SBC Medical Group Holdings Inc (SBC)

CIK: 0001930313. SIC: 8011 Services-Offices & Clinics of Doctors of Medicine. Latest 10-K as of: 2026-03-27.

SIC breadcrumb: Services > SIC Major Group 80 > SIC 8011 Services-Offices & Clinics of Doctors of Medicine

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1930313. Latest filing source: 0001193125-26-127557.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001930313.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-14. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001930313.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-222737.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-14. Report date: 2026-03-31.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). The forward-looking statements contained herein are based on management’s judgment, assumptions made by management and information currently available to it. Actual results could differ materially from those discussed or implied in the forward-looking statements as a result of various factors, including those described elsewhere in this Quarterly Report and the Annual Report, particularly in “Part I, Item 1A. Risk Factors” of the Annual Report and the section entitled “Cautionary Note Regarding Forward-Looking Statements” herein.

Unless the context otherwise requires, any reference in this section of this Quarterly Report to the “Company,” “SBC,” “we,” “us” or “our” refers to Legacy SBC (defined below) and its consolidated subsidiaries and variable interest entity (“VIE”), prior to the consummation of the Business Combination and to SBC Medical Group Holdings Incorporated, together with its consolidated subsidiaries and VIE, following the Business Combination.

Overview

SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated), a Delaware corporation and subsidiary of the Company (“Legacy SBC”) is a management company headquartered in Irvine, California and Tokyo, Japan, that provides management services to cosmetic treatment centers mainly in Japan.

On September 17, 2024, Legacy SBC consummated its going-public business combination with Pono Capital Two, Inc. (“Business Combination”). In connection with the closing of the Business Combination, Pono Capital Two, Inc. changed its name to SBC Medical Group Holdings Incorporated and the Company’s common stock began trading on Nasdaq under the ticker symbol “SBC”.

The Company and its subsidiaries are primarily focused on providing comprehensive management services to franchisee clinics. These services include advertising and marketing across various platforms (such as social media networks), staff management (such as recruitment and training), booking and reservation services for franchisee clinic customers. We also support franchisee clinics through assistance with employee housing rentals and facility rentals, leasehold improvement services and design of clinics, medical equipment and medical consumables procurement (resale), the provision of cosmetic products to clinics for resale to clinic customers, licensure of the use of patent-pending and non-patented medical technologies, trademark and brand use, IT software solutions (including but not limited to remote medical consultations), management of the customer rewards program (customer loyalty point program), and payment tools.

Our wholly owned subsidiary, SBC Medical Group Co., Ltd., a Japanese corporation (“SBC Medical Sub”, or “SBC Japan”), is designated as a “medical service corporation”. In Japan, a medical service corporation is a legal entity that provides management services to “medical corporations”. The management services are conducted through franchisor-franchisee contracts and/or service contracts between SBC Medical Sub and the medical corporations (and, where applicable, other entities) that own domestic franchisee treatment centers in Japan. These treatment centers provide services including but are not limited to breast augmentation, liposuction, rejuvenation treatments (including treatment of wrinkles, acne, scars, cellulite, excess fat, discoloration, and signs of aging), laser skin toning and spot removal, eyes double fold surgery, rhinoplasty, treatment of osmidrosis and hyperhidrosis, hair transplants, gynecological formation treatments, laser hair removal, face line surgeries, cosmetic dental procedures, tattoo removal, lasik eye surgery, lateral canthoplasty, brow lift procedures, androgenetic alopecia treatment, and cheek sagging prevention methods. Separately, we also enter into franchise arrangements with certain independently operated clinics in Japan pursuant to our Partner Doctor Independence Support Program Agreements, which differ in certain respects from our arrangements with the medical corporations and/or general incorporated associations.

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Table of Contents

The Company’s subsidiaries have entered into franchisor-franchisee contracts and service contracts with seven medical corporations, consisting of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai, Medical Corporation Jukeikai, Medical Corporation Ritz Cosmetic Surgery and, effective as of June 2025, Medical Corporation Association Furinkai. In addition, the Company has entered into service contracts since September 2023 with Medical Corporation Association Furinkai and Medical Corporation Association Junikai; and in July 2025 with Medical Corporation Misakikai and General Incorporated Association Miotokai, following the acquisition of MB career lounge Co., Ltd. (collectively with the seven franchisee medical corporations, the “Medical Corporations and/or General Incorporated Associations” or “MCs”). All of the Medical Corporations and General Incorporated Associations are deemed to be related parties of the Company since relatives of the CEO of the Company are the members* of general meetings of members** of the Medical Corporations or General Incorporated Associations. The CEO of the Company was previously a member* of the six franchisee Medical Corporations until he ceased being a member* in July 2023. The Company, through SBC Medical Sub, owns equity interests*** of six franchisee medical corporations. Although the Company, through SBC Medical Sub, has an equity interest*** to the rights to receive a distribution of residual assets in proportion to the amount of contribution in certain circumstances as provided in the Japanese Medical Care Act and in the articles of incorporation (except Medical Corporation Association Furinkai, Medical Corporation Association Junikai, Medical Corporation Misakikai and General Incorporated Association Miotokai), the Company or SBC Medical Sub does not have voting control over the corporate actions at general meetings of members** of the Medical Corporations or General Incorporated Associations per the requirements of the Japanese Medical Care Act.

* “Members (or shain) of general meeting of members (or shain)” means one of the organs of a Japanese Medical Corporation, and element of general meeting of members (as explained below) of the Medical Corporation. Each member (or shain) of general meeting of members (or shain) has one voting right.

** “General meeting of members (or shain)” means one of the organs of a Japanese Medical Corporation, and the highest decision-making body of the Medical Corporation, of which the main duties include the election and dismissal of directors (or riji) and corporate auditors (or kanji) of the Medical Corporation, and the approval of financial statements and statutory business reports of the Medical Corporation.

