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
his career as an Accountant at KPMG from 1996 to 2000. Mr. Nakamoto is a CPA, not in public practice. He graduated from the University
of Washington in 1996 with a Bachelor of Arts in Accounting and a Bachelor of Arts in Finance. Mr. Nakamoto is a former Treasurer and
board member of the Make-A-Wish foundation of Hawaii. Mr. Nakamoto’s public company experience, paired with his entrepreneurial
and management skills in a diverse array of industries makes him a valuable member of our management team and board of directors.
Allison
Van Orman, Chief Financial Officer
Ms.
Van Orman is an experienced Certified Public Accountant and entrepreneur. Since December 2000, Ms. Van Orman has served as Principal
at Allison D T Van Orman, CPA LLC, where she helps clients navigate complex tax compliance and tax planning issues and consults small
business owners to improve operations and identify areas of growth. Ms. Van Orman was sole proprietor of Grumpy Girl Clothing between
October 2003 and December 2010, performing duties such as product design, product costing and distribution, graphic design and marketing,
and public relations and communications for her business. From 1998 to 2000, Ms. Van Orman was an auditor/accountant at Chinaka, Siu,
& Co., CPAs in Honolulu, where she performed accounting and tax duties for small business clients as well as preparing audit programs
and supervising assistants on audits of non-profit organizations. Ms. Van Orman received her Bachelor of Science, Magna Cum Laude in
Accounting from Santa Clara University in 1995 and her MBA from the University of Hawaii in 1997. She is a licensed CPA in the State
of Hawaii, and currently a member of the American Institute of Certified Public Accountants (“AICPA”). Ms. Van Orman’s
accounting experience makes her an invaluable asset to the management team.
Dustin
Shindo, Chairman of the Board
Mr.
Shindo serves as our Chairman of the Board. He is the Manager of Mehana Capital, LLC, our Sponsor, and is an entrepreneur,
executive, technologist, and a seasoned advisor with more than 25 years of industry experience. Mr. Shindo currently also serves
as Chairman of the Board of Pono Capital Three, Inc. (NASDAQ: PTHR). Mr. Shindo previously served as Chief Executive Officer of Pono Capital Corp. until the closing of its business combination
with AERWINS Technologies Inc. in February 2023. Recently, Mr. Shindo started Joynable Corporation,
a software company. Mr. Shindo is also the Vice President and director of Perfect Game Hawaii, a non-profit entity supporting baseball.
From 2017 to July 2022, Mr. Shindo served as the Chief Executive Officer of Junify
Corporation, which operates in California and Japan. Junify offers zero trust network access software
(software defined border) to help companies better secure their cloud resources. Mr. Shindo has also been retained for a number of
consulting positions since July 2014 for companies working in the health care, travel, technology, construction, and non-profit
industries. From December 2012 to December 2018, Mr. Shindo served as the Chief Executive Officer of Pono Health based in
California, Washington, and Hawaii, where he provided consulting, data management, analytics, and software development services.
Pono Health was the primary entity of Pono Corporation, founded in December 2012. Mr. Shindo managed healthcare data for individuals
in Hawaii and for clinics in Washington, Oregon and Arizona. Mr. Shindo also developed analytics platform used to calculate gaps in
care, cost savings, and other health metrics.
From
March 2001 to March 2010, Mr. Shindo served as the Chief Executive Officer of Hoku Scientific based in Honolulu, Hawaii, where he led
the company through an IPO on the NASDAQ Global Market and signed customer contracts totaling USD 2+ billion. From December 1995 to August
1997, Mr. Shindo served as the President of Mehana Brewing Company based in Hilo, Hawaii. In June 1995, Mr. Shindo received his Bachelor
of Art’s degree in Accounting/Finance/Marketing at University of Washington based in Seattle, Washington. In May 1999, Mr. Shindo
received his Master’s in Business Administration at Darden Graduate School of Business Administration, University of Virginia based
in Charlottesville, Virginia. In August 2015, Mr. Shindo completed the SEP program at Stanford Graduate School of Business, Stanford
University. Mr. Shindo’s entrepreneurial, executive, and advising experience, paired with his public company experience through
Pono Capital Corp and Hoku Scientific, make him a valuable member of our board of directors.
Our
Independent Directors
Our
efforts to seek a suitable business combination target will be complemented and augmented by the expertise and network of relationships
of our directors, who each have extensive experience in business and financial matters. In addition to our seasoned executive team, we
have assembled a strong group of directors. The board is expected to be comprised of five individuals. These individuals bring together
a breadth of operating experience, industry connectivity and proprietary access to leading companies that enhance our value proposition.
