AERWINS (AWIN) 10-K2023 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2023

For the transition period from ______ to _____

Commission File Number 001-40734

AERWINS TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in its Charter)

(702)-527-1270

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was approximately $16,752,613 as of the last business day of the registrant’s most recently completed second fiscal quarter. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.

There were 924,890 shares of the registrant’s common stock, $0.000001 par value per share, outstanding as of April 15, 2024.

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates and projections about AERWINS Technologies Inc.’s industry, management beliefs, and assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this Annual Report on Form 10-K are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K and the information incorporated by reference in this Annual Report on Form 10-K to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in the “Risk Factors” section beginning on page 23 and elsewhere in this Form 10-K. These risks represent challenges to the successful implementation of our strategy and to the growth and future profitability of our business. Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

Risks Related to the Lind Global Financing

Risks Related to our Business

PART I

ITEM 1. BUSINESS

AERWINS Technologies Inc., a Delaware corporation (the “Company,” “we,” “us,” or “AERWINS”) together with its wholly owned subsidiary Aerwin Development CA LLC, a California limited liability company (“Aerwin Development”), is redesigning its single-seat optionally Manned Air Vehicle (“MAV” or “Manned Air Vehicle”). All refences in this Form 10-K to the “Company,” “we,” “us,” or “AERWINS” include both AERWINS and Aerwin Development.

We were originally incorporated in Delaware on February 12, 2021 under the name “Pono Capital Corp” as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On August 13, 2021, we consummated an initial public offering. On February 3, 2023, we consummated a merger (the “Merger”) with Pono Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of the Company, then called Pono Capital Corp., a Delaware corporation (“Pono”) with and into AERWINS, Inc. (formerly named AERWINS Technologies Inc.), a Delaware corporation pursuant to an agreement and plan of merger, dated as of September 7, 2022 (as amended on January 19, 2023, the “Merger Agreement”), by and among Pono, Merger Sub, AERWINS, Mehana Equity LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Shuhei Komatsu in his capacity as the representative of the stockholders of AERWINS, Inc. (“Seller Representative”). The Merger and other transactions contemplated thereby (collectively, the “Business Combination”) closed on February 3, 2023 when pursuant to the Merger Agreement, Merger Sub merged with and into AERWINS, Inc. with AERWINS, Inc. surviving the Merger as a wholly-owned subsidiary of Pono, and Pono changed its name to “AERWINS Technologies Inc.” and the business of the Company became the business of AERWINS, Inc., and this business section primarily includes information regarding the AERWINS’, Inc. business. We formed Aerwin Development on October 18, 2023.

On April 2, 2024, the Company consolidated its issued and outstanding share on the basis of one post-consolidation share for each 100 pre-consolidation common shares. All share figures and reference have been retrospectively adjusted.

For additional information on the corporate history of our Company please see the section titled “Corporate History” on page 20 of this Form 10-K.

Mission

With the mission of “Transforming society from the sky down,” we aim to realize an “Air Mobility Society” in which cars, specialized crafts, and drones can fly freely. To this end, are redesigning our single-seat optionally Manned Air Vehicle. We aim to align this vehicle with the stringent requirements of the Federal Aviation Administration’s (“FAA”) Powered Ultra-Light Air Vehicle Category, setting a new standard for safe low-altitude manned flight.

To achieve this goal, we have established AERWIN Development Company LLC, a California subsidiary with offices in Los Angeles, California, and entered into the Letter of Intent with Helicopter Technology discussed below. Helicopter Technology is a designer, developer, and manufacturer of over 20 FAA-approved helicopters and turbine systems with over 20,000 square feet of facilities located five miles from the Company’s Los Angeles office. Its primary focus is helicopter rotor blades with capabilities that include tool design and fabrication, structural design and assembly, and fatigue testing. They are an FAA-approved repair station, certified ISO 9001:2015 + AS9100D, ISO 9001:2015 + AS9110C, hold various EU approvals, and have U.S. Department of Defense (“DOD”) clearance.

The specifications for our MAV has a target price of $200,000 and is designed to be used for sightseeing, sports, agriculture, surveillance, field delivery and numerous military applications. Training time for flying the MAV is expected to last three to five days, with a payload of up to 250 pounds to carry a single-seat occupant, cargo, or weaponry. The MAV is expected to be designed to be manually or entirely remotely controlled with an innovative and proprietary three-rotor configuration to reduce sound and increase stability at a cruise speed of up to 40 miles per hour at a height ranging from 20 to 50 feet.

The timeline for the planned development and launch of our redesigned MAV is as follows:

Our Chief Executive Officer, Kiran Sidhu, will lead the MAV development initiative. He plans to lead a dedicated U.S.-based team working with and within Helicopter Technology to design, build, and commercialize the MAV within the Federal Aviation Regulation Part 103 requirements for ultralight aircraft.

Data from the U.S. Bureau of Labor Statistics and Indeed.com reveal that the Los Angeles metropolitan area is home to the highest number of aerospace engineers in the U.S., with over 4,000 aerospace engineers. The region potentially employs over 50,000 professionals in the aerospace and defense sector. Prominent aerospace entities like Jet Propulsion Laboratory in Pasadena, SpaceX in Hawthorne, and NASA Armstrong Flight Research Center in Palmdale are nearby, and major aerospace corporations, including Boeing, Lockheed Martin, and Raytheon, have a local presence.

Manned Air Vehicle Development Letter of Intent

Effective as of December 19, 2023 (the “Effective Date”), we entered into a letter of intent (the “Letter of Intent”) with Helicopter Technology Company (“Helicopter Technology”) regarding the design, development, manufacturing, sales, and marketing (collectively, the “Project”) of the MAV (the “MAV”). Under the Letter of Intent, we and Helicopter Technology will form an entity (the “Operating Company”) that will be owned 70% by us and 30% by Helicopter Technology. The Operating Company agreed to enter into an agreement with Helicopter Technology to design, build, assemble, and test the MAV planned to meet the FAA Powered Ultra-Light Category (the “Development Services Agreement”). In addition, according to the Development Services Agreement, Helicopter Technology will determine and obtain all required regulatory approvals for the MAV, providing all the necessary labor, materials, and customized equipment. The Letter of Intent contemplates that we and Helicopter Technology will enter into a manufacturing supply agreement on terms to be mutually agreed on. In addition, the parties will work together to secure the funding required to start production of the MAV. Helicopter Technology already has a working capital arrangement with its bank. The Operating Company will pay Helicopter Technology its costs plus 15% of such amount to provide the services it provides pursuant to the Development Services Agreement in addition to equity compensation in our company no less favorable than comparable compensation to our executive management.

The Operating Company will enter into a marketing and support agreement with us whereby we plan to provide certain engineering oversight, accounting, marketing, sales, advertising, development of a dealer distribution network, online marketplace, and other distribution channels, and financial management, budgeting, accounting, legal, and other administrative services as may be required by the Operating Company. The Operating Company will pay us our costs plus 15% of such amount to provide these services. Payments will be subject to the available cash flow of the Operating Company. In addition, we have agreed to provide working capital to the Operating Company of up to a maximum of $1,700,000 for its operations over the first 12 months.

Pursuant to the Letter of Intent, the parties intend to use their best efforts to negotiate and enter into an operating agreement for the Operating Company (the “Operating Agreement”) within 45 days of executing the Letter of Intent. The Letter of Intent also contains additional customary conditions for entering into the Operating Agreement. The Company and Helicopter Technology are in ongoing discussions in an effort to finalize each of the agreements contemplated by the Letter of Intent.

Discontinued Operations

On December 27, 2023, we discontinued the operations of A.L.I. Technologies Inc., a Japanese corporation (“A.L.I.”) which is our wholly-owned indirect subsidiary, as part of our operations, moved to Los Angeles, California, and continued the development of a line of FAA-compliant manned and unmanned crafts for low-altitude flight. Among the reasons for discontinuing the business of A.L.I., was the desire to develop an MAV that would comply with the Federal Aviation Regulation Part 103 requirements for ultralight aircraft and the difficulties that we believed the XTURISMO limited edition hoverbike being developed by A.L.I. would encounter. Following the discontinuation, on December 27, 2023, A.L.I. filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu). A bankruptcy trustee was appointed on January 10, 2024, and proceedings have commenced. See “Item 3 – Legal Proceedings” and the discussion regarding the A.L.I. Bankruptcy.

ALI’s discontinued operations include the manned air mobility business, including the further development of the XTURISMO limited edition hoverbike, the air mobility platform COSMOS (Centralized Operating System for Managing Open Sky), the computing power-sharing business, drone photography business and drone and artificial intelligence research and development business.

Significant Market Opportunities

In today’s increasingly populated and interconnected world, traditional modes of urban transportation continue to contribute to congestion and pollution, and they are primarily confined to land-based infrastructure. Mobility for the future requires a revolutionary solution.

The Total Addressable Market (TAM) for Autonomous Urban aircraft is expected to increase at a cumulative annual growth rate of 29% from 2020 to 2040, reaching $162 billion. ²

² See UBS report/Japan Ministry of Economy, Trade and Industry.

Estimated urban air mobility opportunities by market share are as follows:

See: Urban Air Mobility eVTOL/Urban Air Mobility TAM Update: A Slow Take-Off, But Sky’s the Limit, Morgan Stanley May 6, 2021 .

The manned air mobility industry has been the focus of much attention, with demonstration tests being conducted in many countries and a roadmap published in Japan under the leadership of the Ministry of Economy, Trade, and Industry.

According to data published by Morgan Stanley Research in 2019, the global market for manned air mobility, including hoverbikes, is expected to grow to over 150 trillion yen (approximately $1,036 billion USD) by 2040 according to long-term global forecasts. Data published by PWC in 2020 indicates that the air mobility market in Japan will grow to approximately 2.5 trillion yen (approximately $17 billion USD) by 2040. According to “Flying Cars Global Market Report 2021” published by The Business Research Company in 2021, the global market is expected to grow at a CAGR of 58.7% to 35 billion yen (approximately $241 million USD) by 2025. The report says that the key to growth will be the development of infrastructure system requirements, aircraft development, and institutional response, particularly in passenger transportation.

The manned air mobility field in the air mobility industry, to which we belong, is expected to contribute to solving various social issues such as eliminating traffic congestion and improving productivity in cities, reducing land infrastructure costs for the approximately 20,000 marginalized villages in rural areas (remote islands and mountainous regions) in Japan, transporting people between inhabited islands, replacing helicopters, and diversifying entertainment and sightseeing, as advanced mobility that can go “wherever they want” and “whenever they want.”

Marketing, Sales and Distribution

We plan to develop a marketing, sales and advertising programs following completion of the schematic design and detailed specification phase of our redesigned MAV during 2025 and 2026 as well as begin seeking indications of interest by prospective dealers as part of a dealer distribution network and other distribution channels including online sales.

Competition

We recognize that there are no new alternatives at this time, as hoverbikes and drones themselves are substitutes for existing solutions at this time. Most of the industry’s production experience in the manned air mobility business is still in the demonstration stage, although eHang in China has produced and delivered products. Many companies are still in the research and development stage and are not disclosing their sales prices. The low-altitude manned flight market is, however, evolving and is expected to be highly competitive with a variety of aircraft manufactured in the United States and abroad. With the introduction of new technologies and the potential entry of new competitors into the market that may offer alternatives to our planned MAV, we expect competition to increase in the future, which could harm our business, results of operations, or financial condition once we complete development and commence production and sales. We expect to face significant competition from other manufacturers of low-altitude manned flight vehicles, which may have an adverse effect on expected revenues.

We believe our ability to compete successfully with other manufactures will also depend on a number of factors including purchase price, safety, after-sales support and product warranties, and on factors such as brand, established customer relationships and financial and manufacturing resources. Many of the incumbents have, and future entrants may have, greater resources than we have and may also be able to devote greater resources to the development of their current and future vehicles. They may also have greater access to larger potential customer bases and have and may continue to establish cooperative or strategic relationships amongst themselves or with third parties (including OEMs) that may further enhance their resources and offerings.

Intellectual Property

In connection with our redesign of the MAV, we are evaluating the utility of the proprietary systems, technologies and other intellectual property developed or owned by A.L.I. given that we elected to discontinue all of its operations, shift development, production and potentially initial sales efforts to the United States. Our success depends in part on our ability to protect our technology and intellectual property we may develop or license as part of our efforts to develop the MAV. We expect to rely on a combination of patents, patent applications, trade secrets, know-how, copyrights, trademarks, intellectual property licenses and other contractual rights to establish and protect proprietary rights in technology we utilize in connection with the development and ultimate sale of the MAV. In addition, we plan to enter into confidentiality and non-disclosure agreements with our employees and business partners. The agreements we plan to enter into with our employees will provide that all software, inventions, developments, works of authorship and trade secrets created by them during the course of their employment are our property or that of the Operating Company.

COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses. While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the extent and effectiveness of containment actions, it has already had an adverse effect on the global economy and the lasting effects of the pandemic continue to be unknown. As of the date of this Form 10-K, the extent of the future impact of COVID-19 is still highly uncertain and cannot be predicted.

Recent Developments

Closing of Business Combination

We were originally incorporated in Delaware on February 12, 2021 under the name “Pono Capital Corp” as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On August 13, 2021, we consummated an initial public offering. On February 3, 2023, we consummated a merger (the “Merger”) with Pono Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of the Company, then called Pono Capital Corp., a Delaware corporation (“Pono”) with and into AERWINS, Inc. (formerly named AERWINS Technologies Inc.), a Delaware corporation pursuant to an agreement and plan of merger, dated as of September 7, 2022 (as amended on January 19, 2023, the “Merger Agreement”), by and among Pono, Merger Sub, AERWINS, Mehana Equity LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Shuhei Komatsu in his capacity as the representative of the stockholders of AERWINS, Inc. (“Seller Representative”). The Merger and other transactions contemplated thereby (collectively, the “Business Combination”) closed on February 3, 2023 when pursuant to the Merger Agreement, Merger Sub merged with and into AERWINS, Inc. with AERWINS, Inc. surviving the Merger as a wholly-owned subsidiary of Pono, and Pono changed its name to “AERWINS Technologies Inc.” and the business of the Company became the business of AERWINS, Inc. (the “Company,” “we,” “us, “our” “AERWINS,” or “AERWINS Technologies”).

Pursuant to the terms of the Merger Agreement, the total consideration for the Business Combination and related transactions (the “Merger Consideration”) was approximately $600 million. In connection with the Special Meeting, holders of 11,328,988 pre-consolidated shares of Pono common stock sold in its initial public offering exercised their right to redeem those shares for cash prior to the redemption deadline of January 25, 2023, at a price of $10.50 per share, for an aggregate payment from Pono’s trust account of approximately $118.9 million. Effective February 3, 2023, Pono’s units ceased trading, and effective February 6, 2023, AERWINS Technologies’ common stock began trading on the Nasdaq Global Market under the symbol “AWIN” and the warrants began trading on the Nasdaq Capital Market under the symbol “AWINW.”

After taking into account the aggregate payment in respect of the redemption, Pono’s trust account had a balance immediately prior to the Closing of $1,795,997. Such balance in the trust account was used to pay transaction expenses and other liabilities of Pono, pay certain transaction expenses of AERWINS, Inc., with the remaining being deposited in AERWINS, Inc. cash account. In connection with the Business Combination, a warrant holder of AERWINS, Inc. received a warrant to purchase 4,693 shares of AERWINS Technologies’ common stock as Merger Consideration as set forth in the Merger Agreement. The Merger Consideration was subject to a post-Closing true up 90 days after the Closing. The post-Closing true up period expired on May 5, 2023 without any claims having been made.

As a result of the Merger and the Business Combination, holders of Pono common stock automatically received common stock of AERWINS Technologies, and holders of Pono warrants automatically received warrants of AERWINS Technologies with substantively identical terms. At the Closing of the Business Combination, all shares of Pono owned by the Sponsor (consisting of shares of Class A common stock and shares of Class B common stock), which we refer to as the founder shares, automatically converted into an equal number of shares of AERWINS Technologies’ common stock, and Private Placement Warrants held by the Sponsor, automatically converted into warrants to purchase one share of AERWINS Technologies common stock with substantively identical terms. As of the Closing: public stockholders owned approximately 0.3% of the outstanding shares of AERWINS Technologies common stock; the Sponsor and its affiliates owned approximately 6.7% of the outstanding shares of AERWINS Technologies common stock and AERWINS, Inc.’s former security holders collectively owned approximately 93.0% of the outstanding shares of AERWINS Technologies common stock.

At the closing of the Merger, we issued to the former shareholders of AERWINS, an aggregate of 519,291 shares of common stock, of which 14,079 shares are being held in escrow (the “Escrow Shares”). The Escrow Shares were subject to a post-Closing true up 90 days after the Closing based on confirmed amounts of the Closing Net Indebtedness of AERWINS, the Net Working Capital of AERWINS, and certain Transaction Expenses, each of which are defined in the Merger Agreement. If the adjustment is a negative adjustment in favor of us, the escrow agent shall distribute to us a number of shares of our common stock with a value equal to the adjustment amount. If the adjustment is a positive adjustment in favor of AERWINS, we will issue to the former AERWINS stockholders an additional number of shares of our common stock with a value equal to the adjustment amount. The post-Closing true up period expired on May 5, 2023 without any claims having been made. In addition, at the closing of the Merger, the Company issued an aggregate of 1,500 shares of common stock (the “Compensation Shares”) to Boustead Securities, LLC (“Boustead”), in partial satisfaction of fees due to them in connection with the Merger. In addition, Boustead is entitled to an increase in the number of Compensation Shares on the 18^0th day following the closing of the Merger (the “Measurement Date”) if the VWAP for the common stock during over the five trading days prior to the Measurement Date is less than $1,000 per share (the “Adjustment”). The number of shares of common stock subject to the Adjustment is equal to (1) $1,500,000 divided by the average VWAP of the common stock over the five trading days prior to the Measurement Date, minus (2) the number of Compensation Shares.

Lock-up Agreements

In connection with the Business Combination, certain stockholders of AERWINS, Inc. and certain of AERWINS’, Inc. officers and directors (such stockholders, the “Company Holders”) entered into a lock-up agreement (the “Lock-up Agreement”) pursuant to which they are contractually restricted, during the Lock-up Period (as defined below), from selling or transferring any of (i) their shares of AERWINS common stock held immediately following the closing and (ii) any of their shares of AERWINS common stock that result from converting securities held immediately following the closing (the “Lock-up Shares”). The “Lock-up Period” means the period commencing at closing and end the earliest of: (a) six months from the closing (or, in the case of Shuhei Komatsu, AERWINS’ Chief Executive Officer, thirty months from the closing), (b) the date the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property and (c) the date on which the closing sale price of the Company’s common stock equals or exceeds $1,200 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least one hundred and fifty (150) days after the closing; provided that 1/3 of such restricted shares shall be released from such restrictions if the closing stock price of the Company’s common stock reaches each of $1,300, $1,500, and $1,700.

The Sponsor is subject to a lock-up pursuant to a letter agreement (the “Sponsor Lock-up Agreement”), entered into at the time of the IPO (as defined below), among Pono, the Sponsor and the other parties thereto, pursuant to which the Sponsor is subject to a lock-up beginning on the Closing and end the earliest of: (a) six months from the Closing, (b) the date the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange their shares of the Company’s common stock for cash, securities or other property and (c) the date on which the closing sale price of the Company’s common stock equals or exceeds $1,200 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least one hundred and fifty (150) days after the Closing; provided that 1/3 of such restricted shares shall be released from such restrictions if the closing stock price of the Company’s common stock reaches each of $1,300, $1,500, and $1,700. “IPO” means Pono’s public offering of 10,000,000 pre-consolidation units (the “Units”) at pre-consolidated of $10.00 per Unit, generating gross proceeds of $100,000,000, which was consummated on August 13, 2021.

Indemnification Agreements

On February 7, 2023, AERWINS Technologies entered into indemnification agreements, with each of AERWINS Technologies’ directors containing provisions which are in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements will require AERWINS Technologies, among other things, to indemnify its directors against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Non-Competition and Non-Solicitation Agreements

Following execution of the Merger Agreement, certain significant stockholders of AERWINS, Inc. entered into non-competition and non-solicitation agreements (the “Non-Competition and Non-Solicitation Agreements”), pursuant to which they agreed not to compete with Pono, AERWINS, Inc. and their respective subsidiaries during the two-year period following the Closing and, during such two-year restricted period, not to solicit employees or customers or clients of such entities. The Non-Competition and Non-Solicitation Agreements also contain customary non-disparagement and confidentiality provisions.

Registration Rights Agreements

At the closing of the Business Combination, certain significant stockholders of AERWINS, Inc. entered into a registration rights agreement with Pono providing for the right to three demand registrations, piggy-back registrations and shelf registrations with respect to the Merger Consideration shares.

