☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
OR
☐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: 001-41462
SBC Medical Group Holdings Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Delaware
88-1192288
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
200 Spectrum Center Dr., STE 300
Irvine, California
92618
(Address of Principal Executive Offices)
(Zip Code)
949-593-0250
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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, $0.0001 par value per share
SBC
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
SBCWW
The Nasdaq Stock Market LLC
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. (Check one):
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 ☒
As of July 31, 2026, the registrant had 102,846,943 shares of common stock outstanding, after deducting 1,034,308 shares of treasury stock. An additional 270,000 shares are held by a wholly-owned subsidiary; such shares are outstanding but are not entitled to vote pursuant to Section 160(c) of the Delaware General Corporation Law and are presented as treasury stock in the consolidated balance sheet pursuant to ASC 810-10-45-5.
SBC Medical Group Holdings Incorporated uses its website (https://sbc-holdings.com/en) to distribute company information and makes available free of charge a variety of information for investors, including our filings with the Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after electronically filing that material with, or furnishing it, to the SEC. The information that we post on our website may be deemed material. Accordingly, investors should monitor our website and our social media channels, including our LinkedIn page, in addition to following our press releases, filings with the SEC, and public conference calls and webcasts. In addition, investors may opt in to automatically receive email alerts and other information about us when enrolling their email address by visiting the “Email Alerts” section under the “Resources” tab on our website. We do not incorporate the information contained on, or accessible through, our website or related social media channels into this Quarterly Report on Form 10-Q (“Quarterly Report”).
This Quarterly Report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. These statements are based on the beliefs and assumptions of the management of the Company. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” or similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
•
future financial performance of the Company;
•
changes in the market and level of demand for our products and services;
•
the expansion plans and opportunities of the Company;
•
political, economic or industry conditions, or conditions affecting the financial and capital markets, including the effect of trade policy;
•
the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing conflicts in the Middle East and Eastern Europe;
•
the ability of the Company to access additional capital;
•
the ability of the Company to maintain the listing of the Company’s common stock and warrants on Nasdaq;
•
public securities’ potential liquidity and trading;
•
the impact from the outcome of any known and unknown litigation;
•
the ability of the Company to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;
•
expectations regarding future expenditures of the Company;
•
the future mix of revenue and effect on gross margins of the Company;
•
the attraction and retention of qualified directors, officers, employees and key personnel of the Company;
•
the ability to protect and enhance the Company’s corporate reputation and brand;
•
expectations concerning the relationships and actions of the Company and its affiliates with third parties;
•
the impact from future regulatory, judicial, and legislative changes in the Company’s industry;
•
the ability to locate and acquire complementary products or product candidates and integrate those into the Company’s business;
•
future arrangements with, or investments in, other entities or associations, including transactions that involve the Company’s controlling shareholder, who serves as its Chief Executive Officer and Chairman of the Board of Directors;
intense competition and competitive pressures from other companies in the industries in which the Company operates; and
•
other factors detailed under “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 27, 2026 (the “Annual Report”).
These forward-looking statements are based on information available as of the date of this Quarterly Report, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.
New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on the business of the Company, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. As a result of a number of known and unknown risks and uncertainties, the actual results or performance of the Company may be materially different from those expressed or implied by these forward-looking statements. These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Quarterly Report are more fully described elsewhere in this Quarterly Report, particularly in “Part II, Item 1A. Risk Factors” of this Quarterly Report, and in the Annual Report, particularly in “Part I, Item 1A. Risk Factors” of the Annual Report.
Preferred stock ($0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding as of June 30, 2026 and December 31, 2025)
—
—
Common stock ($0.0001 par value, 400,000,000 shares authorized, 103,881,251 shares issued, and 102,576,943 shares outstanding as of June 30, 2026 and December 31, 2025)
10,388
10,388
Additional paid-in capital
75,715,942
72,867,424
Treasury stock (at cost, 1,304,308 shares as of June 30, 2026 and December 31, 2025)
(7,749,997
)
(7,749,997
)
Retained earnings
262,449,513
240,448,620
Accumulated other comprehensive loss
(66,589,505
)
(57,294,239
)
Total SBC Medical Group Holdings Incorporated stockholders’ equity
263,836,341
248,282,196
Non-controlling interests
16,078,801
15,022,510
Total stockholders’ equity
279,915,142
263,304,706
Total liabilities and stockholders’ equity
$
406,659,022
$
380,447,946
The accompanying notes are an integral part of these unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
Revenues, net – related parties
$
43,732,194
$
38,944,898
$
81,687,254
$
84,202,043
Revenues, net
5,455,874
4,413,949
10,561,376
6,485,505
Total revenues, net
49,188,068
43,358,847
92,248,630
90,687,548
Cost of revenues (including cost of revenues from related parties of $138,593 and $4,669,602 for the three months ended June 30, 2026 and 2025, and $262,982 and $8,126,530 for the six months ended June 30, 2026 and 2025, respectively)
13,210,752
13,348,270
25,924,580
22,943,887
Gross profit
35,977,316
30,010,577
66,324,050
67,743,661
Operating expenses:
Selling, general and administrative expenses (including selling, general and administrative expenses from related parties of $341,510 and $415,767 for the three months ended June 30, 2026 and 2025, and $684,903 and $415,767 for the six months ended June 30, 2026 and 2025, respectively)
17,016,766
15,456,385
29,643,485
28,987,395
Total operating expenses
17,016,766
15,456,385
29,643,485
28,987,395
Income from operations
18,960,550
14,554,192
36,680,565
38,756,266
Other income (expenses):
Interest income
8,520
22,882
129,889
78,215
Interest expense
(128,629
)
(49,651
)
(243,435
)
(55,858
)
Foreign currency exchange gain (loss), net
1,032,259
(769,720
)
1,893,937
(1,828,246
)
Other income
137,056
145,403
628,620
296,731
Other expenses
(455,070
)
(362,745
)
(678,279
)
(1,001,478
)
Gain on redemption of life insurance policies
—
—
—
8,746,138
Total other income (expenses)
594,136
(1,013,831
)
1,730,732
6,235,502
Income before income taxes and equity in losses of equity method investees
19,554,686
13,540,361
38,411,297
44,991,768
Income tax expense
7,823,743
11,100,509
15,351,334
21,059,966
Equity in losses of equity method investees, net of tax
(568,652
)
—
(568,652
)
—
Net income
11,162,291
2,439,852
22,491,311
23,931,802
Less: net income (loss) attributable to non-controlling interests
469,469
(18,388
)
490,418
(28,884
)
Net income attributable to SBC Medical Group Holdings Incorporated
$
10,692,822
$
2,458,240
$
22,000,893
$
23,960,686
Other comprehensive income (loss):
Foreign currency translation adjustment
$
(5,319,471
)
$
8,623,269
$
(9,569,020
)
$
18,431,596
Total comprehensive income
5,842,820
11,063,121
12,922,291
42,363,398
Less: comprehensive income attributable to non-controlling interests
198,369
184,411
216,664
147,579
Comprehensive income attributable to SBC Medical Group Holdings Incorporated
$
5,644,451
$
10,878,710
$
12,705,627
$
42,215,819
Net income per share attributable to SBC Medical Group Holdings Incorporated
Basic and diluted
$
0.10
$
0.02
$
0.21
$
0.23
Weighted average shares outstanding
Basic and diluted
102,576,943
103,507,249
102,576,943
103,392,580
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
Business Overview
SBC Medical Group Holdings Incorporated was originally incorporated under the laws of the state of Delaware on March 11, 2022 as a special purpose acquisition corporation under the name Pono Capital Two, Inc. (“Pono”) for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated, “Legacy SBC”), through its consolidated subsidiaries and, prior to its deconsolidation in June 2026, its variable interest entity (“VIE”), is principally engaged in the medical industry and provides comprehensive management services to the medical corporations and their clinics, including but not limited to licensure of the use of the trademark and brand name of “Shonan Beauty Clinic”, sales of medical equipment, medical consumables procurement services, and management of customer loyalty program, etc.
Reverse Recapitalization
On September 17, 2024, Pono consummated the merger transaction pursuant to the agreement by and among Pono, Pono Two Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of Pono, and Legacy SBC (the “Merger Agreement”), whereby Merger Sub merged with and into Legacy SBC, the separate corporate existence of Merger Sub ceased and Legacy SBC survived the merger as a wholly owned subsidiary of Pono (the “Merger”). The Merger and the other transactions contemplated by the Merger Agreement are collectively referred to as the “Business Combination.” In connection with the closing of the Business Combination, Pono changed its name to “SBC Medical Group Holdings Incorporated” and Legacy SBC changed its name to “SBC Medical Group, Inc.” and the existing equity holders of Legacy SBC exchanged their equity interests of Legacy SBC for equity interests of Pono.
On September 17, 2024, in connection with the closing of the Business Combination, the Company received net cash of $11,707,417. The Company also assumed $416,799 in prepaid expenses and other current assets, $1,108 in accounts payable, $14,431 in income tax payable, $2,700,000 in convertible note payable, which was subsequently converted to 270,000 shares upon the closing of the Business Combination, $1,000,789 in accrued liabilities and other current liabilities, common stock of $508 and additional paid-in capital of $8,407,380.
The total net cash proceeds from the Business Combination of $11,707,417 were 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:
Cash—Pono working capital cash
$
766,735
Cash—Pono trust
16,731,409
Less: transaction costs and advisory fees
5,790,727
Net proceeds from Pono Merger
$
11,707,417
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”). Legacy SBC 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 Legacy SBC.
Unless the context indicates otherwise, any references herein to the “Company”, “we”, “us” and “our” refer to 1) Legacy SBC and its consolidated subsidiaries and VIE, prior to the consummation of the Business Combination, and to 2) SBC Medical Group Holdings Incorporated (formerly Pono Capital Two, Inc.) and its consolidated subsidiaries and VIE, following the Business Combination. Reference herein to “Pono” refers to Pono Capital Two, Inc. prior to the consummation of the Business Combination.
Reorganization
In June 2020 and April 2022, SBC Inc., a company incorporated in Japan in June 2007, and Advice Innovation Co., Ltd., a company incorporated in Japan in December 2018, were merged with and into SBC Medical Group Co., Ltd. (“SBC Japan”), respectively, with SBC Japan being the surviving entity in such mergers. SBC Japan is a company incorporated in Japan in September 2017 and previously known as Aikawa Medical Management Co., Ltd.
In April 2023, SBC Japan acquired 100% equity interest of L’Ange Cosmetique Co., Ltd. (“L’Ange Sub”), a company incorporated in Japan in June 2003, and Shobikai Co., Ltd. (“Shobikai Sub”), a company incorporated in Japan in June 2014, through share exchange. As a result, L’Ange Sub and Shobikai Sub became wholly owned subsidiaries of SBC Japan.
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS (cont.)
In August 2023, SBC Japan and L’Ange Sub disposed of their entire equity interest in Ai Inc. and Lange Inc., respectively, both incorporated in the Federated States of Micronesia in January 2022, for cash. As a result, Ai Inc. and Lange Inc. ceased to be subsidiaries of the Company, with the related investment in capital being treated as a deemed distribution and the disposal proceeds treated as a deemed contribution.
In September 2023, Legacy SBC acquired 100% equity interest of SBC Japan through share exchange with one share of its common stock. As a result, SBC Japan became a wholly owned subsidiary of Legacy SBC.
The above reorganization has been accounted for as a recapitalization among entities under common control since the same controlling shareholder controlled these entities before and after the reorganization. The consolidation of the Company has been accounted for at historical cost and prepared on the basis as if the transactions had become effective as of the beginning of the earliest period presented in the accompanying unaudited consolidated financial statements.
Corporate Structure
As of June 30, 2026, the Company’s major subsidiaries are as follows:
Name
Place of Incorporation
Date of Incorporation or Acquisition
Percentage of Ownership
Principal Activities
Subsidiaries
SBC Medical Group, Inc.
United States
January 20, 2023
100%
Investment holding
SBC Medical Group Co., Ltd.*
Japan
June 18, 2003
100%
Franchising, procurement, management, rental and marketing services
Liesta Co., Ltd.
