AERKOMM INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (kind 10-Q)

Use of phrases



Besides as in any other case indicated by the context and for the needs of this report
solely, references on this report back to "we," "us," "our," or "our firm" are to
the mixed enterprise of Aerkomm Inc., a Nevada company, and its
consolidated subsidiaries, together with Aircom Pacific, Inc., a California
company and wholly-owned subsidiary, or Aircom; Aircom Pacific Ltd., a
Republic of Seychelles firm and wholly-owned subsidiary of Aerkomm; Aerkomm
Pacific Restricted, a Malta firm and wholly owned subsidiary of Aircom Pacific
Ltd.; Aircom Pacific Inc. Restricted, a Hong Kong firm and wholly-owned
subsidiary of Aerkomm; Aircom Japan, Inc., a Japanese firm and wholly-owned
subsidiary of Aerkomm; and Aircom Telecom LLC, a Taiwanese firm and
wholly-owned subsidiary of Aircom, Aircom Taiwan, or Aircom Beijing.



Particular Be aware Relating to Ahead-Trying Statements



Sure data contained on this report consists of forward-looking
statements. The statements herein which aren't historic replicate our present
expectations and projections about our future outcomes, efficiency, liquidity,
monetary situation, prospects and alternatives and are based mostly upon data
presently obtainable to us and our interpretation of what's believed to be
important components affecting the companies, together with many assumptions
relating to future occasions. The next components, amongst others, could have an effect on our
forward-looking statements:



  ? our future monetary and working outcomes;



? our intentions, expectations and convictions relating to anticipated progress,

        market penetration and tendencies in our enterprise;




    ?   the influence and results of the worldwide outbreak of the coronavirus

(COVID-19) pandemic and different pandemics or potential contagious ailments

or the worry of such epidemics, on the worldwide air transport and tourism industries,

        particularly within the Asia Pacific area;




  ? our skill to draw and retain prospects;




  ? our dependence on progress in our prospects' companies;




  ? the consequences of adjusting buyer wants in our market;



? the consequences of market situations on our share value and outcomes of operations;

? our skill to hold out the event, testing and first

        implementation of our product choices;



? our skill to take care of our aggressive benefits over our opponents in

        our trade;



? our skill to adapt our present expertise in a well timed and environment friendly method and

        have our expertise options acquire market acceptance;



? our skill to introduce new product choices and market them in

        a well timed method;



? our skill to acquire telecommunications, aviation and different

        licenses and approvals essential for our operations




  ? our skill to take care of, shield and improve our mental property;




    ?   the consequences of elevated competitors in our market and our skill to
        compete successfully;




    ?   our expectations regarding relationship with prospects and different third
        events;



  ? the attraction and retention of certified staff and key personnel;




    ?   future acquisitions of our investments in complementary corporations or
        applied sciences; and




  ? our skill to adjust to evolving authorized requirements and laws.




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Ahead-looking statements, which contain assumptions and describe our future
plans, methods, and expectations, are usually identifiable by use of the
phrases "could," "ought to," "count on," "anticipate," "estimate," "consider," "intend,"
or "mission" or the adverse of those phrases or different variations on these phrases
or comparable terminology. Precise outcomes, efficiency, liquidity, monetary
situation, prospects and alternatives may differ materially from these
expressed in, or implied by, these forward-looking statements because of
varied dangers, uncertainties and different components, together with the power to boost
ample capital to proceed our operations. Precise occasions or outcomes could
differ materially from these mentioned in forward-looking statements in consequence
of varied components, together with, with out limitation, the dangers outlined below
"Threat Components" included in our Annual Report on Type 10-Okay for the 12 months ended
December 31, 2019, and issues described on this report usually. In mild of
these dangers and uncertainties, there could be no assurance that the
forward-looking statements contained on this report will in actual fact happen.



Potential traders shouldn't place undue reliance on any forward-looking
statements. Besides as expressly required by the federal securities legal guidelines, there
isn't any enterprise to publicly replace or revise any forward-looking statements,
whether or not because of new data, future occasions, modified circumstances or
every other purpose.



The particular discussions herein about our firm embody monetary projections
and future estimates and expectations about our enterprise. The projections,
estimates and expectations are introduced on this report solely as a information about
future prospects and don't symbolize precise quantities or assured occasions. All
the projections and estimates are based mostly solely on our administration's personal
evaluation of our enterprise, the trade during which we work and the financial system at
giant and different operational components, together with capital assets and liquidity,
monetary situation, success of contracts and alternatives. The precise
outcomes could differ considerably from the projections.



Potential traders shouldn’t make an funding resolution based mostly solely on our firm’s projections, estimates or expectations.


Overview



With superior applied sciences and a singular enterprise mannequin, we, as a improvement
stage service supplier of IFEC options, intend to supply airline passengers
with a broadband in-flight expertise that encompasses a variety of service
choices. Such choices embody Wi-Fi, mobile, motion pictures, gaming, reside TV, and
music. We plan to supply these core companies, which we're presently nonetheless
creating, via each built-in in-flight leisure methods, equivalent to
seat-back show, in addition to on passengers' personal private gadgets. We additionally
count on to supply content material administration companies and e-commerce options associated
to our IFEC options.


We plan to associate with airways and provide airline passengers free IFEC companies. We plan to generate income via promoting and in-flight transactions. We consider that is an revolutionary method that units us aside from present market gamers.

To enrich and facilitate our deliberate IFEC service choices, we intend to
construct satellite tv for pc floor stations and associated knowledge facilities inside the geographic
areas the place we count on to be offering IFEC airline companies.



Moreover, we have now developed and begun to market two web connectivity
methods, one for accommodations primarily situated in distant areas and the opposite for
maritime use. Each methods function via a Ku/Ku excessive throughput satellite tv for pc, or
HTS. We additionally count on to develop a distant connectivity system that will probably be
relevant to the highspeed rail trade.



Our whole gross sales had been $ 1,882,000 and $ 0 for the 9 months ended September 30, 2021 and the 12 months ended December 31, 2020.


Enterprise Growth.



We're actively working with potential airline prospects to supply companies
to their passengers using the Airbus licensed AERKOMM Okay++ system. We've
entered into non-binding memoranda of understanding with various airways,
together with Air Malta Airways of Malta and Onur Air of Turkey. There could be no
assurances, nonetheless, that these will result in precise buy agreements.



In view of the growing demand by the airways for a much bigger knowledge throughput,
in the course of the course of discussions between us and Airbus, we have now revised our
technique to focus totally on Ka-band IFEC options for airways and have
suspended work on our twin band (Ka/Ku) satellite tv for pc inflight connectivity
resolution. The Ku-band system will, nonetheless, nonetheless be retained for different product
functions equivalent to distant places and maritime use.



In reference to the Airbus mission, we additionally recognized house owners of ACJ
plane, as potential prospects of our AERKOMM Okay++ system. ACJ prospects,
nonetheless, wouldn't generate sufficient web site visitors to make our free-service
enterprise mannequin viable. To capitalize on this extra market, we plan to promote
our AERKOMM Okay++ system {hardware} for set up on ACJ company jets and
present connectivity via subscription-based plans. This new company jet
market would generate further income and earnings for our firm. We're
presently in superior discussions with various ACJ prospects, a few of whom
have multiple plane of their fleets.



                                       29



Our AERKOMM Okay++ System



Following the course of discussions between us and Airbus and in view of the
growing demand by the airways for a much bigger knowledge throughput, we have now revised
our technique to focus totally on Ka-band satellite tv for pc connectivity options for
aviation prospects and have suspended work on our twin band satellite tv for pc
connectivity resolution. Our AERKOMM Okay++ system will function via Ka/Ka Excessive
Throughput Satellites. The Ku-band system will, nonetheless, nonetheless be retained for
the opposite functions equivalent to distant places and maritime use.



Our AERKOMM Okay++ system will include a low-profile radome (that's, a dome or
comparable construction defending our radio tools) containing two Ka-band
antennas, one for transmitting and the opposite for receiving, and can adjust to
the ARINC 791 customary of Aeronautical Radio, Integrated. Our AERKOMM Okay++
system additionally meets Airbus Design Group Approval.



Ka-band GEO (Geostationary Earth Orbiting) and LEO (Low Earth Orbiting) satellites



Our preliminary AERKOMM Okay++ system will work solely with geostationary earth orbiting,
or GEO, Ka-band satellites. Efficiency of GEO satellites diminishes tremendously in
the areas close to the Earth's poles. Solely low earth orbiting, or LEO, satellites
can gather prime quality knowledge over the North and South poles. We're creating
applied sciences to work with LEO satellites and plans to associate with Airbus to
develop plane set up options. As new GEO and LEO Ka-band satellites
are being usually launched over the subsequent few years, which, we count on, will
allow the supply of worldwide plane protection, we plan to have the
essential expertise able to benefit from this new development in Ka-band
aviation connectivity, though it can't guarantee you that will probably be profitable
on this new space of endeavor.



Gross sales of satellite tv for pc floor methods

Since our acquisition of Aircom Taiwan in December 2017, this wholly owned
subsidiary has been creating ground-based satellite tv for pc connectivity elements
which have an software in distant areas that lack common inexpensive
ground-based communications. In September 2018, Aircom Taiwan consummated its
first sale of such a element, a small cell server terminal, within the quantity of
$1,730,000. This server terminal will probably be utilized by the purchaser within the
building of a satellite-based floor communication system which can act as
a multicast service extension of present networks. The system is designed to
lengthen native present networks, equivalent to ISPs and cell operators, into rural
areas and create higher protection and inexpensive connectivity in these areas.
Aircom Taiwan expects to promote further satellite tv for pc connectivity elements,
methods and companies for use in floor cell models sooner or later, though
there could be no assurances that will probably be profitable in these endeavors.



As well as, in September 2018, Aircom Taiwan offered set up and testing
companies of a satellite-based floor connectivity system to a distant island
resort and obtained service earnings associated to this mission within the quantity of
$15,000. Upon the completion of this method's testing section, and assuming that
the system operates satisfactorily, Aircom Taiwan expects to start to promote this
system to a number of, remotely situated resorts. We will make no assurances at this
time nonetheless, that this method will function satisfactorily, that we are going to be
profitable in introducing this method as a viable product providing or that we
will be capable of generate any further income from the sale and deployment of
this method.



Latest Occasions



Quick Time period Mortgage


In June 2021, we entered right into a mortgage settlement within the quantity of $1,433,177 (NT
$40,000,000) with a non-related social gathering. This mortgage, which carries no curiosity,
initially matured on September 16, 2021. This mortgage is collateralized with
4,000,000 shares of Ejectt shares that we presently personal. As of September 30,
2021, the excellent mortgage stability was $1,436,782 (NT$40,000,000) (unaudited).
As of November 19, 2021, the 2 events signed an modification settlement to increase
the mortgage reimbursement date to December 16, 2021.



                                       30



Taiwan Land Acquisition


On July 10, 2018, our Firm and Aerkomm Taiwan entered into an actual property sale
contract (the "Land Buy Contract") with Tsai Ming-Yin (the "Vendor") with
respect to the acquisition by Aerkomm Taiwan of a parcel of land situated in
Taiwan. The land is anticipated for use to construct a satellite tv for pc floor station and
knowledge middle. Pursuant to the phrases of the Land Buy Contract, and subsequent
amendments on July 30, 2018, September 4, 2018, November 2, 2018 and January 3,
2019, we paid to the vendor in installments refundable prepayments of
$34,474,462 in whole. As of September 30, 2021 and December 31, 2020, the
estimated fee payable for the land buy within the quantity of $1,387,127
was recorded to the price of land and the cost to be paid after the complete
cost of the Land acquisition value no later than December 31, 2021. In accordance
to the amended Land Buy Contract dated on November 10, 2020, the
transaction could also be terminated any time by each the customer and the vendor and
agreed by all events if we're unable to acquire the certified satellite tv for pc license
issued by Taiwan authority earlier than July 31, 2021. As of November 19, 2021, the
license functions are nonetheless in progress and, because of this standing, the
Land Buy Contract is now terminable at will by both social gathering.



Mandate for Sheng Chun Chang



On October 31, 2021, following approval by the Board of Administrators, we issued a
warrant to Mr. Sheng-Chun Chang for the acquisition of as much as 751,879 shares of the
Firm's frequent inventory, exercisable at a value of $2.60 per share, the closing
value of the frequent inventory on the OTC Markets, Inc. QX tier on October 21, 2021.
The issuance of the warrant is (i) in recognition of Mr. Chang's help of the
Firm via his earlier private assure of our $10,000,000 line of
credit score with the Panhsin Financial institution (the "Financial institution") in relation to the non-public placement
providing of $10,000,000 credit score enhanced zero coupon convertible bonds and (ii)
in alternate for Mr. Chang's settlement to resume his assure with the Financial institution for
as long as the assure can be required by the Financial institution. The warrant will vest
20% on issuance. On every anniversary of the difficulty date, starting with December
3, 2021 and ending with December 3, 2025, the warrant will vest with respect to
20% of the variety of shares of our frequent inventory issuable upon conversion of the
principal quantity of the credit score enhanced bonds nonetheless required to be assured by
the Financial institution.



Modifications in Directorships


On October 4, 2021, Dr. James J. Busuttil resigned from his positions as a
member and chairman of our board of administrators and the board of administrators of
Aircom Pacific, Inc. ("Aircom"), an entirely owned subsidiary of ours. Dr. Busutill
additionally resigned from his place as a member of the board of administrators of Aerkomm
Pacific Restricted (Malta), an entirely owned subsidiary of Aircom. On the time of his
resignation, Dr. Busutill was a member of our audit, compensation, nominating
and governance, and regulatory, compliance and authorities affairs committees,
and he was chairman of the nominating and governance committee. Dr. Busuttil's
resignations weren't the results of any disagreement with our government
administration.



On October 7, 2021, our board of administrators appointed Louis Giordimaina as a
member of our board of administrators to fill the place vacated because of Dr.
Busuttil's resignation. Mr. Giordimaina has been our Chief Govt Officer
since March 22, 2020.



