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AMCT American Education Center

Filed: 16 Aug 21, 3:38pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 333-201029

AMERICAN EDUCATION CENTER, INC.

(Exact name of registrant as specified in its charter)

Nevada

     

38-3941544

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.) 

1 Rockefeller Plaza, 10th
New York, NY

10020

(Address of principal executive offices)

(Zip Code)

(646) 722-2931

(Telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which
registered

None

None

None

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

Yes  No 

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

Yes  No 

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 59,137,803 shares of common stock, $0.001 par value, as of August 16, 2021.

FORWARD-LOOKING STATEMENTS

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

our ability to deliver, market, and generate sales of our advisory services;
our ability to develop and/or introduce new advisory services;
our projected revenues, profitability, and other financial metrics;
our future financing plans;
our anticipated needs for working capital;
the anticipated trends in our industry;
our ability to expand our sales and marketing capability;
acquisitions of other companies or assets that we might undertake in the future;
competition existing today or that will likely arise in the future;
the impact of the COVID-19 pandemic on our operations and revenue; and
other factors discussed elsewhere herein.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations. These statements may be found under Part I, Item 2— “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Quarterly Report on Form 10-Q.

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

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

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

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

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

3

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

    

June 30, 

December 31, 

ASSETS

  

2021

  

2020

Current assets:

 

  

 

  

Cash

$

541,844

$

911,658

Accounts receivable, net of allowance for doubtful accounts of $3,575,615 and $3,575,615 at June 30, 2021 and December 31, 2020, respectively

 

72,580

 

141,667

Prepaid expenses

 

168,903

 

212,826

Total current assets

 

783,327

 

1,266,151

Noncurrent assets:

 

  

 

  

Other long-term receivable, net

38,720

0

Fixed Asset, net

6,320

7,520

Deferred income taxes

1,051,718

948,066

Intangible asset, net

 

84,000

 

124,046

Goodwill

139,725

139,725

Operating lease right-of-use asset

 

276,326

 

315,293

Security deposits

 

23,544

 

23,297

Total noncurrent assets

 

1,620,353

 

1,557,947

TOTAL ASSETS

$

2,403,680

$

2,824,098

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities:

 

 

Accounts payable and accrued expenses

$

2,648,219

$

2,321,811

Taxes payable

2,108

332

Deferred revenue

 

95,000

 

101,687

Advances from clients

 

0

 

-

Short-term loan from related party

 

0

 

1,072,797

Operating lease liability - current portion

 

90,595

 

82,997

Total current liabilities

 

2,835,922

 

3,579,624

Noncurrent liabilities:

 

  

 

  

Operating lease liability

204,714

248,838

Long-term loan from related party

929,282

0

Long-term loan

 

236,070

 

313,275

Total liabilities

 

4,205,988

 

4,141,737

Stockholders’ equity:

 

  

 

  

Series A Convertible Preferred stock, $0.001 par value;20,000,000 shares authorized. 0 shares issued and outstanding at June 30, 2021 and December 31, 2020 respectively

 

0

 

0

Series B Convertible Preferred stock, $0.001 par value; 25,000,000 shares authorized. 25,000,000 shares issued and outstanding at June 30, 2021 and December 31, 2020 respectively

 

25,000

 

25,000

Common stock, $0.001 par value; 450,000,000 shares authorized; 59,137,803 shares issued and outstanding at June 30, 2021 and December 31, 2020 respectively

 

60,138

 

60,138

Additional paid-in capital

 

8,535,659

 

8,535,659

Treasury stock at cost, 1,000,000 shares at 0.66 per share

(660,000)

(660,000)

Subscription receivables

 

(592,305)

 

(592,305)

Retained earnings

 

(9,152,399)

 

(8,677,883)

Accumulated other comprehensive income

 

(59,449)

 

(52,335)

Total controlling interest

 

(1,843,356)

 

(1,361,726)

Noncontrolling Interest

 

41,048

 

44,087

Total stockholders' equity

 

(1,802,308)

 

(1,317,639)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,403,680

$

2,824,098

See accompanying notes to consolidated financial statements.

4

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

    

Three Months Ended June 30, 

    

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Revenues

$

63,643

$

161,984

$

76,953

$

276,182

Cost of revenues

 

10,900

 

55,717

 

13,450

 

166,054

Gross profit

 

52,743

 

106,267

 

63,503

 

110,128

Operating expenses:

 

 

 

 

Selling and marketing

 

0

 

60,754

 

0

 

74,115

Research and development expenses

22

12,242

General and administrative

 

345,406

 

777,991

 

706,803

 

1,425,116

Total operating expenses

 

345,428

 

838,745

 

719,045

 

1,499,231

(Loss) from operations

 

(292,685)

 

(732,478)

 

(655,542)

 

(1,389,103)

Other income

 

77,588

 

3

 

77,588

 

317

(Loss) before provision for income taxes

 

(215,097)

 

(732,475)

 

(577,954)

 

(1,388,786)

Provision for income taxes (benefit)

 

(38,347)

 

(199,530)

 

(100,399)

 

(362,153)

Net (loss) from continuing operations including noncontrolling interest

$

(176,750)

$

(532,945)

$

(477,555)

$

(1,026,633)

Net (loss) including noncontrolling interest

 

(176,750)

 

(532,945)

 

(477,555)

 

(1,026,633)

Less: Net (loss) attributable to noncontrolling interest

 

(1,569)

 

(1,470)

 

(3,039)

 

(2,953)

Net (loss) attributable to American Education Center

$

(175,181)

$

(531,475)

$

(474,516)

$

(1,023,680)

Net (loss) including noncontrolling interest

$

(176,750)

$

(532,945)

$

(477,555)

$

(1,026,633)

Other comprehensive (loss)

 

 

 

 

Foreign currency translation (loss) income

 

(10,074)

 

(1,434)

 

(7,114)

 

5,798

Comprehensive (loss) including noncontrolling interest

$

(186,824)

 

(534,379)

$

(484,669)

 

(1,020,835)

Less: Comprehensive (loss) attributable to noncontrolling interest

 

(1,569)

 

(1,470)

 

(3,039)

 

(2,953)

Comprehensive (loss) attributable to American Education Center

$

(185,255)

$

(532,909)

$

(481,630)

$

(1,017,882)

Income (loss) earnings per common share - basic and diluted

 

 

 

 

Net income (loss) earnings per common share - basic and diluted

(0.00)

(0.01)

(0.01)

(0.02)

 

 

 

 

Weighted average shares

  

  

  

  

Outstanding, basic and diluted

 

59,137,803

 

55,957,769

 

59,137,803

 

55,957,769

See accompanying notes to consolidated financial statements.

5

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30

  

2021

  

2020

Cash flows from operating activities:

 

  

 

  

Net (loss)

$

(477,555)

$

(1,026,633)

Loss from discontinued operation, net of income taxes

0

0

Adjustments to reconcile net (loss) including noncontrolling interest to net cash

 

 

  

(Used in) operating activities:

 

 

Deferred tax provision (benefit)

 

(103,652)

 

(303,692)

Stock-based compensation expense

0

7,000

Provision for doubtful accounts

 

0

 

463,411

Depreciation expense for fixed assets

2,009

1,103

Gain on forgiven of PPP loan

(77,588)

0

Amortization expense for learning platform

 

6,000

 

6,000

Amortization expense

 

34,045

 

68,090

Change in operating assets and liabilities:

 

  

 

  

in other assets and liabilities

2,266

6,657

in accounts receivable

 

32,329

 

676,860

in prepaid expenses

44,580

26,517

in security deposits

0

2,548

in accounts payable and accrued expenses

 

324,810

 

(278,483)

in taxes payable

 

1,818

 

(62,368)

in deferred revenue

 

0

 

(120,500)

in lease liabilities

0

0

in advances from clients

(6,758)

0

Net cash (used in) operating activities

 

(217,696)

 

(533,490)

Cash flows from investing activities:

Purchase of fixed asset

(734)

0

Net cash used for by investing activities

(734)

0

Cash flows from financing activities:

 

  

 

  

(Repayment) of short-term loan

0

(98,434)

Proceeds from SBA Loan

0

236,588

Proceeds from (Repayment of) Loan from stockholder

 

(154,880)

 

283,082

Net cash provided by financing activities

 

(154,880)

 

421,236

Effect of exchange rates changes on cash

 

3,496

 

(574)

Net change in cash

 

(369,814)

 

(112,828)

Cash at beginning of period

 

911,658

 

1,035,395

Cash at end of period

$

541,844

$

922,567

Less cash of discontinued operations - end of period

 

0

 

0

Cash of continuing operations - end of period

541,844

922,567

Supplemental disclosure of cash flow information

 

  

 

  

Cash paid for income taxes

$

0

$

12,696

Cash paid for interest

$

0

$

1,566

Non-Cash investing and financing activities:

PPP loan forgiven

$

77,588

$

0

See accompanying notes to consolidated financial statements.

6

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(UNAUDITED)

FOR SIX MONTHS ENDED JUNE 30, 2021

���

Accumulated

Additional  

other  

Common stock

Series B Preferred Stock

paid-in

Treasury Stock

Subscription

Retained

comprehensive

Noncontrolling

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

  

Shares

  

Amount

  

Receivables

  

earnings

  

income

  

Interest

  

Total

January 1, 2021

59,137,803

$

60,138

25,000,000

$

25,000

$

8,535,659

1,000,000

$

(660,000)

$

(592,305)

$

(8,677,883)

$

(52,335)

$

44,087

$

(1,317,639)

Net loss

(299,335)

(1,470)

(300,805)

Foreign currency translation income

2,960

2,960

Balance as of March 31, 2021

59,137,803

$

60,138

25,000,000

$

25,000

$

8,535,659

1,000,000

$

(660,000)

$

(592,305)

$

(8,977,218)

$

(49,375)

$

42,617

$

(1,615,484)

Adjustment on foreign currency translation income

Net loss

(175,181)

(1,569)

(176,750)

Foreign currency translation loss

(10,074)

(10,074)

Balance as of June 30, 2021

59,137,803

$

60,138

25,000,000

$

25,000

$

8,535,659

1,000,000

$

(660,000)

$

(592,305)

$

(9,152,399)

$

(59,449)

$

41,048

$

(1,802,308)

See accompanying notes to consolidated financial statements.

7

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2020

   

   

   

   

   

   

   

   

Accumulated

   

   

  

Additional  

other  

Common stock

Series B Preferred Stock

paid-in

Treasury Stock

Subscription

Retained

comprehensive

Noncontrolling

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

  

Shares

  

Amount

  

Receivables

  

earnings

  

income

  

Interest

  

Total

January 1, 2020

55,797,113

$

56,797

25,000,000

$

25,000

$

8,267,930

1,000,000

$

(660,000)

$

(592,305)

$

(5,924,231)

$

(4,678)

$

49,980

$

1,218,493

Net loss

(492,205)

(1,483)

(493,688)

Issuance of common stock for services

700,000

700

6,300

7,000

Foreign currency translation income

7,232

7,232

Balance as of March 31, 2020

56,497,113

$

57,497

25,000,000

$

25,000

$

8,274,230

1,000,000

$

(660,000)

$

(592,305)

$

(6,416,436)

$

2,554

$

48,497

$

739,037

Net loss

(531,475)

(1,470)

(532,945)

Foreign currency translation income

(1,434)

(1,434)

Balance as of June 30, 2020

56,497,113

$

57,497

25,000,000

$

25,000

$

8,274,230

1,000,000

$

(660,000)

$

(592,305)

$

(6,947,911)

$

1,120

$

47,027

$

204,658

See accompanying notes to consolidated financial statements.

8

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

1.    ORGANIZATION AND BUSINESS

American Education Center, Inc. (“AEC New York”) is a New York corporation incorporated on November 8, 1999 and is licensed by the Department of the State of New York to engage in education related consulting services.

On May 7, 2014, the President and then sole shareholder of AEC New York formed a new company, American Education Center, Inc. in the State of Nevada ("AEC Nevada"). On May 31, 2014, the President and the sole shareholder of AEC New York exchanged his 200 shares for 10,563,000 shares of AEC Nevada. The share exchange resulted in AEC New York becoming a wholly owned subsidiary of AEC Nevada (hereinafter the “Company”).

AEC Southern Management Limited, a Hong Kong company (“AEC Southern HK”) was formed on December 29, 2015. AEC Southern HK then formed Qianhai Meijiao Education Consulting Management Co., Ltd. (“AEC Southern Shenzhen”) on March 29, 2016 pursuant to PRC laws, with a registered capital of RMB 5,000,000. AEC Southern HK and AEC Southern Shenzhen are wholly owned subsidiaries of the Company.

On July 13, 2018, pursuant to a Business Purchase Agreement (the “Purchase Agreement”), the Company acquired 51% of the issued and outstanding equity interests of American Institute of Financial Intelligence LLC (“AIFI”), a New Jersey limited liability company formed on May 10, 2017, in exchange for 100,000 shares of the Company common stock issued to the then sole shareholder of AIFI. As a result, AIFI became a 51% majority owned subsidiary of the Company.

On October 23, 2018, AEC Nevada incorporated a subsidiary, AEC Management Ltd. (“AEC BVI”) in the British Virgin Islands, pursuant to the laws of British Virgin Islands. AEC BVI is a wholly owned subsidiary of AEC Nevada, and as of the date of this report, does not have significant business activities.

On May 22, 2020, AEC Southern HK formed Yiqilai (Shenzhen) Consulting Management Co., Ltd. ("AEC YQL") in Shenzhen, China on May 22, 2020 pursuant to PRC laws. AEC YQL is a wholly owned subsidiary of AEC Southern HK, and as of the date of this report, does not have significant business activities.

On August 18, 2020, AEC YQL entered into a series of contractual arrangements, including an Equity Pledge Agreement, Exclusive Management Consulting Agreement, Exclusive Option Agreement, and Irrevocable Power of Attorney (collectively, the "VIE Agreements"), with Shenzhen Zhongwei Technology Co., Ltd. ("Zhongwei"), a PRC company, and Ding Xiang (Shenzhen) Investment Co., Ltd., a PRC company ("Pledgor"), the sole shareholder of Zhongwei controlled by Dewei Li and Bin Liu (collectively, the “Ding Xiang Shareholders”). Pursuant to the VIE Agreements, AEC YQL gained 100% fully control over Zhongwei and its subsidiaries. Zhongwei is involved in, among other things, e-commerce, and our company plans to leverage Zhongwei's current e-commerce platform, and to engage in business such as online education e-commerce. In consideration for entering into the transactions contemplated by the VIE Agreements, on August 18, 2020, the Company entered into a Share Issuance Agreement (the "Share Issuance Agreement") with the Ding Xiang Shareholders, whereby the Company agreed to issue to the Ding Xiang Shareholders an aggregate of 2,640,690 shares of the Company's common stock, par value $0.001. The transactions underlying the Share Issuance Agreement is closed in August 2020.

9

Table of Contents

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

1.    ORGANIZATION AND BUSINESS (continued)

VIE Agreements with Zhongwei

Due to the restrictions imposed by PRC laws and regulations on foreign ownership of companies engaged in value-added telecommunication services and certain other businesses, we operate our businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC domestic companies. As such, Zhongwei is controlled through VIE Arrangements in lieu of direct equity ownership by us or any of our subsidiaries. Such VIE Arrangements consist of a series of 4 agreements (collectively, the “VIE Arrangements”), which were signed on August 18, 2020.

The significant terms of the VIE Arrangements by and among our wholly-owned subsidiary, AEC YQL, our consolidated variable interest entity, Zhongwei, and the shareholders of Zhongwei are as follows:

Agreements that Provide Us Effective Control over Zhongwei

Our PRC Wholly Foreign Owned Entity, AEC YQL, has entered into the following agreements with Zhongwei and its shareholders.

Equity Pledge Agreement

Pursuant to the equity interest pledge agreement dated August 18, 2020, each shareholder of Zhongwei (collectively “Shareholder”) has pledged all of its equity interest in Zhongwei to guarantee the shareholder’s and Zhongwei’s performance of their obligations under the exclusive management consulting and service agreement, exclusive option agreement and power of attorney. If Zhongwei or any of its shareholders breaches their contractual obligations under these agreements, AEC YQL, as pledgee, will be entitled to dispose the pledged equity interest entirely or partially. Each of the shareholders of Zhongwei agrees that, during the term of the equity pledge agreement, it will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of AEC YQL. In addition, AEC YQL has the right to collect dividends generated by the pledged equity interest during the term of the pledge. The equity pledge agreement conforms to the validity period of the exclusive management consulting and service agreement

Power of Attorney

Pursuant to the power of attorney dated August 18, 2020, each shareholder of Zhongwei has irrevocably appointed AEC YQL to act as such shareholder’s exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of Zhongwei requiring shareholder approval, disposing of all or part of the shareholder’s equity interest in Zhongwei, oversee and review Zhongwei’s operation and financial information. AEC YQL is entitled to designate any person to act as such shareholder’s exclusive attorney-in-fact without notifying or the approval of such shareholder, and if required by PRC law, AEC YQL shall designate a PRC citizen to exercise such right. Each power of attorney will remain in force for so long as the Zhongwei exists. The shareholders of Zhongwei do not have the right to terminate this agreement or revoke the appointment of the attorney-in-fact without the prior written consent of AEC YQL

Exclusive Management Consulting and Service Agreement

Under the exclusive management consulting and service agreement between AEC YQL and Zhongwei dated August 18, 2020, AEC YQL has the exclusive right to provide Zhongwei with technical support, consulting services and other services. AEC YQL has the right to designate and appoint, at its sole discretion, any entities affiliated with the AEC YQL to provide any and all services. The service fees are calculated and paid on a yearly basis and at the amount that equals to 100% of the consolidated net profits of Zhongwei. AEC YQL may adjust the service fee at its discretion after taking into account multiple factors, such as the difficulty of the services provided, the time consumed, the content and commercial value of services provided and the market price of comparable services. AEC YQL owns the intellectual property rights arising out of the performance of this agreements. Zhongwei shall seek approval from AEC YQL prior to entering into any contracts obtaining the same or similar services as provided under the Exclusive Management Consulting and Service Agreement. This agreement will remain effective as long as Zhongwei exists, unless AEC YQL advance written notice to Zhongwei and its shareholders or upon the transfer of all the equity interest held by Zhongwei’s shareholders to AEC YQL and/or a third party designated by AEC YQL.

10

Table of Contents

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

1.    ORGANIZATION AND BUSINESS (continued)

Agreements that Provide Us with the Option to Purchase the Equity Interest in Zhongwei

Exclusive Option Agreement

Pursuant to the exclusive option agreement dated August 18, 2020, each shareholder of Zhongwei has irrevocably granted AEC YQL an exclusive option to purchase, or have its designated person or persons to purchase, at its discretion, to the extent permitted under PRC law, all or part of the shareholder’s equity interests in Zhongwei. The purchase price is equal to the lowest price allowable under PRC laws and regulations at the time of the transfer. Zhongwei has agreed that without AEC YQL’s prior written consent, Zhongwei shall cause the persons designated by AEC YQL to be the directors and executive officers of Zhongwei, not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of its assets or beneficial interest, create or allow any encumbrance on its assets or other beneficial interests, provide any loans to any third parties, enter into any material contract, merge with or acquire any other persons or make any investments, or distribute dividends to the shareholders. The shareholders of Zhongwei have agreed that, without AEC YQL’s prior written consent, they will not dispose of their equity interests in Zhongwei or create or allow any encumbrance on their equity interests. Moreover, without AEC YQL’s prior written consent, no dividend will be distributed to Zhongwei’s shareholders, and if any of the shareholders receives any profit, interest, dividend or proceeds of share transfer or liquidation, the shareholder must give such profit, interest, dividend and proceeds to AEC YQL. These agreements will remain effective as long as Zhongwei exists unless AEC YQL advance written notice to Zhongwei and the shareholders or upon the transfer of all the equity interest held by the shareholders to AEC YQL and/or its designee.

The Company has concluded that the Company is the primary beneficiary of Zhongwei and its subsidiaries, and should consolidate their financial statements. The Company is the primary beneficiary based on the Power of Attorney entered into as part of the VIE Agreements that each equity holder of Zhongwei assigned their rights as a shareholder of Zhongwei to AEC YQL. These rights include, but are not limited to, voting on all matters of Zhongwei requiring shareholder approval, disposing of all or part of the shareholder’s equity interest in Zhongwei, oversee and review Zhongwei’s operation and financial information. As such, the Company, through AEC YQL, is deemed to hold all of the voting equity interest in Zhongwei and its subsidiaries. For the periods presented, the Company has not provided any financial or other support to either Zhongwei or its subsidiaries. However, pursuant to the Exclusive Management Consulting and Services Agreement, the Company may provide complete technical support, consulting services and other services during the term of the VIE agreements. Though not explicit in the VIE agreements, the Company may provide financial support to Zhongwei and its subsidiaries to meet its working capital requirements and capitalization purposes. The terms of the VIE Agreements and the Company’s plan of financial support to the VIEs were considered in determining that the Company is the primary beneficiary of the VIEs. Accordingly, the financial statements of the VIEs are consolidated in the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

1.    ORGANIZATION AND BUSINESS (continued)

Based on the foregoing VIE Agreements, AEC YQL has effective 100% fully control of Zhongwei and its subsidiaries, which enables AEC YQL to receive all of their expected residual returns and absorb the expected losses of the VIE and its subsidiaries. Accordingly, the Company consolidates the accounts of Zhongwei and its subsidiaries for the periods presented herein, in accordance with Accounting Standards Codification, or ASC, 810-10, Consolidation.

As of June 30, 2021, the Company’s corporate structure is as follows:

Graphic

Headquartered in New York with operations in the People’s Republic of China (“PRC”), the Company covers 2 market segments through two subsidiaries:

(1)AEC New York capitalizes on the rising demand of middle-class families in China for quality education and work experiences in the United States (“US”) and delivers customized high school and college placement and career advisory services to Chinese students wishing to study in the US. 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. Currently, the revenue of AEC Southern is generated from AEC Southern Shenzhen and Zhongwei.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary to give a fair presentation have been included.

During 2020, the Company acquired 100% control of Zhongwei via VIE (Footnote 1). As the result, this VIE’s financial results of operations, assets, and liabilities (Footnote 21) are consolidated with the Company’s consolidated financial statements. All inter-company transactions and balances have been eliminated upon consolidation.

Cash

Cash consists of all cash balances and liquid investments with an original maturity of three months or less are considered as cash equivalents.

Accounts Receivable

Accounts receivable are carried at net realizable value. The Company maintains an allowance for doubtful accounts, periodically evaluates its accounts receivable balances and makes general and/or specific allowances when there is doubt as to their collectability. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balances, customers’ historical payment history, their current credit-worthiness and current economic trends. Accounts receivable are written off against the allowance only after exhaustive collection efforts.

Foreign Currency Translation

The Company’s functional currency is US dollars. The Company has six bank accounts located in the mainland China and one located in Hong Kong. Translation adjustments arising from the use of different exchange rates, in the circumstance any subsidiary’s functional currency is not US dollars, from period to period are included as a separate component of accumulated other comprehensive income included in statements of changes in stockholders’ equity. Gain and losses from foreign currency transactions are included in the consolidated statements of operations and comprehensive income.

Revenue Recognition

The Company adopted ASU No. 2014-09, Topic 606 on January 1, 2018, using the modified retrospective method. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (continued)

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.

AEC Shenzhen delivers customized high school and college placement and career advisory services. Fees related to such advisory services 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.

For the six months ended June 30, 2021, the revenue of $76,953 was all realized from services completed.

Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

    

Estimated useful lives (years)

Office furniture

 

5

Electronic equipment

 

3

Goodwill and Intangible Asset

Goodwill arises from business acquisition and is generally determined as the excess of fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquire, over the fair value of the nets assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently in events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company adopted (ASU) 2017-04, Intangibles—Goodwill and Other (Topic 350) in 2018, using Simplifying the Test for Goodwill Impairment, which eliminated the calculation of implied goodwill fair value. Instead, companies will record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its fair value. The Company valued the current Goodwill with its license built in is still valuable based on the results of the Company’s annual impairment testing of goodwill, no impairment charges were deemed necessary.

Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

The Company’s finite-lived intangible asset consists of a customized online campus system that was acquired from a third party. The system is used to provide online training for career advisory services. The asset was recorded at cost on the acquisition date and is amortized on a straight-line basis over its economic useful life.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill and Intangible Asset (continued)

The Company reviews its finite-lived intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset to be held and used is measured by a comparison of the carrying amount of an asset to its undiscounted future net cash flows expected to be generated by the asset. If such asset is not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the asset exceeds its fair value. Fair value is generally determined using a discounted cash flow approach.

Acquired intangible assets other than goodwill with finite lives are stated at cost less accumulated amortization if there is any. Intangible assets mainly represent the software development in progress of R&D at cost, less accumulated amortization on a straight-line basis over an estimated life of ten years. The Company evaluated the acquired online application in the amount of $26,973 (RMB 176,000) and recorded full impairment charges on December 31, 2020.

    

    

Estimated

Residual

useful

value

lives

Intangible Asset

rate

(years)

Software

 

0

%  

3

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and carrying amount.

Stock-Based Compensation

The Company uses the fair value-based method for stock issued for services rendered and therefore all awards to employees and non-employees will be recorded at the market price on the date of the grant and expensed over the required period of services to be rendered.

The fair value of stock options issued to third party consultants and to employees, officers and directors are recorded in accordance with the measurement and recognition criteria of FASB ASC 505-50, “Equity-Based Payments to Non-Employees” and FASB ASC 718, “Compensation – Stock Based Compensation,” respectively.

The options are valued using the Black-Scholes valuation model. This model is affected by the Company’s stock price as well as assumptions regarding a few subjective variables. These subjective variables include but are not limited to the Company’s expected stock price volatility over the expected term of the awards, and actual and projected stock option and warrant exercise behaviors and forfeitures.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 also addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. On June 30, 2021 and December 31, 2020, the Company does not have a liability for any unrecognized tax benefits. The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:

United States (“US”)

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (TCJA) was signed into law. The TCJA results in significant revisions to the U.S. corporate income tax system, including a reduction in the U.S. corporate income tax rate, implementation of a territorial system and a one-time deemed repatriation tax on untaxed foreign earnings. Generally, the impacts of the new legislation would be required to be recorded in the period of enactment.

The Company is subject to Federal corporate income tax in the US at 21%. Provisions for income taxes for the United States have been made for the periods ended June 30, 2021.

British Virgin Island (“BVI”)

According to BVI corporate taxation, there is a zero-rated income tax regime for all BVI-domiciled corporate entities, and there is no concept of residence applicable to BVI corporate taxation.

AEC BVI was incorporated in the BVI and is governed by the laws of the BVI.

Hong Kong

AEC Southern HK was formed in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non-Hong Kong source income. For the income that is Hong Kong related, the Company is subjected to corporate income tax at 16.5%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The People’s Republic of China (“PRC”)

AEC Southern Shenzhen, AEC YQL and Zhongwei were incorporated in the PRC. Pursuant to the income tax laws of China, the Company is not subject to tax on non-China source income. The Company is subject to corporate tax in China at 25% for the net taxable income. AEC Southern Shenzhen has 0 income tax for the six months ended June 30, 2021 due to the net operating loss for the period.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures.

Fair Value Measurements

FASB ASC 820, “Fair Value Measurement,” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

FASB ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Non-derivative financial instruments include cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, taxes payable, and loan from stockholders. As of June 30, 2021 and December 31, 2020, respectively, the carrying values of these financial instruments approximated their fair values due to their short-term nature.

COVID-19 Outbreak

As the COVID-19 pandemic continues into 2021, it has impacted the Company’s operations and financial results since the second quarter of 2020 and continues to impact the Company. The future impact of COVID-19 on the Company’s financial condition and results of operations will depend on a number of factors, including factors that we may not be able to forecast at this time.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Earnings (Loss) per Share

Earnings (loss) per share is calculated in accordance with FASB ASC 260, “Earnings Per Share.” Basic earnings (loss) per share is based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options are converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Options and warrants are only dilutive when the average market price of the underlying common stock exceeds the exercise price of the options or warrants because it is unlikely that they would be exercised if the exercise price were higher than the market price.

Related Party Transactions

A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the company’s securities (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. Related parties may be individuals or corporate entities.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.

Selling and Marketing

Selling and marketing costs are related to promoting, advertising, and other marketing activities, and are expensed as incurred. For the periods ended June 30, 2021 and 2020, the marketing and advertising expenses were $0 and $74,115, respectively.

Noncontrolling interest

According to Financial Accounting Standards Board (FASB) Statement No. 160, the noncontrolling interest shall be reported in the consolidated statement of financial position within equity, separately from the parent’s equity. That amount shall be clearly identified and labeled, for example, as noncontrolling interest in subsidiaries. An entity with noncontrolling interests in more than one subsidiary may present those interests in aggregate in the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Bargain Purchase

According to Financial Accounting Standards Board (FASB) Accounting Standards, a barging purchase is defined as a business combination in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, and it requires the acquirer to recognize that excess in earnings as a gain attributable to the acquire.

Contingent Consideration

The Company recognizes the fair value of any contingent consideration that is transferred to the seller in a business combination on the date at which control of the acquiree is obtained. This value is generally determined through a probability-weighted analysis of the expected cash flows.

Contingent consideration is classified as a liability or as equity on the basis of the definitions of an equity instrument and a financial liability. The contingent consideration is payable in cash and, accordingly, the Company classified its contingent consideration as a liability. It is not remeasured, and any gain or loss on settlement at an amount different from its carrying value will be recognized in net income in the period during which it is settled.

Leases

The Company determined if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and short- and long-term lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.

3.    RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

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 adopted this ASU on January 1, 2020 and the standard impacted on its consolidated financial statements and related disclosures from the adoption of the new guidance in Footnote 1 and Footnote 21.

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 Company adopted this ASU on January 1, 2021. The adoption of the ASU did not have an impact on our consolidated financial statements.

The Company does not expect that any following recently issued accounting pronouncements will have a material effect on its consolidated financial statements:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

3.    RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS (continued)

In March 2021, the FASB issued ASU 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. The amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this Update for interim financial statements already issued in the year of adoption. The amendments in this Update also include an unconditional one-time option for entities to adopt the alternative prospectively after its effective date without assessing preferability under Topic 250, Accounting Changes and Error Corrections.

In May 2021, the FASB issued ASU 2021-4, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The FASB is issuing this Update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call  options (for example, warrants) that remain equity classified after modification or exchange.

In July 2021, the FASB issued ASU 2021-5, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in this Update amend Topic 842, which has different effective dates for public business entities and most entities other than public business entities. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1)The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3; 2)The lessor would have otherwise recognized a day-one loss.

4.    ACCOUNTS RECEIVABLES

Activity in the allowance for doubtful accounts was as followings:

    

June 30, 

    

December 31, 

2021

2020

Accounts receivable

$

3,648,195

$

3,717,282

Allowance for bad debts

 

(3,575,615)

 

(3,575,615)

Accounts receivable, net

$

72,580

$

141,667

Balance, beginning of year

$

3,575,615

$

2,605,348

Provision (net of recover)

 

0

 

970,267

Amounts written off, net of recoveries

 

0

 

0

Balance, end of year

$

3,575,615

$

3,575,615

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

5.    FIXED ASSET, NET

As of June 30, 2021 and December 31, 2020, fixed asset, net as follows:

    

June 30, 

    

December 31, 

2021

2020

Electronic equipment

$

12,167

$

11,313

Office furniture

 

881

 

872

Less: accumulated depreciation

 

(6,728)

 

(4,665)

Fixed asset - net

$

6,320

$

7,520

For the three and six months ended June 30, 2021 and 2020, depreciation expense was $1,016 and $2,009, $556 and $1,103, respectively.

6.    INTANGIBLE ASSET, NET

The gross carrying amount and accumulated amortization of this asset as of June 30, 2021 and December 31, 2020 are as follows:

    

June 30, 

    

December 31, 

   

2021

   

2020

Intangible asset: online campus system

$

612,814

$

612,814

Intangible asset: learning platform

 

120,000

 

120,000

Less: accumulated amortization

 

(648,814)

 

(608,768)

Intangible asset - net

$

84,000

$

124,046

The Company’s customized online campus system is being amortized on a straight-line basis over four and a half years. For the three and six months ended June 30, 2021 and 2020, amortization expense was $3,000 and $40,045, and $37,045 and $74,090 respectively.

The newly acquired intangible asset of software development in progress of research and development at cost of $26,973 (RMB 176,000) has been evaluated and recorded full impairment charges on December 31, 2020.

The following table is the future amortization expense to be recognized:

Year Ending December 31, 

    

  

2021

 

6,000

2022

 

12,000

2023 and after

 

66,000

$

84,000

21

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AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

7.    GOODWILL

At acquisition of the Zhongwei via VIE, the Company recognized goodwill in the amount of $139,725 which represents the amount of total consideration transferred in excess of the fair value assigned to identifiable assets acquired and liabilities assumed in a business acquisition. This goodwill should be held and used for impairment charges whenever events or changes in circumstances may trigger goodwill impairment include deterioration in economic conditions, increased competition, loss of key personnel, and regulatory action and have indicated that the carrying value exceeds fair value.

The Company performed testing of goodwill impairment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. The Company valued the current Goodwill with its license built in is still valuable based on the results of the Company’s annual impairment testing of goodwill. Thus, no impairment of goodwill was recorded for the period ended June 30, 2021.

8.    SECURITY DEPOSITS

The Company has security deposits with the landlord for its offices of $23,544 and $23,297 as of June 30, 2021 and December 31, 2020 respectively. The Company terminated the lease of its New York office in August 2020 and the landlord retained the entire security deposits to offset the rent payable on the termination date of August 31, 2020. As of June 30, 2021, AEC New York has security deposits of $0 and AEC Shenzhen has security deposits of $23,544 (translation from RMB152,012).

9.    CONCENTRATION OF CREDIT AND BUSINESS RISK

The Company maintains its cash accounts at 2 commercial banks in the US, 6 commercial banks in the Mainland China and 1 commercial bank in Hong Kong.

Funds held in US banks and insured by Federal Deposit Insurance Corporation up to $250,000 per depositor, per insured bank, for each account ownership category.

Funds held in the PRC banks are covered by Deposit Insurance Ordinance (index: 000014349/2015-00031) that insures RMB500,000 for the total of all depository accounts.

Funds held in HK banks are insured by Hong Kong Deposit Protection Board covers up to HK$500,000 per bank for the total of all depository accounts.

The Company performs ongoing evaluation of its financial institutions to limit its concentration of risk exposure. Management believes this risk is not significant due to the financial strength of the financial institutions utilized by the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

9.    CONCENTRATION OF CREDIT AND BUSINESS RISK (continued)

The following table represents major customers that individually accounted for more than 10% of the Company’s gross revenue for the six months ended June 30, 2021 and 2020:

  

June 30, 2021

 

Gross

Accounts

 

    

Revenue

    

Percentage

    

Receivable

    

Percentage

 

Customer 1

$

55,408

 

72.0

%

$

0

 

0

%

Customer 2

$

8,617

 

11.2

%  

$

0

 

0

%

  

June 30, 2020

 

Gross

Accounts

 

    

Revenue

    

Percentage

    

Receivable

    

Percentage

 

Customer 1

$

103,980

 

37.6

%  

$

1,582,433

 

33.6

%

10.  SEGMENT REPORTING

Operating segments have been determined on the basis of reports reviewed by the Company’s Chief Executive Officer (CEO) who is the chief operating decision maker of the Company. The CEO evaluates the business from a geographic perspective, assesses performance and allocates resources on this basis. The reportable segments are as follows:

The Company has 2 operating segments: AEC New York (including U.S. entities) and AEC BVI (including all foreign entities).

AEC New York delivers placement, career and other advisory services Its advisory services include language training, admission advisory, on-campus advisory, internship and start-up advisory as well as other advisory services.
AEC BVI delivers customized high school and college placement and career advisory services to Chinese students wishing to study in the U.S. Currently, the revenue of AEC BVI all generated from AEC Southern Shenzhen.

The following table shows an analysis by segment of the assets and liabilities of operations as of June 30, 2021 December 31,2020:

    

June 30, 2021

    

AEC New York

    

AEC BVI

    

Total

Segment assets and liabilities:

 

  

 

  

 

  

Segment assets

$

1,861,169

542,511

2,403,680

Segment liabilities

$

2,645,130

1,560,858

4,205,988

    

December 31, 2020

    

AEC New York

    

AEC BVI

    

Total

Segment assets and liabilities:

 

  

 

  

 

  

Segment assets

$

2,106,006

$

718,092

$

2,824,098

Segment liabilities

$

2,695,097

$

1,446,640

$

4,141,737

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

10.  SEGMENT REPORTING (Continued)

Revenues from external customers, and gross profit for each business are as follows:

    

For the three months ended June 30, 2021

    

AEC New York

    

AEC BVI

    

Total

Segment revenue:

 

  

 

  

 

  

Placement advisory

$

0

$

58,512

$

58,512

Career advisory

 

4,240

 

0

 

4,240

Other Revenue

0

554

554

Commission

0

337

337

Total revenue

$

4,240

$

59,403

$

63,643

Gross profit

$

(6,660)

$

59,403

$

52,743

    

For the six months ended June 30, 2021

    

AEC New York

    

AEC BVI

    

Total

Segment revenue:

 

  

 

  

 

  

Placement advisory

$

62,151

62,151

Career advisory

4,240

 

4,240

Other Revenue

 

 

1,945

 

1,945

Commission

8,617

8,617

Total revenue

4,240

72,713

76,953

Gross profit

$

(9,210)

$

72,713

$

63,503

For the three months ended June 30, 2020

    

AEC New York

    

AEC BVI

    

Total

Segment revenue:

  

 

  

 

  

Placement advisory

$

0

$

41,484

$

41,484

Career advisory

 

120,500

 

0

 

120,500

Student & Family advisory

 

0

 

0

 

0

Other advisory

0

0

0

Total revenue

$

120,500

$

41,484

$

161,984

Gross profit

$

66,560

$

39,707

$

106,267

    

For the six months ended June 30, 2020

    

AEC New York

    

AEC BVI

    

Total

Segment revenue:

 

  

 

  

 

  

Placement advisory

$

 

$

41,484

$

41,484

Career advisory

 

234,191

 

 

234,191

Student & Family advisory

 

 

 

Other advisory

507

507

Total revenue

$

234,698

$

41,484

$

276,182.00

Gross profit

$

71,808

$

38,320

$

110,128

11.  DEFERRED REVENUE

The Company receives advance payments for services to be performed and recognizes revenue when services have been rendered. The deferred revenues as of June 30, 2021 and December 31, 2020 were $95,000 and $ 101,687, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

12.  RELATED-PARTY TRANSACTIONS

The Company’s CEO has a 34% interest in Columbia International College, Inc. (“CIC”). The Company prepaid CIC $48,000 for student consulting services which are expected to be fully delivered and accounted in the second quarter of 2021.

The Company’s CEO has a 40% interest in Wall Street Innovation Center, Inc. (“WSIC”), a corporation incorporated in the state of New York that focuses on career and business development activities. In the course of delivering career advisory services, the Company has engaged WSIC to assist in certain career development activities. The Company prepaid WSIC $50,000 for business consulting services to be delivered and completed in 2021.

The Company’s CEO received 12,500,000 shares of Series B Convertible Preferred Stock of the Company (“Series B Preferred Stock”), par value $0.001 per share as a reward for his dedicated services to the Company on November 26, 2018.

The Company repaid loan of $154,880 (translated from RMB1,000,000) to a shareholder of the Company during the year of 2021. The amounts due to this related party were $929,282 and $1,072,797 as of June 30, 2021 and December 31, 2020, respectively. The loan is non-interest bearing and non-secure, and should be paid May 19, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

12.  RELATED-PARTY TRANSACTIONS (continued)

The Company borrowed $76,687 (translated from RMB500,000) from a shareholder of the Company during the three months ended December 31, 2020. The amounts due to this related party were $77,070 and $76,687 as of June 30, 2021 and December 31, 2020, respectively. The amounts are bearing 1% annual interest rate and due on December 31, 2022. The interest expenses occurred were $383 and $0 as of June 30, 2021 and December 31, 2020, respectively.

13.  LOANS PAYABLE

On December 1, 2014, an unrelated party loaned the Company $295,579, with interest at 10%. The loan was fully paid off as of March 31, 2020.

Interest expenses for the three and six months ended June 30, 2021 and 2020 were $0 and $776 respectively.

On May 4, 2020, the Company received a loan of $77,588 from the Paycheck Protect Program (“ PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States. In accordance with the requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan has a 1.00% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act. The PPP Loan Forgiveness has been approved on April 12, 2021.

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 total proceeds of $150,000 under the SBA's EIDL program. 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. The Company has used all the proceeds of this loan as working capital to alleviate economic injury caused by COVID-19 occurring in 2020.

14.  LEASE COMMITMENTS

The Company has 2 operating leases for offices in different cities during 2020. In December 2014, the Company entered into a lease for 10,086 square feet of office space in New York, NY, with an unrelated party, expiring on July 31, 2025. The lease commenced on March 1, 2015. Due to COVID-19 pandemic effect the business operations in New York, the Company entered into a lease termination agreement with the landlord of this office in August 2020.

In May 2019, the Company entered into a lease of office space in Shenzhen, Guangdong, PRC with an unrelated party, expiring on April 30, 2024. The lease commenced on May 1, 2019. We determined the present value of the future lease payment using a discount rate of 8.16%, our incremental borrowing rate based on SBA loan borrowing rate, resulting in an initial right-of-use asset of $414,157 (RMB2,899,099) and lease liability of $399,048 (RMB2,793,341) on the commenced date of May 1, 2019, which are being amortized ratably over the term of the lease.

As of June 30, 2021, the balance of net right-of-use asset was $276,326, and lease liability was $295,309 (including $90,595 for current portion and $204,714 for noncurrent portion).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

14.  LEASE COMMITMENTS (continued)

Future minimum lease commitments are as follows on June 30, 2021:

    

Gross Lease

Year Ending December 31, 

   

Payment

2021

 

54,771

2022

113,925

2023 and thereafter

 

161,788

$

330,484

Less: Present value adjustment

 

(35,175)

Operating lease liability

$

295,309

Payments under operating leases are expensed on a straight-line basis over the periods of their respective leases. The total rent expense was approximately $33,050 and $66,000, and $129,110, $261,137 (including AEC New York lease before its termination in August 2020) for the three and six months ended June 30, 2021 and 2020, respectively.

15.  INCOME TAXES

The component of deferred tax assets on June 30, 2021 and December 31, 2020 are as follows:

    

June 30, 

    

December 31, 

  

2021

  

2020

Net operating loss carryforwards

 

$

716,205

 

$

612,553

Allowance for bad debt

 

1,132,524

 

1,132,524

Accelerated Depreciation

 

0

 

0

Allowance for deferred tax asset

 

(797,011)

 

(797,011)

Deferred tax asset, net

$

1,051,718

$

948,066

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

15.  INCOME TAXES (continued)

The provision for income taxes and deferred income taxes for the three and six months ended June 30, 2021 and 2020 are as follows:

For the three months ended June 30,

For the six months ended June 30,

   

2021

   

2020

   

2021

   

2020

Current:

  

 

  

  

 

  

Federal

$

$

0

$

$

0

State

 

3,253

 

0

 

3,253

 

0

Foreign

 

 

0

 

 

0

Total current

 

3,253

 

0

 

3,253

 

0

Deferred:

 

  

 

  

 

  

 

  

Federal

 

(24,385)

 

(116,851)

 

(60,154)

 

(212,087)

State

 

(17,215)

 

(82,679)

 

(43,498)

 

(150,066)

Foreign

 

0

 

0

 

 

0

Total deferred

(41,600)

(199,530)

(103,652)

(362,153)

Total

$

(38,347)

$

(199,530)

$

(100,399)

$

(362,153)

The Company conducts business globally and, as a result, files income tax returns in the US federal jurisdiction, state and city, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including jurisdictions in the US. The Company is subject to income tax examination of US federal, state, and city tax returns for 2020, 2019 and 2018 tax years. The Company, to its knowledge, is not currently under examination nor has it been notified by the authorities.

A reconciliation of the provision for income taxes, with the amount computed by applying the statutory effective income tax rate for the three and six months ended June 30, 2021 and 2020 is as follows:

    

For the three months ended

    

For the six months ended

 

June 30, 

June 30, 

   

2021

   

2020

 

2021

   

2020

 

 

Tax at federal statutory rate

 

21.0

%   

21.0

%  

21.0

%   

21.0

%

State and local taxes, net of federal benefit

 

11.0

 

11.0

11.0

 

11.0

PRC statutory income tax rate

 

25.0

 

25.0

25.0

 

25.0

Non-deductible/ non-taxable items

 

 

0

 

0

Total

 

57

%   

57

%  

57

%   

57

%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

16.  FINANCIAL INSTRUMENTS

Fair values

The Company’s financial instruments from continuing operations approximate include cash and cash equivalents and prepaid expenses and other current assets which approximate to fair value due to their short-term nature and include cash accounts. The Company’s borrowings approximate fair value as the rates of interest are similar to what they would receive from other financial institutions. The carrying amounts of these financial assets and liabilities are a reasonable estimate of their fair values because of their current nature.

The following table summarizes the carrying values of the Company’s financial assets and liabilities:

June 30, 

December 31,

    

2021

    

2020

Cash and cash equivalents

$

541,844

$

911,658

Accounts receivable, prepaid expenses and other current assets

 

241,483

 

354,493

Other financial liabilities(i)

 

2,835,922

 

3,579,624

(i)

Accounts payable, accrued expenses and other current liabilities, advance from customers, and income tax payable.

The Company classifies its fair value measurements in accordance with the three-level fair value hierarchy as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices), and

Level 3 – Inputs that are not based on observable market data.

The financial assets and liabilities carried at fair value on a recurring basis on June 30, 2021 are as follows:

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial Assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

541,844

$

0

$

0

$

541,844

Other financial assets

 

241,483

 

0

 

0

 

241,483

Total Financial assets

$

783,327

$

0

$

0

$

783,327

Financial Liabilities

 

 

  

 

  

 

Other liabilities

$

2,835,922

$

0

$

0

$

2,835,922

Total Financial Liabilities

$

2,835,922

$

0

$

0

$

2,835,922

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

16.  FINANCIAL INSTRUMENTS (continued)

The financial assets and liabilities carried at fair value on a recurring basis on December 31, 2020 are as follows:

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial Assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

911,658

$

0

$

0

$

911,658

Other financial assets

 

354,493

 

0

 

0

 

354,493

Total Financial Assets

$

1,266,151

$

0

$

0

$

1,266,151

Financial Liabilities

 

 

  

 

  

 

Other liabilities

$

3,579,624

$

0

$

0

$

3,579,624

Total Financial Liabilities

$

3,579,624

$

0

$

0

$

3,579,624

Interest rate and credit risk

Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash and cash equivalents, and net accounts receivable. The Company minimizes the interest rate and credit risk of cash by placing deposits with financial institutions located in the United States and Mainland China. Management believes that there is no significant credit risk arising from the Company’s financial instruments.

Financial assets past due

The following table provides information regarding the aging of financial assets that are past due, but which are not impaired on June 30, 2021:

Less than

90 days to

Over

Carrying

    

90 days

    

1 year

    

1 year

    

Value

Accounts receivable, net

$

0

$

0

$

72,580

$

72,580

Other receivable

$

0

$

0

$

0

$

0

Total accounts receivable, net

$

0

$

0

$

72,580

$

72,580

The Company determines past due amounts by reference to terms agreed with individual clients. NaN of the net amounts outstanding have been challenged by the respective clients and the Company continues to conduct business with them on an ongoing basis and does not consider its current accounts receivable to be past due.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

17.  STOCK OPTIONS

The Company did not grant any stock options during the six months ended June 30, 2021.

The following is a summary of stock option activities:

Weighted-

Weighted

Average

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

  

Shares

  

Price

  

Life

  

Value

Outstanding on December 31, 2020

3,200,000

$

2.45

2.87 years

$

0

Granted

0

0

Exercised

0

0

Cancelled and expired

 

0

 

0

 

 

Forfeited

 

0

 

0

 

 

Outstanding on June 30, 2021

 

3,200,000

$

2.45

 

2.37 years

$

0

Vested and expected to vest on June 30, 2021

 

3,200,000

$

0.89

 

0.74 years

$

0

Exercisable on June 30, 2021

 

3,200,000

$

0.89

 

0.74 years

$

0

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were 0 options exercised during the six months ended June 30, 2021 and 2020.

The estimated fair value of these options was $0, therefore 0 compensation expense was recognized for the periods ended June 30, 2021 and 2020.

18.  COMMON STOCK

The Company is authorized to issue 450,000,000 shares of Common Stock, par value $0.001.

Stocks issued to employees and for services

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.

Stocks issued for business acquisition

On August 18, 2020, AEC YQL entered into a series of contractual arrangements, including 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. Pursuant to the VIE Agreements, the Company entered into a Share Issuance Agreement (the "Share Issuance Agreement") with the Ding Xiang Shareholders, whereby the Company agreed to issue to the Ding Xiang Shareholders an aggregate of 2,640,690 shares of the Company's common stock, par value $0.001. The transactions underlying the Share Issuance Agreement is closed in August 2020. Refer to Footnote 20 Business Acquisition.

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FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

19.  PREFERRED STOCK

Series B Convertible Preferred Stock

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

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

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

The Company has 25,000,000 shares of Series B Convertible Preferred Stock issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

20.  BUSINESS ACQUISITION

Acquisition of Shenzhen Zhongwei Technology Co., Ltd.

On August 18, 2020, the Company 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. Pursuant to the VIE Agreements, the Company entered into a Share Issuance Agreement (the "Share Issuance Agreement") with the Ding Xiang Shareholders, whereby the Company agreed to issue to the Ding Xiang Shareholders an aggregate of 2,640,690 shares at $0.1 per share for total $264,070 of the Company's common stock, par value $0.001.

The Acquisition has been accounted for as a business combination, under the acquisition method of accounting, which results in acquired assets and assumed liabilities being measured at their fair values as of the Acquisition Date. As of the Acquisition Date, goodwill is measured as the excess of consideration transferred, which is also generally measured at fair value of the net acquisition date fair values of the assets acquired and liabilities assumed. Based upon the purchase price allocations, the following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the Acquisition Date:

Cash

    

$

94,425

Accounts receivable, net

 

R&D (Software development in progress)

 

25,428

Other current assets

 

812

Property and equipment

 

3,684

Total assets acquired on the book value

$

124,349

Other payables

$

(4)

Total liabilities assumed

 

(4)

Net assets acquired on the book value

 

124,345

Goodwill

 

139,725

Total purchase price

$

264,070

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

21.  VARIABLE INTEREST ENTITY

On August 18, 2020, AEC YQL entered into VIE Agreements with Zhongwei and its shareholders. The following amounts of Zhongwei are included in the accompanying consolidated financial statements for six months ended June 30,2021 and the years ended December 31, 2020.

    

June 30,

    

December 31,

2021

2020

ASSETS

 

  

 

  

Cash and cash equivalents

$

72,101

$

137,222

Fixed Assets, Net

 

2,496

 

3,254

Prepaid expenses

 

8,352

 

7,159

Total assets

 

82,949

$

147,635

LIABILITIES

 

  

 

  

Accounts payables and accrued expenses

$

5,597

$

5,849

Deferred revenue

 

 

6,687

Total Liabilities

 

5,597

$

12,536

    

For the six months ended

    

For the year ended

June 30,

December 31,

2021

2020

Revenues

$

6,744

$

22,375

Income from Operations

 

6,744

 

20,733

Net Income

$

(59,054)

$

(69,396)

Risks of variable interest entity structure

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the VIE Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of WFOE and the VIE are in compliance with existing PRC laws and regulations in all material respects.

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the VIE Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the VIE Arrangements is remote based on current facts and circumstances.

Although currently substantially all of our revenue comes from our wholly owned subsidiaries, instead of our VIE, our VIE in China and our investors may face uncertainty about future actions by the government of China that could significantly affect the VIE and our subsidiaries’ financial performance and operations, including the enforceability of the VIE Agreements.

22.  COMMITMENTS & CONTINGENCY

A contingency should be recognized at its acquisition date fair value if that value can be determined. (The guidance in Topic 820 is used to determine fair value). If the acquisition-date fair value of contingency cannot be determined, then an asset or liability is recognized for the contingency if it’s probable at the acquisition date that such asset or liability exists and if its amount is reasonable estimable.

33

Table of Contents

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

22.  COMMITMENTS & CONTINGENCY (continued)

A contingency is not recognized for a contingency in the accounting for a business combination if: a) its fair value cannot be determined and b) the probable and reasonably estimate criteria are not met. Instead, the contingency is disclosed and accounted for subsequent to the acquisition date in accordance with Topic 450.

Pursuant to the Purchase Agreement, the contingent consideration consisted of compensatory arrangement for services to be performed by the officers of the acquiree, and such amounts are to be determined in the future by both parties; therefore, the fair value cannot be determined at the acquisition date. The Company as an acquirer did not recognize a liability at the acquisition date.

23.  GOING CONCERN

Substantial doubt about the Company’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. Our current operating results indicate that substantial doubt exists related to the Company's ability to continue as a going concern. We believe that the new education platforms acquired may mitigate the substantial doubt raised by our current operating results and with additional funding from a shareholder of the Company will be sufficient to meet its anticipated needs for working capital and satisfying our estimated liquidity needs 12 months from the date of the financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned.

24.  SUBSEQUENT EVENT

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.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 exchanges 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 Management Co., Ltd, a company formed pursuant to the laws of England and Wales (“AEC Southern UK”) and its subsidiaries in 2016 pursuant to a certain share exchange agreement. 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 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. Although currently substantially all of our revenue comes from our wholly owned subsidiaries, instead of our VIE, our VIE in China and our investors may face uncertainty about future actions by the government of China that could significantly affect the VIE and our subsidiaries’ financial performance and operations, including the enforceability of the VIE Agreements.

35

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

Graphic

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, AEC Southern Shenzhen and Zhongwei, 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.

36

Headquartered in New York with operations in the PRC, the Company, during the quarter ended June 30, 2021 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 and Zhongwei, 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.

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 by the end 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 business 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.

37

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.

In order to respond to the adverse impact of the COVID-19 outbreak, we have devoted time and effort to research and develop new services and products. For the period ended June 30, 2021, through AEC Southern HK, we have assisted our existing students, students’ families, and corporate clients to obtain a health product named Rocitin. On December 31, 2020, we entered into a Commission Agreement with Clark Orient Company Limited (“Clark Orient”), pursuant to which Clark Orient agrees to pay us RMB 10.00 on every bottle of Rocitin we sell before March 31, 2021, and HKD 10.00 on every bottle of Rocitin we sell starting from April 1, 2021. The Commission Agreement remains effective until either party gives written notice of termination. As of June 30, 2021, revenue from sales of Rocitin by AEC Southern HK was $8,617, approximately 11% of our total revenue in the period ended June 30, 2021.

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. 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 six months ended June 30, 2021, and these negative impacts will likely continue through the rest of the fiscal year 2021.

In order to respond to the COVID-19 outbreak, the 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 identified an online platform related to education to diversify our means in generating revenue and are in still the process of negotiating a partnership or acquisition. In addition, we have been devoting time and effort to research and develop new services and products. As a result, we have been developing a new revenue resource by distributing health products through AEC Southern HK.

38

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 rest quarters of 2021. 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, 2021.

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 June 30, 2021, 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.

39

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 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 Company adopted this ASU on January 1, 2021. The adoption of the ASU did not have an impact on our consolidated financial statements.

In March 2021, the FASB issued ASU 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. The amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this Update for interim financial statements already issued in the year of adoption. The amendments in this Update also include an unconditional one-time option for entities to adopt the alternative prospectively after its effective date without assessing preferability under Topic 250, Accounting Changes and Error Corrections.

40

In May 2021, the FASB issued ASU 2021-4, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The FASB is issuing this Update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call  options (for example, warrants) that remain equity classified after modification or exchange.

In July 2021, the FASB issued ASU 2021-5, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in this Update amend Topic 842, which has different effective dates for public business entities and most entities other than public business entities. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1)The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3; 2)The lessor would have otherwise recognized a day-one loss.

The Company has assessed all newly issued accounting pronouncements released during the six months ended June 30, 2021 and through the date of this filing and believes none of them will have a material impact on the Company’s financial statements when or if adopted.

Results of Operations

Below we have included a discussion of our operating results and material changes in the periods covered by this 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, 2020, as filed on April 15, 2021. 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.

The Three Months Ended June 30, 2021, as Compared to the Three Months Ended June 30, 2020

For the three months ended June 30,

2021

2020

Variance

%

Key revenue streams:

    

  

    

  

    

  

    

  

    

Placement Advisory Services

$

58,512

$

41,484

$

17,208

 

41

%  

Career Advisory Services

 

4,240

 

120,500

 

(116,260)

 

(96)

%

Other Advisory Services

 

554

 

 

554

 

NM

Commission

 

337

 

 

337

 

NM

Total revenues

$

63,643

$

161,984

$

(98,341)

 

(61)

%  

Gross Profit

$

52,743

$

106,267

$

(53,524)

 

(50)

%  

Gross Margin

 

83

%  

 

66

%  

 

  

 

  

 

Revenue

Total revenues for the three months ended June 30, 2021, were $63,643, representing a decrease of $98,341, or 61% from $161,984 for the same period in 2020. The decrease was mainly due to the COVID-19 pandemic, 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. These factors adversely impacted the financial performance of the Company.

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Total revenues for the three months ended June 30, 2021 were generated by the operations of AEC New York and AEC BVI, which deliver Placement Advisory Services, Career Advisory Services and Other Advisory Services to our clients.

Revenues for the three months ended June 30, 2021, from our Placement Advisory Services were $58,512, representing an increase from the same period in 2020. The increase in our Placement Advisory Services was due to the increase demands from customers who would like to study overseas. For the three months ended June 30, 2021, $4,240 revenues from our Career Advisory Services were generated, representing an decrease from the same period in 2020. The decrease was due to the decreased requests resulting from negative impact of the COVID-19 pandemic. . Revenues for the three months ended June 30, 2021 from Other Advisory Services were $544, representing an increase from $0 for the same period in 2020. The increase was from other local advisory requests from one client. To reduce the severe impact of pandemic, we developed a new source of revenue in the first quarter of 2021 by selling health products on a commission basis. The revenue generated from commission were $337.

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.

Gross Profit & Gross Margin

Our gross profit for the three months ended June 30, 2021 was $52,743, representing an decrease of $53,524 from $106,267 for the three months ended June 30, 2020. The decrease can be attributed mainly to the net effect of a decline in service request and decreased cost by reducing outsourcing.

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

For the three months ended June 30,

 

2021

2020

Variance

%

 

Operating expenses

    

  

    

  

    

  

    

  

Selling and marketing

$

$

60,754

$

(60,754)

 

(100)

%

Research and development expenses

 

22

 

 

22

 

NM

General and administrative

 

345,406

 

777,991

 

(432,585)

 

(56)

%

Total operating expenses

$

345,428

$

838,745

$

(493,317)

 

(59)

%

Income tax benefit

$

(38,347)

$

(199,530)

$

161,183

 

(81)

%

Net (loss) from continuing operations including non-controlling interest

$

(176,750)

$

(532,945)

$

356,195

 

(67)

%

Operating Expenses

Total operating expenses decreased by $493,317 or 59% as compared to the three months ended June 30, 2020. The decrease mainly due to  the decrease of the rent expense and professional expense.

42

Income Tax Benefit

Income tax benefit of $38,347 for the three months ended June 30, 2021 represents the net losses for the periods presented.

Net Loss

Net loss from operations including non-controlling interest was $176,750 for the three months ended June 30, 2021, as compared to the net loss of $532,945 for the three months ended June 30, 2020, which representing the net effect of the decreased operation expenses and the decreased revenue.

The Six Months Ended June 30, 2021, as Compared to the Six Months Ended June 30, 2020

    

For the six months ended June 30,

    

2021

2020

Variance

%  

Key revenue streams:

 

  

 

  

 

  

 

  

Placement Advisory Services

$

62,151

$

41,484

$

20,667

 

50

%  

Career Advisory Services

 

4,240

 

234,191

 

(229,951)

 

(98)

%

Other Advisory

 

1,945

 

507

 

1,438

 

284

%

Commission

 

8,617

 

 

8,617

 

NM

Total revenues

$

76,953

$

276,182

$

(199,229)

 

(72)

%  

Gross Profit

$

63,503

$

110,128

$

(46,625)

 

(42)

%  

Gross Margin

 

83

%  

 

40

%  

 

  

 

  

Revenue

Total revenues for the six months ended June 30, 2021, were $ 76,953, representing a decrease of $199,229, or 72% from $276,182 for the same period in 2020. The decrease was mainly due to the COVID-19 pandemic, 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. These factors adversely impacted the financial performance of the Company .

Total revenues for the six months ended June 30, 2021 were generated by the operations of AEC New York and AEC BVI, which deliver Placement Advisory Services, Career Advisory Services and Other Advisory Services to our clients.

Revenues for the six months ended June 30, 2021, from our Placement Advisory Services increased by $20,667 from $41,484 for the same period in 2020. The increase in our Placement Advisory Services was due to the increase demands from our clients. Revenues for our Career Advisory Services decreased by $229,951, or 98% from $234,191 for the same period in 2020, primarily due to the declined requests from clients because of COVID-19 related issues. Revenues from Other Advisory Services increased by $1,438 from $507 for the same period in 2020, due to some incidental requests from local customers. To reduce the severe impact of pandemic, we developed a new source of revenue in the first quarter of 2021 by selling health products on a commission basis. The revenue generated from commission were $8,617.

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.

43

In addition, the Chinese government offers incentives and benefits though its Talents Policy to Chinese students who return to China to work and live there. This Talents Policy has encouraged many of our clients who recently graduated or are about to graduate to go back to China, instead of staying in the U.S., which resulted in less service requests for our placement advisory and student & family advisory services. Additionally, the decrease in the value of China’s currency and the relatively restrictive U.S. policy on international students is increasingly driving Chinese students to choose to apply to universities and colleges in non-U.S. countries or choose to return to the PRC after graduation, rather than staying in the U.S. To mitigate the effect of such recent changes, we are expanding our local services in the PRC, concentrating on new services promotion and increasing our mergers and acquisitions efforts by focusing on researching, identifying prospective targets, negotiating and executing on this strategy.

Gross Profit & Gross Margin

Our gross profit for the six months ended June 30, 2021 was $63,503 representing a decrease of $46,625 from $110,128 for the six months ended June 30, 2020. The decrease can be attributed mainly to the net effect of a decline in service request and decreased cost by reducing outsourcing.
Our gross margin was approximately 83% for the six months ended June 30, 2021, compared to approximately 40% for the same period in 2020.

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

    

For the six months ended June 30,

 

2021

2020

Variance

%

Operating expenses

 

  

 

  

 

  

 

  

Selling and marketing

$

$

74,115

$

(74,115)

 

(100)

%

Research and development expenses

 

12,242

 

 

12,242

 

NM

General and administrative

 

706,803

 

1,425,116

 

(718,313)

 

(50)

%

Total operating expenses

$

719,405

$

1,499,231

$

(779,826)

 

(52)

%

Income tax benefit

$

(100,399)

$

(362,153)

$

261,754

 

(72)

%

Net (loss) from continuing operations including noncontrolling interest

$

(477,555)

$

(1,026,633)

$

549,078

 

(53)

%

Operating Expenses

Total operating expenses decreased by $779,826 or 52% as compared to the six months ended June 30, 2020. The decrease mainly represents the net effect of the decrease of the marketing expense and professional fee, and the increase of the research and development expenses.

Income Tax Benefit

Income tax benefit of $100,399 for the six months ended June 30, 2021 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 $477,555 for the six months ended June 30, 2021, as compared to the net loss of $1,026,633 for the six months ended June 30, 2020, which representing the net effect of the decreased operation expenses and revenue.

44

Liquidity and Capital Resources

Cash Flows and Working Capital

As of June 30, 2021, we had cash of $541,844, a decrease of $369,814 from $911,658 as of December 31, 2020. 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.

Six Months ended June 30,

 

2021

2020

Variance

%

 

Net cash (used in) operating activities

    

$

(217,696)

    

$

(533,490)

    

$

315,794

    

(59)

%

Net cash (used in) investing activities

 

(734)

 

 

(734)

 

NM

Net cash (used in) financing activities

$

(154,880)

$

421,236

 

(576,116)

 

(137)

%

Effect of exchange rates changes on cash

 

3,496

 

(574)

 

4,070

 

(709)

Net change in cash

$

(369,814)

$

(112,828)

$

(256,986)

 

228

%

Cash Flow from Operating Activities

Net cash used in operating activities for the six months ended June 30, 2021 was $217,696, decreased by $315,794 for the six months ended June 30, 2020. The decrease in net cash used in operations in the six months ended June 30, 2021 was primarily attributable to slowing decreased operating expense and down payment to our service providers.

Cash Flow from Investing Activities

Net cash used in investing activities during the six months ended June 30, 2021 was $734, increased by $734 for the six months ended June 30, 2020 .

Cash Flow from Financing Activities

Net cash used in financing activities for the six months ended June 30, 2021 was $154,880, representing repayment of short-term loan.

Working Capital

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

    

June 30,

    

December 31,

    

    

    

    

 

2021

2020

Variance

%

Total current assets from continuing operations

$

783,327

$

1,266,151

$

(482,824)

 

(38)

%

Total current liabilities from continuing operations

 

2,835,922

 

3,579,624

 

(743,702)

 

(21)

Working capital

$

(2,052,595)

$

(2,313,473)

$

260,878

 

(11)

%

Current ratio

 

0.28

 

0.35

 

  

 

  

As of June 30, 2021, we had a working capital deficiency of $2,052,595, an increase of $260,878 from a working capital deficiency of $2,313,473 as of December 31, 2020. The increase in working capital represents the net effect of decreased liabilities.
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.

45

Going Concern

The independent auditors’ report accompanying our June 30, 2021 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 COVID-19 pandemic will continue to have material and adverse impacts on our cash flow for the three months ending September 30, 2021 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.

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

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Smaller reporting companies are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures.

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

During the six months ended June 30, 2021, we have established procedures requiring the CEO to review filing-related files before preparing the consolidated financial statements and to confirm and ensure that all significant, non-routine events and pending transactions are properly disclosed.

46

We performed an evaluation, under the supervision and with the participation of our management, including our CEO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our CEO has concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported properly within the time periods specified by the SEC, and did not provide reasonable assurance that information required to be disclosed by the Company in such reports would be accumulated and communicated to the Company’s management, including its CEO, as appropriate, to allow timely decisions regarding required disclosure. Such conclusion was based solely on the fact that the Company identified deficiencies in its internal control over financial reporting as of June 30, 2021. Although we have determined that the existing controls and procedures are not effective, the deficiencies identified have not been deemed material to our reporting disclosures.

We have identified the following deficiencies, we have limited administrative and accounting resources, outdated accounting software and generally weak accounting processes and internal control procedures. Additionally, we have inadequate segregation of duties in certain accounting processes, including the payroll, cash receipts and disbursements processes in our accounting system, partly as a result of our limited size and accounting staff. We have taken steps to remediate these issues, including (1) hiring one more accounting personnel, (2) updating our operations manual to clarify and limit the power of our management team and our employees, and (3) periodical inspections by major shareholders to supervise both of our financial condition and decision making process. We expect that we will have improved controls and documentation in place by December 31, 2021.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

47

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.

There has been no unregistered sale of equity securities during the six months ended June 30, 2021.

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

48

ITEM 6. EXHIBITS

Exhibit

 

Description

No.

 

 

3.1

 

Certificate of Amendment filed with the Secretary of State of the State of Nevada dated November 8, 2018 (incorporated by reference to our Form 8-K, Exhibit 3.1, filed with the Securities and Exchange Commission on November 19, 2018)

3.2

 

Bylaws (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.2, filed with the Securities and Exchange Commission on December 18, 2014)

3.3

 

Certificate of Designation of Series A Convertible Preferred Stock, (incorporated by reference to our Form 8-K, Exhibit 3.1, filed with the Securities and Exchange Commission on November 3, 2017)

3.4

 

Certificate of Designation of Series B Convertible Preferred Stock (incorporated by reference to our Form 8-K, Exhibit 3.2, filed with the Securities and Exchange Commission on November 19, 2018)

4.1

 

Specimen stock certificate (incorporated by reference to our Form S-1 Registration Statement, Exhibit 4.1, filed with the Securities and Exchange Commission on December 18, 2014)

10.1*

 

Contract between AEC Southern Management Limited and Clark Orient Company Limited dated April 1, 2021

31.1*

 

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

31.2*

 

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

32.1*

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **

32.2*

 

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **

101.INS

 

Inline XBRL Instance Document *

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document *

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document *

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document *

104

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

*

Filed herewith.

**

In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 herewith are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act.

49

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

American Education Center, Inc.

 

 

 

 

By:

/s/ Max P. Chen

 

Name:

Max P. Chen

August 16, 2021

Title:

President, Sole Director, Chief Executive Officer, Interim Chief Financial Officer, and Secretary

50