SBC Medical Group Holdings Inc

Current report

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”).

Current report

Unless the context otherwise requires, any reference in this section of this Quarterly Report to “SBC,” “we,” “us” or “our” refers to SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated) prior to the consummation of the Business Combination and to the Combined Entity and its consolidated subsidiaries following the Business Combination.

Current report

This Quarterly Report contains forward-looking statements. Forward-looking statements are not historical facts or statements of current conditions, but instead represent only the Company’s beliefs regarding future events and performance, many of which, by their nature, are inherently uncertain and outside of the Company’s control. These forward-looking statements reflect the Company’s current views with respect to, among other things, the Company’s financial performance; growth in revenue and earnings; business prospects and opportunities; and capital deployment plans and liquidity. In some cases, forward-looking statements can be identified by the use of words such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. The Company cautions readers not to place undue reliance upon any forward-looking statements, which are current only as of the date of this Quarterly Report and are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. The forward-looking statements are based on management’s current expectations and are not guarantees of future performance. The Company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. Factors that may cause actual results to differ materially from current expectations may emerge from time to time, and it is not possible for the Company to predict all of them; such factors include, among other things, changes in global, regional, or local economic, business, competitive, market and regulatory conditions, and those listed under the heading “Risk Factors” and elsewhere in the Company’s filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

Current report

SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated), a Delaware corporation and subsidiary of the Company (“Legacy SBC”) is a management company headquartered in Irvine, California and Tokyo, Japan, that provides management services to cosmetic treatment centers mainly in Japan. The Company and its subsidiaries are primarily focused on providing comprehensive management services to franchisee clinics, including but not limited to advertising and marketing needs across various platforms (such as social media networks), staff management (such as recruitment and training), booking reservations for franchisee clinic customers, assistance with franchisee employee housing rentals and facility rentals, construction and design of franchisee clinics, medical equipment and medical consumables procurement (resale), the provision of cosmetic products to franchisee clinics for resale to clinic customers, licensure of the use of patent-pending and non-patented medical technologies, trademark and brand use, IT software solutions (including but not limited to remote medical consultations), management of the franchisee clinic’s customer rewards program (customer loyalty point program), and payment tools for the franchisee clinics.

Current report

Our wholly owned subsidiaries, SBC Medical Group Co., Ltd., a Japan corporation (“SBC Medical Sub”, L’Ange Cosmetique Co., Ltd., a Japan corporation (“Lange Sub”), and Shobikai Co., Ltd., a Japan corporation (“Shobikai Sub”), are each designated as a “medical service corporation” in Japan. In Japan, a medical service corporation is a legal entity that provides management service to “medical corporations”. The management services are conducted through franchisor-franchisee contracts and/or service contracts between certain subsidiaries of the Company (SBC Medical Sub, Lange Sub, and Shobikai Sub) and the medical corporations that own all 224 of the treatment centers in Japan as of September 30, 2024, which operate under the brand name “Shonan Beauty Clinic”. These clinics provide include but are not limited to breast augmentation, liposuction, rejuvenation treatments (including treatment of wrinkles, acne, scars, cellulite, excess fat, discoloration, and signs of aging), laser skin toning and spot removal, eyes double fold surgery, rhinoplasty, treatment of osmidrosis and hyperhidrosis, hair transplants, gynecological formation treatments, laser hair removal, face line surgeries, cosmetical dental procedures, tattoo removal, lasik eye surgery, lateral canthoplasty, brow lift procedures, androgenetic alopecia treatment, and cheek sagging prevention methods.

Current report

There are currently six medical corporations that the Company’s subsidiaries have entered into franchisor-franchisee contracts and service contracts, consisting of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai, Medical Corporation Jukeikai and Medical Corporation Ritz Cosmetic Surgery. In addition, the Company has entered into service contracts since September 2023 with two additional medical corporations, Medical Corporation Association Furinkai and Medical Corporation Association Junikai (collectively with the six franchisee medical corporations, the “Medical Corporations” or “MCs”). All of the Medical Corporations are deemed to be related parties of the Company since relatives of the CEO of the Company are the members (orshain) of general meetings of members of the Medical Corporations. The CEO of the Company was previously a member of the six franchisee Medical Corporations until he ceased being a member in July 2023. The Company, through SBC Medical Sub, owns equity “deposit” interests (ormochibun) of the Medical Corporations (except Medical Corporation Association Furinkai and Medical Corporation Association Junikai). Although the Company, through SBC Medical Sub, has an equity “deposit” interest to the rights to receive a distribution of residual assets in proportion to the amount of contribution in certain circumstances as provided in the articles of incorporation of each of the Medical Corporations (except Medical Corporation Association Furinkai and Medical Corporation Association Junikai), the Company or SBC Medical Sub does not have voting control over the corporate actions at general meetings of members (orshain) of the Medical Corporations per the requirements of the Japanese Medical Care Act.

Current report

For the three months ended September 30, 2024 and 2023, we generated revenues of $53,084,883 and $47,278,685, respectively, we reported net income attributable to SBC Medical Group Holdings Incorporated of $2,832,894 and $8,356,414, respectively. For the nine months ended September 30, 2024 and 2023, we generated revenues of $160,995,005 and $131,192,729, respectively, we reported net income attributable to SBC Medical Group Holdings Incorporated of $40,075,054 and $25,027,776, respectively, and cash flow provided by operating activities of $27,886,231 and $22,753,983, respectively. As of September 30, 2024, we had retained earnings of $182,923,786.

Current report

Our primary mission is to provide quality comprehensive management services to the Medical Corporations and expand our “Shonan Beauty Clinic” brand. We plan to achieve the mission by maintaining and strengthening our market position and brand in the cosmetic medical treatment management market in Japan, Vietnam, and the United States, and by growing our presence globally.

Current report

Comparison of Results of Operations for the Three Months Ended September 30, 2024 and 2023

Current report

The following table summarizes our operating income as reflected in our unaudited consolidated statements of operations and comprehensive income for the three months ended September 30, 2024 and 2023, and presents information regarding amounts and percentage changes during those periods.

Current report

Revenues, Net

Current report

Revenues, net generated from different revenue streams consist of the following:

Current report

Revenues, net, increased by 12.28% from $47,278,685 for the three months ended September 30, 2023 to $53,084,883 for the three months ended September 30, 2024.

Current report

Japanese Yen (“JPY”) against the U.S. dollar slightly depreciated for the three months ended September 30, 2024, compared to the three months September 30, 2023. For the three months ended September 30, 2024 and 2023, we generated net revenues of $53,084,883 (JPY7,908 million) and $47,278,685 (JPY6,718 million), respectively, we reported net income of $2,834,467 (JPY389 million) and $8,057,791 (JPY1,149 million), respectively. Overall, the unfavorable impacts of the period-to-period foreign exchange rate changes on net revenues was $2,570,776 and favorable impact on net income was $108,549, for the three months ended September 30, 2024.

Current report

The main reasons for the variance of $5,806,198 in revenues, net per revenue stream are as follows:

Current report

Royalty income

Current report

Royalty income for the three months ended September 30, 2024 increased to $15,688,528 by $7,081,529, or 82.28%, from $8,606,999 for the same period in 2023. This increase was mainly due to authorizing the six MCs, which are our main recurring customers, to use our patents and trademarks starting from September 2023, as well as the business expansion of the MCs.

Current report

Procurement services

Current report

The procurement services revenue for the three months ended September 30, 2024 increased to $17,571,299 by $8,611,610, or 96.12%, from $8,959,689 for the same period in 2023. This increase was mainly due to the increased demand on advertising services and medical materials due to the business expansion of MCs.

Current report

Management services

Current report

The management services revenue for the three months ended September 30, 2024 decreased to $12,110,764 by $10,858,423, or 47.27%, from $22,969,187 for the same period in 2023. This decrease was mainly due to the revenue generated by dispatching staff to MCs to provide clinic operation services were discontinued since September 2024, because the Company plans to merge Shobikai Sub to another subsidiary and the related license, held by Shobikai Sub, to conduct such staff dispatching business will be invalid after the merger.

Current report

Rental services

Current report

The rental services revenue for the three months ended September 30, 2024 increased to $4.124,774 by $2,786,971, or 208.32%, from $1,337,803 for the same period. This increase was mainly due to the increased demand for medical equipment from MCs due to the business expansion of MCs.

Current report

Others

Current report

The other revenues for the three months ended September 30, 2024 decreased to $3,589,518 by $1,815,489, or 33.59%, from $5,405,007 for the same period in 2023. This decrease was mainly due to the decrease in demand for leasehold improvement services**.**

Current report

Cost of Revenues

Current report

Cost of revenues for the three months ended September 30, 2024 was $9,845,793 compared to $13,780,309 for the same period in 2023. The decrease was mainly due to the discontinuation of clinic operation staff supporting services provide by Shobikai Sub to MCs since September 2024, and the Company then terminated the employment of the related staff. As a result, labor cost significantly decreased.

Current report

Gross Profit

Current report

Gross profit for the three months ended September 30, 2024 was $43,239,090 compared to $33,498,376 for the same period in 2023. The increase in gross profit by $9,740,714 or 29.08% was mainly due to the increase in royalty income and procurement services with a relatively high gross margin as a result of the factors described above, offset by the decrease in management services revenue as a result of the factors described above.

Current report

Operating Expenses

Current report

Operating expenses for the three months ended September 30, 2024 and 2023 were as follows:

Current report

The operating expenses increased to $29,404,487 for the three months ended September 30, 2024 by $15,929,353, or 118.21%, from $13,475,134 for the same period in 2023. The increase was mainly due to the increase in stock-based compensation, the increase in consulting and professional service fees and the increase in office, utility and other expenses, partially offset by the decrease in depreciation and amortization expenses.

Current report

Stock-based compensation relate to the warrants issued to the service provider that supported SBC’s listing process. These warrants were issued in November 2022 and became exercisable upon the consummation of business combination with Pono Two Capital, Inc., and the fair value was recognized as an expense.

Current report

Consulting and professional service fees increased by $4,157,001, or 455.20%, to $5,070,231 for the three months ended September 30, 2024 from $913,230 for the same period in 2023, mainly due to the increase of the professional service fees incurred related to the business combination transaction.

Current report

Office, utility and other expenses increased by $1,175,844, or 94.40%, to $2,421,455 for the three months ended September 30, 2024 from $1,245,611 for the same period in 2023, mainly due to the insurance expense recognized due to the decrease in the cash surrender values of the corporate-owned life insurance policies and administrative expenses increased in preparation for the listing.

Current report

Depreciation and amortization expense decreased by $2,204,482, or 76.30%, to $684,926 for the three months ended September 30, 2024 from $2,889,408 for the same period in 2023, mainly because the decrease in amortization expense incurred from the intangible assets owned by Cell Pro Japan Co., Ltd.(“Cellpro”), a former subsidiary of the Company, due to the disposal of Cellpro on January 1, 2024.

Current report

Other Income (Expenses)

Current report

Other income (expenses) for the three months ended September 30, 2024 and 2023, were as follows:

Current report

In particular, the other income was $65,922 for the three months ended September 30, 2024, as compared to $1,138,869 for the three months ended September 30, 2023, mainly due to the income from the surrender of life insurance policies. The other expense was $795,158 for the three months ended September 30, 2024, as compared to $98,314 for the three months ended September 30, 2023, mainly due to the increase in unrealized loss from the Company’s investment in a public entity with readily determinable fair value.

Current report

Income Tax Expense

Previous report

References in this report (the “Quarterly 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 unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Previous report

This Quarterly Report includes “forward-looking statements” that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering (as defined below) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.report. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Previous report

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.