Japan
December 15, 2020
100%
Real estate brokerage services
SBC Sealane Co., Ltd.
Japan
June 7, 2022
100%
Leasehold improvement services
Medical Payment Co., Ltd.
Japan
June 30, 2022
75%
Loan services
SBC Medical Consulting Co., Ltd.
Japan
August 2, 2022
100%
Human resource services
MB career lounge Co., Ltd.
Japan
July 17, 2025
100%
Management supporting services
Waqoo, Inc.
Japan
December 19, 2025
54%
Medical support services and direct-to-consumer product sales
Cell Pro Japan Co., Ltd.
Japan
December 19, 2025
54%
Regenerative medicine, contract review and processing, and cosmetics and raw materials business
SBC Medical M&A Advisory Co., Ltd.
Japan
January 7, 2026
100%
M&A brokerage and financial advisory services
Shoubikai Medical Vietnam Co., Ltd.
Vietnam
August 29, 2013
100%
Cosmetic clinic
SBC Irvine, LLC
United States
December 27, 2018
100%
Management services for cosmetic clinic in the United States
SBC Healthcare Inc.
United States
December 16, 2019
100%
Management services for cosmetic clinic in the United States
Aesthetic Healthcare Holdings Pte. Ltd.
Singapore
November 20, 2024
100%
Investment holding
Wen & Weng Family Clinic Pte. Ltd. **
Singapore
November 20, 2024
100%
General outpatient medical services
Wen & Weng Medical Group Pte. Ltd. **
Singapore
November 20, 2024
100%
Healthcare-related businesses
Rochor Clinic Pte. Ltd. **
Singapore
November 20, 2024
100%
General outpatient medical services
Dermasolutions Pte. Ltd. **
Singapore
November 20, 2024
100%
Cosmetic and dermatological treatments and products
Dermasolutions Services Pte. Ltd. **
Singapore
November 20, 2024
100%
Cosmetic services and products
SBC MEDICAL APAC PTE. LTD.
Singapore
March 26, 2025
100%
Asia-Pacific regional headquarters
* In January 2025, the Company effected a merger in which SBC Japan and Shobikai Sub merged with and into L’Ange Sub. As a result, the separate corporate existence of SBC Japan and Shobikai Sub ceased, with L’Ange Sub continuing as the surviving company. Following the merger, L’Ange Sub changed its name to SBC Medical Group Co., Ltd., which is herein referred to as “SBC Japan.” In January 2026, the Company effected a merger in which SBC Marketing Co., Ltd. merged with and into SBC Japan. As a result, the separate corporate existence of SBC Marketing Co., Ltd. ceased, with SBC Japan continuing as the surviving company.
** Subsidiaries of Aesthetic Healthcare Holdings Pte. Ltd. (“AHH”)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation and Principles of Consolidation
The accompanying unaudited 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 unaudited consolidated financial statements do not include all of the information and disclosure required by U.S. GAAP for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2025.
The unaudited consolidated financial statements include the financial statements of the Company, its subsidiaries and, for the periods prior to its deconsolidation, its consolidated VIE for which the Company was the primary beneficiary. The results of the subsidiaries and VIE are consolidated from the date on which the Company obtains control or becomes the primary beneficiary, and continue to be consolidated until the date that such control ceases or the VIE is deconsolidated. All significant transactions and balances among the Company, its subsidiaries, and the VIE (prior to its deconsolidation), have been eliminated upon consolidation.
Reporting Lag
The Company reports AHH and its subsidiaries, which were acquired in November 2024, and Waqoo, Inc. and its subsidiary, Cell Pro Japan Co., Ltd., which were acquired in December 2025, on a three-month calendar lag allowing for the timely preparation of financial statements.
The Company recognizes its portion of the earnings or losses for its equity method investment in OT Midco Holdings, LLC (“OT Midco”) on a three-month calendar lag to ensure consistency and timely filing of the Company’s financial statements. See Note 4 for further information with respect to the investment in OT Midco.
This three-month reporting lag is applied except for significant transactions or events that occur during the intervening period, if any.
Variable Interest Entities
In accordance with ASC Topic 810, “Consolidation”, the Company identifies its variable interests and analyzes to determine if the entity in which the Company has a variable interest is a VIE. Determining whether a variable interest is a VIE involves both quantitative and qualitative considerations. For those entities determined to be VIEs within the scope of the VIE model, a further quantitative and qualitative analysis is performed to determine if the Company is deemed the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant.
The Company would consolidate those entities in which it is determined to be the primary beneficiary. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and the relevant development, operating management and financial agreements.
The Company evaluates its relationship with its VIE on an ongoing basis to determine whether it continues to be the primary beneficiary of its consolidated VIE, or whether it has become the primary beneficiary of the VIE it does not consolidate.
Voting Model
If a legal entity fails to meet any of the three characteristics of a VIE, we then evaluate such entity under the voting model. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that other equity holders do not have substantive participating rights.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Assessment of Medical Corporations in Japan
SBC Japan is designated as a medical service corporation (the “MSC”) to provide services to the Medical Corporations (the “MCs”) in Japan. To maintain and strengthen the business relationship, the Company has acquired equity interests in the following MCs throughout the years.
Name of the MC
Percentage of Equity Interest Acquired
Percentage of Voting Interest Held
Medical Corporation Shobikai
100
%
0
%
Medical Corporation Kowakai
100
%
0
%
Medical Corporation Nasukai
100
%
0
%
Medical Corporation Aikeikai
100
%
0
%
Medical Corporation Jukeikai
100
%
0
%
Medical Corporation Ritz Cosmetic Surgery
100
%
0
%
As non-profit organizations, MCs are required to comply with the medical-related laws and regulations of the Japanese Medical Care Act (the “Act”, “Medical Care Act”). In accordance with the Act, the highest authority of each MC is its general meeting of members (the “Members”), with each Member having one voting right. The Company, through the MSC, has no right to elect the Members, no decision-making ability and no right to receive dividends or any profit distributions, but has the right to receive distribution of the residual assets of the MCs.
Since the not-for-profit entities scope exception to the variable interest model is applicable to the MCs, the Company evaluates its business relationship, franchisor-franchisee agreements and/or services agreements with the MCs in Japan under the voting model. The Company has concluded that consolidation of the MCs is not appropriate for the periods presented as it does not have a majority voting interest in the Members of the MCs nor does it have a controlling financial interest in the MCs. The equity interests in the MCs held by the Company are recorded as long-term investments in MCs — related parties on the unaudited consolidated balance sheets. The transactions between the MCs and the Company are disclosed in Note 17 — Related Party Transactions.
(b) Foreign Currency
The Company maintains its books and records in its local currency, mainly Japanese YEN (“JPY” or “¥”), which is the functional currency, as it is 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 unaudited statements of operations.
The reporting currency of the Company is the U.S. dollar (“US$” or “$”), and the accompanying financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translations of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ 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 unaudited statements of changes in stockholders’ equity.
Translation of amounts from local currency of the Company into US$1 has been made at the following exchange rates:
June 30, 2026
June 30, 2025
Current JPY:US$1 exchange rate
162.3790
144.1650
Average JPY:US$1 exchange rate
158.1446
148.4720
(c) Non-controlling Interests
Non-controlling interests in the unaudited consolidated balance sheets represent the portion of the equity in the subsidiaries not attributable, directly or indirectly, to the Company. The portion of the income or loss applicable to the non-controlling interests in subsidiaries is also separately reflected in the unaudited statements of operations.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(d) Use of Estimates
In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, 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 unaudited consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, useful lives and impairment of long-lived assets, impairment of goodwill, impairment of long-term investments in MCs — related parties, valuation allowance of deferred tax assets, uncertain income tax positions, the recognition and measurement of impairment of investments in securities, allowance for credit losses, implicit interest rate of operating and finance leases, and liability associated with unredeemed loyalty points. Management bases its estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results could differ from those estimates.
(e) Reclassification
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings or financial position.
(f) Customer Loans Receivable
In February 2023, the Company started to provide loan services to certain customers of the related-party MCs (“End Customers”). Once a loan was granted to finance an End Customer’s purchase, the End Customer was required to repay the Company in monthly installments. The loans provided to the End Customers were unsecured, interest-bearing, and due in three months to five years, depending on the End Customers’ choice of the loan service term.
The Company records the customer loans receivables at gross loan receivables less unamortized costs of issuance fees or discounts, which are amortized over the life of the loan to interest income. The Company generated interest income of $210,735 and $305,227 for the three months ended June 30, 2026 and 2025, respectively, and generated interest income of $459,858 and $588,643 for the six months ended June 30, 2026 and 2025, respectively, from the loan services, which were included in revenues.
Management periodically evaluates individual End Customers’ financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Customer loans receivable is charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the three months ended June 30, 2026 and 2025, the Company recorded a reversal of allowance for doubtful accounts of $13,400 and provision for doubtful accounts of $258,650, respectively, for customer loans receivable. During the six months ended June 30, 2026 and 2025, the Company recorded a reversal of allowance for doubtful accounts of $44,753 and provision for doubtful accounts of $353,752, respectively, for customer loans receivable.
When a loan was granted to an End Customer, the Company paid the transaction amount directly in cash to the MC on behalf of the End Customer in the month following the purchase.
The loan services were suspended in November 2025, no new loans have been originated since then, and all related payables to MCs were settled by December 31, 2025.
(g) Intangible Assets, Net
Intangible assets with an indefinite life are not amortized and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Intangible assets with finite lives are initially recorded at cost and amortized on a straight-line basis over the estimated economic useful lives of the respective assets. Acquired intangible assets from business combinations and asset acquisitions are recognized and measured at fair value at the time of acquisition. Those assets represent assets with finite lives are further amortized on a straight-line basis over the estimated useful lives of the respective assets.
The estimated useful lives of intangible assets are as follows:
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(h) Goodwill, Net
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in the business combination. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value based test.
The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.
When performing the annual impairment test, the Company has the option of performing a qualitative or quantitative assessment to determine if an impairment has occurred. If a qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would be required to perform a quantitative impairment analysis for goodwill. The quantitative analysis requires a comparison of the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The fair value is generally determined using the income approach with the discounted cash flow valuation method, which requires management to make significant estimates and assumptions related to forecasted revenues and cash flows and the discount rates.
(i) Impairment of Long-lived Assets Other Than Goodwill
Long-lived assets with finite lives, primarily property and equipment, intangible assets, operating lease right-of-use assets and finance lease right-of-use assets 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.
(j) Investments in Securities
Available-for-sale debt securities
The Company’s short-term investments consist of debt securities classified as available-for-sale, which are measured at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) and realized gains and losses included in other income (expenses).
Investments in equity securities with readily determinable fair values
The Company holds long-term investments in equity securities of publicly listed companies, for which the Company does not have significant influence. Investments in equity securities with readily determinable fair values are measured at fair value and any changes in fair value are recognized in other income (expenses).
Investments in privately held companies and organizations that do not report Net Asset Value (the “NAV”) per share
The Company’s long-term investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative, under which these investments are measured at cost, adjusted for observable price changes and impairments, with changes recognized in other income (expenses).
The Company recognizes both realized and unrealized gains and losses in its unaudited consolidated statements of operations and comprehensive income, classified with other income (expenses). Unrealized gains and losses represent observable price changes for investments in privately held entities that do not report NAV per share. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV per share, if impairments are deemed other than temporary, to their estimated fair values.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(k) Equity Method Investments
Investments in LLC
The Company uses the equity method to account for investments in limited liability companies (“LLC”) that maintain a specific ownership account for each investor, in which we do not have a controlling financial interest but have the ability to influence the operating and financial policies of the investees.
Under the equity method of accounting, the Company initially recognizes the investments at cost and subsequently adjusts the carrying amount of the investments for its share of earnings or losses reported by the investees, distributions received, and other-than-temporary impairments.
(l) 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 an MSC in Japan. In accordance with the 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 economic benefit to be realized at the time of dissolution of MCs or the equity interests being sold.
The investments in MCs — related parties are accounted for using a measurement alternative, under which these 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. The payments made for such investments are classified as investing activities in the unaudited 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. Also see Note 2(a) for further details.