Purchaser Support Agreement

Simultaneously with the execution of the Merger Agreement, Lind Global Representative entered into a support agreement (the “Purchaser Support Agreement”) in favor of Pono and AERWINS, Inc. and their present and future successors and subsidiaries. In the Purchaser Support Agreement, the Purchaser Representative agreed to vote all equity interests in Pono in favor of the Merger Agreement and related transactions and to take certain other actions in support of the Merger Agreement and related transactions. The Purchaser Support Agreement also prevents the Purchaser Representative from transferring its voting rights with respect to equity interests in Pono or otherwise transferring equity interests in Pono prior to the meeting of Pono’s stockholders to approve the Merger Agreement and related transactions, except for certain permitted transfers.

Voting Agreement

Simultaneously with the execution of the Merger Agreement, certain stockholders of AERWINS, Inc. entered into a voting agreement (the “Voting Agreement”) in favor of Pono and AERWINS, Inc. and their present and future successors and subsidiaries. In the Voting Agreement for certain stockholders of AERWINS, they each agreed to vote all of their AERWINS, Inc. stock interests in favor of the Merger Agreement and related transactions and to take certain other actions in support of the Merger Agreement and related transactions. The Voting Agreement also prevents them from transferring their voting rights with respect to their AERWINS, Inc. stock or otherwise transferring their AERWINS stock prior to the AERWINS, Inc. approval of the Merger Agreement and related transactions, except for certain permitted transfers.

Executive Employment Agreements

On February 3, 2023, the Company entered into employment agreements (the “Employment Agreements”) with executive officers: Shuhei Komatsu (former Chief Executive Officer), Taiji Ito (Global Markets Executive Officer), Kazuo Miura (former Chief Product Officer) and Kensuke Okabe (former Chief Financial Officer). The Employment Agreements all provide for at-will employment that may be terminated by the Company for death or disability and with or without cause, by the executive with or without good reason, or mutually terminated by the parties. The Employment Agreements for Mr. Komatsu, Mr. Ito, Mr. Miura, and Mr. Okabe provide for a severance payment equal to the remaining base salary for the remaining period of the respective term of employment (each term is one (1) year) upon termination by the Company without cause or termination by such executive for good reason. The executive agreements provide for a base salary of $200,000, $200,000, $200,000 and $200,000 for Mr. Komatsu, Mr. Ito, Mr. Miura and Mr. Okabe, respectively, as well as possible annual performance bonuses and equity grants under the equity incentive plan if and when determined by the Company’s Compensation Committee. No performance bonuses were paid under these agreements.

Option Award Agreements

On February 3, 2023, the Company entered into Option Award Agreements (the “Option Award Agreements”) with former executive officers: Shuhei Komatsu (former Chief Executive Officer), Taiji Ito (former Global Markets Executive Officer and Chief Executive Officer), Kazuo Miura (former Chief Product Officer) and Kensuke Okabe (former Chief Financial Officer).

The Option Award Agreements grants to each of the following persons options to acquire shares of the Company’s common stock, to vest as set forth in the Option Award Agreements, as follows:

Stock Purchase Agreement

On February 2, 2023, the Company entered into a Subscription Agreement (the “Agreement”) with AERWINS, Inc., and certain investors (collectively referred to herein as the “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase an aggregate 31,963 shares of common stock (the “Shares”) of AERWINS, Inc. which was immediately exchanged for 50,000 shares of common stock of the Company (the “Company Shares”) upon the consummation of the Business Combination in exchange for an aggregate sum of $5,000,000 (the “Purchase Price”) with the Purchase Price being paid to AERWINS, Inc. prior to the closing of the Business Combination (the “Closing”). Effective immediately prior to the Closing, AERWINS, Inc. issued the Shares to the Purchasers and thereafter immediately upon the Closing, the Shares were exchanged for the Company Shares, and the Company Shares were issued as a registered issuance of securities under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an effective registration filed by the Company on Form S-4 (Registration No. 333-268625) which was declared effective by the Securities and Exchange Commission on January 13, 2023.

Standby Equity Purchase Agreement

On January 23, 2023 (the “Effective Date”), Pono entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., (“YA”). The Company and its successors will be able to sell up to one hundred million dollars in aggregate gross purchase price of the Company’s shares of common stock, par value $0.000001 per share (the “Common Shares”) at the Company’s request any time during the 36 months following the date of the SEPA’s entrance into force. The shares would be purchased at 96% or 97% (depending on the type of notice) of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily VWAP of the Common Shares during the three consecutive trading days commencing on the advance notice date, other than the daily VWAP on any excluded days. “VWAP” means, for any trading day, the daily volume weighted average price of the Common Shares for such trading day on the principal market during regular trading hours as reported by Bloomberg L.P.

Pursuant to the SEPA, the Company is required to register all shares which YA may acquire. The Company agreed to file with the Securities and Exchange Commission (the “SEC”) a Registration Statement (as defined in the SEPA) registering all of the shares of common stock that are to be offered and sold to YA pursuant to the SEPA. The Company is required to have a Registration Statement declared effective by the SEC before it can raise any funds using the SEPA. The Company may not issue more than 19.99% of its shares issued and outstanding as of the Effective Date without first receiving shareholder approval for such issuances, unless such additional shares may be issued consistent with the rules and regulations of the Nasdaq Stock Market. Pursuant to the SEPA, the use of proceeds from the sale of the shares by the Company to YA shall be used by the Company in the manner as will be set forth in the Form 10-K included in the Registration Statement (and any post-effective amendment thereto) and any Form 10-K supplement thereto filed pursuant to the SEPA. There are no other restrictions on future financing transactions. The SEPA does not contain any right of first refusal, participation rights, penalties or liquidated damages. The Company has paid YA Global II SPV, LLC, a subsidiary of YA, a structuring fee in the amount of $15,000, and, on the Effective Date, the Company agreed to issue to YA shares with aggregate value equal to one million dollars, as a commitment fee.

YA has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our common stock during any time prior to the public disclosure of the SEPA. Unless earlier terminated as provided under the SEPA, the SEPA shall terminate automatically on the earliest of (i) the first day of the month next following the 36-month anniversary of the Effective Date or (ii) the date on which YA shall have made payment of Advances (as defined in the SEPA) pursuant to the SEPA for the Common Shares equal to the Commitment Amount (as defined in the SEPA).

Loan Agreement

On February 27, 2023, the wholly owned subsidiary of the Company’s wholly owned subsidiary, A.L.I. Technologies Inc., a Japanese corporation (“A.L.I.”) entered into a Loan Agreement with Shuhei Komatsu, the Company’s former Chief Executive Officer (the “Agreement”). The Agreement was approved by the Company’s Board of Directors on February 26, 2023 and by the Company’s Compensation Committee on February 26, 2023. Pursuant to the Agreement, Mr. Komatsu agreed to lend A.L.I. 200,000,000 yen (approximately $1,469,400 US Dollars based on a conversion rate of $0.007347 US Dollar for each $1 yen as of February 27, 2023) (the “Loan”). The original maturity date of the Loan under the Agreement was April 15, 2023, and was extended to June 30, 2023 (the “Maturity Date”) pursuant to the terms of a memorandum agreement signed on May 15, 2023 (the “Memorandum”). The interest rate under the Agreement is 2.475% per annum (calculated on a pro rata basis for 365 days a year), and the interest period is from February 27, 2023 until April 21, 2023. Pursuant to the terms of the Memorandum, the Company paid Mr. Komatsu 100,000,000 yen (approximately US$753,266), the interest rate was increased to 14.6% per annum as of April 22, 2023 and A.L.I. agreed to delay damages in the amount of 480,000 yen (approximately US$3,616). In addition, A.L.I pledged as collateral for the Loan shares of ASC Tech Agent Co., Ltd. held by A.L.I. and the equity interest in any entity in which A.L.I. may transfer its drone service business in the future. We are in discussions with Mr. Komatsu regarding further extension of the maturity date of the Loan and other alternatives regarding settlement of this debt.

If any of the following events occur while the Loan is outstanding, the Loan will become immediately due and payable together with all interest thereon: (i) if payment is suspended or bankruptcy proceedings are initiated against A.L.I., (ii) if A.L.I. initiates legal proceedings related to debt reorganization involving court intervention or when facts are recognized as having occurred that payment has been suspended, (iii) if provisional seizure, preservation seizure, seizure order, or delinquent disposition is received by A.L.I., (iv) if A.L.I. is delayed in make any payments under the Agreement, (v) if A.L.I. violates any provisions of the Agreement or (vi) upon the occurrence of any equivalent reasons requiring the preservation of the right to claim arise in addition to the foregoing. Pursuant to the Agreement, if A.L.I. does not timely repay the Loan in accordance with the terms of the Agreement, the interest rate on the Loan will increase to 14.6% per annum until the full payment is made. Under the Agreement, for any litigation arising under the Agreement, regardless of the amount or claim, the exclusive court of jurisdiction will be the Tokyo District Court.

Summary of Lind Global Financing

On April 12, 2023, we entered into the Purchase Agreement with Lind Global pursuant to which we agreed to issue to Lind Global up to three secured convertible promissory notes (the “Convertible Notes” and each a “Convertible Note”) in the aggregate principal amount of $6,000,000 for an aggregate purchase price of $5,000,000 and warrants (the “Warrants” and each a “Warrant”) to purchase 56,016 shares of the Company’s common stock (the “Transaction”). On August 25, 2023 (the “Amendment Date”), we entered into an Amendment to Senior Convertible Promissory Note First Closing Note and an Amendment to the Senior Convertible Promissory Note Second Closing Note with Lind Global (collectively, the “Floor Note Amendments”) which amended the Conversion Price (as defined below) to include a floor price of $18.176(the “Floor Price”). In addition to inclusion of a Floor Price, the Note Amendments also provide that at the option of Selling Securityholder, if in connection with a conversion under the Closing Notes, as amended, the Conversion Price is deemed to be the Floor Price, then in addition to issuing the Conversion Shares (as defined in the Closing Notes) at the Floor Price, we agreed to pay to Selling Securityholder a cash amount equal to (i) the number of shares of common stock that would be issued to Selling Securityholder upon a conversion determined by dividing the dollar amount to be converted being paid in shares of common stock by ninety percent (90%) of the lowest single VWAP during the twenty (20) Trading Days prior to the applicable date of conversion (notwithstanding the Floor Price) less (ii) the number of Conversion Shares issued to Selling Securityholder in connection with the conversion; and (iii) multiplying the result thereof by the VWAP on the Conversion Date.

The closings of the Transaction (the “Closings and each a “Closing”) occured in tranches (each a “Tranche”): the Closing of the first Tranche (the “First Closing”) occurred on April 12, 2023 and consisted of the issuance and sale to Lind Global of a Convertible Note with a purchase price of $2,100,000 and a principal amount of $2,520,000 (the “First Closing Note”) and the issuance to Lind Global of a Warrant to acquire 23,527 shares of common stock and the Closing of the second Tranche (the “Second Closing) which occurred on May 23, 2023 and consisted of the issuance and sale to Lind Global of a Convertible Note with a purchase price of $1,400,000 and a principal amount of $1,680,000 (the “Second Closing Note”), and the issuance to Lind Global of a Warrant to acquire 15,685 shares of common stock. The Convertible Notes issued in the First Closing and the Second Closing are hereinafter referred to as the “Closing Notes”. As provided for in the January Note Amendments, neither party to the Purchase Agreement is obligated to complete the previously agreed on third Tranche (the “Third Closing), which would have consisted of the issuance and sale to Lind Global of a Convertible Note with a purchase price of $1,500,000 with a principal amount of $1,800,000, and the issuance to Lind Global a Warrant to acquire 16,805 shares of common stock. The Third Closing would have closed upon the effectiveness of the Registration Statement discussed below, but the Registration Statement was never declared effective by the SEC. Pursuant to the Purchase Agreement, at each Closing, the Company agreed to pay Lind Global a commitment fee in an amount equal to 2.5% of the funding amount being funded by Lind Global at the applicable Closing. Pursuant to the Purchase Agreement, at each Closing, the Company agreed to pay Lind Global a commitment fee in an amount equal to 2.5% of the funding amount being funded by Lind Global at the applicable Closing.

The Convertible Note issued in the First Closing has a maturity date of April 12, 2025 and the Convertible Note issued in the Second Closing has a maturity date of May 23, 2025 (the “Maturity Date”).

Each Convertible Note has a conversion price equal to the lesser of: (i) US$9.00 (“Fixed Price”); or (ii) 90% of the lowest single volume weighted average price during the 20 Trading Days prior to conversion of each Convertible Note (the “Conversion Price”) “), provided that in no event shall the Conversion Price be less than $18.176 (the “Floor Price”), and in the event that the calculation as set forth above would result in a Conversion Price less than the Floor Price, the “Conversion Price” shall be the Floor Price.

In addition to inclusion of a Floor Price, the Note Amendments also provide that at the option of Selling Securityholder, if in connection with a conversion under the Closing Notes, as amended, the Conversion Price is deemed to be the Floor Price, then in addition to issuing the Conversion Shares (as defined in the Closing Notes) at the Floor Price, we agreed to pay to Selling Securityholder a cash amount equal to (i) the number of shares of common stock that would be issued to Selling Securityholder upon a conversion determined by dividing the dollar amount to be converted being paid in shares of common stock by ninety percent (90%) of the lowest single VWAP during the twenty (20) Trading Days prior to the applicable date of conversion (notwithstanding the Floor Price) less (ii) the number of Conversion Shares issued to Selling Securityholder in connection with the conversion; and (iii) multiplying the result thereof by the VWAP on the Conversion Date.

The Convertible Note will not bear interest other than in the event that if certain payments under the Convertible Note as set forth therein are not timely made, the Convertible Note will bear interest at the rate of 2% per month (prorated for partial months) until paid in full. The Company will have the right to prepay the Convertible Note under the terms set forth therein.

The Warrants were issued to Lind Global without payment of any cash consideration. Each Warrant will have an exercise period of 60 months from the date of issuance. The Exercise price of the First Closing Warrant and Second Closing Warrant is $89.26 per share and $73.16 per share, respectively, subject to adjustments as set forth in the Warrant.

In the event that there is no effective registration statement registering the shares underlying the Warrants or upon the occurrence of a Fundamental Transaction as defined in the Purchase Agreement, then the Warrants may be exercised by means of a “cashless exercise” at the holder’s option, such that the holder may use the appreciated value of the Warrants (the difference between the market price of the underlying shares of common stock and the exercise price of the underlying warrants) to exercise the warrants without the payment of any cash.

In accordance with our obligations under the Purchase Agreement, we filed a registration statement on Form S-1 on May 12, 2023 (the “May 2023 Registration Statement”) with the SEC to register under the Securities Act the resale by Lind Global of up to 112,223 shares of common stock issuable by us upon partial conversion of the Convertible Notes and exercise of the Warrants issued by us in connection with the Purchase Agreement. We plan to withdraw the May 2023 Registration Statement as permitted pursuant to the SPA Amendment No. 2 discussed below.

The Purchase Agreement contains customary registration rights, representations, warranties, conditions and indemnification obligations by each party, including our agreement to refrain from engaging in certain “Prohibited Transactions” as defined in the Purchase Agreement, to hold a special meeting of shareholders for the purpose of obtaining shareholder approval of the Transactions, certain events giving rise to a default under the Convertible Notes, obligations to use the proceeds from certain future financings to repay a portion of the principal amount of the Convertible Notes, our pledge to Lind Global of the ownership interests in our subsidiaries, a grant by us and our subsidiaries of a security interest in all of their respective assets and rights as collateral for the obligations due under the Convertible Notes, and a guaranty by our subsidiaries of our obligations under the Convertible Notes.

The A.L.I. Bankruptcy constitutes an event of default pursuant to the Closing Notes in the aggregate principal amount of $4,200,000. Consequently, Lind Global may at any time, at its option, (1) demand payment of an amount equal to 120% of the outstanding principal amount of the Closing Notes and (2) exercise all other rights and remedies available to it under the Closing Notes and other agreements entered into among the Company and Lind in connection with the issuance of the Closing Notes (collectively, the “Transaction Documents”); provided, however, that (x) upon the occurrence of the event of default described above, Lind Global, in its sole and absolute discretion (without the obligation to provide notice of such event of default), may: (a) from time-to-time demand that all or a portion of the outstanding principal amount of the Closing Notes be converted into shares of the Company’s common stock at the lower of (i) the then-current Conversion Price (that price being $18.176 per share (the “Floor Price”)) and (ii) eighty-percent (80%) of the average of the three (3) lowest daily volume weighted average prices (“VWAPs”) during the 20 trading days prior to the delivery by Lind Global of the applicable notice of conversion or (b) exercise or otherwise enforce any one or more of Lind Global’s rights, powers, privileges, remedies and interests under the Closing Notes, the Transaction Documents or applicable law.

The Closing Notes also provide that at the option of Lind Global, if in connection with a conversion under the Closing Notes, the Conversion Price is deemed to be the Floor Price, then in addition to issuing the Conversion Shares (as defined in the Closing Notes) at the Floor Price, the Company will also pay to Lind Global a cash amount equal to (i) the number of shares of common stock that would be issued to Lind Global upon a conversion determined by dividing the dollar amount to be converted being paid in shares of common stock by ninety percent (90%) of the lowest single VWAP during the twenty (20) trading days prior to the applicable date of conversion (notwithstanding the Floor Price) less (ii) the number of shares of the Company’s common stock issued to Lind Global in connection with the conversion; and (iii) multiplying the result thereof by the VWAP on the date of conversion.

On January 23, 2024, the Company and Lind Global entered into an Amendment No. 2 to Senior Convertible Promissory Note First Closing Note and an Amendment No. 2 to the Senior Convertible Promissory Note Second Closing Note (collectively, the “January Note Amendments”) which amended the Closing Notes to, subject to the conditions discussed below, (i) reduce the aggregate principal amount of the Closing Notes from $4,200,000 to $3,500,000, (ii) require the Company to repay an aggregate of $1,750,000 of the principal amount of the Closing Notes no later than the closing date of a public offering of the Company’s common stock where it receives gross proceeds of at least $13,500,000 (the “Public Offering”) no later than April 15, 2024 and (iii) requires Lind Global to convert no less than an aggregate of $1,750,000 of the Closing Notes no later than 11 months after the closing of the Public Offering, provided that at the time of such conversion Lind Global receives shares of common stock that may be disposed of without restrictive legend at their issuance pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act (the “Mandatory Conversion Amount”).

In addition, on January 23, 2024, the Company and Lind Global entered into Amendment No. 2 to Securities Purchase Agreement (the “SPA Amendment No. 2”) to, subject to the conditions discussed below, (i) eliminate the obligation of the Company and Lind Global to complete the Third Closing discussed above, (ii) delete the clause obligating the Company to register the shares of common stock issuable upon conversion of the Closing Notes and exercise of the Warrants (collectively, the “Closing Securities”) or pay Lind Global any delay payments as a result of the Company’s failure to register the Closing Securities, (iii) eliminate certain restrictions on the Company’s right to issue equity and debt in future transactions and (iv) eliminate Lind Global’s right to participate in future offerings of the Company’s securities, other than its rights to participate in this offering.

The January Note Amendments and the SPA Amendment are subject to the Company completing a public offering of its Common Stock where it receives gross proceeds of at least $13,500,000 (the “Public Offering”) and making the Mandatory Prepayment as discussed above. In as much as the Company failed to complete the Public Offering by April 15, 2024, Lind Global is not obligated to fulfill the terms of the January Note Amendments. The Company plans to enter into discussions with Lind Global to extend the time period in which it is obligated to complete the Public Offering.

Officer and Director Changes

On March 20, 2023, Shuhei Komatsu resigned from his positions as Chief Executive Officer and Director and Chairman of the Board of Directors of the Company (the “Board”). Mr. Komatsu previously served as the Company’s Chief Executive Officer and a Director and Chairman of the Board since February 3, 2023. Mr. Komatsu’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On March 20, 2023, the Company’s Board appointed Taiji Ito to serve as Chief Executive Officer of the Company. Mr. Ito formerly served as the Company’s Global Markets Executive Officer and as a Director of the Company, and has served in such capacities since his appointment to those positions on February 3, 2023 until his resignation as discussed below.

On March 22, 2023, the Board appointed Daisuke Katano to fill the vacancy on its Board created upon Mr. Komatsu’s resignation to serve as a Director of the Company, and on the same date also appointed Mr. Katano to serve as the Company’s Chief Operating Officer.

On March 22, 2023, the Board appointed Marehiko Yamada to serve as the Chairman of the Board. Mr. Yamada was appointed as an independent director of the Company on February 3, 2023. On March 22, 2023, the Company’s Board of Directors also appointed Dr. Sayama to serve as the Vice-Chair of the Board. Dr. Sayama was appointed as an independent director of the Company on February 3, 2023. On March 22, 2023, the Company’s Board also appointed Kensuke Okabe to serve as Secretary of the Company. Mr. Okabe was appointed as the Company’s Chief Financial Officer on February 3, 2023.

