Ambow Education Holding Ltd.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND NATURE OF BUSINESS

The accompanying condensed consolidated financial statements include the financial statements of Ambow Education Holding Ltd. a Cayman Islands company (hereinafter referred to as the “Company”) and its subsidiaries. The Company was incorporated in the Cayman Islands on June 26, 2007.

The Company is a U.S.-based, AI-driven technology educational company. Its mission is to eliminate barriers between online and offline environments, languages and regions, and academia and industry. The Company is developing a new HybriU AI Digital Education Solution that transforms the educational environment, bridging the gap between traditional methods and the future of digital learning. This solution combines sophisticated software and hardware to create an AI-powered digital and hybrid classroom, designed to enhance educational delivery and engagement. HybriU is the Company’s patented, dynamic, open-platform technology that facilitates hybrid learning. In addition, the Company offers high-quality, individualized, and dynamic career education services and products through the operation of its for-profit colleges.

2. LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, the Company’s consolidated current assets exceeded its consolidated current liabilities by $5,528, reflecting a positive working capital balance. The Company’s consolidated net assets were $8,591 as of June 30, 2026. The Company assesses that it could meet its obligations for the next 12 months from the issuance date of the condensed consolidated financial statements.

The Company’s principal sources of liquidity were cash provided by operating activities and bank borrowings. The Company reported net cash provided by operating activities of $978 for the six months ended June 30, 2025 and net cash used in operating activities of $122 for the six months ended June 30, 2026, respectively. As of June 30, 2026, the Company had $4,469 in unrestricted cash and cash equivalents.

The Company’s operating results for future periods are subject to numerous uncertainties and it is uncertain if the Company will be able to continuously achieve a net income position in the foreseeable future. If management is not able to increase revenues and/or manage costs and operating expenses in line with revenue forecasts, the Company may not be able to achieve profitability.

The Company believes that available cash and cash equivalents, cash provided by operating activities should enable the Company to meet presently anticipated cash needs for at least the next 12 months after the date that the financial statements are issued and the Company has prepared the condensed consolidated financial statements on a going concern basis. However, the Company continues to have ongoing obligations and it expects that it will require additional capital in order to execute its longer-term business plan. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity, which could include, but not necessarily be limited to, initiating additional public offerings, obtaining credit facilities, streamlining business units, controlling rental, overhead and other operating expenses and seeking to further dispose non-cash generating units. Management cannot provide any assurance that the Company will raise additional capital if needed.

3. SIGNIFICANT ACCOUNTING POLICIES

a. Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and footnotes thereto, included in the Company’s 2025 Annual Report filed with the SEC on February 13, 2026. The interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year or any future periods.

b. Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment if any. Depreciation is calculated on a straight-line basis over the following estimated useful lives:

Construction in progress includes direct costs related to the construction of various equipment and software, and is stated at original cost. These costs include materials, labor, and any directly attributable overhead. Once a construction project is completed and the asset is placed into service, the capitalized costs are transferred to the appropriate property, plant, and equipment categories and depreciated over the estimated useful life of the underlying assets using the Company’s standard depreciation methods.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, we measure impairment by comparing the carrying value of the property and equipment to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we will recognize an impairment loss based on the fair value of the assets, using the expected future discounted cash flows.

c. Intangible assets

Intangible assets represent software, trade name and accreditation. The software was initially recorded at historic acquisition costs or cost directly incurred to develop the software during the application development stage that can provide future benefits, and amortized on a straight-line basis over estimated useful lives.

The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. The intangible assets have original estimated useful lives as follows:

The Company has determined that trade names and accreditation have the continued ability to generate cash flows indefinitely. There are no legal, regulatory, contractual, economic or other factors limiting the useful life of the respective trade names and accreditation. Consequently, the carrying amounts of trade names and accreditation are not amortized but are tested for impairment annually.

d. Impairment of long-lived assets

Indefinite intangible assets are reviewed for impairment annually, and definite intangible assets and other long-lived assets when events or circumstances arise that indicate the existence of impairment for patents and other intangibles. When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. For infinite intangible asset, trade names, when impairment indicators are present, the fair value of trade names is estimated using the Relief from Royalty (RFR) method, an income approach based on notional royalty savings.

e. Revenue recognition

The Company generates revenue through the delivery of educational programs and licensing and sales of HybriU solutions.

The core principle of ASC 606 is that an entity recognizes revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To achieve that principle, the Company applies the following steps:

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract;

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company hastwo reportable segments. One reportable segment generates revenue from providing educational programs and services to undergraduate students. The other reportable segment generates revenue from the sales and licensing of HybriU solutions.

For educational programs and services, usually there are no written formal contracts between the Company and the students according to business practice. Records with students’ name, grade, tuition and fee collected are signed or confirmed by students. Academic requirements and each party’s rights are communicated with students through enrollment brochures or daily teaching and academic activities.

For educational programs and services, the Company’s performance obligation is to provide acknowledged academic education within academic years, and post-secondary with Associates and Bachelor’s programs within agreed-upon periods. The transaction price is the predetermined fixed tuition fee received and circumstances like other variable consideration, significant financing component, noncash consideration, consideration payable to a customer did not exist. As there is only one performance obligation, all the transaction price is allocated to the one performance obligation. The Company satisfies performance obligation to students over time, and recognizes revenue according to school days consumed in each month of a semester.

We also generate revenue primarily through the licensing and sales of HybriU solutions.

Licensing - There is only one performance obligation for Licensing which is to deliver our HybriU solution to customers as a combination of software, user manuals, technical documentation and other related materials, from which customers can benefit alongside ready-made resources. Revenue for Licensing is recognized at the point in time upon delivery of the HybriU solution because the solution is considered functional intellectual property due to its significant standalone functionality, and the Company does not expect to substantively change that functionality in any way that would significantly affect the utility of the solution after delivery. The Company also promises to provide unspecified updates, bug fixes and error collection for the solution (referred to as “technical support”) free of charge if any issues occur during the operation and if support is requested by customers during the licensing term. This technical support is considered an immaterial promise and not identified as a single performance obligation because it is minimally and infrequently provided to customers based on historical experience. There is no variable consideration and significant financing component.

In relation to the sale of HybriU solutions, the following two performance obligations have been identified: (i) the delivery of the HybriU solution, comprising the relevant hardware, the complete software package, and all documentation and resources necessary for the customer’s immediate deployment; and (ii) the provision of maintenance services for a one-year period post-delivery. The standalone selling price for the one-year maintenance service is contractually specified within the range of $3 to $5, whereas the total contract price for each HybriU product unit is approximately $30 to $35. Allocation of the transaction price between the solution delivery and the one-year after-sales service is performed by reference to their standalone selling prices. The Company recognizes revenue for the HybriU solution when control of the solution is transferred to the customer, which generally occurs upon delivery and acceptance by the customer. Revenue for the one-year maintenance service is recognized ratably over the service period. The amount allocated to the maintenance service is immaterial to the financial statements.

The following table presents revenues by geographic area based on the sales location of our service and products:

Contract Balances

The transferred control of promised service to customers results in the Company’s unconditional rights and conditional consideration receivable on passage of time. The Company hasno contract assets as of December 31, 2025 and June 30, 2026.

The contract liabilities consist of deferred revenue, which relates to unsatisfied performance obligations at the end of each reporting period and consists of tuition received in advance from students. As of December 31, 2025 and June 30, 2026, the Company’s deferred revenue amounted to $262 and $152, respectively. For the six months ended June 30, 2025 and 2026, the Company has recognized $226 and $110 in educational programs and services revenue from the deferred revenue balance as of December 31, 2024 and 2025, respectively.

f. Segment reporting

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker, the CEO, reviews segment results when making decisions about allocating resources and assessing performance of the Company.

In accordance with ASC 280-10,Segment Reporting: Overall, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer.

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands public entities’ segment disclosures, requiring, among other things, disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss; the amount and description of the composition of other segment items; and interim disclosures of a reportable segment’s profit or loss and assets.

As a result of the assessment made by the CODM, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews financial information of operating segments based on U.S. GAAP amounts of gross profit when making decisions about allocating resources and assessing performance of the Company. For the six months ended June 30, 2025 and 2026, the Company presents financial information disaggregated by business components for internal management purposes, including (i) Educational programs and services and (ii) HybriU licensing and sales. The Company considers the “management approach” concept as the basis for identifying reportable segments.

