AMERICAN EDUCATION CENTER, INC. - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2019

or

For the transition period from ________ to ________

Commission file number 333-201029

Registrant’s telephone number, including area code: (212) 825-0437

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ¨  No x

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standard provided pursuant to Section 13(a) of the Exchanger Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨  No x

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2019 (the last business day of the Registrant’s most recently completed fiscal year) was $11,489,850.

As of May 28, 2020, the registrant had 57,497,113 shares of common stock issued and outstanding.

TABLE OF CONTENTS

EXPLANATORY NOTE

Throughout this Annual Report on Form 10-K, the “Company”, “we,” “us,” and “our,” refer to (i) American Education Center, Inc., a Nevada corporation (“AEC Nevada”); (ii) American Education Center, Inc., a New York corporation (“AEC New York”) and its subsidiary; (iii) AEC Southern Management Co., Ltd, a company formed pursuant to the laws of England and Wales (“AEC Southern UK”), before it ceased to be an indirect wholly owned subsidiary of AEC Nevada on May 1, 2019 pursuant to a sale; and (iv) AEC Management Ltd., a British Virgin Islands company (“AEC BVI”) and the subsidiaries of BVI, unless otherwise indicated or the context otherwise requires.

This Annual Report on Form 10-K is filed after the March 30, 2020 deadline applicable to the Company for the filing of a Form 10-K in reliance on the 45-day extension provided by an order issued by the U.S. Securities and Exchange Commission (the "SEC") under Section 36 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies, originally issued on March 4, 2020, and later revised on March 25, 2020 (Release No. 34-88465) (the "Order"). On March 20, 2020, the Company filed a Current Report on Form 8-K to indicate its intention to rely on the Order for such extension. Consistent with the Company’s statements made in the Form 8-K, the Company was unable to file this Annual Report on Form 10-K until the date of this Annual Report on Form 10-K because the lockdown due to the outbreak of COVID-19 led to the Company’s delay in preparation and completion of its financial statements and the auditors’ inability to complete the field work and onsite inventory audit required in order to prepare their audit report.

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events. Such forward-looking statements include statements regarding, among other things:

Forward-looking statements, which involve assumptions and describe our plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements because of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations. These statements may be found under Part II, Item 7- “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Annual Report on Form 10-K generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Annual Report on Form 10-K.

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report on Form 10-K will in fact occur.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. Such statements are presented only as some guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Annual Report on Form 10-K.

This Annual Report on Form 10-K also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Annual Report on Form 10-K. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

PART I.

ITEM 1. Business

Overview

American Education Center Inc. (“AEC Nevada”) was incorporated in Nevada in May 2014 as a holding company. AEC Nevada operates through its wholly owned subsidiaries, American Education Center, Inc., incorporated in the State of New York in 1999 (“AEC New York”), and AEC Management Ltd., incorporated in the British Virgin Islands on October 23, 2018 (“AEC BVI”) and the subsidiaries of AEC BVI.

AEC New York was approved and licensed by the Department of the State of New York in 1999 to engage in education consulting service between the U.S. and the People’s Republic of China (the “PRC”). For more than 20 years, AEC New York has devoted itself to international education exchange between China and the U.S., by providing education and career enrichment opportunities for students, teachers, and educational institutions from both countries.

AEC Nevada acquired AEC Southern UK and its subsidiaries in 2016 pursuant to the Share Exchange Agreement (as defined below). AEC Southern UK holds 100% of the equity interests in AEC Southern Management Limited, a Hong Kong company (“AEC Southern HK”) incorporated on December 29, 2015, with a registered capital of HK$10,000. AEC Southern UK owns 100% of the equity interests in Qianhai Meijiao Education Consulting Management Co., Ltd. (“AEC Southern Shenzhen”), a foreign wholly owned subsidiary incorporated pursuant to PRC law on March 29, 2016, with a registered capital of RMB5,000,000.

AEC BVI acquired AEC Southern HK and its subsidiary, AEC Southern Shenzhen, on April 22, 2019 pursuant to a share transfer agreement by and among the related parties, AEC BVI and AEC Southern UK, for a nominal consideration (the “AEC Southern HK Transfer”). Pursuant to a certain share exchange agreement dated May 1, 2019, AEC Nevada sold 100% of the equity interest in AEC Southern UK, on May 1, 2019, to three individuals, Ye Tian, Rongxia Wang and Weishou Li (the “AEC Southern UK Sale”). Thereafter, AEC Southern UK ceased to be a subsidiary of AEC Nevada.

AEC BVI, via its operating entity in the PRC, AEC Southern Shenzhen, serves as a local platform for expanding the Company’s business in mainland China. Our PRC operations are based in the city of Shenzhen, Guangdong province, a city designated by the PRC as a Special Economic Zone (“SEZ”). SEZs are granted a more free-market oriented economic and regulatory environment, with business and tax policies designed to attract foreign investment and technology.

Our mission is to become a leading provider of international education services, and to provide total solutions for technology in education field.

Currently, we provide four types of consulting services:

Services to our clients are provided through the Company’s principal executive office in New York, NY and AEC Southern Shenzhen’s office in Shenzhen, China.

Leveraging our knowledge of and access to the education system and environment in the U.S., our understanding of China’s market demand for overseas education services and the evolving economy in China, we specialize in the delivery of customized high school and college placement advisory services as well as career advisory services to Chinese students wishing to study and gain post-graduate work experience in the U.S. Our advisory services are specifically designed to address the educational needs of the rising middle-class families in China. The demand for our advisory services is primarily the result of China’s decades-long one-child policy, society’s focus and emphasis on children’s education, and families’ desire to gain access to U.S. colleges and universities as well as work experience in the U.S.

Our total revenues for the fiscal years ended December 31, 2019 and 2018 were $5,308,412 and $7,012,439, respectively. For the fiscal year ended December 31, 2019, a vast majority of the revenue was from student advisory services in the U.S., delivered by AEC New York, which accounted for approximately 97.7% of our total revenue. Similarly, for the fiscal year ended December 31, 2018, revenue from student advisory services in the U.S., delivered by AEC New York, accounted for approximately 98.9% of our total revenue. Our strategy is to continue to strengthen localized services provision for students in the U.S. and continue to expand the U.S. market. We have already formulated and are in the process of implementing this multi-stage growth plan by marketing on various media platforms. Based in Shenzhen, we are also promoting localized services for Chinese students through various social media. For detailed information on marketing strategies and growth plans targeting to grow our advisory services in the U.S., refer to “Item 1. Business—Our Marketing Strategies” and “Item 1. Business—Our Growth Strategy.”

Share Exchange with AEC Southern Management Co. Ltd 

On November 8, 2016, AEC Nevada, AEC Southern UK, Ye Tian (“Tian”), Rongxia Wang (“Wang”) (Tian and Wang, owners of record of 100% equity interests of AEC Southern UK, collectively, the “Former AEC Southern UK Shareholders”), and Yangying Zou (“Zou”) entered into a share exchange agreement (the “Share Exchange Agreement”) whereby AEC Nevada acquired AEC Southern UK as a 100% subsidiary, for a consideration of 1,500,000 shares of its common stock, par value $0.001 per share (“Common Stock”). Additionally, AEC Nevada also agreed to appoint Zou to serve as the CEO of AEC Southern UK and agreed to issue to Zou an aggregate of 1,500,000 shares of Common Stock at the closing (the “Share Exchange Closing Date”) of the Share Exchange Agreement. The transactions underlying the Share Exchange Agreement are referred hereinafter as the “Share Exchange Transaction.” On March 27, 2017, the parties to the Share Exchange Agreement agreed to amend the Share Exchange Agreement so that the Share Exchange Agreement would take effect on October 31, 2016, and amend the Share Exchange Closing Date to be on October 31, 2016. Pursuant to the Share Exchange Agreement, AEC Southern Shenzhen became an operating entity of the Company in China.

Share Purchase Agreement with China Cultural Finance Holdings Company Limited

On October 30, 2017, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with China Cultural Finance Holdings Company Limited, a British Virgin Islands corporation (“CCFH”) pursuant to which the Company issued 500,000 shares (the “Shares”) of the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at price of $4 per Share to CCFH, with the rights, privileges, and preferences set forth in the Certificate of Designation of Series A Convertible Preferred Stock, for the aggregate price of $2,000,000 (the “Purchase Price”). The transactions underlying the Share Purchase Agreement closed on the same day (the “Share Purchase Closing Date”).

Pursuant to the Share Purchase Agreement, the Company agreed to use its commercially reasonable efforts to apply to list on the NASDAQ Capital Market or such other national securities exchange as is reasonably acceptable to CCFH (the “National Exchanges”), so that the Common Stock will commence trading on one of the National Exchanges (the “Uplisting”) within 365 days after the Share Purchase Closing Date (the “Uplisting Deadline”). Pursuant to the Share Purchase Agreement, if the Company did not complete Uplisting on or before the Uplisting Deadline, CCFH had, within 30 days following the Uplisting Deadline, the right to request the Company to buy back any number of the Shares (the “Buy Back Shares”), for a payment of the Buy Back Shares times the Purchase Price Per Share and such interest payment at a rate of 5% per annum accruing from the Share Purchase Closing Date, subject to the terms and conditions of the Shares Purchase Agreement. CCFH did not exercise such right to buy back.

Business Purchase Agreement with FIFPAC, Inc.

On July 10, 2018, the Company entered into a Business Purchase Agreement (the “Business Purchase Agreement”) with FIFPAC Inc. (“FIFPAC”), a New Jersey corporation, the 100% owner of American Institute of Financial Intelligence LLC, a New Jersey limited liability company (“AIFI”).

Pursuant to the Business Purchase Agreement, the Company issued 100,000 shares of Common Stock to FIFPAC on July 10, 2018, in exchange for a 51% equity ownership in AIFI.

Certificate of Amendment to Increase Authorized Stock

On November 6, 2018, the board of directors of the Company, with the written consent of the holders of a majority of the shares of the Company’s Common Stock issued and outstanding and the Company’s preferred stock issued and outstanding, voting together as a single class, authorized the Company to (i) increase the number of authorized shares of Common Stock from 180,000,000 to 450,000,000 and the number of authorized shares of preferred stock from 20,000,000 to 50,000,000 (the “Authorized Stock Increase”), and (ii) file a Certificate of Amendment with the Secretary of State of the State of Nevada to effect the Authorized Stock Increase.

On November 8, 2018, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to effect the Authorized Stock Increase, which became effective upon filing.

Designation of Series B Convertible Preferred Stock

On November 13, 2018, the Company filed with the Secretary of State of the State of Nevada the Certificate of Designation of Series B Convertible Preferred Stock (the “Certificate of Designation”), which became effective upon filing. The Certificate of Designation established and designated the Series B Convertible Preferred Stock (“Series B Preferred Stock”) and the rights, preferences, privileges, and limitations thereof, summarized in the following:

The Company designated 25,000,000 shares as Series B Preferred Stock out of the 50,000,000 unissued shares of preferred stock of the Company, par value $0.001 per share, with an original issue price of $0.1 per share. Series B Preferred Stock is senior in rights of payment, including dividend rights and liquidation preference, to the Company’s common stock but junior to Series A Preferred Stock with respect to liquidation preference.

Holders of shares of Series B Preferred Stock are entitled to vote with shareholders of the Company’s common stock, voting together as a single class, except on matters that require a separate vote of the holders of Series B Preferred Stock. In any such vote, each share of Series B Preferred Stock is entitled to 20 votes per share.

Each share of Series B Preferred Stock shall, upon the approval of the board of directors of the Company and without the payment of additional consideration by such holder thereof, be convertible into one fully paid and non-assessable share of the Company’s common stock at a conversion price of $1 per share.

Share Issuance Agreement and Exchange Agreement with China Cultural Finance Holdings Company Limited

On November 26, 2018, the Company entered into a Share Issuance Agreement (the “Share Issuance Agreement”) with CCFH, whereby the Company agreed to issue a certain number of shares Common Stock to CCFH in exchange for an RMB5,000,000 investment in the Company’s subsidiary, AEC Southern Shenzhen, a foreign wholly owned subsidiary incorporated pursuant to PRC laws. The transactions underlying the Share Issuance Agreement closed on the same day and 7,199,113 shares of Common Stock were issued to CCFH.

On November 26, 2018, the Company entered into an Exchange Agreement (the “CCFH Exchange Agreement”) with CCFH, whereby the Company agreed to issue 12,500,000 shares of Series B Preferred Stock, and 7,500,000 shares of Common Stock to CCFH in exchange for the 500,000 shares of Series A Preferred Stock already held by CCFH. The transactions underlying the CCFH Exchange Agreement closed on the same day and 12,500,000 shares of Series B Preferred Stock and 7,500,000 shares of Common Stock were issued to CCFH.

As a result of the Share Issuance Agreement and the CCFH Exchange Agreement, no shares of Series A Preferred were issued and outstanding as of November 26, 2018.

Manager Share Issuance Agreement with Max P. Chen

On November 26, 2018, the Company entered into a Manager Share Issuance Agreement (the “Manager Share Issuance Agreement”) with Mr. Max P. Chen, the Chief Executive Officer, President, and Chairman of the Board of the Company, whereby the Company agreed to reward Mr. Chen for his dedicated services to the Company by issuing 12,500,000 shares of Series B Preferred Stock to him. The 12,500,000 shares of Series B Preferred Stock were issued to Mr. Chen on November 26, 2018.

Corporate Reorganization

On April 22, 2019, AEC BVI acquired AEC Southern HK and its subsidiary, AEC Southern Shenzhen, pursuant to a share transfer agreement by and between AEC BVI and AEC Southern UK, for a nominal consideration.

On May 1, 2019, AEC Nevada transferred 100% of the equity interest in AEC Southern UK, to three individuals, including Former AEC Southern UK Shareholders, Ye Tian and Rongxia Wang, and Weishou Li pursuant to a share exchange agreement.

Upon completion of the above transactions, AEC Southern UK is no longer one of our subsidiaries. We operate and control both AEC Southern HK and AEC Southern Shenzhen via AEC BVI. 

Corporate Structure 

The corporate structure of the Company as of the date of this quarterly report is illustrated as follows:

The address of our principal executive offices and corporate offices is 2 Wall Street, Fl. 8, New York, NY 10005. Our telephone number is (212) 825-0437. Our website is www.aec100.com.

Our Business

Headquartered in New York with operations in China, the Company, during fiscal year ended December 31, 2019 operated, and currently operates, in two market segments:

Our Key Revenue Drivers

We have expanded our service platform to include advisory services for our student customers wishing to study and gain post-graduate work experiences in the U.S. Currently, our main advisory services include:

All advisory services above are provided by our subsidiaries, AEC New York and AEC Southern Shenzhen.

Placement Advisory Services

Our Placement Advisory Services include Language Training, Placement Advisory and Elite College Advisory services.

Since 1999, we have been delivering customized Language Training & Placement Advisory services to Chinese students. Our one-stop advisory service encompasses ESL training and assistance throughout the high school, college application, and admission process.

Our Language Training service is based on the existing ESL training platform which provides language training for standard test preparation and is designed to help improve student’s English listening, speaking, reading, and writing skills. Student customers will be able to take these training courses online when our ESL online training platform goes live in 2020.

Targeting the needs of Chinese families in obtaining admission to Ivy League and other prestigious universities in the U.S., our Elite College Advisory service is designed to assist qualified Chinese students in applying to prestigious colleges and universities in the U.S. Specifically, we arrange campus tours, assist our student customers with their university applications, provide tailored language training, offer guidance on interview and communication techniques, and follow up on their applications.

Once our student customers are admitted into their target universities, our Placement Advisory services further extend to academic and cultural related experiences including, among other things, providing assistance with applying for a second major or minor, transferring to a different university, housing accommodations, and applying for accelerated degrees. To help students optimize their on-campus experience and train their leadership and social skills, we also organize seminars and social events with our partner scholars and universities, non-profit and for-profit business organizations. Additionally, to help enrich their cultural experiences, we organize extracurricular and artistic activities including dance, music, painting, photography, and other performance events.

For college application, we have designed the Key School Admissions Program, giving student customers closely guided application consulting services to gain admission to top U.S. universities.

For on-campus academic counseling, we offer the Elite100 program that focuses on leadership and communication skills development for our student customers.

We provide placement services through both AEC New York and AEC Southern Shenzhen. AEC New York refers businesses to AEC Southern Shenzhen when clients in China need local support.

Career Advisory Services

Our Career Advisory Services include our Internship Advisory program and our Start-up Advisory program.

Our Internship Advisory program focuses on student’s career development by helping them identify and secure suitable internship and part-time or full-time work opportunities that are appropriate for their educational background and experience level. Through this program, we strive to help students map and navigate their career path and counsel them on matters including academic improvement to career assistance. Through this program, our student customers are given opportunities to communicate with professionals in their field of study and to participate in real-world case studies.

Our Start-up Advisory program provides advisory services to individual students and/or their families who want to start or make an investment in a business in the U.S. Collaborating with our strategic partners, our services include (i) recommending alternative business development opportunities; (ii) assistance with business plan development; (iii) assistance with accounting and financial management, marketing, product and project design; and (iv) assistance in project financing.

Student & Family Advisory Services

Our Student & Family Advisory Services are designed to assist our students and/or their families in the process of settling down in the U.S., such that they can effectively focus on their studies. We provide thorough services tailored to the unique needs of each student family encountered in the U.S.

Through our business partners, we assist the students’ families with purchasing real estate properties, organizing their personal financial management and investment needs, getting insurance and starting businesses. Our American Dream Program helps students’ families find investment projects in the U.S. We also advise corporate clients whose executives are moving to the U.S. for work. The scope of our services includes assistance with business consulting, relocation and other aspects of family support services.

Other Advisory Services

Through our Foreign Student Recruitment services, we assist universities in China to recruit students from the U.S. We customize this service based on our strategic relationship with college and universities in the U.S. and the specific recruitment goals of these universities in China. The demand for our recruitment services is driven mainly by the lack of an established channel to attract students from the U.S. and the needs by the Chinese universities to expand and diversify their student body.

Our Foreign Educator Placement services are designed to meet the increasing demand for experienced educators and teachers from the U.S. to teach in China. Such demand covers the need to recruit qualified US educators from Pre K-12 to teach in China.

Recent Development

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic”. The pandemic has resulted in quarantines, travel restrictions, and temporary closure of stores and facilities in China and elsewhere. A substantial part of the Company’s revenue and workforce are concentrated in China. Consequently, the COVID-19 outbreak may materially adversely affect the Company’s business operations and its financial condition and operating results for 2020, including but not limited to material negative impact to the Company’s total revenues. Because of the significant uncertainties surrounding the COVID-19 outbreak, the extent of the business disruption and the related financial impact cannot be reasonably estimated at this time.  

On May 22, 2020, AEC Southern HK formed Yiqilai (Shenzhen) Consulting Management Co., Ltd. (“WOFE”) in the PRC. We intend to use WOFE as the primary entity to carry out our plan to identify and acquire an operating company in the PRC for online education e-commerce platform business. This new subsidiary is expected to expand and add to the our current business and is expected to better serve the our student customers.

Our Competitive Advantage

Our strength comes mainly from our understanding of the Chinese education and education-related service markets and our ability in not only anticipating areas with great market demand but also delivering quality, customized services on a consistent basis. We have a scalable business platform that is conducive to growth in earnings and profitability; and have a business model that we believe adapts well to changing market conditions. We believe that the following competitive strengths enhance our position in the markets that we are currently competing in:

Our Growth Strategy

Our goal is to become a leading total solutions educational services provider for Chinese students wishing to study and gain work experiences in the U.S. Our business development plan includes, among other things, the following strategic initiatives:

Our Management Team

We believe we have a strong and experienced management team including our founder, chief executive officer, interim chief financial officer, and chairman, Mr. Max P. Chen, a pioneer and leader in the education service industry; Ms. Congying Fang, the director, president, and the chief executive officer of AEC BVI; and Ms. Weihua Zhu, the chief operating officer of AEC New York with over a decade of experience in education advisory services. Our team as a whole has many years of public and private company experience, industry and professional experience and a significant network of business contacts in the industry, and extensive experience in SEC reporting, compliance and risk management, business reorganization, and mergers and acquisitions.

Our Industry and Market Opportunities

The demand for global education is growing rapidly in China, and the U.S. remains the top choice for Chinese students wishing to study abroad. According to one article published by the PRC’s Ministry of Education in March 2018, approximately 5.19 million Chinese students had studied in foreign countries in the past 40 years since 1978.

Source: Open Doors, IIE. Leading Places of Origin: Previous Years. Retrieved from https://www.iie.org/Research-and-Insights/Open-Doors/Data/International-Students/Places-of-Origin/Leading-Places-of-Origin

The number of Chinese students entering the U.S. to study grew sharply in 2006, when Congress loosened restrictions on student visas from China for the first time since 2001. Accordingly, there is a large and growing number of Chinese students in the U.S. seeking a broad range of acclimation support and services, including education consulting services. We strive to become a bridge for these students with our service offerings.

According to Project Atlas, a collaborative global research initiative led by the Institute of International Education, in the academic year 2018/2019, the total number international students studying in the U.S. (in both public and private institutions) was 1,095,299, of which 369,548, or 33.7%, were Chinese nationals. For the academic year 2017/2018, the comparable figures were 1,094,792 international students in the U.S., of whom 33.2% or 363,341 were Chinese. This growth trend has been in place for several years. However, with the current political environment in Washington, DC regarding visas, it is not known whether it will continue in the future.

Our Competition

The education service and consulting industry targeting both PRC citizens abroad and PRC residents is rapidly evolving, highly fragmented and competitive. We expect competition in this industry to persist and intensify. For services provided by AEC New York, we primarily serve Chinese student customers and their families in the U.S. For services provided by AEC BVI, our prospective student clients are primarily located in China.

Our advisory services for student customers face significant competition from New Oriental Education & Technology Group Inc., a leader in the market of advisory services for student customers that we operate in.

Our Marketing Strategies

We believe prospective student customers are attracted to our advisory services due to our excellent brand name, personalized service model, and the quality of our services. Historically, as a small business, we rely extensively on our strategic partners and word-of-mouth referrals in growing our student customers, and employ the following marketing and recruiting methods to attract new student customers:

Commission-based referrals. To enhance the effectiveness of the referral process, we pay a commission that ranges from 10% to 20% for successful referrals. Our placement advisory and career advisory services have benefited from, and are expected to continue to benefit from, commission-based referrals by our current and former student customers.

Marketing materials. We plan to publish a “Chinese Visitors Guide Book.” It is planned to be a travel book with plug-in advertisements for the Company, which will assist Chinese visitors to the U.S. and simultaneously promote our services. We will also advertise in e-magazines, prepare and distribute brochures and present at exhibitions as part of our marketing strategy.

Social media marketing. We maintain our own WeChat official account that offers information on education and life abroad. In addition, we work with other WeChat official accounts with significant followings to publish information on AEC services. After every offline event, our employees will create chat groups with all event attendants to facilitate direct communication and follow up.

We have launched our in-house developed mobile application—AEC Help. It is an iOS app that users can download for free from the Apple AppStore. Users are international students who are in the U.S. or seek to study in the U.S. The app provides various academic and non-academic resources compiled by us to assist users for studying and living in the U.S. Resources available through AEC Help Application include academic resources where users can filter and search for universities based on the user’s own test scores and preferences, and non-academic resources such as unit conversions, maps, real-time exchange rates, student events, etc. Where the online resources cannot provide sufficient assistance to our users, they are able to reach a member of our staff who will connect the user with a third-party service provide directly. We believe this social media network, AEC Help, will allow us to broaden our reach to potential student customers.

Our Customers

We currently provide services to Chinese students wishing to study and/or gain work experience in the U.S. Some of these Chinese students are our direct customers, and the others are ultimate users of our services through corporate customers we serve.

Our target corporate customers include staffing agencies and student placement agencies. Our target student customers include high school students who want to apply for U.S. colleges, college students who need academic counseling and future career consulting, and graduates who need professional development, as well as students’ families. The cost of studying abroad is high, therefore international students usually come from middle class or high-net-worth families.

For the year ended December 31, 2019, our two largest customers, Oxbridge International Group Inc. and Skybound Consulting Inc. accounted for 50.3% and 21.5% of our revenues, respectively. 

Our Regulatory Environment

Regulation of the Education Industry in the U.S.

Government authorities in the U.S., at the Federal, state and local level, extensively regulate education and exchange student programs. Such regulations include, among other things, the regulations, and policies of the United States Department of Education. Unlike the systems of most other countries, however, the education system in the U.S. is highly decentralized, and the Federal government and Department of Education are not heavily involved in determining curricula or educational standards. The establishment and grading of such standards have been left to state and local school districts.

The Education Department of the State of New York in 1999 consented for AEC New York to incorporate pursuant to §216 of New York Education Law Relating to Education Corporations, and Section 104 of the New York Business Corporation Law, and consented in 2003 for AEC New York to amend its certificate of incorporation to include education consulting service as its business purpose, pursuant to §216 of New York Education Law Relating to Education Corporations, and Section 104(e) of the New York Business Corporation Law.

A more formalized regulation is the requirement that a citizen of a foreign country who wishes to enter the U.S. must first obtain a visa, either a nonimmigrant visa for temporary stay, or an immigrant visa for permanent residence. Foreign students must have a student visa to study in the U.S. Visas generally require an application and an interview.

In addition to the regulatory approval requirements described above, we are or will be, directly or indirectly, subject to extensive regulation of the educational industry by the Federal and state governments and the governments’ of foreign countries in which our services are provided.

Regulation of the Education Industry in China

The principal laws and regulations governing private education in China consist of the Education Law of the PRC, the Law for Promoting Private Education (2003), the Implementation Rules for the Law for Promoting Private Education (2004), and Law for Promoting Private Education (2016).

Under these regulations, “private schools” are defined as schools established by non-governmental organizations or individuals using non-government funds. Private schools providing academic qualifications education, kindergarten education, education for self-study examination, and other education shall be subject to approval by the education authorities at or above the county level, while private schools engaging in occupational qualification training and occupational skill training shall be subject to approvals from the authorities in charge of labor and social welfare at or above the county level.

Since our operations in the PRC are either delivered through our AEC New York office for education consulting services, placement services, and family support services, or through our AEC Southern UK operation for corporate training, we believe we are not involved in providing services relating to the fundamental education systems of the PRC, which include a school system of pre-school education, primary education, secondary education, and higher education, a system of nine-year compulsory education and a system of education certificates. Therefore, we believe our operations in the PRC are not subject to the PRC Private Education Laws. If our operations are found to be subject to, and/or in violation of any of these laws, regulations, rules, or policies or any other law or governmental regulation to which we or our customers are or will be subject, or if interpretations of the foregoing changes, we and our PRC subsidiaries may be subject to civil and criminal penalties, damages, fines, and the curtailment or restructuring of our operations. Similarly, if our customers are found non-compliant with applicable laws, they may be subject to sanctions.

Foreign Investment in Educational Service Industry

The Ministry of Commerce of the PRC, or MOFCOM, and the National Development and Reform Commission, or NDRC, promulgated the Catalogue of Industries for Guiding Foreign Investment, or the “Catalogue,” as amended on March 10, 2015, which came into effect on April 10, 2015, and as further amended on June 28, 2017, and came into effect on July 28, 2017 (the “2017 Catalogue”). On June 28, 2018, the MOFCOM and NDRC promulgated the Special Measures for Foreign Investment Access (2018 version), or the “2018 Negative List,” terminating the 2017 Catalogue. According to the 2018 Negative List, any foreign investment in preschool education, senior high school education, and higher education has to take the form of a cooperative joint venture. Foreign investment is banned from compulsory education, which means grades one to nine. Foreign investment is allowed in after-school tutoring services and training services that do not grant certificates or diplomas. We do not believe we are subject to the aforementioned bans on foreign investment in educational service industries.

Employment Laws

We are subject to laws and regulations governing our relationship with our employees, including wage and hour requirements, working and safety conditions, social insurance, housing funds, and other welfare. These include local labor laws and regulations, which may require substantial resources for compliance.

China’s National Labor Law, which became effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1, 2008, permit workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract. The National Labor Contract Law has enhanced rights for the nation’s workers, including permitting open-ended labor contracts and severance payments. The legislation requires employers to provide written contracts to their workers, restricts the use of temporary labor, and makes it harder for employers to lay off employees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed once or the employee has worked for the employer for a consecutive 10-year period.

As required under the Regulation of Insurance for Labor Injury implemented on January 1, 2004, and amended in 2010, the Provisional Measures for Maternity Insurance of Employees of Corporations implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for Old-Aged Pension Insurance of the State Council issued on July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council promulgated on December 14, 1998, the Unemployment Insurance Measures promulgated on January 22, 1999, and the Social Insurance Law of the PRC implemented on July 1, 2011, employers are required to provide their employees in the PRC with welfare benefits covering pension insurance, unemployment insurance, maternity insurance, labor injury insurance and medical insurance. In accordance with the Regulations on the Management of Housing Fund which was promulgated by the State Council in 1999 and amended in 2002, employers must register at the designated administrative centers and open bank accounts for depositing employees’ housing funds. Employer and employee are also required to pay and deposit housing funds, with an amount no less than 5% of the monthly average salary of the employee in the preceding year in full and on time. Except for housing funds, we are in compliance with payment of all other employment related insurance on behalf of our employees.

Taxation in the U.S.

We are subject to income taxes in the U.S., and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

· changes in the valuation of our deferred tax assets and liabilities;

· expected timing and amount of the release of any tax valuation allowances;

· tax effects of stock-based compensation;

· costs related to intercompany restructurings;

· changes in tax laws, regulations or interpretations thereof; and

· lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income and sales and other transaction taxes by U.S. federal and state authorities.

Taxation in the PRC

Pursuant to the Provisional Regulations on Value-Added Tax (“VAT”) of the PRC, or the “VAT Regulations,” which were promulgated by the State Council on December 13, 1993, and took effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19, 2017, respectively, and the Rules for the Implementation of the Provisional Regulations on Value Added Tax of the PRC, which were promulgated by the Ministry of Finance of the PRC, on December 25, 1993, and were amended on December 15, 2008, and October 28, 2011, respectively, entities and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible assets, or immovables, or import goods within the territory of the PRC are taxpayers of value-added tax. The VAT rate is 16% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified; 10% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified; 6% for taxpayers selling services or intangible assets.

Regulations on Dividend Distribution in the U.S.

Our Board of Directors’ ability to declare a dividend is subject to restrictions imposed by Nevada corporate law. Nevada corporate law provides that no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, (i) the corporation would not be able to pay its debts as they become due in the usual course of business, or, (ii) except as otherwise specifically permitted by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a dissolution to satisfy the preferential rights of preferred stockholders. Directors may consider financial statements prepared on the basis of accounting practices that are reasonable in the circumstances, a fair valuation, including but not limited to unrealized appreciation and depreciation, and any other method that is reasonable in the circumstances.

Regulations on Dividend Distribution in the PRC

The principal regulations governing dividend distributions by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:

Under these regulations, wholly foreign owned enterprises and Sino-foreign equity joint ventures in China may pay dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Additionally, a wholly foreign-owned enterprise is required, as other enterprises subject to PRC laws, to set aside at least 10% of its after-tax profits each year, if any, to fund statutory reserve funds until the cumulative amount of such funds reaches 50% of its registered capital. For our PRC subsidiary that has achieved profit under the PRC accounting standards, it has set aside at least 10% of its after-tax profits to meet the statutory reserve requirements. A wholly foreign-owned enterprise may, at its discretion, allocate a portion of its after-tax profits calculated based on the PRC accounting standards to staff welfare and bonus funds. Our subsidiary has not set aside its after-tax profits, if any, to fund these discretionary staff welfare and bonus funds. We have not implemented any policy or plan for our PRC subsidiaries to maintain discretionary staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. These requirements apply to AEC Southern Shenzhen. 

M&A Rules and Overseas Listings

On August 8, 2006, six PRC regulatory agencies, namely, the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration of Taxation, State Administration for Industry & Commerce, or SAIC, China Securities Regulatory Commission, or CSRC, and the State Administration of Foreign Exchange, jointly adopted the Provisions Regarding Mergers and Acquisitions of Domestic Projects by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006. This M&A Rules purport to require, among other things, offshore special purpose vehicles formed for the purpose of acquiring PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC counsel, that CSRC approval was not required in the context of our initial public offering as we are not a special purpose vehicle formed for the purpose of acquiring domestic companies that are controlled by our PRC individual shareholders, as we acquired contractual control rather than equity interests in our domestic affiliated entities. However, we cannot assure you that the relevant PRC government agency, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory agency subsequently determines that we needed to obtain the CSRC’s approval for our initial public offering or if CSRC, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from our initial public offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, and prospects, as well as the trading price of our Common Stock.

Properties/Facilities

Our principal executive office is located at 2 Wall Street, Floor 8, New York, NY 10005 (the “Headquarters”). We entered into a lease agreement for the Headquarters with an unrelated third-party landlord, pursuant to which the Company pays a monthly rent of $34,056. The Headquarters lease expires on July 31, 2025.

AEC Southern Shenzhen entered into a new lease in the fiscal year ended December 31, 2019, pursuant to which it leases office space from an unrelated third party on a month to month basis with a monthly rental cost of RMB52,456 (approximately US$8,497). The lease will expire on April 30, 2024.

We believe our facilities are sufficient for our business operations.

Employees

As of the filing date hereof, the Company has 20 full and part-time employees inclusive of outsourced consultants. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we are currently not a party to, any off-balance sheet arrangements.

Seasonality

AEC New York typically experiences seasonal fluctuations in its revenues and results of operations, primarily due to quarterly changes in student enrollments related to the admission seasons. AEC BVI does not experience substantial seasonality in its revenues and results of operations.

Intellectual Property

We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on trademark and trade secret law and confidentiality and invention assignment with our employees and others to protect our proprietary rights. Our intellectual property includes two domain names, https://americaneducationcenter.org/and https://aec100.com.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.

ITEM 1A. RISK FACTORS

Risks Related to Our Business

If we are not able to continue to attract students to enroll in our courses without a significant decrease in course fees, our revenues may decline, and we may not be able to maintain profitability.

The success of our business depends primarily on the number of students enrolled in our courses and the amount of course fees that our students are willing to pay. Therefore, our ability to continue to attract students to enroll in our courses without a significant decrease in course fees is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demand, expand our geographic reach, manage our growth while maintaining the consistency of our service quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and respond to competitive pressures, as well as the ability of our partner colleges and institutions to maintain their faculties’ teaching quality. If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our revenues may decline and we may not be able to operate profitability.

Our business depends on our brand name “American Education Center.” Because we do not currently have any copyright or trademark protection for our company name or brand name, there is no guarantee that someone else will not encroach upon our intellectual property rights, which could negatively affect our business and results of operations.

We believe that market recognition of our name “American Education Center” has contributed significantly to the success of our business. We also believe that maintaining and enhancing the “American Education Center” brand is critical to maintaining our competitive advantage. We offer a diverse set of programs, services, and products to primary and middle school students, college students, and other adults throughout many provinces and cities in China. As we continue to grow in size, expand our programs, services, and product offerings, and extend our geographic reach, our ability to maintain and improve the quality and consistency of our services, products, and offerings may be more difficult to achieve. We currently have no copyright or trademark for our company name or brand name. We may seek such protection in the future; however, we currently have no plans to do so. Since we have no copyright protection, unauthorized persons may attempt to copy aspects of our business, including our web site design or functionality, products, or marketing materials. Any encroachment upon our corporate information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated against us for infringement upon another company's proprietary information or improper use of their copyright, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business. Litigation or proceedings may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and domain name and/or to determine the validity and scope of the proprietary rights of others. Any such infringement, litigation or adverse proceeding could result in substantial costs and diversion of resources and could harm our business and results of operations.

A severe or prolonged slowdown in the global or Chinese economy could materially and adversely affect our business and our financial condition.

The rapid growth of the Chinese economy has slowed down since 2012 and such slowdown may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition. In addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity needs.

If we fail to successfully execute our growth strategies, our business and prospects may be materially and adversely affected.

Our growth strategies include but are not limited to expanding our service offerings to satisfy the needs of our student customers. Our ability in executing our growth strategies depends largely on our capability in developing and delivering quality, customized services on a consistent basis and in a cost-effective and timely manner, as well as maintaining and continuing to establish strategic relationships with other businesses and education institutions. If we fail to successfully execute our growth strategies, we may be unable to maintain and grow our business operation, and our profitability may be materially and adversely affected.

We face competition in the student advisory services markets, and if we fail to compete effectively, our profitability may be adversely affected.

The markets for language training, college placement, and career advisory are rather fragmented. With relatively low entry barriers, we face competition that focuses generally on price. The number of our student customers may decrease due to price competition. Some of our competitors have greater resources than we do. These competitors may be able to devote greater resources than us to the development, promotion, and marketing of their programs and services, and respond more quickly to changes in student needs, admissions standards, or new technologies. We cannot assure you that we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respond to evolving competition effectively, our profitability may be adversely affected.

We may need additional capital for growth purposes. The availability of capital and the terms on which it will be available are uncertain.

We may need to raise funds to take advantage of growth or acquisition opportunities in the future. We currently have no arrangements or commitments for additional financings. If we cannot expand our operation or make acquisitions that we believe are necessary to maintain our competitive position, we may not be able to maintain a reasonable growth rate. If we raise additional capital by selling equity or equity-linked securities, these securities would dilute the ownership percentage of our existing stockholders. Also, these securities could also have rights, preferences, or privileges senior to those of our Common Stock. Similarly, if we raise additional capital by issuing debt securities, those securities may contain covenants that restrict us in terms of how we operate our business, which could also affect the value of our Common Stock. We may not be able to raise capital on reasonable terms or at all.

Our strategic relationships are usually non-exclusive arrangements and our strategic partners may provide the same or similar services to our competitors, which could significantly dilute any competitive advantage we get from these relationships.

We rely on our strategic partners to provide us with access to potential student customers and corporate customers with clients that need compliance training and advisory services. Our strategic partners may enter identical or similar relationships with our competitors, which could diminish the value of our service offerings. Our strategic partners could terminate their relationship with us at any time. We may not be able to maintain our existing relationships or enter new strategic relationships.

Because we rely on a limited number of customers for a large portion of our revenue, the loss of one or more of these customers could materially harm our business.

We receive a significant portion of our revenue in each fiscal period from a relatively limited number of customers, and that trend is likely to continue. Sales to our major customers (that individually accounted for more than 10% of our gross revenues) accounted for approximately 50.3% and 53.3% of our total revenue for the year ended December 31, 2019 and 2018. The loss of one or more of these major customers, a significant decrease in orders from one of these customers, or the inability of one or more customers to make payments to us when they are due could materially affect our revenue, business, and reputation. While none of our major customers have failed to make payments to us when they are due, we cannot guarantee that we would not experience this in the future.

We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or reduce our prices.

Our success depends in part on our brand identity and our ability to protect and preserve our proprietary rights. We cannot assure you that we will be able to prevent third parties from using our intellectual property rights and technology without our authorization. We own the intellectual property of our products, including our mobile app, the AEC Help and our online training platform, and protect our intellectual property, we rely on trade secrets, common law trademark rights, trademark registrations, copyright notices, copyright registrations, as well as confidentiality and work for hire, development, assignment and license agreements with our employees, consultants, third party developers, licensees, and customers. However, these measures afford only limited protection and may be flawed or inadequate. In addition, enforcing our intellectual property rights could be costly and time-consuming and could distract management’s attention from operating business matters.

The uncertainty involving the immigration policies of the current administration of the U.S. could have significant adverse effects on the demand for our business and may negatively impact our results of operation.

The current U.S. administration has evoked uncertainty among international students and overseas business owners who wish to travel to the U.S. for education opportunities and business opportunities, respectively. Our business model and revenue from advisory services to student customers depends on the demand of international students and overseas business owners, and as such, could have a negative impact in our results of operation.

New services and programs that we develop may compete with our current offerings.

We are constantly developing new programs and services to meet changes in student demand and respond to changes to admissions standards, market needs and trends and technological changes. While some of the programs and services that we develop will expand our current offerings and increase student customers, others may compete with or make irrelevant our existing offerings without increasing our total revenues from advisory services provided to student customers. For example, our online training courses may take away students from our existing in-person courses. If we are unable to expand our program and service offerings while increasing our total student customer base and profitability, our business and growth may be adversely affected.

Our business is subject to fluctuations caused by seasonality or other factors beyond our control, which may cause our operating results to fluctuate from quarter to quarter.

For our AEC New York operations, we have experienced, and expect to continue to experience, seasonal fluctuations in our revenues and results of operations, primarily due to quarterly changes in student customers resulting from admission seasons. Historically, we receive deposits for our services during the second and third quarters of our fiscal year that usually lead to increased revenues during the subsequent quarters. However, deposits are refundable and thus, if the student customer is not accepted to the college or university of his/her choice (normally in the third and fourth quarters of our fiscal year), our revenues during these quarters may be lower than those in previous quarters. In addition, because these deposits are refundable, revenue cannot be recognized until we successfully complete our services and our student customers receive admission letters. These fluctuations could result in volatility and adversely affect our operations from one quarter to the next. As our revenues grow, these seasonal fluctuations from AEC New York’s business operations may become more pronounced.

Our historical financial and operating results are not indicative of our future performance, and our financial and operating results are difficult to forecast.

Our financial and operating results to date are not necessarily indicative of future operating results. In addition to the fluctuations described above, our revenues, expenses, and operating results may vary from quarter to quarter and from year to year in response to a variety of other factors beyond our control, including, but not limited to:

  · general economic conditions;

  · perception of value and future opportunities for an international education as perceived by our Chinese customers;

  · changes in corporate training needs in China;

  · regulations or actions pertaining to the provision of corporate training and advisory services in China;

  · detrimental negative publicity about us, our competitors, or our industry;

  · changes in consumers’ demand for our services and programs; and

  · non-recurring charges incurred in connection with acquisitions or other extraordinary transactions or unexpected circumstances.

Due to these and other factors, we believe that quarter-to-quarter comparisons of our operating results may not be indicative of our future performance, and therefore you should not rely on them to predict the future performance of our Company. In addition to the above factors, our past results may not be indicative of future performance because of new businesses developed or acquired by us.

Our business is difficult to evaluate in part because we have limited experience with respect to some of our newer services, programs, and offerings.

Historically, our core business has been the delivery of advisory services to Chinese student customers wishing to study in the U.S. in the areas of college admission, internship, and career development. In the fourth quarter of 2016, we expanded our business to include corporate training and advisory services with the acquisition of AEC Southern UK. We continue to develop ideas for new services to expand our business and client base and we launch new projects on a regular basis and are in the process of rolling out our online training services. Some of these new service offerings have not generated significant revenues to date, and we have, necessarily, less experience responding quickly to changes, competing successfully, and maintaining and expanding our brand in such new project areas. Consequently, there is limited operating history on which you can base your evaluation of the business and prospects of these relatively newer operations.

If fewer Chinese students choose to study in the United States, demand for our services and programs may decline.

The main demand for our main advisory services is the increasing number of Chinese students who choose to study abroad, especially in the United States, reflecting the growing demand for higher education in overseas countries by Chinese students. As such, any restrictive changes in immigration policy, terrorist attacks, geopolitical uncertainties and any international conflicts involving these countries could increase the difficulty for Chinese students to obtain student visas to study overseas or decrease the appeal of studying in such countries to Chinese students. Any significant change in admission standards adopted by overseas educational institutions could also affect the demand for overseas education by Chinese students. If overseas educational institutions significantly reduce their reliance on or acceptance of admission and assessment tests, such as TOEFL, IELTS or the Scholastic Assessment Test, or the SAT, the difficulty for Chinese students to meet the new admission standards could significantly increase, which could in turn negatively affect the demand for overseas education by Chinese students. Additionally, Chinese students may also become less attracted to studying abroad due to other reasons, such as improving domestic educational or employment opportunities associated with increased economic development in China. These factors could cause declines in the demand for our main advisory services, which may adversely affect our revenue and profitability.

An overall decline in the health of the Chinese economy and global economy and other factors impacting education spending and/or disposable income, such as natural disasters and fluctuations in inflation and foreign currency exchange rates may affect the spending power of our student customers, reduce demand for our services and materially harm our business, results of operations and financial condition.

Our business depends on the demand for education and the spending power and/or disposable income of the families of our student customers and, consequently, is sensitive to a number of factors that influence spending, such as general current and future economic and political conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, war and fears of war, inclement weather, natural disasters, terrorism, active shooter situations, outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the coronavirus, commonly referred to as “COVID-19” and its potential impact on our financial results) and consumer perceptions of personal well-being and security.

The outbreak, and threat or perceived threat of outbreak, of COVID-19 has negatively impacted the ability of our student customers and their families to travel to the U.S., which could adversely affect our business, results of operations and financial condition

The outbreak of COVID-19, first in mainland China, then in Asia and eventually throughout the world, may adversely affect our business, results of operations and financial condition. Travel within China and to and from other countries, particularly the U.S., has been or may be restricted, which has impacted or inhibited travel of our student customers and/or their families. Student customers currently engaging us for services may not be able to travel to the U.S. in the near future and thus may be suspending their use of our services. Student customers seeking to enroll in U.S. educational institutions may choose to remain in China, thereby not seeking our services. The foregoing may result in reduced demand for our main advisory services, and accordingly, adversely affect our business, results of operations and financial condition.

The continuing efforts of our senior management team and other key personnel are important to our success, and our business may be harmed if we lose their services.

The continuing services of our senior management team is very important to us. We particularly value the service of Mr. Max P. Chen—our founder, CEO, interim CFO, and Chairman—who has been with AEC New York since its inception in 1999. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily, and our business may be disrupted or suffer from their departure. Competition for experienced management personnel in the private education sector is intense, the pool of qualified candidates is limited, and we may not be able to retain the services of our senior executives or key personnel or attract and retain high-quality senior executives or key personnel in the future. In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose teachers, students, key professionals, and staff members.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our annual reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1,000,000,000 in non-convertible debt in a three year period, or if the market value of our Common Stock held by non-affiliates exceeds $700,000,000 as of any April 30 before that time, in which case we would no longer be an emerging growth company as of the following April 30. We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with the public company effective dates.

Risks Related to Doing Business in China

The PRC laws and regulations governing the Company’s business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations as well as in the PRC economic, political, and social conditions may have a material and adverse effect on the PRC economy and the education service industry in particular, and in turn the Company’s business.

There are substantial uncertainties regarding the interpretation and application of the PRC laws and regulations, including but not limited to the laws and regulations governing the Company’s business, or the enforcement and performance of the Company’s arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy, and criminal proceedings. The Company and any future subsidiaries are considered foreign persons or foreign funded enterprises under the PRC laws, and as a result, the Company is required to comply with the PRC laws and regulations. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.

The effectiveness of newly enacted laws, regulations, or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. The Company cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the Company’s businesses.

Doing business in the PRC is subject to many uncertainties and changes in the political, economic, or social direction of the PRC could have an adverse effort on the Company’s operations.

While the PRC economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our educational services depends, in large part, on economic conditions in China. Any significant slowdown in China’s economic growth may cause our potential students to delay or cancel their plans to enroll in our schools, which in turn could reduce our revenue.

The Company’s operations may be adversely affected by significant political, economic, and social uncertainties in the PRC. The differing cultures, business preferences, corruption, uncertain government regulations, tax systems, and currency regulations are risks that can impact the Company’s operations. Although the PRC government has been pursuing economic reform policies, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly attend, especially in the event of a change in leadership, social or political description or unforeseen circumstance, there is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent, effective or continue.

Regarding intermediate and consulting business activities relating to self-funded overseas studying, the Ministry of Education, or MOE, the Ministry of Public Security, and the SAIC jointly issued the Administrative Regulations on Intermediate Services for Overseas Studies with Private Funds and their Implementing Rules in 1999 and the Education Commission of Beijing and Beijing Administration for Industry and Commerce jointly issued the Beijing Measures of Supervisions and Recognition of Intermediate Services for Self-Funded Overseas Studies (Trial) in September 2015, which require that any intermediate service organization engaged in such services procure from the MOE the Recognition on the Intermediate Service Organization for Self-funded Overseas Studies. On January 12, 2017, the State Council promulgated the Decision of the State Council on the Third Installment of the Cancellation of the Administrative Licensing Matters Delegated to Local Governments, which, among other things, cancelled the Recognition on the Intermediate Service Organization for Self-funded Overseas Studies, which means that the requirement for intermediate service organizations to obtain Recognition on the Intermediate Service Organization for Self-funded Overseas Studies from the provincial government for their engaging in intermediate and consulting business activities relating to self-funded overseas studies is cancelled. This Decision provided that after the cancellation of such requirements, the MOE and the SAIC shall study and develop contract template for reference and strengthen their guidance, regulating and service to intermediate service organizations and that the relevant industrial association shall play their role in self-discipline.

We believe that we are not required to obtain the aforementioned license for our student advisory services because the services are primarily delivered in the U.S. For our corporate training and advisory services provided through AEC Southern UK to corporate customers with corporate clients located in the PRC, we believe they are not subject to the aforementioned regulations.

Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process, which could make it more difficult for us to pursue growth through acquisitions in China.

The M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the MOFCOM must be notified in the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national security review by the MOFCOM. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited.

There is significant uncertainty regarding the interpretation and implementation of these regulations relating to merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review, or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could harm our business.

We are subject to the United States Foreign Corrupt Practices Act, or “FCPA,” and other laws that prohibit U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants, sales agents, or distributors of our Company, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove ineffective, and the employees, consultants, sales agents, or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could adversely impact our business, operating results and financial condition.

Risks Related to the Shares of our Common Stock

The ownership of our Common Stock is concentrated among a small number of shareholders, and if our principal shareholders, director, and officers choose to act together, they may be able to significantly influence management and operations, which may prevent us from taking actions that may be favorable to you.

Our ownership is concentrated among a small number of shareholders, including our founder, director, officers, and entities related to these persons. Accordingly, these shareholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our shareholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control of the Company or impeding a merger or consolidation, takeover or other business combination that could be favorable to you.

The requirements of being a public company may strain our resources and divert management’s attention.

Compliance with the Exchange Act and the Sarbanes-Oxley Act and other applicable securities rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. In addition, complying with public company disclosure rules makes our business more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

Our Common Stock is considered a “penny stock” which is subject to restrictions on marketability, so you may not be able to sell your shares.

The U.S. Securities and Exchange Commission, or SEC, has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is currently less than $5.00 per share and therefore is designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose some information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the common stock and may affect the ability of investors to sell their shares. These regulations may likely have the effect of limiting the trading activity of the Company’s common stock and reducing the liquidity of an investment in its common stock. In addition, investors may find it difficult to obtain accurate quotations of the common stock and may experience a lack of buyers to purchase our Company’s stock or a lack of market makers to support the stock price.

We will be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their shares.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested director transactions, conflicts of interest, and similar matters.

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and NYSE AMEX Equities exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than necessary, we have not yet adopted these measures.

We do not currently have independent audit or compensation committees. As a result, our sloe director has the ability, among other things, to determine his own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our shareholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

There may not be an active, liquid trading market for our equity securities.

Our common stock trades exclusively on the OTCQB Marketplace since September 2016. Trading volumes on the OTCQB Marketplace can fluctuate significantly, which could make it difficult for investors to execute transactions in our securities and could cause declines or volatility in the prices of our common stock.

If the price of our common stock is volatile when we are trading, purchasers of our shares of common stock could incur substantial losses.

When and if an active market develops for our securities, the market price of our Common Stock could fluctuate significantly for many reasons, including reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or announcements by our competitors regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the price of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could negatively affect revenues or expenses in any particular quarter, including vulnerability of our business to a general economic downturn; changes in the laws that affect our products or operations; competition; compensation related expenses; application of accounting standards; and our ability to obtain and maintain all necessary regulatory and industry certifications and/or approvals to conduct our business. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

Moreover, we cannot assure you that any securities analysts will initiate or maintain research coverage of our company and our shares of common stock. We do not control analysts or the content and opinions included in their reports. The price of our shares of common stock could decline if one or more equity research analysts downgrade our shares of common stock or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.

Compliance with changing regulations of corporate governance and public disclosure will result in additional expenses.

Changing laws, regulations, and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management has invested significant management time and financial resources to comply with existing standards for public companies, any changes in these standards could which could lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

We do not intend to pay cash dividends on our shares of Common Stock in the foreseeable future.

We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the right of holders of our shares of Common Stock to receive dividends declared by our board of directors may be restricted to the extent we issue preferred shares with dividend rights superior to those of our shares of Common Stock.

Shares of our Common Stock represent equity interests and are subordinate to existing and future indebtedness.

Shares of our Common Stock represent equity interests in our Company and, as such, rank junior to any indebtedness of our Company now existing or created in the future, as well as to the rights of any preferred shares that may be issued in the future. In the future, we may incur substantial amounts of debt and other obligations that will rank senior to our Common Stock or to which our Common Stock will be structurally subordinated.

Provisions in our charter documents and Nevada law could discourage or prevent a takeover, even if an acquisition would be beneficial to our shareholders.

Provisions of our articles of incorporation and bylaws, as well as provisions of Nevada law, could make it more difficult for a third party to acquire us, even if beneficial to our shareholders. Provisions include (i) authorizing the issuance of “blank check” preferred shares that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; (ii) prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of our shareholders to elect director candidates; and (iii) advance notice provisions in connection with shareholder proposals that may prevent or hinder any attempt by our shareholders to bring business to be considered by shareholders at a meeting or replace our Company’s board of directors.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable to smaller reporting companies.

ITEM 2. PROPERTIES

Our principal executive office is located at 2 Wall Street, Floor 8, New York, NY 10005 (the “Headquarters”). We entered into a lease agreement for the Headquarters with an unrelated third-party landlord pursuant to which the Company pays a monthly rent of $34,056. The Headquarters lease expires on July 31, 2025.

AEC Southern Shenzhen entered into a new lease in the fiscal year ended December 31, 2019 pursuant to which it leases office space from an unrelated third party on a month to month basis with a monthly rental cost of RMB52,456 (approximately US$8,497). The lease will expire on April 30, 2024.

We believe our facilities are sufficient for our business operations.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Common Stock is quoted on the OTCQB under the symbol “AMCT” and has very limited trading. The closing price for our Common Stock on the OTCQB on May 28, 2020, was $0.15 per share.

The market for our stock is highly volatile. We cannot assure you that there will be a market in the future for our common stock.

The following table shows the high and low bid prices of our common shares on the OTQB for each quarter within the two most recent fiscal years. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

There is no “public market” for shares of common stock of the Company. Although the Company’s shares are quoted on the OTCQB marketplace, there has been almost no transaction taken place in the previous years. In any event, no assurance can be given that any market for the Company’s common stock will develop or be maintained.

Stockholders of Record

As of May 28, 2020, we have 109 record holders of our Common Stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

As of May 28, 2020, we have two record holders of our Series B Convertible Preferred Stock and no record holder of our Series A Preferred Stock.

VStock Transfer, LLC, at 18 Lafayette Pl, Woodmere, NY 11598, is our transfer agent.

Effective August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Options, Warrants, Convertible Securities

Currently, we do not have any warrants, options or convertible securities outstanding other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal year 2019 and current reports on Form 8-K.

Dividends

We have not declared any cash dividends on our Common Stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the board of directors deems relevant.

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2019, we did not have sales of unregistered securities other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal year 2019 and current affair reports on Form 8-K, except the following:

In May 2019, the Company entered into agreements pursuant to which it issued an aggregate of 200,000 shares of the Company’s common stock to four individuals who have been service providers to the Company for services provided.

Recent Purchases of Equity Securities by us and our Affiliated Purchasers

None.

Where You Can Find Additional Information

We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. For further information with respect to the Company, you may obtain its reports, proxy statements and other information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company’s SEC filings are also available at the SEC’s web site at http://www.sec.gov.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to smaller reporting companies.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the consolidated financial statements of the Company thereto, which appear elsewhere in this Annual Report on Form 10-K, and should be read in conjunction with such financial statements and related notes included in this report. Except for the historical information contained herein, the following discussion, as well as other information in this report, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Actual results and the timing of the events may differ materially from those contained in these forward-looking statements due to many factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this Annual Report on Form 10-K.

Overview

Leveraging our knowledge of the educational system and environment in the U.S. and our understanding of the market demand for education services in the PRC and its changing business economy, we specialize in the delivery of customized high school and college placement advisory services as well as career advisory services to Chinese students wishing to study and gain post-graduate work experience in the U.S. Our advisory services are specifically designed to address the educational needs of the rising middle-class families in China. The demand for our advisory services is primarily the result of China’s decades-long one-child policy, society’s focus and emphasis on children’s education, and families’ desire to gain access to U.S. colleges and universities as well as work experience in the U.S.

Having delivered customized ESL training, college and business consulting, and career advisory services to Chinese students and families since 1999, we are one of the most experienced and recognizable holistic solutions providers of education advisory services in the U.S. Additionally, recognizing the needs for enterprise training in China, from October 2016 to late 2018, we also delivered customized corporate training and advisory services to customers in China in the food industry to help them meet the related regulatory standards. The demand for such corporate training and advisory services in China has escalated in recent years and is driven mainly by China’s growing economy and desire to improve its competitiveness by meeting or setting international standards. Through AEC Southern Shenzhen, in fiscal year ended December 31, 2019, we delivered customized high school and college placement and career advisory services to Chinese students wishing to study in the U.S. through referred by AEC New York.

Headquartered in New York with operations in the PRC, our key advisory services currently include:

Placement Advisory Services

Our Placement Advisory Services include Language Training and Placement Advisory, and Elite College Advisory services.

Since 1999, we have been delivering customized Language Training & Placement Advisory services to Chinese students. Our one-stop advisory service encompasses ESL training and assistance throughout the high school/college application and admission process.

Targeting the needs of Chinese families in obtaining admission to Ivy League and other prestigious universities in the U.S., our Elite College Advisory service is designed to assist qualified Chinese students in applying to prestigious colleges and universities in the U.S. Specifically, we arrange campus tours, assist our student customers with their university applications, provide tailored language training, offer guidance on interview and communication techniques, and follow up on their applications.

Once our student customers are admitted into their target universities, our Placement Advisory services further extend to academic and cultural related experiences including, among other things, providing assistance with applying for a second major or minor, transferring to a different university, housing accommodations, and applying for accelerated degrees. To help students optimize their on-campus experience and train their leadership and social skills, we also organize seminars and social events with our partner scholars and universities, non-profit and for-profit business organizations. Additionally, to help enrich their cultural experiences, we organize extracurricular and artistic activities including dance, music, painting, photography, and other performance events.

Career Advisory Services

Our Internship Advisory program focuses on student’s career development by helping them identify and secure suitable internship and part-time or full-time work opportunities that are appropriate for their educational background and experience level. Through this program, we strive to help students map and navigate their career path and counsel them on matters including academic improvement to career assistance. Through this program, our student customers are given opportunities to communicate with professionals in their field of study and to participate in real-world case studies.

Our Start-up Advisory program provides advisory services to students and/or their families who want to start or make an investment in a business in the U.S. Collaborating with our strategic partners, our services include (i) recommending alternative business development opportunities; (ii) assistance with business plan development; (iii) assistance with accounting and financial management, marketing, product and project design; and (iv) assistance in project financing.

Student & Family Advisory Services

Our Student & Family Advisory Services are designed to assist our students and/or their families in the process of settling down in the U.S., so they can effectively focus on their studies.

Through our business partners, we assist the students’ families with purchasing real estate properties, organizing their personal financial management and investment needs, getting insurance and starting businesses. Our American Dream Program helps students’ families find investment projects in the U.S. We also advise corporate clients whose executives are moving to the U.S. for work. The scope of our services includes assistance with business consulting, relocation and other aspects of family support services.

Other Advisory Services

Through our Foreign Student Recruitment services, we assist universities in China to recruit students from the U.S. We customize this service based on our strategic relationship with college and universities in the U.S. and the specific recruitment goals of these universities in China. The demand for our recruitment services is driven mainly by the lack of an established channel to attract students from the U.S. and the needs by the Chinese universities to expand and diversify their student body.

Our Foreign Educator Placement services are designed to meet the increasing demand for experienced educators and teachers from the U.S. to teach in China. Such demand covers the need to recruit qualified US educators from Pre K-12 to teach in China.

Pursuant to Accounting Standard Codification 280 “Segment Reporting” (“ASC 280”), we have identified two reporting segments: AEC New York and AEC Southern UK. These two segments engage two sets of customers and vendors to generate revenue and incur expenses; they generate separate financial information; and based on their financial reports and other segment specific information, our chief operating decision maker determines the resources to be allocated and evaluates the performance, of each segment.

Significant Accounting Policies

The discussion and analysis of our consolidated financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The consolidated financial statements are comprised of AEC Nevada and its wholly owned subsidiaries, AEC New York and AEC Southern UK. The consolidated financial statements are comprised of AEC Nevada and its wholly owned subsidiaries, AEC New York, AEC BVI, and AEC Southern UK (until the disposition of AEC Southern UK on May 1, 2019). All significant intercompany accounts and transactions have been eliminated in consolidation. On May 1, 2019, AEC Nevada sold 100% of the equity interest in AEC Southern UK. We have classified the operating results of AEC Southern UK as discontinued operations in the audited consolidated statement for all periods presented in this annually report on Form 10-K. All significant intercompany accounts and transactions have been eliminated in consolidation.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. As of December 31, 2019, the Company does not have a liability for any unrecognized tax benefits.

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial statements when we deem it necessary.

We have determined significant accounting principles with policies that involve the most complex and subjective decisions or assessments. While our significant accounting policies are more fully described in Note 2 to our financial statements, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Both operating groups are reported under the same accounting policies/estimations.

Revenue is recognized when the following criteria are met: (1) when persuasive evidence of an arrangement exists; (2) delivery of the services has occurred; (3) the fee is fixed or determinable; and (4) collectability of the resulting receivable is reasonably assured. Advisory services fees paid in advance will be reflected as deferred revenue, and they are recognized proportionally as services are completed. Fees related to compliance training and advisory services are recognized upon completion of such services.

We adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02 “Leases (Topic 842)” for the three months and nine months ended September 30, 2019. We first evaluate our leases to determine whether they are classified as a finance lease or as an operating lease. A lease is a finance lease if any of the following criteria are met: (a) ownership transfers, (b) the lease includes an option to purchase the underlying asset, (c) the lease term is for the major part of the remaining economic life of the underlying asset, (d) the present value of the lease payments equals or exceeds the fair value of the underlying asset, or (e) the underlying asset is of a specialized nature that is expected to have no alternative use to the lessor at the end of the lease term. As such, all of our leases are classified as operating leases. We then determine whether the short-term exemption applies. The short-term exemption applies if the lease term 12 months or less and does not include a purchase option whose exercise is reasonably certain. If the short-term exemption applies then lease payments are recognized as expense and no asset or liability is recorded. If the short-term exemption does not apply, then we record an operating lease right-of-use asset and a corresponding operating lease liability equal to the present value of the lease payments. The ten-year commercial real estate lease we entered into in December 2014 did not meet the short-term exemption and, accordingly, we recorded the present value of the lease payments as a right-of-use asset and a lease liability in the unaudited consolidated balance sheet. We recognize expense on a straight-line basis over the life of the lease.

Recent Accounting Pronouncements

In January 2017, the FASB issued accounting standard update which simplifies the test for goodwill impairment. To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the update in the fourth quarter of 2018. The adoption of the new standard did not have an impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220). The amendments in this update affect any entity that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities. ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance will be adopted using a retrospective approach and is effective for the 20

The Company has assessed all newly issued accounting pronouncements released during the year ended December 31, 2019 and through the date of this filing and believes none of them will have a material impact on the Company’s financial statements when or if adopted.

Results of Operations

Below we have included a discussion of our operating results and material changes in the periods covered by this Annual Report on Form 10-K. For additional information on the potential risks associated with these initiatives and our operations, please refer to the Risk Factors sections starting on page 14 of this Annual Report on Form 10-K.

Year Ended December 31, 2019, as Compared to Year Ended December 31, 2018

Revenues

Gross Profit & Gross Margin

The following table summarizes changes in operating expenses and provision for income taxes for the periods presented: 

Operating Expenses

Income Tax Benefit

Net Loss

Liquidity and Capital Resources

Discontinued Operations

On May 1, 2019, the Company sold AEC Southern UK to three individuals, Ye Tian, Rongxia Wang and Weishou Li. As a result, (1) the financial results of AEC Southern UK were reflected in our consolidated statement of income, retrospectively, as discontinued operations beginning in the first quarter of 2019; and (2) the related assets and liabilities associated with AEC Southern UK in the consolidated balance sheet for the three months ended September 30, 2018 and December 31, 2018, respectively, are classified as discontinued operations. See "Note 5 - Discontinued Operations" to our unaudited consolidated financial statements included in this report.

Cash Flows and Working Capital

As of December 31, 2019, we had cash of $1,035,396, a decrease of $949,738 from $1,985,133 as of December 31, 2018. We have financed our operations primarily through cash flow from operating and financing activities. We require cash for working capital, payment of accounts payables and accrued expenses, salaries, commissions and related benefits, and other operating expenses and income taxes. The following table sets forth a summary of our cash flows for the periods indicated.

Cash Flow from Operating Activities

Cash Flow from Investing Activities

Cash Flow in Financing Activities

Working Capital 

The following table sets forth our working capital.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we are currently not party to, any off-balance sheet arrangements.

Seasonality

Subsequent Events

The Company’s management has performed subsequent events procedures through the date the financial statements were available to be issued. There were no subsequent events requiring adjustment to or disclosure in the consolidated financial statements except for the following.

In January 2020, the Company entered into agreements pursuant to which it issued an aggregate of 700,000 shares of the Company’s common stock to 2 individuals who are either employees of the Company or have been service providers to the Company, for employment-based compensation or services provided, respectively.

The Company borrowed two loans of $287,282 from a shareholder of the Company, $143,641 (translated from RMB1,000,000) borrowed on April 1, 2020, and $143,641 (translated from RMB1,000,000) borrowed on May 26, 2020. The amounts are non-interest bearing, non-secure and due on demand.

The Company incorporated a new subsidiary, Yiqilai (Shenzhen) Consulting Management Co., Ltd., in Shenzhen, China on May 22, 2020 pursuant to PRC laws.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The audited financial statements of the Company for the fiscal year ended December 31, 2019, and the notes thereto are set forth on page F-1 through F-31 of this Annual Report.

ITEM 9. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

Acquisition of G.C. & Associates CPAs, PLLC

In January 2020, G.C. & Associates CPAs, PLLC (“GCA CPA”), the Company’s independent registered public accounting firm, entered into a joint venture agreement with JLKZ CPA LLP (“JLKZ CPA”), pursuant to which JLKZ CPA acquired GCA CPA’s audit operations and certain employees at GCA CPA became employees of JLKZ CPA. As a result, on January 17, 2020, JLKZ CPA replaced GCA CPA and became the Company’s independent registered public accounting firm. The Company’s Board of Directors approved this change on January 17, 2020, effective as of January 17, 2020. GCA CPA’s audit reports on the financial statements of the Company as of and for the fiscal years ended December 31, 2018 and 2017 did not contain an adverse opinion or disclaimer of opinion, nor were them qualified or modified as to uncertainty, audit scope, or accounting principles.

During the Company’s two most recent fiscal years and subsequent interim period before the replacement of GCA CPA as the Company’s independent registered public accounting firm, (i) there were no “disagreements” (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and GCA CPA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to GCA CPA’s satisfaction, would have caused GCA CPA to make reference in connection with GCA CPA’s opinion to the subject matter of the disagreement and (ii) there were no “reportable events” as the term is described in Item 304(a)(1)(v) of Regulation S-K.

Dismissal of Wei & Wei

The Company dismissed Wei & Wei as the Company’s independent registered public accounting firm, effective as of February 22, 2018. The Board approved of the dismissal of Wei & Wei as of February 22, 2018. Wei & Wei’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2016 and 2017, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal years ended December 31, 2017 and 2016, and the subsequent interim period through February 22, 2018, there were (i) no “disagreements” (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Wei & Wei on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Wei & Wei’s satisfaction, would have caused Wei & Wei to make reference thereto in their reports, and (ii) no “reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K).

Effective February 22, 2018, the Company appointed G.C. & Associates CPAs PLLC (“GC & Associates”) as the Company’s independent registered public accounting firm for the Company’s fiscal years ended December 31, 2017 and ending December 31, 2018. The Board approved of the appointment of GC & Associates as of February 22, 2018. During the fiscal year ended December 31, 2017, and the subsequent interim period through February 22, 2018, neither the Company nor anyone on its behalf consulted with GC &Associates regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial statements by GC & Associates, in either case where written or oral advice provided by GC & Associates would be an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor, Wei & Wei or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively).

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures.

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer (CEO), as appropriate to allow timely decisions regarding required disclosure.

During the year ended December 31, 2019, procedures have been established to ensure that all significant, non-routine events and pending transactions must be evaluated by our CEO for disclosures in our consolidated financial statements and public filings.

We performed an evaluation, under the supervision and with the participation of our management, including our CEO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual Report on Form 10-K. Based on this evaluation, our CEO has concluded that, as of December 31, 2019, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported properly within the time periods specified by the SEC, and did not provide reasonable assurance that information required to be disclosed by the Company in such reports would be accumulated and communicated to the Company’s management, including its CEO, as appropriate, to allow timely decisions regarding required disclosure. Such conclusion was based solely on the fact that the Company identified deficiencies in its internal control over financial reporting as of December 31, 2019. Although we have determined that the existing controls and procedures are not effective, the deficiencies identified have not been deemed material to our reporting disclosures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Interim Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP.

Management, under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 Internal Control-Integrated Framework.

Based on this evaluation, our CEO has concluded that as of December 31, 2019, our disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder. We have identified the following deficiencies, we have limited administrative and accounting resources, outdated accounting software and generally weak accounting processes and internal control procedures. Additionally, we have inadequate segregation of duties in certain accounting processes, including the payroll, cash receipts and disbursements processes in our accounting system, partly as a result of our limited size and accounting staff. We have taken steps to remediate these issues and expect to have improved controls and documentation in place by December 31, 2020.

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

Changes in internal control over financial reporting

Our CEO, Max P. Chen, has acted as the interim CFO since February 5, 2018, following the prior Chief Financial Officer resignation for personal reasons. Mr. Chen will continue to act as the interim CFO until the Company engages a CFO with significant experience in public reporting company.

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table presents information with respect to our officers and directors:

Max P. Chen has over 30 years of experience in international education. He has served as the Sole Director, Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company first since May 2014. He had previously served as the President, and sole Director of American Education Center, Inc., a New York corporation and now a wholly owned subsidiary of the Company, since its inception in 1999 to May 2014. From 1978 to 1982, Mr. Chen enrolled in Sichuan Normal University Department of Foreign Language. He was originally a professor with China Peasant University, and operated Correspondence Sichuan University with more than 70,000 students registered in the 1980s. Mr. Chen relocated to the U.S. and has developed schools and educational centers that coordinate cooperative educational programs between the U.S. and China. He holds an M&R Management Certificate from Harvard Business School. Mr. Chen is also the executive director of the U.S.-China Higher Education Alliance.

Departure and Appointment of Certain Officers

On February 5, 2018, Mr. Anthony S. Chan notified the Company of his resignation from the Company as Chief Financial Officer, effective immediately. The Board of Director of the Company (the “Board”) accepted Mr. Chan’s resignation. Following Mr. Chan’s departure, the Board appointed Mr. Max P. Chen, Chief Executive Officer, President, and Chairman of the Board, as interim Chief Financial Officer effective February 5, 2018, until such time that the Company secures the employment of a new Chief Financial Officer. The Company and Mr. Chen will not enter into an additional employment agreement regarding his interim position as Chief Financial Officer.

Committees of the Board of Directors

Our board of directors has not established any committees, including an audit committee, a compensation committee, a nominating committee or any committee performing a similar function. The functions of those committees are being undertaken by our sole Board member. Because we have only one director and do not have any independent directors, the establishment of committees of the Board of Directors would not provide any benefits to our company and could be considered more form than substance.

Code of Ethics

We have adopted a code of business conduct and ethics that applies to our director, officers, and all employees.

Family Relationships

There are no family relationships among the directors and executive officers of the Company.

Directors’ Compensation

We have not paid any cash compensation to our sole member of our Board of Directors for his service as our director.

The Company will reimburse its director for reasonable expenses in connection with attendance at board and committee meetings. Director will also be eligible to receive stock options offered by our company from time to time. No options have been granted to our sole director.

Involvement in Certain Legal Proceedings

To the best of our knowledge, our sole director or any executive officers have not, during the past ten years:

Corporate Governance

The business and affairs of the Company are managed under our sole board member. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors of the Company at our annual stockholders meetings. All communications from stockholders are relayed to the board of member.

Role in Risk Oversight

Our sole director is primarily responsible for overseeing our risk management processes. The sole director receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The sole director focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While the sole director oversees our company’s risk management, management is responsible for day-to-day risk management processes.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

We believe that our executive officers and directors and persons who own more than 10% of a registered class of our equity securities are not subject to reporting requirements under Section 16(a) of the Securities Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION.

The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two most highly compensated executive officer who occupied such position at the end of our latest fiscal year.

(1) Mr. Chen received employment compensation pursuant to an Employment Agreement entered into with the Company dated August 28, 2017 as the Company’s CEO. Mr. Chen did not separately receive any other compensation for acting as the Company’s interim CFO.

(2) Mr. Chen received stock awards for 12,500,000 shares of Series B Preferred Stock, pursuant to a Manager Share Issuance Agreement with the Company dated November 26, 2018.

(3) Anthony S. Chan served as Chief Financial Officer of the Company from September 28, 2017 to February 5, 2018.

Option Grants in Last Fiscal Year

The company did not grant any options in the fiscal year ended December 31, 2019.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement, or similar benefits for directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

Employment Agreements

The Company has not entered into employment agreements with officers and other key employees except as disclosed in this Item 11.

Equity Compensation Plan

We have a 2015 Equity Compensation Plan in place with 10,000,000 shares reserved for issuance. Our Board of Directors may adopt one or more equity compensation plans in the future.

Directors’ and Officers’ Liability Insurance

The Company currently does not have insurance for directors and officers against liability; however, the Company is in the process of investigating the availability of such insurance.

Change of Control Compensatory Plans

As of December 31, 2019, we had no pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or change in control of us.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the ownership of our capital stock, as of May 15, 2020, by: (i) each person known by us to be the beneficial owner of 5% or more of the outstanding Common Stock, Series A Preferred Stock, or Series B Preferred Stock, (ii) each executive officer and director of the Company, and (iii) all of our executive officers and directors as a group. As of May 28, 2020, the Company has 57,497,113 shares of Common Stock outstanding, 0 shares of Series A Preferred Stock outstanding, and 25,000,000 shares of Series B Preferred Stock outstanding.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock or Series B Preferred Stock that such person has the right to acquire within 60 days of May 29, 2020. For purposes of computing the percentage of outstanding shares of our Common Stock or Series B Preferred Stock held by each person or group of persons named below, any shares that such person or persons has the right to acquire within 60 days of May 29, 2020 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, 2 Wall St., FL. 8, New York, NY, 10004.

Securities Authorized for Issuance under Equity Compensation Agreements

We have a 2015 Equity Compensation Plan in place with 10,000,000 shares reserved for issuance. Our Board of Directors may adopt one or more equity compensation plans in the future.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than compensation agreements and other arrangements described in “Management,” and our transactions described below, since our inception there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

The Company’s CEO has a 34% interest in Columbia International College, Inc. (“CIC”). The Company prepaid CIC $96,000 for student consulting services pursuant to which $48,000 was realized in 2019 and the rest is expected to be fully delivered and accounted for in 2020.

The Company’s CEO has a 40% interest in Wall Street Innovation Center, Inc. (“WSIC”), a corporation incorporated in the state of New York that focuses on career and business development activities. In the course of delivering career advisory services, the Company has engaged WSIC to assist in certain career development activities. The Company prepaid WSIC $149,628 for business consulting services pursuant to which $100,000 was realized in 2019 and the rest is expected to be fully delivered and accounted for in 2020.

The Company borrowed RMB4,000,000 (approximately $574,564) from a shareholder of the Company during the year ended December 31, 2019. The amount due to this related party was $574,564 as of December 31, 2019. The loan is non-interest bearing, unsecured and due on demand. We do not anticipate the shareholder-creditor to demand immediate repayment during the fiscal year ending December 31, 2020.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

For the Company’s fiscal years ended December 31, 2019 and 2018, we were billed approximately $75,000 and $125,139 for professional services rendered for the audit and review of our financial statements.

Audit Related Fees

There were no fees for audit related services for the years ended December 31, 2019 and 2018.

Tax Fees

For the Company’s fiscal years ended December 31, 2019 and 2018, we engaged Wei & Wei, and were billed approximately $6,350 and $0, respectively, for professional services rendered for tax compliance, tax advice, and tax planning.

All Other Fees

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2019 and 2018.

Effective May 6, 2003, the SEC adopted rules that require that before our independent registered public accounting firm is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

We do not have an audit committee. Our sole director preapproves all services provided by our independent registered public accounting firm. However, all of the above services and fees were reviewed and approved by the sole board member for the respective services were rendered.

PART IV

ITEM 15. EXHIBITS

(a) The following documents are filed as part of this report:

(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements on pages F-1 through F-31 of this report.

(2) Financial Statement Schedule: None.

(3) Exhibits

Item 16. FORM 10–K SUMMARY

None.

SIGNATURES

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Stockholders of

American Education Center, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of American Education Center, Inc. and Subsidiaries (the “Company”), as of December 31, 2018, and the related consolidated statement of income, stockholders’ equity, and cash flow for the year ended December 31, 2018. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flow for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 24 to the financial statements, the Company had incurred substantial losses during the year, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 24. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ G.C. & Associates CPAs, PLLC

G.C. & Associates CPAs, PLLC

Flushing, NY

April 16, 2019

We have served as the Company’s auditor since February 2018.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of American Education Center, Inc. and Subsidiaries (the “Company”), as of December 31, 2019, and the related consolidated statement of income, stockholders’ equity, and cash flow for the year ended December 31, 2019. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flow for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 24 to the financial statements, the Company had incurred substantial losses during the year, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 24. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

s/ JLKZ CPA LLP

JLKZ CPA LLP
Flushing, NY
May 29, 2020

We have served as the Company’s auditor since January 2020.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY