NOTE 4 - Deconsolidation of Subsidiaries

Due to sanctions imposed by China (see Note 1), on January 4, 2025, the Company lost operational control over its subsidiaries, Aerkomm HK and Beijing Yatai, whose operations and assets are located in China. Since that date, the Company has been unable to access the bank accounts or obtain updated financial information from these subsidiaries. Accordingly, Aerkomm HK and Beijing Yatai were deconsolidated from the Company’s unaudited condensed consolidated financial statements, and the related investments in these subsidiaries were written off. Upon deconsolidation, the Company recognized a loss of $234,454.

On March 11, 2026, Aerkomm Taiwan received official approval from the Taiwan Depository & Clearing Corporation and completed its merger with Ejectt. Upon completion of the merger, Ejectt’s shares were cancelled and new shares of Aerkomm Taiwan were issued to the former shareholders of Ejectt. As a result, the Company collectively holds a 48.65% ownership interest in Aerkomm Taiwan, consisting of (i) 30,501,000 shares (26.5%) held directly by the Company and (ii) 25,500,000 shares (22.15%) held by dMobile System Co., Ltd., the real party in interest of whom is the Company, subject to dMobile’s payment to the Company for such shares (see Note 1 and Note 23). Following the completion of the merger, the completion of share exchange procedures, and the issuance of new shares to the shareholders on March 11, 2026, the Company determined that it no longer has a controlling financial interest in Aerkomm Taiwan and, accordingly, lost control of Aerkomm Taiwan on March 11, 2026, which represents the deconsolidation date for accounting purposes. The unaudited condensed consolidated statement of operations for the three months ended March 31, 2026 therefore includes activity related to Aerkomm Taiwan prior to March 11, 2026, the assets and liabilities of Aerkomm Taiwan were no longer included within the unaudited condensed consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with Aerkomm Taiwan are referring to the periods prior to March 11, 2026. Upon deconsolidation, the Company remeasured its retained investment in Aerkomm Taiwan at fair value and recognized a gain on the remeasurement and a loss on deconsolidation, as follows:

Gain on remeasurement of retained investment upon deconsolidation

Loss on deconsolidation

Upon the loss of control of Aerkomm Taiwan on March 11, 2026, the Company derecognized the assets and liabilities of Aerkomm Taiwan and recognized its retained investment in Aerkomm Taiwan at fair value. The resulting difference was recognized as a gain (loss) on deconsolidation. Following the deconsolidation, the Company accounts for its retained investment in Aerkomm Taiwan under the equity method of accounting, as the Company continues to exercise significant influence over Aerkomm Taiwan. The fair value of the retained investment as of March 11, 2026 became the initial carrying amount of the equity method investment. (see Note 8 for details).

The deconsolidation of Aerkomm HK, Beijing Yatai and Aerkomm Taiwan, Inc did not have a material impact on the Company’s overall operations.