There are no reconciling items or adjustments between segment gross profit and net income as presented in the Company’s statements of operations. The CODM does not review assets in evaluating segment results and therefore such information is not presented. The management approach considers the internal organization and reporting used by the Company for operating decisions as the source for determining the Company’s reportable segments.

g. Allowance for Credit Losses

In accordance with Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments - Credit Losses, the Company estimates and records an expected lifetime credit loss on accounts receivable, other receivables included in prepaid and other current assets by utilizing historical write-off rates as a starting point for determining expected credit losses and has considered all available relevant information, including details about past events, current conditions, and reasonable and supportable forecasts, as well as their impact on the expected credit losses.

h. Leases

The Company accounts for its lease under ASC 842 Leases, and identifies lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. For all operating leases except for short-term leases, the Company recognizes operating right-of-use assets and operating lease liabilities. Leases with an initial term of 12 months or less are short-term lease and not recognized as right-of-use assets and lease liabilities on the consolidated balance sheet. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term. The operating lease liabilities are recognized based on the present value of the lease payments not yet paid, discounted using the Company’s incremental borrowing rate over a similar term of the lease payments at lease commencement. Some of the Company’s lease agreements contain renewal options; however, the Company do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. The right-of-use assets consist of the amount of the measurement of the lease liabilities and any prepaid lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

i. Net income per share

Basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary share equivalents consist of the ordinary shares issuable upon the vest of restricted shares. Ordinary share equivalents are excluded from the computation of the diluted net income per share in years when their effect would be anti-dilutive. Ordinary share equivalents are also excluded from the calculation in loss periods, as their effects would be anti-dilutive.

j. Share-based compensation

The Company periodically grants restricted stock and stock options to its employees, directors and consultants. The Company measures the cost of employee services received at the grant date using the fair value of the equity instruments issued, net of an estimated forfeiture rate, and therefore only recognizes compensation costs for those awards expected to vest over the service period. The Company records stock-based compensation expense on a straight-line basis over the requisite service period, generally ranging fromone year tofour years.

The Company granted stock options in 2025 to its employees and directors, which vest using the graded vesting method. Under this method, the total grant is divided into tranches that vest at different dates over the service period. Stock-based compensation expense for these options is recognized for each tranche individually over its respective vesting period, reflecting the expected forfeitures.

Forfeitures are estimated at the time of grant and revised in the subsequent periods if actual forfeitures differ from those estimates.

k. Income taxes

Income taxes are provided for in accordance with the laws of the relevant taxing authorities. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss carryforwards and tax credit carryforwards, by applying enacted statutory tax rates applicable to future years. A valuation allowance is recorded against deferred tax assets when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC 740-10-50-19 requires that an entity disclose its policy on classification of interest and penalties due to taxing authorities in the notes to the financial statements. In addition, ASC 740-10-50-15(c) requires that all entities disclose in the statement of operations and in the statement of financial position the total amounts of the interest and penalties related to tax positions recognized. As of December 31, 2025 and June 30, 2026 the Company did not have any interest or penalty on tax deficiencies.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires specific disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is ‘effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company has adopted the ASU.

Deferred tax liabilities and assets are classified as noncurrent and presented with a netted off amount in the condensed consolidated balance sheets as of December 31, 2025 and June 30, 2026, respectively.

l. Recently issued accounting standards

In November, 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which require additional disaggregation of income statement expenses and clarify effective dates for public and nonpublic entities. The ASU is effective for fiscal years beginning after December 15, 2027. The Company is currently assessing the impact of this ASU on the Company’s accounting policies and the financial statements.

In July, 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides updates related to CECL guidance for certain short-term receivables. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Group is currently assessing the impact of this ASU on the Company’s accounting policies and the financial statements.

In December 2025, FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements, which clarifies interim disclosure requirements. This ASU is effective for interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of this ASU on the Company’s accounting policies and the financial statements.

4. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows.

(Note i)Restricted cash required by U.S. Department of Education and the deposits necessary to secure lines of credit from financial institutions.

5. ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

Allowance for credit losses:

As of June 30, 2026, the Company’s allowance for credit losses on accounts receivable amounted to $607, all of which was attributable to the educational program.

6. PREPAID AND OTHER CURRENT ASSETS, NET

Prepaid and other current assets, net consisted of the following:

(Note i)Receivables from third-party, net, were $278 as of June 30, 2026. These amounts relate to Bay State College and are expected to be collected by the end of the year 2026.

7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

For the six months ended June 30, 2025 and 2026, depreciation expenses were $6 and $49, respectively, which were recorded in general and administrative expenses, research and development expenses and cost of revenue.

