EDGAR 10-K Filing

Company CIK: 1626556
Filing Year: 2021
Filename: 1626556_10-K_2021_0001104659-21-050798.json

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ITEM 1. BUSINESS
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 Southern HK formed Yiqilai (Shenzhen) Consulting Management Co., Ltd. (“AEC YQL”) in Shenzhen, China on May 22, 2020 pursuant to PRC laws. AEC YQL is a wholly owned subsidiary of AEC Southern HK, and as of the date of this annual report, it does not have significant business activities.
AEC YQL gained control over Shenzhen Zhongwei Technology Co., Ltd. (“Zhongwei”), a PRC company from Ding Xiang (Shenzhen) Investment Co., Ltd., a PRC company, through VIE Agreements (defined hereinafter) on August 18, 2020. Zhongwei is involved in, among other things, e-commerce, and our company plans to leverage Zhongwei’s current e-commerce platform, and to engage in business such as online education e-commerce. In consideration for entering into the transactions contemplated by the VIE Agreements, on August 18, 2020, the Company entered into a Share Issuance Agreement (the “Share Issuance Agreement”) with the shareholders of Ding Xiang (Shenzhen) Investment Co., Ltd. (“Zhongwei Ultimate Shareholders”), whereby the Company agreed to issue to the Ding Xiang Shareholders an aggregate of 2,640,690 shares of the Company’s common stock, par value $0.001. The transactions underlying the Share Issuance Agreement closed in August 2020.
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:
· Placement Advisory Services;
· Career Advisory Services;
· Student & Family Advisory Services; and
· Other Advisory 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, which is shared with Zhongwei, 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, 2020 and 2019 were $ 342,499 and $5,308,412, 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, 2020, revenue from student advisory services in the U.S., delivered by AEC New York, accounted for approximately 69.2% 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 the U.S. market, besides the previous plans, we are continually monitoring the development of the COVID-19 epidemic as well as the impact on our operations and financial performance and actively adjusting our operational and marketing strategies. For the China market, we have been expanding our services in China through the platform of Zhongwei ever since we gained control power over Zhongwei through variable interest entity arrangement. As of the date of this report, the Zhongwei platform is still in trial operation stage. For detailed information on marketing strategies and growth plans targeting to grow our advisory services in the U.S., please refer to the section entitled “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.
On May 22, 2020, AEC Southern HK formed Yiqilai (Shenzhen) Consulting Management Co., Ltd. (“AEC YQL”) in Shenzhen, China pursuant to PRC laws. AEC YQL is a wholly owned subsidiary of AEC Southern HK, and as of the date of this Report, does not have significant business activities.
On August 18, 2020, AEC YQL entered into a series of contractual arrangements, including an Equity Pledge Agreement, Exclusive Management Consulting Agreement, Exclusive Option Agreement, and Irrevocable Power of Attorney (collectively, the “VIE Agreements”), with Shenzhen Zhongwei Technology Co., Ltd. (“Zhongwei”), a PRC company, and Ding Xiang (Shenzhen) Investment Co., Ltd., a PRC company (“Pledgor”), the sole shareholder of Zhongwei controlled by Dewei Li and Bin Liu (the “Zhongwei Ultimate Shareholders”). Pursuant to the VIE Agreements, AEC YQL gained control over Zhongwei. Zhongwei is involved in, among other things, e-commerce, and the Company plans to leverage Zhongwei’s current e-commerce platform, and to engage in business such as online education e-commerce. In consideration for entering into the transactions contemplated by the VIE Agreements, on August 18, 2020, the Company entered into a Share Issuance Agreement (the “Share Issuance Agreement”) with the Zhongwei Ultimate Shareholders, whereby the Company agreed to issue to the Zhongwei Ultimate Shareholders an aggregate of 2,640,690 shares of the Company’s common stock, par value $0.001. The transactions underlying the Share Issuance Agreement closed in August 2020.
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 1 Rockefeller Plaza, 10th floor, New York, NY 10020. Our telephone number is (646) 722-2931. Our website is www.aec100.com.
Our Business
Headquartered in New York with operations in China, the Company, during fiscal year ended December 31, 2020 operated, and currently operates, in two market segments:
(1) AEC New York capitalizes on the rising demand from the middle-class families in China for quality education in the U.S. It delivers customized high school and college placement and career advisory services to Chinese students wishing to study in the U.S. Its advisory services include language training, college admission advisory, on-campus advisory, internship and start-up advisory as well as student and family services.
(2) AEC BVI, through AEC Southern Shenzhen and Zhongwei, delivers customized high school and college placement and career advisory services to Chinese students intending to study in the U.S., through business referred by AEC New York. During the fiscal year ended December 31, 2020 and presently, the revenue of AEC BVI is generated by the operation of AEC Southern Shenzhen and Zhongwei.
