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.



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.



                                       36

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 Quarterly
Report on Form 10-Q, 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 is closed
in August 2020.



                                       37

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

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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.



                                       38





Headquartered in New York with operations in the PRC, the Company, during the
quarter ended September 30, 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, though AEC Southern Shenzhen, 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 Southern

Shenzhen. Currently, all revenues of AEC BVI are generated from AEC Southern

Shenzhen.




Placement Advisory Services

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

Since 1999, we have been delivering customized Language Training & Placement
Advisory services to Chinese students. Our one-stop advisory 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, which we expect to take place
in the first 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 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.



                                       39





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.



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 our four lines of business rely upon
the ability to 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, we saw a significant decrease in
requests for our services, which has materially adversely affected the Company's
business operations and its financial condition and operating results for the
nine months ended September 30, 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 an online platform related to education to diversify our means in
generating revenue and are in the process of negotiating a partnership or
acquisition.



                                       40





The COVID-19 pandemic is rapidly evolving. The information in this Quarterly
Report on Form 10-Q is based on data currently available to us and will likely
change as the pandemic progresses. As of the date of this Quarterly Report on
Form 10-Q, 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
September 30, 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.



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.



                                       41

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.



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.



                                       42





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 Quarterly Report on
Form 10-Q.



The Three Months Ended September 30, 2020, as Compared to the Three Months Ended
September 30, 2019



                                    For the three months ended September 30,
                                2020           2019           Variance         %
Key revenue streams:
Placement Advisory Services   $    865      $   432,371     $   (431,506 )     (100 )%
Career Advisory Services             -          731,610         (731,610 )     (100 )
Student & Family Advisory            -          400,700         (400,700 )     (100 )
Other Advisory                       -                -                -          - %
Total revenues                $    865      $ 1,564,681     $ (1,563,816 )     (100 )%
Gross Profit                  $   (749 )    $   684,292     $   (685,041 )     (100 )%
Gross Margin                        NM %             44 %




Revenue

? Total revenues for the three months ended September 30, 2020, were $865,

representing a decrease of $1,563,816, or 100% from $1,564,681 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 three months ended September 30, 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 three months ended September 30, 2020, from our placement

advisory services decreased by $431,506 from $432,371 for the same period in

2019. The decrease in our placement advisory services was due to the

decrease in service requests. For the three months ended September 30, 2020,

no revenues from our career advisory services and student & family advisory

    services were generated, 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 last until the end of this

year, 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.

? 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.




                                       43





Gross Profit & Gross Margin

? Our gross profit for the three months ended September 30, 2020 decreased by

$685,041 from $684,292 for the three months ended September 30, 2019. The

decrease can be attributed mainly to a decline in service request as the

travel restrictions imposed as a result of COVID-19 had led to fewer student

    customers requesting our services.

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

                                                 For the three months ended September 30,
                                            2020            2019          Variance          %
Operating expenses
Selling and marketing                   $          4     $   116,008     $ (116,004 )         (100 )%

Research and development expenses             37,454               -       

 37,454            100
General and administrative                 1,394,113         953,872        440,241             46 %
Total operating expenses                $  1,431,571     $ 1,069,880     $  361,691             34 %
Income tax benefit                      $    (22,632 )   $  (105,656 )   $   83,024             NM %

Net (loss) from continuing operations including non-controlling interest $ (1,170,151 ) $ (279,925 ) $ (890,226 )

           NM %




Operating Expenses

? Total operating expenses increased by $361,691 or 34% as compared to the

three months ended September 30, 2019. The increase mainly represents the

net effect of the decrease of the marketing expense and professional fee,

    and the increase of the uncollectable account receivables and office
    expense.




Income Tax Benefit

? Income tax benefit of $22,632 for the three months ended September 30, 2020

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

    presented.




Net Loss

? Net loss from continuing operations including non-controlling interest was

$1,170,151 for the three months ended September 30, 2020, as compared to the

net loss of $279,925 for the three months ended September 30, 2019, which

    representing the net effect of the increased operation expenses and
    decreased revenue.




The Nine Months Ended September 30, 2020, as Compared to the Nine Months Ended
September 30, 2019



                                     For the nine months ended September 30,
                                2020           2019           Variance         %
Key revenue streams:
Placement Advisory Services   $  42,349     $ 1,264,887     $ (1,222,538 )      (97 )%
Career Advisory Services        234,191       2,548,885       (2,314,694 )      (91 )
Student & Family Advisory             -         887,700         (887,700 )     (100 )
Other Advisory                      507           3,000           (2,493 )      (83 )%
Total revenues                $ 277,047     $ 4,704,472     $ (4,424,931 )      (94 )%
Gross Profit                  $ 109,379     $ 2,055,396     $ (1,946,017 )      (95 )%
Gross Margin                         39 %            44 %




                                       44





Revenue

? Total revenues for the nine months ended September 30, 2020, were $277,047,

representing a decrease of $4,424,931, or 94% from $4,704,472 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 nine months ended September 30, 2020 were generated by

the operations of AEC New York and 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 nine months ended September 30, 2020, from our placement

advisory services decreased by $1,222,538 from $1,264,887 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 $2,314,694, or 91% from $2,548,885 for the same period in 2019,

primarily due to the decreased request from negative impact of the COVID-19.

No revenue from our student & family advisory services was generated for the

nine months ended September 30, 2020, compared to $887,700 for the same period

in 2019. Revenues from other advisory services decreased by $2,493 from $3,000

for the same period in 2019, due to the service request from customers.

We expect the impact of COVID-19 on our business, especially on school

application and career advisory services, will last until the end of this

year, 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

to start providing online courses to our customers.

? 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 accelerating our mergers and

    acquisitions efforts.




Gross Profit & Gross Margin

? Our gross profit for the nine months ended September 30, 2020 was $109,379,

representing a decrease of $1,946,017 from $2,055,396 for the nine months

ended September 30, 2019. The decrease can be attributed mainly to a decline

in service request as the travel restrictions imposed as a result of COVID-19

had led to fewer student customers requesting our services.

? Our gross margin was approximately 39% for the nine months ended September 30,

    2020, compared to approximately 44% for the same period in 2019.




                                       45

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

                                                  For the nine months ended September 30,
                                            2020            2019           Variance            %
Operating expenses
Selling and marketing                   $     74,119     $   317,257     $   (243,138 )          (77 )%

Research and development expenses             37,454               -       

   37,454            100
General and administrative                 2,819,229       2,405,750          413,479             17
Total operating expenses                $  2,930,802     $ 2,723,007     $    207,795              8 %
Income tax benefit                      $   (384,785 )   $   260,420     $   (645,205 )           NM %

Net (loss) from continuing operations including noncontrolling interest $ (2,196,784 ) $ (926,727) $ (1,270,057 )

           NM %




Operating Expenses

? Total operating expenses increased by $207,795 or 8% as compared to the nine

months ended September 30, 2019. The decrease mainly represents the net effect

    of the decrease of the marketing expense and professional fee, and the
    increase of the uncollectable account receivables and office expense.




Income Tax Benefit

? Income tax benefit of $384,785 for the nine months ended September 30, 2020

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

    presented.




Net Loss

? Net loss from continuing operations including non-controlling interest was

$2,196,784 for the nine months ended September 30, 2020, as compared to the

net loss of $926,727 for the nine months ended September 30, 2019, which

representing the net effect of the increased operation expenses and decreased

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

Cash Flows and Working Capital

As of September 30, 2020, we had cash of $ 741,693, a decrease of $293,702 from
$1,035,395 as of December 31, 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.



                                       46





                                                      Nine Months ended September 30,
                                           2020            2019           Variance           %
Net cash used in operating activities
Net cash used in continuing operating
activities                              $ (814,673 )   $ (1,543,744 )    $  729,071              NM %
Net cash used in by discontinued
operating activities                             -                -               -              NM

Net cash used in operating activities $ (814,673 ) $ (1,543,744 ) $ 729,071

              NM %

Net cash (used in) provided by
investing activities
Net cash (used in) provided by
continuing investing activities         $   97,785     $     (5,361 )    $  103,146              NM %
Net cash (used in) provided by
discontinued investing activities                -                -               -              NM
Net cash (used in) provided by
investing activities                    $   97,785     $     (5,361 )       103,146              NM %

Net cash (used in) provided by
financing activities
Net cash (used in) provided by
continuing financing activities         $  432,722     $    547,286      $ (114,564 )           (21 )%
Net cash (used in) provided by
discontinued financing activities                -                -               -              NM
Net cash (used in) provided by
financing activities                    $  432,722     $    547,286        (114,564 )           (21 )%

Effect of exchange rates changes on
cash                                        (9,536 )          6,759         (16,295 )            NM
Net change in cash                      $ (293,702 )   $   (995,060 )    $  701,358              NM %

Cash Flow from Operating Activities

? Net cash used in continuing operating activities for the nine months ended

September 30, 2020 was $814,673, decreased by $729,071 for the nine months

ended September 30, 2019. The decrease in net cash used in operations in the

nine months ended September 30, 2020 was primarily attributable to slowing

    down payment to our service providers and decreased operating expense.

Cash Flow from Investing Activities

? Net cash provided by investing activities for the nine months ended

September 30, 2020 was $97,785 for stock issuance of VIE Zhongwei. Net cash

flow from investing activities for nine months ended September 30, 2019. Was

$5,361 for fixed assets purchased by AEC Southern Shenzhen.

Cash Flow from Financing Activities

? Net cash provided by financing activities for the nine months ended

September 30, 2020, was $432,722, a decrease of $114,564, for the nine months

ended September 30, 2019. The decrease in net cash flow provided by financing

activities was primarily attributable to the net effect of repayment of

short-term loan and proceeds from loans.

? 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 on August 18,

2020 in consideration for entering into the transactions contemplated by the

VIE Agreements to gain control over Zhongwei' assets.

? 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.




                                       47

The PPP Loan forgiveness amount will be reduced for any EIDL advance that the

Company receives. The amount of loan forgiveness will be further reduced if

the borrower terminates employees or reduces salaries during the

twenty-four-week period following the loan's origination. The Company

currently believes that its use of the loan proceeds met the conditions for

forgiveness of the loan.

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 from continuing operations:



                                        September 30,        December 31,
                                            2020                 2019            Variance             %
Total current assets from continuing
operations                             $     1,600,416      $    4,163,050     $ (2,562,634)             (62) %
Total current liabilities from
continuing operations                        3,389,246           4,147,871         (758,625)             (18)
Working capital                        $    (1,788,830 )    $       15,179     $ (1,804,009)               NM %
Current ratio                                     0.47                1.00

? As of September 30, 2020, we had a working capital deficiency of $1,788,830, a

decrease of $1,804,009 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 September 30, 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
December 31, 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.

Off-Balance Sheet Arrangements

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

                                       48





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.

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