The Construction in progress mainly represented AI classroom project at the NSAD campus. During the six months ended June 30, 2026, the Company transferred approximately $1,303 of construction in progress to property and equipment, which included approximately $732 in January 2026 and $571 in June 2026 upon the completion of project phases.

The Company performed impairment assessment on the property and equipment. For the six months ended June 30, 2025 and 2026, nil and $161 of impairment losses were recorded, respectively. The impairment loss in 2026 was recognized with respect to construction in progress as a result of water damage caused by a leak from an upper floor. Together with the transfer of $1,303 to property and equipment, this impairment loss fully accounts for the reduction of the construction in progress balance from $1,464 as of December 31, 2025, to anil ending balance.

8. INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

There wasno impairment loss accrued for the six months ended June 30, 2025 and 2026, respectively.

Amortization expenses for intangible assets amounted to $5 and $83 for the six months ended June 30, 2025 and 2026, respectively, which were recorded in cost of revenue and research and development expenses. Based on the current amount of intangible assets subject to amortization, the estimated amortization expenses for the remainder of 2026 and each subsequent annual periods are as follows:

9. OTHER NON-CURRENT ASSETS, NET

Other non-current assets, net consisted of the following:

(Note i)The Company performed impairment assessment on the educational content and no impairment loss was recorded.

10. SHORT-TERM AND LONG-TERM BORROWINGS

The following table sets forth the loan agreement of short-term borrowing from bank:

(Note i)In April 2025, the Company entered into a loan agreement with EverTrust Bank for a revolving line of credits $2,500. The loan bears variable interest at the prime rate minus 0.75% with monthly interest payments commencing May 1, 2025. The outstanding balance under the loan agreement is secured by substantially all assets of the NewSchool and is guaranteed by the Company. As of June 30, 2026, the outstanding balance under the loan agreement was $500.

The following table sets forth the loan agreement of long-term borrowing from bank:

(Note ii)In October 2022 and January 2024, the Company pledged its restricted cash amount of $1,500 and $1,200, respectively, to obtain the borrowings amount of $1,500 and $1,200 from Cathay Bank. Refer to the Note 4-Cash, Cash Equivalents and Restricted Cash.

On October 11, 2022, the Company obtained a $1,500 loan from Cathay Bank with an original maturity date of October 11, 2023 and interest at 6.29% per annum. The loan was renewed on November 6, 2023, extending the maturity to October 11, 2024. It was subsequently renewed in 2024 for an additional one-year extension to October 11, 2025, and further extended in 2025 to October 11, 2027.

On January 9, 2024, the Company obtained a $1,200 loan from Cathay Bank with an original maturity date of December 28, 2024 and interest at 6.00% per annum. The loan was renewed in 2024 for a one-year extension to 2025, and further extended in 2025 to December 27, 2027.

The pledges shall be terminated once all borrowings have been repaid and pledge cancellation registration procedures have been completed.

11. ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consisted of the following:

(Note i)The balance represented the tuition payment collected in advance.

(Note ii)The payment due to the former landlord within the next 12 months. In June 2025, the Group entered into a settlement agreement with the landlord.

12. CONCENTRATIONS

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, account payable, other receivable and other non-current assets. The Company places its cash and cash equivalents with financial institutions with high-credit ratings in the U.S. The Company conducts credit evaluations of its customers and suppliers and generally does not require collateral or other security from them. The Company evaluates its collection experience and long outstanding balances to determine the need for an allowance for doubtful accounts.

The companies who accounted for 10% or more of the Company’s condensed consolidated accounts receivable and accounts payable as of December 31, 2025, and June 30, 2026, and of revenues and purchases for the six months ended June 30, 2025 and 2026 were as follows.

13. SHARE-BASED COMPENSATION

Amended and Restated 2010 Equity Incentive Plan

On June 1, 2010, the Company adopted the 2010 Equity Incentive Plan, or the “2010 Plan”, which became effective upon the completion of the IPO on August 5, 2010 and terminated automatically 10 years after its adoption. On December 21, 2018, the Company amended and restated the 2010 Plan, or the “Amended and Restated 2010 Plan,” which became effective upon the approval from the Board of Directors and shareholders. The plan will continue in effect for 10 years from the date adopted by the Board, unless terminated earlier under section 18 of the plan.

