{"url_path":"/sec/ccgww/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1965473/0001493152-26-019130-index.html","accession_number":"0001493152-26-019130","cik":"0001965473","ticker":"CCG","issuer_name":"Cheche Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1965473/0001493152-26-019130-index.html","primary_entity_key":"0001965473","primary_entity_name":"Cheche Group Inc."},"word_count":8978,"has_tables":true,"body_markdown":"**ITEM\n5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\n*Unless\nthe context otherwise requires, all references in this section to “we,” “us,” or “our” refer collectively\nto CCT, the PRC Subsidiaries and the Affiliated Entities prior to the completion of the Business Combination, and Cheche Group Inc.,\nthe PRC Subsidiaries and the Affiliated Entities following the consummation of the Business Combination.*\n\n \n\nYou\nshould read the following discussion and analysis of our results of operations and financial condition together with the consolidated\nfinancial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements\nbased upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from\nthose anticipated in these forward-looking statements as a result of various factors, including those set forth in the section of this\nannual report captioned “Item 3. Key Information - D. Risk Factors” and in other parts of this annual report. Our fiscal\nyear ends on December 31.\n\n \n\n**A.\nOperating Results**\n\n \n\n**Key\nFactors Affecting Our Results of Operations**\n\n \n\nWe\nbelieve the following factors significantly affect our results of operations:\n\n \n\n**Market\nconditions in China**\n\n \n\nWe\nderive most of our revenues from facilitating insurance transactions on our platform, particularly auto insurance transactions. As such,\nour results of operations substantially depend on the growth of the automobile, auto insurance and digital auto insurance transaction\nmarkets in China.\n\n \n\nWe\nexpect the growing number of automobiles in China to drive significant demand for auto insurance. We also expect that recent developments\nin the new energy vehicle sector with favorable government policies will drive the growth of China’s automobile industry.\n\n \n\nThe\nPRC government requires each automobile owner to purchase statutory automobile liability insurance and renew its auto insurance policy\nevery year. We expect that the growth in automobile ownership will result in more purchases and renewals of statutory automobile liability\ninsurance as well as other commercial auto insurance. The total number of vehicles sold in China is expected to grow from 26.3 million\nin 2021 to 33.0 million in 2026, according to iResearch. China’s auto insurance industry has expanded in recent years, driven by\nits rapid economic growth, increasing disposable income, urbanization, the growing number of automobiles and the increasing ease in purchasing\nauto insurance. China’s auto insurance industry is expected to grow from RMB777.3 billion in 2021 to RMB1.1 trillion in 2026, according\nto iResearch.\n\n \n\n124\n\n \n\n \n\nWe\nalso believe that the increasing digitalization of auto insurance in China will drive demand for our auto insurance transaction services.\nDriven by technological advancements, policy reforms and more standardized digital operations, digital transaction volumes for auto insurance\nin China grew from RMB85.2 billion in 2018 to RMB270.9 billion in 2021, and are expected to grow to RMB832.0 billion in 2026, according\nto iResearch. The digital transaction penetration rate for auto insurance in China, defined as the amount of auto insurance premiums\ntransacted digitally during a certain period, divided by the total premiums in the auto insurance industry during such period, increased\nfrom 10.9% in 2018 to 34.8% in 2021 and is expected to further grow to 72.9% in 2026, according to iResearch.\n\n \n\nWe\nhave broadened our service and solution offerings in recent years to include services and solutions other than auto insurance transaction\nservices. In particular, we commenced our non-auto P&C insurance transaction services in 2016 and insurance SaaS solutions in 2020.\nWe are also co-developing digital products with our insurance carrier partners and large third-party technology platforms to enhance\nthe breadth of their product and service offerings. These include innovative insurance products, such as embedded digital distributions\nto address the evolving needs of China’s insurance consumers. Our growth also depends on the growth of the non-auto P&C insurance,\ninsurance SaaS solutions and insurance technology services industries in China, and our ability to diversify our distributions and integrate\ntechnology capabilities among such different sectors and develop innovative insurance products.\n\n \n\nThe\nnon-auto insurance market in China includes non-auto P&C and life & health insurance and has been developing rapidly. Non-auto\ninsurance premiums in China grew from RMB3.0 trillion in 2018 to RMB3.7 trillion in 2021 at a CAGR of 7.1% and are expected to reach\nRMB5.8 trillion in 2026 at a CAGR of 9.2%. Growth of the non-auto insurance market and our ability to capitalize on industry trends will\nsignificantly affect demand for our services and solutions and financial results.\n\n \n\nOn\nthe other hand, the automobile, auto insurance and digital auto insurance transaction markets in China may be affected by global systemic\neconomic and financial crisis, such as the recent concerns over the significant changes to United States trade policies, treaties and\ntariffs, including trade policies and tariffs regarding China. See “Item 3. Key Information—D. Risk Factors—Risks Related\nto Our Business and Industry—Any global systemic economic and financial crisis could negatively affect our business, financial\ncondition and results of operations.”\n\n \n\n**Insurance\npremiums and transaction service fees**\n\n \n\nWe\ngenerate revenue primarily from transaction service fees paid by insurance carriers and certain intermediaries, typically calculated\nas a percentage of the insurance premiums paid by consumers. Insurance premiums and transaction service fee rates we charge for our insurance\ntransaction services fluctuate based on regulatory requirements, prevailing economic conditions, the competitive landscape, the volume\nof business that we generate, the availability of comparable services from our competitors and other factors.\n\n \n\nWe\nderive the majority of our insurance transaction service revenue from facilitating auto insurance transactions. Laws and regulations\ngoverning China’s auto insurance industry may significantly affect the premiums of auto insurance policies charged by insurance\ncarriers and service fee rates we charge for auto insurance transactions. For example, historically, the PRC government has imposed stringent\nreporting requirements on the terms of auto insurance products sold by insurance carriers and rules regulating actuarial and pricing\npractices of insurance carriers and intermediaries, which have resulted in industry-wide decreases in the transaction service fee rates\ncharged by industry participants, including us. Our results of operations from auto insurance transactions have been affected by, and\nwill continue to depend on laws and regulations governing China’s auto insurance industry and their impacts on the transaction\nservice fees we can charge.\n\n \n\nSimilarly,\nthe service fee rates we charge for insurance transactions other than auto insurance transactions, including non-auto P&C insurance\ntransactions, may also fluctuate based on factors such as changes in industry regulations and reforms, pricing strategies of our competitors,\nchanges in sales and marketing policies and product demand from consumers, among others.