6-K - AMBO - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2021

Commission File Number: 001-34824

Ambow Education Holding Ltd.

Not Applicable

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

12th Floor, Tower 1, Financial Street Chang’An Center,

Shijingshan District, Beijing 100043

People’s Republic of China

Telephone: +86 (10) 6206-8000

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐ No ☒

If “Yes” marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___

Other Information

Attached hereto as Exhibit 99.1 is a press release dated September 20, 2021, announcing the Company’s unaudited financial and operating results for the three months and six months ended June 30, 2021, respectively.

The information contained in Exhibits 99.2 and 99.3 on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 (File No. 333-231273), and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

Exhibits

99.1 **** Press Release, dated September 20, 2021

99.2 **** Unaudited Condensed Consolidated Financial Statements as of and for the Six Months Ended June 30, 2021 and 2020 and Notes to the Unaudited Condensed Consolidated Financial Statements as of and for the Six Months Ended June 30, 2021 and 2020

99.3 **** Management Discussion and Analysis of Financial Condition and Results of Operations

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Ambow Education Holding Ltd.
By:	/s/Jin Huang
Name: Dr. Jin Huang
Title: President and Chief Executive Officer

Date: September 20, 2021

Exhibit 99.1

Ambow Education Announces Second Quarter 2021 Financial Results

BEIJING, September 20, 2021 -- Ambow Education Holding Ltd. (“Ambow” or the “Company”) (NYSE American: AMBO), a leading cross-border career educational and technology service provider, today announced its unaudited financial and operating results for the three-month and six-month periods ended June 30, 2021.

“In the second quarter of 2021, we remained focused on technology-driven educational and career enhancement services, embracing the national strategy of improving collaborative and coordinated development across education, talents and industry and promoting high-quality economic growth," noted Dr. Jin Huang, Ambow's President and Chief Executive Officer. “We’re pleased to report solid financial performance and further improved operating efficiency in the second quarter, highlighted by a 10.8% year-over-year growth in net revenues and an increase in gross margin of 530 basis points year-over-year to 44.1%.”

“Additionally, during the quarter, we made a number of strides that helped to expand our role as a leading innovator in the Chinese career education market. Building on our 20-year proven track record in the vocational and technical education sector, in June we cooperated with Nanchang Vocational University, one of the 15 first batch of undergraduate vocational education pilot schools in China, to co-found the Smart Manufacturing Modern Industrial College, underscoring China’s pilot program for the integration between industry and education. Meanwhile, we formed a strategic cooperation with the Talent Exchange Center of the Ministry of Industry and Information Technology to strengthen international communication in various information technology-related disciplines. More excitingly, in July we launched an open education platform, OOOK, which incorporates our in-house developed technologies, enabling teachers to provide high-quality, cross-device live and recorded courses with immersive and interactive learning experiences. Notably, with its groundbreaking technology and solutions, OOOK won the ‘2021 Best Product Technology Innovation’ award at the 10th Annual China Finance Summit.”

“Moving into the second half of 2021, we remain committed to delivering innovative educational products and services that will be at the forefront of the industry by continuingly capitalizing on technology trends. We are confident that our strategic efforts will continue to drive the long-term growth of our overall business,” concluded Dr. Huang.

Second Quarter 2021 Financial Highlights

●	Net revenues for the second quarter of 2021 increased by 10.8% to RMB 172.3 million (US$ 26.7 million) from RMB 155.5 million (US$ 22.0 million) in the same period of 2020. The increase was primarily due to the full business recovery from the impact of the COVID-19 pandemic.
●	Gross profit for the second quarter of 2021 increased by 25.7% to RMB 75.9 million (US$ 11.8 million) from RMB 60.4 million (US$ 8.5 million) in the same period of 2020. Gross profit margin was 44.1%, compared with 38.8% for the first second quarter of 2020. The increases in gross profit and margin were mainly attributable to faster growth of net revenues in the period.
---	---
●	Operating expenses for the second quarter of 2021 decreased by 7.8% to RMB 55.6 million (US$ 8.6 million) from RMB 60.3 million (US$ 8.5 million) in the same period of 2020. The decrease was primarily attributable to stringent expense controls to improve operating efficiency.
---	---
●	Operating income for the second quarter of 2021 was RMB 20.3 million (US$ 3.1 million), compared to operating income of RMB 0.1 million (US$ 0.02 million) in the same period of 2020.
---	---
●	Net income attributable to ordinary shareholders was RMB 22.4 million (US$ 3.5 million), or RMB 0.48 (US$ 0.07) per basic and diluted share, compared with a net income of RMB 4.8 million (US$ 0.7 million), or RMB 0.11 (US$ 0.02) per basic and diluted share, in the same period of 2020.
---	---
●	As of June 30, 2021, Ambow maintained strong cash resources of RMB 257.7 million (US$ 39.9 million), comprised of cash and cash equivalents of RMB 168.4 million (US$ 26.1 million), short-term investments of RMB 87.6 million (US$ 13.5 million) and restricted cash of RMB 1.7 million (US$ 0.3 million).
---	---

First Six Months 2021 Financial Highlights

●	Net revenues for the first six months of 2021 increased by 22.9% to RMB 301.9 million (US$ 46.8 million) from RMB 245.7 million (US$ 34.8 million) in the same period of 2020. The increase was primarily due to the full business recovery from the impact of the COVID-19 pandemic and higher revenue contribution from our new U.S. business.

●	Gross profit for the first six months of 2021 increased by 67.5% to RMB 120.6 million (US$ 18.7 million) from RMB 72.0 million (US$ 10.2 million) in the same period of 2020. Gross profit margin was 39.9%, compared with 29.3% in the same period of 2020. The increases in gross profit and margin were mainly attributable to faster growth of net revenues in the period.
●	Operating expenses for the first six months of 2021 slightly increased by 3.9% to RMB 115.4 million (US$ 17.9 million) from RMB 111.1 million (US$ 15.7 million) in the same period of 2020.
---	---
●	Operating income for the six months of 2021 was RMB 5.2 million (US$ 0.8 million), compared to operating loss of RMB 39.2 million (US$ 5.5 million) in the same period of 2020.
---	---
●	Net income attributable to ordinary shareholders was RMB 8.1 million (US$ 1.3 million), or RMB 0.17 (US$ 0.03) per basic and diluted share, compared with a net income of RMB 10.8 million (US$ 1.5 million), or RMB 0.25 (US$ 0.04) per basic and diluted share, in the same period of 2020. Excluding the one-time gain from bargain purchase of NewSchool of Architecture and Design, LLC of RMB 40.3 million (US$ 5.7 million), net loss for the first six months of 2020 was RMB 29.5 million (US$ 4.2 million) or RMB 0.68 (US$ 0.10) per basic and diluted share.
---	---

The Company's financial and operating results for the second quarter and first half of 2021 can also be found on its Current Report on Form 6-K to be furnished with the U.S. Securities and Exchange Commission at www.sec.gov.

Regulatory Policy Update

The Standing Committee of the National People’s Congress promulgated an amendment to the Implementation Rules of the Law for Promoting Private Education on April 7, 2021, which has been effective since September 1, 2021 (the “Implementation Rules”). The Implementation Rules stipulated, among other provisions, that (1) sponsors of private schools may choose to establish schools as either non-profit or for-profit schools, but nine-year compulsory education schools cannot be operated as for-profit schools; (2) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education; (3) group-based education organizations shall not control non-profit private schools through mergers and acquisitions, franchise agreements and contractual arrangements; and (4) related party transactions entered into by private schools shall be open, fair and just, and shall not harm national interests, school interests, or student or teacher interests. The Company is assessing the impact of the Implementation Rules and formulating different scenarios as compliance measures.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all amounts translated from RMB to U.S. dollars for the second quarter and first half of 2021 are based on the effective exchange rate of 6.4566 as of June 30, 2021; all amounts translated from RMB to U.S. dollars for the second quarter and first half of 2020 are based on the effective exchange rate of 7.0651 as of June 30, 2020; all amounts translated from RMB to U.S. dollars as of December 31, 2020 are based on the effective exchange rate of 6.5250 as of December 31, 2020. The exchange rates were according to the middle rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. Fluctuations in financial highlights are based on RMB amounts.

About Ambow Education Holding Ltd.

Ambow Education Holding Ltd. is a leading cross-border career educational and technology service provider, offering high-quality, individualized services and products. With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in China and United States of America.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the outlook and quotations from management in this announcement, as well as Ambow’s strategic and operational plans, contain forward-looking statements. Ambow may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements, including but

not limited to the following: the Company’s goals and strategies, expansion plans, the expected growth of the content and application delivery services market, the Company’s expectations regarding keeping and strengthening its relationships with its customers, and the general economic and business conditions in the regions where the Company provides its solutions and services. Further information regarding these and other risks is included in the Company’s filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and Ambow undertakes no duty to update such information, except as required under applicable law.

For investor and media inquiries please contact:

Ambow Education Holding Ltd.

Tel: +86-10-6206-8000

The Piacente Group | Investor Relations

Tel: +1-212-481-2050 or +86-10-6508-0677

E-mail: ambow@tpg-ir.com

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)


	As of June 30,		As of December 31,
	2021		2020
	US	RMB	RMB
ASSETS
Current assets:
Cash and cash equivalents	26,086	168,424	118,821
Restricted cash	256	1,650	824
Short-term investments, available for sale	13,266	85,652	117,854
Short-term investments, held to maturity	310	2,000	45,000
Accounts receivable, net	3,289	21,234	20,972
Amounts due from related parties	501	3,235	3,024
Prepaid and other current assets, net	18,858	121,757	117,634
Total current assets	62,566	403,952	424,129
Non-current assets:
Property and equipment, net	21,989	141,972	144,492
Land use rights, net	262	1,693	1,715
Intangible assets, net	8,403	54,252	54,808
Goodwill	3,982	25,710	25,710
Deferred tax assets, net	883	5,704	6,338
Operating lease right-of-use asset	35,522	229,353	247,608
Finance lease right-of-use asset	860	5,550	5,850
Other non-current assets	21,805	140,786	139,067
Total non-current assets	93,706	605,020	625,588

Total assets	156,272	1,008,972	1,049,717

LIABILITIES
Current liabilities:
Short-term borrowings *	3,020	19,498	10,000
Deferred revenue *	21,106	136,274	163,699
Accounts payable *	3,320	21,425	19,423
Accrued and other liabilities *	31,473	203,207	209,590
Income taxes payable, current *	28,669	185,105	184,638
Amounts due to related parties *	429	2,771	2,543
Operating lease liability, current *	7,620	49,198	53,702
Total current liabilities	95,637	617,478	643,595
Non-current liabilities:
Long-term borrowing	—	—	9,594
Other non-current liabilities *	47	304	292
Income taxes payable, non-current *	5,316	34,322	34,763
Operating lease liability, non-current *	32,196	207,877	220,319
Total non-current liabilities	37,559	242,503	264,968

Total liabilities	133,196	859,981	908,563

EQUITY
Preferred shares
(US0.003 par value;1,666,667 shares authorized, nil issued and outstanding as of June 30, 2021 and December 31, 2020)	—	—	—
Class A Ordinary shares
(US0.003 par value; 66,666,667 and 66,666,667 shares authorized, 41,948,276 and 41,923,276 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)	123	794	794
Class C Ordinary shares
(US0.003 par value; 8,333,333 and 8,333,333 shares authorized, 4,708,415 and 4,708,415 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)	14	90	90
Additional paid-in capital	549,130	3,545,512	3,545,073
Statutory reserve	652	4,210	4,210
Accumulated deficit	(528,302)	(3,411,035)	(3,419,146)
Accumulated other comprehensive income	1,844	11,907	12,101
Total Ambow Education Holding Ltd.’s equity	23,461	151,478	143,122
Non-controlling interests	(385)	(2,487)	(1,968)
Total equity	23,076	148,991	141,154
Total liabilities and equity	156,272	1,008,972	1,049,717

All values are in US Dollars.

*All of the VIE's assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company's general assets.

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(All amounts in thousands, except for share and per share data)


	For the six months ended June 30,			For the three months ended June 30,
	2021	2021	2020	2021	2021	2020
	US	RMB	RMB	US	RMB	RMB
NET REVENUES
Educational program and services	46,635	301,104	245,659	26,576	171,590	155,392
Intelligent program and services	116	752	83	102	661	71
Total net revenues	46,751	301,856	245,742	26,678	172,251	155,463
COST OF REVENUES
Educational program and services	(27,782)	(179,375)	(172,324)	(14,797)	(95,536)	(94,891)
Intelligent program and services	(299)	(1,930)	(1,458)	(122)	(786)	(160)
Total cost of revenues	(28,081)	(181,305)	(173,782)	(14,919)	(96,322)	(95,051)

GROSS PROFIT	18,670	120,551	71,960	11,759	75,929	60,412
Operating expenses:
Selling and marketing	(3,782)	(24,422)	(24,206)	(2,079)	(13,422)	(13,657)
General and administrative	(13,220)	(85,357)	(84,243)	(5,949)	(38,412)	(45,042)
Research and development	(868)	(5,602)	(2,698)	(582)	(3,757)	(1,567)
Total operating expenses	(17,870)	(115,381)	(111,147)	(8,610)	(55,591)	(60,266)

OPERATING INCOME (LOSS)	800	5,170	(39,187)	3,149	20,338	146

OTHER INCOME (EXPENSES)
Interest income	621	4,008	4,135	302	1,948	2,145
Foreign exchange gain (loss), net	31	203	35	(2)	(12)	9
Other (loss) income, net	(183)	(1,180)	1,552	(37)	(240)	146
Gain from deregistration of subsidiaries	205	1,325	3,897	183	1,181	3,897
Gain on the bargain purchase	—	—	40,273	—	—	—
Gain on sale of investment available for sale	189	1,221	1,056	73	474	530
Total other income	863	5,577	50,948	519	3,351	6,727
INCOME BEFORE INCOME TAX AND NON-CONTROLLING INTEREST	1,663	10,747	11,761	3,668	23,689	6,873
Income tax expense	(489)	(3,155)	(1,623)	(236)	(1,526)	(2,362)

NET INCOME	1,174	7,592	10,138	3,432	22,163	4,511
Less: Net loss attributable to non-controlling interest	(80)	(519)	(708)	(43)	(277)	(296)

NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS	1,254	8,111	10,846	3,475	22,440	4,807

NET INCOME	1,174	7,592	10,138	3,432	22,163	4,511

OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments	(65)	(417)	8,328	(82)	(532)	7,895
Unrealized gains on short-term investments
Unrealized holding gains arising during period	166	1,075	940	76	493	499
Less: reclassification adjustment for gains included in net income	132	852	668	48	308	381
Other comprehensive (loss) income	(31)	(194)	8,600	(54)	(347)	8,013

TOTAL COMPREHENSIVE INCOME	1,143	7,398	18,738	3,378	21,816	12,524

Net income per share – basic and diluted	0.03	0.17	0.25	0.07	0.48	0.11

Weighted average shares used in calculating basic and diluted net income per share	46,642,280	46,642,280	43,577,168	46,648,495	46,648,495	43,583,418

All values are in US Dollars.

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(All amounts in thousands, except for share and per share data)


		Attributable to Ambow Education Holding Ltd.’s Equity
																Accumulated
		Class A Ordinary				Class C Ordinary				Additional						other		Non-
		shares				shares				paid-in		Statutory		Accumulated		comprehensive		controlling		Total
	****	Shares	****	Amount	****	Shares	****	Amount	****	capital	****	reserves	****	deficit	****	income	****	interest	****	Equity
	****		****	RMB	****		****	RMB	****	RMB	****	RMB	****	RMB	****	RMB		RMB		RMB
Balance as of January 1, 2021	****	41,923,276	****	794	****	4,708,415	****	90	****	3,545,073	****	4,210	****	(3,419,146)	****	12,101	****	(1,968)	****	141,154
Share-based compensation		—		—		—		—		219		—		—		—		—		219
Issuance of ordinary shares for restricted stock award		12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment		—		—		—		—		—		—		—		115		—		115
Unrealized gain on investment, net of income taxes		—		—		—		—		—		—		—		38		—		38
Net loss		—		—		—		—		—		—		(14,329)		—		(242)		(14,571)
Balance as of March 31, 2021	****	41,935,776	****	794	****	4,708,415	****	90	****	3,545,292	****	4,210	****	(3,433,475)	****	12,254	****	(2,210)	****	126,955
Share-based compensation		—		—		—		—		220		—		—		—		—		220
Issuance of ordinary shares for restricted stock award		12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment		—		—		—		—		—		—		—		(532)		—		(532)
Unrealized gain on investment, net of income taxes		—		—		—		—		—		—		—		185		—		185
Net income/(loss)		—		—		—		—		—		—		22,440		—		(277)		22,163
Balance as of June 30, 2021	****	41,948,276	****	794	****	4,708,415	****	90	****	3,545,512	****	4,210	****	(3,411,035)	****	11,907	****	(2,487)	****	148,991

Balance as of January 1, 2020	****	38,858,199	****	730	****	4,708,415	****	90	****	3,508,745	****	20,185	****	(3,371,815)	****	6,341	****	(680)	****	163,596
Share-based compensation		—		—		—		—		238		—		—		—		—		238
Issuance of ordinary shares for restricted stock award		12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment		—		—		—		—		—		—		—		433		—		433
Unrealized gain on investment, net of income taxes		—		—		—		—		—		—		—		154		—		154
Impact on adoption of ASC 326		—		—		—		—		—		—		(594)		—		—		(594)
Net income/(loss)		—		—		—		—		—		—		6,039		—		(412)		5,627
Balance as of March 31, 2020	****	38,870,699	****	730	****	4,708,415	****	90	****	3,508,983	****	20,185	****	(3,366,370)	****	6,928	****	(1,092)	****	169,454
Share-based compensation		—		—		—		—		242		—		—		—		—		242
Issuance of ordinary shares for restricted stock award		12,500		1		—		—		(1)		—		—		—		—		—
Foreign currency translation adjustment		—		—		—		—		—		—		—		7,895		—		7,895
Unrealized gain on investment, net of income taxes		—		—		—		—		—		—		—		118		—		118
Deregistration of subsidiaries		—		—		—		—		—		(15,473)		15,473		—		—		—
Net income/(loss)		—		—		—		—		—		—		4,807		—		(296)		4,511
Balance as of June 30, 2020	****	38,883,199	****	731	****	4,708,415	****	90	****	3,509,224	****	4,712	****	(3,346,090)	****	14,941	****	(1,388)	****	182,220

Discussion of Segment Operations

(All amounts in thousands)


	For the six months ended June 30,			For the three months ended June 30,
	2021	2021	2020	2021	2021	2020
	US	RMB	RMB	US	RMB	RMB
NET REVENUES
K-12 Schools	27,205	175,650	126,800	16,223	104,748	85,389
CP&CE Programs	19,546	126,206	118,942	10,455	67,503	70,074
Total net revenues	46,751	301,856	245,742	26,678	172,251	155,463
COST OF REVENUES
K-12 Schools	(15,161)	(97,886)	(74,542)	(8,100)	(52,297)	(41,113)
CP&CE Programs	(12,920)	(83,419)	(99,240)	(6,819)	(44,025)	(53,938)
Total cost of revenues	(28,081)	(181,305)	(173,782)	(14,919)	(96,322)	(95,051)
GROSS PROFIT
K-12 Schools	12,044	77,764	52,258	8,123	52,451	44,276
CP&CE Programs	6,626	42,787	19,702	3,636	23,478	16,136
Total gross profit	18,670	120,551	71,960	11,759	75,929	60,412

All values are in US Dollars.

Table of Contents Exhibit 99.2

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Unaudited Condensed Consolidated Balance Sheets	F-2
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months ended June 30, 2021 and 2020	F-5
Unaudited Condensed Consolidated Statements of Changes in Equity for the Six Months ended June 30, 2021 and 2020	F-6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2021 and 2020	F-7
Notes to Unaudited Condensed Consolidated Financial Statements for the Six Months ended June 30, 2021 and 2020	F-8

F-1

Table of Contents AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)


	****	Note	****	As of June 30,			As of December 31,
	****		****	2021		****	2020
	****		****	US	RMB	****	RMB
							Note 3(a)
ASSETS
Current assets:
Cash and cash equivalents		4		26,086	168,424		118,821
Restricted cash		4		256	1,650		824
Short-term investments, available for sale		5		13,266	85,652		117,854
Short-term investments, held to maturity		5		310	2,000		45,000
Accounts receivable, net		6		3,289	21,234		20,972
Amounts due from related parties		14		501	3,235		3,024
Prepaid and other current assets, net		7		18,858	121,757		117,634
Total current assets				62,566	403,952		424,129
Non-current assets:
Property and equipment, net				21,989	141,972		144,492
Land use rights, net				262	1,693		1,715
Intangible assets, net				8,403	54,252		54,808
Goodwill				3,982	25,710		25,710
Deferred tax assets, net				883	5,704		6,338
Operating lease right-of-use asset		12		35,522	229,353		247,608
Finance lease right-of-use asset		12		860	5,550		5,850
Other non-current assets		8		21,805	140,786		139,067
Total non-current assets				93,706	605,020		625,588

Total assets				156,272	1,008,972		1,049,717

All values are in US Dollars.

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

F-2

Table of Contents AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands, except for share and per share data)


	****	Note	****	As of June 30,			As of December 31,
	****		****	2021		****	2020
	****		****	US	RMB	****	RMB
							Note 3(a)
LIABILITIES
Current liabilities:
Short-term borrowings (including consolidated VIE amount without recourse to the Company of RMB 10,000 and RMB 10,000 as of June 30, 2021 and December 31, 2020, respectively)		9		3,020	19,498		10,000
Deferred revenue (including consolidated VIE amount without recourse to the Company of RMB 132,947 and RMB 158,735 as of June 30, 2021 and December 31, 2020, respectively)		3(b)		21,106	136,274		163,699
Accounts payable (including consolidated VIE amount without recourse to the Company of RMB 10,346 and RMB 10,682 as of June 30, 2021 and December 31, 2020, respectively)				3,320	21,425		19,423
Accrued and other liabilities (including consolidated VIE amount without recourse to the Company of RMB 168,420 and RMB 165,706 as of June 30, 2021 and December 31, 2020, respectively)				31,473	203,207		209,590
Income taxes payable, current (including consolidated VIE amount without recourse to the Company of RMB 180,666 and RMB 180,070 as of June 30, 2021 and December 31, 2020, respectively)				28,669	185,105		184,638
Amounts due to related parties (including consolidated VIE amount without recourse to the Company of RMB 2,771 and RMB 2,543 as of June 30, 2021 and December 31, 2020, respectively)		14		429	2,771		2,543
Operating lease liability, current (including consolidated VIE amount without recourse to the Company of RMB 24,014 and RMB 27,962 as of June 30, 2021 and December 31, 2020, respectively)		12		7,620	49,198		53,702
Total current liabilities				95,637	617,478		643,595
Non-current liabilities:
Long-term borrowing (including consolidated VIE amount without recourse to the Company of RMB nil and RMB nil as of June 30, 2021 and December 31, 2020, respectively)				—	—		9,594
Other non-current liabilities (including consolidated VIE amount without recourse to the Company of RMB 95 and RMB 188 as of June 30, 2021 and December 31, 2020, respectively)				47	304		292
Income taxes payable, non-current (including consolidated VIE amount without recourse to the Company of RMB 34,322 and RMB 34,763 as of June 30, 2021 and December 31, 2020, respectively)		10		5,316	34,322		34,763
Operating lease liability, non-current (including consolidated VIE amount without recourse to the Company of RMB 71,459 and RMB 74,725 as of June 30, 2021 and December 31, 2020, respectively)		12		32,196	207,877		220,319
Total non-current liabilities				37,559	242,503		264,968

Total liabilities				133,196	859,981		908,563

All values are in US Dollars.

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

F-3

Table of Contents AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands, except for share and per share data)


	Note	****	As of June 30,			As of December 31,
		****	2021		****	2020
		****	US	RMB	****	RMB
						Note 3(a)

EQUITY
Preferred shares
(US 0.003 par value; 1,666,667 shares authorized, nil issued and outstanding as of June 30, 2021 and December 31, 2020)			—	—		—
Class A Ordinary shares
(US0.003 par value; 66,666,667 and 66,666,667 shares authorized, 41,948,276 and 41,923,276 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)			123	794		794
Class C Ordinary shares
(US0.003 par value; 8,333,333 and 8,333,333 shares authorized, 4,708,415 and 4,708,415 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)			14	90		90
Additional paid-in capital			549,130	3,545,512		3,545,073
Statutory reserve			652	4,210		4,210
Accumulated deficit			(528,302)	(3,411,035)		(3,419,146)
Accumulated other comprehensive income			1,844	11,907		12,101
Total Ambow Education Holding Ltd.’s equity			23,461	151,478		143,122
Non-controlling interests			(385)	(2,487)		(1,968)
Total equity			23,076	148,991		141,154
Total liabilities and equity			156,272	1,008,972		1,049,717

All values are in US Dollars.

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

F-4

Table of Contents AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(All amounts in thousands, except for share and per share data)


		For the six months ended June 30,			For the three months ended June 30,
	Note	2021	2021	2020	2021	2021	2020
		US	RMB	RMB	US$	RMB	RMB
NET REVENUES
Educational program and services	13	46,635	301,104	245,659	26,576	171,590	155,392
Intelligent program and services	13	116	752	83	102	661	71
Total net revenues		46,751	301,856	245,742	26,678	172,251	155,463
COST OF REVENUES
Educational program and services	13	(27,782)	(179,375)	(172,324)	(14,797)	(95,536)	(94,891)
Intelligent program and services	13	(299)	(1,930)	(1,458)	(122)	(786)	(160)
Total cost of revenues		(28,081)	(181,305)	(173,782)	(14,919)	(96,322)	(95,051)

GROSS PROFIT		18,670	120,551	71,960	11,759	75,929	60,412
Operating expenses:
Selling and marketing		(3,782)	(24,422)	(24,206)	(2,079)	(13,422)	(13,657)
General and administrative		(13,220)	(85,357)	(84,243)	(5,949)	(38,412)	(45,042)
Research and development		(868)	(5,602)	(2,698)	(582)	(3,757)	(1,567)
Total operating expenses		(17,870)	(115,381)	(111,147)	(8,610)	(55,591)	(60,266)

OPERATING INCOME (LOSS)		800	5,170	(39,187)	3,149	20,338	146

OTHER INCOME (EXPENSES)
Interest income		621	4,008	4,135	302	1,948	2,145
Foreign exchange gain (loss), net		31	203	35	(2)	(12)	9
Other (loss) income, net		(183)	(1,180)	1,552	(37)	(240)	146
Gain from deregistration of subsidiaries	15	205	1,325	3,897	183	1,181	3,897
Gain on the bargain purchase		—	—	40,273	—	—	—
Gain on sale of investment available for sale		189	1,221	1,056	73	474	530

Total other income		863	5,577	50,948	519	3,351	6,727

INCOME BEFORE INCOME TAX AND NON-CONTROLLING INTEREST		1,663	10,747	11,761	3,668	23,689	6,873
Income tax expense	10	(489)	(3,155)	(1,623)	(236)	(1,526)	(2,362)

NET INCOME		1,174	7,592	10,138	3,432	22,163	4,511
Less: Net loss attributable to non-controlling interest		(80)	(519)	(708)	(43)	(277)	(296)

NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS		1,254	8,111	10,846	3,475	22,440	4,807

NET INCOME		1,174	7,592	10,138	3,432	22,163	4,511

OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments		(65)	(417)	8,328	(82)	(532)	7,895
Unrealized gains on short-term investments
Unrealized holding gains arising during period		166	1,075	940	76	493	499
Less: reclassification adjustment for gains included in net income		132	852	668	48	308	381
Other comprehensive (loss) income		(31)	(194)	8,600	(54)	(347)	8,013
TOTAL COMPREHENSIVE INCOME		1,143	7,398	18,738	3,378	21,816	12,524

Net income per share - basic and diluted	11	0.03	0.17	0.25	0.07	0.48	0.11

Weighted average shares used in calculating basic and diluted net income per share	11	46,642,280	46,642,280	43,577,168	46,648,495	46,648,495	43,583,418

All values are in US Dollars.

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

F-5

Table of Contents AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(All amounts in thousands, except for share and per share data)


	****			Attributable to Ambow Education Holding Ltd.’s Equity
																		Accumulated
				Class A Ordinary				Class C Ordinary				Additional						other		Non-
				shares				shares				paid-in		Statutory		Accumulated		comprehensive		controlling		Total
		Note		Shares		Amount		Shares		Amount		capital		reserves		deficit		income		interest		Equity
	****		****		****	RMB	****		****	RMB	****	RMB	****	RMB	****	RMB	****	RMB	****	RMB	****	RMB
Balance as of January 1, 2021	****	****	****	41,923,276		794		4,708,415	****	90	****	3,545,073	****	4,210	****	(3,419,146)	****	12,101	****	(1,968)	****	141,154
Share-based compensation				—		—		—		—		219		—		—		—		—		219
Issuance of ordinary shares for restricted stock award				12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment				—		—		—		—		—		—		—		115		—		115
Unrealized gain on investment, net of income taxes				—		—		—		—		—		—		—		38		—		38
Net loss				—		—		—		—		—		—		(14,329)		—		(242)		(14,571)
Balance as of March 31, 2021				41,935,776		794		4,708,415		90		3,545,292		4,210		(3,433,475)		12,254		(2,210)		126,955
Share-based compensation				—		—		—		—		220		—		—		—		—		220
Issuance of ordinary shares for restricted stock award				12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment				—		—		—		—		—		—		—		(532)		—		(532)
Unrealized gain on investment, net of income taxes				—		—		—		—		—		—		—		185		—		185
Net income/(loss)				—		—		—		—		—		—		22,440		—		(277)		22,163
Balance as of June 30, 2021				41,948,276		794		4,708,415		90		3,545,512		4,210		(3,411,035)		11,907		(2,487)		148,991

Balance as of January 1, 2020				38,858,199		730		4,708,415		90		3,508,745		20,185		(3,371,815)		6,341		(680)		163,596
Share-based compensation				—		—		—		—		238		—		—		—		—		238
Issuance of ordinary shares for restricted stock award				12,500		0		—		—		(0)		—		—		—		—		—
Foreign currency translation adjustment				—		—		—		—		—		—		—		433		—		433
Unrealized gain on investment, net of income taxes				—		—		—		—		—		—		—		154		—		154
Impact on adoption of ASC 326		3(c)		—		—		—		—		—		—		(594)		—		—		(594)
Net income/(loss)				—		—		—		—		—		—		6,039		—		(412)		5,627
Balance as of March 31, 2020				38,870,699		730		4,708,415		90		3,508,983		20,185		(3,366,370)		6,928		(1,092)		169,454
Share-based compensation				—		—		—		—		242		—		—		—		—		242
Issuance of ordinary shares for restricted stock award				12,500		1		—		—		(1)		—		—		—		—		—
Foreign currency translation adjustment				—		—		—		—		—		—		—		7,895		—		7,895
Unrealized gain on investment, net of income taxes				—		—		—		—		—		—		—		118		—		118
Deregistration of subsidiaries				—		—		—		—		—		(15,473)		15,473		—		—		—
Net income/(loss)				—		—		—		—		—		—		4,807		—		(296)		4,511
Balance as of June 30, 2020	****	****	****	38,883,199		731		4,708,415	****	90	****	3,509,224	****	4,712	****	(3,346,090)	****	14,941	****	(1,388)	****	182,220

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

F-6

Table of Contents

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands, except for share and per share data)


		For the six months ended June 30,
		2021	2021		2020
	****	US	RMB	****	RMB
Cash flows from operating activities
Net cash used in operating activities		(2,997)	(19,339)		(61,989)
Cash flows from investing activities
Purchase of available-for-sale investments		(10,532)	(68,000)		(86,000)
Proceeds from available-for-sale investments		15,565	100,500		65,000
Purchase of held-to-maturity investments		(18,741)	(121,000)		(25,000)
Maturity and proceeds from held-to-maturity investments		25,400	164,000		41,000
Purchase of property and equipment		(153)	(990)		(2,213)
Prepayment for leasehold improvement		(674)	(4,353)		(15)
Purchase of intangible assets		(47)	(306)		—
Purchase of subsidiary, net of cash acquired		—	—		37,622
Purchase of other non-current assets		—	—		(2,883)
Cash balances at disposed subsidiaries		(2)	(12)		(9)
Loan to third party		—	—		(19,900)
Net cash provided by investing activities		10,816	69,839		7,602
Cash flows from financing activities
Proceeds from long-term borrowing		—	—		10,409
Net cash provided by financing activities		—	—		10,409

Effects of exchange rate changes on cash, cash equivalents and restricted cash		(11)	(71)		(1,007)

Net change in cash, cash equivalents and restricted cash		7,808	50,429		(44,985)
Cash, cash equivalents and restricted cash at beginning of periods		18,534	119,645		157,600

Cash, cash equivalents and restricted cash at end of periods		26,342	170,074		112,615
Supplemental disclosure of cash flow information
Income tax paid		(193)	(1,249)		(106)
Interest paid		(34)	(220)		—
Supplemental disclosure of non-cash investing and financing activities:
Derecognition of assets other than cash of disposed subsidiaries/deregistered subsidiaries		161	1,041		217
Derecognition of liabilities of disposed subsidiaries/deregistered subsidiaries, net of recognized amount due to the disposed subsidiaries/deregistered subsidiaries		368	2,378		9,328
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities		2,041	13,175		98,845

All values are in US Dollars.

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

F-7

Table of Contents AMBOW EDUCATION HOLDING LTD.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

ORGANIZATION AND PRINCIPAL ACTIVITIES

a.	Background

The accompanying condensed consolidated financial statements include the financial statements of Ambow Education Holding Ltd. (the “Company”), its subsidiaries and variable interest entities (“VIEs”) for which the Company or its subsidiaries are the primary beneficiaries. The Company, its subsidiaries and VIEs are hereinafter collectively referred to as the “Group”.

In the six months ended June 30, 2021, the Company established a few new subsidiaries and branch companies, and completed deregistration procedures of certain subsidiaries and branch companies in China.

GOING CONCERN

Liquidity and Capital Resources

As of June 30, 2021, the Group’s consolidated current liabilities exceeded its consolidated current assets by RMB 213,526. With certain non-cash payment adjustments excluded from the current liabilities, the gap between the current liabilities and current assets has been significantly reduced. The Group’s consolidated net assets were amounting to RMB 148,991 as of June 30, 2021. There are no liquidity concerns noted in the next 12 months.

The Group’s principal sources of liquidity have been cash provided by operating activities. The Group had net cash used in operating activities of RMB 61,989 and RMB 19,339 for the six months ended June 30, 2020 and 2021, respectively. The net cash outflow for both periods were mainly due to seasonal fluctuations. As of June 30, 2021, the Group had RMB 168,424 in unrestricted cash and cash equivalents, RMB 85,652 in short-term investments, available for sale, and RMB 2,000 in short-term investments, held to maturity.

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

From the beginning of 2021, all our K-12 schools, tutoring centers and training offices in China have been in full business operation. Teachers and students of Bay State College and NewSchool in U.S. returned to campus from September 2021. Yet the pandemic continues to be fluid and uncertain, making it difficult to forecast the final impact it could have on our future operations.

There were certain regulatory policy updates in the past period of 2021. On April 7, 2021, Chinese regulatory authorities promulgated an amendment to the Implementation Rules of the Law for Promoting Private Education, which has been effective since September 1, 2021 (the “Implementation Rules”). The Implementation Rules stipulated, among other provisions, that (1) sponsors of private schools may choose to establish schools as either non-profit or for-profit schools, but nine-year compulsory education schools cannot be operated as for-profit schools; (2) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education; (3) group-based education organizations shall not control non-profit private schools through mergers and acquisitions, franchise agreements and contractual arrangements; and (4) related party transactions entered into by private schools shall be open, fair and just, and shall not harm national interests, school interests, or student or teacher interests. The Group is assessing the impact of the Implementation Rules and formulating different scenarios as compliance measures. There are still significant uncertainties with respect to those scenarios. The Group, however, does not expect any related liquidity concerns in the next 12 months. On July 24, 2021, Chinese regulatory authorities issued a set of guidelines aiming to ease the burden of excessive homework and after-school tutoring on students receiving an elementary school or junior high school education (the “Guidelines”). The Group does not expect its operations to be materially affected by the Guidelines. F-8

Table of Contents Conclusion

The Group believes that available cash and cash equivalents, short-term investments, available for sale and short-term investments, held to maturity, cash provided by operating activities, together with cash available from the activities mentioned above, should enable the Group to meet presently anticipated cash needs for at least the next 12 months after the date that the financial statements are issued and the Group has prepared the consolidated financial statements on a going concern basis. However, the Group 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 Group 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, curtailing the Group’s business development activities, suspending the pursuit of its business plan, obtaining credit facilities, controlling overhead expenses and seeking to further dispose of non-core assets. Management cannot provide any assurance that the Group will raise additional capital if needed.

SIGNIFICANT ACCOUNTING POLICIES

a.	Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and generally accepted accounting principles in the United States ("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 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 2020 Annual Report filed with the SEC on April 8, 2021. The interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year or any future periods.

All amounts in the accompanying unaudited condensed consolidated financial statements and notes are expressed in Renminbi (“RMB”). Amounts in United States dollars (“US$”) are presented solely for the convenience of readers and use an exchange rate of RMB 6.4566, representing the middle rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board as of June 30, 2021. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

b.	Revenue recognition

The Group has adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective transition method from January 1, 2018. The Group’s revenue is generated from delivering educational programs and services and intellectualized operational services.

Disaggregation of revenues

The following table illustrates the disaggregation of revenue by operating segments for the six and three months ended June 30, 2021 and 2020, respectively:


(RMB in thousands)		K ‑ 12 Schools	CP&CE Programs	Consolidated
	****	RMB	RMB	RMB
Net Revenues in the six months ended June 30, 2021		175,650	126,206	301,856
Net Revenues in the six months ended June 30, 2020		126,800	118,942	245,742
Net Revenues in the three months ended June 30, 2021		104,748	67,503	172,251
Net Revenues in the three months ended June 30, 2020		85,389	70,074	155,463

F-9

Table of Contents Contract Balances

The transferred control of promised services to customers results in the Group’s unconditional rights and conditional consideration receivable on passage of time. Accordingly, as of June 30, 2021 and December 31, 2020, the Group has no other contract assets except for Accounts Receivable, in RMB 21,234 and RMB 20,972, respectively. Please refer to Note 6-Accounts Receivable, Net for detail.

Contract liabilities represent the Group has received consideration but has not satisfied the related performance obligations. The tuition and service fees received in advance are the Group’s contract liabilities and presented in deferred revenue in the consolidated balance sheets. The revenue recognized during the six months ended June 30, 2021 that was previously included in the deferred revenue balances as of December 31, 2020 was RMB 163,699.

The following table provides the deferred revenue balances by segments as of June 30, 2021 and December 31, 2020.


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
K-12 Schools	111,106	126,564
CP&CE Programs	25,168	37,135
Total	136,274	163,699

c.	Allowance for doubtful accounts

The Group adopted ASC 326 Financial Instruments – Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1, 2020 and interim periods therein. Management used an expected credit loss model for the impairment of trading receivables as of period ends. Management believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. Management measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Cash and cash equivalents	168,424	118,821
Restricted cash	1,650	824
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows	170,074	119,645

SHORT-TERM INVESTMENTS

Short-term investments consist of held-to-maturity investments and available-for-sale investments. F-10

Table of Contents Held to maturity investments

Held-to- maturity investments consist of various fixed-income financial products purchased from Chinese commercial banks, which are classified as held-to-maturity investments as the Group has the positive intent and ability to hold the investments to maturity. The maturities of these financial products are within one year, with annual interest rates ranging from 2.19% to 3.30% and matured and fully collected with principal and interest as of the date of this report. They are classified as short-term investments on the consolidated balance sheets as its contractual maturity dates are less than one year. The repayments of principal of the financial products are not guaranteed by the Chinese commercial banks from which the fixed income financial products were purchased. Historically, the Company has received the principal and the interest in full upon maturity of these investments.

While these fixed-income financial products are not publicly traded, the Company estimated that their fair value approximate their amortized costs considering their short-term maturities and high credit quality. No other-than-temporary impairment ("OTTI") loss was recognized for the six months ended June 30, 2021 and 2020, respectively.

Available-for-sale investments

Investments other than held-to-maturity are classified as available-for-sale investments, which consist of various adjustable-income financial products purchased from Chinese commercial banks. All the available for sale investments did not have maturity date. They are classified as short-term investments on the consolidated balance sheets as management intends to hold them for a period less than one year.

Available-for-sale securities are carried at their fair values and the unrealized gains or losses from the changes in fair values are included in accumulated other comprehensive income. The aging of all the available-for-sale investments were less than 12 months as of June 30, 2021. No OTTI loss was recognized for the six months ended June 30, 2021 and 2020, respectively.

The amortized cost, gross unrealized gain in accumulated other comprehensive income, and estimated fair value of investments as of June 30, 2021 and December 31, 2020, are reflected in the tables below:


	As of June 30, 2021
		Gross unrealized gain
		in accumulated other	Estimated
	Amortized Cost	comprehensive income	Fair value
	RMB	RMB	RMB
	Unaudited	Unaudited	Unaudited
Short-term investments:
Held-to-maturity investments
Fixed-rate financial products	2,000	—	2,000

Available-for-sale investments
Adjustable-rate financial products	84,500	1,152	85,652


	As of December 31, 2020
		Gross unrealized gain
		in accumulated other	Estimated
	Amortized Cost	comprehensive income	Fair value
	RMB	RMB	RMB
Short-term investments:
Held-to-maturity investments
Fixed-rate financial products	45,000	—	45,000

Available-for-sale investments
Adjustable-rate financial products	117,000	854	117,854

F-11

Table of Contents Interest income recognized on held-to-maturity investments for the six months ended June 30, 2021 and 2020 were as follows:


	Six months ended June 30,
	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Interest income recognized on held-to-maturity investments	672	175

ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Accounts receivable	28,447	27,219
Less: Allowance for doubtful accounts	(7,213)	(6,247)
Accounts receivable, net	21,234	20,972

Allowance for doubtful accounts:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Balance at beginning of year/period	(6,247)	(2,993)
Addition	(2,002)	(7,857)
Written off	1,036	4,603
Balance at end of year/period	(7,213)	(6,247)

PREPAID AND OTHER CURRENT ASSETS, NET

Prepaid and other current assets consisted of the following:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Amount due from Xihua Group (Note i)	49,800	49,800
Receivable from Zhenjiang operating rights (Note ii)	35,000	35,000
Prepaid input value-added tax	3,938	4,069
Staff advances	3,175	3,723
Rental deposits	2,860	2,826
Prepayments to suppliers	8,421	9,209
Subsidy receivable (Note iii)	4,522	4,567
Others (Note iv)	14,111	8,510
Total before allowance for doubtful accounts	121,827	117,704
Less: allowance for doubtful accounts	(70)	(70)
Total	121,757	117,634

F-12

Table of Contents Allowance for doubtful accounts:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Balance at beginning of year/period	(70)	(4,339)
Addition (Note v)	—	(1,046)
Written off (Note v)	—	5,315
Balance at end of year/period	(70)	(70)

(Note i) A payable balance amounted to RMB 49,800 was recorded by a subsidiary prior to its acquisition by the Group, and such payable was indemnified by Xihua Investment Group (“Xihua Group). No provision was made for the indemnity. The indemnity balance was still outstanding as of the date of issuance of the financial statements.

(Note ii) The balance represented the prepaid operating rights to the Zhenjiang Foreign Language School and Zhenjiang International School. The Group started a negotiation of returning the operating right back to the original owner Zhenjiang Education Investment Center in the third quarter of 2011. As a result, the prepaid operating rights have been reclassified as receivable since then. As of June 30, 2021 and December 31, 2020, the payable balance to Zhenjiang Foreign Language School amounted to RMB 36,770 and RMB 36,770, respectively; therefore, no provision was made. As of the date of issuance of the financial statements, the negotiation was still in progress.

(Note iii) On March 6, 2020, Ambow NSAD Inc. acquired 100% of the outstanding membership interest of NewSchool. As part of the acquisition, a subsidy was provided by the seller for each of the four years after the acquisition for the loss of certain online business of NewSchool after the change of ownership.

(Note iv) Others mainly included inventories and supplies, prepayments for employees, and other miscellaneous items with trivial amounts.

(Note v) Addition of allowance during the year of 2020 was mainly provided against third parties due to the remote recoverability. Certain provisions were written off after all collection efforts being exhausted and the potentials for recovery were remote.

8. OTHER NON-CURRENT ASSETS

Other non-current assets consisted of the following:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Prepaid long-term deposit and loans to lock-up an equity interest investment (Note i)	92,865	89,929
Long-term receivables from Jinghan Taihe (Note ii)	13,723	13,723
Long-term restricted cash (Note iii)	19,168	19,373
Long-term lease deposits	3,521	3,603
Equity method investments	1,736	1,740
Long-term subsidy receivable (Note 7(iii))	5,407	6,577
Others	4,366	4,122
Total	140,786	139,067

F-13

Table of Contents (Note i) In April 2019, Beijing Shida Ambow Education Technology Co., Ltd. (“Ambow Shida”) entered into an agreement to lock-up a no-less-than 51% equity interest of Hebi School held by Beijing Dongyuanzhongheng Investment Management Co., Ltd. (“Dongyuan”) for six years, starting from May 1, 2019 till April 30, 2025. Hebi School is a for-profit K-12 school located in Hebi, Henan Province in China, providing junior and senior high school full curriculum services. It has completed a phase I campus construction which started from July 2019, and is in phase II construction. It has admitted first-year students from fall 2020. Ambow Shida paid RMB 40,000 to Dongyuan as a deposit in April 2019 according to the agreement. As agreed by both parties, if Ambow Shida and Dongyuan reach an agreement to transfer the equity interest of Hebi School at any time during the six years, the deposit in RMB 40,000 plus 10% annual interest accrued would not be returned but as part of the consideration for the transfer; or, Dongyuan will return the deposit to Ambow Shida with 10% annual interest within seven days upon termination of the Agreement. Ambow Shida recognized RMB 40,000 as the principal and RMB 7,641 as interest receivable of the lock-up deposit as of June 30, 2021.

Beijing Ambow Shengying Education and Technology Co., Ltd. (“Ambow Shengying”) also entered into a series of loan agreements with Dongyuan in 2019 and 2020 with 5% annual interest rate. The total outstanding principals and interest receivable were RMB 42,600 and RMB 2,624 as of June 30, 2021, respectively. All loan agreements were without any requirements for collateral or pledge on the loans.

On April 8, 2020, the Group entered into an equity transfer intention agreement with Dongyuan to agree that the outstanding loans and interest due would be turned into part of consideration for the Group to acquire a no-less-than 51% equity interest of Hebi School depending on both parties further agreement. No allowance upon such deposit loans and interest receivable was provided in the first six months of 2021.

(Note ii) As of June 30, 2021, the Group recognized long-term receivables due from Beijing Jinghan Taihe Education Technology Co., Ltd. (“Jinghan Taihe”) of RMB 13,723, including the present value of long-term receivable related to the acquisition of tutoring centers previously owned by Jinghan Taihe and accrued management fee income from Jinghan Taihe. Due to the termination of operation of Jinghan Tutoring Centers, the Group is negotiating with Jinghan Taihe on settlement of the outstanding receivables and payables as of the date of this report.

(Note iii) It includes cash in collateral bank accounts for the issuance of letters of credit in U.S. and cash in special deposit accounts required by the Education Commission to prevent abusive use of educational funds in China.

SHORT-TERM BORROWINGS

The following table sets forth the loan agreements of short-term borrowings from banks:


	****		****		****	Amount	****	Original Amount	****	Annual	****	Repayment
Date		Borrower		Lender		(RMB)		(US$)		Interest Rate		Due Date
September 1, 2020		Ambow Shida		Huaxia Bank		10,000		N/A		4.35	%	September 1, 2021
May 1, 2020		Bay State College		Small Business<br>Administration<br>(“SBA”)		9,498		1,470		1.00	%	May 2, 2022

In July 2020, the Group mortgaged its office property in Beijing, China with the carry amount of RMB 65,078 to obtain a line of credit in RMB 30,000 from Bank of Huaxia with one-year term from July 1, 2020 to July 1, 2021. The mortgage shall be terminated once all borrowings were repaid and mortgage cancellation registration procedures were completed. On September 1, 2020, the Group received a loan from Huaxia Bank in the amount of RMB 10,000 with maturity date on September 1, 2021 and bearing interest at 4.35% per annum for working capital purpose. As of the date of this report, this loan was fully repaid.

On May 1, 2020, Bay State College obtained a PPP loan under the CARES Act from the SBA through Bank of America for US$1,470, with maturity date on May 2, 2022. Bay State College accrued interest expense on the loan using a fixed rate of 1%. Bay State College is applying for the forgiveness of the PPP loan as of the date of this report.

F-14

Table of Contents 10. TAXATION

a.	Value added tax (“VAT”)

The PRC government implemented a value-added tax reform pilot program, which replaced the business tax with VAT. Since May 2016, the change from business tax to VAT are expanded to all other service sectors which used to be subject to business tax. The VAT rates applicable to the subsidiaries and consolidated variable interest entities of the Group ranged from 3% to 6% as compared to the 3%~5% business tax rate which was applicable prior to the reform.

As of June 30, 2021 and December 31, 2020, the payable balances for VAT were RMB 2,675 and RMB 2,176 respectively.

b.	Business tax

In PRC, business taxes used to be imposed by the government on the revenues arising from the provision of taxable services including but not limited to education in the years before 2016. The business tax rates for the Group’s subsidiaries and consolidated variable interest entities ranged from 3% to 5%. Business tax was then replaced by the VAT from 2016 and thereafter.

As of June 30, 2021 and December 31, 2020, the payable balances for business tax were RMB 17,406 and RMB 17,456, respectively.

c.	Income taxes

Cayman Islands

Under the current laws of 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.

British Virgin Islands

The Company’s subsidiaries incorporated in the BVI are not subject to taxation.

Hong Kong

Only one of the Company’s subsidiaries incorporated in Hong Kong is subject to a profit tax rate of 8.25% for the first HK$ 2,000 of assessable profits. Profits exceeding HK$ 2,000 and other subsidiaries in Hong Kong are subject to profit tax at a rate of 16.5%.

Taiwan

Entity incorporated in Taiwan is subject to Taiwan profit tax at a rate of 17%. F-15

Table of Contents PRC and US

Significant components of the provision for income taxes on earnings for the six months ended June 30, 2021 and 2020 are as follows:


	Six months ended June 30,
	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Current:
PRC	1,872	2,506
U.S.	690	2,771
Deferred:
PRC	869	(386)
U.S.	(276)	(3,268)
Provision for income tax expenses	3,155	1,623

Corporate entities

The PRC Enterprise Income Tax (“EIT”) is calculated based on the taxable income determined under the applicable EIT Law and its implementation rules, which became effective on January 1, 2008. EIT Law imposes a unified income tax rate of 25% for all resident enterprises in China, including both domestic and foreign invested enterprises.

Reconciliation between total income tax expense and the amount computed by applying the PRC statutory income tax rate to income before income taxes is as follows:


	Six months ended June 30,
	2021		2020
	%		%
	Unaudited		Unaudited
PRC statutory income tax rate	25	%	25	%
Impact of different tax rates in other jurisdictions	(196)	%	0	%
Tax effect of preferential tax rate for small enterprises	15	%	28	%
Tax effect of non-deductible expenses	48	%	8	%
Tax effect of non-taxable income	(281)	%	(3)	%
Tax effect of tax-exempt entities	548	%	(24)	%
Tax effect of deemed profit	0	%	1	%
Deferred tax effect of tax rate change	54	%	7	%
Changes in valuation allowance	(182)	%	(27)	%
Effective tax rate	31	%	15	%

d.	Uncertain tax positions

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Unrecognized tax benefits	34,322	34,763

The amounts of unrecognized tax benefits listed above are based on the recognition and measurement criteria of ASC Topic 740, and the balance is presented as a non-current liability in the consolidated financial statements since December 31, 2020 due to the fact that the Group does not anticipate payments of cash within one year. F-16

Table of Contents The Group recognizes interest and penalty charges related to uncertain tax positions as necessary in the provision for income taxes. The Group has a liability for accrued penalty and interest of RMB nil as of June 30, 2021 and December 31, 2020, respectively.

However, due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of uncertain tax positions may result in liabilities which could be materially different from these estimates. In such an event, the Group will record additional tax expense or tax benefit in the period in which such resolution occurs. As of June 30, 2021 and December 31, 2020, there were RMB 34,322 and RMB 34,763 unrecognized tax benefits that if recognized would affect the annual effective tax rate. The Group does not expect that the position of unrecognized tax benefits will significantly increase or decrease within 12 months of June 30, 2021.

In accordance with PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years to assess underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination by the tax authorities based on the above.

NET INCOME PER SHARE

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


	Six months ended June 30,
	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Numerator:
Numerator for basic and diluted income per share	8,111	10,846
Denominator:
Denominator for basic and diluted income per share weighted average ordinary shares outstanding	46,642,280	43,577,168

Basic and diluted income per share	0.17	0.25

Basic net income (loss) per share is computed using the weighted average number of the ordinary shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of ordinary shares and ordinary equivalent shares outstanding during the period.

LEASES

The Group has operating leases for classrooms, dormitories, offices and certain equipment; and finance lease for a teaching building used by Shenyang K-12 School. For the finance lease, all lease payments have been paid to the landlord from the commencement date of the lease.

The components of lease expense were as follows:


	Six months ended June 30,
	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Operating and short-term lease expense	24,567	31,966

Finance lease expense	300	300

F-17

Table of Contents Supplemental cash flow information related to leases was as follows:


	Six months ended June 30,
	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	19,615	25,583
Operating cash flows from finance lease	—	—

Supplemental balance sheet information related to leases was as follows:


	****	As of			****
	****	June 30, 2021	****	December 31, 2020
	****	Unaudited
Weighted-average Remaining Lease Term
Operating leases		7.23 Years		7.41 Years
Finance lease		9.18 Years		9.67 Years
Weighted-average Discount Rate
Operating leases		4.50	%	4.51	%

The Group’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 Group 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, 2021 and December 31, 2020, respectively.

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, 2021 and December 31, 2020, respectively.

As of June 30, 2021, maturities of lease liabilities were as follows:


	****	Amount
		RMB
		Unaudited
2021 (remaining)		29,900
2022		45,240
2023		43,487
2024		42,916
2025		42,501
Thereafter		110,113
Total lease payments		314,157
Less: interest		(57,082)
Total		257,075
Less: current portion		(49,198)
Non-current portion		207,877

As of June 30, 2021, the Group had no material operating or finance leases that had not yet commenced.

Sublease

The Group subleases offices to third parties under operating leases. Sublease income is recorded as a reduction of lease expense in the consolidated statements of operations. F-18

Table of Contents For the six months ended June 30, 2021 and 2020, gross sublease income of the Group was RMB 42 and RMB 139, respectively.

SEGMENT INFORMATION

The Group offers a wide range of educational and career enhancement services and products focusing on improving educational opportunities for primary and advanced degree school students and employment opportunities for university graduates.

The Group’s chief operating decision maker (“CODM”) has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Group. Management has classified the reportable segments into two parts: 1) K-12 schools, 2) CP&CE Programs.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM evaluates performance based on each reporting segment’s revenues, cost of revenues, gross profit, operating expenses, other income (expense), (loss) income before income tax and non-controlling interests and total assets as follows.

For the six months ended June 30, 2021 (Unaudited)


	K-12	CP&CE
(RMB in thousands)	Schools	Programs	Consolidated
	RMB	RMB	RMB
Net Revenues	175,650	126,206	301,856
Cost of revenues	(97,886)	(83,419)	(181,305)
GROSS PROFIT	77,764	42,787	120,551

OPERATING EXPENSES
Selling and marketing	(1,163)	(22,098)	(23,261)
General and administrative	(22,371)	(38,131)	(60,502)
Research and development	(424)	(2,184)	(2,608)
Unallocated corporate expenses	—	—	(29,010)
Total operating expenses	(23,958)	(62,413)	(115,381)

OPERATING INCOME (LOSS)	53,806	(19,626)	5,170

OTHER INCOME
Interest income	725	602	1,327
Other (loss), net	(36)	(1,439)	(1,475)
Gain from deregistration of subsidiaries	—	1,325	1,325
Gain on sale of investment available for sale	1,001	—	1,001
Unallocated corporate other income	—	—	3,399
Total other income	1,690	488	5,577

INCOME (LOSS) BEFORE INCOME TAX AND NON-CONTROLLING INTERESTS	55,496	(19,138)	10,747

Segment assets	402,185	399,336	801,521
Unallocated corporate assets	—	—	207,451
TOTAL ASSETS as of June 30, 2021	402,185	399,336	1,008,972

F-19

Table of Contents For the six months ended June 30, 2020 (Unaudited)


	K ‑ 12	CP&CE
(RMB in thousands)	Schools	Programs	Consolidated
	RMB	RMB	RMB
Net Revenues	126,800	118,942	245,742
Cost of revenues	(74,542)	(99,240)	(173,782)
GROSS PROFIT	52,258	19,702	71,960

OPERATING EXPENSES
Selling and marketing	(580)	(21,492)	(22,072)
General and administrative	(18,270)	(37,963)	(56,233)
Research and development	—	(724)	(724)
Unallocated corporate expenses	—	—	(32,118)
Total operating expenses	(18,850)	(60,179)	(111,147)

OPERATING INCOME (LOSS)	33,408	(40,477)	(39,187)

OTHER INCOME
Interest income	218	1,412	1,630
Foreign exchange gain, net	—	33	33
Other (loss) income, net	(233)	979	746
Loss from deregistration of subsidiaries	—	(92)	(92)
Gain on sale of investment available for sale	827	—	827
Unallocated corporate other income	—	—	47,804
Total other income	812	2,332	50,948

INCOME (LOSS) BEFORE INCOME TAX AND NON-CONTROLLING INTERESTS	34,220	(38,145)	11,761

The following table summarizes the net revenues by geographic areas for the six and three months ended June 30, 2021 and 2020, respectively.


		Six months ended June 30,				Three months ended June 30,
	****	2021	****	2020	****	2021	****	2020
		RMB		RMB		RMB		RMB
		Unaudited		Unaudited		Unaudited		Unaudited
Net Revenues
PRC		234,927		182,039		141,066		116,729
U.S.		66,929		63,703		31,185		38,734
Total		301,856		245,742		172,251		155,463

Net revenues are attributed to areas based on the location where the service is performed to the customers. Other than in PRC and the United States, the Group does not conduct business in any other individual country. F-20

Table of Contents The following table summarizes long-lived assets by geographic areas as of June 30, 2021 and December 31, 2020, respectively.


	As of
	June 30, 2021	December 31, 2020
	RMB	RMB
	Unaudited
Long-Lived Assets
PRC	291,180	300,623
U.S.	167,350	179,560
Total	458,530	480,183

Long-lived assets represent property and equipment, land use rights, intangible assets, goodwill, operating and finance lease right-of-use assets for each geographic area.

RELATED PARTY TRANSACTIONS

a.	Transactions

The Group entered into the following transactions with related parties:


	Six months ended June 30,
Transactions	2021	2020
	RMB	RMB
	Unaudited	Unaudited
Service purchased from Jinan QCY Intelligent Technology Co., Ltd., an entity significantly influenced by a member of management team of the Company	(1,279)	(1,417)
Service purchased from Beijing QC Technology Company Limited, an entity significantly influenced by a member of management team of the Company	(654)	(152)
Service purchased from Beijing HJRT Technology Co., Ltd., an entity significantly influenced by a member of management team of the Company	(132)	(132)

F-21

Table of Contents

b.	The Group had the following balances with related parties:


	Amounts due from related parties		Amounts due to related parties
	As of		As of
Relationship	June 30, 2021	December 31, 2020	June 30, 2021	December 31, 2020
	RMB	RMB	RMB	RMB
	Unaudited		Unaudited
Shandong Shichuang Software Engineering Co., Ltd., an entity controlled by Executive Principal of Ambow Research Center	—	—	2,417	2,417
Jinan QCY Intelligent Technology Co., Ltd., an entity significantly influenced by a member of management team of the Company	775	774	—	—
Beijing QC Technology Company Limited, an entity significantly influenced by a member of management team of the Company	2,039	1,961	354	126
URSUS Information Technology (Beijing) Company Limited, an entity significantly influenced by a member of management team of the Company	201	201	—	—
Beijing HJRT Technology Co., Ltd., an entity significantly influenced by a member of management team of the Company	220	88	—	—
	3,235	3,024	2,771	2,543

GAIN FROM DEREGISTRATION OF SUBSIDIARIES

In the six months ended June 30, 2020 and 2021, the Company closed several subsidiaries through local government and corporate service institutions’ deregistration procedures. Those subsidiaries had no business operations and were in accumulated deficit for years. As a result, the Company recognized gain from deregistration of those subsidiaries in a collective amount of RMB 1,325 and RMB 3,897 in the six months ended June 30, 2021 and 2020, respectively.

SUBSEQUENT EVENTS

1)	Regulatory Policy on After-School Tutoring

On July 24, 2021, Chinese regulatory authorities issued a set of guidelines aiming to ease the burden of excessive homework and after-school tutoring on students receiving an elementary school or junior high school education. The Company does not expect its operations to be materially affected by the Guidelines.

The Group has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that there are not any other events that would have required adjustment or disclosure in the financial statements.

F-22

Exhibit 99.3

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements for the periods specified in this earnings release on Form 6-K. We undertake no obligation to update publicly any forward-looking statements in this earnings release on Form 6-K.

A. Operating Results

Overview

Our business addresses three critical demands in the education market of China and U.S., students’ aspirations to be admitted into top secondary and post-secondary schools, the desire for graduates of those schools to obtain more attractive jobs and the need for schools and corporate clients to optimize their teaching and operating environment. We offer high-quality, individualized services and products through our integrated online and offline delivery model powered by our proprietary technologies and robust infrastructure.

Intelligent technology is transforming education industry as students can be no longer restricted by the traditional learning environment. Intelligent campuses and classes are becoming the trend leading to increased efficiency, cost savings, and improved experiences for students and staff. We proactively introduce our intellectualized operational services to more universities and colleges to provide students access to educational resources regardless of the location or device, increasing the potential for learning and teaching through cooperation with peers and experts worldwide and optimizing facilities to create a sustainable campus.

Our net revenues increased by RMB 56.2 million to RMB 301.9 million (US$ 46.8 million) for the six months ended June 30, 2021 from RMB 245.7 million in the same period of 2020, and increased by RMB 16.8 million to RMB 172.3 million (US$ 26.7 million) for the three months ended June 30, 2021 from RMB 155.5 million in the same period of 2020. The increases were mainly due to full business recovery from the impact of the COVID-19 pandemic and higher revenue contribution from NewSchool which was acquired and consolidated by the Company in March 2020.

Our net income decreased by RMB 2.5 million to RMB 7.6 million (US$ 1.2 million) for the six months ended June 30, 2021 from RMB 10.1 million in the same period of 2020. Our net income increased by RMB 17.7 million to RMB 22.2 million (US$ 3.4 million) for the three months ended June 30, 2021 from RMB 4.5 million in the same period of 2020.

Net revenues from the K-12 Schools segment accounted for 58.2%, 51.6%, 60.8% and 54.9% of our total net revenues in the six months ended June 30, 2021 and 2020, three months ended June 30, 2021 and 2020, respectively. Net revenues from CP&CE Programs accounted for 41.8%, 48.4%, 39.2% and 45.1% of our total net revenues in the six months ended June 30, 2021 and 2020, three months ended June 30, 2021 and 2020, respectively.

Due to certain restrictions and qualification requirements under PRC law that applies to foreign investment in China’s education industry, our education business is currently conducted through contractual arrangements among our wholly-owned subsidiaries in China and our consolidated variable interest entities, or VIEs, in China. Our VIEs and their respective subsidiaries hold the licenses and permits necessary to conduct our educational and career enhancement services business in China and directly operate our tutoring centers, K-12 schools and career enhancement centers, develop and distribute educational content, software and other technologies, and operate our online education business. We have entered into Technology Service Agreements or Exclusive Cooperation Agreements with our VIEs pursuant to which we may receive economic benefits in the future. We have, however, entered into additional agreements to sell products and provide services to our VIEs’ subsidiaries. The terms of these sales agreements to our VIEs’ subsidiaries are the same as sales to third parties described further in this section of the report.

Factors affecting our results of operations

General factors affecting our results of operations

We have benefited significantly from the following recent trends in the China educational and career enhancement services market:

●	Rapid growth in disposable household income;

●	Intense competition in the education sector and the job market;
●	Rapid economic growth;
---	---
●	Increasing hiring needs of existing and new companies doing business in China; and
---	---
●	The increased availability and utilization of advanced learning technologies to supplement the traditional education delivery model.
---	---

The overall economic growth and the increase in the GDP per capita in China have led to a significant increase in spending on education in China. In addition, education is a welcomed and supported industry in China, which means that education service providers often get preferential treatment in terms of infrastructure support and tax rates. We anticipate that the demand for private education and career enhancement training in China will continue to increase as the economy in China continues to grow and as disposable income of urban households continues to rise. However, any adverse changes in the economic conditions or regulatory environment in China may have a material adverse effect on the education and career enhancement industries in China, which in turn may harm our business and results of operations. We are subject to a legal regime consisting of regulations governing various aspects of our business such as regulations on education, software, internet, audio-video broadcasting, tax, information security, privacy, copyright and trademark protection and foreign exchange. These regulations are evolving and are subject to frequent changes which may materially adversely affect our business in all aspects such as the operation of our K-12 schools, tutoring centers, career enhancement centers and training offices through the VIE structure, the engagement of public school teachers and the organization of classes with large-size attendance in our tutoring centers, the establishment of new colleges and the offering of our online services. Although we do not possess the land use right certificates or building ownership certificates with respect to some of our owned real properties, and the lessors of some of our leased properties do not have effective ownership certificates, we believe the risk is remote that our ability to maintain and obtain or renew our licenses or permits for our business operations will be adversely affected by such issues.

Specific factors affecting our results of operations

While our business is influenced by factors affecting the education and career enhancement industries in China generally and by conditions in each of the geographic markets we serve within China, we believe our business is more directly affected by company-specific factors, including, among others:

●

The number of student enrollments. The number of student enrollments is largely driven by the demand for the educational programs offered by K-12 Schools and CP&CE Programs, the amount of fees we charge, the effectiveness of our marketing and brand promotion efforts, the locations and capacity of our tutoring centers, K-12 schools, career enhancement centers and colleges, and training offices, our ability to maintain the consistency and quality of our teaching, and our ability to respond to competitive pressures, as well as seasonal factors. We plan to continue to add new offerings to attract more students of different needs and provide cross-selling opportunities.

●

The fee we charge. We determine course fees for our educational services primarily based on the targeted markets and demands for our services, the geographic location and capacity of our schools, centers and colleges, the course fees charged by our competitors, direct costs to deliver our services, and expenses to promote our services, maintain and administer our teaching and operating activities and develop new service and product offerings etc.

---

Education services are an investment for the future, especially for children’s education, in China. Steady growth of the economy will likely result in the continuous growth of income and higher consumption levels for China’s citizens, who will have more capital for the education of their children. However, we believe that the tuition fees of our educational services in China are less impacted by the ups and downs of the overall economy as we believe that people in China generally cut back on other spending before they reduce their spending on their children’s education.

The maximum tuition fees that a school can charge vary by locations, but usually the regulations governing these price controls take into consideration China’s economic growth in determining whether to approve a tuition increase and in setting the size of the tuition increase. Usually the local governments review and adjust tuition fees every two to three years as necessary to reflect

inflation or new educational services that are provided. Price controls by local governments will affect the amount by which we are able to increase our fees charged to students in our K-12 schools and tutoring centers.

●

Our costs and expenses. We incur costs and expenses at both the head quarter level and at our K-12 schools, tutoring centers, training offices, career enhancement centers and colleges. Our most significant costs are compensation and social welfare paid to/for our teachers and teaching facility employees, rental, depreciation and amortization, and teaching related expenses. A substantial majority of our operating expenses are selling and marketing and general and administrative expenses.

The Standing Committee of the National People’s Congress promulgated an amendment to the Implementation Rules of the Law for Promoting Private Education on April 7, 2021, which has been effective since September 1, 2021 (the “Implementation Rules”). The Implementation Rules stipulated, among other provisions, that (1) sponsors of private schools may choose to establish schools as either non-profit or for-profit schools, but nine-year compulsory education schools cannot be operated as for-profit schools; (2) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education; (3) group-based education organizations shall not control non-profit private schools through mergers and acquisitions, franchise agreements and contractual arrangements; and (4) related party transactions entered into by private schools shall be open, fair and just and shall not harm national interests, school interests, or student or teacher interests. We are currently operating three K-12 schools as profit-making schools with reasonable return. We are assessing the impact of the Implementation Rules and formulating different scenarios as compliance measures. There are still significant uncertainties with respect to those scenarios and we did not notice any immediate impairment triggers of related long-lived assets as of the date of this report. We shall re-access any impairment triggers of related long-lived assets for financial statements as of and during the nine months ended September 30, 2021.

Effects of disposals and other strategic plans

In the six months ended June 30, 2021, we closed several subsidiaries and branch companies through the deregistration procedures of local governmental and corporate service institutions. Those subsidiaries and branch companies had no business operations and had accumulated deficits for years. As a result, we recognized gain from deregistration of those subsidiaries and branch companies in a collective amount of RMB 1.3 million in the period.

There were no acquisitions during the six months ended June 30, 2021.

Key financial performance indicators

Our key financial performance indicators consist of our net revenues, cost of revenues, gross profit and operating expenses, which are discussed in greater details as below. The following tables set forth our net revenues, cost of revenues and gross profit, both in absolute amount and as a percentage of net revenues, for the periods indicated.


	****	For the six months ended June 30,
		2021			****	2020
		US	RMB	%		RMB	****	%
Net revenues		42,751	301,856	100.0		245,742		100.0
Cost of revenues		(28,081)	(181,305)	(60.1)		(173,782)		(70.7)
Gross Profit		18,670	120,551	39.9		71,960		29.3

All values are in US Dollars.


	****	For the three months ended June 30,
		2021				2020
		US	RMB	%	****	RMB	****	%
Net revenues		26,678	172,251	100.0		155,463		100.0
Cost of revenues		(14,919)	(96,322)	(55.9)		(95,051)		(61.1)
Gross Profit		11,759	75,929	44.1		60,412		38.9

All values are in US Dollars.

Net revenues

In the six months ended June 30, 2021 and 2020, three months ended June 30, 2021 and 2020, we generated net revenues of RMB 301.9 million (US$ 46.8 million), RMB 245.7 million, RMB 172.3 million (US$ 26.7 million) and RMB 155.5 million, respectively.

The increases of net revenues were mainly due to the full business recovery from the impact of the COVID-19 pandemic and higher revenue contribution from NewSchool which was acquired and consolidated by the Company in March 2020.

We derived net revenues from our two reportable segments in terms of percentages of our overall net revenues as follows in the six and three months ended June 30, 2021 and 2020, respectively:


	****	For the six months ended June 30,			For the three months ended June 30,
		2021	****	2020	2021	****	2020
		%		%	%		%
K-12 Schools:		58.2		51.6	60.8		54.9

CP&CE Programs:		41.8		48.4	39.2		45.1

K-12 Schools. We operated three K-12 schools as of June 30, 2021. We recognize revenues from tuition fees and associated accommodation fees collected for enrollment in our K-12 schools ratably over the corresponding semester or school year. Tuition fees and associated accommodation fees collected from students at our K-12 schools are recorded as deferred revenue until they are recognized as revenues over the semester or school year. Our K-12 schools either collect full year tuition fees once a year, or collect half year tuition fees twice per year. Collections mainly take place between August and October and in February or March. The most significant factors that directly affect our net revenues for our K-12 schools are the number of student enrollments and the tuition fees we charge. Tuition fees and associated accommodation fees range from RMB 3,500 to RMB 80,000 per year. We typically adjust tuition fees and associated accommodation fees based on the market conditions of the city where the particular school is located, subject to the relevant local governmental authority’s advance approval, if required. Our K-12 schools have classes that range from 30 students to 60 students per class.

CP&CE Programs. Our CP&CE Programs include tutoring services and career enhancement services. Our tutoring service provided educational services in our 12 tutoring centers as of June 30, 2021. These services consist primarily of test preparation courses and tutoring. We recognize revenues from course fees collected for enrollment in the courses we offer at our tutoring centers proportionally as we deliver the instruction over the period of the course. Course fees collected are recorded as deferred revenues until they are recognized as revenues over the period when the course is taught, which typically ranges from one to nine months. The most significant factors that directly affect our net revenues in our tutoring services are the number of student enrollments in the courses and the amount of course fees. Although similar courses have comparable rates, course fees vary among our numerous courses. Tuition fees in our tutoring centers range from RMB 100 to RMB 16,000 per program. We determine course fees primarily based on demand for our courses, the targeted market for our courses, the geographic location of the tutoring center, the length of time of the course, cost of services and the course fees charged by our competitors for the same or similar programs. Our courses are delivered in class settings ranging from 4 students to 20 students per class. In addition, we also deliver these services in premium classes, including one-on-one tutoring.

Our career enhancement services are provided in our 24 career enhancement centers, which include 4 career centers, 17 training offices and 3 career enhancement college campuses. We recognize revenues over the period of the services, which typically ranges from several days to 12 months. Course fees are either collected in advance and recorded as deferred revenues or recorded as accounts receivable and collected within credit periods. The most significant factors that directly affect our revenues in our career enhancement segment are the number of enrollments in the courses and the amount of course fees. In addition to the specific factors mentioned above, enrollments at our career enhancement centers are affected by the local job markets’ specific demand for skills such as soft skills, information technology services and digital art. In addition, we believe many university graduates choose to obtain job-readiness training or acquire supplementary skills to differentiate themselves from their peers in order to get a better job. Tuition fees in our career enhancement centers range from RMB 400 to RMB 20,000 per program with course lengths ranging from several days to 12 months. We determine course fees primarily based on demand for our courses, the targeted market for our courses, the geographic location of the career enhancement center, costs of services delivered, and the course fees charged by our competitors for the same or similar programs. Our career enhancement courses are generally delivered in settings ranging from 15 students to 50 students per class. The corporate trainings are all tailor-made according to customer companies’ requirements, and normally are delivered to 10 to 30 persons per course.

Cost of revenues

Cost of revenues for our educational and career enhancement programs and services primarily consists of:

●	Teaching fees and performance-linked bonuses paid to our teachers. Our teachers consist of both full-time teachers and part-time teachers. Full-time teachers deliver teaching instruction and may also be involved in management, administration and other functions at our schools, tutoring centers and career enhancement centers. Their compensation and benefits primarily consist of teaching fees based on hourly rates, performance-linked bonuses based on student evaluations, as well as base salary, annual bonus and standard employee benefits in connection with their services other than teaching. Compensation of our part-time teachers is comprised primarily of teaching fees based on hourly rates and performance-linked bonuses based on student evaluations and other factors;
●	Rental, utilities, water and other operating expenses for the operation of our school and center properties;
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●	Depreciation and amortization of properties, leasehold improvement and equipment used in the provision of educational and career enhancement services and accommodation facilities;
---	---
●	Cost to purchase meals, residence, uniform and other students related services; and
---	---
●	Amortization of student population intangible assets.
---	---
●	K-12 Schools. Cost of revenues for our K-12 Schools segment primarily consists of teaching fees and performance-linked bonuses paid to our teachers and rental payments for our schools, depreciation and amortization of property, leasehold improvement and equipment used in the provision of educational services, cost to purchase meals, residence, uniform, school bus and other students related services, and to a lesser extent, costs of course materials.
---	---
●	CP&CE Programs. Cost of revenues for our CP&CE Programs segment primarily consists of teaching fees and performance-linked bonuses paid to our teachers, rental payments for our centers, training offices and campuses, depreciation and amortization of property, leasehold improvement and equipment used in the provision of educational services, and costs to purchase meals, residence and other students related services.
---	---

Gross profit

Gross profit as a percentage of our net revenues was 39.9%, 29.3%, 44.1% and 38.9% in the six months ended June 30, 2021 and 2020, three months ended June 30, 2021 and 2020, respectively. The increases in gross profit margin were mainly attributable to the faster growth of net revenues in the periods.

Operating expenses

Our operating expenses consist of selling and marketing expenses, general and administrative expenses and research and development expenses. The following tables set forth the components of our operating expenses, both in absolute amounts and as a percentage of revenues, for the periods indicated.


	****	For the six months ended June 30,
		2021				2020
		US	RMB	%	****	RMB	****	%
Net revenues		46,751	301,856	100.0		245,742		100.0
Operating expenses:
Selling and marketing		(3,782)	(24,422)	(8.1)		(24,206)		(9.9)
General and administrative		(13,220)	(85,357)	(28.3)		(84,243)		(34.3)
Research and development		(868)	(5,602)	(1.9)		(2,698)		(1.1)

Total operating expenses		(17,870)	(115,381)	(38.3)		(111,147)		(45.3)

All values are in US Dollars.


		For the three months ended June 30,
	****	2021				2020
		US	RMB	%	****	RMB	****	%
Net revenues		26,678	172,251	100.0		155,463		100.0
Operating expenses:
Selling and marketing		(2,079)	(13,422)	(7.8)		(13,657)		(8.8)
General and administrative		(5,949)	(38,412)	(22.3)		(45,042)		(29.0)
Research and development		(582)	(3,757)	(2.2)		(1,567)		(1.0)

Total operating expenses		(8,610)	(55,591)	(32.3)		(60,266)		(38.8)

All values are in US Dollars.

Selling and marketing expenses. Our selling and marketing expenses primarily consist of expenses relating to advertising, seminars, marketing and promotional trips and other community activities for brand promotion purposes. The changes in selling and marketing expenses for the periods were relatively small.

General and administrative expenses. Our general and administrative expenses primarily consist of compensation and benefits of administrative staff, amortization of intangibles, costs of third-party professional services, rental and utilities payments relating to office and administrative functions, and depreciation and amortization of property and equipment used in our general and administrative activities as well as bad debt provision. Our general and administrative expenses increased by 1.2 million to RMB 85.4 million for the six months ended June 30, 2021 from RMB 84.2 million for the same period of 2020. The increase was mainly due to more expenses related to NewSchool as the consolidation of NewSchool started in March 2020. General and administrative expenses decreased by 6.6 million to RMB 38.4 million for the three months ended June 30, 2021 from RMB 45.0 million for the same period of 2020. The decrease was mainly primarily attributable to stringent expense controls to improve operating efficiency.

Research and development expenses. Our research and development expenses primarily consist of compensation, benefits and other headcount-related costs associated with the development of our online educational technology, new service and product offerings. The increases from the six months and three months ended June 30, 2020 to the corresponding periods of 2021 were mainly due to more expenditures on personnel.

Share-based compensation expenses. The following tables set forth the allocation of our share-based compensation expenses, both in absolute amount and as a percentage of total share-based compensation expenses, among our employees based on the nature of work which they were assigned to perform.


	****	For the six months ended June 30,
		2021				2020
		US	RMB	%	****	RMB	****	%
Allocation of share-based expenses:
General and administrative		(68)	(439)	100.0		(480)		100.0

Total share-based expenses		(68)	(439)	100.0		(480)		100.0

All values are in US Dollars.


		For the three months ended June 30,
		2021				2020
	****	US	RMB	%	****	RMB	****	%
Allocation of share-based expenses:
General and administrative		(34)	(220)	100.0		(242)		100.0

Total share-based expenses		(34)	(220)	100.0		(242)		100.0

All values are in US Dollars.

Our predecessor entity, Ambow Education Co., Ltd., adopted the 2010 Equity Incentive Plan in June 2010 and became effective upon completion of our 2010 IPO. On December 21, 2018, we adopted the Amended 2010 Plan, which became effective upon the approval from the Board of Directors and shareholders. From 2015 to the six months ended June 30, 2021, we only granted restricted share to our employees. No options were granted. We have adopted the provisions of ASC 718 “Stock Compensation” for the restricted shares we granted. For restricted shares granted to our employees, we record share-based compensation expenses based on the fair value of the award as of the date of grant and amortize the expenses over the vesting periods of the restricted shares.

Taxation

We are a Cayman Islands company and we currently conduct our operations primarily through our subsidiaries in China and our VIEs and their respective subsidiaries. Under the current laws of the Cayman Islands, we and our Cayman Island subsidiaries are not subject to tax on our income or capital gains. In addition, our payment of dividends, if any, is not subject to withholding tax in the Cayman Islands.

Our subsidiaries incorporated in Hong Kong which were subject to Hong Kong profit. Hong Kong’s two-tier income tax system was officially implemented on April 1, 2018. Only one of our subsidiaries in Hong Kong is subject to profits tax rate of 8.25% for the first HK$ 2.0 million of assessable profits. Profits exceeding HK$ 2.0 million and other subsidiaries in Hong Kong are taxed at 16.5%.

Entity incorporated in Taiwan is subject to Taiwan profit tax at a rate of 17%.

We operate a number of subsidiaries and through our VIEs, schools, tutoring centers, training offices and career enhancement centers in China. The following is a summary of the types and rates of taxation to which our China entities are subject to.

VAT

The PRC government implemented a value-added tax reform pilot program, which replaced the business tax with value-added tax. Since May 2016, the changes from business tax to VAT are expanded to all other service sectors which used to be subject to business tax. The value-added tax rates applicable to the subsidiaries and consolidated variable interest entities of the Group ranged from 3% to 6% as compared to the 3% to 5% business tax rate which was applicable prior to the reform.

As of June 30, 2021 and December 31, 2020, the payable balances for VAT were RMB 2.7 million and RMB 2.2 million, respectively.

Business tax

In PRC, business taxes used to be imposed by the government on the revenues arising from the provision of taxable services including but not limited to education in the years before 2016. The business tax rates for our subsidiaries and consolidated variable interest entities ranged from 3% to 5%. Business tax was then replaced by the VAT from 2016 and thereafter.

As of June 30, 2021 and December 31, 2020, the payable balances for business tax were RMB 17.4 million and RMB 17.5 million, respectively.

Income tax

Current income taxes are provided for in accordance with the laws and regulations set out below. Deferred income taxes are recognized when temporary differences exist between the tax bases and their reported amounts in the consolidated financial statements.

Corporate entities

EIT Law also imposes a withholding income tax rate of 10% on dividends distributed by a foreign invested enterprise, or FIE to its immediate holding company outside of PRC. However, a lower withholding income tax rate of 5% would be applied after the immediate holding company was registered in Hong Kong or other jurisdiction that have a tax treaty or arrangement with PRC and the FIE’s immediate holding company, and satisfies the criteria of a beneficial owner set out in Circular Guoshuihan (2009) No. 601, a circular issued by the State Administration of Taxation on October 27, 2009 on how to understand and identify a beneficial owner in tax treatments. Such withholding income tax was exempted under the previous income tax laws and rules. A joint circular issued by the Ministry of Finance and State Administration of Taxation on February 22, 2008 clarified that the withholding income tax is only to be paid for earnings generated after January 1, 2008. According to the EIT Law and a circular promulgated by the PRC State Administration of Taxation on December 10, 2009, in addition to the withholding income tax on dividends distributed by an FIE, the immediate holding company of an FIE will also be subject to an income tax at the rate of 10% for capital gain realized from transferring the equity interests in such FIE to third parties, and shall file and pay such tax within seven days after the date of the transferring agreement. Furthermore, when the de facto controlling shareholder who controls an FIE through an intermediate controlling entity, “indirectly transfers” the equity interests in such FIE by selling the intermediate controlling entity, such de facto controlling shareholder shall also file with the PRC tax authorities in some cases and may be subject to the PRC corporate income tax for the capital gain realized in such sale.

We have determined that our FIEs in China will not declare any dividends on which withholding tax should be paid and therefore no withholding tax has been accrued on the retained earnings of its FIEs in China.

Private schools

Our private schools, being privately run non-enterprise institutions, acquired in 2008 and 2009 are registered as private schools that require a reasonable return. Prior to January 1, 2008, these private schools were subject to income tax determined in accordance with the Law for Promoting Private Education and the 2004 Implementing Rules, as well as the Notice on Tax Policy for Educational Institutions and Notice on Several Preferential Tax Policy jointly issued by the PRC Ministry of Finance and the State Administration of Taxation, collectively referred to as the 2003 Education Law. Under these laws and regulations, private schools not requiring reasonable returns were treated in a similar manner to public schools and were generally not subject to income tax. While it is indicated in the 2004 Implementing Rules that the relevant authorities under the State Council may consider formulating separate preferential tax treatment policies applicable to private schools requiring reasonable returns, no such tax preferential policy has been promulgated yet.

Under the EIT Law there are specific criteria that should be met to qualify as a not-for-profit entity that is exempt from corporate income tax, and the preferential corporate income tax policy for education institutions under the 2003 Education Law has been superseded. No detailed implementation guidance has been provided to local tax authorities on how to apply these changes to schools.

The determination of our provision for income taxes, particularly for private schools, is subject to uncertainty. The strict application of the EIT Law indicates that certain of our private schools are subject to income tax of 25% after January 1, 2008. For those private schools where the tax authorities have not determined a deemed fixed amount or deemed fixed rate for the purposes of calculating income tax payable, we have assumed that income tax of 25% is payable. However, as of June 30, 2021, no detailed implementation guidance has been provided to local tax authorities on how to apply the EIT Law to private schools. It is possible that, upon the introduction of the detailed implementation guidance, we may find ourselves in a position whereby income tax is not payable for periods prior to the release of the detailed guidance.

The amount of income tax payable by our PRC subsidiaries, VIEs and schools in the future will depend on various factors, including, among other things, the results of operations and taxable income of, and the statutory tax rate applicable to, such PRC subsidiaries, and our effective tax rate depends partially on the extent of each of our subsidiaries’ relative contribution to our consolidated taxable income. If further detailed guidance is issued by the State Administration of Taxation on how to apply the EIT Law to schools, this may also have an impact on the amount of income tax payable by our own schools.

Critical accounting policies and estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company, its Wholly Owned Foreign Enterprise (“WOFEs”) and its VIEs. We have adopted the guidance of accounting for VIEs, which requires VIEs to be consolidated by the primary beneficiary of the entity. The Company and its WOFEs have entered into contractual arrangements with the VIEs and their shareholders, which enable the Company to (1) have power to direct activities that most significantly affect the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and has consolidated the VIEs’ financial results of operations, assets and liabilities in the Company’s consolidated financial statements. All inter-company transactions and balances have been eliminated upon consolidation.

The entities apart from the consolidated VIEs mainly include Ambow Education Holding Ltd., Ambow Shengying, Beijing Ambow Chuangying Education and Technology Co., Ltd. (“Ambow Chuangying”), Beijing BoheLe Science and Technology Co., Ltd. (“BoheLe”), Ambow Education Inc., Ambow BSC Inc., Bay State College, Ambow NSAD Inc., NewSchool, three holding companies registered in Cayman and six holding companies registered in Hong Kong. Bay State College and NewSchool offer post-secondary educational services in U.S. Other entities than Bay State College and NewSchool are investment holding companies. Assets and liabilities of these entities mainly include cash, current accounts balances of inter-group financing and transactions.

The separated VIE and Non-VIE financial information as of June 30, 2021 was as follows (in RMB thousands):


	****		****		****	Inter-	****
		VIEs		Non-VIEs		company		Group
		Consolidated		Consolidated		Elimination		Consolidated
Cash and cash equivalent		132,038		36,386		—		168,424
Inter-Group balances due from VIEs/Non VIEs		1,746,415		2,252,618		(3,999,033)		—
Other current assets		206,365		29,163		—		235,528
Non-current assets		304,639		300,381		—		605,020
Total Assets		2,389,457		2,618,548		(3,999,033)		1,008,972
Inter-Group balances due to VIEs/Non VIEs		2,685,423		1,362,351		(4,047,774)		—
Other current liabilities		529,164		88,314		—		617,478
Non-current liabilities		105,876		136,627		—		242,503
Total Liabilities		3,320,463		1,587,292		(4,047,774)		859,981
Equity		(931,006)		1,031,256		48,741		148,991

The separated VIE and Non-VIE financial information as of December 31, 2020 was as follows (in RMB thousands):


	****		****		****	Inter-	****
		VIEs		Non-VIEs		company		Group
		Consolidated		Consolidated		Elimination		Consolidated
Cash and cash equivalents		67,269		51,552		—		118,821
Inter-Group balances due from VIEs/Non VIEs		1,759,421		2,680,978		(4,440,399)		—
Other current assets		274,440		30,868		—		305,308
Non-current assets		311,948		313,640		—		625,588
Total Assets		2,413,078		3,077,038		(4,440,399)		1,049,717
Inter-Group balances due to VIEs/Non VIEs		2,671,922		1,792,790		(4,464,712)		—
Other current liabilities		555,698		87,897		—		643,595
Non-current liabilities		109,676		155,292		—		264,968
Total Liabilities		3,337,296		2,035,979		(4,464,712)		908,563
Equity		(924,218)		1,041,059		24,313		141,154

The separated VIE and Non-VIE net revenues and net income (loss) for the six months ended June 30, 2021 was as follows (in RMB thousands):


	****		****		****	Inter-	****
		VIEs		Non-VIEs		company		Group
		Consolidated		Consolidated		Elimination		Consolidated
Net Revenues		234,926		66,930		—		301,856
Net Income (Loss)		27,915		(20,323)		—		7,592

The separated VIE and Non-VIE net revenues and net (loss) income for the six months ended June 30, 2020 was as follows (in RMB thousands):


	****		****		****	Inter-	****
		VIEs		Non-VIEs		company		Group
		Consolidated		Consolidated		Elimination		Consolidated
Net Revenues		182,039		63,703		—		245,742
Net (Loss) Income		(20,764)		30,902		—		10,138

Revenue recognition

We have adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective transition method from January 1, 2018. Our revenue is generated from delivering educational programs and services and intellectualized operational services.

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 principal, the Group 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.

We have two reportable segments: 1) K-12 Schools, 2) CP&CE Programs. K-12 schools provide K-12 full curriculums educational services to pre-school children, primary and secondary students in China. CP&CE Programs offer tutoring services to pre-school children, primary and secondary students, provide vocational education services to undergraduate students in partner colleges, provide boarding and accommodation services to partner colleges or corporate customers, provide short-term outward bound and in-house training services to corporate clients, and provide intellectualized operational services to corporate clients, colleges and universities. Bay State College and NewSchool in U.S. under CP&CE Programs offers career-focused post-secondary educational services to undergraduate students in U.S.

For individual customers including pre-school children, primary and secondary students and undergraduate students, usually there are no written formal contracts between us and the students according to business practice. Records with student’s name, grades, 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 colleges and corporate clients, there are written formal contracts with these customers which recorded service fee, service period, each party’s rights and obligations and payment terms.

For individual customers including pre-school children, primary and secondary students and undergraduate students, our performance obligations are to provide acknowledged academic education from kindergarten till grade twelve to school-aged students within academic years, extracurricular tutoring services and post-secondary education with Associates and Bachelor’s programs within agreed-upon periods respectively. For college and corporate customers, our performance obligations are to provide customized vocational educational services to college students within academic years; or to provide boarding and accommodation services to customers for agreed-upon periods; or to provide short-term outward bound and in-house training services to corporate clients within agreed-upon periods; or to provide intellectualized operational services and warranty of agreed period of time.

For individual customers including pre-school children, primary and secondary students and undergraduate students, transaction price of each customer is the tuition and fee received normally up front. For college and corporate customers, transaction price of each customer is the service fee defined in the contract, net of value added tax, and would be received either up front or within payment terms depending on each contract. Circumstances like other variable consideration, significant financing component, noncash consideration, consideration payable to a customer did not exist.

For individual, college and corporate customers, we identify one performance obligation. The transaction prices are allocated to the one performance obligation. For intellectualized operational services to corporate customers, we identify two distinct performance obligations, which is to provide intellectualized operational services and warranty, since customers obtain different benefits from the two services separately and these two services are usually quoted to customers with stand-alone prices, which are determined by cost of services plus certain amount of profit. The transaction price from the contract is allocated according to stand-alone selling prices of each obligation.

For individual customers including pre-school children, primary and secondary students and undergraduate students, we satisfy performance obligations to students over time, and recognizes revenue according to tutoring hours or school days consumed in each month of a semester. For vocational education services, outbound and in-house training services, and boarding and accommodation services to college and corporate customers, we satisfy performance obligations to customers over time, and recognizes revenue according to the number of months within the academic year, or training days consumed in each month, or boarding service days within each month. For intellectualized operational service to corporate clients, we satisfy performance obligations to customers over time, use the cost-based input method to depict its performance in transferring control of services promised to the clients. Such input measure is determined by the proportional relation of the contract costs incurred to date relative to the estimated total contract costs at completion. For performance obligation of warranty, the change of control would be transferred to the customer over time. Accordingly, we recognize revenue using a straight line method within the whole warranty period.

Intangible assets, net

Intangible assets represent brand, software, trade name, student population, corporative agreement, customer relationship, license, trademark, workforce, non-compete agreement 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.

Other finite lived intangible assets are initially recorded at fair value when acquired in a business combination, in which the finite intangible assets are amortized on a straight-line basis except student populations and customer relationships, which are amortized using an accelerated method to reflect the expected departure rate over the remaining useful life of the asset. We review 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:


Software		2 years to 10 years
Student populations		1.8 years to 15 years
Trade names		Indefinite
Brand		Indefinite
Others		1.3 years to 10 years

We have determined that trade names and brand 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 brand. Consequently, the carrying amounts of trade names and brand are not amortized but are tested for impairment annually in the third quarter or more frequently if events or circumstances indicate that the assets may be impaired. Such impairment test consists of a comparison of the fair values of the trade names and brand with their carrying amounts and an impairment loss is recognized if and when the carrying amounts of the trade names and brand exceed their fair values.

We performed impairment testing of indefinite-lived intangible assets in accordance with ASC 350, which requires an entity to evaluate events and circumstances that may affect the significant inputs used to determine the fair value of the indefinite-lived intangible assets when performing qualitative assessment. When these events occur, we estimate the fair value of these trade names and brand with the Relief from Royalty method (“RFR”), which is one of the income approaches. RFR method is generally applied for assets that frequently licensed in exchange for royalty payments. As the owner of the asset is relieved from paying such royalties to a third party for using the asset, economic benefit is reflected by notional royalty savings. An impairment loss is recognized for any excess in the carrying value over the fair value of trade names and brand.

Income taxes

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not some portion or all of the deferred tax assets will not be realized. Income taxes are provided for in accordance with the laws of the relevant taxing authorities.

We do not record PRC withholding tax expense for foreign earnings which we plan to reinvest to expand our PRC operations. We considered business plans, planning opportunities and expected future outcomes in assessing the needs for future expansion and support of our operations. If our business plans change or our future outcomes differ from our expectations, PRC withholding tax expense and our effective tax rate could increase or decrease in that period.

We adopted the guidance on accounting for uncertainty in income taxes, which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on the de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating our uncertain tax positions and determining its provision for income taxes. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite its belief that its tax return positions are in accordance with applicable tax laws. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation, or the change of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate.

Lease

We adopted ASC 842 Leases as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842, and will not make the new required lease disclosures for comparative periods beginning before January 1, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among others things (i) allowed us to carry forward the historical lease classification; (ii) did not require us to reassess whether any expired or existing contracts are or contain leases; (iii) did not require us to reassess initial direct costs for any existing leases.

We identify 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, we recognize 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. We recognize lease expense for short-term leases on a straight-line basis over the lease term. For finance lease, we recognize finance lease right-of-use assets. The operating lease liabilities are recognized based on the present value of the lease payments not yet paid, discounted using our incremental borrowing rate over a similar term of the lease payments at lease commencement. Some of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are 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. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease

When none of the criteria of finance lease are met, we shall classify the lease as an operating lease.

Finance lease

We classify a lease as a finance lease when the lease meets any of the following criteria at lease commencement:

a.	The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;
b.	The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise;
---	---
c.	The lease term is for the major part of the remaining economic life of the underlying asset;
---	---
d.	The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments in accordance with ASC 842 paragraph 842-10-30-5(f) equals or exceeds substantially all of the fair value of the underlying asset;
---	---

e.	The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

Share-based compensation

We grant restricted shares to our employees and directors. Cost of employee services received is measured at the grant-date using the fair value of the equity instrument issued net of an estimated forfeiture rate, and therefore only recognizes compensation costs for those shares expected to vest over the service period of the award. Share-based compensation expense is recorded on a straight-line basis over the requisite service period, generally ranging from one year to four years.

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

Foreign currency translation and transactions

We use RMB as our reporting currency. The functional currency of the Company and its subsidiaries incorporated in the Cayman Islands, United States, Hong Kong and the British Virgin Islands is US$, the functional currency of our VIE and its subsidiary incorporated in Taiwan is TWD, and the functional currency of our VIE and their subsidiaries and branch companies in China is RMB. An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which it primarily generates and expends cash. We considered various indicators, such as cash flows, sales price, market expenses, financing and inter-company transactions and arrangements in determining an entity’s functional currency.

In the consolidated financial statements, the financial information of the Company and its subsidiaries, which use US$ and TWD as their functional currencies, have been translated into RMB. Assets and liabilities are translated from each subsidiary’s functional currency using the exchange rates as of the balance sheet date, equity accounts are translated using historical exchange rates, and revenues, costs, expenses, gains and losses are translated using the average rate for the period/year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income or loss in the statement of shareholders’ equity and comprehensive income.

Foreign currency transactions denominated in currencies other than functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from re-measurement at year-end are recognized in foreign currency exchange gain/loss, net on the consolidated statement of operations.

Results of operations

The following table sets forth a summary of our consolidated statements of operations for the periods indicated. This information should be read together with our unaudit condensed consolidated financial statements and related notes included elsewhere in this report. We believe that period-to-period comparisons of results of operations should not be relied upon as indicative of future performance.

Summary of Consolidated Statements of Operations


	****	For the six months ended June 30,					****	For the three months ended June 30,
		2021	****	2021	****	2020	****	2021	****	2021	****	2020
		US$		RMB		RMB		US$		RMB		RMB
		(in thousands)
Consolidated Statement of Operations Data:
NET REVENUES:
- Educational programs and services		46,635		301,104		245,659		26,576		171,590		155,392
- Intellectualized operational services		116		752		83		102		661		71
Total net revenues		46,751		301,856		245,742		26,678		172,251		155,463
COST OF REVENUES:
- Educational programs and services		(27,782)		(179,375)		(172,324)		(14,797)		(95,536)		(94,891)
- Intellectualized operational services		(299)		(1,930)		(1,458)		(122)		(786)		(160)
Total cost of revenues		(28,081)		(181,305)		(173,782)		(14,919)		(96,322)		(95,051)
GROSS PROFIT		18,670		120,551		71,960		11,759		75,929		60,412
Operating expenses:
Selling and marketing		(3,782)		(24,422)		(24,206)		(2,079)		(13,422)		(13,657)
General and administrative		(13,220)		(85,357)		(84,243)		(5,949)		(38,412)		(45,042)
Research and development		(868)		(5,602)		(2,698)		(582)		(3,757)		(1,567)
Total operating expenses		(17,870)		(115,381)		(111,147)		(8,610)		(55,591)		(60,266)
OPERATING (LOSS) INCOME		(800)		5,170		39,187		3,149		20,338		146
OTHER INCOME		863		5,577		50,948		519		3,351		6,727
Income before income tax and non-controlling interest		1,663		10,747		11,761		3,668		23,689		6,873
Income tax expense		(489)		(3,155)		(1,623)		(236)		(1,526)		(2,362)
NET INCOME		1,174		7,592		10,138		3,432		22,163		4,511
Less: Net loss contributable to non-controlling interest		(80)		(519)		(708)		(43)		(277)		(296)
NET INCOME ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD.		1,254		8,111		10,846		3,475		22,440		4,807
NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS		1,254		8,111		10,846		3,475		22,440		4,807

Six and three months ended June 30, 2021 compared with six and three months ended June 30, 2020

Net revenues. Our net revenues increased by RMB 56.2 million to RMB 301.9 (US$ 46.8 million) for the six months ended June 30, 2021 from RMB 245.7 million in the same period of 2020, and increased by RMB 16.8 million to RMB 172.3 (US$ 26.7 million) for the three months ended June 30, 2021 from RMB 155.5 million in the same period of 2020. The increases were mainly due to the full business recovery from the impact of the COVID-19 pandemic and higher revenue contribution from NewSchool which was acquired and consolidated by the Company in March 2020.

Cost of revenues. Our cost of revenues increased by RMB 7.5 million to RMB 181.3 million (US$ 28.1 million) for the six months ended June 30, 2021 from RMB 173.8 million in the same period of 2020, and increased by RMB 1.2 million to RMB 96.3 million (US$ 14.9 million) for the three months ended June 30, 2021 from RMB 95.1 million in the same period of 2020.The increases were mainly attributable to the full business recovery from the pandemic and more cost related to NewSchool as the consolidation of NewSchool started in March 2020.

Gross profit. Gross profit as a percentage of our net revenues increased to 39.9% in the six months ended June 30, 2021 from 29.3% in the same period of 2020, and increased to 44.1% in the three months ended June 30, 2021 from 38.9% in the same period of 2020. The increases were mainly attributable to faster growth of net revenues in the periods.

Operating expenses. Our total operating expenses increased by 3.9% to RMB 115.4 million (US$ 17.9 million) for the six months ended June 30, 2021 from RMB 111.1 million for the same period of 2020, and decreased by 7.8% to RMB 55.6 million (US$ 8.6 million) for the three months ended June 30, 2021 from RMB 60.3 million for the same period of 2020. The analysis of changes is as below.

●	Selling and marketing expenses. Our selling and marketing expenses increased by 0.8% to RMB 24.4 million (US$ 3.8 million) in the six months ended June 30, 2021 from RMB 24.2 million in the same period of 2020, and decreased by 2.2% to RMB 13.4 million (US$ 2.1 million) in the three months ended June 30, 2021 from RMB 13.7 million in the same period of 2020. The changes were relatively small in the periods.
●	General and administrative expenses. Our general and administrative expenses increased by 1.4% to RMB 85.4 million (US$ 13.2 million) in the six months ended June 30, 2021 from RMB 84.2 million in the same period of 2020. The increase was mainly due to more expenses related to NewSchool as the consolidation of NewSchool started in March 2020. General and administrative expenses decreased by 14.7% to RMB 38.4 million (US$ 5.9 million) in the three months ended June 30, 2021 from RMB 45.0 million in the same period of 2020. The decrease was mainly attributable to stringent expense controls to improve operating efficiency.
---	---
●	Research and development expenses. Our research and development expenses increased by 107.4% to RMB 5.6 million (US$ 0.9 million) in the six months ended June 30, 2021 from RMB 2.7 million in the same period of 2020, and increased by 137.5% to RMB 3.8 million (US$ 0.6 million) in the three months ended June 30, 2021 from RMB 1.6 million in the same period of 2020. The increases were mainly due to more expenditures on personnel.
---	---

Other income, net. We recorded net other income of RMB 5.6 million (US$ 0.9 million) for the six months ended June 30, 2021, compared to net other income of RMB 50.9 million in the same period of 2020, which mainly included RMB 40.3 million gain on the bargain purchase from acquisition of NewSchool. We recorded net other income of RMB 3.4 million (US$ 0.5 million) for the three months ended June 30, 2021, compared to net other income of RMB 6.7 million in the same period of 2020.

Income tax expense. Our income tax expense increased by RMB 1.6 million to RMB 3.2 million (US$ 0.5 million) for the six months ended June 30, 2021 from RMB 1.6 million in the same period of 2020, decreased by RMB 0.9 million to RMB 1.5 million (US$ 0.2 million) for the three months ended June 30, 2021 from RMB 2.4 million in the same period of 2020.

Net Income. According to above mentioned factors, our net income decreased by RMB 2.5 million to RMB 7.6 million (US$ 1.2 million) for the six months ended June 30, 2021 from income of RMB 10.1 million in the same period of 2020, and increased by RMB 17.7 million to RMB 22.2 million (US$ 3.4 million) for the three months ended June 30, 2021 from RMB 4.5 million in the same period of 2020.

