SBC Medical Group Holdings Incorporated(SBC) - 2024 Q3 - Quarterly Report

Financial Performance - For the three months ended September 30, 2024, the company generated revenues of $53,084,883, a 12.28$47,278,685 in the same period of 2023[174]. - Net income attributable to SBC Medical Group Holdings Incorporated for the three months ended September 30, 2024, was $2,832,894, a decrease of 66.10$8,356,414 in the same period of 2023[174]. - Revenues, net for the nine months ended September 30, 2024, increased by 22.72% to $160,995,005 from$131,192,729 in 2023[196]. - Net income for the nine months ended September 30, 2024, was $40,142,008, representing an increase of$15,811,044 or 64.98% from $24,330,964 for the same period in 2023[211]. - Net income for the three months ended September 30, 2024, was$2,834,467, a decrease of $5,223,324 or 64.82$8,057,791 in 2023[193]. Revenue Breakdown - Royalty income increased by 82.28% to $15,688,528 for the three months ended September 30, 2024, from$8,606,999 in the same period of 2023[180]. - Procurement services revenue rose by 96.12% to $17,571,299 for the three months ended September 30, 2024, compared to$8,959,689 in the same period of 2023[181]. - Management services revenue decreased by 47.27% to $12,110,764 for the three months ended September 30, 2024, from$22,969,187 in the same period of 2023[181]. - Rental services revenue increased by 208.32% to $4,124,774 for the three months ended September 30, 2024, from$1,337,803 in the same period of 2023[182]. - Royalty income surged by $19,979,012 or 78.52$45,425,052 for the nine months ended September 30, 2024, attributed to changes in billing and business expansion[198]. - Procurement services revenue increased by $9,640,957 or 27.81$44,303,891 for the nine months ended September 30, 2024, driven by higher demand for medical materials[199]. - Management services revenue decreased to $44,471,031, down by$9,222,917 or 17.18% compared to the same period in 2023[200]. - Rental services revenue increased to $11,195,888, up by$6,514,675 or 139.17% compared to the same period in 2023[201]. Operating Expenses and Profitability - Cost of revenues decreased to $9,845,793 for the three months ended September 30, 2024, from$13,780,309 in 2023, primarily due to the discontinuation of clinic operation staff supporting services[183]. - Gross profit increased by $9,740,714 or 29.08$43,239,090 for the three months ended September 30, 2024, driven by higher royalty income and procurement services[184]. - Operating expenses rose to $29,404,487 for the three months ended September 30, 2024, an increase of$15,929,353 or 118.21% from $13,475,134 in 2023, mainly due to stock-based compensation and consulting fees[185]. - Gross profit increased to$122,178,140, an increase of $28,241,477 or 30.06$56,592,092, up by $9,326,188 or 19.73$27,886,231 for the nine months ended September 30, 2024, compared to $22,753,983 for the same period in 2023[174]. - Cash and cash equivalents increased to$137,393,070 as of September 30, 2024, compared to $103,022,932 as of December 31, 2023[213]. - Net cash provided by operating activities was$27,886,231, reflecting an increase of $5,132,248 or 22.56$11,584,038, compared to $6,262,589 for the same period in 2023, primarily due to recapitalization proceeds[220]. - The company anticipates obtaining additional funds through indebtedness or equity financings to meet long-term liquidity needs[215]. Taxation - Income tax expense decreased by$2,738,878 or 21.05% to $10,273,384 for the three months ended September 30, 2024, reflecting a reduction in income before tax[191]. - The effective tax rate increased to 78.38$7.8 million (approximately US$6.0 million) as of November 12, 2024[221]. - The company has restated its previously reported consolidated balance sheets and statements of operations for the years ended December 31, 2022, and 2021, due to the misappropriations[224]. - Misappropriations of funds amounted to approximately JPY632 million ($5.6 million), with the former director receiving approximately JPY335 million ($3.0 million) between April 2016 and January 2024[222]. Accounting and Reporting - The company generates revenue from various sources, including franchising, procurement, management services, and rental services, with specific revenue recognition policies under ASC Topics 606 and 842[231][242]. - The company accounts for stock-based compensation awards in accordance with ASC Topic 718, recognizing costs based on estimated fair value on the grant date and amortizing over the requisite service period[249]. - The fair value of warrants is determined using the binomial option pricing model, with significant estimates related to forecasted revenues and cash flows[250]. - The company qualifies as an "emerging growth company," allowing it to take advantage of certain exemptions from reporting requirements, including auditor attestation requirements[251]. - The company has elected not to opt out of the extended transition period under the JOBS Act, allowing it to adopt new or revised financial accounting standards at the same time as private companies[252]. - The company is classified as a "smaller reporting company," which allows it to provide only two years of audited financial statements[253]. - The market value of the company's common stock held by non-affiliates must exceed$250 million or annual revenue must exceed $100 million for it to cease being a smaller reporting company[253]. - The company is not required to provide quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[254]. Foreign Exchange and Risk Exposure - The unfavorable impacts of foreign exchange rate changes on net revenues were$2,570,776 for the three months ended September 30, 2024[179]. - The company is exposed to foreign currency exchange rate fluctuations, primarily due to operations in Japan and revenues denominated in Japanese yen[228].