\n\n \n\n**Collaboration\nwith insurance carriers and insurance intermediaries.**\n\n \n\nWe\nprovide insurance transaction services and insurance SaaS solutions to insurance carriers, and insurance transaction services and insurance\nSaaS solutions to certain insurance intermediaries. As a result, our revenue growth depends on our ability to maintain relationships\nwith these insurance carriers and insurance intermediaries. As of December 31, 2025, we collaborated with approximately 100 insurance\ncarriers and 4,500 insurance intermediaries.\n\n \n\n125\n\n \n\n \n\nWe\nneed to provide high quality insurance transaction services and SaaS solutions and help them reach and serve their target consumers.\nThis affects whether insurance carriers or other insurance intermediaries will sell insurance products through our platform or use our\nSaaS solutions and the rates of transaction service fees, system purchase prices and subscription fees we receive. Any significant changes\nto our relationships with insurance carriers and other insurance intermediaries could materially impact our revenue and financial performance.\n\n \n\n**Collaboration\nwith referral partners and third-party platforms**\n\n \n\nWe\ncollaborate with referral partners and third-party platforms to attract and acquire insurance consumers, facilitate transactions of a\nvariety of insurance products to consumers, and retain such consumers on our platform. The number, type and productivity of our referral\npartners and third-party platform partners significantly affect our revenue and results of operations. To achieve profitability, we intend\nto retain and expand the base of our referral partners and third-party platform partners as well as their productivity in a cost-effective\nmanner.\n\n \n\nA\nlarge component of our operating costs are the referral fees paid to our referral partners. In light of the intense competition for referral\npartners in the insurance industry and rising salaries in China, we have proactively adjusted our referral fee rates in recent years\nto acquire and retain productive referral partners, which has increased our operating costs. We plan to optimize our referral fee rates\nfor referral partners in response to market conditions and requirements in the future, which may increase our operating costs.\n\n \n\n**Our\nproduct and service offerings**\n\n \n\nOur\nrevenue growth depends on our ability to improve existing products, services and solutions, enhance user experience and capture new opportunities\nto expand into additional insurance markets and services. We derive a majority of our revenues from facilitating auto insurance transactions.\nAs such, our financial performance depends in part on our ability to collaborate with our insurance carrier partners to offer auto insurance\nproducts attractive to auto insurance consumers.\n\n \n\nIn\naddition to auto insurance products, we have been facilitating the sale of non-auto P&C insurance products since 2016 and life &\nhealth insurance products since 2019. We have also started to provide technology services to insurance carriers since 2016 as well as\ninsurance SaaS solutions to insurance intermediaries and insurance carriers since December 2020 and March 2021, respectively. As our\nservice and solution offerings may have different pricing strategies and cost structures, expansion of our business and changes to revenue\nmix may affect our financial position and profitability.\n\n \n\nOur\nresults of operations also depend upon our ability to diversify our distribution channels and product offerings. We believe the large\nbase of our existing referral partners and third-party platforms presents us with significant opportunities to distribute various non-auto\nP&C insurance products and enables us to strengthen relationships with insurance carriers and referral partners, and increase engagement\nbetween referral partners and their customers. We also believe our extensive partnership network of insurance carriers and insurance\nintermediaries allows us to facilitate selling insurance SaaS solutions to these insurance carriers and insurance intermediaries as we\nhave established relationships with them on our insurance transaction service offerings.\n\n \n\n**Operating\nefficiency of our platform**\n\n \n\nWe\nhave incurred significant costs and expenses in building our platform, growing our user and partnership base and developing capabilities\nin data analytics and technology. Our business model is highly scalable, and our platform supports our continued growth. While we expect\nour operating costs to increase in absolute terms as our business expands, we also expect them to decrease as a proportion of our revenues\nas we improve the operating efficiency of our platform and achieves more economies of scale.\n\n \n\n126\n\n \n\n \n\nFor\nour insurance transaction service business, which requires significant costs and expenses to acquire users and facilitate insurance transactions\nfor these users on our platform, we pay referral fees to our referral partners, which constitute the largest component of our operating\ncosts. We plan to enlarge our user base and optimize referral fees as a percentage of our total revenues by expanding our user base acquisition\nchannels and collaborating with more influential third-party platform partners. In addition, we intend to optimize collaboration with\nthird-party platforms and referral partners to improve user base acquisition and conversion, and diversify offerings among auto and non-auto\nP&C insurance products, to improve our operating margins for insurance transaction service.\n\n \n\nFor\nour insurance SaaS solutions business, we actively engage in selling and marketing efforts to capture marketing opportunities from which\nwe can effectively increase our customer base, while focusing on more precise and effective ways of acquiring insurance intermediary\nand insurance carrier customers. As our insurance SaaS solutions business grows, we expect to improve the efficiency and utilization\nof our personnel and scale to achieve greater operating leverage.\n\n  \n\n**Key\nComponents of Results of Operations**\n\n \n\n**Net\nRevenues**\n\n \n\nNet\nrevenues include insurance transaction services income, SaaS and technical service income, and others. The following table sets forth\na breakdown of our revenues for the periods indicated.\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \n% \n\n  \n(in millions, except percentages) \n\nInsurance transaction services income \n 3,275.2  \n 99.2  \n 3,447.4  \n 99.3  \n 2,989.8  \n 99.3 \n\nSaaS and technical service income* \n 25.1  \n 0.8  \n 20.8  \n 0.6  \n 14.1  \n 0.5 \n\nOthers* \n 1.1  \n 0.0  \n 4.9  \n 0.1  \n 6.0  \n 0.2 \n\n**Total net revenues**** **\n** ****3,301.4**** **** **\n** ****100.0**** **** **\n** ****3,473.1**** **** **\n** ****100.0**** **** **\n** ****3,009.9**** **** **\n** ****100.0**** **\n\n \n\n*\nTechnical\nservice income was reclassified from “Others” to “SaaS income” and renamed as “SaaS and technical services\nincome” for all periods presented. See Note 2 to our audited consolidated financial statements included elsewhere in this annual\nreport.