Discussion of segment operations

We offer a wide range of educational and career enhancement services and products focusing on improving educational opportunities for primary and advanced degree school students and employment opportunities for university graduates.

Our chief operating decision maker (“CODM”) has been identified as our CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing our performance. We have two reportable segments: 1) K-12 schools, 2) CP&CE Programs. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The following table lists our net revenues, cost of revenues, gross profit and gross margin by our reportable segments for the periods indicated:


	****	For the six months ended June 30,					****	For the three months ended June 30,
		2021	****	2021	****	2020	****	2021	****	2021	****	2020
		US$		RMB		RMB		US$		RMB		RMB
		(in thousands)
Consolidated Statement of Operations Data:
Net revenues:
K-12 Schools		27,205		175,650		126,800		16,223		104,748		85,389
CP&CE Programs		19,546		126,206		118,942		10,455		67,503		70,074
Total net revenues of reportable segments and the Company		46,751		301,856		245,742		26,678		172,251		155,463
Cost of revenues:
K-12 Schools		(15,161)		(97,886)		(74,542)		(8,100)		(52,297)		(41,113)
CP&CE Programs		(12,920)		(83,419)		(99,240)		(6,819)		(44,025)		(53,938)
Total costs of revenues of reportable segments and the Company		(28,081)		(181,305)		(173,782)		(14,919)		(96,322)		(95,051)
Gross profit
K-12 Schools		12,044		77,764		52,258		8,123		52,451		44,276
CP&CE Programs		6,626		42,787		19,702		3,636		23,478		16,136
Total gross profit of reportable segments and the Company		18,670		120,551		71,960		11,759		75,929		60,412
Gross margin
K-12 Schools		44.3	%	44.3	%	41.2	%	50.1	%	50.1	%	51.9	%
CP&CE Programs		33.9	%	33.9	%	16.6	%	34.8	%	34.8	%	23.0	%
Total gross margin of reportable segments and the Company		39.9	%	39.9	%	29.3	%	44.1	%	44.1	%	38.9	%

Six and three months ended June 30, 2021 compared with six and three months ended June 30, 2020

K-12 Schools

The net revenues increased by RMB 48.9 million to RMB 175.7 million (US$ 27.2 million) for the six months ended June 30, 2021 from RMB 126.8 million in the same period of 2020, and increased by RMB 19.3 million to RMB 104.7 million (US$ 16.2 million) for the three months ended June 30, 2021 from RMB 85.4 million in the same period of 2020. The increases were primarily due to the full business recovery from the impact of the COVID-19 pandemic in the first half of 2021.

The cost of revenues increased by RMB 23.4 million to RMB 97.9 million (US$ 15.2 million) for the six months ended June 30, 2021 from RMB 74.5 million in the same period of 2020, and increased by RMB 11.2 million to RMB 52.3 million (US$ 8.1 million) for the three months ended June 30, 2021 from RMB 41.1 million in the same period of 2020. The increases were primarily attributable to the full business recovery from the pandemic.

The gross profit margin increased to 44.3% for six months ended June 30, 2021 from 41.2% for the same period of 2020, and decreased to 50.1% for three months ended June 30, 2021 from 51.9% for the same period of 2020. The changes in gross profit margins were insignificant.

CP&CE Programs

The net revenues increased by RMB 7.3 million to RMB 126.2 million (US$ 19.5 million) for the six months ended June 30, 2021 from RMB 118.9 million in the same period of 2020, which was mainly due to the full business recovery from the pandemic and higher revenue contribution from NewSchool which was acquired and consolidated by the Company in March 2020. Net revenues decreased by RMB 2.6 million to RMB 67.5 million (US$ 10.5 million) for the three months ended June 30, 2021 from RMB 70.1 million in the same period of 2020, which was insignificant.

The cost of revenues decreased by RMB 15.8 million to RMB 83.4 million (US$ 12.9 million) for the six months ended June 30, 2021 from RMB 99.2 million in the same period of 2020, and decreased by RMB 9.9 million to RMB 44.0 million (US$ 6.8 million) for the three months ended June 30, 2021 from RMB 53.9 million in the same period of 2020. The decreases were primarily attributable to stringent cost controls to improve operating efficiency.

The gross profit margin increased to 33.9% for six months ended June 30, 2021 from 16.6% for the same period of 2020, and increased to 34.8% for three months ended June 30, 2021 from 23.0% for the same period of 2020. The changes were primarily contributed by the decrease of cost in the periods.

B. Liquidity and Capital Resources

As of June 30, 2021, our consolidated current liabilities exceeded consolidated current assets by RMB 213.5 million. With certain non-cash payment adjustments excluded from the current liabilities, the gap between the current liabilities and current assets has been significantly reduced. Our consolidated net assets were amounting to RMB 149.0 million as of June 30, 2021. There are no liquidity concerns noted in the next 12 months.

Our principal sources of liquidity have been cash provided by operating activities. We had net cash used in operating activities of RMB 19.3 million and RMB 62.0 million for the six months ended June 30, 2021 and 2020, respectively. The net cash outflow for both periods were mainly due to seasonal fluctuations. As of June 30, 2021, we had RMB 168.4 million in unrestricted cash and cash equivalents, RMB 85.7 million in short-term investments, available for sale, and RMB 2.0 million in short-term investments, held to maturity.

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

From the beginning of 2021, all our K-12 schools, tutoring centers and training offices in China have been into full business operation. Teachers and students of Bay State College and NewSchool in U.S. returned to campus from September 2021. Yet the pandemic continues to be fluid and uncertain, making it difficult to forecast the final impact it could have on our future operations.

There were certain regulatory policy updates in the past period of 2021. On April 7, 2021, Chinese regulatory authorities promulgated an amendment to the Implementation Rules of the Law for Promoting Private Education, which has been effective since September 1, 2021. The Implementation Rules stipulated, among other provisions, that (1) sponsors of private schools may choose to establish schools as either non-profit or for-profit schools, but nine-year compulsory education schools cannot be operated as for-profit schools; (2) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education; (3) group-based education organizations shall not control non-profit private schools through mergers and acquisitions, franchise agreements and contractual arrangements; and (4) related party transactions entered into by private schools shall be open, fair and just, and shall not harm national interests, school interests, or student or teacher interests. The Group is assessing the impact of the Implementation Rules and formulating different scenarios as compliance measures. There are still significant uncertainties with respect to those scenarios. The Group, however, does not expect any related liquidity concerns in the next 12 months. On July 24, 2021, Chinese regulatory authorities issued a set of guidelines aiming to ease the burden of excessive homework and after-school tutoring on students receiving an elementary school or junior high school education (the "Guidelines"). The Group does not expect its operations to be materially affected by the Guidelines.

We believe that available cash and cash equivalents, short-term investments, available for sale and short-term investments, held to maturity, cash provided by operating activities, together with cash available from the activities mentioned above, should enable us to meet presently anticipated cash needs for at least the next 12 months after the date that the financial statements are issued and we have prepared the consolidated financial statements on a going concern basis. However, we continue to have ongoing obligations and we expect that we will require additional capital in order to execute our longer-term business plan. If we encounter 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, curtailing our business development activities, suspending the pursuit of our business plans, obtaining credit facilities, controlling overhead expenses and seeking to further dispose of non-core assets. Management cannot provide any assurance that we will raise additional capital if needed.

Condensed summary of our cash flows


	****	For the six months ended June 30,
		2021	2021		2020
		US	RMB	****	RMB
		(in thousands)
Net cash used in operating activities		(2,997)	(19,339)		(61,989)
Net cash provided by investing activities		10,816	69,839		7,602
Net cash provided by financing activities		—	—		10,409
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(11)	(71)		(1,007)
Net change in cash, cash equivalents and restricted cash		7,808	50,429		(44,985)
Cash, cash equivalents and restricted cash at beginning of periods		18,534	119,645		157,600
Cash, cash equivalents and restricted cash at end of periods		26,342	170,074		112,615

All values are in US Dollars.

Operating activities

Net cash used in operating activities amounted to RMB 19.3 million (US$ 3.0 million) in the six months ended June 30, 2021, as compared to net cash used in operating activities of RMB 62.0 million in the same period of 2020.

Investing activities

Net cash provided by investing activities amounted to RMB 69.8 million (US$ 10.8 million) in six months ended June 30, 2021, as compared to net cash provided by investing activities of RMB 7.6 million in the same period of 2020.

Net cash provided by investing activities in the six months ended June 30, 2021 was mainly attributable to proceeds from redemption of available-for-sale investments of RMB 100.5 million (US$ 15.6 million), proceeds from redemption of held-to-maturity investments of RMB 164.0 million (US$ 25.4 million), partially offset by purchase of available-for-sale investments of RMB 68.0 million (US$ 10.5 million), purchase of held-to-maturity investments of RMB 121.0 million (US$ 18.7 million), purchase of property and equipment of RMB 1.0 million (US$ 0.2 million), purchase of intangible assets of RMB 0.3 million (US$ 0.05 million) and prepayment for leasehold improvement of RMB 4.4 million (US$ 0.7 million).

Net cash provided by investing activities in the six months ended June 30, 2020 was mainly attributable to proceeds from redemption of available-for-sale investments of RMB 65.0 million, proceeds from redemption of held-to-maturity investments of RMB 41.0 million, net cash resulted from purchase of subsidiary of RMB 37.6 million, partially offset by purchase of available-for-sale investments of RMB 86.0 million, purchase of held-to-maturity investments of RMB 25.0 million, loan to third party of RMB 19.9 million, purchase of property and equipment of RMB 2.2 million, and purchase of other non-current assets of RMB 2.9 million.

Financing activities

Net cash provided by financing activities amounted to RMB nil million (US$ nil million) in the six months ended June 30, 2021, as compared to net cash provided by financing activities amounted to RMB 10.4 million in the same period of 2020, which was attributable to proceeds from long-term borrowing amounted to RMB 10.4 million.

Long-term/short-term borrowings

Loan agreements for long-term/short-term borrowings consisted of the following:


	****		****	As of June 30,	As of December 31,
		Maturities		2021	2020
				RMB	RMB
				(In thousands)
Bank borrowing from Huaxia Bank		September 2021		10,000	10,000
Bank borrowing from Small Business Administration		May 2022		9,498	9,594

The weighted average interest rate of the borrowings outstanding was 2.7% and 2.7% per annum as of June 30, 2021 and December 31, 2020, respectively. The fair values of the borrowings approximate their carrying amounts. The weighted average borrowings for the six months ended June 30, 2021 and 2020 was RMB 19.5 million and RMB 3.5 million, respectively.

The borrowings incurred interest expenses were RMB 0.3 million and RMB 0.02 million for the six months ended June 30, 2021 and 2020, respectively. There was neither capitalization as additions to construction in progress nor guarantee fees for the six months ended June 30, 2021 and 2020, respectively.

Refer to Note 9 Short-Term Borrowings to the unaudited condensed consolidated financial statements for further information.

Capital expenditures

Our capital expenditures were RMB 5.6 million (US$ 0.9 million) and RMB 2.2 million in the six months ended June 30, 2021 and 2020, respectively. These capital expenditures were incurred primarily for investments in property, facilities, equipment, leasehold improvement and technology.

Holding company structure

We conduct our operations primarily through our wholly-owned subsidiary in China, Ambow Shengying, Ambow Chuangying, BoheLe, Ambow Education Management (Hong Kong) Limited (“Ambow Education Management”) and their affiliated PRC entities, which we collectively refer to as our VIEs and their respective subsidiaries.

As a result, our ability to pay dividends and to finance any debt we may incur depends primarily upon dividends paid by Ambow Shengying, Ambow Chuangying, BoheLe, Ambow Education Management and fees paid by Ambow Sihua Intelligent Technology Co., Ltd. (“Ambow Sihua”), Shanghai Ambow Education Information Consulting Co., Ltd. (“Ambow Shanghai”), Ambow Shida, Beijing Le’An Operational Management Co., Ltd. (“Beijing Le’An”), Ambow Rongye Education and Technology Co., Ltd. (“Ambow Rongye”), Ambow Zhixin Education and Technology Co., Ltd. (“Ambow Zhixin”) and IValley Co., Ltd. (“IValley”) and their subsidiaries to Ambow Shengying, Ambow Chuangying, BoheLe and Ambow Education Management for sales of services and products. Fees paid by VIEs and subsidiaries are mainly for sales of services. The aggregate amount that VIEs and subsidiaries had paid to Ambow Shengying, Ambow Chuangying, BoheLe and Ambow Education Management were insignificant for the reporting period, and the aggregate amount of fees payable from the VIE and subsidiaries to Ambow Shengying, Ambow Chuangying, BoheLe and Ambow Education Management were insignificant for the reporting period.

If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries incorporated as companies may only distribute dividends after they have made allowances to fund certain statutory reserves. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of the companies.

Ambow Sihua, Ambow Shanghai, Ambow Shida, Ambow Rongye and Ambow Zhixin own and/or operate private schools, tutoring centers, career enhancement centers and training offices in China. At the end of each fiscal year, every private school in China is required to allocate a certain amount to its development fund for the construction or maintenance of the school or procurement or upgrade of educational equipment. In the case of a private school that requires reasonable returns, this amount shall be no less than 25% of the annual net income of the school, while in the case of four of our private schools that do not require reasonable returns, this amount shall be equivalent to no less than 25% of the annual increase in the net assets of the school (as determined under the generally accepted accounting principles of the PRC), if any. Pursuant to an amendment to The Law for Promoting Private Education on November 7, 2016, which went into effect on September 1, 2017, sponsors of for-profit private schools are entitled to retain the profits from their schools and the operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant laws and regulations.

Inflation

Inflation in China has not materially impacted our results of operations in recent years. Although we were not materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

C. Research and Development, Patents and Licenses

We have an in-house research and development team with 59 full-time software and educational professionals as of June 30, 2021 to design and develop our educational and intellectualized operational programs and services. We integrate the best content from our schools, tutoring centers and career enhancement centers into our qualified content database and then introduce it to our nationwide student user base. In the six months ended June 30, 2021 and 2020, and three months ended June 30, 2021 and 2020, we spent RMB 5.6 million (US$ 0.9 million) and RMB 2.7 million, RMB 3.8 million (US$ 0.6 million) and RMB 1.6 million, respectively, on research and development expenses.

D. Trend Information

For a discussion of significant recent trends in our financial condition and results of operations, please see “A Operating and Financial Review and Prospects—Operating Results” and “B Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

E. Off-balance sheet arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

There were no new off-balance sheet arrangements as of June 30, 2021 and December 31, 2020.

F. Contractual Obligations

The following table presents a summary of our contractual obligations and payments, by period, as of June 30, 2021.


	****	Payments Due by Period
			2021
		Total	(remaining)	2022-2023	2024-2025	Thereafter
		RMB	RMB	RMB	RMB	RMB
		(in millions)
Operating lease obligations		314.2	29.9	88.7	85.4	110.2
Short-term borrowings obligations		19.5	19.5	—	—	—