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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, 2023

☐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 ☒

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. ☐

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 ☐

of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $19,785,098.

of March 18, 2024, there were 5,216,290 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 1 share

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, 2023

Page

PART I 4

ITEM 1. BUSINESS 4

ITEM 1A. RISK FACTORS 8

ITEM 1B. UNRESOLVED STAFF COMMENTS 8

ITEM 1C. CYBERSECURITY 8

ITEM 2. PROPERTIES 8

ITEM 3. LEGAL PROCEEDINGS 8

ITEM 4. MINE SAFETY DISCLOSURES 8

PART II 8

ITEM 6. [RESERVED] 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 14

ITEM 9A. CONTROLS AND PROCEDURES 15

ITEM 9B. OTHER INFORMATION 15

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 15

PART III 16

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 16

ITEM 11. EXECUTIVE COMPENSATION 23

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 27

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 28

CERTAIN

TERMS

References

to “the Company,” “Pono,” “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

ITEM 1. BUSINESS

Introduction

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”).

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.

May 5, 2023, we held a special meeting of stockholders (the “Special Meeting”), and the chairman adjourned the Special Meeting

to May 8, 2023. On May 8, 2023, we held the Special Meeting. During the Special Meeting, stockholders approved an amendment to the Company’s

amended and restated certificate of incorporation (the “Extension Amendment” (i) to extend the date by which the Company

has to consummate a business combination from May 9, 2023 to February 9, 2024 for no additional amount to be paid by the Sponsor into

the Trust Account, and (ii) to provide for the right of a holder of Class B common stock to convert such shares into shares of Class

A common stock on a one-for-one basis prior to the closing of a business combination at the election of the holder. As approved by the

stockholders of the Company, the Company filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware

Secretary of State on May 8, 2023. The Company’s stockholders elected to redeem an aggregate of 9,577,250 shares of Class A common

stock of the Company in connection with the Special Meeting. Following such redemptions, the amount of funds remaining in the Trust Account

is approximately $20 million.

connection with the Special Meeting, the Company and the Sponsor entered into non-redemption agreements with certain unaffiliated stockholders

owning, in the aggregate, 998,682 shares of the Company’s Class A common stock, pursuant to which such stockholders agreed, among

other things, not to redeem or exercise any right to redeem such public shares in connection with the Extension Amendment. In connection

with the non-redemption agreements, the Sponsor agreed to transfer to the stockholders that entered into such agreements Sponsor Shares

upon the consummation of the Company’s initial business combination.

May 8, 2023, the Sponsor converted 2,874,999 Founder Shares of Class B common stock into 2,874,999 shares of Class A common stock.

February 5, 2024, the Company held another special meeting of stockholders (the “Second Special Meeting”). During the Second

Special Meeting, stockholders approved another amendment to the Company’s amended and restated certificate of incorporation to

extend the date by which the Company has to consummate a business combination (the “Combination Period”) from February 9,

2024 to November 9, 2024 for no additional amount to be paid by the Sponsor into the Trust Account. As approved by the stockholders of

the Company, the Company filed another amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary

of State on February 5, 2024. The Company’s stockholders elected to redeem an aggregate of 273,334 shares of Class A common stock

of the Company in connection with the Second Special Meeting. Following such redemptions, the amount of funds remaining in the trust

account is approximately $17.9 million.

connection with the Second Special Meeting, the Company entered into a non-redemption agreement with an unaffiliated investor (the

“Holder”) which agreed to acquire from public stockholders of the Company 1,500,000 to 1,700,000 shares of Class A

common stock in the open market, at a prices no higher than the redemption price per share payable to stockholders who exercise

redemption rights in connection with the stockholder vote to approve the Company’s proposed business combination with SBC (as

defined below), prior to the Second Special Meeting and to agree to waive its redemption rights and hold the shares until after the

closing of the business combination. In consideration of the Holder’s agreement to waive its redemption rights with respect to

the shares, and subject to (i) the Holder acquiring 1,500,000 to 1,700,000 shares of Class A common stock in the open market, and

(ii) Holder’s satisfaction of its other obligations under the non-redemption agreement, the Company, on the closing date of

the business combination, provided that Holder has continued to hold the Holder’s shares through the closing date, SBC and

Yoshiyuki Aikawa, the chief executive officer of SBC, shall cause to be issued or transferred to Holder a number of shares of Class

A common stock held by Dr. Aikawa (the “Incentive Shares”), which will equal one (1) Incentive Share for each public

share purchased in the open market pursuant to the non-redemption agreement that is continuously owned by Holder until the closing

date of the business combination. This non-redemption agreement terminates on the earliest to occur of (i) the closing date of the

business combination, (ii) the termination of the related business combination agreement, or (iii) April 30, 2024 (the

“Clearance Date”) if the Company has not cleared all SEC comments to its proxy statement in connection with the business

combination by that date. On March 15, 2024, the parties to the non-redemption agreement entered into an amendment to the

non-redemption agreement to extend the Clearance Date to June 30, 2024, and to agree to close the business combination on or before August

31, 2024.