On March 22, 2023, the Board also appointed Mr. Yamada as the Chair of the Company’s Compensation Committee and appointed Dr. Sayama as the Chair of the Company’s Nominating and Corporate Governance Committee. Dr. Sayama previously served as the Chair of the Company’s Compensation Committee from February 3, 2023 to March 22, 2023. Mr. Yamada previously served as the Chair of the Company’s Nominating and Corporate Governance Committee from February 3, 2023 to March 22, 2023.

On March 27, 2023, the Board approved the removal of Kazuo Miura as the Company’s Chief Product Officer. Mr. Miura served as the Company’s Chief Product Officer since his appointment to this position on February 3, 2023. Mr. Miura’s removal was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On May 15, 2023, the Company’s Board appointed Kiran Sidhu as the Chairman of the Board. Following the appointment of Mr. Sidhu, Dr. Sayama and Mr. Yamada resigned as members of the Board, effective May 18, 2023 and May 15, 2023, respectively. Their resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On May 22, 2023, the Board also appointed Katharyn (Katie) Field and Pavanveer (Pavan) Gill as independent directors to fill the vacancies on the Board created by the resignations of Dr. Sayama and Mr. Yamada. Following the appointment of Ms. Field and Mr. Gill, Mr. Iwamura resigned as a member of the Board. Mr. Iwamura’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On July 17, 2023, Daisuke Katano resigned as a member of our Board of Directors and on July 25, 2023 resigned as our Chief Operating Officer. Mr. Katano’s resignation was not the result of any dispute or disagreement with the Company or the Board on any matter relating to the operations, policies or practices of the Company.

On July 18, 2023, the Board appointed Kiran Sidhu as Executive Chairman of the Board and President of the Company and expanded the size of the Board by one person, to a total of seven persons, appointing Mr. Robert Lim as an independent Director of the Company, filling the vacancy created by Mr. Katano’s resignation. Mr. Lim’s term is to serve in such position until his earlier death, resignation or removal from office.

On July 18, 2023, the Board changed the composition of the Committees of the Board to be comprised of the following persons:

On July 18, 2023, the Board formed a “Funding Committee of the Board” that is comprised on the following persons: Katharyn Field as Committee Chair; Mr. Lim; and, Mr. Katano. The purpose of the committee is to consider funding alternatives and make recommendations on such alternatives to the Board.

On August 24, 2023, we appointed Yinshun (Sue) He as our Chief Financial Officer following the resignation of Kensuke Okabe.

On December 12, 2023, Kiran Sidhu was appointed as our Chief Executive Officer following the resignation of Taiji Ito as our Chief Executive Officer. Mr. Ito remains as a director of the Company. As part of this change, the Board appointed Ms. Field as the Chairman of the Board to take on the role formerly held by Mr. Sidhu who will remain as a director of the Company in addition to his role as its CEO.

Potential Nasdaq Delisting

As previously disclosed in the Current Report on Form 8-K filed on April 21, 2023 by the Company, on April 20, 2023, Nasdaq Listing Qualifications staff (“Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that it no longer complied with the minimum bid price requirement under Listing Rule 5450(a)(1). In accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until October 17, 2023, to regain compliance with Rule 5450(a)(1) (the “Bid Price Rule”). As previously disclosed on a Form 8-K filed with the SEC on October 23, 2023, on October 18, 2023, Staff notified the Company that it had determined to delist the Company as it did not comply with the requirements for continued listing on the Exchange. As previously disclosed in the Current Report on Form 8-K filed with the SEC on November 28, 2023, the Company appealed Nasdaq’s determination in accordance with the procedures set forth in the Nasdaq Listing Rules and requested a hearing (the “Hearing Request”) before the Nasdaq Hearings Panel (the “Panel”). As previously disclosed on a Form 8-K filed with the SEC on November 28, 2023, on November 21, 2023, Staff issued an additional delist determination letter after the Company failed to file its Form 10-Q for the period ended September 30, 2023 (the “Delinquent Report”), as required by Listing Rule 5250(c)(1) (the “Periodic Filing Rule”). On November 28, 2023, the Company filed its Delinquent Report and, thus, regained compliance with the Periodic Filing Rule. As previously disclosed on a Form 8-K filed with the SEC on December 12, 2023, on December 6, 2023, Staff issued an additional delist determination letter as the Company’s no longer complied with the $50,000,000 minimum market value of listed securities requirement set forth in Listing Rule 5450(b)(2)(A) (the “MVLS Rule”), which served as an additional and separate basis for delisting.

A hearing before the Panel was conducted on January 4, 2024. The Panel conditionally granted the Company’s request to transfer its shares from The Nasdaq Global Market to The Nasdaq Capital Market, effective at the open of trading on January 18, 2024 and the Company’s request for an exception to the Exchange’s listing rules until April 15, 2024, to demonstrate compliance, subject to the satisfaction of the following conditions (the “Panel Decision”):

The Panel Decision indicates that the Company may request that the Nasdaq Listing and Hearing Review Council (the “Council”) review the Panel Decision, in which case a written request for review would need to be received within 15 days from the date of the Panel Decision. The Council may also on its own motion determine to review the Panel Decision.

The Panel Decision has no immediate effect on the listing of the Company’s common stock on the Nasdaq Global Market. The Company plans to fulfil each of the conditions as stated in the Panel Decision. To this end, the Company filed a Registration Statement on Form S-1 which this prospectus is a part on January 23, 2024 and completed the filing of all necessary documentation required to transfer its listing from The Nasdaq Global Market to The Nasdaq Capital Market. In addition, in satisfaction of the A.L.I. Technologies deconsolidation condition of the Panel Decision and as previously disclosed in a Form 8-K filed by the Company with the SEC on January 16, 2024, the Tokyo District Court entered an order on January 10, 2024, (the “January 10 Order”) confirming that bankruptcy proceedings are commenced against the A.L.I. Technologies, that A.L.I. Technologies is found to be insolvent and other administrative matters relating to the A.L.I. Technologies bankruptcy filing. Finally, on November 20, 2023, our stockholders voted to approve an amendment of our Fourth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effectuate a reverse stock split of our common stock at a ratio of no less than 1-for-10 and no more than 1-for-100, with such ratio to be determined at the sole discretion of our board of directors and, effective as of April 2, 2024, we effectuated a 1-for-100 reverse stock split of our common stock. No assurance can be given, however, as to the definitive date on which the remaining fifth condition set forth in the Panel Decision will be achieved.

Following a request submitted by the Company on April 12, 2024, the Panel granted a further extension to the exception granted on January 16, 2024, to the Company, as amended on January 17, 2024 (the “Decision”), to extend the Company’s deadline to regain compliance with Listing Rule 5550(b)(1) (the “Equity Requirement”). In granting the extension, the Panel noted that as of April 15, 2024, the Company has regained compliance with Nasdaq Listing Rule 5550(b)(1). Based on the information presented, the Panel determined to grant the Company’s request for an exception extension to regain compliance with the Equity Requirement until May 31, 2024, subject to the Company demonstrating compliance with all applicable continued listing requirements for The Nasdaq Capital Market under Rule 5550.

On April 17, 2024, the Company received an Additional Staff Delisting Determination (the “Additional Staff Determination”) from Nasdaq. The Additional Staff Determination noted that the Company is now delinquent in filing its Form 10-K for the period ended December 31, 2023 (the “Form 10-K”), which additional delinquency may serve as a separate basis for the delisting of the Company’s securities from Nasdaq. The Additional Staff Determination notified the Company that the Nasdaq Hearings Panel (the “Panel”) will consider this matter in their decision regarding the Company’s continued listing on The Nasdaq Capital Market and that it should present its views with respect to this additional deficiency to the Panel in writing no later than April 24, 2024. On April 30, 2024, the Company filed its delinquent Form 10-K for the period ended December 31, 2023.

Submission of Matters to a Vote of Security Holders

On November 20, 2023, the Company held its 2023 virtual special meeting of stockholders to vote on the following matters:

Stockholders voted to approve the amendment of the Company’s Fourth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effectuate a reverse stock split of the Company’s outstanding shares of our common stock, at a ratio of no less than 1-for-10 and no more than 1-for-100, with such ratio to be determined at the sole discretion of the Board (the “Reverse Stock Split”).

Stockholders voted to approve, for purposes of complying with NASDAQ Listing Rule 5635(b), the issuance of the shares of the Company’s common stock pursuant to its purchase agreement with Lind Global representing more than 20% of our common stock outstanding, which would result in a “change of control” of the Company under applicable Nasdaq listing rules.

Stockholders voted to approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of more than 20% of the Company’s issued and outstanding common stock pursuant to its purchase agreement with Lind Global.

Recent Sales of Unregistered Securities

On February 27, 2024 and March 22, 2024, we entered into and completed the sale to two unrelated accredited investors (the “Investors”), of 100,000 shares and 35,500 unregistered shares, respectively, of our Common Stock at a price of $4.00 per share for an aggregate of $542,000 in cash (the “Offerings”). The Offerings were made pursuant to the terms of a Subscription Agreement. In connection with the Offerings, the Company entered into a Piggyback Registration Rights Agreement with each Investor whereby the Company agreed to register the Common Stock acquired by the Investor in the Offering if at any time while the Investor remains the holder of such shares, the Company proposes to file any registration statement under the Securities Act of 1933, as amended (the “Securities Act”) with respect to its Common Stock for its own account or for shareholders of the Company for their account, subject to certain customary exceptions.

Effects of Inflation

We have not been affected by inflationary pressure as we are in the development stage of the MAV and have not commenced production.

Employees

Prior to the closing of the Business Combination, at December 31, 2022, the Company had three executive officers and the Company did not have any full-time employees prior to the completion of the Business Combination.

Following the December 27, 2023 discontinuation of A.L.I., we have two employees as of January 22, 2024. Of these, both are part-time, temporary, or other temporary employees. No labor union has been formed, but labor-management relations are amicable.

Facilities

Prior to the December 27, 2023 discontinuation of A.L.I., our headquarters were located at Shiba Koen Annex 6 f, 1-8, Shiba Koen 3-chome, Minato-ku, Tokyo, Japan 105-0011, where we leased and occupied office space with an aggregate floor area of approximately 340 square meters from unrelated third parties under operating lease agreements. Our manufacturing and shipping facility was located at 1-2-11 Fukamidai, Yamato-shi, Kanagawa. Our testing facilities was located at 72 Misawa, Minobu-cho, Minami Koma-gun, Yamanashi. We no longer occupy any of these offices or facilities and following the discontinuance of ALI’s operations and bankruptcy filing on December 27, 2023, we moved our corporate offices to The Walnut Building, 691 Mill St, Suite 240, Los Angeles, California 90021 where we lease this this office.

We believe that our existing office is generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate our future growth. There are no major facilities currently inactive.

Insurance

We currently do not maintain any types of insurance, employer’s liability insurance, or general liability insurance policies. Once we commence commercialization of the MAV which is expected in 2027, we will purchase insurance policies that are either legally compulsory or required by our customers.

Government Regulation

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions.

Although we expect to operate under the ultralight aircraft exceptions of Federal Aviation Regulation Part 103, aircraft, including the MAVs, are subject to substantial regulation and changes to those regulations under international, federal, state, local and foreign laws regarding safety, performance, and import regulations. Our planned vehicles will need to comply with many governmental standards and regulations relating to vehicle safety, fuel economy, emissions control, noise control, and vehicle recycling, among others. Compliance with all of these requirements may delay our production launch or require substantially higher compliance costs than anticipated, thereby adversely affecting our business and financial condition.

We plan to design the MAV to conform with Federal Aviation Regulation Part 103 requirements for ultralight aircraft. We do not believe we need to achieve FAA Certification for domestic MAV flight operations and sales as long as we continue to conform to FAR Part 103 in terms of aircraft specifications and flight operations. Changes in FAA regulations requiring certification for flight operations or sales might result in us incurring significantly increased costs to comply with those new regulations and in attempting to correct any issues causing such delays. Also, the impact of new or changed laws or regulations on the planned MAV compliance or the costs of complying with such laws and regulations cannot be predicted.

Further, as we sell our MAV products internationally, we will face challenges in quickly and sufficiently familiarizing ourselves with foreign regulatory environments and policy frameworks. If any new regulation is put in place, or a different interpretation of existing regulation is adopted, our ability to manufacture, market, sell or operate our MAVs may be limited or otherwise affected. Failure to comply with applicable regulations or to obtain, maintain or renew the necessary permits, licenses, registrations or certificates could cause delays in, or prevent us from, manufacturing, marketing, selling and operating our MAVs products, meeting product demand and expectations, introducing new products or expanding our service coverage, and could materially and adversely affect our operation results. If we are found to be in violation of applicable laws or regulations, we could be subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in the United States, including the U.S. Foreign Corrupt Practices Act, or the FCPA and other anti-corruption laws and regulations. The FCPA prohibits us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation.

We expect to have direct or indirect interactions with officials and employees of government agencies and state-owned affiliated entities in the ordinary course of business. We may also enter into joint ventures and/or other business partnerships with government agencies and state-owned or affiliated entities. These interactions subject us to an increased level of compliance-related concerns. We are in the process of implementing policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient, and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.

Corporate History

We were originally incorporated in Delaware on February 12, 2021 under the name “Pono Capital Corp” as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On August 13, 2021, we consummated an initial public offering (“Initial Public Offering”). The registration statement for the Company’s Initial Public Offering was declared effective on August 10, 2021. On August 13, 2021, the Company consummated its Initial Public Offering of 10,000,000 pre-consolidation units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at pre-consolidated price of $10 per Unit, generating gross proceeds of $100,000,000 (see Note 6) (the “Initial Public Offering”). The Company granted the underwriter a 45-day option to purchase up to an additional 1,500,000 pre-consolidation Units at the Initial Public Offering price to cover over-allotments, if any. Simultaneously with the consummation of the closing of the Offering, the Company consummated the private placement of an aggregate of 469,175 pre-consolidation units (the “Placement Units”) to the Sponsor at a price of $10.00 per Placement Unit, generating total gross proceeds of $4,691,750 (the “Private Placement”).

On August 18, 2021, the underwriters exercised the over-allotment option in full, and the closing of the issuance and sale of the additional Units occurred (the “Over-allotment Option Units”). The total aggregate issuance by the Company of 1,500,000 pre-consolidation units at a price of $10.00 per unit resulted in total gross proceeds of $15,000,000. On August 18, 2021, simultaneously with the sale of the Over-allotment Option Units, the Company consummated the private sale of an additional 52,500 pre-consolidation Placement Units, generating gross proceeds of $525,000. The Placement Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering. A total of $116,725,000, comprised of the proceeds from the Offering and the proceeds of private placements that closed on August 13, 2021 and August 18, 2021, net of the underwriting commissions, discounts, and offering expenses, was deposited in a trust account established for the benefit of the Company’s public stockholders. On October 8, 2021, the Class A ordinary shares and Public Warrant included in the Units began separate trading.

On March 17, 2022, the Company entered into an Agreement and Plan of Merger (the “Old Merger Agreement”), by and among Pono, Merger Sub, Benuvia, Inc., a Delaware corporation (“Benuvia”), Mehana Equity, LLC, in its capacity as Purchaser Representative, and Shannon Soqui, in his capacity as Seller Representative. Pursuant to the Old Merger Agreement, at the closing of the transactions contemplated by the Old Merger Agreement, Merger Sub would merge with and into Benuvia, with Benuvia continuing as the surviving corporation. The Business Combination Agreement and related agreements are further described in the Company’s Current Report on Form 8-K filed with the SEC on March 18, 2022. On August 8, 2022, the Company and Benuvia mutually terminated the Merger Agreement pursuant to Section 8.1(a) of the Merger Agreement, effective immediately. Neither party was required to pay the other a termination fee as a result of the mutual decision to terminate the Merger Agreement.

On November 9, 2022, the Company entered into Purchase Agreements and completed the private sale of an aggregate of 115,000 pre-consolidation Placement Units at a purchase price of $10.00 per Placement Unit in a private placement and deposited $1,150,000 into the Company’s Trust account for its public stockholders, representing $0.10 per pre-consolidated public share, allowing the Company to extend the period of time it had to consummate its initial business combination by three months from November 11, 2022 to February 13, 2023. The Purchase Agreements and related agreements are further described in the Company’s Current Report on Form 8-K filed with the SEC on November 10, 2022.

On December 31, 2022, substantially all of the assets held in the Trust Account were held in mutual funds.

No payments for our expenses were made in the offering described above directly or indirectly to (i) any of our directors, officers or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities or (iii) any of our affiliates, except in connection with the repayment of outstanding loans and pursuant to the administrative support agreement disclosed herein which we entered into with our sponsor.

On February 3, 2023, we consummated a merger (the “Merger”) with Pono Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of the Company, then called Pono Capital Corp., a Delaware corporation (“Pono”) with and into AERWINS, Inc. (formerly named AERWINS Technologies Inc.), a Delaware corporation pursuant to an agreement and plan of merger, dated as of September 7, 2022 (as amended on January 19, 2023, the “Merger Agreement”), by and among Pono, Merger Sub, AERWINS, Mehana Equity LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Shuhei Komatsu in his capacity as the representative of the stockholders of AERWINS, Inc. (“Seller Representative”). The Merger and other transactions contemplated thereby (collectively, the “Business Combination”) closed on February 3, 2023 when pursuant to the Merger Agreement, Merger Sub merged with and into AERWINS, Inc. with AERWINS, Inc. surviving the Merger as a wholly-owned subsidiary of Pono, and Pono changed its name to “AERWINS Technologies Inc.” and the business of the Company became the business of AERWINS, Inc. (the “Company,” “we,” “us, “our” “AERWINS,” or “AERWINS Technologies”).

Pursuant to the terms of the Merger Agreement, the total consideration for the Business Combination and related transactions (the “Merger Consideration”) was approximately $600 million. In connection with the Special Meeting, holders of 11,328,988 pre-consolidated shares of Pono common stock sold in its initial public offering exercised their right to redeem those shares for cash prior to the redemption deadline of January 25, 2023, at a pre-consolidated price of $10.50 per share, for an aggregate payment from Pono’s trust account of approximately $118.9 million. Effective February 3, 2023, Pono’s units ceased trading, and effective February 6, 2023, AERWINS Technologies’ common stock began trading on the Nasdaq Global Market under the symbol “AWIN” and the warrants began trading on the Nasdaq Capital Market under the symbol “AWINW.”

After taking into account the aggregate payment in respect of the redemption, Pono’s trust account had a balance immediately prior to the Closing of $1,795,997. Such balance in the trust account was used to pay transaction expenses and other liabilities of Pono, pay certain transaction expenses of AERWINS, Inc., with the remaining being deposited in AERWINS, Inc. cash account. In connection with the Business Combination, a warrant holder of AERWINS, Inc. received a warrant to purchase 4,693 shares of AERWINS Technologies’ common stock as Merger Consideration as set forth in the Merger Agreement. The Merger Consideration was subject to a post-Closing true up 90 days after the Closing. The post-Closing true up period expired on May 5, 2023 without any claims having been made.

As a result of the Merger and the Business Combination, holders of Pono common stock automatically received common stock of AERWINS Technologies, and holders of Pono warrants automatically received warrants of AERWINS Technologies with substantively identical terms. At the Closing of the Business Combination, all shares of Pono owned by the Sponsor (consisting of shares of Class A common stock and shares of Class B common stock), which we refer to as the founder shares, automatically converted into an equal number of shares of AERWINS Technologies’ common stock, and Private Placement Warrants held by the Sponsor, automatically converted into warrants to purchase one share of AERWINS Technologies common stock with substantively identical terms. As of the Closing: public stockholders owned approximately 0.3% of the outstanding shares of AERWINS Technologies common stock; the Sponsor and its affiliates owned approximately 6.7% of the outstanding shares of AERWINS Technologies common stock and AERWINS, Inc.’s former security holders collectively owned approximately 93.0% of the outstanding shares of AERWINS Technologies common stock.

