AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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

As of December 31,

As of December 31,

2019

2018

US$

RMB

RMB

ASSETS

Current assets:

Cash and cash equivalents

22,638

157,600

211,436

Restricted cash

–

–

30,072

Short term investments, available for sale

8,257

57,487

47,208

Short term investments, held to maturity

4,453

31,000

70,000

Accounts receivable, net

2,577

17,939

18,132

Amounts due from related parties

333

2,318

1,105

Prepaid and other current assets, net

19,147

133,296

134,770

Loan receivable, current

–

–

42,677

Total current assets

57,405

399,640

555,400

Non-current assets:

Property and equipment, net

22,618

157,463

165,933

Land use rights, net

253

1,759

1,804

Intangible assets, net

8,131

56,607

92,412

Goodwill

8,669

60,353

73,166

Deferred tax assets, net

1,464

10,195

10,240

Operating lease right-of-use asset

36,968

257,361

–

Finance lease right-of-use asset

926

6,450

–

Other non-current assets, net

10,194

70,971

11,264

Total non-current assets

89,223

621,159

354,819

Total assets

146,628

1,020,799

910,219

LIABILITIES

Current liabilities:

Deferred revenue  *

23,717

165,111

124,250

Accounts payable  *

2,113

14,718

13,583

Accrued and other liabilities  *

27,717

192,957

256,325

Borrowing from third party, current 

–

–

41,179

Income taxes payable, current  *

25,958

180,715

207,114

Amounts due to related parties  *

283

1,971

2,696

Operating lease liability, current  *

7,687

53,512

–

Total current liabilities

87,475

608,984

645,147

Non-current liabilities:

Consideration payable for acquisitions

–

–

1,322

Other non-current liabilities

–

–

979

Income taxes payable, non-current  *

4,618

32,152

–

Operating lease liability, non-current  *

31,036

216,067

–

Total non-current liabilities

35,654

248,219

2,301

Total liabilities

123,129

857,203

647,448

EQUITY

Preferred shares

(US$ 0.003 par value;1,666,667 shares authorized,
nil issued and outstanding as of December 31,
2018 and 2019) 

–

–

–

Class A Ordinary shares

(US$0.003 par value; 66,666,667 and
66,666,667 shares authorized, 38,756,289
and 38,858,199 shares issued and
outstanding as of December 31, 2018 and
2019, respectively)

105

730

728

Class C Ordinary shares

(US$0.003 par value; 8,333,333 and 8,333,333
shares authorized, 4,708,415 and 4,708,415
shares issued and outstanding as of
December 31, 2018 and 2019, respectively)

13

90

90

Additional paid-in capital

504,000

3,508,745

3,507,123

Statutory reserve

2,899

20,185

20,149

Accumulated deficit

(484,331)

(3,371,815)

(3,271,838)

Accumulated other comprehensive income

911

6,341

8,305

Total Ambow Education Holding Ltd.’s equity

23,597

164,276

264,557

Non-controlling interests

(98)

(680)

(1,786)

Total equity

23,499

163,596

262,771

Total liabilities and equity

146,628

1,020,799

910,219

*  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 CHANGES IN EQUITY

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

Attributable to Ambow Education Holding Ltd.’s Equity

Retained

Accumulated

Class A Ordinary

Class C Ordinary

Additional

Earnings

other

Non-

shares

shares

paid-in

Statutory

(Accumulated

comprehensive

controlling

Total

Shares

Amount

Amount

capital

reserves

deficit)

income

Interest

Equity

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

Balance as of January 1,
     2019

38,756,289

728

4,708,415

90

3,507,123

20,149

(3,271,838)

8,305

(1,786)

262,771

Share-based compensation

–

–

–

–

872

–

–

–

–

872

Issuance of ordinary shares
      for restricted stock award

28,646

1

–

–

(1)

–

–

–

–

–

Foreign currency translation
      adjustment

–

–

–

–

–

–

–

(2,428)

–

Unrealized gain on
      investment, net of income
      taxes

–

–

–

–

–

–

–

75

–

75

Net loss

–

–

–

–

–

–

(23,756)

–

(93)

(23,849)

Balance as of March 31,
2019

38,784,935

729

4,708,415

90

3,507,994

20,149

(3,295,594)

5,952

(1,879)

237,441

Share-based compensation

–

–

–

–

266

–

–

–

–

266

Issuance of ordinary shares
     for restricted stock award

19,097

0

–

–

(0)

–

–

–

–

–

Foreign currency translation
     adjustment

–

–

–

–

–

–

–

(746)

–

(746)

Unrealized gain on
      investment, net of income 
      taxes

–

–

–

–

–

–

–

173

–

173

Addition of noncontrolling
     interests resulting from
     new subsidiaries

–

–

–

–

–

–

–

–

502

502

Net income/(loss)

–

–

–

–

–

–

8,778

–

(180)

8,598

Balance as of June 30,
     2019

38,804,032

729

4,708,415

90

3,508,260

20,149

(3,286,816)

5,379

(1,557)

246,234

Share-based compensation

–

–

–

–

244

–

–

–

–

244

Foreign currency translation
     adjustment

–

–

–

–

–

–

–

(93)

–

(93)

Unrealized gain on
     investment, net of income
     taxes

–

–

–

–

–

–

–

501

–

501

Net (loss)/income

–

–

–

–

–

–

(72,811)

–

4

(72,807)

Balance as of
     September 30, 2019

38,804,032

729

4,708,415

90

3,508,504

20,149

(3,359,627)

5,787

(1,553)

174,079

Share-based compensation

–

–

–

–

242

–

–

–

–

242

Issuance of ordinary shares
     for restricted stock award

54,167

1

–

–

(1)

–

–

–

–

–

Foreign currency translation
     adjustment

–

–

–

–

–

–

–

343

–

343

Appropriation to statutory
      reserves

–

–

–

–

–

36

(36)

–

–

–

Unrealized gain on
      investment, net of income
      taxes

–

–

–

–

–

–

–

211

–

211

Deregistration of
      subsidiaries

–

–

–

–

–

–

–

–

306

306

Noncontrolling interests
     from new subsidiaries

–

–

–

–

–

–

–

–

783

783

Net loss

–

–

–

–

–

–

(12,152)

–

(216)

(12,368)

Balance as of
      December 31, 2019

38,858,199

730

4,708,415

90

3,508,745

20,185

(3,371,815)

6,341

(680)

163,596

Balance as of January 1,
     2018

34,206,939

640

4,708,415

90

3,456,307

20,036

(3,316,715)

6,876

(1,275)

165,959

Share-based compensation

–

–

–

–

616

–

–

–

–

616

Issuance of ordinary shares
     for restricted stock award

30,187

1

–

–

(1)

–

–

–

–

–

Foreign currency translation
     adjustment

–

–

–

–

–

–

–

3,276

–

3,276

Unrealized gain on
     investment, net of income
     taxes

–

–

–

–

–

–

–

64

–

64

Deregistration of
     subsidiaries

–

–

–

–

–

–

–

–

(9)

(9)

Net (loss)/income

–

–

–

–

–

–

(7,062)

–

93

(6,969)

Balance as of March 31,
     2018

34,237,126

641

4,708,415

90

3,456,922

20,036

(3,323,777)

10,216

(1,191)

162,937

Share-based compensation

–

–

–

–

618

–

–

–

–

618

Issuance of ordinary shares
     for restricted stock award

30,187

0

–

–

(0)

–

–

–

–

–

Issuance of ordinary shares
     on IPO

4,140,000

80

–

–

46,047

–

–

–

–

46,127

Foreign currency translation
      adjustment

–

–

–

–

–

–

–

(1,523)

–

(1,523)

Unrealized gain on
     investment, net of income
     taxes

–

–

–

–

–

–

–

69

–

69

Buy-outs of noncontrolling
     interests

–

–

–

–

(2,619)

–

–

–

(1,885)

(4,504)

Deregistration of
     subsidiaries

–

–

–

–

–

–

–

–

(41)

(41)

Net income/(loss)

–

–

–

–

–

–

33,312

–

(143)

33,169

38,407,313

721

4,708,415

90

3,500,968

20,036

(3,290,465)

8,762

(3,260)

236,852

Share-based compensation

–

–

–

–

655

–

–

–

–

655

Issuance of ordinary shares
     for restricted stock award

29,355

0

–

–

(0)

–

–

–

–

–

Foreign currency translation
      adjustment

–

–

–

–

–

–

–

(501)

–

(501)

Unrealized gain on
      investment, net of income
      taxes

–

–

–

–

–

–

–

(114)

–

(114)

Buy-outs of noncontrolling
     interests

–

–

–

–

–

–

–

–

1

1

Net (loss)/income

–

–

–

–

–

–

(12,413)

–

89

(12,324)

Balance as of
     September 30, 2018

38,436,668

721

4,708,415

90

3,501,623

20,036

(3,302,878)

8,147

(3,170)

224,569

Share-based compensation

–

–

–

–

6,232

–

–

–

–

6,232

Issuance of ordinary shares 
     for restricted stock award

319,621

7

–

–

(7)

–

–

–

–

–

Issuance of ordinary shares
     on IPO

–

–

–

–

(725)

–

–

–

–

(725)

Foreign currency translation
     adjustment

–

–

–

–

–

–

–

52

–

52

Appropriation to statutory
     reserves

–

–

–

–

–

113

(113)

–

–

–

Unrealized gain on
      investment, net of income
      taxes

–

–

–

–

–

–

–

106

–

106

Buy-outs of noncontrolling
     interests

–

–

–

–

–

–

–

–

3

3

Capital injection from
     minority shareholders

–

–

–

–

–

–

–

–

1,470

1,470

Net income/(loss)

–

–

–

–

–

–

31,153

–

(89)

31,064

Balance as of
     December 31, 2018

38,756,289

728

4,708,415

90

3,507,123

20,149

(3,271,838)

8,305

(1,786)

262,771

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the years ended December 31,

For the three months ended December 31,

2019

2019

2018

2019

2019

2018

US$

RMB

RMB

US$

RMB

RMB

NET REVENUES

 Educational program and
      services

83,700

582,706

525,134

24,899

173,339

168,705

Intelligent program and
    services

173

1,203

6,374

1

10

340

Total net revenues

83,873

583,909

531,508

24,900

173,349

169,045

COST OF REVENUES

 Educational program and
     services

(55,106)

(383,635)

(331,939)

(16,976)

(118,181)

(110,948)

Intelligent program and
      services

(755)

(5,259)

(6,204)

80

559

(1,016)

Total cost of revenues

(55,861)

(388,894)

(338,143)

(16,896)

(117,622)

(111,964)

GROSS PROFIT

28,012

195,015

193,365

8,004

55,727

57,081

Operating expenses:

Selling and marketing

(8,004)

(55,721)

(43,751)

(2,146)

(14,943)

(11,784)

General and administrative

(27,926)

(194,417)

(132,718)

(7,743)

(53,907)

(35,846)

Research and development

(545)

(3,793)

(1,513)

(321)

(2,238)

134

Impairment loss

(5,567)

(38,754)

–

–

–

–

Total operating expenses

(42,042)

(292,685)

(177,982)

(10,210)

(71,088)

(47,496)

OPERATING (LOSS)
INCOME

(14,030)

(97,670)

15,383

(2,206)

(15,361)

9,585

OTHER INCOME
   (EXPENSES)

Interest income

773

5,379

6,652

292

2,036

1,285

Foreign exchange gain, net

3

23

372

(3)

(23)