Previous report

On January 11, 2024, Pono entered into a non-redemption agreement with an unaffiliated investor (the “Holder”) which agreed to acquire from public stockholders of Pono 1,500,000 to 1,700,000 shares of Class A common stock, par value $0.0001 per share, of Pono 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 Pono’s proposed business combination with SBC, prior to the stockholder meeting to vote on the Extension Amendment (the “Meeting Date”) 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, Pono, 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 the Target, shall cause to be issued or transferred to holder 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 originally terminated 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 if Pono had 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. On August 8, 2024, the parties to the non-redemption agreement entered into an amendment to the non-redemption agreement to extend the clearance date to September 10, 2024, and to agree to close the business combination on or before September 16, 2024. As of June 30, 2024, the Holder had purchased 1,460,771 Public Shares. As such, it has been determined that the Holder has not yet met the minimum share requirement for the transfer of the incentive shares.

Previous report

On February 5, 2024, the Company held a special meeting of stockholders (the “Second Special Meeting”). During the Second 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 February 9, 2024 to November 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 (the “Extension Amendment”). 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.

Previous report

On April 22, 2024, the Company entered into the Fourth Amendment to the Merger Agreement with the parties thereto. The Amendment was entered into solely to extend the Outside Date to September 30, 2024.

Previous report

On January 31, 2023, the Company entered into an Agreement and Plan of Merger (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 capacity as Seller Representative.

Previous report

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.”

Previous report

As a condition to closing of the Business Combination, SBC will complete certain restructuring transactions pursuant to which SBC Medical Group Co., Ltd., a Japanese corporation (“SBC-Japan”) and certain 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.

Previous report

As 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) $1,200,000,000, 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.

Previous report

In 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).

Previous report

On 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 $20.0 million. On February 5, 2024, the Company’s stockholders approved a proposal to extend the date by which the Company must consummate a business combination from February 9, 2024 to November 9, 2024.

Previous report

In 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.

Previous report

On October 26, 2023, the Company entered into the Second Amendment to the Merger Agreement (the “Amendment”) with the parties thereto. Prior to the Amendment, the Pono 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 Amendment, the Company 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.

Previous report

On December 28, 2023, the Company entered into the Third Amendment to the Merger Agreement with the parties thereto. The amendment was entered into solely to extend the Outside Date (as defined in the Merger Agreement) from December 31, 2023 to March 31, 2024.

Previous report

On April 22, 2024, the Company entered into the Fourth Amendment to the Merger Agreement with Pono Two Merger Sub, Inc., SBC Medical Group Holdings Incorporated, Mehana Capital, LLC, and Dr. Yoshiyuki Aikawa. The Amendment was entered into solely to extend the Outside Date (as defined in the Merger Agreement) from June 30, 2024 to September 30, 2024.

Previous report

On August 12, 2024, the Company filed a definitive proxy statement with the SEC for the special meeting of stockholders to approve the Business Combination and related transactions. The special meeting is scheduled for August 23, 2024 at 1:00 p.m. Eastern Time.

Previous report

Issuance of Convertible Promissory Note

Previous report

On May 18, 2023, the Company entered into a Convertible Promissory Note with SBC, pursuant to which SBC agreed to loan the Company an aggregate principal of $1,000,000 (the “Convertible Promissory Note”). The Convertible Promissory Note is non-interest bearing and is due and payable upon the earlier to occur of (i) the first business day following the consummation of the Company’s initial Business Combination and (ii) May 17, 2024, unless accelerated upon the occurrence of an event of default.

Previous report

On February 27, 2024, the Company and SBC entered into an Amendment to the Note (the “Amended Note Purchase Agreement”), which increased the purchase price of the note from $1,000,000 to $2,700,000 and amended the maturity date to the earlier to occur of (i) the first business day following the consummation of the Company’s initial Business Combination and (ii) August 29, 2024, unless accelerated upon the occurrence of an event of default. In consideration for entering into the Amended Note, each of the parties to the Merger Agreement agreed to release each other party from any claims arising out of any termination of the Merger Agreement or failure to consummate the transactions contemplated thereby. The Convertible Promissory Note will automatically convert into Class A Common Stock at one share for each $10 in outstanding principal amount. As of June 30, 2024 and December 31, 2023, the outstanding balance under the Convertible Promissory Note amounted to an aggregate of $2,700,000 and $1,000,000, respectively.

Previous report

We have neither engaged in any operations nor generated any revenues to date. Our only activities from March 11, 2022 (inception) through June 30, 2024 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.

Previous report

For the three months ended June 30, 2024, we had a net loss of $308,266, which resulted from operating and formation costs of $460,648, franchise tax of $41,073, and income tax expense of $40,507, partially offset by interest and dividend income on investments held in the Trust Account for $233,962.

Previous report

For the three months ended June 30, 2023, we had net income of $196,786, which resulted from interest and dividend income on investments held in the Trust Account for $836,888, partially offset by operating and formation costs of $430,842, franchise tax expense of $42,532, and income tax expense of $166,728.

Previous report

For the six months ended June 30, 2024, we had a netlossof $600,812, which resulted from operating and formation costs of $923,287, franchise tax expense of $83,100, and income tax expense of $85,722, partially offset by interest and dividend income on investments held in the Trust Account for $491,297.

Previous report

For the six months ended June 30, 2023, we had net income of $810,119 which resulted from interest and dividend income on investments held in the Trust Account for $2,101,363, partially offset by operating and formation costs of $805,330, franchise tax expense of $56,491, and income tax expense of $429,423.

Previous report

Liquidity, Capital Resources, and Going Concern

Previous report

For the six months ended June 30, 2024, net cash used in operating activities was $895,262, which was due to interest and dividends earned on marketable securities held in the Trust Account of $491,297 and net loss of $600,812, offset by a change in operating assets and liabilities of $196,847.

Previous report

For the six months ended June 30, 2023, net cash used in operating activities was $1,315,001, which was due to interest and dividends earned on marketable securities held in the Trust Account of $2,101,363 and by a change in operating liabilities of $23,757, offset by net income of $810,119.

Previous report

For the six months ended June 30, 2024, net cash provided by investing activities was $3,260,369 which was due to proceeds from the Trust Account of $2,964,667 and proceeds from the Trust Account to pay franchise taxes of $295,702.

Previous report

For the six months ended June 30, 2023, net cash provided by investing activities was $100,883,237, which was primarily due to proceeds from the Trust Account for payment to redeeming shareholders of $100,078,879, proceeds from the Trust Account to pay franchise taxes of $804,358.

Previous report

For the six months ended June 30, 2024, net cash used in financing activities was $1,264,667, which was due to payments to redeeming stockholders of $2,964,667, offset by proceeds from the amended convertible promissory note of $1,700,000.

Previous report

For the six months ended June 30, 2023, net cash used in financing activities was $99,078,879, which was due to payments to redeeming stockholders of $100,078,879, partially offset by proceeds from the amended convertible promissory note of $1,000,000.

Previous report

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.

Previous report

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.

Previous report

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 Unitswas placed in a trust account.

Previous report

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.

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As of June 30, 2024, the Company had $1,384,834 in cash held outside of the Trust Account, working capital deficit, net of income tax payable and franchise tax payable of $1,992,535 and accumulated deficit of $6,596,081. The Company has incurred and expects to continue to incur significant costs in pursuit of the Company’s financing and acquisition plans. For the six months ended June 30, 2024 and 2023, the Company had loss from operations of $1,006,387 and $861,821, respectively and net cash used in operating activities was $895,262 and $1,315,001, respectively. Management plans to address this uncertainty with the successful closing of the business combination. The Company expects that it will need additional capital to satisfy its liquidity needs beyond the net proceeds from the consummation of the Initial Public Offering held outside of the Trust Account for paying existing accounts payable and consummating the Business Combination. Although certain of the Company’s initial stockholders, officers and directors or their affiliates have committed up to $1,500,000 Working Capital Loans (see Note 5) from time to time or at any time, there is no guarantee that the Company will receive such funds. In addition, the Company will have until November 9, 2024 to consummate a business combination. If a business combination is not consummated by November 9, 2024, less than one year after the date these unaudited condensed consolidated financial statements are issued, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, along with the lack of liquidity, 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 November 9, 2024. 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 November 9, 2024.

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Registration and Stockholder Rights Agreement

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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 signed on the effective date of the Initial Public 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.

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Administrative Support Agreement