SBC Medical Group Holdings Inc SBC US Equity☆

10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year endedDecember 31, 2025

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)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 949-593-0250

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

Securities registered pursuant to Section 12(g) of the Act: None

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

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

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

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

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

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

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

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2025, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $48.2 million, calculated by using the closing price of the Registrant’s Common Stock on such date on the Nasdaq Stock Market LLC of $4.64.

The number of shares of registrant’s Common Stock outstanding as of February 28, 2026 was 102,576,943, after deducting 1,304,308 shares of treasury stock.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2025. Portions of such proxy statement or Form 10-K/A, in lieu thereof, are incorporated by reference into Part III of this Annual Report on Form 10-K.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements 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 Annual Report include, but are not limited to, statements about:

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future financial performance of the Company;

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changes in the market and level of demand for our products and services;

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the expansion plans and opportunities of the Company;

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the ability of the Company to access additional capital;

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the ability of the Company to maintain the listing of the Company’s common stock on Nasdaq;

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public securities’ potential liquidity and trading;

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the impact from the outcome of any known and unknown litigation;

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the ability of the Company to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;

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expectations regarding future expenditures of the Company;

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the future mix of revenue and effect on gross margins of the Company;

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the attraction and retention of qualified directors, officers, employees and key personnel of the Company;

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the ability of the Company to compete effectively in a competitive industry;

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the ability to protect and enhance the Company’s corporate reputation and brand;

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expectations concerning the relationships and actions of the Company and its affiliates with third parties;

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the impact from future regulatory, judicial, and legislative changes in the Company’s industry;

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the ability to locate and acquire complementary products or product candidates and integrate those into the Company’s business;

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future arrangements with, or investments in, other entities or associations;

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intense competition and competitive pressures from other companies in the industries in which the Company operates;

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the possibility that we may be adversely affected by other economic, business, and/or competitive factors;

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changes in applicable laws or regulations; and

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other factors detailed under “Part I, Item 1A. Risk Factors.”

These forward-looking statements are based on information available as of the date of this Annual 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.

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In addition, statements that the Company “believes” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based upon information available to the Company as of the date of this Annual Report, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these 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. Some factors that could cause the Company’s actual results to differ include:

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the outcome of any legal or regulatory proceedings that have been, or may be, instituted in the future against the Company;

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the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

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risks related to macroeconomic or geopolitical developments;

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future exchange and interest rates;

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the risk that the Company fails to maintain an effective system of disclosure controls and internal controls over financial reporting, which could impair the Company’s ability to produce timely and accurate financial statements or comply with applicable regulations; and

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other risks and uncertainties indicated in this Annual Report, including those under “Part I, Item 1A. Risk Factors” herein, and other filings that have been made or will be made with the SEC by the Company.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Annual Report are more fully described under “Part I, Item 1A. Risk Factors” and elsewhere in this Annual Report. The risks described under the heading “Part I, Item 1A. Risk Factors” are not exhaustive. Other sections of this Annual Report describe additional factors that could adversely affect the business, financial condition or results of operations of the Company. 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. Forward-looking statements are not guarantees of performance. This is particularly true for a company like the Company that has a limited operating history to reference. 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.

Summary of Material Risks

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We are a holding company and depend upon our operating subsidiaries for our cash flows.

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We may need additional capital to execute our business plans, and additional financing may not be available on favorable terms or at all. If we raise additional capital through equity or debt financings, our stockholders may be diluted and our operations may become subject to additional restrictions.

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Our business depends significantly on the financial condition, performance and expansion of the MCs, our franchisees and other alliance partners, and we have substantial concentration in a limited number of such partners. We have limited ability to control their operations, their interests may conflict with ours, and their actions or failures to perform may adversely affect our business and expose us to liability.

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We may not be able to grow our franchise system, compete effectively, manage our growth, or maintain the strength and reputation of our brand.

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Adverse publicity, misconduct, safety concerns, product recalls, product liability claims, or unethical or non-compliant conduct by us, the MCs, our franchisees and other alliance partners, suppliers, business partners or other third parties could harm our reputation, brand and operating results.

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Any significant cybersecurity incident, disruption to our operating systems, or failure to safeguard personal information could subject us to significant legal, regulatory, financial, operational and reputational consequences.

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Uncertainties with respect to the development and use of artificial intelligence in our business may adversely affect our business and reputation.

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Failure by the MCs, other independently operated clinics and physicians, or our clinics and business partners to comply with applicable laws and regulations, including the Medical Care Act in Japan, privacy and personal information laws, and environmental and work safety laws, could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

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Our international operations and expansion outside Japan subject us to additional operational, regulatory, compliance and market risks.

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We are subject to risks associated with strategic alliances, acquisitions, minority investments and other investments, including acquisitions involving related party transactions, integration challenges, and the risk that such transactions do not achieve their intended strategic or financial benefits.

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We are involved in litigation from time to time and could incur substantial judgments, fines, legal fees or other costs. We and our subsidiaries have limited insurance coverage, and our operations may be interrupted by utility shortages or stoppages, fire, natural disasters or other calamities at or near our facilities.

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Challenging macroeconomic conditions, financial or economic crises, and trade tariffs or other trade barriers may adversely affect our franchisees, business partners and customers and could have a material adverse effect on our business, financial condition and results of operations.

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Our disclosure controls and procedures were not effective as of December 31, 2025, as a result of material weaknesses in our internal control over financial reporting that had not been fully remediated as of that date. Continued or additional control failures could impair our ability to report our financial results timely and accurately or prevent fraud.

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Nasdaq may delist our securities from trading on its exchange, which could limit investors' ability to make transactions in our securities, reduce liquidity and coverage, and adversely affect our ability to obtain additional financing.

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PART I

Item 1. Business. 5

Item 1A. Risk Factors 74

Item 1B. Unresolved Staff Comments. 103

Item 1C. Cybersecurity. 103

Item 2. Properties. 104

Item 3. Legal Proceedings. 104

Item 4. Mine Safety Disclosures. 104

PART II

Item 6. [Reserved]. 105

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 117

Item 8. Financial Statements and Supplementary Data. F-1

Item 9A. Controls and Procedures. 116

Item 9B. Other Information. 118

PART III

Item 10. Directors, Executive Officers and Corporate Governance. 119

Item 11. Executive Compensation. 119

Item 14. Principal Accountant Fees and Services. 119

PART IV

Item 15. Exhibits and Financial Statement Schedules 120

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PART I

Item 1. Business.

Unless the context indicates otherwise, any references herein to the “Company”, “we”, “us” and “our” refer to (i) SBC Medical Group, Inc. (formerly known as SBC Medical Group Holdings Incorporated), a Delaware corporation (“Legacy SBC”), and its consolidated subsidiaries and variable interest entity (“VIE”), prior to the consummation of the Business Combination and to (ii) SBC Medical Group Holdings Incorporated, the Combined Entity and its consolidated subsidiaries and VIE following the Business Combination, and reference herein to “Pono” refers to Pono Capital Two, Inc., the predecessor company prior to the consummation of the Business Combination.

Company Overview

History

We were originally incorporated in Delaware on March 11, 2022 under the name “Pono Capital Two, Inc.,” referred to herein as “Pono,” as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On August 9, 2022, Pono consummated its IPO of 11,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares” and with respect to the warrants included in the Units, the “Public Warrants”) (the “Pono IPO”).

Simultaneously with the consummation of the closing of the Pono IPO, Pono consummated the private placement of an aggregate of 634,375 units (the “Placement Units”) at a price of $10.00 per Placement Unit in a private placement to the Sponsor (the “Private Placement”).

On September 26, 2022, the Class A common stock and Public Warrant included in the Units began separate trading on The Nasdaq Global Market under the symbols “PTWO” and “PTWOW,” respectively.

On January 31, 2023, Pono entered into an Agreement and Plan of Merger (as subsequently amended from time to time, the “Merger Agreement”) with Pono Two Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and then a wholly-owned subsidiary of Pono, SBC Medical Group, Inc., then named SBC Medical Group Holdings Incorporated, a Delaware corporation (“Legacy SBC”), Mehana Capital LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Yoshiyuki Aikawa in his personal capacity and his capacity as the representative of the stockholders of Legacy SBC (“Seller Representative”).

On September 17, 2024, the closing (the “Closing”) of the merger (the “Merger”) and other transactions contemplated thereby (collectively, the “Business Combination”) took place and the Merger was consummated with Merger Sub merging with and into Legacy SBC with Legacy SBC surviving the Merger as a wholly-owned subsidiary of Pono, and Pono then changed its name to SBC Medical Group Holdings Incorporated and on September 17, 2024, Legacy SBC changed its name to SBC Medical Group, Inc.

Effective September 17, 2024, Pono’s units ceased trading, and effective September 18, 2024, SBC’s common stock began trading on the Nasdaq Global Market under the symbol “SBC” and the public warrants began trading on the Nasdaq Capital Market under the symbol “SBCWW.”

As a result of the Closing of the Merger and the Business Combination, the business of SBC Medical Group, Inc. (“Legacy SBC”), became the business of the Company.

Business Overview

The Company is a management company with offices in Irvine, California and Tokyo, Japan, and, through our subsidiaries, we provide management services to aesthetic clinics in Japan that are owned and operated by medical corporations and other franchisees we support. We also own and operate clinics in Vietnam and Singapore, and we are pursuing U.S. market initiatives primarily through strategic investments and alliances. The history of Legacy SBC began with the establishment of L’Ange Cosmetique Co., Ltd. in 2003 and SBC Japan (formerly Aikawa Medical) in 2017 for the purpose of providing management services to medical corporations and the medical clinics of the medical corporations. The history of the medical corporations and the medical clinics began in 2000 with the opening of Shonan Beauty Clinic in Fujisawa City, Japan, where Dr. Aikawa opened in private practice. Subsequently, Dr. Aikawa opened clinics in Yokohama in 2001 and Shinjuku in 2003, incorporated as Medical Corporation Shobikai in 2004, acquired a medical corporation named Medical Corporation Kowakai in 2009 and Medical Corporation Nasukai in 2009.

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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 improvements 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.

In 2017, we began providing our management services to our franchisee treatment centers. Unless otherwise indicated, the operational metrics in this section are as of December 31, 2025. As of December 31, 2025, the Company and its subsidiaries provided management services to a total of 237 franchisee treatment centers located in Japan, including 5 independently operated clinics in Japan under separate franchise arrangements. In addition, we operate 21 treatment centers in Singapore through Aesthetic Healthcare Holdings (“AHH”) and its subsidiaries. The Company also (i) owned and operated 1 treatment center under its “SBC” brand name in Ho Chi Minh City, Vietnam, as well as (ii) previously provided management services to 1 treatment center under its “SBC” brand name in Irvine, California in the United States (the “CA Clinic”), which was owned and operated by the related party, until it was permanently closed at the end of May 2025, and we no longer provide management services to any clinic in the United States. However, in the United States, we have pursued market entry through a strategic minority equity investment in OT Midco, through which we hold an indirect minority interest in the OrangeTwist business (“OT”), and we may explore potential commercial arrangements with OT on a non-binding basis. OT operates 24 treatment centers across the United States, rather than through directly owned and operated clinics or management service arrangements. Our franchisee treatment centers in Japan, together with our treatment centers in Singapore and Vietnam, provide an array of surgical and non-surgical medical services that vary based upon location, including cosmetic surgery, dermatology, and dentistry. These medical services include 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.

To further our growth and global expansion, we have recently completed or announced several strategic transactions and initiatives:

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In November 2024, we acquired a 100% equity interest in Aesthetic Healthcare Holdings (“AHH”) and its subsidiaries, which are incorporated in Singapore and principally engaged in medical aesthetics business, for cash consideration of SGD$7.8 million (equivalent to approximately US$5.8 million). As a result of this acquisition, we operate clinics in Singapore owned and operated through AHH and its subsidiaries.

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In July 2025, we acquired 100% equity interest in MB career lounge, Co., Ltd. (“MB career lounge”), a company providing comprehensive management supporting services for medical institutions in Japan, including medical professional recruiting and operational consulting, with a cash consideration of JPY 2,040 million (approximately $14.2 million). In the same month, we appointed Dr. Steven R. Cohen as Medical Strategy Advisor to support our global expansion initiatives and enhance our medical quality and physician training programs.

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In November 2025, we entered into a consulting agreement with BLEZ ASIA Co., Ltd., which operates more than 20 clinics and pharmacies in Thailand, to support our entry into Thailand, including management support for a new dermatology-focused clinic BLEZ is preparing to open in Bangkok.

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In December 2025, we acquired a controlling interest in Waqoo, Inc. (“Waqoo”), a company listed on the Tokyo Stock Exchange Growth Market and a medical research and development company specializing in regenerative medicine technologies. We initially conducted a tender offer for Waqoo’s common stock from November 14, 2025 through December 12, 2025, through which we acquired 575,052 shares, or 16.27% of the voting rights. Concurrently, on December 19, 2025, we acquired additional shares through an off-market transaction from Yoshiyuki Aikawa, the Company's CEO, a related party to the Company and the then-largest shareholder of Waqoo, resulting in our total ownership of Waqoo’s voting rights exceeding 50% and Waqoo becoming our consolidated subsidiary.

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Additionally, on December 29, 2025, we acquired an approximately 18.2% voting interest in OT Midco Holdings, LLC (“OT Midco”), a holding company through which we hold an indirect minority interest in the OrangeTwist, LLC and its subsidiaries (collectively, “OrangeTwist”), a lifestyle medicine and medical aesthetics provider operating treatment centers across the United States, for a total cash consideration of $20 million. In addition, we committed to make an additional cash contribution of $5.0 million in December 2026 for newly issued common units of OT Midco. We account for this investment under the equity method due to our board representation and participation in policy-making processes.

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As part of our ongoing expansion strategy, we also continuously evaluate other potential investments and acquisitions. For example, in May 2025, we announced that we began reviewing a potential acquisition of Risenet Co., Ltd., and, as of the date of this Annual Report, we have not entered into a definitive agreement.

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Since our inception, we have been committed to delivering high quality management services to our franchisee clinics and other alliance clinics. We believe our team of highly qualified and experienced professionals has underpinned our strong reputation as we continue to provide multifaceted management services to our franchisee clinics.

Business Segments

The Company operates in a single operating segment. The Company’s Chief Executive Officer, who serves as the Chief Operating Decision Maker (“CODM”), is responsible for evaluating performance and allocating resources. Our revenues are primarily derived from providing comprehensive management services to franchisee cosmetic treatment centers, including advertising, staffing, procurement, IT solutions, and the licensing of medical technologies and trademarks. For additional details, see Note 21, “Segment Reporting,” in the accompanying notes to our consolidated financial statements.

Corporate Structure

The Company wholly owns SBC Medical Group, Inc., a Delaware corporation and SBC MEDICAL APAC PTE. LTD., a Singapore corporation that serves as the Asia-Pacific regional headquarters.

The Company’s subsidiary, SBC Medical Group, Inc., primarily operates through 15 wholly owned subsidiaries and three majority owned subsidiaries. The wholly owned subsidiaries consist of SBC Medical Group Co., Ltd., a Japanese corporation (“SBC Medical Sub”), Liesta Co., Ltd., a Japanese corporation (“Liesta”), SBC Sealane Co., Ltd., a Japanese corporation (“SBC Sealane”), SBC Marketing Co., Ltd., a Japanese corporation (“SBC Marketing”), SBC Medical Consulting Co., Ltd., a Japanese corporation (“SBC Medical Consulting”), Shoubikai Medical Vietnam Co. Ltd., a Vietnam corporation (“SBC Vietnam”), SBC Healthcare, Inc., a Delaware corporation (“SBC Healthcare”), SBC Irvine, LLC, a Delaware limited liability company (“SBC Irvine”), Aesthetic Healthcare Holdings Pte., Ltd., a Singapore corporation (“AHH”), Wen & Weng Family Clinic Pte., Ltd., a Singapore corporation (“WWFC”), Wen & Weng Medical Group Pte., Ltd., a Singapore corporation (“WWMG”), Rochor Clinic Pte., Ltd., a Singapore corporation (“RCC”), Dermasolutions Pte., Ltd., a Singapore corporation (“DS”), and Dermasolutions Services Pte., Ltd., a Singapore corporation (“DSS”) and MB career lounge Co., Ltd. (“MB career lounge”). The three majority owned subsidiaries are Medical Payment Co., Ltd., a Japanese corporation (“Med Payment”), Waqoo, Inc., a Japanese corporation (“Waqoo”), and Cell Pro Japan Co., Ltd., a Japanese corporation (“Cell Pro Japan”), which is a wholly owned subsidiary of Waqoo.

The Company also consolidates Aikawa Medical Management, Inc., which is the Company's variable interest entity.

Effective January 1, 2026, the Company effected a merger in which SBC Marketing Co., Ltd. merged with and into SBC Medical Group Co., Ltd. As a result, the separate corporate existence of SBC Marketing Co., Ltd. ceased, with SBC Medical Group Co., Ltd. continuing as the surviving company. Effective January 7, 2026, the Company established SBC Medical M&A Advisory Co., Ltd. to provide healthcare-focused M&A advisory services.

Disposal of SBC Kijimadaira Resort Inc. (“Kijima”) and Skynet Academy Co., Ltd. (“Skynet”)

On December 17, 2024, the Company entered into definitive agreements to sell and transfer all of the shares in its subsidiaries, Kijima and Skynet, to entities owned by Yoshiyuki Aikawa, CEO of the Company, for cash. The Company pursued the transactions to concentrate business and management resources on its main medical business. The disposal of Kijima and Skynet did not constitute a strategic shift that would have a major effect on the Company’s operations and financial results. The transactions closed on December 23, 2024, subject to customary closing conditions. The Company received total cash consideration of one Japanese Yen (less than $0.01) for Kijima and $446,460 for Skynet. In accounting for the disposals, operating results of Kijima and Skynet are included in the Company’s consolidated financial statements up to the disposal date. The difference between (i) the fair value of the net assets disposed and (ii) the consideration received was recognized as an adjustment to Additional Paid-in Capital (“APIC”). No retrospective adjustments have been made to prior-period consolidated financial statements. Following the completion of these transactions, Kijima and Skynet ceased to be subsidiaries of the Company after December 23, 2024. Their financial results are therefore excluded from the Company’s consolidated financial statements for periods subsequent to the disposal date.

Acquisition of AHH

On November 20, 2024, the Company completed the payment of SGD 7.8 million in cash for the acquisition of 100% of the voting equity interest in AHH and its subsidiaries, following the execution of a Share Purchase Agreement with Dr. Ewen Chee Yew Wen, Dr. Lee Tee Kit, Dr. Phua Vanessa Mae, Dr. Charlotte Kim Thomas, and Dr. Gary Si Khin Yuen. AHH is based in Singapore and operates aesthetic medical clinics, family clinics, and quick facial aesthetics outlets. The founder, Dr. Ewen Chee, is known as one of the pioneers in the field of aesthetic medicine in Singapore and is a co-chair of the first Asia Pacific Thread Lift Conference (APEM) and a board-certified physician by the American Academy of Aesthetic Medicine. He is a frequent speaker at international conferences and workshops, and his expertise and knowledge have been featured in numerous scientific publications. AHH’s major brands and number of clinics are The Chelsea Clinics, Gangnam Laser Clinic, SkinGo! and Family clinics. Due to AHH’s fiscal year ending on September 30, the financial results of AHH and its subsidiaries have been included in the Company’s consolidated financial statements with a three-month lag.

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Acquisition of MB career lounge Co., Ltd. (“MB career lounge”)

On July 17, 2025, the Company acquired MB career lounge, a Japan-based management support services provider that provides management and operational support services to “JUN CLINIC,” an aesthetic dermatology and plastic-surgery platform.

Acquisition of Waqoo, Inc. (“Waqoo”)

On December 19, 2025, the Company acquired a controlling interest in Waqoo, Inc. (“Waqoo”), a Japanese corporation listed on the Tokyo Stock Exchange Growth Market. The acquisition was conducted through a tender offer by SBC Medical Group Co., Ltd. (“SBC Japan”) from November 14, 2025 through December 12, 2025, in which SBC Japan acquired 575,052 shares, representing 16.27% of the voting rights. Concurrently, SBC Japan acquired additional shares from Yoshiyuki Aikawa, the Company's CEO, a related party to the Company and the then-largest shareholder of Waqoo through an off-market transaction. As a result of these transactions, SBC Japan’s ownership ratio of the voting rights of Waqoo exceeded 50% as of the settlement date of December 19, 2025.

For the fiscal years ended December 31, 2025 and 2024, the Company generated revenues of $173,607,489 and $205,415,542, respectively, reported net income of $51,045,023 and $46,689,892, respectively, and cash flow provided by operating activities of $24,668,496 and $20,582,933, respectively. As of December 31, 2025, the Company had retained earnings of $240,448,620.

