What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-08-13 compared with 2025-05-15 · 961 added, 919 removed, 586 unchanged (76% of the section changed)

FINANCIAL STATEMENTS

SBC MEDICAL GROUP HOLDINGS INCORPORATED

INDEX TO FINANCIAL STATEMENTS

Balance Sheets as of March 31, 2025 and December 31, 2024 (Unaudited)

Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2025 and 2024 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024 (Unaudited)

Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (Unaudited)

MEDICAL GROUP HOLDINGS INCORPORATED

TO FINANCIAL STATEMENTS

Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (Unaudited)

Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2025 and 2024 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024 (Unaudited)

Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited)

Notes to Unaudited Consolidated Financial Statements

SBC MEDICAL GROUP HOLDINGS INCORPORATED

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED BALANCE SHEETS

9 unchanged sentences

Prepaid expenses and other current assets

Other receivables – related parties

Total current assets

4 unchanged sentences

Goodwill, net

Cryptocurrencies

Finance lease receivables, non-current – related parties

25 unchanged sentences

Total current liabilities

SBC MEDICAL GROUP HOLDINGS INCORPORATED

UNAUDITED CONSOLIDATED BALANCE

SHEETS — (Continued)

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED BALANCE SHEETS — (Continued)

Non-current liabilities:

9 unchanged sentences

Preferred stock ($ 0.0001 par value, 20,000,000 shares authorized;

no shares issued and outstanding as of March 31, 2025 and December 31, 2024)

Common stock ($ 0.0001 par value, 400,000,000 shares authorized, 103,881,251 and 103,020,816 shares issued, 103,611,251 and 102,750,816 shares outstanding as of March 31, 2025 and December 31, 2024, respectively)

no shares issued and outstanding as of June 30, 2025 and December 31, 2024)

Common stock ($ 0.0001 par value, 400,000,000 shares authorized, 103,881,251 and 103,020,816 shares issued, 103,098,442 and 102,750,816 shares outstanding as of June 30, 2025 and December 31, 2024, respectively)

Additional paid-in capital

Treasury stock (at cost, 270,000 shares as of March 31, 2025 and December 31, 2024)

Treasury stock (at cost, 782,809

and 270,000 shares as of June 30, 2025 and December 31, 2024, respectively)

( 5,115,262 )

10 unchanged sentences

$ 266,083,154

The accompanying notes are an integral part of these

unaudited consolidated financial statements.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

COMPREHENSIVE INCOME

accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE

For the Three Months Ended

the Six Months Ended

Revenues, net – related parties

$ 101,509,245

Revenues, net

Total revenues, net

Cost of revenues (including cost of revenues from related parties of $ 3,456,928 and $ 1,797,359 for the three months ended March 31, 2025 and 2024, respectively)

Cost of revenues (including cost of revenues from related

parties of $ 4,669,602

and $ 3,616,103

for the three months ended June 30, 2025 and 2024, and $ 8,126,530

and $ 5,413,462

for the six months ended June 30, 2025 and 2024, respectively)

Operating expenses:

Selling, general and administrative expenses

Selling, general and administrative expenses (including

selling, general and administrative expenses from related parties of $ 415,767

for the three months ended June 30, 2025 and 2024, and $ 415,767

for the six months ended June 30, 2025 and 2024, respectively)

Total operating expenses

6 unchanged sentences

( 2,829,724 )

( 1,951,292 )

Gain on redemption of life insurance policies

Change in fair value of cryptocurrencies

Gain on disposal of subsidiary

Total other income

Total other income (expenses)

( 1,013,831 )

Income before income taxes

Income tax expense

net loss attributable to non-controlling interests

net income (loss) attributable to non-controlling interests

Net income attributable to SBC Medical Group Holdings Incorporated

2 unchanged sentences

$ ( 9,046,549 )

$ ( 19,240,401 )

Total comprehensive income

comprehensive loss attributable to non-controlling interests

comprehensive income (loss) attributable to non-controlling interests

Comprehensive income attributable to SBC Medical Group Holdings Incorporated

3 unchanged sentences

Basic and diluted

Retrospectively restated for effect of reverse recapitalization on September 17, 2024.

The accompanying notes are an integral part of these

unaudited consolidated financial statements.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

Retrospectively

restated for effect of reverse recapitalization on September 17, 2024.

accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

Comprehensive

13 unchanged sentences

( 44,343,412 )

Net income (loss)

Repurchase of common stock

( 2,415,262 )

1 unchanged sentence

( 2,415,262 )

Deemed contribution in connection with price modification on disposal of property and

Foreign currency translation adjustment

Balance as of June 30, 2025

$ ( 5,115,262 )

$ 213,423,693

$ ( 35,922,942 )

$ 244,591,991

$ 244,652,571

Comprehensive

6 unchanged sentences

$ 143,810,249

( 37,578,255 )

Disposal of subsidiary

12 unchanged sentences

$ 151,144,818

Foreign currency translation adjustment

( 8,995,632 )

1 unchanged sentence

( 9,046,549 )

The accompanying notes are an integral part of these

unaudited consolidated financial statements.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

Balance as of June 30, 2024

$ 180,090,892

$ ( 56,683,275 )

$ 160,296,317

$ 160,655,594

$ 180,090,892

$ ( 56,683,275 )

$ 160,296,317

$ 160,655,594

accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization expense

7 unchanged sentences

Gain on disposal of property and equipment

Change in fair value of cryptocurrencies

Deferred income taxes

( 3,322,728 )

Changes in operating assets and liabilities:

Accounts receivable

( 1,423,412 )

Accounts receivable – related parties

( 17,039,113 )

Accounts receivable

( 17,039,113 )

Finance lease receivables – related parties

( 6,482,967 )

( 1,759,556 )

Customer loans receivable

1 unchanged sentence

( 1,349,225 )

( 1,488,347 )

Long-term prepayments

( 1,007,431 )

Accounts payable

3 unchanged sentences

( 5,031,570 )

Advances from customers

( 5,101,368 )

Advances from customers

Advances from customers – related parties

( 2,363,891 )

( 4,663,233 )

Advances from customers

( 2,363,891 )

Income tax payable

( 4,663,233 )

Income tax payable

( 6,030,526 )

4 unchanged sentences

( 2,508,035 )

( 4,444,172 )

Other liabilities

NET CASH PROVIDED BY OPERATING ACTIVITIES

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

( 6,411,168 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

( 1,565,333 )

Purchase of convertible note

2 unchanged sentences

Advances to related parties

Payments made on behalf of related parties

( 1,836,541 )

( 5,245,990 )

Purchase of long-term investments

Purchase of cryptocurrencies

Long-term loans to others

1 unchanged sentence

Repayments from others

Proceeds from redemption of life insurance policies

Disposal of subsidiary, net of cash disposed of

Proceeds from disposal of property and equipment

NET CASH USED IN INVESTING ACTIVITIES

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

( 9,405,716 )

SBC MEDICAL GROUP HOLDINGS INCORPORATED

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

— (Continued)

For the Three Months Ended

MEDICAL GROUP HOLDINGS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Six Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES

3 unchanged sentences

Repayments to related parties

NET CASH USED IN FINANCING ACTIVITIES

Repurchase of common stock

( 2,415,262 )

Deemed contribution in connection with price modification

on disposal of property and equipment

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Effect of exchange rate changes

1 unchanged sentence

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 6,841,382 )

CASH AND CASH EQUIVALENTS AS OF THE BEGINNING OF THE PERIOD

1 unchanged sentence

$ 152,740,882

$ 103,702,770

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

Cash paid for income taxes

Cash paid for income taxes, net

NON-CASH INVESTING AND FINANCING ACTIVITIES

3 unchanged sentences

Remeasurement of operating lease liabilities and right-of-use assets due to lease modifications

Payables to related parties in connection with loan

services provided

Payables to related parties in connection with loan services provided

Issuance of common stock as incentive shares

proceeds receivable on life insurance policies

The accompanying notes are an integral part of these

unaudited consolidated financial statements.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND DESCRIPTION OF

Business Overview

SBC Medical Group Holdings Incorporated

(“SBC Holding”) was originally incorporated under the laws of the state of Delaware on March 11, 2022 as a special purpose

acquisition corporation under the name Pono Two Capital, Inc.

(“Pono”) for the purpose of entering into a merger, capital

stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

SBC Medical Group, Inc.

known as SBC Medical Group Holdings Incorporated, “SBC USA”, “Legacy SBC”), through its consolidated subsidiaries

and variable interest entity (“VIE”), is principally engaged in medical industry to provide comprehensive management services

to the medical corporations and their clinics, including but not limited to licensure of the use of the trademark and brand name of “Shonan

Beauty Clinic”, sales of medical equipment, medical consumables procurement services, and management of customer’s loyalty

program, etc.

Reverse Recapitalization

On September 17, 2024, Pono consummated

the merger transaction pursuant to the agreement by and among Pono, Pono Two Merger Sub, Inc., a Delaware corporation (“Merger Sub”)

and a wholly-owned subsidiary of Pono, and SBC USA (the “Merger Agreement”), whereby Merger Sub merged with and into SBC USA,

the separate corporation existence of Merger Sub ceased and SBC USA survived the merger as a wholly owned subsidiary of Pono (“Pono

In connection with the consummation of Pono Merger, Pono changed its name to “SBC Medical Group Holdings Incorporated”

and SBC USA changed its name to “SBC Medical Group, Inc.” and, among other transactions contemplated by the Merger Agreement,

the existing equity holders of SBC USA exchanged their equity interests of SBC USA for equity interests of Pono.

On September 17, 2024, the Company

received net cash of $ 11,707,417 from Pono Merger.

The Company also assumed $ 416,799 in prepaid expenses and other current assets, $ 1,108

in accounts payable, $ 14,431 in income tax payable, $ 2,700,000 in convertible note payable, which was subsequently converted to 270,000

shares upon the consummation of Pono Merger, $ 1,000,789 in accrued liabilities and other current liabilities, common stock of $ 508 and

additional paid-in capital of $ 8,407,380 .

The total funds from Pono Merger

of $ 11,707,417 were available to repay certain indebtedness, transaction costs and for general corporate purposes, which primarily consisted

of investment banking, legal, accounting, and other professional fees as follows:

accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Medical Group Holdings Incorporated (“SBC Holding”) was originally incorporated under the laws of the state of Delaware on

March 11, 2022 as a special purpose acquisition corporation under the name Pono Capital Two, Inc.

(“Pono”) for the purpose

of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination

with one or more businesses.

Medical Group, Inc.

(formerly known as SBC Medical Group Holdings Incorporated, “SBC USA”, “Legacy SBC”), through

its consolidated subsidiaries and variable interest entity (“VIE”), is principally engaged in medical industry to provide

comprehensive management services to the medical corporations and their clinics, including but not limited to licensure of the use of

the trademark and brand name of “Shonan Beauty Clinic”, sales of medical equipment, medical consumables procurement services,

and management of customer’s loyalty program, etc.

Recapitalization

September 17, 2024, Pono consummated the merger transaction pursuant to the agreement by and among Pono, Pono Two Merger Sub, Inc., a

Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of Pono, and SBC USA (the “Merger Agreement”),

whereby Merger Sub merged with and into SBC USA, the separate corporation existence of Merger Sub ceased and SBC USA survived the merger

as a wholly owned subsidiary of Pono (“Pono Merger”).

In connection with the consummation of Pono Merger, Pono changed its

name to “SBC Medical Group Holdings Incorporated” and SBC USA changed its name to “SBC Medical Group, Inc.” and,

among other transactions contemplated by the Merger Agreement, the existing equity holders of SBC USA exchanged their equity interests

of SBC USA for equity interests of Pono.

September 17, 2024, the Company received net cash of $ 11,707,417 from Pono Merger.

