UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number 001-40734

AERWINS TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		86-2049355
(State or Other Jurisdiction of of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Shiba Koen Annex 6 f, 1-8, Shiba Koen 3-chome, Minato-ku, Tokyo, Japan		105-0011
(Address of Principal Executive Offices)		(Zip Code)

+813-6409-6761

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.000001 par value per share	AWIN	The Nasdaq Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	AWINW	The Nasdaq Stock Market LLC

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

Title of each class

N/A

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were [~~56,139,855~~62,688,215] shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of ~~May 12,~~August 21, 2023.

TABLE OF CONTENTS

Note About Forward-Looking Statements

PART I	FINANCIAL INFORMATION	4

Item 1.	Consolidated Financial Statements	4

	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 (Unaudited) and December 31, 2022	4

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	5

	Consolidated Statements of Changes in Shareholders’ Equity as of ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	6

	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	7

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2126

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	3039

Item 4.	Controls and Procedures	3039

PART II	OTHER INFORMATION	3139

Item 1.	Legal Proceedings	3139

Item 1A.	Risk Factors	3139

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3140

Item 3.	Defaults Upon Senior Securities	3140

Item 4.	Mine Safety Disclosures	3140

Item 5.	Other Information	3140

Item 6.	Exhibits	3140

	Signatures	3443

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

PART ~~I—FINANCIAL~~I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AERWINS TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEET

	March 31,			December 31,			June 30,			December 31,
	2023			2022			2023			2022
	(unaudited)						(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	235,741		$	1,278,026		$	35,359		$	1,278,026
Notes receivable		-			3,488			-			3,488
Accounts receivable, net		795,934			980,688			159,278			980,688
Others receivable		1,746,985			2,089,921			802,438			2,089,921
Advances and prepayments to suppliers		1,568,211			611,959			2,921,394			611,959
Inventory		3,687,779			2,687,092			1,538,563			2,687,092
Escrow deposit		-			575,000			-			575,000
Total current assets		8,034,650			8,226,174			5,457,032			8,226,174

Long-term Assets
Property and equipment, net		1,287,113			1,390,547			-			1,390,547
Intangible assets, net		167,421			150,576			-			150,576
Investment-equity method		955,985			997,470			893,922			997,470
Operating lease right-of-use assets		577,173			693,474			-			693,474
Long-term loans receivable		106,972			107,735			98,294			107,735
Other non-current assets		203,221			213,370			184,232			213,370
Total long-term assets		3,297,885			3,553,172			1,176,448			3,553,172

Total Assets	$	11,332,535		$	11,779,346		$	6,633,480		$	11,779,346

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Short-term loans payable	$	1,506,592		$	-		$	207,656		$	-
Short-term loans payable, related party								692,185			-
Short-term loans payable								692,185			-
Accounts payable								6,320,552			3,333,675
Accounts payable, related party								312,424			-
Accounts payable		4,813,440			3,333,675			312,424			-
Notes payable		1,580,000			-			1,480,000			-
Others payable		1,317,972			230,060			438,883			230,060
Accrued expenses		582,040			402,036			863,561			402,036
Contract liabilities		833,461			1,104,582			737,980			1,104,582
Current portion of long-term loans		101,333			54,624			166,332			54,624
Finance leases liabilities-current		101,856			102,114			85,025			102,114
Operating leases liabilities-current		254,541			293,710			228,175			293,710
Other current liabilities		165,561			380,344			-			380,344
Total Current Liabilities		11,256,796			5,901,145			11,532,773			5,901,145

Longer-term liabilities
Long-term loans		3,170,983			3,259,237			2,836,367			3,259,237
Warrant liabilities		556,962			-			1,255,795			-
Derivative liability								1,456,641			-
Long-term convertible promissory note, net								456,677			-
Finance leases liabilities-non-current		62,605			87,056			57,527			87,056
Operating leases liabilities-non-current		323,771			397,720			244,238			397,720
Other long-term liabilities		180,122			225,284			165,509			225,284
Total long-term liabilities		4,294,443			3,969,297			6,472,754			3,969,297

Total Liabilities		15,551,239			9,870,442			18,005,527			9,870,442

Stockholders’ Equity (deficit):
Common stock, par value $0.000001, 400,000,000 shares authorized; 56,139,855 and 46,929,065 shares issued and outstanding, respectively		56			47
Stockholders’ Equity (Deficit):
Common stock, par value $0.000001, 400,000,000 shares authorized; 61,409,146 and 46,929,065 shares issued and outstanding, respectively*								61			47
Preferred stock, par value $0.000001, 20,000,000 shares authorized; No shares issued and outstanding		-			-			-			-
Additional Paid-in capital		51,603,397			49,299,343			53,523,392			49,299,343
Retained earnings (Accumulated deficiency)		(54,274,448	)		(46,472,904	)		(65,695,768	)		(46,472,904	)
Treasury stock		(575,000	)		-			(575,000	)		-
Accumulated other comprehensive income (loss)		(972,709	)		(917,582	)		1,375,268			(917,582	)
Stockholders’ Equity (deficit)		(4,218,704	)		1,908,904
Total Liabilities and Stockholders’ Equity	$	11,332,535		$	11,779,346
Stockholders’ Equity (Deficit)								(11,372,047	)		1,908,904
Total Liabilities and Stockholders’ Equity (Deficit)							$	6,633,480		$	11,779,346

*	Retrospectively restated for effect of the business combination on February 6, 2023.

See Notes to Consolidated Financial Statements (unaudited)

AERWINS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	2023			2022
	Three months ended March 31,
	2023			2022			For the six months ended June 30,			For the six months ended June 30,			For the three months ended June 30,			For the three months ended June 30,
	(unaudited)						2023			2022			2023			2022
								(unaudited)
Revenues	$	1,265,883		$	2,038,656		$	457,753		$	1,934,118		$	25,703		$	321,171
Cost of revenues		955,071			1,956,702			600,280			2,047,280			265,680			425,962
Gross profit		310,812			81,954
Gross profit (loss)								(142,527	)		(113,162	)		(239,977	)		(104,791	)

Operating expenses:
Selling expenses		40,382			7,906			63,525			59,526			26,492			56,624
General and administrative expenses		6,222,451			1,508,270			10,108,287			2,722,078			4,215,208			1,462,361
Research and development expenses		2,090,219			2,325,999			6,795,396			4,484,102			4,751,800			2,208,964
Total operating expenses		8,353,052			3,842,175			16,967,208			7,265,706			8,993,500			3,727,949

Loss from operations		(8,042,240	)		(3,760,221	)		(17,109,735	)		(7,378,868	)		(9,233,477	)		(3,832,740	)

Other income (expenses):
Interest income (expenses), net		(6,847	)		(7,466	)		(484,950	)		(13,841	)		(478,082	)		(6,375	)
Gain (Loss) on foreign currency transaction		(11,005	)		46,948
Gain (Loss) on disposal of fixed assets		(9,943	)		-
Gain(Loss) on foreign currency transaction								(10,420	)		88,539			585			41,591
Gain(Loss) on disposal of fixed assets								(1,191	)		-			18,513			-
Impairment on fixed assets								(1,565,853	)		-			(1,565,853	)		-
Equity in earnings of investee		6,176			20,773			(11,640	)		10,736			(17,816	)		(10,037	)
Gain on sale of investment securities								-			451,154			-			451,154
Gain on fair value adjustments of warrant								1,199,672			-			1,113,421			-
Gain on fair value adjustment of derivative								595,673						595,673
Derivative expense								(1,088,477	)		-			(1,088,477	)		-
Other income (expenses), net		262,315			307,963			100,555			293,863			(82,333	)		(13,409	)
Total other income		240,696			368,218
Total other income (expenses)								(1,266,631	)		830,451			(1,504,369	)		462,924

Loss before income tax provision		(7,801,544	)		(3,392,003	)		(18,376,366	)		(6,548,417	)		(10,737,846	)		(3,369,816	)

Income tax expense		-			-
Income tax benefit (expense)								-			-			-			-

Net loss
Less: net loss attributable to non-controlling interest
Net loss from continuing operations								(18,376,366	)		(6,548,417	)		(10,737,846	)		(3,369,816	)

Discontinued operations (Note 23)
Loss from discontinued operations								(846,499	)		(679,519	)		(683,474	)		(466,117	)
Loss on discontinued operations								(846,499	)		(679,519	)		(683,474	)		(466,117	)

Net loss	$	(7,801,544	)	$	(3,392,003	)	$	(19,222,865	)	$	(7,227,936	)	$	(11,421,320	)	$	(3,835,933	)

Other comprehensive loss:
Other comprehensive income:
Foreign currency translation adjustment		(55,127	)		(195,256	)		2,292,850			(1,680,395	)		2,347,977			(1,485,139	)

Total comprehensive loss	$	(7,856,671	)	$	(3,587,259	)	$	(16,930,015	)	$	(8,908,331	)	$	(9,073,343	)	$	(5,321,072	)

Net loss per common share from continuing operations
Basic	$	(0.15	)	$	(0.08	)	$	(0.33	)	$	(0.15	)	$	(0.19	)	$	(0.08	)
Diluted	$	(0.15	)	$	(0.08	)	$	(0.33	)	$	(0.15	)	$	(0.19	)	$	(0.08	)

Weighted average common shares outstanding
Net loss per common share from discontinued operations
Basic		53,023,366			41,907,613		$	(0.02	)	$	(0.02	)	$	(0.01	)	$	(0.01	)
Effect of dilutive securities
Conversion of option warrants		3,451,984			4,977,392
Diluted		56,475,350			46,885,005		$	(0.02	)	$	(0.02	)	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding*
Basic *								54,957,819			42,712,850			56,871,014			43,509,237
Effect of dilutive securities *
Convertible debt ^*								1,742,620			-			3,466,090			-
Conversion of option warrants ^*								11,197,594			4,291,180			13,102,497			3,612,510
Diluted ^*								67,898,033			47,004,030			73,439,601			47,121,747

*	Retrospectively restated for effect of the business combination on February 6, 2023.

See Notes to Consolidated Financial Statements (unaudited)

AERWINS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)

Shares Amount Shares Amount Capital Deficit) Stock Income Totals
Common Stock 400,000,000 authorized
$0.000001 Par Value Preferred stock 20,000,000 authorized
$0.000001 Par Value Additional Paid-in (Registered) Retained Earnings (Accumulated Treasury Accumulated
Other
Comprehensive
Shares Amount Shares Amount Capital Deficit) Stock Income Totals

Balance at January 1, 2022 41,206,803 $ 41 - $ - $ 32,288,699 $ (31,993,085 ) $ - $ (238,057 ) $ 57,598

Corporate bond conversion 2,034,611 2 - - 8,399,182 - - - 8,399,184

Net income (unaudited) - - - - - (3,392,003 ) - - (3,392,003 )

Other comprehensive income (unaudited) - - - - - - - (195,256 ) (195,256 )

Balances at March 31, 2022 (unaudited) 43,241,414 $ 43 - $ - $ 40,687,881 $ (35,385,088 ) $ - $ (433,313 ) $ 4,869,523

Balance at January 1, 2023 46,929,065 $ 47 - $ - $ 49,299,343 $ (46,472,904 ) $ - $ (917,582 ) $ 1,908,904

Issuance of common stock prior to the closing of Business Combination 5,000,000 5 - - (1,156,124
)
- - - (1,156,119 )

Reverse recapitalization 3,740,187 4 - - (878,120 ) - - - (878,116 )

Issuance of common stock warrants for services 413,103 0 - - 4,338,298 - - - 4,338,298

Acquisition of treasury stock 57,500 - - - - - (575,000 ) - (575,000 )

Net income - - - - - (7,801,544 ) - - (7,801,544 )

Other comprehensive income - - - - - - - (55,127 ) (55,127 )

Balances at March 31, 2023 56,139,855 $ 56 - $ - $ 51,603,397 $ (54,274,448 ) $ (575,000 ) $ (972,709 ) $ (4,218,704 )

	Shares		Amount		Shares		Amount		Capital		Deficit)			Stock		Income			Totals
	Common Stock				Preferred stock
	400,000,000 authorized				20,000,000 authorized				Additional		Retained					Accumulated
	$0.000001 Par Value				$0.000001 Par Value				Paid-in (Registered)		Earnings (Accumulated			Treasury		Other Comprehensive
	Shares		Amount		Shares		Amount		Capital		Deficit)			Stock		Income			Totals

Balance at January 1, 2022		41,206,803	$	41		-	$	-	$	32,288,699	$	(31,993,085	)	$	-	$	(238,057	)	$	57,598

Corporate bond conversion		2,034,611		2		-		-		8,399,182		-			-		-			8,399,184

Net income		-		-		-		-		-		(3,392,003	)		-		-			(3,392,003	)

Other comprehensive income		-		-		-		-		-		-			-		(195,256	)		(195,256	)

Balances at March 31, 2022 (unaudited)		43,241,414	$	43		-	$	-	$	40,687,881	$	(35,385,088	)	$	-	$	(433,313	)	$	4,869,523

Issuance of common stock		1,709,541		2		-		-		2,715,194		-			-		-			2,715,196

Issuance of common stock upon exercise of stock options		351,310		0		-		-		367,277		-			-		-			367,277

Net income		-		-		-		-		-		(3,835,933	)		-		-			(3,835,933	)

Other comprehensive income		-		-		-		-		-		-			-		(1,485,139	)		(1,485,139	)

Balances at June 30, 2022 (unaudited)		45,302,265	$	45		-	$	-	$	43,770,352	$	(39,221,021	)	$	-	$	(1,918,452	)	$	2,630,924

	Common Stock				Preferred stock
	400,000,000 authorized				20,000,000 authorized				Additional			Retained						Accumulated
	$0.000001 Par Value				$0.000001 Par Value				Paid-in (Registered)			Earnings (Accumulated			Treasury			Other Comprehensive
	Shares		Amount		Shares		Amount		Capital			Deficit)			Stock			Income			Totals

Balance at January 1, 2023		46,929,065	$	47		-	$	-	$	49,299,343		$	(46,472,904	)	$	-		$	(917,582	)	$	1,908,904

Issuance of common stock prior to the closing of Business Combination		5,000,000		5		-		-		(1,156,124	)		-			-			-			(1,156,119	)

Reverse recapitalization		3,740,187		4		-		-		(878,120	)		-			-			-			(878,116	)

Issuance of common stock warrants for services		413,103		0		-		-		4,338,298			-			-			-			4,338,298

Acquisition of treasury stock		57,500		-		-		-		-			-			(575,000	)		-			(575,000	)

Net loss		-		-		-		-		-			(7,801,544	)		-			-			(7,801,544	)

Other comprehensive income		-		-		-		-		-			-			-			(55,127	)		(55,127	)

Balances at March 31, 2023		56,139,855	$	56		-	$	-	$	51,603,397		$	(54,274,448	)	$	(575,000	)	$	(972,709	)	$	(4,218,704	)
Begining balances, value		56,139,855	$	56		-	$	-	$	51,603,397		$	(54,274,448	)	$	(575,000	)	$	(972,709	)	$	(4,218,704	)

Issuance of common stock for services		5,269,291		5		-		-		1,919,995			-			-			-			1,920,000

Net loss		-		-		-		-		-			(11,421,320	)		-			-			(11,421,320	)
Net income (loss)		-		-		-		-		-			(11,421,320	)		-			-			(11,421,320	)

Other comprehensive income		-		-		-		-		-			-						2,347,977			2,347,977

Balances at June 30, 2023		61,409,146	$	61		-	$	-	$	53,523,392		$	(65,695,768	)	$	(575,000	)	$	1,375,268		$	(11,372,047	)
Ending balances, value		61,409,146	$	61		-	$	-	$	53,523,392		$	(65,695,768	)	$	(575,000	)	$	1,375,268		$	(11,372,047	)

* Retrospectively restated for effect of the business combination on February 6, 2023.

