# SBC Medical Group Holdings Inc: Form 10-Q for the period ended Mar 31, 2026

- Company: [SBC Medical Group Holdings Inc](/companies/sbc.md) (CIK 1930313)
- Form: 10-Q
- Filed: 2026-05-14
- Accepted by EDGAR: May 14, 2026, 07:00 ET
- Period: 2026-03-31
- Accession: 0001193125-26-222737
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1930313/000119312526222737/sbc-20260331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1930313/000119312526222737/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2026-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2026-01-01 to 2026-03-31 | $43.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2026-01-01 to 2026-03-31 | $12.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2026-01-01 to 2026-03-31 | $30.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2026-01-01 to 2026-03-31 | $12.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2026-01-01 to 2026-03-31 | $17.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2026-01-01 to 2026-03-31 | $111.9k | us-gaap:InterestExpense |
| Income tax | 3 months, 2026-01-01 to 2026-03-31 | $7.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2026-01-01 to 2026-03-31 | $11.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2026-01-01 to 2026-03-31 | $0.11 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2026-01-01 to 2026-03-31 | $0.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2026-01-01 to 2026-03-31 | 102,576,943 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2026-01-01 to 2026-03-31 | $9.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2026-01-01 to 2026-03-31 | $125.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2026-03-31 | $167.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2026-03-31 | $238.8m | us-gaap:AssetsCurrent |
| Total assets | at 2026-03-31 | $388.0m | us-gaap:Assets |
| Current liabilities | at 2026-03-31 | $62.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2026-03-31 | $117.6m | us-gaap:Liabilities |
| Long-term debt | at 2026-03-31 | $40.4m | us-gaap:LongTermDebt |
| Current portion of debt | at 2026-03-31 | $219.6k | us-gaap:DebtCurrent |
| Shareholders' equity | at 2026-03-31 | $255.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,000 characters.

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

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

### Overview

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

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

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

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

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

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

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

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

### Financial Overview

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

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

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

### Results of Operations

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

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

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

|  | For the Three Months Ended March 31, 2026 Amount | % of revenue | 2025 Amount | % of revenue | Variance Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues, net (including net revenues provided to related parties) | $43,060,562 | 100.00% | $47,328,701 | 100.00% | $(4,268,139) | (9.02)% |
| Cost of revenues (including cost of revenues from related parties) | 12,713,828 | 29.53% | 9,595,617 | 20.27% | 3,118,211 | 32.50% |
| **Gross profit** | **30,346,734** | **70.47%** | **37,733,084** | **79.73%** | **(7,386,350)** | **(19.58)%** |
| Operating expenses (including selling, general and administrative expenses from related parties) | 12,626,719 | 29.32% | 13,531,010 | 28.59% | (904,291) | (6.68)% |
| **Income from operations** | **17,720,015** | **41.15%** | **24,202,074** | **51.14%** | **(6,482,059)** | **(26.78)%** |
| Other income | 1,136,596 | 2.64% | 7,249,333 | 15.32% | (6,112,737) | (84.32)% |
| **Income before income taxes** | **18,856,611** | **43.79%** | **31,451,407** | **66.45%** | **(12,594,796)** | **(40.05)%** |
| Income tax expense | 7,527,591 | 17.48% | 9,959,457 | 21.04% | (2,431,866) | (24.42)% |
| **Net income** | **11,329,020** | **26.31%** | **21,491,950** | **45.41%** | **(10,162,930)** | **(47.29)%** |
| Less: net income (loss) attributable to non-controlling interests | 20,949 | 0.05% | (10,496) | (0.02)% | 31,445 | (299.59)% |
| **Net income attributable to SBC Medical Group Holdings Incorporated** | **$11,308,071** | **26.26%** | **$21,502,446** | **45.43%** | **$(10,194,375)** | **(47.41)%** |

