Executive Summary / Key Takeaways

• Skillful Craftsman Education Technology Limited (EDTK) is undergoing a profound strategic transformation, pivoting from its traditional, declining online vocational education services in China to become an AI technology provider focused on educational technology innovation, AI skills training, and digital transformation for educational institutions.
• This strategic shift is evidenced by the termination of its Variable Interest Entity (VIE) structure with Wuxi Wangdao in March 2025, the launch of the AI-powered "Sesame Chat" app, and a domain migration to edtk.ai, signaling a clear commitment to its new direction.
• The transition has significantly impacted recent financial performance, with the company reporting a net loss of $7.58 million in fiscal year 2025, a substantial increase from the $4.72 million net loss in fiscal year 2024, primarily due to the decline of the legacy business and a $3.15 million loss from VIE termination.
• EDTK faces significant liquidity challenges, including accumulated losses of $4.23 million, a working capital deficit of $115,688, and negative operating cash flows of $831,606 as of March 31, 2025, raising substantial doubt about its ability to continue as a going concern without further financial support.
• While the company operates in a highly competitive and evolving market, its proprietary EQ-driven large language models (EQ-LLMs) and modular SaaS platforms offer differentiated technological advantages, positioning it to potentially capture value in specialized AI-enhanced education and consulting.

From Vocational Training to AI-Powered EdTech: EDTK's Strategic Pivot

Skillful Craftsman Education Technology Limited (EDTK) is at a pivotal juncture, shedding its legacy as a traditional online vocational education provider in China to embrace a future deeply rooted in artificial intelligence and digital transformation. Founded in 2013 with Wuxi Kingway Technology Co., Ltd. (Wuxi Wangdao) offering vocational training and virtual simulation, EDTK initially thrived through a Variable Interest Entity (VIE) structure, which allowed it to operate within PRC foreign investment restrictions. This model saw Wuxi Wangdao contribute 91% of consolidated revenue in fiscal year 2023 and 100% in fiscal year 2024.

However, the landscape of online education in China shifted dramatically. Intensified competition, marked by competitors offering free online courses, coupled with a slow economic recovery, led to a sharp decline in EDTK's fee-paying members and revenue from its online education services. This challenging environment necessitated a strategic re-evaluation, culminating in a decisive pivot towards "educational technology innovation, artificial intelligence skills training, and the digital transformation of educational institutions" since late 2024. The termination of the VIE Agreements with Wuxi Wangdao on March 17, 2025, and its subsequent deconsolidation, underscores this fundamental strategic realignment. The company's new domain, www.edtk.ai, announced on July 15, 2025, further solidifies its commitment to becoming an AI technology provider in the education industry.

The broader industry trend highlights that AI is fundamentally reshaping the edu-tech sector, acting as the primary catalyst for its evolution from simple digitization to intelligent transformation. AI's most significant contribution is enabling true personalized learning by analyzing individual student performance, learning pace, and interaction patterns. This allows AI-driven systems to create adaptive learning paths and deliver customized content, effectively providing each student with a dedicated digital tutor. AI also empowers educators by automating time-consuming tasks and enhances student engagement through interactive and immersive learning experiences, making expert-level instruction scalable and affordable, thereby promoting educational equity.

The Technological Core: EQ-LLMs and Digital Transformation

At the heart of EDTK's new strategy lies its commitment to technological differentiation, particularly through artificial intelligence. The company's core technology infrastructure supports three primary business lines: Educational Technology Consulting Services, Educational Institution Digital Transformation (SaaS Solutions), and Educational AI Products Operation.

EDTK's proprietary Communication Skill Learning (CSL) products leverage vertical large language models (LLMs) that are fine-tuned for emotional understanding, dialogue structure modeling, and expression optimization. Products in the CSL series, such as "Sesame Chat" (Zhima Goutong), offer tailored expression recommendations for personal, professional, and social communication scenarios. This technology is powered by multi-turn reasoning chains, tone-matching engines, and real-time feedback modules, with applications for both direct-to-consumer (C-end) users and business-to-business (B-end) enterprise learning contexts. The "Sesame Chat" app, launched on iOS platforms in China, employs this proprietary AI technology to analyze communication contexts and relationship dynamics, aiming to enhance users' communication and interpersonal skills through personalized guidance and support.

The company's research and development (R&D) focus areas are critical to its technological roadmap. These include the development of AI-Enhanced Consulting Tools, which are digital consulting assistants powered by LLMs designed to streamline diagnostic, planning, and reporting workflows in education transformation projects. Another key area is Scenario-Based Learning Algorithms, aimed at optimizing learner path recommendations, risk detection, and micro-learning interventions based on behavioral analytics from platform usage. Furthermore, EDTK is pursuing Global Platform Adaptation, internationalizing its CSL products to support multilingual deployments, localized compliance, and regional pedagogical variations, particularly in Southeast Asia and North America.

For investors, these technological advancements are crucial. EDTK's proprietary EQ-LLMs and modular SaaS platforms represent a significant competitive moat, offering tangible benefits such as enhanced operational efficiency for educational institutions and personalized, interactive learning experiences for individuals. While specific quantifiable performance metrics for these new technologies are not yet publicly detailed, the strategic intent is to drive higher user engagement, improve learning outcomes, and create scalable solutions that can command premium pricing or achieve lower operational costs in the long term. This technological leadership is foundational to EDTK's ability to carve out a unique market position and drive future growth.

Competitive Arena: Carving a Niche in a Fragmented Market

EDTK operates within a rapidly evolving, highly fragmented, and competitive education technology market in China. Its strategic pivot positions it against a diverse set of players, ranging from large, established education groups to agile, tech-focused startups. Key direct competitors include New Oriental Education & Technology Group Inc. (EDU), TAL Education Group (TAL), Gaotu Techedu Inc. (GOTU), and 17 Education & Technology Group Inc. (YQ).

EDTK's vocational-focused platforms and its emphasis on technology services like cloud-based experimental training offer a specialized approach to hands-on, career-oriented education. This contrasts with EDU's broader K-12 emphasis, which, while offering wider appeal and strong brand recognition, provides less depth in vocational niches. EDTK's unique value proposition in flexible employment and financial education services, primarily through Jisen Information and Wuxi Talent Home, targets job readiness for graduates, potentially giving it an edge in these specialized segments. However, EDU's extensive physical and digital infrastructure and adaptability to regulatory changes mean it often exhibits stronger cash flow generation and higher profitability margins.

Against TAL Education Group, which specializes in adaptive learning technologies, EDTK's Virtual Simulation Experimental Training platform provides practical, experimental learning that could be more accessible and user-friendly for vocational users. While TAL leverages AI for customized experiences and likely has a faster innovation speed due to its scale, EDTK's focus on specialized vocational content offers a unique value proposition in areas like auto repair and electronics training. EDTK's operational efficiency in technology services could be strong, but TAL likely demonstrates superior margins from its premium services and aggressive expansion.

Compared to Gaotu Techedu Inc. (GOTU), which focuses on affordable digital platforms, EDTK's integrated vocational and financial education services offer a more comprehensive range of courses. GOTU's emphasis on affordability may give it an advantage in market share among price-sensitive users, but EDTK could lead in content depth for professional training. EDTK's inclusion of technology services like software development differentiates it, though GOTU's lean model allows for quicker adaptations and potentially higher revenue growth rates.

Finally, against 17 Education & Technology Group Inc. (YQ), which provides interactive online education tools, EDTK's simulation-based learning for vocational skills could be significantly more effective for practical skill-building. YQ's user-friendly interfaces might lead to broader adoption among younger audiences, but EDTK's depth in vocational content and potentially lower costs for specialized content provide a competitive edge. However, EDTK may lag in growth rates and R&D investment compared to YQ's agility in user acquisition.

EDTK's overall market positioning is that of a niche player with strengths in vocational specificity and technology services, allowing it to compete effectively in targeted areas. However, it faces challenges from competitors with longer operating histories, greater brand recognition, and more extensive financial and marketing resources. The company's ability to compete effectively will hinge on its continued innovation in AI-driven educational solutions and its capacity to scale these offerings.

Financial Performance: A Transitional Period of Deep Losses

EDTK's financial performance in fiscal year 2025 reflects a challenging transitional period marked by the decline of its legacy business and the costs associated with its strategic pivot. Revenue decreased significantly by 49% from $1.99 million in fiscal year 2024 to $1.02 million in fiscal year 2025. This sharp decline was primarily driven by a 94% decrease in revenue from online education services, falling from $1.99 million in fiscal year 2024 to $0.12 million in fiscal year 2025. The online VIP membership revenue alone plummeted from $1.60 million in FY2024 to $0.12 million in FY2025, a direct consequence of intensified competition and free course offerings in the vocational education market in China.

The cost of revenue saw a decrease of $0.20 million, or 13%, from $1.80 million in fiscal year 2024 to $1.60 million in fiscal year 2025, mainly due to reduced website maintenance and virtual simulation fees. However, operating expenses increased by $0.30 million, or 13%, to $2.40 million in fiscal year 2025 from $2.10 million in fiscal year 2024. This increase was largely attributable to higher employee salaries and bonuses as the company invested in talent for its new educational technology business.

A notable impact on profitability came from investment income, which shifted from an income of $1.70 million in fiscal year 2024 to a loss of $1.90 million in fiscal year 2025, representing a substantial decrease of $3.60 million or 212%. This was primarily due to a $3.50 million loss recognized on the investment in Fujian Pingtan Ocean Fishery Corporation during the VIE termination process, based on a fair value assessment. Consequently, EDTK reported a net loss of $7.58 million for fiscal year 2025, a significant increase of $2.80 million from the $4.72 million net loss in fiscal year 2024. The deconsolidation of the VIE on March 17, 2025, resulted in a total loss of $4.60 million from discontinued operations, including a $3.15 million loss from the VIE termination itself. As of March 31, 2025, there are no remaining performance obligations related to discontinued operations.

Liquidity and Capital: Funding the Future

EDTK's financial health presents significant challenges, particularly concerning its liquidity and ability to fund its ambitious strategic pivot. As of March 31, 2025, the company's cash and cash equivalents stood at $1.20 million, a sharp decline from $17.80 million in 2024 and $21 million in 2023. This reduction reflects the ongoing operational losses and the costs associated with the business transition.

The company's operations have consistently generated negative cash flows, with an outflow of $0.80 million in fiscal year 2025 and $2.60 million in fiscal year 2024. These outflows are a direct result of the intensified competition and the offering of free courses in the vocational education market, which eroded the fee-paying member base of the former VIE. As of March 31, 2025, EDTK reported accumulated losses of $4.23 million since inception, a working capital deficit of $115,688, and negative operating cash flows of $831,606. These factors collectively "raise substantial doubt regarding the Company’s ability to continue as a going concern." The company's future hinges on securing financial support from its stockholders, obtaining necessary equity financing, and ultimately achieving profitable operations.

Most of EDTK's cash balances are located in the PRC, with the remainder in the U.S. under the holding company. Access to these funds is subject to PRC legal restrictions on dividend payments, foreign exchange controls, and limitations on foreign investment, which could restrict the company's ability to transfer cash to fund operations outside of China. PRC regulations require the company's wholly-owned foreign enterprise (WOFE) to set aside at least 10% of its accumulated profits annually to reserve funds until 50% of registered capital is reached, and these reserves are not distributable as cash dividends.

In fiscal year 2025, EDTK generated a cash inflow from financing activities of $0.60 million from the issuance of bonds. Additionally, on September 24, 2024, the company entered into a Promissory Note Purchase Agreement for a total of $1.00 million from major shareholders and directors, with an annual interest rate of 6% due on September 23, 2025. By March 31, 2025, $0.60 million of this principal had been received. While management believes current cash and cash flow from operations will be sufficient for anticipated needs and expansion plans for at least the next 12 months, it acknowledges the potential need for additional cash resources due to changing business conditions or future investments. The company does not anticipate paying dividends in the foreseeable future, intending to retain all future earnings to finance its PRC subsidiaries' operations and business expansion.

Strategic Outlook and Growth Initiatives: Building the Future

EDTK's strategic outlook is firmly centered on its transformation into a leading AI technology provider in the education industry. The company is actively pursuing several growth initiatives to solidify this new direction. The launch of the "Sesame Chat" app on iOS platforms in China, leveraging proprietary AI technology for communication skills enhancement, represents a concrete step in its AI product strategy. This direct-to-consumer and enterprise licensing model aims to tap into the growing demand for personalized communication training.

Beyond product development, EDTK is expanding its service offerings to educational institutions. It provides end-to-end educational technology consulting services, including strategic digital transformation planning, AI-integrated pedagogy design, infrastructure roadmap development, and faculty upskilling programs. These services are designed to help clients transition towards intelligent, sustainable education models. Furthermore, EDTK offers modular SaaS solutions, such as Learning Management Systems (LMS), AI-powered content generation tools, academic administration platforms, and real-time student analytics dashboards, all built on a microservice architecture to support hybrid and fully digital teaching environments.

Global expansion is also on the horizon, with the establishment of Giga Learning Inc. in the United States in November 2024, aimed at exploring potential market opportunities in educational technology. Similarly, Le First Skillland Pte. Ltd. in Singapore, a 75%-owned subsidiary established in March 2023, is in the business development stage to facilitate global vocational education initiatives. These moves signal EDTK's intent to diversify its geographical footprint and capitalize on international demand for AI-driven educational solutions.

The company's R&D efforts are aligned with these strategic goals, focusing on AI-Enhanced Consulting Tools, Scenario-Based Learning Algorithms, and Global Platform Adaptation. These initiatives are designed to continuously improve its technological offerings and maintain a competitive edge. The recent appointments of Mr. Chunyang Yuan as Chief Technology Officer and Mr. Jie Ma as Chief Product Officer, both with extensive experience in AI and product development, underscore the company's commitment to strengthening its leadership in these critical areas.

Key Risks: A Path Fraught with Challenges

Despite its ambitious strategic pivot, EDTK faces a multitude of risks that could significantly impact its future trajectory. Operating primarily in China, the company is exposed to complex and evolving PRC laws and regulations, particularly concerning cybersecurity, data privacy, and overseas listings. Any failure to comply with these regulations could result in substantial fines, penalties, or even the suspension of operations. The uncertainty surrounding the interpretation and enforcement of these laws by Chinese authorities remains a significant concern.

The Holding Foreign Companies Accountable Act in the U.S. poses a delisting risk if EDTK's auditor cannot be fully inspected by the PCAOB for two consecutive years. While the current U.S.-based auditor is not presently subject to PCAOB determinations, future changes could impact the company's listing status.

Operationally, EDTK's success hinges on its ability to attract and retain customers for its new AI-driven educational technology offerings. Failure to do so could materially and adversely affect its results of operations. The highly competitive nature of the AI skills training and educational services market means EDTK must continuously innovate and effectively market its products against competitors with potentially greater resources and brand recognition.

The company's reliance on its senior management, particularly Mr. Bin Fu, the Chairman and CEO, is a critical risk. His departure or inability to continue in his role could severely disrupt operations. Furthermore, the executive officers' limited experience in operating a U.S. public company creates uncertainty regarding compliance with applicable laws and regulations, potentially leading to regulatory scrutiny.

EDTK's dual-class share structure, with Mr. Bin Fu holding 76.20% of the total voting power, limits the influence of other shareholders on corporate matters and could deter potential change-of-control transactions. As a Cayman Islands exempted company, EDTK is also permitted to adopt home country corporate governance practices that differ from NASDAQ standards, potentially offering less protection to shareholders.

Finally, the company's internal controls over financial reporting were deemed ineffective as of March 31, 2025, due to material weaknesses related to corporate governance and SEC disclosure requirements. While remediation efforts are underway, these weaknesses present a risk of material misstatement in financial statements. Foreign exchange risk from RMB fluctuations and credit risk from uninsured cash deposits in PRC financial institutions also pose financial vulnerabilities.

Conclusion

Skillful Craftsman Education Technology Limited is embarking on a high-stakes transformation, moving decisively from a declining traditional online education model to an AI-powered educational technology future. This strategic pivot, marked by the termination of its VIE and the launch of innovative AI products like "Sesame Chat," positions EDTK to capitalize on the profound reshaping of the edu-tech industry by artificial intelligence. While the company's proprietary EQ-LLMs and modular SaaS platforms offer a differentiated technological edge and a clear pathway to future value creation in specialized segments, the journey is fraught with significant financial and operational challenges.

The substantial net losses, negative operating cash flows, and a "going concern" warning underscore the immediate financial pressures EDTK faces. Its ability to secure additional financing, successfully execute its R&D roadmap, and effectively compete against larger, more established players will be paramount. Investors considering EDTK must weigh the immense potential of its AI-driven strategy against the considerable risks inherent in its transitional phase, the complex Chinese regulatory environment, and its current financial vulnerabilities. The success of this ambitious transformation will ultimately determine whether EDTK can translate its technological vision into sustainable growth and profitability.