   Consultant Agreement dated February 16, 2020 be and between the Registrant and Daniel Shih. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 19, 2020)
     
10.48   Lease Memorandum of Understanding dated May 1, 2018 by and between the Registrant and Golden Plate Limited (Official Chinese Version) (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on May 3, 2018)
     
10.49   Lease Memorandum of Understanding dated May 1, 2018 by and between the Registrant and Golden Plate Limited (Unofficial English Translation) (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on May 3, 2018)
     
10.50   Liquidity Contract dated September 9, 2019 by and between the Registrant and Invest Securities (incorporated by reference to Exhibit 10.50 to the Amendment No. 1 to the Registration Statement on Form S-1 filed on July 29, 2020)
     
10.51   Loan Agreement by and between Aircom Pacific, Inc. and Well Thrive Limited (Original) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on July 7, 2020)
     
10.52   Loan Agreement by and between Aircom Pacific, Inc. and Well Thrive Limited (English Translation) (incorporated by reference to Exhibit 10.1a to the Quarterly Report on Form 10-Q filed on July 7, 2020)
     
10.53   Unsecured Loan Agreement by and between Aircom Pacific, Inc. and EESquare Superstore Corp. dated April 16, 2020 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on July 7, 2020)
     
10.54   In-flight Entertainment Equipment Purchase Agreement by and between Yuanjiu Inc. and Aircom Telecom, LLC dated May 11, 2020 (Chinese Original) (incorporated by reference to Exhibit 10.54 to the Amendment No. 2 to the Registration Statement on Form S-1 filed on October 21, 2020)
     
10.55   In-flight Entertainment Equipment Purchase Agreement by and between Yuanjiu Inc. and Aircom Telecom, LLC dated May 11, 2020 (English Translation) (incorporated by reference to Exhibit 10.55 to the Amendment No. 2 to the Registration Statement on Form S-1 filed on October 21, 2020)
     
10.56   In-flight Entertainment Equipment Purchase Agreement by and between Yuanjiu Inc. and Aircom Telecom, LLC dated July 15, 2020 (Chinese Original) (incorporated by reference to Exhibit 10.56 to the Amendment No. 2 to the Registration Statement on Form S-1 filed on October 21, 2020)
     
10.57   In-flight Entertainment Equipment Purchase Agreement by and between Yuanjiu Inc. and Aircom Telecom, LLC dated July 15, 2020 (English Translation) (incorporated by reference to Exhibit 10.57 to the Amendment No. 2 to the Registration Statement on Form S-1 filed on October 21, 2020)
     
10.58   Amendment No. 5 to Real Estate Sales Contract, dated November 10, 2020, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Official Document) (Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed on November 13, 2020)
     
10.59   Amendment No. 5 to Real Estate Sales Contract, dated November 10, 2020, among Tsai Ming-Yin, Sunty Development Co., Ltd., Aerkomm Inc. and Aerkomm Taiwan Inc. (Unofficial English Translation) (Incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K filed on November 13, 2020)
     
10.60   Purchase Agreement dated November 27, 2020 by and between Aerkomm, Inc. and Yuanta Securities (Hong Kong) Co. Limited (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 4, 2020)
     
10.61   Credit Enhanced Bonds Indenture Dated December 2, 2020 (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 4, 2020)
     

71

     
10.62   Coupon Bonds Indenture dated December 2, 2020 (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on December 4, 2020)
     
10.63   Guarantee Agreement by the Company and Bank of Panhsin Co., Ltd. Dated December 2, 2020 (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on December 4, 2020)
     
10.64*   Agreement, dated July 24, 2020, between Airbus Interior Services (AIS) and Aircom Pacific Limited for AERKOMM
     
14.1   Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Transition Report on Form 10-KT filed on April 30, 2018)
     
14.2   Code of Professional Conduct for Chief Executive and Senior Financial Officers (incorporated by reference to Exhibit 14.2 to the Transition Report on Form 10-KT filed on April 30, 2018)
     
21.1   List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Transition Report on Form 10-KT filed on April 1, 2019)
     
31.1*   Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2*   Certifications of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2*   Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
Executive Compensation Plan or Agreement

72

FINANCIAL STATEMENTS

AERKOMM INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

TABLE OF CONTENTS

F-1

AERKOMM INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2020 and 2019

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Board of Directors and Stockholders

AERKOMM INC.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated
balance sheets of AERKOMM INC. AND SUBSIDIARIES (the “Company”) as of December 31, 2020 and 2019, and the related consolidated
statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years ended December
31, 2020 and 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for the years ended December
31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated
below are matters arising from the current period audit of the consolidated financial statements that were communicated or required
to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts
or disclosures to which they relate.

Valuation of Prepayment for Land

Description of the Matter

As described in Note 5, the Company entered
into a real estate sale contract with respect to the acquisition of a parcel of land located in Taiwan. As of December 31, 2020
and 2019, the total prepayment of $35,861,589 included the refundable installment prepayment of $34,474,462 to the seller and the
commission payable of $1,387,127 to the broker. As of March 23 2021, the land title transfer is still in progress and subject to
the approval from the local jurisdiction.

The Company performed land appraisal on
an annual basis to test if an event occurs or circumstances change that would more likely than not reduce the fair value of the
land below the carrying amount of prepayment for land.

F-3

How We Addressed the Matter in Our Audit

The primary procedures
we performed to address this critical audit matter included obtaining an understanding of controls over the Company’s impairment
review process, reviewing the appraisal report for the fair value of the land, and assessing the impairment loss if any. We also
issued confirmations to the seller to verify the right and existence of the prepayment for land.

Valuation
of Goodwill

Description of the Matter

As described in
Note 1 to the consolidated financial statements, the Company tests goodwill for impairment on an annual basis, or more often if
events or circumstances indicate that there may be impairment. As of December 31, 2020, the Company had goodwill of $1,475,334.
In performing the test, management used income approach to determine the estimated fair value of the reporting unit.

Auditing management’s
goodwill impairment test was complex and relatively judgmental due to the significant estimation required to determine the estimated
fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as changes
in the Company’s financial forecast, the discount rate, cost synergies and growth rate, which are affected by expectations
about future market or economic conditions, including uncertainty resulting from the COVID-19 pandemic.

How We Addressed the Matter in Our Audit

We obtained an understanding,
evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment review process,
including controls over management’s review of the significant assumptions. To test the estimated fair value of the reporting
unit, we performed audit procedures that included, among others, assessing the valuation methodology used by management and testing
the significant assumptions discussed above, as well as the underlying data used by the Company in its analysis. We tested the
mathematical accuracy of the calculations performed.
We assessed the reasonableness of the forecasted future revenue growth
rate and margins rate by comparing the Company’s business plans.

/s/ Chen & Fan Accountancy Corporation

We have served as the Company’s auditor since 2017.

San Jose, California

March 23, 2021

F-4

AERKOMM INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2020 and 2019

    December 31,  
    2020     2019  
             
Assets                
Current Assets                
Cash   $ 584,591     $ 751,329  
Short-term investment     87,154        
Accounts receivable           451,130  
Inventories, net     5,211,427       3,038,564  
Prepaid expenses     1,622,956       2,968,912  
Other receivable – related parties     496       920  
Other receivable – others     1,546       1,446  
Temporary deposit – related party     1,496        
Other current assets     10,701       5,708  
Total Current Assets     7,520,367       7,218,009  
Prepayment for long-term investment     4,305,556        
Property and Equipment                
Cost     2,806,420       2,777,144  
Accumulated depreciation     (1,414,191 )     (869,747 )
      1,392,229       1,907,397  
Prepayment for land     35,861,589       35,861,589  
Prepayment for equipment     86,617        
Net Property and Equipment     37,340,435       37,768,986  
Other Assets                
Restricted cash     3,210,000       225,500  
Intangible asset, net     2,392,500       2,887,500  
Goodwill     1,475,334       1,475,334  
Right-of-use assets, net     353,442       302,602  
Deposits – others     119,436       113,660  
Total Other Assets     7,550,712       5,004,596  
Total Assets   $ 56,717,070     $ 49,991,591  
                 
Liabilities and Stockholders’ Equity                
Current Liabilities                
Short-term loan – related parties   $ 527,066     $  
Accounts payable     1,874,339       912,729  
Accrued expenses     1,131,459       245,140  
Other payable – related parties     451,186       30,971  
Other payable – others     3,112,355       1,801,109  
Long-term loan – current     10,171       8,666  
Lease liability – current – related parties     45,086       22,632  
Lease liability – current – others     312,794       309,747  
Total Current Liabilities     7,464,456       3,330,994  
Long-term Liabilities                
Long-term bonds payable     9,218,094        
Long-term loan – non-current     29,034       36,803  
Prepayments from customer     762,000       762,000  
Lease liability – non-current – related parties     23,575        
Lease liability – non-current – others     186,868       45,199  
Restricted stock deposit liability     1,000       1,000  
Total Long-term Liabilities     10,220,571       845,002  
Total Liabilities     17,685,027       4,175,996  
Commitments                
Stockholders’ Equity                
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding as of December 31, 2020 and 2019            
Common stock, $0.001 par value, 90,000,000 shares authorized, 9,487,889 shares (excluding 149,162 unvested restricted shares) issued and outstanding as of December 31, 2020; 9,391,729 shares (excluding 149,162 unvested restricted shares) issued and outstanding as of December 31, 2019     9,488       9,392  
Additional paid in capital     73,160,616       69,560,529  
Accumulated deficits     (32,383,833 )     (23,271,687 )
Accumulated other comprehensive loss     (1,754,228 )     (482,639 )
Total Stockholders’ Equity     39,032,043       45,815,595  
Total Liabilities and Stockholders’ Equity   $ 56,717,070     $ 49,991,591  

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

F-5

AERKOMM INC. AND SUBSIDIARIES

Consolidated Statements of Operations and
Comprehensive Loss

For the Years Ended December 31, 2020 and
2019

    Year Ended December 31,  
    2020     2019  
             
Sales   $     $ 1,599,864  
Cost of Goods Sold             1,587,222  
Gross Margin           12,642  
Operating Expenses     8,335,598       8,569,231  
                 
Loss from Operations     (8,335,598 )     (8,556,589 )
                 
Non-Operating Income (Loss)                
Foreign currency exchange gain     1,088,672       586,040  
Governmental grant income     217,048        
Impairment loss     (1,155,623 )      
Unrealized investment loss     (868,064 )      
Other loss, net     (55,295 )     (5,759 )
                 
Net Non-Operating Income (Loss)     (773,262 )     580,281  
                 
Loss Before Income Taxes     (9,108,860 )     (7,976,308 )
                 
Income Tax Expense     3,286       3,251  
                 
Net Loss     (9,112,146 )     (7,979,559 )
                 
Other Comprehensive Loss                
Change in foreign currency translation adjustments     (1,271,589 )     (602,603 )
                 
Total Comprehensive Loss   $ (10,383,735 )   $ (8,582,162 )
                 
Net Loss Per Common Share:                
                 
Basic   $ (0.9550 )   $ (0.8507 )
Diluted   $ (0.9550 )   $ (0.8507 )
                 
Weighted Average Shares Outstanding – Basic     9,541,154       9,380,450  
Weighted Average Shares Outstanding – Diluted     9,541,154       9,380,450  

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

F-6

AERKOMM INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’
Equity

For the Years Ended December 31, 2020 and
2019

    Common Stock     Additional


Paid in
    Accumulated     Accumulated


Other


Comprehensive
    Total Stockholders’  
    Shares     Amount     Capital     Deficits     Income (Loss)     Equity  
Balance as of January 1, 2019     9,098,110     $ 9,098     $ 56,582,800     $ (15,292,128 )   $ 119,964     $ 41,419,734  
Issuance of common stock     293,619       294       10,810,394                   10,810,688  
Stock compensation expense                 2,342,802                   2,342,802  
Issuance of stock warrant                 1,200                   1,200  
Revaluation of stock warrant                 (176,667 )                 (176,667 )
Net loss for the year                       (7,979,559 )           (7,979,559 )
Other comprehensive loss                             (602,603 )     (602,603 )
Balance as of December 31, 2019     9,391,729       9,392       69,560,529       (23,271,687 )     (482,639 )     45,815,595  
Issuance of common stock     96,160       96       1,666,984                   1,667,080  
Stock compensation expense                 1,697,703                   1,697,703  
Revaluation of stock warrant                 235,400                   235,400  
Net loss for the year                       (9,112,146 )           (9,112,146 )
Other comprehensive loss                               (1,271,589 )     (1,271,589 )
Balance as of December 31, 2020     9,487,889     $ 9,488     $ 73,160,616     $ (32,383,833 )   $ (1,754,228 )   $ 39,032,043  

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

F-7

AERKOMM INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020 and
2019

    Year Ended December 31,  
    2020     2019  
Cash Flows from Operating Activities                
Net loss   $ (9,112,146 )   $ (7,979,559 )
Adjustments to reconcile net loss to net cash used for
operating activities:
               
