What changed in this filing

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Item 1. Business

2025-03-28 compared with 2024-03-19 · 2819 added, 265 removed, 1 unchanged (100% of the section changed)

are a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition,

share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to herein as our

initial business combination.

Our Sponsor is Mehana Capital LLC, a Delaware limited liability company (“Sponsor”).

believe that there are many target companies that could become attractive public companies and we will seek a target in the disruptive

technology sector with a spotlight on companies in Asia with Japan in particular.

While we may pursue an initial business combination

target in any industry or geographic region, we will seek to capitalize on the operational and investment experience of our management

team and focus on disruptive technology companies that we believe have significant growth prospects and the potential to generate attractive

returns for our stockholders.

We expect to focus on identifying potential target companies with above-industry-average growth, and a

defensible market position where our management team’s operational, strategic, or managerial expertise can assist in maximizing

Registration Statement for our initial public offering was declared effective on August 4, 2022 (the “Initial Public Offering,”

On August 9, 2022, we consummated the Initial Public Offering of 11,500,000 Units, including 1,500,000 Units issued

pursuant to the exercise of the underwriters’ over-allotment option in full, generating gross proceeds of $115,000,000.

consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”).

Each Public Warrant entitles

the holder to purchase one share of Class A common stock at an exercise price of $11.50 per whole share.

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 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 predecessor company prior to the

consummation of the Business Combination.

were originally incorporated in Delaware on February 12, 2021 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 closing of the Initial Public Offering, we consummated the sale of 634,375 units (the “Placement Units”) at a price

of $10.00 per Placement Unit in a private placement to the Sponsor, including 63,000 Placement Units issued pursuant to the exercise

of the underwriters’ over-allotment option in full, generating gross proceeds of $6,343,750, which is described in Note 4.

the closing of the Initial Public Offering on August 9, 2022, an amount of $117,875,000 ($10.25 per Unit) from the net proceeds of the

sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account (the “Trust

Account”), and will be invested only in U.S.

government treasury obligations with maturities of 185 days or less or in money market

funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S.

government treasury

obligations, until the earlier of:

(i) the completion of a business combination and (ii) the distribution of the funds held in the Trust

Account, as described below.

May 5, 2023, we held a special meeting of stockholders (the “Special Meeting”), and the chairman adjourned the Special Meeting

to May 8, 2023.

On May 8, 2023, we held the Special Meeting.

During the Special Meeting, stockholders approved an amendment to the Company’s

amended and restated certificate of incorporation (the “Extension Amendment” (i) to extend the date by which the Company

has to consummate a business combination from May 9, 2023 to February 9, 2024 for no additional amount to be paid by the Sponsor into

the Trust Account, and (ii) to provide for the right of a holder of Class B common stock to convert such shares into shares of Class

A common stock on a one-for-one basis prior to the closing of a business combination at the election of the holder.

As approved by the

stockholders of the Company, the Company filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware

Secretary of State on May 8, 2023.

The Company’s stockholders elected to redeem an aggregate of 9,577,250 shares of Class A common

stock of the Company in connection with the Special Meeting.

Following such redemptions, the amount of funds remaining in the Trust Account

is approximately $20 million.

connection with the Special Meeting, the Company and the Sponsor entered into non-redemption agreements with certain unaffiliated stockholders

owning, in the aggregate, 998,682 shares of the Company’s Class A common stock, pursuant to which such stockholders agreed, among

other things, not to redeem or exercise any right to redeem such public shares in connection with the Extension Amendment.

In connection

with the non-redemption agreements, the Sponsor agreed to transfer to the stockholders that entered into such agreements Sponsor Shares

upon the consummation of the Company’s initial business combination.

May 8, 2023, the Sponsor converted 2,874,999 Founder Shares of Class B common stock into 2,874,999 shares of Class A common stock.

February 5, 2024, the Company held another special meeting of stockholders (the “Second Special Meeting”).

During the Second

Special Meeting, stockholders approved another amendment to the Company’s amended and restated certificate of incorporation to

extend the date by which the Company has to consummate a business combination (the “Combination Period”) from February 9,

2024 to November 9, 2024 for no additional amount to be paid by the Sponsor into the Trust Account.

As approved by the stockholders of

the Company, the Company filed another amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary

of State on February 5, 2024.

The Company’s stockholders elected to redeem an aggregate of 273,334 shares of Class A common stock

of the Company in connection with the Second Special Meeting.

Following such redemptions, the amount of funds remaining in the trust

account is approximately $17.9 million.

connection with the Second Special Meeting, the Company entered into a non-redemption agreement with an unaffiliated investor (the

“Holder”) which agreed to acquire from public stockholders of the Company 1,500,000 to 1,700,000 shares of Class A

common stock in the open market, at a prices no higher than the redemption price per share payable to stockholders who exercise

redemption rights in connection with the stockholder vote to approve the Company’s proposed business combination with SBC (as

defined below), prior to the Second Special Meeting and to agree to waive its redemption rights and hold the shares until after the

closing of the business combination.

In consideration of the Holder’s agreement to waive its redemption rights with respect to

the shares, and subject to (i) the Holder acquiring 1,500,000 to 1,700,000 shares of Class A common stock in the open market, and

(ii) Holder’s satisfaction of its other obligations under the non-redemption agreement, the Company, on the closing date of

the business combination, provided that Holder has continued to hold the Holder’s shares through the closing date, SBC and

Yoshiyuki Aikawa, the chief executive officer of SBC, shall cause to be issued or transferred to Holder a number of shares of Class

A common stock held by Dr.

Aikawa (the “Incentive Shares”), which will equal one (1) Incentive Share for each public

share purchased in the open market pursuant to the non-redemption agreement that is continuously owned by Holder until the closing

date of the business combination.

This non-redemption agreement terminates on the earliest to occur of (i) the closing date of the

business combination, (ii) the termination of the related business combination agreement, or (iii) April 30, 2024 (the

“Clearance Date”) if the Company has not cleared all SEC comments to its proxy statement in connection with the business

combination by that date.

On March 15, 2024, the parties to the non-redemption agreement entered into an amendment to the

non-redemption agreement to extend the Clearance Date to June 30, 2024, and to agree to close the business combination on or before August

we are unable to complete a business combination within the Combination Period, we will (i) cease all operations except for the purpose

of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding

Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest

earned (net of taxes payable and less interest to pay dissolution expenses up to $100,000), divided by the number of then outstanding

Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to

receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following

such redemption, subject to the approval of the remaining stockholders and our board of directors, proceed to commence a voluntary liquidation

and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements

of applicable law.

The underwriters have agreed to waive their rights to the deferred underwriting commission held in the Trust Account

in the event we do not complete a business combination within the Combination Period and, in such event, such amounts will be included

with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares.

In the event of such distribution,

it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering

price per Unit ($10.00).

January 31, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among us, Pono Two Merger

Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), SBC Medical Group Holdings Incorporated,

a Delaware corporation (“SBC”), Mehana Capital, LLC, in its capacity as Purchaser Representative, and Yoshiyuki Aikawa, in

his capacity as Seller Representative.

to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into

SBC, with SBC continuing as the surviving corporation.

The transactions contemplated by the Merger Agreement are referred to herein as

the “Business Combination.”

a condition to closing of the Business Combination, SBC will complete certain restructuring transactions pursuant to which SBC Medical

Group Co., Ltd., a Japanese corporation (“SBC-Japan”) and certain related entities which carry on the business of SBC-Japan

and such other related entities, will become subsidiaries of SBC.

consideration for the Business Combination, the holders of SBC securities as of the closing of the Business Combination, collectively

will be entitled to receive from us, in the aggregate, a number of our securities with an aggregate value equal to (a) $1,200,000,000,

minus (b) the amount, if any, by which $3,000,000 exceeds SBC’s Net Working Capital, plus (c) the amount, if any, by which SBC’s

Net Working Capital exceeds $3,000,000, minus (d) the aggregate amount of any outstanding indebtedness (minus cash held by SBC) of SBC

at Closing, minus (e) specified transaction expenses of SBC associated with the Business Combination.

April 26, 2023, the parties entered into an amendment to the Merger Agreement.

Our board approved the amendment on April 25, 2023.

to the Amendment, the Sponsor in its sole discretion may direct Pono to issue all or a portion of the Sponsor Shares on an earlier or

later date as it may determine, which date will not be earlier than the Closing.

