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.



  23







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

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





  · Placement Advisory Services;
  · 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.



  24

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 delivers 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.



  25







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



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



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



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



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

Recent Accounting Pronouncements





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



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



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



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



  26






Results of Operations



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

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





                                                  For year ended December 31,
                                        2019            2018           Variance         %
Key revenue streams:
Placement Advisory Services            1,264,107         704,164          559,943        80 %
Career Advisory Services               3,153,605       2,084,055        1,069,550        51
Student & Family Advisory Services       887,700       4,224,220       (3,336,520 )     (79 )
Other Advisory Services                    3,000               -            3,000       100
Total revenues                       $ 5,308,412     $ 7,012,439     $ (1,707,026 )     (24 )%
Gross Profit                         $ 2,213,944     $ 2,514,168     $   (300,224 )     (12 )%
Gross Margin                                  42 %            36 %




Revenues

· Total revenues for the year ended December 31, 2019, were $5,308,412,

representing a decrease of $1,707,026, or 24% from $7,012,439 for the year

ended December 31, 2018. The decrease was attributed mainly to a decrease in

service requests. Total revenues for the year ended December 31, 2019 were

generated by the operations of AEC New York and AEC Southern Shenzhen which

deliver customized high school and college placement and career advisory


    services to Chinese students seeking to study in the U.S.

· Our revenues from placement advisory services typically fluctuate as a result

of seasonality or other factors related to the high school/college admission

process. Revenues for the year ended December 31, 2019 from our placement

advisory services increased by $559,943, or approximately 80% from $704,164

for the same period in 2018. The increase in our placement advisory services

was due to the increased request from students while the allocation of our

resources to elite college advisory services brought higher income per

student. Revenues for our career advisory services increased by $1,069,550, or

51% from $2,084,055 for the same period in 2018, primarily because we

reclassified revenues that would have been previously classified as student &

family advisory services to Placement Advisory Services and Career Advisory

Services. Revenues from student & family advisory services decreased by

$3,36,520 from $4,224,220 for the same period in 2018, mainly due to the

decrease in services requests of Chinese students planning to return to the

PRC and reclassification of the revenue line from under the student & family

advisory services to placement advisory services. Revenues from other advisory

services were $3,000 for the year ended December 31,2019 due to the request to

hold the exhibition for student activities. For the year ended December 31,

2018, we did not receive similar request and we are seeking opportunities to

attract potential clients through event-holding for students' activities.






  27

· Due to the incentives and benefits of Talents Policy that Chinese government

offers to the overseas Chinese students who wish to return to, live and work

in China, our clients who recently graduated or are about to graduate have

expressed interest in going back to China instead of staying in the U.S.,

which results in less service requests for placement advisory and student &

family advisory services than before. 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 accelerating our mergers and


    acquisitions efforts.




Gross Profit & Gross Margin

· Our gross profit for the year ended December 31, 2019, was $2,213,944,

representing a decrease of $300,224, or 12% from $2,514,168 the year ended

December 31, 2018. 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 42% in 2019, as compared to approximately


    36% in 2018.

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





                                                      For the year ended December 31,
                                            2019             2018          Variance          %
Operating expenses
Sales and marketing                     $    317,248     $    485,495     $ (168,247 )          (35 )%
General and administrative                 3,763,455        4,243,708       (480,253 )          (11 )
Total operating expenses                $  4,080,703     $  4,729,203     $ (648,485 )          (14 )%
Income taxes benefit                    $    (31,472 )   $   (764,835 )   $  733,363             NM

Net (loss) from continuing operations including noncontrolling interest $ (1,832,867 ) $ (1,436,177 ) $ (396,690 )

           NM %




Operating Expenses

· Total operating expenses decreased by $648,485 or 14% as compared to the year

ended December 31, 2018. The decrease was attributed to the equity-based

compensation to employee occurred in 2018 and decreased sales and marketing


    expenses.




Income Tax Benefit

· Income tax expense of $31,472 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 $1,832,867 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.



  28

Cash Flows and Working Capital


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

indicated.



