{"url_path":"/sec/lxeh/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-12","source_url":"https://www.sec.gov/Archives/edgar/data/1814067/0001213900-26-055168-index.html","accession_number":"0001213900-26-055168","cik":"0001814067","ticker":"LXEH","issuer_name":"Lixiang Education Holding Co. Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1814067/0001213900-26-055168-index.html","primary_entity_key":"0001814067","primary_entity_name":"Lixiang Education Holding Co. Ltd."},"word_count":11172,"has_tables":true,"body_markdown":"**ITEM 5. OPERATING AND FINANCIAL REVIEW\nAND PROSPECTS**\n\n* *\n\n*You should read the following\ndiscussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes\nto those statements included elsewhere in this annual report on Form 20-F. The discussion in this annual report on Form 20-F contains\nforward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives,\nexpectations and intentions. The cautionary statements made in this annual report on Form 20-F should be read as applying to all related\nforward-looking statements wherever they appear in this annual report on Form 20-F. Our actual results could differ materially from those\ndiscussed here. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” as\nwell as those discussed elsewhere. See “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report\non Form 20-F.*\n\n** **\n\n**A. Operating Results**\n\n** **\n\n**Overview**\n\n \n\nOur and the VIEs’ private\neducation services primarily consist of high school education and vocational education. For the year ended December 31, 2025, we and the\nVIEs have established an education services network consisting of one high school, two vocational education services providers and one\nhuman resources and healthcare support services provider, covering Zhejiang Province, Hebei Province, and Hainan Province in mainland\nChina. The entities engaging in our main business include:\n\n \n\n●Lishui\nInternational School, an educational institution specialized in providing high school education\nto students from overseas Chinese families returning to China who are commonly known as the\noverseas Chinese returnees;\n\n \n\n●Langfang\nSchool and Hainan Jiangcai, vocational education services providers offering a variety of\nvocational education programs with the aim to help students to equip with practical vocational\nskill sets; and\n\n \n\n●Hebei\nChuangxiang, a human resources service provider offering internship placement,\nemployment referral and healthcare support services. It partners with employers to arrange\ninternships for students from Langfang School and Hainan Technical School. It also cooperates\nwith healthcare and elderly care enterprises to deliver daily care, specialized nursing and\ncompanion services.\n\n \n\nOn August 18, 2021, Lishui\nMengxiang entered into a sponsorship interests transfer agreement with Qingtian Zhongyi Education Investment in respect of the acquisition\nof 100% of the sponsorship interests of Qingtian International School. On August 24, 2021, the alteration registration of Qingtian International\nSchool was completed and Lishui Mengxiang started to hold 100% of the sponsorship interests of Qingtian International School. The transaction\nwas closed in November 2021. We have consolidated the results of Qingtian International School in our consolidated financial statements\nsince August 31, 2021, in accordance with U.S GAAP through a series of contractual arrangements. On January 15, 2024, Lishui Mengxiang\nentered into a definitive agreement to transfer 100% of the sponsorship interests of Qingtian International School to Qiaoxiang Education.\nOn April 2, 2024, Liandu WFOE and the shareholders of Lishui Mengxiang, among others, entered into the Acknowledgment Agreement of Contractual\nAgreements of Qingtian International School, pursuant to which rights and obligations under the contractual arrangements with respect\nto Qingtian International School were terminated on December 31, 2023. We deconsolidated the results of Qingtian International School\nin our consolidated financial statements since December 31, 2023. For details regarding the history of Qingtian International School\nas one of the VIEs, see “*Item 4. Information on the Company—A. History and Development of the Company.*” Lishui\nMengxiang also holds 100% of the sponsorship interests of Lishui International School since June 25, 2023. The high school curriculum\nprograms offered at Qingtian International School and Lishui International School are designed for students from the families of overseas\nChinese returnees. The increasing population of overseas Chinese returnees and their immediate relatives in Zhejiang Province provides\na growing opportunity in the private education industry. Students as overseas Chinese returnees have the opportunity to attend the PRC\nJoint Recruitment Examination for overseas Chinese returnees and students in Hong Kong, Macau and Taiwan as a parallel track to the college\nentrance exam taken by local students. Qingtian International School and Lishui International School provide PRC high school curriculum\nprogram combined with the courses designed for the PRC Joint Recruitment Examination, using small-class teaching method and semi-military\nmanagement, which enable its students to gain admission to the most prestigious colleges and universities and therefore we believe our\noutstanding admission performance will enhance our and the VIEs’ schools’ reputation in the industry and improve our prospects.\n\n \n\n125\n\n \n\n \n\nWe and the VIEs offer vocational\neducation services through the Vocational Education Services providers, namely Langfang School and Hainan Jiangcai.\n\n \n\nBeijing Xinxiang is a vocational\neducation service provider in the healthcare industry, formed in January 2022 by Lishui Mengxiang and Beijing R.R.Z. The healthcare industry\nin China has significant unmet demand for vocational training education to bridge the supply and demand gap between employers and students.\nBeijing Xinxiang was deregistered on June 17, 2024.\n\n \n\nLangfang School is a provincial\nprivate vocational school approved by the Human Resources and Social Security Department of Hebei Province, integrating academic education\nand vocational education. Langfang School was acquired by Lishui Mengxiang in January 2022. As of the date of the annual report, the\nadministrative procedures with the PRC governmental authorities to amend the registration reflecting the result of the acquisition of\nLangfang School have not been completed due to the internal procedures of the competent authorities and we and the VIEs are still in\nthe process of active communication with such local authorities.\n\n \n\nThrough Hainan Jiangcai,\na subsidiary of Beijing P.X., we and the VIEs cooperate with Hainan Technical School, a reputable vocational education school in Haikou\nCity, Hainan Province to jointly design and develop curriculum programs based on the prevalent market trends and employer preferences.\n\n \n\nChuangmei Weiye is a professional\ncomprehensive education and human resources service provider through which we assisted talents with practical skills in obtaining internship\nopportunities and positions in well-known companies so as to bridge the supply and demand gap between the employers and talents. On November\n5, 2023, Lishui Mengxiang elected to exercise the right to sell 100% of the equity interests of Chuangmei Weiye back to Beijing S.K.\nand its affiliates pursuant to that certain supplementary agreement by and among Lishui Mengxiang, Beijing S.K., certain affiliates of\nBeijing S.K. and Beijing P.X. dated August 20, 2023, primarily due to the substantial amount of Chuangmei Weiye’s historical debts.\nThe equity interests of Chuangmei Weiye were transferred back to Beijing S.K.’s affiliates at a price of RMB6.36 million and the\ntransfer was completed on November 9, 2023. After the transaction, the amount of RMB6.36 million has been added to the total debts owed\nby Beijing S.K. to Lishui Mengxiang.\n\n \n\nOn January 6, 2023, Beijing\nP.X. established Hebei Chuangxiang as its wholly-owned subsidiary, which was primarily engaged in providing healthcare support services,\nand human resources services integrating internship and employment recommendation services. For the healthcare support services, it has\nsigned formal service cooperation contracts with a number of enterprises in the health and elderly care industry, providing professional\nhealthcare support services covering basic living care, special care, accompanying services and other categories. Hebei Chuangxiang charges\nfixed daily service fees to cooperative customers based on the actual service period and service volume. For human resources services,\nit has entered into cooperation agreements with certain employers, assigning students from Langfang School and Hainan Technical School\nto these employers as interns and charging labor dispatch fees based on the number of interns dispatched.\n\n \n\nOur net revenues for continuing\noperation were RMB50.8 million, RMB32.8 million and RMB30.8 million (US$4.4 million) in 2023, 2024 and 2025, respectively. We had net\nloss RMB127.0 million, RMB24.7 million and RMB121.3 million (US$17.3 million) in 2023, 2024 and 2025, respectively.\n\n \n\n**Major Factors Affecting Our Results of Operations**\n\n \n\nWe believe that our results\nof operations are affected by the following factors:\n\n** **\n\n**Demand for private education and vocational\neducation in China**\n\n \n\nOur and the VIEs’\noperations are driven by the growth of demand for private education and vocational education in China. Such demand is primarily driven\nby the increasing number of Chinese students who seek quality education and aspire to gain solid practical skills, which is in turn driven\nby an increasing number of affluent families in China, the rising recognition of the quality of high school education, and various economic\nfactors. The demand of private education and vocational education are affected by a number of factors, including general economic conditions,\ndiversified course offerings, quality of education, expected compensation levels, social acceptance towards vocational graduates, and\ngovernment support. Material changes to these factors will affect our operation results.\n\n** **\n\n126\n\n \n\n** **\n\n**Level of our and the VIEs’ student\nenrollment**\n\n \n\nOur net revenues and profitability\nare dependent on the level of student enrollment at our schools. The number of students enrolled in Lishui International School, Langfang\nSchool and Hainan Jiangcai (through its cooperator Hainan Technical School) was 97,660 and 510 as of September 1, 2025, respectively.\n\n \n\nAttracting students and\nsubsequent student admission largely depends on our reputation which is mainly driven by the quality of education we and the VIEs provide.\nThrough the years of operations, we and the VIEs have accumulated experience in developing and customizing our and the VIEs’ educational\nprograms to continue to attract students and teachers to our schools. We believe that highly qualified and dedicated teachers are critical\nto ensure our quality education and the quality of the teachers will continue to play an important role in the success of our schools.\nAccordingly, we and the VIEs provide various training opportunities to the teachers, such as education expert seminars and continuous\nstudies. The teachers’ assessments are performance-based, and we provide incentives based on the quality of teaching. We believe\nthat our emphasis on high quality teachers will transform into high quality education for our students in and outside the classroom.\n\n \n\nThe student enrollment level\nis also affected by the capacity of the schools. As of September 1, 2025, there were 97 students in four classes enrolled in Lishui International\nSchool with 100% of the students living on-campus. The school recorded a utilization rate of 71.8% with the capacity of 135 students\nas of September 1, 2025. As of September 1, 2025, Lishui International School had 5 teachers, with a teacher-student ratio of 1:19.4.\nSubject to the capacity of the schools, we expect that the number of students will increase steadily by school year as the schools continue\nto recruit more students than graduates/withdrawals from the schools.\n\n** **\n\n**Tuition, meal and accommodation services\nfees**\n\n \n\nOur net revenues from schools\nprimarily consist of tuition, meal and accommodation fees. The tuition and accommodation service fees we and the VIEs charge are subject\nto approval by the competent government pricing authorities. The pricing standards on tuition and accommodation fees for diploma education\napplied to privately-run schools shall be determined by the competent authorities with reference to the operating costs of the schools.\nThe base price for each privately-run school shall be approved by the competent governmental departments for both price and education.\nThe school may determine specific charging rates within applicable floating range on its own and implement such rates after reporting\nto those governmental departments and making announcements to the public.\n\n \n\nOur tuition and accommodation\nfees are within the applicable floating range based on the approved base prices. In the event that we consider it necessary to increase\nthe base prices based on the costs, we will initiate communications with the competent price authority which will issue a written notice\ninstructing us the required application materials to be submitted. The new charging rates will be determined and issued after on-site\nexamination and review of the materials by the competent price authority. The processing time of this procedure is approximately one\nto two months. The tuition rates we and the VIEs charge are typically based on the demand for our and the VIEs’ educational programs,\nthe cost of operations, the tuition rates charged by our competitors, our pricing strategy to gain market share and general economic\nconditions in China and the areas in which our campuses are located. We believe high-quality educational resources and school infrastructure\nwill allow us and the VIEs to raise our tuition rates to the extent permitted by the government. We believe that we and the VIEs remain\ncompetitive leveraging on our reputation and our ability to attract and retain students even if we and the VIEs raise the tuition rates.\n\n** **\n\n**Our ability to control operating costs\nand expenses**\n\n \n\nOur cost of revenues primarily\nconsists of salaries and welfare for the teachers, cost for food, books and uniform, depreciation and amortization, rental fees, utilities,\ntax surcharges and maintenance and repairs. Our general and administrative expenses primarily consist of salaries and welfare for our\nadministrative staff and office expenses. Our profitability depends, in part, on our ability to control our operating costs and expenses.\nWe and the VIEs highly value the teachers and invest in the teachers heavily, through extensive training opportunities and competitive\ncompensation levels. The number of teachers employed by Lishui International School, Langfang School and Hainan Jiangcai were 5, 57,\nand 24 as of September 1, 2025, respectively. Our strategy is to maintain and attract more high-quality teachers, by continuing to increase\nteachers’ salaries and other benefits from time to time to maintain our competitiveness in the market. As we and the VIEs continue\nto increase our student base and expand our operations, our cost of revenues and general and administrative expenses may increase accordingly.\nOur capability to effectively control operating costs and expenses will continue to affect our results of operations.\n\n** **\n\n**Seasonality**\n\n \n\nOur financial performance\nis subject to seasonality as each of the school years includes a winter holiday between December and January and a summer holiday between\nJuly and August. Our net loss and results of operations normally fluctuate from quarter to quarter as a result of seasonal variations\nin our education operations. The students and their parents typically pay the tuition and other fees prior to the commencement of a semester,\nand we recognize revenue generated from tuition and other fees on a straight-line basis over the semester. We and the VIEs typically\nincur higher upfront operating expenses in the third fiscal quarter at the start of each school year. As a result of the combination\nof the forgoing, we have historically recorded significantly lower net loss in the first and third fiscal quarters, primarily due to\nour school being closed due to the winter and summer holidays, when no revenue from our school operations is recognized.\n\n \n\n127\n\n \n\n \n\n**Key Components of Results of Operations**\n\n** **\n\n**Net revenues of continuing operations**\n\n \n\nThe following table sets\nforth the contribution of revenue of continuing operations.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\nRevenue from third parties: \n   \n   \n  \n\nTuition fees \n 30,626,298  \n 15,416,740  \n 13,863,581 \n\nCourse design, development and training \n 4,766,127  \n 6,839,135  \n 5,101,952 \n\nAccommodation \n 5,963,281  \n 4,032,860  \n 3,580,137 \n\nHealthcare support services \n -  \n 780,233  \n 2,568,905 \n\nUniforms, learning materials and other campus necessities \n 2,937,007  \n 2,164,187  \n 2,070,624 \n\nMeals \n 1,925,744  \n -  \n 986,477 \n\nComprehensive human resource services \n 653,149  \n 1,263,810  \n 847,756 \n\nRental revenue \n 746,294  \n 888,470  \n 983,125 \n\nOthers \n 2,443,231  \n 660,940  \n 226,875 \n\nSubtotal \n 50,061,131  \n 32,046,375  \n 30,229,432 \n\n  \n    \n    \n   \n\nRevenue from related party: \n    \n    \n   \n\nRental revenue \n 754,285  \n 754,285  \n 377,143 \n\nOthers \n -  \n -  \n 226,415 \n\nSubtotal \n 754,285  \n 754,285  \n 603,558 \n\n  \n    \n    \n   \n\nTotal revenue \n 50,815,416  \n 32,800,660  \n 30,832,990 \n\n \n\nFor continuing operations,\nour total net revenues were RMB50.8 million, RMB32.8 million and RMB30.8 million (US$4.4 million) in 2023, 2024 and 2025, respectively.\n\n* *\n\n*Revenue from third parties*\n\n \n\nLishui Mengxiang started\nto hold 100% of the sponsorship interests of Qingtian International School on August 24, 2021, and transferred 100% of such sponsorship\ninterests to a related party, Qiaoxiang Education, for a consideration of RMB23,161,000, effective on December 31, 2023. Lishui Mengxiang\nbegan to hold 100% of the sponsorship interests of Lishui International School on June 25, 2023. Qingtian International School and Lishui\nInternational School offered high school education services and our high school curriculum programs were designed for students as overseas\nChinese returnees. We offer high school curriculum programs and accommodation service to the students, and generally charge the students\ntuition and accommodation fees prior to the beginning of each semester. During the stay in school, Qingtian International School offered\nstudents with meals, and meal fees were collected each time students had meal.