Amendment: SEC Form 10-K/A filed by SBC Medical Group Holdings Incorporated
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 2
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
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well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant as of June 28, 2024, the last business day of the Registrant’s most recently
completed second fiscal quarter, was approximately $
The number of shares of the registrant’s Common Stock outstanding as of April 15, 2025 was , after deducting 270,000 shares of treasury stock.
DOCUMENTS INCORPORATED BY REFERENCE
Explanatory Notes
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Form 10-K/A amends Item 15 of Part IV of the 2024 10-K solely to update the exhibit list to include new certifications by our principal executive officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of 2002, as well as two employment agreements with our executive officers. Because no financial statements have been included in this Form 10-K/A and this Form 10-K/A does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of these certifications have been omitted. Similarly, because no financial statements have been included in this Form 10-K/A, certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 have been omitted.
Except as described above, no other changes have been made to the 2024 10-K, and this Form 10-K/A does not modify, amend or update in any way any of the financial or other information contained in the 2024 10-K. This Form 10-K/A does not reflect events occurring after the date of the filing of the 2024 10-K, nor does it amend, modify or otherwise update any other information in the 2024 10-K. Accordingly, this Form 10-K/A should be read in conjunction with the 2024 10-K and with the Company’s filings with the SEC subsequent to the filing of the 2024 10-K.
We were originally incorporated in Delaware on February 12, 2021 under the name “Pono Capital Two, Inc.,” referred to herein as “Pono,” as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On August 9, 2022, Pono consummated its IPO of 11,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares” and with respect to the warrants included in the Units, the “Public Warrants”) (the “Pono IPO”).
Simultaneously with the consummation of the closing of the Pono IPO, Pono consummated the private placement of an aggregate of 634,375 units (the “Placement Units”) at a price of $10.00 per Placement Unit in a private placement to the Sponsor (the “Private Placement”).
On September 26, 2022, the Class A common stock and Public Warrant included in the Units began separate trading on The Nasdaq Global Market under the symbols “PTWO” and “PTWOW,” respectively.
On January 21, 2023, Pono entered into an Agreement and Plan of Merger (as subsequently amended from time to time, the “Merger Agreement”) with Pono Two Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and then a wholly-owned subsidiary of Pono, SBC Medical Group, Inc., then named SBC Medical Group Holdings Incorporated, a Delaware corporation (“Legacy SBC”), Mehana Capital LLC, a Delaware limited liability company (“Sponsor” or “Purchaser Representative”) in its capacity as the representative of the stockholders of Pono, and Dr. Yoshiyuki Aikawa in his personal capacity and his capacity as the representative of the stockholders of Legacy SBC (“Seller Representative”).
On September 17, 2024, the closing (the “Closing”) of the merger (the “Merger”) and other transactions contemplated thereby (collectively, the “Business Combination”) took place and the Merger was consummated with Merger Sub merging with and into Legacy SBC with Legacy SBC surviving the Merger as a wholly-owned subsidiary of Pono, and Pono then changed its name to SBC Medical Group Holdings Incorporated and on September 17, 2024, Legacy SBC changed its named to SBC Medical Group, Inc.
Effective September 17, 2024, Pono’s units ceased trading, and effective September 18, 2024, SBC’s common stock began trading on the Nasdaq Global Market under the symbol “SBC” and the public warrants began trading on the Nasdaq Capital Market under the symbol “SBCWW.”
As a result of the Closing of the Merger and the Business Combination, the business of SBC Medical Group, Inc., Legacy SBC, became the business of the Company.
Table of Contents
| Part III | 1 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence. | 1 |
| Part IV | 11 |
| Item 15. Exhibits. | 11 |
i
PART III
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Policies and Procedures for Related Person Transactions
Under Item 404 of SEC Regulation S-K, a related person transaction is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiary were or are a party, or in which we or our subsidiary were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting securities (a “significant shareholder”), or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
We recognize that transactions between us and any of our directors or executives or with a third party in which one of our officers, directors or significant shareholders has an interest can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of our Company and stockholders.
The Audit Committee of the Board of Directors is charged with responsibility for reviewing, approving and overseeing any transaction between the Company and any related person (as defined in Item 404 of Regulation S-K), including the propriety and ethical implications of any such transactions, as reported or disclosed to the Audit Committee, and to determine whether the terms of the transaction are not less favorable to us than could be obtained from an unaffiliated party.
Please also see the description of all the Related Party Transaction in Note 18 of this Annual Report on Form 10-K/A.
Related Party Transactions Prior to the Business Combination
Convertible Promissory Note
On May 18, 2023, Pono entered into a Convertible Promissory Note with the Company, pursuant to which the Company agreed to loan Pono an aggregate principal of $1,000,000 (the “Convertible Promissory Note”). The Convertible Promissory Note was non-interest bearing and was due and payable upon the earlier to occur of (i) the first business day following the consummation of the Company’s initial Business Combination and (ii) May 17, 2024, unless accelerated upon the occurrence of an event of default.
On February 27, 2024, Pono and the Company entered into an Amendment to the Note (the “Amended Note Purchase Agreement”), which increased the purchase price of the note from $1,000,000 to $2,700,000 and amended the maturity date to the earlier to occur of (i) the first business day following the consummation of the Company’s initial Business Combination and (ii) August 29, 2024, unless accelerated upon the occurrence of an event of default. In consideration for entering into the Amended Note, each of the parties to the Merger Agreement agreed to release each other party from any claims arising out of any termination of the Merger Agreement or failure to consummate the transactions contemplated thereby. The Convertible Promissory Note automatically converted into Class A Common Stock at one share for each $10 in outstanding principal amount at the Closing.
Non-redemption Agreement
On May 5, 2023, the Company held a special meeting of stockholders (the “Special Meeting”), and the chairman adjourned the Special Meeting to May 8, 2023. On May 8, 2023, the Company held the Special Meeting. During the Special Meeting, stockholders approved an amendment to the Company’s amended and restated certificate of incorporation (i) to extend the date by which the Company has to consummate a business combination from May 9, 2023 to February 9, 2024 for no additional amount to be paid by the Sponsor into the Trust Account, and (ii) to provide for the right of a holder of Class B common stock to convert such shares into shares of Class A common stock on a one -for-one basis prior to the closing of a business combination at the election of the holder. As approved by the stockholders of the Company, the Company filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on May 8, 2023. The Company’s stockholders elected to redeem an aggregate of 9,577,250 shares of Class A common stock of the Company in connection with the Special Meeting. Following such redemptions, the amount of funds remaining in the trust account was approximately $20 million.
In connection with the Special Meeting, the Company and the Sponsor entered into non-redemption agreements with certain unaffiliated stockholders owning, in the aggregate, 998,682 shares of the Company’s Class A common stock, pursuant to which such stockholders agreed, among other things, not to redeem or exercise any right to redeem such public shares in connection with the Extension Amendment. On February 5, 2024, the Company’s stockholders approved a proposal to extend the date by which the Company had to consummate a business combination from February 9, 2024 to November 9, 2024.
The Company estimated the aggregate fair value of the 339,565 Sponsor Shares attributable to the Non-Redeeming Stockholders to be $709,691 or $ 2.09 per share. Each Non-Redeeming Stockholder acquired from the Sponsor an indirect economic interest in the Sponsor Shares. The excess of the fair value of the Sponsor Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Accordingly, in substance, it was recognized by the Company as a capital contribution by the Sponsor to induce these holders of the Class A shares not to redeem, with a corresponding charge to additional paid -in capital to recognize the fair value of the shares transferred as an offering cost.
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.
| 1 |
Related Party Transactions of Legacy SBC
SBC Medical Group Co., Ltd., a Japan corporation (“SBC Medical Sub”) is designated as a “medical service corporation” in Japan. In Japan, a medical service corporation is a legal entity that provides management service to “MCs”. The management services are conducted through FC contracts and service contracts between certain subsidiary of the Company (SBC Medical Sub) and the MCs that own all 241 of the treatment centers in Japan.
There are currently six MCs that the SBC Medical Sub has entered into franchisor-franchisee contracts and service contracts with, consisting of Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation Nasukai, Medical Corporation Aikeikai, Medical Corporation Jukeikai, and Medical Corporation Ritz Cosmetic Surgery (collectively, the “MCs”).