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:
· Placement Advisory Services;
· Career Advisory Services;
· Student & Family Advisory Services; and
· Other Advisory Services.
All advisory services above are provided by our subsidiaries, AEC New York, AEC Southern Shenzhen and Zhongwei.
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. We expect student Student customers will be able to take these training courses online when our ESL online training platform goes live in third quarter of 2021.
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 AEC New York, AEC Southern Shenzhen and Zhongwei. 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
The COVID-19 pandemic has severely affected China and the rest of the world. In an effort to contain the spread of the COVID-19 pandemic, China and many other countries have taken precautionary measures, such as imposing travel restrictions, quarantining individuals infected with or suspected of being infected with COVID-19, encouraging or requiring people to work remotely, and canceling public activities, among others. The pandemic has resulted in quarantines, travel restrictions, and temporary closure of stores and facilities in China and other countries including the United States. These ongoing measures adversely affected our operations and financial performance in 2020.
Consequently, we expect the COVID-19 outbreak will continue to have material and adverse impacts on the Company’s business operations and its financial condition, including but not limited to material negative impact to the Company’s total revenues. Since late March 2020, due to restrictions on domestic and international travels and uncertainty of the pandemic, the company’s revenue substantially decreased approximately 90%. 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. In response to COVID-19, we have taken some measures, such as reducing our office rent.
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 our current business and is expected to better serve 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:
· Experienced Management. Our management team is comprised of industry experts with extensive experience in the education service industry, knowledge of the education system in the U.S. and a deep understanding of the Chinese market as well as finance executives who specializes in mergers and acquisitions, business reorganization, internal controls and risk management. We have established a corporate culture that is based on integrity, built compliance into risk management, integrated structure and discipline into our operating management and financial reporting processes, and made it a priority to deliver quality, customized services without compromising our ability to generate sustainable operating profits.
· Proven Business Model. Our business model is to target those service areas that are driven by significant market demand and have potential for sustainable growth in the long run. As a total solutions education advisory services provider, we have been successful in meeting the market demand for quality education and career development in the U.S.
· Scalable Business Platform. As an emerging business in the education service business, we believe we have the structure and discipline to control our operating expenses and overhead as we grow our business and strive to improve our operating profits. By keeping a relatively low headcount and optimizing the use of outsourced industry experts, we believe we have been effective in delivering quality services while maintaining healthy operating margins.
· Customized Service Approach. Our success is built on our reputation in delivering consistent, reliable, quality, and customized advisory services. Our approach is result oriented and we customize our service based on the specific needs of our student and corporate customers. Without compromising our objective of delivering consistent growth in earnings and profitability, we take pride in the delivery of tailored advisory services to our student customers.
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:
· Expand organically within existing markets and into new markets. To carry out our vision of strengthening our market position in the U.S., we are implementing a combination of on- and off-line marketing approaches to expand our student-customer base in markets we currently serve. Such approaches include the recently launched Membership Program that is designed to maximize the power of personal and commission-based referral of our services to other potential customers; and the AEC Help mobile application, a social network platform that is intended to bring students together under one roof, offering them alternative solutions to issues frequently encountered by foreign students in the U.S.
· Our Membership Program allows third-party agents and education service providers, either individuals or entities, to sign up as members. Benefits to becoming our members include access to all programs pursuant to our student advisory services currently provided by AEC New York. Our members typically have access to clients with needs that can be met by programs provided by AEC New York. After paying a one-time, non-refundable fee of $50,000 to become a member, members can seamlessly integrate our services with their service offerings by outsourcing the specific services to us. We believe the Membership Program will allow us to broaden the reach of our brand and services without establishing additional offices in China and in the U.S.
· Our AEC Help mobile application was developed in-house and is operated by AEC New York. 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 the AEC Help app 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.
· To grow organically, we plan to expand our service offerings to existing student customers, as well as deepening our strategic relationships with top universities, top companies, and top recruitment agencies, to aggregate our resources to collectively deliver customized career advisory services. Previously, we intended to launch the Other Recruitment & Placement Services, which include our Foreign Student Recruitment services and Foreign Educator Placement services in 2019. However, due to the outbreak of COVID-19, this plan has been postponed to 2021. As of the date of this annual report, we already started implementing this plan. For detailed information on the impact of the outbreak of COVID-19, refer to “Item 1. Business-Outbreak of COVID-19.”
· Through our Foreign Student Recruitment services, we will assist universities in China to recruit foreign students from the U.S. and other countries. We customize this service based on our relationship with universities in China and their specific recruitment goals. We believe 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 to expand and diversify the university’s student body.