The Company also assumed $ 416,799 in prepaid expenses

and other current assets, $ 1,108 in accounts payable, $ 14,431 in income tax payable, $ 2,700,000 in convertible note payable, which was

subsequently converted to 270,000 shares upon the consummation of Pono Merger, $ 1,000,789 in accrued liabilities and other current liabilities,

common stock of $ 508 and additional paid-in capital of $ 8,407,380 .

total funds from Pono Merger of $ 11,707,417 were available to repay certain indebtedness, transaction costs and for general corporate

purposes, which primarily consisted of investment banking, legal, accounting, and other professional fees as follows:

OF PROCEEDS FROM MERGER

3 unchanged sentences

Net proceeds from Pono Merger

Pono Merger was accounted for

as a reverse recapitalization under the accounting principles generally accepted in the United States of America (“U.S.

SBC USA was determined to be the accounting acquirer and Pono was treated as the acquired company for financial reporting purposes.

the financial statements of the combined company represent a continuation of the financial statements of SBC USA.

Unless the context indicates

otherwise, any references herein to the “Company”, “we”, “us” and “our” refer to 1) SBC

USA and its consolidated subsidiaries and VIE, prior to the consummation of Pono Merger, and to 2) SBC Holding and

its consolidated subsidiaries and VIE, following Pono Merger;

and reference herein to “Pono” refers to SBC Holding prior to

the consummation of Pono Merger.

Merger was accounted for as a reverse recapitalization under the accounting principles generally accepted in the United States of America

SBC USA was determined to be the accounting acquirer and Pono was treated as the acquired company for financial

reporting purposes.

Accordingly, the financial statements of the combined company represent a continuation of the financial statements

the context indicates otherwise, any references herein to the “Company”, “we”, “us” and “our”

refer to 1) SBC USA and its consolidated subsidiaries and VIE, prior to the consummation of Pono Merger, and to 2) SBC Holding and its

consolidated subsidiaries and VIE, following Pono Merger;

and reference herein to “Pono” refers to SBC Holding prior to the

consummation of Pono Merger.

Reorganization

In June 2020 and April 2022,

SBC Inc., a company incorporated in Japan in June 2007, and Advice Innovation Co., Ltd., a company incorporated in Japan in December 2018,

were merged with and into SBC Medical Group Co., Ltd.

(“SBC Japan”), respectively, with SBC Japan being the surviving entity

in such mergers.

SBC Japan is a company incorporated in Japan in September 2017 and previously known as Aikawa Medical Management Co.,

In April 2023, SBC Japan acquired

100 % equity interest of L’Ange Cosmetique Co., Ltd.

(“L’Ange Sub”), a company incorporated in Japan in June 2003,

and Shobikai Co., Ltd.

(“Shobikai Sub”), a company incorporated in Japan in June 2014, through share exchange.

L’Ange Sub and Shobikai Sub become wholly owned subsidiaries of SBC Japan.

In August 2023, SBC Japan and

L’Ange Sub disposed of their entire equity interest in Ai Inc.

and Lange Inc., respectively, both incorporated in the Federated

States of Micronesia in January 2022, for cash.

June 2020 and April 2022, SBC Inc., a company incorporated in Japan in June 2007, and Advice Innovation Co., Ltd., a company incorporated

in Japan in December 2018, were merged with and into SBC Medical Group Co., Ltd.

(“SBC Japan”), respectively, with SBC Japan

being the surviving entity in such mergers.

SBC Japan is a company incorporated in Japan in September 2017 and previously known as Aikawa

Medical Management Co., Ltd.

April 2023, SBC Japan acquired 100 % equity interest of L’Ange Cosmetique Co., Ltd.

(“L’Ange Sub”), a company

incorporated in Japan in June 2003, and Shobikai Co., Ltd.

(“Shobikai Sub”), a company incorporated in Japan in June 2014,

through share exchange.

As a result, L’Ange Sub and Shobikai Sub became wholly owned subsidiaries of SBC Japan.

August 2023, SBC Japan and L’Ange Sub disposed of their entire equity interest in Ai Inc.

and Lange Inc., respectively, both incorporated

in the Federated States of Micronesia in January 2022, for cash.

As a result, Ai Inc.

and Lange Inc.

cease to be subsidiaries of the Company, with the

related investment in capital being treated as a deemed distribution and the disposal proceeds treated as a deemed contribution.

In September 2023, SBC USA acquired

100 % equity interest of SBC Japan through share exchange with one share of its common stock.

As a result, SBC Japan becomes a wholly owned

subsidiary of SBC USA.

The above reorganization has

been accounted for as a recapitalization among entities under common control since the same controlling shareholder controlled these entities

before and after the reorganization.

The consolidation of the Company has been accounted for at historical cost and prepared on the basis

as if the transactions had become effective as of the beginning of the earliest period presented in the accompanying consolidated financial

Corporate Structure

As of March 31, 2025, the Company’s

major subsidiaries and VIE are as follows:

cease to be subsidiaries of the

Company, with the related investment in capital being treated as a deemed distribution and the disposal proceeds treated as a deemed

contribution.

September 2023, SBC USA acquired 100 % equity interest of SBC Japan through share exchange with one share of its common stock.

SBC Japan became a wholly owned subsidiary of SBC USA.

above reorganization has been accounted for as a recapitalization among entities under common control since the same controlling shareholder

controlled these entities before and after the reorganization.

The consolidation of the Company has been accounted for at historical

cost and prepared on the basis as if the transactions had become effective as of the beginning of the earliest period presented in the

accompanying consolidated financial statements.

of June 30, 2025, the Company’s major subsidiaries and VIE are as follows:

OF MAJOR SUBSIDIARIES

9 unchanged sentences

June 18, 2003

procurement, management and rental services for the medical corporations

SBC MEDICAL GROUP HOLDINGS INCORPORATED

Franchising, procurement, management and rental services for the medical corporations

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND DESCRIPTION OF

BUSINESS (cont.)

1 — ORGANIZATION AND DESCRIPTION OF BUSINESS (cont.)

Incorporation

52 unchanged sentences

January 2025, the Company effected a merger in which SBC Japan and Shobikai Sub merged with and into L’Ange Sub.

As a result, the

separate corporate existence of SBC Japan and Shobikai Sub ceased, with L’Ange Sub continuing as the surviving company.

the merger, L’Ange Sub changed its name to SBC Medical Group Co., Ltd., which is herein referred to as “SBC Japan.”

the separate corporate existence of SBC Japan and Shobikai Sub ceased, with L’Ange Sub continuing as the surviving company.

Following the merger, L’Ange Sub changed its name to SBC Medical Group Co., Ltd., which is herein referred to as “SBC

of Aesthetic Healthcare Holdings Pte.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

(a) Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated

financial statements have been prepared in accordance with U.S.

GAAP and pursuant to the rules and regulations of the Securities and Exchange

Commission (“SEC”).

The unaudited consolidated financial

statements do not include all of the information and disclosure required by U.S.

GAAP for complete financial statements.

Interim results

are not necessarily indicative of results for a full year.

In the opinion of management, all adjustments consisting of a normal recurring

nature considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim

periods have been included.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated

financial statements and related notes for the year ended December 31, 2024.

The unaudited consolidated financial

statements include the financial statements of the Company, its subsidiaries, and consolidated VIE for which the Company is the primary

The results of the subsidiaries are consolidated from the date on which the Company obtained control and continue to be consolidated

until the date that such control ceases.

All significant transactions and balances among the Company’s subsidiaries, including the

VIE, have been eliminated upon consolidation.

The Company reports AHH and its

subsidiaries, which were acquired in November 2024, on a three-month calendar lag allowing for the timely preparation of financial statements.

This three-month reporting lag

is with the exception of significant transactions or events that occur during the intervening period, if any.

Variable Interest Entities

In accordance with ASC Topic

810, “Consolidation”, the Company identifies its variable interests and analyzes to determine if the entity in which the Company

has a variable interest is a VIE.

Determination if a variable interest is a VIE includes both quantitative and qualitative consideration.

For those entities determined to be VIEs within the scope of the VIE model, a further quantitative and qualitative analysis is performed

to determine if the Company is deemed the primary beneficiary.

The primary beneficiary is the party who has the power to direct the activities

of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity

or a right to receive benefits from the entity that could potentially be significant.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

accompanying unaudited consolidated financial statements have been prepared in accordance with U.S.

GAAP and pursuant to the rules and

regulations of the Securities and Exchange Commission (“SEC”).

unaudited consolidated financial statements do not include all of the information and disclosure required by U.S.

GAAP for complete financial

Interim results are not necessarily indicative of results for a full year.

In the opinion of management, all adjustments

consisting of a normal recurring nature considered necessary for a fair presentation of the financial position and the results of operations

and cash flows for the interim periods have been included.

The unaudited consolidated financial statements should be read in conjunction

with the audited consolidated financial statements and related notes for the year ended December 31, 2024.

unaudited consolidated financial statements include the financial statements of the Company, its subsidiaries, and consolidated VIE for

which the Company is the primary beneficiary.

The results of the subsidiaries are consolidated from the date on which the Company obtained

control and continue to be consolidated until the date that such control ceases.

All significant transactions and balances among the

Company’s subsidiaries, including the VIE, have been eliminated upon consolidation.

Company reports AHH and its subsidiaries, which were acquired in November 2024, on a three-month calendar lag allowing for the timely

preparation of financial statements.

This three-month reporting lag is with the exception of significant transactions or events that

occur during the intervening period, if any.

Interest Entities

accordance with ASC Topic 810, “Consolidation”, the Company identifies its variable interests and analyzes to determine if

the entity in which the Company has a variable interest is a VIE.

Determination if a variable interest is a VIE includes both quantitative

and qualitative consideration.

For those entities determined to be VIEs within the scope of the VIE model, a further quantitative and

qualitative analysis is performed to determine if the Company is deemed the primary beneficiary.

The primary beneficiary is the party

who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has

an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

The Company would consolidate

those entities in which it is determined to be the primary beneficiary.

The Company based its qualitative analysis on its review of the

design of the entity, its organizational structure including decision-making ability and the relevant development, operating management

and financial agreements.

The Company evaluates its relationship

with its VIE on an ongoing basis to determine whether it continues to be the primary beneficiary of its consolidated VIE, or whether it

has become the primary beneficiary of the VIE it does not consolidate.

If a legal entity fails to meet

any of the three characteristics of a VIE, we then evaluate such entity under the voting model.

Under the voting model, we consolidate

the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that other equity holders do

not have substantive participating rights.

Assessment of Medical Corporations in Japan

is designated as a medical service corporation (the “MSC”) to provide services to the Medical Corporations (the

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Company would consolidate those entities in which it is determined to be the primary beneficiary.

The Company based its qualitative analysis

on its review of the design of the entity, its organizational structure including decision-making ability and the relevant development,

operating management and financial agreements.

Company evaluates its relationship with its VIE on an ongoing basis to determine whether it continues to be the primary beneficiary of

its consolidated VIE, or whether it has become the primary beneficiary of the VIE it does not consolidate.

a legal entity fails to meet any of the three characteristics of a VIE, we then evaluate such entity under the voting model.

voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and

that other equity holders do not have substantive participating rights.

of Medical Corporations in Japan

Japan is designated as a medical service corporation (the “MSC”) to provide services to the Medical Corporations (the

“MCs”) in Japan.

To maintain and strengthen the business relationship and to secure the source of revenues from the MCs,

the Company acquired equity interests in the following MCs throughout the years.

To maintain and strengthen the business relationship, the Company has acquired equity interests in the

following MCs throughout the years.

OF ACQUIRED EQUITY INTERESTS

10 unchanged sentences

Medical Corporation Ritz Cosmetic Surgery

As non-profit organizations,

MCs are required to comply with the medical-related laws and regulations of the Japanese Medical Care Act (the “Act”, “Medical

In accordance with the Act, the highest authority of MCs is its general meeting of members (the “Members”),

with each Member having one voting right.

The Company, through the MSCs, has no right to elect the Members, no decision-making ability

and no right to dividend or any profit distribution, but has the right to receive distribution of the residual assets of the MCs.

Since the not-for-profit entities

scope exception to the variable interest model is applicable to the MCs, the Company evaluates its business relationship, franchisor-franchisee

agreements and/or services agreements with the MCs in Japan under the voting model.

The Company has concluded that consolidation of the

MCs is not appropriate for the periods presented as it does not have a majority voting interest in the Members of the MCs nor does it

have a controlling financial interest in the MCs.

The equity interests in the MCs held by the Company are recorded as long-term investments

in MCs — related parties on the unaudited consolidated balance sheets.

The transactions between the Company and the MCs are disclosed

in Note 16 Related Party Transactions.

(b) Foreign Currency

maintains its books and record in its local currency, mainly Japanese YEN (“JPY” or “¥”), which is a

functional currency as being the primary currency of the economic environment in which its operation is conducted.

denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates

prevailing at the dates of the transaction.

Monetary assets and liabilities denominated in currencies other than the functional

currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates.

The resulting

exchange differences are recorded in the unaudited statements of operations.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

non-profit organizations, MCs are required to comply with the medical-related laws and regulations of the Japanese Medical Care Act (the

“Act”, “Medical Care Act”).

In accordance with the Act, the highest authority of MCs is its general meeting of

members (the “Members”), with each Member having one voting right.

The Company, through the MSCs, has no right to elect the

Members, no decision-making ability and no right to dividend or any profit distribution, but has the right to receive distribution of

the residual assets of the MCs.

the not-for-profit entities scope exception to the variable interest model is applicable to the MCs, the Company evaluates its business

relationship, franchisor-franchisee agreements and/or services agreements with the MCs in Japan under the voting model.

The Company has

concluded that consolidation of the MCs is not appropriate for the periods presented as it does not have a majority voting interest in

the Members of the MCs nor does it have a controlling financial interest in the MCs.

The equity interests in the MCs held by the Company

are recorded as long-term investments in MCs — related parties on the unaudited consolidated balance sheets.

The transactions between

the Company and the MCs are disclosed in Note 17 — Related Party Transactions.

Foreign Currency

Company maintains its books and record in its local currency, mainly Japanese YEN (“JPY” or “¥”), which is

a functional currency as being the primary currency of the economic environment in which its operation is conducted.

Transactions denominated

in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the

dates of the transaction.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated

into the functional currency using the applicable exchange rates at the balance sheet dates.

The resulting exchange differences are recorded

in the unaudited statements of operations.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

The reporting currency of the

Company is the United States Dollars (“US$” or “$”), and the accompanying financial statements have been expressed

In accordance with ASC Topic 830-30, “Translations of Financial Statements”, assets and liabilities of the Company

whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date.

Revenues and expenses

are translated at average rates prevailing during the period.

The gains and losses resulting from the translation of financial statements

are recorded as a separate component of accumulated other comprehensive loss within the unaudited statements of changes in stockholders’

Translation of amounts from local

currency of the Company into US$1 has been made at the following exchange rates:

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

reporting currency of the Company is the United States Dollars (“US$” or “$”), and the accompanying financial

statements have been expressed in US$.

In accordance with ASC Topic 830-30, “Translations of Financial Statements”, assets

and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet

Revenues and expenses are translated at average rates prevailing during the period.

The gains and losses resulting from the translation

of financial statements are recorded as a separate component of accumulated other comprehensive loss within the unaudited statements

of changes in stockholders’ equity.

of amounts from local currency of the Company into US$1 has been made at the following exchange rates:

OF LOCAL CURRENCY EXCHANGE RATES

2 unchanged sentences

Exchange rate

the unaudited consolidated financial statements in conformity with U.S.

GAAP, management is required to make certain estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

Use of Estimates

preparing the unaudited consolidated financial statements in conformity with U.S.

GAAP, management is required to make certain estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are

based on information available as of the date of the unaudited consolidated financial statements.

Significant estimates required to

be made by management include, but are not limited to, useful lives and impairment of long-lived assets, impairment of goodwill,

impairment of long-term investments in MCs — related parties, valuation allowance of

deferred tax assets, uncertain income tax positions, the recognition and measurement of impairment of investments in securities,

allowance for credit losses and implicit interest rate of operating and finance leases.

Management bases its estimates on historical

experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going

These estimates are based

on information available as of the date of the unaudited consolidated financial statements.

Significant estimates required to be made

by management include, but are not limited to, useful lives and impairment of long-lived assets, impairment of goodwill, impairment of

long-term investments in MCs — related parties, valuation allowance of deferred tax assets, uncertain income tax positions, the

recognition and measurement of impairment of investments in securities, allowance for credit losses and implicit interest rate of operating

and finance leases.

Management bases its estimates on historical experience and other assumptions it believes to be reasonable under

the circumstances and evaluates these estimates on an on-going basis.

Actual results could differ from those estimates.

(d) Customer Loans Receivable, and Notes and Other Payables

— Related Parties

In February 2023, the Company

started to provide loan services to certain customers of the related-party MCs (“End Customers”).

Once a loan is granted to

finance an End Customer’s purchase, the End Customer is required to repay the Company in monthly installments.

The loans provided to the End Customers

are unsecured, interest-bearing, and due in three months to five years, depending on the End Customers’ choice of the loan service

The Company records the customer

loans receivables at gross loan receivables less unamortized costs of issuance fees or discounts, which are amortized over the life of

the loan to interest income.

During the three months ended March 31, 2025 and 2024, the Company generated interest income of $ 283,416

and $ 317,509 , respectively, from the loan services, which were included in revenues.

Management periodically evaluates

individual End Customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance

when necessary.

Customer loans receivable is charged off against the allowance after all means of collection have been exhausted and the

potential for recovery is considered remote.

During the three months ended March 31, 2025 and 2024, the Company recorded $ 95,102 and

nil allowance for doubtful accounts, respectively, for customer loans receivable.

Prior to January 2025, when

a loan was granted to an End Customer, the Company issued a promissory note to the related party MC to settle the purchase

transaction on behalf of the End Customer.

The Company repays each promissory note when the corresponding loan is fully repaid by

the End Customer or earlier if mutually agreed.

Customer Loans Receivable, and Notes and Other Payables — Related Parties

February 2023, the Company started to provide loan services to certain customers of the related-party MCs (“End Customers”).

Once a loan is granted to finance an End Customer’s purchase, the End Customer is required to repay the Company in monthly installments.

The loans provided to the End Customers are unsecured, interest-bearing, and due in three months to five years, depending on the End

Customers’ choice of the loan service term.

Company records the customer loans receivables at gross loan receivables less unamortized costs of issuance fees or discounts, which

are amortized over the life of the loan to interest income.

The Company generated interest income of $ 305,227 and $ 172,701 for the three

months ended June 30, 2025 and 2024, respectively, and generated interest income of $ 588,643

and $ 490,210

for the six months ended June 30, 2025 and 2024 ,

respectively, from the loan services, which were included in revenues.

periodically evaluates individual End Customer’s financial condition, credit history and the current economic conditions to make

adjustments in the allowance when necessary.

Customer loans receivable is charged off against the allowance after all means of collection

have been exhausted and the potential for recovery is considered remote.

During the three months ended June 30, 2025 and 2024, the Company

recorded $ 258,650 and nil allowance for doubtful accounts, respectively, for customers receivable.

During the six months ended June 30,

2025 and 2024, the Company recorded $ 353,752

allowance for doubtful accounts, respectively, for customer

loans receivable.

to January 2025, when a loan was granted to an End Customer, the Company issued a promissory note to the related party MC to settle

the purchase transaction on behalf of the End Customer.

The Company repays each promissory note when the corresponding loan is fully

repaid by the End Customer or earlier if mutually agreed.

These promissory notes are unsecured and bear no interest.

Starting in January 2025,

instead of issuing a promissory note to the MC upon loan issuance, the Company pays the transaction amount directly in

cash on behalf of the End Customer in the month following the purchase.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

January 2025, instead of issuing a promissory note to the MC upon loan issuance, the Company pays the transaction amount directly in

cash to the MC on behalf of the End Customer in the month following the purchase.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (cont.)

(e) Goodwill, Net

Goodwill represents the excess

of the purchase price over the fair value of the identifiable assets and liabilities acquired in the business combination.

In accordance

with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment for impairment

or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value based test.

The Company would recognize an

impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill

allocated to that reporting unit.

When performing the annual impairment

test, the Company has the option of performing a qualitative or quantitative assessment to determine if an impairment has occurred.

a qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,

the Company would be required to perform a quantitative impairment analysis for goodwill.

The quantitative analysis requires a comparison

of the fair value of the reporting unit to its carrying value, including goodwill.

If the carrying value of the reporting unit exceeds

its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated

to that reporting unit.

The fair value is generally determined using the income approach with the discounted cash flow valuation method,

which requires management to make significant estimates and assumptions related to forecasted revenues and cash flows and the discount

(f) Impairment of Long-lived Assets Other Than

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Cryptocurrencies

are included in non -current assets in the unaudited consolidated

balance sheets because the Company holds them for long-term investment purposes.

January 1, 2025, the Company adopted ASU No.

2023-08, Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”) using

a modified retrospective approach, which requires cryptocurrency assets to be measured at fair value each reporting period with changes

in fair value recorded in net income or loss.

The adoption of ASU 2023-08 did not have impact on the Company’s prior years’

consolidated financial statements as the Company did not hold cryptocurrencies prior to the adoption.

The Company purchases Bitcoins through Coinbase, Inc., a cryptocurrency exchange, which

are initially recorded at cost and subsequently measured at fair value in the consolidated balance sheets.

The Company determines

the fair value of its cryptocurrency in accordance with ASC 820, Fair Value Measurement , based on quoted prices on active exchange(s)

that are identified as the principal market(s) for such assets (Level I inputs).

The cost basis of cryptocurrencies is determined using

the average cost method.

The change in fair value of cryptocurrencies is recorded in “Other income

(expenses)” as a non-operating item in the unaudited consolidated statements of operations.

Purchases and sales of cryptocurrencies,

if any, are included within investing activities in the accompanying consolidated statements of cash flows.

Goodwill, Net

represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in the business combination.

In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment

for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value

Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up

to the amount of goodwill allocated to that reporting unit.

performing the annual impairment test, the Company has the option of performing a qualitative or quantitative assessment to determine

if an impairment has occurred.

If a qualitative assessment indicates that it is more likely than not that the fair value of a reporting

unit is less than its carrying amount, the Company would be required to perform a quantitative impairment analysis for goodwill.

quantitative analysis requires a comparison of the fair value of the reporting unit to its carrying value, including goodwill.

carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited

to the total amount of goodwill allocated to that reporting unit.

The fair value is generally determined using the income approach with

the discounted cash flow valuation method, which requires management to make significant estimates and assumptions related to forecasted

revenues and cash flows and the discount rates.

Impairment of Long-lived Assets Other Than Goodwill

assets with finite lives, primarily property and equipment, intangible assets, operating lease right-of-use assets and finance lease

right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an

asset may not be recoverable.

If the estimated cash flows from the use of the asset and its eventual disposition are below the

asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.

(g) Long-term Investments, Net

Investments in equity securities with readily

determinable fair values

The Company holds investments

in equity securities of publicly listed companies, for which the Company does not have significant influence.

Investments in equity securities

with readily determinable fair values are measured at fair value and any changes in fair value are recognized in other income (expenses).

SBC MEDICAL GROUP HOLDINGS INCORPORATED

right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may not be recoverable.

If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s

carrying value, then the asset is deemed to be impaired and written down to its fair value.

Long-term Investments, Net

in equity securities with readily determinable fair values

Company holds investments in equity securities of publicly listed companies, for which the Company does not have significant influence.

Investments in equity securities with readily determinable fair values are measured at fair value and any changes in fair value are recognized

in other income (expenses).

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

Investments in privately held companies and

organizations that do not report Net Asset Value (the “NAV”) per share

The Company’s long-term

investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative, under which

these investments are measured at cost, adjusted for observable price changes and impairments, with changes recognized in other income

The Company recognizes both realized

and unrealized gain and losses in its unaudited consolidated statements of operations and comprehensive income, classified with other

income (expenses).

Unrealized gains and losses represent observable price changes for investments in privately held entities that do not

report NAV per share.

Realized gains and losses represent the difference between proceeds received upon disposition of investments and

their historical or adjusted cost.

Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce

the carrying values of investments in privately held entities that do not report NAV per share, if impairments are deemed other than temporary,

to their estimated fair values.

(h) Long-term Investments in MCs — Related

Long-term investments in MCs

— related parties represent the payments to obtain equity interests of the MCs in Japan, made by the Company through SBC Japan,

a company designated as a MSC in Japan.

In accordance with the Act and articles of incorporation of the MCs, which are non-profit organizations,

the equity interest holders of MCs are prohibited from receiving any profit distribution from MCs but have the right to receive distribution

of the residual assets of the MCs in proportion to the amount of their contribution.

As of the balance sheet dates, the investments represent

probable future economic benefit to be realized at the time of dissolution of MCs or the equity interests being sold.

The investments in MCs —

related parties are accounted for using a measurement alternative, under which these investments are measured at cost, less impairment,

and adjusted for observable price changes.

The Company reviews the investments in MCs for impairment whenever events or changes in circumstances

indicate that the carrying amount may not be recoverable.

The payments made for such investments are classified as investing activities

in the unaudited consolidated statements of cash flows.

The MCs are considered related parties as the relatives of the Chief Executive

Officer (“CEO”) of the Company being the Members of the MCs.

Also see Note 2(a) for further details.

The Company determines if an

arrangement is or contains a lease at inception or modification of the arrangement.

An arrangement is or contains a lease if there are

identified assets and the right to control the use of an identified asset is conveyed for a period in exchange for consideration.

over the use of the identified assets means the lessee has both the right to obtain substantially all of the economic benefits from the

use of the asset and the right to direct the use of the asset.

The Company classifies its leases

as either finance leases or operating leases if it is the lessee, or sales-type, direct financing, or operating leases if it is the lessor.

The following criteria is used to determine if a lease is a finance lease (as a lessee) or sales-type or direct financing lease (as a

ownership is transferred from lessor to lessee by the end of the lease term;

an option to purchase is reasonably certain to be exercised;

the lease term is for the major part of the underlying asset’s remaining economic life;

the present value of lease payments equals or exceeds substantially all of the fair value of the underlying assets;

the underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

in privately held companies and organizations that do not report Net Asset Value (the “NAV”) per share

Company’s long-term investments in privately held entities that do not report NAV per share are accounted for using a measurement

alternative, under which these investments are measured at cost, adjusted for observable price changes and impairments, with changes

recognized in other income (expenses).

Company recognizes both realized and unrealized gain and losses in its unaudited consolidated statements of operations and comprehensive

income, classified with other income (expenses).

Unrealized gains and losses represent observable price changes for investments in privately

held entities that do not report NAV per share.

Realized gains and losses represent the difference between proceeds received upon disposition

of investments and their historical or adjusted cost.

Impairments are realized losses, which result in an adjusted cost, and represent

charges to reduce the carrying values of investments in privately held entities that do not report NAV per share, if impairments are

deemed other than temporary, to their estimated fair values.

Long-term Investments in MCs — Related Parties

investments in MCs — related parties represent the payments to obtain equity interests of the MCs in Japan, made by the

Company through SBC Japan, a company designated as a MSC in Japan.

In accordance with the Act and articles of incorporation of the

MCs, which are non-profit organizations, the equity interest holders of MCs are prohibited from receiving any profit distribution

from MCs but have the right to receive distribution of the residual assets of the MCs in proportion to the amount of their

contribution.

As of the balance sheet dates, the investments represent probable future economic benefit to be realized at the time

of dissolution of MCs or the equity interests being sold.

investments in MCs — related parties are accounted for using a measurement alternative, under which these investments are measured

at cost, less impairment, and adjusted for observable price changes.

The Company reviews the investments in MCs for impairment whenever

events or changes in circumstances indicate that the carrying amount may not be recoverable.

The payments made for such investments are

classified as investing activities in the unaudited consolidated statements of cash flows.

The MCs are considered related parties as

the relatives of the Chief Executive Officer (“CEO”) of the Company being the Members of the MCs.

Also see Note 2(a) for

further details.

Company determines if an arrangement is or contains a lease at inception or modification of the arrangement.

An arrangement is or contains

a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period in exchange for

consideration.

Control over the use of the identified assets means the lessee has both the right to obtain substantially all of the economic

benefits from the use of the asset and the right to direct the use of the asset.

Company classifies its leases as either finance leases or operating leases if it is the lessee, or sales-type, direct financing, or operating

leases if it is the lessor.

The following criteria is used to determine if a lease is a finance lease (as a lessee) or sales-type or

direct financing lease (as a lessor):

is transferred from lessor to lessee by the end of the lease term;

option to purchase is reasonably certain to be exercised;

lease term is for the major part of the underlying asset’s remaining economic life;

present value of lease payments equals or exceeds substantially all of the fair value of the underlying assets;

underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

If any of the above criteria

is met, the Company accounts for the lease as a finance, a sales-type, or a direct financing lease.

If none of the criteria is met, the

Company accounts for the lease as an operating lease.

Lessee accounting

The Company recognizes right-of-use

assets and lease liabilities for all leases other than those with a term of twelve months or less as the Company has elected to apply

the short-term lease recognition exemption.

Right-of-use assets represent the Company’s right to use an underlying asset for the

Lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets

and lease liabilities are classified and recognized at the commencement date of a lease.

Lease liabilities are measured based on the present

value of fixed lease payments over the lease term.

Right-of-use assets consist of (i) initial measurement of the lease liability;

lease payments made to the lessor at or before the commencement date less any lease incentives received;

and (iii) initial direct costs

incurred by the Company.

As the rates implicit on the

Company’s leases for which it is the lessee are not readily determinable, the Company uses its incremental borrowing rate based

on information available at the commencement date in determining the present value of lease payments.

When determining the incremental

borrowing rate, the Company assesses multiple variables such as lease term, collateral, economic conditions, and its creditworthiness.

From time to time, we may enter

into sublease agreements with third parties.

Our subleases generally do not relieve us of our primary obligations under the corresponding

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

any of the above criteria is met, the Company accounts for the lease as a finance, a sales-type, or a direct financing lease.

of the criteria is met, the Company accounts for the lease as an operating lease.

Company recognizes right-of-use assets and lease liabilities for all leases other than those with a term of twelve months or less as

the Company has elected to apply the short-term lease recognition exemption.

Right-of-use assets represent the Company’s right

to use an underlying asset for the lease term.

Lease liabilities represent the Company’s obligation to make lease payments arising

from the lease.

Right-of-use assets and lease liabilities are classified and recognized at the commencement date of a lease.

Lease liabilities

are measured based on the present value of fixed lease payments over the lease term.

Right-of-use assets consist of (i) initial measurement

of the lease liability;

(ii) lease payments made to the lessor at or before the commencement date less any lease incentives received;

and (iii) initial direct costs incurred by the Company.

the rates implicit on the Company’s leases for which it is the lessee are not readily determinable, the Company uses its incremental

borrowing rate based on information available at the commencement date in determining the present value of lease payments.

When determining

the incremental borrowing rate, the Company assesses multiple variables such as lease term, collateral, economic conditions, and its

creditworthiness.

time to time, we may enter into sublease agreements with third parties.

Our subleases generally do not relieve us of our primary obligations

under the corresponding head lease.

As a result, we account for the head lease based on the original assessment at lease inception.

We determine if the sublease

arrangement is either a sales-type, direct financing, or operating lease at inception of the sublease.

If the total remaining lease cost

on the head lease for the term of the sublease is greater than the anticipated sublease income, the right-of-use asset is assessed for

Our subleases are generally operating leases and we recognize sublease income on a straight-line basis over the sublease term.

Lessor accounting — operating leases

The Company accounts for the

revenue from its lease contracts by utilizing the single component accounting policy.

This policy requires the Company to account for,

by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single component if two criteria

the timing and pattern of transfer of the lease component and the nonlease component(s) are the same;

the lease component would be classified as an operating lease if it were accounted for separately.

Lease components consist primarily

of fixed rental payments, which represent scheduled rental amounts due under our leases.

Nonlease components consist primarily of tenant

recoveries representing reimbursements of rental operating expenses, including recoveries for utilities, repairs and maintenance and common

area expenses.

If the lease component is the

predominant component, we account for all revenues under such lease as a single component in accordance with the lease accounting standard.

Conversely, if the nonlease component is the predominant component, all revenues under such lease are accounted for in accordance with

the revenue recognition accounting standard.

Our operating leases qualify for the single component accounting, and the lease component

in each of our leases is predominant.

Therefore, we account for all revenues from our operating leases under the lease accounting standard

and classify these revenues as rental income.

The Company commences recognition

of rental income related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes

possession or controls the physical use of the leased asset.

Income from rentals related to fixed rental payments under operating leases

is recognized on a straight-line basis over the respective operating lease terms.

Any amounts received but will be recognized as revenue

in future periods are classified as advances from customers in the Company’s unaudited consolidated balance sheets.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

determine if the sublease arrangement is either a sales-type, direct financing, or operating lease at inception of the sublease.

total remaining lease cost on the head lease for the term of the sublease is greater than the anticipated sublease income, the right-of-use

asset is assessed for impairment.

Our subleases are generally operating leases and we recognize sublease income on a straight-line basis

over the sublease term.

accounting — operating leases

Company accounts for the revenue from its lease contracts by utilizing the single component accounting policy.

This policy requires the

Company to account for, by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single

component if two criteria are met.

timing and pattern of transfer of the lease component and the nonlease component(s) are the same;

lease component would be classified as an operating lease if it were accounted for separately.

components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases.

Nonlease components

consist primarily of tenant recoveries representing reimbursements of rental operating expenses, including recoveries for utilities,

repairs and maintenance and common area expenses.

the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with

the lease accounting standard.

Conversely, if the nonlease component is the predominant component, all revenues under such lease are

accounted for in accordance with the revenue recognition accounting standard.

Our operating leases qualify for the single component accounting,

and the lease component in each of our leases is predominant.

Therefore, we account for all revenues from our operating leases under

the lease accounting standard and classify these revenues as rental income.

Company commences recognition of rental income related to the operating leases at the date the property is ready for its intended use

by the tenant and the tenant takes possession or controls the physical use of the leased asset.

Income from rentals related to fixed

rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms.

received but will be recognized as revenue in future periods are classified as advances from customers in the Company’s unaudited

consolidated balance sheets.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

Lessor accounting — sales-type leases

The Company purchases medical

equipment from vendors and leases them to its customers, who are required to pay installments throughout the term of the leases.

agreements include lease payments that are fixed, do not contain residual value guarantees or variable lease payments.

The lease terms

are based on the non-cancellable term of the lease and the buyer may have options to terminate the lease in advance when meets certain

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

accounting — sales-type leases

Company purchases medical equipment from vendors and leases them to its customers, who are required to pay installments throughout the

term of the leases.

The lease agreements include lease payments that are fixed, do not contain residual value guarantees or variable

lease payments.

The lease terms are based on the non-cancellable term of the lease and the buyer may have options to terminate the lease

in advance when meets certain conditions.

The customers obtain control of the medical equipment when they physically possess the equipment.

The Company recognizes sales

from sales-type leases equal to the present value of the minimum lease payments discounted using the implicit interest rate in the lease

and cost of sales equal to carrying amount of the asset being leased and any initial direct costs incurred, less the present value of

the unguaranteed residual.

Interest income from the leases is recognized over the lease terms and included in revenues, net.

The Company excludes from the

measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific

revenue-producing transaction and collected from a customer.

(j) Revenue Recognition

The Company recognizes revenue

from franchising services, procurement services, management services and other services or product sales under ASC Topic 606, “Revenue

from Contracts with Customers”.

To determine revenue recognition

for contracts with customers, the Company performs the following five steps:

(i) identify the contract(s) with the customer, (ii) identify

the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that

it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations

in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Revenue amount represents the

invoiced value, net of consumption tax and applicable local government levies, if any.

The consumption tax on sales is calculated at 10%

of gross sales.

The Company does not have significant remaining unfulfilled performance obligations or contract balances.

The Company reports revenue on

a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction.

determination of whether the Company acts as a principal or an agent in a transaction is based on the evaluation of whether (i) the Company

is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before

the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has

discretion in establishing the price for the specified good or service.

If the terms of a transaction do not indicate the Company is acting

as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized

on a net basis.

The Company recognizes revenue

from rental services under ASC Topic 842, “Leases”.

The Company currently generates

its revenue from the following main sources:

Franchising Revenue

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, patents, and trademarks, as a franchisor pursuant to

franchise agreements with the medical corporations (the “MCs”) in Japan.

It recognizes revenue 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.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

Procurement Revenue

The Company generates procurement

services revenue by purchasing primarily advertising services and medical materials from qualified vendors on behalf of MCs to maintain

brand quality consistency.

Procurement services revenue is recognized at the point in time upon the delivery of products or over time

as services are performed.

Company recognizes sales from sales-type leases equal to the present value of the minimum lease payments discounted using the implicit

interest rate in the lease and cost of sales equal to carrying amount of the asset being leased and any initial direct costs incurred,

less the present value of the unguaranteed residual.

Interest income from the leases is recognized over the lease terms and included

in revenues, net.

Company excludes from the measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on and

concurrent with a specific revenue-producing transaction and collected from a customer.

Revenue Recognition

Company recognizes revenue from franchising services, procurement services, management services and other services or product sales under

ASC Topic 606, “Revenue from Contracts with Customers”.

determine revenue recognition for contracts with customers, the Company performs the following five steps:

(i) identify the contract(s)

with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable

consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price

to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance

Revenue amount represents the invoiced value, net of consumption tax and applicable local government levies, if any.

consumption tax on sales is calculated at 10% of gross sales.

The Company does not have significant remaining unfulfilled performance

obligations or contract balances.

Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or

agent in the transaction.

The determination of whether the Company acts as a principal or an agent in a transaction is based on the evaluation

of whether (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company

has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer

and (iii) the Company has discretion in establishing the price for the specified good or service.

If the terms of a transaction do not

indicate the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated

revenues are recognized on a net basis.

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

Company currently generates its revenue from the following main sources:

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

brand name (“Shonan Beauty Clinic”), trade name, patents, and trademarks, and by providing consulting services to

enhance the value of “Shonan Beauty Clinic” brand, as a franchisor pursuant to franchise agreements with the medical

corporations (the “MCs”) in Japan.

Prior to April 2025, revenue was based on a fixed amount to each MC and a fixed

amount to each clinic of the MCs;

starting from April 2025, rather than charging the same flat fee for all MCs/clinics, the monthly service fee to each MC and to each clinic of the MCs is determined by the facility type,

operational tenure, operational performance of each clinic of the MCs.

The revenue is recognized over time as services are rendered.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Company generates procurement services revenue by purchasing primarily advertising services and medical materials from qualified vendors

on behalf of MCs to maintain brand quality consistency.

Procurement services revenue is recognized at the point in time upon the delivery

of products or over time as services are performed.

Occasionally, the Company receives vendor discounts on certain large purchases.

It recognizes revenue based

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

Management Services Revenue

The Company provides loyalty

program management services, labor supporting services, function supporting services, and management consulting services to MCs.

Loyalty program management services

The Company awards loyalty points

on behalf of MCs to MCs’ customers, who earn loyalty points from each qualified purchase made at the loyalty program participating

clinics of MCs, in exchange for a handling fee.

The revenue is based on a percentage of the related payment amount made by MCs’

customers and is recognized when the loyalty points are awarded.

At the time loyalty points are

awarded, a MC pays the Company cash in an amount equivalent to the awarded loyalty points, which is recorded as advances from customers.

When a MC’s customers redeem the loyalty points, the Company returns the cash back to the MC in an amount equivalent to the redeemed

loyalty points.

The awarded loyalty points expire if a MC’s customer does not make any additional qualified purchase at a participating

clinic within a year.

The Company accumulates and tracks the points on behalf of MCs until the loyalty points expire at which time the

Company recognizes an amount equivalent to the expired loyalty points as revenue, which is normally not significant.

The Company also awards certain

points to MCs’ customers on behalf of MCs for free in order to increase the volume of MC’s sales, from which the Company earns

other types of revenues, such as royalty income.

When a MC’s customers redeem such points, the Company reimburses MC in an amount

equivalent to the used free points and records it as a reduction of the revenue recognized.

The Company is an agent in the

management of loyalty programs, and as a result, revenues are recognized net of the cost of redemptions.

Labor supporting services

The Company generates revenue

by dispatching staff to MCs to provide a range of services, primarily including IT, and administrative services.

The Company recognizes

the revenue over the time when services are rendered.

Function supporting services

The revenue is derived from providing

functional supporting services to MCs, such as accounting and human resources services.

The Company recognizes the revenue over the time

when services are rendered.

Management consulting services

The Company generates revenue

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

The Company recognizes the revenue

over the time when services are rendered.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

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 MCs.

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 MCs for free in order to increase the volume of MC’s sales,

from which the Company earns other types of revenues, such as royalty income.

When a MC’s customers redeem such points, the Company

reimburses MC in an amount equivalent to the used free points 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 IT, and administrative services.

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, and IT management

The Company recognizes revenue based on a monthly service fee over the time when services are rendered.

Since April 2025,

the amount of the monthly fee for each clinic is determined using the same key criteria described above under “Franchising

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.

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

Rental Services Revenue

The Company generates rental

income from operating leases and sales-type leases, which is accounted for under ASC Topic 842.

Operating lease revenue is generally recognized

on straight-line basis over the terms of the lease agreements and sales-type leases revenue is generally recognized on the lease commitment

Also see Note 2(i).

Other Revenues

generates other miscellaneous revenues such as medicine dispensed sales revenue, brokerage services revenue, construction services

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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.

Also see Note 2(j).

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

revenue, interest income, beauty and health services revenue, etc.

These revenues are recognized when

the Company satisfies performance obligations.

(k) Advertising Expenses

Advertising expenses consist

primarily of costs of promotion and marketing for the Company’s image and services and are included in selling, general and administrative

The Company expenses advertising costs as incurred or the first time the advertising takes place, whichever is earlier, in accordance

with the ASC 720-35, “Advertising Costs”.

The advertising expenses were $ 682,166 and $ 711,630 for the three months ended March 31,

2025 and 2024, respectively.

(l) Concentration of Credit Risk

Financial instruments that potentially

subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, finance lease receivables and customer loans receivable.

These revenues are recognized when the Company satisfies performance

Advertising Expenses

expenses consist primarily of costs of promotion and marketing for the Company’s image and services and are included in selling,

general and administrative expenses.

The Company expenses advertising costs as incurred or the first time the advertising takes place,

whichever is earlier, in accordance with the ASC 720-35, “Advertising Costs”.

The advertising expenses were $ 973,933 and

$ 223,094 for the three months ended June 30, 2025 and 2024, respectively, and $ 1,656,099

and $ 934,724

for the six months ended June 30, 2025 and 2024, respectively.

Concentration of Credit Risk

instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable,

finance lease receivables and customer loans receivable.

The Company places its cash and cash equivalents with financial institutions.

The Company does not require collateral or other security

to support financial instruments subject to credit risk.

The Company conducts periodic reviews of the financial condition and payment

practices of its customers to minimize collection risk on accounts receivable.

For the three months ended March

31, 2025, customer A, B and C represent 24 %, 26 % and 23 % of the Company’s total revenues, respectively.

For the three months ended

March 31, 2024, customer A, B, C and D represent 24 %, 22 %, 25 % and 10 % of the Company’s total revenues, respectively.

As of March 31, 2025, customer

A, B, C and D account for 24 %, 26 %, 23 % and 10 % of the Company’s total outstanding accounts receivable, respectively.

As of December

31, 2024, customer A, B, C and D account for 17 %, 28 %, 26 % and 10 % of the Company’s total outstanding accounts receivable, respectively.

For the three

months ended March 31, 2025, no vendor accounts for more than 10 %

The Company does not require collateral or other security to support financial instruments subject to credit risk.

The Company conducts

periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.

the six months ended June 30, 2025, customer A, B and C represent 25 %, 25 % and 22 % of the Company’s total revenues, respectively.

For the six months ended June 30, 2024, customer A, B, C and D represent 24 %, 22 %, 24 % and 10 % of the Company’s total revenues,

respectively.

of June 30, 2025, customer A, B and C account for 27 %,

of the Company’s total outstanding accounts receivable, respectively.

As of December 31, 2024, customer A, B, C and D account for

of the Company’s total outstanding accounts receivable, respectively.

the six months ended June 30, 2025, no vendor represents more than 10 %

of the Company’s total purchases.

For the three months ended March 31, 2024, vendor A and C represent 18 %

and 10 % of the Company’s total purchases, respectively.

As of March 31,

2025, vendor A and B each represent 13 %

of the Company’s total outstanding accounts payable.

As of December 31, 2024, vendor A and B represent 12 %

of the Company’s total outstanding accounts payable, respectively.

For the six months ended June 30, 2024, vendor A represents 15 %

of the Company’s total purchases.

of June 30, 2025, vendor A, B and C represent 13 %, 12 % and 11 % of the Company’s total outstanding accounts payable.

As of December

31, 2024, vendor A and B represent 12 % and 15 % of the Company’s total outstanding accounts payable, respectively.

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment

The management approach model is based on the way a company’s chief operating decision maker organizes segments within

the company for making operating decisions assessing performance and allocating resources.

Reportable segments are based on products and

services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

Management determined the Company’s operations constitute a single reporting segment.

(n) Related Parties and Transactions

The Company identifies related

parties, and accounts for, discloses related party transactions in accordance with ASC Topic 850, “Related Party Disclosures,”

and other relevant ASC standards.

Parties, which can be an entity

or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company or exercise significant

influence over the Company in making financial and operational decisions.

Entities are also considered to be related if they are subject

to common control or common significant influence.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

Transactions involving related

parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings

may not exist.

Representations about transactions with related parties, if made, shall not imply that the related party transactions were

consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

(o) Fair Value Measurements

The Company performs fair value

measurements in accordance with ASC Topic 820.

Fair value is defined as the price that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date.

ASC Topic 820 establishes a fair value hierarchy

that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is

significant to the fair value measurement.

ASC Topic 820 establishes three levels of inputs that may be used to measure fair value:

Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.

The management

approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making

operating decisions assessing performance and allocating resources.

Reportable segments are based on products and services, geography,

legal structure, management structure, or any other manner in which management disaggregates a company.

determined the Company’s operations constitute a single reporting segment.

Related Parties and Transactions

Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC Topic 850, “Related

Party Disclosures,” and other relevant ASC standards.

which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company

or exercise significant influence over the Company in making financial and operational decisions.

Entities are also considered to be

related if they are subject to common control or common significant influence.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive,

free market dealings may not exist.

Representations about transactions with related parties, if made, shall not imply that the related

party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations

can be substantiated.

Fair Value Measurements

Company performs fair value measurements in accordance with ASC Topic 820.

Fair value is defined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable

inputs when measuring fair value.

An asset’s or a liability’s categorization within the fair value hierarchy is based upon

the lowest level of input that is significant to the fair value measurement.

ASC Topic 820 establishes three levels of inputs that may

be used to measure fair value:

quoted prices in active markets for identical assets or liabilities;

inputs other than Level 1 that are observable, either directly or indirectly;

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

As of March 31, 2025 and December

31, 2024, the carrying values of current assets and current liabilities approximated their fair values reported in the unaudited consolidated

balance sheets due to the short-term maturities of these instruments.

Debt that bears variable interest rates index to prime also approximates

fair value as it reprices when market interest rates change.

Assets measured at fair value

on a recurring basis as of March 31, 2025 and December 31, 2024 are summarized below.

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets

or liabilities.

of June 30, 2025 and December 31, 2024, the carrying values of current assets and current liabilities approximated their fair values

reported in the unaudited consolidated balance sheets due to the short-term maturities of these instruments.

Debt that bears variable

interest rates index to prime also approximates fair value as it reprices when market interest rates change.

measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 are summarized below.

OF FAIR VALUE ON A RECURRING BASIS

Fair Value Measurements as of March 31, 2025

Fair Value Measurements as of June 30, 2025

Long-term investments:

Equity investments at fair value with readily determinable fair value

Cryptocurrencies:

Fair Value Measurements as of December 31, 2024

1 unchanged sentence

Equity investments at fair value with readily determinable fair value

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (cont.)

(p) Stock-Based Compensation

The Company accounts for stock-based

compensation awards in accordance with ASC Topic 718, “Compensation — Stock Compensation”, under which the Company determines

whether stock-based compensation awards should be classified and accounted for as an equity award.

There were no liability awards granted

during any of the periods stated herein.

For all grants of stock-based compensation classified as equity awards, the cost of services

received from employees and non-employees in exchange for awards is recognized in the consolidated statements of operations and comprehensive

income based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service

period or vesting period.

The Company records forfeitures and cancellations as they occur.

(q) Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No.

Cryptocurrencies:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Stock-Based Compensation

Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “Compensation — Stock Compensation”,

under which the Company determines whether stock-based compensation awards should be classified and accounted for as an equity award.

There were no liability awards granted during any of the periods stated herein.

For all grants of stock-based compensation classified

as equity awards, the cost of services received from employees and non-employees in exchange for awards is recognized in the consolidated

statements of operations and comprehensive income based on the estimated fair value of those awards on the grant date and amortized on

a straight-line basis over the requisite service period or vesting period.

The Company records forfeitures and cancellations as they

Recent Accounting Pronouncements

December 2023, the FASB issued ASU No.

2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets, which requires entities that hold crypto assets to subsequently measure such

assets at fair value with changes recognized in net income each reporting period.

This accounting update also improves the information

provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale

restrictions, and changes during the reporting period.

for and Disclosure of Crypto Assets, which requires entities that hold crypto assets to subsequently measure such assets at fair value

with changes recognized in net income each reporting period.

This accounting update also improves the information provided to investors

about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and

changes during the reporting period.

ASU 2023-08 is effective for all entities for annual periods beginning after December 15, 2024,

1 unchanged sentence

The Company adopted ASU 2023-08 on January 1, 2025.

As of March 31, 2025,

the Company has never held any crypto assets and, therefore, the adoption of this accounting standard had no impact on its consolidated

financial statements or related disclosures.

In December 2023, the FASB issued

Accounting Standards Update (“ASU”) No.

See Note 2(e) and Note 7 for relevant cryptocurrency disclosures.

December 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-09, “Income Taxes (Topic 740):

Improvement to Income Tax Disclosures” to enhance the transparency and decision

usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective

for public business entities for annual periods beginning after December 15, 2024, and for annual periods beginning after December 15,

2025 for all other entities, on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this

accounting standard update on its consolidated financial statements and related disclosures.

NOTE 3 — VARIABLE INTEREST ENTITY

A VIE is defined as a legal entity

whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the

following three characteristics:

decision-making rights, the obligation to absorb losses, or the right to receive the expected residual

returns of the entity.

The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities

of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the

right to receive benefits from the entity that could potentially be significant to the VIE.

The Company followed ASC Topic

810, “Consolidation”, utilizing a qualitative approach, and determined that it is the primary beneficiary of its VIE, Aikawa

Medical Management, Inc.

(“AMM”) and consolidated the result of operations, financial conditions, and cash flows of AMM in

the consolidated financial statements.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 — VARIABLE INTEREST ENTITY (cont.)

The following amounts and balances

of AMM were included in the Company’s unaudited consolidated financial statements as of March 31, 2025 and December 31, 2024 and

for the three months ended March 31, 2025 and 2024:

to Income Tax Disclosures” to enhance the transparency and decision usefulness of income tax disclosures, primarily related to

the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for public business entities for annual periods beginning

after December 15, 2024, and for annual periods beginning after December 15, 2025 for all other entities, on a prospective basis.

adoption is permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial

statements and related disclosures.

3 — VARIABLE INTEREST ENTITY

VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity

investment at risk lack any of the following three characteristics:

decision-making rights, the obligation to absorb losses, or the right

to receive the expected residual returns of the entity.

The primary beneficiary is identified as the variable interest holder that has

both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation

to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

Company followed ASC Topic 810, “Consolidation”, utilizing a qualitative approach, and determined that it is the primary

beneficiary of its VIE, Aikawa Medical Management, Inc.

(“AMM”) and consolidated the result of operations, financial conditions,

and cash flows of AMM in the consolidated financial statements.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3 — VARIABLE INTEREST ENTITY (cont.)

following amounts and balances of AMM were included in the Company’s unaudited consolidated financial statements as of June 30,

2025 and December 31, 2024 and for the three and six months ended June 30, 2025 and 2024:

OF CONSOLIDATED FINANCIAL STATEMENTS OF VARIABLE INTEREST ENTITY

16 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Cost of revenues

Total operating expenses

Net income (loss)

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

$ ( 123,370 )

For the Six Months Ended June 30,

Net cash used in operating activities

$ ( 101,725 )

Net cash provided by investing activities

Net cash used in financing activities

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT

As of March 31, 2025 and December

31, 2024, prepaid expenses and other current assets consist of the following:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

of June 30, 2025 and December 31, 2024, prepaid expenses and other current assets consist of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Advances to suppliers

Redemption proceeds receivable on life insurance policies

Other receivables *

Represent reimbursement receivables from a business partner and other miscellaneous receivables.

NOTE 5 — FINANCE LEASE RECEIVABLES

As of March 31, 2025 and December

31, 2024, finance lease receivables consist of the following:

reimbursement receivables from a business partner and other miscellaneous receivables.

5 — FINANCE LEASE RECEIVABLES

of June 30, 2025 and December 31, 2024, finance lease receivables consist of the following:

OF FINANCE LEASE RECEIVABLES

6 unchanged sentences

Finance lease receivables, non-current

As of March 31, 2025, maturities

of the Company’s gross finance lease receivables are as follows:

of June 30, 2025, maturities of the Company’s gross finance lease receivables are as follows:

OF MATURITIES OF THE FINANCE LEASE RECEIVABLES

2 unchanged sentences

2029 and thereafter

SBC MEDICAL GROUP HOLDINGS INCORPORATED

MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 — PROPERTY AND EQUIPMENT, NET

As of March 31, 2025 and December

31, 2024, property and equipment, net consist of the following:

6 — PROPERTY AND EQUIPMENT, NET

of June 30, 2025 and December 31, 2024, property and equipment, net consist of the following:

OF PROPERTY AND EQUIPMENT

8 unchanged sentences

Property and equipment, net

Depreciation expense was $ 604,882 and $ 744,809 for the three months ended March 31, 2025 and 2024, respectively.

recognized a gain on disposal of property and equipment of $ 12,375

for the three months ended March 31, 2025 and 2024, respectively.

NOTE 7 — INTANGIBLE ASSETS, NET

As of March 31, 2025 and December

31, 2024, intangible assets, net consist of the following:

expense was $ 564,158 and $ 570,730 for the three months ended June 30, 2025 and 2024, respectively, and $ 1,169,040 and $ 1,315,539 for

the six months ended June 30, 2025 and 2024, respectively.

Company recognized a loss on disposal of property and equipment of $ 1,571

and a gain on disposal of property and equipment of $ 902

for the three months ended June 30, 2025 and 2024, respectively, and a gain on disposal of property and equipment of $ 10,804

for the six months ended June 30, 2025 and 2024, respectively.

7 — CRYPTOCURRENCIES

of June 30, 2025 and December 31, 2024, cryptocurrencies consist of the following:

SCHEDULE OF DIGITAL ASSETS, NET

June 30, 2025

December 31, 2024

following table presents a roll-forward of the Company’s cryptocurrencies holdings during the six months ended June 30, 2025:

SCHEDULE OF RECONCILIATION OF

DIGITAL ASSET, NET

Bitcoin Fair Value

Cryptocurrencies at December 31, 2024

Purchases of cryptocurrencies

Unrealized gain on cryptocurrencies

Cryptocurrencies at June 30, 2025

8 — INTANGIBLE ASSETS, NET

of June 30, 2025 and December 31, 2024, intangible assets, net consist of the following:

OF INTANGIBLE ASSETS

8 unchanged sentences

Intangible assets, net

Amortization expense was $ 13,372

and $ 273,668 for the three months ended March 31, 2025 and 2024, respectively.

Estimated future amortization

expense related to intangible assets as of March 31, 2025 is as follows:

expense was $ 41,073 and $ 260,215 for the three months ended June 30, 2025 and 2024, respectively, and $ 54,445 and $ 533,883 for the six

months ended June 30, 2025 and 2024, respectively.

future amortization expense related to intangible assets as of June 30, 2025 is as follows:

OF FUTURE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS

1 unchanged sentence

Remaining of 2025

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 — LONG-TERM INVESTMENTS, NET

As of March 31, 2025 and December

31, 2024, long-term investments, net consist of the following:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9 — LONG-TERM INVESTMENTS, NET

of June 30, 2025 and December 31, 2024, long-term investments, net consist of the following:

OF LONG-TERM INVESTMENTS

7 unchanged sentences

Long-term investments, net

recognized an unrealized loss of $ 159,946

and $ 938,511

on long-term investment in a public entity with readily determinable fair value – related party for the three months ended

March 31, 2025 and 2024, respectively.

The Company recognized

an unrealized gain of $ 19,365

on long-term investment in a public entity with readily

determinable fair value for the three months ended March 31, 2025.

NOTE 9 — OTHER ASSETS

As of March 31, 2025 and December

31, 2024, other assets consist of the following:

Company recognized an unrealized loss on long-term investment in a public entity with readily determinable fair value – related

party of $ 180,622 and $ 107,046 for the three months ended June 30, 2025 and 2024, respectively, and an unrealized loss of $ 340,568 and

$ 1,045,557 for the six months ended June 30, 2025 and 2024, respectively.

Company recognized an unrealized loss on long-term investment in a public entity with readily determinable fair value of $ 63,320 and $ 43,955 for

the three and six months ended June 30, 2025, respectively.

10 — OTHER ASSETS

of June 30, 2025 and December 31, 2024, other assets consist of the following:

OF OTHER ASSETS

2 unchanged sentences

Long-term loans receivable, primarily student loans

NOTE 10 — ACCRUED LIABILITIES AND OTHER CURRENT

As of March 31, 2025 and December

31, 2024, accrued liabilities and other current liabilities consist of the following:

11 — ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES

of June 30, 2025 and December 31, 2024, accrued liabilities and other current liabilities consist of the following:

OF ACCRUED AND OTHER CURRENT LIABILITIES

4 unchanged sentences

Excise and franchise tax payable

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 — LONG-TERM LOANS

As of March 31, 2025 and December

31, 2024, the Company’s long-term loans from banks and other financial institution consist of the following:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12 — LONG-TERM LOANS

of June 30, 2025 and December 31, 2024, the Company’s long-term loans from banks and other financial institution consist of the

OF LONG TERM LOANS

7 unchanged sentences

Non-current portion

Pertained to information for loans outstanding as of March 31, 2025.

The Company borrowed loans from

various banks and a financial institution for working capital purposes.

expense was $ 3,961 and

$ 3,008 for the three

months ended March 31, 2025 and 2024, respectively.

The guarantee information of

the Company’s outstanding loans as of March 31, 2025 and December 31, 2024 consists of the following:

to information for loans outstanding as of June 30, 2025.

Company borrowed loans from various banks and a financial institution for working capital purposes.

expense was $ 46,674 and $ 7,424 for the three months ended June 30, 2025 and 2024, respectively, and $ 50,635 and $ 10,432 for the six months

ended June 30, 2025 and 2024, respectively.

guarantee information of the Company’s outstanding loans as of June 30, 2025 and December 31, 2024 consists of the following:

OF OUTSTANDING LOANS

1 unchanged sentence

Guaranteed by a subsidiary within the Company’s organizational structure

As of March 31, 2025, future

minimum payments for long-term loans are as follows:

of June 30, 2025, future minimum payments for long-term loans are as follows:

OF MATURITIES OF LONG TERM DEBT

1 unchanged sentence

Remaining of 2025

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 — LEASES — AS A LESSEE

The Company has

entered into operating leases for offices and sublease purposes, with terms ranging from two to seven years, and finance leases for certain medical equipment, with terms of four years.

The estimated effect of lease renewal and

termination options, as applicable, that are reasonably certain to be exercised in the determination of the lease term and initial

measurement of right-of-use assets and lease liabilities was included in the unaudited consolidated financial statements.

During the three months ended

March 31, 2025 and 2024, certain operating leases were guaranteed by related parties of the Company.

Operating lease expenses for

lease payments are recognized on a straight-line basis over the lease term.

Finance lease costs include amortization, which is recognized on a straight-line basis over the expected life of

the leased assets, and interest expenses, which are recognized following an effective interest rate method.

Leases with an initial term of twelve

months or less are not recorded on the unaudited consolidated balance sheets.

The components of lease costs

are as follows:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13 — LEASES — AS A LESSEE

Company has entered into operating leases for offices and sublease purposes, with terms ranging from two to seven years, and finance

leases for certain medical equipment, with terms of four years.

The estimated effect of lease renewal and termination options, as applicable,

that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right-of-use assets and

lease liabilities was included in the unaudited consolidated financial statements.

the six months ended June 30, 2025 and 2024, certain operating leases were guaranteed by related parties of the Company.

lease expenses for lease payments are recognized on a straight-line basis over the lease term.

Finance lease costs include amortization,

which is recognized on a straight-line basis over the expected life of the leased assets, and interest expenses, which are recognized

following an effective interest rate method.

Leases with an initial term of twelve months or less are not recorded in the unaudited consolidated

balance sheets.

components of lease costs are as follows:

OF LEASE COSTS

For the Three Months Ended

For the Six Months Ended

Finance lease costs:

5 unchanged sentences

Total lease costs

The following table presents

supplemental information related to the Company’s leases:

following table presents supplemental information related to the Company’s leases:

OF SUPPLEMENTAL INFORMATION OPERATING LEASES

For the Three Months Ended

Cash paid for amounts included

in the measurement of lease liabilities:

For the Six Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

11 unchanged sentences

Finance leases

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 — LEASES — AS A LESSEE

As of March 31, 2025, the future

maturity of operating and finance lease liabilities is as follows:

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13 — LEASES — AS A LESSEE (cont.)

of June 30, 2025, the future maturity of operating and finance lease liabilities is as follows:

OF MATURITY OF LEASE LIABILITIES

7 unchanged sentences

Lease liabilities, non-current

NOTE 13 — INCOME TAXES

United States

SBC Holding, SBC USA, SBC Healthcare

Inc., SBC Irvine, LLC, and Aikawa Medical Management, Inc.

are incorporated in the United States and subject to federal income tax rate

at 21 % and California state income tax rate at 6.98 %.

The Company conducts

its major businesses in Japan and is subject to tax in this jurisdiction.

During the three months ended March 31, 2025 and 2024, substantially

all the taxable income of the Company is generated in Japan.

As a result of its business activities, the Company files tax returns that

are subject to examination by the local tax authority.

Income taxes in Japan applicable to the Company are imposed by the national, prefectural,

and municipal governments, and in the aggregate resulted in an effective statutory rate of approximately 34.69 %

for the three months ended March 31, 2025 and 2024.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 — INCOME TAXES (cont.)

Shoubikai Medical Vietnam Co.,

is incorporated in Vietnam and subject to income tax rate at 20 % statutory tax rate with respect to the assessable income generated

from Vietnam.

14 — INCOME TAXES

Holding, SBC USA, SBC Healthcare Inc., SBC Irvine, LLC, and Aikawa Medical Management, Inc.

are incorporated in the United States and

subject to federal income tax rate at 21 % and California state income tax rate at 6.98 %.

For information on the recent One Big Beautiful Bill Act and the potential impacts thereof on our tax provision,

see Note 20 — Subsequent Event.

Company conducts its major businesses in Japan and is subject to tax in this jurisdiction.

During the six months ended June 30, 2025

and 2024, substantially all the taxable income of the Company is generated in Japan.

As a result of its business activities, the Company

files tax returns that are subject to examination by the local tax authority.

Income taxes in Japan applicable to the Company are imposed

by the national, prefectural, and municipal governments, and in the aggregate resulted in an effective statutory rate of approximately

34.69 % for the six months ended June 30, 2025 and 2024.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

14 — INCOME TAXES (cont.)

Medical Vietnam Co., Ltd.

is incorporated in Vietnam and subject to income tax rate at 20 % statutory tax rate with respect to the assessable

income generated from Vietnam.

Healthcare Holdings Pte.

and its subsidiaries, and SBC MEDICAL APAC PTE.

are incorporated in Singapore and subject to

income tax rate at 17 %

statutory tax rate with respect to the assessable profits generated from Singapore.

For the three months ended March

31, 2025 and 2024, the Company’s income tax expenses are as follows:

are incorporated in Singapore and subject to income

tax rate at 17 % statutory tax rate with respect to the assessable profits generated from Singapore.

the six months ended June 30, 2025 and 2024, the Company’s income tax expenses are as follows:

OF INCOME TAX EXPENSES

For the Three Months Ended

The effective tax rate was 31.67 % and 31.07 % f or

the three months ended March 31, 2025 and 2024, respectively.

NOTE 14 — SHAREHOLDERS’ EQUITY

The Company is authorized to

issue 400,000,000 shares of common stock, par value of $ 0.0001 per share (“Common Stock”), and 20,000,000 shares of undesignated

preferred stock, par value of $ 0.0001 per share.

In February 2025, the Company

issued 860,435 shares of common stock, with no proceeds, to Mehana Capital LLC as incentive shares pursuant to the Non-Redemption Agreements entered into in May 2023 by and among Pono, Mehana Capital LLC, and certain unaffiliated

stockholders, including Wolverine Flagship Fund Trading Limited, Amethyst Arbitrage International Master Fund, Radcliffe SPAC Master Fund,

L.P., and Verition Multi-Strategy Master Fund Ltd.

As of March 31,

2025 and December 31, 2024, there were 103,881,251

and 103,020,816 shares issued, 103,611,251

and 102,750,816 shares outstanding, respectively,

and no preferred stock issued and

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 — SHAREHOLDERS’ EQUITY

Stock-based compensation

The following table summarizes

the stock option/warrant activities and related information for the three months ended March 31, 2025 and 2024:

the Six Months Ended

( 3,322,728 )

effective tax rate was 46.81 %

for the six months ended June 30, 2025 and 2024, respectively.

15 — SHAREHOLDERS’ EQUITY

Company is authorized to issue 400,000,000 shares of common stock, par value of $ 0.0001 per share (“Common Stock”), and 20,000,000

shares of undesignated preferred stock, par value of $ 0.0001 per share.

February 2025, the Company issued 860,435 shares of common stock, with no proceeds, to Mehana Capital LLC as incentive shares pursuant

to the Non-Redemption Agreements entered into in May 2023 by and among Pono, Mehana Capital LLC, and certain unaffiliated stockholders,

including Wolverine Flagship Fund Trading Limited, Amethyst Arbitrage International Master Fund, Radcliffe SPAC Master Fund, L.P., and

Verition Multi-Strategy Master Fund Ltd.

In May 2025, the Company’s

board of directors approved a share repurchase plan (“2025 Share Repurchase Program”), authorizing the repurchases of up to

$ 5.0 million of the Company’s common stock.

During the six months ended June 30, 2025, the Company repurchased 512,809 shares of

common stock at an average price of $ 4.66 per share, totaling approximately $ 2.4 million under the 2025 Share Repurchase Program.

June 30, 2025, approximately $ 2.6 million remained available under the 2025 Share Repurchase Program.

of June 30, 2025 and December 31, 2024, there were 103,881,251 and 103,020,816 shares issued, 103,098,442 and 102,750,816 shares outstanding,

respectively, and no preferred stock issued and outstanding.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15 — SHAREHOLDERS’ EQUITY (cont.)

following table summarizes the stock option/warrant activities and related information for the six months ended June 30, 2025 and 2024:

OF STOCK OPTION/WARRANTS ACTIVITIES

5 unchanged sentences

Forfeited/Cancelled

As of March 31, 2024

( 2,180,190 )

As of June 30, 2024

As of January 1, 2025

Forfeited/Cancelled

As of March 31, 2025

Vested and exercisable as of March 31, 2025

NOTE 15 — DISAGGREGATION OF REVENUES

Revenues generated from different

revenue streams consist of the following:

As of June 30, 2025

Vested and exercisable as of June 30, 2025

16 — DISAGGREGATION OF REVENUES

generated from different revenue streams consist of the following:

OF DISAGGREGATION OF REVENUE

For the Three Months Ended

the Three Months Ended

For the Six Months Ended

Franchising revenue

2 unchanged sentences

Rental services revenue

During the three months ended

March 31, 2025 and 2024, the Company recognized revenue of $ 843,755 and $ 1,970,889 from the opening balance of advances from customers, respectively;

$ 107,910,122

the six months ended June 30, 2025 and 2024, the Company recognized revenue of $ 843,755 and $ 1,970,889 from the opening balance of advances

from customers, respectively;

and recognized no revenue from the opening balance of advances from customers — related parties.

As of March 31, 2025 and December

31, 2024, and for the three months ended March 31, 2025 and 2024, substantially all of our long-lived assets and revenues generated are

attributed to the Company’s operations in Japan.

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 — RELATED PARTY TRANSACTIONS

The related parties had material

transactions for the three months ended March 31, 2025 and 2024 consist of the following:

Name of Related Parties

Nature of Relationship as of March 31, 2025

Yoshiyuki Aikawa

Controlling shareholder, director and CEO of the Company

Medical Corporation Shobikai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Kowakai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Nasukai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Aikeikai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Jukeikai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Ritz Cosmetic Surgery

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Association Junikai

The relatives of CEO of the Company being the Members of the MC

Medical Corporation Association Furinkai

The relatives of CEO of the Company being the Members of the MC

Japan Medical & Beauty Inc.