\n\n \n\n127\n\n \n\n \n\nFor our insurance\ntransaction services business, we charge insurance carrier customers and other intermediaries a percentage of the insurance premiums\ngenerated from insurance transactions facilitated through our platform. Revenue generated from insurance transaction services is primarily\naffected by (1) the number of policies written through our platform, which increased by 9.5% from 15.8 million in 2023 to 17.3 million\nin 2024, and further increased by 17.3% to 20.3 million in 2025, (2) the gross premiums of transactions written through our platform,\nwhich increased by 7.5% from RMB22.6 billion in 2023 to RMB24.3 billion in 2024, and further increased by 11.1% to RMB27.0 billion in\n2025, and (3) the written premiums from embedded policies through partnership with NEV companies, which increased by 127.8% from RMB1.4\nbillion in 2023 to RMB3.3 billion in 2024, and further increased by 91.0% to RMB6.3 billion in 2025. Our service fee rate was 14.5%,\n14.2% and 11.1% in 2023, 2024 and 2025, respectively.\n\n \n\nFor\nour insurance SaaS and technical service business, we offer subscription services to our cloud-based insurance SaaS solutions, including\nSky Frontier and Digital Surge, and provide technical services for our business partners, including industry-leading NEV manufacturers\nand auto service companies. We derive revenue from (1) charging insurance carrier customers and insurance intermediaries services fees\nfor using Sky Frontier and Digital Surge, and (2) charging business partners for using our insur-tech system building services, respectively.\n\n \n\nRevenue\ngenerated from Sky Frontier decreased from RMB11.6 million in 2023 to RMB7.5 million in 2024, primarily due to the decrease in the number\nof paying customers from 17 in 2023 to 9 in 2024. Revenue generated from Sky Frontier increased from RMB7.5 million in 2024\nto RMB8.4 million in 2025, primarily due to the increase in the number of paying customers from 9 in 2024 to 12 in 2025.\n\n \n\nRevenue\ngenerated from Digital Surge remained relative stable at RMB6.0 million in 2024, compared to RMB5.1 million in 2023. Revenue generated\nfrom Digital Surge decreased from RMB6.0 million in 2024 to RMB3.4 million in 2025, primarily due to a decrease in unit price, and a\ndecrease in the number of paying customers from 1,241 in 2024 to 760 in 2025.\n\n \n\nRevenue\ngenerated from technical services remained stable at RMB7.3 million in 2023, 2024 and decreased to RMB2.3 million 2025. ****\n\n \n\nRevenues\nfrom other services include fees generated from our automotive after-sales service to third-party companies and individual consumers.\n\n \n\n**Cost\nof Revenues**\n\n \n\nWe\ncollaborate with referral partners and other third parties in the provision of insurance transaction services and SaaS services. Our\ncost of revenues primarily consists of cost of referral partners, service fee paid to third-party payment platforms, and other costs.\nThese costs are charged to the consolidated statements of operations and comprehensive loss as incurred.\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \n% \n\n  \n(in millions, except percentages) \n\nCost of referral partners \n 3,017.9  \n 95.5  \n 3,199.1  \n 96.5  \n 2,748.0  \n 96.4 \n\nService fee paid to third-party payment platforms \n 129.5  \n 4.1  \n 101.7  \n 3.1  \n 89.1  \n 3.1 \n\nOther costs \n 13.8  \n 0.4  \n 13.6  \n 0.4  \n 12.4  \n 0.5 \n\nTotal cost of revenues \n 3,161.2  \n 100.0  \n 3,314.4  \n 100.0  \n **2,849.5**  \n **100.0** \n\n \n\nCost\nof referral partners refers to referral fees paid by us to referral partners and third-party platform partners, as a certain percentage\nof the insurance transaction service income generated from the insurance transactions referred by them. Our referral partners increased\nfrom approximately 1.1 million as of December 31, 2023 to approximately 1.3 million as of December 31, 2024, and further increased to approximately 1.4 million as December 31,2025. As we continue to scale our business, we are able to improve our ability to negotiate\nmore favorable referral fee rates with referral partners and third-party platform partners, which enables us to reduce referral fee rate\nfor each transaction and manage our costs of revenues for referral partners.\n\n \n\n128\n\n \n\n \n\nService\nfee paid to third-party payment platforms refer to fees charged by such payment platforms with respect to the referral fee payments we\nmake to referral partners through such third-party payment platforms.\n\n \n\nOther\ncosts primarily include (1) salary and welfare benefits, (2) tax and surcharges and others, (3) amortization and depreciation and (4)\ncloud service fees.\n\n \n\n**Selling\nand marketing expenses**\n\n \n\nOur\nselling and marketing expenses primarily consist of salary and welfare benefits, share-based compensation expenses, amortization and\ndepreciation expenses, related expenses for our sales and marketing personnel, and advertising and promotional expenses. Advertising\nand promotional expenses consist primarily of costs for the promotion of corporate image, online platform and mobile applications.\n\n \n\n**General\nand administrative expenses**\n\n \n\nOur\ngeneral and administrative expenses primarily consist of salary and welfare benefits, share-based compensation expenses, professional\nservice fees, amortization expenses and related expenses for employees involved in general corporate functions, including finance, legal\nand human resources; and costs associated with use by these functions of facilities and equipment, such as traveling and general expenses.\n\n \n\n**Research\nand development expenses**\n\n \n\nOur\nresearch and development expenses primarily consist of salary and welfare benefits and subcontracted development expenses incurred for\nthe development and enhancement to our online platform, including SaaS platform, and mobile application.\n\n \n\n**Share-based\ncompensation expenses**\n\n \n\nWe\nperiodically grant share-based awards, such as restricted shares and share options to eligible employees, directors and non-employees.\nIn accordance with ASC 718 Stock Compensation, we recorded share-based compensation expense on the grant date of the equity interests\nto our employees equal to the estimated fair-value of such equity interests at the measurement date. The share-based compensation expense\nwas recorded in cost of revenues, selling and marketing expenses, general and administrative expenses and research and development expenses\non the consolidated statements of operations and comprehensive loss.\n\n \n\nIn\nNovember 2015, we adopted the 2015 Incentive Plan to grant options to relevant directors, officers, senior management, employees and\nnon-employees. Option awards were granted with an exercise price determined by our board of directors. In January 2020, the 2015 Incentive\nPlan was terminated with the concurrent grant of replacement awards under the 2019 Incentive Plan. In January 2020, we adopted the 2019\nEquity Incentive Plan to grant options and restricted shares to relevant directors, officers, other employees and non-employees. Option\nawards were granted with an exercise price determined by the board of directors. The options granted under the 2019 Equity Incentive\nPlan could either be granted with terms that (i) immediately vested upon grant; (ii) 50% vested on grant date and another 50% vested\non anniversary; or (iii) 25% vested on each anniversary for vesting schedule of four years. The restricted shares granted under the\n2019 Incentive Plan could either be granted with terms that (i) immediately vested upon grant; (ii) 25% vested on each anniversary or\n6.25% vested on each quarter for vesting schedule of four years; or (iii) 50% vested on each anniversary for vesting schedule of two\nyears. Our 2023 Equity Incentive Plan was adopted in September 2023. The stock options granted under the 2023 Incentive Plan could either\nbe granted with terms that (i) immediately vested upon grant; (ii) 50% vested on grant date and another 50% vested on anniversary; (iii)\n50% vested on each anniversary for vesting schedule of two years; or (iv) 25% vested on each anniversary for vesting schedule of four\nyears. The restricted shares granted under the 2023 Incentive Plan could either be granted with terms that (i) immediately vested upon\ngrant; (ii) 25% vested on each quarter for vesting schedule of one year; or (iii) 100% vested on one-year anniversary.\n\n \n\n129\n\n \n\n \n\nThe\nweighted average grant date fair value of options granted in 2023, 2024 and 2025 was RMB42.1761 (US$5.9404) . RMB15.1110 (US$2.0702)\nand RMB17.6163 (US$2.5191), respectively. The fair values of the restricted shares granted are estimated on the dates of grant using the binomial\noption pricing model with the following assumptions used.\n\n \n\n  \nFor\nthe year ended December 31, \n\n  \n2023  \n2024  \n2025 \n\nOptions* \n    \n    \n   \n\nFair value per share (US$) \n 6.33-6.37  \n 0.79-0.80  \n 0.68~1.04 \n\nDiscount rate (after tax) \n Not\napplicable  \n Not\napplicable  \n Not applicable \n\nRisk-free interest rate \n 3.88% \n 4.58% \n 4.11%~4.24%\n\nExpected volatility \n 64.2% \n 65.7% \n 59.65%~73.81%\n\nContractual term (in years) \n 10  \n 10  \n 10 \n\nDiscount for lack of marketability (“DLOM”) \n Not\napplicable  \n Not\napplicable  \n Not applicable \n\n \n\n  \n **For\nthe year ended December 31,** \n\n  \n 2023  \n 2024  \n 2025 \n\nRestricted shares \n    \n    \n   \n\nFair value per share (US$) \n 4.90-5.45  \n Not applicable  \n Not applicable \n\nDiscount rate (after tax) \n 15.0%-16.0%  \n Not applicable  \n Not applicable \n\nDiscount for lack of marketability (“DLOM”) \n 5%-10%  \n Not applicable  \n Not applicable \n\n \n\nThe\nfollowing table sets forth the breakdown of share-based compensation expenses by our expense line items for the periods presented.\n\n \n\n  \nYear\nended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \n% \n\n  \n(in millions,\nexcept percentages) \n\nSelling and marketing expenses \n 30.7  \n 27.9  \n 5.7  \n 16.8  \n 3.1  \n 12.7 \n\nGeneral and administrative expenses \n 67.5  \n 61.4  \n 26.3  \n 77.6  \n 20.4  \n 83.6 \n\nResearch and development expenses \n 11.6  \n 10.5  \n 1.9  \n 5.6  \n 0.9  \n 3.7 \n\nCost of revenues \n 0.2  \n 0.2  \n 0.0  \n 0.0  \n 0.0  \n 0.0 \n\nTotal \n 110.0  \n 100.0  \n 33.9  \n 100.0  \n **24.4**  \n **100.0** \n\n \n\n**Discussion\nof Certain Balance Sheet Items**\n\n \n\nThe\nfollowing is a discussion of selected balance items that are material to us. This information should be read together with our consolidated\nfinancial statements and related notes included elsewhere in this annual report.\n\n \n\n**Accounts\nReceivable**\n\n \n\nAccounts\nreceivable mainly represents amount due from insurance transaction services customers. The increase in the accounts receivable was primarily\ncaused by customers’ stricter\nbudget control in 2025.\n\n \n\n130\n\n \n\n \n\n**Accounts\nPayable**\n\n \n\nAccounts\npayable mainly includes payment to the cost of referral partners and third-party platform partners. Accounts payable increased from\nRMB725.8 million as of December 31, 2024 to RMB842.7 million as of December 31, 2025, which was consistent with the increase of accounts receivable.\n\n \n\n**Taxation**\n\n \n\n**Cayman\nIslands**\n\n \n\nWe\nare an exempted company incorporated in the Cayman Islands. Under the laws of the Cayman Islands, we are not subject to tax on\nincome or capital gains, nor are we subject to withholding tax on any payment of dividends. The Cayman Islands enacted the\nInternational Tax Co-operation (Economic Substance) Act (As Revised) together with the Guidance Notes published by the Cayman\nIslands Tax Information Authority from time to time. If a company is considered to be a “relevant entity” and is\nconducting one or more of the nine “relevant activities”, then such company will be required to comply with the economic\nsubstance requirements in relation to the relevant activity from July 1, 2019. All companies whether a relevant entity or not is\nrequired to file an annual report with the Registrar of Companies of the Cayman Islands confirming whether or not it is carrying on\nany relevant activities.\n\n \n\n**Hong\nKong**\n\n \n\nOur\nsubsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5% on its taxable income generated from operations\nin Hong Kong. Starting from the financial year commencing on April 1, 2018, the two-tiered profits tax regime took effect, under which\nthe tax rate is 8.25% for assessable profits on the first HK$2 million and 16.5% for any assessable profits in excess of HK$2 million.\nOur subsidiary incorporated in Hong Kong is not subject to withholding tax on any payment of dividends.\n\n \n\n**PRC**\n\n \n\nWe\nare subject to VAT at the rate of 6% on our services and solutions less any deductible VAT already paid. We are also subject to surcharges\non VAT payments in accordance with PRC law.\n\n \n\n131\n\n \n\n \n\nUnder\nthe Enterprise Income Tax Law of the PRC, the Company’s Chinese subsidiaries, VIE and subsidiaries of VIE are subject to an\nincome tax of 25%, except for Beijing Cheche and Baodafang, as Beijing Cheche was entitled to a preferential tax rate of 15% from\n2022 to 2024 and from 2025 to 2027 for its High and New Technology Enterprise (“HNTE”) status, and\nBaodafang was entitled to a preferential tax rate of 15% from 2023 to 2025 for its HNTE status, subject to annual evaluation and a\nrequirement that they re-apply for the HNTE status every three years.\n\n \n\nThe\nEIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign-invested entity (“FIE”) to its\nimmediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any\nestablishment or place within China or if the received dividends have no connection with the establishment or place of such immediate\nholding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China\nthat provides for a different withholding arrangement. The Cayman Islands, where we were incorporated, does not have such tax treaty\nwith China. According to the arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double\nTaxation and Prevention of Fiscal Evasion in August 2006, dividends paid by a FIE in China to its immediate holding company in Hong Kong\nwill be subject to withholding tax at a rate of no more than 5% if all the requirements are satisfied. To the extent that the PRC Subsidiaries,\nVIE and its subsidiaries have undistributed earnings, we will accrue appropriate expected withholding tax associated with repatriation\nof such undistributed earnings. As of December 31, 2024 and 2025, we did not record any such withholding tax of the PRC Subsidiaries,\nVIE and its subsidiaries in the PRC as they are still in accumulated deficit position. ****\n\n \n\n**Results\nof Operations**\n\n \n\nThe\nfollowing table sets forth a summary of our consolidated results of operations for the periods presented, in absolute amount and as a\npercentage of our operating revenue. You should read this information in conjunction with our consolidated financial statements and related\nnotes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of the results\nthat may be expected for any future period.