Depreciation and amortization     1,039,444       1,042,698  
Stock-based compensation     1,697,703       2,342,802  
R&D expenses transferred from inventory and construction
in progress
          416,231  
Consulting expense adjustment from change in fair value
of warrants
    235,400       (176,667 )
Unrealized losses on trading security     868,064        
Amortization of bonds issuance costs     15,801        
Changes in operating assets and liabilities:                
Accounts receivable     451,130       1,293,870  
Inventories     (2,172,863 )     (2,143,550 )
Prepaid expenses     1,345,956       (1,435,164 )
Other receivable – related parties     424       (920 )
Other receivable – others     (100 )     1,170  
Temporary deposit – related party     (1,496 )     100,067  
Other current assets     (4,993 )     5,628  
Deposits – others     (5,776 )     (5,751 )
Accounts payable     961,610       (1,120,245 )
Accrued expenses     886,319       (167,025 )
Other payable – related parties     420,215       (142,883 )
Other payable – others     1,311,246       (779,849 )
Operating lease liability     151,971       19,828  
Net Cash Used for Operating Activities     (1,912,091 )     (8,729,319 )
                 
Cash Flows from Investing Activities                
Purchase of trading security     (233,174 )      
Prepayment on long-term investment     (5,027,600 )      
Purchase of property and equipment     (29,276 )     (67,601 )
Prepayment on equipment     (86,617 )      
Prepayment on land           (624,462 )
Net Cash Used for Investing Activities     (5,376,667 )     (692,063 )
                 
Cash Flows from Financing Activities                
Proceeds from short-term loan – related party     527,066        
Payment on finance lease liability     (12,066 )     55,148-  

Proceeds from long-term bonds payable

    9,218,094        
(Repayment of) proceeds from long-term loan     (22,065 )     45,469  
Proceeds from issuance of common stock     1,667,080       10,810,688  
Issuance of stock warrant           1,200  
Net Cash Provided by Financing Activities     11,378,109       10,912,505  
                 
Net Increase in Cash and Restricted Cash     4,089,351       1,491,123  
                 
Cash and Restricted Cash, Beginning of Year     976,829       88,309  
                 
Foreign Currency Translation Effect on Cash     (1,271,589 )     (602,603 )
Cash and Restricted Cash, End of Year   $ 3,794,591     $ 976,829  
                 
Supplemental disclosures of cash flow information:                
Cash   $ 584,591     $ 751,329  
Restricted cash     3,210,000       225,500  
Total   $ 3,794,591     $ 976,829  
                 
Cash paid during the year for income taxes   $ 3,286     $  
Cash paid during the year for interest   $ 30,176     $ 5,791  

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

F-8

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 1 – Organization

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

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

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

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

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

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

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

On June 13, 2018, Aerkomm established
a new wholly owned subsidiary, Aerkomm Taiwan Inc. (“Aerkomm Taiwan”), a corporation formed under the laws of Taiwan.
The purpose of Aerkomm Taiwan is to purchase a parcel of land and raise sufficient fund for ground station building and operate
the ground station for data processing (although that cannot be guaranteed).

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

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

F-9

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 1 – Organization – Continued

The Company’s organization
structure is as following:

 

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

The Company has not generated
significant revenues, excluding non-recurring revenues in 2019, and will incur additional expenses as a result of being a public
reporting company. Currently, the Company has taken measures that management believes will improve its financial position by financing
activities, including through ongoing public offerings, short-term borrowings and equity contributions. Two of the Company’s
current shareholders (the “Lenders”) each committed to provide to the Company a $10 million bridge loan (together,
the “Loans”) for an aggregate principal amount of $20 million, to bridge the Company’s cash flow needs prior
to its obtaining a mortgage loan to be secured by a parcel of land (the “Land”) the Company purchased in Taiwan. The
Lenders also agreed to an earlier closing of up to 25% of the principal amounts of the Loans upon the Company’s request prior
to the time that title to the Land is vested in the Company’s subsidiary, Aerkomm Taiwan, to pay the outstanding payable
to the Company’s vendors. With the $20 million in Loans committed by the Lenders and future capital raising, the Company
believes its working capital will be adequate to sustain its operations for the next twelve months by the committed Loans from
its shareholders. On March 23, 2021, the Company borrowed approximately $2.39 million (NT$67,060,000) under the Loans from one
of the Lenders.

On July 29, 2020, the Company
filed an amendment to the Registration Statement on Form S-1, originally filed on April 30, 2020, with the Securities and Exchange
Commission, or the SEC, pursuant to Section 5 of the Securities Act of 1933 to issue and sell up to 1,951,219 shares (approximately
$47,276,000) of the Company’s common stock, at a per share price of €20.50 (approximately $24.23). The Form S-1 was
subsequently amended on July 29, 2020, October 21, 2020 and November 5, 2020, and was declared effective on November 6, 2020. As
of March 23, 2021, the Company has closed a private offering with net proceeds of $1,667,080 (see Note 15.)

On January 16, 2019, the Company
completed a 1-for-5 reverse split of the Company’s authorized, issued and outstanding shares of common stock, which was completed
by the filing of a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State on December 26, 2018 (see Note
15). All of the references in these financial statements to authorized common stock and issued and outstanding common stock have
been adjusted to reflect this reverse split.

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

NOTE 2 – Summary of Significant Accounting
Policies

Changes in Fiscal Year

On March 18, 2018, the Company’s
Board of Directors approved a change in the Company’s fiscal year end from December 31 to March 31. On February 12, 2019,
the Company’s Board of Directors approved a change in the Company’s fiscal year end from March 31 to December 31. Year-over-year
financial data continue to be comparative to prior year as the twelve months that comprise in the new fiscal year are the same
as those in the Company’s historical financial statements.

Principle of Consolidation

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

F-10

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 – Summary of Significant Accounting Policies – Continued

Reclassifications of Prior
Year Presentation

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

Use of Estimates

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

Concentrations of Credit Risk

Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist primarily of cash in banks. As of December 31, 2020 and
2019, the total balance of cash in bank exceeding the amount insured by the Federal Deposit Insurance Corporation (FDIC) for the
Company was approximately $0 and $233,000, respectively. The balance of cash deposited in foreign financial institutions exceeding
the amount insured by local insurance is approximately $3,514,000 and $37,000 as of December 31, 2020 and December 31, 2019, respectively.

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

Inventories

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

Property and Equipment

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

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

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

The Company reviews the carrying
amount of property and equipment for impairment when events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. It determined that there was no impairment loss for the years ended December 31, 2020 and 2019.

Right-of-Use Asset and Lease
Liability

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

F-11

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 – Summary of Significant Accounting Policies – Continued

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

For the leases with a term of
twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally
on a straight-line basis over the lease term. The Company adopted ASU 2016-02 effective January 1, 2019.

Goodwill and Purchased Intangible
Assets

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

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

Fair Value of Financial Instruments

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

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

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

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

The carrying amounts of the Company’s
cash and restricted cash, accounts receivable, other receivable, accounts payable, short-term loan and other payable approximated
their fair value due to the short-term nature of these financial instruments. The Company’s long-term bonds payable,
long-term loan and lease payable approximated the carrying amount as its interest rate is considered as approximate to the current
rate for comparable loans and leases, respectively. There were no outstanding derivative financial instruments as of December 31,
2020 and 2019.

Revenue Recognition

During 2019, the Company adopted
the provisions of ASU 2014-09 Revenue from Contract with Customers (Topic 606) and the principal versus agent guidance within
the new revenue standard. As such, the Company identifies a contract with a customer, identifies the performance obligations in
the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract
and recognizes revenue when (or as) the Company satisfies a performance obligation. The Company’s revenue for the year ended
December 31, 2019 was the sales of compact adaptor for smartphone that allows users to turn their smartphone into a satellite
smartphone to provide reliable connectivity beyond the coverage of traditional networks.

F-12

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 2 – Summary of Significant Accounting Policies – Continued

Research and Development Costs

Research and development costs
are charged to operating expenses as incurred. For the years ended December 31, 2020 and 2019, the Company incurred $0 and $416,231
of research and development costs, respectively.

Income Taxes

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

The Company follows FASB guidance
on uncertain tax positions and has analyzed its filing positions in all the federal, state and foreign jurisdictions where it is
required to file income tax returns, as well as all open tax years in those jurisdictions. The Company files income tax returns
in the US federal, state and foreign jurisdictions where it conducts business. It is not subject to income tax examinations by
US federal, state and local tax authorities for years before 2016. The Company believes that its income tax filing positions and
deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on
its consolidated financial position, results of operations, or cash flows. Therefore, no reserves for uncertain tax positions have
been recorded. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

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

Foreign Currency Transactions

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

Translation Adjustments

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

Earnings (Loss) Per Share

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

Subsequent Events

The Company has evaluated events
and transactions after the reported period up to March 23, 2021, the date on which these consolidated financial statements were
available to be issued. All subsequent events requiring recognition as of December 31, 2020 have been included in these consolidated
financial statements.

F-13

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 3 – Recent Accounting Pronouncements

Simplifying the Accounting
for Debt with Conversion and Other Options.

In June 2020, the FASB issued
ASU 2020-06 to simplify the accounting in ASC 470, Debt with Conversion and Other Options and ASC 815, Contracts in Equity’s
Own Entity. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts
in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled
in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s
fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis
or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption.
The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures,
as well as the timing of adoption.

Simplifying the Accounting
for Income Taxes

In December 2019, the FASB issued
ASU 2019-12 to simplify the accounting in ASC 740, Income Taxes. This guidance removes certain exceptions related to the approach
for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred
tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will
be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments
in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain
amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit)
in the period of adoption. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements
and related disclosures, as well as the timing of adoption.

Financial Instruments

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

Intangibles

In January 2017, the FASB issued
ASU No. 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment, under
which goodwill shall be tested at least annually for impairment at a level of reporting referred to as a reporting unit. ASU 2017-04
will be effective for annual periods beginning after December 15, 2019. The adoption of ASU 2017-04 does not have significant impact
on the Company’s consolidated financial statements as of and for the year ended December 31, 2020.

NOTE 4 – Inventories

As of December 31, 2020 and 2019, inventories consisted
of the following:

    2020     2019  
             
Satellite equipment for sale under construction   $ 4,669,297     $ 3,038,564  
Supplies     5,317       5,230  
      4,674,614       3,043,794  
Allowance for inventory loss     (5,317 )     (5,230 )
Net     4,669,297       3,038,564  
Prepayment for inventory     542,130        
Total   $ 5,211,427     $ 3,038,564  

F-14

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 5 – Property and Equipment

For the years ended December 31, 2020 and 2019, the
changes in cost of property and equipment were as follows:

    Computer


Software


and


Equipment
    Furniture


and Fixture
    Satellite


Equipment
    Ground


Station


Equipment
    Vehicle     Leasehold


Improvement
    Total  
January 1, 2019   $ 321,070     $ 33,344     $ 275,410     $ 1,854,027     $ 141,971     $ 83,721     $ 2,709,543  
Addition     7,793       3,038                   56,770             67,601  
December 31, 2019     328,863       36,382       275,410       1,854,027       198,741       83,721       2,777,144  
Addition     6,845                   22,431                   29,276  
December 31, 2020   $ 335,708     $ 36,382     $ 275,410     $ 1,876,458     $ 198,741     $ 83,721     $ 2,806,420  

In addition to the $2,806,420
total property and equipment, the Company also has prepayment for equipment in an amount of $86,617.

For the years ended December
31, 2020 and 2019, the changes in accumulated depreciation for property and equipment were as follows:

    Computer


Software


and


Equipment
    Furniture


and Fixture
    Satellite


Equipment
    Ground


Station


Equipment
    Vehicle     Leasehold


Improvement
    Total  
January 1, 2019   $ 101,129     $ 9,371     $ 91,360     $ 92,701     $ 21,980     $ 5,508     $ 322,049  
Addition     64,266       6,366       55,082       370,806       33,305       17,873       547,698  
December 31, 2019     165,395       15,737       146,442       463,507       55,285       23,381       869,747  
Addition     55,191       5,674       55,082       370,805       40,202       17,490       544,444  
December 31, 2020   $ 220,586     $ 21,411     $ 201,524     $ 834,312     $ 95,487     $ 40,871     $ 1,414,191  

Depreciation expense was $544,444
and $547,698 for the years ended December 31, 2020 and 2019, respectively.