(m) Leases
The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period in exchange for consideration. Control over the use of the identified assets means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
The Company classifies its leases as either finance leases or operating leases if it is the lessee, or sales-type, direct financing, or operating leases if it is the lessor. The following criteria are used to determine if a lease is a finance lease (as a lessee) or sales-type or direct financing lease (as a lessor):
(i)
ownership is transferred from lessor to lessee by the end of the lease term;
(ii)
an option to purchase is reasonably certain to be exercised;
(iii)
the lease term is for the major part of the underlying asset’s remaining economic life;
(iv)
the present value of lease payments equals or exceeds substantially all of the fair value of the underlying assets; or
(v)
the underlying asset is specialized and is expected to have no alternative use at the end of the lease term.
If any of the above criteria is met, the Company accounts for the lease as a finance, a sales-type, or a direct financing lease. If none of the criteria is met, the Company accounts for the lease as an operating lease.
Lessee accounting
The Company recognizes right-of-use assets and lease liabilities for all leases other than those with a term of twelve months or less as the Company has elected to apply the short-term lease recognition exemption. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are classified and recognized at the commencement date of a lease. Lease liabilities are measured based on the present value of fixed lease payments over the lease term. Right-of-use assets consist of (i) initial measurement of the lease liability; (ii) lease payments made to the lessor at or before the commencement date less any lease incentives received; and (iii) initial direct costs incurred by the Company.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
As the rates implicit on the Company’s leases for which it is the lessee are not readily determinable, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. When determining the incremental borrowing rate, the Company assesses multiple variables such as lease term, collateral, economic conditions, and its creditworthiness.
From time to time, we may enter into sublease agreements with third parties. Our subleases generally do not relieve us of our primary obligations under the corresponding head lease. As a result, we account for the head lease based on the original assessment at lease inception. We determine if the sublease arrangement is either a sales-type, direct financing, or operating lease at inception of the sublease. If the total remaining lease cost on the head lease for the term of the sublease is greater than the anticipated sublease income, the right-of-use asset is assessed for impairment. Our subleases are generally operating leases and we recognize sublease income on a straight-line basis over the sublease term.
Lessor accounting — operating leases
The Company accounts for the revenue from its lease contracts by utilizing the single component accounting policy. This policy requires the Company to account for, by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single component if two criteria are met.
(i)
the timing and pattern of transfer of the lease component and the nonlease component(s) are the same; and
(ii)
the lease component would be classified as an operating lease if it were accounted for separately.
Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases. Nonlease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses, including recoveries for utilities, repairs and maintenance and common area expenses.
If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the lease accounting standard. Conversely, if the nonlease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our leases is predominant. Therefore, we account for all revenues from our operating leases under the lease accounting standard and classify these revenues as rental income.
The Company commences recognition of rental income related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset. Income from rentals related to fixed rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms. Any amounts received that will be recognized as revenue in future periods are classified as advances from customers in the Company’s unaudited consolidated balance sheets.
Lessor accounting — sales-type leases
The Company purchases medical equipment from vendors and leases them to its customers, who are required to pay installments throughout the term of the leases. The lease agreements include fixed lease payments and do not contain residual value guarantees or variable lease payments. The lease terms are based on the non-cancellable term of the lease and the buyer may have options to terminate the lease in advance when certain conditions are met. The customers obtain control of the medical equipment when they physically possess the equipment.
The Company recognizes sales from sales-type leases equal to the present value of the minimum lease payments discounted using the implicit interest rate in the lease and cost of sales equal to the carrying amount of the asset being leased and any initial direct costs incurred, less the present value of the unguaranteed residual. Interest income from the leases is recognized over the lease terms and included in revenues, net.
The Company excludes from the measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(n) Revenue Recognition
The Company recognizes revenue from franchising services, procurement services, management services, Waqoo Segment revenues and other services or product sales 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 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 the “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.
At the time loyalty points are awarded, an MC pays the Company cash in an amount equivalent to the awarded loyalty points, which is recorded as advances from customers. When an 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 an 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.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 procurement revenue. When an MC’s customers redeem such points, the Company reimburses the 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 time as 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 time as 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 time as 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 a straight-line basis over the terms of the lease agreements and sales-type lease revenue is generally recognized on the lease commitment date. Also see Note 2(m).
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.
Waqoo Segment Revenues
The Waqoo segment consists of Waqoo, Inc. and its subsidiary, through which the Company generates revenues primarily from medical support services and direct-to-consumer product sales.
Medical support services revenue, consisting primarily of contract processing services for blood-derived materials used in regenerative medicine, raw material sales, and other services, is generally recognized at a point in time when the processing is completed, typically within one month, or when the related performance obligation is satisfied.
Direct-to-consumer product sales revenue, consisting of cosmetics and other beauty products sold directly to consumers through e-commerce channels, is generally recognized at a point in time when control of the product is transferred to the customer.
(o) Advertising Expenses
Advertising expenses consist primarily of costs of promotion and marketing for the Company’s image and services and are included in selling, general and administrative expenses. The Company expenses advertising costs as incurred or the first time the advertising takes place, whichever is earlier, in accordance with ASC 720-35, “Advertising Costs”. The advertising expenses were $467,606 and $973,933 for the three months ended June 30, 2026 and 2025, respectively, and $1,034,952 and $1,656,099 for the six months ended June 30, 2026 and 2025, respectively.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(p) Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, finance lease receivables and customer loans receivable. The Company places its cash and cash equivalents with financial institutions. The Company does not require collateral or other security to support financial instruments subject to credit risk. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.
For the six months ended June 30, 2026, customer A, B and C represented 25%, 21% and 19% of the Company’s total revenues, respectively.For the six months ended June 30, 2025, customer A, B and C represented 25%, 25% and 22% of the Company’s total revenues, respectively.
As of June 30, 2026, customer A, B and C accounted for 24%, 26% and 26% of the Company’s total outstanding accounts receivable, respectively.As of December 31, 2025, customer A, B and C accounted for 22%, 24% and 23% of the Company’s total outstanding accounts receivable, respectively.
For the six months ended June 30, 2026 and 2025, no vendor represented more than 10% of the Company’s total purchases.
As of June 30, 2026, vendor C represented 13% of the Company’s total outstanding accounts payable.As of December 31, 2025, vendor A, B and C represented 14%, 22% and 14% of the Company’s total outstanding accounts payable, respectively.
(q) Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making operating decisions, assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
Beginning in the second quarter of 2026, management has determined that the Company’s operations constitute two reportable segments: SBC core segment and Waqoo segment.
(r) Related Parties and Transactions
The Company identifies related parties and accounts for and discloses related-party transactions in accordance with ASC Topic 850, “Related Party Disclosures,” and other relevant ASC standards.
Parties, which can be entities or individuals, 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.
(s) Fair Value Measurements
The Company performs fair value measurements in accordance with ASC Topic 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 Topic 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 Topic 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.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(s) Fair Value Measurements (cont.)
As of June 30, 2026 and December 31, 2025, the carrying values of current assets and current liabilities approximated their fair values reported in the unaudited consolidated balance sheets due to the short-term maturities of these instruments. Debt that bears variable interest rates indexed to the prime rate also approximates fair value as it reprices when market interest rates change.
Assets measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 are summarized below.
Fair Value Measurements as of June 30, 2026
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Unobservable Inputs (Level 3)
Fair Value at June 30, 2026
Short-term investments:
Available-for-sale debt security
$
—
307,922
—
$
307,922
Long-term investments:
Equity investments at fair value with readily determinable fair value
$
858,732
—
—
$
858,732
Fair Value Measurements as of December 31, 2025
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Unobservable Inputs (Level 3)
Fair Value at December 31, 2025
Short-term investments:
Available-for-sale debt security
$
—
319,193
—
$
319,193
Long-term investments:
Equity investments at fair value with readily determinable fair value
$
854,927
—
—
$
854,927
(t) Stock-Based Compensation
The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “Compensation — Stock Compensation”, under which the Company determines whether stock-based compensation awards should be classified and accounted for as an equity award. There were no liability awards granted during any of the periods stated herein. For all grants of stock-based compensation classified as equity awards, the cost of services received from employees and non-employees in exchange for awards is recognized in the unaudited consolidated statements of operations and comprehensive income based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period or vesting period. The Company records forfeitures and cancellations as they occur.
(u) Recent Accounting Pronouncements
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in ASU 2025-05 provide entities with a practical expedient to simplify the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606 by allowing the assumption that current conditions as of the balance sheet date will not change during the remaining life of the asset. ASU 2025-05 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those fiscal years, with early adoption permitted. The Company adopted this standard on January 1, 2026. The adoption of this standard and the practical expedient did not have a material impact on its unaudited consolidated financial statements and related disclosures.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregation of certain costs in a separate note to the financial statements, such as the amounts of employee compensation, depreciation and intangible asset amortization, included in each relevant expense caption in annual and interim consolidated financial statements. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. ASU 2025-11 is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
NOTE 3 — VARIABLE INTEREST ENTITY
A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE.
The Company followed ASC Topic 810, “Consolidation”, utilizing a qualitative approach, and determined that it was the primary beneficiary of its VIE, Aikawa Medical Management, Inc. (“AMM”), and consolidated the results of operations, financial position, and cash flows of AMM until the date of its deconsolidation on June 10, 2026.
The amounts and balances of AMM included in the Company’s unaudited consolidated financial statements as of December 31, 2025 and for the three and six months ended June 30, 2026 and 2025 are presented in the tables below.
December 31, 2025
ASSETS
Current assets
Cash and cash equivalents
$
4,238,149
Accounts receivable
10,615
Prepaid expenses and other current assets
10,831
Total Current Assets
4,259,595
Loans receivables from subsidiaries of the Company
On June 10, 2026, pursuant to a subrogation agreement, the Company’s CEO, who is also the controlling shareholder of the Company and the sole shareholder of AMM, repaid the net amount of $5,195,128 owed by AMM to the Company’s subsidiary on AMM’s behalf, thereby settling the intercompany balances. Following the deconsolidation, the Company has no continuing involvement with, explicit or implicit obligations to provide financial support to, or exposure to loss related to AMM. AMM remains wholly owned by the Company’s CEO and controlling shareholder and, accordingly, is considered a related party of the Company.
At the deconsolidation date, AMM had net assets of $1,546,703. The $3,648,425 excess of the repayment amount over AMM’s net assets was recorded as a deemed contribution from the controlling shareholder in the Company’s unaudited consolidated statements of changes in stockholders’ equity.
NOTE 4 — EQUITY METHOD INVESTMENTS
On December 29, 2025, the Company acquired 10,732,089 common units of OT Midco Holdings, LLC (“OT Midco”), representing approximately 18.2% of the voting interest in OT Midco, for a total consideration of $20.3 million, including transaction costs of approximately $0.3 million. The CEO of the Company was designated by the Company as a director of the investee.
OT Midco is an intermediate holding company of Orange Twist, LLC and its subsidiaries (collectively, “OrangeTwist”). Through this investment, the Company holds an indirect minority interest in OrangeTwist.
The Company recognizes its portion of the earnings or losses for its equity method investment in OT Midco on a three-month lag. For the three and six months ended June 30, 2026, the Company recorded equity in losses of equity method investee, net of tax of $0.6 million. As of June 30, 2026 and December 31, 2025, the carrying value of the investment in OT Midco was $19.7 million and $20.3 million, respectively.
NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of June 30, 2026 and December 31, 2025, prepaid expenses and other current assets consist of the following:
June 30, 2026
December 31, 2025
Advances to services and other miscellaneous vendors
$
5,198,343
$
6,374,870
Prepayments for medical equipment and medical materials
1,203,370
4,736,477
Other receivables *
364,479
486,326
Others
473,322
127,179
Total
$
7,239,514
$
11,724,852
* Represent reimbursement receivables from a business partner and other miscellaneous receivables.