See Notes to Consolidated Financial Statements (unaudited)

AERWINS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

							2023			2022
	2023			2022			For the Six Months ended
	Three months ended March 31,						June 30,			June 30,
	2023			2022			2023			2022
	(unaudited)						(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,801,544	)	$	(3,392,003	)
Net income (loss)							$	(19,222,865	)	$	(7,227,936	)
Net income (loss) from discontinued operations								(846,499	)		(679,519	)
Net income (loss) from continuing operations								(18,376,366	)		(6,548,417	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation expenses		98,541			72,145			187,054			141,406
Amortization expenses		12,930			13,992			23,541			27,060
Interest expense								435,072			-
Non-cash lease expense		111,654			109,103			205,103			169,666
Share-based compensation		3,338,298			-			3,658,298			-
Change in fair value of warrant liabilities		(86,251	)		-			(1,199,672	)		-
Change in fair value of derivative liability								(595,673	)		-
Revert of bad debt expenses		7,392			(731	)		7,256			(691	)
Impairment loss								1,565,853			-
Loss on disposal of fixed assets		9,943			-			1,191			176
Gain on sale of investment securities								-			(451,154	)
Equity in earnings of investee		(6,176	)		(20,773	)		11,640			(10,736	)
Derivative Expense								1,088,477			-

Decrease (Increase) in operating assets:
Accounts receivable		174,308			316,743			(25,369	)		(198,989	)
Others Receivable		328,912			(353,492	)		1,215,560			(501,927	)
Prepaid expenses		125,108			7,344			(36,368	)		(4,916	)
Advances and prepayments to suppliers		(62,211	)		(43,630	)		131,687			(87,865	)
Inventory		(1,022,122	)		64,688			769,273			(29,642	)
Other current assets,		-			(10,825	)
Other non-current assets		8,659			(1,293	)
Other non current assets								11,180			8,810

Increase (Decrease) in operating liabilities:
Accounts payable		74,318			(699,512	)		2,871,733			(731,438	)
Notes payable		3,731			-			4,825			-
Others payable		1,092,114			29,154			291,147			(75,836	)
Accrued expenses		183,283			298,105			428,615			85,351
Deferred revenue		(263,921	)		191,962			(288,338	)		269,441
Operating lease liabilities-current		(37,177	)		(6,604	)		(9,652	)		(34,097	)
Warrant liabilities								-			(68,023	)
Other current liabilities		(212,591	)		(209,910	)		(371,592	)		-
Operating lease liabilities-Non-current		(71,301	)		(103,828	)		(148,243	)		(134,547	)
Other non-current liabilities		(43,670	)		(49,706	)		(42,869	)		(154,616	)
Net cash provided (used) by continuing operations								(8,186,637	)		(8,330,984	)
Net cash provided (used) by discontinued operations								29,233			(706,552	)
Net cash provided (used) by operating activities		(4,037,773	)		(3,789,071	)		(8,157,404	)		(9,037,536	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(14,676	)		(19,313	)		(20,757	)		(22,407	)
Purchase of intangible assets		(30,883	)		-			(36,186	)		(26,062	)
Proceeds from disposal of investments								-			487,427
Repayment of loans receivable		-			17,189			-			16,248
Net cash provided (used) by continuing operations								(56,943	)		455,206
Net cash provided (used) by discontinued operations								(5,245	)		(45,171	)
Net cash (used) by investing activities		(45,559	)		(2,124	)		(62,188	)		410,035

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital contribution								-			3,082,473
Proceeds from bond								2,797,697			-
Proceeds from loans		2,263,446			-			3,516,441			-
Repayments to loans		(771,375	)		(74,163	)		(2,612,192	)		(142,816	)
Payments for finance leases		(21,185	)		(23,704	)		(41,681	)		(47,240	)
Proceeds from reverse recapitalization		1,595,831
Proceeds from reverse recapitalization with AERWINS Inc., net								1,595,831			-
Net cash provided (used) by continuing operations								5,256,096			2,892,417
Net cash provided (used) by discontinued operations								-			-
Net cash provided (used) by financing activities		3,066,717			(97,867	)		5,256,096			2,892,417

Net increase (decrease) in cash and cash equivalents		(1,016,615	)		(3,889,062	)		(2,963,496	)		(5,735,084	)
Effects of exchange rates change on cash		(25,670	)		(354,401	)		1,720,829			(813,365	)
Cash and cash equivalents at beginning of period		1,278,026			10,020,459			1,278,026			10,020,459
Cash and cash equivalents at beginning of period held by discontinued operation								-			-
Cash and cash equivalents at ending of period held by discontinued operation								-			-
Cash and cash equivalents at end of period	$	235,741		$	5,776,996		$	35,359		$	3,472,010

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during year for:
Interest	$	6,821		$	7,844		$	11,708		$	14,234
Income taxes	$	-		$	-		$	-		$	-

See Notes to Consolidated Financial Statements

(unaudited)

AERWINS TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March 31,~~June 30, 2023

(unaudited)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

AERWINS Technologies Inc., a Delaware corporation (the “Company,” “we,” “us,” or “AERWINS”) together with its wholly owned subsidiary AERWINS, Inc., a Delaware corporation and its wholly owned subsidiary, A.L.I. Technologies Inc., a Japanese corporation (“ALI”) is the developer and manufacturer of air mobility platform, COSMOS (Centralized Operating System for Managing Open Sky), and the XTURISMO Limited Edition Hoverbike. All refences in this report on Form 10-Q to the “Company,” “we,” “us,” or “AERWINS” include both AERWINS and ALI.

Pono Capital Corp Merger

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.

The Business Combination was accounted for as a reverse recapitalization under the accounting principles generally accepted in the United States of America (“U.S. GAAP”). AERWINS was determined to be the accounting acquirer and Pono was treated as the acquired company for financial reporting purposes. Accordingly, the financial statements of the combined company represent a continuation of the financial statements of AERWINS.

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 3,196,311 shares of common stock (the “Shares”) of AERWINS, Inc. which was immediately exchanged for 5,000,000 Public 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 Public Shares, and the Public 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 which was declared effective by the Securities and Exchange Commission on January 13, 2023.

On February 3, the Company received from the Business Combination with Pono net cash of $1,595,831. The Company also assumed $25,750in prepaid expenses, $1,432,603in other payable, $1,580,000in notes payable ($1,480,000 as of June 30, 2023), $643,213in warrant ~~liabilities, common stock of $~~9 ~~and additional paid-in capital of $(2,034,244).The notes payable of $1,580,000~~ ~~were issued to cover the transaction costs and will be paid within the year ending December 31, 2023. As a result of the merger, the Company reclassified escrow deposit of $575,000~~ ~~to treasury stock.~~

liabilities. The total funds from the Business Combination of $1,595,831. This amount was available to repay certain indebtedness, transaction costs and for general corporate purposes, which primarily consisted of investment banking, legal, accounting, and other professional fees as follows:

SCHEDULE OF BUSINESS COMBINATION


Cash—Pono trust and working capital cash	$	1,802,594
Cash—Subscription agreement made immediately before the closing		5,000,000
Less: transaction costs and advisory fees		5,206,763
Total funds from the Business Combination	$	1,595,831

Regarding the notes payable of $1,480,000 described above, the Company has not paid by the due date. Accordingly, the Company is regarded as in default and recognizes interest expenses of $29,392 as accrued expenses.

NOTE 2 - GOING CONCERN

The Company’s consolidated financial statements are prepared using ~~U.S. GAAP~~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~~period ended ~~March 31,~~June 30, 2023, the Company has incurred ~~operating losses~~net loss from continuing operations of $~~8,042,240~~18,376,366 and accumulated deficit of $~~54,274,448~~65,695,768. These factors raise substantial doubt on the Company’s ability to continue as a going concern.

Although the Company ~~has commenced~~is attempting to commence operations and ~~attempting to~~ generate sufficient revenue, the Company’s cash position may not be 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 operations and 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. 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.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. ~~The Company applies equity method to the following investment in the entity.~~

~~SCHEDULE OF SUBSIDIARIES~~

Percentage of Effective Ownership
Name of entity Place of Organization March 31, 2023 December 31, 2022
ASC TECH Agent Japan 48.81 % 48.81 %

Unaudited Interim Consolidated Financial Information

The accompanying interim consolidated balance sheet as of ~~March 31,~~June 30, 2023, the interim consolidated statements of operations and comprehensive income (loss), consolidated statements of changes in shareholders’ equity (deficiency), and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 and the related notes to such interim consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with U.S. GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of ~~March 31,~~June 30, 2023 and the Company’s consolidated results of operations and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022. The consolidated results of operations for the ~~three~~six months ended ~~March 31,~~June 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

Use of Estimates

In preparing the consolidated financial statements in conformity with 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, and valuation allowance of deferred tax assets. Actual results could differ from those estimates.

9
Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and deposits in banks that are unrestricted as to withdrawal or use, and which have original maturities of three months or less.

Accounts Receivable, net

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.
9

Inventories

Inventories consist principally of raw materials used for rendering computing sharing services and for manufacturing hoverbikes. Work in progress represents the costs incurred to date on unfinished products or services. The costs recognized as work in progress include direct materials, direct labor, and overhead costs that are directly attributable to the production of the unfinished product or service. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method for merchandise. Net realizable value is calculated at estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Loss from inventories written down to net realizable value should be recognized whenever the utility of goods is impaired by damage, deterioration, obsolescence, changes in price levels, or other causes. When inventories have been written down below cost, the reduced amount is to be considered the cost for subsequent accounting purposes.

Fixed assets

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives, as more details follow:

SCHEDULE OF ESTIMATED USEFUL LIVES OF FIXED ASSETS
Depreciation Method Useful Life
Building and building accessories Straight-line method 8-38 years
Office equipment and furniture Straight-line method 2-10 years
Software Straight-line method 5 years
Design right Straight-line method 7 years
Patent right Straight-line method 8 years

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive income (loss).
10

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.

Impairment of Long-Lived Assets

Long-lived assets with finite lives, primarily property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.

10
Equity Method

We apply the equity method to an investment in unconsolidated entities over which we have the ability to exercise significant influence. We initially record our investments based on the acquisition cost. Under the equity method, the carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the investment.
SCHEDULE OF SUBSIDIARIES
Percentage of Effective Ownership
Name of Subsidiary Place of Organization June 30, 2023 December 31, 2022
ASC TECH Agent Japan 48.81 % 48.81 %

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 ~~the Public~~Debt Warrants for periods where no observable traded price was available are valued using a Black Scholes model.
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.
11

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 in shareholders’ deficit.

Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:
SCHEDULE OF FOREIGN EXCHANGE RATES
2023 2022 2022 2023 2022 2022

Three months ended March 31,
(unaudited)
Year ended
December 31,
Six months ended June 30,
(unaudited)

Year ended
December 31,

2023 2022 2022 2023 2022 2022
Current JPY: US$1 exchange rate 132.75 121.44 131.81 144.47 135.69 131.81
Average JPY: US$1 exchange rate 132.44 116.36 131.46 134.91 123.10 131.46
Foreign exchange rate 132.44 116.36 131.46 134.91 123.10 131.46

Consolidated Statements of Cash Flows

In accordance with FASB ASC 830-230, “Statement of Cash Flows”, cash flows from the Company’s operations are calculated based upon the functional currency. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

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.
1112

Cost of Revenues

Cost of revenues primarily consists of salaries and related expenses (e.g. bonuses, employee benefits, and payroll taxes) for personnel directly involved in the delivery of services and products directly to customers. Cost of revenues also includes royalty/license payments to vendors, and hosting and infrastructure costs related to the delivery of the Company’s products and services.

Advertising Expenses

Advertising expenses consist primarily of costs of promotion and marketing for the Company’s image and products, and costs of direct advertising, and are included in selling expenses. The Company expenses advertising costs as incurred, in accordance with the ASC 720-35, “Advertising Costs”. The advertising expenses for ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited) were $~~40,382~~63,525 and $~~7,906~~59,526, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of accounts and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, Customer CA accounts for ~~respectively~~ ~~29.8%~~25.9% of the Company’s total revenues.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, Customer AB, Customer C and Customer BD accounts for respectively ~~25.0%~~17.9%, 14.8% and ~~20.9%~~13.5% of the Company’s total revenues.

As of June 30, 2023, Customer E accounts for 81.6% of the Company’s total accounts receivable. As of December 31, 2022, Customer E, Customer F and Customer G accounts for respectively ~~16.2%~~15.1%, ~~15.1%~~16.2% and ~~12.8%~~12.8 ~~of the Company’s total accounts receivable. Customer C, Customer F and Customer J accounts for respectively~~ ~~37.2%~~, ~~18.4%~~ ~~and~~ ~~10.7%~~% of the Company’s total accounts receivable

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, Vendor A and Vendor B accounts for respectively ~~29.3%~~39.5% and ~~25.2%~~16.4% of the Company’s total raw material purchases.
For the ~~three~~six months ended ~~March 31,~~June 30, 2022, Vendor EA, Vendor C and Vendor AD accounts for respectively ~~36.9%~~30.1%, 19.3% and ~~24.6%~~11.2% of the Company’s total raw material purchases.

As of December 31, 2022, Vendor A ~~Vendor C and Vendor D account~~accounts for ~~respectively~~ ~~20.1%~~31.2, ~~7.8%~~ ~~and~~ ~~6.0%~~% of the Company’s total accounts payable. As of ~~March 31,~~June 30, 2023, Vendor A ~~Vendor B and Vendor C account~~accounts for ~~respectively~~ ~~14.8%~~20.1, ~~9.9%~~ ~~and~~ ~~8.8%~~% of the Company’s total accounts payable.
Comprehensive Income or Loss

ASC 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income or loss, its components and accumulated balances. Comprehensive income or loss as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive loss, as presented in the accompanying consolidated statements of changes in shareholders’ deficit, consists of changes in unrealized gains and losses on foreign currency translation.

Earnings (Loss) Per Share

The Company computes basic and diluted earnings (loss) per share in accordance with ASC 260, Earnings per Share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share reflects the potential dilution that could occur if stock options and other commitments to issue common shares were exercised or equity awards vest resulting in the issuance of common shares that could share in the earnings (loss) of the Company.

13
Related Parties and Transactions

The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.

Parties, which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making financial and operational decisions. Entities are also considered to be related if they are subject to common control or common significant influence.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
12

Income Taxes

Income taxes are accounted for using an asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

The Company follows ASC 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of ASC 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of operations.

Fair Value Measurements

The Company performs fair value measurements in accordance with ASC 820. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

● Level 1: quoted prices in active markets for identical assets or liabilities;
● Level 2: inputs other than Level 1 that are observable, either directly or indirectly; or
● Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

14
NOTE 4 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE, NET

March 31,
2023
(unaudited)
December 31,
2022
Accounts receivable $ 803,309 $ 980,688
Less: allowance for doubtful accounts (7,375 ) -
Accounts receivable, net $ 795,934 $ 980,688
13

June 30,

2023
(unaudited)

December 31,
2022

Accounts receivable $ 166,054 $ 980,688
Less: allowance for doubtful accounts (6,776 ) -
Accounts receivable, net $ 159,278 $ 980,688

Allowance for doubtful accounts movement is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

June 30,

March 31,
2023
(unaudited)
December 31,
2022
2023
(unaudited)

December 31,
2022

Beginning balance $ - $ (739 ) $ - $ (739 )
Change during the year (7,392 ) 739 (7,256 ) 739
Foreign currency translation adjustment 17 - 480 -
Ending balance $ (7,375 ) $ - $ (6,776 ) $ -

Other receivable movement is as follows:
SCHEDULE OF OTHER RECEIVABLE

June 30,

March 31,
2023
(unaudited)
December 31,
2022
2023
(unaudited)

December 31,
2022

Beginning balance $ 2,089,921 $ 1,034,690 $ 2,089,921 $ 1,034,690
Change during the year (328,912 ) 1,189,020 (1,182,560 ) 1,189,020
Foreign currency translation adjustment (14,024 ) (133,789 ) (104,923 ) (133,789 )
Ending balance $ 1,746,985 $ 2,089,921 $ 802,438 $ 2,089,921

The change during the year in 2022 is mainly from increase of consumption tax receivable that ~~will be~~has been refunded in ~~the next fiscal year.~~2023.

