AMERICAN EDUCATION CENTER : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Overview

American Education Center, Inc. was incorporated in Nevada ("AEC Nevada") in May
2014 as a holding company, and operates through its wholly owned subsidiaries,
American Education Center, Inc., incorporated in the State of New York in 1999
("AEC New York"), 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 Education Department of the State
of New York in 1999 to engage in education consulting service between the U.S.
and China. For approximately 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.



On July 10, 2018, AEC New York acquired a 51% equity ownership in American
Institute of Financial Intelligence LLC, a New Jersey limited liability company
("AIFI") from FIFPAC Inc. ("FIFPAC"), a New Jersey corporation, the then 100%
owner of AIFI, pursuant to a Business Purchase Agreement. AIFI currently does
not have any active operating activities.



On April 22, 2019, AEC BVI acquired AEC Southern HK and its subsidiary, AEC
Southern Shenzhen, 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"). On May 1, 2019, Pursuant to a certain share
exchange agreement dated May 1, 2019, AEC Nevada sold 100% of the equity
interest in AEC Southern UK to three individuals, Ye Tian, Rongxia Wang and
Weishou Li (the "AEC Southern UK Sale"). Accordingly, following the transactions
underlying the AEC Southern HK Transfer and the AEC Southern UK Sale, AEC
Southern UK is no longer a subsidiary of ours, and we operate AEC Southern HK
and AEC Southern Shenzhen through AEC BVI.



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.



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.



  34

As of the date of this report, the corporate structure of the Company is illustrated as follows:

[[Image Removed]]

Our mission is to become a leading provider for international education services, and providing total solutions for technology in education field, as well as providing corporation advisory management services.

Currently, through AEC New York and AEC Southern Shenzhen we provide four types of consulting services:

  ? Placement Advisory Services;
  ? Career Advisory Services;
  ? Student & Family 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, China.

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.

Headquartered in New York with operations in the PRC, the Company, during the quarter ended March 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 delivers customized high school and college placement and career

advisory services to Chinese students wishing to study in the U.S. through

businesses referred by AEC New York to AEC BVI. Currently, all revenues of

        AEC BVI are generated from AEC Southern Shenzhen.




  35






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 services encompass
ESL training and assistance throughout the high school and college application
and admission process.



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



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



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



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

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

We provide placement services through both AEC New York and AEC BVI. AEC New
York refers businesses to AEC Southern Shenzhen when clients in the PRC 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 students' 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., so 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. Services provided under this
program are customized and thorough, and tailored towards each family's unique
needs in the U.S.



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.



  36

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.

Impact of the COVID-19 Pandemic

In December 2019, a novel strain of coronavirus was reported to have surfaced in
Wuhan, China, which has and is continuing to spread throughout China and other
parts of the world, including the United States. On January 30, 2020, the World
Health Organization declared the outbreak of the coronavirus disease (COVID-19)
a "Public Health Emergency of International Concern," and on March 11, 2020, the
World Health Organization characterized the outbreak as a "pandemic". The
pandemic has forced governments around the world to take drastic measures to
halt the outbreak, resulting in quarantines, stay-at-home requirements, travel
restrictions, temporary change of immigration policies and temporary closure of
businesses and facilities in China, the U.S., and throughout the world. A
substantial part of the Company's revenue and workforce are concentrated in
China and in the U.S. Additionally, all of the four lines of our business rely
upon the freedom of travel and the level of interest of our customers and
prospective customers to study, work and reside overseas, which has been
significantly affected by the pandemic. Consequently, the COVID-19 outbreak has
materially adversely affected the Company's business operations and its
financial condition and operating results for the three months ended March 31,
2020, and these negative impacts will likely continue through the rest of the
fiscal year 2020.

In order to respond to the COVID-19 outbreak, our Company has taken certain measures to our operations to ensure the safety of our staff, as well as to adjust to the reopening but potential surge of new cases. We have made work-from-home possible for our staff, so as to reduce congregation and possibility of transmission of the disease. We have been devoting time and effort to research and develop new services and products. Additionally, we have identified and are in the process of negotiation, to partner or acquire an online platform related to education, to diversify our means in generating revenue.

The COVID-19 pandemic is rapidly evolving. The information in this report is
based on data currently available to us and will likely change as the pandemic
progresses. As of the date of this Quarterly Report, some countries have slowly
re-opened, but with surges of new cases appearing, while the U.S. continues to
see increasing new COVID-19 cases in certain states. As COVID-19 persists
throughout areas in which we operate and the rest of the world, we believe the
outbreak has the potential to continue to have a material negative impact on our
operating results and financial condition going into the third and fourth
quarters of 2020. The extent of the impact of COVID-19 on our operational and
financial performance will depend on certain developments, including the
duration and spread of the outbreak, impact on our employees, suppliers, student
customers and other customers, and the impact on the Company's ability to obtain
debt and equity financing to fund business activities, all of which are
uncertain and cannot be predicted. Given these uncertainties, at present, we
cannot reasonably estimate the related impact to our business, operating results
and financial condition for the year ending December 31, 2020.

Significant Accounting Policies

The discussion and analysis of our consolidated financial condition and results
of operations is based upon our unaudited 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 BVI. All
significant intercompany accounts and transactions have been eliminated in
consolidation.



As part of the process of preparing our unaudited 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
March 31, 2020, 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 unaudited 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.



  37






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. AEC New York delivers customized high school
and college placement, career advisory as well as student and family services.
Fees related to such advisory services that are collected from individuals are
generally paid to the Company in advance and they are recorded as deferred
revenue. Revenues are recognized proportionally as services are rendered or upon
completion. Fees related to our advisory services provided by AEC New York to
corporate customers (such as staffing agencies and placement agencies) are
generally collected after services are provided, and are recorded as accounts
receivable.



On January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02,
Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease
accounting guidance under Topic 840, and generally requires lessees to recognize
operating and financing lease liabilities and corresponding right-of-use (ROU)
assets on the balance sheet and to provide enhanced disclosures surrounding the
amount, timing and uncertainty of cash flows arising from leasing arrangements.
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 August 2018, the FASB issued ASU 2018-13 to modify the disclosure
requirements on fair value measurements. The amendments are effective beginning
after December 15, 2019. An entity is permitted to early adopt any removed or
modified disclosures and delay adoption of the additional disclosures until the
effective date. Most amendments should be applied retrospectively, but certain
amendments will be applied prospectively. The Company has evaluated the impact
of the standard on the Company's fair value disclosures, and the standard did
not have an impact on the Company's consolidated financial position, results of
operations and cash flows.



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.



  38






Results of Operations



Below we have included a discussion of our operating results and material
changes in the periods covered by this Quarterly Report on Form 10-Q. For
additional information on the potential risks associated with these initiatives
and our operations, please refer to the Risk Factors sections in our annual
report on Form 10-K for the year ended December 31, 2019, as filed on May 29,
2020. Our financial statements have been prepared assuming that we will continue
as a going concern. We expect we will require additional capital to meet our
long-term operating requirements. We expect to raise additional capital through,
among other things, additional funding from a shareholder of the Company, and
believe that will be sufficient to meet our anticipated needs for working
capital and satisfying our estimated liquidity needs 12 months from the date of
the financial statements.



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 as of December 31, 2019 are classified as
discontinued operations. See "Note 10 - Discontinued Operations" to our
unaudited consolidated financial statements included in this report.



The Three Months Ended March 31, 2020, as Compared to the Three Months Ended
March 31, 2019



                                      For the three months ended March 31,
                                2020           2019           Variance         %
Key revenue streams:

Placement Advisory Services   $       -     $   528,447     $   (528,447 )     (100 )%
Career Advisory Services        113,691         955,300         (841,609 )      (88 )%
Student & Family Advisory             -         487,000         (487,000 ) 

   (100 )%
Other Advisory                      507               -              507        100 %
Total revenues                $ 114,198     $ 1,970,747     $ (1,857,056 )      (94 )%
Gross Profit                  $   3,861     $   888,350     $   (884,489 )     (100 )%
Gross Margin                          3 %            45 %




Revenue

? Total revenues for the three months ended March 31, 2020, were $114,198,

representing a decrease of $1,857,056, or 94% from $1,970,747 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 was 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

caused a pause of students entering from China to the U.S. and prospective

students from China applying to U.S. educational institutions. Later, the

travel bans and restrictions due to COVID-19 imposed by the U.S. further

caused a pause of students entering from China to the U.S. and prospective

students from China applying to U.S. educational institutions. These

factors adversely impacted the financial performance of the Company.

Total revenues for the three months ended March 31, 2020 were all

generated by the operations of AEC New York, 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 three months ended March 31, 2020, from our placement

        advisory services decreased by $528,447 from $528,447 for the same period
        in 2019. The decrease in our placement advisory services was due to the

decrease in service requests. Revenues for our career advisory services

decreased by $841,609, or 88% from $955,300 for the same period in 2019,

primarily due to the decreased request from negative impact of the

COVID-19. Revenues from our student & family advisory services decreased

        by $487,000 from $ 487,000 for the same period in 2019.

        We expect the impact of COVID-19 on our business, especially on school
        application and career advisory services, will last for at least the
        coming two fiscal quarters, 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 target market and provide

support of online study to our customers.

? 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.




  39






Gross Profit & Gross Margin

? Our gross profit for the three months ended March 31, 2020 was $3,861,

representing a decrease of $884,489 from $888,350 for the three months

ended March 31, 2019. The decrease can be attributed mainly to a decline

in service request as the travel restrictions placed due to COVID-19 had

led to fewer student customers requesting our services.

? Our gross margin was approximately 3% for the three months ended March 31,

        2020, compared to approximately 45% for the same period in 2019.

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

                                                For the three months ended March 31,
                                         2020           2019         Variance           %
Operating expenses
Selling and marketing                 $   13,361     $  139,289     $ (125,928 )           (90 )%
General and administrative               647,125        392,837        254,288              65 %
Total operating expenses              $  660,486     $  532,126     $  128,360              24 %
Income tax benefit                    $ (162,623 )   $        -     $ (162,623 )           NM1 %
Net (loss) from continuing
operations including noncontrolling
interest                              $ (493,688 )   $  357,426     $ (851,114 )           NM1 %




Operating Expenses



    ?   Total operating expenses increased by $128,360 or 24% as compared to the
        three months ended March 31, 2019. The increase mainly represents the

increase of the professional fee and uncollectable account receivables and

        the decrease in marketing expense.




Income Tax Benefit

? Income tax benefit of $162,623 for the three months ended March 31, 2020

        represents the net effect of the tax payable and net losses for the
        periods presented.




Net Loss

? Net loss from continuing operations including noncontrolling interest was

$493,688 for the three months ended March 31, 2020, as compared to the net

income of $357,426 for the three months ended March 31, 2019, mainly due

        to the decreased revenue and increased expense.

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 years ended December 31, 2019, are
classified as discontinued operations. See "Note 10 - Discontinued Operations"
to our unaudited consolidated financial statements included in this report.

Cash Flows and Working Capital

As of March 31, 2020, we had cash of $811,671, a decrease of $223,724 from
$1,035,395 as of December 30, 2019 for continuing operations. We have financed
our operations primarily through cash flow from operating 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.



  40






                                                    Three Months ended March 31,
                                         2020            2019         Variance           %
Net cash used in operating
activities
Net cash used in continuing
operating activities                  $ (125,154 )    $ (569,219 )   $  444,065              NM %
Net cash used in by discontinued
operating activities                           -         275,000       (275,000 )          (100 )
Net cash used in operating
activities                            $ (125,154 )    $ (294,219 )   $  169,065              NM %

Net cash (used in) provided by
financing activities
Net cash (used in) provided by
continuing financing activities       $  (98,434 )    $  148,987     $ (247,421 )            NM %
Net cash (used in) provided by
discontinued financing activities              -               -              -              NM
Net cash (used in) provided by
financing activities                  $  (98,434 )    $  148,987       (247,421 )            NM %

Effect of exchange rates changes on
cash                                        (136 )         1,165         (1,301 )            NM
Net change in cash                    $ (223,724 )    $ (144,067 )   $  (79,657 )            NM %

Cash Flow from Operating Activities

    ?   Net cash used in continuing operating activities for the three months
        ended March 31, 2020 was $125,154, decreased by $444,065 for the three

months ended March 31, 2019. The decrease in net cash used in operations

in the three months ended March 31, 2020 was primarily attributable to

slowing down payment to our service providers and decreased operating

        expense.

Cash Flow from Investing Activities

    ?   No cash flow from investing activities for three months ended March 31,
        2020 and 2019.

Cash Flow from Financing Activities

? Net cash used in financing activities for the three months ended March 31,

2020, was $98,434, an increase of $247,421, for the three months ended

March 31, 2019. The increase in net cash flow used in financing activities

        was primarily attributable to repayment of short-term loan.




Working Capital



The following table sets forth our working capital from continuing operations:



                                       March 31,       December 31,
                                         2020              2019           Variance            %
Total current assets from
continuing operations                 $ 3,285,637     $    4,163,050     $ (877,413)            (21) %
Total current liabilities from
continuing operations                   3,826,374          4,147,871       (321,497)             (8) %
Working capital                       $ (549,737)     $       15,179     $ (555,916)              NM %
Current ratio                                0.86               1.00

? As of March 31, 2020, we had a working capital deficiency of $549,737, a

        decrease of $555,916 from a working capital surplus of $15,179 as of
        December 31, 2019. The decrease in working capital represents the net
        effect of uncollected accounts receivable, and repayment to vendors as
        detailed in the Section "Cash Flow from Financing Activities" above.

    ?   We believe that our working capital will be sufficient to enable us to
        meet our cash requirements for the next 12 months. We believe we have
        adequate working capital to fund future growth activities.




Going Concern



The independent auditors' report accompanying our March 31, 2020 financial
statements contained an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. The financial statements have been
prepared "assuming that we will continue as a going concern," which contemplates
that we will realize our assets and satisfy our liabilities and commitments in
the ordinary course of business.



Additionally, we expect that the outbreak of COVID-19 will continue to have
material and adverse impacts on our cash flow for the three months ending June
30, 2020 with potential continuing impacts on subsequent periods. As such, we
expect we will require additional capital to meet our long-term operating
requirements. We expect to raise additional capital through, among other things,
additional funding from a shareholder of the Company, and believe that will be
sufficient to meet our anticipated needs for working capital and satisfying our
estimated liquidity needs 12 months from the date of the financial statements



  41

Off-Balance Sheet Arrangements

We did not have, during the period 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 the 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 except for the following.



The Company borrowed two loans in the aggregate of $282,454 from a shareholder
of the Company, with $141,227 (translated from RMB1,000,000) borrowed on April
1, 2020, and with $141,227 (translated from RMB1,000,000) borrowed on May 26,
2020. The loan amounts are non-interest bearing, unsecured and due on demand.



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, Company will receive total proceeds of $93,680 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.



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,
Company will receive 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 will
use all the proceeds of this Loan solely as working capital to alleviate
economic injury caused by disaster occurring in 2020.

© Edgar Online, source Glimpses