*** “Equity interest (or mochibun)” means the right to receive distribution of the residual assets of a Japanese Medical Corporation in proportion to the amount of contribution (Article 10.3.3.2 brackets of the Supplementary Provision of the Japanese Medical Care Act.). However, the procedures for an equity interest (or mochibun) holder to exercise and realize the right to receive distribution of the residual assets of the Medical Corporation is more complicated than that of a stock corporation due to the restrictions under the Medical Care Act.

Financial Overview

For the three months ended March 31, 2026 and 2025, we generated revenues of $43,060,562 and $47,328,701, respectively, we reported net income attributable to SBC Medical Group Holdings Incorporated of $11,308,071 and $21,502,446, respectively, and cash flows provided by operating activities of $9,231,938 and $1,928,621, respectively. As of March 31, 2026, we had retained earnings of $251,756,691.

Our primary mission is to provide high-quality comprehensive management services to the MCs and expand our “Shonan Beauty Clinic” brand. We plan to achieve the mission by maintaining and strengthening our market position and brand in the cosmetic medical treatment management market in Japan, Vietnam and Singapore, and by growing our presence globally.

Further information regarding our business is provided in “Part I, Item 1. Business” of our Annual Report.

Results of Operations

Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025

Because we acquired control of Waqoo, Inc. ("Waqoo") on December 19, 2025 and consolidated the financial information of Waqoo and its subsidiary on a three-month reporting lag, Waqoo’s results of operations did not materially impact our consolidated results for the three months ended March 31, 2026.

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Table of Contents

The following table summarizes our operating income as reflected in our unaudited consolidated statements of operations and comprehensive income for the three months ended March 31, 2026 and 2025, and presents information regarding amounts and percentage changes during those periods.

For the Three Months

Ended March 31,

2026

2025

Variance

Amount

% of revenue

Amount

% of revenue

Amount

%

Revenues, net (including net revenues provided to related parties)

$

43,060,562

100.00

%

$

47,328,701

100.00

%

$

(4,268,139

)

(9.02

)%

Cost of revenues (including cost of revenues from related parties)

12,713,828

29.53

%

9,595,617

20.27

%

3,118,211

32.50

%

Gross profit

30,346,734

70.47

%

37,733,084

79.73

%

(7,386,350

)

(19.58

)%

Operating expenses (including selling, general and administrative expenses from related parties)

12,626,719

29.32

%

13,531,010

28.59

%

(904,291

)

(6.68

)%

Income from operations

17,720,015

41.15

%

24,202,074

51.14

%

(6,482,059

)

(26.78

)%

Other income

1,136,596

2.64

%

7,249,333

15.32

%

(6,112,737

)

(84.32

)%

Income before income taxes

18,856,611

43.79

%

31,451,407

66.45

%

(12,594,796

)

(40.05

)%

Income tax expense

7,527,591

17.48

%

9,959,457

21.04

%

(2,431,866

)

(24.42

)%

Net income

11,329,020

26.31

%

21,491,950

45.41

%

(10,162,930

)

(47.29

)%

Less: net income (loss) attributable to non-controlling interests

20,949

0.05

%

(10,496

)

(0.02

)%

31,445

(299.59

)%

Net income attributable to SBC Medical Group Holdings Incorporated

$

11,308,071

26.26

%

$

21,502,446

45.43

%

$

(10,194,375

)

(47.41

)%

Note: Percentages are calculated as a percentage of total revenue and may not sum due to rounding.

Revenues, Net

Revenues, net generated from different revenue streams consist of the following:

For the Three Months

Ended March 31,

Variance

2026

2025

Amount

%

Franchising revenue

$

9,091,740

$

15,719,282

$

(6,627,542

)

(42.16

)%

Procurement revenue

12,344,366

14,332,783

(1,988,417

)

(13.87

)%

Management services revenue

11,929,791

8,728,103

3,201,688

36.68

%

Rental services revenue

3,435,922

5,640,514

(2,204,592

)

(39.08

)%

Others

6,258,743

2,908,019

3,350,724

115.22

%

Total

$

43,060,562

$

47,328,701

$

(4,268,139

)

(9.02

)%

Revenues, net, decreased by 9.02% from $47,328,701 for the three months ended March 31, 2025 to $43,060,562 for the three months ended March 31, 2026.

Japanese Yen (“JPY”) depreciated against the U.S. dollar during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The average rate against the dollar was 156.9101 yen for the three m

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-27. Report date: 2025-12-31.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows for the periods presented below. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. The forward-looking statements contained herein are based on management’s judgment, assumptions made by management and information currently available to it. Actual results could differ materially from those discussed or implied in the forward-looking statements as a result of various factors, including those described below and elsewhere in this Annual Report, particularly in “Part I, Item 1A. Risk Factors” and the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Unless the context otherwise requires, any reference in this section of this Annual Report to the “Company,” “SBC,” “we,” “us” or “our” refers to Legacy SBC and its consolidated subsidiaries and variable interest entity (“VIE”), prior to the consummation of the Business Combination and to SBC Medical Group Holdings Incorporated, the Combined Entity and its consolidated subsidiaries and VIE following the Business Combination.

Overview

SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated), a Delaware corporation and subsidiary of the Company (“Legacy SBC”) is a management company headquartered in Irvine, California and Tokyo, Japan, that provides management services to cosmetic treatment centers mainly in Japan.

On September 17, 2024, Legacy SBC consummated its going-public business combination with Pono Capital Two, Inc. (“Business Combination”). In connection with the closing of the Business Combination, Pono Capital Two, Inc. changed its name to SBC Medical Group Holdings Incorporated and the Company’s common stock began trading on Nasdaq under the ticker symbol “SBC”.

The Company and its subsidiaries are primarily focused on providing comprehensive management services to franchisee clinics. These services include advertising and marketing across various platforms (such as social media networks), staff management (such as recruitment and training), booking and reservation services for franchisee clinic customers. We also support franchisee clinics through assistance with employee housing rentals and facility rentals, leasehold improvement services and design of clinics, medical equipment and medical consumables procurement (resale), the provision of cosmetic products to clinics for resale to clinic customers, licensure of the use of patent-pending and non-patented medical technologies, trademark and brand use, IT software solutions (including but not limited to remote medical consultations), management of the customer rewards program (customer loyalty point program), and payment tools.