NOTE 5 — INVENTORY

Inventory consists of the following:
SCHEDULE OF INVENTORY

June 30,

March 31,
2023
(unaudited)
December 31,
2022
2023
(unaudited)
December 31,
2022
Raw materials $ 2,337,941 $ 1,533,784 $ 209,330 $ 1,533,784
Work in progress 1,339,454 1,135,852 1,288,027 1,135,852
Product 31,665 -
Stored item 10,384 17,456 9,541 17,456
Total $ 3,687,779 $ 2,687,092 $ 1,538,563 $ 2,687,092

15

NOTE 6 — SEGMENT INFORMATION

Management determined the Company’s operations constituted one reportable segment in accordance with ASC 280—Air mobility segment. Revenue by each service line can be found in Note 7 below.

NOTE 7 — REVENUE RECOGNITION

The Company currently generates its revenue from the following main sources:
~~Revenue from Sales of Computing Equipment~~
Revenues from the sale of equipment are recognized at the point in time when obligations under the terms of a contract with our customer are satisfied and control has been transferred to the customer. For equipment placements that require us to install the product at the customer location, revenue is normally recognized when the equipment has been delivered and installed at the customer location. Sales of customer installable products are recognized upon shipment or receipt by the customer according to the customer’s shipping terms.

Revenue from Computing Power Sharing services with Equipment Installation

The Company provides customers with computing power sharing services with equipment installation, which includes a one-time equipment installation and a certain period of time technology service. The Company recognizes revenue from one-time equipment installation at the point in time when the installation is completed and accepted by the customer. The Company recognizes revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly.

Revenue from Computing Power Sharing services without Equipment Installation

The Company also provides customers with computing power sharing services without equipment installation, which includes a one-time platform set up without equipment installation, and a certain period of time technology service. The Company recognizes revenue from one-time platform set up at the point in time when the platform is set up to function and accepted by the customer. The Company recognizes revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly.
14

Revenue from Air Mobility Drone Solution

The Company provides customers with air mobility drone solution, which includes UAS (Unmanned Aircraft Systems) main equipment, laser scanner, software package, camera system, etc. The solution includes a one-time system set up and a certain period of time technology service. The Company recognizes revenue from one-time system set up at the point in time when the system is set up to function and accepted by the customer. The Company recognizes revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly. Revenue from Air Mobility Drone Solution is included in income from discontinued operations.

Revenue from Project Management

The Company provides customers with project management, which includes project planning and implementation, and providing needed technology human resources, such as construction engineers and software engineers for various projects. The Company recognizes revenue from project management over time when the service is rendered and accepted by the customer, normally monthly. Revenue from Project Management is included in income from discontinued operations.
Revenue from ~~Outsourcing~~Consulting Service

The Company ~~provides customers~~provided a customer with ~~outsourcing~~consulting service ~~of temporary staffing for construction or technology industries.~~related to IPO. The ~~Company~~company recognizes revenue from ~~outsourcing~~the service over time as the service is ~~rendered, normally monthly. Revenue from Outsourcing Service is included in income from discontinued operations.~~rendered.

Disaggregation of Revenue

The Company disaggregates its revenues from contracts by service types, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the six months and three months ended ~~March 31,~~June 30, 2023 and 2022 is as following (unaudited):
SCHEDULE OF DISAGGREGATION OF REVENUE
2023 2022
Six months ended

June 30,
(unaudited)

2023 2022
Revenue from Computing Power Sharing services 101,453 836,059
Revenue from Project Management for Computing Share 6,300 1,098,059
Consulting Service 350,000 -
Total Revenue $ 457,753 $ 1,934,118

2023 2022

Three months ended March 31,

(unaudited)
2023 2022
Revenue from Sales of Computing Equipment＆Drone $ 62,870 $ 682,392
Revenue from Computing Power Sharing services 61,718 417,009
Revenue from Project Management for Computing Share 6,418 30,673
Revenue from Air Mobility Drone Solution 736,642 854,222
Revenue from Project Management 45,304 37,734
Other 352,931 16,626
Total Revenue $ 1,265,883 $ 2,038,656
2023 2022
Three months ended

June 30,
(unaudited)

2023 2022
Revenue from Computing Power Sharing services 25,703 274,823
Revenue from Project Management for Computing Share - 46,348
Total Revenue $ 25,703 $ 321,171
16

For the ~~three~~six months ended ~~March 31~~June 30 in 2023 and 2022 (unaudited), almost all of the revenue generated are attributed to the Company’s operation in Japan.
Revenue from Air Mobility Drone Solution and Project Management are included in income from discontinued operations.

Contract Liability

As of ~~March 31,~~June 30, 2023 (unaudited) and December 31, 2022, the Company recognizes contract liability of $~~833,461~~737,980 and $1,104,582 respectively. Contract liability primarily represents the Company’s remaining performance obligations under its service agreement at the end of the period, for which consideration has been received and revenue had not been recognized.

NOTE 8 — RELATED PARTY TRANSACTIONS
Guarantee provided by a director of A.L.I.

For the ~~three~~six months ended ~~March 31~~June 30 in 2023, the Company received a debt guarantee from the Representative Director of A.L.I. Daisuke Katano for a particular building lease agreement. The transaction amount is $~~6,343~~12,452 which is calculated by the total rental fees paid during the period from January 1, 2023 to ~~March 31,~~June 30, 2023 for the contracts for which guarantees were provided as of ~~March 31,~~June 30, 2023. No warranty fees are paid.

~~Short-term~~Loan from a former director of Aerwins

On February 27, 2023, the Company’s wholly owned subsidiary in Japan, A.L.I. Technologies, entered into a loan agreement with Shuhei Komatsu, the Company’s Chief Executive Officer. Pursuant to the Agreement, Mr. Komatsu agreed to lend A.L.I. 200,000,000 yen (approximately $~~1,506,592~~1,384,370 US Dollars based on a conversion rate of ~~0.007532~~0.006921 US Dollar for each $1 yen as of ~~March 31,~~June 30, 2023). The original maturity date of the ~~loan~~Loan under the Agreement was April 15, 2023, and ~~has been~~was extended to June 30, ~~2023. The Company recognizes the loan as Shor-term loans payable in its balance sheet.~~
2023 (the “Maturity Date”). The interest rate under the ~~agreement~~Agreement is ~~2.475%~~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 the ~~maturity date.~~Maturity Date. The Company recognizes $8,775 of accrued expenses. The Company has not paid 100,000,000yen (approximately $US$~~753,266~~692,185) as of ~~May 22,~~June 30, 2023. Accordingly, the Company is regarded in default and negotiates the terms with the lender.

Payable to Directors of Aerwins
In the second quarter of 2023, two directors of Aerwins, Kiran Sidhu and Daisuke Katano paid some payable on behalf of the Company. Mr. Sidhu paid $102,000 in the second quarter of 2023 and the same amount is outstanding as of June 30, 2023. Mr. Katano paid $210,424 in the second quarter of 2023 and the same amount is outstanding as of June 30, 2023. The Company will pay to them at an appropriate timing in light of its financial situation.
1517

NOTE 9 — PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT

June 30,

March 31,
2023
(unaudited)
December 31,
2022
2023
(unaudited)

December 31,
2022

Building $ 232,213 $ 233,869 $ 213,375 $ 233,869
Accessory equipment 212,639 211,879 182,629 211,879
Structures 47,231 47,568 43,400 47,568
Vehicles 4,480 4,512 4,117 4,512
Tools, furniture and fixtures 1,733,708 1,751,969 1,818,832 1,751,969
Lease assets 185,548 186,871 170,496 186,871
Construction in process - -
Property and equipment, gross
Accumulated depreciation and impairment (1,128,706 ) (1,046,121 )
Accumulated depreciation (721,480 ) (534,426 )
Impairment (1,711,369 ) (511,695 )
Property and equipment, net $ 1,287,113 $ 1,390,547 $ - $ 1,390,547

Depreciation expense for ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, were respectively $~~98,541~~187,054 and $~~72,145~~141,406.

NOTE 10 — INTANGIBLE ASSETS, NET

The components of intangible assets as of ~~March 31,~~June 30, 2023 and December 31, 2022 are as follows:

SCHEDULE OF INTANGIBLE ASSETS
March 31, December 31,

2023
(unaudited)
2022 June 30,

2023
(unaudited)

December 31,
2022

Software $ 707,270 $ 706,320 $ 662,075 $ 706,320
Design right 110,546 111,334 101,578 111,334
Patent right 24,859 - 22,842 -
Intangible assets, gross
Accumulated amortization (675,254 ) (667,078 ) (217,828 ) (191,813 )
Impairment (568,667 ) (475,265 )
Intangible assets, net $ 167,421 $ 150,576 $ - $ 150,576
Amortization expense for ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, were respectively $~~12,930~~23,541 and $~~13,992~~27,060.
NOTE 11 — IMPAIRMENT LOSS
For the six months ended June 30, 2023, the Company recognized impairment losses for the following assets:
SCHEDULE OF IMPAIRMENT LOSS

Type Impairment loss
Building $ 199,601
Accessory equipment 146,334
Structures 37,975
Tools, furniture and fixtures 562,650
Operating Lease right-of-use assets 472,414
Software 71,095
Design right 54,370
Patent right 21,414
Total $ 1,565,853
Because the Company continues to recognize operating losses, and the future cash flows from these assets for its business in Japan are uncertain, so it has decided to write down fixed assets in Japan, the Company recognizes impairment loss for all fixed assets in Japan. The Company recognized the reduction as impairment in the line item of impairment on fixed assets. The Company reduces the book value to zero and recognizes the amount as impairment because the future cash flows from these assets were uncertain at the end of this quarter.
NOTE 12 — LEASES
The components of lease costs are as follows:
SCHEDULE OF LEASE COSTS
2023 2022 2023 2022
For the Three months Ended For the Six months Ended
March 31, (unaudited) June 30, (unaudited)
2023 2022 2023 2022
Short-term lease costs $ 132 $ 284 $ 39,233 $ 536
Finance lease costs 24,691 25,066 47,411 51,127
Operating lease costs 100,844 112,972 177,160 107,922
Total lease costs $ 125,667 $ 138,322 $ 263,804 $ 159,585
1618

As of ~~March 31,~~June 30, 2023, the future maturity of lease liabilities is as follows:
SCHEDULE OF FUTURE MATURITY OF LEASE LIABILITIES
Year ending December 31,

Finance
lease

Operating
lease
Finance
lease Operating
lease
2023 $ 105,026 $ 258,924

2023 (six months) $ 64,834 $ 93,987
2024 32,845 227,033 50,078 227,438
2025 11,191 99,106 10,283 155,979
2026 11,191 - 10,283 -
Thereafter 11,191 - 12,854 -
Total lease payments 171,444 585,063 148,332 477,404
Less: imputed interest (6,983 ) (6,751 ) (5,780 ) (4,991 )
Total lease liabilities 164,461 578,312 142,552 472,413
Less: current portion 101,856 254,541 85,025 228,175

Non-current lease liabilities $ 62,605 $ 323,771 $ 57,527 $ 244,238

The following table presents supplemental information related to the Company’s leases:
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASE
2023 2022 2023 2022
For the Three months Ended For the Six months Ended
March 31, (unaudited) June 30, (unaudited)
2023 2022 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases 108,478 110,432 157,895 168,644
Financing cash flows from finance lease 21,185 23,704 41,681 47,240
Weighted average remaining lease term (years)
Finance leases 1.2 2.0 1.1 1.8
Operating leases 1.2 1.4 1.1 1.4
Weighted-average discount rate: (per annum)
Finance leases 2.59 % 2.34 % 2.66 % 2.38 %
Operating leases 0.94 0.94 0.94 0.94

Pursuant to the operating lease agreements, the Company made security deposits to the lessors. The amount of security deposits as of ~~March 31,~~June 30, 2023 and as of December 31, 2022 is $~~168,794~~152,598 and 174,111 respectively.

~~NOTE 12 —~~ ~~OTHER PAYABLE~~
~~The Company’s Other payable includes~~ ~~a liability arising from factoring of consumption tax receivable of $1,034,271. The liability from the factoring has been repaid on April 17, 2023.~~
19

NOTE 13 — LONG-TERM DEBTS

The Company’s long-term ~~debts included bond payable, and~~ loans borrowed from banks and other financial institutions, which consist of the following:
SCHEDULE OF LONG-TERM ~~DEBTS INCLUDED BOND PAYABLE, AND~~ LOANS BORROWED FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
Name of Lender Original Amount Borrowed
(JPY) Loan
Duration Annual
Interest Rate
Balance as of
March 31,
2023
(unaudited)
Balance as of
December 31,
2022 Original Amount Borrowed (JPY) Loan
Duration Annual
Interest Rate
Balance as of
June 30,
2023
(unaudited)
Balance as of
December 31,
2022
Mizuho Bank, Ltd. 40,000,000 1/22/2021—
1/22/2028 0.00 % 301,318 303,467 40,000,000
1/22/2021—
1/22/2028
0.00 % 276,874 303,467
Mizuho Bank, Ltd. 60,000,000 1/22/2021—
1/22/2028 0.00 % 451,977 455,201 60,000,000
1/22/2021—
1/22/2028
0.00 % 415,311 455,201
Mizuho Bank, Ltd. 50,000,000 1/22/2021—
1/22/2028 1.70 % 376,648 379,334 50,000,000
1/22/2021—
1/22/2028
1.70 % 346,093 379,334
Japan Finance Corporation 50,000,000 12/29/2020—
12/31/2027 1.11 % 259,134 279,190 50,000,000
12/29/2020—
12/31/2027
1.11 % 233,959 279,190
Japan Finance Corporation 250,000,000 12/29/2020—
1/31/2026 0.50 % 1,883,239 1,896,669 250,000,000
12/29/2020—
1/31/2026
0.50 % 1,730,462 1,896,669
Aggregate outstanding principal balances 3,272,316 3,313,861 3,002,699 3,313,861
Less: current portion (101,333 ) (54,624 ) (166,332 ) (54,624 )
Non-current portion $ 3,170,983 $ 3,259,237 $ 2,836,367 $ 3,259,237

Interest expense for long-term debts was $~~6,805~~11,708 and $~~7,538~~14,234 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited), respectively.