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

### Revenues, Net

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

|  | For the Three Months Ended March 31, 2026 | 2025 | Variance Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Franchising revenue | $9,091,740 | $15,719,282 | $(6,627,542) | (42.16)% |
| Procurement revenue | 12,344,366 | 14,332,783 | (1,988,417) | (13.87)% |
| Management services revenue | 11,929,791 | 8,728,103 | 3,201,688 | 36.68% |
| Rental services revenue | 3,435,922 | 5,640,514 | (2,204,592) | (39.08)% |
| Others | 6,258,743 | 2,908,019 | 3,350,724 | 115.22% |
| **Total** | **$43,060,562** | **$47,328,701** | **$(4,268,139)** | **(9.02)%** |

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

Japanese Yen (“JPY”) depreciated against the U.S. dollar during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The average rate against the dollar was 156.9101 yen for the three months ended March 31, 2026 compared to 152.5417 yen for the same period in 2025. For the three months ended March 31, 2026 and 2025, we generated net revenues of $43,060,562 (JPY 6,757 million) and $47,328,701 (JPY 7,220 million), respectively, we reported net income of $11,329,020 (JPY 1,778 million) and $21,491,950 (JPY 3,252 million), respectively. Overall, the unfavorable impacts of the period-to-period foreign exchange rate changes on net revenues and net income were $1,233,130 and $324,425, respectively, for the three months ended March 31, 2026.

The main reasons for the variance of $4,268,139 in revenues, net per revenue stream are as follows:

#### Franchising Revenue

Franchising revenue for the three months ended March 31, 2026 decreased to $9,091,740 by $6,627,542, or 42.16%, from $15,719,282 for the same period in 2025. This decrease was mainly due to the revision of the fee structure for determining service fees for each clinic of MCs based on the size, scale and performance of each clinic effective as of April 1, 2025.

#### Procurement Revenue

The procurement revenue for the three months ended March 31, 2026 decreased to $12,344,366 by $1,988,417, or 13.87%, from $14,332,783 for the same period in 2025. This decrease was mainly due to a decline in orders from MCs for medical materials, reflecting a temporary increase in procurement activities associated with the business expansion of MCs in the same period of the prior year.

#### Management Services Revenue

The management services revenue for the three months ended March 31, 2026 increased to $11,929,791 by $3,201,688, or 36.68%, from $8,728,103 for the same period in 2025. This increase was mainly due to the lower point redemption, which was accounted as a reduction of loyalty program management revenue, resulting from the revision of program policy effective in June 2025, partially offset by the decrease resulting from the revision of the fee structure for determining service fees for each clinic of MCs based on the size, scale and performance of each clinic effective as of April 1, 2025.

#### Rental Services Revenue

The rental services revenue for the three months ended March 31, 2026 decreased to $3,435,922 by $2,204,592, or 39.08%, from $5,640,514 for the same period in 2025. This decrease was mainly due to a decline in revenue from rentals of laser hair removal equipment to existing clinics, as the prior-year period included a higher level of such rentals primarily associated with clinic openings.

#### Others

The other revenues for the three months ended March 31, 2026 increased to $6,258,743 by $3,350,724, or 115.22%, from $2,908,019 for the same period in 2025. This increase was mainly due to higher revenue related to leasehold improvement services revenue as well as higher revenues from Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries, which were acquired in November 2024 and consolidated in the Company's financial statements with three-month reporting lag, as the current-year period reflected three months of their results compared with only one month in the prior-year period.

### Cost of Revenues

Cost of revenues for the three months ended March 31, 2026 was $12,713,828 compared to $9,595,617 for the same period in 2025. The increase was mainly due to higher costs related to leasehold improvement services, the inclusion of three months of costs from Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries in the current-year period under the Company’s three-month reporting lag, compared with only one month in the prior-year period, and higher personnel costs resulting from an increase in headcount to support newly established departments since April 2025, partially offset by lower costs associated with the decline in revenue from rentals of laser hair removal equipment to existing clinics.

### Gross Profit

Gross profit for the three months ended March 31, 2026 was $30,346,734 compared to $37,733,084 for the same period in 2025. The decrease in gross profit by $7,386,350 or 19.58% was mainly due to the decrease in franchising revenue with relatively high gross margin as a result of the factors described above.

### Operating Expenses

Operating expenses for the three months ended March 31, 2026 and 2025 were as follows:

|  | For the Three Months Ended March 31, 2026 | 2025 | Variance Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Salaries and welfare | $6,197,751 | $6,441,742 | $(243,991) | (3.79)% |
| Depreciation and amortization expense | 310,536 | 461,405 | (150,869) | (32.70)% |
| Consulting and professional service fees | 3,474,589 | 3,298,082 | 176,507 | 5.35% |
| Advertising expense | 567,346 | 682,166 | (114,820) | (16.83)% |
| Taxes and dues | 82,365 | 245,462 | (163,097) | (66.44)% |
| Recruiting expense | 247,884 | 244,377 | 3,507 | 1.44% |
| Lease expense | 602,246 | 640,589 | (38,343) | (5.99)% |
| Office, utility and other expenses | 1,144,002 | 1,517,187 | (373,185) | (24.60)% |
| **Total** | **$12,626,719** | **$13,531,010** | **$(904,291)** | **(6.68)%** |

The operating expenses decreased to $12,626,719 for the three months ended March 31, 2026 by $904,291, or 6.68%, from $13,531,010 for the same period in 2025. The decrease was mainly due to the decrease in office, utility and other expenses and the depreciation of JPY, partially offset by the increase in consulting and professional service fees.

Office, utility and other expenses decreased by $373,185, or 24.60%, to $1,144,002 for the three months ended March 31, 2026 from $1,517,187 for the same period in 2025, mainly due to the decrease in insurance expenses.

### Other Income (Expenses)

Other income (expenses) for the three months ended March 31, 2026 and 2025, were as follows:

|  | For the Three Months Ended March 31, 2026 | 2025 | Variance Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $121,369 | $55,333 | $66,036 | 119.34% |
| Interest expense | (114,806) | (6,207) | (108,599) | 1,749.62% |
| Foreign currency exchange gain (loss), net | 861,678 | (1,058,526) | 1,920,204 | (181.40)% |
| Other income | 491,564 | 151,328 | 340,236 | 224.83% |
| Other expenses | (223,209) | (638,733) | 415,524 | (65.05)% |
| Gain on redemption of life insurance policies | — | 8,746,138 | (8,746,138) | (100.00)% |
| **Total** | **$1,136,596** | **$7,249,333** | **$(6,112,737)** | **(84.32)%** |

Other income (expenses), net was $1,136,596 for the three months ended March 31, 2026 compared to $7,249,333 for the same period in 2025. The decrease in other income (expense) by $6,112,737 or 84.32% was mainly due to a gain on redemption of life insurance policies of $8,746,138 in 2025, partially offset by foreign currency exchange gain resulting from the depreciation of the Japanese Yen.

### Income Tax Expense

Income tax expense for the three months ended March 31, 2026 was $7,527,591 compared to $9,959,457 for the same period in 2025. The decrease in income tax expense by $2,431,866 or 24.42% was mainly due to the decrease in income before income taxes.

The effective tax rate was 39.92% and 31.67% for the three months ended March 31, 2026 and 2025, respectively. The increase of 8.25 percentage points was mainly due to deferred tax assets related to losses incurred by certain entities that are not considered more likely than not to be realized due to the lack of sufficient future taxable income at those entities.

### Net Income

As a result of the foregoing, we reported net income of $11,329,020 for the three months ended March 31, 2026, representing a decrease of $10,162,930 or 47.29% from $21,491,950 for the three months ended March 31, 2025.

### Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $20,949 for the three months ended March 31, 2026, as compared to net loss attributable to non-controlling interests of $10,496 for the three months ended March 31, 2025.

### Liquidity and Capital Resources

As of March 31, 2026, the Company had $167,305,095 in cash and cash equivalents compared to $163,773,838 as of December 31, 2025. In addition, the Company had $36,764,725 in accounts receivable as of March 31, 2026 compared to $29,899,751 as of December 31, 2025. The Company’s accounts receivable includes balances due from customers for the services and goods provided by the Company and accepted by customers.

As of March 31, 2026, the Company’s working capital balance was $176,212,567. In assessing liquidity, management monitors and analyzes the Company’s cash and cash equivalents, ability to generate sufficient future earnings, and operating and capital investment commitments. The Company believes that its current cash and cash equivalents from operations and borrowings from banks will be sufficient to meet its working capital needs for the next 12 months from the date of issuance of the unaudited consolidated financial statements included in this Quarterly Report.

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

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

### Cash Flows for the Three Months Ended March 31, 2026 and 2025

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

|  | For the Three Months Ended March 31, 2026 | 2025 | Variance Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Net cash provided by operating activities | $9,231,938 | $1,928,621 | $7,303,317 | 378.68% |
| Net cash used in investing activities | (528,025) | (978,807) | 450,782 | (46.05)% |
| Net cash used in financing activities | (1,842,414) | (280,380) | (1,562,034) | 557.11% |
| Effect of exchange rate changes | (3,330,242) | 6,342,297 | (9,672,539) | (152.51)% |
| Net change in cash and cash equivalents | 3,531,257 | 7,011,731 | (3,480,474) | (49.64)% |
| Cash and cash equivalents as of the beginning of the period | 163,773,838 | 125,044,092 | 38,729,746 | 30.97% |
| Cash and cash equivalents as of the end of the period | $167,305,095 | $132,055,823 | $35,249,272 | 26.69% |

### Operating Activities

Net cash provided by operating activities was $9,231,938 for the three months ended March 31, 2026, mainly derived from net income of $11,329,020 for the period, reconciled by a non-cash lease expense of $1,420,824 and deferred income tax benefit of $1,086,473, and net changes in operating assets and liabilities, which mainly included an increase in accounts receivable - related parties of $6,821,339, an increase in accounts payable of $2,484,437, a decrease in customer loans receivable of $3,270,347, and a decrease in operating lease liabilities of $1,424,716.

Net cash provided by operating activities was $1,928,621 for the three months ended March 31, 2025, mainly derived from net income of $21,491,950 for the period, reconciled by a gain on redemption of life insurance policies of $8,746,138 and deferred income tax expense of $7,016,227, and net changes in operating assets and liabilities, which mainly included an increase in finance lease receivables – related parties of $2,779,253, a decrease in customer loans receivable of $4,501,760, an increase in prepaid expenses and other current assets of $3,150,243, an increase in accounts payable of $3,235,017, a decrease in advances from customers – related parties of $2,114,829, and a decrease in income tax payable of $17,635,239.

### Investing Activities

During the three months ended March 31, 2026, net cash used in investing activities of $528,025 was mainly the result of prepayments for property and equipment of $0.4 million and purchase of property and equipment of $0.1 million.

During the three months ended March 31, 2025, net cash used in investing activities of $978,807 was mainly the result of purchase of long-term investments of $0.6 million, and prepayments for property and equipment of $0.5 million, offset by proceeds from disposal of property and equipment of $0.3 million.

### Financing Activities

During the three months ended March 31, 2026, net cash used in financing activities of $1,842,414 was mainly due to the repayments of bank and other borrowings of $1.8 million.

During the three months ended March 31, 2025, net cash used in financing activities of $280,380 was mainly due to the repayments of finance lease liabilities of $0.2 million.

### Recent Developments

There have been no material recent developments during the quarter ended March 31, 2026, other than as otherwise disclosed in this Quarterly Report.

In April 2026, the Company completed a secondary public offering of 3,565,000 shares of common stock, at a price of $3.25 per share, including 465,000 shares pursuant to the underwriters' option to purchase additional shares. All of the shares were sold by the Company's CEO (the "Seller"). The Company did not sell any shares or receive any proceeds from the offering, nor did it repurchase any shares from the Seller. In connection with the offering, the Company incurred approximately $1.4 million in transaction costs.

### Contractual Obligations

### Lease Agreements

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

As of March 31, 2026, the future maturity of lease liabilities is as follows:

| Years ending December 31, | Finance Lease | Operating Lease |
| --- | ---: | ---: |
| Remaining of 2026 | $93,292 | $4,257,027 |
| 2027 | 77,025 | 4,076,606 |
| 2028 | 43,969 | 2,748,357 |
| 2029 | 7,369 | 250,041 |
| 2030 | — | 54,085 |
| Thereafter | — | — |
| **Total undiscounted lease payments** | **221,655** | **11,386,116** |
| Less: imputed interest | (9,758) | (133,231) |
| **Total lease liabilities** | **$211,897** | **$11,252,885** |

### Bank and Other Borrowings

The Company borrowed funds from various banks and other financial institutions for working capital, securities investments, and mergers and acquisitions purposes.

As of March 31, 2026, future minimum borrowing payments are as follows:

| Years ending December 31, | Principal Repayment |
| --- | ---: |
| Remaining of 2026 | $7,231,423 |
| 2027 | 13,735,668 |
| 2028 | 7,326,957 |
| 2029 | 6,795,762 |
| 2030 | 5,345,208 |
| Thereafter | — |
| **Total** | **$40,435,018** |

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

There are no off-balance sheet arrangements as of March 31, 2026 and December 31, 2025.

### Foreign Exchange Rate Risk

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

### Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.

We believe that there have been no material changes to our critical accounting policies and estimates from those disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” of our Annual Report.

### Emerging Growth Company

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

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

### Smaller Reporting Company

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

## Market risk

As filed, 163 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

## Controls and procedures

As filed, 3,298 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based on this evaluation, management concluded that our disclosure controls and procedures were not effective as of March 31, 2026 due to the previously identified material weaknesses in our internal control over financial reporting. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Despite the identified material weaknesses, we believe that our unaudited consolidated financial statements and other information contained in this Quarterly Report fairly present, in all material respects, our financial condition and results of operations for the periods presented.

We remain committed to the ongoing improvements in our disclosure controls and internal control over financial reporting, including execution of the remediation plan disclosed under “Part II, Item 9A. Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 27, 2026. The material weaknesses previously identified in the Annual Report remained un-remediated as of March 31, 2026.

### Inherent Limitation on the Effectiveness of Internal Control

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations. These include the exercise of judgment in designing, implementing, and operating controls, as well as the inherent inability to completely eliminate the risk of misconduct or error. Accordingly, while we aim to establish robust controls, any system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Additionally, the design of our disclosure controls and procedures is impacted by resource constraints and the necessity for management to balance the benefits of potential controls against their associated costs. Moreover, projections of effectiveness into future periods are subject to risks that controls may become inadequate over time due to evolving conditions or diminished compliance. We will continue to monitor and enhance our internal control as necessary or appropriate, but we cannot provide assurance that these improvements will fully eliminate all risks of material misstatement.

### Changes in Internal Control over Financial Reporting

Except for the remediation efforts described above, there have been no material changes in our internal control over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 915 characters.

Investing in our securities involves a high degree of risk. In addition to the information in this Quarterly Report, these risks are more fully described under “Part I, Item 1A. Risk Factors” of the Annual Report. There have been no material changes to the risk factors set forth in the Annual Report. Any of these factors could result in a material adverse effect on our results of operations or financial condition.

Additional risk factors that are not presently known to us or that we currently deem immaterial may also impair our business or results of operations. If any such risk materializes, it could have a material adverse effect on our business, financial condition, results of operations, and growth prospects and cause the trading price of our securities to decline. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Filed May 14, 2026.
Source: SEC EDGAR, the filing index for accession 0001193125-26-222737. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.