Our wholly owned subsidiary, SBC Medical Group Co., Ltd., a Japanese corporation (“SBC Medical Sub”, or “SBC Japan”), is designated as a “medical service corporation”. In Japan, a medical service corporation is a legal entity that provides management services to “medical corporations”. The management services are conducted through franchisor-franchisee contracts and/or service contracts between SBC Medical Sub and the medical corporations (and, where applicable, other entities) that own domestic franchisee treatment centers in Japan. These treatment centers provide services including but are not limited to breast augmentation, liposuction, rejuvenation treatments (including treatment of wrinkles, acne, scars, cellulite, excess fat, discoloration, and signs of aging), laser skin toning and spot removal, eyes double fold surgery, rhinoplasty, treatment of osmidrosis and hyperhidrosis, hair transplants, gynecological formation treatments, laser hair removal, face line surgeries, cosmetic dental procedures, tattoo removal, lasik eye surgery, lateral canthoplasty, brow lift procedures, androgenetic alopecia treatment, and cheek sagging prevention methods. Separately, we also enter into franchise arrangements with certain independently operated clinics in Japan pursuant to our Partner Doctor Independence Support Program Agreements, which differ in certain respects from our arrangements with the medical corporations and/or general incorporated associations.

The Company’s subsidiaries have entered into franchisor-franchisee contracts and service contracts with seven medical corporations, consisting of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai, Medical Corporation Jukeikai, Medical Corporation Ritz Cosmetic Surgery and, effective as of June 2025, Medical Corporation Association Furinkai. In addition, the Company has entered into service contracts since September 2023 with Medical Corporation Association Furinkai and Medical Corporation Association Junikai; and in July 2025 with Medical Corporation Misakikai and General Incorporated Association Miotokai, following the acquisition of MB career lounge Co., Ltd. (collectively with the seven franchisee medical corporations, the “Medical Corporations and/or General Incorporated Associations” or “MCs”). All of the Medical Corporations and General Incorporated Associations are deemed to be related parties of the Company since relatives of the CEO of the Company are the members* of general meetings of members** of the Medical Corporations or General Incorporated Associations. The CEO of the Company was previously a member* of the six franchisee Medical Corporations until he ceased being a member* in July 2023. The Company, through SBC Medical Sub, owns equity interests*** of six franchisee medical corporations. Although the Company, through SBC Medical Sub, has an equity interest*** to the rights to receive a distribution of residual assets in proportion to the amount of contribution in certain circumstances as provided in the Japanese Medical Care Act and in the articles of incorporation (except Medical Corporation Association Furinkai, Medical Corporation Association Junikai, Medical Corporation Misakikai and General Incorporated Association Miotokai), the Company or SBC Medical Sub does not have voting control over the corporate actions at general meetings of members** of the Medical Corporations or General Incorporated Associations per the requirements of the Japanese Medical Care Act.

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* “Members (or shain) of general meeting of members (or shain)” means one of the organs of a Japanese Medical Corporation, and element of general meeting of members (as explained below) of the Medical Corporation. Each member (or shain) of general meeting of members (or shain) has one voting right.

** “General meeting of members (or shain)” means one of the organs of a Japanese Medical Corporation, and the highest decision-making body of the Medical Corporation, of which the main duties include the election and dismissal of directors (or riji) and corporate auditors (or kanji) of the Medical Corporation, and the approval of financial statements and statutory business reports of the Medical Corporation.

*** “Equity interest (or mochibun)” means the right to receive distribution of the residual assets of a Japanese Medical Corporation in proportion to the amount of contribution (Article 10.3.3.2 brackets of the Supplementary Provision of the Japanese Medical Care Act.). However, the procedures for an equity interest (or mochibun) holder to exercise and realize the right to receive distribution of the residual assets of the Medical Corporation is more complicated than that of a stock corporation due to the restrictions under the Medical Care Act.

Financial Overview

For the years ended December 31, 2025 and 2024, we generated revenues of $173,607,489 and $205,415,542, respectively, we reported net income attributable to SBC Medical Group Holdings Incorporated of $50,985,613 and $46,614,275, respectively, and cash flows provided by operating activities of $24,668,496 and $20,582,933, respectively. As of December 31, 2025, we had retained earnings of $240,448,620.

Our primary mission is to provide quality comprehensive management services to the MCs and expand our “Shonan Beauty Clinic” brand. We plan to achieve the mission by maintaining and strengthening our market position and brand in the cosmetic medical treatment management market in Japan, Vietnam and Singapore, and by growing our presence globally.

Further information regarding our business is provided in “Part I, Item 1. Business” of this Annual Report.

Results of Operations

Comparison of Results of Operations for the Years Ended December 31, 2025 and 2024

Because we acquired control of Waqoo, Inc. ("Waqoo") on December 19, 2025 and consolidated the financial information of Waqoo and its subsidiary on a three-month reporting lag, Waqoo’s results of operations did not impact our consolidated results for the year ended December 31, 2025.

The following table summarizes our operating income as reflected in our consolidated statements of operations and comprehensive income for the years ended December 31, 2025 and 2024, and presents information regarding amounts and percentage changes during those periods.

For the Years

Ended December 31,

2025

2024

Variance

Amount

% of revenue

Amount

% of revenue

Amount

%

Revenues, net (including net revenues provided to related parties)

$

173,607,489

100.00

%

$

205,415,542

100.00

%

$

(31,808,053

)

(15.48

)%

Cost of revenues (including cost of revenues from related parties)

46,323,767

26.68

%

49,365,035

24.03

%

(3,041,268

)

(6.16

)%

Gross profit

127,283,722

73.32

%

156,050,507

75.97

%

(28,766,785

)

(18.43

)%

Operating expenses (including selling, general and administrative expenses from related parties)

59,797,324

34.44

%

85,746,797

41.74

%

(25,949,473

)

(30.26

)%

Income from operations

67,486,398

38.87

%

70,303,710

34.23

%

(2,817,312

)

(4.01

)%

Other income (including other income from related party)

14,579,232

8.40

%

3,152,107

1.53

%

11,427,125

362.52

%

Income before income taxes

82,065,630

47.27

%

73,455,817

35.76

%

8,609,813

11.72

%

Income tax expense

31,020,607

17.87

%

26,765,925

13.03

%

4,254,682

15.90

%

Net income

51,045,023

29.40

%

46,689,892

22.73

%

4,355,131

9.33

%

Less: net income attributable to non-controlling interests

59,410

0.03

%

75,617

0.04

%

(16,207

)

(21.43

)%

Net income attributable to SBC Medical Group Holdings Incorporated

$

50,985,613

29.37

%

$

46,614,275

22.69

%

$

4,371,338

9.38

%

Note: Percentages are calculated as a percentage of total revenue and may not sum due to rounding.

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Table of Contents

Revenues, Net

Revenues, net generated from different revenue streams consist of the following:

For the Years

Ended December 31,

Variance

2025

2024

Amount

%

Franchising revenue

$

45,943,241

$

61,033,032

$

(15,089,791

)

(24.72

)%

Procurement revenue

56,053,171

54,814,399

1,238,772

2.26

%

Management services revenue

29,628,534

53,113,155

(23,484,621

)

(44.22

)%

Rental services revenue

23,032,651

16,141,714

6,890,937

42.69

%

Others

18,949,892

20,313,242

(1,363,350

)

(6.71

)%

Total

$

173,607,489

$

205,415,542

$

(31,808,053

)

(15.48

)%

Revenues, net, decreased by 15.48% from $205,415,542 for the year ended December 31, 2024 to $173,607,489 for the year ended December 31, 2025.

Japanese Yen (“JPY”) against the U.S. dollar appreciated during the year ended December 31, 2025, compared to the year ended December 31, 2024. The average rate against the dollar was 149.6233 yen for the year ended December 31, 2025 compared to 151.4405 yen for the year ended December 31, 2024. For the years ended December 31, 2025 and 2024, we generated net revenues of $173,607,489 (JPY25,976 million) and $205,415,542 (JPY31,108 million), respectively, we reported net income of $51,045,023 (JPY7,636 million) and $46,689,892 (JPY7,071 million), respectively. Overall, the favorable impacts of the period-to-period foreign exchange rate changes on net revenues and net income were $2,083,191 and $620,557, respectively, for the year ended December 31, 2025.

The main reasons for the variance of $31,808,053 in revenues, net per revenue stream are as follows:

Franchising Revenue

Franchising revenue for the year ended December 31, 2025 decreased to $45,943,241 by $15,089,791, or 24.72%, from $61,033,032 for the year ended December 31, 2024. This decrease was mainly due to the revision of the fee structure for determining service fees for each clinic of MCs based on the size, scale and performance of each clinic effective as of April 1, 2025, partially offset by the appreciation of JPY.

Procurement Revenue

The procurement revenue for the year ended December 31, 2025 increased to $56,053,171 by $1,238,772, or 2.26%, from $54,814,399 for the year ended December 31, 2024. This increase was mainly due to the appreciation of JPY.

Management Services Revenue

The management services revenue for the year ended December 31, 2025 decreased to $29,628,534 by $23,484,621, or 44.22%, from $53,113,155 for the year ended December 31, 2024. This decrease was mainly due to (i) the discontinuation of clinic operation staff supporting services that had been provided by Shobikai Sub to MCs since the third quarter of 2024, because the Company completed the merger of Shobikai Sub with and into Lange Sub and the related business license that was held by Shobikai Sub became invalid upon the completion of the merger in January 2025, (ii) the decrease in the revenue in connection with customer rewards program offered to customers of the franchisee clinics and (iii) the revision of the fee structure for determining service fees for each clinic of MCs based on the size, scale and performance of each clinic effective as of April 1, 2025, partially offset by revenues from MB career lounge Co., Ltd., which was acquired in July 2025 and by the appreciation of JPY.

Rental Services Revenue

The rental services revenue for the year ended December 31, 2025 increased to $23,032,651 by $6,890,937, or 42.69%, from $16,141,714 for the year ended December 31, 2024. This increase was mainly due to the opening of new clinics resulting in the increased demand for medical equipment from new clinics and replacing laser hair removal equipment from existing clinics as well as the appreciation of JPY.

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Others

The other revenues for the year ended December 31, 2025 decreased to $18,949,892 by $1,363,350, or 6.71%, from $20,313,242 for the year ended December 31, 2024. This decrease was mainly due to the disposal of its subsidiaries, SBC Kijimadaira Resort Inc. and Skynet Academy Co., Ltd., in December 2024, a decrease in PC equipment sales revenue as the MCs' clinics had updated their PC equipment during the year ended December 31, 2024 with no such demand during the year ended December 31, 2025. The decrease was partially offset by revenues from Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries, which were acquired in November 2024.

Cost of Revenues

Cost of revenues for the year ended December 31, 2025 was $46,323,767 compared to $49,365,035 for the year ended December 31, 2024. The decrease was mainly due to the Company’s effort of the cost reduction, as well as the discontinuation of clinic operation supporting services provided by Shobikai Sub to MCs since the third quarter of 2024, and the Company then terminated the employment of the related staff. As a result, cost of revenues decreased overall, despite a partial offset from higher purchase costs resulting from the demand for replacing laser hair removal equipment from the MCs.

Gross Profit

Gross profit for the year ended December 31, 2025 was $127,283,722 compared to $156,050,507 for the year ended December 31, 2024. The decrease in gross profit by $28,766,785 or 18.43% was mainly due to the decrease in franchising revenue and management services revenue with relatively high gross margin as a result of the factors described above.

Operating Expenses

Operating expenses for the years ended December 31, 2025 and 2024 were as follows:

For the Years

Ended December 31,

Variance

2025

2024

Amount

%

Salaries and welfare

$

26,472,154

$

26,843,524

$

(371,370

)

(1.38

)%

Depreciation and amortization expense

1,738,010

2,258,364

(520,354

)

(23.04

)%

Impairment loss

—

15,058,965

(15,058,965

)

(100.00

)%

Consulting and professional service fees

17,022,128

14,555,087

2,467,041

16.95

%

Advertising expense

3,122,660

2,782,944

339,716

12.21

%

Taxes and dues

938,699

596,122

342,577

57.47

%

Recruiting expense

703,213

1,570,299

(867,086

)

(55.22

)%

Lease expense

2,404,101

2,369,666

34,435

1.45

%

Office, utility and other expenses

7,396,359

6,689,134

707,225

10.57

%

Stock-based compensation

—

13,022,692

(13,022,692

)

(100.00

)%

Total

$

59,797,324

$

85,746,797

$

(25,949,473

)

(30.26

)%

The operating expenses decreased to $59,797,324 for the year ended December 31, 2025 by $25,949,473, or 30.26%, from $85,746,797 for the year ended December 31, 2024. The decrease was mainly due to the decrease in impairment loss on intangible asset and the decrease in stock-based compensation, partially offset by the increase in consulting and professional service fees.

An impairment loss was recognized for the year ended December 31, 2024 related to an intangible asset, patent use right. No such impairment loss was recognized for the year ended December 31, 2025.

Stock-based compensation was recognized as an expense for the year ended December 31, 2024 related to warrants issued to a service provider that supported SBC’s listing process. No such expense was recognized for the year ended December 31, 2025.

Consulting and professional service fees increased by $2,467,041, or 16.95%, to $17,022,128 for the year ended December 31, 2025 from $14,555,087 for the year ended December 31, 2024, mainly due to the increase in legal, tax, and market research expenses associated with ongoing public company compliance and related matters following the Company’s listing.

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Other Income (Expenses)

Other income (expenses) for the years ended December 31, 2025 and 2024, were as follows:

For the Years

Ended December 31,

Variance

2025

2024

Amount

%

Interest income

$

198,315

$

19,943

$

178,372

894.41

%

Interest expense

(160,583

)

(28,300

)

(132,283

)

467.43

%

Foreign currency exchange gain, net

2,002,789

895,711

1,107,078

123.60

%

Other income

5,113,637

3,914,297

1,199,340

30.64

%

Other expenses

(1,321,064

)

(5,463,153

)

4,142,089

(75.82

)%

Gain on redemption of life insurance policies

8,746,138

—

8,746,138

100.00

%

Gain on disposal of subsidiary

—

3,813,609

(3,813,609

)

(100.00

)%

Total

$

14,579,232

$

3,152,107

$

11,427,125

362.52

%

Other income (expenses), net was $14,579,232 for the year ended December 31, 2025 compared to $3,152,107 for the year ended December 31, 2024. The increase in other income (expense) by $11,427,125 or 362.52% was mainly due to a gain on redemption of life insurance policies of $8,746,138 in 2025, partially offset by the absence of the gain on disposal of subsidiary of $3,813,609 that was recognized in the year ended December 31, 2024. In addition, the other income was $5,113,637 for the year ended December 31, 2025, as compared to $3,914,297 for the year ended December 31, 2024. The increase was mainly due to a gain on the sale of land recognized in October 2025, which resulted from the closure of the clinic in Irvine, California, partially offset by the absence of a gain on the disposal of Cell Pro Japan Co., Ltd. recorded on January 1, 2024. The other expense was $1,321,064 for the year ended December 31, 2025, as compared to $5,463,153 for the year ended December 31, 2024. The decrease was mainly due to an unrealized loss recognized on the Company’s investment in a public entity with readily determinable fair value for the year ended December 31, 2024, while no similarly significant loss was recognized for the year ended December 31, 2025.

Income Tax Expense

Income tax expense for the year ended December 31, 2025 was $31,020,607 compared to $26,765,925 for the year ended December 31, 2024. The increase in income tax expense by $4,254,682 or 15.90% was mainly due to the increase of deferred tax expenses recognized and the appreciation of JPY.

The effective tax rate was 37.80% and 36.44% for the years ended December 31, 2025 and 2024, respectively. The increase of 1.36 percentage points was mainly due to the deemed contribution in connection with the price modification on disposal of an aircraft (a one-time item) to General Incorporated Association SBC, an entity controlled by the CEO of the Company, who is also the controlling shareholder of the Company, which was treated as a taxable gain under the Japanese tax law with no corresponding income being recognized for consolidation purposes.

Net Income

As a result of the foregoing, we reported a net income of $51,045,023 for the year ended December 31, 2025, representing an increase of $4,355,131 or 9.33% from $46,689,892 for the year ended December 31, 2024.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $59,410 for the year ended December 31, 2025, as compared to net income attributable to non-controlling interests of $75,617 for the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2025, the Company had $163,773,838 in cash and cash equivalents compared to $125,044,092 as of December 31, 2024. In addition, the Company had $29,899,751 in accounts receivable as of December 31, 2025 compared to $30,260,113 as of December 31, 2024. The Company’s accounts receivable includes balances due from customers for the services and goods provided by the Company and accepted by customers.

As of December 31, 2025, the Company’s working capital balance was $170,103,112. In assessing liquidity, management monitors and analyzes the Company’s cash and cash equivalents, ability to generate sufficient future earnings, and operating and capital investment commitments. The Company believes that its current cash and cash equivalents from operations and borrowings from banks will be sufficient to meet its working capital needs for the next 12 months from the date of issuance of the audited financial statements included in this Annual Report.

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To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of indebtedness, equity financings or a combination of these potential sources of funds. While we face uncertainties regarding the size and timing of our fundraising, which will be affected by general economic, financial, and other factors that may be beyond our control, we believe that we will be able to continue to meet our current business needs through the use of cash flows generated from operations and stockholder working capital, as needed.

The Company evaluates its capital allocation practices with the objective of enhancing stockholder value, while considering performance, the business environment, macroeconomic conditions and other relevant factors. The Company expects to deploy capital for investment opportunities that align with its growth strategy, selectively pursuing prospects in the expanding global medical aesthetics market. Additionally, the Company continues to evaluate alternative methods for deployment of capital, including in the form of dividends to stockholders and repurchases of shares of common stock. The actual timing, manner and value of any such options will depend on several factors, including the market price of our stock, general market and economic conditions, our liquidity requirements, applicable legal requirement and other business considerations.

Cash Flows for the Years Ended December 31, 2025 and 2024

The following table provides a summary of our cash flows for the periods indicated.

For the Years

Ended December 31,

Variance

2025

2024

Amount

%

Net cash provided by operating activities

$

24,668,496

$

20,582,933

$

4,085,563

19.85

%

Net cash used in investing activities

(20,971,552

)

(10,102,410

)

(10,869,142

)

107.59

%

Net cash provided by financing activities

38,292,183

22,965,400

15,326,783

66.74

%

Effect of exchange rate changes

(3,259,381

)

(11,424,763

)

8,165,382

(71.47

)%

Net change in cash and cash equivalents

38,729,746

22,021,160

16,708,586

75.88

%

Cash and cash equivalents as of the beginning of the year

125,044,092

103,022,932

22,021,160

21.38

%

Cash and cash equivalents as of the end of the year

$

163,773,838

$

125,044,092

$

38,729,746

30.97

%

Operating Activities

Net cash provided by operating activities was $24,668,496 for the year ended December 31, 2025, mainly derived from net income of $51,045,023 for the year, reconciled by a gain on redemption of life insurance policies of $8,746,138 and deferred income tax expense of $5,326,982, and net changes in operating assets and liabilities, which mainly included an increase in finance lease receivables – related parties of $12,746,857, a decrease in customer loans receivable of $15,821,375, a decrease in notes payable - related parties of $14,252,502, and a decrease in income tax payable of $11,662,531.

Net cash provided by operating activities was $20,582,933 for the year ended December 31, 2024, mainly derived from net income of $46,689,892 for the year, reconciled by stock-based compensation of $13,022,692, impairment loss on intangible asset of $15,058,965, a gain on disposal of subsidiary of $3,813,609, deferred income tax benefit of $14,417,087, and net changes in operating assets and liabilities, which mainly included an increase in income tax payable of $11,228,429, a decrease in customer loans receivable of $18,477,327, a decrease in accounts payable of $9,588,067, a decrease in notes payable – related parties of $34,756,754, a decrease in advances from customers - related parties of $9,144,031, and a decrease in accrued liabilities and other current liabilities of $12,096,825.

Investing Activities

During the year ended December 31, 2025, net cash used in investing activities of $20,971,552 was mainly the result of the equity method investments of $20 million, the cash paid for acquisition of subsidiaries, net of cash acquired of $22.9 million, offset by proceeds from redemption of life insurance policies of $17.7 million.

During the year ended December 31, 2024, net cash used in investing activities of $10,102,410 was mainly the result of payments made on behalf of related parties of $5.6 million, cash paid for acquisition of a subsidiary, net of cash received of $4.2 million, purchase of property and equipment of $2.6 million and purchase of convertible note of $1.7 million, partially offset by repayments from related parties of $6.6 million.

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Financing Activities

During the year ended December 31, 2025, net cash provided by financing activities of $38,292,183 was mainly due to the borrowings from bank and others of $34.8 million and the deemed contribution in connection with the price modification on disposal of property and equipment of $10.4 million, offset by repurchase of common stock of $5.0 million.

During the year ended December 31, 2024, net cash provided by financing activities of $22,965,400 was mainly due to the proceeds from reverse recapitalization, net of transaction costs of $11.7 million, borrowings from bank and others of $6.6 million and borrowings from related parties of $5.5 million.

Recent Developments

Announcement of Final Results of Tender Offer for Waqoo, Inc. Shares

On December 13, 2025, the Company announced the final results of the tender offer (the “Tender Offer”) conducted by SBC Medical Group Co., Ltd. (“SBC Japan”) for shares of the common stock of Waqoo, Inc. (“Waqoo”), a Japanese corporation listed on the Tokyo Stock Exchange Growth Market.

Below is a summary of the Tender Offer and the results:

•
Tender Offeror: SBC Medical Group Co., Ltd.

•
Target: Waqoo, Inc. (TSE Growth: 4937)

•
Securities Sought: Common stock of Waqoo

•
Offer Period: November 14, 2025 through December 12, 2025

•
Offer Price: ¥1,900 per share

•
Maximum Number of Shares to Be Purchased: 575,000 shares

•
Minimum Number of Shares to Be Purchased: None

•
Total number of shares tendered: 637,817 shares

•
Total number of shares purchased: 575,052 shares

•
Settlement Date: December 19, 2025

•
Settlement Agent: SBI SECURITIES Co., Ltd.

As the total number of tendered shares exceeded the maximum planned purchase volume of 575,000 shares, the Tender Offeror purchased shares on a pro rata basis in accordance with Japanese tender offer regulations. As a result, a total of 575,052 shares were purchased, and the remaining shares in excess of such allocation were not purchased, on December 19, 2025.

In addition, the Company's CEO, also the largest shareholder of Waqoo, transferred all of his remaining shares to SBC Japan through an off-market transaction outside of the Tender Offer, also effective as of December 19, 2025. As a result of these transactions, along with the previously held equity interest in Waqoo, SBC Japan’s ownership ratio of the voting rights of Waqoo exceeded 50% as of the settlement date.

Additional Share Repurchase Program

On December 29, 2025, the Company’s board of directors authorized an additional share repurchase program with an aggregate purchase limit of up to USD 20 million. On December 30, 2025, the Company’s registration statement on Form S-3 was declared effective by the SEC. On December 31, 2025, the Company issued a press release announcing the authorization of the program. The program is effective from December 31, 2025 through December 31, 2026, and may be modified, suspended or discontinued at any time in the Company’s discretion. The program is intended to enable the Company to conduct flexible repurchases of its common stock in the future, and the Company anticipates utilizing surplus cash and future free cash flow to fund repurchases.

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Strategic Equity Investment in OrangeTwist (through OT Midco)

On December 29, 2025, we completed a strategic minority equity investment in OT Midco Holdings, LLC (“OT Midco”), through which we hold an indirect minority interest in Orange Twist, LLC and its subsidiaries (collectively, “OrangeTwist”), acquiring an approximately 18.2% voting interest for total cash consideration of $20 million (the “Transaction”). In addition, we committed to subscribe for and purchase additional common units in December 2026 for an aggregate purchase price of $5.0 million. In connection with the Transaction, we and OrangeTwist agreed to cooperate in good faith to negotiate a future collaboration agreement to explore potential commercial arrangements on a non-binding basis and entered into a side letter containing non-competition covenants, subject to specified terms and conditions.

Failures of Oversight of Related Party Transactions and Executive Compensation

In connection with management’s assessment of internal control over financial reporting for the fiscal year ended December 31, 2025, we identified deficiencies in our governance and approval processes relating to the oversight of related party transactions and executive compensation matters.

Specifically, (i) compensation paid by our subsidiary, SBC Medical Group Co., Ltd., to the mother of our Chief Executive Officer, who serves as an officer of that subsidiary, was not timely identified as a related party transaction for our Audit Committee review and approval purposes, and (ii) a bonus paid to our Chief Financial Officer was not formally approved through the Compensation Committee process on a timely basis.

These deficiencies were considered in management’s evaluation of internal control over financial reporting as of December 31, 2025 and were indicative of the continuing material weaknesses described in Part II, Item 9A, “Controls and Procedures.” These matters related to deficiencies in governance and approval processes and did not involve the misappropriation of company assets.

In March 2026, the Audit Committee and Compensation Committee reviewed and ratified these arrangements. Management concluded that the underlying payments were for valid business purposes and have been appropriately recorded as expenses in the Company's consolidated financial statements for the year ended December 31, 2025.

Contractual Obligations

Lease Agreements

The Company holds a significant number of leases classified as operating leases for offices and sublease purposes, and finance leases for certain medical and office equipment.

As of December 31, 2025, the future maturity of lease liabilities is as follows:

Years ending December 31,

Finance Lease

Operating Lease

2026

$

133,483

$

4,376,464

2027

77,228

2,389,691

2028

44,084

1,592,536

2029

7,387

240,370

2030

—

55,003

Thereafter

—

—

Total undiscounted lease payments

262,182

8,654,064

Less: imputed interest

(12,709

)

(100,847

)

Total lease liabilities

$

249,473

$

8,553,217

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Bank and Other Borrowings

The Company borrowed loans from various banks and other financial institutions for working capital, security investments, and mergers and acquisitions purpose.

As of December 31, 2025, future minimum borrowing payments are as follows:

Years ending December 31,

Principal

Repayment

2026

$

9,099,046

2027

13,954,055

2028

7,437,818

2029

6,906,623

2030

5,435,942

Thereafter

—

Total

$

42,833,484

Off-Balance Sheet Arrangements (Off-Balance Sheet Transactions)

There are no off-balance sheet arrangements as of December 31, 2025 and 2024.

Foreign Exchange Rate Risk

We are exposed to foreign currency exchange rate fluctuations because our business is primarily conducted in Japan and most of our revenues and costs are denominated in Japanese yen, whereas our reporting currency is U.S. dollar. The weakening of the Japanese yen against the U.S. dollar would have a negative impact on our financial results and vice versa.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. We believe that critical accounting policies as disclosed in this Annual Report reflect the more significant judgements and estimates used in preparation of our consolidated financial statements.

The following descriptions of critical accounting policies and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this Annual Report. When reviewing our consolidated financial statements, you should consider our selection of critical accounting policies, the judgments and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions.

Business Combinations and Asset Acquisitions

Business combinations are recorded using the acquisition method of accounting. The purchase price of the acquisition is allocated to the tangible assets, liabilities, identifiable intangible assets acquired and non-controlling interest, if any, based on their estimated fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses are expensed as incurred. Consideration transferred in a business acquisition is measured at the fair value as of the date of acquisition. Transaction costs directly attributable to the acquisition are expensed as incurred.

If investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalized transaction costs, and does not result in the recognition of goodwill. The cost of the acquisition is allocated to the assets acquired on the basis of relative fair values.

Fair value is determined based upon the guidance of ASC Topic 820, Fair Value Measurements and Disclosures, and generally are determined using Level 2 inputs and Level 3 inputs. The determination of fair value involves the use of significant judgment and estimates. The Company utilizes the assistance of a third-party appraiser to determine the fair value as of the date of an acquisition.

In a business combination or asset acquisition, the Company may recognize identifiable intangibles that meet either or both the contractual legal criterion or the separability criterion.

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The Company, with the assistance of a third-party valuation specialist, determined the fair value of the intangible assets identified in conjunction with the acquisition of Waqoo was estimated using 1) income approach with the multi-period excess earnings method, which requires management to make significant estimates and assumptions related to forecasted revenues and cash flows and the discount rates. We believe the accounting estimate for valuation of intangible assets and goodwill in connection with the business combination of Waqoo is a critical accounting estimate because our estimates of the fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.

Revenue Recognition

The Company recognizes revenue from franchising services, procurement services, management services and other services under 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, net of consumption tax and applicable local government levies, if any. The consumption tax on sales is calculated at 10% of gross sales. The Company does not have significant remaining unfulfilled performance obligations or contract balances.

The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. The determination of whether the Company acts as a principal or an agent in a transaction is based on the evaluation of whether (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If the terms of a transaction do not indicate the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

The Company recognizes revenue from rental services under ASC Topic 842, “Leases”.

The Company currently generates its revenue from the following main sources:

Franchising Revenue

The Company generates franchising revenue by licensing its intellectual properties, including but not limited to the Company’s brand name (“Shonan Beauty Clinic”), trade name, patents, and trademarks, and by providing consulting services to enhance the value of “Shonan Beauty Clinic” brand, as a franchisor pursuant to franchise agreements with the medical corporations (the “MCs”) in Japan. Prior to April 2025, revenue was based on a fixed amount to each MC and a fixed amount to each clinic of the MCs; starting from April 2025, the clinic-level monthly fee is determined based on the facility type, operational tenure, and operational performance of each clinic of the MCs, rather than a uniform flat fee for all clinics. The revenue is recognized over time as services are rendered.

Procurement Revenue

The Company generates procurement services revenue by purchasing primarily advertising services and medical materials from qualified vendors on behalf of MCs to maintain brand quality consistency. Procurement services revenue is recognized at the point in time upon the delivery of products or over time as services are performed. Occasionally, the Company receives vendor discounts on certain large purchases. It recognizes revenue based on actual payments. Prior to June 2025, any over-collection resulting from such discounts was returned to MCs; since June 2025, it is retained for future transactions.

Management Services Revenue

The Company provides loyalty program management services, labor supporting services, function supporting services and management consulting services to MCs.

•
Loyalty program management services

The Company awards loyalty points on behalf of MCs to MCs’ customers, who earn loyalty points from each qualified purchase made at the loyalty program participating clinics of MCs, in exchange for a handling fee. The revenue is based on a percentage of the related payment amount made by MCs’ customers and is recognized when the loyalty points are awarded.

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At the time loyalty points are awarded, a MC pays the Company cash in an amount equivalent to the awarded loyalty points, which is recorded as advances from customers. When a MC’s customers redeem the loyalty points, the Company returns the cash back to the MC in an amount equivalent to the redeemed loyalty points. The awarded loyalty points expire if a MC’s customer does not make any additional qualified purchase at a participating clinic within a year. The Company accumulates and tracks the points on behalf of MCs until the loyalty points expire at which time the Company recognizes an amount equivalent to the expired loyalty points as revenue.

The Company also awards certain points to MCs’ customers on behalf of MCs for free in order to increase the volume of MC’s sales, from which the Company earns other types of revenues, such as royalty income. When a MC’s customers redeem such points, the Company reimburses MC in an amount equivalent to the used free points. The redemption of such points is recorded as a reduction of the revenue recognized.

The Company is an agent in the management of loyalty programs, and as a result, revenues are recognized net of the cost of redemptions.

•
Labor supporting services

The Company generates revenue by dispatching staff to MCs to provide a range of services, primarily including IT, and administrative services. The Company recognizes the revenue over the time when services are rendered. Starting from April 2025, the monthly fee for each clinic is determined using the same key criteria described above under “Franchising Revenue.”

•
Function supporting services

The revenue is derived from providing functional supporting services to MCs, such as accounting and human resources services. The Company recognizes revenue based on a monthly service fee over the time when services are rendered. Starting from April 2025, the monthly fee for each clinic is determined using the same key criteria described above under “Franchising Revenue.”

•
Management consulting services

The Company generates revenue by providing consulting services to MCs in relation to business operations of cosmetic dermatology. The Company recognizes the revenue over the time when services are rendered.

Rental Services Revenue

The Company generates rental income from operating leases and sales-type leases, which is accounted for under ASC Topic 842. Operating lease revenue is generally recognized on straight-line basis over the terms of the lease agreements and sales-type leases revenue is generally recognized on the lease commitment date.

Other Revenues

The Company generates other miscellaneous revenues such as beauty and health services revenue, leasehold improvement services revenue, real estate brokerage services revenue, interest income, etc. These revenues are recognized when the Company satisfies performance obligations.

Long-term Investments in MCs — Related Parties

Long-term investments in MCs — related parties represent the payments to obtain equity interests of the MCs in Japan, made by the Company through SBC Japan, a company designated as a MSC in Japan. In accordance with the Japanese Medical Care Act and articles of incorporation of the MCs, which are non-profit organizations, the equity interest holders of MCs are prohibited from receiving any profit distribution from MCs but have the right to receive distribution of the residual assets of the MCs in proportion to the amount of their contribution. As of the balance sheet dates, the investments represent probable future benefit to be realized at the time of dissolution of MCs or the equity interests being sold. The payments made for such investments are classified as investing activities in the consolidated statements of cash flows. The MCs are considered related parties as the relatives of the Chief Executive Officer (“CEO”) of the Company being the Members of the MCs.

The investments in MCs — related parties are accounted for using a measurement alternative, under which the investments are measured at cost, less impairment, and adjusted for observable price changes. The Company reviews the investments in MCs for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, especially the investments in Medical Corporation Jukeikai (“MC Jukeikai”) and Medical Corporation Ritz Cosmetic Surgery (“MC Ritz”), which represent the vast majority of the Company’s investments in MCs balance.

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Impairment Consideration of Investments in MC Jukeikai and MC Ritz

Although these two MCs are non-profit entities, their principal operations are providing health care services and they derive primary source of their revenue from the sale of goods and services, rather than the fund contributions.

No indicator of impairment was noticed based on the Company’s qualitative assessment of impairment. As the Company provides comprehensive management services to these two MCs, including accounting and bookkeeping services, the Company has access to MCs’ financial information. In addition to the external market conditions and trends within the MCs’ industry, the Company considered the MCs’ operating performance, such as sales, increase in sales, and net income (loss) when performing its qualitative assessment. As of December 31, 2025, the carrying value of the investments in the two MCs was higher than their net assets, respectively, because the Company acquired the equity interests with the considerations paid higher than the net asset values at the respective purchase dates due to the expected growth and expansion of the MCs.

For management’s additional internal analysis purposes, the Company estimates the residual values of the two MCs at dissolution when needed, using the income approach with the discounted cash flow method, which estimates the fair values of the MCs by the present worth of the net economic benefit to be received by MCs. Management applies significant judgment and assumptions related to estimation, including but not limited to the forecasted revenues, the selection of an expected EBITDA margin assumption for the forecast period, forecasted future cash flows, and the discounted rate. The Company currently expects the residual values at the dissolution of the MCs will not be less than the carrying values of the investments in MCs. The management is not aware of any legal or regulatory limitations on the Company’s ability to realize the full amount of proceeds generated from a liquidation of the MCs.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we will take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Smaller Reporting Company

Additionally, we are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the last business day of our second fiscal quarter, or (ii) our annual revenue exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our second fiscal quarter. If we continue to be a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from these certain reduced disclosure requirements that are available to smaller reporting companies.