In addition to the six MCs, we have entered into service contracts with Medical Corporation Association Furinkai (the service contract regarding operation on November 22, 2023 and the service contract regarding management consulting on November 25, 2023 respectively) and Medical Corporation Association Junikai (the service contract regarding operation and the service contract regarding management consulting both on November 16, 2023). The scope of work (“SOW”) of the service contracts with these two MCs is limited to marketing, introduction of new treatment technologies and future business development while the SOW of the FC contracts with the six MCs are broad and define general rules in order to allow MCs to use the SBC brand name. Accordingly, the service contracts with these two MCs are different from the FC contracts with the six MCs and the clinics of these two MCs do not use the “Shonan Beauty Clinic” brand. Please see “— Material Contracts between SBC Medical Sub and MCs — Service Contracts” for more information regarding the service contracts with Medical Corporation Association Furinkai and Medical Corporation Association Junikai.
All of the MCs are deemed to be related parties of the Company since relatives of the CEO of the Company are the members (or shain) of general meetings of members of the MCs. The CEO of the Company was previously a member of the six franchisee MCs until he ceased being a member in July 2023. The Company, through SBC Medical Sub, owns equity “deposit” interests (or mochibun) of the six franchisee MCs. Although the Company, through SBC Medical Sub, has an equity “deposit” interest to the rights to receive a distribution of residual assets in proportion to the amount of contribution in certain circumstances as provided in the articles of incorporation of each of the six MCs, the Company or SBC Medical Sub does not have voting control over the corporate actions at general meetings of members (or shain) of the MCs per the requirements of the Japanese Medical Care Act and the MCs’ articles of incorporation.
Since September 2023, Legacy SBC started providing services to two additional medical corporations in Japan, namely, Medical Corporation Association Furinkai and Medical Corporation Association Junikai, which are considered as related parties of Legacy SBC as the relatives of the CEO of Legacy SBC being members of the two medical corporations.
In January 2024, Legacy SBC acquired 353,600 shares of common stock of Waqoo, accounts for less than 10% ownership, a related-party company listed on the Tokyo Stock Exchange, of which the CEO of Legacy SBC is a principal shareholder, with a fair value of $5,565,938 through a share exchange agreement.
The related parties that had material transactions for the years ended December 31, 2024 and 2023 consist of the following:
| Name of Related Parties | Nature of Relationship as of December 31, 2024 | |
| Yoshiyuki Aikawa | Controlling shareholder, director and CEO of the Company | |
| Yoshiko Aikawa | Representative director of subsidiaries of the Company | |
| Mizuho Yamashita | Director of a subsidiary of the Company | |
| Medical Corporation Shobikai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Kowakai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Nasukai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Aikeikai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Jukeikai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Ritz Cosmetic Surgery | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Association Junikai | The relatives of the CEO of the Company being the Members of the MC | |
| Medical Corporation Association Furinkai | The relatives of the CEO of the Company being the Members of the MC | |
| Japan Medical & Beauty Inc. | Controlled by the CEO of the Company | |
| SBC Inc., previously known as SBC China Inc. | Controlled by the CEO of the Company | |
| Hariver Inc. | Controlled by the CEO of the Company | |
| General Incorporated Association SBC | The CEO of the Company being the Member of General Incorporated Association SBC | |
| Public Interest Foundation SBC Medical Promotion | The relative of CEO of the Company being a Member of Public Interest Foundation SBC | |
| Foundation | Medical Promotion Foundation | |
| AI Med Inc. | The CEO of the Company is a principal shareholder of AI Med Inc. | |
| Amulet Inc. | Controlled by Mizuho Yamashita, a director of a subsidiary of the Company | |
| SBC Irvine MC | Significantly influenced by the Company | |
| SBC Tokyo Medical University, previously known as | The CEO of the Company is the chairman of SBC Tokyo Medical University | |
| Ryotokuji University | ||
| SBC Shonan Osteopathic Clinic Inc. | The CEO of the Company is a principal shareholder of SBC Shonan Osteopathic Clinic Inc. | |
| Waqoo Inc. | The CEO of the Company is a principal shareholder of Waqoo Inc. | |
| General Incorporated Association Taiseikai | The relatives of CEO of the Company being the Members of General Incorporated Association Taiseikai | |
| Skynet Academy Co., Ltd.* | Controlled by the CEO of the Company | |
| Kijimadairakanko Inc.* | Controlled by the CEO of the Company |
* Former subsidiaries of the Company that were disposed of to companies controlled by the CEO of the Company on December 23, 2024.
| 2 |
During the twelve months ended December 31, 2024 and 2023, the transactions with related parties are as follows:
| For the Twelve Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Medical Corporation Shobikai | $ | 53,862,520 | $ | 56,554,316 | ||||
| Medical Corporation Kowakai | 46,756,189 | 45,115,149 | ||||||
| Medical Corporation Nasukai | 46,355,437 | 45,893,461 | ||||||
| Medical Corporation Aikeikai | 17,997,072 | 21,521,302 | ||||||
| Medical Corporation Jukeikai | 5,666,907 | 4,518,846 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 7,435,446 | 2,603,405 | ||||||
| Japan Medical & Beauty Inc. | 39,620 | 488,023 | ||||||
| Hariver Inc. | 19,810 | 21,740 | ||||||
| SBC Inc., previously known as SBC China Inc. | 2,512 | 467 | ||||||
| Public Interest Foundation SBC Medical Promotion Foundation | 107 | 387 | ||||||
| General Incorporated Association SBC | 801 | 569 | ||||||
| SBC Tokyo Medical University, previously known as Ryotokuji University | 45,286 | 231,191 | ||||||
| Yoshiyuki Aikawa | 98,445 | 67,516 | ||||||
| Mizuho Yamashita | — | 19,214 | ||||||
| Amulet Inc. | — | 3,587 | ||||||
| AI Med Inc. | 787 | 556,397 | ||||||
| SBC Irvine MC | 1,204,107 | 1,298,539 | ||||||
| Medical Corporation Association Furinkai | 11,708,183 | 2,923,608 | ||||||
| Medical Corporation Association Junikai | 3,923,228 | 851,105 | ||||||
| General Incorporated Association Taiseikai | 692 | — | ||||||
| SBC Shonan Osteopathic Clinic Co., Ltd. | 56,740 | 69,227 | ||||||
| Total | $ | 195,173,889 | $ | 182,738,049 | ||||
As of December 31, 2024 and December 31, 2023, the balances with related parties are as follows:
| Accounts receivable | December 31, 2024 | December 31, 2023 | ||||||
| Medical Corporation Shobikai | $ | 5,091,430 | $ | 9,251,427 | ||||
| Medical Corporation Nasukai | 8,552,722 | 8,447,448 | ||||||
| Medical Corporation Kowakai | 7,742,251 | 7,841,059 | ||||||
| Medical Corporation Aikeikai | 3,071,378 | 4,661,649 | ||||||
| Medical Corporation Jukeikai | 993,944 | 1,358,213 | ||||||
| Medical Corporation Association Furinkai | 1,263,602 | 1,039,074 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 817,283 | 520,891 | ||||||
| Medical Corporation Association Junikai | 283,298 | 348,187 | ||||||
| Japan Medical & Beauty Inc. | — | 139,767 | ||||||
| SBC Tokyo Medical University, previously known as Ryotokuji University | 536 | 66,546 | ||||||
| AI Med Inc. | 33 | 2,329 | ||||||
| SBC Inc., previously known as SBC China Inc. | 137 | 45 | ||||||
| Public Interest Foundation SBC Medical Promotion Foundation | 36 | 37 | ||||||
| SBC Shonan Osteopathic Clinic Co., Ltd. | 4 | — | ||||||
| SBC Irvine MC | 693,850 | — | ||||||
| Kijimadairakanko Inc. | 336,176 | — | ||||||
| Total | $ | 28,846,680 | $ | 33,676,672 | ||||
| December 31, | December 31, | |||||||
| Finance lease receivables | 2024 | 2023 | ||||||
| Medical Corporation Shobikai | $ | 1,877,291 | $ | 2,568,709 | ||||
| Medical Corporation Kowakai | 2,490,705 | 2,779,347 | ||||||
| Medical Corporation Nasukai | 3,872,683 | 2,019,117 | ||||||
| Medical Corporation Aikeikai | 1,047,821 | 1,782,124 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 2,479,771 | 79,439 | ||||||
| Medical Corporation Jukeikai | 500,244 | 335,317 | ||||||
| Medical Corporation Association Furinkai | 1,891,412 | — | ||||||
| Medical Corporation Association Junikai | 197,452 | — | ||||||
| SBC Shonan Osteopathic Clinic Co., Ltd. | $ | 32,788 | $ | |||||
| Total | $ | 14,390,16 | $ | 9,564,053 | ||||
| Less: current portion | $ | (5,992,585 | ) | $ | (6,143,564 | ) | ||
| Non-current portion | $ | 8,397,582 | $ | 3,420,489 |
| Due from related party, net | December 31, 2024 | December 31, 2023 | ||||||
| SBC Irvine MC | $ | 2,836,013 | $ | 3,238,209 | ||||
| Less: allowance for credit loss | (2,836,013 | ) | (3,238,209 | ) | ||||
| Total | $ | — | $ | — | ||||
| 3 |
| Long-term investments in MCs - related parties | December 31, 2024 | December 31, 2023 | ||||||
| Medical Corporation Shobikai | $ | 6,378 | $ | 7,090 | ||||
| Medical Corporation Kowakai | 6,378 | 7,090 | ||||||
| Medical Corporation Nasukai | 6,378 | 7,090 | ||||||
| Medical Corporation Aikeikai | 6,378 | 7,090 | ||||||
| Medical Corporation Jukeikai | 6,859,913 | 7,626,184 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 10,935,485 | 12,157,011 | ||||||
| Total | $ | 17,820,910 | $ | 19,811,555 | ||||
| December 31, | December 31, | |||||||
| Accounts payable | 2024 | 2023 | ||||||
| Japan Medical & Beauty Inc. | $ | 659,044 | $ | — | ||||
| Total | $ | 659,044 | $ | — | ||||
| December 31, 2024 | December 31, 2023 | |||||||
| Advances from customers | ||||||||
| Medical Corporation Shobikai | $ | 5,076,300 | $ | 13,438,645 | ||||
| Medical Corporation Kowakai | 1,801,034 | 4,237,765 | ||||||
| Medical Corporation Nasukai | 1,745,069 | 4,117,597 | ||||||
| Medical Corporation Aikeikai | 379,931 | 1,168,947 | ||||||
| Medical Corporation Jukeikai | 140,170 | 85,044 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 45,701 | 10,177 | ||||||
| SBC Shonan Osteopathic Clinic Co., Ltd. | 16,395 | — | ||||||
| Medical Corporation Association Furinkai | 940,007 | — | ||||||
| Medical Corporation Association Junikai | 1,594,926 | — | ||||||
| Total | $ | 11,739,533 | $ | 23,058,175 | ||||
| December 31, | December 31, | |||||||
| Notes payable – related parties | 2024 | 2023 | ||||||
| Medical Corporation Shobikai | $ | 4,653 | $ | 5,264,101 | ||||
| Medical Corporation Kowakai | 14,672 | 3,855,650 | ||||||
| Medical Corporation Nasukai | 8,827 | 4,099,032 | ||||||
| Medical Corporation Aikeikai | 2,236 | 1,561,642 | ||||||
| Medical Corporation Jukeikai | — | 268,552 | ||||||
| Medical Corporation Ritz Cosmetic Surgery | 1,201 | 268,445 | ||||||
| Total | $ | 31,589 | $ | 15,317,422 | ||||
| Less: current portion | (26,255 | ) | (3,369,203 | ) | ||||
| Non-current portion | $ | 5,334 | $ | 11,948,219 | ||||
| Due to related party | December 31, 2024 | December 31, 2023 | ||||||
| Yoshiyuki Aikawa | $ | 2,823,590 | $ | 3,583,523 | ||||
| Total | $ | 2,823,590 | $ | 3,583,523 | ||||
| December 31, | December 31, | |||||||
| Allowance for credit loss movement | 2024 | 2023 | ||||||
| Beginning balance | $ | 3,238,209 | $ | 2,867,455 | ||||
| Provision for credit loss | 622,804 | 370,754 | ||||||
| Reversal of credit loss | (1,025,000 | ) | — | |||||
| Ending balance | $ | 2,836,013 | $ | 3,238,209 | ||||
| 4 |
| December 31, | December 31, | |||||||
| Other income | 2024 | 2023 | ||||||
| Medical Corporation Shobikai | $ | 999,350 | $ | — | ||||
| Medical Corporation Kowakai | 568,092 | — | ||||||
| Medical Corporation Nasukai | 764,809 | — | ||||||
| Medical Corporation Aikeikai | 316,352 | — | ||||||
| Medical Corporation Jukeikai | 24,474 | — | ||||||
| Total | $ | 2,673,077 | $ | — | ||||
The balances of due to and due from related parties represent the outstanding loans to and from related parties, respectively, as of December 31, 2024 and December 31, 2023. These loans are non-secured, interest-free and due on demand.
In February 2023, the Company paid off the retirement compensation expense accrued to Yoshiko Aikawa.
During the years ended December 31, 2024 and 2023, the Company purchased medical equipment and cosmetics of $8,472,202 and $2,842,588, respectively, from Japan Medical & Beauty Inc., which was recognized and included in the cost of revenues.
Related Party Transactions After the Business Combination
Employment Agreements
Please see the description of the employment agreements between the Company and its executive officers contained in Item 12 of this Annual Report on Form 10-K/A.
Indemnification Agreements
On September 17, 2024, the Company entered into indemnification agreements with each of its directors containing provisions which are in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements will require the Company, among other things, to indemnify its directors against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Disposal of Kijimadairakanko Inc. (“Kijima”) and Skynet Academy Co., Ltd. (“Skynet”)
On December 17, 2024, SBC Medical Sub entered into definitive agreements to sell and transfer all of the shares in its subsidiaries, Kijima and Skynet, to entities owned by Yoshiyuki Aikawa, CEO of the Company, for cash. SBC Medical Sub pursued the transactions to concentrate business and management resources on its main medical business. The disposal of Kijima and Skynet did not constitute a strategic shift that would have a major effect on the SBC Medical Sub’s operations and financial results. The transactions closed on December 23, 2024, subject to customary closing conditions. SBC Medical Sub received total cash consideration of one Japanese Yen ($0) for Kijima and $446,460 for Skynet. In accounting for the disposals, operating results of Kijima and Skynet are included in the Company’s consolidated financial statements up to the disposal date. The difference between (i) the fair value of the net assets disposed and (ii) the consideration received was recognized as an adjustment to Additional Paid-in Capital (“APIC”). No retrospective adjustments have been made to prior-period consolidated financial statements. Following the completion of these transactions, Kijima and Skynet ceased to be subsidiaries of the Company after December 23, 2024. Their financial results are therefore excluded from the Company’s consolidated financial statements for periods subsequent to the disposal date.
| 5 |
Material Contracts between SBC Medical Sub and MCs
SBC Medical Sub has entered into a Partner Doctor Independence Support Program Agreement, an SBC Operating Agreement and Service Contracts with each of the MCs.
Partner Doctor Independence Support Program Agreement
SBC Medical Sub has entered into a Partner Doctor Independence Support Program Agreement (the “PDISPA”) with each of the MCs. The term of the PDISPA is for a period of 5 years from September 1, 2021, to August 31, 2026. The PDISPA will be renewed under the same terms for successive one-year periods upon conclusion of the initial term unless either party requests in writing to terminate the PDISPA 6 months prior to the expiration date of the PDISPA. Pursuant to the PDISPA, the Company agreed to provide the use of the name of the “Shonan Beauty Clinic” and the “SBC Medical Group” (Medical Corporation Shobikai, Medical Corporation Kowakai, Medical Corporation and Nasukai, Medical Corporation which together are referred to as the “SBC Medical”) to the MCs for the purpose of operating clinics. The Company also granted to the MCs the right to use the name “SBC Medical Group,” the know-how of clinic operation, trademark, trade name, and the right to provide the treatment designated by the Company, and the right to conduct business activities as a partner of the SBC Medical Group under a unified image.
SBC’s Operating Agreement
The Company previously entered into an SBC Operating Agreement (the “SBCOA”) with each of the MCs. The original term of the SBCOA was from April 1, 2023, to March 31, 2025. Pursuant to the SBCOA the Company agreed to provide the MCs with the following consulting services related to: (i) marketing related services for developing new clients, (ii) aiming to ensure stable performance and increase customer satisfaction through the creation of repeat customers, (iii) the establishment and operation of a system seeking to ensure medical safety (iv) securing attorneys and medical institutions to transport in the event of claims or medical accidents, (v) measures to improve employee satisfaction, and design of organizational chart and personnel evaluation system (vi) the selection of medical equipment and materials, (vii) the acquisition of properties for new medical facilities (trade area survey, area selection, lease agreement signing, etc.), (viii) various types of general skills training for healthcare facility employees, (ix) specialized and advanced skills training in leadership, motivation, communication, etc., for chiefs, leaders, and other employees with subordinates, (x) development of new type of medical facilities, (xi) development of new treatment methods, (xii) hiring employees with national certifications, professional skills, and interpersonal skills, such as doctors, nurses, and reception counselors, (xiii) performance management, business analysis, and management decision making utilizing financial statements such as income statements, cash flow statements, and balance sheets, (xiv) use of the likeness of the Company’s officers or employees on websites, commercials, and other advertising media and (xv) efficient operation methods that allow for more customer service during the same clinic hours.