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. 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 with the medical corporations and/or general incorporated associations that own and operate domestic franchisee treatment centers in Japan. Separately, we also enter into franchise arrangements with certain independently operated clinics in Japan, which differ in certain respects from our arrangements with the medical corporations. In addition, following the acquisition of MB career lounge in July 2025, the Company, through MB career lounge, provides management and operational support services to Medical Corporation Misakikai and General Incorporated Association Miotokai, and the related revenues are included in the Company’s consolidated revenues.

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, and Medical Corporation Ritz Cosmetic Surgery, as amended and restated effective as of April 2025, and Medical Corporation Association Furinkai, effective as of June 2025.

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 MCs are deemed to be related parties of the Company since relatives of the CEO of the Company are the members (or shain) of general meetings of members of the MCs. The CEO of the Company was previously a member of the six franchisee MCs until he ceased being a member in July 2023. The Company, through SBC Medical Sub, owns equity interests (or mochibun) of the six franchisee MCs. 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 the articles of incorporation of each of the six MCs, the Company or SBC Medical Sub does not have voting control over the corporate actions at general meetings of members (or shain) of the MCs per the requirements of the Japanese Medical Care Act and the MCs’ articles of incorporation. The Company does not hold equity interests (mochibun) in Medical Corporation Misakikai or General Incorporated Association Miotokai; the Company’s arrangements with these entities are based on service contracts. “Members (or shain) of a general meeting of members (or shain)” means constituent members of the general meeting of members (or shain) of a Japanese Medical Corporation. Each member (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, the main duties of which include the election and dismissal of directors (or riji) and 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.

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Mission

Our primary mission is to provide quality comprehensive management services to the MCs and expand our “Shonan Beauty Clinic” brand. We plan to achieve the mission by maintaining and strengthening our market position and brand in the cosmetic medical treatment management market in Japan, Vietnam, Singapore, while pursuing growth opportunities in the United States through strategic investments and alliances, and by continuing to grow our presence globally. Accordingly, we have entered into franchise agreements and service contracts (including consulting and management service agreements) (collectively, the “Support Agreements”) with the MCs to define the scope of the management services that we provide to the MCs as well as the franchise operational provisions that the MCs must comply with. Separately, we have entered into partner doctor independence support program agreements with certain independent practitioners. The Support Agreements generally have one-year terms and are subject to renewal unless either party provides notice of non-renewal in accordance with the applicable agreement. We receive a portion of our overall compensation for providing management services with the following MCs:

•

Medical Corporation Shobikai: from September 29, 2017

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Medical Corporation Kowakai: from September 29, 2017

•

Medical Corporation Nasukai: from September 29, 2017

•

Medical Corporation Aikeikai: from September 29, 2017

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Medical Corporation Jukeikai: from February 21, 2020

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Medical Corporation Ritz Cosmetic Surgery: from May 31, 2021

Effective as of April 1, 2025, the Company revised the fee structure to pursue a long-term growth strategy aimed at expanding and stabilizing the business foundation by creating an environment that can better facilitate the establishment of new clinics by MCs. This updated fee structure introduces a more tailored, performance-based approach to determining service fees for each clinic, based on several key criteria:

1.

Medical service category (facility type): The type of medical services provided by the clinic (for example, cosmetic medicine, dermatology, hair restoration (AGA) treatment, fertility treatment, insured medical care, or other specialized fields).

2.

Operational tenure: The length of time since the clinic’s opening (with newly established clinics in their first year of operation recognized in a dedicated category).

3.

Monthly revenue: The clinic’s revenue for the given month.

4.

Patient volume: The number of patients the clinic has served over the past year.

These factors collectively determine each clinic’s tier classification (e.g., as a small, medium, or large clinic), as defined in the updated service agreement’s appendix. Under this system, each clinic is assigned to an appropriate tier based on its profile, and a corresponding fixed monthly fee is applied according to the schedule set forth in the contract. Notably, clinics offering cosmetic medical services are categorized using a more granular tier system reflecting their scale, with tiers ranging from newly opened clinics in their first year up to “super-large” clinics. In contrast, clinics focusing on other types of medical services (such as dermatology, AGA hair restoration, fertility treatments, or dental and orthopedic care) are classified into the standard small, medium, or large clinic tiers. This tiered approach ensures that service fees are aligned with each clinic’s size and performance, supporting newer and smaller clinics as they grow while accommodating the higher capacities of larger established clinics. Following the acquisition of MB career lounge in July 2025, we entered into new service contracts for the first time with Medical Corporation Misakikai and General Incorporated Association Miotokai.

Material Contracts between the Company and MCs

The Company has entered into Support Agreements (franchise agreements and service contracts) and an SBC Operating Agreement with each of the MCs. Separately, the Company has entered into Partner Doctor Independence Support Program Agreements (“PDISPA”) with certain independent practitioners.

The term of the PDISPA is for a period of 5 years from September 1, 2021, to August 31, 2026. The PDISPA will be renewed under the same terms for successive one-year periods upon conclusion of the initial term unless either party requests in writing to terminate the PDISPA 6 months prior to the expiration date of the PDISPA. Pursuant to the PDISPA, the Company permits such independently operated clinics to use (i) the “Shonan Beauty Clinic” name and (ii) certain trade names associated with our clinic network, including those of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai, L’Ange Cosmetique Co., Ltd. and Shobikai Co., Ltd. (collectively, “SBC Medical”). The Company also grants such independently operated clinics the right to use the “SBC Medical Group” name, our know-how of clinic operation, trademarks, trade names, and to provide the treatments designated by the Company and conduct business activities as a partner of the SBC Medical Group under a unified brand image.

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PDISPA does not charge a franchise fee or a deposit fee, instead the independently operated clinics are to pay fees to the Company, which are to be calculated as follows: total amount of sales at the clinic multiplied by 12% excluding consumption tax. If the total sales amount exceeds 100,000,000 yen per clinic, the maximum fee amount will be 10,000,000 yen. For the purposes of the PDISPA the total amount of sales means the amount of sales after discounting preferential tickets, and other campaigns and discounts.

SBC’s Operating Agreement

The Company previously entered into an SBC Operating Agreement (the “SBCOA”) with each of the MCs. The original term of the SBCOA was from April 1, 2023, to March 31, 2025, and the term was extended until March 31, 2026. Pursuant to the SBCOA the Company agreed to provide the MCs with the following consulting services related to: (i) marketing related services for developing new clients (ii) aiming to ensure stable performance and increase customer satisfaction through the creation of repeat customers (iii) the establishment and operation of a system seeking to ensure medical safety (iv) securing attorneys and medical institutions to transport in the event of claims or medical accidents, (v) measures to improve employee satisfaction, and design of organizational chart and personnel evaluation system (vi) the selection of medical equipment and materials, (vii) the acquisition of properties for new medical facilities (trade area survey, area selection, lease agreement signing, etc.) (viii) various types of general skills training for healthcare facility employees (ix) specialized and advanced skills training in leadership, motivation, communication, etc., for chiefs, leaders, and other employees with subordinates (x) development of new type of medical facilities (xi) development of new treatment methods (xii) hiring employees with national certifications, professional skills, and interpersonal skills, such as doctors, nurses, and reception counselors (xiii) performance management, business analysis, and management decision making utilizing financial statements such as income statements, cash flow statements, and balance sheets (xiv) use of the likeness of the Company’s officers or employees on websites, commercials, and other advertising media and (xv) efficient operation methods that allow for more customer service during the same clinic hours.

Under the SBCOA in effect prior to April, 2025, in exchange for the foregoing services, each MC is required to pay the Company 3,000,000 yen per month (excluding consumption tax) for each medical facility at which such MC provides medical services to its clients.

In light of the current challenging competitive environment, we are pursuing a long-term growth strategy aimed at expanding and stabilizing our business foundation by creating an environment that can better facilitate the establishment of new clinics by MCs. In line with this objective, effective April 1, 2025, we amended and renewed the SBCOA with each MC. Under the revised SBCOA, if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement will be renewed for successive one-year periods under the same terms and conditions.

The main revisions include:

1.

Revised Fee Structure

•

First-Year Fee Reduction for Newly Opened Clinics: Fees will be reduced during the first year of operation for newly established clinics, significantly reducing initial cost burdens at a stage when clinics have yet to fully establish their customer base.

•

Fees Based on Service Utilization from the Second Year Onward: Starting from the second year of operation, fees will be calculated based on the scale of services utilized and the operational size of each clinic.

2.

Changes to Provided Consulting Services Following the revision, consulting services provided by the Company to MCs will include:

•

Management consulting for medical corporations and facilities

•

Human resources and labor management services

•

Recruitment-related services

•

General administrative services

•

Information system management services

•

Customer relations services

•

Accounting, finance, and taxation services

•

Legal services

•

Clinic establishment and facilities management services

•

Infrastructure introduction, improvement, and operational support services related to insurance-covered medical treatments

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Service Contracts

We entered into service contracts with Medical Corporation Association Furinkai (the service contract regarding operation on November 22, 2023 and the service contract regarding management consulting on November 25, 2023 respectively) and Medical Corporation Association Junikai (the service contract regarding operation and the service contract regarding management consulting both on November 16, 2023). On June 30, 2025, we entered into renewed business consignment agreements with Medical Corporation Association Furinkai and Medical Corporation Association Junikai, each effective as of June 1, 2025, which superseded the prior service contracts.

The scope of work (“SOW”) under the renewed agreements includes management consulting and operational support services (including, among others, marketing support, procurement support for medical equipment and materials, operational process support, human resources and recruitment-related support (for Junikai), and information system management services).

Business Consignment Agreement for Management Consulting and Operational Support Services to Medical Corporation Association Furinkai

The material terms of our renewed business consignment agreement with Medical Corporation Association Furinkai are as follows:

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Signing Date:

o

June 30, 2025

•

management consulting and operational support services relating to the operation of medical facilities of Medical Corporation Association Furinkai, including:

o

marketing support for developing new clients;

o

selection and procurement support for medical equipment and medical materials;

o

measures to ensure stable performance and increase customer satisfaction through the creation of repeat customers;

o

planning and consulting for management and operational strategies;

o

renewal of existing treatment methods and development of new treatment methods and manuals, and support for implementation;

o

establishment and operation support for systems intended to help ensure medical safety;

o

support for the integration and improvement of accounting and management processes through the introduction of new accounting systems and related tools; and

o

information system management services, including advisory services relating to information security, IT networks, data centers and communication tools, account management, and business process automation support.

•

Effective Period

o

June 1, 2025 until May 31, 2026

o

If neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement will be renewed for successive one (1) year periods under the same terms and conditions.

•

Fees Payable Under the Agreement

o

On June 30, 2025, we entered into two separate business consignment agreements with Medical Corporation Association Furinkai, both effective as of June 1, 2025. Under both agreements, the monthly service fee for the applicable month is payable for each medical facility and is determined based on the facility’s tier classification set forth in the applicable appendix, considering the length of time since the facility’s opening, the facility’s monthly revenue, and patient volume over the past year. The specific fee ranges are as follows:

•

For medical facilities that use the terms “Shonan Beauty” or “SBC” as part of their facility name (such as SBC Beauty Dermatology Clinics): The monthly service fee ranges from JPY 300,000 to JPY 6,230,000 per facility (excluding consumption tax).

•

For other medical facilities (excluding any medical facility that uses the terms “Shonan Beauty” or “SBC” as part of its facility name): The monthly service fee ranges from JPY 1,700,000 to JPY 5,800,000 per facility (excluding consumption tax).

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Business Consignment Agreement for Management Consulting Services to Medical Corporation Association Junikai

The material terms of our renewed business consignment agreement for management consulting services to Medical Corporation Association Junikai are as follows:

•

Signing Date

o

June 30, 2025

•

management consulting and operational support services relating to the operation of medical facilities of Medical Corporation Association Junikai, including:

o

advisory services to strengthen branding and develop new clients;

o

selection and procurement support for medical equipment and medical materials;

o

renewal of existing treatment methods and development of new treatment methods and manuals, and support for implementation;

o

establishment and operation support for systems intended to help ensure medical safety;

o

planning and consulting for management and operational strategies;

o

support for the integration and improvement of accounting and management processes through the introduction of new accounting systems and related tools;

o

human resources and labor management support (including consultations on employment rules and internal policies and initiatives to improve employee engagement);

o

recruitment-related advisory and support (including strategic recruiting and support for retention and onboarding); and

o

information system management services, including advisory services relating to information security, IT networks, data centers and communication tools, account management, and business process automation support.

•

Effective Period

o

June 1, 2025 until May 31, 2026

o

if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement shall be renewed for another one (1) year under the same terms and conditions.

•

Fees Payable Under the Agreement

o

The monthly service fee for the applicable month is payable for each medical facility where Medical Corporation Association Junikai provides medical services, and is determined based on the facility’s tier classification set forth in the appendix, considering the length of time since the facility’s opening, the facility’s monthly revenue, and patient volume over the past year.

o

The monthly service fee ranges from JPY 450,000 to JPY 1,440,000 per facility (excluding consumption tax). Consumption tax is charged separately.

The use and regulatory status of certain products

The Company acts in the capacity of a purchasing agent by reselling medical supplies, cosmetic products, and medical equipment to the MCs for use in their clinics.

The Company acts as a purchasing agent, for the following cosmetic products: MT Stem Eye Cream, MT Cleansing Gel, MT Contour Lotion, MT Essential Serum, MT Contour B Cream, MT Premium Coffret 2025, MT Facial Foaming Wash, MT Protect UV Gel, MT Condense C Serum, MT Crystal Shot. These products are used to enhance the attractiveness, change the appearance, or maintain the health of the skin or hair of a person and more specifically are used as eye cream, cleanser, toner, serum, moisturizing cream, skincare set, face wash, and sunscreen gel.

The following table describes the primary use and regulatory status of each of the products that we resell:

Available for Sale In

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Product Category Product Line Primary Use United States Vietnam Thailand Japan

Cosmetics MT Stem Eye Cream Eye cream P P P P

Cosmetics MT Cleansing Gel Cleanser P P P P

Cosmetics MT Contour Lotion Toner P P P P

Cosmetics MT Essential Serum Serum P P P P

Cosmetics MT Contour B Cream moisturizing cream P P P P

Cosmetics MT Premium Coffret 2025 Skincare Set P P P P

Cosmetics MT Facial Foaming Wash face wash P P P P

Cosmetics MT Protect UV Gel sunscreen gel P P P P

Cosmetics MT Condense C Serum Serum P P P P

Cosmetics MT Crystal Shot Serum P P P P

The Company acts as a purchasing agent, for the following medical equipment: Embryo Scope, PQX Pico Laser, Nordlys, Coolsculpting ELITE, Stellar M22 IPL, General-purpose video scope for upper gastrointestinal tract GIF-1200N, Sperm motility analyzer with SMAS Biological Microscope, Surgitron DualEMC, Gas Sterilizer CT-540C, Centrifugal Separator H-36α, and G-RO (automated vitrification system). This equipment is used for the diagnosis, treatment, or prevention of human or animal diseases, or to affect the structure or function of the human or animal body, and more specifically is used for observation of fertilized eggs, skincare treatment, fat removal, observation, imaging, diagnosis, and treatment of the upper gastrointestinal tract, analysis of sperm motility, skin incision and coagulation for surgical use, sterilization of medical supplies vulnerable to high pressure, separation of aspirated fat.

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The following table describes the primary use and regulatory status of each of the products that we resell:

Available for Sale In

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The Company acts as a purchasing agent for the following medical supplies: Coolsculpting Elite Reorder Pack, Allergan VISTA, Juv Voluma, Condense Rich Syringe, Juv Volift, MiraDry BioChips, Juv Volbella, VISTA Ultra Plus XC, Juv Volux, and Cellution Disposable Kit. The supplies are used for the diagnosis, treatment or prevention of human or animal diseases and are not quasi-drugs, regenerative medicine products, or machinery and equipment such as dental materials and hygiene products; and more specifically, are used for treatment to reduce fat cells and improve body contours, wrinkle-improving injections, medical consumables, and hyperhidrosis treatment.

The following table describes the primary use and regulatory status of each of the products that we resell:

Available for Sale In

Botox injections Allergan VISTA Wrinkle-improving injections No No No P

hyaluronic acid injections Juv Voluma Wrinkle-improving injections No No No P

fat injections condense rich syringe medical consumables No No No P

hyaluronic acid injections Juv Volift Wrinkle-improving injections No No No P

MiraDry MiraDry BioChips hyperhidrosis treatment No No No P

hyaluronic acid injections Juv Volbella Wrinkle-improving injections No No No P

hyaluronic acid injections Juv Volux Wrinkle-improving injections No No No P

fat injections Cellution Disposable Kit medical consumables No No No P

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Types of Services Provided

Advertising and Marketing Services.

The Company, through its subsidiary SBC Marketing (which was merged into SBC Medical Group Co., Ltd. effective January 1, 2026), provides advertising and marketing services primarily to the MCs, including but not limited to the promotion of the MCs’ clinics’ services and brand on social media networks. We use various marketing and advertising methods to increase awareness of the “Shonan Beauty Clinic” brand.

The marketing services that we provide to the MCs include raising the profile of products and services, creating demand, promoting sales, and building brand image. Our public relations staff has set up target audiences, created promotional materials, and understand customer characteristics and needs, and continue to deliver effective messages to target audiences. Additionally, we utilize social media platforms such as Instagram and YouTube to establish a direct connection with end-users and foster a community. We also believe it is important to measure the effectiveness of marketing advertising and analyze the results. Our public relations staff evaluates the effectiveness of our advertising and makes the necessary adjustments to maximize the MC’s return on investment (ROI) and optimize it on a frequent basis, including but not limited to focusing on the types of services that are popular in each specific geographical location of our franchisee clinics.

Staff Recruitment, Training, and Management.

The Company, through its subsidiary SBC Medical Consulting and SBC Medical Sub, provides staff recruitment and management services to the MCs. The Company maintains a working relationship with SBC Tokyo Medical University, previously known as Ryotokuji University, a medical professional education institution located in Urayasu City of Chiba Prefecture in Japan, which acts as a platform for our recruitment management services. The university provides instruction and professional education to the students of the educational institution, including but not limited to physicians and nurses. We work directly with the university in an effort to recruit students that have completed the applicable education course, to work at one of our franchisee treatment centers. This allows our franchisee treatment centers to reduce recruitment costs by having access to a continuous flow of employee candidates that are newly trained for positions that the franchisee treatment centers need to fill. It also increases employee retention rates at our franchisee treatment centers since we have assisted in the recruitment of an employee that is trained for a specific position at the franchisee treatment center. Our staff recruitment service provides our franchisee clinics with access to a pool of skilled professionals who are well-prepared to make meaningful contributions to their respective healthcare environments. This allows for cost-effective talent acquisition, talent mobility, and enhanced retention rates.

We also provide training program services for all of the employees of our franchisee clinics. This training program is designed to provide employees with the knowledge and skills needed in our franchisee clinic operations, and is intended to improve employee competence and overall company productivity. The content of the training program is wide-ranging. First, we provide team-building training to strengthen cooperation and communication skills among employees. By fostering teamwork, we ensure that cooperation among staff members is smooth and efficient store operations are achieved.

We also provide training on clinic hygiene standards to help the MCs’ employees understand the importance of clinic hygiene. Adherence to strict standards in clinic hygiene is essential, and we ensure that the MCs’ employees are well-informed to protect the health and safety of the franchisee clinics’ patients.

The program also provides training on the basic operating rules and protocols. We train the MCs’ employees to make appropriate decisions in order to provide appropriate services to the patients of the franchisee clinics.

In a further effort to improve the work environment and promote respect for employees, we also provide sexual harassment training services. We emphasize the importance of creating a safe working environment for all staff.

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Customer Management.

The Company, through its subsidiary Medical Payment, provides payment management services to the MCs. These services include but are not limited to the use of payment tools at the point of sale for the MC’s collection of payment from customers of the franchisee clinics.

Additionally, we earn revenue through our points services, which involve managing the customer rewards program offered to customers of the franchisee clinics. Effective June 1, 2025, the Company revised the customer rewards program, and the description below reflects the program in effect as of December 31, 2025. The customer rewards program gives customers points for their birthday, certain referrals, and purchasing products or services at the franchisee clinic locations. The customers also receive additional loyalty benefits in connection with their accumulated points once they reach a certain number of visits to our franchisee clinics or reach certain spending thresholds, as further described below. The three tiers of the customer points ranking system are silver, gold, and diamond. The silver tier rank is the lowest tier rank and is generally achieved once an eligible payment occurs at a participating clinic (subject to certain exclusions and the existence of certain clinics that do not participate in the program), and does not require a specific number of visits or spending amount to obtain. Silver tier rank customers receive 1,000 points on their birthday, 0.5% of the total spending amount back in points (provided that certain items, such as insurance-covered medical care and certain fees, may be excluded from point accrual and/or point usage). For purposes of determining visit counts and spending thresholds, the Company generally counts amounts before point or ticket discounts, and a “visit” is counted when the pre-discount amount is at least JPY 30,000 (tax included). The gold tier rank is achieved when the customer visits the franchisee clinics 6 or more times or spends 500,000 yen or more in a two-year period. Gold tier rank customers receive 10,000 points on their birthday, 1% of the total spending amount back in points (subject to the same exclusions described above). The diamond tier rank is achieved when the customer visits the franchisee clinics 8 or more times or spends 1,000,000 yen or more in a two-year period. Diamond tier rank customers receive 15,000 points on their birthday, 3% of the total spending amount back in points (subject to the same exclusions described above). The customers may use the earned points for discounts on select services and products offered by our franchisee clinics, and each point may be used for a discount amount equal to 1 yen. The customer’s points expire if the customer does not make any additional eligible payment at a participating clinic within one year from the customer’s last eligible payment. Accordingly, at the time that a customer’s points expire, the Company earns 1 yen for each customer point that expires.

Employee Services.

The Company, through its subsidiary Liesta, provides employee management services to the MCs, including assistance with the location and securement of rental housing in Japan for employees of the MCs as well as facility rentals in Japan for the MCs.

Leasehold improvements and Design.

The Company, through its subsidiary SBC Sealane, provides leasehold improvements and design management services to the MCs, by coordinating engagement with our preferred general contractors for the clinic leasehold improvements and design, as well as overseeing the process.

Medical Equipment and Supplies.

The Company acts in the capacity of a purchasing agent by supplying medical devices, medical equipment (including through leases of such equipment), implants, injection materials, other medical consumables, as well as skin care and beauty products that we resell to the MCs for use in their clinics.

Licensure of Intellectual Property and Technologies.

The Company licenses the use of patent-pending and non-patented intellectual property, including but not limited to medical technologies, trademark, trade names, and brand use, to the MCs. Many of the clinics owned by the MCs license the use of our brand name, “Shonan Beauty Clinic”, and/or the right to use the name “SBC Medical Group”, subject to the terms of the applicable agreements.

We have also granted the MCs the right to use the know-how of the clinic operations, offer the procedures designated by us, conduct business activities under our brand name, and utilize our specialized technologies for procedures. We license the use of our highly standardized operational procedures, developed through years of industry experience and accumulated know-how, to the MCs. Our specialized technologies for procedures enhance the safety and efficiency of these cosmetic surgery procedures and include, but are not limited to, puncture devices for buried double eyelid procedures, simplified buried method surgical equipment, proprietary surgical sutures, silicone bags for breast augmentation simulations, and microscopic hair volume evaluation method for the treatment of androgenetic alopecia. Additionally, we license the use of patent-pending and non-patented safety management methods to the MCs for procedures such as full-incision double eyelid surgery, lateral canthoplasty, brow lift procedures, cheek sagging prevention methods, hair removal safety management methods, tattoo removal treatments, and hyperhidrosis procedures.

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The Company licenses the use of simulation technology to the MCs aimed at enhancing the skills, standardization, and education of professional staff that are providing medical services at the MCs’ clinics, and licenses the use of such technologies to the MCs. By utilizing our collection of medical cases and artificial intelligence (“AI”), we employ technologies such as virtual reality, rendering, computing, 5G/6G, and Web3.0 to create simulators for the services that the MCs’ treatment centers provide. For example, SBC AI is the industry’s first double AI simulation service. The highly accurate double AI simulation service has been achieved by learning from actual case data of franchisee’s clinic, which totals 600,000 double layer cases, using an AI model based on the most advanced AI technology, GAN (adversarial generative network). This service enables a 10-step simulation of double layer width on “your own face”, whereas double layer surgery has generally been studied using photographs of other people’s cases. These new technologies offer benefits to our franchisee treatment centers, such as efficient education, knowledge sharing, improved procedural accuracy, proactive support, and remote operations. Through simulation technology, medical professionals can simulate various scenarios and anticipate potential complications, enabling them to develop proactive strategies and responses. We believe this improves the level of patient safety and care at our franchisee clinics. The integration of advanced technologies, such as 5G/6G, allows for remote operations and consultations, enabling medical experts at our franchisee clinics to provide guidance and perform procedures from a distance, expanding access to specialized care and expertise.

Supplementary information regarding other business activities and service overview diagram

Subsidiaries within our group operate businesses beyond our core medical business services. Subsidiaries whose sales account for less than 1% of consolidated net sales are omitted.

Our revenues

Franchising Revenue

The Company generates franchising revenue by licensing its intellectual properties, including but not limited to the Company’s brand name (“Shonan Beauty Clinic”), trade name, patents, and trademarks, and by providing consulting services to enhance the value of “Shonan Beauty Clinic” brand, as a franchisor pursuant to franchise agreements with the medical corporations (the “MCs”) in Japan. Prior to April 2023, revenue was based on a percentage of sales and recognized at the time when the related sales occur; beginning in April 2023, the Company transitioned to a standardized monthly fee arrangement (as subsequently refined in September 2023) in accordance with the applicable agreements, and recognizes over time as services are rendered.

Starting in April 2025, the Company revised its fee model, reducing fees for clinics in their first year of operation to better reflect the lower service utilization during the initial period, before transitioning to a performance-based structure thereafter. This change aims to create a more sustainable long-term revenue model while aligning fees with the actual operations of newly opened clinics.

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

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

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

Labor supporting services

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

Function supporting services

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

Management consulting services

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

Rental Services Revenue

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

Other Revenues

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

Revenues generated from these different revenue streams by the Company consist of the following:

For the YearsEnded December 31,

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Our Strengths

Brand. Our group’s brand name “Shonan Beauty Clinic” has been developed for over 20 years in the medical industry on the basis of safe and reliable medical services that are primarily cosmetic in nature. We maintain high standards for quality control and customer service in our franchisee and other alliance clinics in Japan, as well as our directly owned and operated clinics in Vietnam and Singapore in order to continue to build upon this foundation. In addition, some of the doctors that provide services at our franchisee clinics also publish medical related articles and participate in conferences in Japan and overseas. We believe that this cohesive approach and consistent quality of service promotes global recognition of our brand name.

Comprehensive Medical Services. The Company’s franchisee and other alliance clinics in Japan, as well as our directly owned and operated clinics in Vietnam and Singapore, provide a variety of medical treatments to meet customers’ needs. We, together with the operators of our franchisee and other alliance clinics, focus on building long-term relationships with customers, and customer satisfaction rate ranks highly among Japanese beauty medical service providers. Based on internal management reports from our franchisee and other alliance clinics and our directly owned and operated clinics, our global customer base has grown from 3.0 million customer visits in 2021 to a total of over 6.6 million customer visits globally for the year ended December 31, 2025, and the franchisee clinics have an average repeat customer rate of over 72%. Accordingly, we have been able to continue to provide a high level of management services to the MCs while benefiting from the increasing number of clinics.

Technology. The Company focuses on developing and licensing simulation technology aimed at enhancing the skills, standardization, and education of professional doctors that are providing medical services at our franchisee clinics. By utilizing our collection of medical cases and AI, we employ technologies such as virtual reality, rendering, computing, 5G/6G, and Web3.0 to create simulators for the services that our treatment centers provide. These simulators offer benefits to our treatment centers, such as efficient education, knowledge sharing, improved procedural accuracy, proactive support, and remote operations. Through simulation technology, medical professionals can simulate various scenarios and anticipate potential complications, enabling them to develop proactive strategies and responses. We believe this improves the level of patient safety and care at our franchisee clinics. Our goal is to achieve standardized medical techniques through the development of these technological advancements. The integration of advanced technologies, such as 5G/6G, allows remote consultations (including telemedicine) and remote clinical decision support, enabling medical experts to provide guidance remotely to on-site medical professionals and patients, expanding access to specialized care and expertise.

Management Services. The management services that we provide to our franchisee clinics, through our subsidiaries, include but are not limited to advertising and marketing needs across various platforms (such as social media networks), staff management (such as recruitment and training), booking and reservation services for franchisee customers, assistance with franchisee employee housing rental, facility rentals, leasehold improvements and design, medical equipment procurement (resale), the provision of cosmetic products to franchisees for resale at the franchise locations (resale), licensure of the use of patented, patent-pending and non-patented medical technologies, trademark and brand use, IT software solutions for remote medical consultations, and payment tools for franchisee customers. We believe that our advertising and marketing services (including but not limited to promotion on social media networks) help create effective campaigns that promote our franchisee clinic services and attract a wider audience of customers. We also believe that our maintenance and operation of the booking and reservation process for customers ensures a seamless user experience when booking services at our franchisee clinic locations. These services provide valuable guidance and expertise to our franchisee clinics, helping them optimize their operations, improve customer experience, and enhance overall performance. We believe this to be a crucial component of fostering our franchisees’ growth and success.

Internal Processes and Protocols. To promote high standards of quality and service, we have implemented internal processes and protocols. These measures include ongoing training and education programs for our employees and the employees of our franchisee clinics, continuous monitoring of treatment outcomes, and adherence to industry guidelines and regulations. By upholding these standards, we aim to maintain and enhance our franchisees’ reputation as a trusted provider of cosmetic medical services.

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Our Growth Strategies

Pursue New Clinic Development. We have pursued a disciplined new clinic growth strategy, having expanded our concept and franchisee model across varying clinic sizes and geographies. We plan to leverage our expertise in opening new clinics and our success in the Japan market to fill in existing markets and expand into new geographies with the same careful planning as we have demonstrated in the past. We will continue to utilize our existing strategy of exploring opportunities for additional franchisee and other alliance clinics, as well as directly owned and operated clinics (including but not limited to merger and acquisition transactions). See also our real estate strategy under “Site Development and Expansion — Site Selection Process.” We believe that our revenue will increase if we are able to increase the number of franchisee and other alliance clinics that we provide management services to, since we would be providing our services to additional locations. We believe that we have the potential to increase global recognition of our brand. However, we cannot predict the time period over which we can achieve any level of franchisee and other alliance clinic growth or whether we will achieve this level of growth at all. Our ability to achieve new franchisee and other alliance clinic growth is impacted by a number of risks and uncertainties beyond our control, including those described in “Part I, Item 1A. Risk Factors”.

Deliver Consistent Comparable Franchisee Clinic Sales Growth. We believe we will be able to generate comparable franchisee clinic growth by growing our customer base through increased brand awareness, consistent delivery of quality surgical and non-surgical medical services by our franchisee clinics and our clinics in Vietnam and Singapore, acquiring and developing cutting edge medical services to be licensed to our franchisee clinics, and franchisee clinic renovations. We will continue to manage our franchisee clinics and pricing as part of our overall strategy to increase the number of customers and the average amount spent by customers. We continue to explore initiatives to increase skin care product sales, enhance the services offered by our franchisee clinics and our clinics in Vietnam and Singapore, and improve our appointment booking process. Our franchisee client rewards program, which has been rolled out across the entire franchisee clinic base in Japan, tracks customers’ spending and awards customers with points based upon such spending (generally calculated as a percentage of the spending amount). The rewards program also gives customers points for their birthday and certain referrals. The customers also receive additional loyalty benefits in connection with their accumulated points once they reach a certain number of visits to our franchisee clinics (tiers for a total of 6 or more visits and 8 or more visits in 2 years) or reach certain spending thresholds (tiers for 500,000 yen or more and 1,000,000 yen or more in 2 years). The customers may use the earned points for discounts on select services offered by our franchisee clinics.

Increase Profitability. During our expansion, we have invested in our infrastructure and personnel, which we believe positions us to continue to scale our business operations. As we continue to grow, we expect to drive higher profitability at the corporate level by leveraging our existing support infrastructure, as we believe that as the number of the franchisee clinics that we provide management services to grows, our general and administrative costs over several years will increase at a slower rate than our revenues.

Heighten Brand Awareness. We intend to continue to pursue targeted local and global marketing efforts and plan to increase our brand awareness (including but not limited to advertising on social media platforms). We intend to continue to promote limited time discounts on services provided by the franchisee clinics through our advertising services to build customer loyalty and brand awareness. Our steadily expanding global customer base reflects the growing demand for cosmetic surgery procedures and the confidence that customers have in our brand and services.

Procedure and Product Development. We intend to continue to collect and analyze extensive medical data, develop innovative procedures and products, and obtain intellectual property rights to new products and procedure methodologies relating to skin care and the medical services provided by our franchisee clinics. These assets are then provided to our franchisees. We intend to continue to offer guidance and technical training to our franchisee clinics’ employees with respect to these new products and procedure methodologies in order to stay at the forefront of medical advancements.

Expand Through Multi-Brand Strategy. In 2025, we accelerated a multi-brand strategy designed to capture a broader range of customer segments within the aesthetic and dermatological markets in Japan beyond our flagship “Shonan Beauty Clinic” brand. In April 2025, our affiliated medical corporation launched “SBC NEO Skin Clinic” in Ebisu, Tokyo, a new brand specializing in non-invasive aesthetic dermatology that leverages advanced laser devices and dermatological treatments widely adopted in South Korea and Western markets. This brand is designed to attract customers who previously sought such treatments abroad, particularly in South Korea, by providing comparable services domestically. In October 2025, our affiliated medical corporation launched “Hada no Aozora Clinic” in Tokyo, a hybrid dermatology model that integrates insurance-covered general dermatology with private-pay aesthetic treatments, creating a lower entry barrier for customers new to aesthetic medicine. Together with our existing brands, including “JUN CLINIC” (acquired through MB career lounge in July 2025), we believe this multi-brand approach enables us to serve customer segments ranging from entry-level to advanced users and to build a diversified, multi-tier service portfolio. These new brands complement the core “Shonan Beauty Clinic” brand and we believe they will contribute to our continued growth in average revenue per customer visit and overall market share.

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Site Development and Expansion

Site Selection Process

We consider franchisee clinic site selection to be critical to our success. As part of our strategic site selection process, our team receives potential site locations from networks of local real estate brokers, which are then reviewed by our development and senior management teams. This review includes site visits, key deal terms, and analyses of the estimated profitability of clinics at the proposed properties for our franchisee clinics.

Our current real estate strategy focuses on high-traffic markets with a diverse population and above-average household income. In site selection, we also consider factors such as visibility, traffic patterns, accessibility, parking, and competition when considering approval of a location for a franchisee clinic. We also utilize site analytics tools for demographic analysis and data collection for both existing and new market areas, which we believe allows us to further understand the market area (including but not limited to the types of services desired by the local residents) and set clear market development strategies. Our existing framework and experienced management team allow us to efficiently manage the opening of new franchisee clinics on behalf of the MCs in desired locations and penetrate markets in both suburban and urban areas.

Expansion Strategy and Market Share

The strong market share presence of our franchisee clinics in the Japanese cosmetic surgery industry reflects the success of our brand and customer satisfaction. With our cutting-edge technology, the MC’s skilled medical professionals, and the comprehensive range of services offered at our franchisee clinics, we have established our brand as a trusted and preferred choice among customers seeking cosmetic enhancements. We plan to pursue a two-pronged expansion strategy by opening new clinics in both new and existing markets through our franchisee partners and directly. We believe this expansion will be crucial to executing our growth strategy, as well as building awareness of “Shonan Beauty Clinic” as a global brand and provider of surgical and non-surgical medical services and skin care products. Expansion into new markets occurs in parallel with ongoing growth in existing markets, with the goal of maintaining a pipeline of top-tier development opportunities.

Upon selecting a new market, we typically manage the opening of one or two clinics to prove concept viability in that market. We have a remote management system whereby our operations team can monitor clinics in real-time from our headquarters to maintain operational quality in new markets.

When selecting sites, we look to replicate the site attributes, trade area quality, and co-tenant mix of our most successful clinics. We frequently reevaluate our market area development plan (targeted areas and pacing for development) and our site selection strategy within those targeted areas.

Clinic Design

Franchisee clinic design is handled by our in-house development team on behalf of the MCs in conjunction with outsourced vendor relationships. Our franchisee clinics’ sizes currently average approximately 4,000 square feet. Our average customer capacity per franchisee clinic varies greatly depending upon the services being provided at the time. Our franchisee clinic layout evokes a relaxing experience characterized by an efficient use of staff and customer areas as well as modern furniture.

Renovation of a new franchisee clinic takes approximately 6 months. We oversee and coordinate engagement with our preferred general contractors on behalf of the MCs for the franchisee clinic renovation process. On average, our franchisee clinics opened during fiscal year 2025 required a cash build-out cost of approximately $486 thousand per clinic, net of landlord tenant improvement allowances, excluding projects that involved only renovations or operational format changes without relocation; however, this amount could be materially higher or lower depending on the utilization of union labor, market, clinic size, and condition of the premises upon landlord delivery. The franchisee MCs are responsible for paying for the build-out cost of the respective franchisee location.

Human Capital Management

As of December 31, 2025, we had approximately 863 regular employees globally (excluding employees of the managed clinics/medical corporations we support), a majority of which are located in Japan, Singapore, Vietnam, and the United States. For purposes of this disclosure, “regular employees” includes employees on reduced working-hour arrangements and excludes non-regular employees (such as part-time, temporary, and fixed-term staff). As of December 31, 2025, there were no unions represented within our employee base. We anticipate that we will continue to expand our workforce as our company grows.

We believe that empowered employees make a difference in our ability to execute our strategy. As such, we strive to provide an inclusive, rewarding and engaging environment for employees to develop professionally and contribute to our success.

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Competition

Management Service Competition.

With respect to our management services, we generally do not face significant competition from third parties because substantially all of our management service revenue is derived from our relationship with the MCs, which are related parties.

Clinic and Brand Competition

Our franchisee clinics face significant competition from a variety of locally owned beauty clinics and Japanese chain beauty clinics offering both cosmetic medical services, as well as cosmetic products. Major competitors of our franchisee clinics include those in Japan but also in the global cosmetic surgery market such as Aesthetic Medispa, Alma Lasers, B. Braun SE, Cynosure Lutronic, Evolus, Inc., Galderma S.A., Genesis Biosystems, Inc., Inmode Ltd., IRIDEX Corporation, Lumenis Be Ltd., Sinclair Pharma Limited, Stryker Corporation, and Surgery Partners. To further strengthen our competitive position in the international market, we acquired a Singapore-based cosmetic surgery group in November 2024. In November 2025, our wholly owned subsidiary commenced a tender offer for shares of Waqoo, Inc., which concluded in December 2025. Settlement commenced on December 19, 2025, and Waqoo became a consolidated subsidiary of SBC Medical Group Co., Ltd. Separately, on December 29, 2025, we completed a strategic minority equity investment in OrangeTwist to support our U.S. market expansion initiatives. In connection with this investment, we agreed to explore potential commercial arrangements. Our clinic in Vietnam is still in the early stages of development in our efforts to penetrate global competition. In the United States, we are pursuing market entry through strategic investments and alliances, including our strategic minority equity investment in OrangeTwist completed on December 29, 2025 and our agreement to explore potential commercial arrangements with it. However, we believe that our franchisee clinics, clinics in Singapore, a clinic in Vietnam and our strategic partners in the United States compete primarily based on service quality, customer experience, ambience, location, convenience, value perception, and price. The competition continues to intensify as competitors to our clinics in Vietnam and Singapore and our franchisee clinics increase the breadth and depth of their cosmetic medical service and cosmetic product offerings, and open new clinics. A decrease in the revenue of the managed clinics (including the franchisee and other alliance clinics) as a result of such increased competition would directly result in a reduction of the Company’s revenue since we receive substantial revenue from the MCs as part of our compensation for management services.

We investigate the brand image and concept of competitors to our clinic and our franchisee clinics from the viewpoint of brand and awareness. It is important to understand the franchisee clinic’s impact on its customers because each competitor offers unique characteristics and value. Also, famous chain clinics and locally popular clinics can be a competitive factor.

In terms of pricing strategies, we compare pricing strategies from competitors to our clinic and our franchisee clinics, such as price ranges, extent of services provided, and discount campaigns. Because prices have a significant impact on consumer choice, we understand price competition with competitors and consider our own pricing strategy when we set the guidelines for the pricing of services for our franchisee clinics and our clinics in Vietnam and Singapore. However, it is important to strike a balance, because customers value quality and service as well as price.

In terms of quality and service, we evaluate the quality of service provided by and the working experience of our franchisee clinics’ competitors’ employees. Because customers want high quality service and highly experienced staff members (such as doctors and nurses), the aim is to understand the quality provided by competitors and to find the point of differentiation of the company. We use review sites and word-of-mouth information to gather customer opinions and understand the potential for improvement of our franchised brand.

In terms of the number of clinics and development, we evaluate our regional competitiveness by comparing the number of clinics and the regions in which the franchisee clinics’ competitors operate. We track franchisee clinics’ competitors’ plans to open new clinics and their expansion strategies to understand the status of competition in the market. This provides us with useful information to consider when determining franchisee clinic growth opportunities.

In terms of customer satisfaction and feedback, we analyze customer satisfaction surveys and feedback from the patients of (i) our clinics in Vietnam and Singapore, (ii) the clinics operated by the MCs (including franchisee clinics) in Japan, and (iii) certain independently operated clinics as part of our management services to the MCs and, where applicable, under our partner doctor independence support program arrangements. The goal is to understand the customers’ assessments and find ways to improve the “Shonan Beauty Clinic” brand and the overall customer experience across the clinic network. We compare the customer experience at the franchisee clinics against that offered by competitors and consider differentiation strategies and service improvement measures in order to preserve our franchised brand integrity. Considering the above points of view, we analyze competitors to understand our strengths and competitive challenges, and conduct strategic decision making. By comparing customer experience metrics and service offerings at (i) the clinics operated by the MCs in Japan and (ii) our clinics in Vietnam and Singapore against those of competitors, we are determining the direction to improve the competitiveness of our brand and clinic network in the market.

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Business Trends

In the cosmetic medical service and product industry, customer preferences and needs are very important. Service trends and customer interests can change. For example, there is a growing demand for non-invasive cosmetic services. The key to success is for our clinics in Vietnam and Singapore, and our franchisee and other alliance clinics to offer cosmetic services and products tailored to customers’ needs and preferences. The success of the managed clinics (including the franchisee and other alliance clinics) would directly impact our success since we receive substantial revenue from the MCs as part of our compensation for management services.

The cosmetic medical industry is highly dependent on general economic conditions. During economic boom times, customer discretionary income tends to increase and demand for cosmetic medical services and products tends to increase. In particular, due to inflation, costs and wages are on an upward trend. In the event of rapid inflation, there is a risk of deterioration in business performance, such as inability to pass on higher purchase costs and other costs to price. While we have observed rising operational costs, to date, inflationary pressures have not had a material adverse effect on our operations. On the other hand, during economic downturns, demand may fall due to economic uncertainty and the impact of spending cuts, especially since many of the cosmetic medical services our franchisee clinics and our clinic are elective.

Depending on economic conditions and individual circumstances, customer discretionary spending priorities may change, and some patients may place a higher priority on obtaining cosmetic services and products and actively allocate their budget accordingly. Other patients may be more likely to refrain from buying elective cosmetic services and products to save money. These trends have a significant impact on the demand for our franchisee clinics’ cosmetic services and products. A decrease in the revenue of the managed clinics (including the franchisee and other alliance clinics) as a result of such adverse economic conditions would directly result in a reduction of the Company’s revenue since we receive substantial revenue from the MCs as part of our compensation for management services.

Demographic trends, such as changes in population age structure, family structure, and lifestyle, are also important factors. For example, younger and middle-aged generations may be more willing to undergo elective cosmetic procedures and purchase cosmetic products. Older generations, on the other hand, may be more likely to be apprehensive about undergoing elective cosmetic procedures.

Competitive presence is an important factor in the cosmetic clinic industry. The presence of competitors in the same category or an increase in new entrants can increase customer choices and diversify demand. Differentiation and uniqueness from competitors are required, especially in high income geographical locations.

These factors also directly or indirectly affect consumer confidence. Customers choose beauty clinics they trust based on economic and competitive conditions. Newly opened clinics, especially in new geographical locations, also tend to have an initial revenue peak, known as the honeymoon period, followed by a decline.

While these factors influence the success of the beauty clinic industry, it is important to understand trends and customer needs across the industry, and to develop flexible strategies and appropriate measures for preserving our brand integrity. Focusing on improving clinic quality, service, and customer experience is required to maintain our franchised brand.

Suppliers

As of December 31, 2025, we had a large and diverse network of suppliers, providing us with a diverse selection of medical equipment, supplies and medical consumables. We facilitate the sale of medical equipment, supplies and medical consumables to the MCs as part of our management services. Our suppliers fall into five key categories: medical devices, medical equipment, implants, injection materials and other medical consumables.

We have a system for selecting reliable and quality suppliers, with a selection and review process based on qualification of the business and/or products, pricing, reputation, service quality, delivery schedule and product offerings. We maintain multiple suppliers for key categories of purchases to ensure continuity and quality of supply. Payment terms with the majority of our suppliers are on open account. Certain suppliers grant us credit periods ranging from 20 to 60 days, although we generally pay on delivery.

We have not previously encountered any major problems in sourcing despite not having long-term contracts with our suppliers, nor did we encounter any business disruption due to supply shortages or delays. In any event, we believe any shortage or delay in the supply of implants, injection materials and medical consumables will not have any material impact on us as we are able to switch to other suppliers with comparable quality and prices. If these third parties experience shutdowns or continued business disruptions, our ability to conduct our business and facilitate the sale of medical equipment, supplies and medical consumables to the MCs in the manner and on the timelines presently planned could be materially and negatively impacted, including but not limited to delays in our supply chain which could delay or otherwise impact our business. A decrease in the revenue of the managed clinics (including the franchisee and other alliance clinics) as a result of supply chain delays and a decrease in the volume of purchases of medical equipment, supplies and medical consumables by the MCs would directly result in a reduction of the Company’s revenue.

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Our customers

The majority of the customers of our franchisee and other alliance clinics, as well as our directly owned and operated clinics, are individuals aged between their 20s through 40s.

The Company generates a substantial majority of its revenue from provision of management services to the MCs pursuant to the franchisor-franchisee agreements and/or service agreements.

For the YearsEnded December 31,

Public Interest Foundation SBC Medical Promotion Foundation 67 107

General Incorporated Association SBC — 801

SBC Shonan Osteopathic Clinic Inc. 3,884 56,740

General Incorporated Association Taiseikai — 692

Skynet Academy Co., Ltd. 26,734 —

SBC Kijimadaira Resort Inc.* 78 —

Medical Corporation Misakikai 373,152 —

General Incorporated Association Miotokai 30,076 —

* In July 2025, SBC Kijimadaira Resort Inc. merged into SBC Inc.

Government Regulation and Environmental Matters

In General

The MCs and the Company are subject to extensive and varied federal, state, and local government regulations globally, including regulations relating, among others, to public and occupational health and safety, product labeling, healthcare, medical aesthetics and, to the extent applicable, regenerative medicine technologies, the environment, sanitation, and fire prevention. The MCs operate the franchisee and other alliance clinics, and we operate our clinic in accordance with standards and procedures designed to comply with applicable codes and regulations. However, an inability to obtain or retain health department or other licenses by the MCs or us would adversely affect our operations. Although the MCs and the Company have not experienced any significant difficulties, delays or failures in obtaining required licenses, permits or approvals to date, any such problem could delay or prevent the opening of, or adversely impact the viability of, a particular clinic or group of clinics. Additionally, difficulties, delays or failure to retain or renew licenses, permits or approvals, or increased compliance costs due to changed regulations, by the MCs or us, could adversely affect operations at the MCs' franchisee and other alliance clinics, and our clinic. A decrease in the revenue of the MCs’ franchisee and other alliance clinics as a result of such difficulties, delays, or failure would directly result in a reduction of the Company’s revenue since we receive substantial revenue from the MCs as part of our compensation for management services.

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The MCs and the Company are subject to federal, state and local environmental laws and regulations globally concerning waste disposal, pollution, protection of the environment, and the presence, discharge, storage, handling, release and disposal of, or exposure to, hazardous or toxic substances (“environmental laws”). These environmental laws can provide for significant fines and penalties for non-compliance and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. We are not aware of any environmental laws that will materially affect our earnings or competitive position, or result in material capital expenditures relating to our franchisee and other alliance clinics, or our clinic. However, we cannot predict what environmental laws will be enacted in the future, how existing or future environmental laws will be administered, interpreted or enforced, or the amount of future expenditures that we may need to make to comply with, or to satisfy claims relating to, environmental laws. It is possible that the MCs and the Company will become subject to environmental liabilities, and any such liabilities could materially affect our business, financial condition or results of operations.

We are also subject to laws and regulations globally relating to information security, privacy, cashless payments, gift cards and consumer credit, protection and fraud, and any failure or perceived failure to comply with these laws could harm our reputation or lead to litigation, which could adversely affect our business, financial condition or results of operations.

Furthermore, we are subject to import laws and tariffs globally which could impact our ability to source and secure medical products, other supplies and equipment necessary to supply the MCs' franchisee and other alliance clinics, and our clinic.

In addition, as part of managing the development and renovation of franchisee clinics for the MCs, we must ensure that the applicable zoning, land use and environmental regulations in the applicable jurisdiction are being complied with.

The process of obtaining regulatory approvals and the compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our business activities now and in the future could be subject to challenge under one or more of these laws. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion of products from reimbursement under government healthcare programs, integrity oversight and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To the extent that any of our cosmetic products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

As our business continues to expand in the U.S. and other jurisdictions, including through our strategic initiatives in the United States, and as laws and regulations continue to be passed and their interpretations continue to evolve in numerous jurisdictions, additional laws and regulations may become relevant to us.

Japan Laws and Regulations

Personal Information Protection

In Japan, the Act on the Protection of Personal Information (the “APPI”) and its related guidelines impose various requirements on businesses, including us, that use databases containing personal information. Under the APPI, the MCs and the Company are required to lawfully use personal information we have obtained within the purpose of use we have specified and taken appropriate measures to maintain the security of such personal information. The MCs and the Company are also restricted from providing the personal information of a person (the “principal”) to third parties without the consent of the principal. The APPI also includes regulations relating to the handling of sensitive personal data and anonymized personal information and the transfer of personal information to foreign countries. A Personal Information Handling Business Operator (as defined below) shall not transfer a person’s personal data to third parties, including its affiliated entities without the prior consent of the principal unless an exception applies (Article 27, Paragraph 1 of the APPI).

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A “Personal Information Handling Business Operator” is defined as a person (including a judicial person and excluding any administrative organizations) providing a personal information database for use in business (Article 16, Paragraph 2). The Company’s business collects personal information from customers, thereby subjecting the Company to the provisions applicable to the Personal Information Handling Business Operator. Under the APPI, the prior consent of the principal to a transfer of such person’s personal data (including Sensitive Information (as defined below)) is not required if the transfer:

(a)

is specifically required or authorized by any laws or regulation;

(b)

is necessary for protecting the life, health, or property of an individual and consent of the principal is difficult to obtain;

(c)

is necessary for improving public health and sanitation, or promoting the sound upbringing of children, and the consent of the principal is difficult to obtain; or

(d)

is made in a case where there is a need to cooperate in regard to a central government organization or a local government, or a person entrusted by them performing affairs prescribed by laws and regulations, and when there is a possibility that obtaining the principal’s consent would interfere with the performance of the said affairs.

Furthermore, the Personal Information Handling Business Operator shall, unless an exception listed above applies, not acquire Sensitive Information (such as personal information relating to physical or mental disabilities, medical records, and medical and pharmacological treatment) without obtaining prior consent from the principal (Article 2, Paragraph 3 and Article 20, Paragraph 2 of the APPI).

The MCs gather personal information from customers through questionnaires and other methodologies in connection with the provision of medical services. Some of the information that the MCs collect could fall under the category of sensitive personal data under the APPI. In addition, the MCs gather personal information including diagnosis records, which is understood to typically fall under the Sensitive Information. Therefore, the MCs are required to obtain consent from the customers prior to the transfer of their information.

When storing personal information, it is necessary to manage it safely so that it will not be leaked or the database breached. For the safe management, the APPI requires the Personal Information Handling Business Operator to establish an information security system. It includes establishment of the fundamental rule of personal information management, appointment of personnel responsible for personal information management, provisions of regular training courses on privacy and security breach, and physical security control.

A failure by the MCs to comply with the APPI may harm our franchised brand and directly result in a reduction of the Company’s revenue, since we receive substantial revenue from the MCs as part of our compensation for management services.

Regulations Governing our Franchises

Japan has antitrust laws that protect consumers and regulate how companies operate their businesses. Among the various Japanese antitrust laws, the seminal antitrust law is the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 54 of 1947, as amended) (which we refer to as the “Antimonopoly Act”). The Antimonopoly Act prohibits certain activities that inappropriately induce or mislead persons into entering into a business relationship with us through our granting of seemingly preferable trade terms and conditions that could create false impressions in relation to other franchisors we compete with.

The Japan Fair Trade Commission (which we refer to as the “JFTC”) enforces the Antimonopoly Act and other Japanese antitrust laws. The JFTC issued the “Guidelines Concerning the Franchise System Under the Antimonopoly Act” on April 24, 2002 (last amended on April 28, 2021) (which we refer to as the “Guidelines”), under which the JFTC suggests that, prior to entering into a franchise relationship, a franchisor should adequately disclose and explain material trade terms to a potential franchisee in order to prevent any misunderstanding of the material trade terms, and to prevent such potential franchisee from being misled or improperly induced into entering into such franchise relationship. Material trade terms include terms relating to the following:

•

the supply of products after the party becomes a franchisee (such as a system for recommending suppliers);

•

guidance, procedures, frequency, and cost to the franchisee relating to the business activities of the franchise;

•

nature and amount of payments to be collected when the party joins the franchise, whether the payments are refundable or may be returned, and the conditions for refunding or returning the payments;

•

royalties that the franchisee pays to the franchisor for use of trademarks and trade names and for guidance relating to management procedures, including the amount of, procedure for calculating, and the time and method of payment, of royalties;

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•

loans the franchisor extends to the franchisee, including the interest rate and the mechanism and conditions of settlement;

•

compensation for any losses the business incurs, including the details of such compensation and whether there is management support from the franchisor in the event of a decline in business;

•

terms of the franchise agreement and the conditions and procedures for renewing or terminating the franchise agreement, including early termination prior to the expiration of its term; and

•

restrictions with respect to the franchisor or other franchisees of the franchise setting up an identical or similar business near the proposed business of the potential party to join the franchise, including whether there are any plans to set up additional businesses and the details of such plans.

In addition, when a franchisor markets its franchise, in the event such franchisor provides a prospective franchisee with an estimate of the revenue or profit that could possibly be generated upon becoming a franchisee, such estimated revenue or profit must be based on a reasonable method of calculation and established facts, such as the results of an existing franchise operating in a similar environment. The franchisor is required to present to the prospective franchisee such methods and facts.

If the JFTC finds any activities that violate the Antimonopoly Act, including any “deceptive customer inducement”, then the JFTC may order the offending franchisor to cease and desist from engaging in such unlawful activities, delete any applicable unlawful clauses from the franchise contract, or carry out any other measures necessary to eliminate such unlawful activities.

In the event the JFTC suspects any violation of the Antimonopoly Act or alleges that we have misled or wrongly induced any of our franchisees based upon any particular trade terms, we could be exposed to risks, including governmental action against us.

Regulations Governing Medical Care and Services

The MCs provide services strictly in accordance with the medical-related laws and regulations of the Medical Care Act (Law No. 205) adopted on July 30, 1948, as amended. The Medical Care Act defines rights and obligations regarding medical treatment, advertisement, authority, license, treatment of information, safety and security for patients, doctors and other individuals and organizations engaged in medical activities. The purpose of the Medical Care Act is to protect the health of the nation by safeguarding the interests of medical care recipients and ensuring a system that efficiently delivers high quality and well-suited medical care, by means of providing for the necessary particulars to support well-suited choices about medical care by the recipients thereof, to ensure the safety of medical care, concerning the establishment and management of hospitals, clinics, and birthing centers, and to develop such facilities and promote the sharing of functions and cooperation between medical institutions. The MCs also comply with other laws such as the Medical Practitioners’ Act, Dental Practitioners Act, Radiology Technician Act, Clinical Trials Act, Industrial Safety and Health Act when providing relevant services. A failure by the MCs and other independently operated clinics and physicians to comply with the Medical Care Act may harm our franchised brand and directly result in a reduction of the Company’s revenue, since we receive substantial revenue from the MCs as part of our compensation for management services.

Regulations Governing our Recruiting License

In November 2022, we obtained a recruiting agency license (which we refer to as a “Recruiting License”) from the Ministry of Health, Labor and Welfare of Japan under the Act for Securing the Proper Operation of Worker Dispatching Undertakings and Improved Working Conditions for Dispatched Workers (which we refer to as the “Dispatch Act”). We are required to obtain the Recruiting License because we assist with the placement of staff and employee training at the managed clinics (including the franchisee and other alliance clinics).

Regulations Governing our Use of Certain Substances

The MCs are required to comply with the Poisonous and Deleterious Substances Control Act (Act No. 303 of December 28, 1950, as amended) of Japan. The purpose of this Act is to provide for the necessary control of poisonous and deleterious substances from the standpoint of health and hygiene and regulates the use of deleterious substances. The aforementioned regulations apply to the clinics operated by the MCs (including franchisee and other alliance clinics) handling of such substances in Japan. A failure by the MCs to comply with the Poisonous and Deleterious Substances Control Act may harm our franchised brand and directly result in a reduction of the Company’s revenue, since we receive substantial revenue from the MCs as part of our compensation for management services.

Regulations on Intellectual Property

In Japan, patents are protected by the Patent Act and the Utility Model Act of Japan (Act No. 123 of 1959 as amended). Designs are protected by the Design Act of Japan (Act No. 125 of 1959 as amended), and trademarks by the Trademark Act (Act No. 127 of 1959 as amended). Copyrights are protected by the Copyrights Act (Act No. 48 of 1970 as amended). Trade secrets are protected by the Unfair Competition Prevention Act (Act No. 47 of 1993 as amended). The aforementioned regulations apply to our intellectual property rights in Japan, and accordingly we are subject to complying with such regulations.

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Japanese Employment and Labor Laws

There are various labor-related laws in Japan, including the Labor Standards Act (Act No. 49 of April 7, 1947, as amended), the Industrial Safety and Health Act (Act No. 57 of June 8, 1972, as amended), and the Labor Contracts Act (Act No. 128 of December 5, 2007). The Labor Standards Act regulates, among others, minimum standards for working conditions such as working hours, leave period, and leave days. The Industrial Safety and Health Act requires, among others, the implementation of measures to secure employee safety and protect the health of workers in the workplace. The Labor Contracts Act regulates, among others, the change of terms of employment contracts and working rules, and dismissal and disciplinary action. A portion of our personnel in Japan are paid at rates related to the applicable minimum wage, and further increases in the minimum wage or other changes in these laws could increase our labor costs. Our ability to respond to minimum wage increases by increasing service and product prices will depend on the responses of our competitors and customers. Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs of goods and services supplied to us. We may also be subject to lawsuits from our employees, Labor Standards Inspection Office, or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters.

Regulations on Lease Agreements

Our lease agreements are generally subject to the Civil Code (Act No. 89 of April 27, 1896, as amended) and Act on Land and Building Leases (Act No. 90 of October 4, 1991, as amended). We believe that the terms and conditions of our lease agreements are consistent with these laws and are valid and enforceable as provided for in these agreements.

Regulations regarding Maintenance of Websites and E-commerce

The Act on Special Provisions to the Civil Code Concerning Electronic Consumer Contracts and Electronic Acceptance Notice (Act No. 95 of June 29, 2001, as amended) and the Act on Specified Commercial Transactions (Act No. 57 of June 4, 1976, as amended) regulate sales of goods through e-commerce within Japan. For example, under these acts, we as a seller must explicitly show prices of products, timing and method of payment, timing of delivery, conditions for return of goods, our name and contact information, and name of representative person, among others. We comply with these regulations.

Regulations regarding Product Quality and Customer Protection

We are subject to laws and regulations, as well as pending legislative and regulatory proposals, regarding product quality and customer protection, which could affect us in jurisdictions in which we sell our products.

In Japan, the Product Liability Act (Act No.85 of July 1, 1994, as amended) and Consumer Contract Act (Act No. 61 of May 12, 2000, as amended) mainly regulate the product quality and customer protection. The Product Liability Act sets forth the liabilities of a manufacturer, processor, or importer for damages caused by defects in a product. A seller who was not involved in the manufacturing, processing, or import of a product could still be liable under this act if its name, trade name, or trademark, etc. was indicated on the product as the manufacturer, processor, or importer, such indications on the product might mislead others into believing that the seller was the manufacturer, processor, or importer, or such indications on the product might be recognized by others as those of the substantial manufacturer, processor, or importer. Liability under this act can be imposed even if the manufacturer, processor, or importer (and the said seller) was not negligent. The Consumer Contract Act invalidates certain provisions in contracts with consumers, such as exemption of compensation for damages to consumers and restrictions of termination by consumers due to the seller’s breach of contract. We comply with these regulations.