· Our Foreign Educator Placement services are designed to meet the increasing demand for experienced educators from the U.S. to teach in China. Based on our understanding of the market demand, we believe there is a significant service opportunity for us to recruit qualified U.S. educators from Pre-K-12 to college to teach in China.
· Technology Platforms. We believe that our future success also depends, in part, on our ability to vertically integrate training courses and content delivery, specifically, complementing and integrating off-line, in person delivery with off-the-shelf, online delivery of training modules, which will increase the scalability of our operation. We are in the process of completing the development of an online ESL/language training platform for our student customers as well as an online training platform for our customer’s corporate clients in China which, when completed and launched, will allow participants to access our training courses on demand and on a 24/7 basis. Leveraging these two newly developed online training platforms, we believe we could realize significant growth in our revenues from language training as well as corporate training. Since we gained control power of Zhongwei through VIE Agreements on August 18, 2020, we have been expanding our local online services in China through the platform of Zhongwei with the legitimate certificate. Through this platform, we are attracting local small educational institutions to register in our system and sharing resources to meet local customers’ needs. As of the date of this report, this platform is still in trial operation stage.
· Mergers and Acquisitions. We plan to grow our training and advisory business through acquisitions and intend to replicate our success by identifying potential merger and acquisition targets, especially training institutions that are successful in their respective fields or industries, to efficiently and rapidly broaden our service offering. In addition, we are performing market research to identify suitable new markets and suitable targets in the education and training industry that are potentially profitable such as trade skills training, and personal development.
· As part of our growth strategy, we acquired AIFI in 2018. We intend to provide, through AIFI, financial education and services through its training and certification programs with the goal in building a financial education information ecosystem to cultivate people’s sound financial judgement and decision-making abilities. The AIFI programs are intended to provide extensive and important financial literacy knowledge and relevant services to the financial services industry, non-profit organizations and schools. Specific target audiences include but are not limited to industry professionals, financial literacy educators, lending industry customers, college students, and K-12 students. In the fiscal year ended December 31, 2020 and 2019, we did not generate any revenue from AIFI.
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://opendoorsdata.org/data/international-students/all-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 2019/2020, the total number international students studying in the U.S. (in both public and private institutions) was 1,075,496, of which 372,532, or 34.6%, were Chinese nationals. For 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. This growth trend has been in place for several years. However, with the current political environment in Washington, DC regarding visas, as well as the effect of Covid-19 which may discourage Chinese students from pursuing study-abroad in the year of 2021, 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, 2020, our largest customer, Oxbridge International Group Inc. accounted for 54.8% of our revenues.
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, and through our AEC BVI and its subsidiaries, 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:
· The Wholly Foreign Owned Enterprise Law (1986), as amended;
· The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
· the Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and
· the Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.
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 1 Rockefeller Plaza, 10th floor, New York, NY 10020(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 $273. The lease will expire on August 31, 2022.
We terminated the lease located at 2 Wall Street in August 2020 due to the pandemic. Our office is currently located at 1 Rockefeller Plaza, 10th, New York 10020.
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. Zhongwei currently shares the same office as AEC Southern Shenzhen.
We believe our facilities are sufficient for our business operations.
Employees
As of the filing date hereof, the Company has 21 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.

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ITEM 1A. RISK FACTORS
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 54.8% and 50.3% of our total revenue for the year ended December 31, 2020 and 2019. 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;
· regulations or actions pertaining to the provision of 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, has adversely affected, and may continue adversely affecting 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. Besides the duration and intensity of disruptions resulting from the COVID-19 outbreak remain uncertain, student customers seeking to enroll in U.S. educational institutions may choose to remain in China other than study-abroad. The foregoing may result in reduced demand for our main advisory services, and accordingly, adversely affect our business, results of operations and financial condition. We anticipate that this effect is likely to continue in 2021.
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.
If the PRC government deems that the VIE Arrangements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
We operate Zhongwei through VIE Agreements. As a result of these VIE Agreements, under generally accepted accounting principles in the United States (“U.S. GAAP”), the assets and liabilities of Zhongwei are treated as our assets and liabilities and the results of operations of Zhongwei are treated in all aspects as if they were the results of our operations.
Based on its understandings of the relevant PRC laws and regulations, (i) the ownership structures of Zhongwei in China are not in violation of applicable PRC laws and regulations currently in effect; and (ii) each of the VIE agreements are legal, valid, binding, and enforceable in accordance with its terms and applicable PRC laws. However, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to ours. It is uncertain whether any new PRC laws or regulations relating to VIE structures will be adopted or, if adopted, what they would provide.
If our corporate structure and the VIE Arrangements are determined as illegal or invalid by the PRC court, arbitral tribunal, or regulatory authorities, we may lose control of our VIE and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and VIE agreements are found to be in violation of any existing or future PRC laws or regulations, or we or Zhongwei fails to obtain or maintain any required permits or approvals, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:
● revoking the business and/or operating licenses of Zhongwei;
● discontinuing or restricting the operations of Zhongwei;
● imposing conditions or requirements with which we may not be able to comply;
● requiring us to change our corporate structure and VIE agreements; and
● imposing fines.
The imposition of any of these penalties may result in a material and adverse effect on our ability to conduct our business. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of Zhongwei in our consolidated financial statements, if the PRC government authorities were to find our legal structure and VIE agreements to be in violation of PRC laws and regulations. Either of these results, or any other significant penalties that might be imposed on us in this event, may have a material adverse effect on our financial condition and results of operations.
Our VIE Arrangements with Zhongwei and Zhongwei’s shareholders may not be effective in providing control over Zhongwei.
We expect to continue to rely on the VIE Arrangements to control and operate the business of Zhongwei. However, the VIE Arrangements may not be as effective in providing us with the necessary control over Zhongwei and its operations. For example, Zhongwei and the Zhongwei’s shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of Zhongwei, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Zhongwei, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current VIE Arrangements, we rely on the performance by Zhongwei and Zhongwei’s shareholders of their respective obligations under the contracts to exercise control over Zhongwei. Zhongwei’s shareholders may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Arrangements with Zhongwei. If any disputes relating to these contracts remain unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation, and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. Therefore, our VIE Arrangements with Zhongwei and Zhongwei’s shareholders may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
Our VIE Arrangements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.
As our VIE Arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from the VIE Arrangements will be resolved through arbitration in the PRC, although these disputes do not include claims arising under the United States federal securities law and thus do not prevent you from pursuing claims under the United States federal securities law. The legal environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these contractual arrangements, through arbitration, litigation, and other legal proceedings remain in the PRC, which could limit our ability to enforce these contractual arrangements and exert effective control over Zhongwei. Furthermore, these contracts may not be enforceable in the PRC if the PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over Zhongwei, and our ability to conduct our business may be materially and adversely affected.
We may not be able to consolidate the financial results of Zhongwei or such consolidation could materially and adversely affect our operating results and financial condition.
Our business is expected to be conducted through Zhongwei, which currently is considered for accounting purposes as a VIE, and we are considered the primary beneficiary, enabling us to consolidate the financial results of Zhongwei in our consolidated financial statements. In the event that in the future Zhongwei would no longer meet the definition of a VIE, or we are deemed not to be the primary beneficiary, we would not be able to consolidate line by line its financial results in our consolidated financial statements for PRC purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate that entity’s financial results in our consolidated financial statements for PRC purposes. If such entity’s financial results were negative, this could have a corresponding negative impact on our operating results for PRC purposes. However, any material variations in the accounting principles, practices, and methods used in preparing financial statements for PRC purposes from the principles, practices, and methods generally accepted in the United States and in the SEC accounting regulations must be discussed, quantified, and reconciled in financial statements for the United States and SEC purposes.
The VIE Arrangements may result in adverse tax consequences.
PRC laws and regulations emphasize the requirement of an arm’s length basis for transfer pricing arrangements between related parties. The laws and regulations also require enterprises with related party transactions to prepare transfer pricing documentation to demonstrate the basis for determining pricing, the computation methodology, and detailed explanations. Related party arrangements and transactions may be subject to challenge or tax inspection by the PRC tax authorizes.
Zhongwei’s shareholders have potential conflicts of interest with our company which may adversely affect our business and financial condition.
Zhongwei’s shareholders may have potential conflicts of interest with us. These shareholders may not act in the best interest of our Company or may breach, or cause Zhongwei to breach the existing contractual arrangements we have with them and Zhongwei, which would have a material and adverse effect on our ability to effectively control Zhongwei and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Zhongwei to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company. If we cannot resolve any conflicts of interest or disputes between us and those shareholders, we would have to rely on legal proceedings, which may materially disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceeding.
We rely on the approvals, certificates, and business licenses held by Zhongwei and any deterioration of the relationship between AEC BVI could materially and adversely affect our overall business operations.
Pursuant to the VIE Arrangements, certain of our business in the PRC will be undertaken on the basis of the approvals, certificates, business licenses, and other requisite licenses held by Zhongwei. There is no assurance that Zhongwei will be able to renew its licenses or certificates when their terms expire with substantially similar terms as the ones they currently hold.
Further, our relationship with Zhongwei is governed by the VIE Arrangements, which are intended to provide us, through our ownership of AEC BVI, with effective control over the business operations of Zhongwei. However, the VIE Arrangements may not be effective in providing control over the applications for and maintenance of the licenses required for our business operations. Zhongwei could violate the VIE Arrangements, go bankrupt, suffer from difficulties in its business, or otherwise become unable to perform its obligations under the VIE Arrangements and, as a result, our operations, reputation, business, and stock price could be severely harmed.
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.
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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to smaller reporting companies.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Our principal executive office is located at 1 Rockefeller Plaza, 10th floor, New York, NY 10020 (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 $273. The lease will expire on August 31, 2022.
We terminated the lease located at 2 Wall Street in August 2020 due to the pandemic. Our office is currently located at 1 Rockefeller Plaza, 10th, New York 10020.
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. Zhongwei currently shares the same office as AEC Southern Shenzhen.
We believe our facilities are sufficient for our business operations.

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ITEM 3. LEGAL PROCEEDINGS
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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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 April 14, 2021, was $0.07 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:
Low Price Low Price High Price
First Quarter 2021 $ 0.18 $ 0.21
Fourth Quarter 2020 $ 0.16 $ 0.17
Third Quarter 2020 $ 0.16 $ 0.16
Second Quarter 2020 $ 0.15 $ 0.18
First Quarter 2020 $ 0.15 $ 0.49
Fourth Quarter 2019 $ 0.21 $ 0.75
Third Quarter 2019 $ 0.33 $ 0.58
Second Quarter 2019 $ 0.24 $ 0.70
First Quarter 2019 $ 0.31 $ 0.68
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 April 15, 2021, 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 April 15, 2021, 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 2020 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, 2020, 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 2020 and current affair reports on Form 8-K.
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.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to smaller reporting companies.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. Through AEC Southern Shenzhen, in fiscal year ended December 31, 2020, 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. Through Zhongwei in fiscal year ended December 31, 2020, we delivered customized high school and college placement and career advisory services through platform for local customers.
Headquartered in New York with operations in the PRC, our key advisory services currently include:
· Placement Advisory Services;
· Career Advisory Services;
· Student & Family Services; and
· Other Advisory Services.
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.
· AEC New York capitalizes on the rising demand from the middle-class families in China for quality education and working experience in the U.S. It delivers customized high school and college placement and career advisory services to Chinese students wishing to study in the U.S. Its advisory services include language training, admission advisory, on-campus advisory, internship and start-up advisory as well as student and family services.
· AEC Southern Shenzhen and Zhongwei deliver customized high school and college placement and career advisory services to Chinese students wishing to study in the U.S.
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 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 Company on January 1, 2020. The Company has evaluated the effect of the adoption of this ASU and the standard did not have an impact on its consolidated financial statements and related disclosures from the adoption of the new guidance.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.
The Company has assessed all newly issued accounting pronouncements released during the year ended December 31, 2020 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, 2020, as Compared to Year Ended December 31, 2019
For year ended December 31,
Variance %
Key revenue streams:
Placement Advisory Services $ 105,380 $ 1,264,107 $ (1,158,727 ) (92 )%
Career Advisory Services 236,612 3,153,605 (2,916,993 ) (92 )
Student & Family Advisory Services - 887,700 (887,700 ) (100 )
Other Advisory Services 3,000 (2,493 ) (83 )
Total revenues $ 342,499 $ 5,308,412 $ (4,965,913 ) (94 )%
Gross Profit $ 174,744 $ 2,213,944 $ (2,039,200 ) (92 )%
Gross Margin 51 % 42 %
Revenues
·
Total revenues for the year ended December 31, 2020, were $342,499, representing a decrease of $4,965,913 from $5,308,412 for the same period in 2019. The decrease was mainly due to the recent outbreak of the COVID-19 pandemic around the globe, which negatively impacted our services to current customers who were getting ready to study or work in the U.S., besides the seasonality factors related to the high school/college admission process. The outbreak of COVID-19 in China since January 2020, coupled with travels bans from China to the US prevented students from China from entering the U.S. and paused applications from prospective students from China to U.S. educational institutions. These factors adversely impacted the financial performance of the Company.
Total revenues for the year ended December 31, 2020 were all generated by the operations of AEC BVI, which deliver customized high school and college placement and career advisory services to Chinese students seeking to study in the U.S.
·
Revenues for the year ended December 31, 2020, from our placement advisory services decreased by $1,158,727 from $1,264,107 for the same period in 2019. The decrease in our placement advisory services was due to the decrease in service requests. For the year ended December 31, 2020, revenues from our career advisory services and student & family advisory services reduced substantially, primarily due to the decreased request from negative impact of the COVID-19.
We expect the impact of COVID-19 on our business, especially on school application and career advisory services, will continue in 2021, due to restrictions on domestic and international travels, delay of the spring semester and cancellation of overseas exams, as well as difficulty to obtain valid visas. We will continually monitor the development of the epidemic as well as the impact on our operations and financial performance and actively adjust our operational strategies and make efforts on cost control and reducing expenditures. We will also strive to expand our market in China and provide support of online study to our customers because the high expectation that the demand for the educational services will still keep increasing due to the continued population growth in China as well as the increasing disposable income thanks to the increasing level of urbanization.
· In addition, the Chinese government offers incentives and benefits though its Talents Policy to Chinese students who return to China to work and live there. This Talents Policy has encouraged many of our clients who recently graduated or are about to graduate to go back to China, instead of staying in the U.S., which resulted in less service requests for our placement advisory and student & family advisory services. Additionally, the decrease in the value of China’s currency and the relatively restrictive U.S. policy on international students is increasingly driving Chinese students to choose to apply to universities and colleges in non-U.S. countries or choose to return to the PRC after graduation, rather than staying in the U.S. To mitigate the effect of such recent changes, we are expanding our local services in the PRC, concentrating on new services promotion and increasing our mergers and acquisitions efforts by focusing on researching, identifying prospective targets, negotiating and executing on this strategy.
Gross Profit & Gross Margin
· Our gross profit for the year ended December 31, 2020, was $174,744, representing a decrease of $2,039,200 from $2,213,944 the year ended December 31, 2019. The decrease can be attributed mainly to a decline in total revenue due to the decrease of services request while we have been improving efficiency, and efficient work with our vendors, which has been an intentional effort since 2017.
· Our gross margin was approximately 51% in 2020, as compared to approximately 42% in 2019.
The following table summarizes changes in operating expenses and provision for income taxes for the periods presented:
For the year ended December 31,
Variance %
Operating expenses
Sales and marketing $ 74,321 $ 317,248 $ (242,927 ) (77 )%
Research and development expenses 26,570 - 26,570
General and administrative 3,520,076 3,763,455 (243,379 ) (6 )
Total operating expenses $ 3,620,967 $ 4,080,703 $ (459,736 ) (11 )%
Income taxes benefit $ (446,824 ) $ (31,472 ) $ (415,352 ) NM
Net (loss) from continuing operations including noncontrolling interest $ (2,759,545 ) $ (1,832,867 ) $ (926,678 ) NM %
Operating Expenses
· Total operating expenses decreased by $459,736 or 11% as compared to the year ended December 31, 2019. The decrease mainly represents the net effect of the decrease of the operational office expenses, and the increase of the professional fee and marketing expense.
Income Tax Benefit
· Income tax expense of $446,824 for the year ended December 31, 2019 represents the net effect of tax payable reversal and net loss for the period.
Net Loss
· The net loss of $2,759,545 for the year ended December 31, 2019 was due mainly to the decrease in revenue.
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, 2020, we had cash of $ 911,658, a decrease of $123,737 from $1,035,395 as of December 31, 2019. 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.
Year Ended December 31,
Variance
%
Net cash used in operating activities
Net cash used in continuing operating activities
$ (877,658 )
$ (1,600,034 )
$ 722,376
NM %
Net cash used in by discontinued operating activities
-
-
-
NM
Net cash used in operating activities
$ (877,658 )
$ (1,600,034 )
$ 722,376
NM %
Net cash used in investing activities
Net cash used in continuing investing activities
$ 97,219
$ (7,011 )
$ 104,230
NM %
Net cash used in discontinued investing activities
-
-
-
NM
Net cash used in investing activities
$ 97,219
$ (7,011 )
$ 104,230
NM %
Net cash provided by financing activities
Net cash provided by continuing financing activities
$ 674,611
$ 655,024
$ 19,587
%
Net cash provided by discontinued financing activities
-
-
-
NM
Net cash provided by financing activities
$ 674,611
655,024
19,587
%
Effect of exchange rates changes on cash
(17,909 )
2,283
(20,192 )
NM
Net change in cash
$ (123,737 )
$ (949,738 )
$ 826,001
NM %
Cash Flow from Operating Activities
· Net cash used in operating activities for the year ended December 31, 2020, was $877,658, compared to net cash used in operating activities of $1,600,034 for the year ended December 31, 2019.
· These changes are primarily attributable to the combination of the following: seasonality, where a significant portion of our clients engage our services in the fourth quarter of the fiscal year.
Cash Flow from Investing Activities
· Net cash provided by investing activities for the year ended December 31, 2020 was $97,219 from acquisition of new business and net cash used investing activities was $7,011 during the year ended December 31, 2019.