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).

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.”

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.

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.

April 26, 2023, the parties entered into an amendment to the Merger Agreement. Our board approved the amendment on April 25, 2023. Pursuant

to the Amendment, the Sponsor in its sole discretion may direct Pono to issue all or a portion of the Sponsor Shares on an earlier or

later date as it may determine, which date will not be earlier than the Closing. In addition, pursuant to the Amendment, the date by

which (i) SBC will complete its agreed upon disclosure schedules, (ii) Pono will complete its due diligence review of SBC, and (iii)

the parties to the Merger Agreement will agree upon any modifications or amendments to the Merger Agreement to the terms and conditions

therein, among other related matters, was extended from April 28, 2023 to May 31, 2023. SBC also agreed to purchase, or to cause one

of its Affiliates to purchase, equity in the Sponsor in an amount equal to $1,000,000, by way of a separate agreement to be entered into

on or before May 5, 2023.

May 18, 2023, the parties entered into a Note Purchase Agreement pursuant to which the parties have agreed that Pono will issue and sell

to SBC a convertible promissory note of $1,000,000 in aggregate principal amount which note is convertible into shares of Class A Common

Stock, par value $0.0001 per share of Pono.

May 26, 2023, the closing date of the purchase and sale of the Note, SBC delivered the Note reflecting the Principal Amount and SBC deposited

$1,000,000 by wire transfer into the specified Company account. The Note does not bear interest (unless otherwise required by applicable

law, in which event interest will accrue at the minimum rate required by applicable law) and the principal amount may be prepaid at any

time.

May 30, 2023, the parties entered into Amendment No. 2 to the Merger Agreement. Our board approved the amendment on May 23, 2023. The

amendment extended the time for (i) SBC to deliver disclosure schedules, (ii) Pono to complete its due diligence review of SBC and (iii)

the parties to agree upon a modifications or amendments to the Merger Agreement to the terms and conditions therein until June 15, 2023.

June 15, 2023, the parties entered into Amendment No. 3 to the Merger Agreement. Our board approved the amendment on June 15, 2023. The

amendment further extended the time for (i) SBC to deliver disclosure schedules, (ii) Pono to complete its due diligence review of SBC

and (iii) the parties to agree upon a modifications or amendments to the Merger Agreement to the terms and conditions therein until June

22, 2023.

June 21, 2023, the parties entered into an Amended and Restated Agreement and Plan of Merger (“A&R Merger Agreement”).

Our board approved the A&R Merger Agreement on June 15, 2023. The A&R Merger Agreement revised the target companies to be directly

or indirectly purchased by Pono following a restructuring of SBC’s corporate structure, to include only the Service Companies and

certain other entities, and to no longer include the direct or indirect purchase of Medical Corporations, and as a result, removed other

references to the Medical Corporations, including the related representations and warranties, among others. The Medical Corporations

were removed for Japanese regulatory reasons under the Japanese Medical Care Act. Based on the provisions of the Japanese Medical Care

Act, in essence, medical corporations are considered not-for-profit organizations with a benevolent purpose of serving human-kind and

cannot be controlled by for-profit entities. More specifically, the Medical Corporations, even though considered related parties, are

independent business operators and, the Company does not exercise control over the day-to-day operations of their clinics (except to

the extent governed by our management services contracts). The removal of the Medical Corporations from the A&R Merger Agreement

required a reduction of the valuation. As a result, the schedule was delayed by approximately two months. Other than the reduction of

the valuation and delay, the overall transaction was not affected by this removal. The A&R Merger Agreement also extended the date

by which the disclosures schedules were to be delivered to August 31, 2023 and extended the date by which the Closing shall occur from

September 30, 2023 to December 31, 2023. Pursuant to the A&R Merger Agreement, the parties also agreed that any future expenses incurred

in connection with the extension of the time by which Pono must complete its initial business combination shall be borne entirely by

Pono, which replaces and supersedes the prior requirement under the Original Agreement for Pono and SBC to share such expenses equally.

September 8, 2023, the parties entered into the First Amendment to the A&R Merger Agreement, which provided for the holders of SBC

securities collectively to be entitled to receive from Pono as Merger consideration, in the aggregate, a number of Pono securities with

an aggregate value equal to (a) $1,000,000,000, 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. Our board approved the amendment on September 7, 2023.

October 26, 2023, the parties entered into the Second Amendment to the A&R Merger Agreement (the “Second Amendment”)

with the parties thereto. Prior to the Second Amendment, the Company’s board of directors as of the Closing was to be designated

as follows: (i) three persons designated prior to the Closing by SBC, two of whom must qualify as independent directors; (ii) one person

designated prior to the Closing by the Company; and (iii) one person mutually agreed upon and designated prior to the Closing by the

Company and SBC, who must qualify as an independent director. Following the Second Amendment, the Company’s board of directors

as of the Closing will be designated as follows: (i) three persons designated prior to the Closing by SBC, at least one of whom must

qualify as an independent director; (ii) one person designated prior to the Closing by the Company, who must qualify as an independent

director; and (iii) one person mutually agreed upon and designated prior to the Closing by the Company and SBC, who must qualify as an

independent director.