On July 10, 2018, the Company
and Aerkomm Taiwan entered into a real estate sale contract with Tsai Ming-Yin (the “Seller”) with respect to the acquisition
by Aerkomm Taiwan of a parcel of land located in Taiwan. The land is expected to be used to build a satellite ground station and
data center. Pursuant to the terms of the contract, and subsequent amendments on July 30, 2018, September 4, 2018, November 2,
2018 and January 3, 2019, the Company paid to the seller in installments refundable prepayment of $33,850,000 as of December 31,
2018. On July 2, 2019, the Company paid the remaining purchase price of $624,462. On November 10, 2020, the Company entered into
a further contract amendment with the Seller to allow for a refund of the full purchase price of the Taiwan Land Parcel if licenses
and approvals needed to transfer land title to Aerkomm Taiwan are not granted by July 31, 2021. As of December 31, 2020 and
2019, the estimated commission payable for the land purchase in the amount of $1,387,127 was recorded to the cost of land and the
payment to be paid after the full payment of the Land acquisition price until no later than December 31, 2021.

NOTE 6 – Prepayment for Long-term Investment

On December 3, 2020, the Company
entered into three separate stock purchase agreements (or “Stock Purchase Agreement”) from three individuals to purchase
an aggregate of 6,000,000 restricted shares of one of the Company’s related party, YuanJiu Inc. (YuanJiu) in a total amount
of NT$141,175,000 (approximately $5,027,600). YuanJiu is a listed company in Taiwan Stock Exchange. As the restriction on the stock
transfer will be released on May 13, 2021, the parties agreed to transfer the title upon the restriction expired. The investment
is approximately 10% ownership of YuanJiu. The Company intends to hold the investment for long-term purpose.

As of December 31, 2020, the
fair value of the investment was as follows:

Investment cost   $ 5,027,600  
Less: Allowance for value decline     (722,044 )
Net   $ 4,305,556  

F-15

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 7 – Intangible Asset, Net

For the years ended December
31, 2020 and 2019, the changes in cost and accumulated amortization for intangible asset were as follows:

    Satellite


System


Software
    Accumulated


Amortization
    Net  
January 1, 2019   $ 4,950,000     $ (1,567,500 )   $ 3,382,500  
Addition           (495,000 )     (495,000 )
December 31, 2019     4,950,000       (2,062,500 )     2,887,500  
Addition           (495,000 )     (495,000 )
December 31, 2020   $ 4,950,000     $ (2,557,500 )   $ 2,392,500  

Amortization expense was $495,000 for each of the
years ended December 31, 2020 and 2019.

NOTE 8 – Short-term Investment

On September 9, 2019, the Company
entered into a liquidity agreement with a security company (“the Liquidity Provider”) in France, which is consistent
with customary practice in the French securities market. The liquidity agreement complies with applicable laws and regulations
in France and authorizes the Liquidity Provider to carry out market purchases and sales of shares of our common stock on the Euronext
Paris market. To enable the Liquidity Provider to carry out the interventions provided for in the contract, the Company contributed
approximately $225,500 (200,000 euros) into the account. As of December 31, 2020, the Company contributed additional $893 (730
Euro) to the account. The transaction will be initiated from the beginning of 2020, and the Company will pay the compensation of
20,000 euros in advance by semi-annual installments at the beginning of the semi-annual period of the agreement. The liquidity
agreement has a term of one year and will be renewed automatically unless otherwise terminated by either party. As of December
31, 2020, the Company purchased 11,402 shares of its common stock with the fair value of $87,154. The securities were recorded
as short-term investment with unrealized loss of $146,020.

NOTE 9 – Operating and Finance Leases

  A. Lease term and discount rate:

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

Weighted-average remaining lease term   2020     2019  
Operating lease     2.01 Years          0.64 Years  
Finance lease     3.84 Years       4.85 Years  
Weighted-average discount rate                
Operating lease     6.00 %     6.00 %
Finance lease     3.82 %     3.82 %
  B. The balances for the operating and finance leases are presented as follows within the consolidated balance sheets as of December 31, 2020 and 2019:

Operating Leases

    2020     2019  
Right-of-use assets   $ 353,442     $ 302,602  
Lease liability – current   $ 346,870     $ 322,430  
Lease liability – non-current   $ 173,308     $  

F-16

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 9 – Operating and Finance Leases – Continued

Finance Leases

    2020     2019  
Property and equipment, at cost   $ 56,770     $ 56,770  
Accumulated depreciation     (13,098 )     (1,569 )
Property and equipment, net   $ 43,672     $ 55,201  
                 
Lease liability – current   $ 11,010     $ 9,949  
Lease liability – non-current     37,135       45,199  
Total finance lease liabilities   $ 48,145     $ 55,148  

The components of lease expense
are as follows within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and
2019:

Operating Leases

    2020     2019  
Lease expense   $ 408,694     $ 479,389  
Sublease rental income     (11,239 )     (9,173 )
Net lease expense   $ 397,455     $ 470,217  

Finance Leases

    2020     2019  
Amortization of property and equipment   $ 11,529     $ 1,569  
Interest on lease liabilities     1,964       348  
Total finance lease cost   $ 13,493     $ 1,917  

Supplemental cash flow information related to leases
for the years ended December 31, 2020 and 2019 is as follows:

Cash paid for amounts included in the measurement of lease liabilities:   2020     2019  
Operating cash outflows from operating leases   $ 212,319     $ 439,271  
Operating cash outflows from finance lease   $ 10,102     $ 348  
Financing cash outflows from finance lease   $ 1,964     $ 1,622  
Leased assets obtained in exchange for lease liabilities:                
Operating leases   $ 453,049     $ 722,423  
Finance lease   $     $ 56,770  

Maturity of lease liabilities:

Operating Leases

    Related

Party
    Others     Total  
January 1, 2021 – December 31, 2021   $ 47,979     $ 315,110     $ 363,089  
January 1, 2022 – December 31, 2022     23,989       118,588       142,577  
January 1, 2023 – December 31, 2023           37,190       37,190  
Total lease payments     71,968       470,888       542,856  
Less: Imputed interest     (3,307 )     (19,371 )     (22,678 )
Present value of lease liabilities     68,661       451,517       520,178  
Current portion     (45,086 )     (301,784 )     (346,870 )
Non-current portion   $ 23,575     $ 149,733     $ 173,308  

F-17

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 9 – Operating and Finance Leases – Continued

Finance Leases

January 1, 2021 – December 31, 2021   $ 12,658  
January 1, 2022 – December 31, 2022     12,658  
January 1, 2023 – December 31, 2023     12,658  
January 1, 2024 – December 31, 2024     14,109  
Total lease payments     52,083  
Less: Imputed interest     (3,938 )
Present value of lease liabilities     48,145  
Current portion     (11,010 )
Non-current portion   $ 37,135  

NOTE 10 – Paycheck Protection Program
(PPP)

On April 16, 2020, the Company
received loan proceeds in the amount of $163,200 under the Paycheck Protection Program (“PPP”). The PPP, established
as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses
for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. According to PPP, borrowers may
be eligible for loan forgiveness if the funds were used for eligible payroll costs, payments on business mortgage interest payments,
rent, or utilities during either the 8- or 24-week period after disbursement. On November 18, 2020, the Company obtained the approval
of loan forgiveness. For the year ended December 31, 2020, the Company recognized $163,200 as other income from the PPP. 

NOTE 11 – Long-term Loan

The Company has a car loan credit
line of NT$1,500,000 (approximately US$48,371), which matures on May 21, 2024, from a Taiwan financing company with annual interest
rate of 9.7%. The installment payment plan is 60 months to pay off the balance on the 21st of each month. Future installment
payments as of December 31, 2020 are as follows: 

Year ending December 31,      
2021   $ 13,526  
2022     13,526  
2023     13,526  
2024     5,635  
Total installment payments     46,213  
Less: Imputed interest     (7,008 )
Present value of long-term loan     39,205  
Current portion     (10,171 )
Non-current portion   $ 29,034  

F-18

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 12 – Long-term Bonds Payable
and Restricted Cash

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

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

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

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

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

As of December 31, 2020, the
long-term bonds payable consisted of the following:

Credit Enhanced Zero Coupon Convertible Bonds   $ 10,000,000  
Coupon Bonds     200,000  
      10,200,000  
Unamortized loan fee     (981,906 )
Net   $ 9,218,094  

NOTE 13 – Prepayment from Customer

On March 9, 2015, the Company
entered into a 10-year purchase agreement with Klingon Aerospace, Inc. (“Klingon”), which was formerly named as Luxe
Electronic Co., Ltd. In accordance with the terms of this agreement, Klingon agreed to purchase from the Company an initial order
of onboard equipment comprising an onboard system for a purchase price of $909,000, with payments to be made in accordance with
a specific milestones schedule. As of December 31, 2020 and 2019, the Company received $762,000 from Klingon in milestone payments
towards the equipment purchase price. As of December 31, 2020, the project is still ongoing.

NOTE 14 – Income Taxes

Income tax expense for the years ended December 31,
2020 and 2019 consisted of the following:

    2020     2019  
Current:            
Federal   $     $  
State     1,600       1,600  
Foreign     1,686       1,651  
Total   $ 3,286     $ 3,251  

F-19

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 14 – Income Taxes – Continued

The following table presents
a reconciliation of the Company’s income tax at statutory tax rate and income tax at effective tax rate for the years ended
December 31, 2020 and 2019.

    2020     2019  
Tax benefit at statutory rate   $ (1,729,759 )   $ (1,764,624 )
Valuation allowance on net operating loss carryforwards     1,157,057       1,361,542  
Stock-based compensation expense     356,500       492,000  
Accrued payroll     163,200       (35,400 )
Foreign investment losses     35,706       127,388  
Amortization and depreciation expense     3,835       52,130  
Accrued consulting expense           (138,000 )
Unrealized exchange gain     (70,239 )     (97,373 )
Others     86,986       5,588  
Tax expense at effective tax rate   $ 3,286     $ 3,251  

Deferred tax assets (liabilities)
as of December 31, 2020 and 2019 consist approximately of:

    2020     2019  
Net operating loss carryforwards (NOLs)   $ 8,162,000     $ 6,388,000  
Stock-based compensation expense     2,024,000       1,549,000  
Accrued expenses and unpaid expense payable     309,000       53,000  
Tax credit carryforwards     68,000       68,000  
Excess of tax amortization over book amortization     (577,000 )     (619,000 )
Unrealized/realized exchange gain     (193,000 )     (106,000 )
Others     (173,000 )     (104,000 )
    9,620,000       7,229,000  
Valuation allowance     (9,620,000 )     (7,229,000 )
Net   $     $  

Management does not believe the
deferred tax assets will be utilized in the near future; therefore, a full valuation allowance is provided. The net change in deferred
tax assets valuation allowance was an increase of approximately $2,391,000 and $1,139,000 for the years ended December 31, 2020
and 2019, respectively.

As of December 31, 2020, and
2019, the Company had federal NOLs of approximately $8,243,000 available to reduce future federal taxable income, expiring in 2037,
and additional federal NOLs of approximately $16,743,000 and $11,314,000, respectively, were generated and will be carried forward
indefinitely to reduce future federal taxable income. As of December 31, 2020 and 2019, the Company had State NOLs of approximately
$27,461,000 and $21,117,000, respectively, available to reduce future state taxable income, expiring in 2039.

As of December 31, 2020 and 2019,
the Company has Japan NOLs of approximately $392,000 and $350,000, respectively, available to reduce future Japan taxable income,
expiring in 2030.

As of December 31, 2020 and 2019,
the Company has Taiwan NOLs of approximately $2,405,000 and $1,898,000, respectively, available to reduce future Taiwan taxable
income, expiring in 2030.

As of December 31, 2020 and 2019,
the Company had approximately $37,000 of federal research and development tax credit, available to offset future federal income
tax. The credit begins to expire in 2034 if not utilized. As of December 31, 2020 and 2019, the Company had approximately $39,000
of California state research and development tax credit available to offset future California state income tax. The credit can
be carried forward indefinitely.

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

F-20

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 15 – Capital Stock

The Company is authorized to
issue 50,000,000 shares of preferred stock, with par value of $0.001. As of December 31, 2020, there were no preferred stock shares
outstanding. The Board of Directors has the authority to issue preferred stock in one or more series, and in connection with the
creation of any such series, by resolutions providing for the issuance of the shares thereof, to determine dividends, voting rights,
conversion rights, redemption privileges and liquidation preferences.

The Company is authorized to
issue 90,000,000 shares of common stock, reflecting a reverse split in the ratio of 1 for 5 effective January 16, 2019, with par
value of $0.001.

On February 13, 2017, all of
Aircom’s 5,513,334 restricted shares were converted to 2,055,947 shares of Aerkomm’s restricted stock at the ratio
of 2.681651 to 1, pursuant to the Exchange Agreement (see Note 1). As of December 31, 2020 and 2019, the restricted shares consisted
of the following:

    December 31,

2020
    December 31,

2019
 
Restricted stock – vested     1,802,373       1,802,373  
Restricted stock – unvested     149,162       149,162  
Total restricted stock     1,951,535       1,951,535  

The unvested shares of restricted
stock were recorded under a deposit liability account awaiting future conversion to common stock when they become vested. On December
21, 2018, the Company repurchased and cancelled an aggregate of 104,413 unvested shares of restricted common stock for a purchase
price of $0.0067 per share.