In addition, pursuant to the Amendment, the date by

which (i) SBC will complete its agreed upon disclosure schedules, (ii) Pono will complete its due diligence review of SBC, and (iii)

the parties to the Merger Agreement will agree upon any modifications or amendments to the Merger Agreement to the terms and conditions

therein, among other related matters, was extended from April 28, 2023 to May 31, 2023.

SBC also agreed to purchase, or to cause one

of its Affiliates to purchase, equity in the Sponsor in an amount equal to $1,000,000, by way of a separate agreement to be entered into

on or before May 5, 2023.

May 18, 2023, the parties entered into a Note Purchase Agreement pursuant to which the parties have agreed that Pono will issue and sell

to SBC a convertible promissory note of $1,000,000 in aggregate principal amount which note is convertible into shares of Class A Common

Stock, par value $0.0001 per share of Pono.

May 26, 2023, the closing date of the purchase and sale of the Note, SBC delivered the Note reflecting the Principal Amount and SBC deposited

$1,000,000 by wire transfer into the specified Company account.

The Note does not bear interest (unless otherwise required by applicable

law, in which event interest will accrue at the minimum rate required by applicable law) and the principal amount may be prepaid at any

May 30, 2023, the parties entered into Amendment No.

2 to the Merger Agreement.

Our board approved the amendment on May 23, 2023.

amendment extended the time for (i) SBC to deliver disclosure schedules, (ii) Pono to complete its due diligence review of SBC and (iii)

the parties to agree upon a modifications or amendments to the Merger Agreement to the terms and conditions therein until June 15, 2023.

June 15, 2023, the parties entered into Amendment No.

3 to the Merger Agreement.

Our board approved the amendment on June 15, 2023.

amendment further extended the time for (i) SBC to deliver disclosure schedules, (ii) Pono to complete its due diligence review of SBC

and (iii) the parties to agree upon a modifications or amendments to the Merger Agreement to the terms and conditions therein until June

June 21, 2023, the parties entered into an Amended and Restated Agreement and Plan of Merger (“A&R Merger Agreement”).

Our board approved the A&R Merger Agreement on June 15, 2023.

The A&R Merger Agreement revised the target companies to be directly

or indirectly purchased by Pono following a restructuring of SBC’s corporate structure, to include only the Service Companies and

certain other entities, and to no longer include the direct or indirect purchase of Medical Corporations, and as a result, removed other

references to the Medical Corporations, including the related representations and warranties, among others.

The Medical Corporations

were removed for Japanese regulatory reasons under the Japanese Medical Care Act.

Based on the provisions of the Japanese Medical Care

Act, in essence, medical corporations are considered not-for-profit organizations with a benevolent purpose of serving human-kind and

cannot be controlled by for-profit entities.

More specifically, the Medical Corporations, even though considered related parties, are

independent business operators and, the Company does not exercise control over the day-to-day operations of their clinics (except to

the extent governed by our management services contracts).

The removal of the Medical Corporations from the A&R Merger Agreement

required a reduction of the valuation.

As a result, the schedule was delayed by approximately two months.

Other than the reduction of

the valuation and delay, the overall transaction was not affected by this removal.

The A&R Merger Agreement also extended the date

by which the disclosures schedules were to be delivered to August 31, 2023 and extended the date by which the Closing shall occur from

September 30, 2023 to December 31, 2023.

Pursuant to the A&R Merger Agreement, the parties also agreed that any future expenses incurred

in connection with the extension of the time by which Pono must complete its initial business combination shall be borne entirely by

Pono, which replaces and supersedes the prior requirement under the Original Agreement for Pono and SBC to share such expenses equally.

September 8, 2023, the parties entered into the First Amendment to the A&R Merger Agreement, which provided for the holders of SBC

securities collectively to be entitled to receive from Pono as Merger consideration, in the aggregate, a number of Pono securities with

an aggregate value equal to (a) $1,000,000,000, minus (b) the amount, if any, by which $3,000,000 exceeds SBC’s Net Working Capital,

plus (c) the amount, if any, by which SBC’s Net Working Capital exceeds $3,000,000, minus (d) the aggregate amount of any outstanding

indebtedness (minus cash held by SBC) of SBC at Closing, minus (e) specified transaction expenses of SBC associated with the Business

Our board approved the amendment on September 7, 2023.

October 26, 2023, the parties entered into the Second Amendment to the A&R Merger Agreement (the “Second Amendment”)

with the parties thereto.

Prior to the Second Amendment, the Company’s board of directors as of the Closing was to be designated

(i) three persons designated prior to the Closing by SBC, two of whom must qualify as independent directors;

(ii) one person

designated prior to the Closing by the Company;

and (iii) one person mutually agreed upon and designated prior to the Closing by the

Company and SBC, who must qualify as an independent director.

Following the Second Amendment, the Company’s board of directors

as of the Closing will be designated as follows:

(i) three persons designated prior to the Closing by SBC, at least one of whom must

qualify as an independent director;

(ii) one person designated prior to the Closing by the Company, who must qualify as an independent

and (iii) one person mutually agreed upon and designated prior to the Closing by the Company and SBC, who must qualify as an

independent director.

December 28, 2023, the parties entered into the Third Amendment to the A&R Merger Agreement (the “Third Amendment”) with

the parties thereto.

The Third Amendment was entered into solely to extend the Outside Date (as defined in the A&R Merger Agreement)

from December 31, 2023 to March 31, 2024.

February 27, 2024, the Company and SBC entered into an Amendment to the Note Purchase Agreement (the “Amended Note Purchase Agreement”),

which increased the purchase price of the Note from $1,000,000 to $2,700,000.

see the Current Reports on Form 8-K we filed with the SEC on February 2, 2023, June 22, 2023, September 11, 2023, October 26, 2023, December 29, 2023, and March 1, 2024 for additional information.

are a blank check company incorporated in Delaware on March 11, 2022 formed for the purpose of entering into a merger, share exchange,

asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “business combination”).

We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of

the private placement units, the proceeds of the sale of our shares in connection with our initial business combination pursuant to the

shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the

foregoing or other sources.

believe that there are many target companies that could become attractive public companies and we will seek a target in the disruptive

technology sector with a spotlight on companies in Asia with Japan in particular.

While we may pursue an initial business combination

target in any industry or geographic region, we will seek to capitalize on the operational and investment experience of our management

team and focus on disruptive technology companies that we believe have significant growth prospects and the potential to generate attractive

returns for our stockholders.

We expect to focus on identifying potential target companies with above-industry-average growth, and a

defensible market position where our management team’s operational, strategic, or managerial expertise can assist in maximizing

believe the traditional IPO and direct listing processes are not designed for these types of companies to execute on their ambitious

We believe using a SPAC structure is a disruptive alternative to, and creates more efficiencies than, the traditional IPO

We also believe that because the industries in which we have particular expertise, and in which we will seek to identify a

potential business combination target, are often overlooked by traditional venture capital, public equity and private equity investors,

many high-quality companies in these industries are not well suited to a traditional IPO, direct listing or private equity buyout transaction.

Therefore, we believe our focus on these particular industries will provide unique access to the highest quality companies and management

teams and a substantial number of proprietary business combination opportunities.

Our mission is to create a better solution to the conventional

IPO for these high growth, disruptive technology and technology-enabled companies, which addresses their needs for capital and liquidity,

while overcoming the key points of friction in the traditional IPO path in particular for businesses in Japan.

believe our expertise will make us an attractive partner for companies seeking a clear and efficient path to listing their shares with

a significant degree of funding certainty including high-quality companies in Japan where certain of the Company’s officers and

directors are familiar with Japanese business and M&A culture, which will have an impact on the dynamics of a business combination.

There are a large number of companies that desire to have publicly-traded shares to provide liquidity to investors and employees, create

a currency for mergers and acquisitions and access to equity capital markets.

We may seek to combine with businesses owned by our founder

and minority investors, although we may consummate a transaction with businesses controlled by private equity investors or family-owned

businesses, which means there is a wide universe of potential partners.

We believe our understanding of private deal execution and public

capital markets, and valuation dynamics in both markets, make us uniquely positioned to identify and execute a business combination with

a growth orientation.

Management Team

management team is led by Darryl Nakamoto, our Chief Executive Officer and Director, Allison Van Orman, our Chief Financial Officer,

and Dustin Shindo, our Chairman of the Board, who will be supported by Pono Capital Two, Inc.’s independent directors, sponsor,

accountants and legal counsel, as further described below.