218

Other income, net

57

396

1,447

29

203

930

Gain from derecognition of
     liabilities

–

–

15,226

–

–

15,226

Gain on deregistration of
     subsidiaries

264

1,841

2,858

81

562

(362)

Gain from fair value change of
      contingent consideration
      payable

190

1,322

5,444

190

1,322

5,444

Gain on sale of investment
     available for sale

172

1,200

1,056

112

778

297

Total other income

1,459

10,161

33,055

701

4,878

23,038

(LOSS) INCOME BEFORE
   INCOME TAX AND NON-
   CONTROLLING
   INTEREST

(12,571)

(87,509)

48,438

(1,505)

(10,483)

32,623

Income tax expense

(1,855)

(12,917)

(3,498)

(271)

(1,885)

(1,559)

NET (LOSS) INCOME

(14,426)

(100,426)

44,940

(1,776)

(12,368)

31,064

Less: Net loss attributable to
     non-controlling interest

(70)

(485)

(50)

(31)

(216)

(89)

NET (LOSS) INCOME
   ATTRIBUTABLE TO
   ORDINARY
   SHAREHOLDERS

(14,356)

(99,941)

44,990

(1,745)

(12,152)

31,153

NET (LOSS) INCOME

(14,426)

(100,426)

44,940

(1,776)

(12,368)

31,064

OTHER
     COMPREHENSIVE
     INCOME, NET OF TAX

Foreign currency translation
     adjustments

(420)

(2,924)

1,304

49

343

52

Unrealized gains on short term
     investments

  Unrealized holding gains
     arising during period

294

2,046

776

116

808

330

  Less: reclassification
      adjustment for gains
     included in net income

156

1,086

651

86

597

224

Other comprehensive (loss)
      income

(282)

(1,964)

1,429

79

554

158

TOTAL
     COMPREHENSIVE
     (LOSS) INCOME

(14,708)

(102,390)

46,369

(1,697)

(11,814)

31,222

Net (loss) income per share –
     basic

(0.33)

(2.30)

1.09

(0.04)

(0.28)

0.72

Net (loss) income per share –
     diluted

(0.33)

(2.30)

1.08

(0.04)

(0.28)

0.71

Weighted average shares used
     in calculating basic net
     (loss) income per share

43,505,175

43,505,175

41,342,597

43,529,884

43,529,884

43,255,473

43,505,175

43,505,175

41,671,763

43,529,884

43,529,884

43,589,336

Discussion of Segment Operations

(All amounts in thousands)

For the years ended December 31,

For the three months ended December 31,

2019

2019

2018

2019

2019

2018

US$

RMB

RMB

US$

RMB

RMB

NET REVENUES

K-12 Schools *

45,067

313,747

277,790

15,877

110,533

101,614

CP&CE Programs  *

38,806

270,162

253,718

9,023

62,816

67,431

Total net revenues

83,873

583,909

531,508

24,900

173,349

169,045

COST OF REVENUES

K-12 Schools  *

(28,306)

(197,064)

(178,645)

(9,793)

(68,177)

(69,958)

CP&CE Programs  *

(27,555)

(191,830)

(159,498)

(7,103)

(49,445)

(42,006)

Total cost of revenues

(55,861)

(388,894)

(338,143)

(16,896)

(117,622)

(111,964)

GROSS PROFIT

K-12 Schools  *

16,761

116,683

99,145

6,084

42,356

31,656

CP&CE Programs  *

11,251

78,332

94,220

1,920

13,371

25,425

Total gross profit

28,012

195,015

193,365

8,004

55,727

57,081

* Ambow previously had three reportable segments, including Better School, Better Job and Others for the years prior to 2019. In
2019, in response to the shift of business development focus, Ambow changed its management approach to organize reportable
segments to make operating decisions and assess performance. New reportable segments include K-12 schools and College
Preparation & Career Enhancement Programs (“CP&CE Programs”), which provide K-12 educational services and tutoring and
vocational educational services, respectively.