December 28, 2023, the parties entered into the Third Amendment to the A&R Merger Agreement (the “Third Amendment”) with

the parties thereto. The Third Amendment was entered into solely to extend the Outside Date (as defined in the A&R Merger Agreement)

from December 31, 2023 to March 31, 2024.

February 27, 2024, the Company and SBC entered into an Amendment to the Note Purchase Agreement (the “Amended Note Purchase Agreement”),

which increased the purchase price of the Note from $1,000,000 to $2,700,000.

Please

see the Current Reports on Form 8-K we filed with the SEC on February 2, 2023, June 22, 2023, September 11, 2023, October 26, 2023, December 29, 2023, and March 1, 2024 for additional information.

Our

Company

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.

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.

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.

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

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

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

a smaller reporting company, we are not required to make disclosures under this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not

applicable.

ITEM 1C. CYBERSECURITY

are a SPAC with no business operations. Since our IPO, our sole business activity has been identifying and evaluating suitable acquisition

transaction candidates. Therefore, we do not consider that we face significant cybersecurity risk and have not adopted any cybersecurity

risk management program or formal processes for assessing cybersecurity risk. Our board of directors is generally responsible for the

oversight of risks from cybersecurity threats, if there is any. We have not encountered any cybersecurity incidents since our IPO.

ITEM 2. PROPERTIES

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

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

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

of March 18, 2024, there were 5,216,290 shares of the registrant’s Class A common stock issued and outstanding held by approximately

five stockholders of record, and 1 share 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

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,” “Pono,” 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 consolidated 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 “Special Note Regarding Forward-Looking

Statements” elsewhere in this report for a description of these risks and uncertainties.

Overview

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.

January 31, 2023, the Company entered into an Agreement and Plan of Merger, as amended and restated on June 21, 2023 (the “Merger

Agreement”), by and among the Company, Pono Two Merger Sub, Inc., a Delaware corporation incorporated in January 2023, and a wholly-owned

subsidiary of the Company (“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 personal capacity and his capacity as

Seller Representative.

Pursuant

to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), 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.”

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 affiliated service companies, medical corporations, and

other entities, which collectively carry on the business of SBC-Japan and such other related entities, will become subsidiaries of SBC.

consideration for the Business Combination, the holders of SBC securities collectively will be entitled to receive from the Company,

in the aggregate, a number of the Company’s securities with an aggregate value equal to (a) $1,000,000,000, 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.

connection with the Merger Agreement, 1,200,000 Sponsor Shares will be issued to the Sponsor on the date that is the earlier of (a) the

six (6) month anniversary of the Closing or (b) the expiration of the “Founder Shares Lock-up Period” (as defined in the

Company’s Insider Letter with the initial stockholders); provided that, the Sponsor in its sole discretion may direct Pono to issue

all or a portion of the Sponsor Shares on such earlier or later date as it shall determine (which date shall not be earlier than the

Closing).

May 5, 2023, the Company held a special meeting of stockholders (the “Special Meeting”), and the chairman adjourned the Special

Meeting to May 8, 2023. On May 8, 2023, the Company held the Special Meeting. During the Special Meeting, stockholders approved an amendment

to the Company’s amended and restated certificate of incorporation (i) to extend the date by which the Company has to consummate

a business combination from May 9, 2023 to February 9, 2024 for no additional amount to be paid by the Sponsor into the Trust Account,

and (ii) to provide for the right of a holder of Class B common stock to convert such shares into shares of Class A common stock on a

one-for-one basis prior to the closing of a business combination at the election of the holder. As approved by the stockholders of the

Company, the Company filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State

on May 8, 2023. The Company’s stockholders elected to redeem an aggregate of 9,577,250 shares of Class A common stock of the Company

in connection with the Special Meeting. Following such redemptions, the amount of funds remaining in the trust account is approximately

$20 million.

connection with the Special Meeting, the Company and the Sponsor entered into non-redemption agreements with certain unaffiliated stockholders

owning, in the aggregate, 998,682 shares of the Company’s Class A common stock, pursuant to which such stockholders agreed, among

other things, not to redeem or exercise any right to redeem such public shares in connection with the Extension Amendment. In connection

with the non-redemption agreements, the Sponsor agreed to transfer to the stockholders that entered into such agreements Sponsor Shares

upon the consummation of the Company’s initial business combination.

May 8, 2023, the Sponsor converted 2,874,999 Founder Shares of Class B common stock into 2,874,999 shares of Class A common stock.

September 8, 2023, Pono entered into the First Amendment to the A&R Merger Agreement (the “Amendment”) with the parties

thereto. Prior to the Amendment, the A&R Merger Agreement provided for the holders of SBC securities collectively to be entitled

to receive from Pono, in the aggregate, a number of Pono securities with an aggregate value equal to (the “Merger Consideration”)

(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. Pursuant

to the Amendment, the $1,200,000,000 amount in the Merger Consideration calculation above was reduced to $1,000,000,000.