Our board will be a driving force in our efforts to identify a target and effect a business combination and may invest personal capital
in the transaction. The Company’s independent directors’ bios are presented here.
Kotaro
Chiba, Independent Director
Kotaro
Chiba serves as an independent director. Mr. Chiba currently also serves as an Independent Director of Pono Capital Three, Inc.
(NASDAQ: PTHR) and recently served as an Independent Director of Pono Capital Corp. until the closing of its business combination
with AERWINS Technologies Inc. in February 2023. Mr. Chiba is also the founder and General Partner of Chiba Dojo Fund, a venture
capital based fund in Tokyo focusing its investing on Internet and IOT related start-ups since September 2019. Before launching the
Chiba Dojo Fund, Mr. Chiba founded and continues to serve as the General Partner of the Drone Fund since in June 2017. The Drone
Fund is a venture capital-based fund in Tokyo focusing its investment on drones and air mobility start-ups. The Drone Fund aims to
create a drone and air-mobility enabled society. One of the Drone Fund’s portfolio companies went public on the Tokyo Mothers
Market in December 2019—the first drone company to make an IPO in Japan. As an angel investor, Mr. Chiba has invested in more
than 60 startups and 40 VC funds in Internet markets and other fields. Mr. Chiba also currently serves or has served as Director of
various mobility and technology companies, including: Aeronext since April 2017, A.L.I. Technologies, Inc. since December 2017,
Prodrone Co. Ltd. from October 2020 to October 2022, teTra aviation from May 2020 to August 2022, and VFR from October
2021 to November 2022.
Prior
to that, Mr. Chiba was the co-founder, Executive Vice President and director from January 2009 to July 2016 with COLOPL Inc., which focused
on mobile gaming services on smartphone applications as well as VR services and location data analysis consulting services, research
service dedicated to smartphones. In 2012, he helped lead the company’s listing on the Tokyo Stock Exchange (Mothers) and then
in 2014 led the company to a US$4 billion IPO on the Tokyo Exchange market (first section). Prior to that, Mr. Chiba was the founder
and director from January 2000 to March 2007 for K Laboratory Inc. (now KLab Inc.) that develops mobile games and online games. Before
joining KLab Inc., Mr. Chiba was a mobile web media planner from April 1997 to December 1999 for Recruit Co. Ltd., which is Japan’s
largest recruitment company and provides services such as job advertising, temporary staffing, sales promotion, and IT solution.
Since
April 2019, Mr. Chiba has been a guest Professor at Keio University, a research-oriented campus located in the city of Fujisawa, Kanagawa
Prefecture, Japan where he teaches students to become technology innovators. Mr. Chiba is Keio University, SFC Campus graduate, in March
1997, with a Bachelor of Arts in Environment and Information Studies. He is also the first domestic customer of Honda Jet in Japan and
holds a private pilot license (FAA Japan). Mr. Chiba’s extensive experience and knowledge in developing start-ups and working in
venture capital provides him with a unique perspective and makes him a valuable addition to our board of directors.
Mike
Sayama, Ph.D., Independent Director
Dr.
Mike Sayama serves as an independent director. Dr. Sayama currently also serves as an Independent Director of Pono Capital Three, Inc.
(NASDAQ: PTHR) and as an Independent Director for AERWINS Technologies Inc. (f/k/a Pono Capital Corp.) (NASDAQ: AWIN). Dr. Sayama was
formerly the Executive Director of Community First since it was established in July 2016 until January 2021. As the founding executive
director, he was responsible for operations, developing a strategic plan for an accountable health community in East Hawaii, community
relations, and fund raising. From January 2021 to June 2021 he served as the Director of Strategy to facilitate the transition to a new
management team.
From
October 2013 to December 2018, Dr. Sayama served as a Vice President at Pono Health and was Director of Learning Health Homes, a project
where he was responsible for managing the East Hawaii Independent Physicians Association and implementing a data platform integrating
health plan, hospital, and physician data. Dr. Sayama also facilitated the reorganization of EHI and development of its strategic direction.
Community First, a 501(c) 3 non-profit, which serves as a neutral forum for healthcare stakeholders in East Hawaii, grew out of the Learning
Health Homes Initiative.
From
August 1997 to October 2013, Dr. Sayama served as a Vice President of the Hawaii Medical Service Association, first in Health Benefits
Management and then in Customer Relations. In the first position, he streamlined preauthorization and appeal processes, including the
elimination of preauthorization for inpatient admissions without increase in inpatient utilization. In his second position he established
call centers in Hilo which stabilized the call center work force and improved the timeliness and accuracy of customer service.
From
April 2001 to April 2005, Dr. Sayama was a Director on the City Bank Board, and from April 2005 to April 2009, was a Director on the
Boards of Central Pacific Bank and Central Pacific Financial Corporation.
