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Item 7. Management’s Discussion and Analysis

2024-03-19 compared with 2023-03-09 · 226 added, 135 removed, 69 unchanged (84% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in this report (the “Annual Report”) to “we,” “us” or the “Company” refer to Pono

Capital Two, Inc.

References to our “management” or our “management team”

refer to our officers and directors, and references to the “Sponsor” refer to Mehana Capital LLC .

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction

with the financial statements and the notes thereto contained elsewhere in this Annual Report.

Certain information contained in the discussion

and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Please see “Forward-Looking

in this report (the “Annual Report”) to “we,” “us,” “Pono,” or the

“Company” refer to Pono Capital Two,

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.

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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.

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.

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

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

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

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.

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

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

(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

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 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, we 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,

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.

of Convertible Promissory Note

May 18, 2023, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with SBC.

On May 26, 2023, we issued

and sold to SBC a convertible promissory note (the “Note”) of $1,000,000 in aggregate principal amount (the “Principal

The Note is convertible into shares of our Class A common stock.

On 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 a specified

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.

On February 27, 2024, we entered into an Amendment to the Note Purchase Agreement (the “Amended Note Purchase

Agreement”) with SBC, which increased the purchase price of the Note from $1,000,000 to $2,700,000.

prior to the merger being effected in connection with the consummation of the Business Combination, the outstanding Principal Amount

will be converted automatically into the number of shares of common stock equal to the quotient obtained by dividing (x) the Principal

Amount by (y) $10.00, subject to customary adjustments for any stock splits or combinations occurring prior to conversion.

of Operations

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Our only activities

for the period from March 11, 2022 (inception) through December 31, 2022 were organizational activities, those necessary to prepare

for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a business

We do not expect to generate any operating revenues until after the completion of our initial business combination.

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

the period from March 11, 2022 (inception) through December 31, 2022 , we had net income

of $552,813, which resulted from interest and dividend income on investments held in the Trust

Account for $1,345,016, partially offset by operating and formation costs of $382,051, franchise tax expense of $161,644, and income

tax expense of $248,508.

and Capital Resources

from March 11, 2022 (inception) through December 31, 2023 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.

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.

the year ended December 31, 2023 , we had net income of $339,767, which resulted from interest and

dividend income on investments held in the Trust Account of $2,641,407, partially offset by operating and formation costs of $1,635,452,

franchise tax expense of $137,379, and income tax expense of $528,809.

the period from March 11, 2022 (inception) through December 31, 2022, we had net income of $552,813, which resulted from operating and

formation costs of $382,051, income tax expenses of $248,508 and franchise tax expenses of $161,644, partially offset by interest and

dividend income on investments held in the Trust Account for $1,345,016.

Capital Resources, and Going Concern

the year ended December 31, 2023 , net cash used in operating activities was $2,132,921, which

was due to interest and dividends earned on marketable securities held in the Trust Account of $2,641,407, offset by net income

of $339,767, and a change in operating assets and liabilities of $168,719.

the period from March 11, 2022 (inception) through December 31, 2022, net cash used in operating

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net income of $552,813 and a change in operating assets and liabilities of $329,387.

the year ended December 31, 2023, net cash provided by investing activities was $101,010,630, which was 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 $931,751.

the period from March 11, 2022 (inception) through December 31, 2022 net cash used in investing activities was $117,875,000 which was

primarily due to the investment of cash in the Trust Account.

due to the investment of cash in the Trust Account.

the year ended December 31, 2023, net cash used in financing activities was $99,078,879, which was due to payment to redeeming shareholders

of $100,078,879, partially offset by proceeds from convertible promissory note of $1,000,000.

the period from March 11, 2022 (inception) through December 31, 2022, net cash provided by financing

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growth strategies.

do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating

our business.

However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating

an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate

our business prior to our initial business combination.

Moreover, we may need to obtain additional financing either to complete our initial

business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial

business combination, in which case we may issue additional securities or incur debt in connection with such business combination.

accompanying financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going

concern and the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred

and expects to continue to incur significant costs in pursuit of the Company’s financing and acquisition plans.

Management plans

to address this uncertainty with the successful closing of the business combination.

The Company will have until May 9, 2023 (or up to

February 9, 2024, as applicable) to consummate a business combination.

If a business combination is not consummated by May 9, 2023, less

than one year after the date the accompanying financial statements are issued, there will be a mandatory liquidation and subsequent dissolution

of December 31, 2023, the Company had $284,394 in cash held outside of the Trust Account, working capital deficit, net of income tax

payable and franchise tax payable of $1,129,417 and accumulated deficit of $5,995,269.

The Company has incurred and expects to continue

to incur significant costs in pursuit of the Company’s financing and acquisition plans.

For the year ended December 31, 2023 the

Company had loss from operations of $(1,772,831) and net cash used in operating activities was $2,132,921.

The Company has further satisfied

liquidity needs through a Convertible Promissory Note of $1,000,000.

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 consolidated financial statements are issued, there will be a mandatory liquidation and subsequent dissolution

of the Company.

Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent

dissolution, raises substantial doubt about the Company’s ability to continue as a going concern.

No adjustments have been made

to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 9, 2023.

The Company intends to

complete the initial business combination before the mandatory liquidation date.

However, there can be no assurance that the Company

will be able to consummate any business combination by May 9, 2023.

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

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.

Sheet Arrangements

of December 31, 2022, we did not have any off-balance sheet arrangements.

of December 31, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements.

and Stockholder Rights Agreement

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that may be issued upon conversion of the Units issued as part of the working capital loans and extension loans and Class A common stock

issuable upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement to

be signed prior to or on the effective date of the Proposed Offering, requiring the Company to register such securities for resale (in

the case of the Founder Shares, only after conversion to the Class A common stock).

The holders of these securities are entitled to make

up to two demands, excluding short form demands, that the Company registers such securities.

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”

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The Company has agreed to

pay to Mehana Capital LLC, the Sponsor, $10,000 per month for these services during the 9-month period to complete a business combination.

For the period from March 11, 2022 (inception) through December 31, 2022, $50,000 was paid to Mehana Capital LLC for these services.

pay to Mehana Capital LLC, the Sponsor, $10,000 per month for these services to complete a business combination.

For the year ended December

31, 2023, $120,000 was incurred and paid to Mehana Capital LLC for these services.

For the period from March 11, 2022 (inception) through

December 31, 2022, $50,000 was paid to Mehana Capital LLC for these services.

Simultaneously

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that the Company completes a business combination, subject to the terms of the underwriting agreement.

Accounting Policies

preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United

States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure

of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.

results could materially differ from those estimates.

We have identified the following critical accounting policies:

Financial Instruments

Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded

derivatives in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

For derivative financial instruments that

are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued

at each reporting date, with changes in the fair value reported in the statements of operations.

For derivative instruments that are

classified as equity, the derivative instruments are initially measured at fair value (or allocated value), and subsequent changes in

fair value are not recognized as long as the contracts continue to be classified in equity.

Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s

specific terms and applicable authoritative guidance in ASC 480 and ASC 815.

The assessment considers whether the warrants are freestanding

financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all

of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common

stock, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted

at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component

of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification,

the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet

date thereafter.

Stock Subject to Possible Redemption

of the Class A common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the

redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in

connection with the business combination and in connection with certain amendments to the Company’s amended and restated certificate

of incorporation.

In accordance with ASC 480, conditionally redeemable Class A common stock (including shares of Class A common stock

that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain

events not solely within the Company’s control) is classified as temporary equity.

Ordinary liquidation events, which involve the

redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480.

Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its Public Shares

in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001.

However, the threshold

in its charter would not change the nature of the underlying shares as redeemable and thus Public Shares would be required to be disclosed

outside of permanent equity.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value

of redeemable common stock to equal the redemption value at the end of each reporting period.

Such changes are reflected in additional

paid-in capital, or in the absence of additional paid-in capital, in accumulated deficit.

Income Per Share

income per share is computed by dividing net income by the weighted-average number of shares outstanding during the period.

the income per share calculation allocates income shared pro rata between Class A and Class B common stock.

As a result, the calculated

net income per share is the same for Class A and Class B common stock.

The Company has not considered the effect of the Public Warrants

and Placement Warrants, to purchase an aggregate of 12,134,375 shares in the calculation of income per share, since the exercise of the

warrants is contingent upon the occurrence of future events.

Note - Related Party

April 25, 2022, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public

Offering pursuant to a promissory note (the “Promissory Note”).

This loan is non-interest bearing and payable on the earlier

of (i) March 31, 2023 or (ii) the date on which Company consummates the Initial Public Offering.

Prior to the Initial Public Offering,

the Company had borrowed $300,000 under the Promissory Note.

The outstanding balance under the Promissory Note of $300,000 was repaid

at the closing of the Initial Public Offering on August 9, 2022.

Accounting Estimates

prepare our consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which require our management

to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

To the extent that there

are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our

circumstances and expectations for the future based on available information.

We evaluate these estimates on an ongoing basis.

consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were

highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from

period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact

on our financial condition or results of operations.

There are items within our financial statement that require estimation but are not

deemed critical, as defined above.

a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the Notes to Consolidated Financial

Statements in "Item 15.

Exhibits and Financial Statement Schedules" of this report.

Accounting Standards

August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic

470-0) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify

accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion

and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity

classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible

debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings

per share guidance, including the requirement to use the if-convened method for all convertible instruments.

ASU 2020-06 is effective

for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption

permitted for fiscal years beginning after December 15, 2020.

The Company adopted ASU 2020-06 effective March 11, 2022 (inception).

adoption of ASU 2020-06 did not have a material impact on the financial statements.

does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material

effect on the Company’s financial statements.

QUANTITATIVE AND

QUALITATIVE DISCLOSURES ABOUT MARKET RISK

December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires

public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective

for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted.

The accounting pronouncement

is not expected to have a material impact on our consolidated financial statements and related disclosures.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

required for smaller reporting companies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis