Business Context and Reporting Period
The filing is a Form 10-K for Pono Capital Two, Inc., not an operating-company filing under the name SBC Medical Group Holdings Inc. It covers the period from incorporation on March 11, 2022, through December 31, 2022, and was filed March 8, 2023.
Pono Capital Two was a blank-check company formed to pursue an initial business combination, with a stated focus on disruptive technology companies in Asia, particularly Japan. It had not commenced operating activities or generated operating revenue as of December 31, 2022.
Financial Metrics
| Metric | Period Ended December 31, 2022 |
|---|---|
| Operating revenue | $0 |
| Interest and dividend income from Trust Account | $1.345 million |
| Operating and formation costs | $382,051 |
| Franchise tax expense | $161,644 |
| Income tax expense | $248,508 |
| Net income | $552,813 |
| Basic and diluted earnings per share | $0.06 |
| Net cash used in operating activities | $462,816 |
| Net cash used in investing activities | $117.875 million, primarily Trust Account funding |
| Net cash provided by financing activities | $118.823 million |
| Cash outside Trust Account | $485,564 |
| Trust Account investments | $119.220 million |
| Total assets | $119.942 million |
| Total liabilities | $4.591 million |
| Deferred underwriting fee payable | $4.025 million |
| Class A shares subject to possible redemption | $118.710 million |
| Stockholders' deficit | $3.359 million |
The company completed its initial public offering on August 9, 2022, issuing 11.5 million units for gross proceeds of $115.0 million. It also sold 634,375 private-placement units to its Sponsor for $6.344 million. The Trust Account was funded with $117.875 million and invested in U.S. Treasury securities or qualifying money market funds.
The filing reports no bank debt or outstanding related-party loans at year-end. The company had no off-balance-sheet arrangements.
Material Changes Versus the Prior Comparable Period
No prior comparable annual period is presented because the company was incorporated on March 11, 2022. The principal developments during 2022 were formation, the August IPO and private placement, establishment of the Trust Account, and the commencement of the search for a business-combination target.
Because the company had no operating business, changes in results primarily reflect IPO-related costs, taxes, and interest earned on Trust Account investments rather than operating performance.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- On January 31, 2023, after year-end, the company entered into a merger agreement with SBC Medical Group Holdings Incorporated. The transaction contemplates a merger of SBC with Pono Two Merger Sub, with SBC surviving, and restructuring SBC Medical Group Co., Ltd. and related entities as subsidiaries of SBC.
- The stated aggregate consideration for SBC securities is based on a $1.2 billion value, adjusted for SBC net working capital, debt less cash, and specified transaction expenses. Closing remained subject to the agreement's conditions and restructuring requirements.
- The company had until May 9, 2023 to complete a business combination, with potential extensions to February 9, 2024 subject to specified conditions, including monthly deposits into the Trust Account. Failure to complete a transaction would require liquidation and redemption of the public shares.
- Management and the auditor identified substantial doubt about the company's ability to continue as a going concern because of the mandatory liquidation deadline. The financial statements contain no liquidation adjustments.
- Public stockholders may redeem their shares in connection with a business combination or liquidation. The Sponsor agreed to vote in favor of a business combination and generally waived redemption and liquidation rights for its founder shares and placement securities.
- A $4.025 million deferred underwriting commission would become payable from the Trust Account only if a business combination is completed.
- The company identified risks relating to its ability to complete a transaction, obtain additional financing, satisfy redemption demands, market volatility, competition for targets, conflicts of interest, COVID-19, the Russia-Ukraine conflict, and the potential U.S. excise tax on certain post-2022 stock repurchases.
- The Sponsor received $10,000 per month for office space, utilities, and administrative support; $50,000 was paid during the reporting period.
- Management concluded that disclosure controls and procedures were effective as of December 31, 2022. The filing did not include management's internal-control attestation because of the applicable transition period for newly public companies.
Most Important Facts an Investor Should Verify
- Confirm the filing entity and ticker information: the submitted filing is for Pono Capital Two, Inc. and reports securities under PTWO, PTWOU, and PTWOW, rather than directly reporting SBC Medical Group's historical operating results.
- Review the January 31, 2023 merger agreement and subsequent filings for transaction status, closing conditions, restructuring steps, valuation adjustments, financing, and any required shareholder approvals.
- Verify the liquidation deadline, any extensions obtained, required extension deposits, and the amount ultimately available for public-share redemptions.
- Assess the effect of shareholder redemptions, deferred underwriting fees, warrants, founder shares, and any PIPE or other financing on post-combination ownership and dilution.
- Review SBC Medical Group's separate financial statements and operating metrics; this 10-K does not provide SBC's revenue, profit, cash flow, margins, debt, or liquidity metrics.
- Evaluate the going-concern uncertainty and whether the Trust Account and cash outside the Trust Account were sufficient to fund operations through the transaction or liquidation deadline.