                                                          Year Ended December 31,
                                            2019            2018          Variance           %
Net cash used in operating activities
Net cash used in continuing operating
activities                              $ (1,966,702 )   $ (181,237 )   $ (1,418,797 )          NM%
Net cash used in by discontinued
operating activities                         366,668       (533,606 )        533,606           (100 )

Net cash used in operating activities $ (1,600,034 ) $ (714,843 ) $ (885,191 ) NM%



Net cash used in investing activities
Net cash used in continuing investing
activities                              $     (7,011 )   $        -     $     (7,011 )         (100 )%
Net cash used in discontinued
investing activities                               -              -                -             NM

Net cash used in investing activities $ (7,011 ) $ - $

(7,011 ) (100 )%



Net cash provided by financing
activities
Net cash provided by continuing
financing activities                    $    655,024     $        -     $    655,024            100 %
Net cash provided by discontinued
financing activities                               -              -                -             NM
Net cash provided by financing
activities                              $    655,024              -          655,024            100 %

Effect of exchange rates changes on
cash                                           2,283        (20,618 )         22,901             NM
Net change in cash                      $   (949,738 )   $ (735,461 )   $   (214,277 )          NM%

Cash Flow from Operating Activities

· Net cash used in operating activities for the year ended December 31, 2019,

was $1,600,034, compared to net cash used in operating activities of $714,843


    for the year ended December 31, 2018.

· 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; we now pay our service providers
    faster; increased tax payment.

Cash Flow from Investing Activities

· Net cash used in investing activities for the year ended December 31, 2019 is

$7,011 and we had no cash flow from investing activities during the year ended

December 31, 2018.

Cash Flow in Financing Activities

· Net cash provided by financing activities for the year ended December 31, 2019

was $655,024 and we had no cash flow from financing activities during the year

ended December 31, 2018. The increase was due to the receipts of three

non-interest bearing short-term loans of $574,564 and an investment payment of

$127,606.

    Consequently, China Cultural Finance Holding Company ("CCFH"), through
    Guangdong Jianianhua Entertainment Co., Ltd. ("Guangdong Jianianhua"),

advanced to AEC Southern Shenzhen $143,641 (translated from RMB1,000,000) on

January 18, 2019, $287,282 (translated from RMB2,000,000) on April 15, 2019

and another $143,641 (translated from RMB 1,000,000) on November 11, 2019,

respectively.

Additionally, this increase also accounts for $127,606 (translated from

HKD1,000,000) of investment payment from CCHF as part of a share purchase

transaction between our Company and CCHF pursuant to a share purchase

agreement (the "SPA"). Pursuant to the SPA, CCFH was to wire the purchase

price in the amount of RMB 5,000,000 to AEC Southern Shenzhen, our subsidiary,

in exchange for shares of our common stock. However, due to foreign currency

restrictions imposed by the PRC government, both parties agreed that instead

CCFH would make a loan to AEC Southern Shenzhen, our subsidiary in the PRC, in

several installments for the aggregate amount of RMB 4,000,000 through its

related party in China, Guangdong Jianianhua, and one investment payment as

contribution in the amount of HKD 1,000,000 (approximately $127,606) to AEC

Southern HK, AEC Southern Shenzhen's holding company on April 10, 2019.

The Company has taken steps to resolve this issue of bank account restriction

and a bank account capable of accepting foreign investment is expected to be

set up by the end of this year. Once such account is set up, the Company will

repay any outstanding loans owed to CCFH's related party, while CCFH will make

a one-time payment for the remaining balance of investment to AEC Southern

Shenzhen's investment account in full. The shares of common stock were issued


    to CCFH at the closing of the purchase agreement.




  29








Working Capital

The following table sets forth our working capital.





                                           Year ended December 31,
                               2019            2018           Variance         %
Total current assets        $ 4,163,050     $ 5,192,079     $ (1,029,029 )     (20 )%
Total current liabilities     4,147,871       3,225,784          922,087        29
Working capital             $    15,179     $ 1,966,295     $ (1,951,116 )     (99 )%
Current ratio                      1.00            1.61

· As of December 31, 2018, we had working capital surplus of $15,179, a decrease

of $1,951,116 from a working capital surplus of $1,966,295 as of December 31,

2018. The decrease in working capital surplus was attributable mainly to

uncollectible accounts receivable from AEC New York while we're expecting


    portion of the accounts receivable from AEC New York collected in 2020.

· 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

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





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



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

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

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