Controlled by the CEO of the Company

Public Interest Foundation SBC Medical Promotion Foundation

The relative of CEO of the Company being a Member of Public Interest Foundation SBC Medical Promotion Foundation

The CEO of the Company is a principal shareholder of AI Med Inc.

SBC Irvine MC

Significantly influenced by the Company

SBC Tokyo Medical University

The CEO of the Company is the chairman of SBC Tokyo Medical University

SBC Shonan Osteopathic Clinic

of June 30, 2025 and December 31, 2024, and for the six months ended June 30, 2025 and 2024, substantially all of our long-lived assets

and revenues generated were attributed to the Company’s operations in Japan.

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17 — RELATED PARTY TRANSACTIONS

related parties had material transactions for the six months ended June 30, 2025 and 2024 consist of the following:

of Related Parties

of Relationship as of June 30, 2025

shareholder, director and CEO of the Company

Corporation Shobikai

relatives of CEO of the Company being the Members of the MC

Corporation Kowakai

relatives of CEO of the Company being the Members of the MC

Corporation Nasukai

relatives of CEO of the Company being the Members of the MC

Corporation Aikeikai

relatives of CEO of the Company being the Members of the MC

Corporation Jukeikai

relatives of CEO of the Company being the Members of the MC

Corporation Ritz Cosmetic Surgery

relatives of CEO of the Company being the Members of the MC

Corporation Association Junikai

relatives of CEO of the Company being the Members of the MC

Corporation Association Furinkai

relatives of CEO of the Company being the Members of the MC

Medical & Beauty Inc.

by the CEO of the Company

Interest Foundation SBC Medical Promotion Foundation

relative of CEO of the Company being a Member of Public Interest Foundation SBC Medical Promotion Foundation

CEO of the Company is a principal shareholder of AI Med Inc.

Significantly

influenced by the Company

Tokyo Medical University

CEO of the Company is the chairman of SBC Tokyo Medical University

Shonan Osteopathic Clinic Inc.

CEO of the Company is a principal shareholder of SBC Shonan Osteopathic Clinic Inc.

Skynet Academy Co., Ltd.

Controlled by the CEO of the Company

Kijimadairakanko Inc.

Controlled by the CEO of the Company

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 — RELATED PARTY TRANSACTIONS

During the three months ended

March 31, 2025 and 2024, the transactions with related parties are as follows:

General Incorporated Association Taiseikai

The relatives of CEO of the Company being the Members of General Incorporated

Association Taiseikai

Incorporated Association SBC

CEO of the Company being the Member of General Incorporated Association SBC

Academy Co., Ltd.

of Hariver, Inc., a company controlled by the CEO of the Company

Kijimadairakanko

of SBC Inc., a company controlled by the CEO of the Company

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17 — RELATED PARTY TRANSACTIONS (cont.)

the three and six months ended June 30, 2025 and 2024, the transactions with related parties are as follows:

OF RELATED PARTY TRANSACTIONS

Revenues, net – related parties

For the Three Months Ended

For the Six Months Ended

Revenues, net

7 unchanged sentences

Public Interest Foundation SBC Medical Promotion Foundation

General Incorporated Association SBC

SBC Tokyo Medical University

SBC Shonan Osteopathic Clinic Inc.

Yoshiyuki Aikawa

2 unchanged sentences

Medical Corporation Association Junikai

SBC Shonan Osteopathic Clinic Inc.

Medical Corporation Association Taiseikai

Skynet Academy Co., Ltd.

Kijimadairakanko Inc.

Revenue transactions with related parties

Cost of revenues

For the Three Months Ended

For the Six Months Ended

Cost of revenues

Medical Corporation Nasukai

Medical Corporation Aikeikai

Japan Medical & Beauty Inc.

Kijimadairakanko Inc.

SBC Tokyo Medical University

Cost of revenues transactions with related parties

As of March 31, 2025 and December

31, 2024, the balances with related parties are as follows:

Kijimadairakanko Inc.

Selling, general and administrative expenses

For the Three Months Ended

For the Six Months Ended

Selling, general and administrative expenses

Medical Corporation Shobikai

Medical Corporation Kowakai

Medical Corporation Nasukai

Medical Corporation Aikeikai

Medical Corporation Jukeikai

Medical Corporation Association Junikai

Medical Corporation Association Furinkai

General Incorporated Association SBC

of June 30, 2025 and December 31, 2024, the balances with related parties are as follows:

Accounts receivable

13 unchanged sentences

receivable with related parties

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 — RELATED PARTY TRANSACTIONS

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17 — RELATED PARTY TRANSACTIONS (cont.)

Finance lease receivables

18 unchanged sentences

lease receivables Non-current portion

Other receivables

Medical Corporation Shobikai

Medical Corporation Kowakai

Medical Corporation Nasukai

Medical Corporation Aikeikai

Medical Corporation Jukeikai

Medical Corporation Ritz Cosmetic Surgery

Due from related party, net

4 unchanged sentences

Due from related

Long-term investments in MCs – related parties

Long-term investments in MCs

Medical Corporation Shobikai

10 unchanged sentences

Kijimadairakanko Inc.

Advances from customers

Medical Corporation Shobikai

Medical Corporation Kowakai

Medical Corporation Nasukai

Medical Corporation Kowakai

Medical Corporation Aikeikai

Medical Corporation Jukeikai

Medical Corporation Ritz Cosmetic Surgery

SBC Shonan Osteopathic Clinic Inc.

Medical Corporation Association Furinkai

Medical Corporation Ritz Cosmetic Surgery

Medical Corporation Association Junikai

Advances from

SBC MEDICAL GROUP HOLDINGS INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 — RELATED PARTY TRANSACTIONS

Notes and other payables – related parties

SBC Shonan Osteopathic Clinic Inc.

General Incorporated Association SBC

Advances from customers

Medical Corporation Shobikai

4 unchanged sentences

Medical Corporation Ritz Cosmetic Surgery

SBC Shonan Osteopathic Clinic Inc.

Medical Corporation Association Furinkai

Medical Corporation Association Junikai

Advances from

MEDICAL GROUP HOLDINGS INCORPORATED

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17 — RELATED PARTY TRANSACTIONS (cont.)

and other payables

Corporation Shobikai

Corporation Kowakai

Corporation Nasukai

Corporation Aikeikai

Corporation Jukeikai

Corporation Ritz Cosmetic Surgery

Incorporated Association SBC

payable – related parties

current portion

( 1,422,976 )

payable – related parties Less:

current portion

( 1,422,976 )

Non-current portion

payable – related parties Non-current portion

2 unchanged sentences

Due to related

Allowance for credit loss movement

For the Three Months Ended

For the Six Months Ended

Allowance for credit loss movement

3 unchanged sentences

Ending balance

The balances of

due to and due from related parties represent the outstanding loans to and from related parties, respectively, as of March 31, 2025 and

December 31, 2024.

balances of due to and due from related parties represent the outstanding loans to and from related parties, respectively, as of June

30, 2025 and December 31, 2024.

These loans are non-secured, interest-free and due on demand.

Also see Note 2(a), 8, 11,

12, 15 and 18 for more transactions with related parties.

NOTE 17 — SEGMENT REPORTING

The Company’s chief operating

decision maker (“CODM”), Chief Executive Officer, reviews consolidated results of operations to make decisions, therefore

the Company views its operations and manages its business as a single operating segment.

The Company’s revenues for its single operating

segment are substantially all derived from providing comprehensive management services to MCs and their clinics.

The accounting

policies for the single operating segment are the same as those described in Note 2.

June 2025, the Company entered into a memorandum of sale

for an aircraft pursuant to the property sales agreement dated August 18, 2023 with General Incorporated Association SBC, an entity controlled

by the CEO of the Company, who is also the controlling shareholder of the Company.

The original sale price was increased by approximately

million, which was recorded as a deemed contribution in connection with price modification on disposal

of property and equipment in the Company’s unaudited consolidated statements of changes in stockholders’ equity.

see Note 2(a), 9, 12, 13, 16 and 19 for more transactions with related parties.

18 — SEGMENT REPORTING

Company’s chief operating decision maker (“CODM”), Chief Executive Officer, reviews consolidated results of operations

to make decisions, therefore the Company views its operations and manages its business as a single operating segment.

The Company’s

revenues for its single operating segment are substantially all derived from providing comprehensive management services to MCs and their

accounting policies for the single operating segment are the same as those described in Note 2.

The CODM evaluates performance for the

Company’s single operating segment and decides how to allocate resources based on the Company’s consolidated net income

that is reported in the unaudited consolidated statements of operations and comprehensive income as net income.

The measure of

segment assets is reported on the unaudited consolidated balance sheets as total assets.

The CODM allocates resources across the

Company based on consolidated net income derived during the annual budgeting process and throughout the year in monitoring actual

results compared to budget and updated forecasts.

Company’s single operating segment and decides how to allocate resources based on the Company’s consolidated net income that

is reported in the unaudited consolidated statements of operations and comprehensive income as net income.

The measure of segment assets

is reported in the unaudited consolidated balance sheets as total assets.

The CODM allocates resources across the Company based on consolidated

net income derived during the annual budgeting process and throughout the year in monitoring actual results compared to budget and updated

These results are used to assess segment performance.

The operating

segment financial information regularly reviewed by the CODM, inclusive assets, revenues, expenses, profit or loss, and noncash

items are presented on a consolidated basis in the same amount and using the same captions as those included in the unaudited

consolidated statements of operations and comprehensive income, unaudited consolidated balance sheets, and unaudited consolidated

statements of cash flows.

operating segment financial information regularly reviewed by the CODM, inclusive assets, revenues, expenses, profit or loss, and noncash

items are presented on a consolidated basis in the same amount and using the same captions as those included in the unaudited consolidated

statements of operations and comprehensive income, unaudited consolidated balance sheets, and unaudited consolidated statements of cash

There are no additional segment expense categories regularly provided to the CODM.

Therefore, there are

also no amounts classified as other segment items requiring disclosure.

NOTE 18 — COMMITMENT

As of March 31, 2025 and

December 31, 2024, a subsidiary of the Company provided a guarantee on the debt of its CEO in the amounts of $ 266,011

Therefore, there are also no amounts classified

as other segment items requiring disclosure.

19 — COMMITMENT

of June 30, 2025 and December 31, 2024, a subsidiary of the Company provided a guarantee on the debt of its CEO in the amounts of $ 266,573

and $ 262,095 , respectively.

March 31, 2025 and December 31, 2024, the Company did not record a liability on the unaudited consolidated balance sheets for the

guarantee because it was not probable that the Company would be required to make payments under the guarantee.

As of June 30, 2025 and December 31, 2024, the Company did not record a liability in the unaudited consolidated

balance sheets for the guarantee because it was not probable that the Company would be required to make payments under the guarantee.

20 — SUBSEQUENT EVENTS

In April 2025,

the Company purchased 5 Bitcoins for approximately $ 0.4 million

in cash through Coinbase, Inc., a cryptocurrency exchange.

In May 2025, the

Company’s board of directors approved a share repurchase plan, authorizing the repurchases of up to $ 5.0

million of the Company’s common stock.

The plan is expected to remain in effect until May 20, 2026.

The repurchase s

will be funded by surplus cash and future free cash flow.

July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”).

The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications

to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The OBBBA has multiple

effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We are currently assessing its impact

on our consolidated financial statements and will recognize the income tax effects in the consolidated financial statements beginning

in the period in which the OBBBA was signed into law.

2025, the Company acquired 100% equity interest in MB Career Lounge Co., Ltd., a company providing management support services

for medical institutions in Japan for cash consideration of approximately $ 13.7

July 22, 2025, the Company completed its 2025 Share Repurchase Program.

Under the program, the Company repurchased an

aggregate of 1,034,308 shares

of its common stock for a total cash consideration of approximately $ 5 million,

of which 521,499

shares of common stock were repurchased during the period from July 1, 2025 to July 22, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements