NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Pono
Capital Three, Inc. (the “Company”) is a blank check company incorporated in Delaware on March 11, 2022. On October 14, 2022,
the Company redomiciled in the Cayman Islands. The Company was 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 (a “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company
is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and
emerging growth companies.
As
of March 31, 2023, the Company had not commenced any operations. All activity from inception through March 31, 2023 relates to the Company’s
formation and initial public offering (“Initial Public Offering”), which is described below. The Company will not generate
any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31
as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on February 9, 2023. On February 14, 2023,
the Company consummated the Initial Public Offering of 11,500,000 units, (the “Units” and, with respect to the Class A ordinary
shares included in the Units sold, the “Public Shares”), including 1,500,000 Units issued pursuant to the exercise of the
underwriter’s over-allotment option in full, generating gross proceeds of $115,000,000, which is discussed in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 565,375 units (the “Placement Units”)
at a price of $10.00 per Placement Unit in a private placement to Mehana Capital LLC (the “Sponsor”), including 54,000 Placement
Units issued pursuant to the exercise of the underwriter’s over-allotment option in full, generating gross proceeds of $5,653,750,
which is described in Note 4.
Following
the closing of the Initial Public Offering on February 14, 2023, 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 Units was placed in a trust account (the “Trust
Account”), and will be invested only in U.S. government treasury obligations with maturities of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust
Account, as described below.
Transaction
costs related to the issuances described above amounted to $5,610,317, consisting of $1,265,000 of cash underwriting fees, $3,450,000
of deferred underwriting fees and $895,317 of other offering costs.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least
80% of the value of the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on income
earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete
a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target
or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company
under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company will provide its holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated
to be $10.25 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to
the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect
to the Company’s warrants. With the completion of the Initial Public Offering, the Public Shares subject to redemption are recorded
at redemption value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”).
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon consummation of such
Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If the Company seeks shareholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the amended and restated memorandum
and articles of association (the “Amended and Restated Memorandum and Articles of Association”) provides that a Public Shareholder,
together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
If
a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the
Company will offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”),
and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC
prior to completing a Business Combination.
The
Sponsor has agreed (a) to vote its Class B ordinary shares, the ordinary shares included in the Placement Units and the Public Shares
purchased in the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Amended and Restated
Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior to the consummation
of a Business Combination unless the Company provides dissenting Public Shareholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment; (c) not to redeem any shares (including the Class B ordinary shares) and Placement Units (including
underlying securities) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business
Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder
approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association
relating to shareholders’ rights of pre-Business Combination activity and (d) that the Class B ordinary shares and Placement Units
(including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is
not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public
Shares purchased in the Initial Public Offering if the Company fails to complete its Business Combination.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company will have until 12 months (or up to 18 months from the closing of the Initial Public Offering at the election of the Company
pursuant to six one month extensions subject to satisfaction of certain conditions, including the deposit of up to $379,500 ($0.033 per
unit) for such one month extension, into the Trust Account, or as extended by the Company’s shareholder in accordance with the
Amended and Restated Memorandum and Articles of Association) from the closing of the Initial Public Offering to consummate a Business
Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination
Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no
more than five business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to
the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable and less interest to pay dissolution
expenses up to $100,000), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public
Shareholders’ rights as shareholder (including the right to receive further liquidation distributions, if any), subject to applicable
law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and
the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company,
subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has
agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete
a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust
Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the
per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The
Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products
sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce
the amounts in the Trust Account to below $10.25 per share, except as to any claims by a third party who executed a waiver of any and
all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter of
the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have
to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s
independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute
agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going
Concern and Liquidity
As
of March 31, 2023 and December 31, 2022, the Company had $521,599 and $88,277 in cash, respectively, and a working capital surplus of
$650,594 and a working capital deficit of $352,489, respectively. Prior to the completion of the Initial Public Offering, the Company
lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance
date of the unaudited condensed financial statements. The Company has since completed its Initial Public Offering at which time capital
in excess of the funds deposited in the Trust Account and/or used in fund offering expenses was released to the Company for general working
capital purposes. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may provide
us up to $1,500,000 under Working Capital Loans (see Note 5.)