\n\n \n\nTo expand our and the VIEs’\nbusiness into vocational education, Lishui Mengxiang entered into definitive agreements to acquire 100% of the equity interests of Beijing\nP.X. on January 1, 2022, which was a wholly-owned subsidiary of Beijing S.K. at the time, so that after the transaction, Lishui Mengxiang\nthrough its shareholding of Beijing P.X. would in turn hold 100% of the equity interests of Chuangmei Weiye and Hainan Jiangcai, and\n100% of the sponsorship interests of Langfang School. The acquisition was completed in May 2022. Langfang School offers vocational education\nprograms and accommodation service to the students, and charges tuition, learning materials fees and accommodation fees from the students\nprior to the beginning of each semester. On January 6, 2023, Beijing P.X established a wholly-owned subsidiary Hebei Chuangxiang to provide\ncomprehensive human resource service and healthcare support service.\n\n \n\n128\n\n \n\n \n\nThe following table sets\nforth the number of students enrolled at Qingtian International School, Lishui International School, Langfang School and Hainan Jiangcai\nas of the dates of the beginning of school year indicated.\n\n \n\n  \nAs of September 1, \n\n  \n2023  \n2024  \n2025 \n\n  \nNumber  \n%  \nNumber  \n%  \nNumber  \n% \n\nEnrollment \n   \n   \n   \n   \n   \n  \n\nLangfang School \n 1,554  \n 59.8  \n 1,054  \n 56.4  \n 660  \n 52.0 \n\nHainan Jiangcai \n 480  \n 18.5  \n 685  \n 36.7  \n 510  \n 40.3 \n\nLishui International School \n 74  \n 2.8  \n 129  \n 6.9  \n 97  \n 7.7 \n\nQingtian International School \n 491  \n 18.9  \n -  \n -  \n -  \n - \n\nTotal \n 2,599  \n 100.0  \n 1,868  \n 100.0  \n 1,267  \n 100.0 \n\n \n\nIn addition, we and the\nVIEs sell school uniform, learning materials and other campus necessities to students.\n\n \n\nFor the years ended December\n31, 2025, Lishui International School, Langfang School, and Hainan Jiangcai generated total revenue of RMB3.9 million, RMB15.7 million\nand RMB0.1 million, respectively.\n\n \n\nWe leased staff dormitory\nand administrative office to the third parties for their daily operations. The total rental revenue generated from third parties was\nRMB0.8 million, RMB0.9 million and RMB1.0 million for the years ended December 31, 2023, 2024 and 2025, respectively.\n\n \n\nWe generated revenue\nfrom comprehensive human resource services, which integrate internship and employment recommendation services. The total\ncomprehensive human resource services revenue from third parties amounted to RMB0.6 million, RMB1.3 million and RMB0.8 million for\nthe years ended December 31, 2023, 2024 and 2025, respectively.\n\n \n\nWe generated revenue from\nhealthcare support services. We cooperates with healthcare and elderly care enterprises to deliver daily care, specialized nursing and\ncompanion services. The total revenue from third parties amounted to nil, RMB0.8 million and RMB2.6 million for the years ended December\n31, 2023, 2024 and 2025, respectively.\n\n \n\n*Revenue from related parties*\n\n \n\nRevenue from related parties\nconsists of: (i) rental income from Liandu Foreign Language School Kindergarten, derived from the leasing of kindergarten facilities,\nwith amounts of RMB0.8 million, RMB0.8 million and RMB0.4 million for the years ended December 31, 2023, 2024 and 2025, respectively.\n(ii) software license income from Qiaoxiang Education, which amounted to RMB0.2 million for the year ended December 31, 2025.\n\n \n\n**Net revenues of discontinued operations**\n\n \n\nFor discontinued operations,\nour total net revenues were RMB1.6 million, nil and nil in 2023, 2024 and 2025, respectively.\n\n* *\n\n*Revenue from Chuangmei Weiye*\n\n \n\nTo expand our and the VIEs’\nbusiness into vocational education, Lishui Mengxiang entered into definitive agreements to acquire 100% of the equity interests of Beijing\nP.X. on January 1, 2022, which was a wholly-owned subsidiary of Beijing S.K. at the time, so that after the transaction, Lishui Mengxiang\nthrough its shareholding of Beijing P.X. would in turn hold 100% of the equity interests of Chuangmei Weiye and Hainan Jiangcai, and\n100% of the sponsorship interests of Langfang School. The acquisition was completed in May 2022. In November 2023, Lishui Mengxiang elected\nto exercise its right to sell 100% of the equity interest of Chuangmei Weiye back to Beijing S.K pursuant to that certain supplementary\nagreement by and among Lishui Mengxiang, Beijing S.K., certain affiliates of Beijing S.K. and Beijing P.X. dated August 20, 2023, primarily\ndue to the substantial amount of Chuangmei Weiye’s historical debts. The equity interests of Chuangmei Weiye were transferred back\nto Beijing S.K.’s affiliates at a price of RMB6.36 million and the transfer was completed on November 9, 2023. After the transaction,\nthe amount of RMB6.36 million has been added to the total debts owed by Beijing S.K. to Lishui Mengxiang. We have evaluated the disposal\nof Chuangmei Weiye and concluded that the disposal should be accounted as discontinued operation for the year ended and as of December\n31, 2023 since this disposal had a major effect on our operations and financial results.\n\n \n\nChuangmei Weiye mainly provided\ncomprehensive services for flexible employment, which primarily focused on recommending interns from schools to various enterprises with\nhuman resources demand. For the years ended December 31, 2023, 2024 and 2025, Chuangmei Weiye generated revenue of RMB1.6 million, nil\nand nil, respectively.\n\n \n\n129\n\n \n\n \n\n**Cost of revenues**\n\n \n\nFor continuing operation,\nour cost of revenues primarily consists of salaries, welfare costs, books and uniform, rental fees, utilities, tax surcharges, depreciation\nand amortization, maintenance and repairs, salary and welfare for interns, and healthcare support services fee paid to suppliers. Our\ncost of revenues was RMB46.9 million, RMB35.9 million and RMB42.8 million (US$6.1 million) in 2023, 2024 and 2025, accounting for 92.2%,\n109.3% and 138.7% of our net revenues for the same periods, respectively.\n\n \n\n**Gross profit/(loss)**\n\n \n\nOur gross profit was RMB4.0\nmillion in 2023. Our gross loss was RMB3.1 million and RMB11.9 million (US$1.7 million) in 2024 and 2025, respectively. Our gross profit\nmargin was 7.8% in 2023. Our negative profit margin was 9.3% and 38.7% in 2024 and 2025, respectively. The decrease in profit margin\nwas primarily due to the low-price strategy implemented to expand market share for healthcare support services, coupled with increased\nleasing expenses incurred by the Langfang School.\n\n \n\n**General and administrative expenses**\n\n \n\nOur general and administrative\nexpenses primarily consist of salaries and welfare for our non-teaching staff, professional service fees, depreciation and amortization\nexpenses, office expenses and others. Our general and administrative expenses were RMB25.4 million, RMB22.8 million and RMB23.5 million\n(US$3.4 million) in 2023, 2024 and 2025, respectively, accounting for 50.1%, 69.5% and 76.1% of our net revenues for the same periods,\nrespectively.\n\n \n\n**Selling and marketing expenses**\n\n \n\nOur selling expenses primarily\nconsist of salaries and welfare for staff, office expenses, professional service fees, traveling expenses, entertainment expenses and\nother miscellaneous expenses. Our selling expenses were RMB18.3 thousand, RMB111.8 thousand and RMB985.3 thousand (US$140.9 thousand)\nin 2023, 2024 and 2025, respectively, accounting for 0.04%, 0.3% and 3.2% of our net revenues for the same periods, respectively.\n\n \n\n**Impairment loss on goodwill**\n\n \n\nOur impairment loss on goodwill\nresulted from the impairment of goodwill from acquisition of Beijing P.X. Beijing P.X. has failed to meet the performance requirement\nand we performed the quantitative impairment test for goodwill. Fair value of Beijing P.X. reporting unit was less than its carrying\namount. The goodwill has been fully impaired during the year 2023. Our impairment loss on goodwill was RMB22.7 million, nil and nil in\n2023, 2024 and 2025, respectively, accounting for 44.6%, 0.0% and 0.0% of our net revenues for the same periods, respectively.\n\n \n\n**Expected credit loss for receivables and\nother assets**\n\n \n\nWe periodically adjust our\nallowance for receivables when we believe that the future collection is unlikely. The allowance for Beijing S.K. receivables is calculated\nbased on historical loss experience using probability of default and loss given default methods and adjusted for various qualitative\nfactors that reflect current conditions and reasonable and supportable forecasts of future economic conditions after the adoption of\nAccounting Standard Codification (“ASC”) Topic 326. We recognize any increase in allowance for advance deposit for intent\nacquisition and contingent consideration receivables from Beijing S.K. as expected credit loss for receivables for the relevant period.