We believe our management team is well positioned to identify and evaluate

businesses within the technology industry that would benefit from being a public company and from access to our expertise.

we can achieve this mission by utilizing our team’s extensive experience in growing and operating technology companies as well

as our broad network of contacts in the technology sector.

identifying, evaluating and selecting a target business for our initial business combination, we may encounter competition from other

entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout

funds, public companies and operating businesses seeking strategic business combinations.

Many of these entities are well established

and have extensive experience identifying and effecting business combinations directly or through affiliates.

Moreover, many of these

competitors possess greater financial, technical, human and other resources than we do.

Our ability to acquire larger target businesses

will be limited by our available financial resources.

This inherent limitation gives others an advantage in pursuing the initial business

combination of a target business.

Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their

redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the

future dilution they potentially represent, may not be viewed favorably by certain target businesses.

Either of these factors may place

us at a competitive disadvantage in successfully negotiating an initial business combination.

currently have two executive officers.

These individuals are not obligated to devote any specific number of hours to our matters, but

they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination.

The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial

business combination and the stage of the initial business combination process we are in.

We do not intend to have any full-time employees

prior to the completion of our initial business combination.

additional discussion of the general development of our business, see our final prospectus on Form 424B4, filed with the SEC on August

a smaller reporting company, we are not required to make disclosures under this Item.

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

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.

January 21, 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 named to

SBC Medical Group, Inc.

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.”

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.

Company is a management company headquartered in Irvine California and Tokyo, Japan, that owns, operates, and provides management services

to cosmetic treatment centers mainly in Japan, with footprint also in Vietnam, Singapore and the United States.

The history of Legacy SBC began with the establishment of L’Ange Cosmetique

in 2003 and SBCMG (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.

Company is primarily focused on providing comprehensive management services to franchisee clinics, including but not limited to advertising

and marketing needs across various platforms (such as social media networks), staff management (such as recruitment and training), booking

reservations for franchisee clinic customers, assistance with franchisee employee housing rentals and facility rentals, construction

and design of franchisee clinics, medical equipment and medical consumables procurement (resale), the provision of cosmetic products

to franchisee 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 franchisee clinic’s

customer rewards program (customer loyalty point program), and payment tools for the franchisee clinics.

2017, we began providing our management services to our franchisee treatment center.

The Company and its subsidiaries now provide

management services to a total of 241 franchisee treatment centers located in Japan.

The Company also (i) owns and operates 1

treatment center under its “SBC” brand name in Ho Chi Minh City, Vietnam, as well as (ii) provides management service to

1 treatment center under its “SBC” brand name in Irvine, California in the United States (the “CA Clinic”),

which is owned and operated by the related party.

Our treatment center in Vietnam, and the franchisee treatment centers that we

provide management services to, 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, cosmetical dental procedures, tattoo

removal, lasik eye surgery, lateral canthoplasty, brow lift procedures, androgenetic alopecia treatment, and cheek sagging

prevention methods.

In November 2024, we acquired 100% equity interest of Aesthetic Healthcare Holdings (“AHH”) and its

subsidiaries, companies incorporated in Singapore and principally engaged in medical aesthetics business, with a cash consideration

of SGD$7.8 million (equivalent to approximately US$5.8 million).

Through the acquisition of AHH, the Company currently operates

several clinics in Singapore.

our inception, we have been committed to delivering high quality management services to our franchisee clinics.

We believe our team of

highly qualified and experienced professionals have underpinned our strong reputation as we continue to provide multifaceted management

services to our franchisee clinics.

Business Segments

The Company operates as 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 20, “Segment Reporting,” in the accompanying notes to our consolidated

financial statements.

Company’s subsidiary, SBC Medical Group, Inc., primarily operates through 16 wholly owned subsidiaries, one majority owned subsidiaries

and one variable interest entity.

The wholly owned subsidiaries consist of SBC Medical Group Co., Ltd., a Japan corporation (“SBC

Medical Sub”), L’Ange Cosmetique Co., Ltd., a Japan corporation (“Lange Sub”), Shobikai Co., Ltd., a Japan corporation

(“Shobikai Sub”), Liesta Co., Ltd., a Japan corporation (“Liesta”), SBC Sealane Co., Ltd., a Japan corporation

(“SBC Sealane”), SBC Marketing Co., Ltd., Japan corporation (“SBC Marketing”), SBC Medical Consulting Co., Ltd.,

a Japan 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 & Wang Family Clinic Pte.,

Ltd., a Singapore corporation (“WWFC”), Wen & Wang 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”).

The majority owned subsidiary is Medical Payment

Co., Ltd., a Japan corporation (“Med Payment”).

The variable interest entity is Aikawa Medical Management, Inc.

of Kijimadairakanko Inc.

(“Kijima”) and Skynet Academy Co., Ltd.

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 ($0) for Kijima and $446,460

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.

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

AHH and its subsidiaries, following the execution of a Share Purchase Agreement with Dr.

Ewen Chee Yew Wen, Dr.

Lee Tee Kit, Dr.

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.

For the current period, only the balance

sheet information as of the acquisition date has been included in the consolidated financial statements.

the fiscal years ended December 31, 2024 and 202 3 ,

the Company generated revenues of

$205,415,542 and $193,542,423, respectively, reported net income of $46,689,892 and $38,560,606, respectively, and cash flow

provided by operating activities of $20,582,933 and $50,670 ,322 , respectively.

As of December 31, 2024, the Company had

retained earnings of $189,463,007.

Medical Group Co., Ltd., a Japan corporation (“SBC Medical Sub”), L’Ange Cosmetique Co., Ltd., a Japan corporation

(“Lange Sub”), Shobikai Co., Ltd., a Japan corporation (“Shobikai Sub”) are each designated as a “medical

service corporation” in Japan.

In Japan, a medical service corporation is a legal entity that provides management service to “MCs”.

The management services are conducted through FC contracts and service contracts between certain subsidiaries of the Company (SBC Medical

Sub, Lange Sub, and Shobikai Sub) and the MCs that own all 241 of the treatment centers in Japan.

There are currently six MCs that the Company’s subsidiaries have entered into franchisor-franchisee contracts

and service contracts with, consisting of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical

Corporation Aikeikai, Medical Corporation Jukeikai, and Medical Corporation Ritz Cosmetic Surgery (collectively, the “MCs”).

addition to the six MCs, we have 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).

The scope of work (“SOW”) of the service contracts with these two MCs is limited to marketing, introduction

of new treatment technologies and future business development while the SOW of the FC contracts with the six MCs are broad and define

general rules in order to allow MCs to use the SBC brand name.

Accordingly, the service contracts with these two MCs are different from

the FC contracts with the six MCs and the clinics of these two MCs do not use the “Shonan Beauty Clinic” brand.

“— Material Contracts between the Company and MCs — Service Contracts” for more information regarding the service

contracts with Medical Corporation Association Furinkai and Medical Corporation Association Junikai.

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, owns equity “deposit” interests (or mochibun ) of the six

franchisee MCs.

Although the Company, through SBC Medical, has an equity “deposit” 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 articles of incorporation

of each of the six MCs, the Company or SBC Medical 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.

primary mission is to provide quality comprehensive management services to the MCs and expand our “Shonan Beauty Clinic”

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 and the United States, and by continuing to grow our presence globally.

Accordingly, we

have entered into franchise agreements and partner doctor independence support program agreements (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.

The term of the Support Agreements is until August 31, 2026, provided that such Support Agreements will

continue to automatically renew for one (1) year successive periods unless either the Company or the respective MC provides notice of

termination at least six (6) months prior to the expiration date of the Support Agreement.

We receive a portion of our overall compensation

for providing management services under the Support Agreements with the following MCs:

Corporation Shobikai:

from September 29, 2017

Corporation Kowakai:

from September 29, 2017

Corporation Nasukai:

from September 29, 2017

Corporation Aikeikai:

from September 29, 2017

Corporation Jukeikai:

from February 21, 2020

Corporation Ritz Cosmetic Surgery:

from May 31, 2021

Contracts between the Company and MCs

Company has entered into a Partner Doctor Independence Support Program Agreement and an SBC Operating Agreement with each of the MCs.

Doctor Independence Support Program Agreement

Company has entered into a Partner Doctor Independence Support Program Agreement (the “PDISPA”) with each of the MCs.

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 agreed to provide the use of the name of the “Shonan

Beauty Clinic” and the “SBC Medical Group” (Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation

Nasukai, Medical Corporation Aikeikai, L’Ange Cosmetique Co., Ltd.

and Shobikai Co., Ltd., which together are referred to as the

“SBC Medical”) to the MCs for the purpose of operating clinics.

The Company also granted to the MCs the right to use the

name “SBC Medical Group,” the know-how of clinic operation, trademark, trade name, and the right to provide the treatment

designated by the Company, and the right to conduct business activities as a partner of the SBC Medical Group under a unified image.

does not charge franchise fee or deposit fee, instead the MCs 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

MCs, the maximum amount fee 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.

Operating Agreement

Company previously entered into an SBC Operating Agreement (the “SBCOA”) with each of the MCs.

The term of the SBCOA is from

April 1, 2023, to March 31, 2025.

Either party may terminate the SBCOA by giving notice to the other party of the intended termination

at least 6 months prior to the scheduled termination date.

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.

the existing SBCOA, in exchange for the foregoing services, each MCs are to pay the Company 3,000,000 yen per month (excluding consumption

tax) for each medical facility where a MC provides medical services to its clients.

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, we have decided to amend and renew the SBCOA with each MC, effective from April 1, 2025.

Under the revised SBCOA, similar

with prior terms, either party may terminate the agreement by providing written notice to the other party no later than six months before

the scheduled expiration date.

main revisions include:

Fee Structure

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.

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.

to Provided Consulting Services Following the revision, consulting services provided by the

Company to MCs will include:

consulting for medical corporations and facilities

resources and labor management services

● Recruitment-related

administrative services

● Information

system management services

relations services

● Accounting,

finance, and taxation services

establishment and facilities management services

● Infrastructure

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

medical treatments

the financial impact of these revisions, please refer to the “Item 7.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations—Recent Developments—Upcoming Changes to Service Fee Structure.”

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).

The scope of work (“SOW”) of the service contracts with these two MCs is limited to marketing, introduction of new treatment

technologies and future business development while the SOW of the FC contracts with the six MCs are broad and define general rules in

order to allow MCs to use the SBC brand name.

Accordingly, the service contracts with these two MCs are different from the FC contracts

with the six MCs and the clinics of these two MCs do not use the “Shonan Beauty Clinic” brand.

Consignment Agreement for Management Consulting Services to Medical Corporation Association Furinkai

material terms of our business consignment agreement for management consulting services to Medical Corporation Association Furinkai are

Services by the Company to Medical Corporation Association Furinkai

on the use of business systems used in medical facilities

on the development of new treatments and manuals

for repeat customer acquisition measures related to cosmetic dermatology

on the efficient operation with more customer service during the same clinic hours related

to cosmetic dermatology consulting

for building management strategies related to cosmetic dermatology treatment

1, 2024 until August 31, 2027

neither party expresses an intention not to renew the agreement before the expiration of

the effective period, the agreement shall be renewed for another two (2) years under the

same terms and conditions

● Termination

Provisions & Penalties

party may terminate this agreement by notifying the other party at least six months prior

to the scheduled termination date.

Payable Under the Agreement

◌ JPY60,000,000

per month (excluding consumption tax).

Consignment Agreement for Operational Support to Medical Corporation Association Furinkai

material terms of our business consignment agreement for operational support services to Medical Corporation Association Furinkai are

Services by the Company to Medical Corporation Association Furinkai

stable business performance and increase customer satisfaction through creation of repeat

customers related to cosmetic dermatology

of medical devices and medical materials for cosmetic dermatology

◌ establishment

and operation of a system to ensure the safety of cosmetic dermatology treatment

skills training associated with cosmetic dermatology treatment for medical facility employees

operation methods that enable more customers to be served during the same clinic hours related

to cosmetic dermatology

management strategies related to cosmetic dermatology treatment

◌ development

of new treatment methods, formulation of manuals, and support for implementation

and management of business system implementation

and implementation support, operation and maintenance of servers, networks and IT infrastructure

1, 2023 until August 31, 2027

neither party expresses an intention not to renew the agreement before the expiration of

the effective period, the agreement shall be renewed for another two (2) years under the

same terms and conditions

● Termination

Provisions & Penalties

party may terminate this agreement by notifying the other party at least six months prior

to the scheduled termination date.

Payable Under the Agreement

◌ JPY1,700,000

per month for each medical facility (excluding consumption tax).

Consignment Agreement for Management Consulting Services to Medical Corporation Association Junikai

material terms of our business consignment agreement for management consulting services to Medical Corporation Association Junikai are

Services by the Company to Medical Corporation Association Junikai

on the use of business systems used in medical facilities

on the development of new treatments and manuals

for repeat customer acquisition measures related to cosmetic dermatology

on the efficient operation with more customer service during the same clinic hours related

to cosmetic dermatology consulting

for building management strategies related to cosmetic dermatology treatment

1, 2024 until August 31, 2026

neither party expresses an intention not to renew the agreement before the expiration of

the effective period, the agreement shall be renewed for another two (2) years under the

same terms and conditions

● Termination

Provisions & Penalties

party may terminate this agreement by notifying the other party at least six months prior

to the scheduled termination date.

Payable Under the Agreement

◌ JPY10,000,000

per month (excluding consumption tax).

Consignment Agreement for Operational Support to Medical Corporation Association Junikai

material terms of our business consignment agreement for operational support services to Medical Corporation Association Junikai are

Services by the Company to Medical Corporation Association Junikai

stable business performance and increase customer satisfaction through creation of repeat

customers related to cosmetic dermatology

of medical devices and medical materials for cosmetic dermatology

◌ establishment

and operation of a system to ensure the safety of cosmetic dermatology treatment

skills training associated with cosmetic dermatology treatment for medical facility employees

operation methods that enable more customers to be served during the same clinic hours related

to cosmetic dermatology

management strategies related to cosmetic dermatology treatment

◌ development

of new treatment methods, formulation of manuals, and support for implementation

and management of business system implementation

and implementation support, operation and maintenance of servers, networks and IT infrastructure

and advisory services for the use of marketing analysis tools, etc.

1, 2023 until August 31, 2027

neither party expresses an intention not to renew the agreement before the expiration of

the effective period, the agreement shall be renewed for another two (2) years under the

same terms and conditions

● Termination

Provisions & Penalties

party may terminate this agreement by notifying the other party at least six months prior

to the scheduled termination date.

Payable Under the Agreement

per month for each medical facility (excluding consumption tax).

use and regulatory status of certain products

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.

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 2024, 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.

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

Stem Eye Cream

Cleansing Gel

Contour Lotion

Essential Serum

Contour B Cream

Premium Coffret 2024

Facial Foaming Wash

Protect UV Gel

Condense C Serum

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.

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, and separation of aspirated fat.

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

of fertilized eggs An incubator for growing fertilized eggs of patients.

A camera takes pictures at regular intervals, and the division

can be observed like a movie on the monitor.

Therapy Machine

Care Treatment

Picolaser Fractional

Therapy Machine

Care Treatment

Light Therapy (Photo Double/Photo Triple)

coolsculpting

cooling (slimming)

Therapy Machine

Care Treatment

Light Therapy (Photo Double Photo Triple)

General-purpose

video scope for upper gastrointestinal tract GIF-1200N

imaging, diagnosis, and treatment of the upper gastrointestinal tract

motility analyzer with SMAS Biological Microscope

of sperm motility The system automatically tracks moving sperm and displays and outputs a number of measurement results accurately

and quickly, including the number of moving sperm, their movement trajectories, discrimination from immobile sperm, and various types

Electrosurgical

incision and coagulation for surgical use

minimal downtime

sterilizer CT-540C

Sterilization

of medical supplies vulnerable to high pressure Sterilizer, low temperature up to 40°C

separator H-36 ‹

of aspirated fat

Company does not distribute the products above in the US or in Vietnam for the following reasons.

A foreign entity must apply

to Food and Drug Administration, “FDA,” with regard to medical equipment in advance in order to import and distribute it

in the U.S., and needs to pass examination by the FDA.

In addition, the entity must register the equipment after passing examination.

However, the Company has not applied yet and has no current intention to apply and accordingly does not distribute any of the above

products in the U.S.

A foreign entity should apply

to Ministry of Health, “MOH”, with regard to medical equipment in advance in order to import and distribute it in Vietnam.

In particular, the entity should obtain circulation number and declaration of eligibility to trade medical equipment.

Company has not applied yet and has no current intention to apply and accordingly does not distribute any of the above products in

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, Cellution Disposable Kit.

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 is used for treatment to reduce fat cells

and improve body contours, wrinkle-improving injection, medical consumables, hyperhidrosis treatment.

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

coolsculpting

Elite reorder pack

Contouring Equipment Consumables;

Reduces fat cells and improves body contours;

Wrinkle-improving

acid injection

Wrinkle-improving

acid injection

Wrinkle-improving

hyperhidrosis

acid injection

Wrinkle-improving

acid injection

Ultra Plus XC

Wrinkle-improving

acid injection

Wrinkle-improving

Disposable Kit

Company does not distribute the products above in the US or in Vietnam for the following reasons.

A foreign entity must register

its facility, such as a clinic, drug store, etc., with the Food and Drug Administration, “FDA,” in order to distribute

medical supplies in advance in the US.

However, the Company has not registered yet and has no current intention to register and accordingly

does not distribute any of the above products in the U.S.

A foreign entity should obtain

the pharmaceutical approval in order to distribute medical supply in advance in Vietnam.

However, the Company has not obtained approval

yet and has no current intention to seek approval and accordingly does not distribute any of the above products in Vietnam.

of Services Provided

and Marketing Services.

Company, through its subsidiary SBC Marketing, 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.

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 patient

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.

Recruitment, Training, and Management.

Company, through its subsidiary SBC Medical Consulting and Shobikai 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.

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 treatments 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.

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.

also provide training on clinic hygiene standards to help the MCs’ employees understand the importance of clinic hygiene.

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.

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.

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.

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 involves managing the customer rewards program offered to customers of

the franchisee clinics.

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

The three tiers of the customer points ranking system are silver, gold, and diamond.

The silver tier rank is the lowest tier rank

and does not require a specific number of visits or spending amount to obtain.

Silver tier rank customers receive 5,000 points on their

birthday, 1% of the total spending amount back in points if the payment method for clinic services is cashless, 3% of the total spending

amount back in points if the payment method for clinic services is in cash or through a medical loan, and 0% of the total spending amount

back in points if the payment method for clinic services is entirely through medical insurance.

The gold tier rank is achieved when the

customer visits the franchisee clinics more than 6 times or spends more than 500,000 yen in a two-year period.

Gold tier rank customers

receive 10,000 points on their birthday, 2% of the total spending amount back in points if the payment method for clinic services is

cashless, 4% of the total spending amount back in points if the payment method for clinic services is in cash or through a medical loan,

and 0% of the total spending amount back in points if the payment method for clinic services is entirely through medical insurance.

diamond tier rank is achieved when the customer visits the franchisee clinics more than 8 times or spends more than 1,000,000 yen 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

if the payment method for clinic services is cashless, 6% of the total spending amount back in points if the payment method for clinic

services is in cash or through a medical loan, and 0% of the total spending amount back in points if the payment method for clinic services

is entirely through medical insurance.

The customers may use the earned points for discounts on select services 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 qualified purchase at a participating clinic within a year.

Accordingly, at the time that a customer’s points expire, the Company earns 1 yen for each customer

point that expires.

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.

Company, through its subsidiary SBC Sealane, provides construction and design management services to the MCs, by coordinating engagement

with our preferred general contractors for the clinic construction and design, as well as overseeing the process.

Equipment and Supplies.

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.

of Intellectual Property and Technologies.

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.

Each of the clinics owned by the MCs licenses the use of our brand name, “Shonan

Beauty Clinic”, as well as the right to use the name “SBC Medical Group”.

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.

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.

our collection of medical cases and artificial intelligence, 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 Eye 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

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

under our group operate businesses not only our core medical business services.

Corporations whose sales account for less than 1% of

the group are omitted.

Company generates franchising revenue (royalty income) by licensing its intellectual properties, including but not limited to the Company’s

brand name (“Shonan Beauty Clinic”), trade name, and trademarks, as a franchisor pursuant to franchise agreements with certain

MCs (the “MC”) in Japan.

Prior to April 2023, royalty income was based on a percentage of sales and recognized at the time

when the related sales occur;

since April 2023, it is based on a fixed amount to each clinic of the MCs;

since September 2023, it is

based on a fixed amount to each MC and a fixed amount to each clinic of the MCs and recognized over time as services are rendered.

in April 2025, the Company plans to revise its fee model for newly opened clinics by reducing fees in the first year to better reflect

the lower service utilization during the initial period, before transitioning to a performance-based structure thereafter.

aims to create a more sustainable long-term revenue model while aligning fees with the actual operations of newly opened clinics.

Services Revenue

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.

recognizes revenue based on actual payments and will return the over-collection resulting from such discounts to MCs.

Services Revenue

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

program management services

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.

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, which is normally

not significant.

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 and records it as a reduction of the revenue recognized.

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

supporting services

Company generates revenue by dispatching staff to MCs to provide a range of services, primarily including clinic operation, IT, and administrative

services, among which, clinic operation service has been fully terminated since October 2024.

The Company recognizes the revenue over the time

when services are rendered.

supporting services

revenue is derived from providing functional supporting services to MCs, such as accounting and human resources services.

recognizes the revenue over the time when services are rendered.

consulting services

Company generates revenue by providing consulting services to MCs in relation to business operations of cosmetic dermatology.

recognizes the revenue over the time when services are rendered.

Services Revenue

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.

Company generates other miscellaneous revenues such as accommodation services income, medicine dispensed sales revenue, brokerage services

revenue, construction services revenue, pilot training services revenue, interest income, etc.

These revenues are recognized when the

Company satisfies performance obligations.

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

the Years Ended

Services Revenue

$ 205,415,542

$ 193,542,423

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 both our directly owned and operated clinic, as well as our franchisee clinics 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 directly owned and franchisee clinics provide a variety of medical treatments to meet all of

the clinics’ patients’ needs.

Both the Company and the MC franchisees focus on building long-term relationships with patients,

and customer satisfaction rate ranks highly among Japanese beauty medical service providers.

According to an internal report from our

MCs’ franchisee clinics, the franchisee clinics have an average repeat customer rate of over 71%, and a total of over 6.0 million

customers globally during 2024.

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.

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

artificial intelligence, 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.

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 for remote

operations and consultations, enabling medical experts to provide guidance and perform procedures from a distance, expanding access to

specialized care and expertise.

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 reservations for customers, assistance with franchisee employee housing rental, facility rentals, construction 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 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.

services provide valuable guidance and expertise to our franchisee clinics, helping them optimize their operations, improve patient experience,

and enhance overall performance.

We believe this to be a crucial component of fostering our franchisees’ growth and success.

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.

Growth Strategies

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.

continue to utilize our existing strategy of exploring opportunities for directly owned and operated clinics (including but not limited

to merger and acquisition transactions) as well as additional franchisee clinics.

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 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 clinic growth or whether we will achieve this level of growth at all.

Our ability to achieve new

franchisee clinic growth is impacted by a number of risks and uncertainties beyond our control, including those described in “Part

Risk Factors”.

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 clinic and our franchisee clinics, 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 clinic and our franchisee clinics, 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 (1 point for each 1 yen spent).

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 visits and 8 visits in 2 years) or reach certain

spending thresholds (tiers for a total of 500,000 yen spent and 1,000,000 yen spent in 2 years).

The customers may use the earned points

for discounts on select services offered by our franchisee clinics.

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.

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.

The number of patients

that undergo cosmetic procedures at our franchisee clinics and patient growth trajectory have been a key indicator of our success and

brand awareness.

In 2021, our franchisee clinic patient base reached 3.0 million individuals.

This figure increased further in 2024,

reaching approximately 3.9 million users.

This growth reflects the growing demand for cosmetic surgery procedures and the confidence

that patients have in our brand and services.

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.

Development and Expansion

Selection Process

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

This review includes site visits, key deal terms, and analyses of the estimated profitability of clinics at the proposed properties

for our franchisee clinics.

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.

Strategy and Market Share

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 patients seeking cosmetic

enhancements.

We plan to pursue a two-pronged expansion strategy by opening new clinics in both new and existing markets (directly and

through our franchisee partners).

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.

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.

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 is handled by our in-house development team on behalf of the MCs in conjunction with outsourced vendor relationships.

franchisee clinics’ sizes currently average approximately 357 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 patient space as well as modern furniture.

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 construction process.

On average, our franchisee clinics opened during fiscal year 2024

required a cash build-out cost of approximately $333,000 per clinic, net of landlord tenant improvement allowances ;

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.

Capital Management

of the date of this Annual Report, we had approximately 863 employees globally, a majority of which are located in Japan, Singapore,

Vietnam, and the United States.

As of the date of this Annual Report, there were no unions represented within our employee base.