2024 Equity Incentive Plan

On December 20, 2024, we adopted the Company’s 2024 Equity Incentive Plan (the “Plan”), which became effective upon the approval of the shareholders at the Annual Meeting of Shareholders on December 20, 2024.The Plan provides for the grant of stock options, SARs, performance share awards, performance unit awards, distribution equivalent right awards, restricted stock awards, restricted stock unit awards and unrestricted stock awards to non-employee directors, officers, employees and nonemployee consultants of Ambow Education Holding Ltd. or its affiliates. the maximum aggregate number of Shares that may be awarded and sold under the Plan is 6,500,000 ordinary shares. The number of ordinary shares available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with the calendar year 2025, resulting in the aggregate number of ordinary shares available under this Plan equaling fifteen percent (15%) of the total number of ordinary shares outstanding on the last trading day in December of the immediately preceding calendar year minus the total number of reserved and available shares under the Company’s 2005 Plan and 2010 Plan.

Share options

Management of the Company is responsible for determining the fair value of options granted and has considered a number of factors when making this determination, including valuations.

On March 27, 2025, the Company granted 3,120,000 stock options, and on May 13, 2025, the Company granted an additional 200,000 stock options to employees and directors. The stock options have a four-year requisite service period, with 25% vesting upon the first anniversary of the grant date and the remaining 75% vesting ratably over the subsequent three years.

The Company accounts for stock-based compensation in accordance with ASC 718. Stock-based compensation expense is measured at the grant-date fair value of the stock options, net of estimated forfeitures, and is recognized over the requisite service period using the graded vesting method, whereby each vesting tranche is treated as a separate award and recognized over its respective vesting period.

For the six months ended June 30, 2025 and 2026, the Company recognized approximatelynil and $63 of stock-based compensation expense related to these stock option grants, and the unrecognized share-based compensation expenses was $201 and $137 as of December 31, 2025 and June 30, 2026, respectively.

14. TAXATION

a. Income taxes

Cayman Islands

Under the current laws of the Cayman Islands, the Company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on income or capital gains. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

US

Significant components of the income taxes benefit on earnings for the six months ended June 30, 2025 and 2026 are as follows:

The following is a reconciliation of the differences between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2025 and 2026:

15. NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:

(Note i)Basic income per ADS is computed using the weighted-average number of ordinary shares outstanding during the period. Diluted income per ADS is computed using the weighted-average number of ordinary shares and ordinary share equivalents outstanding during the period. Certain outstanding stock options were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. For the six months ended June 30, 2025 and 2026, approximately 3,120,000 and 3,320,000 shares, respectively, underlying such options were excluded.

16. LEASES

The Company has operating leases for classrooms and corporate offices.

The components of lease expense were as follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

The Company’s lease agreements do not have a discount rate that is readily determinable. The incremental borrowing rate is determined at lease commencement or lease modification and represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The weighted-average discount rate was calculated using the discount rate for the lease that was used to calculate the lease liability balance for each lease and the remaining balance of the lease payments for each lease as of June 30, 2026.

The Company performed an impairment test on the operating lease right-of-use assets and recognized an impairment loss ofnil for the six months ended June 30, 2025 and 2026.

The weighted-average remaining lease terms were calculated using the remaining lease term and the lease liability balance for each lease as of June 30, 2026.

As of June 30, 2026, maturities of lease liabilities were as follows:

As of June 30, 2026, the Group had no material operating or finance leases that had not yet commenced.

17. SEGMENT REPORTING AND INFORMATION ABOUT GEOGRAPHIC AREAS

Our Chief Executive Officer, as the CODM, organizes our company, manages resource allocations and measures performance amongtwo operating and reportable segments: (i) Educational programs and services and (ii) HybriU licensing and sales for internal management purposes. The Company’s CODM makes decisions on resource allocation, evaluates operating performance, and monitors budget versus actual results using gross profit. The following table presents revenues, cost of revenues, and gross profit by reportable segment:

18. CONTINGENCIES

On June 21, 2024, a former executive of Newschool of Architecture and Design, LLC filed a civil lawsuit against the Company and certain individuals alleging breach of contract, labor code violations, fraud-related claims, and wrongful termination. The plaintiff seeks damages, penalties, attorneys’ fees, and other relief. The Company is contesting the claims. As of the date of this report, the matter remains in the early stages, and the outcome and potential financial impact cannot be reasonably estimated.