The
accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“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 February 14, 2024 (or up to August 14, 2024, as applicable)
to consummate a Business Combination. If a Business Combination is not consummated by February 14, 2024, less than one year after the
date these unaudited condensed 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 February 14, 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 February 14, 2024.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target
company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. These unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Additionally,
as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related
economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which
the Company ultimately consummates a Business Combination, may be materially and adversely affected. Further, the Company’s ability
to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events,
including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms
acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on
the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable.
The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures
normally included in unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant
to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes
necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management,
the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying
unaudited condensed financial statements should be read in conjunction with the Company’s form 10-K as filed with the SEC on March
30, 2023. The interim results for three months ended March 31, 2023 are not necessarily indicative of the results to be expected for
the period ending December 31, 2023 or for any future periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another
public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ from those estimates.
Cash
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
Investments
Held in Trust Account
As
of March 31, 2023 the assets held in the Trust Account were held in money market funds, which were invested in U.S. Treasury securities.
All of the Company’s investments held in the Trust Account are classified as trading securities. Such trading securities are presented
on the unaudited condensed balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change
in fair value of investments held in Trust Account are included in interest and dividend income on investments held in Trust Account
in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are
determined using available market information. The Company had $118,491,047 and $0 and in investments held in the Trust Account as of
March 31, 2023 and December 31, 2022, respectively.
Income
Taxes
The
Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition
of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements
and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.
ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred
tax assets will not be realized.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s unaudited condensed financial statements
and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are
no significant uncertain tax positions requiring recognition in the Company’s unaudited condensed financial statements.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of March 31, 2023. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position. The Company is considered an
exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands
or the United States. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements.
Class
A Ordinary Shares Subject To Possible Redemption
All
of the Class A ordinary shares 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 shareholder vote or tender offer
in connection with the Business Combination and in connection with certain amendments to the Company’s Amended and Restated Articles
of Association. In accordance with ASC 480, conditionally redeemable Class A ordinary shares (including Class A ordinary shares 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) are 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. Although
the 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 (shareholders’ 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 ordinary shares to equal the redemption value ($10.25 per share) 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. As of December 31,
2022, Class A ordinary shares subject to possible redemption was $0.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
As
of March 31, 2023, the Class A ordinary shares reflected in the unaudited condensed balance sheet is reconciled in the following table:
SCHEDULE
OF REDEEMABLE CLASS A COMMON STOCK
| | |
| | |
| Gross proceeds | |
$ | 115,000,000 | |
| Less: | |
| | |
| Proceeds allocated to Public Warrants | |
| (3,392,500 | ) |
| Issuance costs allocated to Class A ordinary shares | |
| (5,404,094 | ) |
| Plus: | |
| | |
| Accretion of Class A ordinary
shares subject to redemption to redemption amount | |
| 12,201,276 | |
| Class A ordinary shares subject
to possible redemption | |
$ | 118,404,682 | |
Offering
Costs associated with the Initial Public Offering
The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A - Expenses of Offering.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to
the Initial Public Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are
recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately.
The Company incurred offering costs amounting to $5,610,317, consisting of $1,265,000 of cash underwriting fees, $3,450,000 of deferred
underwriting fees and $895,317 of other offering costs. As such, the Company recorded $5,404,094 of offering costs as a reduction of
temporary equity and $206,223 of offering costs as a reduction of permanent equity.
Net
Income Per Share
Net
income per share is computed by dividing net income by the weighted average number ordinary shares outstanding for the period. Therefore,
the income per share calculation allocates income shared pro rata between Class A and Class B ordinary shares. As a result, the calculated
net income per share is the same for Class A and Class B ordinary shares. The calculation of diluted income per share does not consider
the effect of the warrants issued in connection with the Initial Public Offering and Placement Warrants (as defined in Note 4) since
the exercise of the warrants are contingent upon the occurrence of future events.
The
following table reflects the calculation of basic and diluted net income per share:
SCHEDULE
OF OF BASIC AND DILUTED NET INCOME PER SHARE
| | |
For
the three months ended
March
31, 2023 | | |
For the
period from March 11, 2022
(inception) through March 31, 2022 | |
| | |
Class
A | | |
Class
B | | |
Class
A | | |
Class
B | |
| Basic and diluted net income per share: | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | |
| Net Income | |
$ | 275,738 | | |
$ | 223,676 | | |
$ | — | | |
$ | — | |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
| Weighted Average Ordinary Shares | |
| 6,084,438 | | |
| 4,935,622 | | |
| — | | |
| — | |
| Basic and diluted net income per ordinary shares | |
$ | 0.05 | | |
$ | 0.05 | | |
$ | — | | |
$ | — | |
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on this account
and management believes the Company is not exposed to significant risks on such account.
