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, 2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ______________ to ______________
Commission
File Number: 001-41462
PONO
CAPITAL TWO, INC.
(Exact
name of registrant as specified in its charter)
643
Ilalo St. #102
Honolulu,
Hawaii96813
Telephone:
(808)892-6611
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Securities
registered pursuant to Section 12(g) of the Act: None.
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 every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 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. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes☒ No ☐
As
of June 30, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $0.
As
of March 7, 2023, there were 12,191,875shares of the registrant’s Class A common
stock, par value $0.0001 per share, and 2,875,000shares of the registrant’s Class B common
stock, par value $0.0001 per share, issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
PONO
CAPITAL TWO, INC.
Annual
Report on Form 10-K for the Period Ended December 31, 2022
Page
PART I 4
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 7
ITEM 1B. UNRESOLVED STAFF COMMENTS 7
ITEM 2. PROPERTIES 7
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. MINE SAFETY DISCLOSURES 7
PART II 7
ITEM 6. [RESERVED] 8
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 12
ITEM 9A. CONTROLS AND PROCEDURES 13
ITEM 9B. OTHER INFORMATION 13
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 13
PART III 12
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 14
ITEM 11. EXECUTIVE COMPENSATION 21
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 25
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 26
CERTAIN
TERMS
References
to “the Company,” “our,” “us” or “we” refer to Pono Capital Two, Inc., a blank check
company incorporated in Delaware on March 11, 2022. References to our “Sponsor” refer to Mehana Capital LLC, a Delaware limited
liability company. References to our “IPO” refer to the initial public offering of Pono Capital Two, Inc., which closed on
August 9, 2022.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. The statements contained in this report
that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements
regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking
statements in this report may include, for example, statements about our:
● ability to complete our initial business combination;
● pool of prospective target businesses;
● the potential liquidity and trading of our securities;
● the lack of a market for our securities;
● financial performance following our IPO.
The
forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.”
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may
vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable
securities laws and/or if and when management knows or has a reasonable basis on which to conclude that previously disclosed projections
are no longer reasonably attainable.
PART
I
ITEM 1. BUSINESS
Introduction
We
are a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to herein as our
initial business combination. Our Sponsor is Mehana Capital LLC, a Delaware limited liability company (“Sponsor”).
We
believe that there are many target companies that could become attractive public companies and we will seek a target in the disruptive
technology sector with a spotlight on companies in Asia with Japan in particular. While we may pursue an initial business combination
target in any industry or geographic region, we will seek to capitalize on the operational and investment experience of our management
team and focus on disruptive technology companies that we believe have significant growth prospects and the potential to generate attractive
returns for our stockholders. We expect to focus on identifying potential target companies with above-industry-average growth, and a
defensible market position where our management team’s operational, strategic, or managerial expertise can assist in maximizing
value.
The
Registration Statement for our initial public offering was declared effective on August 4, 2022 (the “Initial Public Offering,”
or “IPO”). On August 9, 2022, we consummated the Initial Public Offering of 11,500,000 Units, including 1,500,000 Units issued
pursuant to the exercise of the underwriters’ over-allotment option in full, generating gross proceeds of $115,000,000. Each Unit
consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles
the holder to purchase one share of Class A common stock at an exercise price of $11.50 per whole share.
Simultaneously
with the closing of the Initial Public Offering, we consummated the sale of 634,375 units (the “Placement Units”) at a price
of $10.00 per Placement Unit in a private placement to the Sponsor, including 63,000 Placement Units issued pursuant to the exercise
of the underwriters’ over-allotment option in full, generating gross proceeds of $6,343,750, which is described in Note 4.
Following
the closing of the Initial Public Offering on August 9, 2022, an amount of $117,875,000 ($10.25 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account (the “Trust
Account”), and will be invested only in U.S. government treasury obligations with maturities of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a business combination and (ii) the distribution of the funds held in the Trust
Account, as described below.
We
will have until 9 months (or up to 18 months from the closing of the Initial Public Offering at our election pursuant to nine one month
extensions subject to satisfaction of certain conditions, including the deposit of $379,500 ($0.033 per unit) for such one month extension,
into the Trust Account, or as extended by our stockholders in accordance with our Amended and Restated Certificate of Incorporation)
from the closing of the Initial Public Offering to consummate a business combination (the “Combination Period”). If we are
unable to complete a business combination within the Combination Period, we will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned
(net of taxes payable and less interest to pay dissolution expenses up to $100,000), divided by the number of then outstanding Public
Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and our board of directors, proceed to commence a voluntary liquidation and thereby
a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements
of applicable law. The underwriters have agreed to waive their rights to the deferred underwriting commission held in the Trust Account
in the event we do not complete a business combination within the Combination Period and, in such event, such amounts will be included
with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution,
it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering
price per Unit ($10.00).