NOTE 14 – CONVERTIBLE PROMISSORY NOTES, NET
On April 12, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) with Lind Global Fund II LP (the “Investor”). Pursuant to the SPA, the Company agreed to issue to the Investor up to three secured convertible promissory notes in the aggregate principal amount of $6,000,000 for a purchase price of an aggregate of $5,000,000 and up to 5,601,613 warrants to acquire up to 5,601,613 shares of the Company’s common stock.
On April 12, 2023, the Company issued first tranche of convertible promissory note of $2,520,000 with maturity date of April 12, 2025 and no interest and issued warrant exercisable for 60 months to acquire 2,532,678 shares of common stock at $0.8926 per share. The note may convert into common shares at the option of the Holder. The conversion price is the lesser of: (i) $0.90; or (ii) 90% of the lowest single VWAP during the 20 Trading Days prior to conversion of the note. Debt issuance cost of $457,304, original issue discount of $420,000 and additional discount of $1,642,696 are recognized as reduction from the principal amount of the note and will be amortized over the life of the note utilizing straight-line method.
On May 23, 2023, the Company issued second tranche of convertible promissory note of $1,680,000 with maturity date of May 23, 2025 and no interest and issued warrant exercisable for 60 months to acquire 1,568,542 shares of common stock at $0.7316 per share. The note may convert into common shares at the option of the Holder. The conversion price is the lesser of: (i) $0.90; or (ii) 90% of the lowest single VWAP during the 20 Trading Days prior to conversion of the note. Debt issuance cost of $245,000, original issue discount of $280,000 and additional discount of $1,133,395 are recognized as reduction from the principal amount of the note and will be amortized over the life of the note utilizing straight-line method.
The notes consist of the following components as of June 30, 2023:
SCHEDULE OF DEBT NOTES
Principal $ 4,200,000
Debt discount (4,178,395 )
Interest expense 435,072
Net Carrying Balance at June 30, 2023 $ 456,677
As of the year ended June 30, 2023, debt discount of the convertible notes consisted of following:
SCHEDULE OF DEBT DISCOUNT OF THE CONVERTIBLE NOTES
Start Date End Date
Debt Discount At
Debt Issuance
Amortization Debt Discount As of June 30, 2023
April 12, 2023 April 12, 2025 $ 2,520,000 302,400 $ 2,217,600
May 23, 2023 May 23, 2025 1,658,395 132,672 1,525,723
Total 4,178,395 435,072 3,743,323
1720

NOTE 15 – DERIVATIVE LIABILITY
The derivative liability is derived from the debt conversion option features in Note 14. They were valued using Monte Carlo simulation model using assumptions detailed below. As of June 30, 2023, the derivative liability was $1,456,641. The Company recorded $595,673 gain from changes in derivative liability during the six months ended June 30, 2023. In addition, the Company recorded $1,088,477 as excess of derivative expense at initial valuation due to the total debt discount cannot excess the face amount of the convertible note balance. The Monte Carlo simulation model with following assumptions:
SCHEDULE OF DERIVATIVE LIABILITY
Volatility 65% - 82.50 %
Risk-free rate 3.95% - 4.98 %
Stock price $0.42 - $0.94
Dividend Yield -
Expected life 4.79 – 5 years
Fair value of the derivative is summarized as below:
SCHEDULE OF FAIR VALUE OF THE DERIVATIVE

Derivative Liability

Balance at January 1, 2023 $
-

Additions 2,052,314
Change in fair value (595,673 )
Ending Balance, June 30, 2023 $ 1,456,641
NOTE 16 – WARRANT LIABILITY
The warrant liability is derived from warrants issued as debt warrants in Note 14, public warrants and placement warrants.
As of June 30, 2023, the total fair value of the warrant liability was $1,255,795.
The following table provides a reconciliation of the warrants measured at fair value using Level 1 inputs:
SCHEDULE OF RECONCILIATION OF THE WARRANTS MEASURED AT FAIR VALUE USING LEVEL 1 INPUTS
Public warrants
Balance at January 1, 2023 $ -
Additions -
Transfer from Level 2 603,750
Change in fair value (280,313 )
Ending Balance, June 30, 2023 $ 323,437
The Black-Scholes model with the following assumptions inputs:
SCHEDULE OF BLACK-SCHOLES MODEL ASSUMPTIONS INPUTS
Volatility 62.80% - 82.50 %
Risk-free rate 3.62% - 4.98 %
Stock price $0.42 - $0.94
Dividend Yield -
Expected life 4.79 – 5 years
The following table provides a reconciliation of the warrants measured at fair value using Level 2 inputs:
SCHEDULE OF RECONCILIATION OF THE WARRANTS MEASURED AT FAIR VALUE USING LEVEL 2 INPUTS
Public warrants Placement warrants Debt warrants
Balance at January 1, 2023 $ - - -
Additions 603,750 39,463 1,812,253
Transfer to Level 1 (603,750 ) - -
Change in fair value - (18,180 ) (901,178 )
Ending Balance, June 30, 2023 $ - 21,283 911,075
21
NOTE 17 — INCOME TAXES

United States

Aerwins Technologies Inc. is a holding company registered in the State of Delaware incorporated in June 2022. The U.S. federal income tax rate is ~~21%~~21%.

Japan

The Company conducts its major businesses in Japan and is subject to tax in this jurisdiction. During the three months periods ended ~~March 31,~~June 30, 2023 and 2022, all taxable income (loss) of the Company is generated in Japan. Income taxes in Japan applicable to the Company are imposed by the national, prefectural, and municipal governments, and in the aggregate resulted in an effective statutory rate of approximately ~~34.59%~~34.59% for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022.

For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, the Company’s income tax expenses are as follows:
SCHEDULE OF ~~COMPANY'S~~COMPANY' S INCOME TAX EXPENSES
2023 2022
For the Three months Ended
March 31,
2023 2022
Current $ - $ -
Deferred - -
Total $ - $ -
2023 2022
For the Six months Ended
June 30,
2023 2022
Current $ - $ -
Deferred - -
Total $ - $ -

A reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of operations to the Japanese statutory tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 is as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATES OF OPERATIONS TO THE JAPANESE STATUTORY TAX RATE
2023 2022 2023 2022
For the Three months Ended For the Six months Ended
March 31, June 30,
2023 2022 2023 2022
Japanese statutory tax rate 34.59 % 34.59 % 34.59 % 34.59 %
Change in valuation allowance (34.59 )% (34.59 )% (34.59 )% (34.59 )%
Effective tax rate (0.00 )% (0.00 )% (0.00 )% (0.00 )%
For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited)

The Company’s provision for income taxes for interim periods was determined using an estimate of its annual effective tax rate. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The Company recognized no income tax expense for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, ~~because the Company did not recognize profit in the~~ both ~~periods.~~of which were estimated corporate inhabitant taxes.
22

NOTE ~~15—~~18 — EQUITY METHOD

As of ~~March 31, 2023~~June 30, 2022 and ~~2022,~~2021, the Company holds a ~~48.81%~~48.81 ~~interest in~~% of ASC TECH Agent. Accordingly, the Company applies ~~the~~ equity method ~~of accounting~~ to its investment. For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 202 (unaudited), net income from ASC TECH ~~Agent~~agent is recognized as equity in earnings of investee of $~~6,176~~11,640, of loss and $~~20,773~~10,736 of profit in the consolidated statements of operations and comprehensive income (loss).
18

NOTE 1619 – SHAREHOLDERS’ DEFICIT

~~The Company is~~Aerwins was authorized to issue 400,000,000 shares of common ~~stock,~~shares, par value of $0.000001 per share, ~~(“Common Stock”),~~ and 20,000,000 ~~shares of undesignated preferred stock, par value of $0.000001~~ ~~per share. Before the Business Combination, the Company was authorized to issue~~ ~~200,000,000~~ ~~shares of common stock, par value of $0.0001~~ ~~per share, and~~ ~~20,000,000~~ shares of preferred shares, par value of $~~0.0001~~0.000001 per share.

Business combination with Pono Capital Corp

On February 3, 2023, the Company consummated the Merger with ~~Pono and issued an aggregate of~~ ~~51,986,565~~ ~~shares of its common stock to the former shareholders of AERWINS, Inc.~~Pono. On February 2, 2023, the Company entered into a Subscription Agreement with the ~~Purchasers and issued~~Purchasers. In total, the number of Public Shares increased by ~~5,000,000~~8,797,687 ~~shares of Common Stock in exchange for $5,000,000. As of January 25, 2023 shareholders~~at the closing of the ~~Company holding~~ ~~11,328,988~~ ~~shares of Common Stock elected to redeem such shares for an aggregate payment of approximately $118,954,374~~.Business Combination.

Shares issued to service providers

The Company agreed with service providers to pay the service fees by issuing common ~~stock warrants which can be transferred~~stocks subject to ~~882,394~~ ~~shares~~the closing of ~~common stock with fair value of $4,338,298~~ ~~in total.~~the business combination. After the closing of the Business Combination, the Company issued 413,103 shares of common stock ~~in response to the request to transfer the warrants to shares from the service providers.~~ ~~As some service fees were related to future services, $1,000,000~~ ~~were recognized as prepaid when the warrants were exercised.~~
~~The net number of the Company’s outstanding shares increased by~~ ~~9,210,790~~ for the three months ended March 31, 2023. The Company issued 5,269,291 shares to consultants who provide the Company with several services for the three months ended June 30, 2023. These share issuances are recognized as expense at the fair value of the shares at the issuance date. The total amount of fair value of shares issued for the six months ended June 30, 2023 was $6,258,298 and $2,600,000 is recognized as prepaid expenses.
The Company’s outstanding shares increased by 14,480,081 for the six months ended June 30, 2023, and recognized Common stock of $9 14and Additional Paid-in Capital of $~~2,304,054~~4,224,049. As of ~~March 31,~~June 30, 2023, there were ~~56,139,855~~ 61,409,146of common shares issued. The ~~number~~numbers of ~~shares of Common stock~~common stocks are retrospectively presented to reflect the legal capital of post-merger AERWINS.

NOTE 1720 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is calculated on the basis of weighted-average outstanding common shares. Diluted earnings (loss) per share is computed on the basis of basic weighted-average outstanding common shares adjusted for the dilutive effect of stock options. Dilutive common shares are determined by applying the treasury stock method to the assumed conversion of share repurchase liability to common shares related to the early exercised stock options.

The computation of basic and diluted earnings (loss) per share for the six months and three months ended ~~March 31,~~June 30, 2023 and 2022 is as follows:
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
2023 2022 2023 2022
For the Three months Ended For the Six months Ended

March 31,
(unaudited)

June 30,
(unaudited)

2023 2022 2023 2022
Earnings (loss) per share – basic
Numerator:
Net loss $ (7,801,544 ) $ (3,392,003 )
Net loss from continuing operations $ (18,376,366 ) $ (6,548,417 )
Net loss from discontinued operation (846,499 ) (679,519 )
Denominator:
Weighted average number of common shares outstanding used in calculating basic earnings (loss) per share 53,023,366 41,907,613 54,957,819 42,712,850
Denominator used for earnings (loss) per share
Loss per share (basic and diluted) $ (0.15 ) $ (0.08 )
Loss per share from continuing operations (basic and diluted) $ (0.33 ) $ (0.15 )
Loss per share from discontinued operation (basic and diluted) (0.02 ) (0.02 )
2023 2022
For the Three months Ended

June 30,
(unaudited)

2023 2022
Earnings (loss) per share – basic
Numerator:
Net loss from continuing operations $ (10,737,846 ) $ (3,369,816 )
Net loss from discontinued operation (683,474 ) (466,117 )
Denominator:
Weighted average number of common shares outstanding used in calculating basic earnings (loss) per share 56,871,014 43,509,237
Denominator used for earnings (loss) per share
Loss per share from continuing operations (basic and diluted) $ (0.19 ) $ (0.08 )
Loss per share from discontinued operation (basic and diluted) (0.01 ) (0.01 )
Basic loss per share equals diluted loss per share because the calculation of diluted loss per share would be anti-dilutive.
23

NOTE 1821 – STOCK-BASED COMPENSATION

On July 27, 2022, Aerwins issued stock options to certain directors of the Company which can be exercised for a total of 2,648,000 shares ~~(before the pre-merger basis)~~ of the Company’s common stock with an exercise price of $0.00015 per share and a vesting period shall commence on the first business day following the occurrence of going public (the “Trigger Date”), and thereafter (i) one third of the option shall vest on the three months anniversary of the Trigger Date, (ii) one third of the option shall vest on the fifteen month anniversary of the Trigger Date; and (iii) the remaining one third of the option shall vest on the twenty seven month anniversary of the Trigger Date. The remaining weighted average contractual life as of ~~March 31,~~June 30, 2023, is 9.33 years.
SCHEDULE OF STOCK BASED COMPENSATION
Grant date July 27, 2022 July 27, 2022
Number of shares at grant date 4,142,277 4,142,277
Outstanding at January 31, 2023 4,142,277 4,142,277
Forfeiture (2,969,049 ) (2,969,049 )
Outstanding at March 31, 2022 1,173,228
Outstanding at June 30, 2023 1,173,228
Exercise price $ 0.00015 $ 0.00015
Consideration paid to the Company at the grant date $ 132 $ 132

The number of shares is retrospectively presented to reflect the Business Combination with Pono.

The Company estimated the fair value of the stock-based compensation at $0.00005 using the Binomial Option Pricing Model with the following assumption inputs.
SCHEDULE OF FAIR VALUE OF THE STOCK BASED COMPENSATION
Exercise period 5 years
Share price on the issuance date $ 0.0001
Volatility 64.22 %
Expected dividend rate 0 %
Risk-free interest rate 2.88 %
19
NOTE 1922 – FAIR VALUE MEASUREMENT

The estimated fair value of the Company’s financial instrument at ~~March 31,~~June 30, 2023 and December 31, 2022 are set forth below. The following summary excludes cash and cash equivalents, accounts receivable, other receivable, short-term loans payable, accounts payable, accrued expenses, contract liability, current portion of long-term debts, current operating and finance lease liabilities and other current liabilities for which fair values approximate their carrying amounts.
SCHEDULE OF ESTIMATED FAIR VALUE OF THE FINANCIAL INSTRUMENT
Amount at Fair
Value Level 1 Level 2 Level 3 Amount at Fair Value Level 1 Level 2 Level 3
March 31, 2023
June 30, 2023
Liabilities
Public Warrants $ 517,500 $ 517,500 $ - $ - $ 323,437 $ 323,437 $ - $ -
Placement Warrants $ 39,462 $ - $ 39,462 $ - $ 21,283 $ - $ 21,283 $ -
Debt Warrants $ 911,075 $ - $ 911,075 $ -
Subtotal : Warrant liabilities $ 1,255,795 $ 323,437 $ 932,358 -
Derivative Liability $ 1,456,641 $ - $ 1,456,641 $ -
Liabilities fair value $ 1,456,641 $ - $ 1,456,641 $ -

The Public Warrants are classified as Level 1 in the fair value hierarchy because they valued using quoted market prices. The Placement Warrants, Debt Warrants, and Derivative Liability are classified as Level 2 in the fair value hierarchy. This classification is based on the availability of significant inputs used in the Black-Sholes model ~~including stock price, strike price~~ and ~~remaining term,~~Monte Carlo simulation, which are observable in the market.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from Level 2 to Level 1 during the period from January 1, 2023 due to the increase of observable market activity.
24
NOTE 23 – DISCONTINUED OPERATIONS
As at June 30, 2023, to facilitate cost reduction plan, the Company has made the strategic decision to discontinue drone solution service. The results of operations in relation to the Company’s Drone solution service have been classified by the Company as discontinued operations for the six months ended June 30, 2023 and 2022 and are shown below:
SCHEDULE OF DISCONTINUED OPERATIONS
2023 2022 2023 2022

For the six months ended
June 30,

For the three months ended
June 30,

2023 2022 2023 2022
(unaudited) (unaudited)
Revenues $ 925,205 $ 857,303 $ 83,334 $ 431,594
Cost of revenues 735,962 725,562 105,331 390,178
Gross profit 189,243 131,741 (21,997 ) 41,416

Operating expenses:
Selling expenses 4,099 5,904 684 900
General and administrative expenses 715,547 576,135 352,200 327,582
Research and development expenses 167,053 229,736 109,834 178,875
Total operating expenses 886,699 811,775 462,718 507,357

Loss from operations (697,456 ) (680,034 ) (484,715 ) (465,941 )

Other income (expenses):
Interest income (expenses), net (1,164 ) - (1,043 ) -
Gain (Loss) on disposal of fixed assets (9,761 ) (176 ) - (176 )
Impairment of fixed assets (229,600 ) - (205,684 ) -
Other income (expenses), net 91,482 691 7,968 -
Total other income (expenses) (149,043 ) 515 (198,759 ) (176 )

Loss before income tax provision $ (846,499 ) $ (679,519 ) $ (683,474 ) $ (466,117 )

NOTE ~~20 -~~24 – SUBSEQUENT EVENTS

~~On April 12,~~A.L.I. Technologies has not been able to pay some accounts payable by due date. As of August 10, 2023, the ~~Company entered into~~health insurance association seized our bank account in Japan for delinquent health insurance premiums. As a Securities Purchase Agreement (the “SPA”) with Lind Global Fund II LP, a Delaware limited partnership (the “Investor”). Pursuant to the SPA, the Company agreed to issue and sell to the Investor up to three promissory notes (the “Notes”) for a total investmentresult, 28,075 USD deposited in the ~~Company of up to $5,000,000, which Notes are convertible into shares of common stock of the Company (the “Common Stock”); and to issue to the Investor up to~~ ~~5,601,613~~ ~~warrants in the form as attached to the SPA (the “Warrants”) to acquire up to~~ ~~5,601,613~~ ~~additional shares of Common Stock, in each case subject to the terms and conditions of the SPA. The Notes and Warrants will be issued in three separate closings.~~bank account has been seized.
2025

ITEM 2. 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 1. Financial Statements and Supplementary Data” of this Quarterly Report on Form 10-Q. 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” in this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in our Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“Commission”) on March 31, 2023.

Overview

AERWINS Technologies Inc., a Delaware corporation (the “Company,” “we,” “us,” or “AERWINS”) together with its wholly owned subsidiary AERWINS, Inc., a Delaware corporation and its wholly owned subsidiary, A.L.I. Technologies Inc., a Japanese corporation (“ALI”) is the developer and manufacturer of air mobility platform, COSMOS (Centralized Operating System for Managing Open Sky), and the XTURISMO Limited Edition Hoverbike. All references in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. For additional information on the corporate history of our Company please see the section titled “Corporate History” on page 70 of our Annual Report.
Business Overview

We were incorporated in the State of Delaware on June 9, 2022. We conduct business activities principally through our 100%-owned subsidiary, A. L. I. Technologies Inc., a Japanese corporation (“A. L. I. Technologies”), which was established in Japan in September 2016 and was acquired by us in August, 2022.

We are developing our air mobility business with the aim of contributing to society as a global company that leads the air mobility society by providing infrastructure that enables anyone to use the airspace safely, securely, and conveniently through the constant challenge of new technologies and their implementation in society.

26
To realize this vision, we ~~are developing~~have developed the following business ~~areas:~~areas but we are focusing manned air mobility area for the future:

(1) manned air mobility area, which involves the sale and development of hoverbikes that can float at low altitude through difficult-to-move zones in times of disaster,

(2) unmanned air mobility domain, which provides solutions utilizing industrial drones (integrated provision of R&D, aircraft rental or sales, operators, operation management, and other software); and

(3) the computing power sharing domain, which provides services such as blockchain verification and AI.
21

Significant Market Opportunities

In today’s increasingly populated and interconnected world, traditional modes of urban transportation continue to create congestion and pollution, and dependent on land-based infrastructure. Transportation for the future requires a revolutionary solution.

The market opportunities based on our technologies are significant. According to an analysis by Frost & Sullivan, the autonomous vehicle services market is expected to grow from a mere $1.1 billion in 2019 to $202.5 billion in 2030 at a CAGR of 60.1%, facilitated by mutually beneficial business models across the entire mobility value chain. To capture the significant growth potential in the AAV market, we strive to continue to innovate and expand the boundaries for air-based mobility.

We have already completed our first manned flight test of the XTURISMO LTD EDITION prototype 1 which we tested in 2019. The current XTURISMO LTD EDITION made a debut to the public in October 2021 at Fuji Speedway Circuit in Japan. We will further develop the product to be resistant to wind of 6 meters per second and further to 8 meters per second to increase its safety features. In the future, we are also preparing to develop new models ranging from unmanned versions for logistical purposes to potentially hydrogen-based models. On the software side, we are currently further developing our traffic management system and developing a digital sky road infrastructure based on our existing air traffic control system.

Our air mobility enables urban mobility to expand into three-dimensional space. We believe our technology will change the future of transportation, improve lives, and create new industries. The XTURISMO LTD EDITION is a full spec version ranging from high quality carbon and equipped with intensive software capability which allows manual/autonomous/remote control driving experience. Each XTURISMO LTD EDITION is built to order, and accordingly, we begin production of each specific unit when a confirmed order is received by us. Due to the cost of the XTURISMO LTD EDITION, we have decided to limit the production of the XTURISMO LTD EDITION to 200 units. Most of the parts were created exclusively for the product with small unit orders resulting in the purchase price to be relatively expensive. The price of the current XTURISMO LTD EDITION is 77.7 million yen ($550,000 USD) per unit (including insurance and installation program) in Japan. We believe the price of the supply parts can be decreased if we are able to obtain further orders, and at such time we may be able to mass produce a less expensive model to facilitate safe, cost-effective, and easy-to-use air mobility solutions. Additionally, since the XTURISMO LTD EDITION is still in the development phase, the materials can change depending on the usage and unnecessary features can be omitted, both of which can reduce the price.

We design, develop, manufacture, market, and operate unmanned aircraft and their supporting systems and infrastructure for a wide range of industries and applications, including passenger transportation, logistics, and smart city management. For example, in a joint project with Yamanashi prefecture located in a mountainous region in Japan, we have conducted a logistics test for a hypothetical disaster situation using unmanned drones from three different manufacturers equipped with our proprietary air traffic control system (C.O.S.M.O.S.) to control these drones simultaneously. First, we designed and set up minimum flight routes for unmanned drones in C.O.S.M.O.S. that could be used during a disaster. These were then used as airways (equivalent to infrastructure as a smart city), and flights were made to deliver supplies needed in times of disaster by multiple vehicles flying simultaneously along the airways. Additionally, we have conducted similar tests with the Ministry of Land, Infrastructure, Transport and Tourism of Japan. We are also seeking to provide efficient services in the field of civil engineering, particularly for surveying and infrastructure inspections. We aim to use unmanned aircraft instead of the existing methods of surveying and visual inspection, which methods typically involve using Cessna aircraft or having workers perform such tasks in person. Furthermore, in the passenger sector, we develop, manufacture, sell, and operate XTURISMO LTD EDITION. We provide an integrated air mobility solution ranging from hardware to software.

Orders, Delivery and Financial Results

We are developing the following business areas:

(1) manned air mobility area, which involves the sale and development of hoverbikes that can float at low altitude through difficult-to-move zones in times of disaster, etc., and (b) industrial drone business, which involves the sale and development of industrial drones; and

(2) unmanned air mobility domain, which provides solutions utilizing industrial drones (integrated provision of R&D, aircraft rental or sales, operators, operation management, and other software); and

(3) the computing power sharing domain, which provides services such as blockchain verification and AI.

27
For the three months ended March 31, 2023 and 2022, we generated revenues of $1,265,883 and $2,038,656, respectively, and reported net loss of $7,801,544 and net loss of $3,392,003, respectively, and cash flows used in operating activities of $5,074,486 and $3,789,071, respectively. As noted in our consolidated financial statements, as of March 31, 2023, we had an accumulated deficit of $54,274,448.
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. Current estimated costs and charges to be incurred in connection with discontinuing of this portion of our drone service business are not material.
22

Key Factors that Affect Our Results of Operations

Our business is affected by many factors which we discuss under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Commission on March 31, 2023, and in subsequent filings. The following are a few of those key factors that may affect our financial condition and results of operations:

Our Purported Product Superiority.

Both hardware and software technologies are key factors intended to strengthen our competitive advantages. Regarding hardware, we developed air mobility CFRP material for XTURISMO which reduced the weight of the open propeller and its body. CFRP is also easy to process and corresponds to various designs and has strong resistance to dust and salt air. We also developed an original body and steering wheel which enables a driver to drive manually easier. The original hybrid engine has high power generation with low revolution and electric supply support to control the device system. Regarding software, the stability control of XTURISMO assists driving using sensor fusion surrounding the body and links with the cloud in real time through encrypted driving and control data communication. Also, C.O.S.M.O.S., the air traffic control platform connects with each hoverbike and provides flight and network management. These hardware and software solutions are all made in Japan.

Our Ability to Expand International Market

We are seeking to promote global expansion using partnerships, and our ability to succeed in this endeavor will affect our results of operations. Especially in the Gulf Cooperation Council, we have partners for creating the business in the area and will aim to raise funds which we believe will enable us to establish an office and R&D center in the area. We also expect that the area can be a distribution, manufacturing and marketing hub for the vehicles. After that or at the same time, we plan to expand sales channels to other regions, including the United States. Also, in order to facilitate such global expansion, we plan to acquire human resources in various countries ~~and we expect that by 2024, over 50% of our employees will be~~ outside of Japan.

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

We are aiming to establish a highly profitable structure for the mass production of hovercrafts by using a fabless model which focuses on design and supply chain control. We plan to select subcontractors and suppliers appropriately based on cost, quality, and delivery date, and we will seek to build an efficient production system. We also hope to sign a partnership agreement with a local government to implement hovercrafts in society. We aim to reduce the cost of developing advanced technologies and implementing our products in society by utilizing subsidies as part of such support.

A Severe or Prolonged Slowdown in the Global and Japan Economy Could Materially and Adversely Affect Our Business and Our Financial Condition

In recent years, the economic indicators in Japan have shown mixed signs, and future growth of the Japanese economy is subject to many factors beyond our control. The Japanese economy is gradually recovering due to the effects of various government policies which encourage the transition to the post-COVID society. However, it is necessary to note downside risks due to fluctuations in the financial markets, price increases, and supply-chain constraints as global monetary tightening is progressing. Any future deterioration of the Japanese or global economy may result in a decline in consumption that would have a negative impact on demand for our products and their prices.

23
Results of Operations

Comparison of Results of Operations for the ~~three~~six Months Ended ~~March 31,~~June 30, 2023, and 2022

The following table summarizes our operating results as reflected in our statements of income during the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

For the three Months ended March 31, For the six Months ended June 30,
2023 2022 Variance 2023 2022 Variance
Amount % of Amount % of Amount % of Amount % of Amount % of Amount % of
REVENUE $ 1,265,883 100.0 % $ 2,038,656 100.0 % $ (772,773 ) (37.9 )% $ 457,753 100.0 % $ 1,934,118 100.0 % $ (1,476,365 ) (76.3 )%
COST OF REVENUE 955,071 75.4 % 1,956,702 96.0 % (1,001,631 ) (51.2 )% 600,280 131.1 % 2,047,280 105.9 % (1,447,000 ) (70.7 )%
GROSS PROFIT 310,812 24.6 % 81,954 4.0 % 228,858 279.3 % (142,527 ) (31.1 )% (113,162 ) (5.9 )% (29,365 ) 25.9 %
Operating expenses

Selling expenses 40,382 3.2 % 7,906 0.4 % 32,476 410.8 % 63,525 13.9 % 59,526 3.1 % 3,999 6.7 %
General and administrative expenses 6,222,451 491.6 % 1,508,270 74.0 % 4,714,181 312.6 % 10,108,287 n.m. 2,722,078 140.7 % 7,386,209 271.3 %
Research and development expenses 2,090,219 165.1 % 2,325,999 114.1 % (235,780 ) (10.1 %) 6,795,396 n.m. 4,484,102 231.8 % 2,311,294 51.5 %
Total operating expenses 8,353,052 659.9 % 3,842,175 188.5 % 4,510,877 117.4 % 16,967,208 n.m. 7,265,706 375.7 % 9,701,502 133.5 %
Income (loss) from operations (8,042,240 ) (635.3 )% (3,760,221 ) (184.4 %) (4,282,019 ) 113.9 % (17,109,735 ) n.m. (7,378,868 ) (381.5 )% (9,730,867 ) 131.9 %
Other expenses 240,696 19.0 % 368,218 18.1 % (127,522 ) (34.6 %)
Other income (expenses) (1,266,631 ) (276.7 )% 830,451 42.9 % (2,097,082 ) (252.5 )%
Income (loss) before income tax provision (7,801,544 ) (616.3 )% (3,392,003 ) (166.4 )% (4,409,541 ) 130.0 % (18,376,366 ) n.m. (6,548,417 ) (338.6 )% (11,827,949 ) 180.6 %
Income taxes expense (benefit) - - - - - - - - - - - -
Net loss (7,801,544 ) (616.3 )% (3,392,003 ) (166.4 )% (4,409,541 ) 130.0 % (18,376,366 ) n.m. (6,548,417 ) (338.6 )% (11,827,949 ) 180.6 %
28

Revenue

Our total revenues decreased by ~~$772,773,~~$1,476,365, or ~~37,9%~~76.3% to ~~$1,265,883~~$457,753 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 from ~~$2,038,656~~$1,934,118 for the ~~three~~six months ended ~~March 31,~~June 30, 2022. The decrease in our revenues was ~~mainly~~ due to a decrease in sales from shared computing business.
Cost of Revenue

Our total costs of revenues decreased by ~~$1,001,631,~~$ 1,447,000, or ~~51.2%~~70.7%, to ~~$955,071~~$ 600,280 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 from ~~$1,956,702~~$2,047,280 for the ~~three~~six months ended ~~March31,~~June 30, 2022. The decrease in our costs was attributable to the decrease of sales described above.
Gross Profit

Our total gross ~~profit~~loss increased by ~~$228,858,~~$ 29,365 or ~~279.3%~~25.9%, to ~~$310,812 of profit~~$ 142,527 for the ~~three~~six months ended ~~March31,~~June 30, 2023 from ~~$81,954~~$113,162 for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

Operating Expenses

The following table sets forth the breakdown of our operating expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022:

For the three Months ended March 31,
2023 2022 Variance
Amount % of Amount % of Amount % of
REVENUE $ 1,265,883 100.0 % $ 2,038,656 100.0 % $ (772,773 ) (37.9 )%
Operating expenses

Selling expenses 40,382 3.2 % 7,906 0.4 % 32,476 410.8 %
General and administrative expenses 6,222,451 491.6 % 1,508,270 74.0 % 4,714,181 312.6 %
Research and development expenses 2,090,219 165.1 % 2,325,999 114.1 % (235,780 ) (10.1 )%
Total operating expenses 8,353,052 659.9 % 3,842,175 188.5 % 4,510,877 117.4 %
24
For the six Months ended June 30,
2023 2022 Variance
Amount % of Amount % of Amount % of
REVENUE $ 457,753 100.0 % $ 1,934,118 100.0 % $ (1,476,365 ) (76.3 )%
Operating expenses
Selling expenses 63,525 13.9 % 59,526 3.1 % 3,999 6.7 %
General and administrative expenses 10,108,287 n.m. 2,722,078 140.7 % 7,386,209 271.3 %
Research and development expenses 6,795,396 n.m. 4,484,102 231.8 % 2,311,294 51.5 %
Total operating expenses 16, 967,208 n.m. 7,265,706 375.7 % 9,701,502 133.5 %

General and Administrative Expenses

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

For the three Months ended March 31, For the six Months ended June 30,
2023 2022 Variance 2023 2022 Variance
Amount % of Amount % of Amount % of Amount % of Amount % of Amount % of
Salaries and welfare $ 930,136 14.9 % $ 746,540 49.5 % $ 183,596 24.6 % $ 1,233,994 12.2 % $ 1,125,100 41.3 % $ 108,894 9.7 %
Consulting and professional service fees 4,122,900 66.3 % 427,737 28.4 % 3,695,163 863.9 % 5,133,291 50.8 % 981,288 36.0 % 4,152,003 423.1 %
Depreciation expense 119,646 1.9 % 52,054 3.5 % 67,592 129.8 %
Share based payment 1,634,106 16.2 %
-

-
1,634,106 n.m.
Rent expense 39,777 0.6 % 38,807 2.6 % 970 2.5 % 81,593 0.8 % 72,926 2.7 % 8,667 11.9 %
Office, utility and other expenses 596,018 9.6 % 71,278 4.7 % 524,740 736.2 % 950,415 9.4 % 224,402 8.2 % 726,013 323.5. %
Travel and entertainment expense 242,616 3.9 % 69,187 4.6 % 173,429 250.7 % 271,563 2.7 % 128,228 4.7 % 143,335 111.8 %
Commission fees expenses 9,578 0.2 % 24,127 1.6 % (14,549 ) (60.3 )% 292,234 2.9 % 11,186 0.4 % 281,048 n.m.
Other expenses 161,781 2.6 % 78,540 5.2 % 83,241 106.0 % 511,092 5.1 % 178,948 6.6 % 332,144 185.6 %
Total general and administrative expenses 6,222,451 100 % 1,508,270 100 % 4,714,181 312.6 % 10,108,287 100 % 2,722,078 100 % 7,386,209 271.3 %
* Refers to the percentage of total general and administrative expenses.

Our general and administrative expenses increased by ~~$4,714,181~~$7,386,209 or ~~312.6%~~271.3%, to ~~$6,222,451~~$10,108,287 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 from ~~$1,508,270~~$2,722,078 for the ~~three~~six months ended ~~March 31,~~June 30, 2022, primarily attributable to Consulting and professional service fees relating to the business combination with Pono.
29

Research and development expenses

Our research and development expenses primarily consist of employee salaries and welfare, and outsourcing expenses.

For the three Months ended March 31, For the six Months ended June 30,
2023 2022 Variance 2023 2022 Variance
Research and Development Expenses Amount % of Amount % of Amount % of Amount % of Amount % of Amount % of
Raw materials $ 477,532 22.8 % $ 686,160 29.5 % $ (208,629 ) (30.4 )% $ 4,084,773 60.1 % $ 1,719,734 38.4 % $ 2,365,039 137.5 %
Labor expenses 429,848 20.6 % 505,198 21.7 % (75,350 ) (14.9 )% 580,173 8.5 % 497,556 11.1 % 82,617 16.6 %
Outsourcing expenses 1,148,784 55.0 % 1,008,242 43.3 % 140,542 13.9 % 1,864,889 27.4 % 1,919,725 42.8 % (54,836 ) (2.9 )%
Other expenses 34,056 1.6 % 126,399 5.4 % (92,343 ) (73.1 )% 265,560 3.9 % 347,086 7.7 % (81,526 ) (23.5 )%
Total research and development expenses 2,090,219 100 % 2,325,999 100 % (235,780 ) (10.1 )% 6,795,396 100 % 4,484,102 100 % 2,311,294 51.5 %

* Refers to the percentage of total research and development expenses.

Our research and development expenses ~~decreased~~increased by ~~$235,780,~~$ 2,311,294, or ~~10.1%~~51.5%, to ~~$2,090,219~~$ 6,795,396 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 from ~~$2,325,999~~$4,484,102 for the ~~three~~six months ended ~~March 31,~~June 30, 2022, primarily attributable to the ~~decrease~~increase in raw materials cost for development of XTURISMO.

~~As a percentage of revenues, research and development expenses were 165.1% and 114.1% of our revenue for the three months ended March 31, 2023 and 2022, respectively.~~
Other Income (Expenses), net

Our other income (expenses) primarily includes ~~gain or~~impairment loss ~~on disposal~~ of fixed ~~assets and financial related expenses.~~assets.

Total other income, net, decreased by ~~$127,522~~$2,097,082 or ~~34.6%~~252.5% from ~~$368,218~~$830,451 of income for the ~~three~~six months ended ~~March 31,~~June 30, 2022 to ~~$240,696~~$1,266,631 of ~~income~~expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2023.
Net Income (Loss) from Continuing Operations

As a result of the foregoing, we reported a net loss of ~~$7,801,544~~$18,376,366 for the ~~three~~six months ended ~~March 31,~~June 30, 2023 representing a ~~$4,409,541~~$11,827,949 or ~~130.0%~~180.6% increase from a net loss of ~~$3,392,003~~$6,548,417 for the ~~three~~six months ended ~~March 31,~~June 30, 2022. All net ~~income~~loss is attributable to AERWINS Technologies Inc.
Comparison of Results of Operations for the three Months Ended June 30, 2023, and 2022
The following table summarizes our operating results as reflected in our statements of income during the three months ended June 30, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
For the three Months ended June 30,
2023 2022 Variance
Amount % of Amount % of Amount % of
REVENUE $ 25,703 100.0 % $ 321,171 100.0 % $ (295,468 ) (92.0 )%
COST OF REVENUE 265,680 n.m. % 425,962 132.6 % (160,282 ) (37.6 )%
GROSS PROFIT (239,977 ) (933.7 )% (104,791 ) (32.6 )% (135,186 ) 129.0 %
Operating expenses
Selling expenses 26,492 103.1 % 56,624 17.6 % (30,132 ) (53.2 )%
General and administrative expenses 4,215,208 n.m. % 1,462,361 455.3 % 2,752,847 188.2 %
Research and development expenses 4,751,800 n.m. % 2,208,964 687.8 % 2,542,836 115.1 %
Total operating expenses 8,993,500 n.m. % 3,727,949 n.m. % 5,265,551 141.2 %
Income (loss) from operations (9,233,477 ) n.m. % (3,832,740 ) n.m. % (5,400,737 ) 140.9 %
Other expenses (1,504,369 ) n.m. % 462,924 144.1 % (1,967,293 ) (425.0 )%
Income (loss) before income tax provision (10,737,846 ) n.m. % (3,369,816 ) n.m. % (7,368,030 ) 218.6 %
Income taxes expense (benefit) - - - - - -
Net loss (10,737,846 ) n.m. % (3,369,816 ) n.m. % (7,368,030 ) 218.6 %
2530
Revenue
Our total revenues decreased by $295,468, or 92.0% to $25,703 for the three months ended June 30, 2023 from $321,171 for the three months ended June 30, 2022. The decrease in our revenues was mainly due to a decrease in sales from shared computing business.
Cost of Revenue
Our total costs of revenues decreased by $ 160,282, or 37.6%, to $ 265,680 for the three months ended June 30, 2023 from $425,962 the three months ended June 30, 2022. The decrease in our costs was attributable to the decrease of sales described above.
Gross Profit
Our total gross profit decreased by $ 135,186, or 129.0%, to $ 239,977 of loss for the three months ended June 30, 2023 from $ 104,791 of loss for the three months ended June 30, 2022.
Operating Expenses
The following table sets forth the breakdown of our operating expenses for the three months ended June 30, 2023 and 2022:
For the three Months ended June 30,
2023 2022 Variance
Amount % of Amount % of Amount % of
REVENUE $ 25,703 100.0 % $ 321,171 100.0 % $ (295,468 ) (92.0 )%
Operating expenses
Selling expenses 26,492 103.1 % 56,624 17.6 % (30,132 ) (53.2 )%
General and administrative expenses 4,215,208 n.m. % 1,462,361 455.3 % 2,752,847 188.2 %
Research and development expenses 4,751,800 n.m. % 2,208,964 687.8 % 2,542,836 115.1 %
Total operating expenses 8,993,500 n.m. % 3,727,949 n.m. % 5,265,551 141.2 %
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.
For the three Months ended June 30,
2023 2022 Variance
Amount % of Amount % of Amount % of
Salaries and welfare $ 474,063 11.2 % $ 500,006 34.2 % $ (25,943 ) (5.2 )%
Consulting and professional service fees 1,092,364 25.9 % 633,412 43.3 % 458,952 72.5 %
Share-based payment 1,634,106 38.8 % - 0.0 % 1,634,106 n.m. %
Rent expense 42,149 1.0 % 34,401 2.4 % 7,748 22.5 %
Office, utility and other expenses 382,171 9.1 % 160,139 11.0 % 222,032 138.6 %
Travel and entertainment expense 58,945 1.4 % 68,957 4.7 % (10,012 ) (14.5 )%
Commission fees expenses 283,409 6.7 % 4,808 0.3 % 278,601 n.m. %
Other expenses 248,000 5.9 % 60,638 4.1 % 187,362 309.0 %
Total general and administrative expenses 4,215,208 100 % 1,462,361 100 % 2,752,847 188.2 %
* Refers to the percentage of total general and administrative expenses.
Our general and administrative expenses increased by $2,752,847 or 188.2%, to $4,215,208 for the three months ended June 30, 2023 from $2,752,847 for the three months ended June 30, 2022, primarily attributable to Share-based payment and Consulting and professional service fees relating to the business combination with Pono.
31
Research and development expenses
Our research and development expenses primarily consist of employee salaries and welfare, and outsourcing expenses.
For the three Months ended June 30,
2023 2022 Variance
Research and Development Expenses Amount % of Amount % of Amount % of
Raw materials $ 3,364,570 70.8 % $ 850,311 38.5 % $ 2,514,259 295.6 %
Labor expenses 296,743 6.2 % 189,604 8.6 % 107,139 56.5 %
Outsourcing expenses 928,331 19.5 % 925,693 41.9 % 2,638 0.3 %
Other expenses 162,156 3.4 % 243,356 11.0 % (81,200 ) (33.4 )%
Total research and development expenses 4,751,800 100 % 2,208,964 100 % 2,542,836 115.1 %
* Refers to the percentage of total research and development expenses.
Our research and development expenses increased by $ 2,542,836, or 115.1%, to $ 4,751,800 for the three months ended June 30, 2023 from $ 2,208,964 for the three months ended June 30, 2022, primarily attributable to the increase in raw materials cost for development of XTURISMO.
Other Income (Expenses), net
Our other income (expenses) primarily includes impairment loss related to fixed asets.
Total other income, net, decreased by $1,967,293 or 425.0% from $462,924 of income for the three months ended June 30, 2022 to $1,504,369 of expenses for the three months ended June 30, 2023.
Net Income (Loss) from Continuing Operations
As a result of the foregoing, we reported a net loss of $10,737,846 for the three months ended June 30, 2023 representing a $7,368,030 or 218.6% increase from a net loss of $3,369,816 for the three months ended June 30, 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 discontinued providing drone photography services and joint research and development services previously provided within its unmanned air mobility business. The results of operations in relation to these services have been classified by the Company as discontinued operations for the six months ended June 30, 2023 and 2022 and are shown below:
For the six months ended June 30, For the three six months ended June 30,
2023 2022 2023 2022
Revenues $ 925,205 $ 857,303 $ 83,334 $ 431,594
Cost of revenues 735,962 725,562 105,331 390,178
Gross profit 189,243 131,741 (21,997 ) 41,416

Operating expenses:
Selling expenses 4,099 5,904 684 900
General and administrative expenses 715,547 576,135 352,200 327,582
Research and development expenses 167,053 229,736 109,834 178,875
Total operating expenses 886,699 811,775 462,718 507,357

Loss from operations (697,456 ) (680,034 ) (484,715 ) (465,941 )

Other income (expenses):
Interest income (expenses), net (1,164 ) - (1,043 ) -
Gain (Loss) on disposal of fixed assets (9,761 ) (176 ) - (176 )
Impairment of fixed assets (229,600 ) - (205,684 ) -
Other income (expenses), net 91,482 691 7,968 -
Total other income (expenses) (149,043 ) 515 (198,759 ) (176 )

Loss before income tax provision $ (846,499 ) $ (679,519 ) $ (683,474 ) $ (466,117 )
32

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2023, we had ~~$235,741~~$35,359 in cash as compared to $1,278,026 as of December 31, 2022. We also had ~~$795,934~~$159,278 in accounts receivable as of ~~March 31,~~June 30, 2023 as compared to $980,688 as of December 31, 2022. Our accounts receivable primarily include balances due from services provided and accepted by customers. As of ~~March 31,~~June 30, 2023, our working capital deficit was ~~$3,175,050.~~ $6,037,574.
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 revenues which resulted in our discontinuance as of June 30, 2023 of our drone photography services and joint research and development services previously provided within our unmanned air mobility business. 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 June 30, 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 the Selling Securityholder 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 3,921,129 shares of our Common Stock and expect to close on the sale of a third Convertible Note in the principal amount of $1,800,000 for a purchase price of $1,500,000 which includes a warrant to purchase 1,680,484 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 personnel costs, capital expenditures and the costs of operating as a public company. The ability to fund operations, to make planned capital expenditures, to execute on the development and manufacture of air mobility platform COSMOS and the XTURISMO Limited Edition Hoverbike and to repay or refinance indebtedness 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 quarter ended June 30, 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 $102,000 and Mr. Katano paid $210,424. Each of these amounts remain outstanding as of June 30, 2023.
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 period ended June 30, 2023, the Company has incurred net loss from continuing operations of $18,376,366 and accumulated deficit of $65,695,768. These factors raise substantial doubt on the Company’s ability to continue as a going concern.
Although the Company is attempting to commence operations and generate sufficient revenue, the Company’s cash position may not be 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 operations and 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. 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.
33
Certain Effects this Offering May Have on the Exercise of the Warrants
Sales of a substantial number of shares of our Common Stock in the public market by the Selling Securityholder 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 Total Resale Shares represent a substantial percentage of our total outstanding Common Stock as of the date of this prospectus. The Total Resale Shares being offered for resale in this prospectus represent [37.7]% of our current total outstanding Common Stock, assuming the sale of all of the Convertible Notes and exercises of all Warrants. Consequently, the sale of all securities being offered in this prospectus could result in a significant decline in the public trading price of our Common Stock.
In the event of the exercise of any of 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 $0.298 per share on July 20, 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 3,196,311 shares of common stock (the “Shares”) of AERWINS, Inc. which was immediately exchanged for 5,000,000 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 prospectus included in the Registration Statement (and any post-effective amendment thereto) and any prospectus 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.
34
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 the Selling Securityholder pursuant to which we agreed to issue to the Selling Securityholder up to three Convertible Notes in the aggregate principal amount of $6,000,000 for an aggregate purchase price of $5,000,000 and up to Warrants to purchase 5,601,613 shares of the Company’s Common Stock (the “Transaction”).
The closings of the Transaction (the “Closings and each a “Closing”) will occur 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 2,352,678 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 1,568,542 shares of common stock. So long as no Event of Default has occurred under the Convertible Note sold at the First Closing and the Second Closing, the Closing of the third Tranche (the “Third Closing), will consist of the issuance and sale to the Selling Securityholder of a Convertible Note with a purchase price of $1,500,000 and a principal amount of $1,800,000, and the issuance to the Selling Securityholder of a Warrant to acquire 1,680,484 shares of common stock and will occur upon the effectiveness of the Registration Statement that includes this prospectus. The Third Closing is subject to certain conditions precedent as set forth in the Purchase Agreement. 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.
The Convertible Note issued in the First Closing has a maturity date of April 12, 2025, the Convertible Note issued in the Second Closing has a maturity date of May 23, 2025 and the Convertible Note to be issued in the Third Closing will have a maturity date of two years from the date of issuance (the “Maturity Date”). Each Convertible Note has a conversion price equal to the lesser of: (i) US$0.90 (“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 or will be 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 $0.8926 per share and $0.7316 per share, respectively, subject to adjustments as set forth in the Warrant. The exercise price for each the Warrant issued at the Third Closing will be an amount equal to 100% of the 10-day VWAP prior to such closing. For further details regarding the Transaction, see “The Lind Global Financing.”

Cash Flows for the ~~Nine~~Six Months Ended ~~March 31,~~June 30, 2023 and 2022

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

For the three Months ended
March 31, For the Six Months ended
June 30,
2023 2022 2023 2022
Unaudited Unaudited
Net cash provided by (used in) operating activities $ (4,037,773 ) $ (3,789,071 ) $ (8,186,637 ) $ (8,330,984 )
Net cash provided by (used in) investing activities (45,559 ) (2,124 ) (56,943 ) 455,206
Net cash provided by (used in) financing activities 3,066,717 (97,867 ) 5,256,096 2,892,417
Net cash provided by (used in) discontinued operations
23,988

(751,723
)
Net increase (decrease) in cash and cash equivalents (1,016,615 ) (3,889,062 ) (2,963,496 ) (5,735,084 )
Effect of exchange rate changes (25,670 ) (354,401 ) 1,720,829 (813,365 )
Cash and cash equivalents, beginning of the year 1,278,026 10,020,459 1,278,026 10,020,459
Cash and cash equivalents, end of the year $ 235,741 $ 5,776,996 $ 35,359 $ 3,472,010
35

Operating Activities

Net cash used in operating activities was ~~$4,037,773~~$8,186,637 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, primarily consisting of the following:

● Net loss of ~~$7,801,544~~$19,222,865 for the ~~three~~six months ended ~~March 31,~~June 30, 2023.

● Share-based compensation of ~~$3,338,298.~~$3,658,298.

● ~~Depreciation expenses~~Impairment loss of ~~$98,541.~~$1,565,853.

● ~~An increase~~Decrease in ~~Inventory~~Other receivable of ~~$1,022,122.~~$1,215,560.
● ~~An increase~~Increase in ~~Other~~Accounts payable of ~~$1,092,114.~~$2,871,733.
Net cash used in operating activities was ~~$3,789,071~~$8,330,984 for the ~~three~~six months ended ~~March 31,~~June 30, 2022, primarily consisting of the following:

● Net loss of ~~$3,392,003~~$7,227,936 for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

● ~~Depreciation expenses~~Gain on sale of ~~$72,145.~~investment securities of $451,154.

● ~~An increase~~Increase in ~~accounts~~Other Receivable of $501,927
● Decrease in Accounts payable of ~~$699,512.~~$731,439.

Investing Activities

Net cash ~~provided by~~used in investing activities amounted to ~~$45,559~~$56,943 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, and included purchase of fixed assets of ~~$14,676~~$20,757 and purchase of intangible assets of ~~$30,883.~~$36,186.

Net cash ~~used in~~provided by investing activities amounted to ~~$2,124~~$455,206 for the ~~three~~six months ended ~~March 31,~~June 30, 2022, and included a purchase of fixed assets of ~~$19,313~~$22,407 and ~~repayment~~Proceeds from disposal of ~~loans receivable~~investments of ~~$17,189.~~$487,427.
Financing Activities

Net cash provided by financing activities amounted to ~~$3,066,717,~~$5,256,096, for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and primarily consisted of ~~proceeds~~Proceeds from ~~loans~~bond of ~~$2,263,446,~~$2,797,697 and Proceeds from reverse recapitalization of ~~1,595,831, and Repayments to loans of $771,375.~~$1,595,831.

Net cash provided by financing activities amounted to ~~$97,867~~$2,892,417 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and primarily consisted of ~~repayments to loans~~Proceeds from capital contribution of ~~$74,163.~~$3,082,473.
26
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.

As of ~~March 31,~~June 30, 2023, future minimum lease payments under the non-cancelable lease agreements are as follows:
��
Year ending December 31, Finance
lease Operating
lease Finance
lease Operating
lease
2023 105,026 258,924
2023 (six months) 64,834 93,987
2024 32,845 227,033 50,078 227,438
2025 11,191 99,106 10,283 155,979
2026 11,191 - 10,283 -
Thereafter 11,191 - 12,854 -
Total lease payments 171,444 585,063 148,332 477,404
Less: imputed interest (6,983 ) (6,751 ) (5,780 ) (4,991 )
Total lease liabilities 164,461 578,312 142,552 472,413
Less: current portion 101,856 254,541 85,025 228,175
Non-current lease liabilities $ 62,605 $ 323,771 $ 57,527 $ 244,238
36

Long Term Debt

The Company’s long-term debts included loans borrowed from banks and other financial institutions.

As of ~~March 31,~~June 30, 2023, future minimum loan payments are as follows:

Year ending December 31,
Loan
Payment

Loan
Payment

2023 119,805 183,029
2024 353,497 324,315
2025 2,233,003 2,049,191
2026 339,673 311,612
Thereafter 278,003 177,739
Total 3,323,981 3,045,886
Less interest 51,665 43,187
Balance as of March 31, 2023 $ 3,272,316
Balance as of June 30, 2023 $ 3,002,699
Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of ~~March 31,~~June 30, 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 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.
27
We believe critical accounting policies as disclosed in this prospectus 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.
37
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.
28

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:

Six months ended June 30,
(unaudited)

Year ended
December 31,

March 31, 2023 March 31, 2022 2023 2022 2022
Current JPY: US$1 exchange rate 132.75 121.44 144.47 135.69 131.81
Average JPY: US$1 exchange rate activities 132.44 116.36
Average JPY: US$1 exchange rate 134.91 123.10 131.46
38
Revenue Recognition

The Company recognizes revenue ~~under~~in accordance with ASC Topic 606, “Revenue from Contracts with ~~customers”~~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”) ~~and applicable local government levies.~~. The Consumption Tax on sales is calculated at ~~8% before October 1, 2020, and~~ 10% ~~afterwards~~ of gross sales.
~~The Company currently generates its revenue from the following main sources:~~

~~Revenue from Sales of Computing Equipment~~
~~Revenues from the sale of equipment are recognized at the point~~When another party is involved in ~~time when obligations under the terms of a contract with~~providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are ~~satisfied and~~the principal or an agent to the transaction. When we control ~~has been~~the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the ~~customer. For equipment placements that require us~~goods or services before they are transferred to ~~install the product at the~~our customer, ~~location,~~ revenue is ~~normally recognized when~~reported net of the ~~equipment has been delivered and installed at the customer location. Sales of customer installable products are recognized upon shipment or receipt by the customer according~~fees paid to the ~~customer’s shipping terms.~~other party, as agent.
~~Revenue from Computing Power Sharing services with Equipment Installation~~
The Company provides customers with computing power sharing services with equipment installation, which includes a one-time equipment installation and a certain period of time technology service. The Company recognizes revenue from one-time equipment installation at the point in time when the installation is completed and accepted by the customer. The Company recognizes revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly.
~~Revenue from Computing Power Sharing services without Equipment Installation~~
The Company also provides customers with computing power sharing services without equipment installation, which includes a one-time platform set up without equipment installation, and a certain period of time technology service. The Company recognizes revenue from one-time platform set up at the point in time when the platform is set up to function and accepted by the customer. The Company recognizes revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly.
~~Revenue from Air Mobility Drone Solution~~
The Company provides customers with air mobility drone solution, which includes UAS (Unmanned Aircraft Systems) main equipment, laser scanner, software package, camera system, etc. The solution includes a one-time system set up and a certain period of time technology service. The Company recognizes revenue from one-time system set up at the point in time when the system is set up to function and accepted by the customer. The Company recognizess revenue from technology service over time when the service is rendered and accepted by the customer, normally monthly.
29
~~Revenue from Project Management~~
The Company provides customers with project management, which includes project planning and implement, and providing needed technology human resources, such as construction engineers and software engineers for various projects. The Company recognizes revenue from project management over time when the service is rendered and accepted by the customer, normally monthly.
~~Revenue from Outsourcing Service~~
The Company provides customers with outsourcing service of temporary staffing for construction or technology industries. The Company recognizes revenue from outsourcing over time as the service is rendered.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended ~~March 31,~~June 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, 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.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended ~~March 31,~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

30
PART ~~II—OTHER~~II-OTHER INFORMATION

ITEM 1. 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, 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.

ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2022.
39

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
[None.]
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
Exhibit
No. Description

2.1† Agreement and Plan of Merger, dated September 7, 2022, by and among Pono Capital Corp., Pono Merger Sub, Inc. and AERWINS Technologies Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Pono Capital Corp. with the SEC on September 7, 2022).

2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated January 19, 2023, by and among the Pono Capital Corp., Mehana Equity LLC, as Purchaser Representative, AERWINS Inc. and Shuhei Komatsu, as Seller Representative (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Pono Capital Corp. with the SEC on January 19, 2023).

3.1 Fourth Amended and Restated Certificate of Incorporation of AERWINS Technologies Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

3.2 Amended and Restated Bylaws of AERWINS Technologies Inc. (incorporated by reference to Exhibit 3.2 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

4.1 Warrant Agreement, dated August 10, 2021, by and between Pono Capital Corp. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K, filed by Pono Capital Corp. on August 16, 2021).

4.2 Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1, filed by Pono Capital Corp. on July 8, 2021).

4.3 Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1, filed by Pono Capital Corp. on July 8, 2021).
4.4 Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1, filed by Pono Capital Corp. with the SEC on July 8, 2021).
3140
10.1+ Form of AERWINS Technologies Inc. 2022 Equity Incentive Plan (incorporated by reference to Annex C to the proxy statement/prospectus which is part of the Registration Statement on Form S-4 filed by Pono Capital Corp. with the SEC on January 4, 2023).

10.2 Form of Indemnity Agreement. (incorporated by reference to Exhibit 10.2 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.3 Form of Registration Rights Agreement by certain AERWINS equity holders (included as Exhibit E to Annex A to the proxy statement/prospectus which is part of the Registration Statement on Form S-4 filed by Pono Capital Corp. with the SEC on January 4, 2023).

10.4 Form of Lockup by certain AERWINS equity holders (included as Exhibit C to Annex A to the proxy statement/prospectus which is part of the Registration Statement on Form S-4 filed by Pono Capital Corp. with the SEC on January 4, 2023).

10.5 Letter Agreement, dated August 10, 2021, by and among Pono Capital Corp., its officers, directors, and Mehana Equity LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K, filed by Pono Capital Corp. on August 16, 2021).

10.6 Purchaser Support Agreement. (incorporated by reference to 10.4 to Form 8-K filed by Pono Capital Corp. with the SEC on September 7, 2022).

10.7 Voting Agreement. (incorporated by reference to Exhibit 10.5 to Form 8-K filed by Pono Capital Corp. with the SEC on September 7, 2022).

10.8+ Employment Agreement between AERWINS Technologies Inc. and Shuhei Komatsu, dated February 3, 2023. (incorporated by reference to Exhibit 10.8 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.9+ Employment Agreement between AERWINS Technologies Inc. and Taiji Ito, dated February 3, 2023. (incorporated by reference to Exhibit 10.9 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.10+ Employment Agreement between AERWINS Technologies Inc. and Kazuo Miura, dated February 3, 2023. (incorporated by reference to Exhibit 10.10 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.11+ Employment Agreement between AERWINS Technologies Inc. and Kensuke Okabe, dated February 3, 2023. (incorporated by reference to Exhibit 10.11 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.12 Form of Non-Competition and Non-Solicitation Agreement (included as Exhibit D to Annex A to the proxy statement/prospectus which is part of the Registration Statement on Form S-4 filed by Pono Capital Corp. with the SEC on January 4, 2023).

10.13+ Option Award Agreement between AERWINS Technologies Inc. and Shuhei Komatsu, dated February 3, 2023. (incorporated by reference to Exhibit 10.13 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.14+ Option Award Agreement between AERWINS Technologies Inc. and Taiji Ito, dated February 3, 2023. (incorporated by reference to Exhibit 10.14 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).
10.15+ Option Award Agreement between AERWINS Technologies Inc. and Kazuo Miura, dated February 3, 2023. (incorporated by reference to Exhibit 10.15 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).
10.16+ Option Award Agreement between AERWINS Technologies Inc. and Kensuke Okabe, dated February 3, 2023. (incorporated by reference to Exhibit 10.16 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).

10.17 Form of Subscription Agreement dated February 2, 2023. (incorporated by reference to Exhibit 10.1 to Form 8-K filed by AERWINS Technologies Inc. on February 3, 2023).

10.18 Standby Equity Purchase Agreement dated January 23, 2023 with YA II PN, Ltd. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed by Pono Capital Corp. on January 23, 2023).

10.19 Joint Venture Agreement between A.L.I. Technologies Inc. and Vault Investments LLC dated February 6, 2023. (incorporated by reference to Exhibit 10.1 to Form 8-K filed by AERWINS Technologies Inc. on February 9, 2023).
3241
10.20 Loan Agreement between A.L.I. Technologies Inc. and Shuhei Komatsu dated February 27, 2023. (incorporated by reference to Exhibit 10.1 to Form 8-K filed by AERWINS Technologies Inc. on March 2, 2023).

10.21 Memorandum of Understanding with Outsourcing Inc. dated March 17, 2023. (incorporated by reference to Exhibit 10.1 to Form 8-K filed by AERWINS Technologies Inc. on March 23, 2023).

10.22 Form of Securities Purchase Agreement dated April 12, 2023 (incorporated by reference to Exhibit 10.1 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.23 Form of Secured Convertible Promissory Note dated April 12, 2023 (incorporated by reference to Exhibit 10.2 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.24 Form of Warrant dated April 12, 2023 (incorporated by reference to Exhibit 10.3 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.25 Form of Security Agreement dated April 12, 2023 (incorporated by reference to Exhibit 10.4 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.26 Form of Subsidiary Guaranty for AERWINS, Inc. dated April 12, 2023 (incorporated by reference to Exhibit 10.5 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.27 Form of Pledge Agreement for AERWINS, Inc. dated April 12, 2023 (incorporated by reference to Exhibit 10.6 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.28 Form of Pledge Agreement for A.L.I. Technologies Inc. dated April 12, 2023 (incorporated by reference to Exhibit 10.7 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

10.29 Form of Guarantor Security Agreement with AERWINS, Inc. dated April 12, 2023 (incorporated by reference to Exhibit 10.8 to Form 8-K filed by AERWINS Technologies Inc. on April 13, 2023).

31.1* Rule 13a-14(a) Certification of Principal Executive Officer.

31.2* Rule 13a-14(a) Certification of Principal Financial Officer.

32.1* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Principal Executive Officer and Principal Financial Officer.

101.INS* Inline XBRL Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF* Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase

104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed or furnished herewith.
+ Management contract or compensatory plan or arrangement.
3342
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AERWINS TECHNOLOGIES INC.