PONO
CAPITAL THREE, INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, Fair Value Measurement,
approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Derivative
Financial Instruments
The
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 unaudited condensed 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.
Warrants
The
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 ordinary
shares, 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.
For
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
thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed
statements of operations.
The
warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and will be on each condensed
balance sheet date thereafter. As the warrants are equity classified, they are initially measured at fair value (or allocated value).
Subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s unaudited condensed financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
The
registration statement for the Company’s Initial Public Offering was declared effective on February 9, 2023. On February 14, 2023,
the Company consummated the Initial Public Offering of 11,500,000 Units, 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. Each Unit consisted of one Class A
ordinary share and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one Class
A ordinary share at an exercise price of $11.50 per whole share (see Note 7).
PONO CAPITAL THREE, INC.
NOTES TO CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 565,375 Placement Units at a price of $10.00 per
Placement Units, in a private placement to the Sponsor, including 54,000 Placement Units issued pursuant to the exercise of the underwriters’
over-allotment option in full, generating gross proceeds of $5,653,750. Each Placement Unit consists of one Class A ordinary share (“Placement
Share”) and one warrant (“Placement Warrant”). The proceeds from the sale of the Placement Units were added to the
net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within
the Combination Period, the proceeds from the sale of the Placement Units held in the Trust Account will be used to fund the redemption
of the Public Shares (subject to the requirements of applicable law) and the Placement Units will expire worthless.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
May 17, 2022, the Sponsor paid an aggregate of $25,000 to cover certain expenses on behalf of the Company in exchange for the issuance
of 2,875,000 Class B ordinary shares (the “Founder Shares”). On December 22, 2022, the Sponsor subscribed for additional
Founder Shares resulting in the issuance of 2,060,622 Class B ordinary shares to the Sponsor for consideration of $206, which remains
outstanding as of the date of these condensed financial statements. The Founder Shares included an aggregate of up to 643,777 Class B
ordinary shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option is not exercised
in full or in part, so that the Sponsor will own, on an as-converted basis, 30% of the Company’s issued and outstanding shares
after the Initial Public Offering. The underwriters exercised the over-allotment option in full, so those shares are no longer subject
to forfeiture.
The
Sponsor has agreed not to transfer, assign or sell any of the Class B ordinary shares (except to certain permitted transferees as disclosed
herein) until, with respect to any of the Class B ordinary shares, the earlier of (i) six months after the date of the consummation of
a Business Combination, or (ii) the date on which the closing price of the Company’s ordinary shares equals or exceeds $12.00 per
share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading
day period commencing after a Business Combination, with respect to the remaining any of the Class B ordinary shares, upon six months
after the date of the consummation of a Business Combination, or earlier, in each case, if, subsequent to a Business Combination, the
Company consummates a subsequent liquidation, merger, share exchange or other similar transaction which results in all of the Company’s
shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Promissory
Note - Related Party
On
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. On February 15, 2023, the Company repaid the outstanding balance under the
Promissory Note of $300,000 that was borrowed prior to our initial public offering. As of March 31, 2023, there was no borrowings outstanding
under the Promissory Note. The Company no longer has the ability to borrow under the Promissory Note.
PONO CAPITAL THREE, INC.
NOTES TO CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
Administrative
Support Agreement
The
Company’s Sponsor has agreed, commencing from the date of the Initial Public Offering through the earlier of the Company’s
consummation of a Business Combination and its liquidation, to make available to the Company certain general and administrative services,
including office space, utilities and administrative services, as the Company may require from time to time. The Company has agreed to
pay to Mehana Capital LLC, the Sponsor, $10,000 per month for these services during the 12-month period to complete a Business Combination.
For the three months ended March 31, 2023, and for the period from March 11, 2022 (inception) through March 31, 2022, the Company incurred
expenses of $15,000 and $0, respectively. As of March 31, 2023 and December 31, 2022, $15,000 and $0, respectively was accrued by the
Company for expenses incurred under this agreement.
Related
Party Loans
In
order to finance transaction costs in connection with the initial Business Combination, the Sponsor or an affiliate of the Sponsor or
certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the
Company completes the initial Business Combination, the Company will repay such loaned amounts. In the event that the initial Business
Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned
amounts, including the repayment of loans from the Sponsor to pay for any amount deposited to pay for any extension of the time to complete
the initial Business Combination, but no proceeds from the Trust Account would be used for such repayment. Up to $ of such loans
may be convertible into Units, at a price of $ per Unit at the option of the lender, upon consummation of the initial Business Combination.
The Units would be identical to the Placement Units. The terms of such loans by the Company’s officers and directors, if any, have
not been determined and no written agreements exist with respect to such loans.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration
and Shareholder Rights Agreement
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 Class A ordinary shares issuable upon
the exercise of the Placement Warrants and any Class A ordinary shares and warrants (and underlying Class A ordinary shares) that may
be issued upon conversion of the Units issued as part of the working capital loans and extension loans and Class A ordinary shares issuable
upon conversion of the Founder Shares, will be entitled to registration rights pursuant to a registration rights agreement signed prior
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 ordinary shares). 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.
PONO CAPITAL THREE, INC.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(UNAUDITED)
Underwriting
Agreement
Simultaneously
with the Initial Public Offering, the underwriters fully exercised the over-allotment option to purchase an additional 1,500,000 Units
at an offering price of $10.00 per Unit for an aggregate purchase price of $15,000,000.
The
underwriters were paid a cash underwriting discount of $0.11 per Unit, or $1,265,000 in the aggregate, upon the closing of the Initial
Public Offering. In addition, $0.30 per unit, or $3,450,000 in the aggregate will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Representative
Shares
Upon
closing of the Initial Public Offering, the Company issued 103,500 Class A ordinary shares to the underwriters. The underwriters have
agreed not to transfer, assign or sell the Representative Shares until the completion of the initial Business Combination. In addition,
the underwriters have agreed (i) to waive its redemption rights with respect to the Representative Shares in connection with the completion
of the initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to
the Representative Shares if the Company fails to complete its initial Business Combination within 12 months (or up to 18 months if the
Company extends such period) from the closing of the Initial Public Offering.
The
Representative Shares are subject to a lock-up for a period of 180 days immediately following the commencement of sales of the registration
statement pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not
be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction
that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective
date of the registration statement, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately
following the commencement of sales of the Initial Public Offering except to any underwriter and selected dealer participating in the
Initial Public Offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule
5110(e)(2).
The
initial measurement of the fair value of the Representative Shares was determined using the market approach to value the subject interest.
Based on the indication of fair value using the market approach, the Company determined the fair value of the Representative Shares to
be $1.28 per share or $132,480 (for the 103,500 Representative Shares issued) as of the date of the Initial Public Offering (which is
also the grant date). As a result, $132,480 was recorded as an offering cost with a corresponding entry to permanent shareholders’
equity.
Right
of First Refusal
For
a period beginning on the closing of the Initial Public Offering and ending 12 months from the closing of a Business Combination, the
Company has granted EF Hutton a right of first refusal to act as lead-left book running manager and lead left manager for any and all
future private or public equity, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(g)(3)(A)(i), such
right of first refusal shall not have a duration of more than three years from the effective date of the registration statement of which
this prospectus forms a part.
NOTE
7. SHAREHOLDERS’ EQUITY (DEFICIT)
Preference
shares — The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share, with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of March 31, 2023 and December 31, 2022, there were no preference shares issued or outstanding.
PONO CAPITAL THREE, INC.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(UNAUDITED)
Class
A ordinary shares — The Company is authorized to issue 100,000,000 Class A ordinary shares with a par value of $0.0001
per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of March 31, 2023 there
were 12,168,875 Class A ordinary shares issued and outstanding, including 11,500,000 Class A ordinary shares subject to possible redemption
and classified as temporary equity. The remaining 565,375 shares are classified as permanent equity and are comprised of 565,375 shares
included in the Placement Units and 103,500 Representative Shares. As of December 31, 2022, there were no Class A ordinary shares issued
or outstanding.
Class
B ordinary shares — The Company is authorized to issue 10,000,000 Class B ordinary shares with a par value of $0.0001 per
share. Holders of the Company’s Class B ordinary shares are entitled to one vote for each share. As of March 31, 2023 and December
31, 2022, there were 4,935,622 Class B Ordinary Shares issued and outstanding. Of the 4,935,622 Class B ordinary shares outstanding,
up to 643,777 shares were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in
full or in part, so that the initial shareholders will collectively own 30% of the Company’s issued and outstanding ordinary shares
after the Initial Public Offering. On February 14, 2023, the underwriters exercised the over-allotment option in full, so those shares
are no longer subject to forfeiture.
Warrants
— As of March 31, 2023, there were 11,500,000 Public Warrants and 565,375 Placement Warrants outstanding. As of December
31, 2022, there were no warrants outstanding. Each whole Public Warrant entitles the registered holder to purchase one Class A ordinary
shares at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion
of the initial Business Combination. Pursuant to the warrant agreement, a warrant holder may exercise its Public Warrants only for a
whole number of Class A ordinary shares. No fractional Public Warrants will be issued upon separation of the units and only whole Public
Warrants will trade. The Public Warrants will expire five years after the completion of the initial Business Combination, at 5:00 p.m.,
New York City time, or earlier upon redemption or liquidation.
The
Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business
Combination, the Company will use its best efforts to file with the SEC a registration statement covering the Class A ordinary shares
issuable upon exercise of the Public Warrants, to cause such registration statement to become effective and to maintain a current prospectus
relating to those Class A ordinary shares until the Public Warrants expire or are redeemed, as specified in the warrant agreement. If
a registration statement covering the Class A ordinary shares issuable upon exercise of the Public Warrants is not effective by the 60th
business day after the closing of the initial Business Combination, Public Warrant holders may, until such time as there is an effective
registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise
Public Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act; provided that such exemption
is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their Public Warrants on
a cashless basis.
Once
the Public Warrants become exercisable, the Company may call the Public Warrants for redemption:
| ● | in
whole and not in part; |
| | | |
| ● | at
a price of $0.01 per Public Warrant, |
| | | |
| ● | upon
not less than 30 days’ prior written notice of redemption given after the Public Warrants
become exercisable (the “30-day redemption period”) to each Public Warrant holder;
and |
PONO CAPITAL THREE, INC.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(UNAUDITED)
| ● | if,
and only if, the reported last sale price of the Class A ordinary shares equals or exceeds
$18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing
once the Public Warrants become exercisable and ending three business days before the Company
sends the notice of redemption to the Public Warrant holders. |
If
and when the Public Warrants become redeemable by the Company, the Company may not exercise the redemption right if the issuance of Class
A ordinary shares upon exercise of the Public Warrants is not exempt from registration or qualification under applicable state blue sky
laws or the Company is unable to effect such registration or qualification.
In
addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection
with the closing of the initial Business Combination at a Newly Issued Price of less than $9.20 per Class A ordinary shares (with such
issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to
the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable,
prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the market value is below $9.20 per share, then the exercise price of the warrants will be
adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per
share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market
Value and the Newly Issued Price.
The
Placement Warrants are identical to the Public Warrants except that, so long as they are held by the Sponsor or its permitted transferees,
(i) they will not be redeemable by the Company, (ii) they (including the Class A ordinary shares issuable upon exercise of these Placement
Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion
of the initial Business Combination, (iii) they may be exercised by the holders on a cashless basis and (iv) the holders thereof (including
with respect to Class A ordinary shares issuable upon exercise of such Placement Warrants) are entitled to registration rights.
The
Company accounts for the 12,065,375 warrants issued in connection with the Initial Public Offering (including 11,500,000 Public Warrants
and 565,375 Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that the warrants described
above are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value).
Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.
NOTE
8. FAIR VALUE MEASUREMENTS
The
following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis
as of March 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
SCHEDULE
OF FINANCIAL ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS
| Description | |
Amount at Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| March 31, 2023 | |
| | | |
| | | |
| | | |
| | |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Investments held in Trust Account: | |
| | | |
| | | |
| | | |
| | |
| U.S. Treasury Securities | |
$ | 118,491,047 | | |
$ | 118,491,047 | | |
$ | — | | |
$ | — | |
As
of December 31, 2022, the Company had no financial assets recorded at fair value.
NOTE
9. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the unaudited condensed balance sheet date up to the date that
the unaudited condensed financial statements was issued. Based upon this review, the Company did not identify any subsequent events that
would have required adjustment or disclosure in the condensed unaudited financial statements.