Regarding
education: In May 1975, he received his Bachelor of Arts degree in Psychology from Yale University, and in August 1979, his Master of
Arts degree in Clinical Psychology from University of Michigan. In August 1982, Dr. Sayama received his Ph.D. degree in Clinical Psychology
from University of Michigan. He is the author of several books on psychotherapy and Zen Buddhism.
His
community service includes having been a Director on the Bay Clinic Board (the Federally Qualified Health Center in East Hawaii) and
currently serving as the Abbot of Chozen-ji, International Zen Dojo. Mr. Sayama brings broad knowledge of the healthcare technology industry,
as well as prior experience serving as a founding executive director, which makes him a valuable addition to our board of directors.
Trisha
Nomura, Independent Director and Chairperson of the Board’s Audit Committee
Trisha
Nomura serves as an independent director and Chairwoman of our audit committee. Ms. Nomura currently also serves as an Independent
Director of Pono Capital Three, Inc. (NASDAQ: PTHR) and recently served as Chief Financial Officer of Pono Capital Corp. until the
closing of its business combination with AERWINS Technologies Inc. in February 2023. Since July 2018, Ms. Nomura has owned a
consulting firm, Ascend Consulting, LLC. Prior to opening her own firm, Ms. Nomura worked in both public accounting and private
industry. Ms. Nomura was the Chief Operating Officer of HiHR from July 2015 to December 2016, and the Vice President of Strategic
Services from May 2014 to July 2015. Ms. Nomura also served as the Chief People Officer of ProService Hawaii from January 2017 to
June 2018. Ms. Nomura began volunteering with the HSCPA since 2010 through the YCPA Squad, has been the Treasurer of Kaneohe Little
League since 2013, and is a member of the AICPA, where she was selected to attend the Leadership Academy, has served as an at-large
Council member and is now proudly serving on the Association Board of Directors. Ms. Nomura is a CPA, not in public practice, and a
CGMA. She is a graduate of Creighton University, where she obtained her Bachelor of Science in Business Administration in
accounting, and of the University of Hawaii at Manoa, where she earned her Master of Accountancy degree. Ms. Nomura’s
consulting, accounting and management skills and knowledge make her an important addition to our board of directors.
Number
and Terms of Office of Officers and Directors
We
have five directors. Our board of directors is divided into three classes, with only one class of directors being elected in each year
and with each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term.
In accordance with the Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our
first fiscal year end following our listing on Nasdaq.
The
term of office of the first class of directors, consisting of Kotaro Chiba, will expire at our first annual meeting of stockholders.
The term of office of the second class of directors, consisting of Darryl Nakamoto and Mike Sayama, will expire at our second annual
meeting of the stockholders. The term of office of the third class of directors, consisting of Trisha Nomura and Dustin Shindo, will
expire at our third annual meeting of stockholders. We may not hold an annual meeting of stockholders until after we complete our initial
business combination. We may not hold an annual meeting of stockholders until after we complete our initial business combination.
Prior
to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders
of a majority of our founder shares. In addition, prior to the completion of an initial business combination, holders of a majority of
our founder shares may remove a member of the board of directors for any reason. Pursuant to an agreement to be entered into concurrently
with the issuance and sale of our securities, our sponsor, upon completion of an initial business combination, will be entitled to nominate
individuals for election to our board of directors, as long as our sponsor holds any securities covered by the registration rights agreement.
Our
officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms
of office. Our board of directors is authorized to nominate persons to the offices set forth in our amended and restated certificate
of incorporation as it deems appropriate. Our amended and restated certificate of incorporation provides that our officers may consist
of one or more chairman of the board of directors, chief executive officer, president, chief financial officer, vice presidents, secretary,
treasurer and such other offices as may be determined by the board of directors.
Director
Independence
Nasdaq
listing standards require that a majority of our board of directors be independent. An “independent director” is defined
generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship
which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment
in carrying out the responsibilities of a director. Our independent directors will have regularly scheduled meetings at which only independent
directors are present. Kotaro Chiba, Mike Sayama and Trisha Nomura are our independent directors.
Committees
of the Board of Directors
Our
board of directors has three standing committees: an audit committee, a compensation committee and a corporate governance and nominating
committee. Subject to phase-in rules and a limited exception, the rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the
audit committee of a listed company be comprised solely of independent directors. Subject to phase-in rules and a limited exception,
the rules of Nasdaq require that the compensation committee of a listed company be comprised solely of independent directors.
Audit
Committee
We
have established an audit committee of the board of directors. Kotaro Chiba, Mike Sayama, and Trisha Nomura will serve as members of
our audit committee. Our board of directors has determined that Messrs. Chiba, Sayama and Nomura meet the independent director standard
under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act. Trisha Nomura will serve as the chairwoman of the audit
committee. Each member of the audit committee is financially literate, and our board of directors has determined that Ms. Nomura qualifies
as an “audit committee financial expert” as defined in applicable SEC rules. We have adopted an audit committee charter,
which details the principal functions of the audit committee, including:
● reviewing and approving the annual audit plan for the company;
● appointing or replacing the independent registered public accounting firm;
● monitoring our environmental sustainability and governance practices;
The
audit committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.
Financial
Experts on Audit Committee
Pursuant
to Nasdaq rules, the audit committee will at all times be composed exclusively of “independent directors” who are able to
read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
Each
member of the audit committee is financially literate, and our board of directors has determined that Ms. Nomura qualifies as an “audit
committee financial expert” as defined in applicable SEC rules, which generally is any person who has past employment experience
in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results
in the individual’s financial sophistication.
Compensation
Committee
We
have established a compensation committee of our board of directors. The members of our compensation committee are Kotaro Chiba, Mike
Sayama, and Trisha Nomura, and Mr. Sayama will serve as chairman of the compensation committee. Under Nasdaq listing standards and applicable
SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent directors. Our
board of directors has determined that each Messrs. Chiba, Sayama and Nomura is independent. We have adopted a compensation committee
charter, which details the principal functions of the compensation committee, including:
● approving any employment or severance agreements with our Section 16 Officers;
● approving the compensation of our directors; and
Notwithstanding
the foregoing, as indicated above, other than the payment to Mehana Capital LLC, the Sponsor, of $10,000 per month, for up to nine months,
or 18 months if we have elected to extend the time to complete our initial business combination, for office space, utilities and secretarial
and administrative support, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of
our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order
to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial
business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements
to be entered into in connection with such initial business combination.
The
charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such
adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the
compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Corporate
Governance and Nominating Committee
We
have established a corporate governance and nominating committee of our board of directors. The members of our corporate governance and
nominating committee are Kotaro Chiba, Mike Sayama, and Trisha Nomura and Mr. Chiba will serve as chairman of the corporate governance
and nominating committee. Under the Nasdaq listing standards, we are required to have a corporate governance and nominating committee
composed entirely of independent directors. Our board of directors has determined that each of Messrs. Chiba, Sayama and Nomura is independent.
The
primary function of the corporate governance and nominating committee include:
● considering director nominees recommended by stockholders; and
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees generally provide that persons to be nominated:
Each
year in connection with the nomination of candidates for election to the board of directors, the corporate governance and nominating
committee will evaluate the background of each candidate, including candidates that may be submitted by our stockholders.
Code
of Ethics
We
have adopted a Code of Ethics applicable to our directors, officers and employees. You can review these documents by accessing our public
filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request
from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons
who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of our shares of common stock and other equity securities. These executive
officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a)
forms filed by such reporting persons.
Delinquent
Section 16(a) Reports
Based
solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner, except
for (i) one Form 4 filed late by Dustin Shindo on March 8, 2023 and (ii) one Form 4 filed late by Mehana Capital LLC on March 8,
2023, each of which was filed late due to administrative error.
ITEM 11. EXECUTIVE COMPENSATION
Employment
Agreements
We
have not entered into any employment agreements with our executive officers and have not made any agreements to provide benefits upon
termination of employment.
Executive
Officers and Director Compensation
None
of our executive officers or directors have received any cash compensation for services rendered to us. In addition, our sponsor, executive
officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection
with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations.
Our audit committee will review on a quarterly basis all payments that were made to our sponsor, executive officers or directors, or
our or their respective affiliates. Any such payments prior to an initial business combination will be made using funds held outside
the trust account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls
in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection
with our activities on our behalf in connection with identifying and completing an initial business combination. The founder shares will
be worthless if we do not complete an initial business combination. Other than these payments and reimbursements, no compensation of
any kind, including finder’s and consulting fees, will be paid by the company to our sponsor, executive officers and directors,
or any of their respective affiliates, prior to completion of our initial business combination.
After
the completion of our initial business combination, members of our management team who remain with us may be paid consulting or management
fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation
materials or tender offer materials furnished to our stockholders in connection with a proposed business combination. We have not established
any limit on the amount of such fees that may be paid by the combined company to our members of management. It is unlikely the amount
of such compensation will be known at the time of the proposed business combination because the directors of the post-combination business
will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers
will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely
by independent directors or by a majority of the independent directors on our board of directors.