Under the SBCOA before the renewal, in exchange for the foregoing services, each of the MCs were to pay the Company 3,000,000 yen per month (excluding consumption tax) for each medical facility where a MC provides medical services to its clients.
In light of the current challenging competitive environment, we are pursuing a long-term growth strategy aimed at expanding and stabilizing our business foundation by creating an environment that can better facilitate the establishment of new clinics by MCs. In line with this objective, we have decided to amend and renew the SBCOA with each MC, effective from April 1, 2025. Under the amended and renewed SBCOA, the term is from April 1, 2025 to March 31, 2026, and the term will be renewed automatically for 1 year unless either party notifies the termination at the end of the term.
The main revisions include:
| 1. | Revised Fee Structure |
| ● | First-Year Fee Reduction for Newly Opened Clinics: Fees will be reduced during the first year of operation for newly established clinics, significantly reducing initial cost burdens at a stage when clinics have yet to fully establish their customer base. |
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| ● | Fees Based on Service Utilization from the Second Year Onward: Starting from the second year of operation, fees will be calculated based on the scale of services utilized and the operational size of each clinic. |
| 2. | Changes to Provided Consulting Services Following the revision, consulting services provided by the Company to MCs will include: |
| ● | Management consulting for medical corporations and facilities | |
| ● | Human resources and labor management services |
| ● | Recruitment-related services |
| ● | General administrative services |
| ● | Information system management services |
| ● | Customer relations services |
| ● | Accounting, finance, and taxation services |
| ● | Legal services |
| ● | Clinic establishment and facilities management services |
| ● | Infrastructure introduction, improvement, and operational support services related to insurance-covered medical treatments |
Service Contracts
We entered into service contracts with Medical Corporation Association Furinkai (the service contract regarding operation on November 22, 2023 and the service contract regarding management consulting on November 25, 2023 respectively) and Medical Corporation Association Junikai (the service contract regarding operation and the service contract regarding management consulting both on November 16, 2023). The scope of work (“SOW”) of the service contracts with these two MCs is limited to marketing, introduction of new treatment technologies and future business development while the SOW of the FC contracts with the six MCs are broad and define general rules in order to allow MCs to use the SBC brand name. Accordingly, the service contracts with these two MCs are different from the FC contracts with the six MCs and the clinics of these two MCs do not use the “Shonan Beauty Clinic” brand.
Business Consignment Agreement for Management Consulting Services to Medical Corporation Association Furinkai
The material terms of our business consignment agreement for management consulting services to Medical Corporation Association Furinkai are as follows:
| ● | Signing Date: |
| ○ | November 22, 2023 |
| ● | Consulting Services by the Company to Medical Corporation Association Furinkai |
| ○ | consulting on the use of business systems used in medical facilities |
| ○ | consulting on the development of new treatments and manuals |
| ○ | consulting for repeat customer acquisition measures related to cosmetic dermatology |
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○ consulting on the efficient operation with more customer service during the same clinic hours related to cosmetic dermatology consulting
○ consulting for building management strategies related to cosmetic dermatology treatment
● Effective Period
○ September 1, 2024 until August 31, 2027
○ if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement shall be renewed for another two (2) years under the same terms and conditions
● Termination Provisions & Penalties
○ Either party may terminate this agreement by notifying the other party at least six months prior to the scheduled termination date.
● Fees Payable Under the Agreement
○ JPY60,000,000 per month (excluding consumption tax).
Business Consignment Agreement for Operational Support to Medical Corporation Association Furinkai
The material terms of our business consignment agreement for operational support services to Medical Corporation Association Furinkai are as follows:
● Signing Date
○ November 22, 2023
● Consulting Services by the Company to Medical Corporation Association Furinkai
○ secure stable business performance and increase customer satisfaction through creation of repeat customers related to cosmetic dermatology
○ selection of medical devices and medical materials for cosmetic dermatology
○ establishment and operation of a system to ensure the safety of cosmetic dermatology treatment
○ general skills training associated with cosmetic dermatology treatment for medical facility employees
○ efficient operation methods that enable more customers to be served during the same clinic hours related to cosmetic dermatology
○ planning management strategies related to cosmetic dermatology treatment
○ development of new treatment methods, formulation of manuals, and support for implementation
○ support and management of business system implementation
○ design and implementation support, operation and maintenance of servers, networks and IT infrastructure
| ● | Effective Period |
| ○ | September 1, 2023 until August 31, 2027 |
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| ○ | if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement shall be renewed for another two (2) years under the same terms and conditions |
| ● | Termination Provisions & Penalties |
| ○ | Either party may terminate this agreement by notifying the other party at least six months prior to the scheduled termination date. |
| ● | Fees Payable Under the Agreement |
| ○ | JPY1,700,000 per month for each medical facility (excluding consumption tax). |
Business Consignment Agreement for Management Consulting Services to Medical Corporation Association Junikai
The material terms of our business consignment agreement for management consulting services to Medical Corporation Association Junikai are as follows:
● Signing Date
○ November 16, 2023
● Consulting Services by the Company to Medical Corporation Association Junikai
○ consulting on the use of business systems used in medical facilities
○ consulting on the development of new treatments and manuals
○ consulting for repeat customer acquisition measures related to cosmetic dermatology
○ consulting on the efficient operation with more customer service during the same clinic hours related to cosmetic dermatology consulting
○ consulting for building management strategies related to cosmetic dermatology treatment
● Effective Period
○ September 1, 2024 until August 31, 2026
○ if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement shall be renewed for another two (2) years under the same terms and conditions
● Termination Provisions & Penalties
○ Either party may terminate this agreement by notifying the other party at least six months prior to the scheduled termination date.
● Fees Payable Under the Agreement
○ JPY10,000,000 per month (excluding consumption tax).
The material terms of our business consignment agreement for operational support services to Medical Corporation Association Junikai are as follows:
| ● | Signing Date |
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| ○ | November 16, 2023 |
| ● | Consulting Services by the Company to Medical Corporation Association Junikai |
| ○ | secure stable business performance and increase customer satisfaction through creation of repeat customers related to cosmetic dermatology |
| ○ | selection of medical devices and medical materials for cosmetic dermatology |
| ○ | establishment and operation of a system to ensure the safety of cosmetic dermatology treatment |
| ○ | general skills training associated with cosmetic dermatology treatment for medical facility employees |
| ○ | efficient operation methods that enable more customers to be served during the same clinic hours related to cosmetic dermatology |
| ○ | planning management strategies related to cosmetic dermatology treatment |
| ○ | development of new treatment methods, formulation of manuals, and support for implementation |
| ○ | support and management of business system implementation |
| ○ | design and implementation support, operation and maintenance of servers, networks and IT infrastructure |
| ○ | support and advisory services for the use of marketing analysis tools, etc. |
| ● | Effective Period |
| ○ | September 1, 2023 until August 31, 2027 |
| ○ | if neither party expresses an intention not to renew the agreement before the expiration of the effective period, the agreement shall be renewed for another two (2) years under the same terms and conditions |
| ● | Termination Provisions & Penalties |
| ○ | Either party may terminate this agreement by notifying the other party at least six months prior to the scheduled termination date. |
| ● | Fees Payable Under the Agreement |
○ JPY800,000 per month for each medical facility (excluding consumption tax).
Director Independence
Our Board of Directors has reviewed the composition of our Board of Directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors has determined that each of our directors, with the exception of Dr. Aikawa and Mr. Yoshida, is an “independent director” as defined under Rule 5606(a)(2) of the Nasdaq Listing Rules. Our Board of Directors determined that each of Ken Edahiro, Mike Sayama, and Fumitoshi Fujiwara satisfy the applicable independence standards established by the SEC and the Nasdaq Listing Rules. In making such determinations, our Board of Directors considered the relationships that each non-employee director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
| a) | Financial Statements and Schedules: The required information is set forth in “Part II, Item 8 - Financial Statements and Supplementary Data” in this Annual Report. | |
| b) | Exhibits: The following exhibits are filed or furnished as an exhibit to this Annual Report on Form 10-K. |
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| * | Filed herewith |
| ** | Furnished herewith |
| + | Indicates a management or compensatory plan |
| † | Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the SEC upon request. |
| Item 16. | Form 10-K Summary |
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 2 to the Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| SBC Medical Group Holdings Incorporated | ||
| Dated: May 9, 2025 | /s/ Yoshiyuki Aikawa | |
| Name: | Yoshiyuki Aikawa | |
| Title: | Director, Chairman and Chief Executive Officer | |
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