10-K 1 tv490574_10k.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

¨	TRANSITION REPORT UNDER 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.)

2 Wall St, Fl. 8 New York, NY		10004
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 825-0437

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) 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 past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Emerging growth company	x

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 accounting standard provided pursuant to Section 13(a) of the Exchanger Act. ¨

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2017 (the last business day of the Registrant’s most recently completed fiscal year) was $11,991,500.

As of April 17, 2018, the registrant had 41,350,000 shares of common stock issued and outstanding.

EXPLANATORY NOTE

Throughout this Annual Report on Form 10-K, the “Company”, “we,” “us,” and “our,” refer to (i) American Education Center, Inc., a Nevada corporation (“AEC Nevada”); (ii) American Education Center, Inc., a New York corporation ("AEC New York"); and (iii) AEC Southern Management Co., Ltd, a company formed pursuant to the laws of England and Wales (the “AEC Southern UK”) and the subsidiaries of AEC Southern UK unless otherwise indicated or the context otherwise requires.

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K 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; and

other factors discussed elsewhere herein.

Forward-looking statements, which involve assumptions and describe our 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 because 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K.

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report on Form 10-K 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 Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. Such statements are presented only as some 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 Annual Report on Form 10-K.

This Annual Report on Form 10-K 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 Annual Report on Form 10-K. 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.

PART I.

ITEM 1. Business

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”) and AEC Southern Management Co., LTD, a company formed pursuant to the laws of England and Wales (the “AEC Southern UK”) and the subsidiaries of AEC Southern UK.

AEC New York was approved and licensed by the Education Department of the state of New York in 1999 to engage in education consulting service between the U.S. and China. For over seventeen years, AEC New York has devoted itself to international education exchange between China and the United States, by providing education and career enrichment opportunities for students, teachers, and educational institutions from both countries.

AEC Southern UK provides executive services, specifically, targeted and tailored executive training services to industrial clients in the food-related industries.

AEC Nevada acquired AEC Southern UK and its subsidiaries in 2016 pursuant to a Share Exchange Agreement (defined below), with AEC Southern UK’s wholly owned subsidiary, AEC Southern (Shenzhen) Management Co. Ltd (“AEC Shenzhen”) incorporated as a wholly owned foreign enterprise pursuant to PRC laws. AEC Nevada, AEC New York, AEC Southern UK and its subsidiaries are referred to as the “Company” hereinafter. AEC Southern UK, via AEC Shenzhen, to serve as a local platform for expanding the Company’s business in mainland China. Shenzhen, in the province of Guangdong, is designated by the People’s Republic of China as a Special Economic Zone (“SEZ”) City. SEZs are granted a more free-market oriented economic and regulatory environment, with business and tax policies designed to attract foreign investment and technology.

Our mission is to become a leading total solutions educational services provider for Chinese students wishing to study in the United States, and a leading corporate training and advisory services provider for customers with corporate clients in the PRC across various industries.

Currently, we provide five types of consulting services:

Placement Advisory Services;

Career Advisory Services;

Student & Family Advisory Services;

Other Advisory Services; and

Corporate Training & Advisory Services.

Services to our clients are provided through the Company’s principal executive office in New York, NY, and AEC Shenzhen’s office in Shenzhen, China. For marketing, we engage local agents in Shenzhen in Guangdong province, Nanjing in Jiangsu Province, Chengdu in Sichuan Province, and Shanghai in China to promote our services to potential clients, and we plan to engage more agents in China in the future.

Share Exchange with AEC Southern Management Co. LTD.

On November 8, 2016, a certain share exchange agreement (the “Share Exchange Agreement”) was entered into by and among AEC Nevada, AEC Southern UK, Ye Tian (“Tian”), Rongxia Wang (“Wang”) (Tian and Wang, collectively, were the owners of record of 100% equity interest of AEC Southern UK) and Yangying Zou (“Zou”)) where AEC Nevada acquired AEC Southern UK as a 100% subsidiary, for a consideration of 1,500,000 shares of Common Stock. Additionally, AEC Nevada also agreed to appoint Zou to serve as the CEO of AEC Southern UK and agreed to issue to Zou an aggregate of 1,500,000 shares of Common Stock simultaneously as the closing of the transactions underlying the Share Exchange. The transactions underlying the Share Exchange Agreement is referred hereinafter as the Share Exchange Transaction, which was closed on the same day (the “Share Exchange Closing Date”). On March 27, 2017, the parties to the Share Exchange Agreement agreed to amend the Share Exchange Agreement so that the Share Exchange Agreement would take effect on October 31, 2016 and amend the Share Exchange Closing Date to be on October 31, 2016.

Share Purchase Agreement with China Cultural Finance Holdings Company Limited

On October 30, 2017, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with China Cultural Finance Holdings Company Limited, a British Virgin Islands corporation (the “Purchaser”) pursuant to which the Company will issue 500,000 shares (the “Shares”) of the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at price of $4 per Share (the “Purchase Price Per Share”) to the Purchaser, with the rights, privileges and preferences set forth in the Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”), for the aggregate price of Two Million Dollars ($2,000,000) (the “Purchase Price”). The transactions underlying the Share Purchase Agreement were closed on the same day (the “Closing Date”).

Pursuant to the Share Purchase Agreement, the Company will use its commercially reasonable efforts to apply to be listed on the NASDAQ Capital Market or such other national securities exchange as is reasonably acceptable to the Purchaser (the “National Exchanges”), so that the Company’s common stock, par value $0.001 per share (the “Common Stock”) will commence trading on one of the National Exchanges (the “Uplisting”) within 365 days after the Closing Date (the “Uplisting Deadline”). Pursuant to the Share Purchase Agreement, if the Company does not complete Uplisting on or before the Uplisting Deadline (the “Eligible Uplisting”), the Purchaser will, within 30 days following the Uplisting Deadline, have the right to request the Company to buy back any number of the Shares (the “Buy Back Shares”), for a payment of the Buy Back Shares times the Purchase Price Per Share and such interest payment at a rate of 5% per annum accruing from Closing Date, subject to the terms and conditions of the Shares Purchase Agreement.

Corporate Structure

The corporate structure of the Company subsequent to the closing of the Share Exchange Agreement is illustrated as follows:

AEC Southern UK was incorporated on December 1, 2015 pursuant to the laws of England and Wales. AEC Southern Management Limited (“AEC HK”) was incorporated on December 29, 2015 pursuant to the laws of Hong Kong, and is a 100% owned subsidiary of AEC Southern UK. AEC Shenzhen was incorporated on April 15, 2016 as a wholly owned foreign enterprise pursuant to PRC laws, and is a 100% owned subsidiary of AEC HK. AEC HK, and AEC Shenzhen are hereinafter referred to as the “AEC Southern Subsidiaries”.

Upon closing of the Share Exchange Transaction, AEC Southern UK and its subsidiaries (AEC HK and AEC Shenzhen) became wholly owned subsidiaries of AEC Nevada.

The address of our principal executive offices and corporate offices is 2 Wall Street, Fl. 8, New York, NY 10005. Our telephone number is (212) 825-0437.

Other Developments

On August 22, 2017, AEC Southern Management Co. Ltd. (“AEC Southern”), a wholly-owned subsidiary of American Education Center Inc., a Nevada corporation (“AEC” or the “Registrant”), has entered into a non-binding letter of intent to acquire 100% of the outstanding shares of Dongmin Education Investment Co. Ltd. (“Dongmin”). Dongmin is an education investment and management company that delivers customized training and consulting services for both students and corporations in China.

On October 20, 2017 (the “Effective Date”), the Company entered into a copyright license agreement (the “Agreement”) with Max P. Chen, Chairman, Chief Executive Officer and interim Chief Financial Officer of the Company. Pursuant to the Agreement, Mr. Chen granted the Company a revocable, exclusive, world-wide, and royalty-free copyright license to a portfolio of English as second language books and training materials of which he authored /co-authored and currently holds the copyrights (collectively, the “ESL Materials”).

On December 1, 2017, the Company entered into a Strategic Partnership Agreement with Oxbridge International Education Group (“Oxbridge”), a long-time customer and strategic partner of the Company, to strengthen existing business relationship, and to share resources in marketing and sales, and jointly established a number of programs including, but not limited to, the Short-term Exchange Program for Outstanding Students and the Young Chinese-American Start-up/Entrepreneur Center.

Leveraging our knowledge of the educational system and environment in the United States and our understanding of the market demands 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 experiences in the United States. 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.

Additionally, recognizing the needs for enterprise training in China, since October 2016, we also deliver customized corporate training and advisory services to customers in China in the food industry to help them meet the related regulatory standards. The demand for such corporate training and advisory services in China has escalated in recent years and is driven mainly by China’s growing economy and desire to improve its competitiveness by meeting or setting international standards.

Our total revenues for the year ended December 31, 2017 and 2016 were $25,798,115 and $13,674,475, respectively. Revenues from our corporate training and advisory services for the year ended December 31, 2017 accounted for approximately 65% of our total revenues during this period, all delivered by AEC Southern UK, and revenues from student advisory services in the U.S., all delivered by AEC New York, accounted for approximately 35%. While our corporate training and advisory services have contributed significantly to our revenues since we started delivering such services as of October 2016, our strategy is to continue to strengthen our market position in the U.S. market by expanding our student advisory services in the U.S., for which we have formulated, and are in the process of implementing and rolling out, in multi-media marketing strategies and via multi-stage growth plans. For detailed information on marketing strategies and growth plans targeting to grow our education advisory services in the U.S., refer to “Item 1. Business – Our Marketing Strategies” and “Item 1. Business – Our Growth Strategies.”

Our Business

Headquartered in New York with operations in the PRC, the Company covers two market segments:

(1)

AEC New York capitalizes on the rising demand from the middle-class families in China for quality education in the United States (“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 Southern UK delivers customized corporate training and advisory services to customers with corporate clients. We create corporate training curriculum and coordinate with third-party vendors to deliver in-person, live training sessions to our customers’ corporate clients. Our corporate training services focus on subjects such as human resource management, organizational management, as well as information on local food safety regulations and the ISO.

Our Mission is to become a leading total solutions educational services provider for Chinese students wishing to study in the United States, and a leading corporate training and advisory services provider for customers with corporate clients in the PRC across various industries.

Our Key Revenue Drivers

We have expanded our service platform to include not only advisory services for our student customers wishing to study and gain post-graduate work experiences in the U.S. but capitalizing on market demands for enterprise training in China, also corporate training and advisory services for our customers with corporate clients in China. Currently, our main advisory services include:

Placement Advisory Services;

Career Advisory Services;

Student & Family Advisory Services;

Other Advisory Services; and

Corporate Training & Advisory Services.

Placement Advisory Services, Career Advisory Services, and Student & Family Advisory Services are provided by our subsidiary AEC New York; Corporate Training & Advisory Services are provided by our subsidiary AEC Southern UK.

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 and Placement Advisory services to Chinese students. Our one-stop advisory service encompasses ESL training and assistance to students and their families throughout the high school, college application and admission process.

Our Language Training service is based on the existing ESL training platform which provides language training for standard test preparation and is designed to help improve student’s English listening, speaking, reading and writing skills. Student customers will be able to take these training courses online when our ESL online training platform goes live in the second quarter of 2018.

Targeting the needs of Chinese families in obtaining admission to Ivy League and other prestigious universities, our Elite College Advisory service is designed to assist qualified Chinese students apply 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 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.

Career Advisory Services

Our Career Advisory Services include our Internship Advisory program and the Start-up Advisory program.

Our Internship Advisory program focuses on student’s career development by helping them identify and secure suitable internship and part-time or full-time work opportunities that are appropriate for their educational background and experience level. Through this program, we strive to help students map and navigate their career path and counsel them on matters including academic improvement to career assistance. Through this program, our student customers have chances to communicate with professions in the field, and participate in real-world case studies.

Our Start-up Advisory program provides advisory services to students and/or their families who want to start or make an investment in a business in the U.S. Collaborating with our strategic partners, our services include (i) recommending alternative business development opportunities; (ii) assistance with business plan development; (iii) assistance with accounting and financial management, marketing, product and project design; and (iv) assistance in project financing.

Student & Family Advisory Services

Our Student & Family Advisory Services are designed to assist our students and/or their families in the process of settling down in the U.S., so they can effectively focus on their studies.

Through our business partners, we assist the students’ families with purchasing real estate properties, organizing their personal financial management and investment needs, getting insurance and starting businesses. Our American Dream Program helps students’ families find good investment projects in the U.S. We also advise Chinese and 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.

As an emerging company headquartered in the U.S., the advisory services in the U.S. are provided through our AEC New York subsidiary.

Other Advisory Services

Through our Foreign Student Recruitment services, we assist universities in China to recruit students from the US. We customize this service based on our strategic relationship with college and universities in the US 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 US 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 US to teach in China. Such demand covers the need to recruit qualified US educators from Pre K-12 to teach in China.

Corporate Training & Advisory Services

Our Corporate Training & Advisory service is delivered by our wholly owned subsidiary, AEC Southern UK. We currently focus on corporate training in human resources management and organizational management for the general corporate market, as well as information sessions on local food industry regulations and the International Organization for Standardization (“ISO”). We advise on relevant training guidelines designed to further clients’ understanding of the pertinent compliance requirements, best practices, and/or relevant certification requirements.

Based on our clients’ specifications and objectives, we create training programs tailored to the specific needs and operation circumstances of our clients. Currently, our corporate training is delivered in-person by our outsourced vendors in accordance with the guidelines that we have developed based on our clients’ specifications.

Our Competitive Advantage

Our strength comes mainly from our understanding of the Chinese education and enterprise training markets and our ability in not only anticipating areas with great market demands but also delivering quality, customized services on a consistent basis. We have a scalable business platform that is conducive to growth in earnings and profitability; and have a business model that adapts well to changing market conditions. We believe that the following competitive strengths enhance our position in the markets that we are currently competing in:

Experienced Management. Our management team is comprised of industry experts with extensive experience in the education service industry, knowledge of the education system in the United States and a deep understanding of the Chinese market as well as finance executive who specializes in mergers and acquisitions, business reorganization, internal controls and risk management. We have established a corporate culture that is based on integrity, built compliance into risk management, integrated structure and discipline into our operating management and financial reporting processes, and made it a priority to deliver quality, customized services without compromising our ability to generate sustainable operating profits.

Proven Business Model. Our business model is to target those service areas that are driven by significant market demands and have potential for sustainable growth in the long run. We take a measured approach in growing our business and have been effective in anticipating market needs as we expand our customer base from students to corporate clients that need corporate training. As a total solutions education advisory services provider, we have been successful in not only meeting the market demands for quality education in the United States but also anticipating the needs for corporate training in China as the country continues to raise and/or standardize its food industry compliance requirements.

Scalable Business Platform. As an emerging business in the advisory and service business, we have the structure and discipline in controlling our operating expenses and overhead as we grow our business and improve our operating profits. By keeping a relatively low headcount and optimizing the use of outsourced industry experts, we have been effective in delivering quality services while maintaining healthy operating margins.

Customized Service Approach. Our success is built on our reputation in delivering consistent, reliable, quality, customized advisory services. Our approach is result oriented and we customize our service based on the specific needs of our student and corporate customers. Without compromising our objective of delivering consistent growth in earnings and profitability, we take pride in the delivery of tailored advisory services to our student customers as well as customized corporate training for our customer’s corporate clients in China.

Our Growth Strategy

Our goal is to become a leading total solutions educational services provider for Chinese students wishing to study and gain work experiences in the United States, and a leading corporate training and advisory services provider for customers with corporate clients in the PRC across various industries. Our business development plan includes, among other things, the following strategic initiatives:

Expand organically within existing markets and into new markets. Specifically intended to carry out our vision of strengthening our market position in the U.S., we are implementing a combination of on- and off-line marketing approaches to expand our student-customer base in markets we currently serve. Such approaches include the recently launched Membership Program that is designed to maximize the power of personal and commission-based referral of our services to other potential customers; and the AEC Help mobile application, a social network platform that is intended to bring students together under one roof, offering them alternative solutions to issues frequently encountered by foreign students in the United States.

Our Membership Program allows third-party agents and education service providers, either individuals or entities, to sign up as members. Benefits to becoming our members include access to all programs pursuant to our student advisory services currently provided by AEC New York. Our members typically have access to clients with needs that can be met by programs provided by AEC New York. After paying a one-time, non-refundable fee of $50,000 to become our member, members can seamlessly integrate our services with their service offerings by outsourcing the specific services to us. We believe the Membership Program will allow us to broaden the reach of our brand and services without establishing additional offices in China and in the U.S.

Our AEC Help mobile application is developed in-house and is operated by AEC New York. It is an iOS app that users can download for free from the Apple AppStore. Users are international students who are in the U.S. or seek to study in the U.S. The app provides various academic and non-academic resources compiled by us to assist users for studying and living in the U.S. Resources available through AEC Help Application include academic resources where users can filter and search for universities based on the user’s own test scores and preferences, and non-academic resources such as unit conversions, maps, real-time exchange rates, student events, etc. Where the online resources cannot provide sufficient assistance to our users, they are able to reach a member of our staff who will connect the user with a third-party service provide directly. We believe this social media network, AEC Help, will allow us to broaden our reach to potential student customers.

To grow organically, we plan to expand our service offerings to existing student customers, as well as deepening our strategic relationships with top universities, top companies, and top recruitment agencies, to aggregate our resources to collectively deliver customized career advisory services. We are prepared plan to launch the Other Recruitment & Placement Services in 2018 that includes our Foreign Student Recruitment services and Foreign Educator Placement services.

Through our Foreign Student Recruitment services, we will assist universities in China to recruit foreign students from the U.S. and other countries. We customize this service based on our relationship with universities in China and their specific recruitment goals. We believe the demand for our recruitment services is driven mainly by the lack of an established channel to attract students from the U.S. and the needs to expand and diversify the university’s student body.

Our Foreign Educator Placement services are designed to meet the increasing demand for experienced educators from the U.S. to teach in China. Based on our understanding of the market demands, we believe there is a significant service opportunity for us to recruit qualified U.S. educators from PreK-12 to college to teach in China.

Technology Platforms. We believe that our future success also depends, in part, on our ability to vertically integrate training courses and content delivery, specifically, complementing and integrating off-line, in person delivery with off-the-shelf, online delivery of training modules, which will increase the scalability of our operation. We are in the process of completing the development of an online ESL/language training platform for our student customers as well as an online training platform for our customer’s corporate clients in China which, when completed and launched, will allow participants to access our training courses on demand and on a 24/7 basis. Leveraging these two newly developed online training platforms, we believe we could realize significant growth in our revenues from language training as well as corporate training.

Mergers and Acquisitions. We plan to grow our training and advisory business through acquisitions and intend to replicate our success by identifying potential merger and acquisition targets, especially training institutions that are successful in their respective fields or industries, to efficiently and rapidly broaden our service offering. In addition, we are performing market research to identify suitable new markets and suitable targets in the education and training industry that are potentially profitable such as trade skills training, and personal development.

Our Management Team

We believe we have a strong and experienced management team including our founder, chief executive officer and chairman, Mr. Max P. Chen, a pioneer and leader in the education service industry; Mr. Qi Wu, Chairman and CEO of AEC Southern UK, who replaced Yangying Zou effective as of December 1, 2017, and a recognized expert with extensive business relationship in the PRC food industry; and Ms. Weihua Zhu, our chief operating officer with over a decade of experience in education advisory services, who, together as a team, have many years of public and private company experience, industry and professional experience and a significant network of business contacts in the industry, and extensive experience in SEC reporting, compliance and risk management, business reorganization, and mergers and acquisitions.

Our Industry and Market Opportunities

Educational, Non-Corporate Compliance Service Industry

The demand for global education is growing rapidly in China, and the United States remains the top choice for Chinese students wishing to study abroad. According to the Overseas Chinese Returnees Employment Blue Book published by the PRC’s Ministry of Education in 2015, approximately 4 million Chinese students had studied in foreign countries.

Source: Open Doors, IIE. Leading Places of Origin: Previous Years. Retrieved from https://www.iie.org/Research-and-Insights/Open-Doors/Data/International-Students/Places-of-Origin/Leading-Places-of-Origin

The number of Chinese students entering the U.S. for study grew sharply in 2006, when Congress loosened restrictions on student visas from China for the first time since the tragic events of September 11, 2001, and this trend has continued strongly since then. Accordingly, there is a large and growing number of Chinese students in the U.S. seeking a broad range of acclimation support and services, including education consulting services. We strive to become a bridge for these students with our service offerings.

According to Project Atlas, a collaborative global research initiative led by the Institute of International Education, in the academic year 2016/2017, the total number international students studying in the U.S. (in both public and private institutions) was 1,078,822, of which 350,755, or 32.5%, were Chinese nationals. For the academic year 2015/2016, the comparable figures were 1,043,839 international students in the U.S., of whom 31.5% or 328,547 were Chinese. This growth trend has been in place for several years. However, with the current political environment in Washington, DC regarding visas, it is not known whether it will continue in the future.

Corporate Training and Advisory Service Industry

Market size of China's education industry

Source: Golden Age of China’s Education Industry: Seize the Moment. Technology, Media & Telecommunications Industry, Deloitte China. 2016

The PRC market demand for corporate and executive training is expected to continue to grow and take a bigger market share in the entire general education industry. According to a report published by Deloitte in 2016, Golden Age of China’s Education Industry, the education industry in China is expected to grow from RMB 1,643.2 billion in 2015 to RMB 2,923.5 billion in 2020. Corporate training that accounted for approximately 7.6% of the education industry in 2015 is expected to grow to approximately 9.0% in 2020. Individual career training in 2015 made up 20.2% of the education industry and it is projected to increase to 22.4% of the education industry in 2020, according to the Deloitte report. We believe the growth in the corporate training market is intricately linked to China’s growing economy and desire to improve its competitiveness by meeting or setting international standards.

AEC Southern UK is currently focused on delivering customized corporate training and advisory services, with an eye towards general career-related individual training, to be delivered both in person and online. As such, we believe that we are well positioned to address such training needs and plan to deliver customized corporate training for companies in China covering various industries. We are in the process of finalizing our in-house developed online training platform that will be utilized to delivery our corporate training services starting in the first quarter of 2018.

Our Competition

The education consulting business targeting both PRC citizens aboard and PRC residents is rapidly evolving, highly fragmented and competitive, and we expect competition in this sector to persist and intensify. For services provided by our AEC New York subsidiary, we primarily serve Chinese student customers and their families in the U.S. For services provided by our AEC Southern UK subsidiary, our corporate clients are primarily located in China.

Our advisory services for student customers face competition from New Oriental Education & Technology Group Inc., a market leader in the market of advisory services for student customers that we operate in.

The market for continuing professional education, corporate learning solutions, and corporate executive training is large, fragmented and highly competitive.

Our Marketing Strategies

We believe prospective student customers are attracted to our advisory services due to our excellent brand name, personalized service model and the quality of our services. Historically, as a small business, we rely extensively on our strategic partners and word-of-mouth referrals in growing our student customers; and employ the following marketing and recruiting methods to attract new student customers.

Commission-based referrals. To enhance the effectiveness of the referral process, we pay a commission that ranges from 10% to 20% on a success basis. Our placement advisory and career advisory services have benefited from, and are expected to continue to benefit from, commission-based referrals by our current and former student customers.

Sponsorships. We are proud sponsors of Chinese Student Associations in various higher education institutions in the Greater New York Area. We regularly promote our services to members and students of the various Chinese Student Associations and are regularly present at events held by such Associations.

Marketing materials. We plan to publish a “Chinese Visitors Guide Book”. It is planned to be a travel book with plug-in advertisements for the Company, which will assist Chinese visitors to the U.S. and simultaneously promote our services. We will also advertise in e-magazines, prepare and distribute brochures and present at exhibitions as part of our marketing strategy.

Social media marketing. We maintain our own Wechat official accounts that offer information on education and life abroad. In addition, we work with other Wechat official accounts with significant followings to publish information on AEC services. After every offline event, our employees will create chat groups with all event attendants to facilitate direct communication and follow up.

Most recently, we launched our in-house developed mobile application—AEC Help. It is an iOS app that users can download for free from the Apple AppStore. Users are international students who are in the U.S. or seek to study in the U.S. The app provides various academic and non-academic resources compiled by us to assist users for studying and living in the U.S. Resources available through AEC Help Application include academic resources where users can filter and search for universities based on the user’s own test scores and preferences, and non-academic resources such as unit conversions, maps, real-time exchange rates, student events, etc. Where the online resources cannot provide sufficient assistance to our users, they are able to reach a member of our staff who will connect the user with a third-party service provide directly. We believe this social media network, AEC Help, will allow us to broaden our reach to potential student customers.

Our Customers

We currently serve two types of customers: (i) Chinese students wishing to study and/or gain work experience in the U.S.; and (ii) companies with corporate clients in China in the food industry interested in receiving training to meet international standards, and get information on local food safety regulations and the ISO.

Our target student customers include high school students who want to apply for U.S. colleges, college students who need academic counseling and future career consulting, and graduates who need professional development. Our target also includes students’ families. The cost of studying abroad is high, therefore international students usually come from middle class or high-net-worth families. We have found that those families tend to invest overseas for wealth preservation and inheritance purposes.

The market for our AEC Southern UK’s services is driven by businesses that seek to close the execution gap that may exist between their business objectives and their existing business processes. We have two customers and they both have corporate clients in the food industry that need corporate training. With our custom-designed training programs in business/operation processes and executive training, we are also able to offer solutions to a broader range of companies.

For our AEC Southern UK segment, our 2 clients are Damapai International Trading (Hong Kong) Limited (“Damapai”) and W.W. Industrial China Ltd. (“WW”), representing 19.8% and 80.2 %, 17.9% and 82.1% of revenue of AEC Southern UK for the fiscal years ended December 31, 2016 and 2017, respectively. We have entered into long-term agreements with these two customers; and we intend to renew the agreements upon their expiration in January 2018 for Damapai, and in November 2018 for WW. While our commercial relationship is non-exclusive in nature, we have maintained positive working relationships them and we believe they will continue to utilize our services in meeting the corporate training needs of their corporate clients in the PRC. We believe we are not dependent upon these two customers and will be able to find new customers swiftly on commercially reasonable terms, due to our expertise and experience in this field, and the general upswing and expansion of the PRC market demand for corporate and executive training.

Our Regulatory Environment

Regulation of the Education Industry in the United States

Government authorities in the United States, at the Federal, state and local level, extensively regulate education and exchange student programs. Such regulations include, among other things, the regulations and policies of the United States Department of Education. However, unlike the systems of most other countries, education in the United States is highly decentralized, and the Federal government and Department of Education are not heavily involved in determining curricula or educational standards. The establishment and grading of such standards has been left to state and local school districts.

The Education Department of the State of New York in 1999 consented for AEC New York to incorporate pursuant to §216 of New York Education Law Relating to Education Corporations, and Section 104 of the New York Business Corporation Law, and consented in 2003 for AEC New York to amend its certificate of incorporate to include education consulting service as its business purpose, pursuant to §216 of New York Education Law Relating to Education Corporations, and Section 104(e) of the New York Business Corporation Law.

A more formalized regulation is the requirement that a citizen of a foreign country who wishes to enter the United States must first obtain a visa, either a nonimmigrant visa for temporary stay, or an immigrant visa for permanent residence. Foreign students must have a student visa to study in the United States. Visas generally require an application and an interview.

In addition to the regulatory approval requirements described above, we are or will be, directly, or indirectly, subject to extensive regulation of the educational industry by the Federal and state governments and the governments’ of foreign countries in which our services are provided.

Regulation of the Education Industry in China

The principal laws and regulations governing private education in China consist of the Education Law of the PRC, the Law for Promoting Private Education (2003), the Implementation Rules for the Law for Promoting Private Education (2004), and Law for Promoting Private Education (2016).

Under these regulations, “private schools” are defined as schools established by non-governmental organizations or individuals using non-government funds. Private schools providing academic qualifications education, kindergarten education, education for self-study examination and other education shall be subject to approval by the education authorities at or above the county level, while private schools engaging in occupational qualification training and occupational skill training shall be subject to approvals from the authorities in charge of labor and social welfare at or above the county level.

Since our operations in the PRC either delivered through our AEC New York office for education consulting services, placement services and family support services, or through our AEC Southern UK operation for corporate training, we believe we are not involved in providing services relating to the fundamental education systems of the PRC, including a school system of pre-school education, primary education, secondary education and higher education, a system of nine-year compulsory education and a system of education certificates, we believe our operations in the PRC are not subject to the PRC Private Education Laws. If our operations are found to be subject to, and/or in violation of any of these laws, regulations, rules or policies or any other law or governmental regulation to which we or our customers are or will be subject, or if interpretations of the foregoing changes, we and our PRC subsidiaries may be subject to civil and criminal penalties, damages, fines, and the curtailment or restructuring of our operations. Similarly, if our customers are found non-compliant with applicable laws, they may be subject to sanctions.

Foreign Investment in Educational Service Industry

Under the Foreign Investment Industries Guidance Catalog (2015), or Foreign Investment Catalog, which was amended and promulgated by the National Development and Reform Commission, or NDRC, and the MOFCOM in March 2015 and became effective on April 10, 2015, foreign investment is encouraged in non-academic vocational training institutions. Preschool education, senior high school education and higher education in grades 10 to 12 are in a restricted industry, meaning foreign educational organizations with relevant qualifications and experience and Chinese educational organizations are only allowed to operate senior high schools in cooperative ways in the PRC. Any foreign investment in higher education and senior high school education has to take the form of a cooperative joint venture. Foreign investment is banned from compulsory education, which means grades 1 to 9. Foreign investment is allowed in after-school tutoring services and training services which do not grant certificates or diplomas. We do not believe we are subject to the aforementioned ban on foreign investment in educational service industries.

Employment Laws

We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, and social insurance, housing funds and other welfare. These include local labor laws and regulations, which may require substantial resources for compliance.

China’s National Labor Law, which became effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1, 2008, permit workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract. The National Labor Contract Law has enhanced rights for the nation’s workers, including permitting open-ended labor contracts and severance payments. The legislation requires employers to provide written contracts to their workers, restricts the use of temporary labor and makes it harder for employers to lay off employees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed once or the employee has worked for the employer for a consecutive ten-year period.

We are required by PRC laws and regulations to pay various statutory employee benefits, including pensions, housing funds, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated governmental agencies for the benefit of our employees. Except for housing funds, we are in compliance with payment of all other employment related insurance on behalf of our employees.

Taxation in the U.S.

We are subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of our deferred tax assets and liabilities;

expected timing and amount of the release of any tax valuation allowances;

tax effects of stock-based compensation;

costs related to intercompany restructurings;

changes in tax laws, regulations or interpretations thereof; and

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities.

Taxation in the PRC

Pursuant to the Provisional Regulation of China on Value Added Tax and their implementing rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay VAT at a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Further, when exporting goods, the exporter is entitled to a portion of or all the refund of VAT that it has already paid or borne.

To ensure compliance with rules and regulations, we have engaged Mazars, an international audit, tax and advisory services firm to help evaluate the tax obligations of our wholly owned subsidiary, AEC Southern UK and its subsidiaries in light of the manner in which they are legally structured, the manner in which business is currently conducted and pertinent tax rules and regulations that are in effect at the respective jurisdictions (that is Wales, UK; Hong Kong and China). Our plan is to comply with the respective tax filing requirements based on Mazars’ assessment.

Regulations on Dividend Distribution in the U.S.

Our Board of Directors' ability to declare a dividend is subject to restrictions imposed by Nevada corporate law. Nevada corporate law, the Nevada Revised Statutes provides that no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, (i) the corporation would not be able to pay its debts as they become due in the usual course of business, or, (ii) except as otherwise specifically permitted by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a dissolution to satisfy the preferential rights of preferred stockholders. Directors may consider financial statements prepared on the basis of accounting practices that are reasonable in the circumstances, a fair valuation, including but not limited to unrealized appreciation and depreciation, and any other method that is reasonable in the circumstances.

Regulations on Dividend Distribution in the PRC

Under applicable PRC laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises in China are required to allocate at least 10% of their accumulated profits each year, if any, to fund statutory reserves of up to 50% of the registered capital of the enterprise. Statutory reserves are not distributable as cash dividends. Each wholly owned subsidiary in China must comply with the foregoing regulations.

Under PRC law, our subsidiary, AEC Southern Shenzhen, is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

As of the date of this prospectus, AEC Southern Shenzhen has not conducted any business and does not have any after-tax profit; and it has not declared or paid any dividends to our offshore entities.

M&A Rules and Overseas Listings

On August 8, 2006, six PRC regulatory agencies, namely, the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration of Taxation, SAIC, CSRC and SAFE, jointly adopted the M&A Rule which became effective on September 8, 2006. This M&A Rule purports to require, among other things, offshore special purpose vehicles, or SPVs, formed for the purpose of acquiring PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. While the application of the M&A Rule remains unclear, we believe, based on the advice of our PRC counsel, that CSRC approval was not required in the context of our initial public offering as we are not a special purpose vehicle formed for the purpose of acquiring domestic companies that are controlled by our PRC individual shareholders, as we acquired contractual control rather than equity interests in our domestic affiliated entities. However, we cannot assure you that the relevant PRC government agency, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory agency subsequently determines that we needed to obtain the CSRC’s approval for our initial public offering or if CSRC, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from our initial public offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, and prospects, as well as the trading price of our Common Stock.

Properties/Facilities

Our principal executive office is located at 2 Wall Street, Floor 8, New York, NY 10005. In December 2014, the Company entered into a lease for office space with an unrelated party. The lease was to commence on December 11, 2014, however, due to renovation issues, the lease was changed and commenced on March 1, 2015 and the Company received two months of free rent. This lease agreement requires a monthly rental of $29,558 and expires on July 31, 2025.

AEC Southern Shenzhen leases office space from an unrelated third party for a period from April 1, 2016 to March 31, 2018. This lease agreement requires a monthly rental of RMB 2,000 (approximately US$300). Upon expiration of the lease, we plan to renew or seek new locations.

We believe our facilities are sufficient for our business operations.

Employees

As of the filing date hereof, the Company has 25 full and part-time employees inclusive of outsourced consultants. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Off-Balance Sheet Arrangements

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

Seasonality

AEC New York typically experiences seasonal fluctuations in its revenues and results of operations, primarily due to quarterly changes in student enrollments resulting from admission seasons. AEC Southern UK does not experience substantial seasonality in its revenues.

ITEM 1A. RISK FACTORS

Risks Related to Our Business

If we are not able to continue to attract students to enroll in our courses without a significant decrease in course fees, our revenues may decline, and we may not be able to maintain profitability.

The success of our business depends primarily on the number of student enrollments in our courses and the amount of course fees that our students are willing to pay. Therefore, our ability to continue to attract students to enroll in our courses without a significant decrease in course fees is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, expand our geographic reach, manage our growth while maintaining the consistency of our service quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and respond to competitive pressures, as well as the ability of our partner colleges and institutions to maintain their faculties’ teaching quality. If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our revenue may decline and we may not be able to operate profitability.

Our business depends on our brand name “American Education Center”, and if we are not able to maintain and enhance our brand, our business and operating results may be harmed.

We believe that market recognition of our name “American Education Center” has contributed significantly to the success of our business. We also believe that maintaining and enhancing the “American Education Center” brand is critical to maintaining our competitive advantage. We offer a diverse set of programs, services and products to primary and middle school students, college students and other adults throughout many provinces and cities in China. As we continue to grow in size, expand our programs, services and product offerings and extend our geographic reach, our ability to maintain and improve the quality and consistency of our services, products and offerings may be more difficult to achieve.

We have invested in brand promotion activities. We cannot assure you that these or our other marketing efforts will be successful in promoting our brand to remain competitive and well recognized. If we are unable to further enhance recognition of our brand and our programs, services and products, or if we incur excessive marketing and promotion expenses, our business and results of operations may be materially and adversely affected. In addition, any negative publicity relating to our Company or our programs and services, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business and operating results.

If we fail to successfully execute our growth strategies, our business and prospects may be materially and adversely affected.

Our growth strategies include but are not limited to: expanding our service offerings to satisfy the needs of our student customers and customers with corporate clients that have compliance training needs. Our ability in executing our growth strategies depends largely on our capability in developing and delivering quality, customized services on a consistent basis and in a cost-effective and timely manner, as well as maintaining and continuing to establish strategic relationships with other businesses and education institutions. If we fail to successfully execute our growth strategies, we may be unable to maintain and grow our business operation, and our profitability may be materially and adversely affected.

We face competition in the student advisory services markets, and if we fail to compete effectively, our profitability may be adversely affected.

The markets for language training, college placement and career advisory are rather fragmented. With relatively low entry barriers, we face competition that compete generally on price. Our student customers may decrease due to price competition. Some of our competitors have greater resources than we have. These competitors may be able to devote greater resources than us to the development, promotion and marketing of their programs and services, and respond more quickly to changes in student needs, admissions standards or new technologies. We cannot assure you that we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respond to evolving competition effectively, our profitability may be adversely affected.

We may need additional capital for growth purposes. The availability of capital and the terms on which it will be available are uncertain.

We may need to raise funds to take advantage of growth or acquisition opportunities in the future. We currently have no arrangements or commitments for additional financings. If we cannot expand our operation or make acquisitions that we believe are necessary to maintain our competitive position, we may not be able to maintain a reasonable growth rate. If we raise additional capital by selling equity or equity-linked securities, these securities would dilute the ownership percentage of our existing stockholders. Also, these securities could also have rights, preferences or privileges senior to those of our common stock. Similarly, if we raise additional capital by issuing debt securities, those securities may contain covenants that restrict us in terms of how we operate our business, which could also affect the value of our common stock. We may not be able to raise capital on reasonable terms or at all.

Our strategic relationships are usually non-exclusive arrangements and our strategic partners may provide the same or similar services to our competitors, which could significantly dilute any competitive advantage we get from these relationships.

We rely on our strategic partners to provide us with access to potential student customers and corporate customers with clients that need compliance training and advisory services. Our strategic partners may enter identical or similar relationships with our competitors, which could diminish the value of our service offerings. Our strategic partners could terminate their relationship with us at any time. Currently, we depend on two customers that have a significant base of corporate clients in China to generate all of our corporate training and advisory services. If any of these two customers were to terminate their relationship with us at the same time, we could face a significant decline in our revenues from corporate training and advisory services and we may not be able to replace the lost revenues in the short-run. We may not be able to maintain our existing relationships or enter new strategic relationships.

Because we rely on a limited number of customers for a large portion of our revenue, the loss of one or more of these customers could materially harm our business.

We receive a significant portion of our revenue in each fiscal period from a relatively limited number of customers, and that trend is likely to continue. Sales to our major customers (that individually accounted for more than 10% of our gross revenues) accounted for approximately 79.9% and 56.5% of our total revenue for the year ended December 31, 2017 and 2016. The loss of one or more of these major customers, a significant decrease in orders from one of these customers, or the inability of one or more customers to make payments to us when they are due could materially affect our revenue, business and reputation. While none of these five largest customers have failed to make payments to us when they are due, we cannot guarantee that we would not experience this in the future.

We may be unable to protect our intellectual property adequately or cost effectively, which may cause us to lose market share or reduce our prices.

Our success depends in part on our brand identity and our ability to protect and preserve our proprietary rights. We cannot assure you that we will be able to prevent third parties from using our intellectual property rights and technology without our authorization. We do not own any patents on our intellectual property, including our mobile app, the AEC Help and our online training platform. Rather, to protect our intellectual property, we rely on trade secrets, common law trademark rights, trademark registrations, copyright notices, copyright registrations, as well as confidentiality and work for hire, development, assignment and license agreements with our employees, consultants, third party developers, licensees and customers. However, these measures afford only limited protection and may be flawed or inadequate. In addition, enforcing our intellectual property rights could be costly and time-consuming and could distract management's attention from operating business matters.

The uncertainty involving the immigration policies of the current administration of the U.S. could have significant adverse effects on the demand for our business, and may negatively impact our results of operation.

The current U.S. administration has evoked uncertainty among international students and overseas business owners who wish to travel to the U.S. for education opportunities and business opportunities, respectively. Our business model and revenue from advisory services to student customers depends on the demand of international students and overseas business owners, and as such, could have a negative impact in our results of operation.

New services and programs that we develop may compete with our current offerings.

We are constantly developing new programs and services to meet changes in student demands and respond to changes to admissions standards, market needs and trends and technological changes. While some of the programs and services that we develop will expand our current offerings and increase student customers, others may compete with or make irrelevant our existing offerings without increasing our total revenues from advisory services provided to student customers. For example, our online training courses may take away students from our existing in-person courses. If we are unable to expand our program and service offerings while increasing our total student customer base and profitability, our business and growth may be adversely affected.

Our business is subject to fluctuations caused by seasonality or other factors beyond our control, which may cause our operating results to fluctuate from quarter to quarter.

For our AEC New York operations, we have experienced, and expect to continue to experience, seasonal fluctuations in our revenues and results of operations, primarily due to quarterly changes in student customers resulting from admission seasons. Historically, we receive deposits for our services during the second and third quarters of our fiscal year that usually lead to increased revenues during the subsequent quarters. However, deposits are refundable and thus, if the student customer is not accepted to the college or university of his/her choice (normally in the third and fourth quarters of our fiscal year), our revenues during these quarters may be lower than those in previous quarters. In addition, because these deposits can be refundable, revenue cannot be recognized until we successfully complete our services and our student customers receive admission letters. These fluctuations could result in volatility and adversely affect our operations from one quarter to the next. As our revenues grow, these seasonal fluctuations from AEC New York’s business operations may become more pronounced.

Our historical financial and operating results are not indicative of our future performance; and our financial and operating results are difficult to forecast.

Our financial and operating results to date are not necessarily indicative of future operating results. In addition to the fluctuations described above, our revenues, expenses and operating results may vary from quarter to quarter and from year to year in response to a variety of other factors beyond our control, including, but not limited to:

general economic conditions;

perception of value and future opportunities for an international education as perceived by our Chinese customers;

changes in corporate training needs in China;

regulations or actions pertaining to the provision of corporate training and advisory services in China;

detrimental negative publicity about us, our competitors or our industry;

changes in consumers’ demand for our services and programs; and

non-recurring charges incurred in connection with acquisitions or other extraordinary transactions or unexpected circumstances.

Due to these and other factors, we believe that quarter-to-quarter comparisons of our operating results may not be indicative of our future performance, and therefore you should not rely on them to predict the future performance of our Company. In addition to the above factors, our past results may not be indicative of future performance because of new businesses developed or acquired by us.

Our business is difficult to evaluate in part because we have limited experience with respect to some of our newer services, programs and offerings.

Historically, our core business has been the delivery of advisory services to Chinese student customers wishing to study in the U.S. in the areas of college admission, internship and career development. In the fourth quarter of 2016, we expanded our business to include corporate training and advisory services with the acquisition of AEC Southern UK. We continually develop ideas for new services to expand our business and client base and we launch new projects on a regular basis and are in the process of rolling out our online training services. Some of these new service offerings have not generated significant revenues to date, and we have, necessarily, less experience responding quickly to changes, competing successfully and maintaining and expanding our brand in such new project areas. Consequently, there is limited operating history on which you can base your evaluation of the business and prospects of these relatively newer operations.

The continuing efforts of our senior management team and other key personnel are important to our success, and our business may be harmed if we lose their services.

The continuing services of our senior management team is very important to us. We particularly value the service of Mr. Max P. Chen—our founder, CEO and Chairman—who has been with AEC New York since its inception in 1999. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily, and our business may be disrupted or suffer from their departure. Competition for experienced management personnel in the private education sector is intense, the pool of qualified candidates is limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose teachers, students, and key professionals and staff members.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our annual reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1,000,000,000, if we issue more than $1,000,000,000 in non-convertible debt in a three year period, or if the market value of our common stock held by non-affiliates exceeds $100,000,000 as of any April 30 before that time, in which case we would no longer be an emerging growth company as of the following April 30. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with the public company effective dates.

Risks Related To Doing Business in China

The PRC laws and regulations governing the Company’s business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations as well as in PRC economic, political and social conditions may have a material and adverse effect on the PRC economy and the education service industry in particular, and in turn the Company’s business.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing the Company’s business, or the enforcement and performance of the Company’s arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Company and any future subsidiaries are considered foreign persons or foreign funded enterprises under PRC laws, and as a result, the Company is required to comply with PRC laws and regulations. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.

The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. The Company cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the Company’s businesses.

Doing business in the PRC is subject to many uncertainties and changes in the political, economic or social direction of the PRC could have an adverse effort on the Company’s operations.

While the PRC economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our educational services depends, in large part, on economic conditions in China. Any significant slowdown in China’s economic growth may cause our potential students to delay or cancel their plans to enroll in our schools, which in turn could reduce our revenue.

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. The differing cultures, business preferences, corruption, deserve uncertain government regulations, tax systems and currency regulations are risks that can impact the Company’s operations. Although the PRC government has been pursuing economic reform policies, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly attend, especially in the event of a change in leadership, social or political description or unforeseen circumstance, there is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent, effective or continue.

Regarding intermediate and consulting business activities relating to self-funded overseas studying, the Ministry of Education (“MOE”), the Ministry of Public Security and the SAIC jointly issued the Administrative Regulations on Intermediate Services for Overseas Studies with Private Funds and their Implementing Rules in 1999 and the Education Commission of Beijing and Beijing Administration for Industry and Commerce jointly issued the Beijing Measures of Supervisions and Recognition of Intermediate Services for Self-Funded Overseas Studies (Trial) in September 2015, which require that any intermediate service organization engaged in such services procure from the MOE the Recognition on the Intermediate Service Organization for Self-funded Overseas Studies. On January 12, 2017, the State Council promulgated the Decision of the State Council on the Third Installment of the Cancellation of the Administrative Licensing Matters Delegated to Local Governments, which, among other things, cancelled the Recognition on the Intermediate Service Organization for Self-funded Overseas Studies, which means that the requirement for intermediate service organizations to obtain Recognition on the Intermediate Service Organization for Self-funded Overseas Studies from the provincial government for their engaging in intermediate and consulting business activities relating to self-funded overseas studies is cancelled. This Decision provided that after the cancellation of such requirements, the MOE and the SAIC shall study and develop contract template for reference and strengthen their guidance, regulating and service to intermediate service organizations and that the relevant industrial association shall play their role in self-discipline.

We believe that we are not required to obtain the aforementioned license for our student advisory services because the services are primarily delivered in the United States. For our corporate training and advisory services provided through AEC Southern UK to corporate customers with corporate clients located in the PRC, we believe they are not subject to the aforementioned regulations.

Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process, which could make it more difficult for us to pursue growth through acquisitions in China.

The M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the MOFCOM must be notified in the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national security review by the MOFCOM. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited.

There is significant uncertainty regarding the interpretation and implementation of these regulations relating to merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could harm our business.

We are subject to the United States Foreign Corrupt Practices Act, or FCPA, and other laws that prohibit U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants, sales agents or distributors of our Company, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove ineffective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could adversely impact our business, operating results and financial condition.

Risks Related to the Shares of our Common Stock

The ownership of our common stock is concentrated among a small number of shareholders, and if our principal shareholders, director and officers choose to act together, they may be able to significantly influence management and operations, which may prevent us from taking actions that may be favorable to you.

Our ownership is concentrated among a small number of shareholders, including our founder, director, officers and entities related to these persons. Accordingly, these shareholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our shareholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control of the Company or impeding a merger or consolidation, takeover or other business combination that could be favorable to you.

The requirements of being a public company may strain our resources and divert management’s attention.

Compliance with the Exchange Act and the Sarbanes-Oxley Act and other applicable securities rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. In addition, complying with public company disclosure rules makes our business more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

Our common stock is considered a “penny stock” which is subject to restrictions on marketability, so you may not be able to sell your shares.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is currently less than $5.00 per share and therefore is designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose some information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the common stock and may affect the ability of investors to sell their shares. These regulations may likely have the effect of limiting the trading activity of the Company’s common stock and reducing the liquidity of an investment in its common stock. In addition, investors may find it difficult to obtain accurate quotations of the common stock and may experience a lack of buyers to purchase our Company’s stock or a lack of market makers to support the stock price.

We will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their shares.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested director transactions, conflicts of interest and similar matters.

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and NYSE AMEX Equities exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than necessary, we have not yet adopted these measures.

We do not currently have independent audit or compensation committees. As a result, our sloe director has the ability, among other things, to determine his own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our shareholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

There may not be an active, liquid trading market for our equity securities.

Our common stock trades exclusively on the OTCQB Marketplace since September 2016. Trading volumes on the OTCQB Marketplace can fluctuate significantly, which could make it difficult for investors to execute transactions in our securities and could cause declines or volatility in the prices of our common stock.

If the price of our common stock is volatile when we are trading, purchasers of our shares of common stock could incur substantial losses.

When and if an active market develops for our securities, the market price of our Common Stock could fluctuate significantly for many reasons, including reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or announcements by our competitors regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the price of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could negatively affect revenues or expenses in any particular quarter, including vulnerability of our business to a general economic downturn; changes in the laws that affect our products or operations; competition; compensation related expenses; application of accounting standards; and our ability to obtain and maintain all necessary regulatory and industry certifications and/or approvals to conduct our business. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

Moreover, we cannot assure you that any securities analysts will initiate or maintain research coverage of our company and our shares of common stock. We do not control analysts or the content and opinions included in their reports. The price of our shares of common stock could decline if one or more equity research analysts downgrade our shares of common stock or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Compliance with changing regulations of corporate governance and public disclosure will result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. For example, on January 30, 2009, the SEC adopted rules requiring companies to provide their financial statements in interactive data format using the eXtensible Business Reporting Language, or XBRL. Our management has invested significant management time and financial resources to comply with existing standards for public companies, any changes in these standard could which could lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

We do not intend to pay cash dividends on our shares of common stock in the foreseeable future.

We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the right of holders of our shares of common stock to receive dividends declared by our board of directors may be restricted to the extent we issue preferred shares with dividend rights superior to those of our shares of common stock.

Shares of the Company’s common stock represent equity interests and are subordinate to existing and future indebtedness.

Shares of our common stock represent equity interests in our Company and, as such, rank junior to any indebtedness of our Company now existing or created in the future, as well as to the rights of any preferred shares that may be issued in the future. In the future, we may incur substantial amounts of debt and other obligations that will rank senior to our common stock or to which our common stock will be structurally subordinated.

Provisions in our charter documents and Nevada law could discourage or prevent a takeover, even if an acquisition would be beneficial to our shareholders.

Provisions of our articles of incorporation and bylaws, as well as provisions of Nevada law, could make it more difficult for a third party to acquire us, even if beneficial to our shareholders. Provisions include (i) authorizing the issuance of “blank check” preferred shares that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; (ii) prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of our shareholders to elect director candidates; and (iii) advance notice provisions in connection with shareholder proposals that may prevent or hinder any attempt by our shareholders to bring business to be considered by shareholders at a meeting or replace our Company’s board of directors.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our principal executive office is located at 2 Wall Street, Floor 8, New York, NY 10005. In December 2014, the Company entered into a lease for office space with an unrelated party. The lease was to commence on December 11, 2014, however, due to renovation issues, the lease was changed and commenced on March 1, 2015 and the Company received two months of free rent. Pursuant to this lease agreement, the Company currently pays a monthly rent of $29,558 and expires on July 31, 2025.

We believe our facilities are sufficient for our business operations.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is quoted on the OTC.QB under the symbol “AMCT” and has very limited trading. The closing price for our Common Stock on the OTC.QB on April 2, 2018 was $0.50 per share.

	Low Price		High Price
First Quarter 2018	$	0.50	$	0.80
Fourth Quarter 2017	$	0.11	$	1.00
Third Quarter 2017	$	0.25	$	0.80
Second Quarter 2017	$	0.16	$	0.65
First Quarter 2017	$	0.10	$	0.90
Fourth Quarter 2016	$	0.10	$	0.55
Third Quarter 2016	$	0.02	$	1.01
Second Quarter 2016	$	-	$	-
First Quarter 2016	$	-	$	-

Stockholders of Record

As of April 17, 2018, we have 94 recorded holders of our common stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

VStock Transfer, LLC, at 77 Spruce Street, Suite 201, Cedarhurst, New York 11516, is the transfer agent for our common stock.

Effective August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Options, Warrants, Convertible Securities

Currently, we do not have any warrants, options or convertible securities outstanding other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal year 2017 and current affair reports on Form 8-K, and the following.

Dividends

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the board of directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Agreements

We have a 2015 Equity Compensation Plan in place with 10,000,000 shares reserved for issuance. Our Board of Directors may adopt one or more equity compensation plans in the future.

Recent Sales of Unregistered Securities

On November 3, 2017, the Company issued 500,000 shares of its Series A Convertible Preferred Stock to the Purchaser in accordance with the terms of the Share Purchase Agreement. The offer and issuance of the Series A Convertible Preferred Stock and the shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and therefore may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. For this issuance, the Company is relying on the exemption from registration pursuant to Regulation S promulgated under the Securities Act.

Recent Purchases of Equity Securities by us and our Affiliated Purchasers

None.

Where You Can Find Additional Information

We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. For further information with respect to the Company, you may read and copy its reports, proxy statements and other information, at the SEC public reference rooms at 100 F. Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. The Company’s SEC filings are also available at the SEC’s web site at http://www.sec.gov.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the consolidated financial statements of the Company thereto, which appear elsewhere in this Annual Report on Form 10-K, and should be read in conjunction with such financial statements and related notes included in this report. Except for the historical information contained herein, the following discussion, as well as other information in this report, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to many factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this Annual Report on Form 10-K.

Overview

Leveraging our knowledge of the education environment in the United States (US) and understanding of the Chinese markets, we are a full-service advisory firm specializing in the delivery of customized college placement and career advisory services to Chinese students wishing to study in the US. Our advisory services are specifically designed to address the needs of the rising middle-class families in China. The demand for our advisory services is the result of China’s decades-long one-child policy, society’s priority and emphasis on children’s education, and families’ desire to gain access to US colleges and universities as well as work experience in the US.

Having delivered customized ESL (English as a second language) training, college and business consulting, and career advisory services to Chinese students and families since 1999, we are one of most experienced and recognizable holistic solutions providers of education advisory services in the US. With the acquisition of AEC Southern UK in October 2016, we also deliver customized corporate training and advisory services to corporate clients in China in the food industry to help them meet international standards due to China’s growing economy.

Headquartered in New York with operations in PRC (People’s Republic of China), our key advisory services include:

Placement Advisory Services;

Career Advisory Services;

Student & Family Services;

Other Advisory Services; and

Corporate Training & Advisory Services.

Placement Advisory Services

Since 1999, we have been delivering customized Language Training & Placement Advisory services to Chinese students. Our one-stop advisory service encompasses ESL training and assistance throughout the high school/college application and admission process.

Targeting the needs of Chinese families in getting admissions to Ivy League colleges, our Elite College Advisory service is designed to assist qualified Chinese students gain access and apply to prestigious colleges and universities in the US. Specifically, we arrange campus tours, provide tailored language training, offer guidance on interview and communication techniques, and follow-up on their applications.

Once students are admitted into their target universities, our advisory services include, among other things, assistance in connection with their application for a second major, transfers, housing accommodations, and accelerated degree application. To help students optimize their on-campus experience and enhance their leadership and social skills, we would enroll them into seminars and social events that we partner with scholars and universities, business and non-profit organizations. To help enrich their cultural experience, we would arrange extracurricular activities such as organized artistic endeavors including dance, music, painting, photography and other performance events.

Career Advisory Services

Our Internship Advisory program focuses on student’s career development by helping them identify and secure suitable internship and part-time or full-time work opportunities that are appropriate for their educational background and experience level. Through this program, we strive to help students map and navigate their career path and counsel them on matters including academic improvement to career assistance.

Our Start-up Advisory program is designed to provide incubator services to students and/or their families who desire to start or make an investment in a business in the US. 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

Through our business partners, we assist our students and/or their families in addressing their needs in real estate investments, personal financial planning and management, and other personal needs such as getting insurance coverage and starting businesses.

We also advise Chinese and corporate clients whose executives are moving to the US for work. The scope of our services includes assistance with business consulting, relocation and other aspects of family support services.

Other Advisory Services

Corporate Training & Advisory Services

Our Corporate Training & Advisory service is being delivered by our wholly owned subsidiary, AEC Southern UK. Our services are designed to help companies in the food industry train for best practices in human resources management, organization management, business model development, and government relations. We work with local third-party vendors to design one- or two-week training programs that are tailored to our clients' specifications; organize and arrange the training sessions while the instructors are provided by our vendors.

Pursuant to Accounting Standard Codification 280 “Segment Reporting” (“ASC 280”), we have identified two reporting segments: AEC New York and AEC Southern UK. These two segments engage two sets of customers and vendors to generate revenue and incur expenses; they generate separate financial information; and based on their financial reports and other segment specific information, our chief operating decision maker determines the resources to be allocated and evaluates the performance, of each segment.

AEC New York capitalizes on the rising demand from the middle-class families in China for quality education and working experience in the United States. It 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, admission advisory, on-campus advisory, internship and start-up advisory as well as student and family services.

AEC Southern UK delivers customized corporate training services on subjects such as human resource management, organizational management, as well as information on local food safety regulations and the ISO.

Significant Accounting Policies

The discussion and analysis of our consolidated financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The consolidated financial statements are comprised of AEC Nevada and its wholly owned subsidiaries, AEC New York and AEC Southern UK. All significant intercompany accounts and transactions have been eliminated in consolidation.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. As of December 31, 2017, the Company does not have a liability for any unrecognized tax benefits.

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

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

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

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers,” with respect to Principal versus Agent Considerations. In April 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers,” with respect to Identifying Performance Obligations and Licensing. In April 2016, the FASB additionally issued ASU No. 2016-12, “Revenue from Contracts with Customers,” with respect to Narrow-Scope Improvements and Practical Expedients. In December 2016, the FASB issued ASU No. 2016-20, “Revenue from Contracts with Customers,” with respect to Technical Corrections and Improvements. The Company does not believe the adoption will have a material impact on its consolidated financial statements.

In April 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

In May 2016, the FASB issued ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition. The Company does not anticipate that this adoption will have a significant impact on its consolidated financial position, results of operations, or cash flows.

In May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its consolidated financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases.” The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of pending adoption of the new standard on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (ASC 718): Improvements to Employee Share-Based Payment Accounting. The objective is to identity, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification include the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas apply only to nonpublic entities. For public business entities, the ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of ASU 2016-09 did not impact our consolidated financial statements.

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, this ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The adoption of this ASU is not expected to have a material effect on the its consolidated financial statements.

In August 2016, the FASB has issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4)Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company expects that the adoption of this ASU would not have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its consolidated financial position, results of operations, or cash flows.

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

The Company has assessed all newly issued accounting pronouncements released during the year ended December 31, 2017 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.

Year Highlights

For the year ended December 31, 2017,

Our total revenues increased by $12,123,640, or approximately 89%, to $25,798,115 for the year ended December 31, 2017 from $13,674,475 for the year of 2016. The increase is due mainly to the acquisition of AEC Southern UK in the Q4 of 2016 that specializes in the delivery of corporate training and advisory service; as well as increased marketing efforts to promote our career advisory services in 2017.

Our corporate training and advisory services accounted for approximately 65% of our total revenues for year ended December 31, 2017.

Our gross margin was approximately 31% for year ended December 31, 2017 as compared to approximately 28% for the same period of 2016. The increase is attributable mainly to the increased gross profit margin of AEC New York, which increased from 25% for 2016 to 28% for 2017.

Results of Operations

Below we have included a discussion of our operating results and material changes in the periods covered by this Form 10-K annual report. 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, 2017.

Year Ended December 31, 2017 as Compared to Year Ended December 31, 2016

	For year ended December 31,
	2017			2016			Variance			%
Key revenue streams:

Corporate Training & Advisory Services	$	16,661,161		$	6,050,000		$	10,611,161			2	%
Placement Advisory Services		757,640			1,228,028			(470,388	)		NM
Career Advisory Services		4,356,460			2,483,194			1,873,266			75
Student & Family Advisory Services		3,922,120			3,913,253			8,867			0
Other Advisory Services		100,734			-			100,734			100
Total revenues	$	25,798,115		$	13,674,475		$	12,123,640			89	%
Gross Profit	$	7,931,972		$	3,806,430		$	4,125,542			108	%
Gross Margin		31	%		28	%

Revenues

Total revenues for the year ended December 31, 2017 were $25,798,115, representing an increase of $12,123,640, or 89% from $13,674,475 for the year ended December 31, 2016. The increase is attributed mainly to revenues from our corporate training and advisory services delivered by AEC Southern UK, a business that we acquired in Q4 of 2016; as well as overall increase in our revenues from the career advisory services by AEC New York.

Revenues from our corporate training & advisory services were $16,661,161, which accounted for approximately 65% of our total revenues, all delivered by AEC Southern UK.

Our revenues from placement advisory services normally fluctuate as a result of seasonal or other factors related to the high school/college admission process. The decrease in our placement advisory services was due to the allocate our resources to elite college advisory services. Revenues for our career advisory services increased by $1,873,266, or 75% from $2,483,194 the year ended December 31, 2016. The increase in our career advisory services revenues was attributed mainly to increased selling and marketing activities in 2017. Revenues from student & family advisory services increased by $8,867 from $3,913,253 for the year ended December 31, 2016, mainly due to timing of services being requested.

Gross Profit & Gross Margin

Our gross profit increased by $4,125,542, or 108% from $3,806,430 for the year ended December 31, 2016. The increase is attributed mainly to the delivery of corporate training and advisory services in 2017, dedicated marketing activities to promote our placement and career advisory services and reduction in outsourcing activities.

Our gross margin was approximately 31% in 2017, as compared to approximately 28% in 2016. The improvement is attributable mainly to the change in our service-mix as we started to deliver corporate training and advisory services in 2017 (a business that has a gross margin of 32%) as well as an increase of gross margin from AEC New York which has a gross margin of 28%.

Operating Expenses

Total operating expenses increased by $4,467,277 or 156% as compared to the year ended December 31, 2016. The increase in attributed to higher selling and marketing expenses of approximately $3,678,568, and higher general and administrative (G&A) expenses of approximately $3,655,600.

Higher selling and marketing expenses in 2017 is due mainly to the inclusion of the recently acquired business of AEC Southern UK as well as increased marketing activities to promote the career advisory services.

Increase in our G&A expenses is due mainly to the inclusion of AEC Southern UK business operation in 2017.

Income Tax

The provision for income tax was $352,984 for the year ended December 31, 2017, an increase of $137,267 from $215,717 for the year ended December 31, 2016. This was due mainly to decreased income tax due to increased deferred tax expense.

Net Profit

The decrease in our net profit of approximately $474,501 for the year ended December 31, 2017 as compared to the prior year was due mainly to loss from the AEC Southern UK business operation.

Liquidity and Capital Resources

Cash Flows and Working Capital

As of December 31, 2017, we had cash of $2,720,985, an increase of $430,556 from $2,290,429 as of December 31, 2016. We have financed our operations primarily through cash flow from operating and financing activities. We require cash for working capital, payment of accounts payables and accrued expenses, salaries, commissions and related benefits, and other operating expenses and income taxes. The following table sets forth a summary of our cash flows for the periods indicated.

	Year ended December 31,
	2017			2016			Variance			%

Net cash used in (provided by) operating activities	$	(1,312,291	)	$	1,804,498		$	(3,116,789	)		NM	%
Net cash used in by investing activities		-			(612,814	)		612,814			NM
Net cash provided by financing activities		1,736,094			4,990			1,731,104			347
Effect of exchange rates changes on cash		6,753			-			6,753			NM
Net change in cash		430,556			1,196,674			(766,118	)		NM

Cash Flow from Operating Activities

Net cash used in operating activities for the year ended December 31, 2017 was $1,312,291, compared to net cash provided by operating activities of $1,804,498 for the year ended December 31, 2016. The increase in net cash used in operations in 2017 is due mainly the growth in our overall business (both organically and through acquisition), effected by timing of collection of accounts receivable and payment to vendors.

These changes are primarily attributable to the combination of the following: pay our service providers faster; and reduction of deferred revenue reflecting the increased efficiency in providing our services where services are delivered faster and in a shorter time frame.

Cash Flow from Investing Activities

We had no cash flow from investing activities during the year ended December 31, 2017. In 2016, we purchased a new portfolio of software system which includes our Online Campus Solution for $612,814.

Cash Flow in Financing Activities

The loan from stockholders of $113,906 as of September 30, 2017 and December 31, 2016, represented an unsecured non-interest bearing loan, arising from expenses paid on behalf of the Company. We repaid in full on November 4, 2017.

On December 1, 2014, an unrelated party loaned us $295,579, with interest at 10%. The loan is to be repaid on December 13, 2019. We repaid $150,000 on November 10, 2017.

On October 30, 2017, we issued 500,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share at price of $4 per share to China Cultural Finance Holdings Company Limited, a British Virgin Islands corporation, for the aggregate price of $2,000,000.

Working Capital

The following table sets forth our working capital.

	Year ended December 31,
	2017		2016		Variance		%

Total current assets	$	9,510,288	$	5,239,866	$	4,270,422		81	%
Total current liabilities		4,880,592		4,254,624		626,968		15
Working capital	$	4,629,696	$	985,242	$	3,644,454		370	%
Current ratio		1.9		1.2

As of December 31, 2017, we had working capital surplus of $4,629,696, an increase of $3,644,454 from a working capital surplus of $985,242 as of December 31, 2016. The increase in working capital surplus is principally attributable to the increase of overall revenue, represented by increases in accounts receivable and accounts payable.

We believe that our working capital will be sufficient to enable us to meet our cash requirements for the next 12 months. However, we may incur additional expenses as we seek to expand our operations by establishing additional representative offices in our major market, the PRC, increasing our marketing efforts and hiring more personnel to support our growing operations. We believe we have adequate working capital to fund future growth activities.

Off-Balance Sheet Arrangements

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

Seasonality

We experience seasonality in business with students as customers, specifically our placement advisory, career advisory and student and family services, all related to business of AEC New York. The seasonality reflects the general trend of the industry of admissions and education related services, corresponding to the predominantly fall semester start dates of educational institutions admissions. Our services are higher in the fourth and first quarters of our fiscal year than the other two quarters, reflecting the engagement for services of educational institutions admissions predominantly occurring in the fourth quarter and first quarter of a calendar year, and other consulting services corresponding to the beginning of academic year, i.e. the fall semester.

There is no noticeable seasonality for our corporate training and advisory services that are being delivered by AEC Southern UK.

Subsequent Events

The following are a series of events that occurred after the year ended December 31, 2017.

Departure and Appointment of Certain Officers

On February 5, 2018, Mr. Anthony S. Chan notified American Education Center, Inc. (the "Company" or “AEC”) of his resignation from the Company as Chief Financial Officer, effective immediately. The Board of Director of the Company (the “Board”) has accepted Mr. Chan’s resignation. Following Mr. Chan’s departure, the Board appointed Mr. Max P. Chen, Chief Executive Officer, President, and Chairman of the Board, as interim Chief Financial Officer effective February 5, 2018, until such time that the Company secures the employment of a new Chief Financial Officer.

Mr. Chen has served as the Sole Director, Chairman of the Board, President, Chief Executive Officer and Secretary of the Company first since May 2014. He had previously served as the President, and sole Director of American Education Center, Inc., a New York corporation and now a wholly owned subsidiary of the Company, since its inception in 1999 to May 2014. Mr. Chen holds an M&R Management Certificate from Harvard Business School. The Company and Mr. Chen will not enter into an additional employment agreement regarding his interim position as Chief Financial Officer.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The audited financial statements of the Company for the fiscal year ended December 31, 2017 and the notes thereto are set forth on page F-1 through F-27 of this Annual Report.

ITEM 9. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

First Dismissal of Wei, Wei & Co.

The Company dismissed Wei, Wei & Co. LLP (“Wei & Wei”) as the Company's independent registered public accounting firm, effective as of May 23, 2017. The Board approved of the dismissal of Wei & Wei as of May 23, 2017.

Wei & Wei’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2016 and 2015, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports of Wei & Wei on the effectiveness of internal control over financial reporting as of December 31, 2016 and 2015, did not contain an adverse opinion, nor were they qualified or modified. Following the completion of the review of financial statements for the period ended March 31, 2017,

During the fiscal years ended December 31, 2016 and 2015, and the subsequent interim period through May 23, 2017, there were (i) no "disagreements" (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Wei & Wei on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Wei & Wei’s satisfaction, would have caused Wei & Wei to make reference thereto in their reports, and (ii) no “reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K) except that Wei & Wei advised the Company of material weaknesses related to ineffective disclosure controls and procedures as the Company does not have a Chief Financial Officer that is familiar with the accounting and reporting requirements of a U.S. publicly-listed company, and it did not have a financial staff with accounting and financial expertise in U.S. generally accepted accounting principles (“US GAAP”) during the fiscal year ended December 31, 2015.

On May 23, 2017, the Company proposed to appoint Marcum Bernstein & Pinchuk LLP (“Marcum”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2017, pending the completion of Marcum’s internal acceptance procedures. The Board approved of the proposal of Marcum’s appointment as of May 23, 2017. Effective as of June 22, 2017, Marcum completed its internal acceptance procedures and replaced Wei & Wei as the Company’s independent registered public accounting firm immediately. During the fiscal years ended December 31, 2016 and 2015, and the subsequent interim period through May 23, 2017, neither the Company nor anyone on its behalf consulted with Marcum regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial statements by Marcum, in either case where written or oral advice provided by Marcum would be an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor, Wei & Wei or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively).

Dismissal of Marcum Bernstein & Pinchuk LLP

The Company dismissed Marcum as the Company's independent registered public accounting firm, effective as of August 1, 2017. The Board approved of the dismissal of Marcum as of August 1, 2017.

Marcum has not issued any audit reports on the Company’s consolidated financial statements, nor was there any adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

From June 22, 2017 to August 1, 2017, there were (i) no "disagreements" (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Marcum’s satisfaction, would have caused Marcum to make reference thereto in their reports, and (ii) no “reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K).

Effective August 1, 2017, the Company appointed Wei & Wei as the Company’s independent registered public accounting firm. The Board approved of the appointment of Wei & Wei as of August 1, 2017. Wei & Wei audited the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2016 and 2015, and reviewed consolidated financial statements as of the subsequent interim periods until May 23, 2017 when Wei & Wei was previously dismissed by the Company.

Second Dismissal of Wei, Wei & Co.

The Company dismissed Wei & Wei as the Company's independent registered public accounting firm, effective as of February 22, 2018. The Board approved of the dismissal of Wei & Wei as of February 22, 2018. Wei Wei’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2016 and 2015, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal years ended December 31, 2017 and 2016, and the subsequent interim period through February 22, 2018, there were (i) no "disagreements" (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Wei Wei on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Wei Wei’s satisfaction, would have caused Wei Wei to make reference thereto in their reports, and (ii) no “reportable events” (as that term is described in Item 304(a)(1)(v) of Regulation S-K).

Effective February 22, 2018, the Company appointed GC & Associates CPAs PLLC (“GC & Associates”) as the Company’s independent registered public accounting firm for the Company’s fiscal years ended December 31, 2017 and ending December 31, 2018. The Board approved of the appointment of GC & Associates as of February 22, 2018. During the fiscal year ended December 31, 2017, and the subsequent interim period through February 22, 2018, neither the Company nor anyone on its behalf consulted with GC & Associates regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial statements by GC & Associates, in either case where written or oral advice provided by GC & Associates would be an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor, Wei Wei or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively).

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures.

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

During the year ended December 31, 2017, procedures have been established to ensure that all significant, non-routine events and pending transactions must be evaluated by our CEO for disclosures in our consolidated financial statements and public filings.

We performed an evaluation, under the supervision and with the participation of our management, including our CEO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-K. Based on this evaluation, our CEO have concluded that, as of December 31, 2017, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported properly within the time periods specified by the SEC, and did not provide reasonable assurance that information required to be disclosed by the Company in such reports would be accumulated and communicated to the Company’s management, including its CEO, as appropriate, to allow timely decisions regarding required disclosure. Such conclusion was based solely on the fact that the Company identified deficiencies in its internal control over financial reporting as of December 31, 2017. Although we have determined that the existing controls and procedures are not effective, the deficiencies identified have not been deemed material to our reporting disclosures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP.

Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 Internal Control-Integrated Framework.

Based on this evaluation, our CEO has concluded that as of December 31, 2017, our disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder. We have identified the following deficiencies, we have limited administrative and accounting resources, outdated accounting software and generally weak accounting processes and internal control procedures. Additionally, we have inadequate segregation of duties in certain accounting processes, including the payroll, cash receipts and disbursements processes in our accounting system, partly as a result of our limited size and accounting staff. We have taken steps to remediate these issues and expect to have improved controls and documentation in place by the end of the quarterly period June 30, 2018.

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Changes in internal control over financial reporting

In August 2017, the Company engaged a seasoned finance executive with over 25 years of professional experience in auditing and SEC reporting as well as internal controls and risk management as its senior financial advisor to assist senior management in the assessment of its finance and accounting functions, and development of an actionable plan to strengthen the Company’s internal control over financial reporting as well as its ability to comply with rules and regulations. In light of the structure and discipline that has been established during the year ended December 31, 2017, the Company appointed the senior financial advisor as its chief financial officer effective October 1, 2017. The chief financial officer resigned for personal reasons by February 5, 2018. Our CEO, Max P. Chen, has acted as the interim CFO since February 5, 2018, while the Company is currently seeking a CFO with significant experience in public reporting company.

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

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table presents information with respect to our officers and directors:

Name		Age		Position(s)		Position Since
Max P. Chen		62		President, Chief Executive Officer, interim Chief Financial Officer, Secretary, Sole Director		May 2014

Max P. Chen has over 30 years of experience in international education. He has served as the Sole Director, Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company first since May 2014. He had previously served as the President, and sole Director of American Education Center, Inc., a New York corporation and now a wholly owned subsidiary of the Company, since its inception in 1999 to May 2014. From 1978 to 1982, Mr. Chen enrolled in Sichuan Normal University Department of Foreign Language. He was originally a professor with China Peasant University, and operated Correspondence Sichuan University with more than 70,000 students registered in the 1980s. Mr. Chen relocated to the U.S. and has developed schools and educational centers that coordinate cooperative educational programs between the U.S. and China. He holds an M&R Management Certificate from Harvard Business School. Mr. Chen is also the executive director of the US-China Higher Education Alliance.

Committees of the Board of Directors

Our board of directors has not established any committees, including an audit committee, a compensation committee, a nominating committee or any committee performing a similar function. The functions of those committees are being undertaken by our sole Board member. Because we have only one director and do not have any independent directors, the establishment of committees of the Board of Directors would not provide any benefits to our company and could be considered more form than substance.

Code of Ethics

We have adopted a code of business conduct and ethics that applies to our directors, officers and all employees.

Family Relationships

There are no family relationships among the directors and executive officers of the Company.

Directors’ Compensation

We have not paid any cash compensation to our sole member of our Board of Directors for his service as our director.

The Company will reimburse its directors for reasonable expenses in connection with attendance at board and committee meetings. Directors will also be eligible to receive stock options offered by our company from time to time. No options have been granted to any director.

Involvement in Certain Legal Proceedings

To the best of our knowledge, our sole director or any executive officers have not, during the past ten years:

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Corporate Governance

The business and affairs of the Company are managed under our sole board member. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors of the Company at our annual stockholders meetings. All communications from stockholders are relayed to the board of member.

Role in Risk Oversight

Our sole director is primarily responsible for overseeing our risk management processes. The sole director receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The sole director focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While the sole director oversees our company’s risk management, management is responsible for day-to-day risk management processes.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

We believe that our executive officers and directors and persons who own more than 10% of a registered class of our equity securities are not subject to reporting requirements under Section 16(a) of the Securities Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION.

The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two most highly compensated executive officer who occupied such position at the end of our latest fiscal year.

						Stock Option				All Other
Name and		Salary		Bonus		Awards		Stock Awards		Compensation		Total
Principal Position	Year	($)		($)		($)		(#)		($)		($)
Max Chen, President, CEO and interim CFO	2016	$	36,000		N/A		N/A		N/A		N/A	$	36,000
	2017	$	72,000		N/A		N/A		N/A		N/A	$	72,000
Anthony S. Chan, CFO (1)	2016		-		-		-		-		-		-
	2017	$	37,500		N/A		N/A		N/A		N/A	$	37,500

(1)	Anthony S. Chan was served as Chief Financial Officer of the Company from September 28, 2017 to February 5, 2018.

Option Grants in Last Fiscal Year

The company did not grant any options in the fiscal year ended December 31, 2017.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

Employment Agreements

The Company has entered into employment agreements with officers and other key employees.

Equity Compensation Plan

The Company currently does not have any equity compensation plans; however, the Company is currently deliberating on implementing an equity compensation plan.

Directors’ and Officers’ Liability Insurance

The Company currently does not have insurance for directors and officers against liability; however, the Company is in the process of investigating the availability of such insurance.

Change of Control Compensatory Plans

As of December 31, 2017, we had no pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or change in control of us.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the ownership of our capital stock, as of April 17, 2018, by: (i) each person known by us to be the beneficial owner of 5% or more of the outstanding common stock, (ii) each executive officer and director of the Company, and (iii) all of our executive officers and directors as a group. As of April 17, 2018, the Company has 41,350,000 shares of common stock outstanding.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that such person has the right to acquire within 60 days of April 17, 2018. For purposes of computing the percentage of outstanding shares of our Common Stock held by each person or group of persons named below, any shares that such person or persons has the right to acquire within 60 days of April 17, 2018 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, 2 Wall St., FL. 8, New York, NY, 10004.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		% of Class
Director and Officers

Max P. Chen, President, Chief Executive Officer, interim Chief Financial Officer, Sole Director		10,563,000		27.5	%
All officers and directors as a group (1 person)		10,563,000		27.5	%

* Less than 1%.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than compensation agreements and other arrangements described in “Management,” and our transactions described below, since our inception there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

in which the amount involved exceeded or will exceed $120,000; and

in which any current director, executive officer, holder of 5% or more of our shares of Common Stock on an as-converted basis or any member of their immediate family had or will have a direct or indirect material interest.

The Company repaid in full of the loan from Max P. Chen, our principal shareholder, in the total amount of $113,906 on November 4, 2017.

The Company’s CEO has a 34% interest in Columbia International College, Inc. (“CIC”). The Company collected accounts receivable of $21,500 from CIC and prepaid CIC $82,500 for student consulting services to be delivered in 2018.

The Company entered into a sublease agreement with Wall Street Innovation Center, Inc. (“WSIC”) in March 2016, which was terminated on June 30, 2017. AEC New York’s Chief Operating Officer also serves as the Chief Executive Officer of WSIC. The Company also conducts certain transactions in the normal course of business with WSIC, which includes accounts payable in the amount due to WSIC of $372 as of December 31, 2017.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

For the Company’s fiscal years ended December 31, 2017 and 2016, we were billed approximately $92,920 and $74,500 for professional services rendered for the audit and review of our financial statements.

Audit Related Fees

There were no fees for audit related services for the years ended December 31, 2017 and 2016.

Tax Fees

For the Company’s fiscal years ended December 31, 2017 and 2016, we engaged our principal auditor, Wei, Wei & Co. LLP, and were billed approximately $2200 and $2,200, respectively, for professional services rendered for tax compliance, tax advice, and tax planning.

All Other Fees

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2017 and 2016.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our independent registered public accounting firm is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

approved by our audit committee; or

entered into pursuant to preapproval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.

We do not have an audit committee. Our sole director preapproves all services provided by our independent registered public accounting firm. However, all of the above services and fees were reviewed and approved by the sole board member for the respective services were rendered.

PART IV

ITEM 15. EXHIBITS

(a) The following documents are filed as part of this report:

(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements on pages F-1 through F-27 of this report.

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Income	F-4
Consolidated Statements of Shareholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

(2) Financial Statement Schedule: None.

(3) Exhibits

Exhibit No.		Description
10.1		Amendment to Share Exchange Agreement dated March 27, 2017 by and among American Education Center Inc., AEC Southern Management Co., Ltd., Ye Tian, Rongxia Wang, and Yangying Zou
10.2		Licensing Agreement with Max P. Chen dated October 20, 2017
10.3		Securities Purchase Agreement with China Cultural Finance Holdings Company Limited dated October 30, 2017
10.4		Unofficial English Translation of Strategic Partnership Agreement with Oxbridge International Education Group dated December 1, 2017
21.1		Subsidiaries *
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
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		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema Document *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		XBRL Taxonomy Extension Label Linkbase Document *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *

Filed herewith.

Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

April 17, 2018

	AMERICAN EDUCATION CENTER INC.

	By:	/s/ Max P. Chen
		Max P. Chen
		President, Sole Director, Chief Executive Officer, interim Chief Financial Officer and Secretary
		(Principal Executive Officer, Principal Financial
		Officer and Principal Accounting Officer)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

American Education Center, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of American Education Center, Inc. and Subsidiaries (the “Company”), as of December 31, 2017, and the related consolidated statement of income, stockholders’ equity, and cash flow for the year ended December 31, 2017.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of American Education Center, Inc. and Subsidiaries as of December 31, 2016, and for the year then ended were audited by other auditors. Those auditors expressed an unqualified opinion on those financial statements in their report dated April 17, 2017.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Education Center, Inc. and Subsidiaries as of December 31, 2017, and the results of their operations and their cash flow for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

/s/ G.C. & Associates CPAs, PLLC

G.C. & Associates CPAs, PLLC

Flushing, NY

April 17, 2018

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
American Education Center, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of American Education Center, Inc. and Subsidiaries (the “Company”), as of December 31, 2016 and 2015, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2016. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Education Center, Inc. and Subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Wei, Wei & Co., LLP

Flushing, NY

April 17, 2017

F-2

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2017		2016
ASSETS
Current assets:
Cash	$	2,720,985	$	2,290,429
Accounts receivable, net of allowance for doubtful accounts of $249,527 and $63,000 at December 31, 2017 and 2016, respectively		6,482,289		2,887,837
Prepaid expenses		307,014		61,600

Total current assets		9,510,288		5,239,866

Noncurrent assets:
Deferred compensation		2,016,668		3,315,001
Deferred income taxes		25,641		97,936
Intangible asset, net		442,588		578,769
Security deposits		266,021		266,021

Total noncurrent assets		2,750,918		4,257,727

TOTAL ASSETS	$	12,261,206	$	9,497,593

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	4,070,001	$	3,452,231
Taxes payable		775,220		511,355
Deferred revenue		20,000		177,132
Advances from clients		15,371		0
Loan from stockholders		-		113,906

Total current liabilities		4,880,592		4,254,624

Noncurrent liabilities:
Deferred rent		191,542		155,707
Long-term loan		145,579		295,579

Total liabilities		5,217,713		4,705,910

Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized; none issued		500		-
Common stock, $0.001 par value; 180,000,000 shares authorized; 41,350,000 shares issued and outstanding at December 31, 2017 and December 31, 2016		41,350		41,350
Additional paid-in capital		6,021,126		4,021,626
Retained earnings		973,764		728,707
Accumulated other comprehensive income		6,753		-

Total stockholders' equity		7,043,493		4,791,683

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	12,261,206	$	9,497,593

See accompanying notes to consolidated financial statements.

F-3

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Year Ended December 31,
	2017		2016

Revenues	$	25,798,115	$	13,674,475
Cost of revenues		17,866,143		9,868,045
Gross profit		7,931,972		3,806,430

Operating expenses:
Selling and marketing		3,678,568		821,067
General and administrative		3,655,600		2,045,824
Total operating expenses		7,334,168		2,866,891

Income from operations		597,804		939,539
Other income		237		(4,264	)

Income before provision for income taxes		598,041		935,275
Provision for income taxes		352,984		215,717

Net income	$	245,057	$	719,558

Other comprehensive income
Foreign currency translation gain		6,753		-
Comprehensive income	$	251,810		719,558

Earnings per share - basic and diluted	$	0.01	$	0.02

Weighted average shares outstanding, basic and diluted		41,350,000		32,042,704

See accompanying notes to consolidated financial statements.

F-4

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016

													Accumulated
									Additional				other
	Common stock				Preferred Stock				paid-in		Retained		comprehensive
	Shares		Amount		Shares		Amount		capital		earnings		income		Total
Balance as of December 31, 2015		30,000,000	$	30,000		-	$	-	$	214,176	$	9,149	$	-	$	253,325
Issuance of common stock for services		2,350,000		2,350		-		-		93,150		-		-		95,500
Issuance of common stock for employee compensation		9,000,000		9,000		-		-		3,714,300		-		-		3,723,300
Net income		-		-		-		-		-		719,558		-		719,558

Balance as of December 31, 2016		41,350,000		41,350		-		-		4,021,626		728,707		-		4,791,683
Net income		-		-		-		-		-		245,057		-		245,057
Sale of preferred stock, at $0.001 per share		-		-		500,000		500		1,999,500		-		-		2,000,000
Foreign currency translation gain		-		-						-		-		6,753		6,753

Balance as of December 31, 2017		41,350,000	$	41,350		500,000	$	500	$	6,021,126	$	973,764	$	6,753	$	7,043,493

See accompanying notes to consolidated financial statements.

F-5

AMERICAN EDUCATION CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2017			2016

Cash flows from operating activities:
Net income	$	245,057		$	719,558
Adjustments to reconcile net income to net cash
(Used in) provided by operating activities:
Deferred tax provision (benefit)		72,295			(97,936	)
Deferred rent expense		35,835			51,512
Deferred compensation		1,298,333			-
Stock issued for services		-			95,500
Stock issued to employees		-			428,160
Provision for doubtful accounts		78,000			332,050
Amortization expense		136,181			34,045
Change in operating assets and liabilities:
(Increase) in accounts receivable		(3,672,452	)		(2,105,607	)
(Increase) decrease in prepaid expenses		(245,414	)		34,400
Increase in accounts payable and accrued expenses		617,770			2,458,444
Increase in taxes payable		263,865			294,543
(Decrease) in deferred revenue		(157,132	)		(376,492	)
Increase (decrease) in advances from clients		15,371			(63,679	)

Net cash (used in) provided by operating activities		(1,312,291	)		1,804,498

Cash flows from investing activities:
Purchase of intangible assets		-			(612,814	)

Net cash used in investing activities		-			(612,814	)

Cash flows from financing activities:
(Repayment) borrowing of loan from stockholder		(113,906	)		4,990
(Repayment) of long-term loan		(150,000	)
Proceeds from issuance of preferred stock		2,000,000			-

Net cash provided by financing activities		1,736,094			4,990

Effect of exchange rates changes on cash		6,753			-

Net change in cash		430,556			1,196,674
Cash at beginning of year		2,290,429			1,093,755

Cash at end of year	$	2,720,985		$	2,290,429

Supplemental disclosure of cash flow information

Cash paid for income taxes	$	16,823		$	-

Cash paid for interest	$	27,493		$	37,976

See accompanying notes to consolidated financial statements.

F-6

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

ORGANIZATION AND BUSINESS

American Education Center, Inc. (“AEC New York”) is a New York Corporation organized on November 8, 1999 and is licensed by the Education 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 (“AEC Nevada”) in the State of Nevada with the same name. On May 31, 2014, the President and then 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”).

On October 31, 2016, the Company completed an acquisition transaction through a share exchange with two stockholders of AEC Southern Management Co., Ltd. (“AEC Southern UK”), a company incorporated in December 2015 with a registered capital of 10,000 British Pounds pursuant to the laws of England and Wales. The Company acquired 100% of the outstanding shares of AEC Southern UK in exchange for 1,500,000 shares of its common stock valued at $210,000. Prior to October 31, 2016, Ye Tian and Rongxia Wang held 51% and 49%, respectively, ownership interest in AEC Southern UK. As a result of the acquisition, AEC Southern UK became a wholly owned subsidiary of the Company.

AEC Southern UK holds 100% equity interest 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% equity interest in Qianhai Meijiao Education Consulting Management Co., Ltd., a foreign wholly owned subsidiary incorporated pursuant to PRC laws (“AEC Southern Shenzhen”) on March 29, 2016, with a registered capital of RMB 5,000,000.

F-7

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

ORGANIZATION AND BUSINESS (continued)

The Company’s corporate structure is as follows:

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

(1)

AEC New York capitalizes on the rising demand from the middle-class families in China for quality education and working experience in the United States (“US”). It 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 Southern UK delivers customized corporate training and advisory services to corporate clients in China in the food industry on subjects such as human resource management, organizational management, and information on local food safety regulations.

F-8

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

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. Certain prior year balances have been reclassified to conform to the current year's presentation; none of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented. The information in this Form 10-K should be read in conjunction with information included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on April 17, 2017.

Cash

Cash consists of all cash balances and liquid investments with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable are carried at net realizable value. The Company maintains an allowance for doubtful account, 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. At December 31, 2017 and 2016, the allowance for doubtful accounts was $249,527 and $63,000, respectively.

F-9

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Currency Translation

The Company’s functional currency is US dollars. The company has one bank account located in the PRC. Translation adjustments arising from the use of different exchange rates 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

Revenue is recorded pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, delivery of the services has occurred, the fee is fixed or determinable and collectability 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 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.

AEC Southern UK delivers customized corporate training and advisory services. It receives monthly non-refundable retainer payments and recognizes revenue when services are rendered.

Intangible Asset

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 and corporate training and 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.

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.

F-10

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 number of 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.

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.

F-11

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

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. At December 31, 2017 and 2016, 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”)

The Company is subject to corporate income tax in the US at 34%. Provisions for income taxes in the United States have been made for taxable income the Company had in the US for the year ended December 31, 2017 and 2016.

United Kingdom (“UK”)

AEC Southern UK was incorporated in the United Kingdom and is governed by the income tax laws of England and Wales. According to current England and Wales income tax law, the applicable income tax rate for AEC Southern UK is 20%.

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.

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

AEC Southern Shenzhen was incorporated in the PRC. Pursuant to the income tax laws of China, the Company is not subject to tax on non-China source income.

F-12

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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. At December 31, 2017 and 2016, the carrying values of these financial instruments approximated their fair values due to their short-term nature.

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.

F-13

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 they would be exercised if the exercise price were higher than the market price.

F-14

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2014, the FASB issued Accounting Standards Update (the “ASU”) No. 2014-09, "Revenue from Contracts with Customers (Topic 606).'' This guidance supersedes current guidance on revenue recognition in Topic 605, "Revenue Recognition.'' In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No.2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For public business entities that follow U.S. GAAP, the deferral results in the new revenue standard being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers,” with respect to Principal versus Agent Considerations. The Company does not believe the adoption will have a material impact on its consolidated financial statements.

In April 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its consolidated financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases.” The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of pending adoption of the new standard on its consolidated financial statements.

F-15

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

RECENTLY ISSUED ACCOUNTING STANDARDS (continued)

F-16

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

CONCENTRATION OF CREDIT AND BUSINESS RISK

The Company maintains its cash accounts at three commercial banks in the US and one commercial bank in the PRC and Hong Kong, respectively. The Federal Deposit Insurance Corporation covers funds held in US banks and it insures $250,000 per bank for the total of all depository accounts. The Hong Kong Deposit Protection Board covers funds held in HK banks and it insures HK$500,000 per bank for the total of all depository accounts. Fund held in the PRC bank is covered by Deposit Insurance Ordinance (index: 000014349/2015-00031) that insures CNY¥500,000 for the total of all depository accounts. At December 31, 2017, the Company’s US bank accounts had cash balances in excess of federally insured limits of approximately $1,694,668. 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.

The following table represents major customers that individually accounted for more than 10% of the Company’s gross revenue for the years ended December 31, 2017 and 2016:

	2017
	Gross Revenue		Percentage			Accounts Receivable		Percentage

Customer 1	$	13,679,638		53.0	%	$	4,006,836		61.8	%
Customer 2		3,942,625		15.3	%		566,755		8.7	%
Customer 3		2,981,523		11.6	%		480,460		7.4	%

	2016
	Gross Revenue		Percentage			Accounts Receivable		Percentage

Customer 1	$	2,877,000		21.0	%	$	471,000		15.5	%

Customer 2		4,850,000		35.5	%		1,349,000		44.4	%

F-17

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SEGMENT REPORTING

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

The Company has two operating segments: AEC New York and AEC Southern UK.

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 Southern UK delivers customized corporate training and advisory services to corporate clients in China in the food industry to help them comply with local food safety regulations and standards.

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

	For the year ended December 31, 2017
	AEC New York		AEC Southern UK		Total
Segment revenue:
Corporate training & advisory	$	-	$	16,661,161	$	16,661,161
Placement advisory		757,640		-		757,640
Career advisory		4,356,460		-		4,356,460
Student & Family advisory		3,922,120		-		3,922,120
Other advisory		100,734		-		100,734
Total revenue	$	9,136,954	$	16,661,161	$	25,798,115
Gross profit	$	2,551,904	$	5,380,068	$	7,931,972

	For the year ended December 31, 2016
	AEC New York		AEC Southern UK		Total
Segment revenue:
Corporate training & advisory	$	-	$	6,050,000	$	6,050,000
Placement advisory		1,228,028		-		1,228,028
Career advisory		2,483,194		-		2,483,194
Student & Family advisory		3,913,253		-		3,913,253
Total revenue	$	7,624,475	$	6,050,000	$	13,674,475
Gross profit	$	1,923,487	$	1,882,943	$	3,806,430

F-18

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

SEGMENT REPORTING (continued)

	Year ended December 31, 2017
	AEC New York		AEC Southern UK		Total
Segment assets and liabilities
Segment assets	$	5,008,678	$	7,252,528	$	12,261,206
Segment liabilities	$	2,483,435	$	2,734,279	$	5,217,713

	Year ended December 31, 2016
	AEC New York		AEC Southern UK		Total
Segment assets and liabilities:
Segment assets	$	2,878,133	$	6,619,460	$	9,497,593
Segment liabilities	$	2,925,200	$	1,780,710	$	4,705,910

F-19

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

DEFERRED COMPENSATION

On October 31, 2016, 1,500,000 common shares were granted to AEC Southern UK’s CEO that will vest over a three-year period commencing November 1, 2016. The shares were valued using the market price of the Company’s common stock on the grant date of $0.14 per share. On the grant date, $210,000 was recognized as deferred compensation, which will be expensed over the three-year vesting period using the straight-line method. At December 31, 2017, the remaining deferred compensation was expensed due to the resignation of AEC Southern UK’s CEO.

On December 31, 2016, 6,000,000 shares were granted to the AEC Southern UK’s Chairman and vest over a three-year period commencing November 1, 2016. The shares were valued using the market price of the Company’s common stock on the grant date of $0.55 per share. On December 31, 2016, $3,116,667 was recognized as deferred compensation, which will be expensed over the remaining one year and ten months using the straight-line method. At December 31, 2017, the remaining deferred compensation was $2,016,668.

Future amortization of the deferred compensation is as follows:

Year Ending December 31,

2018	$	1,100,000
2019		916,668

Total	$	2,016,668

Stock compensation expense was $1,330,331 and $194,999 for the year ended December 31, 2017 and 2016, respectively.

SECURITY DEPOSITS

The Company has security deposits with the landlord for its New York office of $266,021 as of December 31, 2017 and 2016.

F-20

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

INTANGIBLE ASSET, NET

The Company’s customized online campus system is being amortized on a straight-line basis over four and a half years. The gross carrying amount and accumulated amortization of this asset as of December 31, 2017 and 2016 are as follows:

	December 31,
	2017			2016

Intangible asset	$	612,814		$	612,814
Less: accumulated amortization		(170,226	)		(34,045	)

Intangible asset - net	$	442,588		$	578,769

For the year ended December 31, 2017 and 2016, amortization expense was $136,181 and $34,045 respectively.

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

Year Ending December 31,

2018	$	136,181
2019		136,181
2020		136,181
2021		34,045

Total	$	442,588

F-21

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

DEFERRED REVENUE

The Company receives advance payments for services to be performed and recognizes revenue when services have been rendered. The deferred revenue at December 31, 2017 and 2016 were $20,000 and $177,132, respectively.

10.

RELATED-PARTY TRANSACTIONS

The loan from stockholders of $0 and $113,906 as of December 31, 2017 and 2016, represented an unsecured non-interest bearing loan, arising from expenses paid on behalf of the Company. The loan was due on demand and was repaid in full on November 4, 2017.

The Company’s CEO has a 34% interest in Columbia International College, Inc. (“CIC”). In the normal course of business, the Company conducts certain transactions with CIC. Included in accounts receivable is an amount due from CIC of $0 and $21,500 as of December 31, 2017 and 2016. The Company prepaid CIC $82,500 for 2018 student consulting services. The Company paid $0 and $275,000 for consulting services to CIC for the year ended December 31, 2017 and 2016, respectively.

The Company’s CEO has a 40% interest in Wall Street Innovation Center, Inc. (“WSIC”), a company incorporated in the state of New York that focuses on career and business development activities. AEC New York’s Chief Operating Officer currently serves as the President/CEO of WSIC. In the course of delivering career advisory services, the Company has engaged WSIC to assist in certain career development activities. Included in accounts payable is an amount due to WSIC of $372 and $110,000 as of December 31, 2017 and 2016, respectively. Additionally, the Company had entered into a sublease agreement with WSIC in March 2016, which was subsequently terminated on June 30, 2017.

F-22

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

11.

LONG-TERM LOAN

On December 1, 2014, an unrelated party loaned the Company $295,579, with interest at 10%. The loan is to be repaid on December 13, 2019. Interest will be paid on the last day of each quarter from 2015 to 2019, except for the last payment on December 12, 2019. Interest expense for the year ended December 31, 2017 and 2016 was approximately $27,493 and $29,556 respectively. The Company repaid $150,000 on November 10, 2017.

12.

LEASE COMMITMENTS

In December 2014, the Company entered into a lease for office space with an unrelated party, expiring on July 31, 2025. The lease commenced on March 1, 2015 and the Company received two months of free rent. Due to free rent and escalating monthly rental payments, utilities, real estate taxes, insurance and other operating expenses, the lease is being recognized on a straight-line basis of $34,066 per month for financial statement purposes which creates deferred rent as shown on the balance sheets. In February 2016, the Company entered into a sublease agreement to lease space to WSIC for an annual rental of $250,000 (see Note 10). The sublease commenced on March 1, 2016 and terminated on June 30, 2017. The sublease income was netted against the Company’s rent expense. Rent expense was $283,781 and $178,000 for the year ended December 31, 2017 and 2016, respectively.

Future minimum lease commitments are as follows:

Year Ending December 31,	Gross Lease Payment

2018	$	378,862
2019		388,333
2020		418,604
2021		439,350
2022 and thereafter		1,666,383

Total	$	3,291,532

F-23

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

13.

Income taxes

The component of deferred tax assets at December 31, 2017 and 2016 is as follows:

	December 31,
	2017			2016
Net operating loss carryforwards		-			138,654
Allowance for bad debt		63,441			28,350
Accelerated depreciation		(37,800	)		12,150
Subtotal		25,641			179,154
Allowance		-			(81,218	)
Deferred tax asset		25,641			97,936

The provision for income taxes for the year ended December 31, 2017 and 2016 are as follows:

	For the year ended December 31,
	2017			2016

Current:
Federal	$	177,888		$	(21,534	)
State		102,801			3,000
Foreign		(0	)		332,187
Total current		280,689			313,653

Deferred:
Federal		54,241			(62,068	)
State		18,054			(35,868	)
Foreign		-			-
Total deferred		72,295			(97,936	)
Total	$	352,984		$	215,717

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 and UK. The Company is subject to income tax examinations of US federal, state, and city for 2016, 2015 and 2014 tax years and in the UK for 2016. The Company is not currently under examination nor has it been notified by the authorities.

F-24

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

13.

Income taxes (continued)

A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate for the year ended December 31, 2017 and 2016 is as follows:

	December 31,
	2017			2016

Tax at federal statutory rate		34.0	%		34.0	%
State taxes, net of federal benefit		10.8			4.4
Tax impact of foreign operations		-			(19.7	)
Non-deductible/ non-taxable items		-			13.6
Net operating loss carryforwards		-			(10.0	)
Changes in tax reserves		11.6			-
Others					0.8

Total		56.4	%		23.1	%

F-25

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

14.

ISSUANCE OF COMMON STOCK

In June 2016, the Company issued 1,550,000 shares of common stock at $0.01 per share in exchange of consulting services from unrelated third parties. On September 29, 2016, the Company issued 800,000 shares of common stock at the market price of $0.10 per share, respectively, in exchange for outside consulting services. Compensation expense for the issuance of common stock for third party consulting services was $95,500 and $0 for the years ended December 31, 2016 and 2015, respectively.

On October 31, 2016, the Company issued 1,500,000 shares of common stock at the market price of $0.14 per share to acquire AEC Southern UK. AEC Southern UK was a shell company and had no assets or operations at the acquisition date. The value of the stock issued was recognized as compensation expense of $229,861 for the year ended December 31, 2016.

On October 31, 2016, the Company issued 1,500,000 shares of common stock at market price of $0.14 per share for deferred compensation of AEC Southern UK’s CEO to be earned over three years commencing November 1, 2016. Amortization of deferred compensation was $11,666 for the year ended December 31, 2016.

On December 31, 2016, the Company entered into an agreement to issue 6,000,000 shares of common stock at market price of $0.55 per share for deferred compensation of AEC Southern UK’s chairman to be earned over three years commencing November 1, 2016. Amortization of deferred compensation was $183,333 for the year ended December 31, 2016. The agreement also agrees to issue up to 4,000,000 shares of common stock to AEC Southern UK’s chairman of which 2,000,000 shares (“Tranche 1”) shall be issued if AEC Southern UK’s revenue reaches at least $20,000,000 for any following calendar year ending after December 31, 2016, and the remaining 2,000,000 shares (“Tranche 2”) shall be issued if revenue reaches at least $20,000,000 for any following calendar year ending December 31 after Tranche 1 has been achieved. As of December 31, 2016, no incentive shares of common stock were issued.

The Company didn’t grant any common stock during the year ended December 31, 2017.

15.

STOCK OPTIONS

On June 30, 2016, the Company approved the issuance of non-qualified stock options for the purchase of 1,500,000 shares of common stock to certain employees and persons affiliated with the Company. 500,000 options vest on July 1, 2017 and expire on June 30, 2022 with an exercise price of $1.00 per share; 500,000 options vest on July 1, 2018 and expire on June 30, 2023 with an exercise price of $2.00 per share; 500,000 options vest on July 1, 2019 and expire on June 30, 2024 with an exercise price of $3.00 per share.

The Company didn’t grant any options during the year ended December 31, 2017.

The following is a summary of stock option activity:

	Shares		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value

Outstanding at December 31, 2016		3,200,000	$	2.45		6.87 years	$	-
Granted		-		-		-		-
Exercised		-		-		-		-
Cancelled and expired		-		-		-		-
Forfeited		-		-		-		-

Outstanding at December 31, 2017		3,200,000	$	2.45		5.87 years	$	-

Vested and expected to vest at December 31, 2017		1,203,333	$	1.32		4.54 years	$	-

Exercisable at December 31, 2017		1,203,333	$	1.32		4.54 years	$	-

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 no options exercised during the December 31, 2017 and 2016.

There was no compensation expense related to all the above options because the value ascribed to these options was not material.

F-26

AMERICAN EDUCATION CENTER, Inc. AND SUBSIDIARies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017 and 2016

16.

SERIES A CONVERTIBLE PREFERRED STOCK

On October 30, 2017, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with China Cultural Finance Holdings Company Limited, a British Virgin Islands corporation (the “Purchaser”) pursuant to which the Company will issue 500,000 shares (the “Shares”) of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), at price of $4 per Share (the “Purchase Price Per Share”) to the Purchaser, with the rights, privileges and preferences set forth in the Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”), for the aggregate price of Two Million Dollars ($2,000,000) (the “Purchase Price”).

On November 3, 2017, the Company designated and issued to the Purchaser, 500,000 shares as Series A Convertible Preferred Stock (the “Preferred Stock”) out of the 20,000,000 authorized number of preferred shares of the Company, par value $0.001 per share.

Pursuant to the Share Purchase Agreement, the Company will use its commercially reasonable efforts to apply to be listed on the NASDAQ Capital Market or such other national securities exchange as is reasonably acceptable to the Purchaser (the “National Exchanges”), so that the Company’s common stock (the “Common Stock”) will commence trading on one of the National Exchanges (the “Uplisting”) within 365 days after the Closing Date (the “Uplisting Deadline”). Each and every outstanding shares of Preferred Stock will automatically convert, without the payment of additional consideration by the holder thereof (the “Mandatory Conversion”) if and when Uplisting occurs (the “Mandatory Conversion Commencement”), into fully paid and non-assessable shares of Common Stock, at a conversion price which shall be the lesser of (i) $4.00 or (ii) 90% of the offering price in the occurrence of a secondary public offering of the Company’s Common Stock pursuant to a registration statement on Form S-1 (the “Conversion Price”). The Conversion Price will be subject to adjustment in the event of reorganization, reclassification, consolidation or merger.

17.

SUBSEQUENT EVENTS

The Company’s management has performed subsequent events procedures through April 17, 2018, which is the date the consolidated financial statements were available to be issued. There were no subsequent events requiring adjustment to or disclosure in the consolidated financial statements.

F-27