At the closing of the Merger, we issued to the former shareholders of AERWINS, an aggregate of 519,291 shares of common stock, of which 14,079 shares are being held in escrow (the “Escrow Shares”). The Escrow Shares were subject to a post-Closing true up 90 days after the Closing based on confirmed amounts of the Closing Net Indebtedness of AERWINS, the Net Working Capital of AERWINS, and certain Transaction Expenses, each of which are defined in the Merger Agreement. If the adjustment was a negative adjustment in favor of us, the escrow agent was required to distribute to us a number of shares of our common stock with a value equal to the adjustment amount. If the adjustment was a positive adjustment in favor of AERWINS, we were required to issue to the former AERWINS stockholders an additional number of shares of our common stock with a value equal to the adjustment amount. The post-Closing true up period expired on May 5, 2023 without any claims having been made. In addition, at the closing of the Merger, the Company issued an aggregate of 1,500 shares of common stock (the “Compensation Shares”) to Boustead Securities, LLC (“Boustead”), in partial satisfaction of fees due to them in connection with the Merger. In addition, Boustead is entitled to an increase in the number of Compensation Shares on the 180th day following the closing of the Merger (the “Measurement Date”) if the VWAP for the common stock during over the five trading days prior to the Measurement Date is less than $1,000 per share (the “Adjustment”). The number of shares of common stock subject to the Adjustment is equal to (1) $1,500,000 divided by the average VWAP of the common stock over the five trading days prior to the Measurement Date, minus (2) the number of Compensation Shares.

AERWINS, Inc. formerly named AERWINS Technologies Inc. until it changed its name to AERWINS, Inc. on January 24, 2023, was incorporated in the State of Delaware on June 9, 2022. A. L. I. Technologies Inc., a Japanese corporation and a wholly owned subsidiary of AERWINS, Inc. was established in Japan in September 2016 (“A.L.I.”). On August 5, 2022, pursuant to the terms of a share exchange agreement among the Company, A. L. I. Technologies, the shareholders of A. L. I. Technologies and Shuhei Komatsu, as the representative of the shareholders of A. L. I. Technologies, we issued 300,000 shares of AERWINS, Inc. common stock to the shareholders of A. L. I. Technologies in exchange for 20,067 shares A. L. I. Technologies’ common stock, representing 100% of the issued and outstanding capital stock of A. L. I. Technologies. As a result of this transaction, A. L. I. Technologies became AERWINS Inc.’s 100%-owned subsidiary and the former shareholders of A. L. I. Technologies became the owners of 100% of AERWINS, Inc. outstanding common stock as of August 5, 2022.

We formed Aerwin Development on October 18, 2023.

On December 27, 2023, we discontinued the remaining operations of A.L.I. as part of the move of our operations to Los Angeles, California and continued development of a line of FAA compliant manned and unmanned crafts for low-altitude. This discontinuance follows our discontinuation of A.L.I.’s drone photography services and joint research and development services previously provided within our unmanned air mobility business as of June 30, 2023. Following this discontinuation, on December 27, 2023, A.L.I. filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu) (the “A.L.I. Bankruptcy”). See “Item 3 – Legal Proceedings” and the discussion regarding the A.L.I. Bankruptcy.

On April 2, 2024, the Company consolidated its issued and outstanding share on the basis of one post-consolidation share for each 100 pre-consolidation common shares. All share figures and references have been retrospectively adjusted.

ITEM 1A. RISK FACTORS

An investment in our securities carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this Form 10-K, including our historical financial statements and related notes included elsewhere in this Form 10-K, before you decide to purchase our securities. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our common stock shares and warrants. Refer to “Cautionary Statement Regarding Forward-Looking Statements.”

We may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.

Risks Relating to Our Business and Industry

AERWINS, Inc. has incurred net losses in the past and may do so in the future, and in the future, the Company may also incur, net losses.

For the years ended December 31, 2023 and 2022, we had net losses from continuing operations of $9,516,032 and $2,470, respectively, and had net operating cash outflows of $6,577,441 and $16,865,274, respectively. We expect our expenses to increase in future periods as we continue to develop our planned MAV. We also expect to incur substantial costs and expenses as a result of being a public company. We cannot assure you that we will be able to generate net profits or positive operating cash flows in the future. Our ability to achieve profitability depends in large part on, among other factors, our ability to complete development and commercialization of our planned MAV. If we are unable to generate adequate revenues or effectively manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or subsequently maintain profitability.

We are a holding company and depend upon our subsidiary AERWIN Development CA LLC for our cash flows.

We are a holding company. Following the discontinuance of ALI’s business, all of our operations are conducted, by our operating subsidiary, Aerwin Development CA LLC, a California limited liability company. Furthermore, we don’t expect to launch sales until the end of 2027. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our operating subsidiary and the payment of funds by this operating subsidiary to us in the form of dividends, distributions or otherwise. The ability of our subsidiary to make any payments to us depends on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiary when needed could have a material adverse effect on our business, results of operations or financial condition.

We will need additional capital, and we cannot be sure that additional financing will be available.

As of and for the year ended December 31, 2023, we incurred net loss from continuing operations of $9,516,032 and accumulated deficiency of $72,411,375 and as of and for the year ended December 31, 2022, we incurred continuing operating losses of $2,470 and accumulated deficiency of $46,472,904. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. Our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance and condition of the capital markets at the time we seek financing. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our common stock, and the existing stockholders may experience dilution.

A new health epidemic could significantly disrupt our operations and adversely affect our results of operations.

Our business could be significantly affected by public health epidemics that may hit the United States and/or other countries where we may sell our products, such as the outbreak of coronavirus, avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus or other disease. For example, the severity of the recent COVID-19 pandemic resulted in lock-downs, travel restrictions and quarantines imposed by governments across the world and materially affected general commercial activities on a global scale.

A COVID-19 outbreak may result in potential customers failing to place orders for our planned MAV or make payments on amounts owed to us in a timely manner or at all, which may materially and adversely impact our business and result of operations. Lingering effects of the COVID-19 pandemic has caused, and is expected to cause in the near future, an economic downturn in many countries. Such general economic slowdown may reduce the demand for our products.

Our business performance may be adversely affected if the growth of the Air Mobility Vehicle industry slows down.

In the manned air mobility business, we have acquired various technological expertise and relationships with various technology partners. We recognize that this trend will continue in the future. However, if the growth of the market slows down due to laws and regulations, economic trends, or changes in social awareness that restrict business in the industries in which we are involved, and if our business does not expand accordingly, our business performance may be affected.

Our future growth depends on the demand for, and customers’ willingness to adopt, our planned Manned Air Vehicle.

We operate in the new and evolving Manned Air Vehicle industry. Our business and operating results depend in large part on the acceptance of and demand for our MAVs. The success of these products is and will be subject to risks, including with respect to:

Our failure to manage the risks described above may discourage current or potential customers from purchasing our MAVs, and there may be downward price pressure on our MAVs. If the market for MAVs does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be materially and adversely affected.

We may be unable to successfully redesign, build and commercialize our planned MAV as we have not completed its design nor finalized the agreements to carry out the activities contemplated by the Letter of Intent .

Commercial production of our manned MAVs requires that we complete its redesign and the timely and adequate supply of various types of raw materials and components in order to build it. In addition, while we have entered into the Letter of Intent with Helicopter Technology that contemplates both product development and manufacturing, we have not finalized the definitive agreements contemplated by the Letter of Intent nor have we obtained the working capital needed to carry out the activities contemplated by those agreements. Further, we have no experience in designing MAV’s, high-volume manufacturing or sales of our MAVs. We cannot assure you that we will be able to complete the redesign of the MAV as we expect and to commence production on an efficient and cost-effective basis, or to procure sufficient raw materials and components to meet our future production requirements. While we expect to rely on Helicopter Technology to redesign and produce our MAV’s as discussed in the Letter of Intent, there is no assurance that we will be able to design an MAV that satisfies consumer preferences and commence production on an efficient and cost-effective basis. While we expect to obtain components from multiple sources whenever possible, disruption in the supply of components could temporarily disrupt commercial production of our MAVs. We may experience operational difficulties with Helicopter Technology or other contract manufacturers we may utilize in the future, including reductions in the availability of production capacity, failure to comply with product specifications, insufficient quality control, failure to meet production deadlines, increases in manufacturing costs and longer lead time. Any of the foregoing could result in our failure to make timely deliveries to our customers. Such failure would materially and adversely affect our business, results of operations, financial condition and prospects.

We may not be able to engage customers successfully and to obtain meaningful orders in the future.

Our success depends on our ability to generate revenue and operate profitably, which depends in part on our ability to identify customers and convert them into orders for our MAV’s. We do not currently have any revenue or orders from customers. If we are unable to negotiate, finalize and satisfy the conditions of customer orders, or only able to do so on terms that are unfavorable to us, we will not be able to generate any revenue, which would have a material adverse effect on our business, prospects, operating results and financial condition. Further, if our targeted customers do not commit to make meaningful orders, or at all, it could adversely affect our business, prospects and results of operations. Delays in delivery of the MAV, unexpected performance problems or other events could cause us to fail to meet contractual commitments to deliver the MAV, resulting in defects in material or workmanship or unexpected problems in our manufacturing process, which could lead to unanticipated revenue and earnings losses and financial penalties. The occurrence of any of these events could harm our business, prospects, results of operations and financial results.

Our reputation and the trading price of our common stock may be negatively affected by adverse publicity or detrimental conduct against us.

Adverse publicity concerning our failure or perceived failure to comply with legal and regulatory requirements, alleged accounting or financial reporting irregularities, regulatory scrutiny and further regulatory action or litigation could harm our reputation and cause the trading price of our common stock to decline and fluctuate significantly. The negative publicity and the resulting decline of the trading price of our common stock may lead to the filing of shareholder class action lawsuits against us and some of our senior executive officers, and may potentially have further severe impact on the market price of our common stock and divert management’s attention from the day-to-day operations of our company.

We may continue to be the target of adverse publicity and detrimental conduct against us, including complaints, anonymous or otherwise, to regulatory agencies regarding our operations, accounting, revenues and regulatory compliance. Additionally, allegations against us may be posted on the internet by any person or entity which identifies itself or on an anonymous basis. We and our subsidiaries may be subject to government or regulatory investigation or inquiries, or shareholder lawsuits, as a result of such third-party conduct and may be required to incur significant time and substantial costs to defend ourselves, and there is no assurance that we and our subsidiaries will be able to conclusively refute each of the allegations within a reasonable period of time or at all. Our reputation may also be negatively affected as a result of the public dissemination of allegations or malicious statements about us, which in turn may materially and adversely affect the trading price of our common stock.

We are a relatively young company with a short operating history, and we may not be able to achieve growth, effectively manage our growth or implement our business strategies.

Although our subsidiary, ALI had been providing air mobility solutions since September 2016, we discontinued all of its operations as of December 27, 2023 when we filed a voluntary bankruptcy petition with the Tokyo District Court. Consequently, our historical performance will not be indicative of our future performance due to our limited operating history related to the development and commercialization of our MAV business. Furthermore, our short history of accepting orders for the MAVs developed by ALI and delivering them to customers for testing, training and demonstration purposes is no longer indicative of our future performance relative to the MAV that is being redesigned by us in the United States. There is only a limited historical basis for making judgments on the demand for our planned MAV currently under development or our ability to produce and deliver MAVs, or to become profitable in the future.

You should consider our business and future prospects in light of the risks and challenges we face as a new entrant to a nascent industry, including risks and challenges associated with our ability to:

If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected.

As our business grows, we or our subsidiaries may adjust our product offerings. These adjustments may not bring about expected results and may instead have a material and adverse impact on our financial condition and results of operations. Our revenue structure may continue to evolve in response to market demand. In particular, we expect the revenue from sales of MAVs to begin in 2027. Our growth is dependent on the development of a redesigned MAV. We may not accurately identify market needs before we invest in the development of our planned MAV. In addition, we might face difficulties or delays in the development process, which may result in continued losses.

In pursuit of our growth strategy, we or our subsidiaries may enter into new strategic relationships to further penetrate our targeted markets. Should these relationships fail to materialize and develop into demand or orders for our products, or should we fail to work effectively with these companies, we may lose opportunities to generate sales growth and our business, results of operations and financial condition could be adversely affected.

We may not be successful in competing in the MAV industry.

We operate in the MAV industry. In addition to competing with other MAV companies, we compete with traditional industry players providing similar solutions, such as aircraft and ground transportation service providers. Many of our current and potential competitors, particularly international competitors, have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products.

We expect competition in our industry to intensify in the future in light of increased demand for alternative transportation, continuing globalization and consolidation in the global MAV industry. Factors affecting competition include, among others, ability to innovate, development speed, product quality, reliability, safety and features, pricing and customer service. Increased competition may lead to lower MAV unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results and prospects.

Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets and will affect our market share. If our competitors introduce MAVs or services that are superior in quality or performance and/or lower in price compared with our planned MAV, we may be unable to attract customers at prices that would allow us to generate attractive rates of return on our investment, if at all.

We face risks related to our information technology systems, and potential cyber-attacks and security and privacy breaches.

Our use of technology is critical in our continued operations. We are susceptible to operational, financial and information security risks resulting from cyber-attacks and/or technological malfunctions. Successful cyber-attacks and/or technological malfunctions affecting us, or our service providers can result in, among other things, financial losses, the inability to complete development and production of our planned MAV, the unauthorized release of customer information or confidential information and reputational risk. We have not experienced any material losses to date relating to cybersecurity attacks, other information breaches or technological malfunctions. However, there can be no assurance that we will not incur such losses in the future. As cybersecurity threats continue to evolve, we may be required to use additional resources to continue to modify or enhance protective measures or to investigate security vulnerabilities.

We may store and collect personal information about future customers and will be responsible for protecting that information from privacy breaches that may occur through procedural or process failure, information technology malfunction or deliberate unauthorized intrusions. Any such theft or privacy breach would have a material adverse effect on our business, prospects, revenue, results of operation and financial condition. We are subject to laws, rules and regulations in the United States and other jurisdictions relating to the collection, processing, storage, transfer and use of personal data. Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify regulators and customers, employees and other individuals of a data security breach. Evolving compliance and operational requirements under the privacy laws, rules and regulations of jurisdictions in which we operate impose significant costs that are likely to increase over time. In addition, non-compliance could result in proceedings against us by governmental entities and/or significant fines, could negatively impact our reputation and may otherwise adversely impact our business, financial condition and operating results.

An accident involving an MAV provided by us or another manufacturer could harm the MAV industry.

An accident involving an MAV provided by us or another manufacturer could cause regulatory agencies around the world to tighten restrictions on the use of MAVs, particularly over-populated areas, and could cause the public to lose confidence in our products and MAVs generally. There are risks associated with autopilot, flight control, communications and other advanced technologies, and, from time to time, there have been accidents associated with these technologies. The safety of certain cutting-edge technologies depends in part on user interaction, and users may not be accustomed to using such technologies. We or our subsidiaries could face unfavorable and tightened regulatory control and intervention on the use of autopilot and other advanced technologies and be subject to liability and government scrutiny to the extent accidents associated with our autonomous navigation systems occur. Should a high-profile accident occur resulting in substantial casualty or damages, involving our MAVs, public confidence in and regulatory attitudes toward MAVs could deteriorate. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.

We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and results of operations.

Our MAVs may not perform in line with customers’ expectations. Any product defects, accidents or any other failure of our MAVs to perform as expected could harm our reputation and result in adverse publicity, revenue loss, delivery delays and product recalls, which could harm our brand and reputation. Any product recall or lawsuit seeking significant monetary damages either in excess of or outside of our insurance coverage may have a material adverse effect on our business and financial condition. In the future, we may, voluntarily or involuntarily, initiate a recall if any of our MAVs, including any systems or components sourced from our suppliers, prove to be defective or noncompliant with applicable laws and regulations. Such recalls, whether voluntary or involuntary and whether caused by systems or components engineered or manufactured by us or our suppliers, could incur significant expenses and adversely affect our brand image in our target markets. They may also inhibit or prevent commercialization of our current and future product candidates.

We may become subject to product liability claims or warranty claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may be exposed to significant product liability claims if our MAVs do not perform as expected or malfunction. Any defects, errors, or failures in our products or the misuse of our MAVs, operating systems and infrastructure could also result in injury, death or property damage. Our risks in this area are particularly pronounced given we have limited field experience in the operation or development of MAVs. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our MAVs and business and inhibit or prevent commercialization of our current and future MAV models. Any insurance coverage we may obtain in the future might not be sufficient to cover all potential product liability claims. In addition, insurance coverage may not be available in the future at economical prices, or at all. Even if we are fully insured as it relates to a claim, the claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and result of operations.

We plan to generally provide standard warranties on our MAVs. The term of a warranty is expected to be between six months to three years, depending on the product line and the specific part or component. The occurrence of any material defects in our MAVs could make us liable for damages and warranty claims. In addition, we could incur significant costs to correct any defects or other problems, including costs related to product recalls. Warranty claims may also lead to litigation. Any negative publicity related to the perceived quality of our MAVs could affect our brand image, decrease retailer, distributor and customer demand, and adversely affect our operating results and financial condition.

If we fail to successfully develop and commercialize new products, services and technologies that are well received by customers, our operating results may be materially and adversely affected.

Our future growth depends on whether we can complete the redesign of our planned MAV and develop and introduce new generations of our currently planned MAV and update our operating systems and infrastructure with enhanced functionalities and value-added services. This is particularly important in the current industry landscape where technologies and consumer preferences evolve rapidly, which may shorten the lifecycles of our existing products. We plan to upgrade our current MAV model and introduce new models in order to continue to provide MAVs with the latest technologies. As technological advancements can be complex and costly, we could experience delays in the development and introduction of new products and services in the future.

Our ability to roll out new and innovative products and services depends on a number of factors, including significant investments in research and development, quality control of our products and services and effective management of our supply chain. We may need to devote more resources to the research and development of new or enhanced products, services and technologies, which may reduce our profitability. In addition, our research and development efforts may not yield the benefits we expect to achieve in a timely manner, or at all. To the extent that we are unable to execute our strategy of continuously introducing new and innovative products, diversifying our product portfolio and satisfying consumers’ changing preferences, we may not be able to grow our user base, and our competitive position and results of operations may be adversely affected. Even if we are able to keep up with technological changes and develop new models, our prior models may as a result become obsolete sooner than expected, potentially reducing our return on investment.

We have no experience in managing sales to multiple countries and we are subject to a variety of costs and risks due to our continued international expansion.

One of our core strategies is international expansion. We generally have less experience in marketing, selling and deploying our MAVs in markets outside the U.S. and Japan. International expansion will require us to invest significant capital and other resources, and our efforts may not be successful. International sales and operations are subject to risks such as:

Additionally, to export our MAVs to certain jurisdictions, we may face challenges in coordinating with the U.S., Japanese and the applicable foreign governments and regulatory authorities. If we cannot export our MAVs to such jurisdictions, our business, prospects, financial condition and operating results may be materially and adversely impacted.

The failure to manage any of these risks could negatively affect our international business and consequently our overall business and operating results. In addition, the concern over these risks may also prevent us from entering into, or marketing, selling or releasing our MAVs in, certain markets.

Our operations may be interrupted by production difficulties or delays due to mechanical failures, utility shortages or stoppages, fire, natural disaster or other calamities at or near our facilities.

Production difficulties, such as capacity constraints, mechanical and systems failures and the need for equipment upgrades, may suspend our production and/or reduce our output. There can be no assurance that Helicopter Technology will not experience problems with its production facilities in the future or that it will be able to address any such problems in a timely manner. Problems with key equipment in one or more of Helicopter Technology’s production facilities may affect its ability to produce our MAVs or cause us to incur significant expenses to repair or replace such equipment. Scheduled and unscheduled maintenance programs may affect our production output. Any of these could have a material adverse effect on our business, financial condition, results of operations and prospects.

We depend on a continuous supply of utilities, such as electricity and water, to operate the production facilities operated by Helicopter Technology. Any disruption to the supply of electricity or other utilities may disrupt its production, or cause the deterioration or loss of inventory. This could adversely affect our ability to fulfill our sales orders and consequently may have an adverse effect on our business and results of operations. In addition, fire, natural disasters, pandemics or extreme weather, including droughts, floods or other storms, or excessive cold or heat, could cause power outages, fuel shortages, water shortages, damage to Helicopter Technology’s production, processing or distribution facilities or disruption of transportation channels, any of which could impair or interfere with our planned future operations. We cannot assure you that such events will not happen in the future or that we will be able to take adequate measures to mitigate the likelihood or potential impact of such events, or to effectively respond to such events if they occur.

Weather and seasonality may have a material adverse effect on our operations.

Future sales of our MAVs may be affected by weather and seasonality. Potential customers may choose alternative transportation instead of our MAVs in severe weather conditions in consideration of safety factors, even if our MAVs are able to endure such conditions. As a result, our business, financial condition and operating results may be materially and adversely impacted by the weather conditions. Our operating results may vary from period to period due to many factors, including seasonal factors that may have an effect on the demand for our MAVs in the future. As a result, our quarterly results of operations and financial position at the end of a particular quarter may not necessarily be representative of the results we expect at year-end or in other quarters of a year. Our operating results would suffer if we did not achieve revenues consistent with our expectations due to seasonal demand and weather changes because many of our expenses are based on anticipated levels of annual revenues.

Any decline in the business of our business partners or the deterioration of our relationship with them could have a material adverse effect on our operating results.