On July 2, 2019, the board of
directors approved a supplement to the engagement agreement with one of the Company’s service providers pursuant to which
the Company agreed to issue to the service provider 23,972 restricted shares of the Company’s common stock in consideration
of that service provider’s agreement to defer the receipt of payment of certain accrued fees amounted to $94,930 due to the
service provider.

As of September 10, 2019, the
Company completed two closings in the aggregate gross amount of $11,459,998, or net amount of $10,715,758, and issued 267,647 shares
of common stock.

On December 31, 2020, the Company
entered into an underwriting agreement (the “Underwriting Agreement-Invest Securities”) with Invest Securities SA (“Invest-Securities”)
in connection with the public offering, issuance and sale of up to 1,951,219 shares of the Company’s common stock on a best-efforts
basis at the public offering price of €20.50 (approximately $25.07) per share, less underwriting discounts, for up to a maximum
of €40,000,000 (approximately $48,920,000). As of December 31, 2020, pursuant to the Underwriting Agreement-Invest Securities,
the Company had issued an aggregate of 96,160 shares of common stock for gross proceeds of €1,971,280 (approximately $2,406,915),
or net proceeds of €1,421,344 (approximately $1,667,080). 

F-21

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 15 – Capital Stock – Continued

The Company has entered into
a service agreement which provides for the issuance of warrants to purchase shares of its common stock to a service provider as
payment for services. The warrants allow the service provider to purchase a number of shares of Aerkomm’s common stock that
equals to the service fee value divided by 85% of the share price paid by investors for Aerkomm’s common stock in the first
subsequent qualifying equity financing event, at an exercise price of $0.05 per share. For the year ended December 31, 2018, Aerkomm
issued additional stock warrants exercisable for $56,667 in value of Aerkomm’s common stock to the service provider as payment
for additional services. As of June 28, 2019, these warrants are equivalent to 4,891 shares of the Company’s common stock.
On June 29, 2019, the Company settled with the service provider to cancel all warrants amounting to $176,667 with an aggregate
amount of $75,000 in three equal installments payable on July 3, August 1 and September 1, 2019 and all three installments were
paid on schedule.

In connection with the Underwriting
Agreement with Boustead, the Company agreed to issue to Boustead warrants to purchase a number of the Company’s shares equal
to 6% of the gross proceeds of the public offering, which shall be exercisable, in whole or in part, commencing on April 13, 2018
and expiring on the five-year anniversary at an initial exercise price of $53.125 per share, which is equal to 125% of the offering
price paid by investors. As of December 31, 2019, the Company issued warrants to Boustead to purchase 77,680 shares of the Company’s
stock. 

For the years ended December
31, 2020 and 2019, the Company recorded an increase of $235,400 and a decrease of $176,667, respectively, in additional paid-in
capital as adjustment for the issuance costs of these stock warrants.

NOTE 16 – Major Customer

The Company has one major customer,
which represents 10% or more of the total sales of the Company in 2019. Sales to and account receivable from the customer for the
year ended and as of December 31, 2019 were $1,599,864 and $451,130, respectively.

NOTE 17 – Major Vendors

The Company has two unrelated
major vendors, each of which represents 10% or more of the total purchases of the Company for 2020 and 2019. Purchase from and
accounts payable to these vendors for the years ended and as of December 31, 2020 and 2019 were as follows:

    Purchase     Accounts Payable  
Vendor   2020     2019     2020     2019  
A   $ 1,592,239     $ 2,143,550     $ 1,874,339     $ 658,200  
B           1,587,222             254,529  
Total   $ 1,592,239     $ 3,730,772     $ 1,874,339     $ 912,729  

NOTE 18 – Related Party Transactions

  A. Name of related parties and relationships with the Company:
Related Party   Relationship
Dmedia Holding LP (“Dmedia”)   Major stockholder
Well Thrive Limited (“WTL”)   Major stockholder
Yuan Jiu Inc. (“Yuan Jiu”)   Stockholder; Albert Hsu, a Director of Aerkomm, is the Chairman
AA Twin Associates Ltd. (“AATWIN”)   Georges Caldironi, COO of Aerkomm, is sole owner
EESquare Japan (“EESquare JP”)   Yih Lieh (Giretsu) Shih, President Aircom Japan, is the Director
Wealth Wide Int’l Ltd. (“WWI”)   Bummy Wu, a stockholder, is the Chairman

F-22

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 18 – Related Party Transactions – Continued

  B. Significant related party transactions:

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

    2020     2019  
Other receivable from:            
EESquare JP1   $     $ 920  
Others6     496        
    Total   $ 496     $ 920  
                 
Inventory prepayment to YuanJiu2   $ 542,130     $  
                 
Loan from WTL3   $ 527,066     $  
                 
Other payable to:                
AATWIN4   $ 146,673     $  
Interest payable to WTL3     7,623        
Others6     296,890       30,971  
Total   $ 451,186     $ 30,971  
                 
Lease
liability – current to WWI 5
  $ 45,086     $ 22,632  
1. Aircom Japan entered into a sublease agreement with EESquare JP for the period between March 5, 2019 and March 4, 2021. Pursuant to the terms of this lease agreement, EESquare JP pays Aircom Japan a rental fee of approximately $920 per month.
   
2. Represents inventory prepayment paid to Yuan Jiu. On May 11, 2020, the Company entered into a product purchase agreement with Yuan Jiu to purchase 100 sets of the AirCinema Cube to be installed on aircraft of commercial airline customers. The total purchase amount under this agreement was $1,807,100 and the Company paid 20% of the total amount, or $361,420, as an initial deposit. On July 15, 2020, the Company signed a second product purchase agreement of $1,807,100 with Yuan Jiu for an additional 100 sets of the AirCinema Cube for the same purchase amount and paid a 10% initial deposit of $180,710 on this agreement as well.
   
 3. The Company has loans from WTL due to operational needs under the Loans (Note 1). The original loan amount was approximately $2.64M (NTD 80,000,000). The loan agreement, with an interest rate of 5% per annum, will terminate on December 31, 2021. The Company has repaid approximately $2.14M (NTD 65,200,000) of the outstanding loan amount as of December 31, 2020. As of March 23, 2021, the Company borrowed approximately additional $1.9M (NTD 52,260,000) from WTL under the loans.
   
4. Represents payable to AATWIN due to consulting agreement on January 1, 2019. The monthly consulting fee is €15,120 (approximately $17,000) and will be expired on December 31, 2021.
   
5. Aircom Hong Kong has a lease agreement with WWI for the warehouse with a monthly rental cost of $450. The lease term was from July 1, 2020 to June 1, 2022. Aircom Hong Kong has another lease agreement with WWI for its office space in Hong Kong with a monthly rental cost of HKD 30,000 (approximately $3,829). The lease term is from June 28, 2020 to June 27, 2022.
   
6. Represents receivable/payable from/to employees as a result of regular operating activities.

F-23

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 18 – Related Party Transactions – Continued

  b. For the years ended December 31, 2020 and 2019:
    Year Ended December 31,  
    2020     2019  
             
Consulting expense to AATWIN   $ 208,057     $  
Rental expense charged by WWI   $ 47,111     $ 45,790  
Rental income charged from EESqaure JP   $ (11,239 )   $ (9,173 )
Interest expense charged by:                
   WTL   $ 17,106     $  
   Dmedia7           1,744  
    Total   $ 17,106     $ 1,744  
7. Aerkomm
had short-term loans from Dmedia with an annual interest rate of 3% for the year ended December 31, 2019. The Company repaid the
short-term loans in full on July 1, 2019.

NOTE 19 – Stock Based Compensation

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

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

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

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

F-24

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 19 – Stock Based Compensation – Continued

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

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

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

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

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

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

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

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

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

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

Valuation and Expense Information

Measurement and recognition of
compensation expense based on estimated fair values is required for all share-based payment awards made to its employees and directors
including employee stock options. The Company recognized compensation expense of $1,697,703 and $2,342,802 for the years ended
December 31, 2020 and 2019, respectively, related to such employee stock options.

Determining Fair Value

Valuation and amortization method

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

F-25

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 19 – Stock Based Compensation – Continued

Expected term

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

Expected dividends

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

Expected volatility

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

Risk-free interest rate

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

Forfeitures

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

The Company used the following
assumptions to estimate the fair value of options granted in 2020 and 2019 under the Plans as follows:

Assumptions      
Expected term     5-10 years  
Expected volatility     45.81% – 72.76 %
Expected dividends     0 %
Risk-free interest rate     0.69% – 2.99 %
Forfeiture rate     0% – 5 %

Aircom 2014 Plan

Activities related to options outstanding for the
years ended December 31, 2020 and 2019 were as follows:

    Number of

Shares
    Weighted

Average

Exercise

Price Per

Share
    Weighted

Average

Fair Value

Per Share
 
Options outstanding at January 1, 2019     932,262     $ 0.4081     $ 0.1282  
Granted                  
Exercised                  
Forfeited/Cancelled                  
Options outstanding at December 31, 2019     932,262       0.4081       0.1282  
Granted                  
Exercised                  
Forfeited/Cancelled                  
Options outstanding at December 31, 2020     932,262       0.4081       0.1282  

F-26

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 19 – Stock Based Compensation – Continued

Activities related to nonvested
options under the 2014 incentive compensation plan for the years ended December 31, 2020 and 2019 were as follows:

    Number of

Shares
    Weighted

Average Fair

Value Per

Share
 
Options unvested at January 1, 2019     85,975     $ 0.4963  
Granted            
Vested     (85,975 )     0.4963  
Forfeited            
Options unvested at December 31, 2019            
Granted            
Vested            
Forfeited            
Options unvested at December 31, 2020            

Information related to stock
options outstanding and exercisable at December 31, 2020, is as follows:

      Options Outstanding     Options Exercisable  
Range of

Exercise Prices
    Shares

Outstanding

at 12/31/2020
    Weighted

Average

Remaining

Contractual

Life (years)
    Weighted

Average

Exercise

Price
    Shares

Exercisable at

12/31/2020
    Weighted

Average

Remaining

Contractual

Life (years)
    Weighted

Average

Exercise

Price
 
$ 0.0067       820,391       4.17     $ 0.0067       820,391       4.17     $ 0.0067  
$ 3.3521       111,871       5.50       3.3521       111,871       5.50       3.3521  
          932,262       4.33       0.4081       932,262       4.33       0.4081  

As of December 31, 2020, there
was no unrecognized stock-based compensation expense. No option was exercised during 2020 and 2019.

Aerkomm 2017 Plan

Activities related to options
outstanding for the years ended December 31, 2020 and 2019 were as follows:

    Number of

Shares
    Weighted

Average

Exercise

Price Per

Share
    Weighted

Average Fair

Value

Per Share
 
Options outstanding at January 1, 2019     283,000     $ 28.3867     $ 17.5668  
Granted     436,400       5.4763       3.8452  
Exercised                  
Forfeited/Cancelled                  
Options outstanding at December 31, 2019     719,400       14.4889       9.2431  
Granted     290,997       8.3880       9.6359  
Exercised                  
Forfeited/Cancelled     (18,000 )     11.8067       7.3457  
Options outstanding at December 31, 2020     992,397       12.7486       9.3927  

F-27

AERKOMM INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

NOTE 19 – Stock Based Compensation – Continued

Activities related to nonvested
options under the 2017 incentive compensation plan for the years ended December 31, 2020 and 2019 were as follows:

    Number of

Shares
    Average

Granted-

Date Fair

Value
 
Options unvested at January 1, 2019     171,411     $ 17.5341  
Granted     436,400       3.8452  
Vested     (267,683 )     7.5460  
Forfeited            
Options unvested at December 31, 2019     340,128       7.8313  
Granted     290,997       9.6359  
Vested     (186,209 )     9.3191  
Forfeited     (6,625 )     4.0779  
Options unvested at December 31, 2020     438,291       8.4541  

Of the shares covered by options
outstanding at the end of 2020, 554,106 are now exercisable; 408,941 will be exercisable in 2021; and 29,350 will be exercisable
in 2022. Information related to stock options outstanding and exercisable at December 31, 2020, is as follows:

      Options Outstanding     Options Exercisable  
Range of


Exercise Prices
    Shares


Outstanding at


12/31/2020
    Weighted


Average


Remaining


Contractual


Life (years)
  Weighted


Average


Exercise


Price
    Shares


Exercisable at


12/31/2020
    Weighted


Average


Remaining


Contractual


Life (years)
  Weighted


Average


Exercise


Price
 
$ 3.96       327,000     8.51   $ 3.9600       245,250     8.51   $ 3.9600  
$ 8.00 – 9.00       296,997     9.91     8.3251       12,000     9.00     9.0000  
$ 11.00 – 14.20       103,400     8.72     11.4426       57,856     8.64     11.7423  
$ 20.50 – 27.50       141,000     6.90     24.3638       115,000     6.80     25.2374  
$ 30.00 – 35.00       124,000     6.50     34.4012       124,000     6.50     34.4012  
          992,397     8.47     12.7486       554,106     7.73     16.1099  

As of December 31, 2020, total
unrecognized stock-based compensation expense related to stock options was $2,754,000, which is expected to be recognized on a
straight-line basis over a weighted average period of approximately 0.49 year. No option was exercised during 2020 and 2019.

NOTE 20 – Commitments

As of December 31, 2020, the
Company’s significant commitments with unrelated parties and contingency are summarized as follows:

 

Airbus
SAS Agreement
:
On November 30, 2018, in furtherance of a memorandum of understanding signed in March 2018, the Company
entered into an agreement with Airbus SAS (“Airbus”), pursuant to which Airbus will develop and certify a complete
retrofit solution allowing the installation of the Company’s “AERKOMM K++” system on Airbus’ single aisle
aircraft family including the Airbus A319/320/321, for both Current Engine Option (CEO) and New Engine Option (NEO) models. Airbus
will also apply for and obtain on the Company’s behalf a Supplemental Type Certificate (STC) from the European Aviation
Safety Agency, or EASA, as well as from the U.S. Federal Aviation Administration or FAA, for the retrofit AERKOMM K++ system.
The EU-China Bilateral Aviation Safety Agreement, or BASA, went into effect on September 3, 2020, giving a boost to the regions’
aviation manufacturers by simplifying the process of gaining product approvals from the European Union Aviation Safety Agency,
or EASA, and the Civil Aviation Administration of China, or CAAC, while also ensuring high safety and environment standards will
continue to be met. Pursuant to the terms of our Airbus agreement, Airbus agreed to provides the Company with the retrofit solution
which will include the Service Bulletin and the material kits including the update of technical and operating manuals pertaining
to the aircraft and provision of aircraft configuration control. The timeframe for the completion and testing of this retrofit
solution, including the certification, is expected to be in the third quarter of 2021
,
although there is no guarantee that the project will be successfully completed in the projected timeframe.

F-28

AERKOMM
INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

December
31, 2020 and 2019

NOTE
20 – Commitments – Continued

  Airbus Interior Service Agreement:
On July 24, 2020, Aerkomm Malta, entered into an agreement with Airbus Interior Services, a wholly-owned subsidiary
of Airbus. This new agreement follows the agreement that Aircom signed with Airbus on November 30, 2018 pursuant to which
Airbus agreed to develop, install and certify the Aerkomm K++ System on a prototype A320 aircraft to EASA and FAA certification
standards. 
   
  Hong Kong
Airlines Agreement
:
On January 30, 2020, Aircom signed an agreement with Hong Kong Airlines Ltd. (HKA) to provide
to Hong Kong Airlines both of its Aerkomm AirCinema and AERKOMM K++ IFEC solutions. Under the terms of this new agreement,
Aircom will provide HKA its Ka-band AERKOMM K++ IFEC system and its AERKOMM AirCinema system. HKA will become the first commercial
airliner launch customer for Aircom.
   
  Republic Engineers
Complaint
:
On October 15, 2018, Aircom Telecom entered into a product purchase agreement, or the October 15th PPA,
with Republic Engineers Maldives Pte. Ltd., a company affiliated with Republic Engineers Pte. Ltd., or Republic Engineers,
a Singapore based, private construction and contracting company. On November 30, 2018, the October 15th PPA was re-executed
with Republic Engineers Pte. Ltd. as the signing party. The Company refers to this new agreement as the November 30th PPA
and, together with the October 15th PPA, the PPA. Under the terms of the PPA, Republic Engineers committed to the purchase
of a minimum of 10 shipsets of the AERKOMM K++ system at an aggregate purchase price of $10 million. Additionally, under the
terms of the PPA, the Executive Director of Republic Engineers, C. A. Raja, agreed to sign an agreement, or the Guarantee,
to guarantee all of the obligations of Republic Engineers under the PPA. Republic Engineers had submitted a purchase order,
or PO, dated October 15, 2018 for the 10 shipsets and was supposed to have made payments to Aircom Telecom against the purchase
order shortly thereafter. To date, Republic Engineers has made no payments against the purchase order and the Company has
not begun any work on the ordered shipsets. On July 7, 2020, Republic Engineers and Mr. Raja filed a complaint against Aerkomm,
Aircom and Aircom Telecom in the Superior Court of the State of California for the County of Almeda, or the Court, seeking
declaratory relief only and no money damages, alleging that the PPA and the PO were not executed or authorized by Republic
Engineers and that the Guarantee was not executed or authorized by Mr. Raja. Republic Engineers and C. A. Raja have requested
from the Court (i) orders that the PPA, the PO and the Guarantee be declared null and void and (ii) the payment of their reasonable
attorney’s fees. On July 29, 2020, Aircom Telecom provided notice to Republic Engineers that the PPA and the PO have
been terminated according to their terms as a result of the non-performance of Republic Engineers and the Failure of Mr. Raja
to provide the Guarantee. Aerkomm denies the allegations in the complaint and believes that the claims filed by Republic Engineers
and Mr. Raja have no merit. Aerkomm has retained special litigation counsel and intends to vigorously defend against the claims.
Aerkomm does not expect that this proceeding will have a material adverse effect on its results of operations or cash flows.
   
  Shenzhen Yihe: On June 20, 2018, the Company entered into the Cooperation Framework Agreement, as supplemented on July 19, 2019, with Shenzhen Yihe Culture Media Co., Ltd., or Yihe, the authorized agent of Guangdong Tengnan Internet, or Tencent Group, pursuant to which Yihe agreed to assist the Company with public relations, advertising, market and brand promotion, as well as with the development of a working application of the Tencent Group WeChat Pay payment solution and WeChat applets applicable for Chinese users and relating to cell phone and WiFi connectivity on airplanes. As compensation under this Yihe agreement, the Company paid Yihe RMB 8 million (approximately US$1.2 million). On October 16, 2020, in accordance with the provisions of the agreement with Yihe, as supplemented, the Company filed an arbitration action with the Shenzhen International Arbitration Court, or the Arbitration Court, claiming that Yihe failed to perform under the terms of the supplemented agreement and seeking a complete refund of its RMB 8 million payment to Yihe. The Company received notice from the Arbitration Court on October 16, 2020 of receipt of its arbitration filing and the requirement to pay the Arbitration Court RMB 190,000 in fees relating to the arbitration and the fees were paid on October 28, 2020. The Company intend to aggressively pursue this matter. As of December 31, 2020, the Company reclassified this prepayment to Other Receivable and provided an allowance for the full amount of $1,155,623 under non-operating loss. 

US trademark: On December
1, 2020, the United States Patent and Trademark Office (the “USPTO”) issued a Final Office Action relating to Aerkomm
Inc. indicating that the Company’s US trademark application (Serial No. 88464588) for the name “AERKOMM,” which
was originally filed with the USPTO on June 7, 2019, was being rejected because of a likelihood of confusion with a similarly sounding
name trademarked at, and in use from, an earlier date. The Company is appealing this USPTO Final Office Action but there can be
no guarantee that the USPTO will find on appeal in favor of the Company. The Company is actively considering changing the name
and may determine to do so prior to any appeal decision by the USPTO.

   
 

The COVID–19
Pandemic
:
In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The
spread of COVID-19 around the world in 2020 has caused significant volatility in U.S. and
international markets. There is significant uncertainty about the breadth and duration of
business disruptions related to COVID-19, as well as its impact on the U.S. and international
economies. The Company is in the process of evaluating if the pandemic will have a material
impact on its operations.

F-29

SIGNATURES

Pursuant to the requirements of section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date: March 24, 2021

AERKOMM INC.
   
  /s/ Louis Giordimaina
  Name: Louis Giordimaina
  Title: Chief Executive Officer
   
  /s/ Y. Tristan Kuo
  Name: Y. Tristan Kuo
  Title: Chief Financial Officer
   

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

Signature   Title   Date
         
/s/ Louis Giordimaina   Chief Executive Officer   March 24, 2021
Louis Giordimaina   (Principal Executive Officer)    
         
/s/ Jeffrey Wun   President, Chief Technology Officer and Director   March 24, 2021
Jeffrey Wun        
         
/s/ Y. Tristan Kuo   Chief Financial Officer   March 24, 2021
Y. Tristan Kuo   (Principal Financial and Accounting Officer)    
         
/s/ James J. Busuttil   Chairman   March 24, 2021
James J. Busuttil        
         
/s/ Raymond Choy   Director   March 24, 2021
Raymond Choy        
         
/s/ Chih-Ming (Albert) Hsu   Director   March 24, 2021
Chih-Ming (Albert) Hsu        
         
/s/ Colin Lim   Director   March 24, 2021
Colin Lim        
         
/s/ Jan-Yung Lin   Director and Secretary   March 24, 2021
Jan-Yung Lin        
           
/s/ Richmond Akumiah   Director   March 24, 2021
Richmond Akumiah        

73

Exhibit 10.64

COMMERCIAL
OFFER

For

Aerkomm

Related
To

A320
Aerkomm K++ Connectivity Solution installation

On

A320
Family Aircraft Type

OFFER
REF:
AIS-AJC-20-043
Rev 02
TABLE
OF CONTENTS
 
1. GENERAL  3
         
1.1 DEFINITIONS
AND GLOSSARY
 4
  1.1.1 Definitions  4
  1.1.2 Glossary  5
         
2. TECHNICAL
SOLUTION
 6
         
2.1. AIRCRAFT
IDENTIFICATION
 6
2.2. WORK
DESCRIPTION
 6
2.3. TECHNICAL
SOLUTION DELIVERABLES
 6
2.4. INCLUSIONS  7
2.5. ASSUMPTIONS  7
  2.5.1 Customer
Inputs
 7
  2.5.2 Certification
Assumptions
 7
  2.5.3 Technical
Assumptions
 7
2.6. EXCLUSIONS
/ LIMITATIONS
 7
  2.6.1 Certification
exclusions
 7
  2.6.2 Technical
Exclusions
 7
2.7. SUPPLIER
FURNISHED EQUIPMENT (“SFE”)
 7
2.8. BUYER
FURNISHED EQUIPMENT (“BFE”)
 7
         
3. BUYER
FURNISHED EQUIPMENT  (BFE) REQUIREMENTS
 8
   
4. PLANNING
AND DELIVERY
8
         
4.1. DELIVERY
SCHEDULE
8
4.2. LEAD
TIME
 8
         
5. FINANCIAL
CONDITIONS
9
         
5.1. GENERAL
PRICING POLICY
 9
5.2. PRICES
PROPOSAL FOR REFERENCE
 9
5.3. ADDITIONAL
WORK
 9
         
6. APPLICABLE
TERMS AND CONDITIONS
 9
         
6.1. APPLICABLE
TERMS
 9
6.2. ANTI-CORRUPTION
CONDITIONS
 9
         
7. VALIDITY
PERIOD
10 
     
8. CONFIDENTIALITY  10
     
9. POINT
OF CONTACTS
 10
         
10. OFFER
ACCEPTANCE
 11
         
APPENDIX
1 : INVOICING SCHEDULE
 12
         
APPENDIX
2 : AGREEMENT FOR NEW FINAL CUSTOMER
 13
         
APPENDIX
3 : ESCALATION FORMULA
 15
         
APPENDIX
4 : DETAILED TECHNICAL SCOPE
 16
         
APPENDIX
5 : AIS’ GENERAL TERMS AND CONDITION OF SUPPLY
 17

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 2 of 21

This
agreement (the “Agreement”), dated 24th of July, 2020 is made by and between

AIRBUS
Interiors Services (AIS)
, a French société par actions simplifiée with a share capital EUR 6,000,000.00
with its registered office at 17, Avenue Didier Daurat, 31700 Blagnac, France, registered with the Commercial and Companies Register
of Toulouse under number 498 418 334.

(Hereinafter
referred to as “Airbus Interiors Services“);

and

Aerkomm
Pacific Limited
, a Malta company created and existing under the laws of Malta, registered under the number C93770, with
its registered office at C3006, Balluta Terrace, St. Julian’s Ramp, St. Julian’s STJ 1062, Malta

(hereinafter
referred to as the “Customer”).

Hereafter,
AIS and the Customer are referred to individually as the “Party” and collectively as the “Parties”.

WHEREAS

(A) Airbus
Interiors Services which is dedicated to creating innovative products and solutions for aircraft interiors – with the primary
goals of improving airline revenues, as well as enhancing the overall passenger experience thanks to our strong experience in
highly customized product definition and supply.
(B) As
a fully-owned subsidiary of the company Airbus S.A.S (“Airbus”), part of the Services by Airbus offer, Airbus Interiors
Services is a new capability – extending current cabin upgrade solutions for Airbus aircraft operators while bringing additional
flexibility and reduced lead times.
(C) the
Customer, is an aircraft global connectivity solution provider, who supplied an AERKOMM® K++ system (the “System”);
(D) both
Parties acknowledge being skilled in the aeronautical profession;
(E) the
Customer selected AIS to provide and to certify as per Airbus Design Organisation Approval (“DOA “) a complete retrofit
solution allowing to install the System on Airbus Single Aisle Aircraft A320 aircraft family to the exclusion of the Airbus A318,
and to apply for and obtain a Supplemental Type Certificate (the “STC”), from the relevant Airworthiness Authorities,
needed to carry out and certify the aircraft’s modification (the “Retrofit Solution”);
(F) the
Customer and AIS have discussed the embodiment of the Retrofit Solution on the Aircraft as this term is defined in Appendix 4
below (the “Technical Scope”);
(G) AIS
is willing to provide the Customer with the Retrofit Solution described in Appendix 4, to the Customer;
(H) the
Parties agree to enter into the Agreement to define the terms and conditions of supply by AIS to the Customer of the Services;

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 3 of 21

NOW
THEREFORE, in consideration of the above, the Parties agree as follow:

1.1 DEFINITIONS
AND GLOSSARY

For
the purpose of the Agreement, capitalized terms used herein and not otherwise expressly defined in this Agreement.

“Additional
Work”
means
any activity which is not part of the Services and subject to an Additional Work Order. The scope and the price of Additional
Work shall be mutually agreed between the Parties.
   
“Aircraft” means
the Airbus Single Aisle Aircraft family A320 for which the Customer has received an authorization to install the Retrofit
Solution from the Aircraft Owner.
   
“Aircraft
Operator”
means
Operator or Airlines or any entity, which operates the Aircraft
   
“Aircraft
Owner”
means
Operator or Airline or any entity, which maintains title ownership of the Aircraft and of Additional Aircraft.
   
“Airworthiness
Authorities”
means
the governmental official authority having the jurisdiction to approve the aircraft design, manufacture and airworthiness.
   
“BFE”
/ “Buyer Furnished Equipment”
means
new and/or used engines or components supplied by the Customer for the execution of the Agreement.
   
“Business
Day(s)”
means
a day, other than a Saturday or Sunday, on which business of the kind contemplated by this Agreement is carried on in France
or, where used in relation to a payment, which is a day on which banks are open for business in France.
   
“Customer’s
Input Data”
means
the document gathering the data necessary for the performance of the Service in the form of § 2.5.1.
   
“EASA” means
European Aviation Safety Agency.
   
«EASA
Part 145
shall
mean annex II of the commission regulation EU N° 1321/2014 and related EASA decision, as amended from time to time.
   
“FAA” means
the United States Federal Aviation Administration.
   
“Flight
Test”
means
a flight with a specific flight profile as agreed by AIS and the Customer for the purpose of certifying that the Aircraft
meets all applicable safety and performance requirements of the Aviation Authority. If requested by the local authority.
   
“ITCM” means
Initial Technical Meeting
   
Known
Aircraft Configuration
means
the configuration of the Aircraft at delivery by Airbus to the first customer and as modified by the successive owners and/or
operators of the Aircraft and/or their respective subcontractors, provided those modifications have been formally notified
to Airbus upon their embodiment.
   
“Certification” Airbus
Design Organization Approval (DOA EASA Part 21J) and our Production Organization Approval (POA EASA Part 21G) on A320 Family,
A330, A340, A350 XWB Family and A380, in order to offer an Airbus solution to our customers, meeting all Airbus standard requirements
   
“Retrofit
Solution”
Means
the Service, Bulletin, STC and Aircraft Kits to cover the installation of the System described in Appendix 4

“SFE”
/ “Supplier Furnished Equipment”
means new components supplied by the Supplier for the execution of the Agreement.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 4 of 21

AAP Additional
Attendant Panel
A/C Aircraft
ACP Area
Call Panel
ADIRS Air
Data Inertial Reference System
ADIRU Air
Data / Inertial Reference Unit
AES Aircraft
Earth Station
AIP Additional
Indication Panel
APM Airplane
Personality Module
AMM Aircraft
Maintenance Manual
ASA Above
Service Altitude
ASM Aircraft
Schematic Manual
BFE Buyer
Furnished Equipment
CAM Cabin
Assignment Module
C/B Circuit
Breaker
CBMU Circuit
Breaker Monitoring Unit
CCOM Cabin
Crew Operating Manual
CVE Chief
Verification Engineer
DOA Design
Organization Approval
DSI Discrete
Input
DSO Discrete
Output
Eth Ethernet
EMI Electro
Magnetic Interference
FAP Flight
Attendant Panel
FCOM Flight
Crew Operating Manual
FMA Fuselage
Mounted Antenna
GES Ground
Earth Station
GNSS Global
Navigation Satellite System
HBCS High
Bandwidth Connectivity System
HoV Head
of Version
HPA High-Power
Amplifier
IF Intermediate
Frequency
IMU Inertial
Measurement Unit
INS Inertial
Navigation System
IPC Illustrated
Part Catalog
IO Input/Output
IRS Inertial
Reference System
IRU Inertial
Reference Unit
KANDU Ka-band
Aircraft Data Network Unit
KRFU Ka-band
Radio Frequency Unit
L/H Left-hand
LRU Line
Replaceable Unit
MCDU Multipurpose
Control & Display Unit
MOA Maintenance
Organization Approval
ModMan Modem
Manager
MPD Maintenance
Planning Document
MRO Maintenance
and Repair Organization
N/A Not
applicable
OAE Outside
Aircraft Equipments
ORT Owner
Requirements Table
P/B Push-Button
PODD Passenger
Owned Device Domain
R/H Right-hand
SB Service
Bulletin
SDCU Smoke
Detection Control Unit
SNMP Simple
Network Management Protocol
STC Supplemental
Type Certificate
SW Software
TRS Technical
Repercussion Sheet
WAP Wireless
Access Point

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 5 of 21

2.1. AIRCRAFT
IDENTIFICATION
Type: A320
family aircraft types (excluding A318)
   
Quantity: Generic
offer – Total price depends on HoV number and Number of aircraft.
   
Operator: TBC
– Will be covered via Appendix 2
   
MSN: TBC
– Will be covered via Appendix 2

This
total price CONFIDENTIAL INFORMATION – REDACTED

This
Agreement consists in developing EASA certified Service Bulletins, and supplying related kits, aiming to install the Aerkomm K++
Connectivity solution on-board the A320 family commercial aircraft types.

On
top of the AIS activities, it includes the needed Airbus S.A.S contributions to support the integration on aircraft, such as,
but not limited to, A791 structural reinforcements and Engineering works.

For
more detailed presentation, please refer to the attached Appendix 4.

This
offer is a generic one, CONFIDENTIAL INFORMATION – REDACTED

2.3. TECHNICAL
SOLUTION DELIVERABLES

Airbus
Interiors Services will provide the Customer with: CONFIDENTIAL INFORMATION – REDACTED

The
Customer will receive Airbus Interiors Services SBs and Airbus SBs.

Service
Bulletins will provide instructions for the modification of the aircraft, using validated Design Office drawings and additional
specific information. CONFIDENTIAL INFORMATION – REDACTED

All
together being the “Technical Solution” as described below and applicable to the modification of the aircraft hereunder
(individually and collectively the “Aircraft”).

The
Technical Solution has been defined by AIRBUS Interiors Services on the basis of the Aircraft configuration:

  At
its first delivery by Airbus and/or
     
  Modified
by the reported incorporation of Airbus SB and/or
     
  The
relevant engineering order and/or
     
  Modified
and documented by any Supplemental Type Certificate declared by the Customer (the resulting Aircraft configuration being the
“Pre-modification Configuration”)

AIRBUS
Interiors Services shall not be held liable for any consequence (including but not limited to delays) in relation with any deviations
from the Pre-modification Configuration or modifications performed by the Customer and/or any other entity on the Aircraft. Any
of such deviations or modifications may result in additional costs for which the Customer shall be solely responsible.

CONFIDENTIAL
INFORMATION – REDACTED

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 6 of 21

CONFIDENTIAL
INFORMATION – REDACTED

The
Customer shall provide for each involved aircraft the following pre-mod data:

CONFIDENTIAL
INFORMATION – REDACTED

The
Customer shall act as the technical leader ensuring architecture and interconnection compliance.

AIS
shall act as an integrator, from a full set of detailed and consolidated input data, coming from the Customer and its sub-suppliers.

2.5.2 Certification
Assumptions

CONFIDENTIAL
INFORMATION – REDACTED

2.5.3 Technical
Assumptions
It
is assumed that the Customer and its sub-system suppliers, has implemented the required Product Quality process and deployed tools
in order to ensure:

CONFIDENTIAL
INFORMATION – REDACTED

2.6. EXCLUSIONS
/ LIMITATIONS
2.6.1 Certification
exclusions

CONFIDENTIAL
INFORMATION – REDACTED

2.6.2 Technical
Exclusions

CONFIDENTIAL
INFORMATION – REDACTED

2.7. SUPPLIER
FURNISHED EQUIPMENT (“SFE”)

SFE
and material kits related to the implementation of the Service Bulletin as defined in the Appendix 3 shall be delivered by AIS
to the customer, including Airbus SB kits.

Kits
will be delivered Ex-works at AIS Colomiers (France)

2.8. BUYER
FURNISHED EQUIPMENT (“BFE”)

BFE,
as defined and listed in the Appendix 4, shall be provided by the Customer to the Final customer. BFEs will not be sent to AIS.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 7 of 21

3. BUYER FURNISHED EQUIPMENT (BFE) REQUIREMENTS

AIS
responsibility will be limited to the definition and the manufacturing of provisions according to Buyer furnished equipment (“BFE”)
suppliers’ technical data sheet.

The
Customer and associated BFE sub-suppliers shall remain fully responsible for administration of the warranty of BFE. BFE shall
be solely under the Customer’s responsibility and the following conditions shall apply:

CONFIDENTIAL
INFORMATION – REDACTED

The
delivery schedule is as follows: CONFIDENTIAL INFORMATION – REDACTED

Delivery
dates will be defined depending on each Final customer via an agreement signed by both Parties as in Appendix 2.

For
information, A/C grounding time: CONFIDENTIAL INFORMATION – REDACTED

Service
Bulletin and STC approval: CONFIDENTIAL INFORMATION – REDACTED

As
an indication, CONFIDENTIAL INFORMATION – REDACTED

Airbus
Interiors Services cannot be held liable for the duration of the aircraft grounding time caused by the lead time of the issuance
of the MRO’s declarations and the NAA’s actions.

Lead
time to gain the Buyer’s airworthiness authorities STC is not considered in the commercial offer. The assistance to the
Buyer for obtaining the Certificate of Airworthiness is not considered in the commercial offer.

To
secure the delivery schedule as proposed in Paragraph 4.1 “Delivery schedule”, the supply of the Technical Solution
will be subject to the following cumulative conditions:

(i) the
delivery to AIS by the Final customer of the Buyer Furnished Equipment (BFE) qualification and certification documents, and parts
if necessary, as per milestone chart agreed during ITCM. The Final customer shall ensure that such BFE complies with AIS specifications
and requirements and is not subject to any Airworthiness Directives;

and

(ii) the
delivery to AIS by the Final customer or by its selected BFE suppliers of the relevant and necessary data related to the cabin
layout and to the BFE products design no later than fifteen (15) working days prior to the relevant milestone meeting (such as
Initial Technical Coordination Meeting (the “ITCM”), Preliminary Design Review (the “PDR”), Critical Design
Review (the “CDR”) unless any other dates have been agreed between the parties;

and

(iii) the
receipt by AIS , within the Validity Date (as defined in paragraph 7), of a purchase order mentioning the reference of the Commercial
Offer and for an amount corresponding to the Purchase Price (the “Order”). Such Order shall be sent to the attention
of [email protected];

and

(iv) the
receipt by AIS , within the Validity Date (as defined in paragraph 7), of the full amount of the first payment that will be requested
by AIS at receipt of the Order in accordance with the conditions of Appendix 1,

Named
individually and/or collectively the “Delivery Conditions”.

In
the event the Customer is late in providing any of the above Delivery Conditions, Airbus shall have the right to modify the delivery
dates set out in the paragraph 4.1 “Delivery schedule”. 

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 8 of 21

5.1. GENERAL
PRICING POLICY

The
prices mentioned hereafter are:


CONFIDENTIAL INFORMATION – REDACTED

5.2. PRICES
PROPOSAL FOR REFERENCE

The
below prices CONFIDENTIAL INFORMATION – REDACTED

Non-Recurring
Prices :

CONFIDENTIAL
INFORMATION – REDACTED

Recurring
Prices :

CONFIDENTIAL
INFORMATION – REDACTED

Any
deviation to the scope of work described in paragraphs 2 to 4 will be treated as an additional work and will be subject to the
Work Change Agreement (WCA) process – process to be presented during ITCM.

6. APPLICABLE TERMS AND CONDITIONS

The
Parties agree that this Commercial Offer and all signed Agreement(s) as defined in Appendix 2 shall be governed by the General
Terms and Conditions of Supply attached hereto as Appendix 5. In the event of any conflict between this Commercial Offer and the
General terms and conditions of supply, this Commercial Offer shall prevail. The general terms and conditions of the Customer
shall be expressly excluded.

By
accepting this Commercial Offer and placing a Purchase Order referencing this Commercial Offer and Agreement as defined in Appendix
2, the Customer will accept to be bound by the terms of the General Terms and Conditions of Supply attached in Appendix 5.

6.2. ANTI-CORRUPTION
CONDITIONS

The
Customer shall comply with all applicable anti-money laundering, anti-bribery, and anti-corruption laws and regulations and shall
not assist or contribute to any act or omission violating such laws and regulations. The Customer represents and warrants that
neither the Customer nor any person acting on its behalf shall: (i) request or receive illicit advantages of any kind whatsoever
for itself or for a third party or accept a promise of such advantage; or (ii) promise or give, directly or through an intermediary,
an illicit advantage of any kind whatsoever to a third-party.

The
Customer shall promptly inform AIS of any act or omission in violation of this Article “Anti-corruption”.

Payments
with respect to the Services and/or the Products shall be made by electronic bank transfer from the Customer’s bank account
which shall be communicated to AIS upon signature of this Commercial Offer or upon signature of an Agreement as defined in Appendix
2 by the Customer whichever occurs earlier. The Customer shall notify in writing any change to the Customer’s bank details
and communicate such updated bank details to Airbus Interiors Services without delay but no later than thirty (30) days prior
the payment for the services performed. In the event that the payment is made from a bank account which differs from the bank
account notified to Airbus Interiors Services by the Customer, AIS shall have the right to reject the payment and/or to terminate
any Purchase Order, Agreement and / or commercial relations for breach of the Customer’s obligations and the Customer shall
indemnify AIS from and against any claim, liability, cost arising out of or in connection with such failure or non-compliance.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 9 of 21

The
terms and conditions of this Commercial Offer are valid until CONFIDENTIAL INFORMATION – REDACTED

Should
no Purchase Order received by AIRBUS Interiors Services as specified above before such Validity Date, all the terms and conditions
of this Commercial Offer shall be considered as null and void and AIRBUS Interiors Services reserves the right to revise such
terms and conditions for any potential new commercial offer made to the attention of the Customer.

This
Commercial Offer is considered to be confidential between the Customer and AIRBUS Interiors Services. The Customer shall not disclose
it or part of it to any third party without the prior written consent of AIRBUS Interiors Services.

For
Airbus Interiors Services :

Lionel
LANDE
Benoit
PAWLOWSKY
Sales Director Senior Program Manager
Mobile: +971 56
409 6265
Mobile: +33 6 45
56 12 95
Mailto:
[email protected]
Mailto:
[email protected]
Headquarters
address :
 
   
AIRBUS Interiors
Services
 
Bât Socrate  
17 Avenue Didier
DAURAT
 
31700 BLAGNAC  
France  
Tel : +33 5 34 60
50 50
 
For
Aerkomm Pacific Ltd :
 
   
Georges
Caldironi
Andre
Giordimaina
Chief
Operating Officer
Project
Manager
Mobile
: +33675078116
Mobile
: +35679073598
Mailto
: [email protected]
Mailto:
[email protected]
Headquarters address :
 
Aerkomm Pacific Limited
C3006, Balluta Terrace,
St. Julian’s Ramp
St. Julian’s STJ 1062
Malta

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 10 of 21

If
this Commercial Offer correctly sets forth the terms and conditions of our mutual understanding regarding the supply of the services
herein described and subject to (i) the issuance of a Purchase Order and (ii) the payment of the related instalment as described
in this Commercial Offer, kindly indicate your binding agreement by signing where indicated below.

Accepted
and agreed,

For
Aerkomm Pacific Ltd
  For
AIRBUS Interiors Services
     
Signature:     Signature:  
     
Name:     Name:  
     
Title:     Title:  
     
Date:     Date:  

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 11 of 21

APPENDIX 1 : INVOICING
SCHEDULE

The
Technical Solution will be invoiced as follows:

CONFIDENTIAL
INFORMATION – REDACTED

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 12 of 21

APPENDIX
2 : AGREEMENT FOR NEW FINAL CUSTOMER

In
order to define the applicable conditions of the supply and delivery of the Services described in agreed Commercial Offer ref
AIS-AJC-20-043 and associated General Terms and Conditions of Supply to any following new Final Customer, Parties shall sign an
“Agreement” which mentions all information and data below :

AIS
reference :

This
agreement amends the agreed and signed Commercial Offer AIS-AJC-20-043, and defines the applicable contractual conditions of the
supply and delivery of the services offered to the new Aircraft Operator defined as follows:

New
Final Customer details:

  Final
Customer Name – ICAO Code :
     
  Aircraft
Quantity :
     
  Involved
Aircraft List :
Aircraft
Type
  Aircraft
MSN
  Aircraft
Registration
         
         
         
  Number
of Head Of Version :

Total
Service Prices:

CONFIDENTIAL
INFORMATION – REDACTED

Delivery
Dates:

  SB
Delivery Date :
     
  Aircraft
#1 delivery date :
     
  Delivery
rate :

Invoicing
Schedule (Based on Appendix 1):

CONFIDENTIAL
INFORMATION – REDACTED

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 13 of 21

If
this Agreement correctly sets forth the terms and conditions of our mutual understanding regarding the supply of the services
herein described and subject to (i) the issuance of a Purchase Order and (ii) the payment of the related instalment as described
in this Appendix, kindly indicate your binding agreement by signing where indicated below.

Accepted
and agreed,

For
Aerkomm Pacific Ltd
  For
AIRBUS Interiors Services
     
Signature:     Signature:  
     
Name:     Name:  
     
Title:     Title:  
     
Date:     Date:  

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 14 of 21

APPENDIX
3 : ESCALATION FORMULA

CONFIDENTIAL
INFORMATION – REDACTED

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 15 of 21

APPENDIX
4 : DETAILED TECHNICAL SCOPE

CONFIDENTIAL
INFORMATION – REDACTED

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 16 of 21

APPENDIX
5 : AIS’ GENERAL TERMS AND CONDITION OF SUPPLY

FOR
PRODUCTS AND SERVICES FOR AIRCRAFT

The
general terms and conditions of supply contained herein (the “Terms”) shall apply to all quotations and sales made by
AIS (the “Seller”) concerning the products and services directly or indirectly supplied by the Seller and relating to
aircraft, including but not limited to spares and tools, supplier equipment, ground support equipment, technical data and documentation,
maintenance planning data support, engineering support including with modification kits, technical assistance and training services
(the “Products” and “Services”).

Any
order placed by the Customer with the Seller and the acceptance of or the payment for any Product or Service shall be deemed to
be the acceptance of the Terms (irrespective of whether the Customer accepts the Terms by a written acknowledgement), provided
that if the Terms conflict with any conditions contained in aircraft or spare parts purchase agreements or any other specific
agreement which may be entered into between the Seller and the Customer, the conditions of such specific agreement shall prevail.
The Terms shall prevail over any written or oral purchase conditions related to or contained in a purchase order or similar document
submitted by the Customer notwithstanding any provision to the contrary in such document.

The
term “Affiliates” shall mean, with respect to Seller, any other person or entity directly or indirectly controlling
or controlled by or under common control with the Seller.

1. ORDERS
– ORDER ACCEPTANCE

The
Products and Services shall be subject to due ordering by the Customer and acceptance by the Seller. Any order for Products and
Services must be sent by the Customer with the Commercial Offer sent and duly signed by the Seller (the “Commercial Offer”),
to the address of the Seller provided in the relevant price list of the Seller. Orders shall include all appropriate information
including but not limited to the description of the Products and/or Services requested, order number, delivery schedule, Seller’s
price if available. Orders for Products and Services shall be placed in writing (letter, telefax, telegram, cable, email).

CONFIDENTIAL
INFORMATION – REDACTED

Unless
otherwise provided in any relevant specifications/guides, the obligation to buy and sell the Products or to perform an accept
the Services mentioned in the order shall become binding upon both parties and therefore a “Binding Order” only after
the issuance by the Seller of an order acceptance in written form.

Any
change made by the Seller after receipt of an order shall be sent for approval to the Customer and shall be binding upon both
parties if the Customer has not issued any written objection within eight (8) working days from the date of the changed order.
If the Customer issues a written objection within the relevant period, the Seller and the Customer shall negotiate in good faith
with a view to reaching mutual agreement. If an agreement is not reached within thirty (30) days after issuance by the Customer
of an objection, the order shall be deemed cancelled provided that if the Seller was required to specifically manufacture or purchase
the Products or start performing the Services, the Customer shall be required to accept such Products and Services and pay such
prices as the Seller, will reasonably determine.

As
soon as the obligations to buy and to supply Products and Services are binding upon the Customer and the Seller, respectively,
any cancellation, modification and/or reduction in the terms and conditions of the Binding Order by the Customer is subject to
the prior written approval of the Seller. Cancellation or reduction by the Customer may result in additional charges to the Customer
and the Seller may retain any advance payment made by the Customer.

All
sales of Products, except technical data, are made FCA – the place specified by the Seller, as this term is defined in the
Incoterms 2010 by the International Chamber of Commerce (the “FCA – Incoterm”). Any enquiry, demand or action relating
to the delivery of such Products must be submitted to the carrier.

Sales
of technical data are made DAP – the place specified by the Customer as this term is defined in the Incoterms 2010 publication
by the International Chamber of Commerce (the “DAP – Incoterm”).

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 17 of 21

Claims
against the Seller for shortages or apparent defects must be received by the Seller within seven (7) days after receipt of the
Products and/or Services by the Customer.

Products
and Services will be delivered to the Customer or performed in accordance with the schedule agreed upon in the Binding Order.
The routine order lead time for a stock item (a spare part normally available) is fifteen (15) days from the date of order acceptance.
If applicable, the Seller shall be entitled to pass on to the Customer extra charges for non AIS proprietary parts. Unless otherwise
agreed in writing and in advance, the seller shall not be responsible for the timely delivery of the Customer’s Buyer Furnished
equipment.

The
Seller will use commercially reasonable efforts to comply with the agreed delivery schedule; however,
delivery dates are approximate and the Seller shall not be liable for any loss of profits, loss of use incidental or consequential
damages, which may result directly or indirectly from any delay in the delivery of products and services. SELLER SHALL NOT BE
LIABLE FOR DELAY IN THE DELIVERY OF PRODUCTS AND SERVICES CAUSED BY LATE DELIVERY OF THE CUSTOMER’S BUYER FURNISHED EQUIPMENT.

Any
delivery or performance by the Seller in intermediate stages shall not be deemed to be a breach of these Terms.

For
technical data and documentation and their revisions, packing and shipment shall be carried out by the quickest transportation
method reasonably available.

The
Seller retains title to the Products delivered to the Customer until receipt by the Seller of full payment of the entire price
including principal and interest, if any.

Notwithstanding
the above, the Customer will bear all risk of loss of the Products from the time they are delivered to the Customer in accordance
with the FCA Incoterm.

All
invoices for Products and Services will be at the price indicated in the relevant price list of the Seller or in the relevant
quotation or order change notice.

All
prices listed are net and FCA, as applicable under Clause 2. All prices listed are exclusive of any taxes or duties that may be
levied in connection with the sale, delivery or use of Products and the performance of Services. Should any taxes, duties, or
other charges be levied, the Customer shall (a) ensure that the deduction or withholding does not exceed the amount legally required;
(b) forthwith pay to the Seller such additional amounts as will result in the receipt by the Seller of the full amount which would
have been received had no such deduction or withholding been required; and (c) pay to the relevant authorities the full amount
required.

Except
in case of significant error or omission by the Seller in price preparation or of a significant revision in manufacturing costs,
prices will remain firm for orders received and accepted by the Seller during the applicable calendar year. Binding Orders will
be invoiced on the basis of the price list in force on the date of the acceptance of the order by the Seller.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 18 of 21

Notwithstanding
the below mentioned, for any maintenance service made directly on the aircraft located in AIS premises, payment shall be made
CONFIDENTIAL INFORMATION – REDACTED

Unless
otherwise expressly stated by the Seller, CONFIDENTIAL INFORMATION – REDACTED

Payment
shall be made in immediately available funds in Euros. In case of payment in any other freely convertible currency, this shall
be subject to a specific agreement between the Seller and the Customer.

If
any payment due to the Seller is not received on the due date, without prejudice to the Seller’s other rights (including
but not limited to the right to claim for payment of any outstanding amount and to cease deliveries to the Customer), the Seller
shall CONFIDENTIAL INFORMATION – REDACTED

CONFIDENTIAL
INFORMATION – REDACTED.

6. WARRANTY,
REMEDY AND LIMITATION OF LIABILITY

Subject
to the limitations and conditions hereinafter provided, the Seller warrants to the Customer that the Seller parts manufactured
by the Seller and bearing a Seller’s part number (the “Seller Parts”) will at the date of delivery be CONFIDENTIAL
INFORMATION – REDACTED

CONFIDENTIAL
INFORMATION – REDACTED

In
the event of a failure falling within the scope of the above warranty, the Seller’s sole and exclusive liability shall
CONFIDENTIAL
INFORMATION – REDACTED

CONFIDENTIAL
INFORMATION – REDACTED

7. INDEMNIFICATION
AND INSURANCE

Indemnities
Relating to Training

“Training”
means all training courses performed in classrooms and any other Services provided to the Customer on the ground, which are not
Training on Aircraft.

The
Seller shall, except in the case of wilful misconduct and gross negligence of the Customer, its directors, officers, agents, subcontractors
and employees, be solely liable for and shall indemnify and hold harmless the Customer, its directors, officers, agents and employees
from and against all liabilities, claims, damages, costs and expenses incident thereto or incident to successfully establishing
the right to indemnification (including legal expenses and attorney fees) in respect of loss of or damage to the Seller’s property
and/or injury to, or death of, the directors, officers, agents or employees of the Seller and/or from and against all liabilities,
claims, damages, costs and expenses incident thereto or incident to successfully establishing the right to indemnification (including
legal expenses and attorney fees) for any loss or damage caused by the Seller to third parties, arising out of, caused by or in
any way connected with any Ground Training Services.

The
Customer shall, except in the case of wilful misconduct and gross negligence of the Seller, be solely liable for and shall indemnify
and hold harmless the Seller from and against all liabilities, claims, damages, costs and expenses (including legal expenses and
attorney fees) in respect of loss of or damage to the Customer’s property and/or injury to or death of the directors, officers,
agents or employees of the Customer and/or from and against all liabilities, claims, damages, costs and expenses incident thereto
or incident to successfully establishing the right to indemnification (including legal expenses and attorney fees) for any loss
or damage caused by the Customer to third parties arising out of, caused by or in any way connected with any Ground Training Services.

Indemnities
Relating to Training on Aircraft

“Training
on Aircraft” means all training courses or training support in connection with any aircraft and provided to the Customer.

The
Customer shall, except in the case of wilful misconduct and gross negligence of the Seller, be solely liable for and shall indemnify
and hold harmless the Seller from and against all liabilities, claims, damages, costs and expenses incident thereto or incident
to successfully establishing the right to indemnification (including legal expenses and attorney fees), for injury to or death
of any person (including any of the Customer’s directors, officers, agents and employees utilising such Training on Aircraft Services,
but not directors, officers, agents and employees of the Seller) and/or for loss of or damage to any property (including the aircraft
in connection with which the Training on Aircraft Services are performed) and/or for loss of use thereof, howsoever arising out
of, caused by or in any way connected with any Training on Aircraft Services.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 19 of 21

The
above indemnity shall not apply with respect to the Seller’s legal liability towards any person other than the Customer,
its directors, officers, agents or employees arising out of an accident caused solely by a product defect in the aircraft delivered
to and accepted by the Customer.

Indemnities
Relating to Seller Representatives Services

“Seller
Representatives Services” means all assignments to the Customer at its premises of specialists on a medium to long-term basis.

The
Customer shall, except in the case of wilful misconduct and gross negligence of the Seller, be solely liable for and shall indemnify
and hold harmless the Seller, from and against all liabilities, claims, damages, costs and expenses incident thereto or incident
to successfully establishing the right to indemnification (including legal expenses and attorney fees) for all injuries to or
death of persons (excepting injuries to, or death, of the Seller’s representatives) and for loss or damage to property and/or
loss of use thereof howsoever arising out of or in connection with any Seller Representatives Services.

The
Seller shall, except in the case of wilful misconduct and gross negligence of the Customer, its directors, officers, agents, subcontractors
and/or employees, be solely liable for and shall indemnify and hold harmless the Customer, its directors, officers, agents and
employees from and against all liabilities, claims, damages, costs and expenses incident thereto or incident to successfully establishing
the right to indemnification (including legal expenses and attorney fees) for all injuries to, or death of, the Seller’s
representatives in connection with any Seller Representatives Services.

Indemnities
Relating to Engineering and Technical Assistance

Engineering
and Technical Assistance ” means all engineering and technical assistance Services provided by the Seller to the Customer.

The
Customer shall, except in the case of wilful misconduct and gross negligence of the Seller, be solely liable for and shall or
shall cause the Operator/Owner to indemnify and hold harmless the Seller, from and against all liabilities, claims, damages, costs
and expenses incident thereto or incident to successfully establishing the right to indemnification (including legal expenses
and attorney fees), for injury to or death of any person (excluding directors, officers, agents and employees of the Seller) and/or
for loss of or damage to any property (including the aircraft on which the Services are performed)and/or for loss of use thereof
arising out of, caused by or in any way connected with any Engineering and Technical Assistance Services.

Insurance

The
Customer shall maintain adequate insurance with respect to the undertakings of the Customer in this Section 7 and shall provide
upon the request of the Seller certificates of insurance from the Customer’s insurance brokers, in English, evidencing such
insurance coverage, in a form acceptable to the Seller. For all training periods on aircraft and on aircraft Services, the Customer
shall cause the Seller to be named as additional insured under the Customer’s Comprehensive Aviation Legal Liability insurance
policies, including War Risks and Allied Perils (such insurance shall include the AVN52E Extended Coverage Endorsement (aviation
liabilities) or any further Endorsement replacing AVN52E as may be available as well as coverage in respect of War and Allied
Perils Third Parties Legal Liabilities insurance) to the extent of the Customer’s undertaking hereunder. With respect to the Customer’s
Hull All Risks and Hull War Risks and Allied Perils insurance, the Customer shall cause the insurers of the Customer’s hull insurance
policies to waive all rights of subrogation against the Seller, to the extent of the Customer’s undertaking hereunder.

Any
applicable deductible shall be borne by the Customer with respect to the above policies. The Customer shall furnish to the Seller,
not less than seven (7) working days prior to the start of any concerned Services, certificates of insurance from the Customer’s
insurance brokers, in English, evidencing the limits of liability cover and period of insurance in a form acceptable to the Seller
and certifying that such policies have been endorsed as follows: (i) the Customer’s policies shall be primary and non-contributory
to any insurance maintained by the Seller; (ii) such insurance shall not become ineffective, cancelled, or coverage decreased
or materially changed except on seven (7) days’ prior written notice thereof to the Seller ; and (iii) under any such cover, all
rights of subrogation against the Seller have been waived to the extent of the Customer’s undertaking hereunder.

Should
the Customer be different from the Operator/Owner, the Customer shall obtain that the Operator/Owner comply with all obligations
specified in connection with the above insurance requirements.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used for any purpose other than for which it is supplied.

Page 20 of 21

“Operator/Owner”
means the operator and/or the owner, as applicable, of the aircraft on which the Service is performed or for installation in,
or with respect to, which a Product is delivered.

For
the purpose of this Section 7, “the Seller” includes the Seller, its Affiliates, each of the sub-contractors and assignees
of each of the foregoing, their respective directors, officers, agents and employees and any of their respective insurers.

8. CONFIDENTIAL
AND PROPRIETARY INFORMATION

All
proprietary information contained in the Products and Services and their respective documentation including but not limited to
patent, copyright, drawings, formulae, data, model, descriptions studies, codes and/or other information relating to the design,
assembly, composition, manufacture, performance, application, or operation of the Products or Services (the “Confidential
Information”) are and will remain the exclusive property of the Seller and/or its Affiliates as the case may be. Those proprietary
rights will also apply to any translation into a language or languages or media that may have been performed or caused to be performed
by the Customer.

Whenever
the Seller authorises the Customer to manufacture certain items, such authorisation given by the Seller shall not be construed
as express or implicit approval of the Customer or such manufactured items. The supply of the Confidential Information will not
be construed as a further right for the Customer to design or manufacture any aircraft or part thereof or spare part.

The
Customer shall not disclose the Confidential Information or any part thereof to any third party nor use the same other than for
its own legitimate purposes.

All
technical data and documentation are supplied to the Customer for the sole use of the Customer who undertakes not to disclose
the contents thereof to any third party without the prior consent of the Seller save as permitted herein or otherwise permitted
pursuant to any government or legal requirement imposed upon the Customer.

9. EXPORT
CONTROL LAWS AND REGULATIONS

Customer
acknowledges that the Products, including but not limited to commodities, technology and software, and/or Services to be provided
by the Seller under these Terms may be subject to export control laws and regulations, and any supply or use of such Products
and/or Services contrary to such laws and regulations is prohibited.

Customer
shall indemnify and hold the Seller harmless against any losses, damages, fees or monetary sanctions imposed as a result of Customer’s
failure to comply with any applicable export control law or regulation.

10.
FORCE MAJEURE

The
Seller shall not be responsible for any delays in delivery or for any failure in the performance of its obligations due to causes
beyond the Seller’s control, including but not limited to: acts of God or the public enemy, natural disasters, fires, floods,
explosions or earthquakes, serious accidents, total or constructive total loss; any law, decision, regulation, directive or other
act of any government or of the EC authorities or of any department, commission, board, bureau, agency, court ; any regulation
or order affecting the supply of Products and/or Services ; war, riots, failure of transportation, strikes or labour troubles
causing cessation, slowdown or interruption of work, delay after due and timely diligence to procure materials, accessories, equipment,
parts and documentation.

11.
ASSIGNMENT

The
Customer shall not assign an order or any interest therein or any rights there under (including the right to receive delivery)
without the prior written consent of the Seller.

12.
SEVERABILITY

In
the event that any provision of the Terms should for any reason be held ineffective, the remainder of these Terms shall remain
in full force and effect.

13.
NO WAIVER

The
failure of either party to enforce at any time any of the Terms or to require performance of the same by the other party shall
in no way be construed to be a present or future waiver of the relevant Terms.

14.
GOVERNING LAW

The
Terms shall be governed by, subject to and construed and the performance thereof shall be determined in accordance with the laws
of France. Any dispute arising out of the Terms shall be submitted to the exclusive jurisdiction of the Tribunal de Commerce in
Toulouse.

<<<<< END OF DOCUMENT >>>>

Confidential and proprietary
document. This document and all information contained herein is the sole property of AIRBUS INTERIORS SERVICES.

No intellectual property rights
are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed
to a third party without the express written consent of AIRBUS INTERIOR SERVICES. This document and its content shall not be used
for any purpose other than for which it is supplied.

 Page
20 of 21

EXHIBIT 31.1

CERTIFICATIONS

I, Louis Giordimaina, certify that:

  1. I have reviewed this annual report on Form 10-K of Aerkomm Inc.;
  2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant’s other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
  a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
  b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
  c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
  5. The registrant’s other certifying officer
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
  b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.  

Date: March 24, 2021

/s/ Louis Giordimaina

 
Louis Giordimaina  
Chief Executive Officer  
(Principal Executive Officer)  

EXHIBIT 31.2

CERTIFICATIONS

I, Y. Tristan Kuo, certify that:

  1. I have reviewed this annual report on Form 10-K of Aerkomm
Inc.;
  2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant’s other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
  a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
  b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
  c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
  5. The registrant’s other certifying officer
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
  b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.  

Date: March 24, 2021

/s/ Y. Tristan Kuo

 
Y. Tristan Kuo  
Chief Financial Officer  
(Principal Financial and Accounting Officer)  

EXHIBIT 32.1

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


AS ADOPTED PURSUANT TO SECTION 906


OF THE SARBANES-OXLEY ACT OF 2002

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

1. The Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2020 (the “Report”), fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934; and

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

IN WITNESS WHEREOF, the
undersigned has executed this statement this 24th day of March, 2021.

  /s/ Louis Giordimaina
  Louis Giordimaina
  Chief Executive Officer
  (Principal Executive Officer)

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

EXHIBIT 32.2

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


AS ADOPTED PURSUANT TO SECTION 906


OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Y. Tristan
Kuo, the Chief Financial Officer of AERKOMM INC. (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2020 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934; and

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

IN WITNESS WHEREOF, the
undersigned has executed this statement this 24th day of March, 2021.

  /s/ Y. Tristan Kuo
  Y. Tristan Kuo
  Chief Executive Officer
  (Principal Financial and Accounting Officer)

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

Finally, as we move on to the next post, may I add that geoFence is your security solution to protect you and your business from foreign state actors.

Leave a Reply

Your email address will not be published. Required fields are marked *