PONO CAPITAL(PONO) - 2023 Q4 - Annual Report

Discontinued Operations - The company discontinued non-core operations, including drone photography and joint R&D services, as of June 30, 2023[304]. - A.L.I. Technologies Inc. filed for voluntary bankruptcy on December 27, 2023, following the discontinuation of its operations[305]. - The company discontinued its drone solution service and the remaining operations of A.L.I. Technologies Inc. as part of a strategic cost reduction plan[321]. - The company’s discontinued operations included the XTURISMO hoverbike and the COSMOS air mobility platform[306]. - Revenues from discontinued operations decreased to $1,073,049 in 2023 from $5,207,490 in 2022, while gross loss increased to $(1,750,083) from a profit of $136,983[321]. Financial Performance - The company reported general and administrative expenses of $9,464,905 for the year ended December 31, 2023, a significant increase of 1,020,925.4% compared to $927 in 2022[312]. - The net loss from continuing operations for the year ended December 31, 2023, was $25,938,471, compared to a net loss of $14,479,819 in 2022[311]. - The company reported a net loss of $9,516,032 for the year ended December 31, 2023, representing a $9,513,562 or 385,164.5% increase from a net loss of $2,470 in 2022[320]. - Total liabilities increased to $19,547,304 as of December 31, 2023, compared to $9,870,442 as of December 31, 2022[327]. - As of December 31, 2023, the company had only $2,072 in cash, down from $300,943 as of December 31, 2022, with a working capital deficit of $11,972,171[322]. - The company expects to incur further losses and has not yet achieved profitable operations, raising substantial doubt about its ability to continue as a going concern[325]. Funding and Capital Structure - The company plans to raise additional funds through debt or equity offerings to support its operations and growth strategy, including the redesign and commercialization of its planned MAV[326]. - The company has a significant amount of indebtedness, with the bankruptcy filing of A.L.I. constituting an event of default on secured convertible notes totaling $4,200,000[327]. - The Company entered into a Subscription Agreement on February 2, 2023, for the purchase of 31,963 shares of AERWINS, Inc. for a total of $5,000,000, which was exchanged for 50,000 shares of the Company[331]. - A Standby Equity Purchase Agreement allows the Company to sell up to $100 million in shares over 36 months, with shares purchased at 96% or 97% of the Market Price[333]. - The Company issued two Convertible Notes to Lind Global totaling $4,200,000, with a purchase price of $3,500,000, and Warrants for 39,213 shares of Common Stock[336]. - The first tranche of the Convertible Notes was issued on April 12, 2023, for a purchase price of $2,100,000, and the second tranche on May 23, 2023, for $1,400,000[337]. Cash Flow and Liquidity - The Company reported net cash used in operating activities of $741,247 for the year ended December 31, 2023, compared to $200 in 2022[349]. - Financing activities provided $4,572,147 in cash for the year ended December 31, 2023, while cash used in discontinued operations was $4,898,802[349]. - Cash and cash equivalents at the end of the year were $2,072, a decrease from $300,943 at the beginning of the year[349]. - Net cash used in operating activities was $6,577,441 for the year ended December 31, 2023, compared to $16,865,274 for the year ended December 31, 2022[350]. - Net cash used in investing activities amounted to $62,066 for the year ended December 31, 2023, down from $344,964 for the year ended December 31, 2022[351]. - Net cash provided by financing activities was $5,571,605 for the year ended December 31, 2023, primarily from bond proceeds of $2,797,698 and reverse recapitalization proceeds of $1,595,831[352]. Operational Strategy - The company aims to develop and manufacture a single-seat optionally Manned Air Vehicle (MAV) compliant with FAA regulations, with production expected to commence in 2027[309]. - The company plans to establish a dealer distribution network to market and sell MAVs primarily in the United States, China, and Europe[309]. - The company is focused on creating a highly profitable structure for mass production of MAVs, emphasizing design and supply chain control[310]. - The company aims to set a new standard for safe low-altitude manned flight with its MAV development[302]. - The company has entered into a Letter of Intent with Helicopter Technology to support MAV development[303]. Lease and Off-Balance Sheet Arrangements - The company entered into 13 operating leases and two finance leases through its subsidiary, A. L. I. Technologies[353]. - The company has no off-balance sheet arrangements as of December 31, 2023[354]. Currency Exchange Rates - The current JPY to USD exchange rate was 140.92 as of December 31, 2023, compared to 131.81 as of December 31, 2022[367]. - The average JPY to USD exchange rate was 140.50 for the year ended December 31, 2023, compared to 131.46 for the year ended December 31, 2022[367]. Revenue Recognition - Revenue is recognized in accordance with ASC Topic 606, with the consumption tax on sales calculated at 10% of gross sales[368][369].