Cash Flow in Financing Activities
·
Net cash provided by financing activities for the year ended December 31, 2020 was $674,611 and cash flow from financing activities during the year ended December 31, 2019 was $655,024. The decrease represents the net effect of the repayment of the short-term loan, the receipts of the short-term loans from stockholder of $536,457 and the fund from SBA due to the outbreak of pandemic.
The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States. On May 4, 2020, Company was informed by its lender, Bank of America, N.A (the “Bank”), that the Bank received approval from the U.S. Small Business Administration (“SBA”) to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”) created as part of the recently enacted CARES Act administered by the SBA. Per the terms of the PPP Loan, the Company received total proceeds of $77,588 from the Bank. In accordance with the requirements of the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan has a 1.00% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act. The PPP Loan Forgiveness has been applied. As of the date of this report, such application is still pending for approval.
On April 24, 2020, AEC New York received an advance in the amount of $9,000 from the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act. On June 1, 2020, Company received approval for a loan under the SBA’s EIDL program from SBA. Per the terms of the EIDL, the Company received total proceeds of $150,000. The EIDL Loan has a 3.75% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the EIDL Program as administered by the SBA. Company has used all the proceeds of this loan solely as working capital to alleviate economic injury caused by COVID-19 occurring in 2020.
Working Capital
The following table sets forth our working capital.
Year ended December 31,
Variance %
Total current assets $ 1,266,151 $ 4,163,050 $ (2,896,899 ) (70 )%
Total current liabilities 3,579,624 4,147,871 (568,247 ) (14 )
Working capital $ (2,313,473 ) $ 15,179 $ (2,328,652 ) NM %
Current ratio 0.35 1.00
· As of December 31, 2020, we had working capital deficiency of $2,313,473, a decrease of $2,328,652 from a working capital surplus of $15,179 as of December 31, 2019. The decrease in working capital surplus was attributable mainly to uncollectible accounts receivable from AEC New York. Because some of our client companies were suffered from the outbreak of the pandemic, we’ll continue tracking and keeping in touch with them.
· We believe that our working capital will be sufficient to enable us to meet our cash requirements for the next 12 months. However, we may incur additional expenses as we seek to expand our operations by establishing additional representative offices in our major market, the PRC, increasing our marketing efforts and hiring more personnel to support our growing operations. We believe we have adequate working capital to fund future growth activities.
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
· We experience seasonality in business with students as customers, specifically our placement advisory, career advisory and student and family services, all related to business of AEC New York. The seasonality reflects the general trend of the industry of admissions and education related services, corresponding to the predominantly fall semester start dates of educational institutions admissions. Our services are higher in the fourth and first quarters of our fiscal year than the other two quarters, reflecting the engagement for services of educational institutions admissions predominantly occurring in the fourth quarter and first quarter of a calendar year, and other consulting services corresponding to the beginning of academic year, i.e. the fall semester.
Subsequent Events
Management has evaluated subsequent events for recognition and disclosure through the date these financial statements were filed with the United States Securities and Exchange Commission and concluded that no other subsequent event or transactions have occurred that required recognition or disclosure in our consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the Company for the fiscal year ended December 31, 2020, and the notes thereto are set forth on page through of this Annual Report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
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.

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ITEM 9A. CONTROLS AND PROCEDURES
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, 2020, 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, 2020, 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, 2020. 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, 2020, 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:
· Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
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.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our officers and directors:
Name
Age
Position(s)
Position Since
Max P. Chen
President, Chief Executive Officer, interim Chief Financial Officer, Secretary, Sole Director
May 2014
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.
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:
· been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
· had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
· been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
· been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
· been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
· been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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.

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ITEM 11. EXECUTIVE COMPENSATION
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.
Stock
Option
Stock
All Other
Name and
Salary
Bonus
Awards
Awards
Compensation
Total
Principal Position
Year
($)
($)
($)
(#)
($)
($)
Max P. Chen, President,
CEO and interim CFO (1)
$ 180,000
N/A
N/A
N/A
N/A
$ N/A
$ 180,000
N/A
N/A
12,500,000 (2)
N/A
$ 192,500
(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.
Option Grants in Last Fiscal Year
The company did not grant any options in the fiscal year ended December 31, 2020.
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, 2020, 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.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 April 15, 2021, 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 April 15, 2021, the Company has 56,497,113 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 April 15, 2021. 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 April 15, 2021 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, 1 Rockefeller Plaza, 10th New York, NY 10020.
Name and Address of Beneficial Owner Amount
and
Nature
of
Beneficial
Ownership
(Common
Stock) % of
Class Amount
and
Nature
of
Beneficial
Ownership
(Series B
Preferred
Stock) % of
Class %
Total
Voting
Power
(1)
Director and Officers
Max P. Chen, President, Chief Executive Officer, interim Chief Financial Officer, Sole Director 10,563,000 18.60 % 12,500,000 50.00 % 46.80 %
All officers and directors as a group (one person) 10,563,000 18.60 % 12,500,000 50.00 % 46.80 %
5% Shareholders
China Cultural Finance Holdings Company Limited 14,699,113 25.88 % 12,500,000 50.00 % 47.54 %
(1) Percentage total voting power represents voting power with respect to all shares of our Common Stock, Series B Preferred Stock, voting together as a single class (0 shares of Series A Preferred Stock is issued and outstanding as of May 29, 2020). Each holder of Series B Preferred Stock is entitled to twenty (20) votes per share of Common Stock on all matters submitted to our stockholders for a vote. The Common Stock and Series B Preferred Stock vote together as a single class on all matters submitted to a vote of our stockholders, except as may otherwise be required by law. The Series B Preferred Stock is convertible at any time by the holder into shares of Common Stock on a share-for-share basis upon approval by the Company’s board of directors.
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.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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:
· in which the amount involved exceeded or will exceed $120,000; and
· in which any current director, executive officer, holder of 5% or more of our shares of Common Stock on an as-converted basis or any member of their immediate family had or will have a direct or indirect material interest.
The Company’s CEO has a 34% interest in Columbia International College, Inc. (“CIC”). The Company prepaid CIC $48,000 for student consulting services pursuant to which is expected to be fully delivered and accounted for in 2021.
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 $50,000 for business consulting services to be delivered and completed in 2021.
The Company borrowed $153,257 (translated from RMB1,000,000) from a shareholder of the Company during the three months ended December 31, 2020. The amounts due to this related party were $1,072,797 and $574,564 as of December 31, 2020 and 2019, respectively. The amounts are non-interest bearing, non-secure and due on demand.
The Company borrowed $76,687 (translated from RMB500,000) from a shareholder of the Company during the three months ended December 31, 2020. The amounts due to this related party were $76,687 and $0 as of December 31, 2020 and 2019, respectively. The amounts are bearing 1% annual interest rate and due on December 31, 2022.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended December 31, 2020 and 2019, we were billed approximately $65,000 and $75,000 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, 2020 and 2019.
Tax Fees
For the Company’s fiscal years ended December 31, 2020 and 2019, we engaged Wei & Wei, and were billed approximately $4,450 and $6,350, 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, 2020 and 2019.
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:
· approved by our audit committee; or
· entered into pursuant to preapproval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
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

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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 through of this report.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule: None.
(3) Exhibits
Exhibit
No.
Description
3.1
Certificate of Amendment filed with the Secretary of State of the State of Nevada dated November 8, 2018 (incorporated by reference to our Form 8-K, Exhibit 3.1, filed with the Securities and Exchange Commission on November 19, 2018)*
3.2
Bylaws (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.2, filed with the Securities and Exchange Commission on December 18, 2014)*
3.3
Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to our Form 8-K, Exhibit 3.1, filed with the Securities and Exchange Commission on November 3, 2017)*
3.4
Certificate of Designation of Series B Convertible Preferred Stock (incorporated by reference to our Form 8-K, Exhibit 3.2, filed with the Securities and Exchange Commission on November 19, 2018)*
4.1
Specimen stock certificate (incorporated by reference to our Form S-1 Registration Statement, Exhibit 4.1, filed with the Securities and Exchange Commission on December 18, 2014)*
10.1
Equity Pledge Agreement dated August 18, 2020 (incorporated by reference to our Form 8-K, Exhibit 10.1, filed with the Securities and Exchange Commission on August 20, 2020)*
10.2
Exclusive Management Consulting Agreement dated August 18, 2020 (incorporated by reference to our Form 8-K, Exhibit 10.2, filed with the Securities and Exchange Commission on August 20, 2020)*
10.3
Exclusive Option Agreement dated August 18, 2020 (incorporated by reference to our Form 8-K, Exhibit 10.3, filed with the Securities and Exchange Commission on August 20, 2020)*
10.4
Power of Attorney dated August 18, 2020 (incorporated by reference to our Form 8-K, Exhibit 10.4, filed with the Securities and Exchange Commission on August 20, 2020)*
10.5
Share Issuance Agreement with Subscribers dated August 18, 2020 (incorporated by reference to our Form 8-K, Exhibit 10.5, filed with the Securities and Exchange Commission on August 20, 2020)*
21.1
Subsidiaries **
31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **
31.2
Certification of Interim Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ***
32.2
Certification of Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ***
101.INS
XBRL Instance Document **
101.SCH
XBRL Taxonomy Extension Schema Document **
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB
XBRL Taxonomy Extension Label Linkbase Document **
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document **
* Previously filed.
** Filed herewith.
*** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 herewith are deemed to accompany this Form 10-K and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act.