We anticipate

that we will continue to expand our workforce as our company grows.

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.

Service Competition.

respect to our management services, we do not face significant competition from third parties because all of our management service revenue

is derived from our relationship with the MCs, which are related parties.

and Brand Competition

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 including those in Japan but

also in the global cosmetic surgery market such as Aesthetic Medispa, Alma Lasers, B.

Braun SE, Cynosure Aesthetics, Evolus, Inc., Galderma

S.A., Genesis Biosystems, Inc., Inmode Ltd., IRIDEX Corporation, Lumenis Be Ltd., Revance Therapeutics, Inc., Sientra, Inc., 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.

Our clinics in Vietnam and our related party’s clinic in

the US are still in the early stages of development in our efforts to penetrate global competition.

However, we believe that our franchisee

clinics, clinics in Singapore, a clinic in Vietnam and a clinic in the US compete primarily based on service quality, patient experience,

ambience, location, convenience, value perception, and price.

The competition continues to intensify as competitors to our clinic 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 MCs’ franchisee 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.

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 patients because each competitor offers unique characteristics

Also, famous chain clinics and locally popular clinics can be a competitive factor.

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.

terms of quality and service, we evaluate the quality of service provided by and the working experience of our franchisee clinics’

competitors’ employees.

Because patients 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 patient opinions and understand the potential for improvement of our franchised brand.

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.

terms of customer satisfaction and feedback, we analyze patient satisfaction surveys and feedback from the patients of our clinics in

Vietnam and Singapore and the franchisee clinics as part of our management services to the MCs.

The goal is to understand the patient’s

assessment and find ways to improve our franchised brand.

We compare the patient experience at the franchisee clinics with that of our

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 the competitors to our franchisee clinics and our clinics in Vietnam and Singapore, we are determining

the direction to improve the competitiveness of our franchise in the market.

the cosmetic medical service and product industry, patient preferences and needs are very important.

Service trends and patient interests

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 the franchisee clinics to offer cosmetic services and products tailored to patient’s needs and preferences.

success of the MCs’ franchisee clinics would directly impact our success since we receive substantial revenue from the MCs as part

of our compensation for management services.

cosmetic medical industry is highly dependent on general economic conditions.

During economic boom times, patient 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.

To date, inflationary pressures have not materially impacted 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.

on economic conditions and individual circumstances, patient 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 MCs’ franchisee clinics as a

result of such increased 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.

trends, such as changes in population age structure, family structure, and lifestyle, are also important factors.

For example, younger

and middle age 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.

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 patient choices and diversify demand.

Differentiation and uniqueness from competitors are required, especially

in high income geographical locations.

factors also directly or indirectly affect consumer confidence.

Patients choose beauty clinics they trust based on economic and competitive

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.

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 patient experience are required to maintain our franchised brand.

of December 31, 2024, we had a large and diverse network of suppliers, providing us with a diverse selection of medical equipment, supplies and medical

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.

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.

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 MCs’ franchisee 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.

majority of the customers of our directly owned and operated clinics, as well as our franchisee clinics, are individuals aged between

Company generates more than 90% of its revenue from provision of management services to the MCs pursuant to the franchisor-franchisee

agreements and/or service agreements.

the Years Ended

Revenues from

related parties

Corporation Shobikai

Corporation Kowakai

Corporation Nasukai

Corporation Aikeikai

Corporation Jukeikai

Corporation Ritz Cosmetic Surgery

Medical & Beauty Inc.

SBC Inc., previously known as SBC China Inc.

Utility Foundation SBC Foundation for Medical Promotion

Incorporated Association SBC

SBC Tokyo Medical University, previously known as Ryotokuji University

Shonan Osteopathic Clinic Inc.

Corporation Association Furinkai

Corporation Association Junikai

Incorporated Association Taiseikai

$ 195,173,889

$ 182,738,049

Misappropriations

January 2024, before the issuance of the Company’s consolidated financial statements as of December 31, 2023 and for the year

then ended, in connection with a routine tax examination of SBC Medical Group Co., Ltd.’s income tax returns, the Japanese tax

authority discovered misappropriations of SBC Medical Group Co., Ltd.

funds by a former manager of general affairs and legal

department of L’Ange Cosmetique Co., Ltd., which is a subsidiary of SBC Medical Group Co., Ltd.

manager”), who received kickbacks from multiple vendors of SBC Japan (collectively with the former manager, the

“participants”) possibly beginning as early as 2012 until the misappropriations were discovered.

The Japanese tax

authority, who has the authority to access bank deposit information of companies and individuals under investigation, uncovered this

misconduct during their examination of such deposits.

The former manager was suspended immediately upon the discovery and was

terminated effective February 23, 2024.

SBC Medical Group Co., Ltd.

has commenced a criminal complaint in Tokyo against the

participants.

after this discovery, SBC Medical Group Co., Ltd.

engaged independent legal counsel and forensic consultants to investigate the misappropriations.

The investigation, which was completed in March 2024, revealed that the participants had misappropriated approximately JPY632 million

($5.6 million), including consumption tax, from SBC Medical Group Co., Ltd., of which the former director received approximately JPY335

million ($3.0 million), between April 2016 and the discovery of the misappropriations in January 2024.

The amount misappropriated prior

to April 2016 could not be accurately determined because certain data for the period prior to April 2016 was unavailable, SBC Medical

Group Co., Ltd.

does not expect such amount to be material based on current estimates.

Medical Group Co., Ltd.

found no evidence that any other employee of SBC Medical Group Co., Ltd.

was aware of, or colluded in, the

misappropriations of SBC Medical Group Co., Ltd.

funds or that there was any unlawful activity apart from that associated with the

participants’ misappropriations of SBC Medical Group Co., Ltd.

The misappropriated amounts, excluding the consumption

tax, representing advertising services purchased on behalf of a related-party MC, were originally included in the revenues reported

on a net basis.

After discovery of the misappropriations, the amounts were reported as a misappropriation loss.

ended December 31, 2023, the Company recorded a misappropriation loss of $ 409,030 .

upon learning of the misappropriation of funds, SBC Medical Group Co., Ltd.

engaged independent legal counsel and forensic consultants

to investigate the misappropriations.

As stated above in this Annual Report, based on its internal investigation, SBC Medical Group Co.,

found no evidence that any other employee of SBC Medical Group Co., Ltd.

was aware of, or colluded in, the misappropriations of

Company funds or that there was any unlawful activity apart from that associated with the participants’ misappropriations of Company

on the results of the investigation, management identified the following material weaknesses:

SBC Medical Group Co., Ltd.

did not maintain an effective control environment

that fully emphasized the establishment of adherence to effective internal controls over

financial reporting throughout SBC Medical Group Co., Ltd.’s management.

Group Co., Ltd.

did not give sufficient consideration to the risk of senior management override

of internal controls.

SBC Medical Group Co., Ltd.

had not ensured that certain personnel

were adequately trained to properly execute critical internal controls.

SBC Medical Group Co., Ltd.

did not effectively implement or maintain control

activities, such as ensuring a sufficient functioning of the mechanism of reconciliation

of invoices to contracts and multi-level approvals of contracts, invoices and payments.

Medical Group Co., Ltd.

did not maintain sufficient segregation of duties with respect to

certain activities and did not maintain adequate monitoring

and oversight for those activities.

SBC Medical Group Co., Ltd.

did not have an effective risk assessment process

and the related documentation.

and Communication.

SBC Medical Group Co., Ltd.

did not adequately communicate to all

employees of the organization information regarding the importance of internal controls over

financial reporting and employees’ duties and responsibilities, including segregation

SBC Medical Group Co., Ltd.

did not maintain effective monitoring controls

related to the evaluation and testing of its internal controls over financial reporting.

has implemented, or is in the process of implementing, the following changes to the Company’s internal

control systems and procedures:

● We will clarify the organization structure and employee

positions promoting (i) segregation of duties, (ii) monitoring and oversight, (iii) reconciliation

of invoices to contracts and (iv) multi-level approvals of contracts, invoices and payments.

● We will communicate to all employees of the organization

information regarding the importance of internal controls and employees’ duties and

responsibilities, including segregation of duties.

● We have initiated a project led by Head of Internal Control

and Internal Audit Office, and aided by outside consultants, to fully document its processes

to serve as the basis for activities during 2024 to assess its fraud risks and evaluate and

test its internal controls over financial reporting.

● We are progressing with a project, led by our Head of Internal

Control and Internal Audit Office, to design, implement, and document internal controls to

address risks related to financial reporting.

This year, our activities are focused on “laying

the foundation to complete our response to key financial reporting risks by the end of 2025,”

and we are making progress as planned.

former manager was suspended immediately upon the discovery and was terminated effective February 23, 2024.

Subsequently, SBC Medical Group Co., Ltd.

filed a complaint, which was

accepted by the police on February 25, 2025.

Meanwhile, SBC Medical Group Co., Ltd.

has initiated a search for a new manager of general affairs and legal department and hired an attorney(JP)-qualified manager in February

In order to improve the overall level of competence in the accounting department, the Company is hiring personnel with accounting

experience at listed companies and personnel with CPA(JP).

focused on building internal controls in 2024.

From 2025 onwards, we will test and monitor the operational effectiveness of

these controls and, if necessary, take additional corrective actions to address any deficiencies.

The Company believes the remediation measures described above will strengthen its internal control over financial reporting and

remediate the material weaknesses identified.

Regulation and Environmental Matters

Company and the MCs 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, the environment, sanitation, and

fire prevention.

We operate our clinic, and the MCs operate the franchisee clinics, 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 us

or the MCs would adversely affect our operations.

Although the Company and the MCs have not experienced, and do not anticipate, any significant

difficulties, delays or failures in obtaining required licenses, permits or approvals, 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 us or the MCs, could adversely

affect operations at our clinic and the MCs’ franchisee clinics.

A decrease in the revenue of the MCs’ franchisee 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.

Company and the MCs 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 clinic or our franchisee clinics.

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 Company and the

MCs will become subject to environmental liabilities, and any such liabilities could materially affect our business, financial condition

or results of operations.

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.

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 our clinic and franchisee clinics.

addition, as part of managing the development and construction 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.

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.

our business continues to expand in the U.S.

and other jurisdictions, 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.

Laws and Regulations

Information Protection

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 Company and the MCs 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 Company and the MCs 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 anonymous personal data and the transfer of personal information to foreign countries.

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).

“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:

specifically required or authorized by any laws or regulation;

necessary for protecting the life, health, or property of an individual and consent of the

principal is difficult to obtain;

necessary for improving public health and sanitation, or promoting the sound upbringing of

children, and the consent of the principal is difficult to obtain;

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.

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).

MCs gather personal information from customers through questionnaires and other methodologies in connection with the provision of medical

Some of the information that the MCs collect could fall under the category of sensitive personal data under the APPI.

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.

storing personal information, it is necessary to manage it safely so that it will not be leaked or the database breached.

management, the APPI requires the Personal Information Handling Business Operator to establish an information security system.

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.

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.

Governing our Franchises

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.

Japan Fair Trade Commission (which we refer to as the “JFTC”) enforces the Antimonopoly Act and other Japanese antitrust

The JFTC issued the “Guidelines Concerning the Franchise System Under the Antimonopoly Act” on April 24, 2002 (last

amended on June 23, 2011) (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:

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

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

the franchise;

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;

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;

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;

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;

● 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

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.

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.

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.

Governing Medical Care and Services

MCs provide services strictly in accordance with the medical-related laws and regulations of the Medical Care Act (Law No.

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

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

A failure by the MCs 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.

Governing our Recruiting License

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 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 MCs’ franchisee clinics.

Governing our Use of Certain Substances

MCs are required to comply with the Poisonous and Deleterious Substances Control Act (Act No.

303 of December 28, 1950, as amended) of

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 MCs’ franchisee

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.

on Intellectual Property

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).

are protected by the Copyrights Act (Act No.

48 of 1970 as amended).

Trade secrets are protected by the Unfair Competition Prevention

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.

Employment and Labor Laws

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).

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 patients.

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.

on Lease Agreements

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

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.

regarding Maintenance of Websites and E-commerce

Act on Special Provisions to the Civil Code Concerning Electronic Consumer Contracts and Electronic Acceptance Notice (Act No.

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.

regarding Product Quality and Customer Protection

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.

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

Laws and Regulations

regarding the Environment

are required to comply with the Environmental Protection Law No.

72/2020/QH14 adopted by the National Assembly on November 17, 2020 (as

amended from time to time), which regulates environmental protection activities, including the rights, duties, and responsibilities of

authorities, organizations, residential communities, households, and individuals involved in environmental protection activities.

Specifically,

it establishes certain regulations regarding the protection of the environment in medical activities and the control of the effects of

environmental pollution on human health.

regarding Labor and Health

are required to comply with several labor-related standards prescribed by the local laws and regulations.

The principal statute is the

Labor Code No.

45/2019/QH14 adopted by the National Assembly on November 20, 2019 (as amended from time to time), which provides for

labor standards, the rights, duties, and responsibilities of employees, employers, employees’ representative organizations at establishment,

and employers’ representative organizations in labor-management relations, other relations directly related to labor-management

relations, as well as state control over labor.

on Occupational Safety and Hygiene

Law on Occupational Safety and Hygiene No.

84/2015/QH13 adopted by the National Assembly on June 25, 2015 (as amended from time to time)

regulates measures to ensure occupational safety and hygiene, policies and compensation for victims of occupational accidents and diseases,

responsibilities and rights of organizations and individuals regarding occupational safety and hygiene activities, and state control

over occupational safety and hygiene.

Law on Social Insurance No.

58/2014/QH13 adopted by the National Assembly on November 20, 2014 (as amended from time to time) regulates

mandatory social insurance benefits and policies, the rights and responsibilities of employees and employers, other institutions, organizations,

and individuals involved in social insurance, representative organizations of employees, representative organizations of employers, social

insurance authorities, social insurance funds, social insurance implementation procedures, and state administration of social insurance.

We will comply with the new Law on Social Insurance No.

41/2024/QH15, which will take effect from July 1, 2025.

Law on Health Insurance No.

25/2008/QH12 adopted by the National Assembly on November 14, 2008 (as amended from time to time) regulates

mandatory health insurance system and policies regarding health insurance, health insurance funds, and the rights and responsibilities

of parties involved in health insurance, including enrollees, premium rates, health insurance premium sharing and payment methods, health

insurance cards, health insurance beneficiaries, medical care for insured persons, and the payment of medical expenses.

comply with the Law on Amendment to the Law on Health Insurance No.

51/2024/QH15, which will take effect from July 1, 2025.

regarding Business Activities

are required to comply with several regulations regarding investments and company-related activities such as (a) the Investment Law No.

61/2020/QH14 adopted by the National Assembly on June 17, 2020 (as amended from time to time) providing regulations on business investment

activities in Vietnam and business investment activities from Vietnam to foreign countries and (b) the Law on Enterprises No.

adopted by the National Assembly on June 17, 2020 (as amended from time to time) regulating the formation, management, reorganization,

dissolution and related activities of companies consisting of limited liability companies, joint stock companies, partnership companies

and private companies, and groups of companies.

our beauty clinic service is considered as a commercial activity in general, we are also required to comply with the Commercial Law No.

36/2005/QH11 adopted by the National Assembly on June 14, 2005 (as amended from time to time).

This law applies to commercial activities

(including the sale and purchase of goods, provision of services, investment, commercial promotion and other commercial activities) in

the territory of Vietnam.

Vietnam, (a) massage services (comprising of the use of physical therapies for massage or manual therapies to improve human health) and

(b) plastic surgery services (comprising of using medical techniques to perform surgery for the purpose of alternation of shape or appearance

of body parts) are deemed to be “sensitive” services and therefore must comply with Decree No.

96/2016/ND-CP adopted by the

Government on July 1, 2016 regarding security and order conditions for a number of conditional business sectors.

regarding Medical Treatment

are also subject to the Law on Medical Examination and Treatment No.

15/2023/QH15 adopted by the National Assembly on January 9, 2023

(as amended from time to time), which defines the rights and obligations of patients, physicians, and clinics in relation to matters

such as technical expertise in health diagnosis and treatment, health diagnosis and treatment provided by traditional medicine and by

a combination of traditional and modern medicine, humanitarian or non-profit health diagnosis and treatment, transfer of technical expertise,

the application of new technologies and methods and clinical trials, errors of technical expertise in medicine, operating assumptions,

as well as the mobilization and dispatch of resources to be used for medical examination and treatment in the event of natural disasters,

catastrophes, Group A infectious diseases, and emergency situations.

regarding Liability

principle, our relationship with customers is a civil transaction and therefore governed by the Civil Code No.

91/2015/QH13 adopted by

the National Assembly on November 24, 2015 (as amended from time to time).

This fundamental code specifies the legal status and legal

standards for the conduct of natural and juridical persons, as well as the rights and obligations of natural and juridical persons in

their civil relations.

addition, we are subject to the Law on Product and Goods Quality No.

05/2007/QH12 adopted by the National Assembly on November 21, 2007

(as amended from time to time), which is a specialized legislation regulating the product liability of manufacturers and traders (i.e.,

importers, exporters, sellers, service suppliers).

Under this law, enterprises engaging in manufacturing and/or trading products are

required to provide customers with accurate information on products, recover and remedy defective products, and compensate for losses

due to defective products.

are also subject to the Law on Protection of Consumers’ Rights No.

19/2023/QH15 adopted by the National Assembly on June 20, 2023

(as amended from time to time), which provides for principles and policies for protecting consumers’ rights, the rights and obligations

of consumers, traders’ responsibility to consumers, consumer right protection activities by agencies and organizations, settlement

of disputes between consumers and traders, as well as state management of protection of consumers’ rights.

regarding Firefighting and Fire Prevention

Law on Firefighting and Fire Prevention No.

27/2001/QH10 adopted by the National Assembly on June 29, 2001 (as amended from time to time)

regulates fire prevention, firefighting, human rescue, property rescue, assurance of operating conditions, as well as the rights, obligations,

and responsibilities of relevant agencies, organizations, households, and individuals in fire and rescue operations.

We will comply with

the new Law on Fire and Rescue No.

55/2024/QH15, which will take effect from July 1, 2025.

States Laws and Regulations

Governing Disabilities Act

and state environmental regulations have not had a material effect on our operations to date, but more stringent and varied requirements

of local governmental bodies with respect to zoning, land use and environmental factors could delay or even prevent construction and

increase development costs for new franchisee clinics.

SBC Irvine MC is required to comply with the accessibility standards mandated

Americans with Disabilities Act with respect to the CA Clinic in the United States, which generally prohibits discrimination

in accommodation or employment based on disability.

SBC Irvine MC may in the future have to modify clinics, for example, by adding access

ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons.

these expenses could be material, SBC Irvine MC’s current expectation is that any such actions will not require them to expend

substantial funds.

A failure by SBC Irvine MC to comply with the U.S.

Americans with Disabilities Act may harm our franchised brand and

directly result in a reduction of the Company’s revenue, since we receive revenue from SBC Irvine MC as part of our compensation

for operational services that we provide to SBC Irvine MC.

Governing Labor

we are subject to the U.S.

Fair Labor Standards Act, the U.S.

Immigration Reform and Control Act of 1986, the Occupational Safety and

Health Act and various other federal and state laws governing similar matters including minimum wages, overtime, workplace safety and

other working conditions.

A portion of our personnel in the United States 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 patients.

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, the U.S.

Equal Employment Opportunity Commission or others alleging

violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters.

Governing Healthcare Providers and Information

Company’s and SBC Irvine MC’s current and future arrangements with healthcare providers, third-party payors, customers, and

others may expose the Company and SBC Irvine MC to broadly applicable fraud and abuse and other healthcare laws and regulations, which

may constrain the business or financial arrangements and relationships through which we research, as well as, sell, market and distribute

any product for which we obtain marketing approval.

Insurance Portability and Accountability Act (“HIPAA”) also imposes, among other things, certain standards and obligations

on covered entities including certain healthcare providers, health plans and healthcare clearinghouses, as well as their respective business

associates and subcontractors that create, receive, maintain, or transmit individually identifiable health information for or on behalf

of a covered entity relating to the privacy, security, transmission and breach reporting of individually identifiable health information.

HIPAA imposes strict privacy, security, and breach notification obligations and standards on “covered entities” related to

their use and disclosure of individually identifiable health information, defined by HIPAA as Protected Health Information (“PHI”).

Covered entities are defined under HIPAA to include healthcare providers that undertake certain electronic transmissions of PHI, such

as submitting electronic claims for reimbursement for the treatment of patients.

SBC Irvine MC is considered to be a covered entity.

HIPAA also applies to Business Associates.

HIPAA is generally enforced by the Office for Civil Rights ( the “OCR”) that can

bring enforcement actions against companies that violate HIPAA’s privacy, security or breach notification rules and levy significant

civil fines and/or require changes to the manner in which PHI is used and disclosed.

Department of Justice has jurisdiction

under HIPAA to bring criminal enforcement actions against covered entities, Business Associates and possibly other entities for fraudulent

misuse of PHI and other criminal acts.

Further, HIPAA provides state attorneys general authority to file civil actions for damages or

injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions.

If we are in possession of PHI as a business associate or as part of our health plan covered entity and we have an unauthorized use or

disclosure of the PHI, we will be required pursuant to the HIPAA breach notification rule, to notify our customer covered entity, impacted

individuals, and/or OCR.

states, including, but not limited to, California, Colorado, Connecticut, Utah and Virginia, have adopted generally applicable and comprehensive

privacy laws, although most have an exception for information regulated by HIPAA.

These new and developing state laws provide a number

of new privacy rights for residents of these states and impose corresponding obligations on organizations doing business in these states.

For example, the California Consumer Privacy Act (the “CCPA”) imposes obligations on covered businesses to provide specific

disclosures related to a business’ collecting, using, and disclosing personal data and to respond to certain requests from California

residents related to their personal data (for example, requests to know of the business’s personal data processing activities,

to delete the individual’s personal data, and to opt out of certain personal data disclosures).

The CCPA provides for civil penalties

and a private right of action for data breaches which may include an award of statutory damages.

In addition, the California Privacy

Rights Act (“CPRA”), which took substantial effect January 1, 2023 with enforcement scheduled for July 1, 2023, expanded

The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal data, establish

restrictions on personal data retention, expand the types of data breaches that are subject to the CCPA’s private right of action,

and establish a new California Privacy Protection Agency to implement and enforce the new law.

A failure by us or SBC Irvine MC to comply

with HIPAA may harm our franchised brand and directly result in a reduction of the Company’s revenue, since we receive revenue

from SBC Irvine MC as part of our compensation for operational services that we provide to SBC Irvine MC.

a discussion of the various risks we face from regulation and compliance matters, see “Part I, Item 1A.

Risk Factors”.

Laws and Regulations

Operations, and Compliance

are subject to the Healthcare Services Act 2020 (“ HCSA ”) and the regulations promulgated under it, which governs

the licensing, regulation, and operation of private healthcare institutions, including aesthetic clinics.

We are required to obtain a

license under this legislation to operate our clinics.

Healthcare Services (General) Regulations 2021 also require licensed healthcare service providers to adhere to strict standards of patient

care and service (including for the protection of patient privacy), and we must meet the necessary standards of infrastructure, medical

equipment, and operational procedures, as well as the maintenance of a safe and hygienic clinical environment.

of Our Doctors

Singapore, the Medical Registration Act 1997 regulates the registration and professional conduct of medical practitioners.

This legislation

mandates that only doctors who are properly registered as a medical practitioner and holding a valid practicing certificate may perform

medical procedures in aesthetic clinics.

Under this legislation, any person who wishes to practice medicine or perform medical procedures

that involve medical risks, such as injectable treatments (e.g., botulinum toxin and dermal fillers) and laser treatments, must be performed

by registered medical practitioners holding a valid practicing certificate.

Products and Medicines

Health Products Act 2007 (“ HPA ”) governs the regulation of health products (including, inter alia , medical

devices and therapeutic products) used in clinical settings, including aesthetic clinics.

Under this legislation, we are prohibited from

using health products that are not approved by the Health Sciences Authority of Singapore (“ HSA ”), and we are

obligated to only use products that have passed the HSA’s evaluation and are registered for clinical use in Singapore.

is found to be defective or harmful, this legislation requires us to comply with any product recalls or safety notices issued by the

We are also obligated to report any adverse events or complications related to the use of medical devices and health products in

Medicines Act 1975 (“ MA ”) regulates the importation, manufacture, and sale of medicinal products, including

drugs, vaccines, and injectable products used in aesthetic treatments in Singapore.

Under this legislation, aesthetic clinics are prohibited

from using any unapproved or substandard medicines and must ensure that all prescription products are licensed and approved by the HSA.

This legislation also covers the distribution of medicines and medicinal products, and aesthetic clinics must ensure that any injectable

or medicinal product used in their treatments is legally sourced, licensed, and approved by the HSA for use in Singapore.

What changed 10-K

Item 1. Business