We collaborate with various business partners to promote our MAVs. There can be no guarantee that those business partners will continue to collaborate with us in the future. If we are unable to maintain good relationships with our business partners, or the business of our business partners declines, the reach of our products may be adversely affected and our ability to maintain and expand our user base may decrease.

Most of the agreements with our business partners do not prohibit them from working with our competitors or from offering competing services. If our partners change their standard terms and conditions in a manner that is detrimental to our business, or if our business partners decide not to continue working with us, or choose to devote more resources to supporting our competitors or their own competing products, we may not be able to find a substitute on commercially favorable terms, or at all, and our competitive advantages may diminish.

If we fail to comply with environmental and work safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental and work safety laws and regulations. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations. Environmental and social laws and regulations have tended to become increasingly stringent. There has been increased global focus on environmental and social issues and it is possible that countries may potentially adopt more stringent standards or new regulations in these areas. To the extent regulatory changes occur in the future, they could result in, among other things, increased costs to our company. In addition, we may incur substantial costs in order to comply with current or future environmental and work safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

If our current or future business partners, contractors, suppliers, sales agents, dealers or third-party logistics services providers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity beyond our own control.

Our reputation is sensitive to allegations of unethical business practices. We do not control the business practices of our current or future business partners, independent contractors and suppliers, sales agents, dealers or third-party logistics services providers. Accordingly, we cannot guarantee their compliance with ethical business practices, such as environmental responsibilities, fair wage practices, and compliance with child labor laws, among others. A lack of demonstrated compliance could lead us to seek alternative suppliers, sales agents or dealers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations. Violation of labor or other laws by our suppliers, business partners, sales agent, dealers or third-party logistics services suppliers or the divergence of their labor or other practices from those generally accepted as ethical in the markets in which we do business could also attract negative publicity, diminish our brand image and reduce demand for our MAVs.

If customers modify our MAVs or operating systems, the MAVs may not operate properly, which may cause damage, create negative publicity and harm our business.

Our future customers may try to modify our MAVs or operating systems for various reasons, which could compromise the performance and safety of our MAVs, as well as the safety of their passengers. During such modifications, they may use third-party parts that may not be compatible with our products. We do not plan to test, nor do we plan to endorse, such modification. In addition, the use of improper external cabling can expose our customers to injury from MAV malfunctioning. Any injuries or damages resulting from such modifications or misuses could result in adverse publicity, which would negatively affect our brand and harm our business, prospects, financial condition and operating results.

Failure to safeguard personal information could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

We may log information about each MAV’s use, such as mileage and location information, in order to aid us in vehicle diagnostics, repair and maintenance, as well as to help us customize and optimize the flying experience. Images and videos captured by cameras attached to our MAVs may be stored on our servers, servers of third-party cloud storage providers or other servers designated by our customers. We, therefore, process, including but not limited to collect, store, process, use, transfer, provide, disclose and delete, personal data from our users in order to better understand our users and their needs for the purpose of our content feeds recommendation. Possession and use of our users’ flying behavior and data in conducting our business may subject us to legislative and regulatory oversight in Japan and other jurisdictions, such as the European Union and the United States. For example, in January 2018, the European Union promulgated the General Data Protection Regulation to further protect fundamental rights in privacy and personal information so that members of the general public have more control over their personal information. Regulations in relevant jurisdictions may require us to obtain user consent for the collection of personal information, restrict our use of such personal information and hinder our ability to expand our user base. In the event of a data breach or other unauthorized access to our user data, we may have obligations to notify users about the incident and we may need to provide some form of remedy for the individuals affected by the incident.

Concerns or claims about our practices with regard to the processing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and results of operations. In the Japanese, governmental authorities have enacted a series of laws and regulations to enhance the protection of privacy and data. We may need to adjust our business to comply with data security requirements and other laws and regulations from time to time.

As laws and regulations in Japan on the protection of privacy and data are constantly evolving, complying with new laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.

Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by such laws, regulations or obligations. Any failure on our part to comply with applicable laws or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, collection, transfer, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing users from using our platform or result in investigations, fines, suspension of our app, or other penalties by government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. In addition, the interpretation and application of the aforementioned laws and regulations are often uncertain and in flux. Our practice may become inconsistent with these laws and regulations.

Our platform and internal systems depend on the ability of software and hardware developed and maintained internally and/or by third parties to store, retrieve, process and manage immense amounts of data, including personal information or other privacy-related matters. The software and hardware on which we rely may now or in the future contain, undetected programming errors, bugs, or vulnerabilities which may result in errors or compromise our ability to protect the data of our users and in turn adversely affect our business, financial condition and operation results. Any systems failure or compromise of security that results in the unauthorized access to or release of the data, photo or messaging history of our users could significantly limit the adoption of our services, as well as harm our reputation and brand, result in litigation against us, liquidation and other damages, regulatory investigations and penalties, and we could be subject to material liability. Additionally, we connect our platform with software development kit provided by third parties who may also process users’ data. The integrity of our user data also depends on their ability to secure and protect the data they process. The risk that these types of events could seriously harm our business is likely to increase as we expand the scope of services we offer and as we increase the size of our user base.

We may also become subject to laws and regulations affecting data protection, data privacy and/or information security in other jurisdictions by virtue of having users who reside in these jurisdictions, even if we do not have a physical presence there. Many jurisdictions have in the past adopted, and may in the future adopt, new laws and regulations, or amendments to existing laws and regulations, affecting data protection, data privacy and/or information security, such as the General Data Protection Regulation, or the GDPR, adopted by the European Union that became fully effective on May 25, 2018. The interpretation and application of these laws or regulations are often uncertain and in flux. We cannot guarantee you that our practice is consistent with these laws and regulations and our practice may become inconsistent with these laws and regulations, if so, we could be subject to fines and orders requiring that we change our practices, which could have an adverse effect on our business and results of operations. Complying with new data laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.

If users allege that we have improperly used, released or disclosed their personal information, we could face legal claims and reputational damage. We may incur significant expenses to comply with privacy, consumer protection and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. A major breach of our network security and systems could create serious negative consequences for our business and future prospects, including possible fines, penalties, reduced customer demand for our MAVs, and harm to our reputation and brand.

The execution of our business plans requires a significant amount of capital. In addition, our future capital needs may require us to sell additional equity or debt securities that may dilute the equity interests of our shareholders or introduce covenants that may restrict our operations or our ability to pay dividends.

We will need significant capital to, among other things, complete the design, development and manufacturing of the MAV and roll out new products and solutions. We may also need significant capital to maintain our existing property and equipment. Our expected sources of capital include both equity and debt financing. However, financing might not be available to us in a timely manner or on acceptable terms, or at all.

Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plans. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities, substantially change our current corporate structure, or even curtail or discontinue our operations.

In addition, our future capital needs and other business concerns could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute the equity interests of our shareholders. Additional indebtedness would increase our debt-service obligations and may be accompanied by covenants that would restrict our operations or our ability to pay dividends to our shareholders.

We are subject to risks associated with strategic alliances or acquisitions. If we cannot manage the growth of our business or execute our strategies effectively, our business and prospects may be materially and adversely affected.

We have entered into strategic alliances with various business partners, and may in the future enter into joint research and development agreements or co-branding agreements with third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third parties and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties. If any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

Although we currently do not have any specific acquisition plans, if appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. In addition to any required shareholders’ approval, we may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable Japanese laws and regulations, which could result in delays and increased costs, and may derail our business strategy if we fail to do so. Furthermore, past and future acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

We and our operating subsidiary have no insurance coverage, which could subject us to significant costs and business disruption.

We and our operating subsidiary have no liability insurance coverage for our products and business operations because our business is still in the early development stage. We may not be able to secure additional product liability insurance coverage on acceptable terms or at reasonable costs when needed. A successful liability claim against us, our subsidiaries or its subsidiaries due to injuries or damages suffered by our users could materially and adversely affect our financial condition, results of operations and reputation. Even if unsuccessful, such a claim could cause us adverse publicity, require substantial costs to defend, and divert the time and attention of our management. In addition, we do not have any business disruption insurance. Any business disruption could result in substantial cost to us and diversion of our resources. Furthermore, Japan, the United States or any other jurisdiction relevant to our business may impose requirements for maintaining certain minimum liability or other insurance relating to the operation of MAVs. Such insurance policies could be costly, which would reduce the demand for our MAVs. Alternatively, certain insurance products that would be desirable to MAV operators may not be commercially available, which would increase the risks of operating our MAVs and also reduce the demand for them.

We are involved in litigation from time to time and, as a result, we could incur substantial judgments, fines, legal fees or other costs.

We may be the subject of complaints or litigation from customers, suppliers, employees, creditors of A.L.I. stemming from its bankruptcy proceedings or other third parties for various actions. The damages sought against us in some of these litigation proceedings could be substantial. We cannot assure you that we will always have meritorious defenses to the plaintiffs’ claims. While the ultimate effect of these legal actions cannot be predicted with certainty, our reputation and the result of operations could be negatively impacted. The proceedings we may be involved in from time to time, including the A.L.I. Bankruptcy proceedings, could incur substantial judgments, fines, legal fees or other costs and have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, see “Item 3 – Legal Proceedings” and the discussion regarding the A.L.I. Bankruptcy.

Any financial or economic crisis or perceived threat of such a crisis may materially and adversely affect our business, financial condition and results of operations.

We are subject to risks inherent in economic volatility and disruptions that may arise. For example, the global financial markets experienced significant disruptions in 2008. The recovery since then has been geographically uneven. New challenges have also emerged, including the escalation of the European sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. Federal Reserve and the economic slowdown in the Eurozone in 2014. More recently, in response to inflation, central bank interest rate increases, slowing of economic growth and other factors, stock markets across the world have experienced significant volatility and downward price pressure in 2022. It is unclear whether these challenges will be contained and what effects they each may have. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including Japan’s. Economic conditions in Japan are sensitive to global economic conditions. Any prolonged slowdown in Japan’s economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and customer confidence and dramatic changes in business and customer behaviors.

We face risks related to natural disasters, which could significantly disrupt our operations.

We are vulnerable to natural disasters and other calamities such as typhoons, tornadoes, floods, earthquakes and other adverse weather and climate conditions. Although we may have in the future servers that are hosted in an offsite location, future backup systems may not capture data on a real-time basis, and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to design, develop and produce the MAVs.

If the landlords of our and our subsidiaries’ leased properties fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation of our offices could be materially and adversely affected.

We and our subsidiaries lease all the premises used in our operations from third parties. We and our subsidiaries require the landlords’ cooperation to effectively manage the condition of such premises, buildings and facilities. In the event that the condition of the office premises, buildings and facilities deteriorates, or if any or all of our and our subsidiaries’ landlords fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation of our offices could be materially and adversely affected.

Because our long-term growth strategy involves expansion of our sales to customers outside the United States, our business will be susceptible to risks associated with international operations.

A component of our growth strategy involves the expansion of our operations and customer base worldwide. We plan to establish locally owned, independent dealers and distributors in international offices in the future. These international dealers and distributors will focus primarily on sales, professional services and support. Our future international operations and future initiatives will involve a variety of risks, including:

Our inexperience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to establish our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer. We continue to implement policies and procedures to facilitate our compliance with U.S. laws and regulations applicable to or arising from our international business. Inadequacies in our past or current compliance practices may increase the risk of inadvertent violations of such laws and regulations, which could lead to financial and other penalties that could damage our reputation and impose costs on us.

Our customers may fail to pay us in accordance with the terms of their agreements, at times necessitating action by us to attempt to compel payment.

If our customers fail to pay us in accordance with the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our agreements, including litigation and arbitration costs. The risk of these issues increases with the term length of our customer arrangements. Furthermore, some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our results of operations, financial condition and cash flow.

We believe our success depends on investing in the growth of our plans to expand sales to markets outside the United States. If our investments in these markets are greater than anticipated, or if our customer growth or sales in these markets do not meet our expectations, our results of operations and financial condition may be adversely affected.

We believe our success depends on expanding our business into new geographic markets and attracting customers in countries other than the United States. We anticipate continuing to expand our sales operations worldwide by establishing locally owned, independent dealers and distributors once we begin to commercialize the MAVs in 2027. This includes entering into distribution agreements with companies who have existing operations in these markets. We currently do not have any dealer or distributor agreements in place. If we are unable to enter into dealer or distributor agreements in these markets or if our customer growth or sales in these markets do not meet our expectations or justify the cost of the initial investments, our results of operations and financial condition may be adverse affected.

Risks Related to Our Dependence on Third Parties

We will rely on Helicopter Technology to redesign and produce our planned MAV. Inadequate design and manufacturing services or failure to mitigate the risks of damage or disruption to our development and manufacturing process could adversely affect our business.

Our ability to redesign and manufacture our MAVs is critical to our success across our operations. We expect to rely on Helicopter Technology to redesign and produce our planned MAV. Inadequate design and manufacturing services due to disputes, inadequate design or unexpected design or manufacturing defects could impair our ability to sell our MAVs. Inadequate design and manufacturing services could also potentially disrupt our sales and compromise our business reputation. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to complete the redesign of our planned MAV and its production.

We expect to rely on third-party distributors for sales, marketing and distribution activities relating to our MAVs.

Currently we do not rely on any third-party distributors for sales, marketing and distribution activities relating to our MAVs as are in the process of redesigning our MAV. However, some of our business partners may act as third-party distributors that sell, market and distribute our MAVs to their customers in the future. Accordingly, we may be subject to a number of risks associated with third-party distributors, including a lack of day-to-day control over the activities of third-party distributors selling or using our products and solutions; third-party distributors may terminate their arrangements with us on limited or no notice, or may change the terms of these arrangements in a manner that is unfavorable to us for reasons outside of our control; and any disagreements with our third-party distributors could lead to costly and time-consuming litigation or arbitration. If we fail to establish and maintain satisfactory relationships with our third-party distributors, we may not be able to sell, market and distribute our MAVs according to our internal budget and plans, our future revenues and market share may not grow at a pace that we expect, and we could be subject to increases in sales and marketing and other costs which would harm our results of operations and financial condition.

We will rely on external suppliers for raw materials and certain key externally sourced components and parts used in the assembly of our MAVs, and have limited control over the quality of these components and parts.

We plan to purchase certain key externally sourced components and raw materials, such as computers chips, batteries, motors and electronic displays, from external suppliers for use in our assembly, production and operations of MAVs. A continuous and stable supply of components and raw materials that meet our standards is crucial to our assembly, production and operations. We cannot assure you that we will be able to establish or maintain relationships with suppliers and be able to stably source key components and raw materials at reasonable prices, or at all. Since our MAV is currently under development, we have not identified all of the inputs needed to manufacture it. Consequently, we have not identified the suppliers we will needed until we further along with our development work. Further, once suppliers have been identified, the supply of key components could be interrupted for any reason, or there could be significant increases in the prices of these key components. Additionally, changes in business conditions, force majeure, governmental changes and other factors beyond our control, or that we do not presently anticipate, could also affect our prospective suppliers’ ability to deliver components to us on a timely basis. If any of these events occurs, our business, financial condition, results of operations and prospects may be materially and adversely affected.

We cannot guarantee that the quality of components and parts manufactured by prospective suppliers will be consistent and maintained at a high standard. Any defects of or quality issues with these components or any noncompliance incidents associated with these third-party suppliers could result in quality issues with our MAVs and hence compromise our brand image and results of operations. In extreme situations, we may be exposed to liabilities as a result of significant damages caused by certain components from external suppliers and we cannot assure you that we will be able to obtain sufficient insurance coverage at an acceptable cost in the future. A successful claim brought against us in excess of our available insurance coverage may have a material adverse effect on our business, financial condition and operating results.

We expect to rely on third-party logistics providers to deliver our domestic sales orders and overseas orders. Inadequate third-party logistics services or failure to mitigate the risks of damage or disruption to our distribution logistics could adversely affect our business.

Our ability to transport and sell our MAVs is critical to our success across our operations. We expect to rely on third-party logistics service providers to deliver our domestic sales orders and overseas orders. Damage or disruption to our distribution logistics due to disputes, weather, natural disasters, fire, explosions, terrorism, pandemics or labor strikes could impair our ability to distribute or sell our MAVs. Inadequate third-party logistics services could also potentially disrupt our distribution and sales and compromise our business reputation. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to restore our supply chain.

Risks Related to Employee Matters

Our success depends on the continuing efforts of our key employees, including our senior management members, directors and other key personnel. If we fail to hire, retain and motivate our key employees and directors, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that our success depends substantially on the continued efforts of our key employees, including our senior management members, directors and other qualified and key personnel. We rely on our executive officers, senior management, directors and key employees to generate business, execute programs successfully and provide strategic oversight of our business. In addition, the relationships and reputation that members of our management and key employees have established and maintain with key partners contribute to our ability to implement our initiative to redesign, develop and manufacture the MAVs. The loss of any key personnel or our failure to attract additional talent could reduce our employee retention, disrupt these initiatives and operations, increase our costs of development and impair our revenue growth and competitiveness.

As previously disclosed by us in Form 8-K’s filed with the SEC, in March 2023 and May 2023, four of our directors resigned, one of whom was our former Chief Executive Officer (Shubei Komatsu, Steve Iwamura, Dr. Sayama and Marehiko Yamada) who were appointed on February 9, 2023 upon completion of our merger with AERWINS. In addition, on March 27, 2023, our former Chief Product Officer, Kazuo Miura was removed from his position by the Board, on July 17, 2023 Daisuke Katano resigned as a director and on July 25, 2023 he resigned as our Chief Operating Officer. The resignations and removal of these officers were not the result of any disagreement with our company on any matter relating to our operations, policies or practices. Our board of directors appointed four new directors (Kiran Sidhu on May 15, 2023 and Katharyn (Katie) Field and Pavanveer (Pavan) Gill on May 22, 2023 and Robert Lim on July 18, 2023) and promoted Taiji Ito from his position as our Global Markets Executive Officer to Chief Executive Officer on March 20, 2023. The duties of Messrs. Miura and Katano were assumed by other members of our management team and on August 24, 2023, we appointed Yinshun (Sue) He as our Chief Financial Officer following the resignation of Kensuke Okabe. As previously disclosed by us in a Form 8-K filed with the SEC on July 20, 2023, on July 18, 2023 Kiran Sidhu, the chairman of our board of directors and audit committee was appointed as Executive Chairman of the Board and President, Katharyn Field was appointed as the chairperson of our audit committee and as its audit committee financial expert and Robert Lim was appointed as a member of the board of directors. In addition, on July 18, 2023, the board of directors changed the composition of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee were changed. See “DESCRIPTION OF BUSINESS–Officer and Director Changes.” On December 12, 2023, Kiran Sidhu was appointed as our Chief Executive Officer following the resignation of Taiji Ito as our Chief Executive Officer. As part of this change, the Board appointed Ms. Field as the Chairman of the Board to take on the role formerly held by Mr. Sidhu who will remain as a director of the Company in addition to his role as its CEO. Mr. Ito remains as a director of the Company.

While we were able to either reassign duties or timely identify and appoint qualified individuals to replace members of our management team upon their resignation or removal, if one or more of our other executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all, and we might lose the innovation, collaboration and focus that they contribute to our business.

The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy.

To execute our business strategy, we must attract and retain highly qualified personnel. In particular, we compete with many other companies for developers with high levels of experience in designing, developing and manufacturing MAVs, as well as for skilled information technology, marketing, sales and operations professionals, and we may not be successful in attracting and retaining the professionals we need. Also, inbound sales, marketing, services, and content management domain experts are very important to our success and are difficult to replace. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and difficulty in retaining highly skilled employees with appropriate qualifications. In particular, we expect to experience a competitive hiring environment in the United States, where we are headquartered. Many of the companies with which we compete for experienced personnel have greater resources than we do. In addition, in making employment decisions, particularly in the MAVs industry, job candidates often consider the value of the stock options or other equity incentives they are to receive in connection with their employment. If the price of our stock declines, or experiences significant volatility, our ability to attract or retain key employees will be adversely affected. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

Risks Related to Intellectual Property

We and our subsidiaries may need to defend ourselves against claims of intellectual property infringement, which may be time-consuming and costly.

Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our MAVs, MAV operating systems and infrastructure or their components, which could make it more difficult for us to operate our business. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights by us and our subsidiaries or otherwise assert their rights against us and our subsidiaries. Moreover, our and our subsidiaries’ applications and uses of trademarks relating to our and our subsidiaries’ design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. We or our subsidiaries may also fail to apply for key trademarks in a timely manner. We or our subsidiaries may continue to face intellectual property infringement claims in the future.

If we or our subsidiaries are determined to have infringed upon a third party’s intellectual property rights, we or our subsidiaries may be required to do one or more of the following:

In the event of a successful claim of infringement against us or our subsidiaries and our or our subsidiaries’ failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, even if frivolous, could result in substantial costs, negative publicity and diversion of resources and management attention.