\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \n% \n\n  \n(in thousands, except percentages) \n\nNet revenues \n 3,301,418  \n 100.0  \n 3,473,139  \n 100.0  \n 3,009,845  \n 100.0 \n\nCost of revenues \n (3,161,193) \n (95.8) \n (3,314,377) \n (95.4) \n (2,849,487) \n (94.7)\n\nGross profit \n 140,225  \n 4.2  \n 158,762  \n 4.6  \n 160,358  \n 5.3 \n\nOperating expenses: \n    \n    \n    \n    \n    \n   \n\nSelling and marketing expenses \n (111,454) \n (3.4) \n (79,501) \n (2.3) \n (68,249) \n (2.3)\n\nGeneral and administrative expenses \n (139,385) \n (4.2) \n (107,857) \n (3.1) \n (75,758) \n (2.5)\n\nResearch and development expenses \n (57,167) \n (1.7) \n (37,947) \n (1.1) \n (37,238) \n (1.2)\n\nTotal operating expenses \n (308,006) \n (9.3) \n (225,305) \n (6.5) \n (181,245) \n (6.0)\n\nOperating loss \n (167,781) \n (5.1) \n (66,543) \n (1.9) \n (20,887) \n (0.7)\n\nOther expenses: \n    \n    \n    \n    \n    \n   \n\nInterest income \n 5,398  \n 0.2  \n 6,037  \n 0.2  \n 3,236  \n 0.1 \n\nInterest expense \n (1,446) \n (0.0) \n (838) \n (0.0) \n (2,279) \n (0.1)\n\nForeign exchange (losses)/gains \n (2,546) \n (0.1) \n (2,810) \n (0.1) \n 4,805  \n 0.2 \n\nGovernment grants \n 12,371  \n 0.4  \n 887  \n 0.0  \n 1,879  \n 0.1 \n\nChanges in fair value of warrant \n 1,702  \n 0.1  \n 2,634  \n 0.1  \n 1,476  \n 0.0 \n\nChanges in fair value of amounts due to related party \n (7,524) \n (0.2) \n (757) \n (0.0) \n (4,461) \n (0.1)\n\nOthers, net \n (127) \n (0.0) \n (137) \n (0.0) \n (1,964) \n (0.1)\n\nLoss before income tax \n (159,953) \n (4.8) \n (61,527) \n (1.8) \n (18,195) \n (0.6)\n\nIncome tax credit \n 363  \n 0.0  \n 291  \n 0.0  \n 406  \n 0.0 \n\nNet loss \n (159,590) \n (4.8) \n (61,236) \n (1.8) \n (17,789) \n (0.6)\n\nNon-GAAP measure: \n    \n    \n    \n    \n    \n   \n\nAdjusted net (loss)/income (1) \n (33,192) \n (1.0) \n (24,789) \n (0.7) \n 11,648  \n 0.4 \n\n \n\n(1)\nAdjusted\nnet (loss)/income is defined as net loss adjusted for the impact of share-based compensation expenses, amortization of intangible assets related\nto acquisition, changes in fair value of warrant, changes in fair value of amounts due to related party, listing related professional\nexpenses and dispute resolution expenses. Adjusted net loss is not a measure required by, or presented in accordance with, U.S. GAAP.\nThe use of the non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation from, or as a\nsubstitute for analysis of, our results of operations or financial condition as reported under U.S. GAAP. For further details, see\n“—Non-GAAP Financial Measure.”\n\n \n\n132\n\n \n\n \n\n**Non-GAAP\nfinancial measure**\n\n \n\nWe\nuse adjusted net loss, a non-GAAP financial measure, in evaluating our results of operations and for financial and operational decision-making\npurposes. Adjusted net loss represents net loss excluding share-based compensation expenses, amortization of intangible assets related\nto acquisition, changes in fair value of warrant, changes in fair value of amounts due to related party, listing related professional\nexpenses and dispute resolution expenses. Such adjustments have no impact on income tax.\n\n \n\nWe\npresent the non-GAAP financial measure because it is used by our management to evaluate our operating performance and formulate business\nplans. Adjusted net loss enables our management to assess our results of operations without considering the impact of non-cash share-based\ncompensation expenses, amortization of intangible assets related to acquisition, changes in fair value of warrant, changes in fair value\nof amounts due to related party and non-recurring expenses. We believe that adjusted net loss helps identify underlying trends in our\nbusiness that could otherwise be distorted by the effect of certain expenses that are included in net loss. We also believe that the\nuse of such non-GAAP measure facilitates investors’ assessment of our operating performance. Adjusted net loss should not be considered\nin isolation or construed as an alternative to net loss or any other measure of performance or as an indicator of our operating performance.\nInvestors are encouraged to review the reconciliation of our historical non-GAAP financial measures to the most directly comparable GAAP\nmeasures. Adjusted net loss presented here may not be comparable to similarly titled measures presented by other companies. Other companies\nmay calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors\nand others to review our financial information in its entirety and not rely on a single financial measure.\n\n \n\nThe\ntable below sets forth a reconciliation of our net loss to adjusted net (loss)/income for the years indicated:\n\n \n\n  \nYear\nended December 31, \n\n  \n2023 \n \n2024  \n2025 \n\n  \n(RMB in\nthousands) \n\n**Net loss**** **\n** ****(159,590****)**\n** **\n** ****(61,236****)**** **\n** ****(17,789****)**\n\nAdd: \n   \n \n    \n   \n\nShare-based compensation\nexpense \n 109,983 \n \n 33,869  \n 24,352 \n\nAmortization of intangible\nassets related to acquisition \n 2,100 \n \n 2,100  \n 2,100 \n\nChanges in fair value\nof warrant \n (1,702)\n \n (2,634) \n (1,476)\n\nChanges in fair value\nof amounts due to related party \n 7,524 \n \n 757  \n 4,461 \n\nListing related professional\nexpenses \n 8,493 \n \n -  \n - \n\nDispute\nresolution expenses \n - \n \n 2,355  \n - \n\nAdjusted\nnet (loss)/income \n (33,192)\n \n (24,789) \n **11,648** \n\n \n\n**Year\nEnded December 31, 2025 Compared to Year Ended December 31, 2024**\n\n \n\n*Net\nrevenues.*Our net revenues decreased by 13.3% from RMB3,473.1 million in 2024 to RMB3,009.8 million in 2025, which was mainly\ndriven by a higher proportion of NEV premiums, which carry a lower insurance service fee rate, within total written premiums, which increased\nto 23.4% from 13.6%.\n\n \n\n133\n\n \n\n \n\n*Cost\nof revenues*. Our cost of revenues decreased by 14.0% from RMB3,314.4 million in 2024 to RMB2,849.5 million in 2025, which\nwas mainly due to a decline in net revenues and higher gross margin driven by the rapid growth of the NEV business.\n\n \n\n*Selling\nand marketing expenses*. Our selling and marketing expenses decreased by 14.2% from RMB79.5 million in 2024 to RMB68.2 million\nin 2025, primarily due to the decrease in staff costs and share-based compensation expenses.\nAs a result, selling and marketing expenses as a percentage of net revenues remained 2.3% in 2024 and 2025. Excluding share-based compensation\nexpenses, the percentage would increased from 2.1% in 2024 to 2.2% in 2025.\n\n \n\n*General\nand administrative expenses.* Our general and administrative expenses decreased by 29.8% from RMB107.9 million in 2024 to RMB75.8\nmillion in 2025, primarily due to the decrease in share-based compensation expenses, professional service fees and staff costs. Excluding\nshare-based compensation expenses and dispute resolution expenses, our general and administrative expenses would decrease by 30.2% from\n2024 to 2025, primarily due to the decrease in professional service fees and staff costs.\n\n \n\n*Research\nand development expenses*. Our research and development expenses decreased by 1.9% from RMB37.9 million in2024 to RMB37.2 million\nin 2025, primarily due to the decreases in share-based compensation expenses and staff costs. Excluding share-based compensation expenses,\nour research and development expenses would increase by 0.9% from 2024 to 2025, and would increase as a percentage of net revenues from\n1.0% to 1.2%.\n\n \n\n*Interest\nexpense.* Our interest expense increased by 172.0% from RMB0.8 million in 2024 to RMB2.3 million in 2025, primarily due to\nthe increase of our borrowings in 2025.\n\n \n\n*Net\nloss.* As a result of the foregoing, we incurred a net loss of RMB17.8 million in 2025, as compared to a net loss of RMB61.2 million\nin 2024.\n\n \n\n**Year Ended December 31, 2024 Compared to Year Ended December 31,\n2023**\n\n \n\n*Net\nrevenues.*Our net revenues increased by 5.2% from RMB3,301.4 million in 2023 to RMB3,473.1 million in 2024, which was driven by an increase in insurance\ntransactions conducted through our platform by referral partners and third-party platform partners.\n\n \n\n*Cost\nof revenues**.*Our cost of revenues increased by 4.8% from RMB3,161.2 million in 2023 to RMB3,314.4 million in 2024, which was generally consistent with\nthe growth of our business volume and net revenues.\n\n \n\n*Selling\nand marketing expenses**.* Our selling and marketing expenses decreased by 28.7% from RMB111.5 million in 2023 to RMB79.5\nmillion in 2024, primarily due to the decreases in share-based compensation expenses for relevant staff, marketing expenses and staff\ncosts. As a result, selling and marketing expenses as a percentage of net revenues decreased from 3.4% in 2023 to 2.3% in 2024. Excluding\nshare-based compensation expenses, the percentage would decrease from 2.4% in 2023 to 2.1% in 2024.\n\n \n\n*General\nand administrative expenses.*Our general and administrative expenses decreased by 22.6% from RMB139.4 million in 2023 to RMB107.9\nmillion in 2024, primarily due to the decrease in share-based compensation expenses, partially offset by the increases in post-listing\nprofessional service fees and staff costs. Excluding share-based compensation expenses, listing-related professional service fees and\ndispute resolution expenses, our general and administrative expenses would decrease by 25.0% from 2023 to 2024, primarily due to the increase\nin post-listing professional service fees and staff costs.\n\n \n\n*Research\nand development expenses**.*Our research and development expenses decreased by 33.6% from RMB57.2 million in2023 to RMB37.9\nmillion in 2024, primarily due to the decreases in share-based compensation expenses, technical service fees and staff costs. Excluding\nshare-based compensation expenses, our research and development expenses would decrease by 20.9% from 2023 to 2024, and would decrease\nas a percentage of net revenues from 1.4% to 1.0%.\n\n \n\n*Interest\nexpense.*Our interest expense decreased by 42.0% from RMB1.4 million in 2023 to RMB0.8 million in 2024, primarily due to the\nrepayment of a portion of our borrowings in 2024.\n\n \n\n*Net\nloss.*As a result of the foregoing, we incurred a net loss of RMB61.2 million in 2024, as compared to a net loss of RMB159.6\nmillion in 2023.\n\n \n\n**B.\nLiquidity and Capital Resources**\n\n \n\nIn\n2024 and 2025, our principal source of liquidity was cash generated from financing activities.\n\n \n\nAs\nof December 31, 2024 and 2025, we had cash and cash equivalents of RMB117.5 million and RMB144.5 million, respectively.\nAs of December 31, 2024 and 2025, we had amounts due to related party of RMB45.8 million and RMB50.6 million, respectively.\n\n \n\nWe\nanticipate that we will be able to meet our financing needs for at least the next twelve months from the date of this annual report with\nexisting cash balances. However, we may require additional funding due to changing business conditions or other future developments,\nincluding any investments or acquisitions we may pursue. If our existing cash resources are insufficient to meet our working capital\nrequirements, we may seek to issue equity or equity-linked securities or debt securities or obtain financing from banks and other third\nparties. The sale of equity or equity-linked securities would result in additional dilution to our shareholders, while the incurrence\nof indebtedness could subject us to operating and financial covenants that restrict our operations and ability to pay dividends to our\nshareholders. There is no assurance that we will be successful in raising funds, obtaining sufficient funding on terms acceptable to\nus, or if at all, which could have a material adverse effect on our business, financial condition and results of operations. See “Item\n3. Key Information—D. Risk Factors—Risks Related to Our Securities—The issuance of additional share capital in connection\nwith financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other shareholders.” The sale\nof equity or equity-linked securities would result in additional dilution to our shareholders, while the incurrence of indebtedness could\nsubject us to operating and financial covenants that restrict our operations and ability to pay dividends to our shareholders.\n\n \n\nThe\nfollowing table sets forth a summary of our cash flows for the periods indicated:\n\n \n\n  \nYear\nended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \n(RMB in\nthousands) \n\nNet cash used in operating activities \n (26,950) \n (114,135) \n (40,550)\n\nNet cash generated from/(used in) investing\nactivities \n 12,822  \n (15,600) \n 35,397 \n\nNet cash generated from financing\nactivities \n 140,345  \n 1,945  \n 55,404 \n\nEffect of foreign exchange rate changes on\ncash and cash equivalents \n 2,230  \n 1,870  \n (2,126)\n\nNet increase/(decrease) in cash and\ncash equivalents and restricted cash \n 128,447  \n (125,920) \n 48,125 \n\nCash\nand cash equivalents and restricted cash at beginning of the year \n 119,945  \n 248,392  \n 122,472 \n\nCash\nand cash equivalents and restricted cash at end of the year \n 248,392  \n 122,472  \n **170,597** \n\n \n\n134\n\n \n\n \n\n**Operating\nActivities**\n\n \n\nNet cash used in\noperating activities in 2025 was RMB40.6 million, primarily due to the net loss of RMB17.8 million, and (1) net cash outflow of RMB51.8\nmillion from changes in operating assets and liabilities, which was primarily driven by an increase of RMB162.1 million in accounts receivable,\nan increase of RMB12.8 million in prepayments and other current assets, a decrease of lease liabilities of RMB6.0 million, a decrease\nof accrued expenses and other current liabilities of RMB1.1 million, partially offset by an increase of RMB116.9 million in accounts\npayable, an increase of RMB10.6 million in tax payable, an increase of RMB3.3 million in salary and welfare benefits payable, partially\noffset by (2) adjustments primarily consisting of share-based compensation expense of RMB24.4 million, amortization of right-of-use asset\nof RMB5.6 million, changes in fair value of amounts due to related party of RMB4.5 million, amortization of intangible assets of RMB2.1\nmillion, partially offset by foreign exchange gains of RMB4.8 million, changes in fair value of warrant of RMB1.5 million, provision\nof allowance for current expected credit losses of negative RMB1.2 million.\n\n \n\nNet cash used in operating activities\nin 2024 was RMB114.1 million, primarily due to the net loss of RMB61.2 million, mainly adjusted by (1) adjustments primarily consisting\nof share-based compensation expense of RMB33.9 million, amortization of right-of-use asset of RMB5.3 million, amortization of intangible\nassets of RMB2.1 million, provision of allowance for current expected credit losses of RMB3.4 million, depreciation of property equipment\nand leasehold improvement of RMB1.1 million, foreign exchange losses of RMB2.8 million, dispute resolution expenses of RMB2.4 million\nincurred to settle the dispute with a security holder, and changes in fair value of amounts due to related party of RMB0.8 million, and\n(2) net cash outflow of RMB102.2 million from changes in operating assets and liabilities, which was primarily driven by an increase of\nRMB519.6 million in accounts receivable, a decrease of accrued expenses and other current liabilities of RMB5.4 million, a decrease of\nlease liabilities of RMB4.2 million and a decrease of RMB2.5 million in contract liabilities, partially offset by an increase of RMB408.9\nmillion in accounts payable, an increase of RMB11.1 million in tax payable, an increase of RMB6.8 million in salary and welfare benefits\npayable, and a decrease of prepayments and other current assets of RMB2.7 million.\n\n \n\nNet\ncash used in operating activities in 2023 was RMB27.0 million, primarily due to the net loss of RMB159.6 million, partially offset by\n(1) adjustments primarily consisting of share-based compensation expense of RMB110.0 million, amortization of right-of-use asset of RMB8.4\nmillion, changes in fair value of amounts due to related party of RMB7.5 million, amortization of intangible assets of RMB2.1 million,\nprovision of allowance for current expected credit losses of RMB1.2 million, depreciation of property equipment and leasehold improvement\nof RMB1.0 million, and foreign exchange losses of RMB2.5 million, and (2) net cash inflow of RMB2.0 million from changes in operating\nassets and liabilities, primarily driven by an increase of RMB89.7 million in accounts payable, an increase of RMB10.3 million in salary\nand welfare benefits payable and an increase of RMB3.4 million in contract liabilities, and partially offset by an increase of RMB65.6\nmillion in accounts receivable, a decrease of accrued expenses and other current liabilities of RMB17.7 million, a decrease of lease\nliabilities of RMB9.0 million and an increase of prepayments and other current assets of RMB7.0 million.\n\n \n\n**Investing\nActivities**\n\n \n\nNet\ncash generated from investing activities in 2025 was RMB35.4 million, primarily due to proceeds from short-term investments of RMB52.2\nmillion, partially offset by purchase of short-term investment of RMB16.8 million.\n\n \n\nNet\ncash used in investing activities in 2024 was RMB15.6 million, primarily due to purchase of short-term investments of RMB186.5 million,\npartially offset by proceeds from short-term investment of RMB172.5 million.\n\n \n\nNet\ncash generated from investing activities in 2023 was RMB12.8 million, primarily due to proceeds from short-term investment of RMB56.1\nmillion, partially offset by purchase of short-term investments of RMB42.7 million.\n\n \n\n**Financing\nActivities**\n\n \n\nNet\ncash generated from financing activities in 2025 was RMB55.4 million, primarily due to cash received from short-term borrowings from\nbank of RMB102.5 million and cash received from long-term borrowings from bank of RMB10.0 million, partially offset by repayment of short-term\nborrowings of RMB52.0 million and cash payment of amounts to third party of RMB5.0 million.\n\n \n\nNet\ncash generated from financing activities in 2024 was RMB1.9 million, primarily due to cash received from short-term borrowings from bank\nof RMB30.0 million and cash received from short-term borrowings from third party of RMB5.0 million, partially offset by repayment of\nshort-term borrowings of RMB20.0 million and cash payment of amounts to related party of RMB10.0 million, and cash payment of RMB3.1\nmillion for settling the dispute with a security holder.\n\n \n\nNet\ncash generated from financing activities in 2023 was RMB140.3 million, primarily due to proceeds from issuance of ordinary shares of\nRMB137.9 million and cash received from short-term borrowings from bank of RMB20.0 million, partially offset by repayment of short-term\nborrowings of RMB12.6 million, and cash payment of financing cost of RMB5.0 million.\n\n \n\n**Material\nCash Requirements**\n\n \n\nOur\nmaterial cash requirements as of December 31, 2025 and any subsequent interim period primarily include our capital expenditures and contractual\nobligations.\n\n \n\n**Capital\nExpenditures**\n\n \n\nWe\nincur capital expenditures primarily for purchases of property, equipment and software. Our capital expenditures were RMB0.5 million,\nRMB1.7 million and RMB0.1 million in 2023, 2024 and 2025, respectively. We will continue to make capital expenditures to meet the expected\ngrowth of our business.\n\n \n\n**Contractual\nObligations**\n\n \n\nThe\nfollowing table sets forth our contractual obligations as of December 31, 2025:\n\n \n\n  \n **Payment\ndue by** \n\n  \n **Total**  \n **2026\n– 2029**  \n **Thereafter** \n\n  \n *(RMB\nin thousands)* \n\nOperating lease commitments \n 6,137  \n 6,137  \n - \n\nAmounts due to related\nparty \n 54,421  \n 54,421  \n - \n\nTotal \n 60,558  \n 60,558  \n - \n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nWe\nhave not entered, and does not expect to enter, into any off-balance sheet arrangements. We have also not entered into any financial\nguarantees or other commitments to guarantee the payment obligations of third parties. In addition, we have not entered into any derivative\ncontracts indexed to equity interests and classified as shareholders’ equity.\n\n \n\nFurthermore,\nwe do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity\nor market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity,\nmarket risk or credit support to us or that engages in leasing, hedging or research and development services with us.\n\n \n\n135\n\n \n\n \n\n**Holding\nCompany Structure**\n\n \n\nWe\nare a Cayman Islands holding company with no substantive operations. We carry out our business through the VIE and its subsidiaries in\nChina, due to PRC regulatory restrictions on direct foreign ownership of companies that engage in VATS and other internet related business.\nWe rely on dividends and other distributions from our operating subsidiaries to pay dividends to our shareholders and service our outstanding\ndebts. Our ability to pay dividends depends upon dividends received from the PRC Subsidiaries. If the PRC Subsidiaries or any newly formed\nsubsidiaries incur debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us.\n\n \n\nIn\naddition, the PRC Subsidiaries may pay dividends only out of their retained earnings, if any, in accordance with PRC accounting standards\nand regulations. Under PRC law, each of the PRC Subsidiaries and the Affiliated Entities is required to set aside at least 10% of its\nafter-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the\nstatutory reserves can be used, among other ways, to increase registered capital and eliminate future losses in excess of retained earnings\nof the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.\n\n \n\nRemittance\nof dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE.\n\n \n\nAs of December 31, 2024 and 2025,\nthe VIE and its subsidiaries accounted for an aggregate of 73.9% and 69.9% of the consolidated total assets, respectively, and 75.1% and\n72.4% of the consolidated total liabilities, respectively. In 2023, 2024 and 2025, the VIE and its subsidiaries accounted for an aggregate\nof 93.9%, 84.2% and 79.6%, respectively, of our consolidated total net revenues.\n\n \n\n**C.\nResearch and Development, Patents and Licenses, etc.**\n\n \n\nSee\n“Item 4. Information on the Company—B. Business Overview—Data, Technology and Infrastructure” and “Item\n4. Information on the Company—B. Business Overview—Intellectual Property.”\n\n \n\n**D.\nTrend Information**\n\n \n\nOther\nthan as disclosed in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the current\nfiscal year that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital reserves,\nor that caused the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.\n\n \n\n**E.\nCritical Accounting Policies and Estimate**\n\n \n\nIn\npreparing our consolidated financial statements and related notes, we must make judgments, estimates and assumptions that affect the\nreported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported revenues and expenses. We have\nbased our estimates on historical experience and other assumptions that we believe reasonable under the circumstances. Actual results\nmay differ from these estimates under different assumptions or conditions and differences may be material to the consolidated financial\nstatements.\n\n \n\nAn\naccounting policy is considered to be critical if:\n\n \n\n \n●\nit\nrequires us to make an accounting estimate based on assumptions about matters that are highly uncertain at the time we make the estimate,\nand\n\n \n \n \n\n \n●\ndifferent\nestimates and judgments that we reasonably could have used, or changes in the accounting estimates that are reasonably likely to\noccur periodically, could materially impact our consolidated financial statements.\n\n \n\nWe\nbelieve that the following critical accounting policies require significant judgments and estimates and assumptions in preparing our\nconsolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates\nin conjunction with our consolidated financial statements and related notes included elsewhere in this annual report.\n\n \n\n**Revenue\nrecognition**\n\n \n\nRevenue\nis the transaction price we expect to be entitled to in exchange for the promised services in a contract in the common course of our\nactivities and is recorded net of VAT. The services to be accounted for mainly include insurance transaction services, SaaS services\nand other services.\n\n \n\nThe\ncore principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers\nin an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve\nthat core principle, we apply the following steps:\n\n \n\nStep\n1: Identify the contract(s) with a customer;\n\n \n\n136\n\n \n\n \n\nStep\n2: Identify the performance obligations in the contract;\n\n \n\nStep\n3: Determine the transaction price;\n\n \n\nStep\n4: Allocate the transaction price to the performance obligations in the contract; and\n\n \n\nStep\n5: Recognize revenue when (or as) the entity satisfies a performance obligation.\n\n \n\n*Insurance\nTransaction Services Income*\n\n \n\nThe\nmain source of revenue is insurance transaction services fee from (i) insurance carriers who underwrite insurance policies and (ii) insurance\nintermediaries who directly transact with insurance carriers, both determined based on a percentage of premium paid by the insured. The\nservice fee rate paid by the insurance carriers or insurance intermediaries, shall be based on the terms specified in the service contract\nwith the insurance carriers or with the insurance intermediaries for each insurance policy sold through our online platform and mobile\napplications in the PRC. We determine that the insurance carrier or insurance intermediary, are our customer in these agreements. Insurance\ntransaction services revenue for the commission earned is recognized at a point in time when we have fulfilled our performance obligation.\nThis occurs when the signed insurance policy is in place and the premium is collected by the insurance carriers from the insured.\n\n \n\n*SaaS\nand Technical Services Income*\n\n \n\nWe\nprovide SaaS services to selected insurance companies or insurance intermediaries. This cloud-based services allow insurance carriers\nor insurance intermediaries to use our self-developed SaaS management system without taking possession of our software. We have determined\nthat the insurance carriers or insurance intermediaries as customers and initially records services fee as contract liabilities upon\nreceipt and then recognizes the revenue on a straight-line basis over the service period, which is usually one year.\n\n \n\nWe\nprovide technical service to third-party companies. We charge third-party companies service fee for developing software for them. Technical\nservice revenue is recognized based on cost-to-cost input method of measuring progress upon the completion of each service.\n\n \n\n*Other\nServices*\n\n \n\nWe\nprovide customer service to third-party companies. We satisfy our performance obligation through delivering consulting service to the\nthird-party companies’ customers and receives service fee from the third companies. Customer service revenue is recognized on a\nstraight-line basis over the period of the contract when the service is provided, which is usually within one year.\n\n \n\n**Share-based\ncompensation**\n\n \n\nShare\nbased compensation expenses arise from share-based awards, including share options for the purchase of ordinary shares and restricted\nshares. For share options for the purchase of ordinary shares granted to employee and non-employee determined to be equity classified\nawards, the related share-based compensation expenses are recognized in the consolidated statements of operations and comprehensive loss\nbased on their grant date fair values which are calculated using the binomial option pricing model. The determination of the fair value\nis affected by the fair value of ordinary shares as well as assumptions regarding a number of complex and subjective variables, including\nthe expected volatility of the fair value of ordinary shares, actual and projected employee share option exercise behavior, risk-free\ninterest rate and expected dividends. The fair value of the ordinary shares is assessed using the income approach, with a discount for\nlack of marketability, given that the shares underlying the awards were not publicly traded at the time of grant. Share-based compensation\nexpenses are recorded net of actual forfeitures using straight-line method during the service period requirement, such that expenses\nare recorded only for those share-based awards that are expected to ultimately vest.\n\n \n\n137\n\n \n\n \n\n**Goodwill**\n\n \n\nGoodwill\nrepresents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed\nof an acquired business. Our goodwill as of December 31, 2024 and 2025 was related to our acquisition of Cheche Insurance (previously\nnamed “Fanhua Times Sales and Service Co., Ltd.” or “Fanhua Times”) in October 2017. In accordance with ASC\n350, Goodwill and Other Intangible Assets, recorded goodwill amounts are not amortized, but rather are tested for impairment annually\nor more frequently if there are indicators of impairment present.\n\n \n\nGoodwill\nis not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date (December\n31 for us) and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value\nof a reporting unit below its carrying value. These events or circumstances include a significant change in stock prices, business environment,\nlegal factors, financial performances, competition, or events affecting the reporting unit. Application of the goodwill impairment test\nrequires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment\nof goodwill to reporting units, and determination of the fair value of each reporting unit. The estimation of fair value of reporting\nunit using a discounted cash flow methodology also requires significant judgements, including estimation of future cash flows, which\nis dependent on internal forecasts, estimation of the long-term rate of growth for our business and determination of our weighted average\ncost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results\nand market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill\nimpairment for the reporting unit.\n\n \n\nManagement\nhas determined that we represent the lowest level within the entity at which goodwill is monitored for internal management purposes.\nWe have the option to choose whether we will apply\na qualitative assessment first and then a quantitative assessment, if necessary, or to apply a quantitative assessment directly. The\nquantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares\nthe fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit is greater\nthan zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. Based on the impairment\nassessment, management determined that no impairment loss was recorded for the years ended December 31, 2023, 2024 and 2025. As of December\n31, 2024 and 2025, goodwill was RMB84.6 million and RMB84.6 million, respectively.\n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nA\ndescription of recently issued accounting pronouncements that may potentially impact our financial position and results of operations\nis disclosed in Note 2(dd) to our audited consolidated financial statements included elsewhere in this annual report."}