As of June 30, 2026 and December 31, 2025, finance lease receivables consist of the following:
June 30, 2026
December 31, 2025
Future minimum lease payments receivable
$
25,529,132
$
26,636,777
Estimated residual value
—
—
Gross finance lease receivables
25,529,132
26,636,777
Less: unearned interest income
(129,574
)
(57,909
)
Finance lease receivables
$
25,399,558
$
26,578,868
Finance lease receivables, current
$
13,725,781
$
12,832,355
Finance lease receivables, non-current
$
11,673,777
$
13,746,513
As of June 30, 2026, maturities of the Company’s gross finance lease receivables are as follows:
Years ending December 31,
Remainder of 2026
$
7,165,716
2027
11,881,911
2028
5,720,336
2029
761,169
2030 and thereafter
—
Total
$
25,529,132
NOTE 7 — PROPERTY AND EQUIPMENT, NET
As of June 30, 2026 and December 31, 2025, property and equipment, net consist of the following:
June 30, 2026
December 31, 2025
Buildings and facilities attached to buildings
$
4,219,968
$
4,287,588
Machinery, equipment and automobiles
4,020,632
4,228,598
Aircraft
232,909
241,434
Software
6,174,195
5,879,421
Construction in progress
2,007,531
2,041,608
Subtotal
16,655,235
16,678,649
Less: accumulated depreciation
(8,155,629
)
(7,667,935
)
Less: accumulated impairment
(1,084,915
)
(1,471,322
)
Property and equipment, net
$
7,414,691
$
7,539,392
Depreciation expense was $441,392 and $564,158 for the three months ended June 30, 2026 and 2025, respectively, and $829,973 and $1,169,040 for the six months ended June 30, 2026 and 2025, respectively.
The Company recognized a loss on disposal of property and equipment of $9,397 and $1,571 for the three months ended June 30, 2026 and 2025, respectively,and a loss and a gain on disposal of property and equipment of $9,397 and $10,804, respectively, for the six months ended June 30, 2026 and 2025.
As of June 30, 2026 and December 31, 2025, intangible assets, net consist of the following:
June 30, 2026
December 31, 2025
Patent use right
$
16,011,923
$
16,598,040
Trademarks
1,306,657
1,315,508
Customer relationships
1,897,917
1,928,056
Service agreement
20,062,875
20,797,278
Developed technology
23,740,772
24,143,765
Others
113,699
114,514
Subtotal
63,133,843
64,897,161
Less: accumulated amortization
(3,436,714
)
(2,630,988
)
Less: accumulated impairment
(14,010,432
)
(14,523,285
)
Intangible assets, net
$
45,686,697
$
47,742,888
Amortization expense was $662,637 and $41,073 for the three months ended June 30, 2026 and 2025, respectively, and $912,638 and $54,445 for the six months ended June 30, 2026 and 2025, respectively.
Estimated future amortization expense related to intangible assets as of June 30, 2026 is as follows:
Years ending December 31,
Amortization Expense
Remainder of 2026
$
1,304,362
2027
2,608,725
2028
2,528,605
2029
2,507,656
2030
2,506,671
Thereafter
34,230,678
Total
$
45,686,697
NOTE 9 — LONG-TERM INVESTMENTS, NET
As of June 30, 2026 and December 31, 2025, long-term investments, net consist of the following:
June 30, 2026
December 31, 2025
Investments in private entities or organizations that do not report NAV per share:
Entities or organizations without observable price changes
$
1,660,566
$
1,721,351
Investment in a public entity with readily determinable fair value
858,732
854,927
Less: accumulated impairment
(1,231,821
)
(1,276,912
)
Long-term investments, net
$
1,287,477
$
1,299,366
The Company recognized an unrealized gain on long-term investment in a public entity with readily determinable fair value of $115,206 and an unrealized loss of $63,320 for the three months ended June 30, 2026 and 2025, respectively, and an unrealized gain of $34,905 and an unrealized loss of $43,955 for the six months ended June 30, 2026 and 2025, respectively.
The Company recognized an unrealized loss of $180,622 and $340,568 on its long-term investment in Waqoo, Inc. (“Waqoo”), a public entity with readily determinable fair value, for the three months and six months ended June 30, 2025, respectively. Prior to the Company’s acquisition of Waqoo on December 19, 2025, Waqoo was a related party because the Company’s CEO was its principal shareholder.
NOTE 11 — ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES
As of June 30, 2026 and December 31, 2025, accrued liabilities and other current liabilities consist of the following:
June 30, 2026
December 31, 2025
Individual income tax withheld on behalf of employees
$
1,113,273
$
1,059,398
Wages and bonus payables
3,785,961
3,892,930
Consumption tax payable
2,764,545
1,161,676
Loyalty program future point redemption obligation
5,279,163
5,247,162
Others
144,542
183,529
Total
$
13,087,484
$
11,544,695
NOTE 12 — BANK AND OTHER BORROWINGS
As of June 30, 2026 and December 31, 2025, the Company’s borrowings from banks and other financial institutions consist of the following:
Indebtedness
Weighted Average Interest Rate*
Weighted Average Years to Maturity*
June 30, 2026
December 31, 2025
Guaranteed loans
Fixed rate loan
1.25
%
1.32
$
40,941
$
58,412
Variable rate loans
1.72
%
1.71
7,290,698
7,635,865
Subtotal
1.72
%
1.71
7,331,639
7,694,277
Unsecured loans
Fixed rate loans
2.60
%
0.17
125,546
149,204
Variable rate loans
1.15
%
4.23
29,104,943
33,777,069
Variable rate loans borrowed under revolving lines of credit
1.24
%
0.96
1,192,688
1,212,934
Subtotal
1.16
%
4.08
30,423,177
35,139,207
Total loans
1.27
%
3.62
37,754,816
42,833,484
Less: current portion
(11,816,235
)
(9,099,046
)
Non-current portion
$
25,938,581
$
33,734,438
* Pertained to information for loans outstanding as of June 30, 2026.
The Company borrowed funds from various banks and financial institutions for working capital, securities investments, and mergers and acquisitions (“M&A”) purposes.
Interest expense related to the borrowings presented above was $126,108 and $46,674 for the three months ended June 30, 2026 and 2025, respectively, and $237,968 and $50,635 for the six months ended June 30, 2026 and 2025, respectively.
As of June 30, 2026 and December 31, 2025, the Company had borrowings under revolving lines of credit as follows:
Line of credit *
June 30, 2026
December 31, 2025
Maximum available amounts
$
1,883,192
$
1,915,158
Borrowed amounts **
$
1,192,688
$
1,212,934
* These revolving lines of credit automatically renew annually unless canceled in writing.
** Borrowings typically have three-month to one-year terms.
The guarantee information of the Company’s outstanding loans as of June 30, 2026 and December 31, 2025 consists of the following:
June 30, 2026
December 31, 2025
Co-guaranteed by CEO of subsidiaries within the Company’s organizational structure and Tokyo Credit Guarantee Association
$
84,352
$
122,047
Guaranteed by subsidiaries within the Company’s organizational structure
$
7,247,287
$
7,572,230
As of June 30, 2026, future minimum payments for bank and other borrowings are as follows:
Years ending December 31,
Principal Repayment
Remainder of 2026
$
8,257,452
2027
10,395,723
2028
7,189,992
2029
6,667,664
2030
5,243,985
Thereafter
—
Total
$
37,754,816
NOTE 13 — LEASES — AS A LESSEE
The Company has entered into operating leases for offices and sublease purposes, with terms ranging from two to seven years, and finance leases for certain medical and office equipment, with terms of four to five years. The estimated effect of lease renewal and termination options, as applicable, that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right-of-use assets and lease liabilities was included in the unaudited consolidated financial statements.
During the six months ended June 30, 2026 and 2025, certain operating leases were guaranteed by related parties of the Company.
Operating lease expenses for lease payments are recognized on a straight-line basis over the lease term. Finance lease costs include amortization, which is recognized on a straight-line basis over the expected life of the leased assets, and interest expenses, which are recognized following an effective interest rate method. Leases with an initial term of twelve months or less are not recorded in the unaudited consolidated balance sheets.
The following table presents supplemental information related to the Company’s leases:
For the Six Months Ended June 30,
2026
2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
2,876,789
$
2,275,398
Operating cash flows from finance leases
5,467
5,223
Financing cash flows from finance leases
71,942
278,097
Non-cash information:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
67,106
104,437
Finance lease right-of-use assets obtained in exchange for finance lease liabilities
—
612,466
Remeasurement of operating lease liabilities and right-of-use assets due to lease modifications
4,844,803
1,160,680
Weighted average remaining lease term (years)
Operating leases
2.19
1.75
Finance leases
2.07
2.60
Weighted average discount rate (per annum)
Operating leases
0.93
%
0.69
%
Finance leases
5.31
%
5.05
%
As of June 30, 2026, the future maturity of operating and finance lease liabilities is as follows:
Years ending December 31,
Operating Leases
Finance Leases
Remainder of 2026
$
2,781,068
$
56,110
2027
4,513,169
76,703
2028
2,805,266
43,782
2029
263,360
7,335
2030
53,061
—
Thereafter
12,317
—
Total undiscounted lease payments
10,428,241
183,930
Less: imputed interest
(126,686
)
(7,223
)
Present value of lease liabilities
10,301,555
176,707
Less: lease liabilities, current
(5,404,269
)
(99,627
)
Lease liabilities, non-current
$
4,897,286
$
77,080
NOTE 14 — INCOME TAXES
United States
SBC Medical Group Holdings Incorporated, SBC Medical Group, Inc., SBC Healthcare Inc., SBC Irvine, LLC, and Aikawa Medical Management, Inc. are incorporated in the United States and subject to federal income tax rate at 21% and California state income tax rate at 6.98%.
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The impacts of OBBBA were reflected in our results for the six months ended June 30, 2026, and there was no material impact on our unaudited consolidated financial statements.
The Company conducts its major businesses in Japan and is subject to tax in this jurisdiction. During the six months ended June 30, 2026 and 2025, substantially all the taxable income of the Company was generated in Japan. As a result of its business activities, the Company files tax returns that are subject to examination by the local tax authority. 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 34.69% for the six months ended June 30, 2026 and 2025.
Vietnam
Shoubikai Medical Vietnam Co., Ltd. is incorporated in Vietnam and subject to income tax rate at 20% statutory tax rate with respect to the assessable income generated from Vietnam.
Singapore
Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries, and SBC MEDICAL APAC PTE. LTD. are incorporated in Singapore and subject to income tax rate at 17% statutory tax rate with respect to the assessable profits generated from Singapore.
For the three and six months ended June 30, 2026 and 2025, the Company’s income tax expenses are as follows:
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
Current
$
11,283,218
$
10,663,753
$
19,897,282
$
13,606,983
Deferred
(3,459,475
)
436,756
(4,545,948
)
7,452,983
Total
$
7,823,743
$
11,100,509
$
15,351,334
$
21,059,966
The effective tax rate was 40.01% and 81.98% for the three months ended June 30, 2026 and 2025, respectively, and 39.97% and 46.81% for the six months ended June 30, 2026 and 2025, respectively.
NOTE 15 — SHAREHOLDERS’ EQUITY
The Company is authorized to issue 400,000,000 shares of common stock, par value of $0.0001 per share (“Common Stock”), and 20,000,000 shares of undesignated preferred stock, par value of $0.0001 per share.
As of June 30, 2026 and December 31, 2025, the Company had 103,881,251 shares issued and 102,576,943 shares outstanding on each date, with no preferred stock issued or outstanding.
Warrants
The following table summarizes the stock option/warrant activities and related information for the six months ended June 30, 2026 and 2025:
Each warrant entitles the registered holder to purchase one share of common stock at $11.50 per share.
Waqoo Equity Transactions
In December 2025, the Company acquired Waqoo, which had outstanding stock acquisition rights (“SARs”) previously granted to Waqoo’s directors and employees (collectively the “Holders”). At the acquisition date, the aggregate intrinsic value of these SARs was approximately $210,000.
During the three months ended June 30, 2026, certain SARs vested, and the Company recognized stock-based compensation expense of $7,854. During the same period, certain Holders exercised SARs for an aggregate exercise price of $31,866, resulting in a decrease in the Company’s ownership interest in Waqoo from 54.30% to 54.14% as of June 30, 2026. The decrease in ownership was recorded as an equity transaction, with the difference between the exercise price received and the carrying amount of the non-controlling interests recognized as an adjustment to additional paid-in capital.
NOTE 16 — DISAGGREGATION OF REVENUES
Revenues generated from different revenue streams consist of the following:
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
SBC Core Segment
Franchising revenue
$
9,515,061
$
10,007,581
$
18,606,801
$
25,726,863
Procurement revenue
13,401,040
15,756,519
25,745,406
30,089,302
Management services revenue
12,849,245
5,138,578
24,779,036
13,866,681
Rental services revenue
3,875,860
6,851,176
7,311,782
12,491,690
Others
5,032,354
5,604,993
11,291,097
8,513,012
Subtotal
44,673,560
43,358,847
87,734,122
90,687,548
Waqoo Segment
4,514,508
-
4,514,508
-
Total
$
49,188,068
$
43,358,847
$
92,248,630
$
90,687,548
During the six months ended June 30, 2026 and 2025, the Company recognized revenue of $1,413,371 and $843,755 from the opening balance of advances from customers, respectively; and recognized revenue of $2,036,931 and nil from the opening balance of advances from customers — related parties, respectively.
As of June 30, 2026 and December 31, 2025, and for the six months ended June 30, 2026 and 2025, substantially all of our long-lived assets and revenues generated were attributed to the Company’s operations in Japan. The remaining long-lived assets and revenues were primarily attributable to, or located in, Singapore.
The related parties that had material transactions for the six months ended June 30, 2026 and 2025 consist of the following:
Name of Related Parties
Nature of Relationship as of June 30, 2026
Yoshiyuki Aikawa
Controlling shareholder, director and CEO of the Company
Yoshiko Aikawa
Mother of the Company’s CEO and serving as a director of SBC Japan, a principal operating subsidiary of the Company
Medical Corporation Shobikai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Kowakai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Nasukai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Aikeikai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Jukeikai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Ritz Cosmetic Surgery
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Association Furinkai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Association Junikai
The relatives of CEO of the Company being the Members of the MC
Medical Corporation Misakikai
The relatives of CEO of the Company being the Members of the MC
General Incorporated Association Miotokai
The relatives of CEO of the Company being the Members of the Medical Association
SBC Co., Ltd., previously known as Harvier, Inc.
Controlled by the CEO of the Company
Skynet Academy Co., Ltd.
Subsidiary of SBC Co., Ltd., previously known as Harvier, Inc. a company controlled by the CEO of the Company
Japan Medical & Beauty Inc.
Controlled by the CEO of the Company
AI Med Inc.
The CEO of the Company is a principal shareholder of AI Med Inc., and the Company’s Chief Strategy Officer serves as its representative director
Co-medical Co., Ltd.
The CEO of the Company is a principal shareholder of Co-medical Co., Ltd.
SBC Inc.
Controlled by the CEO of the Company
SBC Shonan Osteopathic Clinic Inc.
The CEO of the Company is a principal shareholder of SBC Shonan Osteopathic Clinic Inc.
General Incorporated Association SBC
The CEO of the Company being the Member of General Incorporated Association SBC
Public Interest Foundation SBC Medical Promotion Foundation
The relative of CEO of the Company being a Member of Public Interest Foundation SBC Medical Promotion Foundation
SBC Tokyo Medical University
The CEO of the Company is the chairman of SBC Tokyo Medical University
SBC Irvine MC
Significantly influenced by the Company
MEDIROM Healthcare Technologies Inc. (“MEDIROM”)
Fumitoshi Fujiwara, an independent director and Chairman of the Audit Committee of the Company, serves as a Director and Chief Financial Officer of MEDIROM, a company listed on Nasdaq.
SBC Kijimadaira Resort Inc.
Previously a subsidiary of SBC Inc., a company controlled by the CEO of the Company; Merged with and into SBC Inc. on July 1, 2025, and corporate existence ceased.
As of June 30, 2026 and December 31, 2025, the balances with related parties are as follows:
Accounts receivable
June 30, 2026
December 31, 2025
Medical Corporation Shobikai
$
10,334,652
$
6,618,853
Medical Corporation Nasukai
11,228,286
7,268,301
Medical Corporation Kowakai
11,279,357
6,930,382
Medical Corporation Aikeikai
3,353,695
2,938,667
Medical Corporation Jukeikai
1,130,638
920,649
Medical Corporation Association Furinkai
684,630
1,065,239
Medical Corporation Ritz Cosmetic Surgery
1,165,338
978,614
Medical Corporation Association Junikai
1,480,539
700,794
SBC Tokyo Medical University
6,141
5,614
AI Med Inc.
—
33
SBC Inc.
2,837
382
Public Interest Foundation SBC Medical Promotion Foundation
26
30
General Incorporated Association SBC
—
5,171
Medical Corporation Misakikai
77,442
73,734
General Incorporated Association Miotokai
5,105
5,267
Total
$
40,748,686
$
27,511,730
Short-term investments
June 30, 2026
December 31, 2025
MEDIROM Healthcare Technologies Inc.
$
307,922
$
319,193
Total
$
307,922
$
319,193
For the Six Months Ended June 30,
For the three Months Ended June 30,
Interest Income
2026
2025
2026
2025
MEDIROM Healthcare Technologies Inc.
$
3,465
$
—
$
3,465
$
—
Total
$
3,465
$
—
$
3,465
$
—
In December 2025, the Company purchased unsecured convertible bonds issued by MEDIROM with a principal amount of JPY50,000,000, which are recorded as short-term investments - related parties. In June 2026, MEDIROM exercised its option to extend the maturity date of these bonds from June 30, 2026 to December 25, 2026, in accordance with the original terms. Consequently, the period for exercising the conversion rights was also extended to December 7, 2026.
The balances of due to and due from related parties represent outstanding loans from and to related parties, respectively, as of June 30, 2026 and December 31, 2025. These loans are unsecured, interest-free and due on demand.
The Company paid officer compensation of approximately JPY20 million per month to Yoshiko Aikawa, the mother of the Company’s CEO, which was recorded in selling, general and administrative expenses. Such compensation amounted to $376,414 and $414,898 for the three months ended June 30, 2026 and 2025, respectively, and $758,799 and $808,233 for the six months ended June 30, 2026 and 2025, respectively. Ms. Aikawa served as the Representative Director of the Company’s principal operating subsidiary, SBC Medical Group Co., Ltd. (SBC Japan), until March 25, 2026. On that date, she resigned from her position as Representative Director and continues to serve as a director of the subsidiary.
Also see Note 2(a), 3, 9, 12, 13, 16 and 19 for more transactions with related parties.
NOTE 18 — SEGMENT REPORTING
The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, reviews financial information to make operating decisions, assess performance and allocate resources by segment. Beginning in the second quarter of 2026, following the inclusion of Waqoo’s results of operations, the Company reports its operations in two reportable segments: SBC Core Segment and Waqoo Segment. Prior to this change, the Company viewed its operations and managed its business as a single reportable segment. The SBC Core Segment primarily derives revenues from providing comprehensive management services to MCs and their clinics. The Waqoo Segment comprises Waqoo and its subsidiary, Cell Pro Japan Co., Ltd., and primarily derives revenues from medical support services and direct-to-consumer product sales.
The accounting policies for the reportable segments are the same as those described in Note 2. The CODM monitors segment actual results against budget and updated forecasts throughout the year. These results are used to assess segment performance. Intersegment transactions are generally accounted for on a cost-plus basis and are eliminated in consolidation, and therefore do not affect consolidated results.
The significant segment expenses regularly reviewed by the CODM and included in the measure of segment income from operations are cost of revenues and selling, general and administrative expenses. Segment asset information is not regularly reviewed by the CODM.
The revenues and operating results by the Company’s reportable segments were as follows:
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
SBC Core Segment
Revenues from external customers
$
44,673,560
$
43,358,847
$
87,734,122
$
90,687,548
Intersegment revenues
5,157
—
5,157
—
Total revenues
44,678,717
43,358,847
87,739,279
90,687,548
Cost of revenues
14,441,272
13,348,270
27,155,100
22,943,887
Selling, general and administrative expenses
14,993,311
15,456,385
27,620,030
28,987,395
Segment income from operations
$
15,244,134
$
14,554,192
$
32,964,149
$
38,756,266
Waqoo Segment
Revenues
$
4,514,508
$
—
$
4,514,508
$
—
Intersegment revenues
5,223,313
—
5,223,313
—
Total revenues
9,737,821
—
9,737,821
—
Cost of revenues
3,952,020
—
3,952,020
—
Selling, general and administrative expenses
2,029,629
—
2,029,629
—
Segment income from operations
$
3,756,172
$
—
$
3,756,172
$
—
Intersegment Eliminations
Revenues
$
(5,228,470
)
$
—
$
(5,228,470
)
$
—
Cost of revenues
(5,182,540
)
—
(5,182,540
)
—
Selling, general and administrative expenses
(6,174
)
—
(6,174
)
—
Intersegment income from operations
$
(39,756
)
$
—
$
(39,756
)
$
—
Consolidated
Revenues
$
49,188,068
$
43,358,847
$
92,248,630
$
90,687,548
Cost of revenues
13,210,752
13,348,270
25,924,580
22,943,887
Selling, general and administrative expenses
17,016,766
15,456,385
29,643,485
28,987,395
Income from operations
18,960,550
14,554,192
36,680,565
38,756,266
Other income (expenses), net *
594,136
(1,013,831
)
1,730,732
6,235,502
Income before income taxes and equity in losses of equity method investees
$
19,554,686
$
13,540,361
$
38,411,297
$
44,991,768
* Other income (expenses), net consists of interest income, interest expense, net foreign currency exchange gain (loss), other income, other expenses, and gain on redemption of life insurance policies, as applicable.
NOTE 19 — COMMITMENTS AND CONTINGENCIES
Guarantees
As of June 30, 2026 and December 31, 2025, a subsidiary of the Company provided a guarantee on the debt of its CEO in the amounts of $203,512 and $228,210, respectively. As of June 30, 2026 and December 31, 2025, the Company did not record a liability in the unaudited consolidated balance sheets for the guarantee because, based on management’s assessment, it was not probable that the Company would be required to make payments under the guarantee.
Investment Commitment (OT Midco)
In addition to the $20 million investment in OT Midco discussed in Note 4, the Company has committed to make an additional $5 million investment in cash, payable in December 2026 or such other month as may be mutually agreed upon by the Company and the investee. The Company will recognize the additional investment when the additional cash investment is made.
From time to time, the Company is involved in legal proceedings, claims and other matters arising in the ordinary course of business. The Company assesses the likelihood of an adverse outcome and, where appropriate, establishes accruals for loss contingencies in accordance with applicable accounting guidance. If a loss is reasonably possible, the Company discloses the nature of the contingency and an estimate of the possible loss or range of loss, or states that such an estimate cannot be made.
On February 11, 2026, a purported stockholder class action complaint was filed against the Company and its directors in the Court of Chancery of the State of Delaware, alleging violations under Delaware General Corporation Law Section 141(k) and Delaware common law, due to the Company’s certificate of incorporation improperly restricting the removal of directors to “only for cause.” The complaint seeks an unspecified amount of declaratory and injunctive relief, class certification, and an award of attorneys’ fees and costs, among other relief as the court may deem just and proper.
At the Company’s 2026 annual meeting of stockholders held on July 8, 2026, the stockholders approved amendments to the Company’s certificate of incorporation, including an amendment to remove the provision stating that directors may be removed only for cause, which is the subject of the complaint. The Company cannot reasonably estimate a range of loss for this action as of the date the unaudited consolidated financial statements are issued.
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. 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 II, Item 1A. Risk Factors” of this Quarterly Report, “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 its VIE (prior to its deconsolidation), 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 (including business consignment agreements of the same nature) 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 June 30, 2026 and 2025, we generated revenues of $49,188,068 and $43,358,847, respectively, and we reported net income attributable to SBC Medical Group Holdings Incorporated of $10,692,822 and $2,458,240, respectively. For the six months ended June 30, 2026 and 2025, we generated revenues of $92,248,630 and $90,687,548, respectively, and we reported net income attributable to SBC Medical Group Holdings Incorporated of $22,000,893 and $23,960,686, respectively, and cash flows provided by (used in) operating activities of $31,741,248 and $(6,411,168), respectively. As of June 30, 2026, we had retained earnings of $262,449,513.