If we fail to protect, or incur significant costs in defending or enforcing our intellectual property and other proprietary rights, our business, financial condition and results of operations could be materially harmed.

Our success depends, in large part, on our ability to protect our intellectual property and other proprietary rights. We expect to rely primarily on patents, trademarks, copyrights, trade secrets, design rights and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. However, existing U.S. legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide us with any competitive advantages, and our rights may be challenged by third parties. The laws of countries other than the United States may be even less protective of our intellectual property rights. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology we expect to develop in the future. Unauthorized third parties may try to copy or reverse engineer our planned products or portions of our products or otherwise obtain and use our intellectual property. Moreover, our employees contractors have or will have access to our trade secrets and other intellectual property. If one or more of these contractors cease working with us and work for one of our competitors, then they may disseminate this proprietary information, which may as a result damage our competitive position. If we fail to protect our intellectual property and other proprietary rights, then our business, results of operations or financial condition could be materially harmed. From time to time, we have initiated lawsuits to protect our intellectual property and other proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact our results of operations.

In addition, affirmatively defending our intellectual property rights and investigating whether any of our products or services violate the rights of others may entail significant expense. Our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to us and divert the attention and efforts of our management and technical employees, even if we prevail.

Risks Related to Government Regulation

Failure to comply with laws and regulations could harm our business.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States.

Although we expect to operate under the ultralight aircraft exceptions of Federal Aviation Regulation Part 103, aircraft, including the MAVs, are subject to substantial regulation and changes to those regulations under international, federal, state, local and foreign laws regarding safety, performance, and import regulations. Our planned vehicles will need to comply with many governmental standards and regulations relating to vehicle safety, fuel economy, emissions control, noise control, and vehicle recycling, among others. Compliance with all of these requirements may delay our production launch or require substantially higher compliance costs than anticipated, thereby adversely affecting our business and financial condition.

We are subject to FAA regulations and changes to FAA regulations requiring certifications for flight operations or sales could negatively impact operations.

We plan to design the MAV to conform with Federal Aviation Regulation Part 103 requirements for ultralight aircraft. We do not believe we need to achieve FAA Certification for domestic MAV flight operations and sales as long as we continue to conform to FAR Part 103 in terms of aircraft specifications and flight operations. Changes in FAA regulations requiring certification for flight operations or sales might result in us incurring significantly increased costs to comply with those new regulations and in attempting to correct any issues causing such delays. Also, the impact of new or changed laws or regulations on the planned MAV compliance or the costs of complying with such laws and regulations cannot be predicted.

Further, as we sell our MAV products internationally, we face challenges in quickly and sufficiently familiarizing ourselves with foreign regulatory environments and policy frameworks. If any new regulation is put in place, or a different interpretation of existing regulation is adopted, our ability to manufacture, market, sell or operate our MAVs may be limited or otherwise affected. Failure to comply with applicable regulations or to obtain, maintain or renew the necessary permits, licenses, registrations or certificates could cause delays in, or prevent us from, manufacturing, marketing, selling and operating our MAVs products, meeting product demand and expectations, introducing new products or expanding our service coverage, and could materially and adversely affect our operation results. If we are found to be in violation of applicable laws or regulations, we could be subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in the United States, including the U.S. Foreign Corrupt Practices Act, or the FCPA and other anti-corruption laws and regulations. The FCPA prohibits us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation.

We expect to have direct or indirect interactions with officials and employees of government agencies and state-owned affiliated entities in the ordinary course of business. We may also enter into joint ventures and/or other business partnerships with government agencies and state-owned or affiliated entities. These interactions subject us to an increased level of compliance-related concerns. We are in the process of implementing policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient, and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.

Risks Related to Indebtedness

Our substantial indebtedness could have important adverse consequences and adversely affect our financial condition.

We have a significant amount of indebtedness. As of December 31, 2023 and December 31, 2022, we had total liabilities of $19,547,304 and $9,870,442, respectively. In addition, A.L.I.’s December 27, 2023 bankruptcy filing constituted an event of default pursuant to the secured convertible notes in the aggregate principal amount of $4,200,000 issued by us to Lind Global on April 12, 2023 and May 23, 2023 and as amended on August 25, 2023 (the “Lind Notes”). Pursuant to the terms of the January Note Amendments and the SPA Amendment, if we complete a Public Offering of our securities and make the Mandatory Prepayment no later than April 15, 2024, as provided for in the January Note Amendments, Lind Global has agreed to forbear enforcement of its rights due to the event of default. If, however, we are unable to fulfill these obligations, Lind Global may, at its option, (1) demand payment of an amount equal to 120% of the outstanding principal amount of the Notes and (2) exercise all other rights and remedies available to it under the Notes and other agreements entered into among the Company and Lind in connection with the issuance of the Notes (collectively, the “Transaction Documents”), subject to the Floor Price and cash payment as discussed elsewhere in this Form 10-K.

Our level of debt could have important consequences, including making it more difficult for us to satisfy our obligations with respect to our debt, limiting our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions, or other general corporate requirements, requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions and other general corporate purposes, increasing our vulnerability to adverse changes in general economic, industry and competitive conditions, exposing us to the risk of increased interest rates, limiting our flexibility in planning for and reacting to changes in the industries in which we compete, placing us at a disadvantage compared to other, less leveraged competitors, increasing our cost of borrowing and hampering our ability to execute on our growth strategy.

We are unable to generate sufficient cash flow to satisfy our significant debt service obligations, which could have a material adverse effect on our business, financial condition results of operations, and cash flows.

Our ability to make principal and interest payments on and to refinance the indebtedness of our subsidiaries will depend on our ability to raise funds from debt and/or equity financing as we no longer believe we will be able to generate a sufficient amount of cash flow from operations prior to the due dates for our outstanding indebtedness in light to our discontinuance of A.L.I.’s business, the inability to achieve the projected revenues from A.L.I and its bankruptcy filing in December 2023. Consequently, we need to refinance all or a portion of our indebtedness and the indebtedness of our subsidiaries on or before maturity, sell assets, delay capital expenditures or seek additional equity. The terms of our existing or future debt agreements may also restrict us from affecting any of these alternatives. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, could have a material adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of our indebtedness.

Despite our level of indebtedness, we and our operating subsidiary may still be able to incur substantially more debt, including off-balance sheet financing, contractual obligations and general and commercial liabilities. This could further exacerbate the risks to our financial condition described above.

We and our subsidiary Aerwin Development, may be able to incur significant additional indebtedness in the future, including off-balance sheet financings, contractual obligations and general and commercial liabilities. If new debt is added to our current debt levels, the related risks that we now face could intensify.

General Risks

Weakened global economic conditions may harm our industry, business and results of operations.

Our overall performance depends in part on worldwide economic conditions. Global financial developments and downturns seemingly unrelated to us or the MAV industry may harm us. The United States and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, and overall uncertainty with respect to the economy, including with respect to tariff and trade issues. In particular, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector, uncertainty over the future of the Euro zone and volatility in the value of the pound sterling and the Euro, including instability surrounding Brexit. If economic conditions in key markets for our MAVs continue to remain uncertain or deteriorate further, it could adversely affect our customers’ ability or willingness to purchase our MAVs and delay prospective customers’ purchasing decisions, all of which could harm our operating results.

We are exposed to fluctuations in currency exchange rates.

We face exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when re-measured, may differ materially from expectations. In addition, our operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. Furthermore, global political events, including Brexit and similar geopolitical developments, fluctuating commodity prices and trade tariff developments, have caused global economic uncertainty, which could amplify the volatility of currency fluctuations. Such volatility, even when it increases our revenues or decreases our expenses, impacts our ability to predict our future results and earnings accurately. Although we may apply certain strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. Additionally, as we anticipate growing our business further outside of the United States, the effects of movements in currency exchange rates will increase as our transaction volume outside of the United States increases.

Our actual operating results may differ significantly from our guidance and projections.

From time to time, we may provide forward looking estimates regarding our future performance that represent management’s estimates as of a point in time. These forward-looking statements are based on projections prepared by our management.

Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions and conditions, some of which will change. The principal reason that we provide forward looking information is to provide a basis for our management to discuss its business outlook with stakeholders. Forward looking statements are necessarily speculative in nature, and it can be expected that some or all of the assumptions of its forward-looking statements will not materialize or will vary significantly from actual results. Accordingly, our forward-looking statements are only an estimate of what management believes is realizable as of the date of release. Actual results will vary from our forward-looking statements and the variations may be material. In particular, we no longer expect to achieve the projected revenues from A.L.I.’s businesses we expected when we completed the Business Combination with Aerwins, Inc. In light of the foregoing, investors are urged not to rely upon, or otherwise consider, our guidance or projections in making investment decisions.

Risks Related to Ownership of Our Securities

Our management will have broad discretion over the use of any net proceeds from future offerings and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.

Our management will have broad discretion as to the use of any net proceeds from future offerings of our securities and could use them for purposes other than those contemplated at the time of the offering. As of the date of this Form 10-K, we will use the net proceeds of future offerings for general corporate purposes, including working capital, the payment of the Mandatory Prepayment portion of the Lind Notes, the expected costs to redesign, build and commercialize our planned MAV and the personnel costs, capital expenditures and the costs of operating as a public company. We have not allocated any specific portion of the net proceeds of any future offering to any particular purpose and our management will have the discretion to allocate the proceeds as it determines except as it relates to the Mandatory Prepayment portion of the Lind Notes. We will have significant flexibility and broad discretion in applying the net proceeds of this offering, and we may not apply these proceeds effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Nasdaq may delist the Company’s securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject the Company to additional trading restrictions.

Our securities are currently listed on the Nasdaq Capital Market. However, we cannot assure you that our securities will continue to be listed on the Nasdaq Capital Market in the future. In order to continue listing its securities on the Nasdaq Capital Market, we must maintain certain financial, distribution and stock price levels and minimum market value of listed securities. Generally, we must maintain a minimum number of holders of its securities (generally 400 public holders).

As previously disclosed in the Current Report on Form 8-K filed on April 21, 2023 by the Company, on April 20, 2023, Nasdaq Listing Qualifications staff (“Staff”) notified the Company that it no longer complied with the minimum bid price requirement under Listing Rule 5450(a)(1). In accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until October 17, 2023, to regain compliance with Rule 5450(a)(1) (the “Bid Price Rule”). As previously disclosed on a Form 8-K filed with the SEC on October 23, 2023, on October 18, 2023, Staff notified the Company that it had determined to delist the Company as it did not comply with the requirements for continued listing on the Exchange. As previously disclosed in the Current Report on Form 8-K filed with the SEC on November 28, 2023, the Company appealed Nasdaq’s determination in accordance with the procedures set forth in the Nasdaq Listing Rules and requested a hearing (the “Hearing Request”) before the Nasdaq Hearings Panel (the “Panel”). As previously disclosed on a Form 8-K filed with the SEC on November 28, 2023, on November 21, 2023, Staff issued an additional delist determination letter after the Company failed to file its Form 10-Q for the period ended September 30, 2023 (the “Delinquent Report”), as required by Listing Rule 5250(c)(1) (the “Periodic Filing Rule”). On November 28, 2023, the Company filed its Delinquent Report and, thus, regained compliance with the Periodic Filing Rule. As previously disclosed on a Form 8-K filed with the SEC on December 12, 2023, on December 6, 2023, Staff issued an additional delist determination letter as the Company’s no longer complied with the $50,000,000 minimum market value of listed securities requirement set forth in Listing Rule 5450(b)(2)(A) (the “MVLS Rule”), which served as an additional and separate basis for delisting.

A hearing before the Panel was conducted on January 4, 2024. The Panel conditionally granted the Company’s request to transfer its shares from The Nasdaq Global Market to The Nasdaq Capital Market, effective at the open of trading on January 18, 2024 and the Company’s request for an exception to the Exchange’s listing rules until April 15, 2024, to demonstrate compliance, subject to the satisfaction of the conditions set forth in the Panel Decision. The Panel Decision indicates that the Company may request that the Nasdaq Listing and Hearing Review Council (the “Council”) review the Panel Decision, in which case a written request for review would need to be received within 15 days from the date of the Panel Decision. The Council may also on its own motion determine to review the Panel Decision. The Panel Decision has no immediate effect on the listing of the Company’s common stock on the Nasdaq Global Market. The Company plans to fulfil each of the conditions as stated in the Panel Decision; however, no assurance can be given as to the definitive date on which such conditions will be achieved.

Following a request submitted by the Company on April 12, 2024, the Panel granted a further extension to the exception granted on January 16, 2024, to the Company, as amended on January 17, 2024 (the “Decision”), to extend the Company’s deadline to regain compliance with Listing Rule 5550(b)(1) (the “Equity Requirement”). In granting the extension, the Panel noted that as of April 15, 2024, the Company has regained compliance with Nasdaq Listing Rule 5550(b)(1). Based on the information presented, the Panel determined to grant the Company’s request for an exception extension to regain compliance with the Equity Requirement until May 31, 2024, subject to the Company demonstrating compliance with all applicable continued listing requirements for The Nasdaq Capital Market under Rule 5550.

On April 17, 2024, the Company received an Additional Staff Delisting Determination (the “Additional Staff Determination”) from Nasdaq. The Additional Staff Determination noted that the Company is now delinquent in filing its Form 10-K for the period ended December 31, 2023 (the “Form 10-K”), which additional delinquency may serve as a separate basis for the delisting of the Company’s securities from Nasdaq. The Additional Staff Determination notified the Company that the Nasdaq Hearings Panel (the “Panel”) will consider this matter in their decision regarding the Company’s continued listing on The Nasdaq Capital Market and that it should present its views with respect to this additional deficiency to the Panel in writing no later than April 24, 2024. On April 30, 2024, the Company filed its delinquent Form 10-K for the period ended December 31, 2023.

If Nasdaq delists our securities from trading on the Nasdaq Capital Market and we are not able to list our securities another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, the Company could face significant material adverse consequences, including:

In the event of a delisting, we anticipate that we would take actions to restore our compliance with the Nasdaq Capital Market or another national exchange’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to remain listed on the Nasdaq Capital Market or the Nasdaq Capital Market, stabilize our market price, improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq Capital Market’s minimum bid price requirement, or prevent future non-compliance with the Nasdaq Capital Market or another national exchange’s listing requirements.

A large number of shares of our common stock issuable upon conversion of the Convertible Notes may be sold in the market, which may depress the market price of our common stock and substantially dilute stockholders’ voting power.

Lind Global is obligated to convert at least an aggregate of $1,750,000 of the principal amount of the Closing Notes at an exercise price of $18.176 per share resulting in the issuance of a total of 96,281 shares of common stock, subject to the limitation that the holder may not convert those securities to the extent that the holder would own more than 4.99% of our outstanding common stock immediately after conversion. However, this limitation does not prevent the holder from selling shares of our common stock and then receive additional shares of our common stock through a subsequent conversion. In this way, Lind Global could acquire and sell more than 4.99% of the outstanding common stock in a relatively short time frame while never holding more than 4.99% at one time. Further since the exercise price under the Convertible Notes is based on market prices of our common stock during the ten trading days prior to each conversion, declines in the market price of our common stock down to the conversion floor price ($18.176 per share) result in, subject to the floor price, higher conversion rates and consequently higher rates of dilution to stockholders for each dollar of principal of a Convertible Debenture being converted during such declines. As of January 22, 2024 there were 626,890 shares of common stock outstanding and 396,244 shares of common stock owned by non-affiliates. Sales of a substantial number of shares of our common stock in the public markets could depress the market price of our common stock, cause substantial dilution to stockholders’ voting power and impair our ability to raise capital through the sale of additional equity securities. If all 96,281 shares of common stock that could potentially be issued underlying the Convertible Notes that Lind Global is obligated to convert are issued, the percentage of our common stock held by the existing non-affiliate stockholders would be reduced from approximately 63.2% to approximately 54.8%. We cannot predict the effect that future sales of our common stock by the holders or others would have on the market price of our common stock.

An Event of Default under a Convertible Notes has occurred and could lead to increased amounts payable under the Convertible Notes and an acceleration of the Convertible Notes will materially and adversely affect our operations.

The A.L.I. Bankruptcy constitutes an event of default pursuant to the Convertible Notes. Pursuant to the terms of the January Note Amendments and the SPA Amendment, if we complete this offering and make the Mandatory Prepayment no later than April 15, as provided for in the January Note Amendments, Lind Global has agreed to forbear enforcement of its rights due to the event of default. If, however, we are unable to fulfill these obligations, Lind Global may, at its option, (1) demand payment of an amount equal to 120% of the outstanding principal amount of the Convertible Notes and (2) exercise all other rights and remedies available to it under the Convertible Notes and the Transaction Documents; provided, however, that (x) upon the occurrence of the event of default described above, Lind Global, in its sole and absolute discretion (without the obligation to provide notice of such event of default), may: (a) from time-to-time demand that all or a portion of the outstanding principal amount of the Convertible Notes be converted into shares of the Company’s common stock at the lower of (i) the then-current Conversion Price (that price being $18.176 per share (the “Floor Price”)) and (ii) eighty-percent (80%) of the average of the three (3) lowest daily volume weighted average prices (“VWAPs”) during the 20 trading days prior to the delivery by Lind Global of the applicable notice of conversion or (b) exercise or otherwise enforce any one or more of Lind Global’s rights, powers, privileges, remedies and interests under the Convertible Notes, the Transaction Documents or applicable law. Consequently, if we are unable to complete the Public Offering and fulfill our other obligations under the January Note Amendments and the SPA Amendment, our costs related to the Convertible Notes could substantially increase and we may not have the funds required to repay Lind Global the accelerated amounts due under the Convertible Notes, which could lead Lind Global to take action against the Company such as commencing litigation which could have material adverse effects on our business and prospects.

The market price of our common stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares of common stock at an attractive price due to a number of factors such as those listed in this Risk Factors section and the following:

These broad market and industry fluctuations may adversely affect the market price of the Company’s common stock, regardless of the Company’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of the Company’s common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If the Company was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from the Company’s business regardless of the outcome of such litigation.

Because there are no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of the Company’s common stock at a price greater than what you paid for it.

The Company intends to retain future earnings, if any, for future operations, expansion and debt repayment, and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of the Company’s common stock will be at the sole discretion of the Company’s board of directors. The Company’s board of directors may take into account general and economic conditions, the Company’s financial condition and results of operations the Company’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by the Company to its stockholders or by its subsidiaries to it and such other factors as the Company’s board of directors may deem relevant. As a result, you may not receive any return on an investment in the Company’s common stock unless you sell your common stock for a price greater than that which you paid for it.

The Company’s stockholders may experience dilution in the future.

The percentage of shares of the Company’s common stock owned by current stockholders may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity awards that the Company may grant to its directors, officers and employees, exercise of the Company’s warrants. Such issuances may have a dilutive effect on the Company’s earnings per share, which could adversely affect the market price of the Company’s common stock.

We have no committed source of financing. Wherever possible, we may attempt to use non-cash consideration to satisfy obligations or obtain financing. Our board of directors has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions would result in dilution of the ownership interests of existing stockholders and may further dilute the common stock book value, and that dilution may be material.

If securities or industry analysts do not publish research or reports about our business, or they publish negative reports about our business, our share price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market, and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or publish negative views on us or our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

As an “emerging growth company” under the JOBS Act, we are permitted to rely on exemptions from certain disclosure requirements.

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our consolidated financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest to occur of: (i) the end of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and (iii) the end of the fiscal year during which the fifth anniversary of our initial public offering (which closed on August 13, 2021) occurs.

Until such time, however, we cannot predict if investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities may be more volatile.

The company may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous for the Company’s warrant holders.

The company will have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Company’s common stock equals or exceeds $1,800 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders. If and when the public warrants become redeemable by the Company, the Company may exercise its redemption right if there is a current registration statement in effect with respect to the shares of the Company’s common stock underlying such warrants. Redemption of the outstanding public warrants could force you to: (i) exercise your warrants and pay the related exercise price at a time when it may be disadvantageous for you to do so; (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, is likely to be substantially less than the market value of your warrants.

Our securities holders may face significant restrictions on the resale of our securities due to state “Blue Sky” laws.

Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state. We do not know whether our common stock will be registered or exempt from registration under the laws of any state. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our common stock. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your common stock without the significant expense of state registration or qualification.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

The market price of shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by Lind Global, our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.

If we fail to maintain effective internal control over financial reporting, the price of our securities may be adversely affected.

We conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended December 31, 2023. Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded that during the period ended December 31, 2023, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at the reasonable assurance level. Management has determined that a material weakness exists due to our late filing of certain reports required to be filed by us with the SEC. Consequently, our internal control over financial reporting has weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify additional weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our common stock.

As an emerging growth company, our auditor is not required to attest to the effectiveness of our internal controls.

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting while we are an emerging growth company. This means that the effectiveness of our financial operations may differ from our peer companies in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and we are not. While our management will be required to attest to internal control over financial reporting and we will be required to detail changes to our internal controls on a quarterly basis, we cannot provide assurance that the independent registered public accounting firm’s audit process in assessing the effectiveness of our internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies. Further, once we cease to be an emerging growth company and cease to be a smaller reporting company (as described below), we will be subject to independent registered public accounting firm attestation regarding the effectiveness of our internal controls over financial reporting. Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report.

If the benefits of any proposed acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our common stock may decline.

If the benefits of any proposed acquisition do not meet the expectations of investors or securities analysts, the market price of our common stock prior to the closing of the proposed acquisition may decline. The market values of our common stock at the time of the proposed acquisition may vary significantly from their prices on the date the acquisition target was identified.

In addition, broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

Our common stock may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

Our common stock may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common stock is not currently considered “penny stock” since it is listed on Nasdaq, if we are unable to maintain that listing and our common stock is no longer listed on Nasdaq, unless we maintain a per-share price above $5.00, our common stock will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future.

We believe we will be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.

Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

As a smaller reporting company, we are not required to, and may not, include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial statements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.

We incur significant costs as a result of operating as a public company, our management is required to devote substantial time to new compliance initiatives and our management has limited experience in operating a public company.

As a public company, we incur significant legal, accounting and other expenses that we did not previously incur as a private company. In addition, the Sarbanes-Oxley Act has imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting the later of our second annual report on Form 10-K or the first annual report on Form 10-K following the date on which we are no longer an emerging growth company or a smaller reporting company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the value of our securities could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on value of our securities, and could adversely affect our ability to access the capital markets.

Further, our executive officers have limited experience in the management of a publicly traded company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of the post-combination company. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies. Our management will need to continually assess our staffing and training procedures to improve our internal control over financial reporting. For example, we did not timely file our Form 10-Qs for the quarters ended March 31, 2023 and September 30, 2023 and unless the matters discussed in this risk factor and elsewhere in this Form 10-K are mitigated, the risk exists that we may not be able to file timely in the future. Further, the development, implementation, documentation and assessment of appropriate processes, in addition to the need to remediate any potential deficiencies, will require substantial time and attention from management. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.

Anti-takeover provisions contained in our Amended Charter and Amended Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

The Company’s Amended Charter and Amended Bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions include:

These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our board of directors and management.

Any provision of our Amended Charter or Amended Bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 1C. CYBERSECURITY.

Cybersecurity Risk Management and Strategy

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.

We do not presently have any general processes for assessing, identifying, and managing material risks from cybersecurity threats. As we expand our business operations, we plan to develop processes that will allow for the identification and assessment of cybersecurity risk that will be integrated into an overall risk management system, which will be managed by senior management and overseen by the Board of Directors. As part of this development, we plan to identify and address cybersecurity risks related to our business, privacy and compliance issues through a multi-faceted approach that is expected to include third party assessments, internal information technology (IT) audit, IT security, governance, risk and compliance reviews. In connection with these planned approaches, and to defend, detect and respond to cybersecurity incidents, we, among other things, will consider: conducting proactive privacy and cybersecurity reviews of systems and applications, audits of applicable data policies, performing penetration testing using external third-party tools and techniques to test security controls, conducting employee training, monitoring emerging laws and regulations related to data protection and information security, and implementing appropriate changes.

As part of the above planned processes, we may engage external auditors and consultants with expertise in cybersecurity to assess our internal cybersecurity programs and compliance with applicable practices and standards.

We plan to design our risk management program to also assesses third party risks, and we plan to perform third-party risk management to identify and mitigate risks from third parties, such as vendors, suppliers, and other business partners associated with our use of third-party service providers. In addition to new vendor onboarding, we plan to perform risk management during third-party cybersecurity compromise incidents to identify and mitigate risks to us from third-party incidents.

Cybersecurity Governance

We expect that cybersecurity will become an important part of our risk management processes and an area of focus for our Board of Directors and management. We expect that our Board of Directors will be responsible for the oversight of risks from cybersecurity threats. We expect our senior management will provide our Board of Directors updates on a quarterly basis regarding matters of cybersecurity. This is expected to include existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. We expect that our Board members will also engage in periodic conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.

Currently, our Chief Executive Officer is expected to lead our cybersecurity risk assessment and management processes and oversees their implementation and maintenance. Our Chief Executive Officer will be tasked with staying informed about, and monitoring the prevention, mitigation, detection and remediation of cybersecurity incidents through his management of, and participation in, the cybersecurity risk management and strategy processes we plan to develop and as described above, including the operation of an incident response plan, and report to the Board of Directors on any appropriate items.

ITEM 2. PROPERTIES

Prior to the December 27, 2023 discontinuation of A.L.I., our headquarters were located at Shiba Koen Annex 6 f, 1-8, Shiba Koen 3-chome, Minato-ku, Tokyo, Japan 105-0011, where we leased and occupied office space with an aggregate floor area of approximately 340 square meters from unrelated third parties under operating lease agreements. Our manufacturing and shipping facility was located at 1-2-11 Fukamidai, Yamato-shi, Kanagawa. Our testing facilities was located at 72 Misawa, Minobu-cho, Minami Koma-gun, Yamanashi. We no longer occupy any of these offices or facilities and following the discontinuance of ALI’s operations and bankruptcy filing on December 27, 2023, we moved our principal executive offices to The Walnut Building, 691 Mill St, Suite 240, Los Angeles, California 90021 where we lease this this office pursuant to a lease that extends until February 28, 2025 when the term becomes a month-to-month tenancy.

ITEM 3. LEGAL PROCEEDINGS

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. As of the date hereof, other than as described below, there are no legal claims currently pending or, to our knowledge, threatened against us or any of our officers or directors in their capacity as such or against any of our properties that, in the opinion of our management, would be likely to have a material adverse effect on our financial position, results of operations or cash flows.

On December 27, 2023, A.L.I. filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu) (the “A.L.I. Bankruptcy”). On January 10, 2024, the Court entered an order (the “January 10 Order”) confirming that bankruptcy proceedings are commenced against the debtor A.L.I., that A.L.I. is found to be insolvent, the appointment of Gaku Iida, Attorney-at-Law, of Abe, Ikubo & Katayama be appointed as the trustee in the bankruptcy proceedings (the “Trustee”) and setting the date and place of the meeting to report on the status of property, to report on calculations and hear opinions regarding the disposition of the bankruptcy proceedings on May 14, 2024, at 10:00 a.m. local time in the Court (the “Status Report Meeting”). The Trustee’s address is Fukuoka Bldg. 9F, 2-8-7 Yaesu, Chuo-ku, Tokyo.

As a result of the filing of the Bankruptcy Proceedings and the January 10 Order, the Company concluded that it no longer controls A.L.I. for accounting purposes as of January 10, 2024, in accordance with U.S. GAAP Accounting Standards Codification 810, and, therefore, A.L.I. will be deconsolidated from the Company’s consolidated financial statements prospectively, commencing in the first quarter of 2024. See, however, “Risk Factors – We are involved in litigation from time to time and, as a result, we could incur substantial judgments, fines, legal fees or other costs.”

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock and Public Warrants are listed on the Nasdaq Capital Market under the symbols “AWIN” and “AWINW,” respectively. On April 12, 2024, the closing price of our common stock was $3.4828 per share and the closing price of our Public Warrants was $0.02.

Holders

As of April 15, 2024 we had approximately 80 holders of record of our common stock and 924,890 shares issued and outstanding and four holders of record of our Public Warrants and 8,624,993 public warrants issued, 563,756 placement warrants issued and outstanding and one holder of warrants to purchase 39,213 shares of common stock issuable upon exercise of warrants issued to Lind Global in connection with the Purchase Agreement. Each Public warrant and placement warrant are exercisable for one-hundredth of a share at $1,150 per share. The number of record holders does not include beneficial owners of common stock or warrants whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

Transfer Agent and Registrar

The Company’s transfer agent and registrar for our common stock and Public Warrants is Continental Stock Transfer & Trust Company located at 1 State Street, New York, NY 10004 and their telephone is (212) 509-4000.

Dividends, Common Stock and Unregistered Stock Issuances

We have not paid any cash dividends on our common or preferred stock and do not anticipate paying any such cash dividends in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business.

Equity Compensation Plans

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholders as of December 31, 2023.

Unregistered Sales of Securities

None.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers

We have not repurchased any shares of our common stock during the fiscal year ended December 31, 2023.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview

AERWINS Technologies Inc., a Delaware corporation (the “Company,” “we,” “us,” or “AERWINS”) through its subsidiaries is redesigning our single-seat optionally Manned Air Vehicle (“MAV” or “Manned Air Vehicle”). We aim to align this vehicle with the stringent requirements of the Federal Aviation Administration’s (“FAA”) Powered Ultra-Light Air Vehicle Category, setting a new standard for safe low-altitude manned flight. Following an evaluation of the viability of other areas of the Company’s business which AWIN considered non-core and our desire to focus solely on our core business of developing an FAA compliant MAV in the United States, we discontinued our non-core operations formerly carried out by our wholly owned indirect subsidiary, A.L.I. Technologies Inc., a Japanese corporation (“ALI”). Following the discontinuation, on December 27, 2023, ALI filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu). A bankruptcy trustee was appointed on January 10, 2024, and proceedings have commenced. All references in this Annual Report on Form 10-K to the “Company,” “we,” “us,” or “AERWINS” include both AERWINS and ALI, except that references to the “Company” “we,” “us,” or “Pono” in this Item 2 refer to Aerwins Technologies Inc. f/k/a Pono Capital Corp.

We were originally incorporated in Delaware on February 12, 2021 under the name “Pono Capital Corp” as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On August 13, 2021, we consummated an initial public offering. On February 3, 2023, we consummated a merger (the “Merger”) with Pono Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of the Company, then called Pono Capital Corp., a Delaware corporation (“Pono”) with and into AERWINS, Inc. (formerly named AERWINS Technologies Inc.), a Delaware corporation pursuant to an agreement and plan of merger, dated as of September 7, 2022 (as amended on January 19, 2023, the “Merger Agreement”), by and among Pono, Merger Sub, AERWINS, Mehana Equity LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Shuhei Komatsu in his capacity as the representative of the stockholders of AERWINS, Inc. (“Seller Representative”). The Merger and other transactions contemplated thereby (collectively, the “Business Combination”) closed on February 3, 2023 when pursuant to the Merger Agreement, Merger Sub merged with and into AERWINS, Inc. with AERWINS, Inc. surviving the Merger as a wholly-owned subsidiary of Pono, and Pono changed its name to “AERWINS Technologies Inc.” and the business of the Company became the business of AERWINS, Inc. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Pono Capital Corp was treated as the acquired company and AERWINS, Inc. was treated as the acquirer for financial statement reporting purposes.

The Business Combination occurred during the period for which the financial information herein is presented. The financial information included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects the historical operations of the Company prior to the Business Combination and the combined operations after the Business Combination, unless otherwise noted. For additional information on the Business Combination please see the “Explanatory Note” on page 1 of this Annual Report on Form 10-K. For additional information on the corporate history of our Company please see the section titled “Corporate History” on page 20 of our Annual Report.

Business Overview

We were incorporated in the State of Delaware on June 9, 2022. Through our U.S.-based subsidiary, Aerwin Development, we are redesigning our single-seat optionally Manned Air Vehicle (“MAV” or “Manned Air Vehicle”) in the United States. We aim to align this vehicle with the stringent requirements of the Federal Aviation Administration’s (“FAA”) Powered Ultra-Light Air Vehicle Category, setting a new standard for safe low-altitude manned flight. Following an evaluation of the viability of other areas of the Company’s business which AWIN considered non-core and our desire to focus solely on our core business of developing an FAA-compliant MAV in the United States, we discontinued our non-core operations formerly carried out by our wholly owned indirect subsidiary, A.L.I. Technologies Inc., a Japanese corporation (“ALI”). Following the discontinuation, on December 27, 2023, ALI filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu). A bankruptcy trustee was appointed on January 10, 2024, and proceedings have commenced.

A.L.I. was established in Japan in September 2016 and was acquired by us in August, 2022. The acquisition of A.L.I. was accounted for as a recapitalization among entities under common control since the same controlling shareholders controlled all these entities before and after the transaction. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the transaction had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

With the mission of “Transforming society from the sky down,” we aim to realize an “Air Mobility Society” in which cars, specialized crafts, and drones can fly freely. To this end, we are redesigning our single-seat optionally Manned Air Vehicle (“MAV”). We aim to align this vehicle with the stringent requirements of the Federal Aviation Administration’s (“FAA”) Powered Ultra-Light Air Vehicle Category, setting a new standard for safe low-altitude manned flight.

To achieve this goal, we have established AERWIN Development Company LLC, a California subsidiary with offices in Los Angeles, California, and entered into the Letter of Intent with Helicopter Technology discussed above.

Discontinued Operations

As of June 30, 2023, we discontinued providing drone photography services and joint research and development services previously provided within our unmanned air mobility business.

On December 27, 2023, we discontinued the operations of A.L.I. as part of our operations, moved to Los Angeles, California, and continued the development of a line of FAA-compliant manned and unmanned crafts for low-altitude. Following the discontinuation, on December 27, 2023, A.L.I. filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu). A bankruptcy trustee was appointed on January 10, 2024, and proceedings have commenced.

ALI’s discontinued operations include the manned air mobility business, including the further development of the XTURISMO limited edition hoverbike, the air mobility platform COSMOS (Centralized Operating System for Managing Open Sky), the computing power-sharing business, drone photography business and drone and artificial intelligence research and development business.

For accounting purpose, the results of operations in relation to the Company’s Drone solution service have been classified by the Company as discontinued operations for the years ended December 31, 2023 and 2022.

Key Factors that Affect Our Results of Operations

Our business is affected by many factors which we discuss under the heading “Risk Factors” included elsewhere in this Annual Report on Form 10-K. The following are a few of those key factors that may affect our financial condition and results of operations:

Our Ability to Complete Development of and Manufacture our planned Manned Air Vehicle (“MAV”)

Our results of operations rely on our ability to redesign our single-seat optionally Manned Air Vehicle (“MAV” or “Manned Air Vehicle”) and commence production pursuant to the stringent requirements of the Federal Aviation Administration’s (“FAA”) Powered Ultra-Light Air Vehicle Category, setting a new standard for safe low altitude manned flight. We plan to do this in conjunction with Helicopter Technology Company (“Helicopter Technology”) pursuant to the terms of the Letter of Intent we entered with them effective as of December 19, 2023 described elsewhere in this Form 10-K.

Our Ability to Develop a Dealer Distribution Network and Market and Sell MAV’s in Sufficient Quantities to Achieve Profitability

Pursuant to the Letter of Intent, we have agreed to provide marketing and support services that includes marketing, sales, advertising, development of a dealer distribution network, online marketplace, and other distribution channels in order to sell sufficient quantities of the MAVs. We plan to sell our MAV’s primarily in the United States, China and Europe beginning in 2027.

Our Ability to Control Costs and Expenses and Improve Our Operating Efficiency

We are aiming to establish a highly profitable structure for a mass production of MAV’s which focuses on design and supply chain control. We plan to select subcontractors and suppliers appropriately based on cost, quality, and delivery date, and seek to build an efficient production system.

Results of Operations

Comparison of Results of Operations for the Years Ended December 31, 2023, and 2022

The following table summarizes our operating results as reflected in our statements of income during the years ended December 31, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Operating Expenses

The following table sets forth the breakdown of our operating expenses for the years ended December 31 2023 and 2022:

General and Administrative Expenses

Our general and administrative expenses primarily consist of employee salaries and welfare, consulting for company reorganization and going public, rental expense, and travel and entertainment expenses.

* Refers to the percentage of total general and administrative expenses.

Our general and administrative expenses increased by $9,463,978 or 1,020,925.3%, to $9,464,905 for the year ended December 31, 2023 from $927 for the year ended December 31, 2022, primarily attributable to Consulting and professional service fees relating to the business combination with Pono.

Other Income (Expenses), net

Our other income (expenses) primarily includes impairment loss of fixed assets.

Total other expenses, net, increased by $51,127 or Nil% from $Nil for the year ended December 31, 2022 to $51,127 of expenses for the year ended December 31, 2023.

Net Loss from Continuing Operations

As a result of the foregoing, we 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 for the year ended December 31, 2022. All net loss is attributable to AERWINS Technologies Inc.

Results from Discontinued Operations

As at June 30, 2023, to facilitate cost reduction plan, the Company has made the strategic decision to discontinue drone solution service and on December 27, 2023, the Company discontinued the remaining operations of A.L.I as part of the move of our operations to Los Angeles, California. The results of operations in relation to the Company’s operations in ALI have been classified by the Company as discontinued operations for the years ended December 31, 2023 and 2022 for accounting purpose and are shown below:

Liquidity and Capital Resources

As of December 31, 2023, we had $2,072 in cash as compared to $300,943 as of December 31, 2022. As of December 31, 2023, our working capital deficit was $11,972,171.

In assessing our liquidity, management monitors and analyzes our cash, our ability to raise funds and to generate sufficient revenue in the future, and our operating and capital expenditure commitments. We are looking for other sources, such as raising additional capital by issuing shares of stock, to meet our needs for cash. To that end, management is currently scrutinizing potential cost reductions among the operating expenses and other cost reductions to better align our expenses with expected future revenues which resulted in our discontinuance as of December 31, 2023 of our drone photography services and joint research and development services previously provided within our unmanned air mobility business and the discontinuance of our non-core operations formerly carried out by our wholly owned indirect subsidiary, A.L.I. Consequently, the projected revenues from A.L.I.’s businesses we expected when we completed the Business Combination with Aerwins, Inc. will not be achieved. Furthermore, we note that we have a history of operating losses, have not yet achieved profitable operations and expect to incur further losses. We have funded our operations primarily from equity and debt financing and shareholder loans. As of December 31, 2023, cash generated from financing activities was not sufficient to fund operations and, in particular, to fund our growth strategy in the short-term or long-term. In connection with our efforts to obtain additional working capital, we sold two Convertible Notes to Lind Global in the aggregate principal amount of $4,200,000 for an aggregate purchase price of $3,500,000 on April 12, 2023 and May 23, 2023, respectively, along with warrants to purchase 39,213 shares of our Common Stock. See “Liquidity and Capital Resources – Recent Financing Transactions” below. The primary need for liquidity is to fund working capital and general corporate purposes, including the payment of the Mandatory Prepayment portion of the Lind Notes, the expected costs to redesign, build and commercialize our planned MAV and the personnel costs, capital expenditures and the expected costs to redesign, build and commercialize our planned MAV and the personnel costs, capital expenditures and the costs of operating as a public company. The ability to meet these needs depends on our ability to raise funds from debt and/or equity financing which is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. There can be no assurance that additional financing will be available to us when needed or at all, or obtained on commercially reasonable terms acceptable to us.

During the year ended December 31, 2023, one of the Company’s directors, Kiran Sidhu and a former director, Daisuke Katano, paid some payables on behalf of the Company. Mr. Sidhu paid $341,424 in the year 2023 and the same amount is outstanding as of December 31, 2023. Mr. Katano paid $215,725 in the year 2023 and $9,935 is outstanding as of December 31, 2023. The Company will pay to them at an appropriate timing in light of its financial situation.

GOING CONCERN

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of and for the year ended December 31, 2023, the Company has incurred net loss from continuing operations of $9,516,032 and accumulated deficit of $72,411,375. On December 27, 2023, the Company discontinued the operations of A.L.I. Technologies Inc., a Japanese corporation (“A.L.I.”) which is its wholly-owned indirect subsidiary and filed a voluntary bankruptcy petition with the Tokyo District Court, Civil Division 20, “Tokutei Kanzai Kakari” [Special Trusteeship Section], Case ID: No. 8234 of 2023 (Fu). These factors raise substantial doubt on the Company’s ability to continue as a going concern.

Although the Company moved its operations to Los Angeles, California where it is planning to redesign its MAV and eventually commence production in order to generate sufficient revenue, the Company’s cash position is not sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of debt, or a private or public offering. While the Company believes in the viability of its strategy to commence production of the MAV following its redesign in order to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of debt, or a public or private offering. In addition, the Company may be the subject of complaints or litigation from customers, suppliers, employees, creditors of A.L.I. stemming from its bankruptcy proceedings or other third parties for various actions. The damages sought against the Company in some of these litigation proceedings could be substantial. The Company cannot assure its stockholder that the Company will always have meritorious defenses to the plaintiffs’ claims. While the ultimate effect of these legal actions cannot be predicted with certainty, the Company’s reputation and the result of operations could be negatively impacted. The proceedings the Company may be involved in from time to time, including the A.L.I. Bankruptcy proceedings, could incur substantial judgments, fines, legal fees or other costs and have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Further, the Company has a significant amount of indebtedness. As of December 31, 2023 and December 31, 2022, the Company had total liabilities of $19,547,304 and $9,870,442, respectively. In addition, A.L.I.’s December 27, 2023 bankruptcy filing constituted an event of default pursuant to the secured convertible notes in the aggregate principal amount of $4,200,000 issued by us to Lind Global on April 12, 2023 and May 23, 2023 and as amended on August 25, 2023 (the “Lind Notes”). Pursuant to the terms of the January Note Amendments and the SPA Amendment, if the Company completes a Public Offering of our securities and make the Mandatory Prepayment no later than April 15, 2024, as provided for in the January Note Amendments, Lind Global has agreed to forbear enforcement of its rights due to the event of default. Since the Company was unable to fulfill these obligations, Lind Global has, at its option, the right to (1) demand payment of an amount equal to 120% of the outstanding principal amount of the Notes and (2) exercise all other rights and remedies available to it under the Notes and other agreements entered into among the Company and Lind in connection with the issuance of the Notes, subject to the Floor Price and cash payment.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Certain Effects of Future Sales of our Common Stock May Have on the Exercise of the Warrants

Sales of a substantial number of shares of our Common Stock in the public market by Lind Global and/or by our other existing securityholders, or the perception that those sales might occur, could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our Common Stock. The shares of our common stock issuable upon conversion of the convertible notes held by Lind Global and upon exercise of warrants it holds would represent a substantial percentage of our total outstanding Common Stock as of the date of this report, assuming the sale of all of the Convertible Notes and exercises of all Warrants. Consequently, the sale of all securities that Lind has the right to acquire could result in a significant decline in the public trading price of our Common Stock.

In the event of the exercise of any Warrants for cash, we will receive the proceeds from such exercise. Assuming the exercise in full of all of Warrants for cash, we would receive an aggregate of approximately $2,355,516, but would not receive any proceeds from the sale of the shares of Common Stock issuable upon such exercise. To the extent any of the Warrants are exercised on a “cashless basis,” we will not receive any proceeds upon such exercise. We intend to use the proceeds received from the exercise of the Warrants, if any, for working capital and general corporate purposes, including personnel costs, capital expenditures and the costs of operating as a public company. The amounts that we actually spend for any specific purpose may vary significantly, and will depend on a number of factors including, but not limited to, market conditions. We believe the likelihood that holders of our Warrants will exercise their Warrants, and therefore the amount of cash proceeds we would receive, is dependent upon the trading price of our Common Stock, the last reported sales price for which was $12.80 per share on November 27, 2023. If the trading price of our Common Stock is less than the Warrant Exercise Prices, respectively, we expect that holders of the Warrants will not exercise them. There is no guarantee the Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the Warrants may expire worthless and we may receive no proceeds from the exercise of Warrants. We will continue to evaluate the probability of Warrant exercises and the merit of including potential cash proceeds from the exercise of the Warrants in our future liquidity projections, but we do not currently expect to rely on the cash exercise of Warrants to fund our operations. We instead currently expect to rely on the sources of funding described below, if available on reasonable terms or at all.

Recent Financing Transactions

Stock Purchase Agreement. On February 2, 2023, the Company entered into a Subscription Agreement (the “Agreement”) with AERWINS, Inc., and certain investors (collectively referred to herein as the “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase an aggregate 31,963 shares of common stock (the “Shares”) of AERWINS, Inc. which was immediately exchanged for 50,000 shares of common stock of the Company (the “Company Shares”) upon the consummation of the Business Combination in exchange for an aggregate sum of $5,000,000 (the “Purchase Price”) with the Purchase Price being paid to AERWINS, Inc. prior to the closing of the Business Combination (the “Closing”). Effective immediately prior to the Closing, AERWINS, Inc. issued the Shares to the Purchasers and thereafter immediately upon the Closing, the Shares were exchanged for the Company Shares, and the Company Shares were issued as a registered issuance of securities under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an effective registration filed by the Company on Form S-4 (Registration No. 333-268625) which was declared effective by the Securities and Exchange Commission on January 13, 2023.

Standby Equity Purchase Agreement. On January 23, 2023 (the “Effective Date”), Pono entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., (“YA”). The Company and its successors will be able to sell up to one hundred million dollars in aggregate gross purchase price of the Company’s shares of common stock, par value $0.000001 per share (the “Common Shares”) at the Company’s request any time during the 36 months following the date of the SEPA’s entrance into force. The shares would be purchased at 96% or 97% (depending on the type of notice) of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily VWAP of the Common Shares during the three consecutive trading days commencing on the advance notice date, other than the daily VWAP on any excluded days. “VWAP” means, for any trading day, the daily volume weighted average price of the Common Shares for such trading day on the principal market during regular trading hours as reported by Bloomberg L.P.

Pursuant to the SEPA, the Company is required to register all shares which YA may acquire. The Company agreed to file with the Securities and Exchange Commission (the “SEC”) a Registration Statement (as defined in the SEPA) registering all of the shares of common stock that are to be offered and sold to YA pursuant to the SEPA. The Company is required to have a Registration Statement declared effective by the SEC before it can raise any funds using the SEPA. The Company may not issue more than 19.99% of its shares issued and outstanding as of the Effective Date without first receiving shareholder approval for such issuances, unless such additional shares may be issued consistent with the rules and regulations of the Nasdaq Stock Market. Pursuant to the SEPA, the use of proceeds from the sale of the shares by the Company to YA shall be used by the Company in the manner as will be set forth in the Form 10-K included in the Registration Statement (and any post-effective amendment thereto) and any Form 10-K supplement thereto filed pursuant to the SEPA. There are no other restrictions on future financing transactions. The SEPA does not contain any right of first refusal, participation rights, penalties or liquidated damages. The Company has paid YA Global II SPV, LLC, a subsidiary of YA, a structuring fee in the amount of $15,000, and, on the Effective Date, the Company agreed to issue to YA shares with aggregate value equal to one million dollars, as a commitment fee.

YA has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our common stock during any time prior to the public disclosure of the SEPA. Unless earlier terminated as provided under the SEPA, the SEPA shall terminate automatically on the earliest of (i) the first day of the month next following the 36-month anniversary of the Effective Date or (ii) the date on which YA shall have made payment of Advances (as defined in the SEPA) pursuant to the SEPA for the Common Shares equal to the Commitment Amount (as defined in the SEPA).

Lind Global Financing. On April 12, 2023, we entered into the Purchase Agreement with Lind Global pursuant to which we issued to Lind Global two Convertible Notes in the aggregate principal amount of $4,200,000 for an aggregate purchase price of $3,500,000 and Warrants to purchase up to 39,213 shares of the Company’s Common Stock (the “Transaction”).

The closings of the Transaction (the “Closings and each a “Closing”) occurred in tranches (each a “Tranche”): the Closing of the first Tranche (the “First Closing”) occurred on April 12, 2023 and consisted of the issuance and sale to the Selling Securityholder of a Convertible Note with a purchase price of $2,100,000 and a principal amount of $2,520,000 and the issuance to the Selling Securityholder of a Warrant to acquire 23,527 shares of common stock and the Closing of the second Tranche (the “Second Closing) which occurred on May 23, 2023 and consisted of the issuance and sale to the Selling Securityholder of a Convertible Note with a purchase price of $1,400,000 and a principal amount of $1,680,000, and the issuance to the Selling Securityholder of a Warrant to acquire 15,685 shares of common stock. Pursuant to the Purchase Agreement, at each Closing, the Company agreed to pay the Selling Securityholder a commitment fee in an amount equal to 2.5% of the funding amount being funded by the Selling Securityholder at the applicable Closing. As provided for in the January Note Amendments discussed below, neither party to the Purchase Agreement is obligated to complete the previously agreed on third Tranche (the “Third Closing), which would have consisted of the issuance and sale to Lind Global of a Convertible Note with a purchase price of $1,500,000 with a principal amount of $1,800,000, and the issuance to Lind Global of 16,805 Warrants to acquire 16,805 shares of common stock. The Third Closing would have closed upon the effectiveness of the Registration Statement discussed below in addition to completion of other conditions by us, but the Registration Statement was never declared effective by the SEC and we did not fulfill the required conditions to closing.

The Convertible Note issued in the First Closing has a maturity date of April 12, 2025 and the Convertible Note issued in the Second Closing has a maturity date of May 23, 2025 (the “Maturity Date”). Each Convertible Note has a conversion price equal to the lesser of: (i) US$9.00 (“Fixed Price”); or (ii) 90% of the lowest single volume weighted average price during the 20 Trading Days prior to conversion of each Convertible Note (the “Conversion Price”). The Convertible Note will not bear interest other than in the event that if certain payments under the Convertible Note as set forth therein are not timely made, the Convertible Note will bear interest at the rate of 2% per month (prorated for partial months) until paid in full. The Company will have the right to prepay the Convertible Note under the terms set forth therein.

The Warrants were issued to the Selling Securityholder without payment of any cash consideration. Each Warrant will have an exercise period of 60 months from the date of issuance. The Exercise price of the First Closing Warrant and Second Closing Warrant is $89.26 per share and $73.16 per share, respectively, subject to adjustments as set forth in the Warrant.

In the event that there is no effective registration statement registering the shares underlying the Warrants or upon the occurrence of a Fundamental Transaction as defined in the Purchase Agreement, then the Warrants may be exercised by means of a “cashless exercise” at the holder’s option, such that the holder may use the appreciated value of the Warrants (the difference between the market price of the underlying shares of common stock and the exercise price of the underlying warrants) to exercise the warrants without the payment of any cash.

In accordance with our obligations under the Purchase Agreement, we filed a registration statement on Form S-1 on May 12, 2023 (the “May 2023 Registration Statement”) with the SEC to register under the Securities Act the resale by Lind Global of up to 112,224 shares of common stock issuable by us upon partial conversion of the Convertible Notes and exercise of the Warrants issued by us in connection with the Purchase Agreement. We plan to withdraw the May 2023 Registration Statement as permitted pursuant to the SPA Amendment No. 2 discussed below.

The Purchase Agreement contains customary registration rights, representations, warranties, conditions and indemnification obligations by each party, including our agreement to refrain from engaging in certain “Prohibited Transactions” as defined in the Purchase Agreement, to hold a special meeting of shareholders for the purpose of obtaining shareholder approval of the Transactions, certain events giving rise to a default under the Convertible Notes, obligations to use the proceeds from certain future financings to repay a portion of the principal amount of the Convertible Notes, our pledge to Lind Global of the ownership interests in our subsidiaries, a grant by us and our subsidiaries of a security interest in all of their respective assets and rights as collateral for the obligations due under the Convertible Notes, and a guaranty by our subsidiaries of our obligations under the Convertible Notes.

The A.L.I. Bankruptcy constitutes an event of default pursuant to the Closing Notes in the aggregate principal amount of $4,200,000. Consequently, Lind Global may at any time, at its option, (1) demand payment of an amount equal to 120% of the outstanding principal amount of the Closing Notes and (2) exercise all other rights and remedies available to it under the Closing Notes and other agreements entered into among the Company and Lind in connection with the issuance of the Closing Notes (collectively, the “Transaction Documents”); provided, however, that (x) upon the occurrence of the event of default described above, Lind Global, in its sole and absolute discretion (without the obligation to provide notice of such event of default), may: (a) from time-to-time demand that all or a portion of the outstanding principal amount of the Closing Notes be converted into shares of the Company’s common stock at the lower of (i) the then-current Conversion Price (that price being $18.176 per share (the “Floor Price”)) and (ii) eighty-percent (80%) of the average of the three (3) lowest daily volume weighted average prices (“VWAPs”) during the 20 trading days prior to the delivery by Lind Global of the applicable notice of conversion or (b) exercise or otherwise enforce any one or more of Lind Global’s rights, powers, privileges, remedies and interests under the Closing Notes, the Transaction Documents or applicable law.

The Closing Notes also provide that at the option of Lind Global, if in connection with a conversion under the Closing Notes, the Conversion Price is deemed to be the Floor Price, then in addition to issuing the Conversion Shares (as defined in the Closing Notes) at the Floor Price, the Company will also pay to Lind Global a cash amount equal to (i) the number of shares of common stock that would be issued to Lind Global upon a conversion determined by dividing the dollar amount to be converted being paid in shares of common stock by ninety percent (90%) of the lowest single VWAP during the twenty (20) trading days prior to the applicable date of conversion (notwithstanding the Floor Price) less (ii) the number of shares of the Company’s common stock issued to Lind Global in connection with the conversion; and (iii) multiplying the result thereof by the VWAP on the date of conversion.

On January 23, 2024, the Company and Lind Global entered into an Amendment No. 2 to Senior Convertible Promissory Note First Closing Note and an Amendment No. 2 to the Senior Convertible Promissory Note Second Closing Note (collectively, the “January Note Amendments”) which amended the Closing Notes to, subject to the conditions discussed below, (i) reduce the aggregate principal amount of the Closing Notes from $4,200,000 to $3,500,000, (ii) require the Company to repay an aggregate of $1,750,000 of the principal amount of the Closing Notes no later than the closing date of a public offering of the Company’s common stock where it receives gross proceeds of at least $13,500,000 (the “Public Offering”) by April 15, 2024 and (iii) requires Lind Global to convert no less than an aggregate of $1,750,000 of the Closing Notes no later than 11 months after the closing of the Public Offering, provided that at the time of such conversion Lind Global receives shares of common stock that may be disposed of without restrictive legend at their issuance pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act (the “Mandatory Conversion Amount”).

In addition, on January 23, 2024, the Company and Lind Global entered into Amendment No. 2 to Securities Purchase Agreement (the “SPA Amendment No. 2”) to, subject to the conditions discussed below, (i) eliminate the obligation of the Company and Lind Global to complete the Third Closing, (ii) delete the clause obligating the Company to register the shares of common stock issuable upon conversion of the Closing Notes and exercise of the Warrants (collectively, the “Closing Securities”) or pay Lind Global any delay payments as a result of the Company’s failure to register the Closing Securities, (iii) eliminate certain restrictions on the Company’s right to issue equity and debt in future transactions and (iv) eliminate Lind Global’s right to participate in future offerings of the Company’s securities, other than its rights to participate in the Public Offering.

The January Note Amendments and the SPA Amendment are subject to the Company completing the Public Offering and making the Mandatory Prepayment as discussed above.

In as much as the Company failed to complete the Public Offering by April 15, 2024, Lind Global is not obligated to fulfill the terms of the January Note Amendments. The Company plans to enter into discussions with Lind Global to extend the time period in which it is obligated to complete the Public Offering.

Recent Sale of Unregistered Securities

On February 27, 2024 and March 22, 2024, we entered into and completed the sale to two unrelated accredited investors (the “Investors”), of 100,000 shares and 35,500 shares, respectively, of our unregistered Common Stock at a price of $4.00 per share for an aggregate of $542,000 in cash (the “Offerings”). The Offerings were made pursuant to the terms of a Subscription Agreement. In connection with the Offerings, the Company entered into a Piggyback Registration Rights Agreement with each Investor whereby the Company agreed to register the Common Stock acquired by the Investor in the Offering if at any time while the Investor remains the holder of such shares, the Company proposes to file any registration statement under the Securities Act of 1933, as amended (the “Securities Act”) with respect to its Common Stock for its own account or for shareholders of the Company for their account, subject to certain customary exceptions.

Cash Flows for the Years Ended December 31, 2023 and 2022

The following table sets forth summary of our cash flows for the periods indicated:

Operating Activities

Net cash used in operating activities was $6,577,441 for the year ended December 31, 2023, primarily consisting of the following:

● Net loss of $9,516,032 for the year ended December 31, 2023;

● Increase in Accounts payable of $827,626.

Net cash used in operating activities was $16,865,274 for the year ended December 31, 2022, primarily consisting of cash used in discontinued operations.

Investing Activity

Net cash used in investing activities amounted to $62,066 for the year ended December 31, 2023, 2023, which is the net cash used by discontinued operations of $62,066.

Net cash used in investing activities was $344,964 for the year ended December 31, 2022, primarily consisting of cash used in discontinued operations.

Financing Activities

Net cash provided by financing activities amounted to $5,571,605, for the year ended December 31, 2023 and primarily consisted of proceeds from bond of $2,797,698, proceeds from reverse recapitalization of $1,595,831, and net cash provided by discounted operations of $999,458.

Net cash used in investing activities was $9,579,119 for the year ended December 31, 2022, primarily consisting of cash used in discontinued operations.

Contractual obligations

Lease commitment

The Company’s subsidiary, A. L. I. Technologies entered into 13 leases for its office space, multi-function printers and a vehicle, which were classified as operating leases. A. L. I. Technologies also entered into two leases classified as finance leases.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2023.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period.

The most significant estimates and assumptions include the valuation of warrant liabilities and derivative liabilities, accounts receivable, advances to suppliers, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, and revenue recognition. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application.

We believe critical accounting policies as disclosed in this Form 10-K reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:

Use of Estimates

In preparing the consolidated financial statements in conformity U.S. GAAP, the management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for doubtful accounts, useful lives of property and equipment, the impairment of long- lived assets, valuation allowance of deferred tax assets, and revenue recognition. Actual results could differ from those estimates.

Accounts Receivable

Accounts receivable, net represent the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less an allowance for doubtful receivables. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is remote. In circumstances in which the Company receives payment for accounts receivable that have previously been written off, the Company reverses the allowance and bad debt.

Lease-Lessee

In accordance with the Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) the Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. Lease terms of certain operating leases include the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain.

The Company leases office facilities, office equipment and furniture, and a vehicle, which are classified as operating leases and leases containers, which are classified as a finance lease in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current, and finance leases are included in property and equipment, finance lease liabilities, current, and finance lease liabilities, non-current in the consolidated balance sheet.

The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. All operating lease right-of-use assets are reviewed for impairment annually.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

The Company has elected the short-term lease exception, and therefore operating lease right-of-use assets and liabilities do not include leases with a lease term of twelve months or less.

Foreign Currency Translation

The Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations.

The reporting currency of the Company is the United States Dollars (“US$”), and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements are recorded as a separate component of accumulated other comprehensive loss within the statements of changes shareholders’ deficit.

Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”.

To determine revenue recognition for contracts with customers, the Company performs the following five steps : (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. Revenue amount represents the invoiced value and net of a value-added tax (“Consumption Tax”). The Consumption Tax on sales is calculated at 10% of gross sales.

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.

Warrant Liabilities

We account for the Warrants in accordance with the guidance contained in Accounting Standards Codification (“ASC”) 815-40 — Derivatives and Hedging — Contracts in Entity’s Own Equity (“ASC 815), under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statements of operations. The Placement Warrants, Public Warrants, and Debt Warrants for periods where no observable traded price was available are valued using a Black Scholes model.

Share-based Compensation

We account for the share-based compensation in accordance with the guidance contained in Accounting Standards Codification (“ASC”) 718 — “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Convertible Promissory Notes and Derivative Instruments

The Company accounts for the fair value of the conversion feature in accordance with the guidance contained in ASC 815, which requires the Company to bifurcate and separately account for the conversion feature as an embedded derivative contained in the Company’s convertible promissory note. Accordingly, we account for the conversion option as an embedded derivative contained in the Company’s promissory note at fair value. The derivative liability is required to be remeasured at each reporting date and the change in fair value is recognized in our consolidated statements of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our financial statements for the fiscal years ended December 31, 2023 and 2022 are attached hereto.

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of AERWINS Technologies, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying balance sheets of AERWINS Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit) and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operating activities, which raise substantial doubt about its ability to continue as a going concern. On December 27, 2023, the Company also discontinued the operations of A.L.I. Technologies Inc., (“A.L.I”) a Japanese corporation which is the wholly-owned indirect subsidiary of the Company and filed a voluntary bankruptcy petition with the Tokyo District Court. These factors raise substantial doubt on the Company’s ability to continue as a going concern. Management’s plans with respect to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Emphasis of a Matter - Bankruptcy Proceedings

Without qualifying our opinion, we draw attention to Note 17 to the financial statements (Subsequent events). As a result of the filing of the Bankruptcy Proceedings and the January 10, 2024 Order, the Company concluded that it no longer controls A.L.I. for accounting purposes as of January 10, 2024, in accordance with ASC 810, and, therefore, A.L.I. will be deconsolidated prospectively commencing in the first quarter of 2024 from the Company’s consolidated financial statements. In addition, the A.L.I. Bankruptcy constitutes an event of default pursuant to the Closing Notes in the aggregate principal amount of $4,200,000. Refer to Note 17 for details of subsequent amendments to the Closing Notes.

/s/ TAAD, LLP

We have served as the Company’s auditor since 2022.

Diamond Bar, California

April 30, 2024

AERWINS TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS