Business Context and Reporting Period
This Form 10-Q was filed by Pono Capital Two, Inc., not SBC Medical Group Holdings Inc. It covers the quarter ended September 30, 2022, and the period from March 11, 2022, inception, through September 30, 2022. Pono Capital Two is a blank-check company formed to pursue a business combination and had not commenced operating activities or selected a target as of the filing date.
Financial Metrics
- Assets: $119.1 million, including $118.2 million held in the Trust Account and $580,000 of cash outside the Trust Account.
- Redeemable Class A shares: 11.5 million shares recorded at a redemption value of $117.9 million, or $10.26 per share.
- Liabilities: $4.3 million, including $4.0 million of deferred underwriting fees.
- Stockholders’ deficit: $3.2 million.
- Revenue: None. The company expects no operating revenue until after a business combination.
- Three-month net loss: $11,419, comprising $177,865 of operating and formation costs and $125,753 of franchise tax expense, partly offset by $350,850 of Trust Account interest and dividend income.
- Net loss from inception: $13,039.
- Cash flow from operations: $(368,410) from inception through September 30, 2022.
- Cash flow from investing: $(117.9) million, primarily the deposit of IPO proceeds into the Trust Account.
- Cash flow from financing: $118.8 million, including $113.0 million of net IPO proceeds and $6.3 million from private placement units.
- Liquidity: $580,000 of cash was available outside the Trust Account for working capital. The Trust Account is generally restricted to funding a business combination, redemptions, or permitted tax payments.
- Debt: No related-party loans were outstanding at September 30, 2022. A $300,000 sponsor promissory note was repaid at the IPO closing.
Material Changes Versus the Prior Comparable Period
The filing does not provide a meaningful year-over-year or prior-year comparable period because the company was formed on March 11, 2022. The principal development during the quarter was the August 9, 2022 initial public offering of 11.5 million units for gross proceeds of $115.0 million, together with a $6.3 million private placement. The company also began earning interest on Trust Account investments and incurred public-company, formation, franchise-tax, and offering-related costs.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management had not identified a target or begun substantive discussions regarding a business combination as of September 30, 2022.
- The company generally had nine months from the IPO closing, until May 9, 2023, to complete a business combination, with potential extensions to February 9, 2024, subject to specified conditions and additional deposits.
- Failure to complete a business combination within the permitted period would require liquidation, redemption of the public shares, and dissolution. Management therefore identified substantial doubt about the company’s ability to continue as a going concern.
- Public stockholders may redeem shares in connection with a business combination or certain charter amendments. The company cannot redeem shares if doing so would reduce net tangible assets below $5.0 million.
- The company had 11.5 million public warrants and 634,375 placement warrants outstanding. Public warrants generally have an $11.50 exercise price and become exercisable only after specified business-combination conditions.
- A $4.0 million deferred underwriting fee is payable only if a business combination is completed; underwriters waived this fee if the company liquidates without completing a transaction.
- COVID-19 effects, the Russia-Ukraine conflict, market volatility, financing availability, redemption levels, and the potential 1% excise tax on certain post-2022 stock repurchases could affect the company’s ability to complete a transaction.
- The filing reports no legal proceedings, no off-balance-sheet arrangements, and no material changes to previously disclosed risk factors. Management concluded that disclosure controls were effective.
Facts an Investor Should Verify
- Confirm the issuer identity: the supplied filing is for Pono Capital Two, Inc., whereas the request identifies SBC Medical Group Holdings Inc.
- Verify whether a business combination was completed by the May 9, 2023 deadline or under a valid extension, and review any subsequent liquidation or redemption filings.
- Review the amount remaining in the Trust Account, public-share redemptions, and any extension payments or financing.
- Assess the effect of the $4.0 million deferred underwriting fee, warrant dilution, and potential sponsor or working-capital financing.
- Review subsequent filings for the identity and terms of any eventual target business and changes to the company’s going-concern status.