\n\n \n\n**Interest expense and interest income**\n\n \n\nOur interest expenses primarily\nconsist of interest in bank borrowings. Our interest expense was RMB3.6 million, RMB2.9 million and RMB3.5 million (US$0.5 million) in\n2023, 2024 and 2025, accounting for 7.2%, 8.7% and 11.2% of our net revenues for the same periods, respectively.\n\n \n\n**Impairment loss on investments**\n\n \n\nImpairment loss on investments\nresulted from our investment in Orientiert XYZ Investment LP. This investment is measured at the fund’s reported net asset value.\nAs the fair value of the investment declined below its carrying amount and such decline was deemed other-than-temporary, we recognized\nan impairment loss of RMB83.6 million (US$12.0 million) in 2025, accounting for 271.2% of our net revenues.\n\n \n\n130\n\n \n\n \n\n**Other income, net**\n\n \n\nOur other income consists\nof government grants and other miscellaneous (expenses)/income. Government grants represented subsidies from various government authorities\nin China in relation to our school operation. Other miscellaneous (expenses)/income consists of non-operating expenses and income, bank\ncharges, investment income and others. Our other income, net was RMB12.3 million, RMB3.8 and RMB2.2 million (US$0.3 million) in 2023,\n2024 and 2025, respectively, accounting for 24.3%, 11.7% and 7.1% of our net revenues for the same periods, respectively.\n\n \n\n**Taxation**\n\n \n\n**Cayman Islands**\n\n \n\nWe are incorporated in the\nCayman Islands and conduct our primary business operations through the wholly foreign-owned subsidiary and consolidated VIEs in China.\nUnder the current laws of the Cayman Islands, we are not subject to income, corporation or capital gains taxes. In addition, dividend\npayments are not subject to withholding tax in the Cayman Islands.\n\n \n\n**Hong Kong**\n\n \n\nOur Hong Kong subsidiary,\nHong Kong Mengxiang Education Development Group Limited, is located in Hong Kong and is subject to an income tax rate of 16.5% for its\nestimated assessable profit for the years ended December 31, 2023, 2024 and 2025. Dividend income received from subsidiaries in\nChina is not subject to Hong Kong profit tax. We made no provision for Hong Kong profits tax in our consolidated financial statements\nas our Hong Kong subsidiary had no assessable profit in 2023, 2024 and 2025.\n\n \n\n**British Virgin Islands**\n\n \n\nUnder the current laws of\nthe British Virgin Islands, our British Virgin Islands subsidiary, Lianwai Investment Co., Ltd., is not subject to income or capital\ngains taxes. In addition, dividend payments are not subject to withholding tax in the British Virgin Islands.\n\n \n\n**PRC**\n\n \n\nPursuant to the “EIT\nLaw, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises except\nwhere a special preferential rate applies, and the income of qualified non-profit organizations shall be tax-exempt. According\nto the Announcement on Further Implementing the Income Tax Preferential Policies for Small and Micro Enterprises (Caishui [2023] No.\n06) issued by the Ministry of Finance and the State Taxation Administration on March 14, 2022, for small and low-profit enterprises with\nan annual taxable income exceeding RMB1.0 million but not exceeding RMB3.0 million, a reduction of 25% will be included in the taxable\nincome and the enterprise income tax will be paid at a 20% tax rate. The execution period of this announcement is from January 1, 2023\nto December 31, 2024. On August 2, 2023, the Ministry of Finance and the State Taxation Administration announced Caishui [2023] No. 12\nand extend the execution period of Caishui [2023] No. 06 from December 31, 2024 to December 31, 2027. For the years ended December 31,\n2023, 2024 and 2025, Chuangmei Weiye, Hainan Jiangcai, Hebei Chuangxiang and Langfang school were qualified as small-scale and low profit\nenterprise. See “*Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Taxation\nin the PRC.*”\n\n \n\n131\n\n \n\n \n\n**Results of Operations**\n\n \n\nThe following table sets\nforth a summary of our consolidated results of operations by amount and as a percentage of total revenue for the periods indicated. This\ninformation should be read together with our consolidated financial statements and related notes included elsewhere in this annual report\non Form 20-F. The results of operations in any period are not necessarily indicative of the results that may be expected for any future\nperiod.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n% of net revenue  \nRMB  \n% of net revenue  \nRMB  \nUS$  \n% of net revenue \n\n  \n(in thousands, except for percentage, share and per share data) \n\nNet revenues: \n   \n   \n   \n   \n   \n   \n  \n\nRevenue from third parties \n 50,061  \n 98.5% \n 32,046  \n 97.7% \n 30,229  \n 4,323  \n 98.0%\n\nRevenue from related party \n 754  \n 1.5% \n 754  \n 2.3% \n 604  \n 86  \n 2.0%\n\nTotal net revenues \n 50,815  \n 100.0% \n 32,800  \n 100.0% \n 30,833  \n 4,409  \n 100.0%\n\nCost of revenues \n (46,850) \n (92.2%) \n (35,851) \n (109.3%) \n (42,763) \n (6,115) \n (138.7%)\n\nGross profit/(loss) \n 3,965  \n 7.8% \n (3,051) \n (9.3%) \n (11,930) \n (1,706) \n (38.7%)\n\nOperating expenses: \n    \n    \n    \n    \n    \n    \n   \n\nGeneral and administrative expenses \n (25,445) \n (50.1%) \n (22,799) \n (69.5%) \n (23,468) \n (3,356) \n (76.1%)\n\nSelling and marketing expenses \n (18) \n (0.04%) \n (112) \n (0.30%) \n (985) \n (141) \n (3.20%)\n\nImpairment loss on goodwill \n (22,678) \n (44.6%) \n -  \n -  \n -  \n -  \n - \n\nExpected credit loss for receivables and other assets \n (65,138) \n (128.2%) \n -  \n -  \n -  \n -  \n - \n\nTotal operating expenses \n (113,279) \n (222.9%) \n (22,911) \n (69.9%) \n (24,453) \n (3,497) \n (79.3%)\n\nOperating loss \n (109,314) \n (215.1%) \n (25,962) \n (79.2%) \n (36,383) \n (5,203) \n (118.0%)\n\nInterest expense \n (3,635) \n (7.2%) \n (2,861) \n (8.7%) \n (3,457) \n (494) \n (11.2%)\n\nImpairment loss on investments \n -  \n -  \n -  \n -  \n (83,622) \n (11,958) \n (271.2%)\n\nInterest income \n 134  \n 0.3% \n 290  \n 0.9% \n 9  \n 1  \n - \n\nOther income, net \n 12,340  \n 24.3% \n 3,831  \n 11.7% \n 2,190  \n 313  \n 7.1%\n\nLoss before income tax expense \n (100,475) \n (197.7%) \n (24,702) \n (75.3%) \n (121,263) \n (17,341) \n (393.3%)\n\nIncome tax expenses \n (3,120) \n (6.1%) \n -  \n -  \n -  \n -  \n - \n\nLoss from continuing operations, net of tax \n (103,595) \n (203.9%) \n (24,702) \n (75.3%) \n (121,263) \n (17,341) \n (393.3%)\n\nLoss from discontinued operation, net of tax \n (23,395) \n (46.0%) \n -  \n -  \n -  \n -  \n - \n\nNet loss \n (126,990) \n (249.9%) \n (24,702) \n (75.3%) \n (121,263) \n (17,341) \n (393.3%)\n\nNet loss attributable to Lixiang Education Holding Co., Ltd. shareholders \n (126,631) \n (249.2%) \n (24,628) \n (75.1%) \n (121,904) \n (17,432) \n (395.4%)\n\nNet (loss)/income attributable to non-controlling interests \n (359) \n (0.7%) \n (74) \n (0.2%) \n 641  \n 91  \n 2.1%\n\nOther comprehensive income: \n    \n    \n    \n    \n    \n    \n   \n\nForeign currency translation adjustment, net of nil tax \n 2,971  \n 5.8% \n 3,810  \n 11.6% \n (5,748) \n (822) \n (18.6%)\n\nComprehensive loss \n (124,019) \n (244.1%) \n (20,892) \n (63.7%) \n (127,011) \n (18,163) \n (411.9%)\n\nTotal comprehensive loss attributable to Lixiang Education Holding Co., Ltd. shareholders \n (123,660) \n (243.4%) \n (20,818) \n (63.5%) \n (127,651) \n (18,254) \n (414.0%)\n\n  \n\n132\n\n \n\n \n\n**Year ended December 31, 2025 compared to year ended December 31,\n2024**\n\n \n\n*Net revenues*. Our\nnet revenues decreased by 6.0% from RMB32.8 million in 2024 to RMB30.8 million (US$4.4 million) in 2025. The decrease in net\nrevenues was mainly due to (i) a decrease of RMB2.0 million in tuition and accommodation service, as a result of the number of graduates\nexceeded the enrolment of new students; (ii) a decline of RMB1.7 million in course design, development and training revenue due to weakened\nmarket demand, and partially offset by (iii) a RMB1.8 million increase in revenue generated from healthcare support services.\n\n \n\n*Cost of revenues*.\nOur cost of revenues increased by 19.3% from RMB35.9 million in 2024 to RMB42.8 million (US$6.1 million) in 2025. The increase in\ncost of revenues was mainly due to an increase of RMB4.4 million in our newly launched healthcare support services, (ii) an increase\nof RMB3.7 million in rental costs attributable to higher site rental fees in 2025, and partially offset by (i) a decrease of RMB3.9 million\nin taxes and surcharges.\n\n \n\n*Gross profit/(loss).*\nAs a result of the foregoing, our gross loss increased from RMB3.1 million in 2024 to RMB11.9 million (US$1.7 million) in 2025.\nOur gross margin increased from 9.3% to 38.7% in 2025.\n\n \n\n*General and administrative\nexpenses*. Our general and administrative expenses increased by 2.9% from RMB22.8 million in 2024 to RMB 23.5 million (US$3.4\nmillion) in 2025. The slight increase was primarily due to a RMB1.4 million reversal of credit losses from Beijing S.K. recorded in 2024,\noffset by overall cost control in general and administrative expenses.\n\n \n\n*Sales and marketing expenses*.\nOur sales and marketing expenses increased from RMB111.8 thousand in 2024 to RMB985.3 thousand (US$140.9 thousand) in 2025.There was\nan increase of RMB554.1 thousand in staff costs and RMB118.5 thousand in office expenses, attributable to expansion of the marketing\nteam for business growth of healthcare support service.\n\n \n\n*Loss from operations*.\nAs a result of the foregoing, our loss from operations increased by 40.1% from RMB26.0 million in 2024 to RMB36.4 million (US$5.2\nmillion) in 2025.\n\n \n\n*Interest expense*.\nOur interest expense increased by 20.8% from RMB2.9 million in 2024 to RMB3.5million (US$0.5 million) in 2025, primarily due to\nthe longer average utilization period of our bank borrowings.\n\n \n\n*Other income, net*.\nOur other income, net decreased by 42.8% from RMB3.8 million in 2024 to RMB2.2 million (US$0.3 million) in 2025, primarily due\nto (i) a decrease of RMB0.8 million in other income mainly attributable to grants for needy students received by Langfang School, and\n(ii) an increase of RMB0.5 million in other expenses, driven by an overdue tax penalty of RMB0.3 million and additional employee compensation\nof RMB0.2 million.\n\n \n\n*Net loss.* As a result\nof the foregoing, our net loss increased by 390.9% from RMB24.7 million in 2024 to RMB121.3 million (US$17.3 million) in 2025.\n\n \n\n**Year ended December 31, 2024 compared to year ended December 31,\n2023**\n\n \n\n*Net revenues*. Our\nnet revenues decreased by 35.5% from RMB50.8 million in 2023 to RMB32.8 million (US$4.5 million) in 2024. The decrease in net\nrevenues was mainly due to (i) a decrease in revenue from tuition and accommodation service, as a result of the number of graduates exceeded\nthe enrolment of new students and the disposal of Qingtian International School as of December 31, 2023; and (ii) that Liandu WFOE ceased\nto provide meal and uniforms to students since 2024; and was partially offset by an increase of course design, development and training\nprovided by Hainan Jiangcai.\n\n \n\n*Cost of revenues*.\nOur cost of revenues decreased by 23.5% from RMB46.9 million in 2023 to RMB35.9 million (US$4.9 million) in 2024. The decrease in\ncost of revenues was mainly due to a decrease in cost of revenues of RMB20.4 million as a result of the disposal of Qingtian International\nSchool; and was partially offset by (i) an increase of RMB8.3 million of property taxes in 2024; and (ii) the costs from cooperative\neducation agreement with a third party for the operation of Lishui International School.\n\n \n\n*Gross profit/(loss).*\nAs a result of the foregoing, our gross profit decreased from RMB4.0 million in 2023 to a gross loss of RMB3.1 million (US$0.4\nmillion) in 2024. Our gross margin decreased from 7.8% in 2023 to a negative margin of 9.3% in 2024.\n\n \n\n*General and administrative\nexpenses*. Our general and administrative expenses decreased by 10.4% from RMB25.4 million in 2023 to RMB 22.8 million (US$3.1\nmillion) in 2024. The decrease was mainly due to (i) the reversal of credit losses from Beijing S.K. of RMB1.4 million due to subsequent\ncollection; and (ii) the disposal of Qingtian International School.\n\n \n\n*Sales and marketing expenses*.\nOur sales and marketing expenses increased from RMB18.0 thousand in 2023 to RMB112.0 thousand (US$15 thousand) in 2024.\n\n \n\n133\n\n \n\n \n\n*Impairment loss on goodwill.*\nOur impairment loss on goodwill decreased from RMB22.7 million in 2023 to nil in 2024, primarily due to the under-performance of Beijing\nP.X. in 2023 and that we made full impairment of the goodwill.\n\n \n\n*Expected credit loss\nfor receivables and other assets.*Our expected credit loss for receivables and other assets amounted to RMB65.1 million (US$9.2 million)\nin 2023, primarily because the collectability from Beijing S.K. is remote as it lacks profitability and financing capacity, and therefore\nwe made full provision for receivables from Beijing S.K.\n\n \n\n*Loss from operations*.\nAs a result of the foregoing, our loss from operations decreased by 76.3% from RMB109.3 million in 2023 to RMB26.0 million\n(US$3.6 million) in 2024.\n\n \n\n*Interest expense*.\nOur interest expense decreased by 21.3% from RMB3.6 million in 2023 to RMB2.9 million (US$0.4 million) in 2024, primarily due\nto lower interest rate charged on our borrowings in 2024.\n\n \n\n*Fair value change gain\nof contingent consideration.* Our fair value change gain of contingent consideration in 2022 primarily due to compensation receivable\nfrom Beijing S.K resulted from Beijing P.X.’s under-performance in 2022.\n\n \n\n*Other income, net*.\nOur other income, net decreased by 69.0% from RMB12.3 million in 2023 to RMB3.8 million (US$0.5 million) in 2024, primarily\ndue to a decrease of government grants of RMB7.2 million received by Qingtian International School to support the development of school\nin 2023.\n\n \n\n*Loss from continuing\noperations, net of tax*. As a result of the foregoing, our loss from continuing operations, net of tax decreased by 76.2% from RMB103.6 million\nin 2023 to RMB24.7 million (US$3.4 million) in 2024.\n\n \n\n*Income/(loss) from discontinued\noperation, net of tax.* Our net loss from discontinued operations decreased from RMB23.4 million in 2023 to nil in 2024, primarily\ndue to the disposal loss of Chuangmei Weiye in 2023.\n\n \n\n*Net loss.* As a result\nof the foregoing, our net loss decreased by 80.5% from RMB 127.0 million in 2023 to RMB24.7 million (US$3.4 million) in 2024.\n\n \n\n**Recent Accounting Pronouncements**\n\n \n\nFor detailed discussion\non recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements.\n\n \n\n**Inflation**\n\n \n\nSince our inception, inflation\nin China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year\npercent changes in the consumer price index for December 2023, 2024 and 2025 were increases of 0.2%, 0.2% and 0.0%, respectively.\nAlthough we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation\nin the future.\n\n \n\n**Critical Accounting Policies**\n\n \n\nAn accounting policy is\nconsidered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at\nthe time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting\nestimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.\n\n \n\nWe prepare our financial\nstatements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these\nestimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions\nthat we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting\nprocess, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require\na higher degree of judgment than others in their application and require us to make significant accounting estimates.\n\n \n\nThe following descriptions\nof critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and\nother disclosures included in this annual report on Form 20-F. When reviewing our financial statements, you should consider (i) our\nselection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies\nand (iii) the sensitivity of reported results to changes in conditions and assumptions.\n\n \n\n134\n\n \n\n \n\n**Consolidation of VIEs**\n\n \n\nWe account for entities\nqualifying as VIEs in accordance with Financial Accounting Standards Boards or ASC 810. In order to comply with PRC regulatory requirements\nrestricting foreign ownership of education services in China, we have been conducting education services through VIEs.\n\n \n\nIn 2018, Liandu WFOE entered\ninto a series of contractual arrangements with Lianwai School, Lishui Mengxiang and their respective shareholders, including loan agreement,\nexclusive call option agreement, proxy agreements and power of attorney for shareholders, proxy agreements and power of attorney for\nschool’s sponsors and directors, equity pledge agreements, spousal undertakings, business cooperation agreement and exclusive technical\nservices and business consulting agreements. Before the 2021 Implementation Regulations became effective, as a result of our direct ownership\nin Liandu WFOE and the contractual arrangements relating to the VIEs and their respective shareholders, we are regarded as the primary\nbeneficiary of the VIEs in accordance with ASC 810, and we treat them as our consolidated affiliate Chinese entities under U.S. GAAP.\nWe have consolidated the financial results of the VIEs in our consolidated financial statements in accordance with U.S. GAAP.\n\n \n\n**Qingtian International School**\n\n \n\nOn August 24, 2021,\nLishui Mengxiang began to hold 100% of the sponsorship interests of Qingtian International School. Thereafter, Liandu WFOE entered into\na series of contractual arrangements with Lishui Mengxiang, Qingtian International School, shareholders of Lishui Mengxiang and the Council\nMembers of Qingtian International School, including Exclusive Call Option Agreement, Proxy Agreement for School’s Sponsors and\nCouncil Members, Proxy Agreement for Shareholders, Business Cooperation Agreement, Exclusive Technical Service and Business Consulting\nAgreement, Equity Pledge Agreement, etc., which become effective since August 31, 2021. We have consolidated the results of Qingtian\nInternational School in our consolidated financial statements since August 31, 2021, in accordance with U.S GAAP through these VIE\ncontractual arrangements. On December 31, 2023, Lishui Mengxiang transferred 100% of the sponsorship interests of Qingtian International\nSchool to Qiaoxiang Education, which is a related party as an entity affiliated with Mr. Biao Wei, a director and the Chief Executive\nOfficer of the Company, and we deconsolidated the results of Qingtian International School in our consolidated financial statements since\nDecember 31, 2023.\n\n \n\n**Langfang School**\n\n \n\nOn March 28, 2023, Liandu\nWFOE entered into a series of contractual arrangements with Lishui Mengxiang, Beijing P.X., Langfang School, shareholders of Lishui Mengxiang\nand the Council Members of Langfang School. The series of contractual arrangements included Exclusive Call Option Agreement, Proxy Agreement\nfor School’s Sponsors and Council Members, Proxy Agreement for Shareholders, Business Cooperation Agreement, Exclusive Technical\nService and Business Consulting Agreement, Equity Pledge Agreement, etc., which became effective on January 1, 2022. We have consolidated\nthe results of Langfang School in our consolidated financial statements since January 1, 2022, in accordance with U.S GAAP.\n\n \n\n**Lishui International School**\n\n \n\nOn April 2, 2024, Liandu\nWFOE entered into a series of contractual arrangements with Lishui Mengxiang, Lishui International School, shareholders of Lishui Mengxiang\nand the Council Members of Lishui International School. The series of contractual arrangements included Exclusive Call Option Agreement,\nProxy Agreement for School’s Sponsors and Council Members, Proxy Agreement for Shareholders, Business Cooperation Agreement, Exclusive\nTechnical Service and Business Consulting Agreement, Equity Pledge Agreement, etc., which became effective on June 25, 2023. We have\nconsolidated the results of Lishui International School in our consolidated financial statements since June 25, 2023, in accordance with\nU.S GAAP.\n\n \n\n**Revenue recognition**\n\n \n\nWe adopted ASC 606, “Revenue\nfrom Contracts with Customers” for all periods presented. Consistent with the criteria of ASC 606, we follow five steps for its\nrevenue recognition: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract,\n(iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract,\nand (v) recognize revenue when (or as) the entity satisfies a performance obligation.\n\n \n\n*Education Services*\n\n \n\nFor continuing operations,\nwe and the VIEs offer school curriculum education services, including high school curriculum and vocational school curriculum, to students.\nSchools also provide accommodation service, offer meals, uniforms, learning materials and other campus necessities.\n\n \n\n●*Tuition,\nmeal and accommodation service income*\n\n \n\nTuition and accommodation\nservice income that are received in advance by schools prior to the beginning of each semester of a school year are initially recorded\nas contract liabilities, and then are recognized over time during the service period of each semester. Amounts which will be earned within\none year are reflected as a current liability, and those which will be earned beyond one year are reflected as a non-current liability.\nBefore disposal, Qingtian International School offered meals to students and collected meal fees each time students have meal, and therefore,\nrevenue was recognized at the point of time when Qingtian International School offered meals to students.\n\n \n\n135\n\n \n\n \n\nWe and the VIEs recognize\nservice income on a gross basis, as we and the VIEs are responsible for fulfilling the promise to provide the education, meal and accommodation\nservices to students.\n\n  \n\n●*Sale\nof uniforms, learning materials and other campus necessities*\n\n \n\nWe and the VIEs sell uniforms,\nlearning materials and other campus necessities to students. Schools provide school uniforms and learning materials to the students with\npayment made prior to the beginning of each semester. Revenue from uniform, learning materials and other campus necessities are recognized\nat a point in time when control of these goods have been transferred and accepted by the students.\n\n \n\nWe and the VIEs recognize\nrevenue from sale of uniforms, learning materials and other campus necessities on a gross basis, as we and the VIEs control the goods\nbefore they are transferred to the students. We and the VIEs are responsible for design of uniforms and have inventory risk for the uniforms,\nlearning materials and other campus necessities.\n\n \n\n*Healthcare support services*\n\n \n\nWe, through VIE’s\nconsolidated subsidiaries, Hebei Chuangxiang, charge service fees to customers for providing healthcare support services, which are calculated\nbased on the actual service periods. Revenue is recognized ratably over the service period.\n\n \n\nHebei Chuangxiang controls\nthe healthcare support services provided to its customers as: (i) Hebei Chuangxiang acts as the primary obligor and manages the entire\nservice process, including service quality, caregiver matching, supervision, and complaint handling; (ii) Hebei Chuangxiang collaborates\nwith multiple service providers nationwide and deploys dedicated personnel to meet customized requirements; (iii) Hebei Chuangxiang directs\ncaregivers to provide personalized care services on its behalf without direct cooperative relationship between caregivers and customers;\n(iv) Hebei Chuangxiang retains the ultimate discretion in setting service prices, including setting standard and differential rates.\nAccordingly, we act as a principal and recognizes revenue in the gross amount of consideration to which we expect to be entitled in exchange\nfor the specified services transferred.\n\n \n\n*Human Resources Services*\n\n \n\nWe, through VIE’s\nconsolidated subsidiaries, Chuangmei Weiye and Hebei Chuangxiang, generate the revenue from providing comprehensive services for flexible\nemployment, which primarily focuses on recommending interns from schools to various clients with human resources demand. We, Chuangmei\nWeiye and Hebei Chuangxiang conclude that there is a single performance obligation to fulfill service requirements from clients. Chuangmei\nWeiye and Hebei Chuangxiang charge service fees from clients based on service periods at a fixed rate per day, and recognize revenue\nover time as the related performance obligations are continuously satisfied.\n\n \n\nWe conclude that Chuangmei\nWeiye and Hebei Chuangxiang control the service of recommending interns to their clients as (i) Chuangmei Weiye and Hebei Chuangxiang\nare primarily responsible for the fulfillment of the services and assuring the customers are satisfied with the services; (ii) Chuangmei\nWeiye and Hebei Chuangxiang need to maintain a talent pool of sufficient interns to satisfy the service requirement from its clients\non an if-needed basis; (iii) Chuangmei Weiye and Hebei Chuangxiang can direct interns to provide services to its clients on its behalf,\nand there is no direct cooperation relationship between the interns and the clients, and (iv) Chuangmei Weiye and Hebei Chuangxiang have\nthe ultimate discretion to set up its service price. Therefore, we act as a principal, and recognize revenue in the gross amount of consideration\nto which it expects to be entitled in exchange for the specified services transferred.\n\n \n\n*Course Design, Development and Training*\n\n \n\nThe VIE, Hainan Jiangcai,\njointly designs and develops curriculum and training programs with Hainan Technical School. We and the Hainan Jiangcai conclude that\nthere is a single performance obligation to fulfill service requirements from Hainan Technical School and recognizes revenue over cooperation\nperiod in a straight-line method.\n\n \n\n*Rental Income*\n\n \n\nRental income is recognized\non a straight-line basis over the term of the lease.\n\n \n\nWe and the VIEs entered\ninto lease agreements as lessor with both third parties and related parties.\n\n \n\n136\n\n \n\n \n\n**Income taxes**\n\n \n\nCurrent income taxes are\nprovided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable\nor deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.\n\n \n\nDeferred income taxes are\naccounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of\ntemporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying\namounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that\nasset or liability for tax purpose. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements\nof operations and comprehensive income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax\nassets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.\n\n \n\n*Uncertain Tax Positions*\n\n \n\nThe guidance on accounting\nfor uncertainties in income taxes prescribes a more likely than not threshold for financial statements recognition and measurement of\na tax position taken or expected to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities,\nclassification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions,\naccounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating our uncertain\ntax positions and determining its provision for income taxes. We did not recognize any significant interest and penalties associated\nwith uncertain tax positions for the years ended December 31, 2023, 2024 and 2025. As of December 31, 2024 and 2025, we did\nnot have any significant unrecognized uncertain tax positions.\n\n \n\n**Goodwill**\n\n \n\nGoodwill represents the\nexcess of the purchase consideration over the fair value of the identifiable net assets acquired in a business combination. Goodwill\nis not amortized but is tested for impairment on an annual basis as of December 31 of each year, or more frequently if events or\nchanges in circumstances indicate that it might be impaired. We have the option to first assess qualitative factors to determine whether\nit is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, we consider primary factors\nsuch as industry and market considerations, overall financial performance of the reporting unit, and other specific information related\nto the operations. We will perform the quantitative impairment test if we bypass the qualitative assessment, or based on the qualitative\nassessment, if it is more likely than not that the fair value of each reporting unit is less than the carrying amount.\n\n \n\nWe adopted Accounting Standards\nUpdate No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating\nstep two from the goodwill impairment test. Under the new guidance, if the fair value of a reporting unit exceeds its carrying amount,\ngoodwill is not impaired and no further testing is required. If the fair value of a reporting unit is less than the carrying value, an\nimpairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the\nloss recognized should not exceed the total amount of goodwill allocated to that reporting unit.\n\n \n\nFor the years ended December 31,\n2023, 2024 and 2025, we recognized RMB22.7 million, nil and nil impairment loss on goodwill.\n\n \n\n**Impact of Foreign Currency Fluctuation**\n\n \n\nSee “*Item 3. Key\nInformation—D. Risk Factors—Risks Relating to Doing Business in China—Fluctuations in exchange rates may result in\nforeign currency exchange losses and may have a material adverse effect on your investment*.” and “*Item 11. Quantitative\nand Qualitative Disclosures about Market Risk—Foreign Exchange Risk*.”\n\n \n\n**Impact of Governmental Policies**\n\n \n\nSee “*Item 3. Key\nInformation—D. Risk Factors—Risks Relating to Doing Business in China*” and “*Item 4. Information on the\nCompany—B. Business Overview—Regulation.*”\n\n \n\n137\n\n \n\n \n\n**B. Liquidity and Capital Resources**\n\n \n\nHistorically, we funded our\noperations primarily through cash generated from our operating activities, bank borrowings, financing from related parties and shareholders,\nand issuance of ordinary shares. As of December 31, 2024 and 2025, we had RMB220.7 million and RMB12.8 million (US$1.8\nmillion), respectively, in cash and cash equivalents. As of December 31, 2025, our cash of RMB12.7 million (US$1.8 million) and RMB0.1\nmillion (US$16.4 thousand) were held in China and overseas, respectively. Our cash primarily consists of cash in banks or other financial\ninstitutions which are unrestricted as to withdrawal or use. As of December 31, 2024 and 2025, we had short-term bank borrowings\nof RMB84.0 million and RMB84.0 million (US$12.0 million), respectively. Our bank borrowings were secured by (i) the pledge\nof the buildings we own and the land use right we have, and (ii) personal guarantees from related parties. As of December 31,\n2025, we had negative net working capital of RMB 90.1 million (US$12.9 million).\n\n \n\nWe believe that, without\ngiving effect to our management plans, our current working capital will not be sufficient to support our operations for the next twelve\nmonths as of the date of this annual report, due to our accumulated deficits, and working capital deficiency. We are evaluating strategies\nto obtain the required additional funding for future operations. These strategies may include, but are not limited to:\n\n \n\n(i) seeking to renew or extend\nexisting short-term borrowings;\n\n \n\n(ii) pursuing additional\nfinancing alternatives, including potential equity financing or strategic investments; and\n\n \n\n(iii) focusing on the improvement\nof operation efficiency, implementation of strict cost control and budget and enhancement of internal controls to create a synergy resources.\n\n \n\nThere can be no assurances,\nhowever, that our current mitigation plans will be achieved or that additional funding will be available on terms acceptable to us, or\nat all. If we are unable to obtain sufficient funding, we could be required to delay our market expansion efforts and limit activities,\nwhich could adversely affect our business and the financial statements.\n\n \n\nAlthough we consolidate\nthe results of the VIEs, we only have access to the assets or earnings of the VIEs through our contractual arrangements with the VIEs\nand their shareholders. See “*Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements*.”\n\n \n\nWe have not encountered\nany difficulties in meeting our cash obligations to date. When considering our liquidity position and our future capital resources and\nneeds, we take into account price controls set by local governments that may affect the tuition and other fees we are able to charge\nto students in our schools, annual enrollment numbers approved for our schools, the economic benefits we have received from Liandu WFOE\nand the VIEs under our Business Cooperation Agreement and Exclusive Technical Service and Business Consulting Agreement.\n\n \n\n**Cash Flows**\n\n \n\nThe following table presents\nour selected consolidated statements of cash flows for the years ended December 31, 2023, 2024 and 2025:\n\n \n\n \n\n  \nFor the year ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \nRMB  \nRMB  \nUS$ \n\n  \n(in thousands) \n\nSelected Consolidated Cash Flows: \n   \n   \n   \n  \n\nNet cash used in operating activities from\ncontinuing operations \n (66,909) \n (18,322) \n (314,302) \n (44,945)\n\nNet cash provided by operating activities from discontinued\noperation \n 7,710  \n -  \n -  \n - \n\nNet cash used in investing activities from continuing\noperations \n (7,576) \n (554) \n (142,214) \n (20,336)\n\nNet cash provided by investing activities from discontinued\noperation \n -  \n -  \n -  \n - \n\nNet cash provided by financing activities from continuing\noperations \n 51,856  \n 8,750  \n 254,323  \n 36,368 \n\nNet cash used in financing activities from discontinued\noperation \n (7,773) \n -  \n -  \n - \n\nEffect of exchange rate changes\non cash and cash equivalents \n 2,970  \n 3,810  \n (5,748) \n (822)\n\nNet decrease in cash \n (19,722) \n (6,316) \n (207,941) \n (29,735)\n\nCash and cash equivalents at the\nbeginning of year \n 246,762  \n 227,040  \n 220,724  \n 31,563 \n\nCash and cash equivalents at the\nend of year \n 227,040  \n 220,724  \n 12,783  \n 1,828 \n\nLess: cash and cash equivalents of discontinued operations\nat the end of year \n -  \n -  \n -  \n - \n\nCash and cash equivalents of continuing operations at\nthe end of year \n 227,040  \n 220,724  \n 12,783  \n 1,828 \n\n \n\n**Operating activities**\n\n \n\nWe generate cash from operating\nactivities primarily from tuition and accommodation fees, all of which are typically paid in advance before the respective services are\nrendered. Tuition and accommodation fees are initially recorded as contract liabilities. We recognize such amounts received as revenue proportionately\nover the relevant period in which the students attend the applicable programs of each semester. Before disposal, Qingtian International\nSchool offered students with meals, and meal fees were collected each time students have the meal. Lishui International School does not\nprovide meals to students.\n\n \n\n138\n\n \n\n \n\nIn 2025, we had net cash\nused in operating activities from continuing operations of RMB314.3 million (US$44.9 million) which is primarily attribute to net loss\nof RMB121.3 million (US$17.3 million) adjusted by depreciation and amortization of long-lived assets of RMB14.6 million (US$2.1 million),\nimpairment loss of investment of RMB83.6 million (US$12.0 million) and changes in the working capital accounts mainly included a decrease\nin amounts due to Lianwai School of RMB288.7 million (US$41.3 million), resulting from the settlement of outstanding balances; a decrease\nin operating lease liabilities of RMB9.8 million (US$1.4 million).\n\n \n\nIn 2024, we had net cash\nused in operating activities from continuing operations of RMB18.3 million (US$2.5 million) which is primarily attribute to net\nloss of RMB24.7 million (US$3.4 million) adjusted by depreciation and amortization of long-lived assets of RMB11.7 million (US$1.6\nmillion) and changes in the working capital accounts mainly included a decrease in operating lease liabilities of RMB10.5 million (US$1.4\nmillion) as the Group entered into new leases in 2024 and prepaid rental fees, an increase in amounts due from a related parties of $6.8\nmillion (US$0.9 million), partly offset by an increase in amounts due to Lianwai School of RMB8.9 million (US$1.2 million).\n\n \n\nIn 2023, we had net cash\nused in operating activities from continuing operations of RMB66.9 million which is primarily attribute to net loss of RMB127.0 million\nadjusted by impairment loss of goodwill of RMB22.7 million, provision for doubtful accounts of RMB65.1 million of receivables\nfrom Beijing S.K. and changes in the working capital accounts mainly included an increase in amounts due from Qingtian International\nSchool of RMB10.8 million due to deconsolidation, a decrease in amounts due to Lianwai School of RMB60.4 million due to repayment,\npartially offset by a decrease in prepayments and other current assets of RMB5.2 million and an increase in amounts due to a related\nparty of $7.7 million.\n\n \n\n**Investing activities**\n\n \n\nIn 2025, we had net cash\nused in investing activities from continuing operations of RMB142.2 million (US$20.3 million), primarily attributable to (i) payment\nfor investment in fund of RMB128.6 million (US$18.4 million), (ii) payments for other non-current assets of RMB7.5 million (US$1.1 million)\nfor software platform development, (iii) prepayment for merger and acquisition consulting services of RMB6.0 million (US$0.9 million),\n(iv) purchase of property and equipment of RMB0.1 million (US$16.8 thousand), (ii) purchase of short-term investment of RMB0.3 million\n(US$42.9 thousand), and partly offset by proceeds from maturity of short-term investment of RMB0.3 million (US$42.9 thousand).\n\n \n\nIn 2024, we had net cash\nused in investing activities from continuing operations of RMB0.6 million (US$0.1 million), primarily attributable to (i) purchase\nof property and equipment and software of RMB0.3 million (US$40.8 thousand), and (ii) cash loss of disposal of non-controlling interests\nof RMB0.3 million (US$35.1 thousand), (iii) purchase of short-term investment of RMB0.2 million (US$ 23.3 thousand),and partly offset\nby proceeds from maturity of short-term investment of RMB0.2 million (US$ 23.3 thousand).\n\n \n\nIn 2023, we had net cash\nused in investing activities from continuing operations of RMB7.6 million, primarily attributable to (i) purchase of property\nand equipment and software of RMB2.2 million, and (ii) cash loss of disposal of Qingtian International School of RMB5.0 million,\nand (iii) cash loss of disposal of Chuangmei Weiye of RMB0.4 million.\n\n \n\n**Financing activities**\n\n \n\nIn 2025, we had net cash\nprovided by financing activities from continuing operations of RMB254.3 million (US$36.4 million), primarily attributable to (i)\nproceeds from issuance of ordinary shares, net of issuance cost of RMB250.4 million (US$35.8 million), (ii) proceeds from short-term\nborrowings with banks of RMB104.0 million (US$14.9 million), (iii) proceeds borrowings from a third party of RMB3.9 million (US$0.6 million),\nand partly offset by (iii) repayments of short-term borrowings with banks of RMB104.0 million (US$14.9 million).\n\n \n\nIn 2024, we had net cash\nprovided by financing activities from continuing operations of RMB8.8 million (US$1.2 million), primarily attributable to net proceeds\nfrom short-term bank borrowings amounting to RMB10.0 million (US$1.4 million) and repayments of long-term borrowings with banks\nof RMB1.3 million (US$0.2 million).\n\n \n\nIn 2023, we had net cash\nprovided by financing activities from continuing operations of RMB51.9 million, primarily attributable to (i) proceeds from short-term\nborrowings with banks of RMB98.0 million, (ii) issuance of ordinary shares of RMB41.9 million to new individual investors, partly offset\nby (i) repayments of short-term borrowings with banks of RMB85.0 million and long-term borrowings with banks of RMB2.5 million,\n(ii) withdrawal of non-controlling shareholders of RMB0.5 million.\n\n \n\n**Capital Expenditure**\n\n \n\nWe incurred capital expenditure\nof RMB2.2 million, RMB0.3 million and RMB7.6 million (US$1.1 million) in 2023, 2024 and 2025, respectively, primarily\nin connection with the purchase of educational equipment. We intend to fund our future capital expenditure through our existing\ncash balance, bank borrowings and other financing alternatives. We will continue to incur capital expenditure to support the growth of\nour and the VIEs’ business.\n\n \n\n139\n\n \n\n \n\n**Holding Company Structure**\n\n \n\nWe are a holding company\nwith no material operations of our own. We conduct our operations primarily through the wholly foreign-owned subsidiary and consolidated\nVIEs in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly foreign-owned subsidiary in China.\nOur wholly foreign-owned subsidiary in China has not historically paid any dividends to our offshore entities until they generate accumulated\nprofits and meet the requirements for statutory reserve funds. If our wholly foreign-owned subsidiary in China or any newly formed subsidiaries\nincur any debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our\nwholly foreign-owned subsidiary in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined\nin accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries, the consolidated VIEs in China\nis required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until\nsuch reserve funds reach 50% of its registered capital. In addition, our wholly foreign-owned subsidiary in China may allocate a portion\nof its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds\nat its discretion, and the consolidated VIEs may allocate a portion of their after-tax profits based on PRC accounting standards\nto a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as\ncash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated\nby SAFE.\n\n \n\nFurthermore, according to\nthe Implementing Regulations for the Law of the PRC on the Promotion of Privately-run Schools currently in force, at the end\nof each fiscal year, our school is required to allocate a portion of its funds to the development fund for the construction or maintenance\nof the school properties or purchase and upgrade of teaching equipment. Our school shall also withhold at least 25.0% of our annual\nincrease of the net assets for the same purposes.\n\n \n\n**Off-Balance Sheet Arrangements**\n\n \n\nWe have not entered into\nany financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered\ninto any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in\nour consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated\nentity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any\nunconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research\nand development services with us.\n\n \n\n**C. Research and Development**\n\n \n\nNot applicable.\n\n \n\n**D. Trend Information**\n\n \n\nOther than as disclosed\nelsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events since January 1,\n2024 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources,\nor that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.\n\n \n\n**E. Critical Accounting Estimates**\n\n \n\nWe consider an accounting\nestimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain\nat the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to\nperiod or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial\ncondition or results of operations. When reading our consolidated financial statements, you should consider our selection of critical\naccounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported\nresults to changes in conditions and assumptions. For a detailed discussion of critical accounting estimate of (i) Consolidation\nof VIEs; (ii) Revenue recognition; (iii) Income tax and uncertain tax position; (iv) Goodwill. See *“—A. Operating\nresults—Critical Accounting Policies.*”\n\n \n\n**F. Tabular Disclosure of Contractual Obligations**\n\n \n\nThe following table sets\nforth our contractual obligations as of December 31, 2025:\n\n \n\n  \nPayment Due by Period \n\n  \nLess than 1 year  \n2-3 years  \nThereafter  \nTotal \n\n  \n( in RMB) \n\nBorrowings \n 84,000,000  \n -  \n -  \n 84,000,000 \n\nLease obligations \n 12,169,810  \n 12,830,189  \n 28,113,208  \n 53,113,207 \n\nLease commitments \n 165,000  \n -  \n -  \n - \n\nTotal \n 96,334,810  \n 12,830,189  \n 28,113,208  \n 137,113,207 \n\n \n\n140\n\n \n\n \n\nOperating lease obligations\nconsist of leases in relation to certain dormitory and school buildings for our daily operation.\n\n \n\nOther than those shown above,\nwe did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2025.\n\n \n\n**G. Safe Harbor**\n\n \n\nThis annual report on Form\n20-F contains forward-looking statements. These statements are made under the “safe harbor” provisions of Section 21E\nof the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as “will,”\n“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”\n“estimates,” “confident” and similar statements. Among other things, the sections titled “*Item 3. Key\nInformation—D. Risk Factors*,” “*Item 4. Information on the Company,*” and “*Item 5. Operating\nand Financial Review and Prospects*” in this annual report on Form 20-F, as well as our strategic and operational plans, contain\nforward-looking statements. We may also make written or oral forward-looking statements in our filings with the SEC, in our annual report\nto shareholders, in press releases and other written materials and in oral statements made by our officers, directors or employees to\nthird parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking\nstatements and are subject to change, and such change may be material and may have a material and adverse effect on our financial condition\nand results of operations for one or more prior periods. Forward-looking statements involve inherent risks and uncertainties. A number\nof important factors could cause actual results to differ materially from those contained, either expressly or impliedly, in any of the\nforward-looking statements in this annual report on Form 20-F. Potential risks and uncertainties include, but are not limited to: the\nCompany’s strategies, future business development, and financial condition and results of operations; the expected growth of the\nChinese private education market; Chinese governmental policies relating to private educational services and providers of such services;\nthe Company’s ability to maintain and enhance its brand. Further information regarding these and other risks is included in the\nCompany’s filings with the SEC. All information provided in this annual report on Form 20-F and in the exhibits is as of the date\nof the annual report, and we do not undertake any obligation to update any such information, except as required under applicable law."}