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 June 30, 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, our consolidated results for the three months ended June 30, 2026 include Waqoo’s results of operations for the period from January 1, 2026 to March 31, 2026. For comparative purposes, the 2025 segment amounts presented in the tables below relate entirely to the SBC Core Segment, as Waqoo was not consolidated during those periods.
The following table summarizes our results of operations as reflected in our unaudited consolidated statements of operations and comprehensive income for the three months ended June 30, 2026 and 2025, and presents information regarding amounts and percentage changes during those periods.
For the Three Months Ended June 30,
2026
2025
Variance
Amount
% of revenue
Amount
% of revenue
Amount
%
Revenues, net (including net revenues provided to related parties)
$
49,188,068
100.00
%
$
43,358,847
100.00
%
$
5,829,221
13.44
%
Cost of revenues (including cost of revenues from related parties)
13,210,752
26.86
%
13,348,270
30.79
%
(137,518
)
(1.03
)%
Gross profit
35,977,316
73.14
%
30,010,577
69.21
%
5,966,739
19.88
%
Operating expenses (including selling, general and administrative expenses from related parties)
17,016,766
34.60
%
15,456,385
35.65
%
1,560,381
10.10
%
Income from operations
18,960,550
38.55
%
14,554,192
33.57
%
4,406,358
30.28
%
Other income (expenses)
594,136
1.21
%
(1,013,831
)
(2.34
)%
1,607,967
(158.60
)%
Income before income taxes and equity in losses of equity method investees
19,554,686
39.75
%
13,540,361
31.23
%
6,014,325
44.42
%
Income tax expense
7,823,743
15.91
%
11,100,509
25.60
%
(3,276,766
)
(29.52
)%
Equity in losses of equity method investees, net of tax
(568,652
)
(1.16
)%
—
0.00
%
(568,652
)
NM
Net income
11,162,291
22.69
%
2,439,852
5.63
%
8,722,439
357.50
%
Less: net income (loss) attributable to non-controlling interests
469,469
0.95
%
(18,388
)
(0.04
)%
487,857
(2,653.13
)%
Net income attributable to SBC Medical Group Holdings Incorporated
$
10,692,822
21.74
%
$
2,458,240
5.67
%
$
8,234,582
334.98
%
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 June 30,
Variance
2026
2025
Amount
%
SBC Core Segment
Franchising revenue
$
9,515,061
$
10,007,581
$
(492,520
)
(4.92
)%
Procurement revenue
13,401,040
15,756,519
(2,355,479
)
(14.95
)%
Management services revenue
12,849,245
5,138,578
7,710,667
150.05
%
Rental services revenue
3,875,860
6,851,176
(2,975,316
)
(43.43
)%
Others
5,032,354
5,604,993
(572,639
)
(10.22
)%
Subtotal
44,673,560
43,358,847
1,314,713
3.03
%
Waqoo Segment
4,514,508
—
4,514,508
NM
Total
$
49,188,068
$
43,358,847
$
5,829,221
13.44
%
Revenues, net, increased by 13.44% from $43,358,847 for the three months ended June 30, 2025 to $49,188,068 for the three months ended June 30, 2026.
Japanese Yen (“JPY”) depreciated against the U.S. dollar during the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The average rate against the dollar for the SBC Core Segment was 159.3346 yen for the three months ended June 30, 2026 compared to 144.0297 yen for the same period in 2025. Financial results for the Waqoo Segment are consolidated on a three-month lag basis, and the average rate applied for its reporting period was 156.9101 yen. For the three months ended June 30, 2026 and 2025, we generated net revenues of $49,188,068 (JPY 7,826 million) and $43,358,847 (JPY 6,245 million), respectively, and we reported net income of $11,162,291 (JPY 1,781 million) and $2,439,852 (JPY 310 million), respectively. Overall, the unfavorable impacts of the period-to-period foreign exchange rate changes on net revenues and net income were $4,747,098 and $1,322,609, respectively, for the three months ended June 30, 2026.
The main reasons for the variance of $5,829,221 in revenues, net per revenue stream are as follows:
SBC Core Segment
Franchising Revenue
Franchising revenue for the three months ended June 30, 2026 decreased to $9,515,061 by $492,520, or 4.92%, from $10,007,581 for the same period in 2025. This decrease was mainly due to the depreciation of JPY.
Procurement Revenue
The procurement revenue for the three months ended June 30, 2026 decreased to $13,401,040 by $2,355,479, or 14.95%, from $15,756,519 for the same period in 2025. This decrease was mainly due to a decline in orders from MCs for medical materials, reflecting a temporary increase in procurement activities associated with the business expansion of MCs in the same period of the prior year as well as the depreciation of JPY.
Management Services Revenue
The management services revenue for the three months ended June 30, 2026 increased to $12,849,245 by $7,710,667, or 150.05%, from $5,138,578 for the same period in 2025. This increase was mainly due to lower point redemptions, which were accounted for as a reduction of loyalty program management revenue, resulting from the revision of program policy effective in June 2025, partially offset by the depreciation of JPY.
Rental Services Revenue
The rental services revenue for the three months ended June 30, 2026 decreased to $3,875,860 by $2,975,316, or 43.43%, from $6,851,176 for the same period in 2025. This decrease was mainly due to a decline in revenue from rentals of laser hair removal equipment to existing clinics, as the prior-year period included a higher level of such rentals primarily associated with clinic openings and equipment upgrades at existing clinics, as well as the depreciation of JPY.
Others
The other revenues for the three months ended June 30, 2026 decreased to $5,032,354 by $572,639, or 10.22%, from $5,604,993 for the same period in 2025. This decrease was mainly due to the depreciation of JPY, partially offset by higher revenue from leasehold improvement services.
Waqoo Segment
Waqoo Segment revenue for the three months ended June 30, 2026 was $4,514,508. There was no comparable revenue for the same period in 2025 because Waqoo and its subsidiary, Cell Pro Japan Co., Ltd. (“Cell Pro”), were not consolidated subsidiaries during that period. This revenue was primarily derived from medical support services and direct-to-consumer product sales.
Cost of Revenues
Cost of revenues for the three months ended June 30, 2026 was $13,210,752 compared to $13,348,270 for the same period in 2025. The decrease was mainly due to lower costs in the SBC Core Segment associated with the decline in revenue from rentals of laser hair removal equipment to existing clinics as well as the depreciation of JPY. This decrease was partially offset by the inclusion of costs attributable to Waqoo and Cell Pro, whose operating results were consolidated beginning in the current-year period.
Gross Profit
Gross profit for the three months ended June 30, 2026 was $35,977,316 compared to $30,010,577 for the same period in 2025. The increase in gross profit by $5,966,739 or 19.88% was mainly due to the inclusion of gross profit from the Waqoo Segment and an increase in management services revenue, partially offset by a decrease in procurement revenue, which has a relatively high gross margin.
Operating expenses for the three months ended June 30, 2026 and 2025 were as follows:
For the Three Months Ended June 30,
Variance
2026
2025
Amount
%
Salaries and welfare
$
7,790,908
$
6,765,517
$
1,025,391
15.16
%
Depreciation and amortization expense
346,539
471,763
(125,224
)
(26.54
)%
Consulting and professional service fees
5,125,152
3,878,036
1,247,116
32.16
%
Advertising expense
467,606
973,933
(506,327
)
(51.99
)%
Taxes and dues
482,733
591,817
(109,084
)
(18.43
)%
Recruiting expense
200,596
142,247
58,349
41.02
%
Lease expense
677,512
558,738
118,774
21.26
%
Office, utility and other expenses
1,925,720
2,074,334
(148,614
)
(7.16
)%
Total
$
17,016,766
$
15,456,385
$
1,560,381
10.10
%
Operating expenses increased to $17,016,766 for the three months ended June 30, 2026 by $1,560,381, or 10.10%, from $15,456,385 for the same period in 2025. The increase was mainly due to the increase in consulting and professional service fees and salaries and welfare, partially offset by the decrease in advertising expense.
Consulting and professional service fees increased by $1,247,116, or 32.16%, to $5,125,152 for the three months ended June 30, 2026 from $3,878,036 for the same period in 2025, mainly due to $1.4 million transaction costs incurred by the Company in connection with the secondary public offering of common stock sold by the Company’s CEO, which was completed in April 2026.
Salaries and welfare increased by $1,025,391, or 15.16%, to $7,790,908 for the three months ended June 30, 2026 from $6,765,517 for the same period in 2025, mainly due to the inclusion of personnel costs attributable to Waqoo and Cell Pro, which were consolidated beginning in the current-year period, and higher social insurance premiums driven by an increase in headcount at a Japanese subsidiary.
Advertising expense decreased by $506,327, or 51.99%, to $467,606 for the three months ended June 30, 2026 from $973,933 for the same period in 2025, mainly due to higher promotional point redemptions in the prior-year period.
Income From Operations
Income from operations for the three months ended June 30, 2026 and 2025 were as follows:
For the Three Months Ended June 30,
Variance
2026
2025
Amount
%
SBC Core Segment
$
15,244,134
$
14,554,192
$
689,942
4.74
%
Waqoo Segment
3,756,172
—
3,756,172
NM
Intersegment Eliminations
(39,756
)
—
(39,756
)
NM
Total
$
18,960,550
$
14,554,192
$
4,406,358
30.28
%
Income from operations for the three months ended June 30, 2026 was $18,960,550 compared to $14,554,192 for the same period in 2025. The increase in income from operations of $4,406,358, or 30.28%, was mainly due to the inclusion of income from operations from the Waqoo Segment and an increase in management services revenue, partially offset by a decrease in procurement revenue, which has a relatively high gross margin, as a result of the factors described above.
Other income (expenses) for the three months ended June 30, 2026 and 2025, were as follows:
For the Three Months Ended June 30,
Variance
2026
2025
Amount
%
Interest income
$
8,520
$
22,882
$
(14,362
)
(62.77
)%
Interest expense
(128,629
)
(49,651
)
(78,978
)
159.07
%
Foreign currency exchange gain (loss), net
1,032,259
(769,720
)
1,801,979
(234.11
)%
Other income
137,056
145,403
(8,347
)
(5.74
)%
Other expenses
(455,070
)
(362,745
)
(92,325
)
25.45
%
Total
$
594,136
$
(1,013,831
)
$
1,607,967
(158.60
)%
Other income (expenses), net was $594,136 for the three months ended June 30, 2026 compared to $(1,013,831) for the same period in 2025. The increase in other income (expense) of $1,607,967, or 158.60%, was mainly due to foreign currency exchange gain resulting from the depreciation of the Japanese Yen.
Income Tax Expense
Income tax expense for the three months ended June 30, 2026 was $7,823,743 compared to $11,100,509 for the same period in 2025. The decrease in income tax expense of $3,276,766, or 29.52%, was mainly due to the absence of a significant tax expense recognized in the three months ended June 30, 2025, which was associated with a deemed contribution treated as a taxable gain under Japanese tax law.
The effective tax rate was 40.01% and 81.98% for the three months ended June 30, 2026 and 2025, respectively. The decrease of 41.97 percentage points was mainly due to the absence of the specific event that occurred in the same period in 2025; specifically, the deemed contribution in connection with the price modification on disposal of an aircraft to General Incorporated Association SBC, an entity controlled by the CEO of the Company, who is also the controlling shareholder of the Company, was treated as a taxable gain under Japanese tax law and increased the effective tax rate for the three months ended June 30, 2025.
Net Income
As a result of the foregoing, we reported net income of $11,162,291 for the three months ended June 30, 2026, representing an increase of $8,722,439, or 357.50%, from $2,439,852 for the three months ended June 30, 2025.
Net Income (Loss) Attributable to Non-controlling Interests
Net income attributable to non-controlling interests was $469,469 for the three months ended June 30, 2026, as compared to net loss attributable to non-controlling interests of $18,388 for the three months ended June 30, 2025.
Comparison of Results of Operations for the Six Months Ended June 30, 2026 and 2025
Because we acquired control of Waqoo on December 19, 2025 and consolidated the financial information of Waqoo and its subsidiary on a three-month reporting lag, our consolidated results for the six months ended June 30, 2026 include Waqoo’s results of operations for the period from January 1, 2026 to March 31, 2026. For comparative purposes, all 2025 amounts in the tables below are attributable to the SBC Core Segment, as Waqoo was not consolidated during those periods.
The following table summarizes our results of operations as reflected in our unaudited consolidated statements of operations and comprehensive income for the six months ended June 30, 2026 and 2025, and presents information regarding amounts and percentage changes during those periods.
For the Six Months Ended June 30,
2026
2025
Variance
Amount
% of revenue
Amount
% of revenue
Amount
%
Revenues, net (including net revenues provided to related parties)
$
92,248,630
100.00
%
$
90,687,548
100.00
%
$
1,561,082
1.72
%
Cost of revenues (including cost of revenues from related parties)
25,924,580
28.10
%
22,943,887
25.30
%
2,980,693
12.99
%
Gross profit
66,324,050
71.90
%
67,743,661
74.70
%
(1,419,611
)
(2.10
)%
Operating expenses (including selling, general and administrative expenses from related parties)
29,643,485
32.13
%
28,987,395
31.96
%
656,090
2.26
%
Income from operations
36,680,565
39.76
%
38,756,266
42.74
%
(2,075,701
)
(5.36
)%
Other income
1,730,732
1.88
%
6,235,502
6.88
%
(4,504,770
)
(72.24
)%
Income before income taxes and equity in losses of equity method investees
38,411,297
41.64
%
44,991,768
49.61
%
(6,580,471
)
(14.63
)%
Income tax expense
15,351,334
16.64
%
21,059,966
23.22
%
(5,708,632
)
(27.11
)%
Equity in losses of equity method investees, net of tax
(568,652
)
(0.62
)%
—
—
%
(568,652
)
NM
Net income
22,491,311
24.38
%
23,931,802
26.39
%
(1,440,491
)
(6.02
)%
Less: net income (loss) attributable to non-controlling interests
490,418
0.53
%
(28,884
)
(0.03
)%
519,302
(1,797.89
)%
Net income attributable to SBC Medical Group Holdings Incorporated
$
22,000,893
23.85
%
$
23,960,686
26.42
%
$
(1,959,793
)
(8.18
)%
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 Six Months Ended June 30,
Variance
2026
2025
Amount
%
SBC Core Segment
Franchising revenue
$
18,606,801
$
25,726,863
$
(7,120,062
)
(27.68
)%
Procurement revenue
25,745,406
30,089,302
(4,343,896
)
(14.44
)%
Management services revenue
24,779,036
13,866,681
10,912,355
78.69
%
Rental services revenue
7,311,782
12,491,690
(5,179,908
)
(41.47
)%
Others
11,291,097
8,513,012
2,778,085
32.63
%
Subtotal
87,734,122
90,687,548
(2,953,426
)
(3.26
)%
Waqoo Segment
4,514,508
—
4,514,508
NM
Total
$
92,248,630
$
90,687,548
$
1,561,082
1.72
%
Revenues, net, increased by 1.72% from $90,687,548 for the six months ended June 30, 2025 to $92,248,630 for the six months ended June 30, 2026.
Japanese Yen (“JPY”) depreciated against the U.S. dollar during the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The average rate against the dollar for the SBC Core Segment was 158.1446 yen for the six months ended June 30, 2026 compared to 148.4720 yen for the same period in 2025. Financial results for the Waqoo Segment are consolidated on a three-month lag basis, and the average rate applied for its reporting period was 156.9101 yen. For the six months ended June 30, 2026 and 2025, we generated net revenues of $92,248,630 (JPY 14,583 million) and $90,687,548 (JPY 13,465 million), respectively, and we reported net income of $22,491,311 (JPY 3,559 million) and $23,931,802 (JPY 3,562 million), respectively. Overall, the unfavorable impacts of the period-to-period foreign exchange rate changes on net revenues and net income were $5,715,671 and $1,552,740, respectively, for the six months ended June 30, 2026.
The main reasons for the variance of $1,561,082 in revenues, net per revenue stream are as follows:
Franchising revenue for the six months ended June 30, 2026 decreased to $18,606,801 by $7,120,062, or 27.68%, from $25,726,863 for the same period in 2025. 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 as well as the depreciation of JPY.
Procurement Revenue
The procurement revenue for the six months ended June 30, 2026 decreased to $25,745,406 by $4,343,896, or 14.44%, from $30,089,302 for the same period in 2025. This decrease was mainly due to a decline in orders from MCs for medical materials, reflecting a temporary increase in procurement activities associated with the business expansion of MCs in the same period of the prior year as well as the depreciation of JPY.
Management Services Revenue
The management services revenue for the six months ended June 30, 2026 increased to $24,779,036 by $10,912,355, or 78.69%, from $13,866,681 for the same period in 2025. This increase was mainly due to lower point redemptions, which were accounted for as a reduction of loyalty program management revenue, resulting from the revision of program policy effective in June 2025, partially offset by the depreciation of JPY.
Rental Services Revenue
The rental services revenue for the six months ended June 30, 2026 decreased to $7,311,782 by $5,179,908, or 41.47%, from $12,491,690 for the same period in 2025. This decrease was mainly due to a decline in revenue from rentals of laser hair removal equipment to existing clinics, as the prior-year period included a higher level of such rentals primarily associated with clinic openings and equipment upgrades at existing clinics, as well as the depreciation of JPY.
Others
The other revenues for the six months ended June 30, 2026 increased to $11,291,097 by $2,778,085, or 32.63%, from $8,513,012 for the same period in 2025. This increase was mainly due to higher leasehold improvement services revenue as well as higher revenues from Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries, which were acquired in November 2024 and consolidated in the Company’s financial statements with a three-month reporting lag, as the current-year period reflected six months of their results compared with only four months in the prior-year period, partially offset by the depreciation of JPY.
Waqoo Segment
Waqoo Segment revenue for the six months ended June 30, 2026 was $4,514,508. There was no comparable revenue for the same period in 2025 because Waqoo and its subsidiary, Cell Pro, were not consolidated subsidiaries during that period. This revenue was primarily derived from medical support services and direct-to-consumer product sales.
Cost of Revenues
Cost of revenues for the six months ended June 30, 2026 was $25,924,580 compared to $22,943,887 for the same period in 2025. The increase was mainly due to the inclusion of costs attributable to Waqoo and Cell Pro, which were consolidated beginning in the current-year period, as well as higher costs related to leasehold improvement services, the inclusion of six months of costs from Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries in the current-year period under the Company’s three-month reporting lag, compared with only four months in the prior-year period, and higher personnel costs resulting from an increase in headcount to support newly established departments since April 2025. This increase was partially offset by lower costs associated with the decline in revenue from rentals of laser hair removal equipment to existing clinics.
Gross Profit
Gross profit for the six months ended June 30, 2026 was $66,324,050 compared to $67,743,661 for the same period in 2025. The decrease in gross profit of $1,419,611, or 2.10%, was mainly due to the decrease in franchising revenue and procurement revenue, with relatively high gross margin, as a result of the factors described above. This decrease was partially offset by the inclusion of gross profit from the Waqoo Segment.
Operating expenses for the six months ended June 30, 2026 and 2025 were as follows:
For the Six Months Ended June 30,
Variance
2026
2025
Amount
%
Salaries and welfare
$
13,988,659
$
13,207,259
$
781,400
5.92
%
Depreciation and amortization expense
657,075
933,168
(276,093
)
(29.59
)%
Consulting and professional service fees
8,599,741
7,176,118
1,423,623
19.84
%
Advertising expense
1,034,952
1,656,099
(621,147
)
(37.51
)%
Taxes and dues
565,098
837,279
(272,181
)
(32.51
)%
Recruiting expense
448,480
386,624
61,856
16.00
%
Lease expense
1,279,758
1,199,327
80,431
6.71
%
Office, utility and other expenses
3,069,722
3,591,521
(521,799
)
(14.53
)%
Total
$
29,643,485
$
28,987,395
$
656,090
2.26
%
Operating expenses increased to $29,643,485 for the six months ended June 30, 2026 by $656,090, or 2.26%, from $28,987,395 for the same period in 2025. The increase was mainly due to the increase in consulting and professional service fees and salaries and welfare, partially offset by the decrease in advertising expense.
Consulting and professional service fees increased by $1,423,623, or 19.84%, to $8,599,741 for the six months ended June 30, 2026 from $7,176,118 for the same period in 2025, mainly due to $1.4 million transaction costs incurred by the Company in connection with the secondary public offering of common stock sold by the Company’s CEO, which was completed in April 2026.
Salaries and welfare increased by $781,400, or 5.92%, to $13,988,659 for the six months ended June 30, 2026 from $13,207,259 for the same period in 2025, mainly due to the inclusion of personnel costs attributable to Waqoo and Cell Pro, which were consolidated beginning in the current-year period, and higher social insurance premiums driven by an increase in headcount at a Japanese subsidiary.
Advertising expense decreased by $621,147, or 37.51%, to $1,034,952 for the six months ended June 30, 2026 from $1,656,099 for the same period in 2025, mainly due to higher promotional point redemptions in the prior-year period.
Income From Operations
Income from operations for the six months ended June 30, 2026 and 2025 were as follows:
For the Six Months Ended June 30,
Variance
2026
2025
Amount
%
SBC Core Segment
$
32,964,149
$
38,756,266
$
(5,792,117
)
(14.94
)%
Waqoo Segment
3,756,172
—
3,756,172
NM
Intersegment Eliminations
(39,756
)
—
(39,756
)
NM
Total
$
36,680,565
$
38,756,266
$
(2,075,701
)
(5.36
)%
Income from operations for the six months ended June 30, 2026 was $36,680,565 compared to $38,756,266 for the same period in 2025. The decrease in income from operations of $2,075,701, or 5.36%, was mainly due to the decrease in franchising revenue and procurement revenue, with relatively high gross margin, as a result of the factors described above, partially offset by the inclusion of income from operations from the Waqoo Segment.
Other income (expenses) for the six months ended June 30, 2026 and 2025, were as follows:
For the Six Months Ended June 30,
Variance
2026
2025
Amount
%
Interest income
$
129,889
$
78,215
$
51,674
66.07
%
Interest expense
(243,435
)
(55,858
)
(187,577
)
335.81
%
Foreign currency exchange gain (loss), net
1,893,937
(1,828,246
)
3,722,183
(203.59
)%
Other income
628,620
296,731
331,889
111.85
%
Other expenses
(678,279
)
(1,001,478
)
323,199
(32.27
)%
Gain on redemption of life insurance policies
—
8,746,138
(8,746,138
)
(100.00
)%
Total
$
1,730,732
$
6,235,502
$
(4,504,770
)
(72.24
)%
Other income (expenses), net was $1,730,732 for the six months ended June 30, 2026 compared to $6,235,502 for the same period in 2025. The decrease in other income (expense) of $4,504,770, or 72.24%, was mainly due to a gain on redemption of life insurance policies of $8,746,138 in 2025, partially offset by foreign currency exchange gain resulting from the depreciation of the Japanese Yen.
Income Tax Expense
Income tax expense for the six months ended June 30, 2026 was $15,351,334 compared to $21,059,966 for the same period in 2025. The decrease in income tax expense of $5,708,632, or 27.11%, was mainly due to the absence of a significant tax expense recognized in the three months ended June 30, 2025, which was associated with a deemed contribution treated as a taxable gain under Japanese tax law.
The effective tax rate was 39.97% and 46.81% for the six months ended June 30, 2026 and 2025, respectively. The decrease of 6.84 percentage points was mainly due to the absence of the specific event that occurred in the same period in 2025; specifically, the deemed contribution in connection with the price modification on disposal of an aircraft to General Incorporated Association SBC, an entity controlled by the CEO of the Company, who is also the controlling shareholder of the Company, was treated as a taxable gain under Japanese tax law and increased the effective tax rate for the six months ended June 30, 2025.
Net Income
As a result of the foregoing, we reported net income of $22,491,311 for the six months ended June 30, 2026, representing a decrease of $1,440,491, or 6.02%, from $23,931,802 for the six months ended June 30, 2025.
Net Income (Loss) Attributable to Non-controlling Interests
Net income attributable to non-controlling interests was $490,418 for the six months ended June 30, 2026, as compared to net loss attributable to non-controlling interests of $28,884 for the six months ended June 30, 2025.
Liquidity and Capital Resources
As of June 30, 2026, the Company had $184,311,213 in cash and cash equivalents compared to $163,773,838 as of December 31, 2025. In addition, the Company had $43,237,261 in accounts receivable as of June 30, 2026 compared to $29,899,751 as of December 31, 2025. 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 June 30, 2026, the Company’s working capital balance was $180,927,568. 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 unaudited consolidated financial statements included in this Quarterly Report.
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.
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. On December 29, 2025, the Company’s board of directors authorized a share repurchase program of up to $20.0 million, pursuant to which the Company may repurchase shares of its common stock from time to time. The program terminates on December 31, 2026. 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 requirements and other business considerations.
Cash Flows for the Six Months Ended June 30, 2026 and 2025
The following table provides a summary of our cash flows for the periods indicated.
For the Six Months Ended June 30,
Variance
2026
2025
Amount
%
Net cash provided by (used in) operating activities
$
31,741,248
$
(6,411,168
)
$
38,152,416
(595.09
)%
Net cash provided by investing activities
37,206
15,397,998
(15,360,792
)
(99.76
)%
Net cash provided by (used in) financing activities
(3,803,472
)
6,901,719
(10,705,191
)
(155.11
)%
Effect of exchange rate changes
(7,437,607
)
11,808,241
(19,245,848
)
(162.99
)%
Net change in cash and cash equivalents
20,537,375
27,696,790
(7,159,415
)
(25.85
)%
Cash and cash equivalents as of the beginning of the period
163,773,838
125,044,092
38,729,746
30.97
%
Cash and cash equivalents as of the end of the period
$
184,311,213
$
152,740,882
$
31,570,331
20.67
%
Operating Activities
Net cash provided by operating activities was $31,741,248 for the six months ended June 30, 2026, mainly derived from net income of $22,491,311 for the period, reconciled by a non-cash lease expense of $2,861,022 and deferred income tax benefit of $4,545,948, and net changes in operating assets and liabilities, which mainly included an increase in accounts receivable - related parties of $14,570,601, an increase in accounts payable of $6,593,276, an increase in income tax payable of $11,194,897, a decrease in customer loans receivable of $5,357,608, a decrease in prepaid expenses and other current assets of $4,173,911 and a decrease in operating lease liabilities of $2,876,789.
Net cash used in operating activities was $6,411,168 for the six months ended June 30, 2025, mainly derived from net income of $23,931,802 for the period, reconciled by a gain on redemption of life insurance policies of $8,746,138 and deferred income tax expense of $7,452,983, and net changes in operating assets and liabilities, which mainly included an increase in accounts receivable - related parties of $17,039,113, an increase in finance lease receivables – related parties of $6,482,967, a decrease in customer loans receivable of $8,081,703, an increase in accounts payable to related parties of $2,455,865, a decrease in notes payables - related parties of $5,031,570, a decrease in advances from customers – related parties of $2,363,891, a decrease in income tax payable of $6,030,526, and a decrease in accrued liabilities and other current liabilities of $2,508,035.
Investing Activities
During the six months ended June 30, 2026, net cash provided by investing activities of $37,206 mainly reflected the $1.0 million of net proceeds received from deconsolidation of VIE, $0.8 million of prepayments for property and equipment and $0.2 million of purchases of property and equipment.
During the six months ended June 30, 2025, net cash provided by investing activities of $15,397,998 was mainly the result of proceeds from redemption of life insurance policies of $17.7 million, offset by the payments made on behalf of related parties of $1.8 million.
Financing Activities
During the six months ended June 30, 2026, net cash used in financing activities of $3,803,472 was mainly due to the repayments of bank and other borrowings of $3.7 million.
During the six months ended June 30, 2025, net cash provided by financing activities of $6,901,719 was mainly due to the deemed contribution in connection with the price modification on disposal of property and equipment of $9.7 million, offset by repurchase of common stock of $2.4 million.
In April 2026, the Company completed a secondary public offering of 3,565,000 shares of common stock, at a price of $3.25 per share, including 465,000 shares pursuant to the underwriters’ option to purchase additional shares. All of the shares were sold by the Company’s CEO (the “Seller”). The Company did not sell any shares or receive any proceeds from the offering, nor did it repurchase any shares from the Seller. In connection with the offering, the Company incurred transaction costs of $1.4 million in aggregate, which were included in selling, general and administrative expenses in the unaudited consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2026.
Revisions to Management Service Agreements and Fees with Certain Medical Corporations
Effective June 1, 2026, the Company entered into renewed business consignment agreements with Medical Corporation Association Furinkai and Medical Corporation Association Junikai. The renewed agreements restructured the fee framework to better reflect actual service volumes, clinic sizes and the addition of new service offerings, including AI implementation support and financial analysis. The revised pricing is intended to align with the expanded operational support provided to these medical corporations.
Separately, effective July 1, 2026, the Company revised the fees for call-center services provided to Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai and Medical Corporation Jukeikai.
Collectively, these revisions are expected to increase the Company’s management service revenue by approximately $15 million on an annualized basis, based on the average exchange rate of 158.1 yen per U.S. dollar. The actual impact on future revenue may vary depending on service volumes, clinic performance, foreign exchange rates and other factors.
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 June 30, 2026, the future maturity of lease liabilities is as follows:
Years ending December 31,
Finance Lease
Operating Lease
Remainder of 2026
$
56,110
$
2,781,068
2027
76,703
4,513,169
2028
43,782
2,805,266
2029
7,335
263,360
2030
—
53,061
Thereafter
—
12,317
Total undiscounted lease payments
183,930
10,428,241
Less: imputed interest
(7,223
)
(126,686
)
Total lease liabilities
$
176,707
$
10,301,555
Bank and Other Borrowings
The Company borrowed funds from various banks and other financial institutions for working capital, securities investments, and mergers and acquisitions purposes.
As of June 30, 2026, future minimum borrowing payments are as follows:
There are no material off-balance sheet arrangements as of June 30, 2026 and December 31, 2025.
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 the 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.
We believe that there have been no material changes to our critical accounting policies and estimates from those disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” of our Annual Report.
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 unless, as of an applicable annual determination date, (i) the market value of our common stock held by non-affiliates is $250 million or more and (ii) either our annual revenues are $100 million or more or the market value of our common stock held by non-affiliates is $700 million or more.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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based on this evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2026 due to the previously identified material weaknesses in our internal control over financial reporting. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in periodic SEC filings 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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Despite the identified material weaknesses, we believe that our unaudited consolidated financial statements and other information contained in this Quarterly Report fairly present, in all material respects, our financial condition and results of operations for the periods presented.
We remain committed to the ongoing improvements in our disclosure controls and internal control over financial reporting, including execution of the remediation plan disclosed under “Part II, Item 9A. Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 27, 2026. The material weaknesses previously identified in the Annual Report remained un-remediated as of June 30, 2026.
Inherent Limitation on the Effectiveness of Internal Control
The effectiveness of any system of internal control over financial reporting is subject to inherent limitations. These include the exercise of judgment in designing, implementing, and operating controls, as well as the inherent inability to completely eliminate the risk of misconduct or error. Accordingly, while we aim to establish robust controls, any system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Additionally, the design of our disclosure controls and procedures is impacted by resource constraints and the necessity for management to balance the benefits of potential controls against their associated costs. Moreover, projections of effectiveness into future periods are subject to risks that controls may become inadequate over time due to evolving conditions or diminished compliance. We will continue to monitor and enhance our internal control as necessary or appropriate, but we cannot provide assurance that these improvements will fully eliminate all risks of material misstatement.
Changes in Internal Control over Financial Reporting
Except for the remediation efforts described above, there have been no material changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The information required by this item is incorporated by reference to Note 19 (Commitments and Contingencies) to the unaudited consolidated financial statements.
ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. In addition to the information in this Quarterly Report, these risks are more fully described under “Part I, Item 1A. Risk Factors” of the Annual Report. Except as set forth below, there have been no material changes to the risk factors set forth in the Annual Report. Any of these factors could result in a material adverse effect on our results of operations or financial condition.
Additional risk factors that are not presently known to us or that we currently deem immaterial may also impair our business or results of operations. If any such risk materializes, it could have a material adverse effect on our business, financial condition, results of operations, and growth prospects and cause the trading price of our securities to decline. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Because we are not currently in compliance with certain Nasdaq corporate governance requirements, Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our common stock began trading on the Nasdaq Global Market under the symbol “SBC” and our public warrants began trading on the Nasdaq Capital Market under the symbol “SBCWW” on September 18, 2024. In order to maintain the listing of our securities on Nasdaq, we must continue to satisfy Nasdaq’s continued listing requirements, which include certain financial, distribution and stock price standards, as well as corporate governance requirements, including requirements relating to the independence of our board of directors and audit committee and size of our audit committee.
On July 8, 2026, the date of our 2026 annual meeting of stockholders, we ceased to satisfy Nasdaq’s independence requirements for the composition of our board of directors and audit committee size requirements under Nasdaq Listing Rule 5605, as a result of the decision of one of our independent directors not to stand for re-election. On July 10, 2026, we received written notice from Nasdaq confirming that we were not in compliance with these requirements. The notice has no immediate effect on the listing of our securities. Nasdaq has provided us with a cure period until the earlier of our next annual meeting of stockholders or July 9, 2027; provided that, if our next annual meeting is held before January 5, 2027, we must evidence compliance no later than January 5, 2027. We are seeking to appoint an additional independent director to join our board prior to the expiration of the cure period. There can be no assurance that we will regain compliance within the cure period, and if we do not, Nasdaq rules require its staff to notify us that our securities will be subject to delisting, which we would be entitled to appeal such determination to a Nasdaq Hearings Panel.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity for our securities; a determination that our common stock is a “penny stock,” which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; a limited amount of news and analyst coverage; and a decreased ability to issue additional securities or obtain additional financing in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Amended and Restated Bylaws
As disclosed in our Current Report on Form 8-K, filed on July 14, 2026, on July 8, 2026, the Company’s board of directors approved and adopted the Company’s amended and restated bylaws (the “Amended and Restated Bylaws”), effective as of such date.
Among other items, including ministerial, clarifying and conforming changes, the Amended and Restated Bylaws reflect recent developments and clarifying revisions related to Delaware law and the federal securities laws (including with respect to stockholder proposals and meetings). The Amended and Restated Bylaws update the procedural and disclosure requirements for stockholder nominations of directors or proposals of other business at the Company’s meetings of stockholders (including both annual and special meetings of stockholders) under the Company’s advance notice provisions, including, without limitation: (1) incorporating universal proxy card rules pursuant to Rule 14a-19 under the Exchange Act, (2) requiring additional representations of stockholders nominating a director or proposing business, (3) in the case of director nominations, requiring additional information about director nominees, requiring director nominees to complete a questionnaire with respect to such director nominee’s background and qualification, and requiring director nominees to make certain representations, (4) restricting the number of director nominees a stockholder may nominate for election at a special meeting of stockholders to the number of directors to be elected at such special meeting, and (5) providing that the chair of the meeting, subject to the supervision, discretion and control of the board of directors, shall have the power to determine whether any nomination or business was made or proposed in accordance with the procedural and disclosure requirements in the Amended and Restated Bylaws.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is included as Exhibit 3.2 to this Quarterly Report and is incorporated herein by reference.
The following exhibits are filed or furnished as part of, or incorporated by reference into, this Quarterly Report.
The agreements and other documents filed as exhibits to this Quarterly Report are not intended to provide factual information or other disclosures other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH
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104
Cover page formatted as Inline XBRL and contained in Exhibit 101.
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.
SBC Medical Group Holdings Incorporated
Dated: August 13, 2026
By:
/s/ Yuya Yoshida
Name:
Yuya Yoshida
Title:
Chief Financial Officer and Chief Operating Officer
(Authorized Signatory and Principal Financial Officer)