On
January 31, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among us, Pono Two Merger
Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), SBC Medical Group Holdings Incorporated,
a Delaware corporation (“SBC”), Mehana Capital, LLC, in its capacity as Purchaser Representative, and Yoshiyuki Aikawa, in
his capacity as Seller Representative.
Pursuant
to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into
SBC, with SBC continuing as the surviving corporation. The transactions contemplated by the Merger Agreement are referred to herein as
the “Business Combination.”
As
a condition to closing of the Business Combination, SBC will complete certain restructuring transactions pursuant to which SBC Medical
Group Co., Ltd., a Japanese corporation (“SBC-Japan”) and certain related entities which carry on the business of SBC-Japan
and such other related entities, will become subsidiaries of SBC.
As
consideration for the Business Combination, the holders of SBC securities as of the closing of the Business Combination, collectively
will be entitled to receive from us, in the aggregate, a number of our securities with an aggregate value equal to (a) $1,200,000,000,
minus (b) the amount, if any, by which $3,000,000 exceeds SBC’s Net Working Capital, plus (c) the amount, if any, by which SBC’s
Net Working Capital exceeds $3,000,000, minus (d) the aggregate amount of any outstanding indebtedness (minus cash held by SBC) of SBC
at Closing, minus (e) specified transaction expenses of SBC associated with the Business Combination.
Please
see the Current Report on Form 8-K we filed with the SEC on February 2, 2023 for additional information.
Our
Company
We
are a blank check company incorporated in Delaware on March 11, 2022 formed for the purpose of entering into a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a
“business combination”). We intend to effectuate
our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the private placement
units, the proceeds of the sale of our shares in connection with our initial business combination pursuant to the shares issued to
the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing or
other sources.
We
believe that there are many target companies that could become attractive public companies and we will seek a target in the disruptive
technology sector with a spotlight on companies in Asia with Japan in particular. While we may pursue an initial business combination
target in any industry or geographic region, we will seek to capitalize on the operational and investment experience of our management
team and focus on disruptive technology companies that we believe have significant growth prospects and the potential to generate attractive
returns for our stockholders. We expect to focus on identifying potential target companies with above-industry-average growth, and a
defensible market position where our management team’s operational, strategic, or managerial expertise can assist in maximizing
value.
We
believe the traditional IPO and direct listing processes are not designed for these types of companies to execute on their ambitious
strategies. We believe using a SPAC structure is a disruptive alternative to, and creates more efficiencies than, the traditional IPO
approach. We also believe that because the industries in which we have particular expertise, and in which we will seek to identify a
potential business combination target, are often overlooked by traditional venture capital, public equity and private equity investors,
many high-quality companies in these industries are not well suited to a traditional IPO, direct listing or private equity buyout transaction.
Therefore, we believe our focus on these particular industries will provide unique access to the highest quality companies and management
teams and a substantial number of proprietary business combination opportunities. Our mission is to create a better solution to the conventional
IPO for these high growth, disruptive technology and technology-enabled companies, which addresses their needs for capital and liquidity,
while overcoming the key points of friction in the traditional IPO path in particular for businesses in Japan.
We
believe our expertise will make us an attractive partner for companies seeking a clear and efficient path to listing their shares with
a significant degree of funding certainty including high-quality companies in Japan where certain of the Company’s officers and
directors are familiar with Japanese business and M&A culture, which will have an impact on the dynamics of a business combination.
There are a large number of companies that desire to have publicly-traded shares to provide liquidity to investors and employees, create
a currency for mergers and acquisitions and access to equity capital markets. We may seek to combine with businesses owned by our founder
and minority investors, although we may consummate a transaction with businesses controlled by private equity investors or family-owned
businesses, which means there is a wide universe of potential partners. We believe our understanding of private deal execution and public
capital markets, and valuation dynamics in both markets, make us uniquely positioned to identify and execute a business combination with
a growth orientation.
Our
Management Team
Our
management team is led by Darryl Nakamoto, our Chief Executive Officer and Director, Allison Van Orman, our Chief Financial Officer,
and Dustin Shindo, our Chairman of the Board, who will be supported by Pono Capital Two, Inc.’s independent directors, sponsor,
accountants and legal counsel, as further described below. We believe our management team is well positioned to identify and evaluate
businesses within the technology industry that would benefit from being a public company and from access to our expertise. We believe
we can achieve this mission by utilizing our team’s extensive experience in growing and operating technology companies as well
as our broad network of contacts in the technology sector.
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter competition from other
entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout
funds, public companies and operating businesses seeking strategic business combinations. Many of these entities are well established
and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these
competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses
will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business
combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their
redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the
future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place
us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We
currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters, but
they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination.
The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial
business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees
prior to the completion of our initial business combination.
For
additional discussion of the general development of our business, see our final prospectus on Form 424B4, filed with the SEC on August
8, 2022.
ITEM 1A. RISK FACTORS
As
a smaller reporting company, we are not required to make disclosures under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM 2. PROPERTIES
We
currently maintain our executive offices at 643 Ilalo St., #102, Honolulu, Hawaii 96813, and our telephone number is (808) 892-6611.
Our Sponsor is making this space available to us as part of a monthly administrative fee of $10,000. We consider our current office space
adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
We
may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not
currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding,
investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business,
financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not
Applicable.
PART
II
Our
units began to trade on The Nasdaq Global Market, or Nasdaq, under the symbol “PTWOU” on or about August 5, 2022, and the
shares of Class A common stock and warrants began separate trading on Nasdaq under the symbols “PTWO” and “PTWOW,”
respectively, on or about September 26, 2022.
Holders
of Record
As
of March 7, 2023, there were 12,191,875 shares of the registrant’s Class A common stock issued and outstanding held by
approximately five stockholders of record, and 2,875,000 shares of the registrant’s Class B common stock issued and
outstanding held by approximately one stockholder of record. The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of shares of common stock whose shares are held in the names of various
security brokers, dealers, and registered clearing agencies.
Dividends
We
have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of an initial
business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements
and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business
combination will be within the discretion of our board of directors at such time. It is the present intention of our board of directors
to retain all earnings, if any, for use in our business operations and, accordingly, our board of directors does not anticipate declaring
any dividends in the foreseeable future. In addition, our board of directors is not currently contemplating and does not anticipate declaring
any share dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited
by restrictive covenants we may agree to in connection therewith.
Securities
Authorized for Issuance Under Equity Compensation Plans
None.
Recent
Sales of Unregistered Securities
There
were no unregistered securities to report which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report
on Form 8-K.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. [RESERVED]
References
in this report (the “Annual Report”) to “we,” “us” or the “Company” refer to Pono
Capital Two, Inc. References to our “management” or our “management team”
refer to our officers and directors, and references to the “Sponsor” refer to Mehana Capital LLC.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with the financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking
Statements” elsewhere in this report for a description of these risks and uncertainties.
Overview
We
are a blank check company incorporated in Delaware on March 11, 2022 formed for the purpose of entering into a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from
the proceeds of our initial public offering (the “Initial Public Offering”) and the sale of the private placement units,
the proceeds of the sale of our shares in connection with our initial business combination pursuant to the shares issued to the owners
of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing or other sources.
Results
of Operations
We
have neither engaged in any operations nor generated any revenues to date. Our only activities
for the period from March 11, 2022 (inception) through December 31, 2022 were organizational activities, those necessary to prepare
for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a business
combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We will
generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. We incur expenses
as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence
expenses.
For
the period from March 11, 2022 (inception) through December 31, 2022, we had net income
of $552,813, which resulted from interest and dividend income on investments held in the Trust
Account for $1,345,016, partially offset by operating and formation costs of $382,051, franchise tax expense of $161,644, and income
tax expense of $248,508.
Liquidity
and Capital Resources
For
the period from March 11, 2022 (inception) through December 31, 2022, net cash used in operating
activities was $462,816, which was due to interest earned on marketable securities held in the Trust Account of $1,345,016, offset by
net income of $552,813 and a change in operating assets and liabilities of $329,387.
For
the period from March 11, 2022 (inception) through December 31, 2022, net cash used in investing activities was $117,875,000 which was
primarily due to the investment of cash in the Trust Account.
For
the period from March 11, 2022 (inception) through December 31, 2022, net cash provided by financing
activities was $118,823,380, which was due to the proceeds from the sale of Units (as defined below) (net of the underwriting discount)
of $113,045,000, proceeds from the sale of Placement Units (as defined below) of $6,343,750, and proceeds from the issuance of Class
B common stock to the Sponsor of $25,000, offset in part by payment of offering costs of $590,370.
The
registration statement for the Company’s Initial Public Offering was declared effective on August 4, 2022. On August 9, 2022, the
Company consummated the Initial Public Offering of 11,500,000 units, (the “Units” and, with respect to the shares of Class
A common stock included in the Units sold, the “Public Shares”), including 1,500,000 Units issued pursuant to the exercise
of the underwriters’ over-allotment option in full, generating gross proceeds of $115,000,000.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 634,375 units (the “Placement
Units”) at a price of $10.00 per Placement Unit in a private placement to Mehana Capital
LLC (the “Sponsor”), including 63,000 Placement Units issued
pursuant to the exercise of the underwriters’ over-allotment option in full, generating gross proceeds of $6,343,750.
Following
the closing of the Initial Public Offering on August 9, 2022, an amount of $117,875,000 ($10.25 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Placement
Units was placed in a trust account.
We
intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the funds
held in the trust account and not previously released to us to pay our taxes (which interest shall be net of taxes payable and excluding
deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay our taxes, if any. Our
annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account.
We expect the interest earned on the amount in the trust account will be sufficient to pay our taxes. We expect the only taxes payable
by us out of the funds in the trust account will be income and franchise taxes, if any. To the extent that our common stock or debt is
used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account
will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our
growth strategies.
We
do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating
our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating
an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate
our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial
business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial
business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
The
accompanying financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going
concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred
and expects to continue to incur significant costs in pursuit of the Company’s financing and acquisition plans. Management plans
to address this uncertainty with the successful closing of the business combination. The Company will have until May 9, 2023 (or up to
February 9, 2024, as applicable) to consummate a business combination. If a business combination is not consummated by May 9, 2023, less
than one year after the date the accompanying financial statements are issued, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent
dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 9, 2023. The Company intends to
complete the initial business combination before the mandatory liquidation date. However, there can be no assurance that the Company
will be able to consummate any business combination by May 9, 2023.
Off-Balance
Sheet Arrangements
As
of December 31, 2022, we did not have any off-balance sheet arrangements.
Contractual
Obligations
Registration
and Stockholder Rights Agreement
The
holders of the Founder Shares and Placement Units (including securities contained therein) and Units (including securities contained
therein) that may be issued upon conversion of working capital loans and extension loans, and any shares of Class A common stock issuable
upon the exercise of the Placement Warrants and any shares of Class A common stock and warrants (and underlying Class A common stock)
that may be issued upon conversion of the Units issued as part of the working capital loans and extension loans and Class A common stock
issuable upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement to
be signed prior to or on the effective date of the Proposed Offering, requiring the Company to register such securities for resale (in
the case of the Founder Shares, only after conversion to the Class A common stock). The holders of these securities are entitled to make
up to two demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of the initial business combination and
rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act.
Administrative
Support Agreement
The
Company’s Sponsor has agreed, commencing from the date of the Initial Public Offering through the earlier of the Company’s
consummation of a business combination and its liquidation, to make available to the Company certain general and administrative services,
including office space, utilities and administrative services, as the Company may require from time to time. The Company has agreed to
pay to Mehana Capital LLC, the Sponsor, $10,000 per month for these services during the 9-month period to complete a business combination.
For the period from March 11, 2022 (inception) through December 31, 2022, $50,000 was paid to Mehana Capital LLC for these services.
Underwriters
Agreement
Simultaneously
with the Initial Public Offering, the underwriters fully exercised the over-allotment option to purchase an additional 1,500,000 Units
at an offering price of $10.00 per Unit for an aggregate purchase price of $15,000,000.
The
underwriters were paid a cash underwriting discount of $0.17 per Unit, or $1,955,000 in the aggregate, upon the closing of the Initial
Public Offering. In addition, $0.35 per unit, or $4,025,000 in the aggregate will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a business combination, subject to the terms of the underwriting agreement.
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual
results could materially differ from those estimates. We have identified the following critical accounting policies:
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). For derivative financial instruments that
are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued
at each reporting date, with changes in the fair value reported in the statements of operations. For derivative instruments that are
classified as equity, the derivative instruments are initially measured at fair value (or allocated value), and subsequent changes in
fair value are not recognized as long as the contracts continue to be classified in equity.
Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding
financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all
of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common
stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted
at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date
thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
The
warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet
date thereafter.
Common
Stock Subject to Possible Redemption
All
of the Class A common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the
redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in
connection with the business combination and in connection with certain amendments to the Company’s amended and restated certificate
of incorporation. In accordance with ASC 480, conditionally redeemable Class A common stock (including shares of Class A common stock
that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) is classified as temporary equity. Ordinary liquidation events, which involve the
redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the
Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its Public Shares
in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001. However, the threshold
in its charter would not change the nature of the underlying shares as redeemable and thus Public Shares would be required to be disclosed
outside of permanent equity. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value
of redeemable common stock to equal the redemption value at the end of each reporting period. Such changes are reflected in additional
paid-in capital, or in the absence of additional paid-in capital, in accumulated deficit.
Net
Income Per Share
Net
income per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Therefore,
the income per share calculation allocates income shared pro rata between Class A and Class B common stock. As a result, the calculated
net income per share is the same for Class A and Class B common stock. The Company has not considered the effect of the Public Warrants
and Placement Warrants, to purchase an aggregate of 12,134,375 shares in the calculation of income per share, since the exercise of the
warrants is contingent upon the occurrence of future events.
Recent
Accounting Standards
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic
470-0) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify
accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion
and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity
classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-convened method for all convertible instruments. ASU 2020-06 is effective
for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption
permitted for fiscal years beginning after December 15, 2020. The Company adopted ASU 2020-06 effective March 11, 2022 (inception). The
adoption of ASU 2020-06 did not have a material impact on the financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
required for smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This
information appears following Item 15 of this Report and is included herein by reference.
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our
reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Evaluation
of Disclosure Controls and Procedures
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation
of the effectiveness of our disclosure controls and procedures as of December 31, 2022. Based upon their evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15
(e) under the Exchange Act) were effective.
Changes
in Internal Control Over Financial Reporting
During
the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Management’s
Report on Internal Controls Over Financial Reporting
This
Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting
or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the
SEC for newly public companies.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not
applicable.
PART
III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The
following table sets forth information about our directors and executive officers.
Name Age Position
Darryl Nakamoto 49 Chief Executive Officer, Director
Allison Van Orman 50 Chief Financial Officer
Dustin Shindo 49 Chairman of the Board
Kotaro Chiba 48 Independent Director
Mike Sayama 69 Independent Director
Trisha Nomura 43 Independent Director, and Chairwoman of the Audit Committee
Darryl
Nakamoto, Chief Executive Officer and Director
Mr.
Nakamoto serves as our Chief Executive Officer and Director. He is an entrepreneur and executive with over 20 years of industry experience,
including his former role as CFO of a publicly traded company. Since 2017, Mr. Nakamoto serves as President and Owner of Viv, LLC, a
successful accounting and finance solutions provider. Since 2021, Mr. Nakamoto has also served as Controller of Hawaiian Springs, LLC.
From May 2016 to July 2017, Mr. Nakamoto served as President and CFO of DKI808 LLC, dba Premier Restoration Hawaii, where he secured
financing for the purchase of Maui Fire & Flood and expanded the full-service restoration business from Maui to Oahu. Between March
2014 and March 2016, Mr. Nakamoto served as President of Island Flooring. Mr. Nakamoto served as President of Kaiuli Energy from April
2012 to February 2014, a seawater air conditioning startup where he was responsible for strategic decisions and project developments.
From 2014 to 2020, Mr. Nakamoto served as Treasurer, Vice Chair and Board Member of the Japanese Cultural Center of Honolulu.
From
January 2005 to March 2012, Mr. Nakamoto was CFO, Treasurer and Secretary of Hoku Scientific, a then publicly traded clean energy firm
based in Honolulu, Hawaii, where he managed all finance, accounting, and treasury functions. Between January 2003 and December 2004,
Mr. Nakamoto was a Finance Analyst for Frito-Lay of Hawaii. From March 2001 to January 2003, he worked as a Consultant for Akamai Consulting
Group/Syntera Solutions. He was a Regional Director for software development startup ActivityMax from 2000 to 2001. Mr. Nakamoto began