Additionally on October 7, 2021, our board of administrators voted to nominate Mr. Jeffrey Wun
as its Chairman and to nominate Mr. Richmond Akumiah as Chairman of the
Nominating and Governance Committee. Each of those positions grew to become open upon
the resignation of Dr. Busuttil.



Restructuring


On October 22, 2021, we and our wholly owned working subsidiary, Aircom,
entered right into a restructuring settlement pursuant to which the entire subsidiaries
of Aircom can be transferred to us whereas we might switch our direct
subsidiary, Aerkomm Taiwan Inc., to Aircom. This settlement was subsequently
amended such that solely three subsidiaries of Aircom, Aircom HK, Aircom Japan and
Aircom Seychelles, had been transferred to us. For a comparability of our
organizational construction earlier than and after this reorganization, see our
group charts in Be aware 1 to our monetary statements on this Type 10-Q.



Influence of the COVID-19 pandemic



The COVID-19 pandemic is having a very adversarial influence on the airline
trade. The outbreak in China and all through the world since December 2019 has
led to a precipitous lower within the variety of every day departures and arrivals for
home and worldwide flights.



Fundamental components affecting monetary efficiency



We consider that our working and enterprise efficiency will probably be pushed by varied
components that have an effect on the business airline trade, together with tendencies affecting
the journey trade and tendencies affecting the shopper bases that we goal, as
effectively as components that have an effect on wi-fi Web service suppliers and common
macroeconomic components. Key components that will have an effect on our future efficiency
embody:



? our skill to enter into and preserve long-term commerce agreements with

airline companions, which will depend on many components, together with the precise or

perceived availability, high quality and value of our companies and product choices

in comparison with these provided by our opponents;

? the extent of adoption of our services by associate airways and

   prospects;




? prices related to implementation and our skill to implement in a well timed method

base, expertise, upgrades and set up applied sciences;

? the related prices and our skill to execute our growth, together with

modification of our community to accommodate satellite tv for pc expertise, improvement

and the implementation of latest satellite tv for pc applied sciences, the provision of

satellite tv for pc capability, the prices of satellite tv for pc capability that we could need to incur

effectively upfront, and compliance with laws;

? the prices related to working a quickly rising enterprise;



                                       31


? the influence and results of the worldwide coronavirus epidemic (COVID-19)

pandemic and different potential pandemics or contagious ailments or worry of such

epidemics, on the worldwide air transport and tourism industries, significantly within the Asia

   Pacific area;




? the variety of plane in service in our markets, together with the consolidation of

the airline trade or adjustments in fleet dimension by a number of of our

   airline companions;




? the financial surroundings and different tendencies that have an effect on each enterprise and leisure

   journey;




? the continued demand for connectivity and the proliferation of Wi-Fi enabled gadgets,

together with smartphones, tablets and laptops;

? our skill to acquire the required licenses in telecommunications, aviation and different

and approvals essential for our operations; and

? adjustments in legal guidelines, laws and interpretations affecting telecommunications

companies and aviation, together with, particularly, adjustments that influence the design

of our tools and our skill to acquire the required certifications for our

   tools.




Rising Development Firm



We qualify as an "rising progress firm" below the Jumpstart Our Enterprise
Startups Act of 2012, or the JOBS Act. Consequently, we're permitted to, and
intend to, depend on exemptions from sure disclosure necessities. For therefore lengthy
as we're an rising progress firm, we won't be required to:



? have an auditor’s report on our inside controls over monetary reporting

        pursuant to Part 404(b) of the Sarbanes-Oxley Act;



? adjust to any necessities which may be adopted by the Public firm

        Accounting Oversight Board relating to obligatory audit agency rotation or a
        complement to the auditor's report offering further details about
        the audit and the monetary statements (i.e., an auditor dialogue and
        evaluation);



? submit sure government compensation issues to the board to shareholders

        votes, equivalent to "say-on-pay" and "say-on-frequency;" and




    ?   disclose sure government compensation associated objects such because the

correlation between compensation and government efficiency and comparisons

        of the CEO's compensation to median worker compensation.




As well as, Part 107 of the JOBS Act additionally gives that an rising progress
firm can benefit from the prolonged transition interval offered in Part
7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for
complying with new or revised accounting requirements.



In different phrases, an rising progress firm can delay the adoption of sure
accounting requirements till these requirements would in any other case apply to non-public
corporations. We've elected to benefit from the advantages of this prolonged
transition interval. Our monetary statements could subsequently not be similar to
these of corporations that adjust to such new or revised accounting requirements.



We'll stay an "rising progress firm" for as much as 5 years, or till the
earliest of (i) the final day of the primary fiscal 12 months during which our whole annual
gross revenues exceed $1 billion, (ii) the date that we change into a "giant
accelerated filer" as outlined in Rule 12b-2 below the Trade Act of 1934, as
amended, or the Trade Act, which might happen if the market worth of our
shares of frequent inventory which are held by non-affiliates exceeds $700 million as
of the final enterprise day of our most lately accomplished second fiscal quarter or
(iii) the date on which we have now issued greater than $1 billion in non-convertible
debt in the course of the previous three 12 months interval.



Latest Market Data


In IATA (Worldwide Air Transport Affiliation) Airways Monetary Monitor dated November – december 2020, revealed on January 21, 2021, the next key factors had been highlighted:


    ?   The ultimate Q3 2020 monetary outcomes present that airways continued to endure
        from very weak journey demand and burnt money, albeit at a slower charge
        in comparison with Q2 with the assistance of price reducing measures and strong cargo
        revenues.



? The primary outcomes bulletins for the fourth quarter of 2020 point out that the airways continued to

burn cash because the pick-up in demand has halted. Nonetheless, the information of the vaccine

undeniable fact that IATA believes airways may break even

        the tip of 2021.



? The worldwide airline inventory value index rose in december 2020 however keep

has fallen behind in broader fairness markets because the virus resurgence weighed on the

        journey demand restoration.




    ?   Trying ahead, the widespread availability of vaccines and

the implementation of profitable testing regimes would be the key to restoration

        in journey demand and airline share costs.



Generally, as a result of the way forward for the COVID-19 pandemic is so unpredictable, the way forward for the airline and air site visitors restoration can also be extraordinarily unpredictable.


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Outcomes of Operations



Comparability of the three accomplished months September 30, 2021 and 2020

The next desk presents the important thing parts of our working outcomes in the course of the three-month durations ended. September 30, 2021 and 2020.


                                                Three Months Ended
                                                   September 30,                      Change
                                               2021             2020              $              %
Gross sales                                      $  1,810,000     $          -     $ 1,810,000         100.0 %
Price of gross sales                                 1,807,100                -       1,807,100         100.0 %
Working bills                            1,676,214        1,556,729         119,485           7.7 %
Loss from operations                         (1,673,314 )     (1,556,729 )      (116,585 )         7.5 %
Internet non-operating earnings (expense)            3,374,616         (813,222 ) 
   4,187,838        (515.0 )%
Loss earlier than earnings taxes                      1,701,302       (2,369,951 )     4,071,253        (171.8 )%
Earnings tax expense                                  (12 )             12             (24 )      (200.0 )%
Internet Loss                                      1,701,314       (2,369,963 )     4,071,277        (171.8 )%
Different complete earnings (loss)               (30,294 )       (367,280 ) 
     336,986         (91.8 )%
Complete complete loss                   $  1,671,020       (2,737,243 )   $ 4,408,263        (161.0 )%




Income. Our whole revenues had been $1,810,000 and $0 for the three-month durations
ended September 30, 2021 and 2020, respectively. The gross sales of $1,810,000 for the
three-month interval ended September 30, 2021 was the gross sales of community {hardware} to
a non-related social gathering. The gross sales for the three-month interval ended September 30,
2020 was $0 as we're nonetheless creating our core enterprise in in-flight
leisure and connectivity and there was no non-recurring sale of apparatus
to associated events in the course of the interval.



Price of gross sales. Our price of gross sales had been $1,807,100 and $0 for the three-month
durations ended September 30, 2021 and 2020, respectively. The price of gross sales of
$1,807,100 for the three-month interval ended September 30, 2021 was because of the
gross sales of community {hardware} to a non-related social gathering. The price of gross sales for the
three-month interval ended September 30, 2020 was $0 as we didn't have any gross sales
throughout each durations.



Working bills. Our working bills consist primarily of compensation and
advantages, skilled advisor charges, analysis and improvement bills, price of
promotion, enterprise improvement, enterprise journey, transportation prices, and
different bills incurred in reference to common operations. Our working
bills elevated by $119,485 to $1,676,214 for the three-month interval ended
September 30, 2021, from $1,556,729 for the three-month interval ended September
30, 2020. Such enhance was primarily because of the enhance in tools leasing,
consulting expense as the results of the warrant re-valuation and payroll and
associated bills of $210,000, $121,107 and $96,311, respectively, which was
offset by the lower in amortization expense, non-cash stock-based
compensation expense and journey expense of $184,559, $121,107 and $94,935,
respectively.



Internet non-operating expense. We had $3,374,049 in web non-operating earnings for the
three-month interval ended September 30, 2021, as in comparison with web non-operating
expense of $813,222 for the three-month interval ended September 30, 2020. Internet
non-operating earnings within the three-month interval ended September 30, 2021 primarily
because of the $3,375,048 enhance of truthful worth from our long-term funding,
which was offset by the opposite financing price from amortizing bond issuing prices.
Internet non-operating earnings within the three-month interval ended September 30, 2020
represents a loss from allowance for different receivable, as defined below the
Authorized Proceedings part beneath, web curiosity expense and unrealized loss from
the transactions of our liquidity contract of $1,155,623, $13,262 and $8,741,
respectively, which was offset by the acquire on overseas alternate translation of
$335,831 and Covid-19 subsidy Aircom Japan obtained from Japanese authorities of
$21,029.


Earnings (loss) earlier than earnings taxes. Our revenue earlier than tax was
$ 1,701,302, an augmentation of $ 4,071,277, for the three-month interval ended
September 30, 2021, a lack of $ 2,369,963 for the three-month interval ended
September 30, 2020, because of the components described above.

Complete complete Earnings (loss). On account of the cumulative impact of the
components described above and a loss in overseas forex translation adjustment of
$30,294, our whole complete earnings elevated by $4,408,263 to $1,671,020
for the three-month interval ended September 30, 2021, from the overall
complete lack of $2,737,243 for the three-month interval ended September
30,
2020.



                                       33


Comparability of the finished 9 months September 30, 2021 and 2020

The next desk presents the important thing parts of our working outcomes in the course of the three-month durations ended. September 30, 2021 and 2020.


                                                 9 Months Ended
                                                   September 30,                      Change
                                               2021             2020              $              %
Gross sales                                      $  1,882,000     $          -     $ 1,882,000         100.0 %
Price of gross sales                                 1,850,978                -       1,850,978         100.0 %
Working bills                            6,843,728        6,199,323         644,405          10.4 %
Loss from operations                         (6,812,706 )     (6,199,323 )      (613,383 )         9.9 %
Internet non-operating earnings (expense)            2,753,250         (655,065 )     3,408,315        (520.3 )%
Loss earlier than earnings taxes                     (4,059,456 )     (6,854,388 )     2,794,932         (40.8 )%
Earnings tax expense                                3,257            3,275             (18 )        (0.5 )%
Internet Loss                                     (4,062,713 )     (6,857,663 )     2,794,950         (40.8 )%
Different complete loss                       (160,708 )       (595,097 )       434,389         (73.0 )%
Complete complete loss                   $ (4,223,421 )     (7,452,760 ) 
   3,229,339         (43.3 )%



Income. Our whole income was $1,882,000 and $0 for the nine-month durations
ended September 30, 2021 and 2020. Our whole income of $1,882,000 for the
nine-month interval ended September 30, 2021 composed of the gross sales of floor
antenna models to certainly one of our associated events and gross sales of community {hardware} to a
non-related social gathering. Our whole income was $0 for the nine-month interval ended
September 30, 2020 as we're nonetheless creating our core enterprise in in-flight
leisure and connectivity and there was no non-recurring sale of apparatus
to associated events in the course of the interval.



Price of gross sales. Our price of gross sales was $1,850,978 and $0 for the nine-month
durations ended September 30, 2021 and 2020. The price of gross sales of $1,850,978 for
the nine-month interval ended September 30, 2021 was for the gross sales of floor
antenna models to certainly one of our associated events and gross sales of community {hardware} to a
non-related social gathering. The price of gross sales for the nine-month interval ended September
30, 2020 was $0 as we didn't have any gross sales in the course of the durations.



Working bills. Our working bills consist primarily of compensation and
advantages, skilled advisor charges, analysis and improvement bills, price of
promotion, enterprise improvement, enterprise journey, transportation prices, and
different bills incurred in reference to common operations. Our working
bills elevated by $644,405 to $6,843,728 for the nine-month interval ended
September 30, 2021, from $6,199,323 for the nine-month interval ended September
30, 2020. Such enhance was primarily because of the enhance in non-cash stock-based
compensation expense, payroll and associated bills, tools leasing and
insurance coverage expense of $824,775, $339,183, $210,000 and $154,693, respectively,
which was offset by the lower in consulting charges as the results of warrant
re-valuation, journey expense and amortization expense of $756,360, $201,707 and
$179,752, respectively. The rise in insurance coverage expense was primarily associated to
the amortization of D&O insurance coverage in the course of the interval.



Internet non-operating expense. We had $2,753,250 in web non-operating earnings for the
nine-month interval ended September 30, 2021, as in comparison with web non-operating
expense of $655,065 for the nine-month interval ended September 30, 2020. Internet
non-operating earnings within the nine-month interval ended September 30, 2021 primarily
because of the $2,731,569 enhance of truthful worth from our long-term funding. Internet
non-operating expense within the nine-month interval ended September 30, 2020
represents a loss from allowance for different receivable, as defined below the
Authorized Proceedings part beneath, web curiosity expense and unrealized loss from
the transactions of our liquidity contract of $1,155,623, $31,690 and $68,912,
respectively, which was offset by a acquire on overseas alternate translation of
$551,591 and Covid-19 subsidy Aircom Japan obtained from Japanese authorities of
$39,513.



Loss earlier than earnings taxes. Our loss earlier than earnings taxes decreased by $2,794,932
to $4,059,456 for the nine-month interval ended September 30, 2021, from a lack of
$6,854,388 for the nine-month interval ended September 30, 2020, because of
the components described above.



Earnings tax expense. Earnings tax expense was $3,257 and $3,275 for the nine-month
interval ended September 30, 2021 and 2020, respectively, primarily as a consequence of California
franchise tax and overseas subsidiary's earnings tax bills.



Complete complete loss. On account of the cumulative impact of the components
described above and a loss in overseas forex translation adjustment of
$160,708, our whole complete loss decreased by $3,229,339 to $4,223,421 for
the nine-month interval ended September 30, 2021, from $7,452,760 for the
nine-month interval ended September 30, 2020.



Liquidity and capital assets

From September 30, 2021, we had money and money equivalents of $ 3,308,135. To this point, we have now funded our operations primarily via money proceeds from financing actions, together with via our finalized public providing, short-term borrowings and capital contributions from our shareholders.


                                       34


The next desk gives detailed details about our web money movement:

                                   Money Circulate



                                                                           9 Months Ended
                                                                             September 30,
                                                                        2021              2020
Internet money used for working actions                              $  (1,415,507 )   $  (1,516,414 )
Internet money used for investing exercise                                      (63,010 )        (213,074 )
Internet money offered by financing exercise                                 1,152,769         1,463,290
Internet enhance (lower) in money and money equivalents                     (325,748 )        (266,198
Money at starting of 12 months                                               3,794,591           976,829
Overseas forex translation impact on money                              (160,708 )        (595,097
Money at finish of the durations                                          $   3,308,135     $     115,534




Working Actions



Internet money used for working actions was $1,415,507 for the 9 months ended
September 30, 2021, as in comparison with $1,516,414 for the 9 months ended
September 30, 2020. Along with the online lack of $4,062,713, the rise in
web money used for working actions in the course of the nine-month interval ended
September 30, 2021 was primarily as a consequence of lower in accounts payable and enhance
of pay as you go bills and different present property of $309,712 and $46,248,
respectively, offset by the rise in accrued bills and different present
liabilities, prepayment from buyer and working lease legal responsibility of
$1,903,246, $1,231,200 and $43,464, respectively, and reduce in stock of
$50,332. Along with the online lack of $6,857,663, the rise in web money
used for working actions in the course of the nine-month interval ended September 30,
2020 was primarily as a consequence of enhance in stock of $1,992,153, which was offset by
the lower in accounts receivable and pay as you go bills and different present
property of $451,130 and 1,292,279, respectively, and enhance in accounts
payable, accrued expense and different present liabilities and working lease
legal responsibility of $961,610, $2,143,258 and $179,372, respectively.



Investing Actions


Internet money used for investing actions for the 9 months ended September 30,
2021 was $62,298 as in comparison with $213,074 for the 9 months ended September 30,
2020. The online money used for investing actions for the 9 months ended
September 30, 2021 was primarily because of the buy of property and tools of
$85,628, which was offset by the proceeds from disposal of property and
tools of $26,063. The online money used for investing actions for the 9
months ended September 30, 2020 was primarily for the acquisition of buying and selling
securities of $184,150 and the acquisition of property and tools of $28,924.



Financing Actions



Internet money offered by financing actions for the 9 months ended September
30, 2021 and 2020 was $1,152,769 and $1,463,290, respectively. Internet money offered
by financing actions for the 9 months ended September 30, 2021 was primarily
attributable to the proceeds from short-term loans of $1,169,561. Internet money
offered by financing actions for the 9 months ended September 30, 2020
was primarily attributable to web proceeds from the borrowing of a short-term financial institution
mortgage below the PPP program within the quantity of $163,200 and short-term loans of
$1,314,162.



On Might 9, 2019, two of our present shareholders, whom we discuss with because the
Lenders, every dedicated to supply us with a $10 million bridge mortgage, or
collectively, the Loans, for an mixture principal quantity of $20 million, to bridge
our money movement wants previous to our acquiring a mortgage mortgage to be secured by a
parcel of our Taiwan land parcel which we have now lately bought. The Taiwan
land parcel consists of roughly 6.36 acres of undeveloped land situated at
the Taishui Grottoes within the Xinyi District of Keelung Metropolis, Taiwan. Aerkomm
Taiwan contracted to buy the Taiwan land parcel for NT$1,056,297,507, or
US$34,474,462, and as of July 3, 2019 we accomplished cost of the acquisition value
for the Taiwan land parcel in full. We at the moment are ready for title to the Taiwan
land parcel to be transferred to us pending the completion of a neighborhood
governmental land workplace re-titling course of. The Loans will probably be secured by the
Taiwan land parcel with the preliminary deadline of the Loans to be a date,
designated by us, inside 30 days following the date that the title for the
Taiwan land parcel is absolutely transferred to and vested in our subsidiary, Aerkomm
Taiwan. The Loans will bear curiosity, non-compounding, on the Financial institution of America
Prime Charge plus 1%, yearly, calculated on the precise variety of days the Loans
are excellent and based mostly on a 365-day 12 months and will probably be due and payable upon the
earlier of (1) the date of our acquiring a mortgage mortgage secured by the Taiwan
land parcel with a principal quantity of not lower than $20 million and (2) one
12 months following the preliminary deadline of the Loans. The Lenders additionally agreed to
an earlier closing of as much as 25% of the principal quantities of the Loans upon our
request previous to the time that title to the Taiwan land parcel is transferred to
our subsidiary, Aerkomm Taiwan, offered that we offer satisfactory proof to
the Lenders that the proceeds of such an earlier closing can be utilized to pay
our distributors. We, after all, can't present any assurances that we are going to have the option
to acquire a mortgage on the Taiwan land parcel as soon as the acquisition is
accomplished. As of the date of this annual report, we have now not drawn down any
portion of the Loans.



                                       35



On July 10, 2018, along with our settlement to amass the Taiwan land
parcel, we entered right into a binding letter of dedication with Metro Funding
Group Restricted, or MIGL, pursuant to which we agreed to pay MIGL an agent
fee of 4 p.c (4%) of the complete buy value of the Taiwan land
parcel, equal to roughly US$1,387,127, for MIGL's companies offered
with respect to the acquisition. Beneath the phrases of the preliminary with MIGL, we
agreed to pay this fee no later than 90 days following cost in stuffed with
the Taiwan land parcel buy value. On Might 9, 2019, we amended the binding
letter of dedication with MIGL to increase the cost to be paid after the complete
cost of the Land acquisition value till no later than December 31, 2020. If
there's a delay in cost, we will be chargeable for punitive liquidated
damages on the charge of 1 tenth of 1 p.c (0.1%) of the fee per day
of delay with a most cap to those damages of 5 p.c (5%). Beneath
relevant Taiwanese legislation, the fee was due and payable upon signing of the
letter of dedication even when the contract is cancelled for any purpose and the
acquisition isn't accomplished. We've recorded the estimated fee to the
price of land and will probably be paying the quantity no later than December 31, 2021.



On December 3, 2020, the Firm closed a personal placement providing (the "Bond
Providing") consisting of US$10,000,000 in mixture principal quantity of its
Credit score Enhanced Zero Coupon Convertible Bond due 2025 (the "Credit score Enhanced
Bonds") and US$200,000 in mixture principal quantity of its 7.5% convertible
bonds due 2025 (the "Coupon Bonds," and along with the Credited Enhanced
Bonds, the "Bonds").



Funds of principal, premium, curiosity in respect of the Credit score Enhanced Bonds
are protected by a financial institution assure denominated in U.S. {dollars} and issued by Financial institution
of Panhsin Co., Ltd., based mostly in Taiwan. Except beforehand redeemed, transformed or
repurchased and canceled, the Credit score Enhanced Bonds will probably be redeemed on December
2, 2025 at 105.11% of their principal quantity and the Coupon Bonds will probably be
redeemed on December 2, 2025 at 100% of their principal quantity plus any accrued
and unpaid curiosity. The Coupon Bonds will bear curiosity from and together with
December 2, 2020 on the charge of seven.5% each year. Curiosity on the Coupon Bonds is
payable semi-annually in arrears on June 1 and December 1 annually, commencing
on June 1, 2021. Except beforehand redeemed, transformed or repurchased and
cancelled, the Bonds could also be transformed at any time on or after December 3, 2020
as much as November 20, 2025 into shares of Widespread Inventory of the Firm with a par
worth US$0.001 every (such shares of Widespread Inventory, the "Conversion Shares"). The
preliminary conversion value for the Bonds is US$13.30 per Conversion Share and is
topic to adjustment in specified circumstances. Please discuss with our Present
Report on Type 8-Okay filed with SEC on December 4, 2020.



On December 31, 2020, we entered into an underwriting settlement (the
"Underwriting Settlement") with Make investments Securities SA ("Make investments Securities") in
reference to our public providing (the "2020/2021 Providing"), issuance and
sale of as much as 1,951,219 shares of our frequent inventory on a best-efforts foundation at
the general public providing value of €20.50 (roughly $25.07) per share, much less
underwriting reductions, for as much as a most of €40 million (roughly $48.9
million). On December 31, 2020, we accomplished our first closing of the 2020/2021
Providing and issued an mixture of 96,160 shares of our frequent inventory for gross
proceeds of €1.97 million (roughly $2.41 million), or web proceeds of €1.4
million (roughly $1.7 million). The Underwriting Settlement with Make investments
Securities has expired and we're presently exploring whether or not to try to
lengthen the Underwriting Settlement with Make investments Securities or interact a unique
funding banker to help us in continuing with the 2020/2021 Providing. We will
present no assurances, nonetheless, that we are going to achieve success in these efforts.



We've not generated important revenues, excluding non-recurring revenues
from associates within the third quarter of fiscal 2021, and we are going to incur
further bills because of being a public reporting firm. For the
nine-month interval ended September 30, 2021, we incurred a complete lack of
$4,223,421 and had a adverse working capital of $4,561,039 as of September 30,
2021. At present, we have now taken measures, as mentioned above, that administration
believes will enhance our monetary place by financing actions, together with
via our ongoing public providing, short-term and long-term borrowings and
fund raisings. Nonetheless, there isn't any assurance that we are going to achieve success in
attaining our monetary and enterprise targets. There are a selection of things
that would doubtlessly come up that would end in shortfalls in attaining the
targets in our marketing strategy, equivalent to common, worldwide financial situations,
the aggressive pricing within the connectivity trade, the continued influence of the
COVID-19 pandemic, our working outcomes persevering with to deteriorate and our financial institution
and shareholders not with the ability to present continued monetary help.



Capital Expenditures



Our operations proceed to require important capital expenditures primarily
for expertise improvement, tools and capability growth. Capital
expenditures are related to the provision of airborne tools to our
potential airline companions, which correlates on to the roll out and/or
improve of service to our potential airline companions' fleets. Capital spending
can also be related to the growth of our community, floor stations and knowledge
facilities and consists of design, allowing, community tools and set up
prices.



Capital expenditure for the 9 months ended September 30, 2021 and 2020 had been
$ 62,298 and $ 213,074, respectively.



We anticipate a rise in capital spending in our fiscal 12 months ended December
31, 2021 and estimate that capital expenditures will vary from $10 million to
$50 million as we start airborne tools installations and proceed to execute
our growth technique. We count on to boost these funds via our deliberate
public providing, the registration assertion for which is presently below evaluate
by the SEC, and/or via different sources of fairness or debt financings. There can
be no assurance, nonetheless, that our deliberate public providing will proceed
efficiently, if in any respect, or that we can increase the required funds
via different means on acceptable phrases to us, if in any respect.



                                       36





Inflation



Inflation and altering costs haven't had a fabric impact on our enterprise and
we don't count on that inflation or altering costs will materially have an effect on our
enterprise within the foreseeable future. Nonetheless, our administration will carefully monitor
value adjustments in our trade and frequently preserve efficient price management in
operations.


Off-balance sheet provisions



We shouldn't have any off stability sheet preparations which have or are moderately
more likely to have a present or future impact on our monetary situation, adjustments in
monetary situation, revenues or bills, outcomes of operations, liquidity or
capital expenditures or capital assets that's materials to an investor in our
securities.



Seasonality


Our outcomes of operations and our working money flows haven’t traditionally been topic to important differences due to the season. This sample could change, nonetheless, as a consequence of new market alternatives or new product launches.


Vital Accounting Insurance policies



The preparation of economic statements in conformity with accounting rules
usually accepted in america requires our administration to make
assumptions, estimates and judgments that have an effect on the quantities reported, together with
the notes thereto, and associated disclosures of commitments and contingencies, if
any. We've recognized sure accounting insurance policies which are important to the
preparation of our monetary statements. These accounting insurance policies are essential
for an understanding of our monetary situation and outcomes of operation.
Vital accounting insurance policies are these which are most essential to the portrayal
of our monetary situation and outcomes of operations and require administration's
tough, subjective, or complicated judgment, typically because of the necessity to
make estimates in regards to the impact of issues which are inherently unsure and will
change in subsequent durations. Sure accounting estimates are significantly
delicate due to their significance to monetary statements and due to
the likelihood that future occasions affecting the estimate could differ
considerably from administration's present judgments. We consider the next
essential accounting insurance policies contain essentially the most important estimates and
judgments used within the preparation of our monetary statements:



Concentrations of Credit score Threat. Monetary devices that doubtlessly topic to
important concentrations of credit score threat consist primarily of money in banks. As
of September 30, 2021 and December 31, 2020, the overall stability of money in financial institution
was absolutely insured by the Federal Deposit Insurance coverage Company (FDIC) for the
Firm was roughly $0 and $0, respectively. The stability of money deposited
in overseas monetary establishments exceeding the quantity insured by native
insurance coverage is roughly $3,111,000 and $3,514,000 as of September 30, 2021
and December 31, 2020, respectively. We carry out ongoing credit score analysis of its
prospects and requires no collateral. An allowance for uncertain accounts is
offered based mostly on a evaluate of the collectability of accounts receivable. We
decide the quantity of allowance for uncertain accounts by analyzing its
historic assortment expertise and present tendencies within the credit score high quality of its
prospects in addition to its inside credit score insurance policies. Precise credit score losses could
differ from administration's estimates.



Quick-term funding. Our short-term funding securities are categorized as
buying and selling safety. The securities are acknowledged at truthful worth inside present property
on the Firm's condensed stability sheets. Honest worth is calculated based mostly on
publicly obtainable market data or different estimates decided by the
administration. Modifications in truthful worth are recorded in present earnings.



Inventories. Inventories are recorded on the decrease of weighted-average price or
web realizable worth. We assess the influence of adjusting expertise on our
stock readily available and writes off inventories which are thought of out of date.
Estimated losses on scrap and slow-moving objects are acknowledged within the allowance
for losses.



Lengthy-term Funding.  Holdings of marketable fairness securities with lower than
20% of possession of the investee. Marketable fairness securities embody fairness
securities that are initially acknowledged at truthful worth plus transaction prices
which are immediately attributable to the acquisition. Modifications in truthful worth from
subsequent remeasurement are reported below non-operating earnings in our
assertion of earnings. The price of the securities bought is predicated on the weighted
common price methodology. Inventory dividends from the funding are included to
recalculate the fee foundation of the funding based mostly on the overall variety of
shares. Holdings of greater than 20% of non-marketable fairness securities are
accounted for utilizing the fairness methodology. If there's lower in degree of
possession or diploma of affect, the funding could now not qualify for
the
fairness methodology.



 Holdings of greater than 20% of non-marketable fairness securities are accounted for
utilizing the fairness methodology. If there's lower in degree of possession or diploma of
affect, the funding could now not qualify for the fairness methodology.



Investments are thought of to be impaired when a decline in truthful worth is judged
to be aside from short-term. If the price of an funding exceeds its truthful worth,
the Firm evaluates, amongst different components, common market situations, the
length and extent to which the truthful worth is lower than price, in addition to its
intent and skill to carry the funding, for recording an impairment loss.



                                       37



Property and Tools. Property and tools are acknowledged at price much less
accrued depreciation. When worth impairment is decided, the associated
property are acknowledged on the decrease of truthful worth or ebook worth. Vital
additions, renewals and betterments are capitalized. Upkeep and repairs are
expensed as incurred. Depreciation is computed through the use of the straight-line and
double declining strategies over the next estimated service lives: floor
station tools - 5 years, pc tools - 3 to five years, furnishings and
fixtures - 5 years, satellite tv for pc tools - 5 years, automobiles - 5 years and lease
enchancment - 5 years. Upon sale or disposal of property and tools, the
associated price and accrued depreciation are faraway from the corresponding
accounts, with any acquire or loss credited or charged to earnings within the interval of
sale or disposal. We evaluate the carrying quantity of property and tools for
impairment when occasions or adjustments in circumstances point out that the carrying
quantity of such property will not be recoverable. We decided that there was no
impairment loss for the nine-month durations ended September 30, 2021 and 2020.



Proper-of-Use Asset and Lease Legal responsibility. In February 2016, the FASB issued ASU
No. 2016-02, "Leases" (Matter 842) ("ASU 2016-02"), which modifies lease
accounting for each lessees and lessors to extend transparency and
comparability by recognizing lease property and lease liabilities by lessees for
these leases categorized as working leases and finance leases below earlier
accounting requirements and disclosing key details about leasing preparations.
A lessee ought to acknowledge the lease legal responsibility to make lease funds and the
right-of-use asset representing its proper to make use of the underlying asset for the
lease time period. For working leases and finance leases, a right-of-use asset and a
lease legal responsibility are initially measured at present worth of the lease
funds by low cost charges. The Firm's lease low cost charges are usually
based mostly on its incremental borrowing charge, because the low cost charges implicit within the
Firm's leases is quickly determinable. Working leases are included in
working lease right-of-use property and lease liabilities within the consolidated
stability sheets. Finance leases are included in property and tools and lease
legal responsibility in our consolidated stability sheets. Lease expense for working
expense funds is acknowledged on a straight-line foundation over the lease time period.
Curiosity and amortization bills are acknowledged for finance leases on a
straight-line foundation over the lease time period. For the leases with a time period of twelve
months or much less, a lessee is permitted to make an accounting coverage election by
class of underlying asset to not acknowledge lease property and lease liabilities.
If a lessee makes this election, it ought to acknowledge lease expense for such
leases usually on a straight-line foundation over the lease time period. We adopted ASU
2016-02 efficient January 1, 2019.



Goodwill and Bought Intangible Belongings. Goodwill represents the quantity by
which the overall buy value paid exceeded the estimated truthful worth of web
property acquired from acquisition of subsidiaries. We take a look at goodwill for
impairment on an annual foundation, or extra typically if occasions or circumstances point out
that there could also be impairment. Bought intangible property with finite life are
amortized on the straight-line foundation over the estimated helpful lives of
respective property. Bought intangible property with indefinite life are
evaluated for impairment when occasions or adjustments in circumstances point out that
the carrying quantity of such property will not be recoverable. Bought intangible
asset consists of satellite tv for pc system software program and is amortized over 10 years.



Honest Worth of Monetary Devices. We make the most of the three-level valuation
hierarchy for the popularity and disclosure of truthful worth measurements. The
categorization of property and liabilities inside this hierarchy is predicated upon the
lowest degree of enter that's important to the measurement of truthful worth. The
three ranges of the hierarchy encompass the next:



Stage 1 - Inputs to the valuation methodology are unadjusted quoted costs in
energetic markets for equivalent property or liabilities that we have now the power to
entry on the measurement date.



Stage 2 - Inputs to the valuation methodology are quoted costs for comparable
property and liabilities in energetic markets, quoted costs in markets that aren't
energetic or inputs which are observable for the asset or legal responsibility, both immediately
or not directly, for considerably the complete time period of the instrument.



Stage 3 - Inputs to the valuation methodology are unobservable inputs based mostly upon
administration's finest estimate of inputs market members may use in pricing
the asset or legal responsibility on the measurement date, together with assumptions.



The carrying quantities of the Firm's money and restricted money, accounts
payable, short-term mortgage and different payable approximated their truthful worth as a consequence of
the short-term nature of those monetary devices. The Firm's short-term
funding and long-term funding are categorized inside Stage 1 of the truthful
worth hierarchy on September 30, 2021. The Firm's long-term bonds payable,
long-term mortgage and lease payable approximated the carrying quantity as its
rate of interest is taken into account as approximate to the present charge for comparable
loans and leases, respectively. There have been no excellent spinoff monetary
devices as of September 30, 2021.



Income Recognition. We acknowledge income when efficiency obligations
recognized below the phrases of contracts with our prospects are glad, which
usually happens upon the switch of management in accordance with the contractual
phrases and situations of the sale. Our income for the 9 months ended
September 30, 2021 composed of the gross sales of floor antenna models to certainly one of our
associated events and gross sales of community {hardware} to a non-related social gathering. The
majority of our income is acknowledged at a time limit when product is shipped
or service is offered to the shopper. Income is measured as the quantity of
consideration we count on to obtain in alternate for transferring items, which
consists of estimates for variable consideration. We adopted the provisions of ASU
2014-09 Income from Contract with Clients (Matter 606) and the principal
versus agent steerage inside the new income customary. As such, the Firm
identifies a contract with a buyer, identifies the efficiency obligations in
the contract, determines the transaction value, allocates the transaction value
to every efficiency obligation within the contract and acknowledges income when (or
as) we fulfill a efficiency obligation.



Earnings Taxes. Earnings taxes are accounted for below the asset and legal responsibility
methodology. Deferred tax property and liabilities are computed for variations between
the monetary assertion and tax bases of property and liabilities that may end result
in taxable or deductible quantities sooner or later based mostly on enacted tax legal guidelines and
charges relevant to the durations during which the variations are anticipated to have an effect on
taxable earnings. Valuation allowances are established when essential to cut back
deferred tax property to the quantity anticipated to be realized. Earnings tax expense is
the tax payable or refundable for the interval plus or minus the change in the course of the
interval in deferred tax property and liabilities. Changes to prior interval's
earnings tax liabilities are added to or deducted from the present interval's tax
provision.



                                       38



The Firm follows FASB steerage on unsure tax positions and has analyzed
its submitting positions in all of the federal, state and overseas jurisdictions the place
it's required to file earnings tax returns, in addition to all open tax years in
these jurisdictions. The Firm recordsdata earnings tax returns within the US federal,
state and overseas jurisdictions the place it conducts enterprise. It isn't topic to
earnings tax examinations by US federal, state and native tax authorities for years
earlier than 2017. The Firm believes that its earnings tax submitting positions and
deductions will probably be sustained on audit and doesn't anticipate any changes
that may end in a fabric adversarial impact on its consolidated monetary
place, outcomes of operations, or money flows. Due to this fact, no reserves for
unsure tax positions have been recorded. The Firm doesn't count on its
unrecognized tax advantages to vary considerably over the subsequent twelve months.



The Firm's coverage for recording curiosity and penalties related to any
unsure tax positions is to report such objects as a element of earnings earlier than
taxes. Penalties and curiosity paid or obtained, if any, are recorded as a part of
different working bills within the consolidated assertion of operations.



Overseas Forex Transactions. Overseas forex transactions are recorded in
U.S. {dollars} on the alternate charges in impact when the transactions happen.
Trade beneficial properties or losses derived from overseas forex transactions or financial
property and liabilities denominated in foreign exchange are acknowledged in
present earnings. On the finish of every interval, property and liabilities denominated in
foreign exchange are revalued on the prevailing alternate charges with the
ensuing beneficial properties or losses acknowledged in earnings for the interval.



Translation Changes. If a overseas subsidiary's useful forex is the
native forex, translation changes will end result from the method of
translating the subsidiary's monetary statements into the reporting forex of
our firm. Such changes are accrued and reported below different
complete earnings (loss) as a separate element of stockholders' fairness.



Earnings (Loss) Per Share. Fundamental earnings (loss) per share is computed by
dividing earnings obtainable to frequent shareholders by the weighted common quantity
of shares of frequent inventory excellent in the course of the interval. Diluted earnings per
share is computed by dividing earnings obtainable to frequent shareholders by the
weighted-average variety of shares of frequent excellent in the course of the interval
elevated to incorporate the variety of further shares of frequent inventory that might
have been excellent if the doubtless dilutive securities had been issued.
Doubtlessly dilutive securities embody inventory warrants and excellent inventory
choices, shares to be bought by staff below the Firm's worker inventory
buy plan.


Subsequent Occasions. The Firm has evaluated occasions and transactions after the
reported interval as much as November 19, 2021, the date on which these consolidated
monetary statements had been obtainable to be issued. All subsequent occasions
requiring recognition as of September 30, 2021 have been included in these
consolidated monetary statements.



Latest accounting positions

Simplified debt accounting with conversion and different choices.

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470,
Debt with Conversion and Different Choices and ASC 815, Contracts in Fairness's Personal
Entity. The steerage simplifies the present steerage for convertible devices
and the derivatives scope exception for contracts in an entity's personal fairness.
Moreover, the amendments have an effect on the diluted EPS calculation for devices
which may be settled in money or shares and for convertible devices. This ASU
will probably be efficient starting within the first quarter of the Firm's fiscal 12 months
2022. Early adoption is permitted. The amendments on this replace should be utilized
on both full retrospective foundation or modified retrospective foundation via a
cumulative-effect adjustment to retained earnings/(deficit) within the interval of
adoption. The Firm is presently evaluating the influence of ASU 2020-06 on its
consolidated monetary statements and associated disclosures, in addition to the timing
of adoption.


Simplify the accounting for earnings taxes

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC
740, Earnings Taxes. This steerage removes sure exceptions associated to the
method for intra-period tax allocation, the methodology for calculating earnings
taxes in an interim interval, and the popularity of deferred tax liabilities for
outdoors foundation variations. This steerage additionally clarifies and simplifies different
areas of ASC 740. This ASU will probably be efficient starting within the first quarter of
the Firm's fiscal 12 months 2021. Early adoption is permitted. Sure amendments
on this replace should be utilized on a potential foundation, sure amendments should
be utilized on a retrospective foundation, and sure amendments should be utilized on a
modified retrospective foundation via a cumulative-effect adjustment to retained
earnings/(deficit) within the interval of adoption. The Firm is presently
evaluating the influence this ASU could have on the monetary statements and associated
disclosures, in addition to the timing of adoption.



                                       39



Monetary Devices



In June 2016, the FASB issued ASU No. 2016-13, "Monetary Devices - Credit score
Losses (Matter 326): Measurement of Credit score Losses on Monetary Devices" ("ASU
2016-13"), which modifies the measurement of anticipated credit score losses of sure
monetary devices. In February 2020, the FASB issued ASU 2020-02 and delayed
the efficient date of ASU 2016-13 till fiscal 12 months starting after December 15,
2022. The Firm is presently evaluating the influence of adopting ASU 2016-13 on
its consolidated monetary statements.



Earnings Per Share



In April 2021, the FASB issued ASU 2021-04, which included Matter 260 "Earnings
Per Share". This steerage clarifies and reduces variety in an issuer's
accounting for modifications or exchanges of freestanding equity-classified
written name choices as a consequence of a scarcity of express steerage within the FASB
Codification. The ASU 2021-04 is efficient for all entities for fiscal years
starting after December 15, 2021. Early adoption is permitted. The Firm is
presently evaluating the influence of adopting ASU 2021-04 on its consolidated
monetary statements.

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