Dated: ~~May 23,~~August 21, 2023 By: /s/ Taiji Ito
Name: Taiji Ito

~~Name:~~
Title:
~~Taiji Ito~~
Chief Executive Officer (Principal Executive Officer)

Dated: ~~May 23,~~August 21, 2023 By: /s/ Kensuke Okabe
Name: Kensuke Okabe

~~Name:~~
Title:
~~Kensuke Okabe~~
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

3443

	Depreciation Method	Useful Life
Building and building accessories	Straight-line method	8-38 years
Office equipment and furniture	Straight-line method	2-10 years
Software	Straight-line method	5 years
Design right	Straight-line method	7 years
Patent right	Straight-line method	8 years

		Percentage of Effective Ownership
Name of Subsidiary	Place of Organization	June 30, 2023			December 31, 2022
ASC TECH Agent	Japan		48.81	%		48.81	%

	●	Level 1: quoted prices in active markets for identical assets or liabilities;
	●	Level 2: inputs other than Level 1 that are observable, either directly or indirectly; or
	●	Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

	March 31, 2023 (unaudited)			December 31, 2022
Accounts receivable	$	803,309		$	980,688
Less: allowance for doubtful accounts		(7,375	)		-
Accounts receivable, net	$	795,934		$	980,688


	June 30,
	2023 (unaudited)			December 31, 2022
Accounts receivable	$	166,054		$	980,688
Less: allowance for doubtful accounts		(6,776	)		-
Accounts receivable, net	$	159,278		$	980,688

	2023		2022
	Six months ended
	June 30, (unaudited)
	2023		2022
Revenue from Computing Power Sharing services		101,453		836,059
Revenue from Project Management for Computing Share		6,300		1,098,059
Consulting Service		350,000		-
Total Revenue	$	457,753	$	1,934,118

	2023		2022
	Three months ended March 31,
	(unaudited)
	2023		2022
Revenue from Sales of Computing Equipment＆Drone	$	62,870	$	682,392
Revenue from Computing Power Sharing services		61,718		417,009
Revenue from Project Management for Computing Share		6,418		30,673
Revenue from Air Mobility Drone Solution		736,642		854,222
Revenue from Project Management		45,304		37,734
Other		352,931		16,626
Total Revenue	$	1,265,883	$	2,038,656

	2023		2022
	Three months ended
	June 30, (unaudited)
	2023		2022
Revenue from Computing Power Sharing services		25,703		274,823
Revenue from Project Management for Computing Share		-		46,348
Total Revenue	$	25,703	$	321,171


Type	Impairment loss
Building	$	199,601
Accessory equipment		146,334
Structures		37,975
Tools, furniture and fixtures		562,650
Operating Lease right-of-use assets		472,414
Software		71,095
Design right		54,370
Patent right		21,414
Total	$	1,565,853

Year ending December 31,	Finance lease			Operating lease				Finance lease			Operating lease
2023	$	105,026		$	258,924

2023 (six months)							$	64,834		$	93,987
2024		32,845			227,033			50,078			227,438
2025		11,191			99,106			10,283			155,979
2026		11,191			-			10,283			-
Thereafter		11,191			-			12,854			-
Total lease payments		171,444			585,063			148,332			477,404
Less: imputed interest		(6,983	)		(6,751	)		(5,780	)		(4,991	)
Total lease liabilities		164,461			578,312			142,552			472,413
Less: current portion		101,856			254,541			85,025			228,175

Non-current lease liabilities	$	62,605		$	323,771		$	57,527		$	244,238

Name of Lender	Original Amount Borrowed (JPY)		Loan Duration	Annual Interest Rate			Balance as of March 31, 2023 (unaudited)			Balance as of December 31, 2022			Original Amount Borrowed (JPY)		Loan Duration	Annual Interest Rate			Balance as of June 30, 2023 (unaudited)			Balance as of December 31, 2022
Mizuho Bank, Ltd.		40,000,000	1/22/2021— 1/22/2028		0.00	%		301,318			303,467			40,000,000	1/22/2021— 1/22/2028		0.00	%		276,874			303,467
Mizuho Bank, Ltd.		60,000,000	1/22/2021— 1/22/2028		0.00	%		451,977			455,201			60,000,000	1/22/2021— 1/22/2028		0.00	%		415,311			455,201
Mizuho Bank, Ltd.		50,000,000	1/22/2021— 1/22/2028		1.70	%		376,648			379,334			50,000,000	1/22/2021— 1/22/2028		1.70	%		346,093			379,334
Japan Finance Corporation		50,000,000	12/29/2020— 12/31/2027		1.11	%		259,134			279,190			50,000,000	12/29/2020— 12/31/2027		1.11	%		233,959			279,190
Japan Finance Corporation		250,000,000	12/29/2020— 1/31/2026		0.50	%		1,883,239			1,896,669			250,000,000	12/29/2020— 1/31/2026		0.50	%		1,730,462			1,896,669
Aggregate outstanding principal balances								3,272,316			3,313,861									3,002,699			3,313,861
Less: current portion								(101,333	)		(54,624	)								(166,332	)		(54,624	)
Non-current portion							$	3,170,983		$	3,259,237								$	2,836,367		$	3,259,237

Principal	$	4,200,000
Debt discount		(4,178,395	)
Interest expense		435,072
Net Carrying Balance at June 30, 2023	$	456,677

Start Date	End Date	Debt Discount At Debt Issuance		Amortization		Debt Discount As of June 30, 2023
April 12, 2023	April 12, 2025	$	2,520,000		302,400	$	2,217,600
May 23, 2023	May 23, 2025		1,658,395		132,672		1,525,723
Total			4,178,395		435,072		3,743,323

Volatility	65% - 82.50	%
Risk-free rate	3.95% - 4.98	%
Stock price	$0.42 - $0.94
Dividend Yield	-
Expected life	4.79 – 5 years

		Derivative Liability
Balance at January 1, 2023	$	-
Additions		2,052,314
Change in fair value		(595,673	)
Ending Balance, June 30, 2023	$	1,456,641

	Public warrants
Balance at January 1, 2023	$	-
Additions		-
Transfer from Level 2		603,750
Change in fair value		(280,313	)
Ending Balance, June 30, 2023	$	323,437

Volatility	62.80% - 82.50	%
Risk-free rate	3.62% - 4.98	%
Stock price	$0.42 - $0.94
Dividend Yield	-
Expected life	4.79 – 5 years

	Public warrants			Placement warrants			Debt warrants
Balance at January 1, 2023	$	-			-			-
Additions		603,750			39,463			1,812,253
Transfer to Level 1		(603,750	)		-			-
Change in fair value		-			(18,180	)		(901,178	)
Ending Balance, June 30, 2023	$	-			21,283			911,075

		2023		2022
		For the Three months Ended
		March 31,
		2023		2022
Current	$	-	$	-
Deferred		-		-
Total	$	-	$	-

	2023			2022
	For the Three months Ended
	June 30, *(unaudited)*
	2023			2022
Earnings (loss) per share – basic
Numerator:
Net loss from continuing operations	$	(10,737,846	)	$	(3,369,816	)
Net loss from discontinued operation		(683,474	)		(466,117	)
Denominator:
Weighted average number of common shares outstanding used in calculating basic earnings (loss) per share		56,871,014			43,509,237
Denominator used for earnings (loss) per share
Loss per share from continuing operations (basic and diluted)	$	(0.19	)	$	(0.08	)
Loss per share from discontinued operation (basic and diluted)		(0.01	)		(0.01	)

Grant date	July 27, 2022				July 27, 2022
Number of shares at grant date		4,142,277			4,142,277
Outstanding at January 31, 2023		4,142,277			4,142,277
Forfeiture		(2,969,049	)		(2,969,049	)
Outstanding at March 31, 2022		1,173,228
Outstanding at June 30, 2023					1,173,228
Exercise price	$	0.00015		$	0.00015
Consideration paid to the Company at the grant date	$	132		$	132

Exercise period		5 years
Share price on the issuance date	$	0.0001
Volatility		64.22	%
Expected dividend rate		0	%
Risk-free interest rate		2.88	%

	Amount at Fair Value		Level 1		Level 2		Level 3		Amount at Fair Value		Level 1		Level 2		Level 3
March 31, 2023
June 30, 2023
Liabilities
Public Warrants	$	517,500	$	517,500	$	-	$	-	$	323,437	$	323,437	$	-	$	-
Placement Warrants	$	39,462	$	-	$	39,462	$	-	$	21,283	$	-	$	21,283	$	-
Debt Warrants									$	911,075	$	-	$	911,075	$	-
Subtotal : Warrant liabilities									$	1,255,795	$	323,437	$	932,358		-
Derivative Liability									$	1,456,641	$	-	$	1,456,641	$	-
Liabilities fair value									$	1,456,641	$	-	$	1,456,641	$	-

	For the three Months ended March 31,																		For the six Months ended June 30,
	2023						2022						Variance						2023						2022						Variance
	Amount			% of			Amount			% of			Amount			% of			Amount			% of			Amount			% of			Amount			% of
REVENUE	$	1,265,883			100.0	%	$	2,038,656			100.0	%	$	(772,773	)		(37.9	)%	$	457,753			100.0	%	$	1,934,118			100.0	%	$	(1,476,365	)		(76.3	)%
COST OF REVENUE		955,071			75.4	%		1,956,702			96.0	%		(1,001,631	)		(51.2	)%		600,280			131.1	%		2,047,280			105.9	%		(1,447,000	)		(70.7	)%
GROSS PROFIT		310,812			24.6	%		81,954			4.0	%		228,858			279.3	%		(142,527	)		(31.1	)%		(113,162	)		(5.9	)%		(29,365	)		25.9	%
Operating expenses
Selling expenses		40,382			3.2	%		7,906			0.4	%		32,476			410.8	%		63,525			13.9	%		59,526			3.1	%		3,999			6.7	%
General and administrative expenses		6,222,451			491.6	%		1,508,270			74.0	%		4,714,181			312.6	%		10,108,287			n.m.			2,722,078			140.7	%		7,386,209			271.3	%
Research and development expenses		2,090,219			165.1	%		2,325,999			114.1	%		(235,780	)		(10.1	%)		6,795,396			n.m.			4,484,102			231.8	%		2,311,294			51.5	%
Total operating expenses		8,353,052			659.9	%		3,842,175			188.5	%		4,510,877			117.4	%		16,967,208			n.m.			7,265,706			375.7	%		9,701,502			133.5	%
Income (loss) from operations		(8,042,240	)		(635.3	)%		(3,760,221	)		(184.4	%)		(4,282,019	)		113.9	%		(17,109,735	)		n.m.			(7,378,868	)		(381.5	)%		(9,730,867	)		131.9	%
Other expenses		240,696			19.0	%		368,218			18.1	%		(127,522	)		(34.6	%)
Other income (expenses)																				(1,266,631	)		(276.7	)%		830,451			42.9	%		(2,097,082	)		(252.5	)%
Income (loss) before income tax provision		(7,801,544	)		(616.3	)%		(3,392,003	)		(166.4	)%		(4,409,541	)		130.0	%		(18,376,366	)		n.m.			(6,548,417	)		(338.6	)%		(11,827,949	)		180.6	%
Income taxes expense (benefit)		-			-			-			-			-			-			-			-			-			-			-			-
Net loss		(7,801,544	)		(616.3	)%		(3,392,003	)		(166.4	)%		(4,409,541	)		130.0	%		(18,376,366	)		n.m.			(6,548,417	)		(338.6	)%		(11,827,949	)		180.6	%

	For the three Months ended June 30,
	2023						2022						Variance
	Amount			% of			Amount			% of			Amount			% of
REVENUE	$	25,703			100.0	%	$	321,171			100.0	%	$	(295,468	)		(92.0	)%
COST OF REVENUE		265,680			n.m.	%		425,962			132.6	%		(160,282	)		(37.6	)%
GROSS PROFIT		(239,977	)		(933.7	)%		(104,791	)		(32.6	)%		(135,186	)		129.0	%
Operating expenses
Selling expenses		26,492			103.1	%		56,624			17.6	%		(30,132	)		(53.2	)%
General and administrative expenses		4,215,208			n.m.	%		1,462,361			455.3	%		2,752,847			188.2	%
Research and development expenses		4,751,800			n.m.	%		2,208,964			687.8	%		2,542,836			115.1	%
Total operating expenses		8,993,500			n.m.	%		3,727,949			n.m.	%		5,265,551			141.2	%
Income (loss) from operations		(9,233,477	)		n.m.	%		(3,832,740	)		n.m.	%		(5,400,737	)		140.9	%
Other expenses		(1,504,369	)		n.m.	%		462,924			144.1	%		(1,967,293	)		(425.0	)%
Income (loss) before income tax provision		(10,737,846	)		n.m.	%		(3,369,816	)		n.m.	%		(7,368,030	)		218.6	%
Income taxes expense (benefit)		-			-			-			-			-			-
Net loss		(10,737,846	)		n.m.	%		(3,369,816	)		n.m.	%		(7,368,030	)		218.6	%

	For the three Months ended June 30,
	2023					2022					Variance
Research and Development Expenses	Amount		% of			Amount		% of			Amount			% of
Raw materials	$	3,364,570		70.8	%	$	850,311		38.5	%	$	2,514,259			295.6	%
Labor expenses		296,743		6.2	%		189,604		8.6	%		107,139			56.5	%
Outsourcing expenses		928,331		19.5	%		925,693		41.9	%		2,638			0.3	%
Other expenses		162,156		3.4	%		243,356		11.0	%		(81,200	)		(33.4	)%
Total research and development expenses		4,751,800		100	%		2,208,964		100	%		2,542,836			115.1	%

	For the six months ended June 30,						For the three six months ended June 30,
	2023			2022			2023			2022
Revenues	$	925,205		$	857,303		$	83,334		$	431,594
Cost of revenues		735,962			725,562			105,331			390,178
Gross profit		189,243			131,741			(21,997	)		41,416

Operating expenses:
Selling expenses		4,099			5,904			684			900
General and administrative expenses		715,547			576,135			352,200			327,582
Research and development expenses		167,053			229,736			109,834			178,875
Total operating expenses		886,699			811,775			462,718			507,357

Loss from operations		(697,456	)		(680,034	)		(484,715	)		(465,941	)

Other income (expenses):
Interest income (expenses), net		(1,164	)		-			(1,043	)		-
Gain (Loss) on disposal of fixed assets		(9,761	)		(176	)		-			(176	)
Impairment of fixed assets		(229,600	)		-			(205,684	)		-
Other income (expenses), net		91,482			691			7,968			-
Total other income (expenses)		(149,043	)		515			(198,759	)		(176	)

Loss before income tax provision	$	(846,499	)	$	(679,519	)	$	(683,474	)	$	(466,117	)

	For the three Months ended March 31,						For the Six Months ended June 30,
	2023			2022			2023			2022
	Unaudited						Unaudited
Net cash provided by (used in) operating activities	$	(4,037,773	)	$	(3,789,071	)	$	(8,186,637	)	$	(8,330,984	)
Net cash provided by (used in) investing activities		(45,559	)		(2,124	)		(56,943	)		455,206
Net cash provided by (used in) financing activities		3,066,717			(97,867	)		5,256,096			2,892,417
Net cash provided by (used in) discontinued operations								23,988			(751,723	)
Net increase (decrease) in cash and cash equivalents		(1,016,615	)		(3,889,062	)		(2,963,496	)		(5,735,084	)
Effect of exchange rate changes		(25,670	)		(354,401	)		1,720,829			(813,365	)
Cash and cash equivalents, beginning of the year		1,278,026			10,020,459			1,278,026			10,020,459
Cash and cash equivalents, end of the year	$	235,741		$	5,776,996		$	35,359		$	3,472,010

Year ending December 31,	Finance lease			Operating lease			Finance lease			Operating lease
2023		105,026			258,924
2023 (six months)								64,834			93,987
2024		32,845			227,033			50,078			227,438
2025		11,191			99,106			10,283			155,979
2026		11,191			-			10,283			-
Thereafter		11,191			-			12,854			-
Total lease payments		171,444			585,063			148,332			477,404
Less: imputed interest		(6,983	)		(6,751	)		(5,780	)		(4,991	)
Total lease liabilities		164,461			578,312			142,552			472,413
Less: current portion		101,856			254,541			85,025			228,175
Non-current lease liabilities	$	62,605		$	323,771		$	57,527		$	244,238

Year ending December 31,	Loan Payment		Loan Payment
2023		119,805		183,029
2024		353,497		324,315
2025		2,233,003		2,049,191
2026		339,673		311,612
Thereafter		278,003		177,739
Total		3,323,981		3,045,886
Less interest		51,665		43,187
Balance as of March 31, 2023	$	3,272,316
Balance as of June 30, 2023			$	3,002,699